Non-tariff barriers hinder exports between China and PakistanPakistan
China and Pakistan have redefined regional trade patterns after explicit bilateral contracts under the China-Pakistan Economic Corridor (CPEC). At present, trade between the two countries stands at $18.9 billion, but it is expected to rise under the multibillion-dollar initiative.
However, the prevailing non-tariff barriers (NTBs) have restrained the volume of Pakistan’s exports to China. Pakistani exporters are facing NTBs in safety and quality standards under the sanitary and phytosanitary (SPS) agreement, and technical standards sought under the technical barriers to trade (TBT) agreement by the World Trade Organisation (WTO).
The TBT and SPS are widely used by WTO member countries because NTBs for environmental protection, consumer safety, interests, etc have increasing impacts on regional as well global trade. The members are authorised to implement these NTBs to protect the health of humans, animals and plants; in fact, all living organisms.
WTO members maintain trade quality and standards to ensure that merchandised food is safe for buyers and to prevent the spread of pests or diseases in living organisms. But strict health and safety regulations are being used unnecessarily as an excuse for protecting interests of domestic producers or to maintain comparative advantage in foreign trade.
These SPS and TBT measures may follow several forms, such as requiring commodities to originate from a disease-free area, inspection of products, specific treatment or processing of products, setting of allowable maximum levels of pesticide residues or permitted use of only certain additives in foods.
The Agreement on the Application of Sanitary and Phytosanitary Measures sets out the necessary rules for quality and standards. The measures should be initiated and enforced only to the extent necessary to protect lives.
China initiated and enforced 87 cases of technical barriers to trade on exports from Pakistan in 2016, according to World Trade Organisation
Sanitary (human and animal health) and phytosanitary (plant health) measures apply to trading commodities. The SPS agreement applies to some specific areas including protection against risks arising from additives, contaminants, toxins or disease-causing organisms that protect human life from plant- or animal-borne diseases, and protection from pests, diseases, or disease-causing organisms.
The NTBs also control other damages to member countries from the establishment or spread of pests.
Similar to the SPS agreement, the TBT agreement has been enacted with the establishment of the WTO on Jan 1, 1995 (Pakistan joined WTO in 1995 and China in 2001).
The TBT measure includes regulations, testing and certification procedures of traded goods. For example, a single regulation on food products could establish a requirement concerning the treatment of fruit to prevent the spread of pests (relevant to the SPS agreement) and other requirements concerning the quality, grading and labelling of the same fruit (relevant to the TBT agreement).
TBT technical regulations include product characteristics, their related processes and production methods. TBT deals with terminology, symbols, packaging, marking and labelling requirements. Standards are approved by an official body which is responsible for issues related to these measures.
The step-by-step process related to TBT that government officials uses starts from procedures for sampling, testing and inspection; evaluation, verification and assurance of conformity; registration; and finally approval and certificates.
Types and product in which the TBT agreement applies are specific; for example, it may relate to a certain permitted level of lead in paint used on toys and towels, or prohibiting the use of certain additives in foods.
Other measures may be more general in nature, involving, for example, the establishment of criteria for the labelling of organic agricultural products, or emission requirements for diesel engines. Conformity assessment procedures are used to determine whether goods such as toys, electronics, food, and beverages fulfil the requirements established by relevant technical regulations or standards.
TBT measures could cover large industries, from car safety to energy-saving devices, and to the shape of food cartons.
In China and Pakistan, both SPS and TBT agreements have common obligations of non-discrimination for the rest of WTO member countries. The agreements are related to international as well as domestic quality and standards.
The Pakistan Standards and Quality Control Authority (PSQCA) and Pakistan National Accreditation Council are national standardisation bodies working under the Ministry of Science and Technology. The two bodies formulate, promulgate, implement and monitor trade related quality and standards. Both organisations work for standardisation policies and programmes to promote industrial efficiency and development, as well as consumer safety and health.
These are also the focal points for national, regional and international organisations such as ISO, International Electrotechnical Commission, etc. Manufacturers and traders in Pakistan are required to register with the PSQCA to ensure implementation of quality and standards rules.
In China, the Standardisation Administration of China works under General Administration of Quality Supervision, Inspection and Quarantine of China, that establishes the centralised system of applications of SPS and TBT queries. These government institutions develop technical standards to resolve queries through research and international cooperation with the WTO.
All the WTO members require maintaining an enquiry point to address queries regarding SPS and TBT. Governments are also required to submit the notifications in advance for implementation of new regulations.
Quality and standards issues have affected Pakistan exports adversely several times. Pakistan’s mango exports face danger of getting banned in the European Union for five years due to quality issues. Pakistan faced the embargo on Pakistani mango by the United States. Lately Australia, Germany and Japan have banned imports of mango from Pakistan due to fruit fly.
Similar to other WTO members, Pakistan also faced SPS and TBT related sanctions by Belgium (peanut), EU (chickpeas/lentils, red chillies, apricot, mango and kernels), Sri Lanka (onion), Philippines (citrus fruit), and US and Japan (fruit fly) during various years under the WTO regime since 1995.
According to WTO statistics, China initiated and enforced 87 TBT cases on exports from Pakistan in 2016. The top products that faced TBT cases were residues and waste from the food industries and prepared animal fodder having 33 cases initiated and enforced, and organic chemicals met 19 cases.
Products of the chemical and allied industries faced 51 cases including 19 organic chemicals. Vehicles, aircraft 14 cases, nuclear reactors, boilers, machinery and mechanical appliances 23 cases, and live animals and vegetable products faced 4 TBT cases. China initiated and enforced 12 SPS cases including oil seeds and oleaginous fruits, miscellaneous grains, seeds and fruit, industrial or medicinal plants straw and fodder.
Although the quality and standard are restricting Pakistan’s exports for a period, they can be increased in the long run by adopting such standards. Under the SPS agreement, to improve animal health care services Pakistan should look into the possibility of importing disease diagnostic and veterinary and public health services.
There is a need for promoting the rational use of veterinary medicine by employing therapeutic drug; counselling, monitoring and modernisation of slaughterhouses to promote food safety standards for meat exports. These slaughter houses should have well-equipped meat hygiene laboratories attached to them.
As far as implications of the WTO are concerned, TBT and SPS have significant impact on Pakistan’s ability to increase the agro-based exports to China.
In 2015, Pakistan received 17 WTO notifications from other countries under SPS and TBT agreement. Considering China’s expertise on SPS and TBT, cooperation between NTBs-related organisations should be strong enough to benefit from each other’s expertise and thus boost bilateral trade in the wake of the CPEC.
The organisations on NTBs publicise the effective use and enforcement of standards. Pakistan’s exports are largely affected by TBT and SPS, because of lack of technical knowledge and modern requisite infrastructure. Joint trade-related programmes between China and Pakistan will lessen NTBs and boost export volume.
Published in Dawn, The Business and Finance Weekly, October 30th, 2017