GLOBAL SPS BASED MRL STANDARDS AND ITS

IMPACT ON EXPORTS:

COMPLIANCE IMPACT ON INDIA

Dr. Murali Kallummal,

Professor

Centre for WTO Studies, IIFT

4th Standards ConclaveSession 5: “Risk assessment in Agri-food Trade and Policy

Options”May 1 & 2, 2017

The Lalit Hotel, New Delhi

OUTLINE

Part – I 1. (CWS study submitted to DoC)

Titled “EC’s SPS and TBT Notifications on

Endocrine Disruptors and Market Access

Implications: Case of India’s Exports” – 199 pages

Part –II

1. General issues related to transparency of non-

Codex MRL standards

2. Based on UNIDO Study – 2011

differential impact of border rejections

Part III

1. Recommendations for INSS

TRADE TO GDP RATIOS (1988 TO 2015)

11.0

41.943.1

31.3

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.01988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Exports and Imports Shares to GDP: India

Trade to GDP US$ current Exports to GDP US$ current

Imports to GDP US$ current

PART – I

CWS STUDY

EUROPEAN COMMISSIONS REGULATION ON ENDOCRINE

DISRUPTORS AND ITS IMPACT ON INDIA

FULL REPORT AVAILABLE AT:

HTTP://WTOCENTRE.IIFT.AC.IN/WORKINGPAPER/CWS%20WORKI

NG%20PAPER%20NO.33.PDF

SPS AGREEMENT:

ARTICLE V - ASSESSMENT OF RISK AND DETERMINATION OF THE APPROPRIATE

LEVEL

Article 5.7 in reads…..

In cases where relevant scientific evidence is

insufficient, a Member may provisionally adopt

sanitary or phytosanitary measures on the basis of

available pertinent information, including that from the

relevant international organizations as well as from

sanitary or phytosanitary measures applied by other

Members.

In such circumstances, Members shall seek to obtain the

additional information necessary for a more

objective assessment of risk and review the sanitary or

phytosanitary measure accordingly within a reasonable

period of time.

ENDOCRINE DISRUPTORS: DEFINED

An endocrine disruptor is an exogenous

substance or mixture that alters function(s) of

the endocrine system and consequently causes

adverse health effects in an intact organism, or

its progeny, or (sub)populations.

A potential endocrine disruptor is an exogenous

substance or mixture that possesses properties

that might be expected to lead to endocrine

disruption in an intact organism, or its progeny,

or (sub)populations.

Source: http://www.who.int/ipcs/publications/en/ch1.pdf.

WHAT ARE THE ISSUES IN EDS

Chemicals with endocrine-disrupting

properties impact the hormone system of

animals and humans.

Endocrine disruption is a relatively recent

way of looking at the toxicity of

chemicals.

There is now scientific consensus in many

areas, though diverging views exist on

specific points within the scientific

community and regulators worldwide.

IMPACT ON INDIA’S EXPORTS

1. Broadly five Categories of EndocrineDisruptors; (Plant Protection Products; Biocidal Products;

Cosmetics; Medical Devices and Water Framework Directive)

2. Identification of CAS numbers for thoseED with blanks;

3. Mapping of Chemical Abstracts Service(CAS) to HS Codes;

4. Seven sectors were identified and impacton these seven sector in terms of -

1. India’s Exports to EU and World;

2. EU imports from World.

Present Analysis (methodology)

THE REGULATION OF ED FOLLOWS, IN DIFFERENT PIECES OF

LEGISLATION, DIFFERENT APPROACHES

ED ClassificationsRegulatory decision making taking into

account

Plant Protection

Products Mainly Hazard with limited risk elements

Biocidal Products Hazard (general public uses) Risk / socio-

economic considerations (approval)

Cosmetics Hazard / Risks (to be reviewed)

Medical Devices Risk / socio-economic considerations

(proposal currently in co-decision)

Water Framework

Directive

No decision making directly applicable on

the authorisation of products; the provisions

are risk-based

REACH (not

Classified as ED)

Hazard (for listing)/ /Risk / socio-

economic considerations (to be reviewed)

Source: European Commission “ROADMAP”, dated July, 2014.

