Millennial Asia, 2:1 (2011) 3-22

3
ISSN 0976-3996

Agricultural Trade Facilitation in Asia: Prioritising

the Invisible Infrastructure

C Nalin Kumar*

Abstract : In the backdrop of the growing agricultural and food trade across
Asia, this paper argues that the installed food safety and associated
infrastructure could be seen as only necessary conditions whereas the
sufficient conditions would be to make an enabling policy environment which
would reduce the overall transaction costs of trade. Imports also assume
equal importance and the arrival of duty-free raw materials for further
processing and value addition enables more employment generation, higher
income for stakeholders, and forward movement in the value chain. As tariffs
do not account for a substantial influence on the course of trade and prices of
many farm commodities, the attention has to turn towards the enabling policy
regime specific to commodities and thereby the development of infrastructure
which would encourage value addition and re-exports. Trade facilitation and
infrastructure are often taken in the general sense at the policy level and only
partly address the specific issues related to the reduction of risks and
transaction costs in the context of agricultural trade, i.e. the invisible
infrastructure such as easy documentation, customs procedures, regulatory
regimes and mutual recognition. Different commodities have different
requirements in terms of costs, time and reliability of logistics and trade
facilitating policies are to be formulated taking into consideration a wider set of
factors and indicators in the context of agricultural trade.

Keywords: Agricultural trade facilitation, SPS, capacity constraints, Asian

agricultural trade.

JEL Codes: F13, F14, F18, Q17, Q18.

1. Introduction
In the backdrop of the growing agricultural and food trade across Asia, this

*Economics and Policy Research Unit, Indian Institute of Plantation Management, Bangalore.

Copyright © 2011, Association of Asia Scholars.

4 Millennial Asia

paper argues that the installed food safety and associated infrastructure could be
seen as only necessary conditions whereas the sufficient conditions would be to
make an enabling policy environment which would reduce the overall transaction
costs of trade. This paper specifically looks at the food safety dimensions of
trade facilitation of agricultural products in the Asian context. The agreement on
Sanitary and Phytosanitary (SPS) Measures of the World Trade Organisation
(WTO) sets out the broad ground rules for the application of food safety, health
and environmental measures. However, there are no specific international
standards for some commodities, which are intensively traded. The literature so
far has not explored the possibility in which well-defined and disseminated
regulations can augment trade. Testing and certification facilities thus become
extremely important in this context. This is also strongly linked to trade facilitation
measures, which are actions undertaken with the objective of facilitating market
access of traded goods and services in areas within the scope of a trade agreement
and these include provisions for expediting and simplifying conformity assessment
procedures, certification or accreditation of laboratories mainly by adopting simpler
documentation, electronic commerce and efficient logistics.

There is no generally-agreed definition of trade facilitation. Different

authors tend to define the term and the scope of trade facilitation based on
different considerations. In the crude form, trade facilitation measures mean
the steps undertaken to reduce the transaction costs of conducting business
across the border. Wilson et al (2003) use seven indicators which include port
logistics and administrative transparency and professionalism, whereas in
Anderson and W incoop (2004) we find policy barriers (tariffs and non tariff
barriers) as one of the indicators. In a strict sense, trade facilitation is concerned
only with the reduction in trade transaction costs and, therefore, Sanitary and
Phytosanitary (SPS) Measures per se are out of the scope of trade facilitation
(Sengupta, 2007).

A study by the Economic Commission for Africa (ECA) on the incidence

of non-tariff barriers shows that 48 per cent of agricultural and fish exports from
least developed countries (LDCs) to developed countries face non-tariff barriers
such as product standards, and phytosanitary and environmental controls and
are more likely to be subject to anti-dumping measures (Mold, 2005). Increasingly,
international buyers require effective application and demonstrated proof of
enterprise system management standards such as International Organisation
for Standardisation (ISO) 9000 for quality management, Hazard Analysis and
Critical Control Points (HACCP) and ISO 22000 for food safety, ISO 14000 for
environmental management and Social Accountability (SA) 8000 for social
 Agricultural Trade Facilitation in Asia 5

standards. Product standards specify characteristics that a product might attain

before it is considered safe to sell. For instance, most developed countries have
maximum residue levels (MRLs) for pesticides and other contaminants. On the
other hand, process standards specify techniques that must be used to process
or package foods, with the belief that certain production techniques make food
safer. Such regulations are based on research, like studies on the per centage of
contaminants destroyed at certain processing stage of food items. Researches
in this area are growing (Kumar, 2010). Thus, in the context of agricultural trade,
trade facilitation requires a comprehensive consideration to include the
implementation, measures to simplify implementation and bring down misuses
of SPS measures.

