Agro-food exports, standards and trade agreements Stefano Ponte Institute for International Studies

Introduction Trade is an important revenue base for developing countries Trade is an important revenue base for developing countries Especially as aid flows slow down Especially as aid flows slow down Still, low income countries account for only 3% of income generated by exports Still, low income countries account for only 3% of income generated by exports Lowering ’traditional’ trade barriers: Will this be enough? Lowering ’traditional’ trade barriers: Will this be enough?

Global Value Chain (GVC) analysis and trade Trade not only between ‘countries’ but also among (and within) firms Trade not only between ‘countries’ but also among (and within) firms Trade rules do not arise only from domestic regulation and international agreements Trade rules do not arise only from domestic regulation and international agreements ‘Lead firms’ in GVCs set ‘private’ rules that shape trade flows and market access ‘Lead firms’ in GVCs set ‘private’ rules that shape trade flows and market access

GVC analysis and standards Standards are one of the mechanisms shaping trade rules and flows Standards are one of the mechanisms shaping trade rules and flows GVC analysis contributes new knowledge on ’private’ and ’voluntary’ standards set and enforced by ’lead firms’ or industry associations, NGOs etc. GVC analysis contributes new knowledge on ’private’ and ’voluntary’ standards set and enforced by ’lead firms’ or industry associations, NGOs etc. These may be even more demanding than ’mandatory’ standards These may be even more demanding than ’mandatory’ standards Standards affect upgrading opportunities for developing countries Standards affect upgrading opportunities for developing countries

Standards as a ’trade passport’? Standards define whether a good is ’fit for trade’ Standards define whether a good is ’fit for trade’ Key issues for developing countries: Key issues for developing countries: Who defines standards?Who defines standards? Who decides the content?Who decides the content? Who sets the measurement methods?Who sets the measurement methods? Who pays for the costs of compliance, monitoring and verification?Who pays for the costs of compliance, monitoring and verification? Who captures the benefits?Who captures the benefits?

Trends in agro-food standards (1) Increased food safety awareness Increased food safety awareness Focus on health and diet Focus on health and diet Social and environmental concerns Social and environmental concerns Authenticity of origin Authenticity of origin

Trends in agro-food standards (2) Product differentiation Product differentiation Quality control Quality control Traceability (field-to-fork) Traceability (field-to-fork) Third-party certifications or auditing Third-party certifications or auditing Larger number of standards Larger number of standards More complex standards More complex standards More stringent food safety standards More stringent food safety standards

Agro-food standards: A simplified typology Mandatory Mandatory Import regulation (i.e. food safety, geographic indications, labelling)Import regulation (i.e. food safety, geographic indications, labelling) Voluntary Voluntary International standards (ISO, Codex, SA8000)International standards (ISO, Codex, SA8000) Labels (organic, fair trade, eco-labels)Labels (organic, fair trade, eco-labels) Model codes of conduct (EUREP-GAP, ETI)Model codes of conduct (EUREP-GAP, ETI) Private Private Defined and owned by a company (supermarket chain quality standards)Defined and owned by a company (supermarket chain quality standards) Considerable overlaps Considerable overlaps

Lessons from case studies (1): Coffee Why is coffee interesting for analysing value chains, trade and standards? Why is coffee interesting for analysing value chains, trade and standards? No protectionist element in standards No protectionist element in standards Produced mainly in the SouthProduced mainly in the South Low tariff barriersLow tariff barriers Yet, tariff escalation (roasted, instant)Yet, tariff escalation (roasted, instant) Proliferation of ’private standards’: ’specialty’ and ’sustainable’ coffees Proliferation of ’private standards’: ’specialty’ and ’sustainable’ coffees

’Specialty’ and ’sustainable’ coffee standards Issues of participation in the setting of standards Issues of participation in the setting of standards Who benefits? Who pays?Who benefits? Who pays? Different stories Different stories SpecialtySpecialty Fair tradeFair trade OrganicOrganic Shade-grownShade-grown Mainstream initiatives on sustainabilityMainstream initiatives on sustainability

Lessons from case studies (2): Supermarket standards for FFVs Extremely demanding Extremely demanding Higher than import regulation on food safety Higher than import regulation on food safety Quality, maximum pesticide residues, ’ethical standards’ Quality, maximum pesticide residues, ’ethical standards’ More functions demanded from exporters More functions demanded from exporters Some cases of upgrading Some cases of upgrading From smallholders to commercial farms; increasing concentration at production and export levels From smallholders to commercial farms; increasing concentration at production and export levels

Challenges (1): Mandatory standards Better use of the dispute settlement system in the SPS Agreement Better use of the dispute settlement system in the SPS Agreement Lenghty and demanding process Lenghty and demanding process Penalties based on punitive tariffs Penalties based on punitive tariffs Not a practical way for developing cosNot a practical way for developing cos SPS Committee as a forum of discussion SPS Committee as a forum of discussion

Challenges (2): International standard setting SPS Agreement: harmonisation SPS Agreement: harmonisation Through: Codex, IPPC, OIEThrough: Codex, IPPC, OIE Poor participation in international standard setting and revisionPoor participation in international standard setting and revision Technical and financial assistance (not binding in SPS Agreement) Technical and financial assistance (not binding in SPS Agreement) Modest size of the Advisory Centre on WTO law Modest size of the Advisory Centre on WTO law

Challeges (3): Voluntary and private standards Voluntary (sectoral) and private standards are often more stringent than public regulation Voluntary (sectoral) and private standards are often more stringent than public regulation Issues of participation, transparency Issues of participation, transparency Public pro-active strategies to help industry organisations Public pro-active strategies to help industry organisations Technical and facilitation support for firms and industries Technical and facilitation support for firms and industries

Key questions Are standards eroding the comparative advantage of developing countries? Are standards eroding the comparative advantage of developing countries? Are they marginalising smallholders and small and medium enterprises? Are they marginalising smallholders and small and medium enterprises? Can standards be a tool for stimulating learning and a launch- pad for upgrading in developing countries? Can standards be a tool for stimulating learning and a launch- pad for upgrading in developing countries?

The role of research GVC analysis, trade and standards GVC analysis, trade and standards Access and participationAccess and participation Specificities of value chainsSpecificities of value chains Catalyst for industry-level debateCatalyst for industry-level debate Entry barrier AND opportunity for upgradingEntry barrier AND opportunity for upgrading Costs and benefits of compliance Costs and benefits of compliance Distributive impact Distributive impact