PROJECTED IMPACTS - EU’S NOTIFICATIONS (SPS AND TBT)

Scope of ED’s Coverage

1. Agricultural products – Indirect through theMRL restriction on Active substances;

2. Chemical Products – Direct restrictions;

3. Cosmetics Products– Direct and indirectrestrictions;

4. Leather Products – Indirect based on thecomposition of Dye used;

5. Textile and Textile Products – Indirectbased on the composition of Dye used;

6. Medical Devices – Direct restrictions

7. Water (Aquatic lives) - Direct Restrictions

8. Other products which contains EDs

NON-CHEMICAL LISTED AS ENDOCRINE DISRUPTORS

Name of Endocrine Disruptors CAS HS Code

Creosote 8001-58-9 2707

Disodium tetraborate, anhydrous 12179-04-3 2528

Distillates (coal tar), naphthalene oils,

naphthalene oil84650-04-4 2707

Laminarin 9008-22-4 2309

Limestone 1317-65-3 2521

Low temperature tar oil, alkaline, extract residues

(coal), low temperature coal tar alkaline122384-78-5 2707

Musk Xylene 81-15-2 2653

Propyzamide 23950-58-5 2395

Sea-algae extract (formerly sea-algae extract

and seaweeds)Not applicable 1302

Sucrose 57-50-1 1701

Source: European Commission, Brussels, 15.6.2016 / SWD(2016) 211 final / PART 5/16

ACTUAL IDENTIFIED (ENDOCRINE DISRUPTORS –ACTIVE

SUBSTANCES) & 6 DIGIT HS TARIFF LINES

Pla

nt

Pro

tectio

n

Pro

ducts

Bio

-cid

al

Pro

ducts

Cosm

etic

s

RE

AC

H

Wate

r

Fra

mew

ork

Dire

ctiv

e

347 98 49 163 48

Total of 588 Active Substances are listed as Endocrine Disruptors (EU document Annex 4)

Plant Protection

Products

49%

Biocidal Products

14%Cosmetics

7%

REACH23%

Water Framework Directive

7%

Endocrine List of 588 Active

Substances (100%)

Chemical and

Chemical Products,

17.1

Cosmetics, 0.5Food and Food

products, 14.9

Leather and Leather

Products, 1.2

Medical Devices,

0.9

Textile and Textile

Products, 12.1

Water, 0.1

Five Sectors (based on HS

Tariff Lines) – (46.8 %)

CHAPTERS COVERED (SECTORAL)

Percentage Share of Tariff

lines (%)Number of Chapters

8 1

18 1

31 1

44 1

97 1

98 1

100 41

Seven Major Sectors 47

Lowest tariff lines shares of 8 % has been one percent (chapter 51)

and highest of 100 percent coverage in 41 chapters.

Therefore, EC’s legislations could have coverage of 47

Chapters.

SUPPLY: INDIA’S EXPORT TO WORLD

Seven Sectors Avg. Shares of India’s Exports

Chemical and Chemical Products 12.9

Cosmetics 0.2

Food and Food products 11.0

Leather and Leather Products 1.3

Medical Devices 0.3

Textile and Textile Products 9.7

Water 0.0

Sub Total of Seven Sectors 35.5 %

Non-ED Products (EU’s Legislations) 64.5 %

India's World Exports (US$ bn.) 303.4 (US$ bn.)

Nearly 36% of India’s global exports are impacted:

1. Chemical and Chemical products accounted for 13 % closely

followed by food and food products with 11 % and Textiles and

Textile products with nearly 10 % shares in India’s global exports of

US$ 304 billion;

2. Water, Leather, Cosmetics and Medical Devices accounted for

nearly 2 % shares;

3. There is a clear evidence of concentration of Impact, with

three of the seven sectors having more than 10 % shares.

INDIA’S EXPORTS TO EU-27 MARKET

Seven Sectors Average Shares of EU's Imports

Chemical and Chemical Products 14.9Cosmetics 0.1

Food and Food products 7.6Leather and Leather Products 4.1

Medical Devices 0.4

Textile and Textile Products 18.2Water 0.0

Sub Total of Seven Sectors 45.2 %Non ED prouducts 54.8 %

India's World Exports (US$ bn.) 50.5(US$ bn )

45 percent of India's export are impacted - US$ 50.5 billion:

1. Impact on Textiles and Textile products is the highest with 18.2 % share of the

exports to EU of US$ 50.5 billion;

2. Chemical and Chemical products accounted for 15 %;

3. Followed by food and food products with 7.6 %;

4. Leather and Leather products was found to have a significant impact of 4.1 %

share;

5. Water, Cosmetics and Medical Devices accounted for only 0.5 % shares;

6. There is a clear evidence of concentration of Impact, with two of the seven sectors

having more than 10 % shares.

Labour intensive sectors are seen to be taking a hit.

