CMYK

and to maintain prices at an equitable level. The Annex of the
Agreement established minimum export prices for defined pilot
products to be monitored by a Committee taking into account the
relevant market factors.
In the new order of things under the WTO regime, market forces
are to decide prices. Supplier determined policies under the WTO
is not in keeping with the free trade principle. The same principle
has been extended to Bovine Meat Agreement which too has lapsed.
Equivalence Concept in SPS
WTO Members have agreed on operationalizing a provision under
SPS Agreement that recognizes the equivalence of different food
safety and animal and plant health measures. This decision was
The equivalence provision further exhorts WTO members to enter
MANAGE Series On :
into negotiations to forge bilateral or multilateral pacts on
recognition of equivalence of specified sanitary or phytosanitary
5
measures. The SPS Committee discussed equivalence provision
under an instruction from the WTO General Council in October
2000.
WTO and AGRICULTURE October
2001
Focus : Milk and Milk Products
The WTO SPS Committee deals with food safety and animal and
plant health, but does not set international standards. These are
handled by Codex Alimentarius, Office International des Epizooties A Publication of MANAGE in association with Academy of Business Studies
(OIE) or World Organization for Animal health, and the
International Plant Protection Convention.

Highlight of SPS Committee Decision on

approved by the WTO Committee on SPS measures on 24 October Equivalence
India along with other developing countries has been pushing for
implementation of equivalence provision. Once the concept comes ● Equivalence can be accepted for a specific measure or
in exports from countries like India will boon as developed countries measures related to a certain product or categories of
products, or on a system-wide basis. Members have to
must accept Indian standards developed equivalent either through
multilateral bodies or bilateral negotiations. accept the equivalence of a measure related to a certain
product or category of products on request;
Principle of equivalence contained in Article 4 of the SPS Agreement
calls upon WTO members to accept the sanitary and phytosanitary ● The importing member is expected to explain the objective
measures of other members, even if they differ from their own or and rationale of the sanitary or phytosanitary measure
from those used by other members trading in the same product. and identify clearly the risks that the relevant measure is
The exporting member should objectively demonstrate to the intended to address. The importing Member is also
importing member that its measures achieve the importing supposed to indicate the appropriate level of protection
member’s appropriate level of sanitary or phytosanitary protection. which its sanitary and phytosanitary measure is designed
to achieve;
● An importing member has to respond in a timely manner,
normally within a six month period, to any request from
WTO and AGRICULTURE is published by on exporting member for consideration of the equivalence
Director General, of its measures;
National Institute of Agricultural ● The exporting member has to provide reasonable access
Extension Management (MANAGE) to the importing members for inspection, testing and other
(An Organization of Ministry of relevant procedures for the recognition of equivalence;
Agriculture, Govt. of India)
● The importing member has to accelerate its procedure for
Rajendranagar, Hyderabad - 500030. determining equivalence in respect of those products which
Andhra Pradesh, India. it has historically imported from the exporting member;
Tel: +90 (040) 4016702 to 706 ● The consideration by an importing member of a request
Fax: +90 (040) 4015388 by an exporting member for recognition of the equivalence
E-mail: dgmanage@hd1.vsnl.net.in
of its measures with regard to a specific product can not
be in itself a reason to disrupt or suspend on-going imports
Website: www.manage.gov.in
from that member of the product in question.
Editor-in-chief:
● A member has to give full consideration to requests by
Shri. A.K.Goel, I.A.S.
another member for appropriate technical assistance to
Editor: facilitate implementation of equivalence provision;
Dr. K.H.Vedini
● Members are required to actively participate in the ongoing
Press Assitant: work in the Codex Alimentarius Commission on the issue
Shri T.Nagaraju of equivalence;
Content Collection & Research: Codex Alimentations to expedite its work on development of
Academy of Business Studies, guidance on the judgment of equivalence. The Office International
des Epizooties and the Interim Commission on Phytosanitary
New Delhi - 110002.
Measures to elaborate guidelines on equivalence of sanitary and
Vamsi Art Printers Pvt. Ltd. Hyd - 4. Phytosanitary measures and equivalence agreements in the animal
✆ : 3236420, 3242787 health and plant protection areas.
M ilk and other dairy products were freely importable from 1
April 2001 following withdrawal of quantitative restrictions
by government under Indo-US Agreement on Removal of QRS.
Applied import duties on milk and milk products range from 35
per cent to 60 per cent. There is no additional duty except on
condensed milk as these items are not exercisable. However, most
of the items attract special additional duty (SADD ) of 4 per cent.
