POST IMPACT OF WTO ON POULTRY & LIVESTOCK SECTOR OF INDIA
The opening up of the Indian economy in 1991 brought about major changes in the livestock economy. The market-oriented economic policies of the country were reinforced with the signing of Uruguay Round of Agreement (URA) in 1994 which led to the establishment of World Trade Organisation (WTO). These developments have been associated with often much heated debate regarding their benefits and costs in respect of livestock trade
Despite constraints like rearing of livestock under sub optimal conditions due to low economic status of livestock owners, India has now become the largest producer of milk in the world, 3rd largest producer of eggs and 4th in the poultry chicken production.. The development of Indian livestock sector is an unprecedented success story as it is based on millions of small producers. Government of India is making concerted efforts to raise the per capita availability of milk and meat, egg through increase in productivity of livestock animals. Though India does not want to leave any stone unturned insofar as her presence in international trade of milk and other livestock products is concerned, the liberalization of markets within the WTO framework, especially due to the export subsidies indulged in by OECD countries, now seen to be threatening the Indian livestock sector. In the WTO regime, surging imports have not only affected farm incomes but also employment in many developing countries. Consequent upon cheap imports and absence of adequate protection measures, safeguarding income and livelihood of poor farmers have emerged issues that need to be addressed by policy makers. In more relaxed market environment, the real challenge posed before Indian livestock sector would be in terms of Sanitary and Phytosanitary Measures (SPS), Agreement on Technical Barriers to Trade (TBT) and animal welfare related issues. With a view to meet these requirements – both domestically and in the world markets – modernization of supply chain encompassing producer as well as consumer is the need of the hour. Undoubtedly, India is already price competitive in the world market and when subsidies from competitive producers like USA and EU countries are removed, the situation will make India more price competitive. In case India is not able to capture the world market in the event of removal of subsidies from the modern bloc countries, the other competitors like Australia and New Zealand would capture this market and enter in a big way to flood markets with their dairy products, making us loosing our competitiveness and a great opportunity in the new trade regime.
WTO and impact of removal of quantitative Restrictions on Indian Poultry Sector
• The Uruguay rounds of trade negotiations were aimed at liberalising the world trade environment and thereby providing improved market access to the member countries.
• The World Trade Organisation (WTO) since its establishment in 1995 has been enforcing various agreements that were concluded in the Uruguay rounds.
• As a part of the agreement on the market access the member countries have made offers of reductions in the tariff and non-tariff barriers to trade.
• The implications of these offers of trade liberalisation depend on the nature of the reduction in the barriers, in the scope of the coverage of the goods included in the offer package
• There are 135 nations who are presently members of WTO.
• In the Uruguay rounds, all the GAT of member countries agreed to
- provide tariff liberalisation on large number of commodities / items.
- Remove all types of prohibitions or restrictions other than duties (i.e. tariff) .
- For the tariff liberalisation submitted to the WTO “offer rates”, also called “bound level” or “bound rate of duty”.
• The member countries are required to maintain the applied rate at or below the “bound rate”.
• India has agreed to make adjustments in the tariff rates to the level of bound rates for more than 3,300 commodities.
• It has also agreed to phase out quantitative restrictions on all commodities except for around 600 commodities for security, religion, health and other reasons by 2002 -3 as per the mutual agreement with her major trading partners and WTO.
• Other member countries of WTO have also taken steps for tariff liberalisation and removal of quantitative restrictions.
• In fact, developed countries had made similar commitments in earlier rounds of multi-lateral trading arrangements.
• It was for the first time that the developing country like India took part in the tariff negotiations in Uruguay rounds.
• The main objective of the tariff negotiations has been to enhance the market access.
• The underlying principal of Uruguay rounds of agreements was to create a fair and equitable multi-lateral trading agreements that leads to development and increased income.
• These principals are amplified further through specific provisions in various individual agreements under WTO.
• Unlike most of the countries of the world, India’s import has been subject to different types of quantitative restrictions.
• These restrictions are in the form of non-automatic licences, import through canalised agencies, special import licence (SIL) 1 actual user criteria etc.
• These restrictions are imposed because India presumes that it has unfavourable position of balance of payment (BOP).
• In the early 1990s and even earlier to that, India had serious balance of payment problem.
