Information-sharing workshop for Geneva-based delegatesGeneva, 29 February 2008Presented by: Ulrich HOFFMANN, UNCTAD secretariat

22222

Role of the New Breed of Standard Packages (combining product-

characteristics and process standards)

Quality-assurance role – facilitating trade

Instruments to encourage shift

towards sustainable production/

consumption methods

Competitiveness instruments

Private voluntary standards as chain-governance tools

Role of StandardsRole of Standards

3

Multidimensionality of RequirementsMultidimensionality of Requirements

Pillars of Environmental, Health and Food Safety Requirements

Food Safety Plant/Animal Health

ProductQuality

Environment Social

MRLsHeavy metal limitsFood additivesHygiene requirementsTraceabilityHACCP

Quarantine requirementsPest risk assessmentRestrictions on feedVaccinationAnimal welfare standards

Product compositionProduct cleanlinessGradingLabeling requirementsControl of nutritional claimsISO 9002

Control of water and env contaminationProtection of biodiversityProtection of endangered speciesRecyclingOrganic prod requirements

Ethnic standardsFair trade standards

4444

0

50

100

150

200

250

Co

ntr

ol P

oin

ts

Holistic view of GLOBALGAP Standard:Food Safety, Environment and Social Control

Points

Recom.

Minor

Major

Multidimensionality of Requirements cont’dMultidimensionality of Requirements cont’d

5555555

Concerns of Exporting Developing Countries 5

• Emerging environmental, health and food-safety (EHFS) requirements will be applied in a discriminatory manner against DgCs.

• DgCs lack the administrative, infrastructural, technical, and managerial capacities to comply with new and more stringent requirements

resulting from a transition from conventional to high-precision production methods.

• Adjustment and compliance costs will undermine the comparative advantage of DgCs.

• Institutional weaknesses and compliance costs will further marginalize weaker economic players, including smaller countries, enterprises and farmers.

666Globalization and Private Voluntary Standards (PVS): What is Cause, What Consequence?

6

• Global sourcing of food – food-safety concerns, lack of enforcement

• Globalization (through efficient factor allocation) facilitates and requires transition to high-precision production methods in agriculture

• Globalization requires strategic positioning (products, capacity, quality-management systems)

• Private Voluntary Standards (PVS) are addressing these issues – make global supply chains manageable and verifiable as well as encourage transfer of new technology + management methods

77777

Changes

Supermarkets by-pass spot markets

Competition and differentiation strategies of

supermarkets

High share of supermarkets in total retail

Need to control risks and reduce related costs

Restructuring of Global Value Chains and the Role of Restructuring of Global Value Chains and the Role of PVSPVS

8

Implications of Changes in Global Supply ChainsImplications of Changes in Global Supply Chains • Need to develop strong and stable ties between producers, exporters

and supermarkets

• Risk of marginalization of small farmers (unless well managed groups)

• Key role of exporters in “organizing” producers (out-grower schemes)

• Reinforcing trend towards “own” production of exporters on large, commercial estates

• May increase wage employment on agro-industrial estates

• Enhances competition among developing countries: supply-chain changes and PVS are reinforcing already existing capacity weaknesses (infrastructure, institutions, skills, quality management, finance etc.) A key issue from a development perspective is: what will be the net effect on the welfare of rural families and what will be the implications for pro-poor agricultural development strategies.

