Food Safety: Economic Issues

Transcription

1 Food Safety: Economic Issues Hermanto Siregar & Heni Hasanah (Bogor Agricultural University) International Seminar on Food Traceability (18th MIICEMA Conference) Food Safety from an Economic and Technological Perspective Bogor, 5 October 2017

2 Introduction O A globalized food trade+extensive production+complex supply chains contributing toward an increased number of microbiological food safety outbreaks O Food safety refers to the potential hazards associated with food that can cause ill-health in humans O Food safety hazards can arise at any stage of the food chain from primary production to consumption O Food safety is of particular concern in a developing country context: O the high prevalence of food-borne illness and other hazards associated with food O the considerable economic and social costs reflect prevailing levels of economic development 1

3 Food Chain and Food Safety Source: Henson (2003) 2

4 Food Markets and Economic Development Source: Henson (2003) LOW INCOME HIGH INCOME 3

5 Food Safety: International Trade Issues O Food safety capacity is of vital importance to agricultural and food exports from developing countries O A number of agricultural and food products, for example fresh fruit and vegetables and fish, can provide significant opportunities for developing countries to develop nontraditional exports O Food safety regulations and the perception of risk are different among countries can lead to persistent trade frictions and even reduce food trade (Buzby, 2003) 4

6 Markets for Food Safety O Key Issues from an economist s perspective: O Whether markets for food products will operate efficiently O Economists represent markets as the inter-play between demand and supply functions for the good or one of its attribute O Efficient market = social optimum = net economic value of the good is maximized 5

7 Potencies of Market Failures 1. Externalities 2. Supply of Information 3. Consumer decision-making 4. Transaction costs 5. Market competition Source: Henson (2003) 6

8 1. Externalities O Gain or losses to society are not reflected in market prices O For food products potentially significant externalities associated with the impact on human health O The costs associated with human disease: O Health care and loss of productivity, are borne by society as a whole O it is unlikely that the supply and demand functions will fully embody the economic consequences of the consumption of the food O If the product increases the incidence of human disease disease-related costs the market is likely to underestimate their value less than social optimum 7

9 2. Supply of Information O The amount of information made available to consumers is insufficient consumers face considerable difficulties O Consumers may not be able to observe directly the associated health effects (from consuming particular product) O Whilst suppliers may have incentives to communicate the benefits associated with their products, there is less incentive to provide information on risks or defects O Markets for many food products will provide little or no information to consumers on risks. 8

10 3. Consumer Decision-Making O The manner in which consumers perceive the potential health effects of the foods they choose to consume, or not to consume. O The response by consumers to particular foods will also reflect their wider perceptions of the determinants of human health and the impact of their own actions O Consumers who perceive that they have some control over their health are more likely to consume foods that are perceived to be risky 9

11 4. Transaction Costs O The costs associated with transactions should be limited (ideally zero) O In many food products there may be significant transaction costs: O search for information on alternative products O assessment of the associated risks to health O Classic examples: new technologies such as irradiation and genetic modification that many consumers perceive to be unknown, and thus inherently risky. 10

12 5. Market Competition O In most industrialised countries, large corporations typically dominate markets for food products O In some developing countries, food markets remain fragmented and are typified by numerous small suppliers with little or no market power. In some others like Indonesia, the market structure tends to be oligopolistic O Sufficient competition must exist between buyers and sellers 11

13 Government Intervention O Government regulation is an attempt to increase the amount of food safety provided by the market, as the market alone will usually not provide the socially desirable level of food safety O The standards that can be applied by governments in order to control the behavior of buyers and/or sellers in order to achieve a certain level of food safety O Information-based measures require suppliers to disclose certain facts about their products, but do not otherwise impose behavioral controls O The government can also use direct economic incentives and disincentives in an attempt to influence the behaviour 12 of buyers and/or sellers

14 The Food Control System (1) O This universe of actors and actions is governed by rules food laws and regulations and is collectively known as the food control system O The ultimate goal of this system is to ensure that food presented to consumers is safe and honestly presented O A further important element of public food safety controls that is frequently overlooked is liability laws O Under these laws, parties who are harmed by a supplier s product may sue for damages. O A negligence standard may be applied in cases arising from food safety breakdowns 13

15 The Food Control System (2) O Basic Objectives: O Protection of the human population from hazards in agricultural and food products that pose of threat to human health. O Improvement of hygienic handling of agricultural products for human consumption. O Regulation of inputs used in agricultural production, including animal feed, agrochemicals and biological materials. O Specific queries such as halal method. 14

16 Elements of a National Food Control System 15 Source: Henson (2003)

17 Deficiencies in National Food Safety Control Systems O Failure to develop and implement any type of national O O O O O strategy for establishing a food control system Lack of a system of management to develop and implement effective and efficiently managed food control programmes Need to up-date food laws and regulations Food control officials that are poorly equipped to perform their respective functions Food control personnel that are generally inadequately trained and often lack the technical information needed to perform their functions Lack of co-ordination between government organizations and agencies with food control responsibilities 16

18 Conclusion O Food safety from an economist s perspective: O There are market failures on food safety market markets may fail to provide for an appropriate level of food safety O Need for government intervention The Food Control System O From international trade perspective: O Food safety issues are more likely to be a concern in fresh food product trade major export from developing countries and LDCs can lead to trade friction O Food safety standards may become instruments of trade control O Need for further review: creation of value added from safer food froduct.- 17

19 Thank