Presented by Khaleda Akhter Senior Research Associate, CPD 18 April, 2015 Dhaka, Bangladesh

1. NON-TARIFF BARRIERS IN BANGLADESH-INDIA TRADE ADDRESSING SPS ISSUES & CONCERNS Presented by Khaleda Akhter Senior Research Associate, CPD 18 April, 2015 Dhaka, Bangladesh

2. STUDY TEAM • PROFESSOR MUSTAFIZUR RAHMAN • KHALEDA AKHTER • NAIMUL GANI SAIF Acknowledgement • The team would like to register our deep appreciation to CPD’s partners, institutions and individuals who have extended cooperation to generate the needed information and provided important insights to carry out the study.

3. CONTENT OF PRESENTATION • SECTION I. INTRODUCTION • SECTION II. OBJECTIVE • SECTION III: CURRENT TRADE DYNAMICS BETWEEN BANGALDESH AND INDIA • SECTION IV: METHODOLOGY • SECTION V: SURVEY RESULTS • SECTION VI: ONGOING COOPERATION AND REMAINING CONCERNS • SECTION VII: CONCLUDING REMARKS-A FRAMEWORK FOR A SPS AGREEMENT

4. SECTION I: INTRODUCTION • The bilateral economic relationship between Bangladesh and India is of significant importance for Bangladesh as the country strives to attain its ambition to become a middle income country. • India is the second largest trading partner of Bangladesh, conceding only to China. • The economic relationship between Bangladesh and India has received growing attention in recent years for a number of reasons. • Indian economy in twenty-first century have important implications for Bangladesh in terms of trade, investment and overall economic welfare. • Deepening of India-Bangladesh economic cooperation also have several significance for regional integration in South Asia. • Bangladesh, as other SAARC LDCs, was given Duty Free Market Access (DFMA) offer to the Indian market which has created significant opportunities to enhance Bangladesh’s market access in India and deepen bilateral economic and trading relationship between the two countries.

5. SECTION 1: INTRODUCTION • While the duties have been brought down to zero, the Non-tariff Barriers (NTBs) such as Sanitary and Phytosanitary (SPS) measures continue to pose significant challenges in advancing the trade between the two countries • In order to protect human, animal and plant life and safety, WTO allows member countries to adopt SPS regulations and measures. • However, the traders from both the countries are confronted with SPS measures which are perceived to be trade-constraining by the concerned players in both countries. • Evidence suggest that various types of SPS measures such as laboratory testing, registration, certification and sanitary phyto sanitary certificate for agricultural exports are undermining the trade potentials of both the countries. • It is also evident that SPS issues start to act as NTBs when appropriate mechanisms and initiatives are not put in place to address the attendant concerns. • There is, thus, an urgent need to identify appropriate mechanisms and institutional initiatives to address SPS-related issues and concerns.

6. SECTION II: OBJECTIVE • Objectives of the study : • Identify major SPS issues and concerns which act as NTBs in Bangladesh-India trade. • Identify the current cooperation mechanism which can be deployed to address SPS related concerns. • To come up with a framework for a bilateral SPS agreement which can then serve as a basis for future cooperation to address SPS related NTBs between the two countries. • It is important to note that, SPS related measures which do not adversely affect bilateral trade have not been discussed in the paper.

7. SECTION III: CURRENT TRADE DYNAMICS BETWEEN BANGALDESH AND INDIA • Bilateral trade between Bangladesh and India has been on the rise over the past years. It has reached about USD 6 billion in FY14 from USD 2 billion in FY05. • It is encouraging to note that in recent years, Bangladesh’s export to India increased to USD 456 million in FY14 from USD 144 million in FY05. • Export earnings from India reached USD 335 million in FY15 (Jul-Feb), rise of 37% compared to the matched period of FY14. • Table-1 : Bangladesh’s Export, Import and Bilateral Deficit with India, 2001-2014 • (in million USD) • Source: Export Promotion Bureau, Bangladesh, 2014

8. SECTION III: CURRENT TRADE DYNAMICS BETWEEN BANGALDESH AND INDIA • As can be seen from Figure 1, the bilateral trade deficit between Bangladesh and India has been on the rise over the past years – from about USD 1.1 billion in FY2001 to about USD 2.5 billion in FY2009 and 5 billion in FY2014. • However, in a globalized world, bilateral trade deficit should not be a concern. Large part of Indian import include raw materials that go for export oriented industries in Bangladesh. • The important issue is whether Bangladesh is being able to fully exploit its export potential in the Indian market. It is from this perspective that resolving SPS concern is important for Bangladesh. Figure 1: Bangladesh’s Export and Import with India

