WTO Agreements on SPS & TBT: Implications for Food Quality Issues

Trade liberalization, hoped to be achieved through WTO Agreement on Agriculture (AoA) is expected to lead to export promotion and import substitution opportunities for Indian food sector. However, these opportunities cannot be exploited unless serious attention is paid to two important WTO agreements - Agreement on Sanitary and Phytosanitary Measures (SPS) and Agreement on Technical Barriers to Trade (TBT). Due to the experience and credence nature of food products, trading partners impose import restrictions based on food safety and quality concerns. These concerns are legitimised by SPS and TBT agreements. Hence, to obtain maximum possible benefit from these agreements, India will have to improve its safety and quality norms to match the Codex standards and participate effectively in Codex standard setting meetings. Moreover, it must ask for substantial amendments to some of the articles of these agreements which seem discriminatory in nature. Finally, India will have to strengthen import monitoring mechanisms so that domestic food and phytosanitary laws are effectively applied to imported food items.

In a Freer WTO Trade Regime, Food Industry Must Focus on Quality Management

In the new WTO led freer trade environment, Indian food industry can compete globally only if it is price and quality competitive. While many have addressed price competitiveness, sensitising food industry on the importance of quality competitiveness has become essential. Mainstream management research has studied quality management in manufacturing sector extensively. However, there is scant attention paid to quality management in food sector. I attempt to relate various dimensions of quality and quality management systems in the context of food industry. Although adopting strategic quality management practices needs a basic change in attitude which cannot happen overnight, a tangible beginning can be made in terms of adopting quality assurance system called HACCP.

GATS and Educational Services: Issues for India Response in WTO Negotiations

Under the auspices of WTO, negotiations on liberalization of trade in services are expected to begin soon. One agenda at the negotiating table will be trade in educational services. Trade in educational services is too important an issue for India, and, a thorough homework needs to be done before we make any commitments at the negotiating table. In this context, the paper analyses the intricacies of the General Agreement on Trade in Services (GATS) as applicable to educational sector. The need for trade, and the likely competitiveness of India educational services is also discussed. Finally, suggestions for trade negotiations and domestic reforms are presented.

WTO Agreements and Indian Agriculture: Retrospection and Prospects

By the end of 1999 World Trade Organization (WTO) will complete its five years of existence. At that time, re-negotiation on Agreement on Agriculture (AOA) will also begin. It is time to take a retrospective look at what were the expected gains for India, how was the AOA implemented, and ponder over India’s prospects in the up-coming re-negotiations. While the predictions of various macro-models about the gains to Indian agriculture and farmer were not unequivocal, their implicit assumption of perfectly competitive export markets is also questionable. Under imperfectly competitive export market structure, improvement in the terms-of-trade for Indian agriculture may be very limited. Whatever little improvement in terms-of-trade may occur, it may not have a favourable effect as agricultural supply response to changes in terms-of-trade is quite ambiguous. Moreover, the ex-post gains accruing to Indian agriculture so far seem to be very little since developed countries have used various escape routes in the WTO agreements to minimise their reform commitments. India will have to concentrate on non-price factors to improve welfare in the agricultural sector. The prospects of getting additional gains in the up-coming re-negotiations hinge on how India can take maximum advantage of the existing clauses of the AOA, and, to what extent it is successful in amending some of the clauses to its advantage.

Degree of Instant Competition: Estimation of Market Power in India Instant Coffee Market

The new competition policy of the Government of India seeks to promote competition to protect consumer interests and increase market efficiency. In fact, the degree of price transmission between farmers and final consumers also depends on the degree of competition in the processing sector. Moreover, policy of trade liberalization too is expected to have impact on domestic markets. It becomes imperative, therefore, that one knows the degree of competition in various domestic industries. Instant coffee market in India is a duopoly of Nestl� and Hindustan Lever for decades. They also differentiate their products through branding. At the same time, however, incumbents might have perceived potential competition from another firm, Tata Coffee. In fact, instant coffee can be considered as a part of a larger beverage market with numerous competing products. With trade liberalization, imports have also started trickling in. Thus, circumstantial evidence regarding degree of competition or the market power in the instant coffee market is rather mixed one. By econometrically estimating the perceived first-order supply relation and the demand function, we calculate the market power parameter. Results indicate that the market is not characterized by collusive behaviour. It is quite close to perfectly competitive behaviour although we cannot reject the Cournot-Nash behaviour as well. The econometric study may be complemented by in-depth case study on coffee procurement, processing, and pricing by leading producers. Similar estimations of market power and case studies may be undertaken for other industries as well.

