National 6 (Spotlight Weekly)

Difficult Access

A study reveals that Nepalese agro-products face uphill task due to market access barriers even in the post WTO accession era

By SANJAYA DHAKAL

* The tariff rates for agriculture products are higher in South Asian countries (except China) with Pakistan slapping 150 percent tariff on tea even though it does not produce it domestically.

* Bound tariff rates reveal formidable barriers with some so high that they resemble quantitative restrictions

* Even in countries that have less tariff rates, the Non Tariff Barriers (NTB) pose enough obstructions

* Application of high standard in EU on honey – an NTB – are based on precautionary principle

* In case of floriculture, Japan has zero tolerance for insects and pests even when such pests are already in Japan

The above points represent some of the findings of a study on “Market Access Barriers to Select Nepalese Agriculture Exports in the Post WTO Accession Era” conducted by Ratnakar Adhikari and Kamlesh Adhikari of South Asia Watch on Trade, Economics and Environment (SAWTEE).

They clearly mirror the hardships that Nepalese agriculture sector will have to suffer when exporting their products.

After Nepal became the 147th member of the World Trade Organization (WTO) this year, one of the most anxious sectors was the agriculture with experts predicting that lack of competitiveness could hinder Nepalese farmers from taking advantage of the liberalized trading regime.

But most of those predictions were only knee-jerk reactions and were not supported by field-based observation and analysis. In order to identify the difficulties and analyze the ground potentials, the study was conducted by choosing five commodities (owing to their comparative advantage and production potentials for Nepal) – Tea; Honey; Vegetable Seeds, Medicinal Plants; and Floriculture. Likewise, the study chose three different types of markets – neighboring markets (like Bangladesh, India, China etc); developing countries; and developed countries (like EU, Japan, US, Canada etc).

Agriculture, without doubt, is the major sector of Nepalese livelihood. It contributes 40 percent of the GDP and provides livelihood option to 80 percent of population. “One of the necessary conditions for enhancing the export of agricultural products is the predictability of market access in the destination markets,” said Ratnakar Adhikari, Executive Director, SAWTEE, explaining why the study was conducted. The study only analyzes developments vis-à-vis WTO regime and does not take into account the provisions of bilateral or regional trading agreement.

The study has exposed that both developing and developed countries impose high tariff as well as non-tariff barrier on agriculture products. “For instance, US imposes 144% tariff on sugar; Canada imposes 360% on butter; Japan imposes 360% on wheat; and EU imposes 200% on beef,” said Adhikari, adding. “Besides, EU has imposed very harsh measures on pesticides residue. They don’t even allow tea leaves picked with hand containing traces of nicotine.”

The study not only brings out the problems but also gives measures to overcome them. “At national level, we have to enhance our competitiveness by trade facilitation, agro-extension, capacity building, infrastructure building and raising awareness on standards issue. Likewise, at international level, Nepal needs to lobby with other like-minded countries within the WTO for better deal; set up accredited labs to test standards; engage in global campaign to pull down protectionist NTBs; and make use of Technical Assistance promised by the WTO during accession,” added Adhikari.

When acceding to the WTO, Nepal has bound agricultural tariff at 42 percent on an average, made a commitment not to introduce export subsidy or domestic support except as allowed by the WTO and has agreed to implement other agriculture related provisions by 2006. “There is nothing to worry about our commitments at the WTO. We have been able to reach favorable agreement with them. In fact, WTO allows us to provide up to 10 percent subsidy on agriculture – but we are only providing 1.3 percent at present as we lack resources,” said Dr. Prakash Sharan Mahat, Minister of State for Foreign Affairs. He believes that Nepal needs to embrace high value crops for export in the agriculture sector.