• However, this has declined significantly during the recent years.
• The article relating to balance of payment mentions that a member country has to publicly announce a time schedule for elimination of quantitative restrictions.
• India presented a case of time schedule of nine (09) years where Australia, Canada, Japan, EU, New Zealand, Switzerland and the US had objections to this -time schedule and brought the dispute settlement proceedings against India, which India ultimately lost.
• The dispute settlement body of the WTO had adopted the panel and the subsequent appellant body reports ruled out that India was not justified in maintaining the QRs on balance of payment ground and advised India to bring its measures in conformity with the obligations under WTO.
• In addition to this, these countries are giving huge subsidies to their exporters in the form of export enhancement scheme in US and restitution refund money scheme in EU whereas there is no subsidy on exports or otherwise in India.
• The developed countries therefore are able to export their products at throwaway prices because the products they export are either surplus production or they are by-products or they have the advantage of huge subsidy they get from their respective governments in different garbs.
• Therefore, if the import of chicken and chicken products and eggs is allowed into India, the survival of the whole industry would be at great risk.
• In some places it is the sanitary and phyto-sanitary measures and in other places it is the technical barriers of trade which hamper us to compete with the developed world.
• Though, it is clearly mentioned in the SPS and TBT Agreements that members shall take account of the special needs of the developing country members and in particular of the least developed country members.
• Likewise, agreement on technical barriers of trade also provides for a differential and more favourable treatment to developing country members and stipulates further that members shall in the preparation of application of technical regulations, standards and conformity assessment procedures, take account of special developments, financial and trade needs of developing country members, with a view to ensuring that such technical regulations, standards and conformity assessment procedures do not create unnecessary obstacles to exports from developing countries.
• But here again, we continue to observe the impositions of standards by developed countries, that are either beyond the technical competence of the developing countries or do not take into account the special developments, financial and trade needs of developing countries or fundamental climate or geographical factors or the fundamental technical problems of the developing countries. We also do not see a corresponding willingness on the part of the developed countries to transfer to the developing countries better and more advanced technologies at a fair reasonable cost.
• The agreements on technical barriers of trade and sanitary and phyto-sanitary measures are not implemented in their real sense and the developing countries like India are put to disadvantage.
• Since ~standards are emerging as one of the major long-tariff barriers to the market access of the developing countries, it has become the -light of the might to dictate to the others lOW they can stop the other person from asking advantage of the market access in the other countries.
• The whole egg powder processing industry has faced these barriers and still are facing because of the new standards being introduced or upgraded, all of a sudden.
• It would not be out of place to mention that some of the countries do not adhere themselves to these standards what they have documented for others.
• But in -reality their strong point is that they have documented them so well and their presentation is excellent whenever you question them.
• Under the TBT Agreement the three basic needs should be kept in mind:
• Participation of the developing :countries in the setting up of standards for International Standard Setting Organisations.
Technical cooperation to upgrade conformity assessment procedures in developing countries to gain their acceptance in the developed market.
• Mutual recognition of agreements between the national standard setting bodies and also providing equivalence of standards for each other.
• I would like to illustrate this that if we have to export our egg powder or chicken products to other countries, we first need to get the country approved as such and also seek equivalence for our standards.
• Thereafter, the importing country team will visit our plants and approve them whether we really meet their standards or not.
• Why such a condition cannot be placed on the countries which intend or would export their poultry products to India ?
• Why we cannot put a condition that our team will visit their plants and if satisfied for scientific and technical reasons, only then the import will be allowed into India.
• I think the Government need to look very seriously in this direction because other countries have been creating the barriers in the garb of SPS and TBT Agreements.
• It is also a reality that in developed countries the industry gets financial support on 4 to 5 per cent interest rate and power is available in plenty and at a cheaper rate as compared to India.
• I would not hesitate to say that in India finance is extremely costly which you get at a rate of 14 to 16 per cent for agriculture, power first of all is scarcely available and if available is very costly and same is the case with infrastructure facilities.
• Now where is the level playing field for the Indian poultry sector as compared to the developed countries.
• Therefore, it is essential that while we frame our policies the Government should give a serious thought before deciding any policy on the removal of QR’s by putting sufficient bound rates for the products covered in poultry sector.
