http://siteresources.worldbank.org/INTARD/825826-1111055015956/21663468/ARDDiscussionPaper39.pdf
Barrier, Catalyst, or Distraction? Standards,Competitiveness, and Africa’s Groundnut Exports to Europe
By: Luz B. Diaz Rios and Steven Jaffee
Introduction
In recent years, industrialized countries have sought to strengthen their food safety management systems to provide increased protection to consumers against long-standing and emerging risks. Increasingly strict measures are being adopted in the wake of a series of food safety scares or crises, and in the context of expanded trade in higher-value food products, increased scientific knowledge about various food safety hazards, and improved access to modern detection technologies and mitigation methods. In parallel with changes in official standards and regulatory measures, private protocols and other stipulations for food safety within national and international supply chains have proliferated and been strengthened.
Although countries have a legitimate right to protect their consumers, there is concern that increasingly stringent food safety standards would adversely affect the market access and/or competitiveness of developing-country suppliers. This could be because of their comparably weaker administrative, technical, and scientific capacities to comply with the emerging requirements, as well as the fixed and recurrent costs that they incur in the process of compliance. Even when rising standards do not result in absolute barriers to trade, there is the distinct possibility that they amplify underlying competitive (and managerial) strengths and weaknesses, thus working to (further) marginalize the position of smaller producers, industries, or countries. From this perspective, emerging standards are frequently cast as “barriers to trade.”
An alternative, and less pessimistic, view emphasizes the potential opportunities provided by the evolving standards environment and the likelihood that certain developing countries can utilize such opportunities to their competitive advantage. From this perspective, many of the emerging public and private standards are viewed as a necessary bridge between heightened (and demanding) consumer requirements and the participation of distant (and international) suppliers. Many of these standards provide a common language within the supply chain and promote consumer confidence in food product safety. Without that confidence, the market for these products cannot be maintained, let alone increased, in turn jeopardizing international trade.
[THIS CASTING OF THE FACTS REFLECTS A POLITICAL EFFORT BY THE WORLD BANK'S EUROPEAN BOARD MEMBERS TO REWRITE PAST WORLD BANK STUDIES BECAUSE THEY SIMPLY DO NOT LIKE THE NEGATIVE RESULTS FOUND]
From this “standards-as-catalyst” perspective, the challenge inherent in compliance with food safety and agricultural health standards may well provide a powerful incentive for the modernization of developing-country export supply chains, and give greater clarity to the necessary and appropriate management functions of government.
[THIS IS WHAT THEY CALL 'SPIN']
Further, via increased attention to the spread and adoption of “good practices” in agriculture and food manufacture, there may be spillovers into domestic food safety and agricultural health, to the benefit of the local population and domestic producers. Part of the costs of compliance could be considered necessary investments.
[WHY THEN DOESN'T THE EU PRIVATE TRADE CAPACITY BUILDING FUNDING AND TRAINING TO ENSURE THEIR OVERLY STRINGENT STANDARDS PREMISED ON THE PRECAUTIONARY PRINCIPLE CAN BE SATISFIED BY THESE POOR COUNTRIES???]
In addition, an array of benefits, both foreseeable and unforeseeable, might arise from the adoption of different technologies or management systems. Rather than degrading the comparative advantage of developing countries, enhancement of capacity to meet stricter standards could potentially create new forms of competitive advantage. Hence, the process of standards compliance could conceivably provide the basis for a more sustainable and profitable trade over the long term, albeit with some particular winners and losers. (See Jaffee and Henson 2004 and World Bank 2005 for broader evidence and discussion of standards as “barriers” and “catalysts.”)
Among the more widely referenced assessments of the impact of standards on developing-country trade, supporting a trade-barrier perspective, are those by Otsuki et al. In these assessments, the authors employed gravity models to estimate the adverse effects on African trade from the EU’s adoption of Community-wide harmonized standards for mycotoxins. In a first paper, the authors examined the effects on African exports of cereals, dried fruits, and edible nuts (Otsuki et al. 2001a). Their findings suggested that the trade of nine African countries would potentially decline by $400 million under the proposed, stringent new EU standards,1 whereas this trade might have increased by some $670 million had the EU based its new harmonized standards on the guidelines of the Codex Alimentarius. A second study, focusing only on edible groundnut exports from Africa, estimated that the new EU standard for aflatoxin would result in an 11 percent decline in EU imports from Africa, and a trade flow some 63 percent lower than it would have been had the Codex international standards been adopted (Otsuki et al. 2001b). Although Otsuki et al. employed a hypothetical and greatly simplified model, their findings have frequently been referred to as evidence that African countries in fact lost such levels of trade as a result of the EU regulation. This research is frequently cited as a clear example of the negative effects on developing-country trade of regulations adopted by industrialized countries.
[HERE IS WHERE THE EU BOARD MEMBERS AND THEIR ECONOMIST PROXIES SEEK TO DISCREDIT THE PRIOR STUDIES AND THEIR AUTHORS AS EMPLOYING 'SIMPLISTIC' METRICS AND METHODS OF ANALYSIS - THIS IS SIMPLY SCANDALOUS!]
