Sweet, but fishy

India has signed a special deal with the US, effectively exchanging mangoes for Harley-Davidsons. Whether mangoes for mobikes is a sensible quid pro quo is a matter of some debate. What is not is that the agreement underlines India8217;s potential interest in agro exports, interpreted not as foodgrains, but horticulture and floriculture. Too often India8217;s negotiating interests are perceived as defensive, designed to prevent import surges. The primary reason for India failing to capitalise on export markets is not protectionism in developed countries. That does exist, and if and when tariffs are reduced. But there are also non-trade barriers like sanitary and phytosanitary SPS measures. Protecting human life and even the environment through standards is fine. But questions should be raised when the perceived threat has low statistical probability, when policy discriminates between domestic and foreign suppliers such as through distribution networks, when standards used are higher than international benchmarks and when, in general, developing countries have little voice in global standard-setting bodies.

Having said this, there are serious systemic problems within India. For something like fish products not covered by WTOs agriculture agreement, domestic standards are non-existent. Such standards that exist domestically are never enforced and prosecution and conviction rates are low. It is impossible to comply with quality-conscious export markets when domestic markets have no quality. Earlier, the story was no different in manufacturing. That apart, compliance with higher standards requires significant fixed costs, impossible for small exporters to bear. Spread over both domestic and export markets, which is possible if domestic standards improve, unit costs of such investments are easier to bear.

The moral that emerges is of greater corporate sector involvement in food processing, since exports can8217;t only be fresh fruits and vegetables targetted at the Middle East. Food processing also requires FDI, since the global market is characterised by product differentiation and branding. Finally, there is the issue of reducing wastage, 30 per cent of fruits and vegetables produced rot because of lack of cold storage and food processing facilities. Countries like Brazil and Thailand have shown what is possible. India shouldn8217;t stop at mangoes.