STANDARDS AND TRADE

FACILITATIONOPPORTUNITIES AND RISKS OF HARMONIZATION

AND OTHER TRADE INSTRUMENTS

John C. Keyser

Senior Agriculture Trade Economist

Staple Food Markets Systems in Eastern

Africa – Donor Coordination Meeting

20 August 2014, Nairobi

OBJECTIVES

Provide an improved platform for discussion of the role of trade

standards.

Introduce some emerging issues from recent research on standards

and trade facilitation.

1

ROLE OF TRADE STANDARDS

Why have trade standards?

• Protect human, animal, and plant health (SPS measures)

• Ensure product safety (quality standards)

• Language between buyers and sellers (grades)

• Improve confidence of consumers (competitiveness)

Many people also say…

• Lack of harmonization is a NTB.

• Harmonized standards not only called for by WTO but essential for

international trade.

Which of these arguments stands up and how should governments and

donor projects pursue trade facilitation?

2

SPS AND QUALITY STANDARDS

Sanitary and Phytosanitary Standards (SPS) and Quality Standards

are fundamentally different.

• SPS deals with preventing the spread of human, animal, and plant

disease.

• Quality standards deals with other aspects of product safety and

voluntary quality attributes.

• WTO draws a key distinction between voluntary standards and

mandatory regulations.

In practice, mandatory SPS, voluntary quality, and quality upgrading

have become mixed.

• EAC standards for food staples mandatory because of mycotoxin risk,

but also include non-essential quality specifications that relate to value.

• Standards often described as a “development goal.”

3

WTO SPS AND TBT AGREEMENTS

Basic rule is that standards must be science based.

• SPS and product standards should not be used as a trade barrier.

• Both SPS and TBT Agreements encourage adoption of international

standards (Codex, OIE, ISO testing methods, etc.) but stop short of

making this mandatory.

SPS and TBT Agreements offer three trade facilitation instruments.

• Harmonization

• Equivalence

• Mutual recognition

Picking the right instrument to serve consumer and producer needs is

important for effective trade facilitation.

4

HARMONIZATION THE MOST POPULAR CHOICE

Harmonization is encouraged by WTO but not required.

Many standards being cut and paste from international ones. Avoids

having to prove “science based” however…

• SPS quality problems and capacity can be very different in Africa than in

developed countries.

• Harmonization risks becoming the “goal” rather than a means to an end

(e.g. output indicators in project logframe rather than outcome).

Harmonized standards can even become an NTB.

• Limited implementation capacity (capacity upgrades becomes the “goal”).

• Extra costs beyond what producers, consumers, and governments can

afford.

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ALTERNATIVE INSTRUMENTS

Equivalence agreements

• Different standards achieve similar levels of SPS and/or consumer

protection.

• Can be system wide or product specific.

• Relatively easy to negotiate.

Mutual recognition agreements

• Despite being different countries agree to accept each other’s SPS

and/or standards measures.

• Less demanding and potentially a good even for exports to very

advanced countries.

In practice, these alternatives are often get interpreted the same as

harmonization – i.e. “We’ll recognize each other’s certificates if we

follow equivalent (harmonized) procedures.”

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EAC HARMONIZED

STANDARDS FOR MAIZE

Staple Food Markets Systems in

Eastern Africa – Donor

Coordination Meeting

20 August 2014, Nairobi

MAIZE STANDARDS BEFORE HARMONIZATION

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Kenya Tanzania Uganda Malawi Zambia Zimbabwe Ethiopia

Moisture content

(max)13.5% 14% 13% 14% 12.5% 14% 13%

Aflatoxin (max) 10ppb 10ppb 10ppb 3ug/kg - - -

Foreign matter 1% 0.5% 1% 2.6% 1.5% 2% 0.5%

Broken grains 2% 2% 2% 11.5% 6% 6% 2%

Insect damaged

grains3% 1% 2% - 5% - 3%

Rotten, diseased,

discolored grains4% 3.5% 1% - 2% 0.5% -

Other colored grains 2% 3% - - 3% - 0.5%

Live insect infestation Nil Nil Nil Nil - - Nil

Total defective grains - 6.5% - - - - 8%

Immature/shriveled

grains- - 1% - 1% - 1%

Fungal damaged

grains- - - - 1% - -

Germinated grains - - - - 1% - -

COMPARISON OF EAS, CODEX AND ZAMACE

2013 EAS introduced…• New standards for Grade 3 maize• Tighter moisture requirements• New requirements for Fumonisin.

2013 EAS still more demanding than old national standards and CODEX.• “Ungraded maize” not allowed in

Tanzania or Burundi.• “Reject maize” other than Grades 1, 2,

and 3 shall be regarded as “unfit for human consumption”.