9

Costs and Benefits of PVSCosts and Benefits of PVS

Benefits Costs Benefits Costs

Market accessHigher pricesBetter managementSavings on inputsOccupational safetyStable profits

High quality management, testing and certification (recurrent) costsHigh fixed capital investment costs

Developmental (national food safety, tax revenues)Environmental (water, soil etc.)Social (employment, skills)

Investment in physical infra-structureInvestment in quality-assurance infra-structure (accredited labs etc.)Extension services

Enterprise Level Macro-economic Level

10101010

Compliance Costs of PVS for Small ProducersCompliance Costs of PVS for Small Producers

GLOBALGAP certification: average cost of compliance as a percentage of the annual profit margin for small-scale growers in Zambia

HectaresSupport from donor-subsidised

Produce Marketing Organisation (PMO)

No support from PMO

Capital costs Recurrent costs

Capital costs Recurrent costs

2.0 – 6.0 2-5 0.4-1 8-23 3-5

1.0 – 1.8 5-8 1-2 26-41 9-14

0.3 – 0.8 12-33 3-8 58-160 19-53

Source: Graffham and Vorley (2005)

1111

PVS: Catalyst or Barrier (1)PVS: Catalyst or Barrier (1)1111

PVS as Barrier

...or...

PVS as Catalyst

1212

PVS: Catalyst or Barrier (2)PVS: Catalyst or Barrier (2)1212

PVS as Barrier ... or...

– Non-transparent protective tool– Information unclear– High, unattainable– High costs of compliance– Marginalize small countries,

traders and farmers– Contraction of Trade

PVS as Catalyst

– Harmonized procedures & rules build confidence

– Spur investment, modernization & public/private collaboration

– Stimulate improved practices & stronger technical support

– Foster new forms of competitive advantage

– Maintain/expand income opportunities

Source: Jaffee S., World Bank, 2004

1313

Exposure of Developing Countries to PVSExposure of Developing Countries to PVS1313

Share of FFV exports from / to in %

EU-15 Asia US and Canada

Latin America

Africa

Asia (Malaysia, Thailand, Vietnam)

10 70 10

Latin America (Brazil, Argentina, Costa Rica)

48 30 20

Africa (other than South Africa)

75 2 2

Example of Fresh Fruit and Vegetable Exports

14

Current Markets and Their Requirements

Whole Chain Assurance

PRE-

FARM

GATE

POST

FARM

GATE

Growers

Farmers

Food Packing and Processing

Retail

Stores Consumers

REQUIREMENTS

Key componentsoPre-Farm and Post Farm Gate Standards oTraceabilityo Risk Assessment o Residue Monitoring

EurepGAPTesco’s Nature’s ChoiceSQF 1000

HACCP

BRC

SQF 2000

In fact, GLOBALGAP effectively enforces mandatory requirements of EU countries

SQF 3000

Currently some 400 private food schemes

15

Coping with an Inflation of “Sustainability” Standards Coping with an Inflation of “Sustainability” Standards

Multiple certification ??

?

NGO-set standards

Private sectors standards

Harmonization & equivalence rare

despite WTO

Mandatory requirements, e.g. on

organic agriculture

• How can one effectively deal with an array of not harmonized and equivalent standards?

For example:- Fairtrade- Ethical Trade- Organic- Bird-friendly coffee- Sustainably managed and harvested wood

Price premia??

161616

National GAP Programmes16

socially acceptable

GAP

economically viableenvironmentally

sustainable

socially acceptable

ensuring food safety & quality

GAP=‘practices that need to be followed to ensure environmental, economic and social sustainability

for on-farm production and post-production processes and result in

safe and quality food and non-food agricultural products’ (FAO 2003)

A way to manage your system better

171717

What is a GAP scheme? 17

1. For decades: extension & research guidelines on “good practices”

2. Late 1990s : “GAP” codes & standards

– farm better (=SUSTAINABLE & SAFE for workers/consumers)– demonstrate that you farm better (=records and/or certification)

= GAP is an opportunity to integrate technical advice to farmers -- to include good agronomy + food safety and quality + business skills

= GAP – to be seen as a building block in the national food chain approach to food safety

