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By Kasturi Das , Research Officer, Centad
The negotiations on the proposed India-EU FTA (Free Trade Agreement) is going through a difficult phase owing to the lack of progress on certain issues of major significance to India, such as food and health safety requirements, known as sanitary and phytosanitary (SPS) measures in the terminology. According to a top-level Indian negotiator in the Commerce Ministry, "If there is no movement there, there will be no deal." India's stand is understandable given that SPS requirements have over the years emerged as one of the most important non-tariff barriers (NTBs) facing India's exports to the EU. Hence, even if the FTA results in zero tariffs on substantially all exports from India to the EU, barring a small sensitive list, chances are high that much of the benefits may be rendered ineffective, in case India fails to put in place adequate checks and balances in the Agreement to tackle these NTBs.
A range of key agro-export items from India has faced diverse SPS-related market access problems in the 27-nation block. Way back in 1997, the EU banned fisheries products exports from India on SPS grounds. More recently, exports of Indian marine products have faced several detentions or rejections in the EU, on the grounds of use of antibiotics and bacterial inhibitors. Indian meat products have encountered severe problems in the EU on grounds of foot and mouth disease and mad cow disease, although the latter never occurred in India. Exports of spices, peanuts, groundnuts, cereals, and various other processed food have long since been facing difficulties on the grounds of presence of aflatoxin beyond the maximum residue levels (MRLs) permitted by the EU. D espite India being one of the largest producers of dairy products, these products are not allowed to be exported to the EU on SPS grounds. Other Indian exports facing SPS problems in the EU include rice, tea, egg products, red chillies, flowers, etc.
A major problem often arises from the EU's non-acceptance of established international standards and the application of its own standards on grounds of observance of higher safety norms. For instance, the MRLs stipulated by the EU are often more stringent than the international standards set by the Codex Alimentarius Commission. Many countries are of the view that there is not enough justification for many such higher standards. More so because often it is observed that lower standards exist in several other developed countries, apparently without any adverse effect on health. Moreover, often the EU does not provide sufficient evidence to justify those stricter requirements. Another problem is the lack of harmonisation of SPS requirements among the member countries of the EU. Even though there are common minimum EU standards on food safety, member states have independent jurisdiction on public health and sanitation, for goods entering into their territories. Hence, there is no uniformity in the EU standards for risk management, detentions, and disposal at the point of entry, which causes enormous uncertainty in the resolution of issues relating to SPS matters. Another major concern for the exporters is the EU system of 'red alert'. When the EU issues a 'red alert', the exporter involved faces a 100% inspection for a pre-determined number of consignments following the alert. Denotification requires merely the same procedures used by the authorities while issuing a 'red alert', but does not take place as speedily as the 'red alert' notice. Yet another damaging procedure followed by the EU is the destruction of rejected consignments without returning them or intimating the consignors. The destruction is carried out on the grounds that consignments declared unfit for human consumption could not be salvaged. This is contrary to practices followed by India and several other developing countries and results in significant losses for the exporters.
Compliance with stringent SPS requirements involves huge investments, which are not easy to undertake in a resource-poor country like India. For instance, subsequent to the EU ban on Indian fisheries exports in 1997, the Seafood Exporters Association of India claimed to have spent US$ 25 million on upgradation of their facilities to meet the EU requirements. Moreover, there is no guarantee that once suitable change in the production processes have been made, the goods would get continued or enhanced market access, since overseas buyers do not give any such guarantee upfront. A concomitant problem is that of shifting standards. The worst affected in the whole process are the small players, who are often technically ill-equipped and financially hard-pressed to be able to comply with stringent SPS requirements. Given the range of capacity constraints that developing countries like India face in this regard, there is a strong case for technical assistance by developed countries and donor agencies. Although, the WTO Agreement on SPS does call for technical assistance, it does not make it obligatory to provide such assistance thereby leaving the developing countries to the mercy of the developed countries.
Importantly, a key objective of the WTO SPS Agreement is to set in place certain checks and balances to cope with the possibility of these measures emerging as NTBs. However, the experience bears testimony to the limited success of the WTO in this regard.
As regards the EU, India has ventilated its SPS-related concerns on several occasions, be it through bilateral interactions or through the multilateral route under the aegis of the WTO. Nevertheless success has been scanty so far. The proposed FTA has opened up another avenue for India to address this major market access concern. The country must use its bargaining chips effectively to win the battle this time around.
March 5, 2008
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