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Competitive Halal regulations as a

Technical Barrier to Trade: Stakes

and Solutions within OIC

Dr El Hassane HZAINE

Director General

Islamic Centre for Development of Trade (ICDT/OIC)

HALAL CONGRESS MIDDLE EAST 2013

SHARJAH. UAE. 16-18 DECEMBER 2013 27/12/2013

OUTLINE

I. Brief presentation of trade in Food products in OIC Member States

II. Barriers to trade in Halal Food Products

III. Halal regulations

IV. Policy options

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HALAL INDUSTRY

The Halal Industry could be categorized into following components : Food Products : Halal food is mostly poultry, meat and meat products as well as chocolates, bread and biscuits, milk and milk products including cheese, beverages and additives such as spices, marinades and gelatine.

Pharmaceutical, Cosmetic and Personal Care: Drugs/Vaccines , Nutraceuticals Lifestyle : Apparels, Restaurant & Hotels.

Services: Logistics, Standard, Auditing & Certifications, Tourism, Research and Technology Development.

HALAL INDUSTRY: some indicators in 2012

Global Halal products market is estimated at 2.3trillion (excluding Islamic banking according to Mazeedi (Kuwait)

• Food & Beverage: 70%. • Pharmaceutical: 22%. • Personal care & cosmetics: 10% .

OIC Halal Food Market: USD 222 billion

Intra-OIC Halal Food trade : USD 121 billion USD

Intra-OIC Halal food trade share: 54.7%

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Key Halal Market

OIC Countries

Saudi Arabia Malaysia

Indonesia

Egypt

Turkey

Algeria

Nigeria

Morocco

Pakistan

Kazakhstan

Yemen

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Non-OIC countries

India = 140million

China = 40 million

Russia = 20 million France = 6 million USA = 8 million Philippines = 6 million Germany = 3 million UK = 1.5 million

South Africa= 1 million Canada = 800,000

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Vegetables and fruit 23%

Cereals/cereal preparations

22%

Oil seeds/oil fruits

1%

Coffee/tea/cocoa/spices 9%

Live animals except fish 2%

Dairy products & eggs 9%

Beverages 3%

Miscellaneous food products

7%

Meat & preparations

3%

Sugar/sugar preparations/honey

6%

Fish/shellfish 4%

Tobacco/manufactures 6%

Processed animal/vegetable oils

5%

Composition of Intra-OIC trade in food products in 2012 in%

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Barriers to Intra-OIC Trade in Halal products

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In many OIC countries halal products face some

difficulties in the export markets notably :

Severe requirements of halal products in some OIC

Countries

Difference of interpretations by different authorities in

OIC Countries

Labeling and sanitary and phytosanitary imports

requirements,

poor product adaptability to suit the local taste

requirement

Lack of incentives of Halal Industry (tax exemption, cold

room equipment for Food)

Survey of ITC on NTBs

Reported non-tariff barries

average of the surveyed countries

Sanitary and phytosanitary measures (SPS)

Technical barriers to trade (TBT)

Pre-shipment inspection and other formalities

Licences, quotas and other quantity control measures

Charges, taxes and other para-tariff measures

Finance measures regulating the access to and cost of foreign exchangefor imports and define the terms of payment.Other

*Based on the data analysis for 5 countries: Chile, the Philippines, Thailand Tunisia, Uganda

Types of Reported Barriers

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Mimouni ITC 2009 Tunis 11

Barriers to Intra-OIC Trade in Halal

products

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GENERAL EXCEPTION IN GATT WTO

The sovereign right of each country to protect its own population through specific laws or standards for safe halal food.

article 20 of GATT

” Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

(a) necessary to protect public morals; (b) necessary to protect human, animal or plant life or health;”

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DIFFERENTS DOMESTIC LAWS

• There are many Halal standards in varying

jurisdictions (regional , national and even at

Certification Body level)

• About 10 of the 57 OIC member countries have an official Halal standard

• In most countries where Halal products are

produced & exported, there is no official Halal

standard

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MANY STANDARDS FOR THE SAME PRODUCTS

Until to date, there are many National Halal Food Standards being produced to serve the local regulator, industry and populations. 1. Malaysian Standard MS1500:2009,Halal Food - Production, preparation, handling and storage –General Guidelines(Second Revision) 2. Brunei Standard PBD 24:2007 Brunei Darussalam Standard Halal Food 3. Saudi Standard SASO 2172:2003, General Requirements for Halal Food 4. Bosnia and Herzegovina Standard BAS 1049:2010 Halal Foods: Requirements and Measures 5. Austria Standard ONR 142000:2009 Halal food – Requirements for the food chain 6. Pakistan Standard PS 3733: 2010 Halal Food 7. Croatia HRN BAS 1049:2010, Halal food – Requirements and measures . 8. Serbia “HSS 2009, Halal Standard of Serbia” (HSS 2009, Srpski halal standard). Islamic community. 27/12/2013 18

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• Competitive regulations and involvement of business circles (private food law)

• Informal market VS Formal Market

The official market includes large-scale exporting companies, large supermarket chains and certification agencies.

