Food Sa...of Beef - Chapter 2 - International Institutional Arrangements

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Food Safety 02 29/5/01 2:35 pm Page 15 Chapter 2 International Institutional Arrangements International institutional arrangements have had an important influence upon the development of food safety systems in the countries examined in this study. The most important of these arrangements include the World Trade Organization’s (WTO’s) Agreement on Sanitary and Phytosanitary Standards (SPS Agreement) and the Agreement on Technical Barriers to Trade (TBT Agreement) as well as the Codex Alimentarius (Codex). These arrangements attempt to standardize the rules for establishing domestic food safety regulations while simultaneously discouraging their use as an unwarranted barrier to trade. The purpose of this chapter is to discuss the main international institutional arrangements and explain their subsequent influence upon domestic food safety systems. While these international institutional arrangements are important drivers of change for domestic food safety systems, they themselves have their own drivers of change. The drivers of the international arrangements are discussed in the next section, followed by a description of the international institutional arrangements themselves. In the final section is an analysis of the institutional arrangements as well as a discussion of the prospects for the establishment of an international food safety system. As we shall see, the prospects are not that good. This suggests the future focus of attention should not be on the international harmonization of food safety regulations. Instead, it should be on the development of food safety systems within individual countries followed by the integration of these systems among divergent countries. International Drivers The development of international institutional arrangements and rules governing food safety regulations has been prompted by international drivers common to the four countries under study. These drivers are market mega15 Food Safety 02 16 29/5/01 2:35 pm Page 16 Chapter 2 trends originating on either the demand side or the supply side of food product markets. On the demand side, there are two important international drivers. First, consumer preferences are becoming more exacting as incomes continue to grow in many parts of the world. Consumers are showing an increased willingness to pay for an assurance of food safety. Second, the globalization of media information allows for the rapid dissemination of sensationalized news stories of cases of food-borne illness, which can adversely affect consumer confidence and consumer demand for food products across international borders. As a result, the perception of consumers that food products are unsafe may be affected on a much greater scale than ever before, even though the actual risk may be quite low. On the supply side, there are also two important international drivers. First, technological improvements in all phases of processing and production as well as in packaging and transportation have made enhanced food safety systems possible. For instance, the adoption of HACCP systems allow firms proactively to identify, verify and minimize the presence of food safety hazards. Also, newer packaging techniques allow for the possibility of endproducts being irradiated after packaging, so there is no other handling of the product. This can reduce the potential for contamination being introduced to the product during further handling at the packing firm, during transportation or at the retail level. The second important supply-side driver is the improved coordination among the various participants of the beef supply chain. These have encouraged enhanced food safety procedures to extend all along the chain to provide an integrated food safety system. Such a system involves food safety controls at every point in the supply chain and product traceability back to the primary producer. Increasingly, supply chain participants are viewing themselves as interdependent operators in a customer-responsive food supply chain. This is beginning to replace the traditional view they had of themselves as independent rancher, feedlot operator, abattoir or retailer. Together, the demand- and supply-side international drivers have made food safety an important international issue and have encouraged the establishment of international food safety rules. For instance, producers want international food safety rules that are consistent, stable and predictable in order to ensure access to foreign markets. Consumers want international food safety rules that ensure that all food products for sale in domestic markets achieve an acceptable level of food safety, because the internationalization of food production increases the potential range of ‘mass contamination’ to include many national markets. It will be argued below that these drivers have resulted in a discernible convergence in food safety rules across countries characterized by adoption of the Risk Analysis Framework and Quality Assurance schemes. Food Safety 02 29/5/01 2:35 pm Page 17 International Institutional Arrangements 17 International Institutional Arrangements As mentioned above, the drivers have encouraged the establishment of internationally standardized food safety rules under the jurisdiction of international institutional arrangements. The most important set of international institutional arrangements is the Codex, a joint agency of the United Nation’s (UN’s) World Health Organization (WHO) and the Food and Agriculture Organization (FAO), whose mandate is to develop international standards, guidelines and codes of practice on issues of food safety and food quality. The creation of the WTO has led to two other important sets of international institutional arrangements: the Agreement on Sanitary and Phyto-Sanitary Standards (SPS Agreement) and the Agreement on Technical Barriers to Trade (TBT Agreement). In the next section, the WTO and the relevant trade agreements will be discussed first followed by a discussion of the Codex. WTO As part of the conclusion of the Uruguay Round of multilateral negotiations on international trade, the WTO was created as a permanent institution administering several international trade agreements as well as dealing with cases of international trade dispute. The international trade agreements that are particularly relevant to the issue of meat safety are the SPS Agreement and to a lesser extent the TBT Agreement. By way of background, the international trade regime has been built on the traditional principle of non-discrimination. Essentially, there are three important aspects of this principle. First, is the ‘like product’ concept implying that products which serve the same end-use are considered like products and treated equivalently regardless of any differences in their process or production methods. Second, is the concept of National Treatment whereby foreign products must face the same regulatory standards as like domestic products. Third, is the concept of most favoured nation (MFN) whereby all like foreign products must face the same market access requirements as those foreign products from the MFN. The non-discrimination principle has been applied to ensure that government reactions to producer pressures for trade protectionism are constrained by trade rules and obligations. The traditional principle of non-discrimination has been used successively to reduce border-type trade barriers such as tariffs as well as non-tariff barriers (NTBs) such as quotas, variable levies and quantitative restrictions. Indeed, the WTO’s Agreement on Agriculture (AoA), which focused on these types of trade barriers, offers the prospect of real international discipline on agricultural trade. Such measures can no longer be established in a unilateral manner and must meet the principle of non-discrimination. Food Safety 02 18 29/5/01 2:35 pm Page 18 Chapter 2 Yet, disciplining these types of trade barriers should not be interpreted to mean that the political pressures for protection have disappeared. In fact, a new type of NTB has been emerging, which is less transparent yet potentially as effective as the older more familiar NTBs. These new measures for protection include domestic regulatory standards and technical rules for consumer and environmental protection. Emerging simultaneously as the regulatory barriers to trade, are calls for protectionism not from producers but from civil society. In other words, two new challenges face the international trade regime. It must deal with new types of trade protectionism as well as new sources of trade protectionism. Food safety is at the vanguard of these two challenges. Domestic regulations that diverge from regulations in other countries have been enacted which delay and sometimes prohibit market access. Also, some segments of society call for public intervention to ensure not just safety, but also product quality and to ensure that new products have socio-economic benefits. Beyond regulatory standards applying to the product, there are also growing calls for governments to regulate the production and processing methods (PPMs) used to create products in order to ensure that they do not have adverse environmental or animal welfare impacts. From a trade perspective, divergent food safety rules among trading nations can create market access barriers for foreign products. This trade threat has encouraged the development of international agreements to provide standardized rules for establishing domestic regulations so that the various national standards and regulations do not provide fertile ground for NTBs (Hooker and Caswell, 1999). Therefore, while the AoA addresses traditional agricultural trade barriers, the SPS and the TBT Agreements both address the potential NTBs created through the use of domestic regulations. The SPS Agreement constitutes a considerable strengthening of rules governing the legitimate use of domestic health regulations to restrict food trade. At the heart of the SPS Agreement is the tenet: no member should be prevented from adopting or enforcing measures necessary to protect human, animal or plant life or health.1 Thus, the SPS Agreement specifically allows for the establishment of NTBs on food imports, but only where there is a proven, scientific risk to human, animal or plant life or health. The main contribution of the SPS Agreement was to standardize the procedures for determining a proven, scientific risk to human, animal or plant life or health (WTO, 1999a). In this way, it reduces the opportunity for using food safety measures for other (inappropriate) reasons. The SPS Agreement established the following principles to be applied by all WTO Members to any domestic regulations concerning human, animal and plant health. In order to be legitimate the regulations: ● must be appropriate to the risk involved, based on scientific proof and the trade impacts should be minimal while achieving the desired level of SPS protection (the principle of proportionality); Food Safety 02 29/5/01 2:35 pm Page 19 International Institutional Arrangements ● ● ● 19 must not involve arbitrary