The paper is organised as follows: the following section (2) provides a

general overview of agricultural sector and trade facilitation in the Asian region.
Section 3 examines the food safety challenges for specific commodity groups
and the indicators of challenges they face in the European Union. Section 4
identifies the major constraints for the overall development of the agricultural and
agribusiness sectors and section 5 concludes the paper.

2. Agricultural Sector and Trade Facilitation in Asia: An

Overview
How important is agricultural trade? According to W TO statistics,
agricultural products account for around 10 per cent of international merchandise
trade with the remaining trade being in fuel and mining products (20 per cent)
and manufactured products (70 per cent). Agricultural trade grew by 9 per cent
compared to 7 per cent in case of manufactured products during 2000-09. Food
products account for 85 per cent of the total agricultural trade and this segment
grew by 10 per cent during 2000-09. European Union and Asia took the lead in
agricultural trade with around 46 and 24 percentage shares, respectively, in
case of exports. Major players including China, Thailand, Indonesia and
Malaysia one in Asia with a combined share of more than 15 per cent in exports.
Prominent importers include China, Japan, Republic of Korea and India. Intra-
regional trade in the Asia has grown faster than trade with the rest of the world.
Agricultural trade is no exception in the context of regional trade. For instance,
around 47 per cent of the agricultural exports from Asia were destined to countries
within the region, followed by Europe (12 per cent) and North America (10 per
cent) (figure 1).
6 Millennial Asia

Figure 1:
Exports of agricultrual products from Asia by major destinations in
percentages - 2000-2009

Source: Calculations based on WTO Statistics.

During the last decade, fresh and processed fruits and vegetables, fish,
meat, nuts and spices accounted for more than 50 per cent of the total agro-food
exports of developing countries (Jaffee and Henson, 2005). Countries which are
top producers of agricultural products are not necessarily so in the case of food
products and their exports. The levels of processing vary widely across countries
in the region as illustrated in table 1. Many countries in the Asian region especially
China and South Asia have become net food importers in recent years. Cross
border investments (for instance, Japan’s investments in the processed and retail
food sectors in China) stimulated this trend and there is enhanced processing
and re-exports.

Asian countries, on an average, do not have a substantial share of

agricultural products in the respective countries’ total trade. This is illustrated in
figure 3. However, the chances of enhanced dividend of growth to the larger section
of the population depend mostly on the developments in the agricultural sector.
This is largely true of the Asian agricultural sector. Enhanced agricultural trade
has the potential to reduce poverty as there are higher proportions of population
dependent upon agriculture in Asia. More than two thirds of the world’s poor live
in Asia. Most of the region’s poor live in rural areas and agriculture is the primary
source of livelihood. In other words, around 60 per cent of the working population
depends on agriculture for their livelihood in the region. The region’s dependence
on agriculture and the shares of agriculture in a country’s Gross Domestic Product
 Agricultural Trade Facilitation in Asia 7

(GDP) and exports are evident from the figures below. As evident from figures 2
and 3, though there are not many economies heavily served by the agriculture
sector, the percentage of population depending on agriculture is relatively high
(figure 4). This would also highlight the potential these countries have in terms of
moving forward in the value chain.
Table 1:
Status of Asian countries in the processed food products
in 2002 (Percentage in total processed food exports,
and total in 000' US $.)

Source: Adapted from Mohanty (2006)

8 Millennial Asia

Figure 2
Contribution of Agriculture to GDP in Select Countries - 2005

Source: FAO Statistics Division.

