The non-tariff barriers (NTBs) imposed by importing countries are a significant reason for India’s sub-optimal export performance. Many products India tries to export, like fish, food, chemicals, or machinery often get rejected or attract extra close inspection because of NTBs.

Small firms lack money and expertise on NTBs and are hurt most. India needs an aggressive plan to resolve major NTBs.

India’s experience with NTBs isn’t unique; a vast majority of world trade, around 96 per cent, is impacted by regulations, most of which can be classified as NTBs.

It is crucial to distinguish between non-tariff measures (NTMs) and NTBs. While NTMs are designed to ensure safety for people, animals, plants, and the environment, unfair implementation without valid scientific grounds turns them into trade barriers — NTBs.

India should adopt a two-pronged strategy to mitigate the influence of NTBs on exports. Firstly, it should upgrade its domestic systems, particularly in cases where NTBs are linked to product quality. Secondly, India should engage in discussions with partner countries and be prepared to retaliate if unreasonable standards or rules are set to obstruct imports from India.

As for the first, many of India’s food and agriculture products face problems due to higher pesticide levels, the presence of pests and contaminations due to foot and mouth disease. These lead to the rejection of export consignments and compulsory inspections before shipment.

The three subcategories of NTBs are:

Pesticide levels in food products: The traces pesticides leave in treated products are called “residues”. A maximum residue level (MRL) is the highest pesticide residue level allowed in food or feed. For example, the EU has set an unreasonable low MRL for tricyclazole, a fungicide in basmati rice, to 0.01 mg per kg. The earlier limit was 10 times higher.

Now EU proposes to raise the limit to 0.09 As the current level is unreasonable and hampers trade. Similarly, India’s exports of chillies and tea to the EU are affected due to the low settings of MRLs. Japan stopped the import of sesame seed from India in 1992-93 due to pesticides/DDT traces.

Foot and mouth disease (FMD)/presence of pests: FMD is a highly contagious viral disease affecting 77 per cent of the global cattle, swine, sheep, and goats population in Asia and Africa. FMD is endemic in India, mainly due to unrestricted animal movements. India needs to invest in creating FMD-free zones to export freely. The export of milk and poultry, bovine meat products to the EU and bovine meat to China and South Korea becomes impossible due to the prevalence of FMD in India.

Suspect product quality leads to higher inspection. An example. Each consignment of Black Tiger Shrimp and Vannamei exported from India to Japan undergoes 100 per cent inspection by Japanese authorities. This is done to rule out the presence of an antibiotic residue called Nitrofuran metabolite AOZ. Also, the EU, due to the frequent detection of prohibited antibiotics, has increased the sampling frequency from 10 per cent to 50 per cent on marine products exported from India. Mexico suspended the import of Indian dry chillies in May 2017 after a live pest (Trogoderma) was detected in two containers.

Engagement, retaliation

Many of India’s exports suffer due to the time taken for prior registration requirements and unreasonable domestic standards/rules. India must talk to the partner countries for reasonable solutions.

The two subcategories of NTBs are:

(i) Complex and expensive prior registration. In most cases, registration requires the physical submission of documents and payment of exorbitant fees.

For examples, to export industrial products to China, a firm must register its product with the specified Chinese authority and submit details about the firm and its products. Chinese experts may then visit and inspect Indian factories. The costs are to be borne by the Indian side. Only Chinese labs do product testing. And there can be no appeal to their decisions.

Similarly, to export machinery to Russia, firms must obtain a technical report called a ‘technical passport” from European inspection firms paying exorbitant fees as no Indian firms are authorised to do so.

(ii) Unreasonable domestic standards/rules. For exporting apparel to Japan, Japanese Inspection System calls for 100 per cent inspection and testing by Japan-approved facilities. Japan does not accept reports of Indian test houses, signatories to the International Laboratory Accreditation Cooperation.

To export chemicals to the EU, Indian firms must comply with EU REACH Regulation. This requires paying a high registration fee for each chemical and sharing costs and technical data with the EU.

The US banned the import of wild-caught shrimp from India in May 2018, terming Indian fishing practices as non-compliant with US regulations to protect sea turtles. The US insisted on equipping fishing gear with Turtle Excluder Devices (TED) to ensure no turtle is harmed during fishing.

Export of generic drugs to the US and EU: Big pharma firms abuse patent laws as they recycle and re-purpose old drugs and patent them as new, thereby encouraging the ever-greening of patents. Three of every four drugs associated with new patents are not new but existing drugs. This delays the launch of affordable generic medicines.

Concerned over rise in NTBs, the WTO adopted two agreements to provide guidelines to members. Agreement on Technical Barriers to Trade (TBT) and the Agreement on Sanitary and Phytosanitary Measures (SPS). The SPS Agreement allows countries to set their own standards on food safety and animal and plant health but these must be based on science, and not arbitrarily or unjustifiably.

The hindrance posed by NTBs on India’s export performance is a critical challenge. A time frame must be decided to resolve important NTBs.

The writer is founder, Global Trade Research Initiative

Related Topics
comment COMMENT NOW