Effect of Environmental Measures on

International Trade

Indian Experience

Structure of the Presentation

Experience of leather, textiles and marine sectors in India

• Issues emerging from Indian experience

• Issues in standard setting and assistance for compliance

• Issues relating to International Rules

Experience of Textiles & Leather Sectors

• Ban on Azo dyes, PCP, harmful amines, etc.

• Proposal to ban another 300 dyes in EU suspected to be carcinogenic

• Eco-labels in textiles based on LCA

• Insistence of buyers on eco-labels, ISO standards

• Animal rights issues in Leather sector

Steps taken byGovernment of India

• Banned 112 harmful Azo dyes

• Pro-active role played by Pollution Control Boards in laying norms for effluent treatment

• Evolved eco-standards in textiles

• Information dissemination efforts

• Technology Upgradation Fund Scheme

• Strengthening testing labs

• Assisting textile units in securing ISO certification

Effect on Indian Textiles Industry

• Dye substitutes are 2.5 times more expensive

• Azo free dyeing increases costs by 15 – 20%

• Increase in production costs, more due to very high standards set by PCBs

• Higher cost of testing

• Shift to common ETP, however, problems for dispersed plants

• Compliance generally by larger units while smaller units shifted to other markets

Processed Foods, Spices, Tea

• Standards for aflatoxin, pesticides residue in spices

• Problem of aflatoxin levels in peanuts

• Difficulties in export of fresh fruits like mango due to quarantine restrictions in Australia, Japan, etc.

• High pesticides residues (Ethion, Bicofol) in tea

• Government of India banned a number of pesticides like DDT, BHC, Aldrin, Aldrox, etc.

• Standards differ from country to country

• Packaging regulations, ban on wooden boxes and jute bags

• Production is predominantly by small farmers and small processors

Effect on Indian Industry

• Costs went up but a number of units complied with new environmental measures

• Smaller units unable to meet environment requirements, Shifted to domestic and other markets

• Lack of credit/funds to upgrade – through in some cases like textiles and marine, Government introduced specific scheme

• Lack of technical and managerial capability to upgrade, particularly for smaller units

• Lack of consultancy firms/agencies/institutions who can provide assistance

Issues in Standard Development

• Lack of International environmental product standards

• Transparency

• Involving exporting firms at an early stage

• Notification requirement in the early stage

• Participation of developing countries in international standard setting organizations

Issues in Standard Development (Contd.)

• Environmental measures should be based on the criteria of sound science

• Proportionality in environment benefits and costs in compliance including for exporting firms

• Rio-Principle 11 provides that environmental standards should reflect the environmental and developmental context to which they apply. Standards applied by some countries may be inappropriate and of unwarranted economic and social cost to other countries, in particular developing countries

Support for compliance• Lack of price premium on eco-friendly products

• Assistance and subsidies are provided to local firms while bringing new environmental measures. This places exporting firms at a disadvantage.

• Bilateral and multilateral assistance for capacity building and technical assistance to developing countries should be an integral obligation when introducing new environmental requirements

• Multilateral funding agencies need to earmark funds for this purpose

• Assistance to development institutions/certification agencies in exporting countries who could assist exporting firms in compliance and certification process

Rules related issues for environmental measures

• Labeling

• Precautionary approach in developing standards

• Obligations relating to transparency, notification, etc.

Labeling requirements

• Mandatory and voluntary schemes

• Large number of labeling schemes

• Lack of international standards

• Equivalence

• Fulfillment of stated environmental objectives

• Transparency and notification requirements

• Problems in certification

• Debate on npr-PPM

• Work Programme in CTE

Different approaches for precaution in International agreements

• Rio-Principle 15 – Precautionary approach to be applied where there are threats of serious or irreversible damage to environment

• Biosafety Protocol – Lack of scientific certainty due to insufficient sientific information regarding effects on bio-diversity and human health should not prevent appropriate action regarding import

• Article 5.7 of SPS Agreement – Provisional adoption of SPS measures where scientific evidence is insufficient. Shall seek additional information within a reasonable period of time.

• Article 2.2 of TBT Agreement – Risk assessment in technical regulations should be based on available scientific and technical information

Different approaches to Precaution

• International Environmental Law recognizes precautionary approach only for serious or irreversible damage to environment.

• Environmental requirements for product standards should be based on sound science and scientific risk assessment.