Fig 3. Share of Agricultural Products in Total Exports and Imports

of Select Asian Countries – 2005

Source: FAO Statistics Division

 Agricultural Trade Facilitation in Asia 9

The proportion of population dependent on agriculture sector in Asia is

also relatively high compared to rest of the World and the World total. With a few
exceptions, countries in the region have significant socio-economic implications of
agricultural trade, as a high proportion of the population is dependent on the sector.
This is illustrated in the following diagram.

Figure 4
Percentage of Agricultural Population to Total in 2005

Source: FAO Statistics Division.

Asia is a region of contrasts. It consists of several economies of various
types and structures. Two of the world’s largest economies are in Asia with rank
1 and 2 in world trade (China and Japan), and economies such as Lao PDR and
Nepal with ranks close to 150 (WTO Secretariat, 2009). The heterogeneity of
Asian countries is also reflected in the Doing Business (DB) Indicators which
serve as some benchmark for a country’s approach to trade facilitation. Singapore
ranks first in Doing Business and Trading Across Border indicators while Lao
PDR ranks 165 out of 183 economies. To trade one standardised container (valued
at US $ 20000 based on DB assumptions), Singapore incurs around US $ 450
whereas for Lao PDR it is around US $ 2000. The diverse structure of the
economies and the availability of resources provide plenty of opportunities for
growth. Most of the economies are transforming, getting more diversified and
open to trade. This implies a smooth integration into the regional and world
10 Millennial Asia

economies and demands a range of cross border flow of trade, investment and
technology.

The contributions of tariffs and transport in transaction costs were of

significant concerns in the past and thus the scope of cost reduction in these
areas was high. Although, shares of transport costs and tariffs in trade costs are
still high, now it is realised that the scope for further reduction in these areas is
either very little or there already exist programmes for their reductions. Meanwhile,
the trade costs due to other components have increased and there is a
considerable scope of pruning these costs, which describes a substantial part of
current scope of trade facilitation. While introducing trade facilitation as a limited
number of measures among all those that reduce transaction costs, it will be
wrong to subjectively redefine the components of transaction costs (Sengupta,
2007).

W hile framing appropriate public policies, the need for analysing

productivity trends should be emphasised. While studies on the measurement of
poverty have been well received, a similar coverage or quality of studies on issues
related to productivity has been missing. Undoubtedly, higher productivity is critical
to poverty reduction. Trade facilitation, as envisaged in the context of non-
agricultural trade may not work sufficiently well in the agricultural context unless
a more holistic approach is adopted. The issue of productivity is central to these
considerations, especially in countries undergoing structural transformation. The
declining share of agriculture and the growing share of the service sector in gross
domestic product (GDP) make productivity assessments further complex, and
hence there is a need to pay attention to the contributions of various factors and
specifically Information and Communication Technologies (ICT) to productivity.

There are specific reasons for the proliferation of regional agricultural

trade in Asia. The sluggishness of the Doha negotiations, the proliferation of
stringent standards in the North American and European markets for agricultural
and food exports (Jaffee and Henson, 2005), higher logistics and procedural
requirements of many far off markets altogether proved to be incentives for
countries to trade with countries closer to them. Regional Trading Arrangements
(RTAs) proliferated in the region further augmenting trade. Apart from the above
factors, substantial cross border investments were done in the food processing
and retailing sectors in the region (ADB-FAO-IFAD, 2009). This resulted in the
enhanced derived demands for many agricultural and food products.

Some countries deserve special attention in this context. According to

FAO Statistics, there are some countries which registered phenomenal growth in
both agriculture and food production, higher than the average of Asia and the
world. Lao PDR, Vietnam, Myanmar and China are the cases in point. However,
 Agricultural Trade Facilitation in Asia 11

there was no corresponding participation in agricultural exports. Many factors

account for this such as growing domestic markets, incapacitated processing
networks for value addition and lack of trade facilitation. Countries which require
special mention in this regard are Lao PDR and Nepal, which have 22 and 33
ranks respectively in the Doing Business Report of the Landlocked Countries out
of the 38 landlocked countries (World Bank and IFC, 2010).

