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Agriculture and The World Trade Organisation

 | 
Gurdarshan Singh Bhalla
, 
Jean-Luc Racine
, 
Frédéric Landy

III. Food security and food safety

8. Food Safety, Consumers’Preferences and International Trade Rules1

Jean-Christophe Bureau et Stephan Marette

Texte intégral

Sanitary and technical barriers

National regulations as trade barriers

  • 1 Reprinted with permission from “Accounting for Consumers’Preferences in International Trade Rules”, (...)

1The Uruguay Round has led to a substantial reduction in tariff protection. As traditional trade barriers tend to come down, non-tariff trade barriers are becoming a more important issue in the agriculture and food sector. This includes sanitary regulations, and more generally, a larger set of technical rules embedded in national regulations. A few years ago, little was known on the trade effect of domestic regulations, but this issue is now getting more and more documented. The listing of barriers to US exports by the Economic Research Service of the United States Department of Agriculture is one of the most detailed works in this area (Roberts and DeRemer, 1997; Thornsbury et al, 1997). To our knowledge, it is so far the only large scaled attempt to quantify the effect of foreign sanitary and technical regulation on trade. Other agencies, such as the US International Trade Commission, the Office of the US Trade Representative, have also investigated the impact of many national regulations on exports. Both the European Union (EU) and the Canadian government publish an annual report on US trade barriers. The European Commission has also set up a database on market access for a large number of countries. This database describes many foreign regulations that European exporters consider as unnecessary barriers to trade.

  • 2 According the EU Commission, “the fervor with which sanitary and phytosanitary rules are applied in (...)
  • 3 The OECD noticed that there are eleven US agencies involved in import regulations, many of them wit (...)

2These efforts show that domestic regulations impede imports in almost all countries. Regulatory barriers in the European Union are often pointed out by US agencies. The EU ban on hormone-treated meat is one of the most quoted examples. In the EU Commission’s market access database, the pages relative to Japan are particularly impressive. Many regulations, from the list of authorized additives to the technical requirements on meat products and the conditions of fumigation of flowers and vegetables at the Narita airport, are described as exceeding reasonable requirements. Even Australia, a country known for low tariffs, has technical standards which often preclude imports2. The US conditions of sanitary inspection, with long and somewhat random delays, open lists for insects which make import authorizations difficult and unpredictable, complex quarantine rules, are also accused of making it unnecessarily difficult to export food products to the United States3.

3International rules have been strengthened in order to address these problems. The Uruguay Round provides a framework for solving disputes, through the WTO’s Dispute Settlement Body, it tackles the problem of nontariff trade barriers through the Sanitary and Phytosanitary (SPS) Agreement and a strengthened Technical Barriers to Trade (TBT) Agreement; and it gives greater importance to international bodies, especially Codex Alimentarius, an international code of standards for human health protection under the auspice of the Food and Agriculture Organization (FAO) and World Health Organization (WHO). The SPS Agreement recognizes the right of governments to restrict trade in order to protect human, animal or plant health, but such measures must be transparent, consistent, and based on international standards or scientific risk assessment. There must be equal treatment for all nations and between imports and domestic products. The SPS Agreement covers health risks (food safety) arising from additives, contaminants, toxins and pathogens contained in food products. The TBT is much broader, covering all technical regulations, voluntary standards, conformity assessment procedures and any other measures not covered by the SPS Agreement. It seeks to ensure that national measures are transparent, have a legitimate purpose and minimize restrictions on trade. Compliance with relevant international standards is encouraged. Recently, at the Singapore conference, the World Trade Organization (WTO) has raised the issue of simplifying the import procedures which are often complex and act as trade barriers. Finally, in addition to the measures taken at the WTO level, the Regulatory reform proposed by the Organization for Economic Cooperation and Development also aims at limiting the negative trade effects of national regulations (OECD, 1997a).

International effects of national regulations

4There is no doubt that many of the regulatory barriers mentioned previously, in particular sanitary and phytosanitary ones, have been erected in order to protect local producers. Anecdotal evidence shows that special groups have often persuaded public authorities to back their case and erect barriers to protect vested interests, and that governments have sometimes “compensated” the decrease in tariffs by stricter sanitary and phytosanitary regulations, in order to prevent a surge in imports. The shorter shelf-life for food products in Korea was a famous example, but many other cases have been reported (see Hillman, 1997 and, more generally, different papers in Orden and Roberts eds, 1997).

5However, governments have also often set up regulations in order to address consumers’concerns. Such regulations often have a negative impact on trade, although this was not their primary purpose. This is the case, for example, when various options exist for ensuring a given level of consumer protection. In order to ensure that a product is safe, a government may consider banning certain techniques or laying down maximum tolerance levels for residual pathogens. If one country’s standards are based on the first option and another country’s are based on the second, exports come up against technical barriers and additional control costs.

6Differing incomes and tastes may lead to differing regulations. Developing countries cannot allow themselves the same standards as developed countries, with the result that their firms come up against regulations which constitute a de facto barrier to exports. Even in developed countries, in economic terms, it is possible to determine an optimum standard for each country, reflecting in particular a trade-off between cost and demand for food safety (Antle, 1995; Viscusi et al., 1995). It depends on the distribution of consumers’willingness to pay, and there is no reason why such an optimum standard should be the same in all countries. But different standards, albeit entirely justified in economic terms, can hamper international trade.

7More generally, regulations which affect trade, may come from genuine technical, geographical, cultural and sometimes religious differences. The concept of product quality is multi-dimensional, and is not limited to product safety (Hooker and Caswell, 1996). The perception of which attributes are essential when defining quality differs greatly among countries. Differing tastes, incomes and willingness to pay for a particular attribute are reflected in dissimilar regulations. In many countries, there is a public debate over regulation of the food industry. This includes safety of food, how it is produced, i.e. social conditions, animal welfare, the use of genetically modified organisms, hormones and growth promoters, cultural preferences, resource sustainability and protection of the environment. New production and processing methods driven by technology have added to consumer unease. The resulting national regulations can pose problems for exporters. The complexity of the issues make the right policy response difficult, especially in the absence of convincing evidence of health risk, but when consumers concerns look nevertheless genuine. The following sections present a few examples of such controversial issues.

Technical and cultural differences and domestic regulations

Disagreement on quality attributes

  • 4 Chen (1997) highlights the incompatibility of European quality marks, which emphasize authenticity, (...)

8There is considerable disagreement on quality attributes, such as the nutritional content, taste, production methods and authenticity of products, that are relevant and on the extent to which they may legitimately be the subject of regulation. Some countries consider that the soil, climate and traditional knowhow that exist in a region have a decisive influence on product quality, others do not. There is considerable disagreement on the meaning of “authenticity” which has inspired the 1992 EU legislation on food quality labeling (the term “authenticity” is used to translate the concept of typicité, which is the basis of all French and Italian quality labeling system, meaning that a product must be “typical” -i.e. representative- of a particular area, in addition to be produced with premium raw materials and, often, traditional techniques). Definitions based on taste or traditional know-how receive little support at an international level. These notions of product quality are ill-matched to the more restrictive approach adopted internationally4. The stance of the SPS Agreement is to take into consideration only a single quality attribute, namely sanitary quality. International Standardization Office (ISO) labels, which could become de facto standards regulating international trade, do not include all the quality dimensions of European regulations, which are based to a considerable extent on a product’s organoleptic qualities (taste) and authenticity.

