article sps provisions

Impacts of WTO Provisions of SPS Agreements on Export of Frozen Foods from Bangladesh

Impacts of WTO Provisions of SPS Agreements on export of frozen foods from Bangladesh.

Dr. Zahed Husain SikderProfessor

Department Of Management StudiesUniversity Of Chittagong

Bangladesh

Dr.Zahurul AlamAssistant Professor

Department of Management StudiesUniversity of Chittagong

Cell: 01819848547

And

Mohammed Ziaul HoqueAssistant Professor

Department of Finance and BankingUniversity of Chittagong

E-mail: [email protected]: 01819605690

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Impacts of WTO Provisions of SPS Agreements on export of frozen foods from Bangladesh

Abstract:

The SPS (Sanitary and Phyto Sanitary) measures have been given increasing emphasis by the members of WTO, particularly by the developed countries. The measures are provided both opportunities and threats to the developing countries and LDCs in boosting their exports. Now a days, consumers are becoming more sophisticated and more demanding day by day. The governments have also become very much conscious to discharge their special responsibilities and enhance safetyness, health and hygienic food for their consumers. On the other hand, the developed countries are increasingly making their import requirements stricter day by day in order to ensure more safety to their consumers. The exporting countries have no other alternatives but to adopt and upgrade their technological process laboratory testing procedures, production methods and rules, regulations to maintain and increase their market share in the global market. Bangladesh is not an exception to this. This study is done in order to give a comprehensive idea about the different provisions of SPS measures undertaken by WTO, highlights the impact of SPS on export of frozen foods, identified the problems faced by the Bangladeshi exporters and provide some policy directions for exploiting opportunities with SPS measures.

1.0 Prologue

The requirements of SPS measures provide both challenge and opportunities to the exporters. Exporters have to ensure that their products meet the mandatory technical specifications of the target market that have been established to protect consumers’ health and safety, and the environment. They must also meet the voluntary quality standards applicable to the market and the specifications lay down by the prospective buyers. For this reason exporters have to obtain information about the technical requirements in the importing country, which in turn help them to adapt their products to meet these requirements.

There is a prevalent sense among WTO members that meeting SPS measures provides an important source of international trade opportunities. With respect to developing countries and LDCs it is realized that some benefits have been derived as that SPS agreement has engendered re-examination of

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some measures and opened potential market opportunities for their products. Achievement of additional benefits will depend on whether there is additional success in disciplining SPS requirements to further open market access worldwide. The producers and their national govt. can exploit these opportunities by marshaling the private and public resources. The SPS agreements limit the power of countries to bar agricultural products out of each other’s market without sound health reasons.

The agreement on SPS measures defines the international rights and obligations of member countries with respect to development or application of standard-related measures, which affect trade.

The SPS agreement establishes international rules on how to apply sanitary and phyto-sanitary measures. It acknowledges a country’s right to protect it from risks to human, animal, and plant life and health, and it conforms the need to constraint countries from using such measures as excuses to create unnecessary barriers to trade.

Sanitary and Phyto-sanitary measures include all relevant laws, decrees, regulations, requirement and procedures including end product criteria, processes and production methods; testing, inspection, certification and approval procedures, quarantine treatment including relevant requirements associated with the transport; provisions on relevant statistical methods, sampling procedure and methods of risk assessment; packaging and labeling requirement directly related to food safety. In brief, this agreement addresses the proper application of food safety, animal health and plant protection rules as they relate to international trade.

A principle objective of the WTO SPS agreement is to minimize the negative effect on trade from the adoption and enforcement of SPS measures. WTO members are encouraged to adopt internationally recognized standards but are free to apply more strict standards. The agreement recognizes the rights of importing countries to implement SPS measures that diverse from international norms (if this exist) but requires that they provide scientific justification for such measures and apply risk assessment mechanisms. The SPS allows members to take scientifically based measures to protect public health. The agreement commits members to base these measures on internationally established guidelines and risk assessment procedures.

