Russian Ban on Pak Agro-Products 2013

(Destruction of Potential Market)

Tabassum Naveed MSc-IR 3rd
April-2014

Introduction Pakistan has rich agriculture potential which constitutes the largest sector of countys economy. It accounts for 21 % of GDP and is a primary source of raw material to downstream industry and therefore contributes substantially to Pakistans exports besides absorbing more than 40 % of employment. The exports of agriculture products all around the world fetches over 625 million US dollars of foreign exchange which comes to 21% of total foreign exchange earnings coming through exports. Pak-Russian Trade Relation History Pakistan's formal trade with Russia dates back to early 90s. Traditionally Pakistan's trade was west centric and Russia also had inbound trade within Common wealth of independent states. The demise of former Soviet Union brought a shift in Russian external outlook after which its trade expanded to outside world. Pakistani exporters also capitalized the opening and established their foothold. With the expanding economy, its capacity base is on rise. Pakistan and Russia had some minor trade disputes in the past including; i) Reluctance on part of Russia to sign FTA(Free Trade Agreement)/PTA(Preferential Trade Agreement) as Russia earlier committed to sign PTA as proposed by Government of Pakistan after signing WTO but later it declined on the pretext that it has already entered into Customs Union with Kazakhstan and Belarus, Pakistan and Russian sides have long persisting overlapping claims against each other and in the same very context , National Bank of Pakistan on the instructions of government of Pakistan had to freeze 14 million US dollars account owed to Russian state corporations

ii)

As evident from the below Table exports to Russia not only include conventional items but market is opening up for finished products like sports, cutlery and leather products which is an encouraging sign.

Exports Flow to Russia

200
183.57 180 160

US $ in Millions

189.614

140
120 100 83.4 80 60 40 20 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 98.626 119.2 105.757

52.419

Regardless of the volume, the encouraging aspect is the fact that exports to Russia is on the positive trajectory. As evident from the above table, the exports in the last 5 years grew 100 percent which is quite a rare phenomenon and speaks of the potential of Russian market.

Ban History 1. In year 2007, Russian government imposed first ban on Pakistans agro products on account of Quarantine (it is a regime preventing intrusion of diseases from other countries) issues which was lifted in following year. In Nov 2007, a MUTUAL COOPERATION PROCEDURE AGREEMENT was signed with Russia and Government of Pakistan assured to make full compliance up to the Russian and international standards. 2. Russia's Federal Service for Veterinary and Phytosanitary Surveillance (FSVPS) has placed ban on import of Pakistani agriculture products from October 1, 2013 for discovering bacterial contaminated potatoes and quarantine objects in rice. Phytosanitary (is a normative act undertaken to prevent introduction/spread of pests and diseases.) 3. Russian authorities have attributed this ban on account of systematic violations of international and Russian Phytosanitary and quarantine requirements. 4. Instead restricting the ban to contaminated items, Russian Government went ahead and implied it on all agro exports from Pakistan.

In Feb 2012, Russian Authorities hinted at imposing restrictive measures against import of quarantine products including Orange, rice, mangoes and potatoes and called upon quarantine controlling body to take cognizance. FSVPS placed a notice on its website about imposing ban on Pakistani products but same couldnt invite attention of government authorities and remains unnoticed. A letter by RSVPS, Russia written on 14th Feb, 2012 expressing anxiety over presence of nematode in potatoes and likely quarantine objects in citrus products and referred to the pending replies on part of Ministry of Food Security Pakistan since year 2008.The replies were pending for the last 4 years in which only basic details were solicited by Russian authorities. The banning orders which says; Introducing temporary restrictions on imports from Pakistan on the territory of Russian Federation of regulated products of highly phytosnitary risk, according to the list of regulated products subject to quarantine control at Custom border of Customs Union and Customs territory Union approved by Commission of Customs Union on 18th June, 2012. From here the problem starts In one of the recent studies conducted by trade wing of Ministry of Commerce, Russian market is perceived to have a huge potential for Pakistani exports particularly fruits and vegetables. Pakistani kinos are on high demand in Russia and being used for making juices as mix content with Vodka drinks. The ban is likely to have instant adverse implications on upcoming Kino and potato season which assumes a substantive proportion of exports to Russia. The season starts in December/ January and thus the ban will have immediate loss of approx. 55 million for Kino and 24 million USD for potatoes which tunes up to 80 million USD instant impact. In the last few years, efforts have been undertaken to introduce Pakistani meat and processed food items which are likely to be matured soon. In the wake of current distrust, it is quite likely that Pakistan may not able to enter into this field and the UNTAPPED REMAINS UNTAPPED. Since the ban implies on all agro items, overall it will deprive off Pakistan from 160-170 million US dollars foreign exchange. When we would not like to let go a single dollar, this quantum of losing foreign exchange will be a serious setback for the ailing economy of the country. Competitors in Russian Market Pakistans main competitors in the Russian market for Kino and potatoes are Egypt, Morocco, Spain, Israel, Holland and France. They will definitely grab Pakistans market share due to the void created on account of ban. Russia, Kazakhstan and Belarus are signatories to Customs Union. On occasions, the consignment destined to Russia, reaches at Belarus from where it is transported to Russia by road while a portion of it, is consumed in local market as well. It is quite likely that Belarus and Kazakhstan may also follow the suit and Government end up in loosing additional 12 million US dollars per annum. Consequences Since the ban attributes to health reasons, it has a social dimension as well. It may shatter the confidence of consumers in those markets. Once an agro-product is labeled for being contaminated, the consumers may not like to prefer it if alternative option is available.

