Beyond Regulation: How voluntary and private standards on quality and ‘sustainability’ shape ‘real world’ trade Stefano Ponte Senior Researcher Danish Institute for International Studies

Global Value Chain Analysis (GVC) Tool for understanding trade flows, power relations and division of functions along the producer-consumer axis in the ‘real world’ of business and industry relations ‘Lead firms’ in GVCs set ‘private’ rules that shape trade flows and market access DIIS studies on: coffee, cocoa, cotton, citrus, fresh vegetables, clothing New research: role of standards in shaping trade flows, market access and governance of GVCs

GVC analysis and standards 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. These may be even more demanding than ’mandatory’ standards Standards affect upgrading opportunities for developing countries

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

Key questions Are standards eroding the comparative advantage of developing countries? 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?

Case studies Fish –EU regulation –MSC (Maritime Stewardship Council) certific. Coffee –Limited effect of mandatory standards Except for forthcomibg ocratoxin legislation (EU) ICO quality improvement programme – Impact of ’sustainability’ standards Fair trade, organics, shade grown, etc.

Fish (gen.) Impact of: –EU regulation ( Council Directive 91/493/EEC) –MSC certification (Maritime Stewardship Council) –Other voluntary and private standards Exports of Nile Perch (from Uganda) and South African Hake (from South Africa) –Substitutes for cod and haddock –Mostly to the EU (duty and quota free from Uganda)

Uganda-Fish Artisanal fishery + industrial processing EU bans on Ugandan exports Responses to the crisis –Implementation of HACCP –Stronger regulation and organization of the industry; product testing (local facilities) –Upgrading (processes, not product) –Re-establishment of good reputation New challenges: MSC certification

MSC Maritime Stewardship Council –Founded in 1997 by Unilever and WWF –Certifies ’sustainable fisheries’ 3 principles: –Status of stock –Impact of fishery on the ecosystem –Performance of fishery management system Main characteristics –10 fisheries so far: one in ’developing countries’ (South Africa) –4% of globally traded fish volume (est.) –Mostly industrial fisheries –Demanding institutional and regulative practices

Coffee Coffee crisis & the coffee paradox Role of ’sustainability’ standards –Certifications: fair trade, organics, shade- grown, Utz kapeh –Codes of conduct and procurement guidelines: Starbucks, Nestle’ (SAI), CCCC Small proportion of market as of now –(1% by value), but growing fast Do they ’deliver’ to producers?

Premium levels

Other indicators Other impacts on income (in and out of the coffee economy) Social and environmental impacts Smallholders vs. Estates Regions

Role of public policy and technical assistance Promote participation of developing country actors in standards setting Provide information and training to formulate negotiating positions Promote coordination and harmonization Capacity building to match new standards Super partes functions –’positive discrimination’ (SMEs, smallholders) –regulatory framework, monitoring claims

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