Indian exports are facing a range of headwinds, chiefly lack of demand from western economies amid high inflation globally due to long-drawn geo-political tensions. But goods exports are also facing rampant non-tariff barriers. Mint explains what non-tariff barriers are and why India should seek their removal during free trade agreement (FTA) negotiations.
What constitutes a non-tariff barrier?
Several countries use policy measures apart from tariffs that impact imports into their countries. Such measures could come in the form of regulations, standards, testing, certification or pre-shipment inspection that are aimed to protect human, animal or plant health and environment. Global Trade Research Initiative (GTRI) says that when these measures become “arbitrary, beyond scientific justification”, they create hurdles for trade and are called non-tariff barriers. The recent carbon border adjustment mechanism (CBAM) implemented by the EU, which seeks to tax steel and aluminium-related exports on grounds of pollution, is seen as a non-tariff barrier.
Which sectors face high non-tariff barriers?
Indian agri exports are routinely subjected to high non-tariff barriers in the form of standards. Export growth of chilies, tea, basmati rice, milk, poultry, bovine meat, fish, meat, fish and dairy products also face barriers. These products face Sanitary and Phytosanitary (SPS) measures, which according to a report by the Economic Advisory Council to the Prime Minister (EAC-PM), are regulations and restrictions that ensure quality of products and protect human, plant and animal health. These measures are largely used for agriculture or animal-origin products that are directly used for human consumption. The EAC-PM report further clarifies that there exists a thin line between non-tariff measures and non-tariff barriers and that all non-tariff measures cannot act as non-tariff barriers.
What are the non-tariff barriers used by China?
India’s exports of mango and grapes to China face high non-tariff barriers. Indian authorities submitted a dynamic list from Agricultural and Processed Food Products Export Development Authority (APEDA), but the time-taking process required by Chinese Customs results in high transaction cost and additional time. Pharma exports to China also face rejection due to non-compliance found while testing. According to the EAC-PM report, there is no redressal mechanism, and the ruling of the lab was considered final, wherein there is no choice to appeal or even contest the results, causing “heavy financial cost” on Indian companies.
What are the kinds of non-tariff barriers faced in the US & EU by exporters?
Indian exports to the US face authorization requirements that are complex and time-consuming, and include several agreements and protocols. Fulfilling such requirements creates the unnecessary burden of high costs and delay in the export of consignments. GTRI says that the US banned import of wild shrimp from India in May 2018, terming Indian fishing practices as non-compliant with US regulations to protect sea turtles. The US insisted on equipping fishing gear with Turtle Excluder Devices (TED) to ensure no turtle is harmed during fishing. For export of chemicals to EU, Indian firms need to comply with EU’s REACH regulation. This requires paying a high registration fee for each chemical and sharing cost and technical data with the EU. The EU regulations prevent Ayurvedic drugs from entering European markets. It requires 15 years of safe use data from a European country in addition to many other conditions.
How can FTAs be used to bring down non-tariff barriers?
GTRI co-founder Ajay Srivastava said that India should adopt a two-pronged strategy to mitigate the influence of NTBs on exports. First, by upgrading the domestic systems, in cases where Indian products are rejected due to quality issues. And second, by engaging in discussions with partner countries and being prepared to retaliate if unreasonable standards or rules continue to obstruct imports from India. India signing a raft of free trade agreements is another opportunity to get the non-tariff barriers removed during the negotiations that will help Indian exports become more competitive. India has recently signed free trade agreements with UAE and Australia, and is negotiating FTAs with the UK, EU and Canada.