Non-tariff barriers blocks Indo-Sino pharma trade

New Delhi, Jan 28: In order to meet the trade expectations of 30-billion-dollar export by 2009 in pharma sector, industry chamber Ficci has called for urgent steps to streamline non-tariff barriers like procedural, legal and cultural barriers that hinder market access in China.

The chamber has also asked for an efficient and effective use of technology for electronic data interface in customs administration and information exchange.

A bilateral pre-shipment inspection agreement would also benefit both countries, it added.

It suggested that recognition agreements on standards should be arrived at and full details of standards should be made easily available.

It has recommended that the various non-tariff barriers be identified and addressed and both the countries should act to remove them in a time bound framework.

Easier trade financing and greater cooperation between the EXIM banks of the two countries would also work to the benefit trade between the two countries.

Indian exports of drug, pharmaceuticals and fine chemicals to markets such as the US, Europe, Africa and South America have grown by 19 per cent year-on-year in the last three years while the world average growth rate for this sector is about six per cent.

In contrast, in the last three years India's pharma exports to China have grown at just three per cent.

From 94 million dollar in 2002-03, Chinese imports from India have grown to 106 million dollar in 2003-04 to 109 million dollar in 2004-05. This accounts for barely two-three per cent of Indian exports of drugs and pharmaceuticals to the world.

This indicates that the high-performing Indian pharma sector has not found the environment conducive for achieving similar growth with China.

The non-tariff barriers identified by Ficci in pulling pharma exports to China include procedures for product and company registration and procuring Import Drug License, which are expensive and time consuming.

Over and above the official cost of 7,000 dollars per product, they cost anywhere between 20,000 dollars to 40,000 dollars per product. Besides, it may take 18 months to three years to procure an Import Drug Licence. These licences and registration are essential for beginning to export or ship goods even to factories owned by the companies that are situated in China.

This is a considerable deterrent for Indian entrepreneurs to initiate exports to China.

Long customs procedures, re-inspections and discriminatory packaging and labelling regulations that even specify the colour used for packaging, result in delays and higher costs and most of all consume energy and patience.

The banking procedures for foreign players, particularly for remittance of foreign exchange, are tough and tedious. Even the sight payments are remitted after a minimum of 30-45 days due to the foreign exchange declaration system of Chinese banks.

Once in the Chinese market, the drug distribution is mostly through hospitals. In practice, locally produced drugs are preferred and this manifests in the form of red tape for Indian pharma products, the chamber said.

Intellectual Property Rights acts as another restrictive non-tariff trade barrier.

China surpassed the US as the world's most litigious country for IP disputes in 2005, with 13,424 cases filed with Chinese courts compared to 10,905 cases filed in the US during the same period.

International companies were involved in only 268 of the IP cases filed in China last year, which represents an increase of 76 per cent over the number in 2004.

This overly cautious approach in seeking IP enforcement by international companies in China is partly due to their unfamiliarity with Chinese civil litigation.

Lack of transparency in information about local markets and trade statistics add to the low awareness of foreign businesses in China.

This lack of transparency clouds insight into the Chinese market and hampers marketing strategies of Indian pharma companies in China.

In all of the above, language is a major barrier to trade. There are very few Chinese-speaking people in India that can be resourced as interpreters. Although the number of Chinese who are learning English is growing, communication remains a major impediment to trade.

While China has consistently complained about anti-dumping cases in India, India has responded by delivering on its words and this is no longer a bone of contention between the two nations. It is for the Chinese now to set the ground rules right and ensure that all non-tariff barriers are removed.

At the same time, China needs to ensure that the quality standards are maintained in pharmaceutical products.

India has the largest number of USFDA approved plants outside the US. There more than 75 plants which are also WHO GMP (Good Manufacturing Practices) certified and could easily cater to the demand for high quality pharma products, noted the chamber.

UNI