• It would be prudent for the policy makers to defend the gains of the poultry sector which it has made and the tremendous contributions it is making to the rural development, employment generation and providing nutritional food to millions of people.
• The basic objective of the WTO agreement on agriculture was to bring about a discipline in one of the most distorted sectors of trade by disciplining the unrestricted use of production and export subsidies as well as by reducing import barriers including non- tariff barriers.
• At the same time, as indicated in the preamble, the agreement recognised the importance of non-trade concerns including that of food security and rural employment.
• This is completely true in India where 66 per cent of population of about one billion is dependent on agriculture sector for its livelihood.
• Moreover, a population of about 320 million is surviving just around the poverty line.
• Therefore, countries like India where large population is dependant on agriculture sector including poultry, need to exert its right of certain degree of autonomy and flexibility in determining their domestic agriculture policies.
• It must also be recognised that in countries where the main source of assured and entitlement to food is food production, these either in the form of subsistence farming or through generation of farming comes, the import of food cannot be an alternative to domestic production.
• Therefore, without protecting the domestic sector, which is sensitive to fluctuations, the opening up could have serious socio-economic ramifications particularly on the rural farming community.
• The developing countries with predominantly rural agrarian economy should use appropriate measures and safeguard mechanism to minimise the ill-effects of import which can destroy our food security. It is, therefore, imperative that all support wherein amber, blue or green box is brought out to the common objective of present production value by the developed nation apart from creating a level playing field.
• The huge amount of export subsidy still continue to distort the world agriculture trade which are given in the new garbs repeatedly by the developed countries.
• It would be important for Government to address issues related to circumvention and rollover of export subsidies by the developed countries during their negotiations.
• Last but not the least, the Government has to give a very serious thought while going for tariffication and bounding of poultry sector products.
• If the bound rates are kept very low the poultry sector really faces a very serious threat of its complete destruction.
• It would be, therefore, prudent that while doing the tariffication maximum bound rates should be worked out to protect this very important rural based sector, which is very vital for the progress of this nation.
POST WTO IMPACT IN LIVESTOCK SECTOR-—-
- Meat and meat preparations have been the major source of export earnings among all livestock products. However, in recent past, the shares of eggs and milk and milk products in total livestock sector export have gone up considerably. 2. Hairs and wool constituted the major item of import, followed by hides and skins. 3. India experienced a drastic turnaround in the post-WTO phase when her status changed from being a net importer of livestock products to a surplus nation with high export potential. At present India is a net exporter of all livestock products, except hides and skins and hairs and wool. This is due to state policy of encouraging the export of processed leather and wool products rather than their primary equivalents. 4. The share of livestock sector to total agricultural export – although small – has shown increasing trend in the recent past, which implies better growth in export earnings from livestock products than those from other agricultural commodities. Furthermore, livestock sector’s share in agricultural imports has gone down drastically in the last two decades, pointing towards India’s potential in achieving self-sufficiency in meeting domestic demand. 5. India has all along been a minor player in international trade of livestock products, which is not in congruence with the larger share of India’s output to that of the world. 6. WTO seems to have favourably impacted on trade performance of livestock sector, as all livestock products registered higher growth rates post-WTO, compared to the pre-WTO period. However, livestock products which witnessed higher growth rates in this period, also exhibited increased variability in exports. 7. India enjoys comparative advantage in meat and meat preparations and eggs export. Although, this comparative advantage declined over time for meat and meat preparations export, that for eggs registered a substantially increasing trend in the early nineties. 8. India is not in a position to take advantage of increase in world prices of chicken meat, probably due to lack of price-competitiveness. On the other hand, India has the potential to take advantage of increase in world prices by enhancing the export of bovine meat, eggs and milk products. India’s dairy sector is potentially more vulnerable to increase in world feed grain prices as compared to her poultry sector.
Impact of WTO Agreements on the Indian Livestock Sector:————-
Impact on Indian Dairy Sector————
India’s trade in milk products – both exports and imports – is highly influenced by the world trade policies. High production and export subsidies provided by several developed countries distort international dairy market to the disadvantage of many developing countries including India. It was expected that the implementation of Agreement on Agriculture (AoA) would substantially reform the trade of agricultural products. This has, however, not happened and high market access barriers are being maintained.
