1 Standards Issues in Agricultural Development Lawrence Busch R. James Bingen Craig Harris Thomas Reardon Institute for Food and Agricultural Standards Michigan State University Paper presented at USAID Washington, February 2000

2 Why should we be concerned about standards? n New rules for global trade n Differentiation of demand n New economic opportunities n New economic constraints n Potential for supply disruptions n Potential for democracy

3 What I will talk about... n What are standards for? n What is at stake n Negotiating standards n Market Access n Outcomes n Where we go from here n Benefits

4 What are standards? n Standards: Measures by which products, processes and producers are judged n Grades: Categories used to implement standards n Standards are… u for people and things u ubiquitous u therefore ignored

5 What are standards for? n Reducing transaction costs n Transparency n Coupling n Functionality n Ensure well-being

6 What are standards for? n Rules of the game n Strategies n Equity/Social Justice

7 What is at stake for agricultural development? n Participation in global markets by u firms u nations n Disruption of commodity flows n Building economic infrastructure n Cultural identities n Fairness and equity

8 Negotiating Standards n Who gets to participate? n Do some actors dominate? n Who gets to vote? n How are standards modified? But negotiation continues throughout the process...

9 Standards and Market Access n Who can participate? n Who is excluded? n What biases are introduced by the standard? n Can this be changed?

10 What are the outcomes? n Who benefits? n Who loses? n Are risks acceptable? n What third party effects? n What impact on environment? n Impacts on other standards?

11 Standards Formation Industry leaders Trade associations Government agencies NGOs Quality, Food Safety, Environment & Labor Standard Setting and Negotiation Process

12 Standards Formation

13 What This Means n Chain is only as strong as weakest link n Attention must be paid to standards across the subsector n Standards may conflict, e.g., environmental and quality standards Let’s look at some examples...

14 Example 1: US Soybeans n Foreign matter in US soybeans debated for >50 years n Millions of $ rest on 1% trash n Reputations of farmers, elevator operators, exporters, processors, retailers rest on 1% trash

15 Example 2: Chinese Rapeseed n China wants to export canola- type rapeseed oil n Establishes standards for seed, grain, oil, etc. n Builds modern processing facilities n Project fails for lack of price differential at elevator n No incentive to meet standard

16 Example 3: Malian Mangoes n President Chamber of Agriculture of Mali attempted to import Malian mangoes n Malian phytosanitary certificates obtained n Product rejected at US port of entry n Did not meet US phytosanitary standards

17 Lessons Learned n One link was sufficient to cause a problem n Incomplete strategies: did not look at each CSP n In Malian case, quality and environmental standards conflicted So what is needed to promote profitable, fair and equitable agricultural development?

18 What is needed? Education about... n Who are the actors? n What are their roles? n How do nations and the civil sector participate? n What are the rules? n How can standards be used strategically?

19 What is needed? n WTO de facto enforcement n International standards u Codex Alimentarius u OECD u IPPC u OIE u UNECE n Industrialized nations’ standards u United States u European Union u Others n Corporate de facto standards Education about standards

20 Who needs education? n Government ministries n Regulatory agencies n Input producers n Farmers n Transporters n Processors n Retailers n Consumers

21 What else is needed? n Greater transparency n Fair implementation of standards u nationally u internationally n Voice for developing nations, consumers n Equivalence of processes, tests n Help in meeting international norms

22 Benefits n Smoother flow of traded goods n Greater fairness in international trade n Improved quality, safety n Better environment n Strengthened democratic processes nationally and internationally