Non Trade Barriers Essay

Final Technical paper on NTB…RM…Unedited version -April 2005 NON-TARIFF BARRIERS AFFECTING INDIA’S EXPORTS Rajesh Mehta2,3 1 1. Introduction Countries use many mechanisms to restrict imports. Till the beginning of 1970s, tariffs (custom duties) were the principle mode of protectionism. But with successive rounds of GATT negotiations, there was a large drop in the average tariff levels of manufactured goods in the developed country markets.

When tariffs paled into insignificance, these countries resorted to a form of administered protection known as Non-Tariff Measures (NTM) – Quantitative restrictions, tariff quota, voluntary export restraints, orderly marketing arrangements, export subsidy, export credit subsidy, government procurement, import licensing, antidumping/countervailing duties, technical barriers to trade, to name a few. It was a return to protectionism harder and more expensive than in the 1950’s and 1960’s. In the 70s and 80s NTMs spread from textiles and clothing to steel, cars, shoes, etc.

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Although measurement problems are formidable, it is estimated that in 1986, 16 percent of imports of industrial countries were subject to “hard core” NTMs: Quotas, non-automatic licensing and variable levies. If one broadens the definition of NTMs to include state monopolies, import surveillance (including automatic license) countervailing duties and antidumping provision, the results are more compelling. Between 1995 and 2000, according to reliable information5, WTO members reported 1441 antidumping investigations.

In the Uruguay Round, the approach for dealing with NTMs was to bring existing barriers into the realm of multilateral negotiations, strengthen rules governing their use, develop surveillance mechanisms to enforce compliance, and offer improved dispute settlement procedures – the aim was to minimize trade distorting and trade restricting effect of NTMs. Some notable success was also achieved in reaching substantive agreements limiting, clarifying or discipling the system that members may use – Article III. 8. b allowing subsidies to domestic producers; Article III. allowing members to have internal price control measures; Article VI on Anti-dumping and countervailing duties; Article VII on methods of customs valuation; the Agreement on Agriculture converting all quantitative restrictions into tariffs; the TBT Agreement defining the rights and obligations of members with respect to development and application of technical regulations and the ways in which products are to be assessed to determine whether they meet the specified technical standards; and similarly, the Sanitary and Phytosanitary Measures (SPS) with respect to human, animal and plant life.

Nevertheless, most would concede that many of the rules fall short of effectively controlling the use of NTMs. More frequently than not, there are instances of flagrant violation of these rules or are applied unreasonably. Some of these such as anti-dumping are used sometimes to foster a climate of uncertainty for foreign suppliers, and or a method of harassment designed to bring about changes in foreign trading practices and policies6. In the same way, domestic policies and regulations may also 1 2 3 5 6

Earlier versions of this paper were presented at technical workshops of ADB Policy Networking Project in October 2004 and Jan. 2005. Author is thankful to the participants of the seminars, particularly Anwarul Hoda, K. L. Krishna and Arvind Virmani, for useful comments and suggestions. Detail comments provided by Hoda were very useful in revising this paper. I am also thankful to Saikat Sinha Roy for his help in preparation of this paper. Prof. R. G. Nambiar and Dr A. Robert have also provided inputs in the write-up of this paper and I am extremely grateful to them.

However, I am responsible for any errors or omissions. Senior Fellow, Research and Information System for Developing Countries (RIS), New Delhi. Email: [email protected] org. in This report was prepared by consultants for the Asian Development Bank. The views expressed in this report are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use.

Prusa, T. J. (2003), “The Growing Problem of Anti-Dumping Protection and What It Means for the Asia-Pacific Region”, mimeo. See, Datta, S. (2003), “Bringing Objectivity to Anti-Dumping Investigations – The India Model”, (mimeo), ALG India, www. alg-india. com; and Datta, S. (2004), “Discussion paper on the Use of ‘Facts Available’ in Anti-dumping investigations”, paper presented at the national seminar “Negotiations on WTO Rules”, organized by Government of India, Ministry of Commerce, New Delhi, Sept. 21-22, 2004.

C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 1 Final Technical paper on NTB…RM…Unedited version -April 2005 result in a variety of impediments to trade, depending upon their intent and behavioural responses that are induced. The ascend of NTMs holds special significance to developing countries like India. These countries have been encountering difficulties in accessing developed country markets because of restrictive standards, burdensome regulations, and expensive compliance costs.

Therefore, it is an opportune time to reflect on the current situation regarding NTMs, to assess the extent of the problem, and to suggest policies for its ramification. This is the main objective behind this paper. Specially, the paper seeks to (a) (b) (c) Identify and trace the type structure of NTBs affecting India’s exports Examine these commodity-wise/category-wise with the main focus on developed country markets. Suggest or recommend policy options.

After an initial section on definitional and data problems, the organization of paper is essentially chronological: a section on type and nature of barriers other than tariffs faced by Indian business abroad especially in developed country markets; a section dealing with a few case studies primarily to highlight the problems created by these barriers to Indian businessmen; a section on policy options and recommendations; and finally a section on how to raise the present concern over these non-tariff measures from a shouting match to a meaningful dialogue at international forums.

In this paper we could not estimate the impact of NTBs on India’s export. Trade barriers (tariff and non-tariff) in destination countries have significant impact on India’s exports because these measures impose additional cost on such exports. Theoretically, an estimate of impact of trade barriers on India’s exports requires knowledge of the extra cost (sometimes known as ‘trade cost’ or ‘tax equivalence’)7. It also depends upon market conditions in India, destination market, and the rest of the world.

An estimate of impact of tariffs (in destination countries) on India’s exports8 can be derived by using supply and demand price elasticities in India and destination country, if sufficient data exists. It is very difficult, almost impossible, to estimate the impact of non-tariff measures on India’s exports9, since there is (i) no reliable estimate of extra cost or ‘tax equivalence’ due to these measures, and (ii) no systematic information is available on NTBs faced by India’s exports.

NTBs raise export price almost in a manner as a tariff does. Due to non-availability of (i) these price differences and (ii) supply and demand conditions, it is not feasible to estimate the impact of these barriers on India’s exports. 2. 2. 1 Definitions and Quantification of Incidence of NTBs Definition of Problem What we should mean by Non-Tariff Measures (NTMs) or Non-Tariff Barriers (NTBs) is not entirely self-evident.

Baldwin (1970) in his seminal work defines “non-tariff distortion as any measure (public or private) that causes internationally traded goods and services, or resources devoted to the production of these goods and services, to be allocated in such a way as to reduce potential real world income”10 This is a useful definition but is problematic in the context of defining “potential” real world income. Deardorff and Stern (1997) have authored the most recent work, but they use the term, non-tariff barriers (NTBs). 1 According to them, NTBs have the following stylized characteristics, namely reduction in quantity of imports, increase in the price of imports, change in elasticity of demand for imports and variability and uncertainty in their implementation. While the authors’ analysis is mostly theoretical, they propose a classification system, which has, at its core, price (other than tariffs) and quantity border measures. 7 8 9 10 11 See, Anderson, J. E. and E van Wincoop (2004), “Trade Costs”, Journal of Economic Literature, and references quoted therein.