It is empirically quite difficult to determine definitively how one country’s or region’s adoption of new or more stringent standards affects trade, given the multiple repercussions of such measures, the varied responses taken once such measures are adopted, and the multiple other factors affecting trade flows and competitiveness. In general, econometric studies using simplified models and cross-country data have tended to estimate rather large changes in (or adverse impacts on) trade. In contrast, most case studies have tended to find more modest impacts, varied winners and losers, and considerable difficulty in separating the distinct role of standards from the other factors affecting trade flows and performance.
[THIS REFLECTS ANOTHER GOOD ATTEMPT TO 'SPIN' THE NEGATIVE RESULTS OF PRIOR STUDIES]
It has now been more than six years since the EU harmonized aflatoxin regulation was adopted. This paper uses cross-country data, as well as information from individual country (or company) experiences, to revisit the issue of trade and other impacts of the EU’s harmonized aflatoxin standards. The paper examines the challenges of and the responses to the new standards by a range of developing countries, although particular emphasis is given to Agricultural and Rural Development the positions, responses, and predicaments of sub-Saharan Africa’s groundnut industries. This experience is set within the context of the longer-term development (or decline) of developing-country groundnut industries and changing patterns in international groundnut product trade and demand.
The paper highlights the varied edible groundnut export performance patterns of developing (including African) countries both in the years or decades prior to the EU’s enforcement of stringent harmonized aflatoxin standards and in the period following adoption of the new standards. Several African countries once dominated global exports and EU imports of raw groundnuts (shelled and in-shell) and processed products (oil/cake). This dominance, mainly for raw groundnut exports, came to an end in the 1970s, initially due to internal supply-side or macroeconomic factors, and subsequently due to market developments, including the rise of strong competition from Latin America and Asia. Although still of some importance to a few particular countries, Africa’s trade in raw groundnuts was already marginalized prior to the EU’s enforcement of more strict aflatoxin standards, either because of an inability to compete on the bases of cost, reliability, and quality, or because of other factors that undermined the incentives for producers and agribusiness to invest in improved production and quality control.
Arguably, the new standards have exacerbated the underlying competitive weaknesses of these industries.
In contrast, for some groundnut industries, especially in Latin America and China, the stringency of the EU’s aflatoxin standards (and increased member-country enforcement of these standards) has served as a catalyst for production and supply-chain upgrades. Some upgrade strategies have also been undertaken within Africa, although with more mixed results. The good news from the recent experiences is that a considerable amount of research has been done and other efforts made, yielding promising insights on ways to prevent and reduce aflatoxin contamination in groundnut production, storage, and trade—and achieve compliance with very stringent standards. Important challenges still remain in implementation and in achieving a necessary degree of collective action and public–private sector collaboration to ensure the cost-effectiveness of adopted approaches.
[GOOD RATIONALIZATION !!!]
The objective of this paper is to improve understanding of the apparent trade impacts of the EU aflatoxin standards on edible groundnut exports from sub-Saharan Africa (SSA), within a framework that takes into account the multiplicity of factors determining the region’s competitiveness in this trade over recent decades. Insights are also provided on how other developing countries have been affected by and have responded to the EU’s more stringent standards. In some cases, a potential trade barrier has catalyzed technical and administrative changes, apparently resulting in improved competitive advantage. The paper draws upon data and other information from COMTRADE and the EU’s Rapid Alert System for Feed and Food (RASFF). It also draws upon findings from prior global or country-specific studies pertaining to groundnut industry development and trade. Interviews were also conducted with selected industry, regulatory, research, and service provider representatives in several groundnut-exporting countries, as well as with selected groundnut importer/distributors and regulatory authorities in Europe.
[SPIN, REINTERPRET PREVIOUS FINDINGS AND THEN RATIONALIZE YOUR NEW INTERPRETATION]
The paper is divided into four sections. Section 1 provides a brief historical perspective of the decline of SSA’s raw groundnut exports during the 1960s to the mid-1980s and its subsequent marginalized position in the contexts of emerging competition and changing patterns of international product demand and buyer requirements. Section 2 reviews the EU regulatory developments regarding aflatoxin since the late 1990s, with a detailed analysis of the apparent trade effects of these regulatory developments on developing country trade, particularly exports from SSA. Section 3 highlights the strategic approaches implemented by several exporting countries to ensure compliance with EU aflatoxin regulations and to gain competitive advantage. This section also provides an overview of the initiatives undertaken in the SSA region for effective aflatoxin management. Section 4 states conclusions.
Note
The EU levels were set at 2 ppb for aflatoxin B1 and 4 ppb for total aflatoxin in groundnuts for direct human consumption. In the case of groundnuts intended for further processing, the levels were set at 8 ppb for aflatoxin B1 and 15 ppb for total aflatoxin. The Codex established a level, set at 15 ppb, only for total aflatoxins in groundnuts intended for further processing; no level was set for aflatoxin B1.
(pp. 1-4)
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