Moreover, in contrast with non-agricultural trade, agricultural products

face significantly higher barriers due to seasonality, perishability and other reasons
of vulnerability in the supply chain. Agricultural trade has the disadvantages in
terms of quality and quantity. Especially in the Asian region, agriculture is
predominantly a small grower phenomenon which may require differing levels of
support through government interventions to survive in the market and move forward
in the value chain. This further adds to the challenges of trade facilitation.
Considerable processing also takes place in the unorganised sectors (Indian
marine and dairy sectors are the cases in point). Food products constitute around
three fourth of all agricultural trade. Hence, the importance of food processing
capacities in different countries in the region is invariably highlighted in agricultural
trade facilitation. Competitive advantage in both international and intraregional
trade is increasingly being defined by the efficiency of infrastructure – hard and
soft. It is also important to coordinate strategies for trade growth with initiatives
to improve infrastructure.

3. Food Safety (SPS) Issues in Asian Food Exports

Food safety is one of the dimensions of agricultural trade facilitation. As
more products cross international borders, enhanced food safety and agricultural
standards are becoming mandatory as they come under the rubric of the SPS
Agreement. The products require various treatments and phytosanitary
compliances before they arrive at the consuming countries. There is a more
exhaustive set of reasons responsible for border rejections including Rules of
Origin. This section provides an assessment based on The Rapid Alert System
for Food and Feed (RASFF) of the European Union which shares information on
the incidence of border rejections of the products as they could not meet the
requirements at the border. Whenever a rapid alert is issued by a country in the
European Union on rejection of a consignment, it is invariably sent to all the EU
members, but after the removal of the consignment and lifting of the alert, the
members are not informed in time which causes delay and embarrassment for
exporters (Aceglobal, 2005; Kumar, 2010).

There are several well-documented case studies in the Asian context on

various ‘sensitive’ products such as fish and fish products, herbs and spices,
nuts and nut products, etc. (Cato and Lima Dos Santos, 1998; Jaffee and Henson,
12 Millennial Asia

2005; Sawhney, 2005; Mohanty, 2006). These studies analyse the challenges of
coping with the more stringent food safety requirements of the Organisation for
Economic Co-operation and Development (OECD) markets, more specifically
the EU. There are also several case studies highlighting that non-tariff measures
are more prevalent in the agricultural sector than in the manufacturing sector
(Chaturvedi and Nagpal, 2003). Jaffe and Henson (2005) observe that the EU has
been the subject of the largest number of complaints by developing countries.
There were more than three times as many complaints against the EU than
against the USA. This indicates considerable problems that developing countries
have in meeting basic food hygiene requirements. However, this does not indicate
how much of this can be attributed to the factors of trade facilitation or the lack of
proper communication or logistic supports between the exporters and importers
(Kumar, 2010).

The standards may not necessarily be stringent given the capacities of

exporting countries to comply with. However, an examination of the RASFF
database of the EU shows that Asian countries have had an increasing number
of border rejections in the recent years. Evidently, China, India, Indonesia,
Malaysia and Thailand have been trading very intensively on more number of
products. In terms of product composition, cereal preparations, fish, coffee, tea,
mate and spices, malt, plantings, meat and fish preparations are traded by large
number of countries.

In response to growing consumer demand and food safety precautions,

there has been a surge in product standards in developed countries. Of late, many
developing countries have started adopting the set of standards. Due to lack of
harmonisation and mutual recognition, exporters often find it difficult to comply
with the multitude of standards required for exports to many OECD countries. An
issue close to this is the development of private standards. Private standards are
voluntary ones and are imposed informally, mainly by the supermarket chains.
Often this results in discrimination against those products which are not certified.
This configuration has put many countries in a ‘crisis management’ and not in a
‘proactive’ mode of operations (Jaffee and Henson, 2005).