Different conceptions of risk

  • 5 The SPS agreement states that countries should have the objective of “consistency”. If, on the basi (...)

9It is seldom possible nor economically feasible to achieve zero risk with respect to food safety. The SPS Agreement explicitly requires risk analysis to be carried out if a country adopts different standards from those of the Codex Alimentarius (Article 5.1). However, there is no agreement on what constitutes justifiable risk or “acceptable risk” as mentioned in the SPS Agreement (Annex A.5). Nor is there any agreement on the importance to be given to risk analysis, or on what is meant by the term “risk”, or on methodology. Officially, risk analysis is a three-stage process. The first stage, risk assessment, consists in identifying hazards, in particular their forms, thresholds and probabilities. The second phase is risk management and the third phase is communication concerning the risk. Approaches may differ widely from one country to another, especially concerning the importance to be placed on risk management (Mazurek, 1996). Some countries prefer to emphasize risk elimination (e.g. sterilization of mineral waters, ban on cheese made from unpasteurized milk, etc.). Others emphasize the possibility of risk control (in the above mentioned examples by bottling at source, Hazard Analysis at Critical Control Points, HACCP- controls, etc.), which is sometimes less costly and alters the product less, and point to the inconsistency of seeking to achieve zero risk in one area while tolerating high risk in others5.

  • 6 According to the Ministère de la Santé (i.e. the Health Department), milk products were responsible (...)

10The diverging conceptions of risk management are particularly obvious in many debates within Codex committees, such as the one on food hygiene, or on dairy products. The case of cheese made from unpasteurized milk provides an illustration of the fundamental differences that exist with regard to food safety thresholds between the European Union and the United States (note that this is also the case within the European Union itself). Cheese made from unpasteurized milk is more likely to contain pathogenic bacteria (Campylobacter, Salmonella, Listeria) than cheese made from pasteurized milk. Raw milk cheeses are however widespread in countries like France, Switzerland and Italy. In France, consumers clearly find that the hazard is minimum, compared to other types of risk, including the risk of infection of pasteurized cheese when improperly stored, and that there is basically no danger6. Risk management (control of dairy processing plants) and risk communication (warning of elder people and those with a weak immune system, systematic warning of pregnant women by doctors about possible abortions) is seen as being preferable to mandatory pasteurization. That is, risks are given media coverage and people clearly accept them. Any attempt to restrict the sales of even the most potentially dangerous soft cheeses is considered as completely unacceptable, and this issue clearly becomes a quasi-religious one every time it is raised at the European Union level. French, Italian and Swiss consumers point out the inconsistency of the banning of raw milk cheese and not, say, raw oysters or hamburgers in other countries. However, it is clear that consumers in other countries are not willing to accept the level of risk associated to raw milk cheese, possibly because they are less sensitive to quality attributes such as “taste” and “authenticity”.

Technical regulations and local conditions

11National regulations on authorized pesticide residues, for example, differ widely. However, the fact that it is difficult to measure the risks in this area makes any attempt to define standards highly controversial (Mazurek, 1996). Even national regulations applied even-handedly to domestic and imported products can have an effect on trade, especially if the chemical substances are not used in the country concerned. This is the case with procymidone, for example, a fungicide that is the subject of controversy in the wine-making industry. As the fungus against which procymidone is effective does not pose a problem in Californian vineyards, mainly for climatic reasons, there is no reason to use procymidone there. But low tolerance levels for residues would indirectly limit imports of wine from other countries, which need to use the product because of their climate. This issue, and more generally the “Delaney clause” in the US legislation was a bone of contention between the EU and the US. This highlights the possible trade effects of national regulations, even when they are applied to imported products in a non-discriminatory way.

12Some techniques used to control bacteriological risk are more adapted to certain countries than others. Bottling mineral water at source, for example, may be more expensive than bulk transportation and sterilization in some cases. HACCP techniques requires sophisticated technology and qualified labor at all stages of the production, transformation and marketing chain, which may be difficult to find in all countries. Irradiation techniques require a lot of capital, and it is overall very costly to transport products with low unit value to the adequate plant, especially in countries where production is scattered over very large areas. In many cases, different techniques, e.g. controlling processes or sterilizing can give equivalent results at the end product, but not all of them are adapted to the domestic conditions. Again, if one country picks an option and a second country picks another one, this will de facto result in technical barriers for exporters.

13The role that should be left to private operators in devising workable standards is a source of disagreements between countries. Producers want to be given greater freedom in the way they produce high quality food and point to the costs that highly specific regulations impose on the production process. They find it hard to understand why consumers and public authorities interfere so much in the definition of standards which in other (non-food) sectors is left much more up to the industry. Consumers do not see things in the same light and criticize what they regard as industry’s over-representation on the scientific committees of standards bodies, such as the Joint FAO/WHO Expert Committee on Food Additives, the Joint FAO/WHO Meeting on Pesticide Residues and the Codex committees. This highlights the difficulties of finding the right mix between highly detailed and restrictive regulations and consumers’concern at the latitude accorded to manufacturers. It affects trade issues because the “right mix” is not seen as being the same in all countries, an issue raised in numerous disputes on the list of permitted food additives (Vogel, 1995).

Legal differences

14Domestic regulations are defined in relation to the legal system prevailing in each country. This framework differs a lot across countries. Punitive damages in product liability action are very different in the United States and in European countries. In the United States, ex post liability clearly plays an important role in deterring firms from marketing unsafe products. Because of the potential outcome of tort law, firms often set up standards that exceed those required for passing government approval process. Antle (1995) shows that this reduces the need for “command and control” type of government intervention. In some EU countries, economic sanctions are very limited in the case of food safety problems. In France, liability is limited, and in non-lethal food poisoning problems, plaintiffs seldom take legal action. When an unsafe product is marketed, resulting in consumers’death, this most of the time results in penal sanctions for the manager rather than in large economic sanctions for the firm. (For example, to our knowledge, the fatal poisoning of hundreds of people with tainted cooking oil in Spain has not resulted in any significant monetary compensation for the plaintiffs 16 years later). That is, the incentive for supplying safe products would be perhaps lesser than in the United States, in the absence of a command and control regulation. Fundamental differences in the legal system for protecting consumers from health hazards provide some justification for diverging conceptions on the role of government in setting standards. More generally, differences in the legal environment, such as ex ante regulation vs. ex post litigation as a basis for law, may provide justifications for differences in governmental standards between countries.

