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Two binding agreements, relevant to food regulations under the WTO regime, which are of major concern to developing countries, include the agreements on application of SPS measures and Technical Barriers on Trade (TBT). The SPS Agreement is aimed at developing measures, which would ensure protection of human, animal or plant life or health; equivalence and transparency in global agricultural trade. The SPS Agreement encourages member countries to establish national SPS measures consistent with the standards, guidelines and recommendations developed by the designated international organizations. It also stipulates that these measures should not be applied in a manner, which should be restrictive and should not discriminate between member countries placed in similar situations. Two international organizations namely, FAO/WHO Codex Alimentarius Commission (CAC) for food safety and the Office International des Epizooties (OIE) for animal health are recognized by WTO for the provisions of SPS Agreement. The Agreement on TBT attempts to bring about harmonization in technical regulations and standards including packaging, marking and labeling requirements. The objective of these agreements is to remove bilateralism and arbitrariness in international trade. The way, in which the animal welfare concerns have been incorporated with the policies of the WTO, it not only poses a new responsibility to the developing countries in respect of compliance to international standards, but adds a new dimension to the guarantees required to be provided to international trade partners. Now that the Agreement on Agriculture has come to stay, bringing with it the concomitants like SPS measures and TBT Agreement, the developing countries have to make sure that CAC and OIE do not adopt standards and measures which are unreasonable and detrimental to their interests. At the same time, these countries should take advantage of the emerging trade opportunities and reshape the production and trade practices to reap the maximum benefits out of it and uplift the economy to new heights.
Keywords: GATT/WTO Agreement, SPS Agreement, Livestock Trade, Developing countries.
Indian Livestock Scenario
Agriculture occupies a predominant position in Indian economy with over 70 per cent working population dependent on agriculture. This sector contributes over 30 per cent to gross national product. Livestock keeping is an age-old tradition for millions of rural households. Livestock sector is among the few growth sectors in rural India and is directly linked with the livelihoods of more than 73 per cent of rural households. Livestock wealth of the country is impressive, not only numerically, but also in terms of rich genetic diversity. India accounts for more than 15 per cent of world cattle numbers, 53 per cent of buffaloes, 20 per cent goats, 4 per cent of sheep and 9 per cent of camels. However, the productivity of these native stocks is low when compared to world average figures. As a result of new policy initiatives, backed up by substantial investment in animal research on improved health cover and up gradation programmes and domestic support in the last four decades, there has been a remarkable change in perspectives of this age-old livestock keeping system in India. During 1950-90 the value of the livestock grew nearly three-fold contributing pro-rata to the national economy. It is notable that while the share of the agriculture to the GDP declined from 52 per cent in 1950 to 29 percent in 1991, the contribution of the livestock sector marginally increased from 8 to 9 per cent to the national GDP.
The livestock sector outputs include milk and milk products, meat and meat products, eggs, leather, wool, drugs, draught power, casein and other by-products of animal origin. A very large percentage of the livestock produce in India is consumed internally. While there is a sizeable external trade on finished products, for value-added items and frozen meat, the export market is small and forms only 0.6 per cent of world trade in buffalo meat, 0.8 per cent of mutton/chevon and 0.3 per cent for eggs. India has only limited access to the global market, which is mostly confined to South Asia, East Asia and Middle East. Dairy products are being exported to developed countries including USA.
Trade in live animals takes place all over the country and throughout the year. The Agricultural Products Market Act regulates the trade in all agricultural produce including livestock. Though Agricultural Produce Marketing Committees (APMC) are responsible for its administration, most livestock trade takes place outside the ambit of APMC in unorganized sector. Export trade in livestock products come under the purview of the Agricultural and Processed Food Product Export Development Authority (APEDA) under the Commerce Ministry. APEDA has established the quality standards including sanitary and hygiene standards to help in promoting the exports. While Indian livestock products have considerably low prices, wholesale prices of other exporting countries are almost the same or slightly lower as a result of export subsidies or other domestic support. This makes India not competitive in global markets. This situation has also a direct relation to the insufficient processing capacity unequipped to handle value addition effectively, particularly in the dairy sector. The Governments mainly provide services in the livestock sector and the institutional infrastructure is predominantly managed by the State Departments of Animal Husbandry. The participation of private enterprise is small except in poultry sector.