The wide variation in standards adopted by different countries leads to

many further constraints. Different countries follow different norms for mycotoxins
(FAO, 2003) and pesticide residues, thus increasing the compliance cost for the
industries. There is considerable discretion available for countries to impose their
own standards and regulations including inspection of goods, specified processing
of the products and even packaging and labeling. There is no substantive progress
or consensus on the issue of MRLs so far even at the international level. Thus,
producers do not have the luxury of being able to sell their products in an
international marketplace with consistent and mutually recognised MRL rules.
 Agricultural Trade Facilitation in Asia 13

The HACCP requirements are central to many national food safety programmes.
This had significantly escalated the costs in meat, poultry and marine products
processing plants (Antle, 2001; Sawhney, 2005). Much of the processing in these
sectors takes place in Small and Medium Enterprises (SMEs). In India, HACCP
is a mandatory requirement in the fishery sector.

The magnitude of food safety induced trade facilitation concerns may be

assessed from tables 2 and 3. The countries experience high incidence of border
rejections and this is true across more number of items, the above listed being
the most vulnerable group of products based on HS system. Table 2 lists the
number of border rejections and the number of products affected during 2000-
2010. Table 3 is on the number of products affected by the measures.
Table 2. Details on border rejections of
agricultural exports (2000-2010)

Source: Author’s compilation based on RASFF.

14 Millennial Asia

Table 3:
Selected products affected and number of rejections

Source: Author’s compilation based on RASFF.

The cases of Cambodia, Lao PDR, Myanmar, Nepal and the Philippines
merit further discussion in this context. It will not be easy to conclude that these
countries are better equipped to deal with the issue of food safety. The non-
existence or lower number of incidences hide the substantive challenge these
countries have in terms of food safety compliance and trade facilitation. Given
the high level of rejections, especially in the fishery, spices and nut products
category, it is fairly evident that the safety and quality systems that are not in
place in many countries – Bangladesh, India, China and Thailand in particular –
still do not ensure easier market access. This is a completely different set of
issues. For a country like Bangladesh, the industry costs of maintaining HACCP
was estimated to be US $ 2.2 million per annum more than a decade ago (Cato
and Lima Dos Santos, 1998). While the levels of rejections are high, it is also to
be reckoned that for many of these products, there has not been any update or
 Agricultural Trade Facilitation in Asia 15

revision of the minimum standards such as MRLs on cadmium, aflatoxins,

ochratoxin, etc., for a variety of products.
The requirements imposed by the OECD countries upon exporting countries
are often significantly higher than international standards (for instance, Codex
Alimentarius) and many countries need to significantly upgrade their testing and
monitoring facilities to meet these requirements. However, they lack the financial
and technical resources to fulfill these criteria and their exports are hindered access
to the international market. Hence, there is a need to identify the basic structural
rigidities/infirmities in the agricultural sector. In terms of need assessment, some
are in place already. However, a detailed or complete analysis for the preparation of
practical action plans has been missing.
Exporters are often faced with having to test or certify their products in each
of the countries to which they are exporting. Even if countries rely on internationally
harmonised standards or accept as equivalent another country’s standard, they may
not rely on an exporting country’s conformity assessment results. This can
substantially increase cost of exports in a number of ways. First of all, exporters
incur the costs of redundant testing and certification for each of the destination
markets. Secondly, they face the risk of higher transportation costs if the goods are
rejected by the importing country after shipment. Third, there is a cost in terms of
time required for complying with administrative requirements and inspections by the
importing countries authorities (WTO, 2005).
In order to reduce such costs, a number of conformity assessment recognition
agreements have been negotiated between and among countries bilaterally. Obviously,
these agreements do not have an influence on the standards and technical regulations
themselves. The impact of such agreements on the trade of participating countries
is clearly positive due to a reduction in costs generated by the avoidance of duplicating
tests, as well as lower transport and administrative costs, as handling time and
uncertainty of delivery are reduced. Mutual recognition requires confidence in the
competence of one another’s conformity assessment bodies and in the methods
employed to assess conformity. For this reason, agreements are often limited to
accepting conformity assessment results from bodies that are recognised by the
parties concerned, and do not extend to self-certification arrangements such as
supplier’s declarations of conformity. The issue of conformity assessment has received
relatively little attention in the theoretical economic literature. This is perhaps, because
conformity assessment can be modelled in a relatively straightforward way as an
additional transaction cost of exports. In practice, though, the issues of conformity
assessment requirements and their impact on trade have given rise to the development
of a complex institutional infrastructure (Sengupta, 2007; WTO, 2005).
Most sensitive agricultural products from the Asian countries are crustaceans,
fish and products, herbs, spices and nut products. It is also observed that trade
16 Millennial Asia