Authors quote “A rough estimate of the tax equivalent of “representative” trade costs for industrialized countries is 170 percent. This number breaks down as follows: 21 percent transportation costs, 44 percent border-related trade barriers, and 55 percent retail and wholesale distribution costs (2. 7=1. 21*1. 44*1. 55). ” See, among others, Vermani, A (1991), “Demand and Supply Factors in India’s Trade”, Economic and Political Weekly, Feb. 9, 1991: and Mehta, R. and P. Mathur (2004), “India’s Export by Countries and Commodities: On the estimation of Forecasting Model using Panel Data”, RIS – DP # 84/2004.

Mehta, R. (2000), QR Removal and India’s import, RIS, make an attempt to estimate the impact of QR removal on India’s import using econometric model; NTM (due to QR removal) is measured by an index commonly as “coverage ratio”. Baldwin, R (1970), Non-Tariff Distortions in International Trade, Brookings Institutions, Washington, D. C. Deardorf, A and R. Stern (1997), “Measurement of Non-Tariff Barriers”, OECD Economics Department Working Paper No. 179, Paris, OECD. C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 2 Final Technical paper on NTB…RM…Unedited version -April 2005

UNCTAD’s TRAINS (Trade Analysis and Information System) classification defines over 100 different types of NTMs, and a much smaller subset called “hard core measures” that includes quantity control measures excluding tariff quotas and enterprise specific restrictions; finance measures excluding regulations concerning terms of payment; and price control measures. 12 However, this classification excludes many internal regulatory measures that can also discriminate against imports such as production subsidies, tax concessions, and discriminatory government procurement.

Yet another problem with this classification is that it does not distinguish between NTMs that are GATT consistent and not GATT consistent. Finally there is the WTO inventory of NTMs based on notifications collected from national sources, which in the view of notifying contracting parties constituted non-tariff measures. This inventory includes licenses, quotas, prohibition, voluntary export restraints, plus information related to custom surcharges, minimum import prices, additional taxes and charges and approval process for imports and exports.

Table 1 provides a comparative picture of UNCTAD’s TRAINS inventory and WTO/GATT inventory of NTMs. In summing up, there is no single internationally agreed list of NTMs. In general, NTMs cover all measures affecting trade, other than tariffs, and hence any list of NTMs will be very long, and is probably continuously growing as governments invent new and new measures. Being nontransparent, NTMs are difficult to identify and analyse. Since NTMs cover all measures affecting trade other than tariffs, what then are NTBs. Are the two terms synonymous?

In the literature, both the terms are used interchangeably, and the distinction is quite vague. The rationale for using the term “measure” instead of “barrier” is sometimes held on the ground that in some cases policies that stimulate the volume of trade rather than retard trade such as export subsidies cannot be held as a barrier. 13 A barrier means prevention of something – in this case trade. Exports subsidies do not prevent trade, and hence cannot be a barrier. This interpretation will keep many internal regulatory measures out of the NTB bundle. Agricultural production subsidies, for instance, will be ut of this NTB bundle. Global agriculture is riddled with national subsidies to farmers that perpetuates a widely critised disarray in agricultural production and generates substantial trade conflicts – the large agricultural production surpluses in rich countries maintained by a heavily subsidised agriculture lowers the export opportunities of developing countries such as India. Though the GATT – Uruguay Round of negotiations began to address agricultural distortions with agreed disciplines on domestic agricultural support measures, only modest progress is achieved in reducing support and protection levels.

By now, a lot has already been written examining the impact of these subsidies on developing countries like India. 14 Without entering too much on this debated problem, we treat in the present context all those measures/policies employed by foreign government as “barriers” when these are found to be used unreasonably or in a discriminatory way against imports from India. To illustrate: take sanitary and phytosanitary Measures (SPS) as Technical Barriers to Trade (TBT). Importing them on imports in perfectly justified so long it is meant to protect human, plant and animal life.

However, certain countries have been at times laying very stringent norms much above the level warranted to meet legitimate health and safety concerns. Because of their legitimacy, these measures are hard to control. 15 But there is little doubt that SPS and TBT measures do restrict trade unreasonably and hence are barriers, especially in the food area. A departure from accepted international norms as standards is one way to judge whether a particular measure is a barrier or not. Through out this paper, we use the term NTBs in this latter sense. 2 13 14 15 See Malcolm Bosworth, (1999), “Non-Tariff Measures As Trade Barriers: Yesterday’s Problem or What? ” paper prepared for the OECD Workshop with non-Member Economies on Barriers to Trade in Goods and Services in the Post Uruguay Round Context, Paris, 27-28 Sept. 1999. See Bora, Bijit (2003), “The Quantification and Impact of Non-Tariff Measures”, paper presented at OECD Global Forum on Trade: The Market Access Challenge in the Doha Development Agenda, Paris 4-6 June 2003, and WTO document TN/MA/SS, 11 Sept. 002. See, among others, Ashraf, N. , M. McMillan and A. P. Zwane (2004), “My Policies and Yours: Do OECD Agriculture Policies Affect Poverty in Developing Countries? ”, mimeo. : Hoda, A. and A. Gulati (2002), “Trade Liberalization and Food Security in South Asia”, ICRIER-ICAR-IFPRI Conference on Economic Reforms and Food Security – The Role of Trade and Technology, April 24-25. Controlling the use of SPS and TBT regulations that do not overly restrict trade is a major multilateral challenge.

It requires sufficiently tightening the disciplines on use of these measures, while still enabling governments the latitude needed to use them to meet legitimate health and safety goals. Although SPS agreement was negotiated during the Uruguay Round and the TBT Agreement revised, there remains plenty of scope for governments to use these measures as a form of protection under the guise of legitimate concern. SPS restrictions therefore remain a very effective protectionist device that, because of their complexity, is particularly deceptive and difficult barriers to challenge.

C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 3 Final Technical paper on NTB…RM…Unedited version -April 2005 2. 2 Measuring the Incidence of NTBs Two different indices (or methods) are generally used in the literature to measure the extent of protection accorded by NTBs. These indices estimate the “frequency ratio” (i. e. how many lines or products) of imports is subject to NTBs and “coverage ratio of NTBs (i. e. how much of imports of a country are subject to NTBs).

Since both the indices have some advantages and at the same time limitations16, we will rely on estimates of both these indices. (i) Index of Coverage Ratio (Cj) is defined as Cj = M j,T Mj ? 100 where “Mj,T” is the value of import subject to reported NTBs in the given product class (or commodity group) and “Mj” is total value of import of commodities in that class. (ii) Index of Frequency Ratio (Fj) is defined as Fj = { nTj / nj }x 100 where “nTj” is the number of products (or lines) subject to reported NTBs in the given class (or commodity group), and “nj” is the total number of commodities in that class.

Mehta and Mohanty (1999)17 have used Index of Frequency Ratio based on hard-core NTBs of nonagriculture goods, for 1995 and 1998. 2. 3 Data In order to address the issues of NTBs, we need accurate and reliable data. UNCTAD’s TRAINS is the most comprehensive international database available on NTMs. It covers NTMs for over 80 countries. But it has several drawbacks. The data is compiled on a piecemeal basis, and the quality of the data is too suspect.