Cultural differences

15Arguably, the fact that Islamic countries tend to erect barriers to pig meat imports is not seen as an unfair non-tariff barrier. One may wonder why the Egyptian ban on genetically modified organisms (GMOs) should not also be considered as legitimate, since it also had some religious connotations (the ban was announced but actually never enforced). This raises the question of how far one should go in this area, and whether the concerns of consumers in Luxembourg and Austria on GMOs (which look genuine) can also legitimate an import ban. A recent survey measured consumer acceptance of GMOs in nineteen countries, and showed that only 22% of Austrian consumers seem willing to buy genetically modified products, against 74% in the United States (Hoban, 1997). Even in Britain, one of the most permissive countries in the EU in this area, a poll shows that only 14% of consumers were happy with the introduction of genetically modified foodstuffs, and 96% wanted labels on food made of genetically modified seeds (The Economist, 1998). This reluctance cannot be completely explained by a lack of information, since Hoban’s survey reported that a higher proportion of consumers than in the United States said they had read or heard information about biotechnologies. Part of the explanation seems to lie in cultural factors. Most of the consumers’concerns actually seem to be linked to the possible spread of unwanted genes in the environment, rather than concerns about their own health.

16The case of genetically modified organisms is an illustration of the impact that consumers’cultural values can have on trade, regardless of scientific considerations. It is not the only one. Consumers in some countries remain opposed to irradiation, which is seldom used as a result (except for specific products such as spices, onions and some poultry in certain countries), even though since 1980 the International Atomic Energy Agency and the WHO have concluded that irradiated food presents no toxicological risk. Dissimilar consumer preferences have an impact on trade, as for example if one country requires ground meats offered for sale on its territory to be irradiated and another refuses to use the technology. Here again, despite scientific considerations, even very subjective quality considerations can have an indirect effect on trade.

Ethical concerns

  • 7 Simulations with the MISS model of INRA and ENSAR in Rennes (France) suggest that EU poultry meat e (...)

17Animal welfare regulations, introduced under pressure from animal rights activists, are becoming a very important topic in Europe. This may also have large consequences for international trade. In some cases, imports of products that do not comply with certain rules may be prohibited. The European Union, for example, has banned imports of furs of thirteen types of animals that may be caught using leghold traps, even though not all of them are listed by the International Convention on Trade in Endangered Species and some species are farmed commercially. National regulations may also distort competition. The European Union has adopted directives banning the battery farming (i.e. rearing in individual boxes) of milk-fed veal calves and has imposed collective rearing including cellulose feedstuffs which considerably increases production costs. This measure, still in the transitional phase, has little impact on trade, since there is little international trade in veal. Similar measures are being prepared for poultry, however, which could have a very considerable impact on the competitiveness of European poultry and egg producers, not only on export markets but also within the EU, if third countries do not adopt similar measures. The planned increase in the size of cages (in egg production) and the possible animal density limitation (in poultry meat production) would cause a substantial rise in heating and feeding costs and hence in the cost of European poultry, in relation to countries not under the same obligations. Substantial trade flows could be affected7. Farmers, especially in England and Sweden, where the regulations are already stricter than in the rest of the EU, claim that consumers’concerns should lead to similar requirements for imported products.

18Growing numbers of consumers are also concerned about the possible adverse effects of their purchases, on the destruction of natural resources in other countries, for example, or on child labor (Mahé and Ortalo-Magné, 1998). There is growing pressure from public opinion for the imposition of more environment-friendly practices in third countries, especially in order to protect the “common resources of humanity” such as tropical rainforest Some governments support a ban of timber products from countries where forests are threatened (Vogel, 1995). Consumers are also concerned about the importation of goods which they reject for cultural or religious reasons. But the fact that consumers’ethical values are not the same in all countries is bound to affect trade.

Mistrust in science

19In some countries, there has been a growing mistrust in science over the last decade. France is a typical example where the government has minimized the effect of major accidents, which have fueled suspicion and eroded public confidence in science. The importance of asbestos related cancers has been largely hidden under the pressure of the industry, and, when disclosed, past responsibility of mandated doctors in spreading wrong information has had a very negative effect on public opinion. Involvement of scientists in hiding information from the public in the nuclear sector has had a similar effect. (Scientists from government agencies claimed that the Chernobyl radioactive cloud had stopped exactly at the French border, something that nobody has actually believed). So has the continuous denying of public agencies involvement in spreading HIV contaminated blood, until journalists disclosed evidence. In France, as well as in most EU countries, the poor management of information about possible links between Bovine spongiform encephalopaty (BSE) and Creutzfeld-Jakob disease, and assurances from government appointed scientists made the mistrust of science a very sensitive issue in the food sector. Consumers concerns about genetically modified organisms and growth activators cannot be understood without taking this into account. While educating consumers is one of the government’s tasks in this area, the situation is such that any government information is considered as suspect.

20The poor management of information on past accidents by scientists and politicians is not the only reason for consumers’unease with science in some countries. One cannot blame only consumers’ignorance when they are not satisfied with the assurances given by biologists concerning the level of the Codex standards. Powell (1997) highlights the difficulties of obtaining reliable scientific assessments of the hazards present in food, because of genetic mutations, for example, or combinations of pathogens with uncertain effects, or the influence of exogenous and unforeseeable factors on microorganisms. The standards accepted by scientists do not always have an indisputable scientific foundation. Some have had to be completely revised at various times, and scientific “certainty” is sometimes fragile, especially with regard to the carcinogenic properties of products (Mazurek, 1996).

21In addition, consumers assert the right to entertain fears that scientists regard as “irrational”, especially concerning genetically modified organisms and irradiated food. Controlling short-term risks does not mean that longterm risks or uncertainties do not exist. In Europe, environmental and consumer groups have recently campaigned for the inclusion in multilateral agreements of a “precautionary principle”, which would allow exceptions to the regulations in cases where scientific proof does not go far enough (Godard, 1997). This does not seem to be as much of an issue in the United States and in the rest of the world, except perhaps on some environment related issues (Rege, 1994).

Accounting for consumers concerns

Consumers’values matter

22Governments and international agencies should not dismiss consumer concerns about food safety, nor about ethical, environmental or cultural values, and even perhaps about imagined health risks. This could significantly erode public support to the trade liberalization process. Mandatory compliance to ill-accepted standards may result in consumers’rejection of freer trade (Olson, 1998). The 1991 GATT panel on tuna, which basically ruled that a country could not ban imports for environmental reasons outside its territory, dragged into anti-GATT movements hundreds of thousands of people who would never had join such organizations otherwise (The Economist, 1993). Threats from the European Commission to restrict the sale of unpasteurized cheese are said to be “responsible for 5 out of 6 French votes against Maastricht”. The figure, quoted by Vogel (1995) may not be completely statistically exact, but it truly reflects how anti-European populist groups exploited fears of being “condemned to eat standardized, aseptic, industrialized cheese”. The 1997 panel on hormone treated beef also had a strong negative impact in European public opinion. Because of this panel, the WTO is now often perceived as an international agency whose goal is to overcome countries’rights to protect their consumers and more generally to undermine national sovereignty. Both issues contribute to fuel the isolationist propaganda of far right wing political parties in France and several other EU countries.

23Clearly, ignoring consumers’concerns could lead to a severe rejection of “globalization”, which already has a poor record in public opinion in many countries. Food is a sensitive topic, and few things are likelier to give trade liberalization a bad name than to have it associated with foisting on consumers mediocre or even potentially unsafe food. This aspect should not be underestimated, when consumer groups find in the Internet a powerful soundboard. The international co-ordination of the opponents to the OECD’s proposal on Multilateral Agreement on Investment shows that decisions can no longer be taken without consumers’approval. The list of Internet web pages gathering protests against the WTO, and even the SPS agreement is becoming very large.

