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CENTRE FOR POLICY DIALOGUE (CPD)

a c i v i l s o c i e t y t h i n k - t a n k B A N G L A D E S H

Impact of Market Access Barrieres and Subsidies: Impact of Market Access Barrieres and Subsidies: The Case of Shrimp in BangladeshThe Case of Shrimp in Bangladesh

Presented at the Hong Kong Trade and Presented at the Hong Kong Trade and

Development SymposiumDevelopment SymposiumSession onSession on Fisheries and Trade – Exploring Opportunities for Advancing Sustainable Fisheries and Trade – Exploring Opportunities for Advancing Sustainable

DevelopmentDevelopmentHong Kong: 15 December 2005Hong Kong: 15 December 2005

by

Dr Fahmida KhatunSenior Research Fellow, CPD

E-mail: fahmida@cpd-bangladesh.org

House No 40/C, Road No 11 (new), Dhanmondi R/A, Dhaka-1209Tel: (880 2) 8124770; 8130951; E-mail: cpd@bdonline.com

Website: www.cpd-bangladesh.org

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1.1 Objective

This presentation seeks to discuss:

Trend of shrimp exports and major markets of shrimp

The issue of market access, in the context of emerging

trade barriers

The impact of market access barriers and subsidies on

shrimp sector in Bangladesh

Challenges and opportunities of shrimp culture

Recommendations

I. IntroductionI. Introduction

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1.2 Trade in Shrimp products

Global shrimp production is dominated by less developed countries

Trade flows from less developed to developed countries

Largest exporters of farmed shrimp are Thailand, Ecuador, Indonesia, India, Mexico, Bangladesh and Vietnam

EU is the major export market for shrimp, amounting to

52.1% of the total market. Exports to USA and Japan are

38.6% and 4.5% respectively

I. IntroductionI. Introduction

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1.3 Importance of the Shrimp Sector in Export Basket of Bangladesh

* Exports of shrimp account for about 5% of total exports from

Bangladesh. Shrimp constitutes of more than 70% of the export of

primary products from Bangladesh. In 2004 the exports brought in US$

362.87 mln

* Shrimp production by aquaculture is a 100% export oriented industry in

Bangladesh. Production takes place in an area covering about 1410,000

ha. There are 128 shrimp processing factories

* Directly or indirectly about 22 million people are engaged in upstream

and downstream activities related to the country's shrimp production

and export

I. Introduction I. Introduction (Contd.)(Contd.)

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II. Emerging Trade IssuesII. Emerging Trade Issues

Sanitary and Phytosanitary Measures (SPS) and Technical Barriers to Trade (TBT)

Anti-dumping

Subsidies and Countervailing Measures (SCM)

Social and Environmental Standards

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On the face of it, SPS and TBT provide WTO members on opportunity to safeguard their interests in crucial areas such as health and hygiene

However, there is a growing apprehension that certain provisions of the SPS agreement can act as protection instruments

It is apprehended that if special safeguard clauses are not exercised, access of LDC products to developed country markets may be seriously constrained. Export potentials including that of fisheries can be undermined.

Anti-dumping cases are also concerns for developing countries. It has been a companion of salmon trade since 1989. Particularly for exports to the US: Chilean and Norwegian Salmon, Vietnamese catfish faced dumping complaints

Subsidies to the fisheries sector have been identified to be the cause of revenue loss, over capacity, over fishing and stock depletion. ‘Friends of Fish’ estimated $14-$20 billion annually as the subsidy which is 20-25 percent of revenue from the sector.

Social and environmental standards added new dimensions in the analysis of sustainable fisheries and international trade. Apprehended to be trade restrictive.

III. The Issue of Market AccessIII. The Issue of Market Access

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SPS Measures - EU Ban on Shrimp Exports from Bangladesh in SPS Measures - EU Ban on Shrimp Exports from Bangladesh in

19971997

A. On Stakeholders

(1) PRODUCERS/FARMERS – low price, loss of income

(2) TRANSPORTERS – new investment, financial loss

(3) PROCESSING FIRMS – big investment

(4) PROCESSING WORKERS – loss of employment,

diversification of employment

(5) WOMEN PROCESSING WORKERS - unemployment, loss of income,

changed power balance in the family, dislocation of family, increased

expenditure, social vulnerability

IV. Impact of Trade MeasuresIV. Impact of Trade Measures

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B. On Export Earnings The provision of the Agreement on SPS measures worked against Bangladesh—the provision states, “countries are allowed to maintain higher standards than international relevant standards”.

The EU maintains higher standards than the USA and Japan who did not ban the export of shrimp

Ban put the country’s shrimp export industry under severe strain and led to serious market disruption during which export of shrimp to the EU from Bangladesh was zero. This led to a loss of about $ 65 mln in foregone exports (Cato and Santos, 2000)

Shrimp export to the USA and Japan increased to cover up for the loss of export to the EU, but still Bangladesh suffered a loss

about $14.7 mln

IV. Impact of Trade Measures IV. Impact of Trade Measures (Contd.)(Contd.)

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V.1 Types of Incentives Fisheries sector receives general incentives

given to the export sector in general Special support includes a value added tax

(VAT) refund on fuel at the rate of 15 percent per litre, subsequent to the export of fish

V.2 Study of Marine Fisheries General incentive package has no detrimental

effect on fishing practice Scope for applying more efforts Implies that in the absence of market distorting

subsidies the country may increase its foreign earnings from exports and still maintain a sustainable stock

V. Impact of SubsidiesV. Impact of Subsidies

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Challenges: Domestic

Environmental Degradation: Negative environmental impacts:

Salinisation of the soil

Decline in soil fertility

Reduction in agricultural production due to reduction in agricultural land and soil fertility

Decrease in cattle production as a result of decline in grazing land

Health hazards from water pollution

Destruction of ecosystem (e.g. mangrove forest in Bangladesh due to shrimp aquaculture)

VI. Challenges and OpportunitiesVI. Challenges and Opportunities

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VI. Challenges and Opportunities VI. Challenges and Opportunities (Contd.)(Contd.)

Challenges: International

“MARKET ACCESS”

Removal of trade barriers

Better understanding of WTO obligations

Technical Assistance and Capacity Building

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VI. Challenges and Opportunities VI. Challenges and Opportunities (Contd.)(Contd.)

Opportunities The demand for fishing products is growing

Increase in production efficiency is required for large-scale

industrial farms as it is not fully exploited

Technological improvement will increase the supply of shrimp.

Removal of market access barriers and higher demand will

increase the production of shrimp aquaculture

Shrimp culture is expected to continue to play an important

role in ensuring food security and poverty alleviation,

particularly for the rural poor. The urban population will

benefit from the improvement in processing, value adding,

marketing and the fish industry as a whole

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• Assessment of the Sector to Determine the Needs

• Monitoring of Shrimp Farms and Close Supervision of Quality Control

• Access to Information on technological improvement and change in global policies

• Market Diversification to Avoid Sudden Shocks

• Financial Support to Small Farmers

• Infrastructural Development for Better Processing, Handling and Storing Facilities

• Ensuring Security and Reducing Tensions

• Capacity Building in Trade Issues

VII. RecommendationsVII. Recommendations

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© CENTRE FOR POLICY DIALOGUE (CPD), 2004 © CENTRE FOR POLICY DIALOGUE (CPD), 2004

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