The total domestic support provided by many developed countries to their producers continues to be very high. Producer support estimates for milk in OECD countries was 42 % during 2002-04 as compared with 61 % in 1986-88, indicating that producers continue to get nearly half of their earnings from transfers due to governments actions. On the other hand, Indian milk producers do not enjoy any significant levels of such support.
Export subsidies also continue to be a significant factor in world dairy trade. The quantity of dairy products eligible for export subsidies, even after reduction commitments, is close to 60% of estimated world trade in all products. The global prices are significantly influenced by these subsidies.
Tariff barriers maintained by several developed economies include: high ad-valorem duties; specific duties that afford a higher level of protection as compared to ad valorem duties; and special agricultural safeguards. Several developed countries have maintained very high level of tariffs on dairy products, such as Norway (more than 300%), Finland (200-480%), Japan (180 to 500%). Further, special agricultural safeguard (SSG) mechanism, designed for import control in cases of surges in imports and decline in world market prices, is being used as an integral part of market management system by many developed countries.
The subsidies provided by some major dairying developed countries depress world prices of dairy products substantially and to levels that make Indian dairy products uncompetitive. While on the one hand, this affects exports of Indian dairy products adversely, on the other, this encourages increased imports of subsidized products damaging domestic industry.
Under the Government’s major trade policy reforms, the dairy industry was de-licensed in June 1991. In April 2001 all quantitative restrictions (QRs) on dairy products were removed. These developments exposed Indian dairy sector to the highly distorted world markets along with the threat of imported products bringing exotic diseases into the country. Accordingly the government, immediately after the removal of the QRs, amended the Livestock Importation Act, 1898 in July 2001 to allow the import of the livestock products, including milk products, against Sanitary Import Permit after conducting risk analysis, as per the SPS Agreement.
Effective April 2006, imports of Genetically Modified Organisms (GMOs) and Living Modified Organisms (LMOs) are governed by the provisions of the Environment Protection Act, 1986 and Rules 1989. Further, import of any food, feed, and food materials that contains GM material is allowed only with the approval of the Genetic Engineering Approval Committee (GEAC). All such consignments will have to carry a declaration stating that the product is genetically modified.
The applied basic custom tariffs are 40% for butterfat products, and 30% for all other major dairy products except milk powders. At the time of WTO Agreement, India had agreed to zero tariff on milk powders. Subsequently however, considering the interest of the domestic milk producer, the bound rate of duty was re-negotiated to 60% with a tariff rate quota of 10000 tonnes at 15% tariff.
Impact of WTO on Meat and Poultry Sector ———
International Trade in meat depends on a combination of factors which should be taken into account to ensure unimpeded trade, without incurring unacceptable risks to human and animal health. On account of likely risks the internal trade and marketing under the WTO environment requires the exporting country to comply with certain responsibilities. An exporting country is required to supply the following information to importing countries on request –
a. information on the animal health situation and national animal health information systems to determine whether the country is free or has free zones of listed diseases, including the regulations and procedures in force to maintain its free status;
b. regular and prompt information on the occurrence of transmissible diseases;
c. details of the country’s ability to apply measures to control and prevent the relevant listed diseases;
d. information on the structure of the Veterinary services and authority which they exercise;
Poultry and poultry products are highly subsidized by countries like USA and EU and this factor has impeded India’s export of such products not only to these countries but to other countries where they compete with us.
Impact of WTO on Wool————
Following the WTO agreement, the import of wool in India has been allowed under OGL. Traditionally, India has been importing fine quality wool for the woolen industry at an import duty of 20- 30%. Under new dispensation the duty was abolished. This has adversely effected the domestic wool production resulting in sharp fall in the domestic crises. At present almost all the requirement of wool by the industry is met through imports from Australia and New Zealand. Indian Sheep breeders finding no market for the fine and medium quality wool have crossed their animals with mutton breeds. Consequently, all programmes relating to improvement of wool quality in the country except in J & K and upper reaches of Himachal Pradesh and Uttranchal States have been closed.