24Even when they do not sign petitions, demonstrate, or protest in the polling booth, consumers can react by changing their consumption patterns. If consumers consider the way in which children are exploited, cosmetics tested, foxes killed or cattle reared to be an integral component of the quality of a food product, lipstick, coat or piece of meat, their demand for such products is altered by the presence or absence on the market of goods which do not comply with their ethical values. This is the case, for example, if it is difficult for consumers to identify goods produced under such conditions.

Bad” products driving out “good” products

25Another reason for taking consumer’s concerns into considerations is that there are some externalities between unsafe (or non-politically correct goods) and the safe (virtuous) ones. When consumers are not able to distinguish the specific quality of different products, they are not willing to pay as high a price as they would if they were sure that the product was of high quality. Akerlof (1970) has shown that imperfect consumer information about product quality could even result in total close-down of the market (absence of trade) if, because of a lack of information, buyers’willingness to pay was insufficient to cover production costs. If buyers’willingness to pay is less than the cost of producing high quality goods, only low quality goods (less costly to produce) are traded and high quality is frozen out of the market. Akerlof quoted second-hand cars as a famous example of poor quality chasing away high quality, but in the food sector too, the workings of the market may cause vendors to offer an inadequate level of quality or safety when information is imperfect.

26Consumer goods may be divided into search, experience and credence goods. A good is a search good when the consumer is capable of assessing its quality before buying it, an experience good when the consumer discovers the quality only after consuming it, and a credence good when the consumer never discovers the quality of the good (or does so only in the very long term). Many agro-food goods fall into the “credence” category (Caswell and Mojduska, 1996). This is the case, for example, when the “safety” component of quality or the nutritional composition of a product are at issue. It is also the case with the ethical, cultural or environmental components of quality. The economic mechanisms at work in these three categories are different. With experience goods, for example, the incentives for quality fraud are limited by consumer sanctions on the occasion of repeat purchases. With credence goods, there is no spontaneous mechanism for market regulation and it is more difficult to indicate quality in a credible way. The market failures highlighted by Akerlof may extend into the long term.

27Opening up markets can result in the coexistence alongside local products of foreign products whose quality is less familiar to domestic consumers. The imported goods may be perceived as being of lower quality because of doubts as to foreign control procedures or the different importance attached to each component of the overall quality of the good. Consumer uncertainty as to the type of products on the market (which might result, for example, from imports of goods like hormone-treated meat or genetically modified seeds) could affect demand, decrease consumer’s willingness to pay and raise adverse selection problem (Bureau et al., 1998). It is theoretically possible for the welfare loss resulting from reduced consumer willingness to pay to outweigh the welfare gain resulting from cheaper imports. For example, the EU commission suggested that lifting the ban on imports of hormone-treated beef, right after the “mad cow” crisis, could lead to a 20% decrease in beef consumption in the EU (Hanrahan, 1997). We are not aware of any rigorous study which supports this particular figure, which clearly seems to be upper bound. However, most observers agree that this would cause an extra decrease in consumption in this market. Although the magnitude of the fall in willingness to pay is difficult to assess, it is possible that the losses for the European economy could be large, in comparison to the gains for US exporters. In such a case, one may consider that opening preferential access quotas to US meat from certified producers who do not use hormones might be a better solution, from the viewpoint of overall welfare.

What are the solutions for reconciling consumers’concerns and international trade rules?

Consumers’concerns in the United States and Europe

28Different consumers’organizations have expressed their displeasure with international trade rules about food safety and quality. Several US organizations, such as the “Center for Science in the Public Interest” (CSPI), “Safe Tables Our Priority” (STOP), or “Public Citizen Inc” have complained that Codex standards are less protective of consumers than some domestic standards. These organizations are concerned that the SPS Agreement, because it facilitates trade and (allegedly) results in a “downward harmonization” of health and safety standards, could contribute to an increase in pathogens outbreaks (Fox, 1998; Public Citizen Global Trade Watch, 1998). Some of these groups are for example pressing for a revision of Article 10 of the SPS Agreement, which recommends taking account of the special needs of developing countries in the definition of standards (Silverglade, 1998). It is worth noticing that the food safety issues raised by such organizations seem to have played a role in the refusal of the “fast track” negotiation procedure by the US Congress. During the 1998 debate on the “Safe food Act”, government representatives have announced on many occasions that they would reinforce inspection procedures and that imports would meet stricter controls, showing that consumers’protests are increasingly affecting international trade arrangements.

29In Europe, consumers’concerns focus perhaps less on food safety than in the United States. According to consumers’representatives, a major concern is that standards should reflect what consumers want in a product, not what the industry wants to put into it. That is, European consumers concerns include more and more cultural and environmental attributes of quality. Organizations such as “Greenpeace” argue that WTO rules should be amended in order to cope with consumers’values and such views meet strong support in some EU countries. Consumers and environmentalist groups have been rather successful in lobbying the European Parliament in some areas. Bowing to the pressure of public opinion, the EU Commission as well as some national governments have introduced regulations in areas such as animal welfare, the protection of fauna and flora and genetically modified organisms. It is noteworthy that some of these regulations considerably increase the cost of producing food. As a result these governments point out that the SPS and TBT Agreements put them in an uncomfortable position by forcing them to authorize imports of goods produced using methods which they have had to ban at home. The European Union is unhappy at being obliged to authorize imports of food produced under less restrictive livestock farming conditions than its own (e.g. animal welfare), or using biotechnologies that consumer pressure prevents its own farmers from using (e.g. BST, or bovine somatotropin, a hormone used to increase milk yields in some countries).

30Although one cannot ignore consumers’concerns, fears about food safety give trade protectionists a wonderful opportunity to cheat, and trade restrictions motivated by social, cultural, ethical or environmental considerations can be a form of protectionism in disguise. There is often convergence between consumer demands for stricter standards than those recommended by scientists and the economic attraction of strengthening non-tariff barriers. The true motives of a government saying that it is barring is imports in order to stop people feasting on unclean fowl, or on meat stuffed with synthetic growth hormones, or maize that has been modified by frightening new technologies (each case being the subject of a quarrel between the United States and Europe) are hard to discern (The Economist, 1997). Since this problem is likely to be a major area of contention in coming years, it is worth exploring possible ways to address it.

More “sound science” in the SPS agreement

31After the Uruguay Round, there were large hopes that the reference to “sound science”, and in practice, the provisions of the SPS agreement which make a clear reference to international standards, would solve any potential conflict on sanitary and phystosanitary issues. However, things have proved more complex in practice.

32The idea of objective science serving to guide trade practice, which prevails in the SPS Agreement, is debatable. In practice, economic and political considerations are very much intermingled. In many cases thresholds have been set not only on the basis of medical effects but also on the basis of what is technically and economically feasible, and many scientists acknowledge off the record that some standards are defined “after the event” (radioactivity thresholds, for example). Ever since scientists’recommendations acquired the status of potentially mandatory standards, with considerable economic interests at stake, it has been difficult for them to ignore economic considerations. Salter (1988), Powell (1997) and Hillman (1997) have given numerous examples of “mandated science” or “negotiated science”. Manufacturers are also strongly represented on Codex and joint FAO/WHO committees, and economic interactions with standard setting are obvious.