Further, the data has not kept pace with great changes in NTMs, and appear to have become less reliable over time. There are for instance some studies which have observed, using TRAINS database, a downward trend in the use of NTMs, while at the same time business surveys have came out with the result of increasing prevalence of NTMs. While these deficiencies are well known, alternatives are also nil. The WTO has a database based on notifications submitted by member countries, but the data is limited compared to UNCTAD data. 2. 4 Recent Studies

A few recent studies have examined the incidence of NTBs faced by Indian business abroad. The Commonwealth Secretariat18 undertook a case study of NTBs affecting India’s exports of pharmaceuticals, engineering products, leather products, marine products and mangoes. The study concluded by stating that Indian exports, in general, faced NTBs relating to (i) packaging and labeling regulations (ii) standards, (iii) uniformity requirements (iv) labour standards, (v) documentation and related procedures and (vi) company and product registration.

The report emphasized that compliance cost with the regulatory requirements often proved to be severe for smaller firms than bigger firms. A recent study prepared by the Federation of Indian chamber of commerce and Industry (FICCI)19 observed intensification of NTBs during the post GATT period. The report adds, “Intensification of antidumping measures and quantitative restrictions on many products in the United States …. are all examples of restrictive trade practices adopted by developed nations”.

The chamber asks “The ban imposed on import of shrimps if caught in the vessels without turtle excluder device by the United States is a glaring example of restrictive trade practice by developed nations…… Can a country or a group decide what is good and what is not good for the protection of global environment when eco system and level of development in each country is different”; and expresses concern at the slow progress in implementation of various agreements concluded at the Uruguay Round. 16 17

Mehta, R (1999), Tariff and Non-Tariff Barriers of Indian Economy: A Profile, RIS Mehta, R. and S. K. Mohanty (1999), WTO and Industrial Tariffs: An Empirical Analysis for India, RIS, New Delhi 18 Wiynaraja, G. etal. (2001), Non-Tariff Measures Affecting India’s Exports: Case Studies of Pharmaceuticals, Engineering, Leather Products, Marine Products and Mangoes, Commonwealth Secretariat, Dec. 2001. 19 See, FICCI Report on NTBS, 2003. C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. oc 4 Final Technical paper on NTB…RM…Unedited version -April 2005 The Economic Division of the Department of Commerce together with the Indian Institute of Foreign Trade (IIFT) have examined the incidence of Non-tariff barriers faced by Indian business abroad, and C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 5 Final Technical paper on NTB…RM…Unedited version -April 2005 makes periodic updations to its reports. 1 This report is again based on analysis of available international databases like the UNCTAD’s TRAINS database. Government of India has also recently Table 1: Comparison of UNCTAD’s TRAINS and WTO/GATT Inventory of NTMs UNCTAD TRAINS Parts and Sections Part I A B C D E Part II A B C D E F G Part III A B C Part IV A B C D E F G H I J K L Part V A B C D E F Description Govt. Participation in Trade and Restrictive Practices Tolerated by Govts. Government aids Countervailing Duties Govt.

Procurement Restrictive Practices tolerated by Govts State Trading, Government monopoly practices, etc. Customs and Administrative Entry Procedures Anti dumping duties Valuation Custom classification Consular formalities and documentation Samples Rules of origin Custom Formalities Technical Barriers to Trade General Technical Regulation and subsidies Testing and certification arrangements Specific Limitation Quantitative Restriction and import licensing Embargoes and other restrictions of similar effect Screen time Quotas and other mixing regulations.

Exchange control Discrimination resulting from bilateral agreements Discriminatory sourcing Export Restraints Measures to regulate domestic prices Tariff Quotas Export Taxes Requirement concerning making, labeling, and packaging Others Charges on Inputs Prior Import deposits Surcharges, port taxes, statistical taxes, etc Discriminating film taxes, use taxes, etc. Discriminatory credit restrictions Border tax adjustments Emergency Action WTO/GATT Inventory Price Control Measures Administrative pricing Voluntary Export Price restraint Variable charges Antidumping Measures Countervailing Measures

Finance Control Measures Advance Payment Requirements Multiple exchange rates Restrictive official foreign exchange allocation Regulations covering term of payment for import Transfer delays Automatic Licensing Measures Automatic license Import Monitoring Surrender requirement Quantity Control Measures Non-automatic Licensing Quotas Import prohibitions Export Restraint arrangement Enterprise specific Restrictions Monopolistic measures Single channel for imports Compulsory National Services Technical Measures Technical Regulations Pre-shipment formalities Special custom formalities Obligation to retain used products Miscellaneous measures for sensitive product categories Marketable permits Public procurement Voluntary instruments Product liability Subsidies Sources: See Bora, Bijit op. cit. submitted to the WTO a notification that identifies NTBs, which its exporters are facing in various markets22. 21 22 Economic Division, Ministry of Commerce, Non-Tariff Barrier (NTBs) Faced by India, November 1999; and Non-Tariff Barriers Faced by India and Policy Measures, a Study: Interim Findings, October 2001. See, WTO (2003), Non-Tariff Barriers Notifications, TN/MA/W/25, TN/MA/W/25, 28 March 2003.

C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 6 Final Technical paper on NTB…RM…Unedited version -April 2005 3. Incidence of NTBs In this section, we present some data relating to the extent of NTBs faced by Indian exporters in the Table 1: Comparison of UNCTAD’s TRAINS and WTO/GATT Inventory of NTMs UNCTAD TRAINS Parts and Sections Part I A B C D E Part II A B C D E F G Part III A B C Part IV A B C D E F G H I J K L Part V A B C D E F Description Govt. Participation in Trade and Restrictive Practices Tolerated by Govts. Government aids Countervailing Duties Govt. Procurement Restrictive Practices tolerated by Govts State Trading, Government monopoly practices, etc.

Customs and Administrative Entry Procedures Anti dumping duties Valuation Custom classification Consular formalities and documentation Samples Rules of origin Custom Formalities Technical Barriers to Trade General Technical Regulation and subsidies Testing and certification arrangements Specific Limitation Quantitative Restriction and import licensing Embargoes and other restrictions of similar effect Screen time Quotas and other mixing regulations. Exchange control Discrimination resulting from bilateral agreements Discriminatory sourcing Export Restraints Measures to regulate domestic prices Tariff Quotas Export Taxes Requirement concerning making, labeling, and packaging Others Charges on Inputs Prior Import deposits Surcharges, port taxes, statistical taxes, etc Discriminating film taxes, use taxes, etc. Discriminatory credit restrictions Border tax adjustments Emergency Action WTO/GATT Inventory