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Generally speaking, the SPS agreement is a compromise that permits countries to take measures to protect public health within their borders so long as they do so in a manner that restricts trade as little as possible.

The SPS deals with technical assistance to developing countries; special and differential treatment to developing countries and least developed countries; dispute settlement and the setting up of a Committee on Sanitary and Phyto-sanitary Measures to provide a regular forum for consultations.

This study is designed with a view to provide information to the business community and government how to prepare them to exploit the opportunities from the WTO agreements on the application of Sanitary and Phyto-Sanitary measures by boosting their exports. This study provides detail guidelines about the measures of SPS standard and environmental compliance requirement, national enquiry points on SPS and Govt. support for SPS compliance in the country. It is hoped that it will be helpful for exporters and potential exporters to understand the requirements of their export markets. 1.1 Objectives

The main objective of the study is to focus on the WTO provisions relating to Sanitary and Phyto sanitary Measures. Therefore other objectives of the study are:

To highlights the impact of SPS on export of frozen foods from Bangladesh

To identify the problems that are faced by Bangladesh with SPS measures

To provide strategies and policy directions for exploiting opportunities from SPS measures.

1.2 Methodology

The Study is based on mainly secondary data and information. Secondary data were collected from the publications of WTO, websites of different organizations, publications of relevant Government authorities, research reports, annual reports of professionals associations and concerned organizations. Some primary data were also used. Sources of primary data were interviews, observation method, with governmental officials, members of professional organizations. Collected data are inspected, analyzed in

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simple tool like percentage and tabulated logically and consistently for making the study more meaningful. 1.3 Findings and Analysis

Provisions of WTO agreements regarding Sanitary and Phytosanitary measures:

In the WTO agreement there are 14 articles and three Annex, which are as follows:Article-1 General Provisions consist of a) Sanitary and phyto, sanitary measures b) Harmonization c) International standard and guidelines for: 1) Food safety 2) Animal health 3) Plant protection 4) Not covering above regulations, d) Risk assessment, e) Appropriate level of sanitary and phyto sanitary protection, f) Pest a disease free area and g) Area of low pest or disease prevalence.Article – 2: Basic rights and obligations.Article -3: Harmonization.Article- 4: EquivalencyArticle - 5: Assessment of risk and determination of the appropriate level of sanitary and phyto sanitary.Article – 6: Adapting to regional conditions including pest or diseases—FreeArea And Areas of low pest or diseases prevent.Article – 7: Transparency of sanitary and phytosanitary: -i) Publications of regulations, ii) Enquiry point, iii) Notification procedures and IV) General reservations.Article -8: Control, inspection and approval procedures.Article- 9: Technical assistanceArticle -10: Special and Differential Treatment.Article -11: Consultation and DisputesettlementArticle12: Administration.Article13: Implementation.Article -14: Final Inspection.3 Annex, such as: -Annex A: Definition, Annex B: Transparency of SPS Measures and Annex C: Control, Inspection and Approval Procedures.

1.3.1 Impact of SPS on export of Fisheries products from Bangladesh

The Fish export is the major source of foreign exchange earnings, second to readymade garments. The sector provides employment for more than

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750000 people and over ten million people are directly and indirectly dependent on shrimp.1 It is reveal from the recent report of FAO that international trade in Fishery commodities has already exceed US $ 50 billion a year and approximately one-third of all global fish and sea food—mainly shrimp—is traded in the international market. Consumer demand in the northern markets is at a record high, with shrimp exports from the developing world to the tune of US$ 8.7 billion a year. Bangladesh produced almost 3% of the total world’s shrimp production and generating an average of US$ 301 million annually from both Bagda (marine) and Golda (fresh water) farms. At present, there are 868 fish hatcheries and farms of which 2.18 lac hectors of shrimp farm. This export-oriented sector includes different sub sectors like hatcheries, sustainable aquaculture technology, feed meal plants, and processing unit for value-added products. These sub-sectors require proper attention to boost production, attain international standard quality, and meet the requirements of SPS measures & EU regulations, and increasing export earnings.