or unjustifiable discrimination between Members (they require a scientific justification for discrimination); should ideally be based on international standards, namely Codex for food safety, the International Plant Protection Convention for plant safety and the International Office of Epizootics for animal safety (countries are permitted to exercise more stringent standards than the ones set by these international institutions, but only if they can demonstrate a scientific justification for doing so); and should be transparent (members are obligated to provide notification during the development, implementation and alteration of relevant regulations). These principles serve to strengthen the role of international standards. However, a country can still maintain or introduce SPS measures that exceed the international norms if there is scientific justification (Article 3), and provided that science-based reasons are given (Article 12). According to Article 12, the burden of proof in such cases lies with the exporter (Article 4). But even without sufficient scientific proof, Members are allowed to adopt temporary measures to deal with short-term safety concerns (Article 5(7)). Thus the SPS Agreement is one of the few WTO Agreements to observe the principle of precaution. In short, the SPS Agreement allows WTO Members to impose additional food safety regulations and to discriminate against imports on the condition there is an acceptable scientific justification to do so. Of course, this raises the important issue of what constitutes acceptable scientific justification. According to WTO case law (Salmon Case – WTO, 1998b), there are three important criteria. The country’s regulations restricting imports must: 1. Explicitly identify the diseases whose entry, establishment or spread the Member wants to prevent and must describe the potential biological and economic consequences of entry; 2. Evaluate both the likelihood of the entry, establishment or spread of the disease and the economic and food safety consequences according to a risk assessment procedure under the Risk Analysis Framework; and 3. Be those that minimize the trade impact. The objectives of the TBT Agreement as stated at the beginning of this chapter are: to ensure the quality of exported products, protect human and animal health, preserve plants, protect the environment, prevent practices which may mislead consumers (economic fraud) and ensure national security. The TBT Agreement is thus broader in scope than the SPS Agreement. Whereas the SPS Agreement focuses explicitly on food safety issues, the TBT Agreement is concerned with all (mandatory and voluntary) technical standards that apply to internationally traded products including food. When a dispute arises, it is first necessary to verify whether the technical issue falls Food Safety 02 20 29/5/01 2:35 pm Page 20 Chapter 2 within the scope of the SPS Agreement. If it does not, it immediately goes to the TBT Agreement. The technical standards considered under the TBT Agreement include technical performance standards a product must meet to be imported or exported – for example, energy efficiency standards for washing machines. The performance standards include product quality attributes, packaging requirements, labelling rules, as well as advertising and marketing claims. They may also include environmental, health, labour or other standards a product must meet during its life cycle (e.g. that forest products must come from sustainably managed forests). The TBT Agreement dictates when such barriers may be allowed and what conditions must be met (notification, transparency in developing the rules, the use of international standards when appropriate, and so on). It applies fully to all government standards, including most levels of government. Non-governmental, non-mandatory standards are less strictly covered under what is called the Code of Good Practice. The principles underlying the TBT Agreement are: ● ● ● ● ● ● avoidance of unnecessary obstacles to trade; non-discrimination and national treatment; harmonization; equivalence of technical regulations; mutual recognition of conformity assessment procedures (these are procedures which ensure imported products conform to domestic technical regulations and standards); and transparency. Hooker and Caswell (1996b) point out there is a blurred distinction between food safety and food quality issues and hence, in the case of food, there is opportunity for jurisdictional overlap between the TBT and the SPS Agreements. This is problematic because while SPS Agreement attempts to distinguish legitimate from illegitimate trade barriers according to scientific justification, the TBT Agreement is not limited to a scientific justification. As a result, the TBT Agreement appears to be softer on allowing import trade barriers against specific products. For example, a country wishing to protect the domestic food industry may successfully appeal to the TBT Agreement on the grounds of environmental and ethical requirements on food PPMs where such grounds would not be available under the SPS Agreement. This is not to say the TBT Agreement allows open season on PPMs because a country cannot simply discriminate against imported products which serve the same end-market as domestic products based on differences in the manner in which they were produced. Codex From the discussion above, it is clear that while the international trade regime is an important institutional arrangement impacting food safety, underlying Food Safety 02 29/5/01 2:35 pm Page 21 International Institutional Arrangements 