Food safety: protection or protectionism?

OECD Observer
Consumers want their governments to pay closer attention to food safety and quality. That may mean more regulation, which if ill-defined or excessive can damage trade and well-being. Weighing up the costs and benefits of particular regulations, rather than just assessing risk, could help improve safety, while avoiding -protectionism.
Consumers are generally much less tolerant about health risks from food than about risks from tobacco or cars. Smokers probably accept the risks they run from cigarettes, but eating food, particularly fresh food, is not supposed to be a risky venture, particularly in today’s modern, hygiene conscious world. But consumer confidence in the food industry has been badly shaken by scares caused by mad cow disease and outbreaks of food-borne poison-ing, such as from E Coli 0157 and listeria. There have been steep drops in demand for certain products as a result of these scares, and serious economic hardship has been the lot of some in the sectors concerned.There is no absence of rulesIn fact, consumer concerns go well beyond basic food safety. The quality of food and how it is produced, animal welfare, the use of genetically modified organisms (GMOs), hormones, the environment and ethical and cultural differences all feature highly in the public debate. Governments have understandably come under intense pressure to ensure safe food at a minimum cost to consumers and industry. The trouble is that the complexity of the issues makes the right policy response difficult to identify, especially in the awkward cases where public opinion is strong and where convincing scientific evidence is in short supply.Nevertheless, governments are responding. Canada, France and New Zealand have established new food agencies with broad mandates for health, safety and inspection responsibilities. A similar agency has been proposed in the United Kingdom. The United States has announced a new initiative to address the health risks of food consumption involving several federal agencies with related responsibilities and the authority of the US Department of Agriculture in this area has been enhanced. The EU has legislated for the labelling of GMO pro-ducts (see article by Mark Cantley, pp. 21–23). Furthermore, the Parliamentary Assembly of the Council of Europe, an organisation which brings together some 40 European countries, has recommended a framework convention on food safety, setting up food safety agencies at the national and Euro-pean level, strengthening legislation, improving health checks and increasing access to information.The difficulty is that consumer attitudes to risk and government approaches to food safety and quality vary significantly from country to country. Making cheese from unpasteurised milk is perfectly acceptable in France, Italy and Switzerland, but is banned in some countries.National regulations on pesticides differ widely. Food safety and quality control systems have different specifications and may not be recognised by trading partners. Irradiation is used on some foods, such as spices, onions, and only in some countries, such as Belgium, but is not used in others. Such differences in approach can inevitably bubble up into disputes between trading partners.There are few quantitative estimates of the impact of national regulations on trade or well-being and where such estimates exist they are always debatable. Nevertheless, the US Department of Agriculture has recently identified some 300 cases where national regulations harmed US food exports and put the impact at as much as $5 billion annually in lost sales. It is clear that as traditional barriers to trade, such as tariffs, come down, regulations have become more numerous and sophisticated. Standards and procedures can help exporters, because they provide concrete and tranparent rules which facilitate trade. But they can also reduce international competition, distort markets and prevent firms, notably foreign firms, from entering the market.New animal welfare rules, such as the banning of battery farming of veal calves, which have been established in several OECD countries, make it possible to prohibit the import of non-compliant goods. There is therefore a danger that with strengthening of international rules, the globalisation of the food industry, increased competition in consumer food products and the growing use of biotechnology, trade disputes over food regulation will become more common in the years ahead.As part of the 1994 Uruguay Round Agreement, the Sanitary and Phyto-sanitary (SPS) and Technical Barriers to Trade (TBT) agreements were forged to guard against regulatory protectionism, while encouraging the use of international standards (see box). The major exporting and importing countries are observing their obligations, with over 700 SPS measures notified by some 52 WTO countries, while many low and middle income countries have yet to notify a single measure.Despite the resolution of several SPS related conflicts through the WTO trade dispute settlement procedure, the agreements have not solved all the problems. India, for example, argues that the sanitary measures imposed by some of the richer countries and by the SPS agreement are unfair because the regulations block exports to North America and Europe. Similarly, some countries protested that the precautionary measures taken by the European Union and the United States against mad cow disease were an over-reaction that restricted imports, and were particularly felt by regions untouched by the virus.Vintage casesSome countries, particularly in Europe, use technical restrictions on production methods in the name of authen-ticity or in order to safeguard traditional products. The re-strictions can create obstacles for their exporters and can put domestic producers at a competitive disadvantage, by preventing them from adopting innovative techniques for example. Another problem concerns intellectual property rights to a region’s traditional products (see article by Evdokia Moïsé, page 29). Wine appellations are a well-known example of this and they continue to be a bone of contention between the European Union and the United States. Disputes when they happen can last a long time. The disagreement between the European Union and the United States over the use of growth hormones in cattle has been going on for ten years. The EU’s refusal to author-ise the use of such substances has the effect of limiting imports from third countries where their use is allowed. The dispute was settled on -appeal in 1998, and the EU has undertaken to comply with the recom-mendations by May 1999.Implementation is difficultThe actual implementation of international standards also holds difficulties of its own. The SPS agreement ex-plicit-ly requires science-based risk analysis to be carried out if a country adopts measures which differ from, and perhaps fall below, international standards. However, there is no agreement on what constitutes acceptable risk and there are ongoing debates over how to calculate it. The SPS agreement (Article 5.7) allows the adoption of provisional measures where relevant scientific evidence is insufficient, but this ‘precautionary principle’ is too restrictive for some consumer groups.New production methods, driven by technology have added to consumer unease, fuelled by a growing mistrust of science and its interpretation in terms of food regulation. It has become essential for governments to consider all potential risks to the safety and wholesomeness of food, at all stages of the food chain.A country may introduce more stringent regulations on cultural, moral or religious grounds only under very limited conditions and only under the TBT agreement, where they may be taken into consideration by authorising different labelling. The question of values can be delicate.Is food just a matter of taste? Ignoring the legitimate values of different consumer groups could result in strongly negative reactions in the market and a falling away of their support for trade liberalisation in general. However, giving too much consideration to ethical arguments could likewise provide justification for a whole host of trade barriers, as concerns are exploited by pressure groups acting in their own interests.Present arrangements for taking economic costs and benefits into consideration in the settlement of disputes relating to technical and sanitary barriers are unclear. The argument, that a measure can be defended if the welfare costs of abolishing the regulation exceed those of keeping it, is just about admissible under the TBT agreement, but barely, if at all, under the SPS agreement. There are objections to the use of cost-benefit analysis on both philosophical and pragmatic grounds. For a start, how can the notion of bene-fit be defined, especially when it comes to something as personal as food?Clearly no overall rule is feasible. Surely regulators should let themselves be guided more by a thorough econo-mic analysis and, as in the implementation of competition policy, allow decisions to be taken on a case-by-case basis, while ensuring that society’s well--being is fully taken into account.©OECD Observer No 216, March 1999

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