IMPACT OF WTO ON HORTICULTURAL SECTOR OF INDIA

IMPACT OF WTO
ON
HORTICULTURAL SECTOR OF INDIA
KIREETI.K (F-2011-02-M)

The WTO... In Brief
•The result is assurance. Consumers and producers know that they can enjoy secure supplies and
greater choice of the finished products, components, raw materials and services that they use. Producers
and exporters know that foreign markets will remain open to them. The result is also a more prosperous,
peaceful and accountable economic world.
•By lowering trade barriers, the WTO’s system also breaks down other barriers between peoples and
nations.
•At the heart of the system — known as the multilateral trading system — are the WTO’s agreements,
negotiated and ratified by a large majority of the world’s trading nations, and signed in their parliaments.
•Their purpose is to help producers of goods and services, exporters, and importers conduct their
business.
•The goal is to improve the welfare of the peoples of the member countries

AGRICULTURE
Negotiations on agriculture began in early 2000, under Article 20 of the WTO Agriculture Agreement.
By November 2001 and the Doha Ministerial Conference, 121 governments had submitted a large
number of negotiating proposals.
The declaration reconfirms the long-term objective already agreed in the present WTO Agreement: to
establish a fair and market-oriented trading system through a programme of fundamental reform.
The programme encompasses strengthened rules, and specific commitments on government support
and protection for agriculture.
The purpose is to correct and prevent restrictions and distortions in world agricultural markets.

 India is naturally endowed with diverse and varied agroclimatic conditions and a vast reservoir of
resources and soil regimes for growing a wide variety of crops for domestic consumption and
export.
 Added to this is the large community of knowledgeable farmers who have been able to adapt
themselves to the changing requirements of growth and diversification dictated by the global
scenario.
Promotion of agricultural exports is looked upon as an important instrument for boosting growth in
the rural and “real economy” and creating conditions for improving the returns to the farmers.
 We are also aware that the Government of India’s EXIM POLICY (2007-2012) endeavours to give the
necessary momentum and direction to the country’s export drive.
 The world trade regime under the WTO has also opened up new export possibilities and new vistas
for the farmers to earn higher values for their produce.

•The WTO, in fact the Agreement on Agriculture (AoA), provides new opportunities for export of
agriculture products and, in this respect, India has yet to take advantage of the emerging
opportunities to enlarge its trade, particularly with the widening of the global market.
•India is good in producing fruits and vegetables (the second largest producer with 150 million
tonnes), spices (world’s largest producer, with over 3 million tonnes).
•Over the years, horticulture has emerged as one of the potential agricultural enterprise in
accelerating the growth of economy.
•Its role in the country's nutritional security, poverty alleviation and employment generation
programmes is becoming increasingly important.
• It offers not only a wide range of options to the farmers for crop diversification, but also provides
ample scope for sustaining large number of Agro industries which generate huge employment
opportunities.
•At present, horticulture is Contributing 24.5% of GDP from 8% land area.

India’s share in world production being nearly 10 per cent in fruits and 14 per cent in vegetables.
India produces 50 per cent of world’s mangoes, 19 per cent of banana, 36 per cent of cashew nut,
more than 10 per cent of onion, 38 per cent of cauliflower, 28 per cent of green peas, etc.
Despite all this, our share in the world exports of fruits and vegetables is only about 1 per cent.
And it is only about 2 per cent of the fruits and vegetables produced in the country is processed
and there is considerable potential to increase it to about 10 per cent.
An area that emerges as highly potential for exports in the years ahead, among the agricultural
exports, is the processed food products.
The export of fresh fruits and vegetables and processed fruits and vegetables continue to remain a
mere 6 per cent of the total value of exports, despite the institutional support to boost their exports,
though there are indications of a steady rise in their exports.
Even in developing countries such as Malaysia (80 per cent) and Thailand (30 per cent) it is very
high. Similarly, value addition in India is estimated at 7 per cent as compared to 45 per cent in The
Philippines and 23 per cent in China.