33More generally, a trade-off between costs and benefits is sometimes implicit behind the scientific criteria, in the form of the setting of standards which take economic factors into consideration and reference to risk analysis in the settlement of disputes. Risk analysis includes a risk management component; this corresponds to the ways in which risk may be reduced to an “acceptable” level, which includes economic considerations, and in the last resort the decisions taken are often of a political nature.

Science is not always completely conclusive

34Many scientists express their doubts about the way standards for chemical residues are defined. (According to Antle 1995: 5, US Environment Protection Agency estimates for cancer risk from pesticide residues are approximately 1000 times higher than equivalent risk estimates using other methods). In many cases standards have been established on the basis of experiments on mice and rats and extrapolated to humans. Even with a considerable safety margin, the basis for such standards seems relatively arbitrary. (In France, some scientists have recently disclosed how fragile were the basis used for defining standards on dioxin, for example, which may be found in dairy products and accumulate in organisms and in mothers’milk when breastfeeding). International standards are now put to the vote at the Codex, and some are passed by a small majority. Not all countries are willing to acknowledge the legitimacy of risk thresholds imposed on them in this way.

  • 8 The precautionary principle is recognized in several international agreements (e.g. International C (...)
  • 9 In December 1998, the Conseil d’Etat postponed the final decision, because the legal consequences o (...)

35“Sound science”, and the reference to “available scientific evidence” in the SPS agreement may in practice conflict with the precautionary principle, which is more and more referred to by consumers’organizations. This problem is of particular importance, since it has recently led to a very controversial situation on the issue of Genetically Modified Organisms (GMOs) in the European Union. According to the precautionary principle, precautionary measures should be taken in absence of certainty according to the state of scientific knowledge at the time. Although it is not a legal principle, it can be reflected in regulations8. The preliminary decision of the French Conseil d’Etat (a kind of Administrative Supreme Court) in September 1998, in favor of non-governmental organizations which asked for a ban on GMOs, partly relied on the fact that the precautionary principle was embedded in the 1995 environmental law9. Article 5.7 of the SPS Agreement indicates that if relevant scientific evidence is “insufficient”, members may adopt SPS measures, on a provisional basis, while seeking additional information about the risks posed by a recently identified hazard. However, provisions of the SPS Agreement regarding precaution, are much more restrictive than what some consumer groups often mean when they invoke the “precautionary principle”, suggesting that there may be a fundamental ambiguity between the expectations of certain groups in society and practical measures.

36For all these reasons, the reference to sound science is not the panacea that is often described by international organizations. Other ways of reconciling consumers’concerns should be taken into consideration.

Labeling

37Labeling is economists’ favorite solution. The idea is that one should “give consumers the choice”. Beales et al (1981) have shown that segmenting the market, and allowing for each group of consumer to buy the products corresponding to their willingness to pay, is, in theory, a much better solution than mandatory uniform standards. As a result, labeling and consumer information policies are often portrayed by international organizations as preferable alternatives to regulation because they are cheaper for producers, leave the choice to consumers and are less likely to constitute trade barriers (OECD, 1997).

38However, in practice, labeling does not solve all problems either. First, labeling is not always possible, or, when it is, it can be very expensive. The proposals for a strict labeling of GMOs in Europe, require complete traceability, that is, that the whole chain be segmented, from the producer to the final processed product. According to the industry, this would generate very large costs (a Canadian study into segregating modified wheat products found this would require separate facilities at 15 different points from farm to market). In addition, pollen is known for spreading between controlled and uncontrolled areas (some pollen was found at several kilometers in altitude), and the segmentation of the two markets can hardly be perfect. In some other cases, labeling is simply not the solution that consumers are willing to accept. For example, animal welfare activists have clearly stated that labeling was not an issue and that they wanted an interdiction of certain rearing practices.

39Another reason why labeling is not the panacea described by some economists, is that the conflicts about the appropriate level of standards are sometimes simply displaced toward the issue of the appropriate label, which is equally complex. There are diverging opinions, for example, on the relevance of labels on clothing certifying low levels of pesticide use in the production of cotton, or on the specifications for labels certifying that wood products do not harm tropical rainforests. Mutual recognition of labeling for organically farmed products is difficult to achieve because countries apply the relevant criteria more or less strictly, or because some countries are considering granting such labels to genetically engineered or irradiated products. In November 1998, this was a bone of contention between EU member countries, and the adoption of an EU-wide definition of “organic” (“biologique” in French) food was postponed. Basically, the need for international harmonization/recognition of labels and of the underlying certification procedures raises difficulties that are comparable to the ones raised by the harmonization/recognition of mandatory standards

40Finally, economic theory suggests that, if agents are rational, a label on credence goods should not be sustainable. The idea is that rational consumers know that they cannot verify that producers fill their commitments, while rational producers have no reason to do so. Labels on credence goods require a third party certification, and, in spite of that, are not always trusted by consumers. In particular, it is difficult to monitor the production process of imported credence goods, which is the sole means for acquiring information about their quality. Foreign firms are also less exposed to judicial sanctions (liability), which may encourage fraud when the consumer is unable to verify the quality of the good in question directly.

Expanding GATT criteria

  • 10 Article XXa allows import restrictions when they are “necessary for the protection of public morals (...)

41Some consumer values may well be out of step with GATT principles. In the environmental sphere, rulings in disputes brought within the framework of GATT and the WTO hold that a country is not entitled to use trade measures restricting imports to protect natural resources outside its territory, even in the case of resources which some consider to be “common to humanity”. In the cultural sphere, a country may introduce regulations that are more stringent than international standards on ethical, moral or religious grounds only under very limited conditions10. Recently, the 1998 appellate body on the Shrimp-Turtle case ruled that the Article XX exceptions are “limited and conditional”, a confirmation of the first GATT tuna panel conclusion, but which could prove important in future challenges to domestic health, safety and environmental regulations. The SPS Agreement does not recognize the validity of consumer concerns in cultural, ethical and environmental areas (though under the TBT Agreement they may be taken into consideration by authorizing different labeling). Because of the mismatch of GATT rules and some consumers’concerns, many environmentalist and consumerist organizations claim that one should include other factors than sanitary and phytosanitary risks in the Codex and the SPS agreement, or that one should give a broader scope to Article XX, so that it embeds a larger set of consumer values.

42A number of arguments can be made for including ethical and cultural values as grounds for trade restrictions. Reluctance to consume goods produced in unethical conditions can affect demand for all goods, including those produced “virtuously”, as for example with animals caught in traps and animals reared on farms. Externalities between goods may arise if ethical and cultural values are acknowledged. Trade is also one of the most effective means for obliging countries to respect human or children’s rights or to protect natural resources and endangered species. Socially aware consumers who would like to be able to wield such a weapon find it hard to understand why international trade rules should prevent them from doing so. Vogel (1995) gives several examples where trade restrictions and a desire for access to greener markets have had an impact on a country’s attempts to improve social and environmental regulation. Moreover, it may be paradoxical to reject trade restrictions for cultural reasons when they are admitted for nonfood products such as medicines. The case of RU 486, the “morning after” contraceptive pill, is an extreme example of a product which may not be imported into certain countries, including the United States, solely for cultural reasons in spite of evidence showing large reductions in hazards for women, linked to pregnancy interruption at a later stage. Lastly, thresholds and standards are sometimes adopted in line with what is socially acceptable, and reference to an acceptable risk introduces cultural considerations into the SPS Agreement (the acceptability of a given risk is subjective although required to be scientifically justified if different from international standards), raising the question of whether this type of consideration should be included explicitly in the agreements.

