Information-sharing workshop for Geneva-based delegates Geneva, 29 February 2008

1. Private Voluntary (process) Standards: A Major Determinant of Access to Global Food Markets Information-sharing workshop for Geneva-based delegates Geneva, 29 February 2008 Presented by: Ulrich HOFFMANN, UNCTAD secretariat

2. 2 2 2 2 2 Quality-assurance role – facilitating trade Competitiveness instruments Instruments to encourage shift towards sustainable production/ consumption methods Private voluntary standards as chain-governance tools Role of Standards Role of the New Breed of Standard Packages (combining product-characteristics and process standards)

3. Multidimensionality of Requirements 3 Pillars of Environmental, Health and Food Safety Requirements Plant/Animal Health Product Quality Food Safety Environment Social Product composition Product cleanliness Grading Labeling requirements Control of nutritional claims ISO 9002 Ethnic standards Fair trade standards MRLs Heavy metal limits Food additives Hygiene requirements Traceability HACCP Quarantine requirements Pest risk assessment Restrictions on feed Vaccination Animal welfare standards Control of water and env contamination Protection of biodiversity Protection of endangered species Recycling Organic prod requirements

4. Multidimensionality of Requirements cont’d 4 4 4 4

5. 5 5 5 5 5 5 5 5 Concerns of Exporting Developing Countries • 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-precisionproduction 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.

6. 6 6 6 6 Globalization and Private Voluntary Standards (PVS): What is Cause, What Consequence? • Global sourcing of food – food-safety concerns, lack of enforcement • Globalization (through efficient factor allocation) facilitates and requires transition to high-precisionproduction 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

7. 7 7 7 7 7 Supermarkets by-pass spot markets High share of supermarkets in total retail Competition and differentiation strategies of supermarkets Need to control risks and reduce related costs Restructuring of Global Value Chains and the Role of PVS Changes

8. Implications of Changes in Global Supply Chains 8 • 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 PVS 9 Enterprise Level Macro-economic Level Benefits Costs Benefits Costs Market access Higher prices Better management Savings on inputs Occupational safety Stable profits High quality management, testing and certification (recurrent) costs High fixed capital investment costs Developmental (national food safety, tax revenues) Environmental (water, soil etc.) Social (employment, skills) Investment in physical infra-structure Investment in quality-assurance infra-structure (accredited labs etc.) Extension services

10. Compliance Costs of PVS for Small Producers 10 10 10 10 GLOBALGAP certification: average cost of compliance as a percentage of the annual profit margin for small-scale growers in Zambia Source: Graffham and Vorley (2005)

11. 11 11 11 11 PVS: Catalyst or Barrier (1) PVS as Barrier ...or... PVS as Catalyst

12. 12 12 12 12 PVS: Catalyst or Barrier (2) 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

13. 13 13 13 13 Exposure of Developing Countries to PVS Example of Fresh Fruit and Vegetable Exports

14. Current Markets and Their Requirements 14 In fact, GLOBALGAP effectively enforces mandatory requirements of EU countries Whole Chain Assurance REQUIREMENTS PRE- FARM GATE POST FARM GATE Currently some 400 private food schemes Food Packing and Processing Growers Farmers Retail Stores Consumers EurepGAP Tesco’s Nature’s Choice SQF 1000 • Key components • Pre-Farm and Post Farm Gate Standards • Traceability • Risk Assessment • Residue Monitoring HACCP BRC SQF 2000 SQF 3000

15. 15 Private sectors standards Multiple certification ??? Harmonization & equivalence rare despite WTO NGO-set standards Mandatory requirements, e.g. on organic agriculture Coping with an Inflation of “Sustainability” Standards For example: - Fairtrade - Ethical Trade - Organic - Bird-friendly coffee - Sustainably managed and harvested wood Price premia?? • How can one effectively deal with an array of not harmonized and equivalent standards?

16. 16 16 16 16 National GAP Programmes ensuring food safety & quality GAP economically viable environmentally sustainable GAP=‘practices that need to be followed to ensureenvironmental, economicandsocialsustainability for on-farm production and post-production processes and result insafe and quality foodand non-food agricultural products’ (FAO 2003) A way tomanage your system better socially acceptable

17. 17 17 17 17 What is a GAP scheme? 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

18. 18 18 18 18 National GAP Programmes Source: Poisot, A.S., FAO, 2007

19. 19 19 19 19 Clarity on Thrust and Focus of National GAP 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)

20. 20 20 20 20 Clarify Target Markets and National Capacity • 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.Theindustrycan = 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

21. 21 21 21 21 Contextualizing National GAP Schemes • 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.

22. 22 22 22 22 22 Role of Governments in National GAP Programmes Supportive and Facilitating Role Facilitating Investment Devising flanking/support policies Policy Analysis Assuring policy coherence Facilitating stakeholder dialogue - facilitating and engaging in stakeholder dialogue on development & implementation of GAP • - among government agencies dealing with various aspects of GAP • towards donors • - on extension services • on financial support • addressing problems with registration of CPPs • - Facilitating conceptual clarity on enhancing developmental contribution • Addressing smallholder concerns • Optimizing costs & benefits - in physical infrastructure - in SMTQ systems & institutions - directing donor funding accordingly

23. Transparency in PVS Setting and Implementation 23 23 23 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. 24 UNCTAD Activities on PVS (1) • UNCTAD Consultative Task Force (CTF) on Environmental • Requirements and Market Access for Developing Countries • 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 Nam • Latin America: Argentina, Brazil, Costa Rica • 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

25. 25 25 25 25 UNCTAD Activities on PVS (2) 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. Website of UNCTAD’s Consultative Task Force www.unctad.org/trade_env ulrich.hoffmann@unctad.org