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    Quality - a prerequisite for exports: Increasing complexity of technical requirements in export markets


    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 disputes

    Disputes 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 infrastructure

    Setting 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.