21 this regime is the Codex Alimentarius (Latin for Food Code, Codex for short), an equally important international arrangement. The need for a consistent and non-fragmented international approach to food regulation after the Second World War culminated in the creation, in 1962, of the Codex Alimentarius Commission (CAC). The objective of the CAC was to develop the Codex. The Codex was intended to provide universally applicable food safety guidelines that would facilitate international trade in food products and ensure international consumer protection. Although the initial intent of the Codex was to focus on food safety and consumer protection, its mandate has broadened to include food quality issues. Given its objective of facilitating international food trade, as well as the inclusion of Codex standards and standards-setting principles into the SPS and TBT Agreements, the CAC has found it difficult to ignore such issues. Administratively, the CAC is a joint agency of the UN’s FAO and the WHO created under the UN’s food standards programme. As a result, all member countries of the UN may be members of the CAC. Assisting the CAC is the Codex Secretariat and the Codex Executive Committee. The Codex Secretariat is located in Rome and is administered by the FAO. The purpose of the Secretariat is to provide day-to-day support for member countries as they attempt to interpret, develop and implement national food regulation congruent with the Codex Alimentarius. The Codex Executive Committee meets yearly and, unlike the CAC, is organized according to principal regions (Europe, Africa, Asia, the South Pacific, Latin America and North America) not according to subjects. Hence, the Codex Executive Committee is a regional coordinating committee providing a regional perspective on food safety. The CAC is composed of committees organized around commodities, general subjects, regions (which were indicated above), and around expert groups providing supporting advice and guidance. Committees are chaired by a member country and they may be active or dormant. The 14 worldwide commodity committees cover the following product categories: cereals, pulses and legumes; vegetable proteins; tropical fresh fruits and vegetables; processed fruits and vegetables; fats and oils; processed meat and meat products; meat hygiene; fish and fishery products; milk and milk products; sugars; cocoa products and chocolate; edible ices; soups and broths; and nutrition and foods for special dietary uses. The eight Codex General Subject Committees are: 1. 2. 3. 4. 5. 6. 7. 8. Residues of veterinary drugs in food; Import/export inspection and certification; Food additives and contaminants; General principles; Pesticide residues; Food labelling; Analysis and sampling; and Food hygiene. Food Safety 02 22 29/5/01 2:35 pm Page 22 Chapter 2 Finally, the Codex group of expert committees includes the expert group on fruit juices and quick frozen foods. Other joint FAO/WHO agencies that provide expert advice and consultation to the CAC and the various committees are the Joint Expert Committee on Food Additives and the Joint Meeting on Pesticides. The process of introducing, developing and adopting food safety standards into the Codex Alimentarius can be cumbersome. A Codex food standard includes several elements: ● ● ● ● ● a description of the product and the essential composition and quality factors which identify the product (from close substitutes); identification and analysis of any additives and potential contaminants; the Codex product hygiene requirements; the Codex labelling requirements; and a description of the scientific procedures used to sample and analyse the product during review. Determination of the safety of the food product is based on scientific risk analysis and toxicological studies of pesticide residues, microbial contaminants, chemical additives and veterinary biologics. A Codex food standard is adopted only after eight stages or steps of consultation have been completed. These eight steps are as follows. 1. A food safety issue is identified by the CAC, the Codex Secretariat or the Codex Executive Committee and presented at a CAC plenary session (every 2 years), where, if it is determined that a Codex food standard ought to be elaborated, the CAC assigns the issue to either a commodity or a general subject committee. 2. The committee presents its elaboration, based on Codex food standard elements, to the Codex Secretariat who produces a Proposed Draft Standard. 3. The Proposed Draft Standard is sent to all member governments and relevant non-governmental international organizations for review and comments. 4. Comments from step 3 are returned to the Committee which initially elaborated the food standard. 5. The committee amends the Proposed Draft Standard subject to the review and comments and the amended Proposed Draft Standard is presented to the CAC by the Secretariat at a plenary session where it may be adopted as a Draft Standard. 6. The adopted Draft Standard is sent to all member governments and relevant non-governmental institutional organizations for further comment. 7. Comments are returned to the Committee through the Secretariat for amendments to the Draft Standard. 