9. SECTION III: CURRENT TRADE DYNAMICS BETWEEN BANGLADESH AND INDIA • It is interesting to note that the share of non-RMG items is significantly higher than that of RMG products in Bangladesh’s export basket in India. This alludes to both product as well as market diversification opportunity for Bangladesh. • Significant positive impact of DFQF market access offer is yet to be realized. • Realizing the market access opportunities will critically hinge on many factors: higher supply-side capacity, infrastructure development, attracting FDI, better trade facilitation, and also Bangladesh’s capacity to address SPS concerns. Table: Share of RMG and Non-RMG Commodities (Million USD) Source: EPB, 2015

10. SECTION IV: METHODOLOGY • The analysis in this study is based on information collected from both primary and secondary sources. • Secondary information was collected from • Export Promotion Bureau (EPB), • Bangladesh Bank (BB), • National Board of Revenue (NBR), • Bangladesh Accreditation Board (BAB), • Bangladesh Standards and Testing Institution (BSTI). • Secondary information was also generated from the Bureau of Indian Standards (BIS) and Food Safety and Standards Authority of India (FSSAI). • Information was also generated from field visits to several land ports and interviews with concerned officials and stakeholders in Kolkata and New Delhi.

11. SECTION IV: METHODOLOGY • The present study has also benefitted from information generated through Focus Group Discussions (FGDs) and Key Informant Interviews (KIIs) with concerned stakeholders including traders, policy makers, and government officials from several ministries. • Primary data was obtained from a perception survey involving exporters, importers and C&F agents in Bangladesh. • Total number of respondents was 100. Among them, 42 respondents were exporters, 38 respondents were importers and 20 respondents were C&F agents. • Perception Survey was held in 5 major ports : • Benapole-Petrapole, • Akhaura-Agartala, • Hili-Hili, • Bhomra-Ghojadanga, • Tamabil –Dawki .

12. SECTION V: SURVEY RESULTS ANALYSIS OF SURVEY RESULTS FOCUSED ON: • Identification of Sanitary and Phytosanitary (SPS) Issues • Labeling and Packaging Requirements • Certification, Registration and Testing Requirements • Pest Elimination, Quarantine and other Requirements • Efficiency of relevant Institutions • Average Time Taken to Clear Inward and Outward Goods • Impact of SPS Measures on Trade

13. SECTION V: SURVEY RESULTS Sanitary and Phytosanitary (SPS) Measures included: • Testing requirement • Certification requirement • Labeling and packaging requirement • Registration requirement • Inspection requirement • Quarantine requirement • Tolerance limits for residues or pesticides • Treatment for elimination of pest. • Our field level perception survey indicate that the first four constitute the major concerns for Bangladesh’s exporters.

14. SECTION V: SURVEY RESULTS Labeling and Packaging Requirement • Exporters felt that there are several packaging and labeling requirements for food items which create difficulties in exporting to the Indian market: • Food items should contain pictures of ‘veg or non-veg sign’ which they do not require for other countries. • Information regarding ‘veg or non-veg sign’ , and name and address of the importer is made mandatory in the FSS (Packaging and Labeling) Regulation, 2011. • Pictures of fruits are not allowed when it comes to the products in which exporters use synthetic items substantially. • On the packets of Toast Biscuits, the word ‘Rusk’ needs to be printed beside the word Toast in the brackets. • For the importers, several imported items need to be marked in accordance with the ‘Bangladesh Packaging Rule, 2007’. The retail price and net weight need to be printed on the body of the packet.

15. SECTION V: SURVEY RESULTS Certification, Registration and Testing Requirement • Exporters felt that certification and testing related requirements in the Indian market for agricultural and food products create problems for exporters. • Several food items such as fruit juice, candies, jam are subject to facing SPS related testing as per the FSSAI regulations. • These products are subject to testing from several laboratories including Central Food Laboratory (CFL) and State Public Health Laboratory (SPHL). • It is important to mention that BIS generally covers product quality certification, hallmarking and systems certification, and development of technical standards. Currently, there are 92 items (14 food products) for which mandatory BIS certification is required. • Apart from 14 products, exporters need to get certificates from the newly established Food Safety and Standards Authority of India (FSSAI). FSSAI was established in 2008 under the Ministry of Health and Family Welfare in India.