Today by 2007 there are about 58 hatcheries in Cox’s Bazar and 4 in the greater Khulna region. These 62 hatcheries are established by the efforts of private entrepreneurs and can generally boast of tangibles and fundamentals based on “Appropriate technology and professional management”.2 The fundamentals and tangibles of these hatcheris are of international standards and can match the procedures and practices of their competing aquaculture nation for the Penaeus Monodon (The technical Name of Bagda Shrimp) species. This hatcheris can together produce about 14 to 15 billions postlarvae of the Penaeus Monodon for the brackish water shrimps grow outs of Bangladesh.3 There is about 1,50,000 hectares of shrimps farming area as on 2006-07.4 The following table shows the export performance of Frozen food from Bangladesh for the last twelve years is given below.

1 Five year Plan 1997-2002, Ministry of Planning (GOV.), Dhaka.2 Selim Nizam Udiin Mahmood, “Shrimp Hatchery Industries in the Private Sector”, Srimps and Fish News Letter, Bangladesh Frozen Foods Exporters Associations (BFFEA), May-June-2007. 3 Ibid4 Ibid

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Export Performance of Frozen Food and shrimp from Bangladesh 1995 –1996 to 2006-07

Year Quantity in Million lbs

% Increase (+) /Decrease (-) over the year 1995-96

Value in Million US$

% Increase (+) /Decrease (-) over the year 1995-96

1995-96 75 - 314 -1996-97 76 + 1.3 231 -26.431997-98 61 - 18.37 294 - 6.371998-99 58 - 22.37 270 -14.021999-‘00 74 - 2.34 344 + 9.552000-01 79 + 5.3 363 + 15.62001-02 88 + 17.33 276 -12.102002-03 74 - 2.34 322 + 2.552003-04 85 + 13.33 390 + 24.202004-05 96 + 28 420 + 33.762005-06 108 + 44 459 + 46.182006-07 112 +49.33 515 +64.01

Source: Export Promotion Bureau

From the above table it is revealed that the export of frozen fish and shrimp was the lowest in the year 1997-98 in respect of quantity, and the export value is the lowest in the year 1996-97. This is due to the embargo imposed by the EU on export of shrimps from Bangladesh. It took nearly 5 years periods to reach the position of pre-embargo periods. This export value of this sector again decreased by 12.1% in 2001-02 over the base period but during this period the quantity of export is increased by 17.33 per cent over the previous year. This is due to the decrease of the price of Bangladeshi shrimps in the international market. It is also seen from the analysis that the quantity of export deceases by 2.34 percent in 2002-03 over the previous year. From 2003-03 to 2006-2007 there is a growing trend of export quantity and it is the highest in 2006-07. The value of export indicates a growing trend 2002-03 to 2006-07. The highest is being recorded in the year 2006-2007. Bangladesh fulfills the requirement of SPS agreement and requirement given by EU for safety of consumer’s health & hygiene. Most of the fish culture, processing plant, and hatcheries have been upgraded by using sophisticated technology. International organizations, different develop

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countries and the national government provided necessary support and technological assistance in this regard. The government in collaboration with private sectors owners and BFFEA established sophisticated lab rotary under the DoF, Ministry of Fisheries and Livestock, fulfill the testing requirement of WTO and EU. As such the quantities and value of export have been increasing gradually from 2003-04 and the highest being in the period of 2006-07. It is 64 percent higher than the year of 1995-96. Mean while a MOU is signed between the BSFF and BCSIR. The MOU and envisage as collaboration in the exportation of the huge potential of shrimps and fish based industry through regular exchange of knowledge and information in respect of production, processing, quality control, food hygiene and sanitary standards set by major consumers markets such as the USA, the EU and Japan. There are about 11 laboratories undertaking rapid test across the country. The BSFF (Bangladesh Shrimp and Fish Foundation) is trying to install independent internationally accredited laboratory for the fishery sector. The DOF is also installed the nitro furan detecting machine the Fisheries Inspection and Quality Control. (FIQC) Laboratory.