8. The amended Draft Standard is presented to the CAC for adoption as a Codex Standard to be sent to member governments for acceptance. Generally it takes about 6 months for each of steps (1)–(6) while steps (7) and (8) take 2 years each. However, it is possible for the Proposed Draft Food Safety 02 4/7/01 4:06 PM Page 23 International Institutional Arrangements 23 Standard to be adopted at step 6 as a Codex Food standard, instead of being sent for further review, if consensus has been achieved. In this case, it can take 4 years for a Codex Food standard to be adopted. Decision making in the CAC can be by vote if consensus cannot be achieved as was done in the beef hormones case. Once a Codex food standard is adopted, member countries are encouraged to incorporate the standard into any relevant domestic standards and legislation. There is a dynamic aspect to this multinational institutional arrangement since the CAC may continuously develop food safety standards. In turn, member countries who wish to harmonize domestic measures with Codex standards also must continuously react to the new standards. Essentially, the Codex attempts to develop universally acceptable food standards through its elaboration and consultation procedure that may be aligned with domestic food safety standards. However, under the principles of Codex, each contracting party maintains the right to establish its own appropriate level of food safety and consumer protection and to act unilaterally to ensure this level of protection. It is anticipated that when countries do deviate from the Codex food standard, they do so in a scientifically justifiable manner. The Codex is perhaps the most influential institutional driver for change in beef food safety now that its principles are enshrined in the SPS and TBT Agreements of the WTO. Although the original intent of Codex was to develop international food standards, it has now taken on a very important trade function. The SPS Agreement requests that all parties harmonize their domestic standards with Codex standards, guidelines and other Codex recommendations. In the case of trade disputes, Codex standards, guidelines and recommendations are to be employed under the SPS for WTO dispute resolution procedures. Along with trade issues comes other domestic objectives and the danger is that these other objectives may obfuscate the initial objective of improving worldwide food safety. Further, new food safety issues, which are brought to the CAC for elaboration as possible Codex food standards, may be motivated by concerns other than food safety, such as political or special interests. The most divisive issue facing members of the CAC is the debate over scientific risk assessment in Codex standards-setting procedures. It has been the traditional stance of the Codex that risk should be assessed according to scientific evidence of risk to human health. However, recent efforts by the EU to include ‘risk to other legitimate factors’ such as political–economic–social factors have created controversy (Codex, 1999). In fact, at the 21st Session of the CAC (3–7 July 1995, Rome) four amendments to the Codex Procedural Manual were made pertaining to the role of science in the Codex decisionmaking process. They were: 1. The food standards, guidelines and other recommendations of the Codex shall be based on the principle of scientific analysis and evidence, involving a thorough review of all relevant information, in order that standards assure the quality and safety of the food supply. Food Safety 02 24 29/5/01 2:35 pm Page 24 Chapter 2 2. When elaborating and deciding on food standards the CAC will have regard, where appropriate, to other legitimate factors relevant for the health protection of consumers and for the promotion of fair practices in food trade. 3. In this regard, it is noted that food plays an important role in furthering both of these objectives. 4. When the situation arises that members of the CAC agree on the necessary level of protection of public health but hold differing views about other considerations, members may abstain from acceptance of the relevant standards without necessarily preventing the decision by the CAC.2 While the first amendment clearly enforces the important role of science, the fourth principle creates an opt-out clause so a country may abstain from the Codex food standard decision, and the standard may still be adopted. This runs directly counter to the original intent of adopting standards by consensus and promoting the international harmonization of food standards. The fourth principle allows member countries legitimately to institute unilateral food standards different from Codex standards by opting out of a CAC decision. This appears to undermine the role of Codex standards and standards-setting principles in establishing the legitimacy or otherwise of trade barriers under the SPS Agreement. Analysis of International Institutional Arrangements The various international institutional arrangements discussed above attempt to ‘de-politicize’ international trade (WTO, 1995). Rather than subjecting trade flows to the divergent normative preferences of various member countries, they attempt to subject trade flows to universal, scientific determinations of safety or hazard or to universal principles of non-discrimination. The SPS and TBT Agreements along with the Codex attempt to ensure consumer protection while disciplining the use of unilateral food safety regulations as non-tariff barriers to trade. In the case of a food safety issue, the basis for a legitimate SPS measure is the scientific evidence of a risk or hazard, proven through credible scientific methods congruent with either Codex standards (if they exist) or Codex standards-setting principles. In the case of a non-safety issue, the basis of a legitimate TBT measure is the traditional trade principle of non-discrimination. That is, the measure must not violate the MFN and the national treatment principles