Price Control Measures Administrative pricing Voluntary Export Price restraint Variable charges Antidumping Measures Countervailing Measures Finance Control Measures Advance Payment Requirements Multiple exchange rates Restrictive official foreign exchange allocation Regulations covering term of payment for import Transfer delays Automatic Licensing Measures Automatic license Import Monitoring Surrender requirement Quantity Control Measures Non-automatic Licensing Quotas Import prohibitions Export Restraint arrangement Enterprise specific Restrictions Monopolistic measures Single channel for imports Compulsory National Services Technical Measures Technical Regulations Pre-shipment formalities Special custom formalities Obligation to retain used products Miscellaneous measures for sensitive product categories Marketable permits Public procurement Voluntary instruments Product liability Subsidies developed country market. The main source for the material used is a recent study by the economics division of the commerce ministry, Government of India. The study again draws on UNCTAD’s TRAINS database. 3. 1 NTBs Facing India in US Markets UNCTAD’s TRAINS database lists the following hardcore NTBs applicable to all imports to the United States (Table 2) C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 7 Final Technical paper on NTB…RM…Unedited version -April 2005

Table 2: List of NTBs in the United States of America 1 Tariff quota 2 Antidumping duty 3 Countervailing duty 4 License for selected purchasers 5 Authorization to protect human life 6 Authorization to protect animal life 7 Authorization to protect plant health 8 Authorization to protect wild life 9 Authorization to ensure human safety 10 Authorization to ensure national security 11 Quota to control 12 Prohibition to protect human health 13 Prohibition to ensure human safety 14 Product characteristic requirements for human health protection 15 Product characteristic requirements for plant health protection 16 Product characteristic requirements to 17 18 19 20 21 22 23 24 25 26 rotect environment Product characteristic requirements to control drug abuse Product characteristic requirements to ensure human safety Product characteristic requirements, n. e. s. Marking requirements Marking requirements to protect human health Labelling Requirements Labelling Requirements to protect human health Labelling Requirements to protect environment Labelling Requirements to ensure human safety Testing, inspection, or quarantine Requirements to protect human How significant are these for India from the point of exporting to US market? In order to throw some light, we have tabulated the percentage share of imports from India facing different NTBs in US. Figure 1 displays the received result.

An inspection of the data given in the figure shows that 44 percent of imports from India to US were facing various types of NTBs. The message is that a sizeable share of Indian exports to US faces various kinds of obstacles in the form of NTBs. F ig u r e 1 : P e r c e n t S h a r e o f I m p o r ts fr o m I n d ia in U S F a c in g D iffe r e n t N T B s -1 9 9 9 4 4 3 3 2 2 1 1 5 0 5 0 5 0 5 0 5 0 % % % % % % % % % % 44% N T M s o n Im p o rts fro m I n d ia Source: Department of Commerce, Economics Division, Non-Tariff Barriers Faced by India and Policy Measures: A Study, Interim Findings, October 2001. The US applies a range of non-tariff barriers including compulsory detention and laboratory testing.

While the preceding analysis certainly helped to highlight the overall magnitude of the problem, we would still want to know which of the several listed core NTBs are the most prominent ones in overly restricting our exports. To provide a feel of this, we have tabulated value of imports falling under each of the listed NTBs24 and then calculated the percent share of each in total US imports from India. The received picture is displayed in figure 2. 24 This excludes anti-dumping duties and countervailing duties as they apply for specific countries. C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 8 Final Technical paper on NTB…RM…Unedited version -April 2005 Figure 2: Important NTBs facing Indian imports in US Others 40% Technical requirements (safety) 25% Quota (Drugs) 1% Technical requirements (Health) 3%

Authorisation (Plants) Labelling requirements 5% 19% Inspection (Health) Requirements (Drugs) Technical Authorisation (Wildlife) 3% 1% 3% For details of Data Source see Appendix 1 Source: Department of Commerce, Economics Division, Non-Tariff Barriers Faced by India and Policy Measures: A Study: Interim Findings, October 2001. It can be seen from the figure that the most prolifically applied NTBs by US on Indian Goods are Technical Barriers to Trade (TBT) including safety, and food safety measures, frequently referred as Sanitary and Phytosanitary Measures (SPS). Which are the commodities affected the most by NTBs? Figure 3 provides the answer.

The most prominent ones using Index of Coverage ratio (with the highest percentage share in US imports from India) are: woven apparel (19%), Knit apparel (7%), textile floor coverings (9%), edible fruits and nuts (5%), fish and sea foods (3%), cotton yarn and fabric (2%), Iron & steel products (2%) and vehicles (2%). (An inventory of NTBs faced by Indian exports, commodity-wise is given in Annex-2). Figure 3: NTBs facing India’s Imports in US: Commodity-wise Analysis Woven Apparel 19% Knit apparel 7% Textile floor coverings 9% Others 51% Edible Fruits & Nuts Fish5%Seafood & Vehicles Cotton yan, Fabric 3% 2% & steel products 2% Iron 2% Source: Department of Commerce, Economics Division, Non-Tariff Barriers Faced by India and Policy Measures: A Study, Interim Findings, October 2001. 3. NTBs Facing Indian Goods in the EU Market How stringent are the rules in the EU market? In table 3, we have listed an array of NTBs applicable to all imports into EU. To illustrate the magnitude of incidence of these measures on Indian business, we have tabulated percent share of imports from India in total EU imports. The data applies to the year 1999. For comparison purpose, we have also tabulated corresponding share from the rest of the world to EU, and have placed it along with the percentage share of India. An inspection of this data shows that nearly one fourth of imports from India to EU face the so-called NTBs, while for the world as a whole this share is only 12 percent.

Table 3: List of NTBs in the European Union Antidumping Investigations Antidumping duties Countervailing duties Retrospective Surveillance C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc Quota to protect human health Quota to protect environment (Montreal Protocol) Prohibition Prohibition for human health protection 9 Final Technical paper on NTB…RM…Unedited version -April 2005 Prior Surveillance Prior Surveillance to protect human health Prior Surveillance to protect environment Non-automatic license Authorization to protect environment Authorization to protect wild life (CITES) Authorization to control drug abuse Allocated quotas Source: UNCTAD’s TRAINS database Prohibition on the basis of origin (Embargo) Technical Requirements Product haracteristic requirements for human health protection Product characteristic requirements to ensure human safety Labelling requirements Labelling requirements to protect human health Testing, inspection and quarantine requirements Figure 4: EU: Percent Share of Imports from India & World facing Different Hard Core NTBs-1999 23. 3 30 20 10 0 World India Source: Ministry of Commerce, Economics Division, Non-Tariff Barriers (NTBs) Faced by India, Preliminary Report, Nov. 1999. To probe further which are the most prolifically applied NTBs by EU on Indian goods, we have tabulated the frequency ratio of various NTBs applied by EU on Indian goods. The received results are displayed in figure 5. A glance at these results show that the most commonly applied NTB by EU on Indian goods is Tariff Quota – 44 per cent of national tariff lines come under Tariff Quota.

