Sanitary & Phyto-Sanitary Measures as Barriers to International Trade

Sanitary & Phytosanitary Measures as Barriers to International Trade
© Sabari Ganesh; “All Rights Reserved” 
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Introduction:

            The World Trade Organisation (WTO) was established on January 1, 1995 with the sole prime objective of promoting free and fair trade among nations of the world. The direct impact of a free trade is the blurring and unification of markets, for any given product or service. The whole world becoming the market for a product manufactured by a company, and the natural tendency of people – consumers preferring quality products at competitive price has eventually made survival of the fittest the rule of the game.

            The companies started focusing on their core competency and thereby became the market leaders across the world for their produce. This resulted in the domestic companies losing their markets to the global players. The prime reason is the domestic players lacking the requisite professionalism and resources needed to compete on an even ground at par with their global counterparts. The political and business economics arising thereof resulted in protectionist measures in the form of tariffs to save the infant industries and domestic ventures of the land. However, WTO with a strong focus of promoting free trade among nations was successful in eliminating direct barriers to trade – Tariffs; and non-tariff barriers like Quantitative Restrictions, Quotas, Subsidies, and Voluntary Export Restraints.

            However, the push and pull factors of nations to protect their domestic industries has forced them to discover new arena that could be tweaked to become a barrier to free trade thereby protecting their domestic industry. The Sanitary and Phyto-Sanitary (SPS) measures is one such glitch in the hands of nations.

SPS Measures – Foundation:

            It is well justified that any consumer, when out for a purchase of a product would try to be sure that the product being purchased is of the requisite quality. This justification is the foundation of enacting the SPS measures under the WTO trade rules. In a trade between companies of different nations, the consumer gets to see the actual product only after import; and when it reaches the destination port. In the event of the quality of the product found to be unsatisfactory and dangerously contaminated, would naturally lead to intense disputes among companies and nations. Also, the product of a bad quality, with contaminants might cause potential threat to the plant, animal and human health of the importing country. To prevent this WTO has set up certain basic laws that intend to protect the plant, animal and human life and health, of the importing country.

SPS Measures – Definition & Issue:

            SPS measures are a set of regulations that aim to protect the plant, animal and human health of the importing country. The Sanitary measures focus on protecting human and animal health while the Phyto-Sanitary measures focus on protecting plant health. These measures on the face of it are very genuine necessity for any nation in its endeavour to protect its plant, animal and human resources from the entry of pests, contaminants and diseases arising out of trade among nations.

The implementation of SPS measures and the level of protection required by the member countries on their imports are based on scientific evidence. WTO has granted its member countries freedom to determine at their individual discretion the level of quality of the product that is imported by their country. The result is a vast variance in the demand of the quality requirement of a specific product across markets.

SPS Measures Tweaked:

Generally demand for quality is relative to the purchasing power of the consumers. Higher our purchasing power, greater is our demand for quality. The people of developed nations possessing relatively higher purchasing power than their counterparts in developing and lesser developed nations; have forced their governments to import only products that conform to the highest quality standards.

The developing and lesser developed countries are found to be lacking heavily in maintaining the minimum reasonable quality expectations. Seizing this opportunity as an excuse, with the intention of protecting their domestic industry; the governments of developed countries have raised the bar of quality requirement to an extent, which can never be met by the developing and lesser developed nations in practical terms. Hence export of their produce to these countries becomes impossible for those countries that fail to conform to the quality requirement.

This is when a genuine, essential, quality standard becomes a trade barrier; chosen and implemented jealously by member nations; in an era of the Tariffs and Non-Tariff Barriers (NTB) removed. The irony is that, even the WTO has been left to its wits end in curbing the misuse of an essential quality standard as a trade barrier.

Argument of Developed Countries:

            Demand for safety and quality is highly individualistic and is directly proportional to the purchasing power of the people of the country. The locally produced product found to be of a better quality than the imported product serves ample justification for the level of quality conformance stipulated by the developed country on its imports. The countries though developed also possess infant industries that need to be protected from the onslaught of cheaper products from member nations. The SPS measure comes handy to the rescue of the developed countries to protect their infant industry.

            The foundation of stipulating a certain level of quality should rest on scientific evidence. The developed countries that have access to advanced technology to test and qualify the products overpower the developing and lesser developed countries that are yet to develop or gain access to the technological development.

Argument of Developing Countries:

            The developing countries face quality requirements from their developed counterparts such that they can never be possibly met in any practical terms. For instance; An Australian quality demand stipulates that for chicken meat to be imported from Thailand, it should be heated at 70 degree Celsius for 143 minutes to prevent the entry of certain disease via chicken meat. It is reportedly found that this treatment converts chicken to paper!

            The Japanese Vapour Heat Treatment (VHT) of fruits is another instance of SPS measure becoming a prime barrier to free trade among nations. The enormous investment demand for technological up gradation and the time associated with it for compliance; coupled with the risk of losing the market to competitors, has made this quality standard a potential NTB.

Role of WTO:

            WTO plays a vital role in fostering and promoting free and fair trade among member nations. When a member nation proposes a specific level of quality standard in the forum, ample opportunity is always provided for a reasonable debate for & against the proposed quality standard prior to its approval. The developing countries have miserably failed to participate and actively get involved in discussions pertaining to the implementation of a quality standard by a member nation.

            Also, since the developing and lesser developed nations have negligible or no access to technological support and knowledge on the implications of a specific standard proposed at the forum by a developed nation for implementation, they have a weak argument that fail to sustain. Also, it has always been a practice of the developing and lesser developed countries to raise alarm only upon material damage done to their exports to developed countries on the front of SPS standards.

Solution – Harmonisation of SPS Measures:

            History evidences that most of the detentions of imports from developing countries are for insanitariness; and most of the detentions from developed countries are for labeling and packaging requirements. The latter is easily corrected than the former; adds to the malice of the developing countries towards their developed counterparts.  

It has been found that both the developing countries and the developed countries have been misusing the very essential quality standard to their advantage, to protect their domestic industry. No wonder cases relating to SPS and resulting trade restrictions are piling in the Dispute Settlement Board (DSB) of the WTO. The ongoing events call for an urgent need, to harmonize the SPS measures uniformly for all the member nations, which could hope to prevent the misuse of a very essential quality standard.

            Most of the developing countries do not possess the technical, scientific and legal competency required to defend a case filed against them under the SPS measure in the DSB of the WTO. Also, the time period granted to implement a SPS quality standard that is notified is found to be insufficient. The developing countries also have no proper representation in the forum of international trade talks that revolve around policy and trade measures.

            As the SPS measures remarkably address market failures; implementation by mere legislative declarations is not viable. An active and vibrant transnational framework that focuses on enabling the capacity building of nations is necessary. It is also imperative that the efforts have to be genuine, meaningful and positive even outside the discussion table. Capacity building of nations to meet the requisite standard is an ongoing process that demands the nation’s intent to develop itself to compete at par on global trade grounds.

Conclusion:

            The developed countries must be ethical in imposing a quality standard and ensure it does not hinder free and fair trade. The developing countries must implement SPS standards as an integral process to the overall development of their competitiveness in the international business scenario. It is imperative on the developing countries to keep a check on the developed countries not to impose the standard beyond the necessary levels; by way of active participation during talks and debates. Active participation of both the developed and developing countries during the proposal, discussion and implementation of standards; supported and opposed by logical scientific evidence is the need of the hour to minimize post implementation dissonance and an amicable way to free trade among nations, under the auspices of WTO.