The ‘uncle and auntie’ market is a local market based on trust in the local butcher and grocery store of the same social and ethnic group.

• At present there are around 144 active Halal certifying bodies around the world consisting of government or part government bodies, non-governmental organizations, local mosques or Muslim associations.

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ACTORS OF CERTIFICATION 144 around the world

VARIOUS STRUCTURES

1. Islamic/ Muslim Associations

2. Certification body under an Islamic/ Muslim Association

3. Mosque/ related to a specific mosque

4. NGO or Group/ Private initiative

5. Profit‐making entity

6. Semi government/ Government‐related

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Norway

Sweden

Spain

Indonesia

Qatar

UAE

Yeman

Lebanon

Singapore

Burkina Faso

Gambia

Kenya

Morocco

Senegal

Belgium

Bangladesh

Malaysia

Sudan

Chile

Russia

India

Pakistan

Taiwan

Nederland’s

Canada

UK

Brazil

USA

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Number of certifying bodies

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Europe 29%

North America 11%

South America 8%

Asia 15%

OIC 23%

Oceania 13%

Africa non OIC 1%

distribution of CBs by regions

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28%

18%

13%

10%

8%

8%

5%

3%

3%

2% 2%

Certification Systems at World Level

World Halal Council

Halal Stock (Philipines)

MUI (Indonesia)

Jakim Malaysia

Halal Development Council

International Halal Integrity Alliance (IHI)

Halal Research Council

Islamic Republic of Iran

Islamisches Zentrum Hamburg

RAL-Gütesiegel Halal (Germany)

Chualalongkorn University Thailand

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IMPACT OF ABSENCE OF AGREED NORMS

• Different national regulatory systems (rules and conformity assessment procedures) may cause impediments to trade in three ways (Spencer Hensen) :

• import restrictions and high trade cost for production suppliers

• requirements can have discriminatory effect among partners

• trade can be reduced due to higher prices or more severe trade barriers

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Harmonization is probably the most well known trade-facilitating tool. The goal of

harmonization is uniformity of trade measures on an international basis.

The harmonization of halal standards at the regional and international level is achievable if a

consensus is obtained on commonalities

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DYMAMIC OF HALAL NORM BUILDING

1 explanation legal perspective

Role of non state actors in building customary law

• World Halal Council,

• IHI Alliance,

• Global Harmonisation Initiative Working Group

2 explanation sociological approach

Stage 1 persuasion by norms entrepreneurs

Stage2 dynamic of imitation of norms leaders by followers

Stage 3 norms are taken for granted and no debate around the norms

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The effect of international law differs from country to country depending on the membership in international and regional organisations and their ratification of the relevant treaties.

We can also distinguish between soft law (codex alimentarius, OIC SMIIC; ASEAN) and hard law (WTO and EU agreements) Current International Halal standards that address food labeling and halal food production :

1. Organization of Islamic Cooperation, OIC/SMIIC 1:2011, General Guidelines on Halal Food General guidelines on halal foods,

Guidelines for bodies providing halal certification, and

Guidelines for the authorized accreditation body accrediting halal certification bodies

2. Codex Alimentarius Commission, CAC/CL 24-1997 General Guidelines for Use of the Term “Halal”

• 3. Arab guidelines, 2012-2563(AIDMO)ASEAN General Guidelines on the Preparation and Handling of Halal Food

4 EU Project Committee CEN/TC 425 Project Committee - Halal Food with the task of preparing a European Standard on halal food in 2012

5. WTO TBT and SPS agreements

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HALAL IN GLOBAL ARENA

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WTO FRAMEWORK • The WTO is placing great emphasis on the role of

harmonization through the use of standards.

• Even though compliance with international standards is voluntary, standards may in practice be ascribed a certain semi-binding authority through the WTO.

• on the basis of the SPS Agreement (Agreement on the Application of Sanitary and Phytosanitary Measures) and the TBT Agreement3 (Agreement on Technical Barriers to Trade), WTO members are committed to participate in establishing new international standards and to base their national regulations on relevant international standards when such exists.

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THE WAY FORWARD

Policy options

POLICY OPTIONS

Five options:

1) HARMONISATION BY ADOPTION OF OIC STANDARDS AS REFERENCE AT OIC AND CODEX ALIMENTARIUS LEVELS;

2) EQUIVALENCE;

3) MUTUAL RECOGNITION AGREEMENTS ;

4) Code of conduct : SMICC GUIDELINES

5) TPS/OIC EXAMINATION WITHIN TNC

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BENEFITS OF HARMONISATION

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Barriers to Harmonisation of Halal standards

and putting aside the minor

differences between the

scholars of different School

of Thoughts and conflict of

interest.

