Overview of Standards and their Role in Market Access

Thousands of standards or standards-related agreements exist for the agrifood sector. While many are public with common applications, most of today’s agricultural trade standards are privately set by groups or firms and apply primarily to their specific needs. The complex distinctions between process and product characteristics and different types of indirect costs associated with standards can dramatically diminish their benefits and effectively make them barriers to entry (Giovannucci and Ponte, 2005). Standards affect not only producers but also value chains, agribusinesses, and consumers, so it is vital to understand who is forming standards, their motivations, their increasing privatization, and the impacts.

Standards: Public and Private

Public standards revolving around food safety, consumer protection, and trade facilitation are embodied primarily in government regulations and some international codes and accords. The public standards of individual governments are also important. Often they are the primary portal that products must pass through, and they can be both rigorous and mandatory.

Private standards are those imposed by buyers and usually require higher levels of performance than the baseline public standards. These can apply to such areas as quality, process management, packaging requirements, or social concerns. While public standards are typically clear and well established, private standards can be more difficult, particularly because they can be fast-changing. Though sometimes called voluntary, private standards are becoming the basic de facto entry requirement for trade with many of the large-scale operators and leading value chains.

Meeting private standards is becoming essential for doing business in higher-value agriculture. Among the best-known private standards are those of the International Standardization Organization (ISO) series, HACCP, Fair Trade, Organic, and Good Agricultural Practices (GAP) adopted by entities such as EUREP or ASEAN. Sometimes private sector standards like Certified Organic or HACCP are adopted and codified by government as regulations.

In addition to the private standards noted above, individual firms are also developing their own internal norms that may differ from the current broader sectoral norms. Firms ranging from Cargill and Unilever to Cadbury, Starbucks, and Nestle all have undertaken such efforts.

Process standards are typically private in character and typically refer to the entire cultivation, packaging, or manufacturing process. These serve as criteria for sourcing decisions, and some pay closer attention to the responsible use of agrochemical inputs, energy, water, wastes, and the impact on communities and the environment. In addition to well-known process standards such as GAP, GMP, HACCP, and ISO, the cause-related standards are becoming increasingly popular. Some better-known examples are:

1. Organic
2. Fair Trade
3. Ethical Trading Initiative
4. Rainforest Alliance
5. SA-8000
6. UTZ Certified

These are sometimes referred to as sustainability standards and are unique in that they can embody somewhat intangible social and environmental characteristics; see Error! Reference source not found.. Although all are managed by or originate from NGOs, these standards have evolved to become much more public in their objectives, transparency, and standard setting. All are nonprofit,⁹ and it can be argued that they fulfill a public good while filling a growing consumer demand.

Organic

Organic is the fastest-growing sector of the food industry, with global sales doubling since 2001 and exceeding US$40 billion in 2007.¹⁰ High market growth rates are leading to supply shortages in some sectors such as fresh produce, meat, dairy, and certain processing ingredients. The Asia region alone has experienced triple-digit growth in organic farmland between 2000 and 2006. The International Federation of Organic Agriculture Movements (IFOAM) is the global coordinating body for Organics.

Organic standards are among the most misunderstood. They are sometimes considered to be simply the absence of synthetic inputs; however, this is only one aspect of an organic system. Organic agriculture relies on scientific and traditional knowledge to work with biological and mechanical methods to manage ecological systems. It works to optimize quality and sustainability while reducing external inputs and synthetic materials.

Social issues such as labor rights and conditions are also part of organic principles but not commonly part of certification requirements. General environmental principles are clearly embedded in organic principles, but specific guidelines on aspects such as biodiversity are not necessarily part of the certification processes. Organic certification can also apply to processed food, and in this case most artificial preservatives or additives are avoided.

For the purposes of most trade, organic products are third-party certified and include both internal controls and traceability. However, for local applications, different credence mechanisms are often utilized that do not depend on formal certification processes. These are often lower in cost and can be equally effective (Giovannucci, 2005).

