1 Market Access, Trade Agreements and Standards for Agricultural Products EAN Thailand, Food Seminar Bangkok, 28 August 2001 Tom Heilandt Agricultural Standards Unit, UNECE Trade Division 2 “The difference between selling your product domestically and selling it abroad is the amount of paperwork involved” 3 Outline • • • • Principles of market access Example: European Union Example: United States Questions, discussion 4 Market Access: a definition “The extent to which a country permits imports. Tariffs and non-Tariff trade barriers can be used to limit entry of foreign products into a country” 5 Things are complicated, they depend on… • • • • • Where you are What you want to export Where you want to export to When you want to export What the importer wants to do with it 6 Assumption “Let’s assume an exporting company has done initial market research and decided to which country it wants to export their product to.” 7 Overview of tasks • Identify export requirements • Identify import requirements • Obtain the necessary certificates 8 How it used to be…a myriad of non-tariff measures • • • • • • Quotas Import bans Variable levies Export subsidies Discrimination No transparency 9 How a multilateral trading system should be • • • • • Without discrimination Without barriers Predictable Allowing fair competition Make access easier for less developed countries • Have rules for conflict resolution 10 Basic principles of the existing multilateral trade agreements • National treatment rule • Most favoured nation treatment (MFN) or normal trade relations rule (NTR) • Mainly tariffs but less and bound • Rules for non-tariff measures • Rules for red tape • Rules for subsidies (less and only some) • Dispute settlement • Notification/transparency 11 “treat your neighbours like your family”: National treatment “Treating foreigners and locals equally. Imported and locallyproduced goods should be treated equally — at least after the foreign goods have entered the market..” “Everybody’s equal...”: Most favoured nation rule (MFN) or normal trade relations (NTR) • Each member treats all the other members equally as “most-favoured” trading partners. • If a country improves the benefits that it gives to one trading partner, it has to give the same “best” treatment to all the other WTO members. • Today because of the many preferential agreements one speaks about “normal trade relations” NTR 12 “…but some are more equal than others”: Exceptions to the MFN rule • Customs unions and free trade areas • One-way preferential arrangements 13 14 Customs unions and free trade areas • European Union • East European Free Trade Arrangements • Australia/New Zealand Closer Regional Trade Arrangement • North America Free Trade Agreement (NAFTA) • ASEAN Free Trade Area • Mercado Commun del Sur (MERCOSUR) • Andean Pact • Common Market for Eastern and Southern Africa (COMESA) 15 One-way preferential arrangements • • • • • Generalized system of preferences (GSP) Lomé Convention (and follow-up) Caribbean basin agreement Global system of trade preferences … 16 Mainly tariffs • Many confusing non-tariff bbarriers were translated into tariffs (tariffication) • Tariffs were bound against increase • Tariffs are reduced or phased out • Each member has a tariff schedule giving the max tariffs for each product 17 Current and minimum access opportunities:Tariff quotas 18 Exceptions: duties allowed • “antidumping” duties against selling at a price lower than the exporting contries domestic price • “countervailing” duties to offset the subsidies provided to producers in the exporting country • Additional duty to safeguard domestic production under a special emergency situation 19 Exceptions, non-tariff measures allowed… • Special safeguard measures • SPS (Application of Sanitary and Phyto-sanitary measures) • TBT (Technical barriers to trade) • Precautionary principle 20 Technical barriers or justified measures to ensure quality • Many national technical regulations and standards exist – – – – – Protection of human, animal, plant safety or health Protection of the environment; National security Prevention of deceptive practices; trade facilitation and quality assurance • They have an impact on trade and can disadvantage foreign producers, increase their costs and discourage them to try to sell abroad • They might be adopted only to protect domestic industry 21 TBT agreement or “standards code”: principles • Avoidance of unnecessary obstacles to trade • Non-discrimination (MFN) and national treatment • International harmonization, use of international standards: benefits for all, special differential treatment for some • Equivalence of technical regulations: recognize others standards if they have the same objectives • Mutual recognition of conformity assessment procedures: multiple testing is expensive, countries are encouraged to recognize others’ results, code of good practice • Transparency: notifications, enquiry boards • Technical assistance Agreement on sanitary or phyto-sanitary measures: Why another agreement? 