International Trade Forum - Issue 3/2010
Exporters from developing countries are increasingly feeling the
pressure to conform to international standards if they are to enter
successfully developed country markets.
Much has been achieved in various developing countries to
construct the requisite quality infrastructure, to enable exporters
both to understand the nature and detail of the quality standards
to be met and to take the steps to comply with them. For many
developing countries yet to install the necessary infrastructure to
help their exporters meet market requirements, the path to
effective arrangements is well defined and, importantly, there are
many good examples to follow and opportunities to influence
standards.
Non-Tariff Barriers - public and private
The gradual reduction of tariff barriers to facilitate trade has
been accompanied by an increase in non-tariff barriers. These
consist of technical regulations and sanitary and phytosanitary
measures (SPS), imposed by governments to protect the health and
safety of their citizens and the environment, and voluntary
standards established by national, regional and international
standards bodies, such as ISO 9001 for quality management systems
and ISO 22000 for food safety management systems. They also
comprise private standards established by consortiums and
retailers.
In the food sector, periodic outbreaks of food-borne illnesses
have led to stricter regulation, making suppliers of branded
produce liable for the safety of their products unless they can
show due diligence. This resulted in private standards developed by
consortiums and forums, e.g. British Retail Consortium Technical
Food Standard and GlobalG.A.P., produced by the Euro Retailer
Produce Working Group on Good Agricultural Practice. Environmental
and social concerns have led to standards such as Worldwide
Responsible Accredited Production, applicable mainly to the
apparel, footwear and sewn sectors, SA 8000 on social
accountability (see the article 'Closing the gap' on page 13),
Forestry Stewardship Council for the wood and furniture sector,
Marine Stewardship Council for fishery products, and standards for
carbon footprints.
Challenges faced by enterprises in developing countries
The first thing needed by enterprises considering exporting
their products is up-to-date information about the applicable
technical requirements, both voluntary and mandatory, in the target
markets. It is quite difficult, especially for small and
medium-sized enterprises (SMEs), to keep abreast of these
constantly changing requirements.
After obtaining the right information, enterprises have to adapt
their products to export market requirements. This may require
expensive investment to purchase equipment and upgrade
infrastructure. Furthermore, even if technical regulations and SPS
are based on international standards, enterprises still have
problems to overcome, as their specific needs may not have been
considered when the standards were developed. Developing countries
are generally 'standard-takers' rather than 'standard-makers'.
Additionally, the proliferation of private standards dealing, inter
alia, with food safety and environmental and social issues has
resulted in complex challenges for exporters.
Once the product has been adapted to target market requirements,
the exporter has to demonstrate compliance. In many cases,
exporters are compelled to use foreign certification bodies as many
developing countries lack domestic bodies that are recognized in
the export market. Costs can be high. For food and agricultural
products, it may not be possible to export in the absence of
recognized domestic 'competent authorities' to certify the product
to the requirements of the export market, e.g. exports of fishery
products to the European Union (EU).
A major problem faced by enterprises exporting fruits and
vegetables is the considerable time it takes to obtain market
access. A profile of the pests and diseases associated with the
potential export product has to be determined, in order to
facilitate import risk analysis in the target market. If the
product has pests and diseases that are not present in the
importing country, it would require treatment before gaining market
access. For example, it took eight years for China to obtain market
access for its Ya pear to Australia in the 1990s, subject to
orchards and packing facilities being registered and pest
management measures applied. Imports of agricultural products also
require control to protect indigenous crops, which could be damaged
by the introduction of foreign pests and diseases.
Overcoming challenges for export: Influencing technical requirements
The World Trade Organization (WTO) has tried to minimize
non-tariff barriers by requiring its members to use international
standards as a basis for their technical regulations and SPS. This
decision has significantly increased the use of international
standards as they are more significant for exports than national
standards. It is, therefore, imperative for developing countries to
be standard-makers for products of export interest so that their
specific needs are taken into account when international standards
are elaborated.
Mechanisms can be developed at national level to obtain the
views of the business sector and involve them in the development of
international standards. Malaysia, a major exporter of filled milk
(milk substitutes based on vegetable fats) produced from palm oil,
participated in meetings of the relevant committee of the Codex
Alimentarius Commission and was able to influence international
standards. India played a proactive role in formulating the ISO
standard on black tea, which took into account Indian views.
When WTO members propose to establish technical regulations and
SPS not based on international standards, and which can have a
significant impact on trade, they must notify other WTO members so
that their views can be taken into consideration before standards
are finalized. They should track these notifications and submit
comments whenever required to protect their exports.
Obtaining information on technical requirements
One of the obligations of WTO members under the WTO Agreements
on Technical Barriers to Trade (TBT) and the Application of
Sanitary and Phytosanitary Measures is to set up enquiry points to
provide information about technical requirements to other WTO
members. The latter can turn this obligation into a right by
obtaining up-to-date information on public standards and mandatory
technical requirements in the export markets from the enquiry
points. It is more difficult to obtain information about voluntary
standards established by consortiums and retailers, as this is
outside the mandate of the enquiry points.
Exporters need to keep abreast of changes in the technical
requirements for products in their export markets. Guatemala was
exporting berries to Mexico when it suddenly found its products
denied entry. The requirements for importing berries in Mexico had
changed and these changes had not been tracked and communicated to
exporters in Guatemala. There are proven methods for tracking
changes and disseminating them to stakeholders, one example being
Export Alert of the Standards Council of Canada.
