Mega-trends: The Changing Commercial and Standards Environment for Trade in High-Value Perishable Foods

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1 Mega-trends: The Changing Commercial and Standards Environment for Trade in High-Value Perishable Foods Steven Jaffee WB/International Trade Department March 2004 Workshop

2 Outline of Presentation Consumer, Technological and Structural Dynamics Food Safety/Agricultural Health Crises and Growing Consumer Concerns Official Responses in US, EU, and Japan Private Sector Responses Some Implications for Developing Countries

3 Consumer Dynamics North Rich country aging/more diversified populations Rising demand for fish, f/v/nuts/spices; mixed for meat Rising demand for variety, quality, freshness, healthiness, convenience and safety year round Food choice reflecting values: environmental, social, animal welfare South Urbanization and income growth> ++demand More attention to variety, quality, safety, and convenience (i.e. urban middle class) yet external catalysts more common for standards change

4 Technological Changes More information technology applications Food processing and treatment technologies Varietal Development + Biotechnology Scientific understanding of food safety risks Improved measurement/detection technologies Some technologies create new perceived risks

5 Agro-Food System Structural Changes Ascendancy of the supermarkets Retail paradox: consolidation yet more competition between different formats Rapid expansion in food service for out-of home consumption Varied trends for wholesale markets Fewer gatekeepers handling imports Increased importance of branded products

6 Repetitive Series of Food safety and Agricultural Health Crises Mad cows (34 countries) Bad berries Salmonella scares; e.coli outbreaks Hormone/antibiotic concerns Dioxin in animal feed Pesticides in children s food Avian flu

7 Consumer Concerns and Attitudes Perceived loss of control--technological change and globalization Long-standing fear of chemical contamination Mistrust of private sector information Media>>hazard, conflict, and vested interests Perceived under-regulation or non-enforcement of regulation Limited trust of scientists; baffled by scientific disputes (and findings) Search for alternative foods and guidance

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9 Unfolding Official Responses Consolidation of food safety regulatory functions (DG SANCO)/ independent advisors (Japanese FS Committee) Tightening existing standards (i.e. pesticide MRLs) Broadening standards coverage (i.e. contaminants) Greater emphasis on system-based controls (I.e. HACCP; competent authority ) Yet intensified inspection (FDA 6X; EU rapid alert) Increased focus on traceability (EU Food Law; Japan meat) and country of origin (US) Globally, precaution and over-reaction in the face of (scientific) uncertainty

10 Private Responses to Concerns and Law Perception of major commercial risks From company codes of practice to alphabet soup Food safety process standards (HACCP; GAP/GMP; ISO 9000; SQF) + environmental/social (ISO 14000; SA8000) Consolidate sourcing from preferred suppliers Intensify auditing, including third party certification Drive to harmonize, yet still competition between private standards Joint databases on certified suppliers/private alert system Major P.R. effort to signal compliance and values

11 Yet traditional sourcing concerns still apply and often dominate Volumes Consistency of supply Competitive pricing Acceptable quality Information exchange Responsiveness Product innovation

12 Manifestations of Standards at the International Level Rising # of official SPS notifications to the WTO >> greater transparency Yet, the majority are not int l standards Int l standards increasingly focus on process guidelines (how to test, assess, etc.) Complexity: considerable diversity in standards between countries + measurement

13 i.e. Diverse Standards in the EU Single Market Local Customs and Consumer Preferences Private Sector Competitive Strategies Standards as applied Laws and Regulations Enforcement Capacity

14 Implications for Developing Countries Int l buyers and consumers want outcomes, processes, and (soon) impacts Meshing of safety, environmental, and social standards in various packages Goal posts are continually moving Uncertainty on the future direction of change difficult to plan

15 A More Complex Terrain Old Regime New Regime Scientific Assessment Public Opinion Economic Interests Food Safety Politics + Nationalism Politics + Nationalism Food Safety Social + Ethnical Values Economic Interests Scientific Assessment

16 More implications. Equivalence remains elusive rather, strive for compliance on an on-going basis Increased risks associated with trade. Rising level of rejections/retentions (EU + US) Reputation is critical and long-term relationships key to market positioning and safe passage Yet diversity in standards applied within and between countries scope for different speeds on highway of standards compliance The playing field will continue to move so,

17 Managing the challenge of standards: A core dimension of international competitiveness