Applied duty on liquid milk and cream is 35 per cent while bound
duty stands at 100 per cent. In other words, India can go upto the
full bound rate of applied duty and bound duty on skimmed milk
powder (SMP) both are pegged at 60 per cent.
Similarly, applied duty and bound duty on butter are same (35%).
While applied duty on melted butter (ghee) stands at 35 per cent,
ceiling binding is at 40 per cent.
Duty on concentrated milk and cream was earlier bound at zero
level. This was during the time when SMP was sent duty free by
the European Union to deal with over supply and the proverbial
“mountains of milk powder and butter” which had to find consumer
in another country like India. The bound rate has been raised to
60 per cent after consultations with India’s trade partners. However,
India had to give a tariff quota of 10,000 tonnes at a nominal duty
of 15 per cent for the 60 per cent bound rate.
S.No HS Products Applied Bound
Code Duty % Duty %
1 0401 Milk and cream not concentrated
nor containing addedsugar or
other sweetening matter 35 100
0402 Milk and cream, not concentrated
nor containing added sugar or other
sweetening matter
2 0402.10 In powder, granules or other solid
forms, of a fat content, by weight,
not exceeding 1.5% 60 60
3 0402.21 High fat milk powder”
Not containing added sugar or
other sweetening matter 35 60
4 0402.29 Other (Tariff rate quota on low fat
and high fat milk powder, granules
Qty 10,000 tonnes at 15% duty ) 35 40
5 0405 Butter and other fats and oil
derived from milk dairy spreads 35 40
6 04059002 Melted butter (ghee) 35 40
Export
Export of milk and other dairy products is also freely allowed.
Nevertheless, quantitative ceilings are notified by the DGFT for
powder milk, infant milk food, pure milk Ghee and Butter.
Registration cum-allocation certificate issued by APEDA is also
required for export of these milk items. Quantitative ceilings are
imposed on export of dairy products with a view to regulating
prices in the domestic market.
As the largest producer of milk in the world, India is in a position
to export substantial quantities, specially to the South Asian
Countries. There are moves to remove the ceiling on export of milk
products to give a better deal to farmers.
India Slaps Non-tariff Barriers on Milk Products
The Livestock Act was amended by an Ordinance to provide for a
prior import permit system on livestock products. Accordingly, the
import of products like meat will require a prior permit from the
Animal Husbandry Department in the Ministry of Agriculture before
Message from Director General
Agriculture production and
consequent food security of the
nation is determined in farmers’
field. However, farmers’ well being
is ultimately determined at market
place. With the changing scenario,
quantities are giving way to quality.
Local mandies are networking with
national mandies. And WTO would
accelerate the process eventually for
a global network. Shri A.K.Goel, I.A.S.,
WTO and its impact upon Indian Agriculture has been
a subject matter of heated debates, frayed tempers, extreme
views and eventually more confusion. To clarify doubts in this
regard, Honourable Prime Minister convened a meeting at the
highest level in New Delhi on May 21, 2001. It was decided to
undertake Awareness building exercise at state levels.
To have an informed debate, it is important to
disseminate right information first. And that is what is
attempted by MANAGE now. We are publishing bulletins,
covering only one commodity at a time. This issue focusses on
Milk and Milk Products.
I hope that it would be of use to farmers, extension
workers and policy makers.

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CMYK
import. The normal tests by the Health Officer at the airport from
the PFA(Prevention of Food Adulteration) act will be in addition to
the permit condition.
The definition of livestock covers farm animals like cow, buffaloes,
pigs, goats, sheep. Apart from this, pets like dogs and even certain
birds like finches are covered by the term. The definition of product
is wide enough to describe all derivatives. Thus in the dairy case,
starting from milk down to even sweets and other preparations
derived from milk will be covered.
The purpose of the permit system is to keep watch on imports and
ensure that risk assessment and quality control systems are
followed by other countries. The mechanism will also come in
handy to negotiate with the developed countries when quality
standards are imposed on our export products without reason.
There is a similar measure in place for animal products also in the
form of agriculture permit. However, processed agriculture products
are not covered by a permit system as such. Only PFA and packing
regulations apply after actual importation.