  • 11 In 1990, the EU imposed a moratorium on the use of BST until the end of 1999 (though without bannin (...)

43However, giving consideration to ethical, cultural or moral arguments could open a Pandora’s box. For some countries, risk may be social as well as biological, including factors such as bankruptcy among farmers and rural desertification. Cultural or ethical arguments could be used to cover a potentially unlimited number of exceptions to free trade. A laxist interpretation of the TBT Agreement in this sphere would provide justification for a whole host of trade barriers. In practice, this debate has already been raised within the Codex. The legitimacy of socio-economic and cultural factors has been a bone of contention for years in Codex committees, namely on the issue of BST. Some countries argued that economic and social factors and consumer reluctance should be taken into account. But if a decision has been taken at the Codex to defer and reconsider the BST case, it is not on account of these arguments11.

44More generally, there is no agreement on the consideration that should be given to arguments other than “objective” medical risk when sanitary regulations are being defined seems difficult to reach. Discussions on the item on “the role of science and the extent to which other factors are taken into account” at 13th Session of the Codex Committee on General Principles (September 1998, Paris) have been largely inconclusive. A similar problem exists within the dispute settlement procedure of the WTO. Decisions taken on the basis of purely scientific considerations simply seem unacceptable to consumers’organizations who expect that international standards reflect what they want to eat, not only what is safe to eat. When WTO rules conflict with decisions of a democratically elected parliament (as in the EU-US hormone treated beef issue), things get even more difficult.

Can economics help?

45When cultures differ, economic analysis may perhaps help finding a common playing field. This issue has progressively been accepted in the area of environmental disputes, and it is progressing, albeit slowly, in the phytosanitary area, and, to a lesser extent, in the sanitary area. Here, we consider the possibility of a broader use of economic assessment in food quality regulations as well as in disputes settlement on non-tariff barriers.

46Cost-benefit analysis is already used to enable public authorities to take decisions concerning national regulations. It is already an important stage in the framing of regulations in the United States. Arrow et al, (1996), recommend that the method should be used systematically, since they observed considerable differences between the cost of public health measures and their real impact on health (they give estimates where, within the same agency, the cost per life saved varies between US$200 000 and US$10 000 000 depending on the program, which means that more lives could be saved at the same cost to society; see also Magat et al., 1986). Even though society does not accept all risks in the same way, and even though social choices cannot be reduced to the equalization of a statistical cost between programs, cost benefit analysis should take a more important place.

47Box 1 describes a few possible techniques in order to introduce more economic assessment in the sanitary and phytosanitary regulations. There are clearly many technical difficulties. Measuring the benefits procured by regulations designed to guarantee certain subjective aspects of product quality is not easy, and the problem of the valuation of imagined risks is a difficult one (Pollak, 1995, 1998). Estimates of cancer risk from pesticide residues contain a substantial degree of uncertainty as to the risk, making any economic estimate particularly difficult. Sometimes, it is not possible to calculate the probability of a risk that is too uncertain, making it difficult to carry out analysis with conventional tools. This is the case, for example, with the risk of genetically modified organisms propagating genes, or the risk of long-term epidemics such as Bovine Spongiform Encephalopathy and Creutzfeld Jakob Disease, or environmental risks. However, similar problems exist in traditional risk assessment procedures. With an economic approach, it is possible to use approaches based on the measurement of changes in the consumer utility function when consumers have access to a product with attributes to which they are attached (Kopp et al., 1997).

Box 1: Methods for estimating the benefits of sanitary and technical regulations

     
Where food safety and the spread of plant and animal diseases are concerned, cost benefit analysis involves quantifying the level of risk and estimating its economic impact. This approach is widely used, though very unevenly from one country to another, not only in order to assess the interest of a regulation but also to compare the advantages and disadvantages of several possible means of government intervention. In particular, it can be used to rationalize the strengthening of sanitary and phytosanitary controls in relation to the dissemination of information and the raising of consumer awareness, or to inform decisions about the introduction of regulatory standards (Kopp
et al., 1997).
Although there are still some technical difficulties, there are few major obstacles (except the lack of economic culture of the administrations in some countries such as France) to complementing classical risk analysis by cost benefit analysis in the phytosanitary and animal health area. Things are more complex, however when cultural values are at stake, and when one deals with human health issues.
Several methods exist for estimating the cost of mortality and morbidity and evaluating in money terms the benefits of government action resulting in a reduction of sanitary risk. With the human capital method, a value is placed on the reduced risk of premature death based on an evaluation of discounted labor flow. For an individual of a given age, the value of the life prolonged (statistically) by a regulation corresponds to the discounted sum of the mathematical expectation of the person’s revenues (Freeman, 1993). Some extensions of this method have been proposed, in particular by integrating non-merchant aspects and the value of the individual’s descendants (Viscusi, 1993). With the cost of illness method, a value is placed on the reduced morbidity resulting from sanitary or regulatory methods, based on an estimate of medical costs and productivity losses due to illness (Buzby
et al, 1996; Crutchfield et al., 1997). Opportunity costs from investing in activities that reduce the risk are included in the value of reduced illness (Landelfeld and Seskin, 1982). As with the human capital method, statistical methods have to be used to estimate the risk, especially dose-effect relationships.
Methods based on estimates of willingness to pay, although more difficult to apply, are wider reaching, since they make it possible to include quality-related aspects that cannot be translated into identifiable short-term illness. The preventive expenditure method seeks to measure agents’willingness to pay by observing the efforts made to avoid illness. With this method, a money evaluation of the disutility of being ill is added to the estimated cost of illness, together with an estimate of the preventive expenditure that an individual is willing to commit according to a given pathogen level (Harrington and Portney, 1987). Contingent evaluation methods involve asking individuals directly about their willingness to pay in order to reduce the risk of an illness, or more generally to obtain higher quality in a good. By directly revealing willingness to pay, this method theoretically makes it possible to gain a money estimate of all the benefits arising from a given measure. However, answers have to be corrected for statistical bias due to respondents’incentives to over- or underestimate their willingness to pay (which depends in particular on whether they anticipate having to pay the disclosed sum or not). As these methods are widely applied to environmental issues, efforts have been made recently to harmonize survey methodologies (see, in the United States, NOAA panel, Federal Register 58,10). Another method being used increasingly widely at present is the experimental economics method, which involves getting a group of individuals in a situation where their real behavior is simulated to reveal their willingness to pay for particular qualities. Such methods are relatively onerous to put in place, but they make it possible to obtain a precise measurement of the value that a sample of individuals places on different sanitary thresholds, according to information received, for example (Hayes
et al., 1995).
The methods described above are used to evaluate the benefits of drawing up a regulation to protect consumers’health or to ensure that they acquire the quality they desire. Methods for evaluating the cost of regulations are generally based on estimates of the welfare loss of the agents concerned when they have to comply with a regulation. This includes, for example, the cost to firms of acquiring suitable equipment and many other direct and indirect costs. Kopp
et al., (1997) provide illustrations of such estimates. One method involves valuing them as opportunities that had to be foregone. This includes the diversion of resources, the value of specific inputs that become useless, the excess cost of substitution technologies and the price differentials with replacement products borne by the consumer.