16. SECTION V: SURVEY RESULTS Pest Elimination, Quarantine and other Requirements • For Sesame Seed and Potatoes, fumigation certificate is required which states that the consignment has been treated/fumigated for pest elimination. • The imported fruit consignments are also checked for any existing radiation inside the goods by the Bangladesh Atomic Energy Commission. • Furthermore, fruit Juice exporters of Bangladesh informed that there is a lack of harmonization in standards and different standards are followed in Bangladesh and India.

17. SECTION V: SURVEY RESULTS Different Standards in Bangladesh and India

18. SECTION V: SURVEY RESULTS Impact of SPS Measures on Trade • Fall in Product Quality from Delays at Port • Reduced Shelf Life of Products • Higher Cost of Doing Business due to High Testing, Licensing and Registration Fee • Complex and Expensive Renewal Process for Licensing • Damage of Products at Land Customs Stations • Disruption in the Supply Chain

19. SECTION VI:ONGOING COOPERATION AND REMANING CONCERNS • Memorandum of Understanding between BSTI (Bangladesh) and BIS (India) in place since 2007. • Possible areas of cooperation include • Standardization • Certification • Calibration • Testing • Technical Information • Dispute Settlement • Trainings • The MOU is renewed every three years. However, the perception survey indicates, carried out for this study, that much more energetic and innovative steps are needed to address the SPS concerns.

20. SECTION VI:ONGOING COOPERATION AND REMANING ONCERNS • National Accreditation Board for Testing and Calibration Laboratories (NABL) has accredited 25 items. • Products were : • Fruit Juice, Drinks, Jam, Jelly, Pickle, Fruit Syrup • Chanachur, Biscuits, Chutney etc • Others: Soap, Textile and Garments, Cement • Some Important Concerns • There is no government order from either side • Field level information is limited (both for traders and institutions )

21. SECTION VI:ONGOING COOPERATION AND REMANING ONCERNS • An added concern is that some of these test parameters are not covered by NABL. • Consequently, exporters can’t have BSTI certificates and export the products. Examples • Fruit Drinks: • Covered : Acidity • Not covered: Total sugar • Packaged Mineral Water: • Covered : Calcium, Sodium, Nickel • Not Covered: Pesticide related test • Biscuits : • Covered :Moisture • Not Covered: Preservatives

22. SECTION VI:ONGOING COOPERATION AND REMANING ONCERNS • Regional Cooperation through South Asian Regional Standards Organization (SARSO) • Came into force in 2011. • Six Sectoral Technical Committee (STC) • STC on Food and Agricultural products: Biscuit and Refined Sugar • SARSO will play an important role to promote regional cooperation • Strengthen BSTI and Bangladesh Accreditation Board • Bilateral Cooperation Agreement (BCA) between BSTI and BIS • BCA has not been signed yet. • NABL Accreditation Issues. • Cooperation on standards are needed between BSTI and FSSAI.

23. SECTION VII: CONCLUDING REMARKS –A FRAMEWORK FOR A SPS AGREEMENT • In view of the above, it is proposed that Bangladesh and India sign a comprehensive SPS framework agreement which will allow to address the attendant concerns. • Based on an extensive analysis of cross-country and cross-regional documents, the study proposes that: • Two countries should sign a bilateral SPS agreement. • Cross-country evidence shows that in most cases, such SPS agreements are part of bilateral or regional FTAs.

24. SECTION VII: CONCLUDING REMARKS –A FRAMEWORK FOR A SPS AGREEMENT • Framework for a SPS Agreement will need to include the following elements (these are detailed out in the main paper): • Objectives • Scope and Coverage • Mutual Recognition of Conformity Assessment • Harmonization • Equivalence • Dispute Settlement • SPS Committee • Transparency • Technical Cooperation and Exchange of Information

25. SECTION VII: CONCLUDING REMARKS • SPS measures pose significant challenges in advancing the trade between the two countries. • Several SPS measures have been identified including testing, certification, labeling and packing requirements. • Bilateral Cooperation between BSTI and BIS • Regional Cooperation through SARSO • Bilateral cooperation between BSTI and FSSAI • Bilateral SPS Agreement

26. THANK YOU