Burgeoning importance of Non-Tariff Barriers on Agricultural Trade
India has come a long way from being a food-deficit country at the time of Independence to a food surplus country. With its varied agro-climatic conditions and large production base for cereals, pulses, oilseeds, fruits, vegetables, dairy, poultry and meat products, the country has become a leading exporter of fresh and processed food products.
India today is one of the largest producers of milk, rice, groundnuts and various fruits and vegetables such as mangoes and eggplant. Given these advantages, India is now exporting fresh and processed food products to a number of developed and developing country markets including the United States (US), the European Union (EU), Vietnam and the Middle Eastern countries. The country has a positive trade balance in this sector, which is an important contributor to India’s trade earnings.
According to the World Trade Organization (WTO), India was the 9th largest exporter of agricultural products in 2017, after the EU, the US, Brazil, China, Canada, Indonesia, Thailand and Australia. The Indian government, in recent years, with an aim to promote food processing and exports of fresh and processed food products, has come up with several policies and schemes to support agricultural product exports. For example, in the Foreign Trade Policy 2015-20, the government has focused on extending incentives to promote exports of agricultural products that integrate with the ‘Make in India’ initiative. The government has already allowed foreign direct investment (FDI) in horticulture and is in favour of doing the same in food retailing. To improve farmers’ incomes, the Cabinet Committee on Economic Affairs removed the quantitative ceilings on organic product exports, allowing unrestricted exports of organic agricultural and organic processed products, irrespective of any existing or future restriction/prohibition on the export of conventional (non-organic) products.
While there is a strong commitment from the government to promote exports of fresh and processed food products, global agricultural trade faces a number of tariff and non-tariff barriers. Tariff rates have come down significantly with the inclusion of agriculture under the General Agreement on Tariff and Trade (GATT) in the Uruguay Round of the WTO negotiations and in regional and bilateral trade agreements. However, non-tariffs barriers continue to be an impediment to international trade in fresh and processed produce. The WTO data on notifications show increasing use of sanitary and phytosanitary (SPS) measures by WTO member countries since the mid-1990s, which acts as barrier to trade.
In terms of specific products, in the past, Indian exports of mangoes, table grapes, okra, peanuts, curry leaves, chillies, shrimps, prawns and tamarind have faced rejections or bans in markets such as the US, Vietnam, EU, Saudi Arabia, Japan and Bhutan due to issues related to health and food safety standards. For instance, in the US, Saudi Arabia and Bhutan, Indian chillies were rejected and even faced temporary bans due to the presence of higher than approved levels of chemical residues. Lately, shrimp consignments to the US too are being rejected for similar reasons. Pest infestation has also led to rejection of export consignments. For example, in the recent past, the EU had imposed a ban on import of mangoes from India due to the presence of fruit flies. Similar issues have adversely affected the exportability of other Indian agricultural products such as eggplant. This is a cause for concern, especially because such bans have both short run and long run adverse effects on exporters and farmers. In the short run, there are financial losses due to the rejection of consignments, and in the long run, exporters and farmers lose their market share to exporters from other countries that are able to meet the food safety and health standards of importing countries.
The agreement states that regulations should not arbitrarily or unjustifiably discriminate between countries where identical or similar conditions prevail. The SPS Agreement also sets out the basic rules for food safety, and animal and plant health standards, which WTO member countries, including India, follow. If a member country feels that the importing country has implemented measures that are not based on scientific justification, it can raise the issue in the WTO’s Committee on Sanitary and Phytosanitary Measures. Further, the WTO member countries are encouraged to use international standards, guidelines and recommendations, where they exist. Specifically, the agreement encourages harmonisation on the basis of standards, guidelines and recommendations set by three international organisations, including the Codex Alimentarius Commission, the International Office International des Epizooties (OIE), and the relevant international and regional organisations operating within the framework of the International Plant Protection Convention.
India has a larger number of notifications raised by the EU on its RASFF portal as compared to other selected exporting countries. Border rejections as a percentage of total notifications raised are the highest for India, when compared to other developing countries. Moreover, severe consequences of these notifications such as destruction of consignment, was also the highest in the case of India. Thus, not only are Indian exports facing more rejections compared to the volume of trade, the country is definitely in a disadvantageous position vis-à vis its competitors from other developing countries in the EU market.
As regards the EUROPHYT notifications, between 2005 and 2017, India had the highest number of interceptions raised for the presence of harmful organisms in the plant and produce imported as compared to other developing country exporters to the EU. The interceptions for India during the period were 1,324 as compared to 452 for Brazil, 602 for China, 114 for Turkey and 922 for Vietnam. A majority of the interceptions for India were raised in the years 2012 and 2013 and these pertained to eggplant, mangoes, bitter gourd and taro (arabi), among others. Over the years, the number of notifications raised by the EU against India on its RASFF portal has fluctuated. Moreover, concerns were raised for different products in different periods. For instance, in 2012, there were around 263 notifications and a large number of them pertained to shrimps, vegetables such as okra and herbs such as curry leaves. The number of notifications declined marginally to 183 in the year 2014. However, it increased to 267 notifications in 2015, a number of which were related to fish, betel leaves, sesame seeds and chilli powder. In 2016 & 2017, the number of notifications declined marginally to 189 and 183.
There is need for cordial inter-government relationship with the importing countries, and a number of issues can be resolved through bilateral discussions and mutual recognition of standards and procedures. Apart from the inter-government relationship, Indian government and industry bodies should work closely with their counterparts in key export markets as sometimes such measures lead to greater policy flexibility.