Sanitary and Phyto-sanitary Measures ———
The SPS Agreement has provisions in the Agreement which amount to non-tariff barriers to trade. Article 3.3 allows a member to introduce SPS measures more stringent than stipulated in the relevant international standards. Further, Article 5.7 allows a member to introduce SPS measures even if relevant scientific evidence is insufficient to justify them. Some developed countries have taken advantage of these provisions and set several very stringent SPS measures not justified by science just because they can achieve them. These include very low levels of chemical contaminants, very stringent health rules, very low levels of bacterial counts in raw milk etc., especially by EU and also by Australia, Canada, Japan, New Zealand and USA. All these act as non-tariff barriers to India. SPS Agreement requires exporting country to provide evidence to importing countries that the product, which is intended for export, has originated from disease free areas. In a vast country like India, it is very difficult to provide evidence that a product has originated from disease-free area or zone.
Every country is required to undertake the import risk analysis in terms of its consistency with the sanitary and phyto-sanitary agreement of the WTO. The fundamental purpose of the SPS Agreement was to introduce a mechanism whereby restrictions on trade that are based on SPS measures could only be applied if there was an analysis undertaken of the basis of risks involved rather than taking decision so in an arbitrary manner. It is commonly believed that the risk assessment process has to be consistent with the SPS Agreement and can only be based on scientific facts.
Article 5(2) of SPS Agreement mentions that in the assessment of risks, members shall take into account available scientific evidence but also series of other factors including relevant processes and production methods, relevant ecological and environmental conditions. However, this dictates the extent to which the economic factors will be considered in a way that is far narrower than the adopted SPS measures itself.
Article 5(3) of the Agreement states “in assessing the risk to animal or plant life or health and in determining the measures to be applied for achieving the appropriate level of sanitary or phyto-sanitary protection from such risk, member shall take into account as relevant economic factors the potential damage in terms of loss of production or sales in the event of the entered establishment or spread of a pesticide or disease, the cost of control or eradication in the territory of the importing member and the relative cost effectiveness of alternative approaches to limiting risks”.
Further, the SPS Agreement does not envisage that losses in production should be limited to the losses applied in the industry in which the disease occurs i.e. the poultry industry alone or one sub-sector viz. the growing or processing. Therefore, there is nothing in the SPS Agreement preventing consideration of losses in other industries or sectors of the economy in the event of disease occurrence. Accordingly, all losses whatever industry suffers in the event of the disease should legitimately be considered in the economic analysis.
Considering the above factors, Government of India should continue to retain as retained duties equivalent to bound rates under WTO obligations the import duties should be maintained at the bound rate level as long as the developed countries continue their domestic support and export subsidies.
POLICY SUGGESTIONS ———-
The rates of growth in the values of livestock products exports were significantly higher in post-WTO period, indicating that the WTO regime has provided favourable environment for enhancing India’s potential in livestock sector trade. However, there is scope to reduce the variability in exports of livestock products from India. India has got a comparative advantage in international trade in meat and meat preparations and eggs. However, the real challenge for Indian meat export would be from SPS and animals welfare issues. In this regard, harmonisation of SPS measures at a level below the international standards would bring in benefits to developing countries like India. As for setting international standards under SPS agreements, the WTO and international standard setting organisations need to facilitate developing country participation by modifying their procedures and providing technical, scientific and legal assistance. India is not in a position to take advantage of increase in world prices of some livestock products like chicken meat, probably due to lack of pricecompetitiveness on account of processing inefficiencies. Furthermore, India’s main competitors, viz., EU, U.S.A. and Australia have got higher plant efficiency and produce products of superior quality. To make livestock products like chicken meat internationally competitive, domestic processing efficiency has to be improved substantially. As India’s dairy sector has shown potential vulnerability towards increase in world feed grains prices, there is need to make available the requisite feed grains domestically. The livestock sector remains the most highly regulated and distorted sector in the developed countries as the Uruguay Round Agreement (URA) has not yet led to significant changes in the livestock policies, which still remain protective. If WTO commitments on subsidy reduction are sincerely fulfilled, world prices of livestock products will increase which would in turn improve the export prospects of livestock products like dairy products from India. The extent to which India grabs the opportunities opened up after URA, depends upon how successfully implementation of the provisions of WTO agreements are carried out and for this India has to take the lead in WTO trade negotiations. As India at present does not provide any subsidies to livestock sector, India’s commitments to Agreement on Agriculture, will not require change in her current policies. India can negotiate strongly in the WTO with the developed countries to reduce or dismantle their support to the livestock sector to gain access in their markets
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