By law, EAS mandatory at regional and domestic levels.

ZAMACE standards not mandatory and used to determine value • Phyto certificate is required but not

ZASBS for grain quality.• Aflatoxin testing not part of Zambia Phyto.

Significantly higher tolerances for total defect and discolored grains a major barrier to regional trade.

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Grade

1

Grade

2

Grade

3

A

Grade

B

Grade

C

Grade

Moisture content

(maximum)

13%

(13.5)

13%

(13.5)13% 15% 12.50% 12.50% 12.50%

Aflatoxin (maximum) 10ppb 10ppb 10ppb n/s n/s n/s

Aflatoxin B1 5ppb 5ppb 5ppb n/s n/s n/s

Fumonisin 2ppb* 2ppb* 2ppb* 0.50% 0.50% 0.50%

Foreign matter 0.50% 1% 1.50% 1.50%

Inorganic matter 0.25% 0.50% 0.75% 0.50%

Broken grains 2% 4% 6% 6% 6% 7% 8%

a. Insect damaged

grains1% 3% 5% 7% 3% 6% 9%

b. Rotten and

diseased grains

(EAS); Diseased

grains (ZAMACE)

2% 4% 5% 7% 2% 2% 2%

c. Discolored grains 0.50% 1% 1.50% 2% 3% 6% 9%

d. Other colored grains - - - - 3% 4% 5%

e. Fungal damaged

grains- - - - 0.50% 1% 1.50%

f. Immature/shriveled

grains1% 2% 3% - 1% 1.50% 2%

Total defective

grains (Sum a to f)4% 5% 7% n/s 11% 18.50% 26%

Germinated grains n/s n/s n/s - Nil Nil Nil

Pass through 4.15mm

sieve (max)n/s n/s n/s - 1.50% 2% 2.50%

Diplodia (ear rot) n/s n/s n/s - Nil Nil Nil

Filth 0.10% 0.10% 0.10% 0.10% n/s n/s n/s

1% 1.50% 2%

CODEX

Standard

Set by

CODEX

Commission

2013 EAS ZAMACE Standards

IMPLICATIONS FOR REGIONAL TRADE

Difficult and expensive for EAC to import from other African

countries (cheaper to buy from rest of world!)

• WFP in Zambia says it costs $1.50 to $2.00 per ton per place

inspected to source EAC compliant grain (may have to inspect 4 - 5

places).

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Small traders not able to afford costs of

compliance.

• Trade costs highly regressive.

• Grain goes across in small (informal) loads

that add to the total costs of trade.

• COMESA STR (where it exists) only saves on

clearing agent and certificate of origin so little

benefit overall.

Costs of Maize exports at Kasumbalesa

(US$/ton)

OTHER QUESTIONS ABOUT HARMONIZATION

Are the EAC standards really science based?

• Sun drying results in high share of “discolored grains”, but perfectly safe.

• OPV seed and/or late use of fertilizer also results in product “defects”

(discoloration, size, shape) that have nothing to do with safety.

Does harmonization really speed border procedures?

• After harmonization, still left with mutual recognition and equivalence

challenges (EADRAC has helped in dairy; anything similar for grains?)

• Long delays at borders a vector for corruption.

Standard are a useful language for warehouse receipts and commodity

exchanges, but is the vocabulary too restrictive (i.e. mandatory Grades

1, 2, and 3)?

11

MIXING OF STANDARDS AND OTHER REQUIREMENTS

Multiple agencies often focused on

generating revenue rather than facilitating

trade and competition.

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The Tanzania Atomic

Energy Commission

• Export license / import license

• Phytosanitary certificate and inspection

• Fumigation certificate (with

phytosanitary)

• Non-GMO certificate and inspection

• Certificate of origin

• Product registration (especially of

foods and crop inputs)

• Food safety certificate (sometimes

including grains)

• Certificate of radiation analysis (TAEC)

• Certificate of standards compliance

• Cost of standards documents (EAC

maize standards reference 16 EAC,

ISO, and CODEX standards)

CONCLUSIONS

Harmonization has many uses and advantages but is an incomplete

solution and may involve risks for smallholders and small traders.

• Group formation can help, but risks becoming necessary.

• Harmonization may add to the challenge of mutual recognition and

equivalence.

• Still left with mutual recognition and equivalence challenges.

Trade facilitation about more than making harmonization work and

requires action on many levels including awareness and use simple

solutions.

Important for regulatory ambitions to match current capabilities.

Need clear distinction between genuine SPS and other safety

concerns and voluntary quality issues.

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Asante Sana!

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