48When human health is at stake, the topic is more sensitive since giving a value to illness avoided or even a human life saved is not always well accepted, especially in some EU countries. However, it is worth noticing that in the same countries, transportation and energy departments use such calculations on a daily basis when they decide priority investment in road safety or thresholds in dam buildings. Economic assessment would simply make choices more explicit, although concepts such as “the value of life” (actually, the value of life saved) can still be shocking for many people (Viscusi, 1993).

  • 12 The French Institut National de la Recherche Agronomique (INRA) has recently started several academ (...)

49Cost-benefit analysis can be of particular interest as far as ethical or cultural values are concerned. If for example consumers place particular value on the fact that a good is produced without the use of biotechnology or irradiation techniques, estimating their willingness to pay means that the variation in consumer satisfaction resulting from a regulation prohibiting the technique in question can be quantified in money terms (Viscusi et al., 1995; Magat and Viscusi, 1993). One application could be the animal welfare issue, an awkward case where public opinion is being represented by vociferous consumer lobbies in Europe, and where scientists have proved being of little help. More economic assessment would make it possible to assess the real importance of this concern throughout the entire population12.

Economic analyses and the settlement of disputes

Scientific and economic criteria

50Present arrangements for the settlement of international disputes relating to technical and sanitary barriers have put economic analysis second to risk assessment. The SPS Agreement recognizes that governments may set higher sanitary standards than the ones used in other Member countries. In practice, this means that one can restrict imports on sanitary grounds, when a hazard is scientifically proved to exist, and that one cannot implement such import restrictions in the absence of proof of significant hazard. Although Article 5.3. of the SPS Agreement (and Article 2.2 of the TBT Agreement) mention economic assessment, such considerations only have a limited place in the settlement of sanitary and technical disputes, and cost-benefit analysis is far less central than risk analysis.

51International agreements on sanitary and technical measures do not oblige countries to adopt only those regulations whose benefits exceed their costs (Roberts, 1997). In practice, many countries introduce import restrictions on sanitary grounds, to avoid the spread of pests for example, without making any prior estimate of potential losses. These may sometimes be very small in comparison with the cost to consumers caused by the regulation in question. If economic methods of calculation were used more systematically, the welfare gains resulting from the import restrictions could be compared with the welfare gains resulting from freer trade (James and Anderson, 1998; OECD, 1997b).

Assessing consumers’concerns

52In addition to helping decision-makers when choosing between different risk management options and when reviewing quarantine policies, cost-benefit analysis can also provide a sounder basis for discussing the role of “other legitimate factors” than health hazards, a problem that remains a live issue.

53It is often argued that Codex standards and texts express policy choices and that such policy choices could extend to national policies in such areas as the environment, consumer concerns, animal welfare, and societal values. If these values were considered from an economic standpoint, the debate might lead to more convergence in the different points of view. Since it is based on a revelation of individual preferences, cost-benefit analysis can be seen as a tool for organizing many different pieces of information and points of views in a consistent framework.

54Up to a certain extent, willingness to pay is a defendable measure of people’s concerns. Genuine consumer aversion for certain sanitary as well as cultural reasons, is reflected in a willingness to pay in order to avoid the products. Although there are still some technical difficulties and conceptual obstacles, contingent valuation techniques or experimental economics may help people from different cultures to find a common “metrication” for defining more objectively how genuine the concerns of their consumers are, and for finding solutions to complex issues which largely reflect cultural differences. In this respect, microeconomics can be seen as a useful negotiation language.

More economics in the settlement of disputes?

55The procedure for settling sanitary and technical disputes under the auspices of the WTO could draw on the experience of competition policy. One accepted principle, including in international disputes, in competition policy is that certain forms of co-ordination between producers, which may indeed restrict competition, are not necessarily undesirable from a social standpoint. In most developed countries, as in most international organizations, public regulators (competition councils, anti-trust commissions, etc.) weigh up their advantages and disadvantages (Viscusi et al., 1995). Infringements of competition rules are permitted after an economic cost benefit analysis, and non-competitive arrangements are often accepted if it can be proved that they bring economic benefits and that the benefits are fairly distributed between agents. Regulators tend to take such decisions on a case by case basis, weighing the pros and cons and carrying out a mainly economic cost-benefit analysis, rather than applying immutable general principles. Less consideration is given to such principles in the settlement of sanitary and technical disputes, especially in the international arena.

56All regulatory measures likely to hinder imports are sometimes classified as non-tariff barriers. Some particular studies in the agro-food sector use a broad definition of the term non-tariff trade barriers (Hillman, 1991, Roberts and DeRemer, 1997). However, Baldwin (1970) has suggested that non-tariff barriers should be defined as policies which reduce potential world revenue. According to this definition, policies which in practice restrict trade flows would not be regarded as non-tariff barriers if their effect was to correct market inefficiencies and increase world revenue. Mahé (1997) proposes extending the definition to include non-merchant effects. He suggests that measures whose elimination would cause welfare losses in some countries that are greater than welfare gains in other countries should be classified as non-tariff barriers. This definition is in line with both economic theory and the idea of using cost benefit analysis to arbitrate disputes.

57When trade liberalization calls into question national regulations whose effect is also to reduce market inefficiencies, the welfare effects may be analytically ambiguous (Thilmany and Barrett, 1997; Bureau et al., 1998). If a WTO panel, for example, results in an obligation to import products that do not satisfy consumers’ethical, environmental or cultural concerns, antiselection mechanisms could cause substantial welfare losses. In practice, this could involve consumer boycotts or rejections, which would affect demand for all the goods concerned, both imported and domestic. Estimating overall costs and benefits would involve quantifying the different variations in welfare, raising awkward technical problems. Nonetheless, it is possible for welfare losses to be greater than welfare gains at a global level. It would be paradoxical if trade liberalization, introduced by an international organization in the framework of the settlement of disputes, were to result in more trade but less welfare. In such cases, Baldwin’s criterion could serve as a basis for settling disputes (Mahé 1997). Practical implementation could be based on a cost-benefit analysis which would seem to be more in line with the maximization of collective welfare than are rigid principles derived from uniform scientific standards.

Conclusion

58Americans may wonder how come Europeans chose to ban hormone-treated beef and not tobacco, a far more hazardous substance. Yet, French consumers find it difficult to understand why Americans support a ban on “camembert” cheese, while they tolerate the risks linked to legal possession of handguns. Both American and French consumers will nevertheless look aghast at the Japanese who willingly pays an extraordinarily high price for eating the dangerous “fugu” fish, which regularly leads to death. Coping with such differences in the perception of risk within a uniform international code of standards and a “one size fits all” SPS agreement is bound to raise a lot of difficulties and frustrations. The issue is even more complicated when attributes of food quality other than safety are involved, i.e. cultural, environmental or ethical values.