Adaptation of products and demonstration of conformity
After obtaining information about technical requirements in
export markets, enterprises have to adapt their products and
demonstrate conformity acceptable to buyers and regulators in the
target market. Sector associations are well placed to provide
advisory services. National standards bodies cannot provide these
services if they also act as certification bodies; they cannot be
judge and party at the same time.
As certification costs can be expensive when using foreign
certification bodies, firms can share the costs of certification,
especially those related to airfares. Small farmers can group
together and access group certification offered by foreign
certification bodies.
Enterprises have a choice of strategic options. They can employ
an exit strategy and leave difficult markets for less stringent
markets. They can adopt a compliance strategy by anticipating
standards and comply ahead of time. Finally, they can adopt a
'voice' strategy where they participate in standard-making. One
example of an exit strategy is from Benin, which made an agonizing
decision to suspend voluntarily exports of shrimps to the EU in
July 2003 since the Government could not guarantee the conformity
of seafood products to the latest European directives (see case
study on page 20).
Resolving disputesDisputes between trading partners could be resolved at bilateral
level, in the margins of the WTO Committees on TBT and SPS, or in
the meetings of the committees where specific trade concerns are
discussed. However, if agreement is not reached, the aggrieved
party can have recourse to the dispute settlement mechanism of the
WTO. The dispute between the EU and Peru regarding the
classification of sardines is an example of gaining access to a
previously denied market. The EU had refused to classify the Peru
variety of sardines as 'sardines', although this decision was
against the relevant Codex Alimentarius Commission standard. The EU
had to modify its regulation to align it with the Codex standard
and allow sardines to be imported from Peru.
The quality infrastructureSetting up a quality infrastructure comprising standardization,
metrology, testing, inspection, certification and accreditation is
complex, expensive and time-consuming. However, it is a crucial
element of the export competitiveness of countries. It has been
observed in newly industrializing economies that SMEs seldom use
foreign service providers if there is no indigenous capability.
Sending equipment for calibration overseas or using overseas
auditors is a deterrent. Developing countries should pay special
attention to the development of a quality infrastructure when
developing their national export strategy.
A step-by-step approach is recommended. The first step is to set
up a national standards body to provide testing, calibration and
inspection services, as well as a national enquiry point to provide
information about technical requirements in export markets. This is
the minimum quality infrastructure for any country. The next step
is to set up certification bodies. When there are a significant
number of conformity assessment bodies, a national accreditation
system could be set up.
The public sector should be responsible for ensuring the
traceability of measurements and the control of weights and
measures in trade as well as accreditation. On the other hand, the
private sector should provide conformity assessment services such
as testing, inspection and certification. The public and private
sectors could both deal with standardization and provision of
technical information. The public sector could also provide
conformity assessment services such as testing if it is in the
national interest and if there is no private sector interest given
insufficient returns.
A concerted public-private partnership can go a long way to
establishing the quality infrastructure. In South Africa, the wine
growers' association worked with the Department of Agriculture to
set up a system to maintain exports to the EU. The Department of
Agriculture, as the competent authority, certifies the wine for
export on the basis of conformity assessment results from both
public and private laboratories and certification bodies that are
suitably accredited. It does not test itself.
In the SPS infrastructure, the public sector is responsible for
the maintenance of pest- and disease-free zones, border inspection
and quarantine for plant and animal diseases, and epidemiological
surveillance. Enterprises can only export to a specific market such
as the EU when the government can provide the official guarantees
ensuring food safety. The private sector also has an important role
with the preventive approach it has to take, as it is required to
implement Hazard Analysis and Critical Control Point system for
many food products.
As setting up a quality infrastructure requires a lot of
investment, consideration could be given to regional approaches.
Collaboration at the regional level requires a minimal national
quality infrastructure in each country. The national institutions
could then share experiences and limited resources, such as
equipment and personnel. A regional network for testing would
facilitate the use of laboratories that are suitably accredited in
neighbouring countries. A national accreditation organization
in many developing countries is unlikely to cover costs because
there is just not enough work. A regional accreditation body would
be more appropriate but it can take a long time to set up such a
body and obtain international recognition. It took more than 12
years, for example, to make the Southern African Development
Community Accreditation System operational through a twinning
agreement with the Southern African National Accreditation System,
an internationally recognized accreditation body.
Way forward
Countries should establish an adequate national quality
infrastructure, taking into account relevant value chains. This is
critical for food and agricultural products, as certification
should be provided by competent national authorities and to protect
fruits and vegetables from pests and diseases.
Mechanisms should be set up to keep track of upcoming technical
requirements for products of export interest so that they can be
taken into account and to disseminate up-to-date information to
exporters. A public-private partnership would be appropriate.
Sector associations could provide advisory services for adapting
products to the requirements of target markets and accredited
domestic bodies could provide certification to these requirements,
if they are recognized in the target market. Or the services of
foreign bodies could be used.
Meeting technical requirements will ensure that market access is
obtained. However, there is a need to go beyond technical
requirements and delight consumers. Promoting a culture of
innovation, continual improvement and excellence, e.g. through a
national quality policy, will go a long way to enabling
exports.