Table 2: Comparative Overview of Some Popular Process or Sustainability Standards [ PDF 22.2KB | 2 page ]

Eco-friendly or Safe Foods

A broad range of standards exists that are focused primarily on ecological systems and the assurance of agricultural products produced in a manner that avoids toxic chemicals or other forms of contamination. Rainforest Alliance standards are among the best known of this category and are sourced in dozens of countries for sale primarily to the US, Europe, and Japan. Some nations have also developed standards. Japan has a government production standard that references ecologically friendly measures as well as food safety and requires certification by an accredited body. In the PRC “Green Foods” are government-certified products are labeled under government supervision as safe from chemical contamination with their production and processing using more environmentally friendly processes. This standard is recognized only in the PRC, but some trading partners in Japan and Europe have accepted it as a substitute assurance for basic food safety measures. In 2003, green food exports topped US$1.5 billion. Other governments including Malaysia and Thailand have developed certifiable standards for agriculture. In India, less formal approaches include several traditional holistic farming systems based on ancient techniques for soil and animal management that eschew synthetic inputs and are in harmony with natural on-farm inputs and cycles. These are neither government regulated nor formally certified but are followed in many of the country’s regions and are commonly called either “Jaivic Krishi” or “Vedic Krishi.”

Fair Trade

Fair Trade is an alternative to the often asymmetrical buyer/producer negotiations featured in conventional trade and aims to improve the livelihoods and well-being of small producers by assuring a fair price agreement, continuity in trading relationships, and the strengthening of small-producer organizations. Fair Trade products are typically sold in more developed markets via an NGO-operated certification system. Fairtrade Labelling Organizations International (FLO) is the global coordinating body for certified products. Nearly 60 countries now export a variety of certified Fair Trade products and they are sold in more than 50 countries. In 2006, the estimated retail value in these markets was more than €1.6 billion and products were sourced from two dozen developing countries.¹¹

Codex

Codex Alimentarius is an intergovernmental body facilitated by the UN’s Food and Agriculture Organization (FAO) and the World Health Organization (WHO) that aims to protect consumer health and facilitate international trade in food. For decades its guidelines have been internationally recognized benchmarks for food products and form a basis for many standards, including national standards and those recommended by the World Trade Organization (WTO). For example, it has evaluated hundreds of food additives and common contaminants and set maximum residue limits for approximately 2,500 combinations of commodities and pesticides.

While certainly beneficial, particularly in setting baseline public standards and the development of many national regulations,¹² Codex is a large, consensus-oriented organism and is therefore relatively slow to adapt to the needs of day-to-day trade and recommend timely changes.

ISO

The ISO is a network of national standards institutes from 157 countries and is organized as an NGO. Within its objective to facilitate international exchange of goods and services, it sets a number of the most popular trade standards and fosters standardization activities. Its standards are voluntary and typically codify sectoral best practices. Although ISO certification does not refer to the output of the process but only that a process is in place, it is perceived as a signal of conscientious management.

An increasing number of ISO’s 15,000 standards and guidelines are relevant to producers and agrifood enterprises. The 9000 series, the most popular, promotes good management practices to ensure the consistent quality and delivery of goods and services. The 14000 series promotes sound environmental management in order to minimize negative effect caused by various productive activities including agricultural processing.

ISO is increasingly writing overview standards that capture trends in agrifood trade, such as ISO 22000, which is designed for generic food safety,¹³ and the forthcoming ISO 26000, which covers voluntary guidance on social responsibility and is slated for publication in 2010. ISO's importance extends to verification mechanisms in that many governments and private firms insist that certification bodies comply with a standard (ISO65) that is an international equivalent and recognized for other rulings such as European Norm EN 45011.¹⁴

HACCP

Hazard Analysis at Critical Control Points (HACCP) is a systematic analysis for potential food safety risks within, for example, a post-harvest or processing operation. The analysis typically identifies appropriate control and monitoring systems to minimize such risks. It assures that such a management approach has been established but not whether it is used or how effectively.

It is most often used with higher-risk foods, such as poultry, livestock, and fish products. Typically, HACCP reduces food contamination risk in two ways:

1. Anticipates potential problems or failures before they happen and does not depend only on a final inspection;
2. There is a greater likelihood of resolving the problem during process rather than at the end of the process or once the product moves into the supply chain or market.

Consequently, HACCP can also yield cost savings in terms of reduced waste, reprocessing, or recalls.

GAP and GMP

The more recent ASEAN GAP standard is adapted to Asia-Pacific conditions and has many similarities to EUREP-GAP (known as Global-GAP as of September 2007). These standards are widely used by many companies, especially by firms that export to Europe. They are based on Good Agricultural Practices (GAP) that promote basic food safety principles to minimize biological, chemical, and physical hazards associated with crops from seed through harvest storage.¹⁵

Good Manufacturing Practices (GMP) begin from the harvest and storage stage and serve to guide the people working in contact with food, its packaging materials, and work environs to conform to basic sanitation and hygiene practices to protect against food contamination from both direct or indirect sources. These standards also typically improve worker safety.