1.3.2 Problems Facing by Bangladesh associated with SPS measures:

i) Relatively little is known about the cost impacts of differing product standards and how they affect exporters in developing countries.

ii) In defining and implementing more effective standards, however, many poor countries will need technical assistance from international organizations and specialists with expertise. But these are not available to them.

iii) The SPS and TBT agreements with in the WTO have set a bar that must be met by exporting firms in developing countries. All WTO members can be expected to adopt such regulations, but the richer members choosing even stronger rules.

iv) Due to lack of modern technical infrastructure and capacity, developing countries could not engage in international standards development activities.

v) Providing internationally recognized testing and certification procedures for product are a common constraint.

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vi)Without resources necessary for building and maintaining modern standards and conformity assessment system, it is difficult either to ensure rights or to exercise responsibilities under the existing WTO rules.

vii) If developing countries lack resources to access information on international standards or to participate in their development, a key link between the rules of law as specified in the WTO systems and developing countries ability to fulfill their obligations and defend their rights is called into question. Many countries are also concerned to clarify provisions regarding special and differential treatment in the TBT and SPS agreements.

viii) A number of developing countries have cited problems with their ability to react to the notification of new TBT and SPS measures. A notification of intent to promulgate a new regulation with 60 –day open comment rule, is of questionable value to developing countries that have no capacity to respond.

ix) Concern over the use of environmental standards to restrict imports is also prevalent among developing countries. The use of trade measures to enforce environmental standards is viewed with serious alarm by many countries with regard to both manufacture and agricultural products.

x) The questions of how and under what circumstances Mutual Recognition Agreements (MRAs) are best implemented to facilitate trade have also been raised. Such agreements are used to reduce trade-impending effect of technical barriers through mutual recognition of national product testing and certification procedures. To date, they have only been negotiated between industrial countries although both the TBT and SPS agreements encourage all WTO members to enter into MRAs. xi) Industrial countries place high political priority on the inclusion of environmental and sustainable development considerations in trade negotiations. xii) Developing countries may be more vulnerable to environmental measures because of composition of their exports. They may also find such standards difficult to meet on account of several constraints.

xiii) From the survey made in different developed and developing countries it is revealed that duplicative and discrimination testing and certification requirements to be substantial barriers to trade and some

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representatives of the US industry claimed that standards related costs were the most significant trade restrictions in the industry. It is costly to meet multiple conformity assessment procedures and labeling requirements, and the delays involved are costly as well.

xiv)) It is realized from another survey conducted by Messerlin (2001) that the EU’s ban on import of beef treated with growth hormones has no basis in science as a safety measures but it is a convenient way to block competition to domestic cattle farmers.

xv) There is a risk that clarifying the status of eco-labeling wit respect to WTO rules would encourage its wider use in international trade and might serve the intent of the protectionists. In addition, it may become more difficult to challenge eco-labeling measures. Even if the disadvantages of clarification were not significant, there may be little direct benefits, as developing countries do not use eco-labeling to any great extent in their domestic markets and have little to gain from eco-labeling programs in OECD countries.xvi) Lack of efficiency to settle disputes in WTO dispute settlement organization. Domestic regulatory systems may restraint trade and limit market entry through environmental, health, or safety requirements are not based on international norms.

xvii) Developing countries protest that the standards promoted in the agreements lack their input and are dominated by the interests of developed countries. The inability of developing country’s Governments to adequately fund their delegations to attend SPS meeting is also concern for them.