1. Nearly 30 % is the Impact on EU’s Import market.

1. Chemical and Chemical products accounted for 15 percentage

of the total imports of US$ 5.5 trillion;

2. Followed by food and food products with 8 percent shares and

Textiles and Textile products with 4.2 percent;

3. Medical Devices accounted for nearly 2 percent shares;

4. Water, Leather, Cosmetics and Medical Devices accounted for

nearly 2.6 percent shares.

TOTAL DEMAND - EU-27 IMPORT COVERAGE OF ED PRODUCTS

Sectors Average (2012 to 2015)

Chemical and Chemical Products 15.0

Cosmetics 0.4

Food and Food products 7.9

Leather and Leather Products 1.1

Medical Devices 1.5

Textile and Textile Products 4.2

Water 0.1

ED's Products Sub-total 30.3 %

Non ED products (US$ Trillion) 3.8 (US$ Tr.)

US$ In Trillions (EU total) 5.6 (US$ Tr.)

DEPENDENCE ON EU: INDIA’S EXPORT SHARES (IN %)

22 % share of India’s seven sector is dependent by way of exports to EU:

1. The Impact on Leather exports will be highest with almost 50 % exports to

EU;

2. Textile is second highest in terms of impact, with 31 % of exports to EU;

3. Followed by Chemical and medical devices with 19.2 %;

4. Food and food products will be impacted of up to 12 %;

5. Water accounted for only 5.1 % shares;

6. There is a clear evidence of concentration of Impact, with six of the seven

sectors having more than 10 % shares.

Most labour intensive sectors can be seen to take a hit.

Seven SectorsIndia’s Exports Shares to

EU Imports (in %)

Chemical and Chemical Products 19.2

Cosmetics 10.1

Food and Food products 11.5

Leather and Leather Products 50.4

Medical Devices 19.1

Textile and Textile Products 31.1

Water 5.1

Sub-Total of Seven Sectors 21.2

Non ED Products 14.1

Total Indian Exports to EU (%) 16.6

METHODOLOGY CHALLENGES

Deeper Analysis - ‘Information Asymmetry’

Market survey for MRL standards and

restrictions on active substances (AS);

Market survey to identification the products

containing the EDs;

Need for a completely different structure at the

multilateral level (more effective and better

transparency mechanisms)

SUMMARY TABLE OF AGRI. PRODUCTS COVERAGE OF EDS(ANNEX TABLE NO. 3)

Range of

Agricultural

Products

(numbers)

Coverage of

Agricultural

Products (No.)

Maximum

Agricultural

products

Minimum

Agricultural

products

Coefficient of

Variation (CV)

- % age

1 to 100 115 100 1 79.7

101 to 200 42 200 101 16.6

201 to 300 21 297 203 11.5

301 to 400 10 395 309 8.6

401 to 600 6 534 413 11.1

Agricultural

Products534 534 1 105.5

Agricultural

Substances194

Sources: Calculated based on Endocrine list based on EC’s regulation of 2011 and Global MRL Database. (now

maintained by Bryant Christie Inc.)

40,000 total active substances(according to chemicalbook.com)

588 active substances declared as

endocrine disruptors;

ED’s accounting for approximately

1.5 percent of total active

substances – misses the logic.

Vital Statistics from Chemicalbook

PART –II

GENERAL ISSUES RELATED TO TRANSPARENCY OF

NON-CODEX MRL STANDARDS

DIFFERENTIAL IMPACT OF BORDER REJECTIONS

NON-CODEX MRL STANDARD?

There is no Definition (internationally)

1. But from the empirical analysis, we found that

these are those active substances/ingredients for

which there are no comparable Codex

measures;

2. Therefore, these are purely national by

application;

3. Like the other MRL standards these are

applicable on Agricultural crops used as food or

feed;

4. Calculation of stringency in these cases is not

possible as there is no comparable Codex

measures (international).

EU’S UNDERSTANDING ON HARMONISATION EFFORTS BY WTO

Number of MRL on Active Ingredients of EU

Source: Global MRL Database. (now maintained by Bryant Christie Inc.)