= Different types of GAP standards for different objectives and conditions

Source: Poisot, A.S., FAO, 2007

181818

National GAP Programmes 18

Stakeholders coordinationand mechanisms

Market Demand& Sector Support

Infrastructure & capacity building

ReliableInspection/Certif/ Lab

Standards &documentation

Concertedstrategy and policy

GAP PROGRAMME

Source: Poisot, A.S., FAO, 2007

191919

Clarity on Thrust and Focus of National GAP 19

STRATEGY DEPENDS ON

• OBJECTIVE : where do we want to go?• STRATEGY : how will we get there?• POTENTIAL: what will we realistically gain by doing it?• ...AND SHOULD BE:= COHERENT= COST EFFECTIVE= REALISTIC (based on existing capacity)

202020

Clarify Target Markets and National Capacity 20

• Target your market and other objectives first, then see what you need to comply with

• Step 1: CRITICAL ANALYSIS of – country strengths– diagnostic of current practices – comparison with legal and commercial requirements of current and

target markets – importance of sub-sector for development and poverty

• Government cannot make the industry competitive. The industry can = if strong and interested, take the lead

• Market recognition of government-run or supported GAP schemes can be low, however advantages of governmentally supported GAPs

212121

Contextualizing National GAP Schemes 21

• When contextualizing national GAP development, it is important not to limit it to the commercial, micro-economic context of

enabling producers to comply with downstream market standards. • Rather, national GAPs should address both the commercial context

and the non-commercial sustainability aspects, including benefits for worker health, national food safety, the environment and national economic development, including transfer of technology and

innovative management methods. • This is the background for using public (and development assistance) resources to support national GAP implementation.

222222

Role of Governments in National GAP Programmes 2222

Supportive and Facilitating Role

Policy Analysis

Facilitating Investment

Devising flanking/support

policies

Assuring policy

coherence

Facilitating stakeholder

dialogue

- Facilitating conceptual clarity on enhancing developmental contribution- Addressing smallholder concerns- Optimizing costs & benefits

- in physical infrastructure- in SMTQ systems & institutions- directing donor funding accordingly

- on extension services- on financial support- addressing problems with registration of CPPs

- among government agencies dealing with various aspects of GAP- towards donors

- facilitating and engaging in stakeholder dialogue on development & implementation of GAP

232323

Transparency in PVS Setting and Implementation 23

Assuring Transparency and Equivalence (WTO principles)• Are PVS (sufficiently) risk based?• Contain requirements that are proportional (and related) to the risk • Are PVS transparently implemented? • Allow real equivalence or rather require 'sameness'

Most recent measures of GLOBALGAP to facilitate inclusion of small producers• Creation of an African Observer for GLOBALGAP sectoral committees• Formation of a Smallholder Taskforce to work with the African Observer aimed at elaborating concrete proposals for smallholder-friendly changes in the GLOBALGAP standard (control points) and General Regulations (certification procedures) -- may also assist in making certification easier for small-scale growers

24

UNCTAD Consultative Task Force (CTF) on EnvironmentalRequirements and Market Access for Developing Countries

1. Three recent books synthesizing the challenges and opportunities of pro-actively adjusting to PVS of the following country groups:Africa: Ghana, Ethiopia, Kenya, Uganda, Zambia Asia: Malaysia, Thailand, Viet NamLatin America: Argentina, Brazil, Costa Rica

2. Active observer role in WTO discussions on PVS – SPS Committee:- two recent joint UNCTAD-WTO information sessions on private

standards on the sidelines of SPS Committee sessions in October 2006 and July 2007

UNCTAD Activities on PVS (1)

25252525

Website of UNCTAD’s Consultative Task Force

www.unctad.org/trade_env

UNCTAD Activities on PVS (2)

ulrich.hoffmann@unctad.org

3. Two regional stakeholder workshops, organized by FAO and UNCTAD on compliance with PVS and conceptual issues of national GAP programmes (one for South America in 2006, one for East and Southern Africa in 2007).

4. Planned advisory and technical assistance activities (jointly with FAO, and, where appropriate with FoodPlus) on conceptual issues of

developing national GAP programmes to pro-actively adjust to PVS in export and national markets.