and must be the least trade distorting measure available. All other justifications for unilateral trade barriers are considered to be illegitimate and in contravention of international trade agreements. International institutional arrangements have significant implications for the restructuring of the domestic food safety systems under study. Hence they may be considered as a special class of drivers for change. The international institutional arrangements are broadly consistent with our socio-economic Food Safety 02 29/5/01 2:35 pm Page 25 International Institutional Arrangements 25 objective. They have helped to standardize the international rules governing food safety, and in so doing have lowered the transaction costs involved in the international trade in food products. Of course, they have not eliminated differences in standards between countries, and neither should they. The Codex provides an acceptable minimum standard of food safety as stipulated in our socio-economic objective. However, allowing for differences between countries (subject to this minimum) allows different countries to explore changes to their food safety systems, which may enhance international competitiveness. This ability is enhanced by the concept of ‘mutual recognition’ which is enshrined in the SPS and TBT Agreements and in the Codex. Thus, for example, domestic food safety systems, when deviating from the Codex food standards, must show that their standards yield the equivalent effect on overall food safety. Allowing for differences between countries (subject to the minimum standards provided by Codex) raises the cost of difference between countries. However, a country may choose to do this for socio-economic reasons provided it can justify the differences on scientific grounds. As such, we believe this is consistent with our socio-economic objective. The international institutional arrangements have also helped to lower the enthusiasm of special interest groups (either from industry or civil society) to seek economic protection through the inappropriate use of food safety rules. The present international institutional arrangements are unable to completely solve this problem. However, they do raise the political costs to errant country governments, and for other governments these arrangements provide international support to resist this form of economic protectionism. It is important that the SPS Agreement remains based on scientific risk assessment and that it does not entertain social concerns as a basis for allowing a trade restriction. Allowing the consideration of social concerns would considerably enhance the prospects of special interest groups seeking economic protection from imports. These international institutional arrangements also contribute to the ability of countries to move towards an optimal food safety system because they attempt to move the process of dispute resolution from one of negotiation to one of adjudication. In a process of negotiation, might is right. Hence the most economically powerful countries will tend to achieve the most gains. This power imbalance tends to limit the ability of other countries to achieve what would be, for them, an optimal food safety system. By contrast, a process of adjudication reduces the impact of power imbalances on dispute outcomes. Of course, the present international arrangements do not completely remove the effect of power imbalances on dispute outcomes. A good case in point is the recent trade dispute between Canada and the USA on the one hand and the European Union (EU) on the other over the use of hormones in beef production. This practice has been a source of controversy in Europe for over 20 years; first arising because of misuse by French farmers. In 1988 an EU Directive banned the use of six hormones in beef production (oestradiol 17B, progesterone, testosterone, trenbolone acetate, Food Safety 02 26 29/5/01 2:35 pm Page 26 Chapter 2 zeranol and melengestrol acetate or MGA) applying a zero-tolerance policy. This ban pertained to both domestically produced and imported beef products and effectively banned a vast quantity of North American beef products. When the WTO came into force on 1 January 1995, Canada and the USA were able to challenge the legitimacy of the EU’s safety ban under the scientific principles of the SPS Agreement. The dispute panel ruled against the EU ban, and the EU promptly appealed. The appellate body also ruled against the EU ban. It held the ban was not based on an appropriate scientific risk assessment and hence, was not scientifically justifiable. The EU was ordered to bring its domestic measures for meat safety into conformity with the SPS Agreement by 18 May 1999. Failure to comply would permit Canada and the USA to impose trade sanctions against any EU goods imported into North America in order to offset the economic costs created by the EU trade barrier. As of December 2000, the EU has not complied with the WTO ruling; in this instance it appears that a powerful actor in the international trading system can effectively remain in contravention of a WTO ruling. Let us now examine the important drivers and subsequent institutional arrangements in each of the countries under review and then return to this important issue in Chapter 7. Notes 1. Agreement on the Application of Sanitary and Phyto-Sanitary Measures, Uruguay Round of Multilateral Trade Negotiations Legal Texts, pp. 69–84. Preamble. WTO Secretariat, Geneva, Switzerland. 2. Codex Alimentarius Commission (CAC) (1995) Report of the 21st Session; Rome, 3–7 July (ALINORM 95/37 Appendix 2). FAO, Rome.