59Since the 1994 SPS Agreement, the reference to “sound science”, has helped make legislation more consistent across countries. However, it is unlikely to solve all the problems. Science is not always conclusive, scientists’recommendations are not always trusted nor well accepted by consumers, and scientific risk assessment do not make it possible to account for the genuine concerns of consumers on other aspects than health risk (i.e. cultural, environmental and ethical concerns) which are becoming a major area of contention in international trade (Bhagwati and Hudec, 1996). In any case, measuring the risk gives no indication of the loss of utility for consumers. When focusing on risk analysis as the SPS agreement presently does, one may run into the problem that although there is a very slight risk that a product is dangerous, the mere fact of knowing this to be the case could result in a very high proportion of consumers refusing to buy the product, and therefore high welfare losses (Josling, 1998).

60Accounting for consumers’values, including factors other than health risks, could prove necessary in the future, if one wishes to avoid weakening support for trade. Food is a sensitive issue and free trade will be given a bad name if it is associated with the foisting on consumers of unwanted food. Genuine consumer aversion for certain imported products, for sanitary or cultural reasons, is normally reflected in a willingness to pay in order to buy other goods with which satisfies their concerns. Giving this willingness to pay greater importance in the settlement of disputes, by comparing it with the costs to other economic agents, would help take account of consumer preferences. This could also help to prevent detractors of a more open trading environment from linking trade liberalization with an obligation to consume products that do not correspond to consumers’aspirations.

  • 13 The economist Claude Henry defended such a position some 15 years ago in environmental-related issu (...)

61Economic analysis raises a number of technical difficulties. However, the methodologies described in Box 1 have raised similar difficulties in the evaluation of environmental costs and benefits, though agreements on evaluation procedures have progressed. What was considered as not feasible 20 years ago (e.g. the use of contingent valuation for assessing environmental damages and calculating fines in a trial) is now widely accepted. One may think that economic analysis in the SPS area is at a stage comparable to that of economics in the environmental area two decades ago. In many cases, cost-benefit analysis can already be a useful negotiation tool13. It will not solve everything, but given its potential contribution in the settlement of disputes, it deserves a more important role in the sanitary and phytosanitary area.

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Notes

1 Reprinted with permission from “Accounting for Consumers’Preferences in International Trade Rules”, in Incorporating Science Economics and Sociology in Developing Sanitary and Phytosanitary Standards in International Trade, Board of Agriculture and Resources of the National Academy of Sciences, National Academy Press, Washington, 2000, pp. 170-198.

2 According the EU Commission, “the fervor with which sanitary and phytosanitary rules are applied in Australia suggests that the system operates as a trade barrier”. For example canned tomatoes which have failed a case pressure test are banned; it is nearly impossible for cereals to enter Australia even at times of severe drought (when domestic prices are very high) due to disease fears. Import permits are required for over 150 agricultural products, without which they are prohibited, and the significant financial costs of product control and testing, as well as the slowness of the monitoring process, serve to deter trade of chocolate, canned meat, olives, wine, herbs, poultry or pork meat. Quarantine regulations de facto prohibit the importation of a whole range of meat, dairy and other products.

3 The OECD noticed that there are eleven US agencies involved in import regulations, many of them with different methods of assessments, imposing an unnecessary administrative burden on would-be exporters to the United States. For example, imported foods are treated differently depending on whether they are regulated by the FDA or the USDA (the US data inspects meat and poultry products), and as a result, different processed products exported by the same firm are sometimes treated differently.

4 Chen (1997) highlights the incompatibility of European quality marks, which emphasize authenticity, with US legislation, and the difficulty of achieving international recognition for this type of mark.

5 The SPS agreement states that countries should have the objective of “consistency”. If, on the basis of a risk assessment, there is one in a million chance of a certain product causing a certain level of damage, the product should not be subject to greater restrictions than other products presenting a similar level of risk. The level of risk may be acceptable or not, the objective is that the acceptable risk should not be different according to the product concerned (see Doussin, 1995).

6 According to the Ministère de la Santé (i.e. the Health Department), milk products were responsible of 5% of alimentary toxico-infections, that is 5% of 0.00016% of the meals served in 1995 (only a share of them being raw-milk products); unpasteurized cheese was however clearly involved in the death of one person in 1997 (to our knowledge, none in 1996 and 1998).

7 Simulations with the MISS model of INRA and ENSAR in Rennes (France) suggest that EU poultry meat exports could fall by 70% if the limitation of density asked by animal right activists (16-18 chickens per square meter instead of the present density of around 23-26) was adopted. The competition of cheap US chicken cuts on the EU market would also increase dramatically.

8 The precautionary principle is recognized in several international agreements (e.g. International Convention on the Protection of the North Sea, Rio Declaration, Framework Convention on Climate Change), in European law (Maastricht Treaty) and in national laws (French 1995 law on environment, US law on pharmaceutical approval). However, in many cases, European consumers’organizations give a much broader scope to this principle than the somewhat restricted version mentioned in international agreements. The Rio Declaration for example, only states that “in order to protect the environment, the precautionary approach shall be applied by a State, according to its capabilities. Where there are threats of serious or irreversible damages, lack of full scientific certainty shall not be used as a reason forpostponing cost effective measures to prevent environmental degradation” (Principle 15 of the Declaration of the United Nations Conference on the Environment and Development, adopted in 1992).

9 In December 1998, the Conseil d’Etat postponed the final decision, because the legal consequences of this principle were unclear and contradicted other legal texts (i.e. the EU Directive 90/220 which regulates the approval of deliberate releases of genetically modified organisms into the environment). It temporarily upheld its preliminary ban on Novartis genetically engineered maize and asked the European Court of Justice to give its advice on the legality of the initial approval.

10 Article XXa allows import restrictions when they are “necessary for the protection of public morals”.

11 In 1990, the EU imposed a moratorium on the use of BST until the end of 1999 (though without banning imports of dairy products from countries where BST is allowed). The Codex Alimentarius approached the problem of BST and growth hormones from the standpoint not of fanning practice but of measurable residues, which proved to be low in both case. The consumer representatives and several countries argued that consumers were opposed to the use of BST and that BST improved neither the quality not the health characteristics of milk, and asked to be allowed to ban it. The European Union asked for “legitimate factors other than scientific analysis” to be taken into consideration. But the vote to defer the decision was taken because some delegations had contributed scientific evidence which raised questions about the weakening of the immune systems of animals treated with BST and argued that this could increase the risk of infection, the need for treatment and hence levels of antibiotic residues.

12 The French Institut National de la Recherche Agronomique (INRA) has recently started several academic studies involving either contingent evaluation (the measurement of willingness to pay for guaranteed prion-free meat, for “animal welfare correct” food, at INRA-Rennes) or experimental economics (organic food, GMO-free products, etc., at INRA-Ivry).

13 The economist Claude Henry defended such a position some 15 years ago in environmental-related issues. On the basis of examples in the United Kingdom, he showed how cost-benefit analysis could be a constructive language for expressing public concerns. This paper was an important step in convincing environmentalists that serious economic evaluation could be in their interest, and the public in general that economics was not the evil science that many believed it was (Henry, 1984; we do not know whether this seminal paper has ever been published in English).

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