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Difference of Islamic rulings in certain cases such as gelatin,

food flavouring, mechanical slaughter, stunning of animals and

also phosphates.

conflict of interest and competing national standards.

lack of mutual recognition and disconnection between halal

certifiers.

lack of infrastructure, new technology equipment and raw

material related to Halal products

Many certification agencies are not industry friendly.

Halal Auditors do not have relevant industry knowledge

(Shariah centric).

Certification agencies do not follow SOPs, Quality

Management Systems, etc.

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The concept of equivalence

• The concept of equivalence, is based on the fact that

“ regulatory goals, e.g., in relation to health and food quality, in practice may be fulfilled by the use of different kinds of measures”

Trade barriers can thus be removed and the products can be accepted on the basis that they fulfill the relevant regulatory objectives –even though regulatory differences persist.

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Mutual recognition

Mutual recognition • means that “two or more parties mutually accept each other’s rules

or conformity assessment procedures, i.e., the process through which products are evaluated for compliance with the rules”.

• Mutual Recognition Agreements (MRAs) primarily involve conformity assessment procedures. Under these agreements the parties mutually accept each other’s conformity assessment procedures as equivalent in order to ensure compliance with prevailing regulatory requirements.

• Normally, an MRA is a voluntary agreement between governmental conformity assessment bodies.

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The code of conduct The code of conduct may include To strengthen as far as possible the use of international

standards when they exist

To seek mutual recognition of national trade related technical standards and sanitary and phytosanitary Sanitary measures among OIC Member States.

Trade facilitation : to simplify and streamline as far as

possible the procedures applied by the customs and other relevant authorities of the Participating States and adopt the international rules and best practices .

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HALAL ISSUE IN THE CONTEXT OF

THE OIC TPS/OIC NEGOTIATIONS

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Non-Tariff Barriers IN the context of TPS/OIC NEGOTIATIONS

• TPS/OIC Agreement stipulates in Art 2 PARA 6

”The exchanged preferences are not be limited to tariffs but are to be progressively extended to para-tariff and non-tariff concessions”

• Art 3 para 1

« Negotiations are to cover. inter alia. the following areas :Tariff. para-tariff and non-tariff concessions »

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PROVISIONS OF THE PROTOCOL ON THE PREFERENTIAL

TARIFF SCHEME FOR TPS-OIC (PRETAS)

Definitions

Para-tariffs: Border charges and fees. other than tariffs. on foreign trade transactions of a tariff-like effect which are levied solely on imports. but not those indirect taxes and charges. which are levied in the same manner on like domestic products. Import charges corresponding to specific services rendered are not considered as para-tariff measures;

It is agreed upon that border charges refer to all charges and fees. other than tariffs. imposed on import.

Non-tariff barriers: Any measure. regulation. or practice. other than “tariffs” and “para-tariffs.” the effect of which is to restrict imports. or to significantly distort trade;

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PROVISIONS OF THE PROTOCOL ON THE PREFERENTIAL

TARIFF SCHEME FOR TPS-OIC (PRETAS)

Article 7 Elimination of Non-Tariff Barriers

1. Participating States shall eliminate. upon entry into force of

this Protocol. and in the case of LDCs within three years. their non-tariff barriers on the products which are subject to tariff reduction. This period for LDCs may be extended. if a request is made to and approved by TNC.

2. Upon entry into force of this Protocol no new Non-Tariffs Barriers shall be introduced. nor shall those already applied be increased. on the products which are subject to tariff reduction.

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PROVISIONS OF THE PROTOCOL ON THE PREFERENTIAL

TARIFF SCHEME FOR TPS-OIC (PRETAS)

Article 11

Institutional Structure

3. The Trade Negotiating Committee shall hold regular meetings with a view to fulfilling its mandate stemming from the Protocol and the Framework Agreement. to clarify and incorporate trade-related issues. and to help develop and expand the TPS-OIC.

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SELECTED EXPERIENCES

OF

REGIONAL ECONOMIC GROUPINGS

WITHIN OIC

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ASEAN EXPERIENCE

• The CEPT Agreement for AFTA provides for the immediate elimination of quantitative restrictions for products included in the CEPT Scheme. and the elimination of other non-tariff barriers within a period of five years upon enjoyment of the CEPT concession.

• several measures have been taken within ASEAN to remove unnecessary barriers to trade through:

1. harmonization of product standards and mutual recognition of conformity assessment requirements.

2.simplification of customs clearance procedures

3. harmonization of sanitary and phytosanitary standards.

4. Establishment of a mechanism to address private sector complaints on non-tariff barriers.

5. Single window for customs and foreign trade Ministries

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ASEAN EXPERIENCE • Establishment of a mechanism to address private sector

complaints on non-tariff barriers.

1. Complaints or notifications are to be channeled directly to member countries and to the ASEAN Secretariat.

2. These complaints/notifications would go through a process of clarification and verification by member countries concerned.

3. and if they were found to constitute an NTB. efforts would be taken towards their removal.

4. Information on these non-tariff issues that have been raised with directly with the member country or the ASEAN Secretariat would be routinely placed on the ASEANWEB

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