The economic reforms, which are being implemented by Govt. of India since July 1991, include liberalization and globalization, privatization, devaluation and convertibility of rupee value, adjusting balance of payments, etc. Liberalization has set the pace in the removal of all restrictions on trade, such as permits, licenses, regulations, etc. The consequences of liberalization are obvious. Today India is the largest producer of milk, ranks fourth in egg production and among the top ten in broiler production. Leather industry ranks fourth among all export-oriented industries and accounts for 7-8 per cent of India's total export. The export of leather goods grew at around 40 per cent. There is also a flourishing trade in edible offals, bone, bone products, horn and hoof meal. Realization from these products could be much higher if the quality can be improved. The major export products from meat industry, besides meat, are casein, bone grit, crushed bone and gelatin.
Genesis of GATT/WTO
General Agreement on Tariffs and Trade (GATT) was founded in 1947 after the formation of the World Bank and the International Monetary Fund (IMF) in 1945 to contribute to a reduction in the inequality in international distribution of wealth and income and to ensure monetary stability, which was essential for growth and prosperity. Realizing the need for a multilateral forum to oversee the smooth conduct of the world trade and prevent the trade conflicts, an adhoc treaty better known as GATT, was signed among 23 countries including India. The GATT with its headquarters located at Geneva in Switzerland, calls upon the nations (signatories) to negotiate reductions in tariffs, customs duties and quotas in order to promote free trade. Presently, it has 135 member countries that account for more than 93 per cent of the world trade. The essence of GATT is a commitment on the part of each signatory to give all other signatories the Most Favored Nations (MFN) status. Although, technically it is only a treaty, it has over the years assumed a commercial policy rule. In addition to being a forum for trade negotiations, it symbolizes the International Court to resolve trade disputes. The member countries signed the GATT Agreement at Marrakesh on 15th April 1994, which paved the way for formation of World Trade Organization (WTO). The GATT had been rechristened as World Trade Organization from 1st January 1995 with a status equivalent to IMF and World Bank.
The main objectives of GATT/WTO are to:
- Strengthen the relationships between the member countries in the field of trade and development with an endeavor for raising the standards of living of their people.
- Ensuring full employment and steady growth of real income and effective demand.
- Developing the full use of the resource of the World reciprocally and mutually advantageous to all.
Main Components of the Agreement on Agriculture (AoA)
The obligations and disciplines incorporated in the Agreement on Agriculture cover five distinct areas namely, (i) Domestic support (ii) Market access (iii) Export competition (iv) Trade related aspects of Intellectual Property Rights (TRIPS), and (v) Sanitary and Phytosanitary measures.
Agreement on Sanitary and Phytosanitary (SPS) Measures and Agreement on Technical Barriers to Trade (TBT)
With the constitution of WTO, the whole world is going to be a single market place with all types of products crossing international boarders never seen before. The globalization process has set in motion diminishing protectionist measures. To minimize the probability of disguised restrictions on international trade, two binding agreements relevant to food regulations were put in place under the WTO regime. The Agreement on application of SPS measures and the Agreement on TBT constitute important landmarks. The WTO tackles regulatory trade barriers mainly through these agreements.