facilitation issues are different for different agricultural products. While product
perishability is a concern for marine products exporters, it is the level of contaminants,
fungi or pesticide residues that become concern for spice and nut product exporters.
However, there are many common cost components. Weak institutional arrangements
(vulnerability to corruption in the case of subsidising SPS certificates or Single
Window) or inadequate capacities (in terms of coordination between different bodies)
exist. Though there are initiatives at the multilateral and the ministry levels, the
existing national structures may not give a robust system for trade facilitation. OECD’s
quantitative study on the benefits of trade facilitation suggests that the welfare gains
would be higher for trade facilitation measures, reducing delays at the border than
those for reducing compliance cost related to border procedures (OECD, 2003).
Several challenges get in the way of empirical research in SPS measures
and trade facilitation. The transaction costs approach in the monopolistic framework
provides a more comprehensive assessment of the trade effects as a result of border
effects such as SPS and trade facilitation. However, such a comprehensive modelling
framework has been missing so far. A major problem is the classification of variables.
Though the conventional gravity model used to assess the impact of SPS regulations
does include trade facilitating variables and the gravity model used for assessing the
benefits of trade facilitation measures also include regulatory variables as a standard
practice, the overlapping issues between SPS and trade facilitation could not be
incorporated so far and this assumes higher importance in the context of regional
and preferential trading arrangements. Also added to the problem is the multitude of
variables that are considered to influence the course of trade between countries,
such as tariff reductions, regional agreements, and regulatory systems (Kumar, 2010).
Possibilities of network externalities exist as there are high number of
rejections in particular categories. For instance, China has a high number of rejections
in nuts and nut products category. Similarly, India has a high number of rejections in
herbs and spices category. However, international food safety regulations are same
for most of the parameters for these HS categories. Same laboratory can facilitate
the testing and certifications for both the products. China demonstrates that while
herbs and spices category had only five rejections, nuts and products category had
a very high 325 rejections. In India, while 128 rejections were recorded for herbs and
spices category, 55 rejections were recorded for nuts and products category. Further
assessments are necessary at the country level to validate the reasons.
It is also crucial to note the information asymmetry especially in the context
of SMEs and unorganised sector, which would deter further processing and value
added exports. Proper and timely information dissemination would help reduce the
rate of rejection or detention of consignments and avoid the expenses related to
reprocessing, rerouting or destruction. As the costs of export fall, it is more likely
that there is at least one firm with high enough productivity to successfully export.
Export propensity should, therefore, increase as trade costs fall. Also, less productive
 Agricultural Trade Facilitation in Asia 17

firms at the fringes of the export market will find that it becomes profitable to start
exporting. Lower export costs can, therefore, facilitate entry of SMEs into export
markets, thereby expanding the number of people and firms that are in direct contact
with the world market. Finally, lower trade costs tend to promote the reallocation of
resources from low-productivity to high-productivity firms. The overall effect will be to
increase the economy’s level of productivity, which may have important implications
for future growth prospects. However, the degree to which these factors affect the
agro-food industries in the wake of the preferential and free trade agreements requires
continuous studies.
Countries need to serve a growing domestic markets, and hence for the
infinitesimally small portion that enters trade, policy makers may not pay much
attention. However, since safety and quality are going to be the key determinants of
sustainability of the markets there is a need to enhance quality in ‘home’ markets as
well. In the backdrop of RTAs, it is easier for member countries to exploit these huge
markets with products which could be claimed to have met higher levels of quality
and safety.
4. Moving Ahead: Addressing the Major Constraints
Trade in agricultural products continues to remain buoyant in Asia. However,
the augmentation of trade brings many new challenges and opportunities along. As
mentioned in the previous section, countries in the region exhibit various levels of
developments and constraints in the agricultural sector. They may be broadly classified
as:
a. For some countries, the priority is development of basic infrastructure
and cost reduction in agriculture sector. This would include formation
of farmers’ collectives, locating and diversifying export markets and
product portfolio and development of statistical system, thus implying
further homework in terms of product and process innovations.
b. There exist diversified agricultural portfolio in terms of products and
markets. Priority is for value addition and re-exports, at the same
time ensuring that rules of origin, domestic value added taxes are
not prohibitive for the same.
c. In a few cases, though already established in value added exports,
they do not bring enough returns (value realisation). Complying with
food safety erodes profits. There are also questions on organic and
sustainability initiatives fitting into regional requirements.
d. There are possibilities to reduce transaction costs further and to
adopt many of the multilateral initiatives as electronic commerce
and paperless trading. But there are no incentives to do so, because
of huge domestic demand or some other reasons.
18 Millennial Asia

