Presented by Khaleda Akhter Senior Research Associate, CPD 18 April, 2015 Dhaka, Bangladesh 1...

Presented by

Khaleda Akhter Senior Research Associate, CPD

18 April, 2015Dhaka, Bangladesh

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NON-TARIFF BARRIERS IN BANGLADESH-INDIA TRADENON-TARIFF BARRIERS IN BANGLADESH-INDIA TRADEADDRESSING SPS ISSUES & CONCERNSADDRESSING SPS ISSUES & CONCERNS

STUDY TEAM

PROFESSOR MUSTAFIZUR RAHMAN

KHALEDA AKHTER

NAIMUL GANI SAIF

Acknowledgement

The team would like to register our deep appreciation to CPD’s partners, institutions and individuals who have extended cooperation to generate the needed information and provided important insights to carry out the study.

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SECTION I. INTRODUCTION

SECTION II. OBJECTIVE

SECTION III: CURRENT TRADE DYNAMICS BETWEEN BANGALDESH AND INDIA

SECTION IV: METHODOLOGY

SECTION V: SURVEY RESULTS

SECTION VI: ONGOING COOPERATION AND REMAINING CONCERNS

SECTION VII: CONCLUDING REMARKS-A FRAMEWORK FOR A SPS AGREEMENT

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CONTENT OF PRESENTATION

The bilateral economic relationship between Bangladesh and India is of significant importance for Bangladesh as the country strives to attain its ambition to become a middle income country.

India is the second largest trading partner of Bangladesh, conceding only to China. The economic relationship between Bangladesh and India has received growing

attention in recent years for a number of reasons. Indian economy in twenty-first century have important implications for

Bangladesh in terms of trade, investment and overall economic welfare. Deepening of India-Bangladesh economic cooperation also have several

significance for regional integration in South Asia. Bangladesh, as other SAARC LDCs, was given Duty Free Market Access

(DFMA) offer to the Indian market which has created significant opportunities to enhance Bangladesh’s market access in India and deepen bilateral economic and trading relationship between the two countries.

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SECTION I: INTRODUCTION

While the duties have been brought down to zero, the Non-tariff Barriers (NTBs) such as Sanitary and Phytosanitary (SPS) measures continue to pose significant challenges in advancing the trade between the two countries

In order to protect human, animal and plant life and safety, WTO allows member countries to adopt SPS regulations and measures.

However, the traders from both the countries are confronted with SPS measures which are perceived to be trade-constraining by the concerned players in both countries.

Evidence suggest that various types of SPS measures such as laboratory testing, registration, certification and sanitary phyto sanitary certificate for agricultural exports are undermining the trade potentials of both the countries.

It is also evident that SPS issues start to act as NTBs when appropriate mechanisms and initiatives are not put in place to address the attendant concerns.

There is, thus, an urgent need to identify appropriate mechanisms and institutional initiatives to address SPS-related issues and concerns.

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SECTION 1: INTRODUCTION

Objectives of the study :

Identify major SPS issues and concerns which act as NTBs in Bangladesh-India trade.

Identify the current cooperation mechanism which can be deployed to address SPS related concerns.

To come up with a framework for a bilateral SPS agreement which can then serve as a basis for future cooperation to address SPS related NTBs between the two countries.

It is important to note that, SPS related measures which do not adversely affect bilateral trade have not been discussed in the paper.

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SECTION II: OBJECTIVE

Bilateral trade between Bangladesh and India has been on the rise over the past years. It has reached about USD 6 billion in FY14 from USD 2 billion in FY05.

It is encouraging to note that in recent years, Bangladesh’s export to India increased to USD 456 million in FY14 from USD 144 million in FY05.

Export earnings from India reached USD 335 million in FY15 (Jul-Feb), rise of 37% compared to the matched period of FY14.

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SECTION III: CURRENT TRADE DYNAMICS BETWEEN BANGALDESH AND

INDIA

Table-1 : Bangladesh’s Export, Import and Bilateral Deficit with India, 2001-2014 (in million USD)

FY Export to India Import from India Bilateral Trade Deficit (negative) 2001 63 1184 -11212003 99 1358 -12592005 144 2026 -18822007 289 2226 -19372009 277 2822 -25462010 305 3214 -29092011 513 4569 -40572012 498 4743 -42452013 563 4740 -41762014 456 6063 -5579

Source: Export Promotion Bureau, Bangladesh, 2014

As can be seen from Figure 1, the bilateral trade deficit between Bangladesh and India has been on the rise over the past years – from about USD 1.1 billion in FY2001 to about USD 2.5 billion in FY2009 and 5 billion in FY2014.

