Measuring the Impact of SPS Standards on Market Access notes that sanitary and phytosanitary (SPS) non-tariff measures are among the most important barriers to trade. Four recent research projects take realistic approaches to analyzing impacts on trade flows. A multi-agency study team (MAST) from UNCTAD (United Nations Conference on Trade and Development) has developed 13 categories of measures that are non-technical barriers to trade ranging from pre-shipment inspection to trade-related investment measures to rules of origin. UNCTAD and the U.S. International Trade Commission are now testing the new classification system for Brazil, China, Thailand, the Philippines, India, Tunisia and Uganda.
A second approach taken by a consortium of 21 research institutes and affiliated academics includes a comparative study of trade barriers in major markets, a series of case studies focusing on commodity clusters and access by developing countries to the EU market. The study will follow the MAST classifications closely and focus on EU regulations. Some results are expected to be released late this year.
The Economic Research Service of USDA is pursuing a similar effort on phytosanitary regulations on imports of fresh fruits and vegetables, including detailed information from the USDA Animal and Plant Health Inspection Service. They have found that “importer standards are often specific to particular exporting countries.” Bilateral and regional trade agreements can also affect the ability to be approved for exporting to the U.S. Exporting countries can learn the key factors to be approved for exporting to the U.S.
The fourth study by the International Center for Trade and Development addresses the cost of import regulations by developing a composite indicator of market access (CIMA). It tries to include all exporter costs so the cost of regulatory compliance can be compared in dollars to other costs. A pilot study for CIMA has been completed for two rice exporting countries. Costs for public (government) standards and private (company) standards are included.
The second paper Tracking the Implementation of Internationally Agreed Standards in Food and Agricultural Production focuses on greater harmonization of health and safety standards as a way to reduce the transactions cost of trade. The SPS Agreement of the WTO provides for that approach where such international standards exist. The authors cite research that found harmonization has been low, possibly due to lack of international standards in many areas and outmoded standards that do not meet specific member needs. Use of private standards has also increased substantially since the SPS Agreement came in to force in 1995.
The authors reviewed 2,340 “notifications” from members to the WTO from 2006 through 2008 concerning proposed changes in regulations that could affect trade, with 36 percent indicating compliance in full or in part to an international standard. Another 59 percent reported there was no international standard and the remaining 5 percent left the question unanswered. High income countries adopted an international standard 22 percent of the time, upper middle income countries 45 percent and lower middle income countries 76 percent of the time. The use of international standards also varied by product groups and regulatory objectives with higher use for plants and animals and lower use for food safety and protection of humans from animal and plant pests and diseases.
The authors also reviewed private standards such as those developed by business-led efforts like the Global Food Safety Initiative (GFSI) that has seven major food safety programs. International businesses introduce hundreds of new products each year and need a system that works faster than the Codex Alimentarius Commission and other standards setters that usually take two to four years, but can need much longer. GFSI tries to ‘amplify’ existing Codex standards. The authors note that “private standards do not fit comfortably into WTO legal architecture.” Private standards can be set too low and not protect consumers or set too high and increase costs for competitors.
A quick read of the two papers makes clear that we have only begun to understand how sanitary and phytosanitary measures retard trade. As a major buyer and seller of agricultural products, the U.S. has a role in making sure that U.S. exports are treated fairly in international markets and imported products are treated the same way to the benefit of U.S. consumers. The EU is in a somewhat similar position.
The role of private standards needs to be further explored. Buyers and sellers have a substantial role in agreeing to standards that positively affect both groups. They have resources at risk and can be rewards for meeting consumer demands. Aid for trade can help new sellers from developing countries enter the market by strengthening their ability to meet the higher standards set by buyers in response to consumer demands. Once some producers in a developing country can meet the higher standards that knowledge will spread to other producers who seek to capture higher returns. There should be a positive feedback loop between government standards and private standards to improve both sets.
These research efforts need to be further developed as another step in gaining market access for efficient producers while protecting the health and safety of consumers. The research outcomes could also set the stage for possible future negotiations on sanitary and phytosanitary issues in the WTO.
Ross Korves is the Economic Policy Analyst for Truth About Trade & Technology.