22 • Giving more specific and in-depth coverage than the TBT to the relationship between health protection and trade measures • GATT allowed measures to be exempted from the provisions if it was "necessary to protect human, animal or plant life or health". • In absence of clearer more detailed rules it was feared that this might lead to barriers in trade 23 SPS principles • Harmonization: international standards should be used otherwise risk assessment necessary • Equivalence: the burden of the proof is with the exporting country • Risk assessment: evaluation of the actual risk or use of int. standards • • • • Disease-free areas: burden of proof with the exporting country Transparency Developing countries Dispute settlement 24 Loop-hole or justified protection: Precautionary principle • The SPS Agreement allows Members to take precautionary measures in cases of emergency and when sufficient scientific evidence does not yet exist to support definitive measures. • Example: following the BSE scare in 1996, and in the absence of sufficient scientific evidence, several emergency bans were immediately introduced. • Emergency measures should only be provisional. Within a reasonable period of time, a more objective assessment of the risks involved is necessary and the methods hould be reviewed 25 Red tape - the final barrier: customs and trade administration • • • • Customs valuation Rules of origin Pre-shipment inspection Import licensing 26 Subsidies: Domestic support • Green box measures: no/minimal trade destorting effects; can be maintained or increased • Blue box measures: new measures to limit production • Amber box measures: trade destorting; e.g. market price support measures; are subject to reduction commitments (except if value of subsidy below 5% of total value of product in one year) 27 Export subsidies are prohibited unless…. • They are subject to product-specific reduction commitments as specified in the schedule of the WTO Member concerned; • any excess of budgetary outlays for export subsidies or subsidized export volume over the limits specified in transitional provisions; • export subsidies consistent with the special and differential treatment provision for developing country Members • export subsidies other than those subject to reduction commitments, e.g. food aid 28 Import requirements • customs duties including seasonal duties and preferential rates measures • tariff rate quotas Tariff (TRQ), TRQ administration • special safeguard measures in emergency situations; (agreement of agriculture) antidumping duties, countervailing duties to offset the subsidies provided to producer in the exporting country • technical regulations and standards, packaging and Non tariff measures/requirements allowed labelling, rules of origin, precautionary principle under agreements (TBT, SPS, • sanitary andWTO phytosanitary measures Import licensing, rules for valuation of goods at customs, preshipment TRIPS, TRIMS…) inspection • customs surcharges, import license fees, variable levies • import bans, discretionary licensing, import quotas, Non tariff measures: not allowed quantitative restrictions 29 Example: European Union Generalities • High levels of self-sufficiency in primary agricultural products: wheat, dairy, meat • Access on high-tariff items through tariff quotas TRQ. – Administration of tariff quotas controversial – Access difficult for agricultural items produced in the Community during the season (tariffs depend on the season) • Reform: support to producers shifts from market price support to direct payments subject to production-limiting programmes (blue-box measures) • market access conditions foodstuffs are affected by the EU's policy of greater food safety, linked to a number of “food scares” at Community level • not everything is harmonized - then national provisions apply 30 31 EU Tariffs: TARIC • • • • europa.eu.int/comm/taxation_customs/databases/taric_en.htm Average MFN tariff 4.9% (1996), 4.2% (1999); Simple average tariff on agri-products estimated at 17.3% Preferential duty rates within and outside tariff quotas published in TARIC (also internet) • Only companies established in the EU can apply for an import license for a TRQ – First come first served – Based on traditional flows – In proportion to the quantities requested (TRQs were established the former quota system and are often allocated to certain countries) • In accordance with the WTO agreements the EU has opened up further opportunities for access to reach 5% of market access for third countries. 32 Only MFN/NTR treatment • The EU has numerous preferential trade agreements and arrangements • Exclusive MFN treatment applicable only to imports from eight WTO Members: – Australia; Canada; Hong Kong, Japan; Republic of Korea; New Zealand; Singapore; and the United States. • 20% of lines are duty free • EU exports benefit from preferential agreements in 17 countries. Export to the rest of the world under MFN. 33 Preferential trade agreements • Europe agreements: Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia • Mediterranean co-operation agreement: Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestinian authority, Syria, Tunesia • Mexico, South Africa • Andorra, Cyprus, Malta, Turkey (industrial products only) • 80% of lines are duty free 34 Preferential agreements (non reciprocal) • In February 2000, the EU and 70 African, Caribbean and Pacific (ACP) countries agreed on a successor to the Fourth Lomé Convention: the Partnership Agreement of Suva • It continues the EU's non-reciprocal trade preferences until 2007 at the latest, to permit the parties to conclude new trading arrangements, with the aim of WTO-compatibility. • WTO Members are considering a request for a