However, in a globalized world, bilateral trade deficit should not be a concern. Large part of Indian import include raw materials that go for export oriented industries in Bangladesh.

The important issue is whether Bangladesh is being able to fully exploit its export potential in the Indian market. It is from this perspective that resolving SPS concern is important for Bangladesh.

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SECTION III: CURRENT TRADE DYNAMICS BETWEEN BANGALDESH AND

INDIA

Figure 1: Bangladesh’s Export and Import with India

It is interesting to note that the share of non-RMG items is significantly higher than that of RMG products in Bangladesh’s export basket in India. This alludes to both

product as well as market diversification opportunity for Bangladesh.

Significant positive impact of DFQF market access offer is yet to be realized. Realizing the market access opportunities will critically hinge on many factors:

higher supply-side capacity, infrastructure development, attracting FDI, better trade facilitation, and also Bangladesh’s capacity to address SPS concerns.

SECTION III: CURRENT TRADE DYNAMICS BETWEEN BANGLADESH AND INDIA

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Time Period RMG % Share Non-RMG % Share

FY2010 13 4 292 96

FY2011 36 7 477 93

FY2012 55 11 443 89

FY2013 75 13 488 87

FY2014 96 21 360 79

Source: EPB, 2015

Table: Share of RMG and Non-RMG Commodities (Million USD)

The analysis in this study is based on information collected from both primary and secondary sources.

Secondary information was collected from

Export Promotion Bureau (EPB),

Bangladesh Bank (BB),

National Board of Revenue (NBR),

Bangladesh Accreditation Board (BAB),

Bangladesh Standards and Testing Institution (BSTI).

Secondary information was also generated from the Bureau of Indian Standards (BIS) and Food Safety and Standards Authority of India (FSSAI).

Information was also generated from field visits to several land ports and interviews with concerned officials and stakeholders in Kolkata and New Delhi.


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The present study has also benefitted from information generated through Focus Group Discussions (FGDs) and Key Informant Interviews (KIIs) with concerned stakeholders including traders, policy makers, and government officials from several ministries.

Primary data was obtained from a perception survey involving exporters, importers and C&F agents in Bangladesh.

Total number of respondents was 100. Among them, 42 respondents were exporters, 38 respondents were importers and 20 respondents were C&F agents.

Perception Survey was held in 5 major ports : Benapole-Petrapole, Akhaura-Agartala, Hili-Hili, Bhomra-Ghojadanga, Tamabil –Dawki .


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ANALYSIS OF SURVEY RESULTS FOCUSED ON: Identification of Sanitary and Phytosanitary (SPS) Issues Labeling and Packaging RequirementsCertification, Registration and Testing RequirementsPest Elimination, Quarantine and other Requirements Efficiency of relevant InstitutionsAverage Time Taken to Clear Inward and Outward Goods Impact of SPS Measures on Trade


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Sanitary and Phytosanitary (SPS) Measures included:

Testing requirement Certification requirement Labeling and packaging requirement Registration requirement Inspection requirement Quarantine requirement Tolerance limits for residues or pesticides Treatment for elimination of pest.

Our field level perception survey indicate that the first four constitute the major concerns for Bangladesh’s exporters.


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Labeling and Packaging RequirementExporters felt that there are several packaging and labeling requirements for

food items which create difficulties in exporting to the Indian market: Food items should contain pictures of ‘veg or non-veg sign’ which they do

not require for other countries. Information regarding ‘veg or non-veg sign’ , and name and address of the

importer is made mandatory in the FSS (Packaging and Labeling) Regulation, 2011.

Pictures of fruits are not allowed when it comes to the products in which exporters use synthetic items substantially.

On the packets of Toast Biscuits, the word ‘Rusk’ needs to be printed beside the word Toast in the brackets.

For the importers, several imported items need to be marked in accordance with the ‘Bangladesh Packaging Rule, 2007’. The retail price and net weight need to be printed on the body of the packet.


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Certification, Registration and Testing RequirementExporters felt that certification and testing related requirements in the Indian

market for agricultural and food products create problems for exporters. Several food items such as fruit juice, candies, jam are subject to facing SPS

related testing as per the FSSAI regulations. These products are subject to testing from several laboratories including

Central Food Laboratory (CFL) and State Public Health Laboratory (SPHL). It is important to mention that BIS generally covers product quality

certification, hallmarking and systems certification, and development of technical standards. Currently, there are 92 items (14 food products) for which mandatory BIS certification is required.