19 Agricultural

productsEU’s AIs

Stringent over

the CODEX

Total Non-

Codex AIs

Share of Non Codex to

Total AIs (%)

Guar 141 2 131 92.9

Chickpea 318 6 283 89.0

Sesame, seed 28 1 24 85.7

Milk (Pesticide) 660 10 548 83.0

Mustard (oilseed ) 31 1 25 80.6

Coffee bean, green 19 2 15 78.9

Soybean 218 13 168 77.1

Sugar cane 41 2 28 68.3

Cucumber 202 16 130 64.4

Tea, leaves 10 1 6 60.0

Peanut 87 3 51 58.6

Corn, grain 113 7 60 53.1

Nut, cashew 77 6 38 49.4

Pepper, non-bell 107 21 50 46.7

Wheat, grain 100 10 46 46.0

Onion, bulb 75 5 34 45.3

Rice 58 6 21 36.2

Grape, table 111 15 39 35.1

Cattle, meat (Pest.) 129 26 44 34.1

NON-CODEX MRL STANDARDS ON ACTIVE INGREDIENTS - GLOBAL TRENDS

58.6

51.9

45.0

43.7

10.7

6.3

0.7

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0

United States

Dominican…

Honduras

Mexico

Japan

Hong Kong

Canada

South Africa

Eurasia Customs…

Iceland

Norway

Australia

Turkey

European Union

Egypt

Morocco

United Arab…

Russia

Argentina

Brazil

China

South Korea

Taiwan

Indonesia

New Zealand

Malaysia

India

Bahrain

Gulf Cooperation…

Kuwait

Oman

Qatar

Chile

Switzerland

Singapore

Israel

Brunei

Thailand

Vietnam

Saudi Arabia

Share of Non-codex MRLs Standards

What do Border Rejections tell us about Trade Standards Compliance of Developing

Countries? Analysis of EU and US Data 2002-2008

UNIDO Working Paper (August 2011)

[Pages 55]Analysis of RRR for four Agricultural Products

1. Fish & Fishery Products

2. Fruit & Vegetables

3. Nuts & Seeds

4. Herbs & Spices)

Study downloaded from:

www.unido.org/tradestandardscompliance

RELATIVE REJECTION RATES OF IMPORTS BY THE EU (DEVELOPED AND

DEVELOPING COUNTRY)

Relatively Rejection Rates Categorised

Developing Developed Total

High RRR 43 43

Low RRR 36 8 44

Medium RRR 42 3 45

No Data 48 19 67

Number of Countries 169 30 199

High

0%

Low

27%

Mediu

m10%

No

Data63%

30 Developed Countries

High26%

Low21%

Medium25%

No Data28%

169 Developing Countries

RELATIVE REJECTION RATES OF IMPORTS BY THE US (DEVELOPED AND

DEVELOPING)

Relatively Rejection Rates Categorised Developing Developed Total Numbers

High RRR 51 2 53

Low RRR 34 17 51

Medium RRR 46 8 54

No Data 38 3 41

Number of Countries 169 30 199

169 Developing Countries

High

30%

Low

20%

Medium

27%

No Data

23%

30 Developed Countries

High

7%

Low

56%

Medium

27%

No Data

10%

PART III

RECOMMENDATIONS FOR INSS

By Way of Conclusion

1. EC’s Endocrine Disruptors regulations have an significant

impact both in terms of India’s exports to EU and EUs

Imports,

1. further there are significant Sectoral differences;

2. In general the chemical exports would suffer under the

new regime.

2. As protectionism is observed across the world - India needs

strategies that support the exporting activity by creating

systems for an effective response mechanisms based on

exporters feed back – external market surveillances;

3. As a matter of principle, standards have moved away from

‘Risk-based approach’– which in itself can be challenged –

so more and more ‘technological alone approach’ while

ignoring the commercial and development angles.

By Way of Conclusion

1.No certainty about its full scale of impact,

as this would require an analysis of what

goes in to the industrial production

process. (need wider domestic stakeholders

consultation)

1.Trade Facilitation issue in Goods Trade: if

not addressed through Negotiations;

1.India will have to create institutions and

mechanisms to address these MRLs through

the process of DSM of the WTO.

1. Domestically - the developing countries needs tounderstand the use of NTMs and theirimplications for formulation and implementationof effective development strategies.

2. Internationally - HS codes to be mademandatory for all SPS and TBT notifications tothe WTO – as it is trade regulatory body

3. International effort should be targeted toimprove access and increasing transparencywith regard to NTMs, to collect and classifyinformation about these measures (as suggested byvarious studies like, UNCTAD 2016, Kallummal, 2007 & 2015,Kallummal and Gurung 2016 & 2017).

4. Comprehensive and reliable information onMRL (NTMs) is scarce and difficult/costly toobtain.

RADICALLY DIFFERENT APPROACH (MRL)

THANK YOU