waiver. • Preferential treatment for bananas is examined by WTO • 95% of lines are duty free 35 GSP • Who benefits (146 developing countries), basically Asian and Latin American countries for which no other agreements exist: 54% of lines duty free • Regional cumulation of origin allowed for ASEAN, ANDEAN, CACM • Products are classified into 4 groups according to sensitivity = modulation • Countries are reviewed to determine if some of their trade sectors can face international competition without preferences = graduation • Incentives for countries combatting drug production or adhere to labour standards or environmental standards • LDC enjoy duty free access for 95% of lines (“everything but arms initiative”) 36 New GSP: what changes? • Simplify modulation of tariffs: only 2 categories • Increase graduation: remove preferences for high GDP countries to open more opportunities to LDC • Countries using incentives: – Social and environmental: benefits doubled – To fight drugs: increased and extended until 2004 – Incentives subject to control of implementation otherwise not justifyable to WTO 37 Mutual recognition • Australia, Canada, New Zealand, Switzerland, and the United States, • Negotiations with Japan. 38 Food Safety: concerns • Shift from a period where producers interests dominated to one where consumers’ concerns are the most important • Over-intensive practices of industrial farming not yet eliminated (might be related to spread of BSE and foot and mouth) • New techniques and whole new technologies might raise efficiency and solve some problems but introduce different sorts of risks (GMO, Hormones) • Diverse food scares due to residues, bacteriological contamination etc • Policy not harmonized sufficiently • High pressure from consumers for increased information and food safety Food safety: measures 39 • Prevention: HACCP • “General Food Law”: consumer protection: – horizontal/harmonized law – robust and independent scientific advice to support any approvals; – traceability of ingredients, should problems arise. • “European Food Authority” – to provide a coherent, independent, scientific basis for European policy and legislation • legislative reform covering more than 80 actions. – hygiene legislation; pesticides; labelling; official inspections; food supplements; animal foodstuffs and animal waste. a ban on meat-and-bone meal in animal foodstuffs. • encourage production of higher quality food – recognition of regional specialities, – through the setting of standards for organic food. 40 Apply the precautionary principle more systematic • Important for risk management because – sometimes science may come up with the answer too late. No “proof”, does not mean no problem. – there are so far too few specialists capable of giving scientific guidance – and many work for companies promoting the technology • precaution should not become protectionism: – Transparent, non-discriminatory – proportional – Subject to review Labeling • Name under which product is sold • List of ingredients in descending order of weight – ingredient of less than 25% does not need to be broken down – Some ingredients may be mentioned by category (spices) – Quantity of certain ingredients • • • • • • • • Net quantity of prepackaged foodstuffs (metric) Shelf life Any special storage conditions or conditions of use Contact details of manufacturer, packager or vendor in EU Place of origin (if absence might mislead consumer) Alcoholic strength if more than 1.2% Mark identifying lot additives 41 42 Labelling: goal and possible changes • Give consumers full information to make the choice • Presently: List of ingredients (in descending order of weight) – components of an ingredient constituting less than 25% of the finished product do not have to be labelled separately • Planned for the future: all ingredients to be labelled and all known allergens must be labelled (e.g. wine with sulphite concentration of at least 10mg/kg) 43 GMO: Status • 18 GMO's authorised in the EU by a Commission Decision • In two cases the Commission Decision has not yet been implemented by the Member State • Since October 1998 no further authorisations have been granted and there are currently 14 applications pending • Some countries have invoked the so-called safeguard clause, to temporarily ban genetically modified maize and oilseed rape products in their territories. • cases have been examined by the Scientific Committee on Plants, which in all cases deemed that the information submitted by Member States did not justify their bans. • Many consumers demand (and would pay more for) GMO free food 44 Present GMO labelling • Food consisting of or containing GMOs. • Food produced from GMOs if traces of DNA or protein from the genetic modification are detectable in the final product (such as flour produced from genetically modified maize • No labelling of feed • Simplified procedure for foods derived from GMOs but no longer containing GMOs which are "substantially equivalent" to existing foods,such as highly refined soya or maize oil. • The accidental presence of GM-material in food up to 1% is exempted from the labeling obligation. 