Quality Attributes and Hedonic Price Analysis of Ghee

In the post-WTO scenario processed food industry is witnessing intra-industry trade, i.e., trade in similar products. It also means that there will be intense competition between foreign and Indian companies in the domestic market. This competition will compel companies to focus their attention on product differentiation and branding. This is possible if companies prepare themselves to be quality competitive. In order to be quality competitive, firms have to understand consumers perception and valuation of various quality attributes. Hedonic price analysis, a methodology used for this purpose, is extensively used for processed food products in developed countries. However, it has not been applied to Indian food markets. We conduct a hedonic price analysis of a typical Indian processed food product - ghee. Results indicate that consumers are willing to pay a premium for branded over non-branded ghee, and, for corporate brands over cooperative brands. Flavour is an important quality attribute valued by consumers. While texture is not that important, an agreement needs to be developed on whether or not there is an ideal colour attribute for ghee. The results imply that branding generates reputation, and, cooperatives may want to enhance their brand equity. Firms may do well in improving flavour to enhance ghee quality. Another implication is that large firms and other organizations need to generate data on measurements of food quality attributes so that hedonic price analysis can be effectively used for strategic food quality management.

Dynamic Demand Analysis of India Domestic Coffee Market

Coffee, although an important commodity in India agricultural exports, has faced fluctuating international prices and decreasing unit value realisation, especially in the post-reform period. Hence, domestic market for coffee cannot be neglected altogether. In fact, Coffee Board has proposed a promotional campaign to increase domestic demand for coffee. In this context, it becomes necessary to understand weather the emphasis should be on price incentives or nonprice factors. We estimate coffee demand for the Indian domestic market using the dynamic error-correction methodology (ECM). Results show that while demand for coffee is inelastic in the long-run, it is highly inelastic in the short-run. This suggests that Coffee Board may focus efforts on non-price factors rather than price incentives in their generic coffee promotional campaign.

What’s in a Drink that you calla Chai? Quality Attributes and Hedonic Price Analysis of Tea

India is one of the leading producers and exporters of tea. However, in the last two decades its share in the world exports has gone down considerably. On the other hand, although the domestic market is large, the per capita consumption in India is one of the lowest in the world. Therefore, Indian growers, processors, and traders could focus their attention to cultivate and expand the domestic market as a buffer against the vicissitudes of export performance. As a first step in their competitive strategy, Indian tea industry may want to understand the valuation consumers place on various quality attributes of tea. This can be done by applying hedonic price analysis to the data on prices and the quality attributes of tea. In this paper, we applied the hedonic price analysis to the data on 43 Indian tea brands. Based on performance of regression equations, exponential functional form was selected for the Box-Cox transformation, where price of tea brands was taken as the dependent variable and quality attributes of tea were considered as independent variables. Indian consumers seemed to attach importance to two quality attributes, aroma and colour. No significant value is attached to flavour and strength of tea. Premium is attached to the tea types CTC Leaf, Teabags, and CTC Fanning in that order over the type CTC Dust. Based on these results, stakeholders in the tea industry may want to enhance or reduce some of the quality attributes during the tea blending process. The newly blended teas may be marketed through aggressive generic promotions to increase overall consumption and/or through firm specific advertisements to improve market share.

DEGREE OF COMPETITION IN THE U.S. PEANUT BUTTER INDUSTRY: A DYNAMIC ERROR CORRECTION APPROACH

Reforms in the U.S. peanut program entail a reduction in support price of peanuts. The degree to which price reduction is passed on to final consumers of peanut butter is directly related to the degree of competition in the peanut butter market. To assess the impact of changes in the peanut program on final consumers, it is necessary to know the degree of competition in the peanut butter industry. A dynamic error correction model (ECM) developed by Steen and Salvanes is estimated using nonlinear-three-stage-least-squares procedure to measure the degree of competition. Results indicate that the market is characterized by perfect competition in the short-run. The hypothesis of perfect competition is rejected in the long-run, although the long-run solution is close to a perfectly competitive behavior. This result has important implications for the peanut butter industry. Reductions in the support price of peanut may not be fully passed on to peanut butter consumer, but the consumers' welfare gain will certainly be much higher than what it would have been if the market was collusive in structure.Agribusiness, Industrial Organization,

ESTIMATION OF IMPERFECT COMPETITION IN FOOD MARKETING: A DYNAMIC ANALYSIS OF THE GERMAN BANANA MARKET

Several studies have estimated the welfare effects of recent changes in the European Union's common policy on banana imports, based upon the assumption that the market is perfectly competitive. However, if the market is imperfectly competitive, predictions about changes in banana policy may be inaccurate. The objective of this paper is to estimate the degree of market imperfection in the German market for banana imports using dynamic methods. The hypothesis that this market is perfectly competitive is rejected, and, in addition, the degree of market imperfection is estimated to be higher using a dynamic model compared to previous static estimates.Marketing,