Next comes non-automatic license (21% of tariff lines) Import Monitoring (12% of tariff lines), seasonal Tariff Rates (8% of tariff lines), Import Monopoly (7% of tariff lines), and variable changes (6% of tariff lines). Figure 5: Important NTBs Facing Indian Imports in EU: No. of National Tariff Lines in percent Index of Frequency Ratio 12. 1 Variable Charges n. e. s. 6% Import Monoply 7% Seasonal Tariff Rates 8% Bilateral Quota 1% Quota for Environmental Protection 1% Tariff Quota 44% Import Monitoring 12% Non-Automatic Licence 21% C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 10 Final Technical paper on NTB…RM…Unedited version -April 2005

Figure 6: NTBs Facing India’s Import in EU for Different Commodity Group: Index of Frequency Ratio Textiles and Textile Articles 1% Vehicles, Aircraft, Vessels and Mineral Products Associated Transport 1% Equipment Okastucs abd Articles thereof; 1% Rubber and Articles Thereof 2% Live Animals 2% Machinery and Mechanical Appliances; Electrical Equipment; Parts thereof; Base Metals and Articles of Sound Recorders and Base Reproducers, Television ImageMetal and Sound Recorders and13% Reproducers, and Parts and Accessories of such article 4% Total No. of Commodities = 83 Vegetable Products 34% Products of the Chemical or Allied Industries 23% Prepared Foodstuffs; Breverages, Spirits and Vinegar; Tobacco and Manufactured Tobacco Substitutes 19%

In figure 6 we show the type of structure of commodities by tabulating the frequency ratio of commodities facing various NTBs in EU. An inspection of these results show that the most important product group facing NTBs in EU is vegetable products – 34 per cent of all commodities facing NTBs are ‘vegetable products’. Next comes products of chemical and applied products (27%), prepared food safety and Beverages etc. (19%), Base metals and articles of base metals (13%), and machinery, mechanical appliances and electrical equipments etc. (4%). 3. 3 NTBs Facing India’s Exports in Japan Japan is seen to have the highest listed NTBs for a large number of items compared with EU.

UNCTAD has identified around 36 categories of hard-core NTB, which Japan is imposing on its imported goods. Out of this, at least half of it are imposed on imports of manufactured goods to Japan (Table 4), i. e. there are 2742 manufactured commodities (lines) which face at least one or other type of listed NTBs. Also, a significant number of Japanese imports are subject to multiple types of NTBs; and most of these items, among industrial products, belong to commodity groups like mineral fuel (HS Chapter 27), organic chemical (chapter 29), pharmaceutical products (chapter 30), fur skin and artificial skin (chapter 43) and wood and wood products (chapter 44).

Apart from these, imports of a large number of commodities require licenses, must meet particular specifications, and imported only through specific agencies etc. (part II of Table 4 gives a few illustrations). Table 4: Types of NTBs imposed by Japan on Non-Agriculture Products I Broad categories of NTBs imposed: 1. Tariff Quota 2. Variable charges 3. Antidumping duties 4. Automatic license 5. Non-automatic license 6. Authorization for wild life protection 7. Authorization to ensure national security 8. Authorization for political reasons 9. Global quota 10. Quota for seminar products 11. State monopoly of imports 12. Sale importing Agency 13.

Product characteristic Requirements to protect human health 14. Product characteristic requirements to protect environment 15. Product characteristics to protect wild life II Some select examples of NTBs i) Tariff quota on certain food products, alcohol, leather and footwear products ii) Prior to importation motor vehicles generally need to meet a type approval test. iii) Only some select branded vehicles approved for car imports: (a) BMW (46 types), (b) Volkswagen / audi (84 types), (c) Mercedes Bens (62 types), (d) Oper (20 types) (e) GH (12 types) (f) Chrysler (6 types). Examination period: 2 months C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 11

Final Technical paper on NTB…RM…Unedited version -April 2005 Auto components regarded as essential to vehicle safety called “critical parts” must be replaced either by a certified garage approved or capable of repairing all critical parts, or the replacement needs to be checked by Ministry of Transport. v) According to the provision of Law, importing pharmaceuticals require a license from the Minister of Health and Welfare. vi) For granting a license to import cosmetics, the MHW uses a protective list, such that only ingredients with prior approval can be used. vii) Iron and steel production can apply for government assistance, such as low interest loan, loan guarantees and tax breaks.

Source: Mehta R (2003), “WTO, Liberalization and Industrial Sector: The Case of Market Access”, R. I. S Occasional Paper No. 63. iv) Figure 7: Japan: Percent share of Imports from India and Word facing different Hard Core NTBs 45. 9 50 45 40 35 World India 39. 5 Source: Ministry of Commerce, Economics Division, Non-Tariff Barriers (NTBs) Faced by India, Preliminary Report, Nov. 1999. Figure 7 displays the percent share of imports from India in total imports of Japan facing different NTBs vis-a-vis the corresponding percent share for the world as a whole. An examination of these results shows that 45. 90 percent of India’s exports to Japan faces these hard core NTBs. The comparative figure for the world is 39. 5 percent.

The inference is that a very high percentage of imports from India to Japan face hurdles in the form of NTBs, while for the world as a whole the figure work out less. The most prolifically applied NTBs by Japan on Imports from India are Product Characteristic Requirements to Protect Human Health – 62 per cent of national tariff lines are frequented by this NTBs alone Then comes Authorisation (15%), labelling requirements (8%), Quota (7%), Nonautomatic license (1%) and state monopoly (1%). To locate the type structure of commodities which are more frequented affected by Japan’s NTBs than others, we have tabulated the frequency ratio of the number of commodities facing these NTBs. The results are shown in Figure 9.

As can be seen from the figure, the most important product group that are frequented by NTBs are products of Chemical and Allied Products (37%) out of a total of 354 commodities facing NTBs fall under this product group), textiles and textile products (19%), vegetable products (15%), live animals (7%), prepared food stuffs (5%) etc. We shall try to summarise what is already a condensed argument. The following points seem worth making. 1. 2. 3. A sizeable share of India’s exports to developed country markets – US, EU, Japan and other developed countries – face various NTBs that seek to restrict imports of Indian goods. The types vary from country to country and from product to product. Some prominent NTBs deployed are standards, testing, labelling and certification. Needless to say, many of these such as testing and labeling impose unnecessary costs on business.

Then there are others like port fees / taxes, custom procedures and administrative procedures including valuation, port of entry, quota etc. all of which tend to add to costs of Indian exporters. C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 12 Final Technical paper on NTB…RM…Unedited version -April 2005 Figure 8: Important NTBs Facing Indian Imports in Japan: No. of National Tariff Lines in percent – Index of Frequency Ratio Quota 7% Technical Measures n. e. s. 0% Technical Requirements n. e. s. 0% Authorisation 15% Variable Charges n. e. s. 1% Quota for Sensitive Products 5% Labelling Requirements 8% Non-Automatic Licence 1% State Monopoly 1% Product Characteristics Requirements to Protect Human Health 62%

Figure 9: NTBs Facing India’s Import in Japanfor Different Commodity Groups: Index of Frequency Ratio Total No. of Commodities = 354 Vegetable Products 15% Live Animals 7% Textiles and Textile Articles 19% Prepared Foodstuffs; Breverages, Spirits and Vinegar; Tobacco and Manufactured Tobacco Substitutes 5% Raw Hides and Skins, Leather, Furskins and Articles thereof; Saddlery and Harness; Travel Goods, H. bags and Similar Containers; articles of Animal Gut (other than Silk-worm Gut) 3% Base Metals and Articles of Base Metal 2% Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical Instruments and apparatus; clocks and watches; musical instruments; part and accessories thereof 2%

