Second International Workshop on Conformity AssessmentRio de Janeiro, 11-12 December 2006Presented by: Ulrich HOFFMANN, UNCTAD secretariat

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Abstract 2

1. Trends of environmental, health, and food-safety requirements (EHFSRs) along supply chains

2. The interrelationship between mandatory and voluntary EHFSRs

3. Main problems arising from mandatory and voluntary EHFSRs

4. Becoming more pro-active and holistic: Activities of UNCTAD’s Consultative Task Force

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Concerns of Exporting Developing Countries 3

• Emerging environmental, health and food-safety requirements (EHFSRs) may be applied in a discriminatory manner against DgCs.

• DgCs lack the administrative, infrastructural, technical, and managerial capacities to comply with new and more stringent requirements

resulting from a transition from conventional to high-precision production methods.

• Adjustment and compliance costs may undermine the comparative advantage of DgCs.

• Institutional weaknesses and compliance costs may further marginalize weaker economic players, including smaller countries, enterprises and farmers.

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Key Reasons

“Perception” on recent food scares and

scandals

Demographic developments in OECD

countries

Risk and cost minimization management by major

retailers

More sophisticated detection and testing methods

Escalating Food Safety and Quality RequirementsEscalating Food Safety and Quality Requirements

55

Drivers of Private-sector Safety and Quality Drivers of Private-sector Safety and Quality RequirementsRequirements

55

Governments “Name and Shame” policy in some countries.

Retailers legal responsibility (due diligence legislation in some countries) and increasing retailer own labels.

Retailers do not want to compete on the basis of “who’s food is safer”.

Shuffling off certain risk management costs to producers.

Globalisation of retailing and production (i.e. global sourcing) requires rigorous quality assurance system.

New food-safety, health and environmental requirements are being used as value-chain governance tools.

66

Putting Environmental, Health and Food-safety Putting Environmental, Health and Food-safety Requirements into ContextRequirements into Context

66

• Enhanced globalization of investment and trade lead to transnational application of specific EHFSRs.

• Many EHFSRs are an attempt to alter market conditions to encourage sustainable production, trade and consumption patterns.

• With increasing liberalization of tariffs and quotas, EHFSRs have the potential of being turned into versatile non-tariff measures – difficult to distinguish justified from unjustified EHFSRs.

• A tool of companies in the competitive battle with rivals -- gain or temporarily maintain a competitive edge over rivals – certain EHFSRs may require anti-trust/competition law measures.

• EHFSRs are increasingly becoming an integral part of product quality. • DgCs need to exploit full national benefits of meeting EHFSRs in exportmarkets, notably in terms of resource efficiency, pollution intensity, occupational safety and public health -- important are dynamic effects that also reduce adjustment costs.

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Main Trends in EHFS Requirements [1]Main Trends in EHFS Requirements [1]77

More strict More strict (e.g. MRLs)(e.g. MRLs)

More complex More complex (e.g. traceability and auditing requirements)(e.g. traceability and auditing requirements)

More multi-dimensional More multi-dimensional (e.g. see next slide)(e.g. see next slide)

3 Trends: 3 Trends:

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Multidimensionality of RequirementsMultidimensionality of Requirements

Pillars of Environmental, Health and Food Safety Requirements

Food Safety Plant/Animal Health

ProductQuality

Environment Social

MRLsHeavy metal limitsFood additivesHygiene requirementsTraceabilityHACCP

SurveillanceQuarantinePest risk assessmentSanitation

Product compositionProduct cleanlinessGradingLabeling requirementsControl of nutritional claimsISO 9002

Control of water and env contaminationProtection of biodiversityProtection of endangered speciesRecyclingOrganic prod requirements

Labour standardsFair trade standards

9999

0

50

100

150

200

250

Co

ntr

ol P

oin

ts

Holistic view of EUREPGAP Standard:Food Safety, Environment and Social CPs

Recom.