Apart from 14 products, exporters need to get certificates from the newly established Food Safety and Standards Authority of India (FSSAI). FSSAI was established in 2008 under the Ministry of Health and Family Welfare in India.


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Pest Elimination, Quarantine and other Requirements For Sesame Seed and Potatoes, fumigation certificate is required which

states that the consignment has been treated/fumigated for pest elimination.

The imported fruit consignments are also checked for any existing radiation inside the goods by the Bangladesh Atomic Energy Commission.

Furthermore, fruit Juice exporters of Bangladesh informed that there is a lack of harmonization in standards and different standards are followed in Bangladesh and India.


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Different Standards in Bangladesh and IndiaSECTION V: SURVEY RESULTS

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Impact of SPS Measures on Trade

Fall in Product Quality from Delays at Port

Reduced Shelf Life of Products

Higher Cost of Doing Business due to High Testing, Licensing and Registration Fee

Complex and Expensive Renewal Process for Licensing

Damage of Products at Land Customs Stations

Disruption in the Supply Chain


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Memorandum of Understanding between BSTI (Bangladesh) and BIS (India) in place since 2007.

Possible areas of cooperation include StandardizationCertification Calibration Testing Technical InformationDispute Settlement Trainings

The MOU is renewed every three years. However, the perception survey indicates, carried out for this study, that much more energetic and innovative steps are needed to address the SPS concerns.

SECTION VI:ONGOING COOPERATION AND REMANING CONCERNS

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National Accreditation Board for Testing and Calibration Laboratories (NABL) has accredited 25 items.

Products were :

Fruit Juice, Drinks, Jam, Jelly, Pickle, Fruit Syrup

Chanachur, Biscuits, Chutney etc

Others: Soap, Textile and Garments, Cement

• Some Important Concerns

• There is no government order from either side

• Field level information is limited (both for traders and institutions )

SECTION VI:ONGOING COOPERATION AND REMANING ONCERNS

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An added concern is that some of these test parameters are not covered by NABL.

Consequently, exporters can’t have BSTI certificates and export the products.

Examples Fruit Drinks:

Covered : Acidity

Not covered: Total sugar

Packaged Mineral Water:

Covered : Calcium, Sodium, Nickel

Not Covered: Pesticide related test

Biscuits :

Covered :Moisture

Not Covered: Preservatives


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Regional Cooperation through South Asian Regional Standards Organization (SARSO)

Came into force in 2011.

Six Sectoral Technical Committee (STC)

STC on Food and Agricultural products: Biscuit and Refined Sugar

SARSO will play an important role to promote regional cooperation

Strengthen BSTI and Bangladesh Accreditation Board

Bilateral Cooperation Agreement (BCA) between BSTI and BIS

BCA has not been signed yet.

NABL Accreditation Issues.

Cooperation on standards are needed between BSTI and FSSAI.


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In view of the above, it is proposed that Bangladesh and India sign a comprehensive SPS framework agreement which will allow to address the attendant concerns.

Based on an extensive analysis of cross-country and cross-regional documents, the study proposes that:

Two countries should sign a bilateral SPS agreement.

Cross-country evidence shows that in most cases, such SPS agreements are part of bilateral or regional FTAs.

SECTION VII: CONCLUDING REMARKS –A FRAMEWORK FOR A SPS AGREEMENT

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SECTION VII: CONCLUDING REMARKS –A FRAMEWORK FOR A SPS AGREEMENT

Framework for a SPS Agreement will need to include the following elements (these are detailed out in the main paper):

Objectives Scope and Coverage Mutual Recognition of Conformity Assessment Harmonization Equivalence Dispute Settlement SPS Committee Transparency Technical Cooperation and Exchange of Information

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SECTION VII: CONCLUDING REMARKS

SPS measures pose significant challenges in advancing the trade between the two countries.

Several SPS measures have been identified including testing, certification, labeling and packing requirements.

Bilateral Cooperation between BSTI and BIS

Regional Cooperation through SARSO

Bilateral cooperation between BSTI and FSSAI

Bilateral SPS Agreement

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THANK YOU

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Presented by Khaleda Akhter Senior Research Associate, CPD 18 April, 2015 Dhaka, Bangladesh 1...

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