Wood and Articles of Wood; Wood Charcoal; Cork and Articles of Cork; Manufactures of Straw, of Esparto or of other Plaiting Materials; Basketware and Wickerwork 1% Footwear, Headgear, Umbrellas, Sun Umbrellas, Walking-sticks, Seat-Sticks, Whips, Riding-crops and Parts Thereof; Prepared Feathers and Articles Made Therewith; Artificial Flowrs; Articles of Human Hair 1% Articles of Stone, Plaster, Cement, Asbestos, Mica or Similar Materials; Ceramic Products; Glass and Glassware 1% Products of the Chemical or Allied Industries 37% Mchinry & Mchnicl Applncs; Electrical Eqpt; Parts thereof; Sound Rcdrs and Reprdcrs, TV Image & Sound Rcrdrs & Rprducrs,& Parts & Accessories of such article 0% Natural or Cultured Pearls, Precious or Pulp of Wood or of other Fibrous Semi-precious Stones, Precious Metals, Cellulosic Material; Recovered (Waste and Metals Clad with Precious Metal, and Scrap) Paper or Paperboard; Paper and Articles thereof; Imitation Jewellery; Coin Paperboard and Articles thereof 0% 1% Mineral Products 1% Animals or Veg. Fats and Oils and their Cleavage Products; Prepared Edible fats; Animal or Veg. Waxes 1%

Vehicles, Aircraft, Vessels and Miscellaneous Manufactured Articles Associated Transport Equipment 4. Case Studies There are several issues connected with the deployment of NTBs. Some NTBs affect individual consignments, while some others impose additional cost burden. We illustrate these through three case studies. C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 13 Final Technical paper on NTB…RM…Unedited version -April 2005 Case Study 1: Detention of Shipments by USFDA of India’s Exports of Select Food Product25 The US is one country, which provides information about detention of shipments based on preinspection basis.

Table 5 provides data on the number of detentions by the US Food and Drug Administration. An inspection of the data shows that the total number of detentions of shipment by the US from all countries were 9875 during the time period, May 1999 to April 2000. Out of this, 860 shipments had originated from India (figure 10). Again, the number of detention of shipments from India increased to 997 during the 12 months beginning from December 2001 to November 2002. The table also gives the number of detentions per one million dollars worth of imports. While the range of this parameter for all countries was 0. 1 – 11. 0, the rate for India (shipments) was 4. 5.

To examine the rate of detention over time, we estimated it for months from December 2001 to June 2002. The estimated results show that the number of detentions per one million dollar has declined from the previous 4. 5 (1999-2000) to 1. 17 (2001-2002). Similar estimates were repeated for two specific commodities imported from India to US namely shrimps and mushrooms. The detention rates for these sectors were 0. 35 and 1. 86 for the period 2001-2002; the rejection rate for shrimps is lower than the overall average rate, while for mushrooms the rate is very high. Figure 10: No. of Detention of Indian consignments (9875) by the USFDA, May 1999-April, 2000 No. of Detention by the USA from R. O. W. No. of detentions from India by US (8%) 92%

Table 5: US Food Imports and Detention of Shipments by the US Food and Drug Administration: Total Detentions and Number of Detentions per $ one million worth of Imports Country group/ country*/Period Period: May 1999 – April 2000 Total [52 countries] Mean Range India (All commodities) Period: Dec. 2001 – June 2002 India (a) All commodities (b) Shrimps (c) Mushroom 847. 7 250. 96 16. 1 997 88 30 1. 17 0. 35 1. 86 9875 179 11-860 860 0. 9 1. 7 0. 1-11. 0 4. 5 Import Mill US $ No. of Detentions No. of Detentions per 1 million dollar worth of imports Notes: * The number of countries are shown in [ ] brackets. , Total number of detention is net of shipments originating within the USA Source: Compiled from the following sources: 1. Import detention: US Food and Drugs Administration, OASES Website – www. fda. gov/oasis, 2.

Import/Export value: (0) UN Trade data tapes held at the international economic database of the Australian National University (Imports), (b) Export Value of India to US, G. O. I. , DGCIS. , 3. Athukorala, Prema Chandra (2002), “Asian Developing Countries and the Global Trading System for Agriculture, Textiles and Clothing”, in Adhikari R. and P. Athukorala (eds. ): Developing Countries in the World Trading System: The Uruguay Round and Beyond, Edward Elgar, UK and US. The USFDA also provides information on causes of detention of different shipments. Table 6 lists these causes for all commodities (see also Figures 11). A glance at these results shows: Based on Data given in Table 6 25 This sub-section draws from a detailed study, Mehta, R. , M. Saqib and J.

George (2002), “Addressing Sanitary and Phytosanitary Agreement: A Case Study of Select Processed Food Products in India”, RIS Discussion Paper No. 39, web www. ris. org. in. C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 14 Final Technical paper on NTB…RM…Unedited version -April 2005 Table 6: Causes of Detention of Indian Shipment by USFDA A. All Commodities (Dec. 2001 – Nov. 2002) Causes of Detentions No. of Shipments FILTHY 256 UNAPPROVED: NET DRUG WITHOUT APPROVAL 174 SALMONELLA 161 NOT LISTED 107 MFRHACCP 88 NO. PMA/PDP 87 LIST INGRE 78 NUTRITION LABEL 72 LACK N/C 51 PESTICIDE 43 UNSAFE ADD 37 UNSAFE COL 35 DIRECTION: HOW TO USE ETC. 8 AGR RX 24 COLOR LBLG 17 DR QUALITIC 16 DRUG NAME 16 REGESTRED 16 INSANITARY 15 LACK FIRM: NAMES ETC. 13 NO. 510 (K) 12 SACC HARIN 12 COSMET LBLG 11 FALSE 11 USUAL NAME 11 LABELING 10 CSTIC LBLG 8 Causes of Detentions No. of Shipments FLAUR LBLG 8 COSM COLOR 7 NEWWET DR 7 ICONSPICU 6 RX LEGENT 6 DIETRY LBL 5 FOREIGN OB 5 NEED FCE 4 CONTAINER 3 DE IMPGMP 3 HOLES 3 POISONOUS 3 PRESERVE LBL 3 RX COMPOUND 3 COL ADDED 2 JUICE do 2 PERSONAL RX 2 UNDER PRC 2 ANTIBIOTIC 1 BACTERIA 1 HEALTH C 1 IMPT HACCP 1 NO ENGLISH 1 NO PROCESS 1 NO REGISTER 1 SOAKED WET 1 WARNINGS 1 YELLOW H5 1 TOTAL 1493 (997) * Figures in parentheses represent total number of detained shipments for the period Dec. 2001 – Nov 2002.