Identifying the contraints in agricultural trade facilitation to contribute to poverty

reduction would be made easier by locating the product, process and functional
dimensions in a matrix. The points within the boxes (table 4) are more symptomatic
and are to be explored in specific country contexts and need specific policy
prescriptions.

Table 4
Major contraints in agricultural trade facilitation

Product Process Function

Small holdings
Unorganized sectors
Lack of collectives
Safety and quality
systems in place and
implementation
issues(HACCP, Global-
GAP, etc.)
Structural problems and
infirmities in sectors
Weak statistics and
difficulty in quantifying
costs and benefits

Labour shortage and Organic production – Vulnerable single

limited mechanisation
compatibility problems
with mainstream trade
policy – low premium
window/corruption/smug
gling presence or
readiness for ‘cloud’ and
Asycuda but low
leverage

Export orientation - Gender sensitivity Lack of transdicsiplinary

limited diversification
both in terms of products
and markets
International
sustainability and
certification systems and
incompatibility to local
conditions
efforts between
institutions/ministries on
R&D and transaction
costs reduction

Food safety – no Thin distinction between Counterproductive taxes

international consensus food safety and trade and subsidies, limited
on MRLs facilitation access to finance, test
facilities (institutional)

Technology, productivity Rules of Origin or tax High airfreight escalating

and sustainability
systems inhibiting
enhanced processing
and value addition not
ensuring expected value
realization
the costs of perishable
products and thus less
competitive
Lack of statistics on re-
exports and suitable
Agri-TF indicators
 Agricultural Trade Facilitation in Asia 19

5. Summary and Conclusion

This paper analyses the food safety dimension of agricultural trade and
the constraints associated with trade facilitation. Albeit with this limited scope, it
argues that the installed food safety and associated infrastructure could be seen
as only necessary conditions whereas the sufficient conditions would be to make
an enabling policy environment which would reduce the overall transaction costs of
trade. Trade facilitation concerns of many of the Asian exporting countries are
dominated by the lack of proper infrastructure to deal with the export and import
procedures especially in the food safety dimensions. The non existence or lower
number of incidence of border rejections (based on RASFF database) hide the
substantive challenge some countries such as Cambodia, Lao PDR, Myanmar
and Nepal have in terms of food safety compliance and trade facilitation. Given the
high level of rejections especially in the fishery, spices and nut products category,
it is fairly evident that the safety and quality systems that are in place in many
countries – Bangladesh, India, China and Thailand in particular – still do not ensure
easier market access. So, this is a multifaceted issue in many countries, regardless
of the stages of development. Possibilities of network externalities exist as there
are high number of rejections in particular categories. International food safety
regulations are same for most of the parameters for these HS categories.

Agricultural trade facilitation, therefore, calls for a thorough relook at the

domestic structural rigidities and infirmities in terms of various parametres which
include product, process and intersectoral aspects. So, consideration of land and
labour issues, mechanisation, research and develpoment, subsidy and incentives
structure, export orientation, synergy of federal and state departments, ministries,
etc. are crucial in this context. Further, unlike non agricultural trade facilitation, it
requires a holistic approach for trade facilitation component to work towards poverty
reduction. These priorities would vary in different countries. For instance, readiness
to adopt ‘cloud’ system in the customs domain would come much later for many
countries as there are immediate aspects that would require policy attention.