BASIC PRINCIPLES & ISSUES OF WTO

NON DISCRIMINATION
A country should not discriminate its trading partner i.e. every member country will be granted the
same status that is granted to Most Favoured Nation. It means that products made in member’s own
country are not given any favourable treatment in comparison to the products which originated from
other member countries and are imported into their territory. It includes that the procedures and
standards which are applicable to the domestic industry will automatically be implied to the imported
goods i.e., once a foreign good satisfies the conditions including payment of customs duty and/or other
charges, it will be treated no less favourably in terms of taxes and measures with equivalent effect than
domestic goods.
RECIPROCITY
The agreements administered by WTO are based on a balance of rights and obligations achieved
through reciprocal exchange of market access commitments. The open trading system is to be
based upon the rules for bringing competition.

MARKET ACCESS
An important goal of the WTO is to facilitate the availability of the goods across the border.
This agreement also helps in increasing the transparency under the trade regimes.
Through this Agreement, the trade across the borders is only governed by imposition of tariffs while
rest of the quantitative restrictions, such as quota are to be waived off in a phased manner.
In order to exploit the marketing accessibility, competitiveness of a product with respect to its price
and quality is a fundamental criteria.

FAIR COMPETITION
The main objective of this principle is to discourage the unfair trade practices such as export
subsidies and dumping of products at below cost to gain market share.
It is being carried out through regulation of subsidies on export and imposition of anti-dumping
duties.

AGREEMENT ON AGRICULTURE
Agreement on Agriculture has 4 main components, namely: -
· Concession and commitments on market access
· Domestic support and export subsidies
· The Agreement on sanitary & phytosanitory measures, and
· Ministerial declaration concerning least developed and under developed countries

AOA
However, the other subsidies which are also called green subsidies are presently being
allowed under this agreement.
The allowed subsidies are basically broad based in terms of research and pest and disease
control, training services, extension services, marketing and promotion services, infrastructural
services in order to exploit the market accessibility.
After going through the agreement, it clearly comes out that in order to exploit the facilities
being given in the above agreement, there is need to overcome the infrastructure inadequacy and
other impediments to the large scale investments.
Apart from this, it is necessary that post-harvest technologies for food processing and
preservation should be promoted so as to bring about added value to the agriculture economy.

Finally, the gain or loss to a country as a result of liberalisation will largely depend on achieving the
market accessibility through providing the green box subsidies.
Indian export basket consisting of agro-based products and manufacturing items suffers from
considerable supply related problems. So far as the agro based products are concerned, the
question of surplus is most critical.
In case of manufacturing products, there are serious problems of competition relating to high cost,
inefficiency in production, outdated technology, problems related to delivery schedule and product
specification.

AGREEMENT ON SANITARY AND PHYTO-SANITARY (SPS) MEASURES
The objective of this Agreement is to improve health or life of human, animal and plant and
overall phyto-sanitary situations in all the member countries.
This agreement states, that the measures should not be applied in a manner, which would result in
a means of arbitrary or unjustifiable discrimination between the members.
In other words, it means that the sanitary and phyto- sanitary measures applied by each
member country should be based on scientific justification and to the extent possible, it should
take into consideration, the international standards and guidelines already available.
The major articles in the Agreement having an effect on the horticulture produce are as follows

ARTICLE 3 ON HARMONISATION
This Article states to harmonise the sanitary and phyto-sanitary measures, which basically include
levels of food additives, contaminants, pesticide residues, microbiological criteria and other related
toxins with the international standards and guidelines.
This process of harmonisation is crucial with respect to both exports and imports.
This issue of harmonisation is also required when we enter into an equivalence agreement for
exporting our goods into other countries.

ARTICLE 4 ON EQUIVALENCE
Article 4 of the Agreement directs the WTO members to accept SPS measures of the other countries
as equivalent even if these measures differ from their own or from those used by other countries
trading in similar products, provided, the supplier country can demonstrate to the importing country
that its measures achieve the importing country’s appropriate level of SPS protection.
Under this Article, WTO members can also enter into bilateral or multi-lateral agreements on mutual
recognition of equivalence of specified SPS measures.
ARTICLE 5 ON SPS MEASURES TO BE BASED ON SCIENTIFIC EVIDENCE
As per Article 5 of the Agreement, countries are required to ensure that the measures of SPS
protection are based on risk assessment on the basis of available scientific evidence, production
processes and environmental conditions.