Minor

Major

Multidimensionality of Requirements cont’dMultidimensionality of Requirements cont’d

10101010

Main Trends in EHFS Requirements [2]Main Trends in EHFS Requirements [2]

• Growing importance of private sector standards and codes in the marketplace in general;

• Growing importance of requirements transmitted to producers and exporters in developing countries through the supply chain;

• An enhanced relationship between mandatory and voluntary requirements;

• Greater reliance on traceability and related certification; and

• Greater regulatory responsibility on food and feed controls, including system of registration of crop-protection products for the exporting country.

11

Diverse Standards in National and International MarketsDiverse Standards in National and International Markets

Standardsas

applied

PrivateSector

Competitive Strategies

Local Customs and Consumer

Preferences

Laws and

Regulations

Enforcement Capacity

There is an ongoing process to put in place harmonized requirements and codes, yet the application is occurring at different speed and depth.

Source: Jaffee, S.

• Differential application of requirements/standards is the norm, rather than the exception.

• Weak compliance enforcement by governments, strong by retailers.

TBT and SPS Agreements contain disciplines on the preparation, adoption and application of technical regulations, standards and conformity assessment procedures.

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EHFSRs and the Limits of WTO DisciplinesEHFSRs and the Limits of WTO Disciplines

Four sets of problems:• Many DgCs cannot take advantage of the disciplines because a baseline of institutional capacity does simply not exist. • The procedural aspects of voluntary standards can be as important as for technical

regulations, yet they are de facto outside WTO disciplines (also: non-governmental bodies that set voluntary requirements are not part of WTO debate).

• Notification and transparency requirements need to be further improved - Access to information is difficult- No difference in notification between complex and simple EHFSRs- Format of notification should be changed (even problematic for

industry representatives)• Justification, legitimacy and the role of scientific evidence under TBT / SPS

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Hierarchy of Trade-related SPS Management FunctionsHierarchy of Trade-related SPS Management Functions

SPS

Diplomacy

Technically

Demanding Risk Management Functions

Institutional Structures and Role Clarity

Suitable and Effectively Implemented Regulation

Application of Basic “Good Practices” for Hygiene and Safety

Awareness and Recognition

Source:Jaffee, S. et.al.

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Pillars of EHFS RequirementsPillars of EHFS RequirementsIssue Details

Food safety MRLsHeavy metalsFood additivesHygiene requirementsTraceabilityHazard analysis and critical control points (HACCP)

Plant health SurveillancePlant quarantinePest risk assessmentSanitation

Product quality

GradingFreshnessProduct compositionProduct cleanlinessLabelling requirementsControl of nutritional claims

Environment Control of water and environmental contaminationRecycling requirementsOrganic production requirementsProtection of biodiversityProtection of endangered species

Social Labour standardsFair trade standardsCorporate social responsibility

Source:Jaffee, S. et.al.

15151515Main Problems Arising from Mandatory EHFSRsMain Problems Arising from Mandatory EHFSRsin Key Export Marketsin Key Export Markets

• Stringent phyto-sanitary measures in certain countries, such as Japan and the United States impose restrictions on imports based on the country of origin – individual country listings of FFV approved for entry – cumbersome approval process for new products

• More stringent food-safety requirements:– HACCP has become mandatory for all food categories (of both animal

and non-animal origin). Use of HACCP is not mandatory in the case of primary production, which covers most of FFV; exception – packaging for semi-processed fruit.

– Registration of plant protection products: problematic for those pesticides used in production of “minor crops”, which applies to most FFV exported by DgCs.

– Regulation (EC) No 882/2004 on official food and feed controls obliges DgCs to provide information on the general organization and management of their national food control system, including assurance of compliance or equivalence with the requirements of Community legislation.

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Spectrum of Private-sector Requirements

Whole Chain Assurance

PRE-

FARM

GATE

POST

FARM

GATE

Growers

Farmers

Food Packing and Processing

Retail

Stores Consumers

REQUIREMENTS

Key componentsoPre-Farm and Post Farm

Gate Standards o Traceabilityo Documentation o Residue Monitoring

EurepGAPSQF 1000Integrated Farming of FARREUK Assured ProduceTESCO’s Nature’sChoice

HACCPBRCISO 9000SQF 2000

HACCPISO 9000SQF 3000

Currently some 400 private food schemes

Collective

Individual

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Implications for DgC Producers/ExportersImplications for DgC Producers/Exporters

• Move towards high-precision agricultural production methods.