Further country and commodity level assessments are necessary for the
overall development of the agricultural sector in the region. Trade facilitation and
infrastructure are often taken in the general sense at the policy level and only
partly address the specific issues related to the reduction of risks and transaction
costs in the context of agricultural trade, i.e. the invisible infrastructure such as
easy documentation, customs procedures, regulatory regimes and mutual
recognition. Different products have different requirements in terms of costs, time
and reliability of logistics and trade facilitating policies are to be formulated taking
into consideration a wider set of factors and indicators in the context of agricultural
trade.
20 Millennial Asia

References:
Aceglobal (2005) Trade Facilitation Problems of Indian Exporters: A Survey. UNCTAD
India – MoCI – DFID Project, New Delhi: Aceglobal Consulting LLP.
ADB-FAO-IFAD (2009) Summary of Proceedings of Greater Mekong Subregion
Economic Cooperation Program Technical Meeting on GMS cross-border
agriculture trade and contract farming, Bangkok, Thailand, 6 March 2009.
Anderson, James E and Wincoop (2004) 'Trade Costs', Journal of Economic
Literature, 42 (3): 691-751.
Antle , J M (2001) ‘Economic Analysis of Food Safety’ In B. L. Gardner, and G. C.
Rausser (eds.) Handbook of Agricultural Economics: Elsevier Science,
1(2), Chapter 19: 1083-1136.
Cato, James C, and Lima Dos Santos, C.A. (1998) 'European Union 1997 Seafood
Safety Ban: The Economic Impact on Bangladesh Shrimp Processing',
Marine Resources Economics 13(3): 215-227.
Chaturvedi, S and G Nagpal (2003) WTO and Product – Related Environmental
Standards Emerging Issues and Policy Options, Economic and Political
Weekly, 38(1): 66-74.
European Commission Rapid Alert System for Food and Feed (RASFF Database
Portal), Various Years.
Food and Agriculture Oraganization (FAO) (2003) Selected Indicators of Food and
Agriculture Development in Asia-Pacific Region 1992-2002, Rome: FAO.
FAO (2003) Mycotoxin Regulations Worldwide, Rome: FAO.
Jaffee, Steven and Spencer J Henson (2005) 'Agro-food Exports from Developing
Countries: The Challenges Posed by Standards', in Aksoy, Ataman and
John C Beghin (Eds.) Global Agricultural Trade and Developing Countries,
The World Bank: 91-114.
Kumar, N (2010) Export Supply Chain and Food Safety in India: New Issues for
Policy Research, Journal of Asian Public Policy, 3(1): 71-85.
Mohanty, S. K (2006) 'Trade and Environment Dimensions in the Food and Food
Processing Industries in Asia and the Pacific', Regional Study, New Delhi:
Research and Information System for the Non Aligned and Other Developing
Countries.
 Agricultural Trade Facilitation in Asia 21

Mold, A. (2005) Trade Preferences and Africa: The state of play and the issues at
stake, ATPC No.12, UN/ECA, at (www.uneca.org) accessed on November
10, 2008.
OECD (2003) Trade Facilitation: The Benefits of Simpler, more Transparent Border
Procedures, OECD Policy Brief, Paris: OECD.
Sawhney, A. (2005) 'Quality measures in food trade: The Indian experience', The
World Economy, 28(3): 329–348.
Sengupta, N. (2007) The Economics of Trade Facilitation, New Delhi: Oxford
University Press.
Wilson, J.S. Catherine Mann and Tsunehiro Otsuki (2003) 'Trade Facilitation and
Economic Development: A New Approach to Quantifying the Impact', World
Bank Economic Review, 17(3): 367-389.
World Bank and IFC (2010) Doing Business Vietnam, Washington DC: World
Bank and IFC.
World Bank and IFC (2010) Doing Business Report of the Landlocked Countries,
Washington DC: World Bank and IFC.
World Trade Organization ((WTO) (2005) Trade, Standards and the WTO, World
Trade Report 2005, Geneva: WTO.
World Trade Organization (WTO) Secretariat (2009) Statistics Division, World
Commodity Profiles for 2009, Geneva: WTO.