ARTICLE 7 ON TRANSPARENCY
According to Article 7 (transparency), all WTO members have an obligation to notify to the WTO
committee, any changes in their SPS measures.
ARTICLE 9 ON TECHNICAL ASSISTANCE
As per Article 9, the WTO members are expected to facilitate technical assistance to other members
especially the developing countries either bilaterally or through the relevant international
organisations.
ARTICLE 10 ON SPECIAL & DIFFERENTIAL TREATMENT
As per Article 10 of the SPS Agreement, Special and Differential Treatment (SDT) is required to be
provided to the developing countries, whereby, longer time frames for compliance with SPS measures
are supposed to be provided by the developed countries.

PRODUCTS FACING SPS RELATED PROBLEMS
MANGO AND GRAPE
Japan, Australia and China have banned imports of mangoes and grapes from India on account of
presence of certain fruit flies. China has imposed a ban on grapes for a species of fruit fly that does
not even exist in India.
It has taken more than five years to develop the protocols and inspite of this lifting of the ban is not
anticipated in the near future.
In the process, we are likely to lose a total of about 10 years before India can think of actually
exporting these fruits to Japan.
It is, informally learnt that these restrictions are actually a non tariff barrier to trade because of
the commercial interest of Japanese companies in Philippines and Thailand, where they have
their own mango orchards for meeting the Japanese demands. The Indian mangoes could reach
Japanese market only in July 2006.
COFFEE
The European Union (EU) introduced a regulation prescribing unreasonably low levels of
Octratoxin-A (OTA) in coffee.

. PESTICIDE RESIDUE PROBLEMS
GRAPES
The European Union (EU) has introduced regulations on pesticide residue levels in fruits and
vegetables imported from different countries.
Indian exporters are required to comply with the maximum pesticide residue levels for exporting
their products to the EU. This problem has specially been faced in exporting grapes
GHERKINS
TEA AND SPICES
HONEY
While this appears to be an appropriate level of protection, the procedure of implementation is
cumbersome.

FACTORS GOVERNING COMPETITIVENESS
LACK OF RANGE OF VARIETIES
 While a wide variety of germplasm is available in most of the horticultural commodities, varieties
most suited for exports have not been adequately identified in several crops.
 Work on developing export -oriented varieties and those suited for value addition needs to be
given due priority
PRE- HARVEST PRACTICES TO CONTROL POST HARVEST LOSSES
 Several post harvest diseases and pests can be avoided with appropriate pre-harvest treatment.
 Apart from this, pest infestation is also a problem, which is affecting the price realization of
Indian produce in the market.

LOSS OF PRODUCE AT THE PRIMARY LEVEL
 There is significant loss of produce at the primary production level as a result of inappropriate
harvesting methods.
 Efforts would be needed to popularize the same among the farmers.
LACK OF ADHERENCE TO MATURITY INDICES
 The maturity indices in most of the horticultural crops are either not available or not followed by
the farmers resulting in harvesting of these crops at varied maturity levels
 Hence, there is need to create awareness about the maturity indices of different horticultural
commodities among the farmers both for catering the needs of export market and for
marketing of produce in distant locations within the country.

LACK OF FACILITIES FOR PHYSICAL AND CHEMICAL TREATMENT AFTER HARVESTING
 Several post harvest treatments are recommended for minimizing post harvest losses in different
horticulture commodities. However, adequate facilities for large-scale treatment are not available
at the farm level.
LACK OF POST HARVEST INFRASTRUCTURE AND LOGISTICS
 In order to maintain the quality of horticultural commodities there is need to develop proper
infrastructure in terms of pre-cooling units, grading and packing houses in the producing
areas.

NEW OPPORTUNITIES
ORGANIC FARMING
 While a wide variety of germplasm is available in most of the horticultural commodities, varieties
most suited for exports have not been adequately identified in several crops.
 Work on developing export -oriented varieties and those suited for value addition needs to be
given due priority
PRE- HARVEST PRACTICES TO CONTROL POST HARVEST LOSSES
 Several post harvest diseases and pests can be avoided with appropriate pre-harvest treatment.
 Apart from this, pest infestation is also a problem, which is affecting the price realization of
Indian produce in the market.