45 New GMO food labelling • Traceability of GMOs from farm to the table – business operators have to transmit/retain information at each stage – industry must have systems in place that identify to whom and from whom GM products are made available. – Information must be retained for five years. • Labelling of all food produced from GMOs irrespective of whether there is DNA or protein of GMO origin in the final product • Accidental presence of up to 1% still exempted from labeling • Labelling of feed along the same principle as food • The simplified procedure for substantially equivalent GMfoods will be abandoned. 46 Import of fruit and vegetables • Phyto-sanitary certificate • Import license • variable tariffs according to marketing season of local produce • standard import price for some products • compliance with marketing standards for products that are sold directly to the consumer • compliance with horizontal legislation on pesticides, contaminants and labeling 47 EU marketing organisation for Fruit and Vegetables • Goals: facilitate fair trade and keep off the market unsatisfactory products • Defining commercial quality of foodstuffs • 33 products to be standardized taking into account UNECE standards • Inspection done prior to import (possibility to recognized inspection services from third countries - not used at present) • Future: standards will change to take into account consumers requirements e.g. internal quality 48 Meat • All beef pork and horsemeat imported into the EU must come from slaughterhouses, cutting plants, and cold storages that have been approved by the EU • Since 1989 ban on meat from cattle treated with growth hormones - Canada and the US have challenged this 49 US/EU Poultry issue • Most forms of anti-microbial treatments are prohibited in the EU • United States use chlorinated water and other antimicrobial treatments; US authorities could not sign export certificates complying with EU requirements • $50 million loss to US exporters per year • EU has commissioned scientific study 50 Beef labelling and traceability • In force now: – Reference number ensuring link between meat and animal(s) – Slaughterhouse: country and approval number – Cutting plant: country and approval number • From 2002: – Country of birth – Country/ies where fattening took place 51 Inspection visits • Many countries have been visited by EU inspection teams concerning products to be exported into the EU: e.g. • Thailand on fishery products and poultry meat; • Australia on bovine meat and fishery products…etc. 52 Example: United States 53 Generalities • Continuing strong exporter of agricultural products advocating free trade • potential distortions to competition may arise as a consequence of various forms of assistance provided by federal and state governments to some sectors (notably agriculture) • Maintains liberal trading and investment regimes • policies, practices and measures relating to trade and investment are, by and large, transparent • Government has resisted pressure from industry for protection because of alleged “unfair” trading practices of foreign producers • low level of use of standards set by international standard setting bodies • third party conformity assessment compulsory 54 HTSUS: Tariffs • http://dataweb.usitc.gov/SCRIPTS/tariff/toc.html • Most imports either enter the United States duty free or are subject to very low tariffs, mainly bound • Zero tariffs apply to nearly one third of national tariff lines and the • simple average applied MFN tariff rate has declined from 6.4% in 1996 to 5.7% in 1999; expected to fall to 4.6% implemented. • U.S. agricultural tariffs average under 10%. • low overall level of tariff protection, 5% of MFN tariffs involve rates exceeding three times the overall average; such tariff "peaks" affect some agricultural and food products as well as textiles, clothing and footwear. Preferential trade agreements 55 • NAFTA (free trade agreement with Mexico and Canada) – accelerated tariff reductions was put in place with Mexico, on 1 August 1998. – tariffs covered by the NAFTA were eliminated between the United States and Canada on 1 January 1998. • Free trade agreements with Israel, Jordan • Negotiations within the Asia-Pacific Economic Cooperation (APEC) to push forward an agenda of tariff cuts in eight sectors • Negotiations towards a Free Trade Area of the Americas (FTAA) . 56 Other bilateral agreements • The United States concluded 63 bilateral trade, investment, and intellectual property rights agreements between 1996 and 1998, 53 of which entered • into force on 31 December 1998 concerning: – a trade practice by a U.S. trading partner – market-opening agreements – sector or area specific, mostly for the protection of investment or intellectual property rights; – mutual recognition agreements on standards. • Some with countries not Members of the WTO and aimed at setting disciplines similar to those already in existence in the multilateral trading system. 