Apart from international trade perspective, the ban has serious domestic implications. Thousands of people employed in agro-sector and export industry would lose their jobs which would increase the poverty and ultimately lead to rise of crimes. Closure of international market means more supply in local market and hence price would drop significantly due to which farmers will suffer. It can be safely deduced that had the Ministries of National Food Security and Commerce had at least responded in time, we could have been able to avoid horizontal application of ban on all the agro products. Even in follow up of ban imposed, the draft MOU was signed and the Minister for National Food Security (Pakistan) held a meeting with Russian Ambassador on November 2013 and discusses the prospects of lifting of ban. He has categorically conveyed that Pakistan has to ensure strict compliance to quarantine and phytosanitary regime. The meeting didnt bring any positive result. Failure of Govt Authorities Issuance of Phytosanitary Certificates without due processing has raised a question mark on our governance framework - leading to embarrassment at international level. Inaction on part of government against the complaints added insult to the injury. In a bid to save skins of individuals, credibility of national organization has been put on stake. The recent incident has vehemently exposed lack of inter-ministerial coordination framework. After 18th amendment, Ministry of Food & Agriculture was devolved but clarity of mandate and terms of Reference has become a serious barrier in routine working. Apathy on part of Ministries concerned shows that probably gravity of situation has not been realized at all. Ministry of Commerce in the case under consideration, miserably failed to play any worthwhile role instead it confined itself to an isolation and left the matter into the hands of Ministry of National Food and Security. Its role was in total contrivance to one of the cardinals of its marketing mandate i.e. collection of better commercial intelligence. In the case under consideration, the INTELLIGENCE KNOCKED AT THEIR DOOR BUT MINISTRY KEPT ITS EYES SHUT Phytosanitary and Quarantine issues have assumed prime significance in international trade spectrum. Unfortunately, In Pakistan no tangible efforts are seen on ground despite prospects of capitalizing foreign funding. A Lab has been established at Karachi but failed to implement second phase i.e. hiring human resource. Russian Trade attitude Russian authorities are quite strict on quarantine and quality control standards. 1) Case Study of Indian Ban & Response Russia imposed a similar kind of ban on India in 2012 due to presence of pest on rice and oil seeds and Indian government reacted very fast and sent two member delegation to Russia on 9th day of receiving complaints and managed to resolve it in 4 months time. They also invited Russian delegation to India and arranged inspection to the cultivation sites and assured full compliance. Likewise they didnt let the ban to be imposed on any other item which had no symptoms of contamination. 2) Case Study of Netherland Ban & Response RSVPS issued a warning to Netherlands on presence of quarantine objects on food items which was immediately addressed by up gradation of their quality standards in line with Russian standards. Netherlands Ambassador took keen interest in the matter and managed it in 45 days.

Recommendations Post of Trade Co-coordinator for Russia should not be vacant for what so ever reasons. He is considered as THE MAN who acts as interface between the two governments on trade matters. 1. Engagement process of Russian Authorities using diplomatic channels be done forthwith. Russian delegation may be invited for discussion on their concerns, offering inspection of cultivation sites, processing units, export centers etc. Ministries of Foreign Affairs, Commerce have to integrate and coordinate for evolving a well thought out strategy. 2. Russian authorities should be convinced to allow exports of those products against which there are no issues of quarantine. Additional safeguards be invoked after consultation with Russian authorities i.e. after testing from any laboratory on which they have more faith. 3. Minstry of National food security should conduct an inquiry into the issuance of certificates without due process and culprits be penalized. The same may be shared with Russian authorities to win their trust. 4. The situation demands that its capacity building on scientific/electronic lines be made and Unified integrated system called Webocc be installed which would not only weed out chances of fake certification but would also establish an efficient networking mechanism within trading partners. The funding of WTO and World Bank need to be capitalized as they are quite open to it. 5. There is a need to mobilize Russian importers for seeking immediate concession for export of other agro items less rice and potatoes. It is the responsibility of our Embassy in Russia to reach out to local importers and sensitized them on the issue. 6. Pakistan Russia Business council should be established for establishing linkages between the stake holders of both the countries. Such like associations play an active role in dispute settlement processes.

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