1.3.3 Policy Directions:

Strategies and Policy Directions for Exploiting Opportunities from SPS Measures: Bangladesh is one of the signatory of WTO and she was the founding member of it. So there is no scope to avoid the SPS measures introduced by WTO.

a) The WTO members including Bangladesh are required to establish enquiry points that are responsible for providing answer to all reasonable

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questions from interested members and making available relevant documents on the standards that apply. b) The Members must notify new and proposed standards to the WTO’s SPS and TBT committee.c) An extensive use of mandatory third-party certification (e.g. ISO-9000) of conformity with technical regulations and standards may be ensured.

d) The developing countries and the LDCs need to monitor the development of dispute settlement regarding the standards of their products meet SPS and WTO rules and assert their own interest. e) In order to comply with the requirements to follow export certification procedures that are technically justifiable and carry out import inspection and quarantine procedure effectively, the member counties must have to develop microbiological laboratory infrastructure. This will help to do accurate diagnosis of disease and pests, identification of toxic residues, analysis and verification of the quality of agricultural, chemical and veterinary products.

f) The Member countries must develop their capacity to operate services that will provide information, surveillance and alerts on animal and plants diseases and pests, and monitor the presence of toxic or harmful residues in animals and agricultural products. It also helps to get information regarding the change of standards and other regulatory measures adopted by the developed countries from time to time for market access to these countries. These services enable the countries to detect problems that could put their SPS measures at risk. The establishment and effective operation of such service is a commitment assumed under the SPS agreements. The developing countries and LDCs require technical assistance from the developed countries for designing effective network for rapid flow of information. It is essential for Bangladesh to have necessary expertise knowledge and transfer of technology for assessment of risks, opportunity for meaningful participation in the discussion of SPS committee, dispute settlement bodies and international standards determining committees.

g) The Member countries Government should adapt their laws, rules, and standards to the requirements of SPS agreement. The harmonization of national legislation to adapt it to the requirement of SPS agreement is essential. In developing national standards and measures different provisions of international standards like OIE, CAC, IPPC and regulations of EU must

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be taken into consideration. It is required to incorporate into national regulations the concept of risk assessment, determination of appropriate level of SPS protection, identification of pest or diseases areas, and areas of low pests and diseases prevalence in order to comply with SPS agreement. In order to ensure transparency government must adapt their procedures to the terms of SPS agreement relating to publication of regulations, enquiry points and notification procedures.

h)The Member countries particularly Bangladesh must develop the capability to conduct risk analysis studies and retains the services of qualified professionals and expertise. If they can not establish risk analysis units enriched with professional expertise the countries will not able to provide scientific and technical justification for SPS measures required in case of imports & exports or their claims regarding disease or pest free areas or areas of low pest and disease prevalence. Likewise they will not be able to analyze the risk assessment studies of other countries for the recognition of pest or disease free areas or areas of low pest and disease prevalence or to argue against those import measures imposed by other countries that could hinder agricultural trade operations. i) By considering the capability, circumstances, culture, environment situations and problems of LDCs and developing countries complying with the new SPS measures they should be given sufficient time, technical and financial support. These problems of LDCs must be given due recognition in various bilateral, multilateral, regional and global negotiation forums.

j) The South Asians Countries by integrating their efforts and capabilities can participate meaningfully in the negotiations of notifications relating to SPS and TBT measures in the different international bodies. This in turn helps to uphold the regional interests.

k) The national standards and SPS requirements should as far as possible be consistent with internationally established standards, guidelines and recommendations developed by scientists and government experts working together in the specialized international bodies concerned with these measures.

l) The developing countries and LDCs particularly Bangladesh required support from international agencies to develop its capability, and capacity to meet requirement of international standards, technical and other SPS

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measures. The WTO members of the developed countries should maintain their commitment to provide support and assistance to the developing countries and LDCs countries to develop their facilities in order to comply with the SPS and TBT agreements.

m) The capacity building training of negotiators, lawyers, customs, and tax officials and other trade related cadres who will be capable to deal with complex multilateral negotiation process is extremely important for advancing Bangladesh’s interests in the contact of the on going negotiations.

