After India’s Big EU Turn, Blockchain Matters Even More For Exporters
As trade with Europe expands, exporters need to be careful about the EU's rigorous quality benchmarks. Blockchain can help credible exporters prove that they have taken steps to meet the EU’s non-negotiable food, health, and environmental standards.
The Gist
India's Recent Trade Deals: Opportunities and Challenges
- The EU deal creates a $24 trillion market for Indian exporters.
- Compliance with strict EU regulatory standards poses challenges for exporters.
- Blockchain technology can enhance credibility and streamline compliance processes for Indian exporters.
In the past two to three weeks, India has secured two important trade deals. First with the European Union in the last week of January, and with the United States earlier this month.
While the details of the deal with the US are still emerging, the one with the EU, which created a combined market of $24 trillion, was termed the “mother of all deals”.
No doubt it’s great news for Indian exporters across sectors as they gain access to Europe’s high-income consumer markets.
Everything looks rosy and promising at first glance, but experts say the journey won’t be easy for all Indian exporters, especially because of the EU’s rigorous regulatory standards.
In a recent article on The Core, Debraj Dasgupta, the Chair of India-Swiss Business Forum, wrote: “The EU's biggest barrier is often not tariffs, but its strict technical barriers to trade and sanitary and phytosanitary measures. Exporters must invest in quality control to meet the EU's non-negotiable health, food safety, and environmental standards.”
Destroyed, Not Returned
It’s not a well-known fact that if the quality of exported goods does not match the EU standards, they are not returned; they are often destroyed.
According to the EU’s Rapid Alert System for Food and Feed, thousands of consignments annually fail to meet EU safety criteria and are rejected at the border.
These rejections can result in destruction, re-dispatch, or other official measures when the goods cannot be brought into compliance.
In October last year, exports of eggs from one Ukrainian producer to the EU were suspended after several batches were found to contain antibiotic residues.
The shipments were stopped and inspected at the Polish and Slovak borders, after which the products were disposed of and did not reach end consumers.
Establishing Credibility
As Dasgupta pointed out, Indian exporters will have to raise the product standards to meet the EU norms and avoid rejection at the checkpoint.
Exporters who attach no importance to quality have little room to manoeuvre. Even those producing high-quality goods must be able to electronically demonstrate compliance with scientific evidence and proper documentation, not just claims.
One easy way to show compliance is to register every step of the production process on a blockchain.
Let’s look at an example of how an exporter can use blockchain to improve their operations and enhance credibility.
You are an exporter of mango pulp, and your client in Brussels insists on third-party certificates, temperature logs, and processing methods.
To prove you are a credible supplier, you have to spend money and time. If the client is not convinced even after all your efforts, the whole deal might go for a toss.
Let’s suppose you already have blockchain integrated into the supply chain system. Now, every step — sourcing of the fruit, plant location and machinery, processing, packing, quality checks, transit temperatures, and customs clearance — is recorded on the blockchain.
As a result, when your client scans a code, he sees the whole journey and pays up without raising any doubts or questions.
The reason the trust is near-absolute is that once data is entered on the blockchain, it cannot be changed or manipulated.
This is already being done in India by several players such as StarAgri and TraceX Technologies, which use blockchain in parts of their agri supply chain to record where produce comes from, how it is stored, and how it moves before reaching buyers.
Final Words
The trade agreements with the European Union and the United States have given Indian exporters a larger market. Europe, in particular, brings large buyers with high spending capacity, but it also brings tighter norms.
Products entering the EU must meet certain rules on safety and hygiene. Otherwise, shipments can be stopped at the border, or worse, destroyed.
When sourcing, processing, storage, and transport details are recorded in one system, buyers as well as regulators can verify them instantly.
Exporters who build such systems early will find it easier to deal with European buyers and regulations. Those who do not will learn their lessons soon enough.
This series is brought to you in partnership with Algorand.