• Explicit objective to meet higher food-safety and quality requirements with environmentally beneficial practices (EurepGAP refers to itself as the “Partnership for Safe and Sustainable Agriculture”).

• Supply-chain requirements tend to reinforce existing strengths and weaknesses of competing producers. Risk of marginalization.

• Multitude of standards increases certification costs. Need for equivalence and harmonization, such as EurepGAP. Also increasingly important for enhanced South-South trade (particularly relevant in Asia).

• Significance of adjustment costs and little opportunity for price premiums.

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Interrelationship between Mandatory and Interrelationship between Mandatory and Voluntary EHFS RequirementsVoluntary EHFS Requirements

Different thrust:– mandatory requirements: equivalence of risk-outcomes (i.e. characteristics of finished

product)– Private-sector standards: equivalence of production system

Results in a “tacit alliance” that benefits either side:• Reduced need for enforcement of governmental regulation. Rather than spending large

amounts of money on extensive and costly testing of imports, governments can rely on the certification and assurance processes laid down by private sector bodies.

• Private standards free governments from any need to interfere with overseas production processes.

• Governmental regulation (reflecting private-sector requirements) is occasionally required to - harmonize requirements;- level the competitive playing field; or - reduce consumer confusion.

• Private sector benefits from public funds that assist producers in meeting supply-chain requirements.

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Advantages of the EurepGAP StandardAdvantages of the EurepGAP Standard

• Harmonization of procurement standard among key global retailers– However, retailers can still procure non-EurepGAP certified produce

• Allows local adaptation through “interpretation guidelines”• Facilitates equivalence of standards through

“benchmarking procedure”• Allows “group certification” • Can provide access to lucrative export markets, cutting out

middlemen• Better transparency in development and revision of

standard, compared to requirements of individual retailers• Appropriate EurepGAP implementation can lead to

benefits and catalytic effects (in terms of reduced input use, better occupational safety, better soil fertility etc.)

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Problematic Aspects of the EurepGAP StandardProblematic Aspects of the EurepGAP Standard

• Risk of marginalization of small producers (different experience in Senegal and Kenya)

• Supply-chain governance implications– Control mechanisms without ownership– Favours FDI type of investment– Producers have to shoulder significant part of risk management costs

(capital and recurrent costs: 20-200% of annual profit of producers of 0.5-6 hectares)

• No price premium for compliance or advantages through use of a EurepGAP label

• Risk of becoming dependent on servicing packages of globally active agro-chemical companies

• EurepGAP is gradually becoming important also for access to the high-end domestic market in DgCs

• Revision of EurepGAP standard every three years – moving target (DgCs have to seek active participation)

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Key Challenges for Developing CountriesKey Challenges for Developing Countries

• Lack of local regulation/enforcement in DgCs• Lack of institutional support (notably significant deficiencies in

SMTQ system - standards, metrology, testing, and quality assurance)

• Weak regulatory system relating to the import, production and sale of crop protection products

• Lack of knowledge on responsible pesticide use• Lack of extension services• Constraints of physical infrastructure• Constraints regarding farmer skills

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Key Problems of Current Adjustment ApproachKey Problems of Current Adjustment Approach

• Reactive/fire-fighting approach prevails (delaying compliance until after a crisis has occurred).

• Piecemeal and fire-fighting approach on technical assistance• Insufficient participation in pre-standard-setting consultations by

DgC producers/exporters• Costs of adjustment are often more apparent than benefits/ catalytic effects.

General IssuesGeneral Issues

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Swinging the PendulumSwinging the Pendulum

• In DgCs:– looking beyond costs at opportunities and catalytic role of new EHFS

requirements for national economy (e.g. resource savings, enhanced occupational safety, environmental benefits, new business and export opportunities)

– assuring coherent and inclusive policy approach towards supply-chain requirements (conceptual clarity on approaches and supportive policies)

• Active participation of DgCs’ exporters in standard-setting consultations and revision process of supply-chain requirements (including insistence on ex-ante assessment of impact on DgCs).