Private sector plays dominant role in the export business. So sending representatives from the different Trade Bodies and professional Associations like experts from FBCCI in Geneva would help to uphold their interests.

They could send people with good exposure to business needs and trade laws. Such representation would serve as the link between businessmen and WTO, could alert them about the developments made in the WTO.

The recent assessment of country experience undertaken by the World Bank as well as other literature on the rural development, suggests that for developing countries to exploit the advantages of better access to developed-country markets and free trade in general, they need investment in capacity building targeting to improve the SPS and fisheries frozen foods.

1.4 Conclusion:

The consumers of different developed countries are becoming sophisticated and more demanding customer day by day. The government of these countries also placing more emphasis on food safety, hygienic conditions, in importing products from developing countries and LDCs. The WTO introduces sanitary and phytosanitary measures and the EU, USA, Japan, and other developed countries are also imposing different types of rules and regulations for ensuring standards and quality of the fish, fishery products, exported to these countries. Bangladesh has no other alternative but to fulfill the requirements of different international standards maintaining organizations e.g. HACCP, OIE, ISO, EU regulations, CAC, etc. in order to compete in the international market. The worldwide demand

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for fish has been increasing due to more demand for fish protein. It is irony for us that our productivity of shrimp is lower. But we enjoy competitive advantage in respect of “taste” of product. By continuous upgrading of production and processing of products by using modern technology, developing skill efficiency of manpower, establishment of sophisticated laboratory for testing quality attributes with joint effort of private sector and govt. organization, ensuring effective information flow with the relevant agencies and authorities, effective utilization of support services provided by the developed countries the country can make meaningful changes in this sector. By identifying different constraints created through SPS agreements, required capacity relating to development of human resources, infrastructure facilities and development of scientific and technical capability must be developed. So it can exploit necessary opportunities from these measures.

REFERENCES:

www.iso.orgwww.intracen.orghttp://docsonline.wto.org www.asq.orgwww.rdg.ac.uk www.crd.dkwww.nap.eduwww.bsi.global.comhttp://eur-op.eu.int http://docsonline.wto.orgwww.oecd.orghttp://docsonline.wto.org/genhome.asp:www.fao.org/ag/agp/pq/en/ippc.htmwww.wssn.netwww.codexalimentarius.netwww.oie.intwww.oiml.orgwww.itu.intwww.gen.gr.jpwww.iecee.org

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http://www.iecee.org/

http://www.gen.gr.jp/

http://www.itu.int/

http://www.oiml.org/

http://www.oie.int/

http://www.codexalimentarius.net/

http://www.wssn.net/

http://www.fao.org/ag/agp/pq/en/ippc.htm

http://docsonline.wto.org/genhome.asp

http://www.oecd.org/

http://docsonline.wto.org/

http://eur-op.eu.int/

http://www.bsi.global.com/

http://www.nap.edu/

http://www.crd.dk/

http://www.rdg.ac.uk/

http://www.asq.org/

http://docsonline.wto.org/

http://www.intracen.org/

http://www.iso.org/


List of Acronyms

SPS - Sanitary and PhytosanitaryWTO - World Trade OrganizationLDCs - Least Developed CountriesFAO - Food and Agriculture organizationEU - European UnionBFFEA - Bangladesh Frozen Foods Export AssociationDOF -Department of FisheriesMOU -Memorandum of UnderstandingBSFF -Bangladesh Shrimp and Fish FoundationBCSIR - Bangladesh Council of Scientific and Industrial ResearchFIQC - Fish Inspection and Quality ControlTBT -Technical Barrier to TradeMRA - Mutual Recognition AgreementOECD - Organization for Economic Co-operation and DevelopmentOIE - Office International des epizootiesCAC - Codex Alimentarius CommissionUSA - United States of AmericaIPPC - International Plant Protection Convention FBCCI - Federation of Bangladesh Chamber of Commerce and IndustryHACCP - Hazard Analysis and Critical Control PointISO - International Organization for StandardizationEU - European Union

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article sps provisions

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