Major Landmarks leading to the development of SPS Measures
1924 : Establishment of Office International des Epizooties (OIE)
1945 : Formation of World Bank and International Monetary Fund
1947 : Birth of General Agreement on Tariffs and Trade (GATT)
1962 : Establishment of Codex Alimentarius
1974-79 : Inclusion of SPS concerns for food safety and health on humans, animals and plants in TBT and Agreement on SPS measures
1947-85 : Seven Rounds of Trade negotiations
1986 : Call for SPS measures in agricultural trade
1988 : Identification of priority areas related to SPS measures - Harmonization - Transparency - Improvement
1991 : The Famous Dunkel Draft on IPRs
1993 : Establishment of Secretariat of the International Plant Protection Convention (IPPC) - Start of standard setting process related to SPS measures
1993 : Final (Eighth) Round of Uruguay Trade negotiations bringing agriculture under GATT regime
1994 : GATT Agreement paving way for formation of WTO
1995 : Formation of WTO and Dispute Settlement Body (DSB)
2000 : Preparation of draft guidelines on risk consistency by SPS committee
Aims and Goals of SPS Agreement
The Agreement is aimed at developing measures, which would ensure protection of human, animal and plant life or health and equivalence and transparency in global agricultural trade.
The basic aim of SPS Agreement is to maintain the sovereign right of any Government to provide a level of health protection it deems
appropriate. At the same time, it is only incumbent on the part of the Government to ensure that these sovereign rights are not misused for protection purposes and do not result in unnecessary trade barriers to international trade.
SPS measures are applied to both domestically produced and imported goods to protect (i) humans from animal and plant carried diseases, (ii) plants and animals from pests or diseases, and (iii) territory of a country from spread of a pest or diseases.
The SPS Agreement stipulates the member countries to develop domestic SPS measures that are (i) technically sound and economically feasible to implement, (ii) based on geographical, climatic and epidemiological conditions prevailing in different regions of the country, (iii) do not discriminate in favour of domestic producers, (iv) recognize disease-free areas of other countries and allow import of products originating from such areas, (v) permit introduction of measures providing a higher level of protection than achieved by international standards if these are scientifically warranted and are based on risk assessment, and (vi) allow provisional adoption of SPS measures as a precautionary step in cases where scientific evidence is insufficient, but probable risk of spread of pests or diseases exists in the importing country.
The SPS Agreement encourages Governments to establish national SPS measures consistent with international standards, guidelines and recommendations developed by International Organizations. The WTO itself does not have any standards. The standards are developed by leading scientists in the field and governmental experts on health protection and are subject to international scrutiny and review.
International standards provide the legal framework as well as the basis for international trade. They define the identity of the products and describe its basic composition, quality and safety required for international trade. The Agreement on TBT attempts to bring about harmonization in technical regulations and standards including packaging, marking and labeling requirements for smooth flow of trade.
International Standards
The Article 3 of the SPS Agreement envisages application of international standards as the basis for SPS regulations of the member countries. Any divergence of standards and regulations adds to the cost to international trade. At the same time, divergence arising from legitimate differences in societal preferences, technical developments, environmental and health conditions may be justified. In such conditions, mutual recognition of standards is a desirable option. Where divergences are justified, harmonization of international standards should provide appropriate solutions. In both the cases, the crucial requirement is the efficiency and fairness of the process of international standards development. Articles 3, 4 & 5 of the SPS Agreement encourages Governments to harmonize or base their national measures on the international standards, guidelines and recommendations developed by WTO member governments in international organization. These organizations include for food safety, the joint FAO/WHO Codex Alimentarius Commission (CAC), for animal health, the Office International des Epizooties (OIE); and for plant health, the FAO International Plant Protection Convention (IPPC). WTO member countries are accepted to participate in the work of these organizations including the work on risk assessment and the scientific determination of the effects on human health of pesticides, contaminants or additives in food, or the effects of pests and diseases on animal and plant health.