Fire-fighting, reactive approach

Pro-active, strategic approach

INVOLVES:

2424242424242424Specific Elements of Pro-active Adjustment to Specific Elements of Pro-active Adjustment to Supply-chain Requirements Supply-chain Requirements

• Enhanced transparency in setting of supply-chain requirements (including consideration of international trade implications and impact on DgCs. Active outreach to DgCs on participation in consultative processes).

• Develop coherent national strategies in DgCs to respond to new requirements (conceptual clarity, stakeholder dialogue/involvement).

• Strengthen synergies between meeting external requirements and assuring domestic food safety.

• Promoting strategic alliances among key stakeholders in DgCs.• Building regulatory/institutional capacity (on food control systems, information

management, without being focused on a specific standard). • Pay special attention to needs, but also best ways of adjustment of small

producers (strategies should be multi-pronged, i.e. enabling them to supply global retailers, national and international conventional wholesale markets, and national and international organic markets).

• For further detail: See handout that distils findings of recent country-cases studies prepared by UNCTAD’s Consultative Task Force.

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Key Elements of a Proactive Role of DgC GovernmentsKey Elements of a Proactive Role of DgC Governments 25

Key Function of Government: 1. Taking into account broad commercial and developmental objectives.2. Optimizing long-term costs and catalytic benefits of compliance.3. Focus on wider distributional and societal impacts of the available responses.

Public- private sector

dialogue

Info gathering and dissemination –

cost/benefit analysis

Pay special attention to

smallproducers

Setting up and Supporting Quality Assurance Systems

Clusters of Policy Tools

Effectiveadjustment

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Special Role of UNCTAD’s Consultative Task ForceSpecial Role of UNCTAD’s Consultative Task Forceon Environmental Requirements and Market Accesson Environmental Requirements and Market Access

• Country- and sector-focused exchange of national adjustment experiences among DgCs

• Includes in the analysis and discussion voluntary ERs of the private sector and NGOs and thus

provides a formal exchange mechanism between these stakeholders and governments

• Facilitating access to information on new ERs

• Allows a regular exchange of information among agencies and initiatives that provide TC/CB in fields relevant to CTF discussions

• Provides input into WTO debate (CTE, TBT, SPS)

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1. Three series of country-case studies on challenges and opportunities of EurepGAP for horticultural exports. Asia: Malaysia, Philippines, Thailand, Viet Nam Latin America: Argentina, Brazil, Costa Rica Africa: Ghana, Kenya, Uganda

2. Sub-regional, multi-stakeholder workshops on exchanging national experiences on national GAPs for horticultural products Asia: Manila, November 2005; Latin America: Rio de Janeiro, December 2005; Africa: planned for February 2007 in Nairobi

3. Publication of monographs on the three regions (see info note)

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Recent Activities under UNCTAD’s Consultative Task Recent Activities under UNCTAD’s Consultative Task Force on Environmental Requirements and Market AccessForce on Environmental Requirements and Market Access

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1. At the global/regional level: organize dialogues between governments, private-sector standard bodies and producers/exporters in DgCs on conceptual issues of adjustment strategies.

2. At country/sub-regional level: promoting stakeholder dialogue on strategy development (including on adjustment options for smallholders), based on sound information for decision making. Aim: conceptualizing strategies with clear local ownership that can be sustained in the long run.

3. Assisting interested stakeholders in exploring different options for EurepGAP certification and technical equivalence.

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Further Activities under UNCTAD’s Consultative Task Further Activities under UNCTAD’s Consultative Task Force on Environmental Requirements and Market AccessForce on Environmental Requirements and Market Access

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Website of UNCTAD’s Consultative Task Force

www.unctad.org/trade_env/test1/projects/taskforce.htm

UNCTAD Trade and Environment Review 2006: Environmental Requirements and Market Access for Developing Countries:

Developing Pro-active Approaches and Strategies

www.unctad.org/trade_env/test1/publications.htm

On-line Sources

Country-case studies under UNCTAD’s Consultative Task Force on challenges and opportunities of

EurepGAP for Central and South American countries

www.unctad.org/trade_env/test1/meetings/inmetro2.htm