WTO IMPACT: GLOBALISATION AND TRADE FOR DEVELOPMENT
Between 1994 and 2003, we were busy finding faults with the WTO Agreement rather than paying
attention to enhancing the productivity, quality, diversification, value addition and sustainability
aspects of our agriculture.
As a result, the mismatch between production and post-harvest technologies persists and the
infrastructure for handling perishable commodities continues to be poor.
The experience has, thus far, shown that WTO has no visible agenda for the resource-poor farming
families.
Globalisation has proved to be inherently asymmetric in its impact.
Countries most dependent on export of primary commodities have not been able to derive benefit
from a “free trade” regime.
Rich nations are not prepared to phase out trade distorting subsidies and provide increased market
access to predominantly agri- developing countries.
Globalisation creates losers as well as winners, and entails risks as wells as providing
opportunities.

EFFECTS AND IMPACTS OF WTO AND THEIR RELEVANCE TO
INDIA’S HORTI-EXPORTS.
1. There has been a growing divergence, not convergence of income levels, both between countries
and people.
2. Inequality among and within nations has widened.
3.Assets and incomes are more concentrated and wage share fallen while profits share have risen.
4.Capital mobility alongside labour immobility has reduced the bargaining power of the organised
labour.
5.The rise in unemployment and with more and more people working in the informal sector, has
generated an excess supply of labour and depressed real wages.

MAJOR IMPORTING COUNTRIES
PRODUCT GROUP MAJOR IMPORTING COUNTRIES
Floriculture USA, The Netherlands, UK, Germany, Japan
Fruits & Vegetable Seeds USA, Pakistan, Japan, Bangladesh, The Netherlands
Fresh Onions Bangladesh, Malaysia, UAE, Sri Lanka, Bahrain
Other fresh vegetables UAE, Nepal, UK, Saudi Arabia, USA
Walnuts Spain, Germany, UK, Egypt, The Netherlands
Fresh mangoes Bangladesh, UAE, Saudi Arabia, UK, Nepal
Fresh Grapes The Netherlands, UK, UAE, Bangladesh, Germany
Other fresh fruits Bangladesh, UAE, Nepal, Saudi Arabia, The Netherlands
Dried & Preserved Veg Bangladesh, Sri Lanka, USA, UK, UAE
Mango Pulp Saudi Arabia, The Netherlands, Yemen, UAE, Kuwait
Pickles & Chutneys Russia, USA, France, Belgium, Spain
Other processed fruits/Veg USA, Israel, Saudi Arabia, UK, the Nethrlands

WTO AND HORTICULTURE SECTOR IN H.P.
Horticulture sector has a great potential for export.
Export of Horticultural produce in H.P. can be concentrated on crops where Himachal has a
comparative advantage in terms of climatic suitability for production of various traditional crops.
Similarly we could also concentrate in exports of fruits and vegetables such as apples. pears,
peaches, kiwis, almonds, apricots, some citrus fruits, and exotic vegetables grown
organically, vegetable seeds, floriculture produce especially in the form of seeds and disease free
cuttings.
In conclusion they laid stress on the improvement of quality of products of industrial sector,
proper implementation of the export strategies and negotiations with WTO.

ISSUES AND INTERESTS OF H.P. HORTICULTURE SECTOR
IN INTERNATIONAL TRADE AND WTO REGIME
HPMC has stressed upon the issues and concerns related to the export of fruits and fruit
products from0Himachal Pradesh.
They have also attempted a SWOT analysis for export from H.P., status of apple imported to
India and exported from India, initiatives taken up by HPMC for export of Apple Juice
Concentrate (AJC) and the steps taken and required by state to meet the challenges of WTO.
H.P. produces around 36% of apples, which constitute around 81% of total fruit production in
H.P. The area under apple cultivation has increased from 3, 025 ha in 1960-61 to 2, 08,154 ha.
in 2010-11. The strengths under SWOT analysis included the suitable agro climatic conditions,
clean & pollution free environment, good governance, locational advantage for export to
neighboring countries, high literacy rate 83.78 % – educated and hard working farmers
community, adopting latest technology, reforms in Agriculture Marketing set up, participation
of private players, establishment of modern grading and packing facilities, CA stores, cool
chain facilities in public and private sector, unique flora and fauna and introduction of globally
accepted varieties of fruits