Codex Alimentarius Commission (CAC)
The CAC with a membership of over 160 countries has developed the Codex Alimentarius, a collection of international food standards for all principal food products. The Codex Alimentarius includes nearly 5000 standards aimed at protecting the health of consumers and for ensuring fair practices in the food trade. India is a member of the CAC and the Ministry of Health is the Nodal Agency. The country has passively adopted the Codex Alimentarius and India does not have any process for developing international standards, although a Nodal Codex Committee and a Central Committee for food standards exist. These committees need adequate infrastructure for testing to ensure that international standards are suitable for Indian situation, if not to develop appropriate alternative standards. There is also an imminent need to establish a network of laboratories to certify that the products meet the international/national standards. The key issues are the agricultural and industrial chemicals, pesticides, residues limit, hazard analysis critical control point (HACCP) system and detection of food-borne pathogens, mycotoxins, veterinary drug residues and heavy metals. Dioxins are yet another group of objectionable contaminants of animal products formed as by-products in industrial and chemical production processes that attract the FAO/WHO Codex Commission.
The Office International Des Epizooties (OIE)
The OIE first established by 28 countries in 1924 is now recognized as the world organization for animal health serving 145 member countries. The OIE provides current information on disease occurrence, coordinates studies on disease surveillance and control and harmonizes regulations for trade in animals and animal products. The OIE's specialist commission, the Standards Commission works in close collaboration with the Scientific and Technical Department of the OIE's Central Bureau on the international harmonization of standards for diagnostic tests and vaccines. The Manual of Standards for diagnostic tests and vaccines approved by the International Committee defines the international standards for diagnostic tests and for the production of biological products as applied to mammals, birds and bees. The Manual represents one of the key scientific and technical references for harmonization of regulations for trade in animals and animal products. The Commission coordinates the activities of a network of some 110 OIE reference laboratories and six collaborating centres. By creating and nurturing this network, international harmonization is promoted through sharing of knowledge and establishment of collaborative projects related to methods development and standardization, production, and distribution of international reference standards, quality assurance and assay validation. In scientific and technical matters concerning diagnostic tests and vaccines, the Standards Commission collaborates with other international organizations such as the FAO, WHO, IICA and PAHO thus promoting harmonization at the international programme level.
It is expected that WTO members would complete the process of harmonization latest by the year 2004. There are several constraints and the following are the most hotly debated and pursued issues of the SPS Agreement.
1. Right of the WTO members to maintain standards which are stricter than the international standards.
2. The decision making process by a single majority vote vis-à-vis a consensus based approach.
3. Subjectivity in quantitative risk assessment.
4. Validity of assumptions for risk assessment.
5. Long winded procedures of settlement by the WTO Dispute Panels.
The Standard Setting Process
Harmonization
The procedures for formulating standards vary among the international standard setting organizations. Therefore, harmonization of procedures as per Article 3 of SPS Agreement is required for a coherent, transparent and effective system of international standardization.
Mutual Recognition Agreements (MRAs)
Article 4.2 encourages member countries to develop MRAs. The MRAs could either be limited to purposes like the testing methods or they can cover all aspects including the standards. MRAs play an important role in building confidence and form a base for developing broader MRAs. The MRAs reduce costs by avoiding duplicative testing and eliminating delays. Through intensive information, it facilitates building of valuable databases between different laboratories over the continents.
Adaptation to Regional Conditions
Article 6 of the SPS Agreement deals with the adaptation to regional conditions including recognition of pest or disease-free areas or areas of low pest or disease prevalence. It is an important clause for countries like India, which have a vast geographical area and diverse agro-climatic conditions. To benefit from this clause, the country should identify and maintain some areas free of animal diseases. Wherever feasible cost effective programme for eradication of a particular disease can also be taken up. Declaring an area free of disease requires scientific documentation for its acceptance by the relevant international organization(s).
Transparency
According to Article 7 of SPS measures, for establishing credibility as a basis for promoting trade, transparency is the watch word.
Equivalence
The Article 9 of the SPS Agreement envisages that members shall accept the SPS measures of other members as equivalent even if these differ from their own or from those used by other members trading in the same products. Members shall upon request enter into consultations with the aim of achieving bilateral or multilateral agreements on recognition of the equivalence of specific SPS measures.