WTO Access and the Role of SPS and TBT Agreements

The public or governmental application of sanitary and phytosanitary (SPS) or technical measures can act as standards and have a growing impact on the nature and direction of international trade controls. Although part of the WTO for some time, the SPS and Technical Barriers to Trade (TBT) agreements are increasingly important ways to manage trade in light of the diminution of tariffs, quotas, and other formal measures. For example, Environmental and Related Health Requirements—provisions for which are contained in both the SPS and TBT agreements—have nearly doubled (rising from 10% to 18%) as a percentage of WTO notifications since the early 1990s (UNCTAD, 2006).

SPS measures are intended to ensure human food safety and protect agricultural plant and animal populations and ecosystems. Each country sets food safety and animal and plant health standards based on its own assessment of acceptable risk levels. The SPS agreement recognizes the right of countries to maintain national standards that are stricter than international levels, although they must be justified by scientific evidence and should be consistently applied.

The TBT agreement aims to stop WTO members from using arbitrary technical regulations, standards, or testing and certification procedures to protect domestic producers. It applies to all aspects of food standards not covered by the SPS agreement, including labeling requirements, nutrition claims, and quality and packaging regulations, which are generally not considered as either sanitary or phytosanitary measures. TBT prevents members from distinguishing between goods on the basis of either production or processing methods but specifies conditions when members may restrict trade using technical regulations or standards.

The WTO recognizes three organizations as sources of internationally agreed-upon benchmark agrifood standards that can affect SPS and TBT: the Codex Alimentarius, the Office International des Epizooties (known as OIE) for animal health, and the International Plant Protection Convention (IPPC) for plant health. The OIE is an 83-year-old intergovernmental organization that analyzes and disseminates veterinary information to provide expertise and transparency in control of global animal disease (includes aquatic). The IPPC is a standards treaty that aggregates 19 approved international standards, establishing measures to prevent the introduction and spread of plant pathogens and pests. Its Secretariat is within FAO, but it works through National and Regional Plant Protection Organizations such as the Asia and Pacific Plant Protection Commission or the European and Mediterranean Plant Protection Organization to help countries meet their IPPC obligations.

Harmonizing Standards

Efforts have been made to develop more coherent meta-standards, particularly for food safety. Theoretically at least, they would permit the rapid movement of foods from country to country and facilitate the learning process of producers and processors when they are meeting only one general standard. Understandably, these efforts would raise issues of domestic impact in each country, particularly in poorer nations. The International Committee of Food Retail Chains (CIES) Global Food Safety Initiative is one harmonization effort to provide a single set of rules for standards. The International Social and Environmental Accreditation and Labeling (ISEAL) organization also strives to achieve harmonization among some of the most important eco-social standards bodies including IFOAM, Rainforest Alliance, FLO, UTZ Certified, and the Forest Stewardship Council. Their efforts can provide useful stepping stones for countries to collectively adopt standards guidelines and training frameworks that have broad-scale relevance and can reduce the individual cost of compliance.

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Comment(s)

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1. Prof. J. George
   (posted 06 July 2008 / 07:56:18 PM)
   
   The authors, Giovannucci and Pursell needs to be complimented on this publication for putting together a business perspective to the application of standards in the food trade.
   
   The perspective of the book however could have been broadened if the production landscape in the region was brought to play a dominant role. The price discovery advantages are certainly not available to the producers. The cost burden, however, is surely an additionality for the producer in more than one ways. For instance, the AGORA experience in Bangladesh is being experienced in all the member countries in the region. This burden is magnified when the state governments either in collusion or in default setting withdraws due to the fiscal conditionalities.
   
   The publication could have immensely benefitted from a professional copyediting and/or critical peer review. But it is a useful addition to the discipline of food safety regulation.
2. Dr T. Tappani
   (posted 03 June 2008 / 05:47:56 AM)
   
   This ADBI paper: "Standards and Agricultural Trade in Asia" is quite a practical and useful look at the topic of trade and development. The authors, Giovannucci and Pursell, clearly have a sharp eye for the needs of business and the realities of farmers (mostly small in the region) and combine these to offer some practical solutions that the Asian Development Bank and governments would be wise to consider in their work.