Opportunities in World Dairy Trade :
Shifts towards Value-added Products
International dairy trade, accounting for about five per cent of world
milk production, is confined mostly to manufactured products such
as butter, cheese, dry milk powders, and whey. Despite the
elimination of many of the non-tariff barriers affecting international
dairy trade negotiated during the Uruguay Round, standardization
of tariff-rate quotas (TRQ,) export subsidies, and import access
still remain as issues to be addressed under the WTO.
World trade in dairy products up to the 1980s was largely directed
towards sales of basic products. In many cases, surpluses arisen
from high level of support tied to production, were disposed of on
world markets with the help of liberal export subsidies. But the
reduction in butter and skim milk powder surpluses in the early
1990s and the subsequent decline in subsidised exports coupled
with growing world demand, has led to a restructuring of world
trade towards different types of dairy products. Though exports of
basic products such as butter and skim milk powder remain
substantial, trade is now increasingly based on sales of high value-
added products.
Rising Demand for Whole Milk Powder
World demand for skim milk powder is increasingly being replaced
by whole milk powder, which is preferred for the reconstitution of
liquid milk, and by powdered whey which is used in the
manufacture of other dairy products or non-dairy foodstuffs and
particularly animal feeds. The ingredients market in general is a
highly buoyant sector, based on high value-added products whose
extraction ensures a higher return on the original raw material,
milk.
Trade Shifts away from EU
Within growing dairy product markets, there are likely shifts in
world trade shares at the expense of the European Union and in
favour of WTO Agreement on Agriculture and the consequent
limits on dairy subsidies which raise the final price to the consumer.
In the case of cheese, world demand is growing in the household
sector and, above all, in the catering and food processing sectors.
With the implementation of the AoA regarding removal of export
subsidies and substantial progress in the reduction commitments
on domestic subsidies, and the next round of multilateral trade
negotiations already underway, governments are under increasing
pressure to reform their dairy policies.
In the European Union, subsidised exports of all dairy products
are limited by the WTO Agriculture Agreement and these are
especially constraining for cheese and skim milk powder. If the EU
were to lower its support prices for milk, it could reduce the existing
difference between the world and domestic prices of dairy products.
Intervention prices for butter and skim milk powder are being
reduced by 15 per cent in the EU.
The EU dairy prices could fall to world price levels without
subsidised exports, and thus WTO export subsidy constraints
would, in principle, no longer be an issue. However, favourable
market share may not be the necessary outcome as EU exports
also depend upon the exchange rate between Euro and the Dollar.
Subsidies in Canada
In Canada, under the system of special milk classes introduced
after entry into force of the WTO, milk for manufacture into higher
value products is made available at discounted prices. The milk
price varies according to end use. The level is adjusted to allow
processors, exporters and secondary processors to remain
competitive in both the domestic and international markets.
Revenues of milk for manufacturing export is pooled with revenues
of milk for domestic use. The export product is thus cross subsidised
by the higher domestic sales price. However, the cross subsidy
system has been successfully challenged in the WTO by the US
and New Zealand. The dispute settlement body found that the
practice was a disguised form of export subsidy.
In New Zealand, Section 27 of the Dairy Board Act, which
established a link between the domestic and export markets by
pooling revenues from the two markets, has recently been reviewed.
This section was abolished at the beginning of the 1998/99 milk
year because of its possible interpretation as an indirect export
subsidy in that revenue pooling could be deemed to allow cross-
subsidisation of lower revenue from export sales by higher revenue
from domestic sales.
Precautionary Principle – A New NTB
Growing consciousness about health following frequent
outbreaks of BSE, FMD (Foot and Mouth Disease) in recent years
is putting increasing pressure on governments in developed
countries to tighten food safety laws. The SPS Agreement
encourages governments to harmonise domestic regulations
with international standards, the developed countries are
allowed a higher than international level standard provided this
can be justified in scientific terms. A risk analysis is also required
if a country decides to adopt standards different from those in
the internationally accepted Codex Alimentarius. The EU
precautionary principle to justify deviation from Codex is already
on the negotiating table at Doha.
Acceptance of precautionary principle at WTO entails a country
can restrict imports on health grounds even though risks may
not have yet been scientifically proved. This trend towards higher
food quality and safety regulations can emerge as a major source
of non-tariff barriers in future.