Continued…
Weaknesses under SWOT analysis enlist the tough geographical situations, small
fragmented holdings, dying old orchards, processing facility with old technology, inadequate
Grading Packing/ CA capacity, poor rail and air connectivity, week logistic support,
inadequate processing capacity, lack of vegetable processing facilities/ drying unit, knowledge
deficit in international trade– need for training and capacity building.
There are opportunities for the export of fruit crops like apple such as, setting up of markets in
private sector/ farm markets/ consumer markets/ contract farming and direct farming,
Introduction of single point levy system, farmers representation in boards and committees,
import of better plant material, rejuvenation of old senile orchards, and the import and
installation of modern infrastructure for grading / packing and other facilities.

Continued..
The Himachal Apple is being exported to the neighbouring countries like Bangladesh, Nepal,
Indonesia, Vietnam and UAE. Therefore, we need to improve the quality of apples and to explore a
good number of other nations where demand of Indian apple is good.
The following issues were stressed:
• Export Initiatives taken up by HPMC: HPMC has exported apples from Kinnaur to
England and exports of Apple Juice concentrate (AJC) undertaken since 1990-91 to Germany,
Holland, South Africa, European countries, USA and Ghana. “With latest upgradation of
computerized grading packing lines HPMC will be able to export quality apples”.
• Constraints in export of Apple Juice Concentrate: Lack of better technology,
outdated plant and machinery and inadequate capacity to meet even domestic demand are the
major constraints.

Continued..
Implications of WTO on Apple Industry: Imports of apple from USA, Australia, New Zealand
and China have increased manifold during last few years. And apple import increased from 21,622
M.T. in 2004-2005 to 134,577 M.T’s in 2010-2011.Thus, import duty on foreign apple should be put on
the maximum bound rate as applicable on other fruits from the present rate.
Apple should be declared as “special product”: As the apple industry operates under various
difficulties and constraints of small scattered land holdings (0.3 to 1.20 h.a ) & physiological quality
of apples in State is not comparable to that produced in advanced countries under favorable
conditions employing mechanized and advanced scientific post harvest techniques, the apple
should be declared as “ Special Product”.
Few steps taken by the State to meet the challenges of WTO, which mainly include;
Replacement of old and uneconomical plantations, import of virus free rootstock by Government;
improved, high yielding and globally popular varieties, CA stores set up by HPMC; and packing
houses of HPMC equipped with latest machinery to bring about standardization with assistance
of APEDA. He recommended that the financial assistance could be sought from the revenue earned
from carbon credits to develop the horticulture sector.

MAJOR CONSTRAINTS OF HORTI-EXPORT SECTOR
(i) Lack of a broad raw material base in terms of the kinds and varieties of fruits and vegetables
suitable in all respects for processing and their availability in commercial quantities at prices
economical to the processing industry. Invariably, the cost of the raw material is high.
(ii) Low productivity and poor quality of the produce as compared to the very high levels obtained in
the advanced countries affect processing and none of the processing units work to full capacity
utilisation. Much of the produce taken up for processing is devoid of the quality attributes or
characteristics required for processing.
(iii) Despite the WTO and the Agreement on Agriculture (which focuses primarily on reduction of
tariffs, increased market access, reduction in Aggregate Measure of Support in the form of
subsidies) subsidies continue as a result of which the expected gains have eluded developing
countries like India.
(iv) Imposition of non-tariff barriers like sanitary and phyto sanitary (SPS) conditions on imports
from developing countries. Lack of awareness and knowledge about the SPS measures and quality
standards required to be adopted by the processing industry and exporters.
(v) Fruits and vegetables are generally constrained by poor price support, credit support and
delivery system which affect processing.
(vi) The quality of packaging is poor. Importing countries demand specific packaging for each
produce and the use of bio-degradable materials resulting in high cost of packaging.