57 Preferential agreements - non reciprocal • General System of Preferences (GSP), • Andean Trade Preferences Act (ATPA), • Caribbean Basin Economic Recovery Act (CBERA). • initiative to grant wider preferences to African countries, is being considered by congress 58 GSP • Product enters US without duty if: – from designated beneficiary country (many but not all developing countries; some Asian countries “graduated”) – eligible for GSP treatment; – It meets the rules of origin. – Regional cumulation rule for: the Andean Group, the Association of Southeast Asian Nations (ASEAN) excluding Singapore and Brunei Darussalam, the Caribbean Common Market (CARICOM), the Southern Africa Development Community (SADC), and the West African Economic and Monetary Union (WAEMU). • Product eligibility mentioned in HTSUS • Competitive Need Limitation (CNL) preventing preferences to countries who are competitive for an item • 38 LDC have a wider range of products and no CNL 59 Products requiring import licenses • • • • • • • • alcoholic beverages animals and animal products certain drugs firearms and ammunition fruits, nuts meat and meat products milk, dairy, and cheese products plants and plant products 60 US Food safety • Food safety standards applying domestically also apply to imported foods • Several federal agencies involved: FDA, USDA, EPA, FTC • HACCP 61 Labelling • Name of the food (also english, if standard exists it must be used) • Net quantity of contents • Manufacturer, packer or distributor • Ingredients (order predominance by weight) unless standardized • Food additives and colour • Nutrition information 62 GMO Attitude • Ensure Fair Treatment For Agricultural Products Made With Biotechnology. • the use of genetic engineering to raise productivity and create pest-resistant plant strains, develop new medicines and other innovations offers remarkable opportunities to protect the environment and fight hunger in the years to come. • consumer concerns which must be met through fair, transparent and scientifically based regulatory processes. 63 GMO Status (1998) • Planted and marketed: corn, canola, rice, tomatoes, potatoes and soybeans • In the pipeline for approval: peppers, sunflowers and peanuts • Developed and in test: sugar beets, wheat, squash, papayas, berries, bananas and pineapples • 1998: 25% of corn, 38% of soybeans, 45% of cotton and 42% of canola. 64 GMO responsibilities • FDA:Food, feed, food additives, veterinary drugs “Safe to eat” • USDA Plant pests, plants, veterinary biologic “Safe to grow” • EPA Microbial/plant pesticides, new uses of existing pesticides, novel microorganisms “Safe for the environment.” 65 US GMO regulation • Currently, no federal agency requires foods to be labeled as genetically modified unless it contains a known allergen or the nutritional content of the food is changed. • The U.S. regulatory agencies assume that these genetically engineered foods are similar to traditional counterparts except for the modified genes • FDA considers the voluntary label “gmo free” (or similar) as misleading unless with a statement that there is no difference in the healthfulness • After a nation-wide hearing, FDA has now proposed regulatory changes in the field of GMOs: mandatory notification, guidelines for voluntary labeling 66 GMO: Differences to EU • Labeling: EU is process-based (in US it is contentbased). If one compares the US and EU regulatory approaches, • industry-driven vs. consumer-driven. 67 Import of Fruit and Vegetables • phytosanitary certificate issued by an official of the exporting country. • 14 Animal and Plant Health Inspection Services (APHIS) plant introduction stations for commercial importation of plant materials • Where marketing orders exist products must comply with them 68 US Marketing orders • Standards of quality have been established for many vegetables. – minimum standards only – specifications for quality factors such as tenderness, color, and freedom from defects. • food not meeting these standards – must be labeled in bold type "Below Standard in Quality" – followed by the statement "Good Food-Not High Grade" or – a statement showing in what respect the product fails to meet the standard, such as excessivelybroken," or "excessive peel“ • Grading and quality inspection by the Agricultural Marketing Service, USDA is required for each lot (shipment) imported. 69 Products covered • Products covered: – avocados, dates (other than dates for processing), hazelnuts (filberts), grapefruit, table grapes, kiwifruit, limes, olives (other than Spanish-style), onions, oranges, Irish potatoes, plums, prunes, raisins, tomatoes, and walnuts. 70 Meat • Meat or meat products derived from cattle, sheep, swine, goats, and horses are subject to the more specific provisions of the Federal Meat Inspection Act enforced by the Food Safety and Inspection Service of the U.S. Department of Agriculture. • Foreign meat products must originate in countries whose meat inspection programs have been approved. Each shipment must be properly certified by the foreign country • Inspection by Federal meat inspectors, found to be completely sound, wholesome, and fit for human food before entry into the United States. 71 Investigate the market need • Does the market need the product – is there a shortage of the particular commodity • Or is there a significant price advantage with the proposed commodity • Can you meet the quality and other market requirements • Have you access to a willing buyer • Can you deliver the product in the volumes and in the condition that the market demands 72 Decide – Make contact - Evaluate • approach to the most likely potential buyer to establish market access requirements • Contact and enquiries with your national Ministries of Trade and both Animal/ Plant and Public Health authorities • evaluate the cost benefits of any required plant or infrastructure upgrading. • in-depth investigation of the issues involves, although involving some cost, will almost certainly give long term savings and speed up any course of action taken.