Total number may not tally with sum of individual causes, because in many shipments, more than one cause is mentioned for detention Source of data: USFDA Website, For definition of causes of detention: See USFAS website Source: Mehta Rajesh, J. George & M. Saqib (2002), “Addressing Sanitary and Phytosanitary Agreement: A Case Study of Select Processed Food Products in India” RIS Discussion Paper, #39. web www. ris. org. in Figure 11: Causes of Detention of Indian Shipments: All Commodities, 2001-02 300 200 100 Filthy Unapproved: Net Drug Salmonella Not Listed Mfrhaccp No Pma/Pdp List Ingre Nutrition Label Lack N/C Pesticide Unsafe Add Unsafe Col Direction: How To Use Etc. Agr Rx Color Lblg Dr Qualitic Drug Name Registered Insanitary Lack Firm: Names Etc. No 510 (K) Saccharin Cosmet Lblg FALSE Usual Name Labeling Cstic Lblg Flavr Lblg Cosm Color Newvet Dr Inconspicu Rx

Legent Dietrylbl Foreign Ob Need Fce Container De Impgmp Holes Poisnous Preserve Lbl Rx Compound Col Added Juice % Personalrx Under Prc Antibiotic Bacteria Health C Impthaccp No English No Process No Register Soaked Wet Warnings Yellow H5 0 C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 15 Final Technical paper on NTB…RM…Unedited version -April 2005 1. 2. 3. 4. 5. A significant number of Indian consignments were rejected on the basis of multiple reasons. For example, a consignment of Nishat Export (of black pepper) in September 2002 was rejected on the grounds of (a) Filthy or adulteration and (b) SAMLONELLA, the presence of a poisonous and deleterious substance. Each rejected consignments were on the basis of an average 1. 0 percentage of reasons for all commodities, 1. 25 percentage for shrimps and 1. 17 percentage for mushrooms: the reasons for rejection are higher for shrimps than mushrooms. A large number of Indian consignments of all commodities were rejected by USFDA on the basis of (a) SALMONELLA, (b), FILTHY (c) NOT LISTED, i. e. information about product was not provided and (d) UNAPPROVED, i. e. a new drug without an approved application. A large number of Indian consignments of shrimps were rejected due to UNSANITARY CONDITIONS, i. e. item packed under unsanitary conditions. Out of 30 rejected Indian consignments of Mushroom, 28 were rejected due to PESTICIDE.

Case Study 2: Export of An Indian “Egg Powder” Consignment26 An Indian consignment of Egg powder was rejected by the EU on the ground that the said consignment did not pass through the “Minimum Required Performance Limit” (MRPL). Obviously this raises the question of ‘time frame’ and ‘reasonable time interval’ between the announcement and enforcement of new directive, as per SPS agreement of the WTO. The cited additional parameter formed part of the Foundational EC Directive 96/23/EC on Measures to Monitor certain Substances and Residues thereof in Live Animals and Animal Products. But no consignment prior to this was ever tested under this directive.

As the Indian consignment was for the first time subjected to this examination, the EC is seen to have bypassed both transitional period as well as Reasonable time interval on the ground that the commission’s decision 2002/657 EC of August 2002 was in fact a directive for implementation; and thus criteria and procedures for the validation of analytical methods to ensure the quality and comparability of analytical results generated by official laboratories came into practice for the first time. In March 2003, this decision for establishing MRPL to be used for substances for which no permitted limit has been established was amended by the decision 2002/181/EC setting MRPLs for certain residues in foods of animal origin. The company whose consignment was rejected had a valid equivalence certificate issued by the EU. Yet, there was a “Rapid Alert” issued in EC that went to all member states as a routine.

Even after the consignment was declared to be meeting the additional parameter of MRPL, the “Rapid Alert” was neither withdrawn nor the members de-alerted. The loss of reputation and additional costs incurred will take this company longer time to recover from this episode. A large number of applications are lying with developed countries for granting “equivalence”; but no action is being taken. For instance, application from India for providing equivalence has been with EU for the last 7-8 years. The EU is not able to process these applications due to non-availability of staff. As an interim measure, temporary equivalence is granted on an annual basis.

All these Indian companies have been set up partly as export oriented units (EOUs) and have the approval from EU for exporting egg powder to EU member countries. The ground realities in EU are therefore different from what is normally presented; and is indeed a cause for concern while examining SPS implementation issues of WTO. In this context, attention may also be called to the Shrimp export by EU for the developing countries in general and Bangladesh in particular. Some other illustrations are: EU ban of African peanut on the ground of afflatoxin (a chemical causing cancer); rejection of fish consignment from Kenya because of the bacterium, which causes cholera.

This case proves that Doha Declaration and Post Cancun concerns of WTO are not being implemented in spirit. Some issues identified at Doha Declaration as constraining implementation of SPS. “Reasonable interval” between publications of a country’s new SPS measure and its entry into force. 26 The material for this case study is drawn from Mehta Rajesh, and J. George (2003), “Implementation Issues in SPS: A developing Country Perspective for Development Agenda on the Meandring Pathways from Doha to Cancun”, RIS discussion paper No. 58. C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 16 Final Technical paper on NTB…RM…Unedited version -April 2005

Longer time – frame for developing countries to comply with other countries’ new SPS measures. Equivalence (Article 4) – steps to make it easier. Case Study 3: Anti-Dumping and Anti-Subsidy Cases on India’s Exports Indian exporters are facing a number of antidumping and anti-subsidy cases against them from other countries. In what follows, we give a product-wise and country-wise analysis of these cases. First, a product wise analyses of cases against Indian exporters (table 7) indicates that the highest number of anti-dumping cases continue to be on engineering products, including steel products which account for 32 percent of the total cases, followed by extiles and articles thereof (19 percent), Drugs and pharmaceuticals and chemicals (18 percent), rubber / plastics and articles thereof (13 percent), and consumer industrial goods (12 percent). In the anti-subsidy cases, engineering products, particularly steel products account for 38% of the total cases, followed by rubber/plastic articles (25%) and textiles/articles & drugs (13% each). Table 7: Product-wise break up of Anti-dumping cases Product Anti-dumping cases Engineering including steel products 27 Textile and articles 15 Drugs & pharmaceuticals 15 Electronics 4 Rubber, plastic, glassware and articles 10 Consumer industrial goods 9 Agri. products 1 Total 82 Source: Directorate of General of Anti Dumping and Allied Duties, Annual Report, 2002-03

Anti-subsidy cases 12 4 4 2 8 2 0 32 Next, a country-wise analysis of the cited cases brings EU on the top of the list. Out of a total of 82 Anti-dumping cases initiated against exports from India, the highest number of cases are seen to have filed by EU (33%), followed by USA (17%), South Africa (13%), Indonesia (7%), Canada (6%), and Brazil (5%). These details are given in Table 8. Table 8: Country-wise Break up of Anti-Dumping Cases Country Argentina Australia Brazil Canada EU Indonesia Mexico Trinidad & Tabago South Africa Turkey Thailand USA Korea Venezuela Russia Federation China Total cases Anti-dumping 1 2 4 5 27 8 1 1 11 4 2 14 1 1 1 1 82