vii) The emergence of trading blocs in Asia, Europe and North America have also considerably affected
India’s agri-export trade.
(viii) Due to poor infrastructure in handling, transport, marketing and processing, horticulture, as an
industry, has not grown in our country. Poor infrastructure, particularly transportation, road networks,
and freight and cargo facilities, cold storage facilities, etc., coupled with inadequate post-harvest
management affect the produce and products.
(ix) Inadequate supply of power, water and research and development support add to the constraints.
(x) The freight rates in India are reported to be around 50 to 100 per cent higher than those prevalent in
some other countries which does very little to improve our competitiveness.
(xi) It is the residual rather than the fresh produce that is often taken up for processing, which has a
bearing on quality.
(xii) Lack of a proper marketing strategy geared to meeting the raw material requirement of processing
units and ensuring a sustainable export market for the processed products.
(xiii) Poor and inconsistent quality of processed products and inadequate export promotion are some
of the constraints plaguing the processing industry.

SUGGESTIONS FOR PROMOTING HORTICULTURE
Infrastructure Development
Marketing Strategy
Contract Farming
Market Access and Information
Trade Related Intellectual Property Rights
Credit Facilities
Economies of scale

Traditional Vs Innovative
Traditional mango Transportation
methods are not ideally suited to
effective food hygiene
Innovative mango Transport
methods
hyy

Traditional Vs Innovative
Traditional mango packing
methods are not ideally suited to
effective food hygiene
Innovative mango packing methods
hyy

Supply to Retail Supermarkets which are coming up with high pace

WHERE ARE LACUNAE ?
 Fragmented land holding
 Very poor backward and forward linkages
 Poor infrastructure
 Lack of post harvest Technology
 Poor logistics
 Supply Chain Management missing
hyy

SUPPLY CHAIN MANAGEMENT
 End use based production
 Contract cultivation
 Captive cultivation
 Cluster approach in cultivation
 Supply just in time-production logistics
 Quality production
 Post harvest technology application
 Scientific storage
hyy

END USE BASED PRODUCTION
 Local market for table purpose
 Long distance market within country
 As raw material for processing and for definite product manufacture
 Produce what market / consumer wants
hyy

COMPETITIVENESS
Key issues in supply chain……….
Global and local competitiveness
Quality competitiveness
 Cost competitiveness
hyy

QUALITY COMPETITIVENESS
 Variety
 Controlling quality during growth
 Harvesting and Maturity standards
 Post harvest handling
 Post harvest treatments
 Packaging and storage
 Safety and Hygiene
 Traceability
hyy

QUALITY PRODUCTION
 Variety
 Season
 Horticultural practices
 Integrated water, nutrient, pest and disease, weed management
 Training/Prunning
 Growth regulators
 Organic cultivation
 Harvesting methods/maturity standards
hyy

COST COMPETITIVENESS
 Cost of production
 Productivity
 By-product and waste utilization
 Off season production
 Marketing logistics
 Value addition
 Presentation in market
hyy

SUPPLY JUST IN TIME – LOGISTICS
 Determine what buyer wants?- Variety, Quality, Stage of maturity
 Determine when he wants?- Frequency
 Determine how much he wants?- Quantity, Lot size, Duration
 Determine how he wants?- Grading, Packaging, Transport mechanisms
 Determine where he wants?- at farm, Port
hyy

SERVICE PROVIDERS
 Aggregators
 Logistic support
 Cold chain
 Warehousing
 Port handling
 Credit facilitators
 IT related services
hyy

In conclusion, let us remember the quote from our eminent agricultural scientist, Dr M S
Swaminathan, “India should ensure that all boxes in the WTO must be abolished, and trade
distortion, and unfair practices must be spelt out clearly and factors governing sustainable livelihood
should be recognised so that resource-poor, developing countries should be able to place
restrictions on imports.”

THANK
YOU
KIREETI.K (F-2011-02-M)

IMPACT OF WTO ON HORTICULTURAL SECTOR OF INDIA

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