State Trading Enterprises and Dairy Monopolies equivalent levels of protection between countries whose domestic
regulations differ from Codex standards, and accordingly heightens
The role and operating procedures of State trading enterprises are
the potential risk of trade restrictions.
also likely to be examined as part of the ongoing trade negotiations
at WTO. The New Zealand Dairy Board (NZDB), as one of the
Total Export Subsidy Reduction Commitments on Milk and
largest State trading agencies in the dairy sector, is expected to
Milk Products, 1995-2000
come under the spotlight because of its export monopoly. If the
single seller export authority powers of the Board were rescinded, (000 MT)
the NZDB will substitute a single private entity for the Board. The
Board is supporting the New Zealand dairy Industry in the Products 1995 1996 1997 1998 1999 2000
establishment of a single exporting company owned jointly by all Butter and butter oil 631 602 573 545 516
dairy co-operatives in the country. A high level of merger activity Skim milk powder 754 720 683 646 612 82
is currently taking place between co-operatives.
Cheese 557 529 500 472 444
New Entrants in WTO Enlarge Market Size Other milk products 1,563 1,471 1,405 1,342 1,245 70
Some 20 to 30 countries are in the queue to join the WTO. Quite a
few of the aspirants are major importers of dairy products,
Subsidies in Budget of Major Dairy Producers in 2000
particularly Russia, Algeria and Saudi Arabia. China is already allowed
entry into WTO. The participation of these countries in the WTO
Country Products Currency Budget 2000
would require them to offer greater, and above all more consistent,
access to their markets. These will help to reduce price fluctuations Australia Butter and Butter oil Mn A$ 14.36
in the world market. This is particularly for butter, where the world Skim Milk Powder 23.78
price is heavily influenced by the level of imports by Russia.
Cheese 21.74
Food Safety Standards Other Milk products 27.99
Livestock products are associated with health risks (BSE crisis, as Canada Butter 000 USD 11,025
well as increasing instances of food poisoning outbreaks caused Skim Milk Powder 31,149
by various pathogenic agents), and food safety demands. The Cheese 16,228
Developed Country Governments under the banner of OECD are
Other Milk 22,505
under increasing pressure to introduce higher food safety standards
at both the national and international level and to enforce existing EU Butter and butter oil mn ECU 947.8
regulations more strictly. Furthermore, with higher income levels Skim milk powder 275.8
and better access to information, consumers have the capacity to Cheese 341.7
bear some of the additional costs of more stringent regulations. Other milk products 697.7
Product quality and safety regulations are essential both to reduce
health risks and to instil confidence in economic agents and allow 1 A$ = Rs. 24
markets to function properly. However, such regulations, in cases
1 USD = Rs. 48
where they are considered to be indispensable, can modify
production costs and have an impact on the competitiveness of 1 ECU = Rs. 43
producing countries. The fears of consumers regarding the safety 1mn = 10 lakh
of food products can encourage governments to use regulations
Source: WTO backgrounder on agriculture export subsidies (G/AG/
as a technical barrier to trade.
NG/S/15/Rev.1, 19 July 2001)
Acceptable Risk Levels
International Dairy Agreement Terminated,
The SPS Agreement encourages governments to harmonise Apparent Price Regulation Out
domestic regulations with international standards. If a country
introduces health safeguards at a level higher than that provided The International Dairy Agreement (IDA) negotiated as a plurilateral
for under international standards, such measures must be justified agreement to stabilise dairy prices in world market has been
in scientific terms. A risk analysis is also required if a country terminated. IDA on 1 January 1995 replaced International Dairy
decides to adopt standards differing from those of the Codex Arrangement which was operating since 1980. At its meeting on
Alimentarius, although the concept of acceptable risks mentioned 30 September 1997, the International Dairy Council decided to
in the Agreement is not clearly defined. Moreover, the Agreement terminate the International Dairy Agreement as of 1 January 1998.
takes no account of economic, social or cultural arguments, and At the time of its termination, the following were parties to the
the thresholds of what are considered to be acceptable health risks
IDA: Argentina, Bulgaria, Chad, the European Communities (15),
differ from one country to another. For example, consumers in Japan, New Zealand, Norway, Romania, Switzerland and Uruguay.
some countries are prepared to accept the risks associated with
eating cheese made from unpasteurised milk, those in other The primary objectives of the IDA were to advance the expansion
countries are not prepared to accept any level of risk even if that and liberalisation of world trade in dairy products under stable
risk is small. The second group of countries would therefore seek market conditions on the basis of mutual benefit to exporting and
regulations requiring the elimination of any risk, whereas the first importing countries. In adopting these objectives, the economic
group would want the risk to be controlled. This leads to problems importance of milk and dairy products to many countries were
in establishing international standards and in the recognition of recognised, as well as the need to avoid surpluses and shortages