Source: Director General of Anti-Dumping and Allied Duties, Annual Report, 2002-2003. C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 17 Final Technical paper on NTB…RM…Unedited version -April 2005 Table 9 reports country-wise break up of Anti-subsidy cases. An inspection of this table shows that maximum numbers of cases are filed by EU (44%). This is followed by South Africa (19%), USA (19%), Canada (16%) and Brazil (3%). Table 9: Country-wise Break up of Anti Subsidy Cases Country EU South Africa Canada USA Brazil Total Source: Director General of Anti-Dumping and Allied duties, Annual Reports, 2002-03. Anti subsidy cases 14 5 5 5 1 32

Almost all the anti-dumping and anti-subsidy cases against Indian exports were initiated in the latter half of the nineties (Figure 16). This follows from the data given in Table 10. Table 10: Year-wise Break up of Anti-Dumping & Anti-subsidy cases Year 1990-91 91-92 92-93 93-94 94-95 96-97 97-98 98-99 99-2000 2000-01 2001-02 2002-03 Total Anti-Dumping cases 1 1 2 3 5 6 5 16 13 7 13 7 82 1 1 Anti-subsidy cases 2 9 6 4 9 1 32 Source: Directorate General of Anti-Dumping and Allied Duties, Annual Report, 2002-2003. 5. What needs to be done? Policy Challenges The picture that emerges from this analysis of non-tariff barriers faced by Indian business in the foreign markets, especially the US, EU and Japan is not an optimistic one.

The Indian business, continue to be hunted by a variety of restrictions in the form of standards and compliance costs that exporting to these markets have become a nightmare. The question now is how the Indian policy makers should respond to these challenges. The way forward, it appears to be, through a multipronged approach – multilateral trade forum, bilateral/regional trade arrangements and internal streamlining. We shall comment on each of them. 5. 1 Multilateral Trade Forum In all future WTO negotiations, the work programme should include the following. 1. Removal of NTBs should climb to the top of agenda Policy makers should insist that any negotiations on market access are acceptable only on a precondition that all NTBs be removed under a fast track approach.

This can be a powerful negotiating stand of India in the ongoing trade negotiations. In fact, the fourth ministerial conference of WTO held in Doha in November 2001 has already recognized that NTBs are an integral and equally important part of the negotiations. The mandate for NTBs in Doha Development Declaration (DDA) is in para 16 (see Box 1) and is the responsibility of the Negotiating Group on Market Access (NAGMA). C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 18 Final Technical paper on NTB…RM…Unedited version -April 2005 Box 1: NTMS AND THE DRAFT ELEMENTS OF MODALITIES FOR NEGOTIATIONS ON NON-AGRICULTURAL PRODUCTS

The following elements are proposed for the modalities a) It is understood that the NGMA maintains overall responsibility for addressing non-tariff barriers (NTBs) as part of the Doha Declaration. b) The negotiating group will proceed with the identification and examination of the various types of NTBs. c) After completing the identification, participants will aim to categorize the NTBs as well as clarify and seek additional information where necessary, and then proceed in the following manner: • Selected NTBs, to be agreed upon by the participants would be dealt with by the NGMA on the basis of modalities, which could include request-offer, horizontal or vertical approaches. NTBs that have a specific negotiating mandate in the Doha Declaration in other areas should continue to be addressed in that body but information on the progress or outcome of those negotiations should be reported to this group for transparency. • Work on NTBs which relate to other areas of the Doha Declaration which currently do not have a specific negotiating mandate would progress in other fora but information on the progress should be reported to this group for transparency; and • NTBs that currently do not have a specific negotiating mandate would after further clarification and if the group decides there is a need to send them to another WTO body, be reported to the TNC in order to be forwarded to the appropriate WTO body for action and reporting back. Source: WTO document TN/MA/35.

A problem with the DDA mandate is that it offers no precise guidance on how the NTB negotiation in the market access group is related with other WTO bodies such as negotiating group on Rules and Trade Facilitation, which are handling non-tariff issues as part of Doha mandate, and also the ones handling non-tariff measures as a part of their regular work programme such as Committee on Customs Valuation, Committee on Rules of Origin, and the committee on TBT. The open nature of the mandate carries the risk of conflict and overlap with the mandate of other negotiating groups. 2. Plug loopholes in the multilateral rules and make the system less restrictive

In the Uruguay Round notable success was already achieved in controlling the abuse of NTBs by way of strengthening the disciplinary rules, develop surveillance mechanism to enforce, and offer improved disputed settlement mechanisms. The strengthening of dispute settlement mechanism is considered as one of the major achievements of UR. Similarly, the Agreement on Agriculture has virtually made it impossible to impose any type of QRs. Negotiations are also continuing in other areas such as customs valuation, pre-shipment inspection, import licensing procedures, rules of origin, TBT and SPS measures. The underlying objective is to make the system less restrictive and discriminatory. Hence suggestions for improvement of these agreements including how to close the holes in the multilateral rules have to be made.

A great deal of work has already been done27 by identifying changes in order to make the international practice less restrictive. These suggested changes are worth considering. 3. Improve Empirical database It is pretty clear that we do not have a good database on NTBs. What is available is UNCTAD’s TRAINS database, but it has many drawbacks. While the WTO notification process is yet another source, these too have limitations. Hence building a sufficiently detailed inventory of NTBs, countrywise and commodity-wise just as the United States and New Zealand has done is an essential requirement for furthering multilateral negotiations in this area. USTR prepares a detailed annual report that surveys significant trade barriers to US exports.

The latest report28 classifies trade barriers into different categories that cover foreign government imposed measures and policies that restricts, prevents and impede the US exports. The report includes trade barriers of 56 countries/regional blocs. 5. 2 Bilateral/Regional FTAs The past 3 to 4 years have witnessed a large number of bilateral/regional FTAs. Instead of traditional FTAs leading to reduction of tariffs, they also deal with the reduction or elimination of non-tariff barriers, services, investment, etc. These FTAs are sometimes called comprehensive economic cooperation (CEC). Some of the recently signed FTAs/CECs, which give emphasis on NTBs, are: 27 28

See Anwarul Hoda and Rajeev Ahuja, “Agreement on Subsidies and Countervailing Measures: Need for clarification and Improvement” working paper No. 101, ICRIER, May 2003; Aradhana Aggrawal “The WTO Anti-dumping Agreement: Possible Reform through the Inclusion of a Public Interest Clause”. Working paper No. 142, ICRIER, Sept. 2004; and “The WTO Anti-dumping Code: Issues for Post Doha Negotiations”, working paper No. 99, ICRIER May 2003. USTR (2004), Foreign Trade Barriers, USTR, pp. 1-502. C:JohnRaviProjectsADB ask_history200510 – OctoberINRM2005-10-27Trademehta. doc 19 Final Technical paper on NTB…RM…Unedited version -April 2005 1. New Zealand – Singapore Economic Partnership: Some features of Agreements particularly relating to NTBs is displayed in Box 2

Box 2: Some Important features of New Zealand-Singapore Economic Partnership Agreement Description Tariff Non-Tariff measures Anti-dumping Elimination of all tariffs No non-tariff restrictions except otherwise mentioned in the agreement. Provisions are still there. The de minimis dumping margin was raised from 2% to 5% and the maximum volume of dumped imports normally regarded as negligible increased from 3% to 5% Prohibition of subs

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