Technical Cooperation
Article 9.1 provides for assistance to developing countries either on a bilateral basis or through appropriate international organization for effective implementation of the SPS Agreement. Technical cooperation could be used for building capacity of the officials, upgrade the technical skill of personnel working in the laboratories, certification bodies, accreditation of institutions, etc.
Special and Differential Treatment
Article 10 of the SPS Agreement provides for special and differential treatment for the developing and the least developed countries. Assistance could be sought for eradicating the disease, improve packaging and transportation, developing good manufacturing practices (GMPs) for individual agricultural products and training of personnel.
Enquiry Point
All member countries are required to establish an Enquiry Point to receive and respond to requests for information regarding domestic SPS measures including new or existing regulations. India does not have a single window Enquiry Point. The other functions would be to serve as notification authority, coordinate with SPS related committees, represent country's interest in international fora and identify and resolve technical issues related to agricultural trade.
SPS Concerns to Developing Countries and Suggested Measures
Since most developing countries including India lack the resources for complying with the enhanced standards, there is a legitimate concern that this Agreement could facilitate introduction of non-trade barriers for agricultural exports. The major SPS concerns from an Indian perspective may be summarized as under:
1. Quality and Safety of Dairy and Meat Products
Developing countries including India are likely to loose out on quality and safety criteria unless they can ensure that all dairy products for export are manufactured using internationally recognized systems of quality assurance such as, HACCP based system. It is imperative that the principles of HACCP systems, code of practices on good animal feed, good hygienic practices (GHP) and good manufacturing practices (GMPs) and cold chain system are followed sensu stricto .
2. Concept of disease free or low disease prevalence areas
Major policy shift is necessary depending on the prevalent situation. For example India should put in place Prevention of Infectious and Contagious Diseases in Animals Act and take effective measures to eradicate 'A' category diseases as notified by OIE.
3. Hygienic practices for milk production
Codex Standards not only require that livestock products for export conform to stipulated safety and suitability standards but also that the raw milk used in the manufacture of the products is produced using GHPs and GMPs. Extensive extension programmes should be implemented to ensure this stringent requirement.
4. Maximum levels of contaminants
The maximum permissible levels of aflatoxins, heavy metals, veterinary drugs, pesticide residues, etc. are increasingly becoming areas of major safety concerns. SPS measures permit members to adopt, if necessary, a higher level of protection based on risk assessment. Better physical infrastructure for reference laboratories for monitoring and surveillance of the contaminants and their critical levels, strengthening of information systems for risk analysis, assessment and management and risk communication are some suggested measures.
Now there is no denying of the fact that subsequent to globalization of the agricultural trade including the livestock sector, the inconsequential economic compulsions on the less developed countries are greater today. Therefore, we should take advantage of the emerging trade opportunities in various livestock and poultry based commodities and services. India and some other developing countries have the advantage of having diverse agro-climatic conditions, rich biodiversity, competent professional workforce and cheap labour. Emphasis should be laid down on those commodities in which a particular country has cost advantage and also on the export of value-added products rather than on primary products for increasing share in world livestock based exports.
The quality of all livestock products, raw or processed meat for export has to be improved to meet the international standards. For this, appropriate quality control measures, modern processing and infrastructure facilities should be developed .In order to become a significant player in the world market, it is necessary to ensure a sizeable market surplus of the exportable farm products. The productivity growth should also be higher in order to offset the effect of cost reducing technological innovations that are expected to be adopted by the developed nations. It will also help in reducing the problem of inflation on cost production. The various governmental agencies involved in export and import should be under one umbrella. For instance, in India, the proposal of the Planning Commission to have a permanent directorate or regulatory agency in the Department of Animal Husbandry and Dairying merits expeditious policy decision. Greater emphasis should be laid for interaction among the farmers, R&D Wings of Research Institutes and Industry to explore sustainable new market avenues. The information system needs to be strengthened as it helps all participants. Necessary legislative reforms are to be introduced for ensuring adequate safeguards to prevent any undue exploitation of the small and marginal farmers while strengthening the present market system.
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