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Increasing Market Access For Developing Countries

Improving Food Safety And Health Standards Can Increase Market Access For Developing Countries: World Bank

Developing Countries Need Strategic Approach to Food Safety, says report; Industrial Countries Should Increase Aid Flows to Help Countries Meet New Challenges

WASHINGTON, February 2, 2005 – Developing countries facing the challenges of rising health and food safety standards can improve market access and position their industries for long-term competitiveness by adopting a strategic approach to meet these challenges, but rich nations should increase aid flows to help developing countries plan and undertake the necessary strategies, according to a new report released today by the World Bank.

The report, Food Safety and Agricultural Health Requirements: Challenges and Opportunities for Developing Country Exports, notes that recent food safety issues such as those related to E. Coli breakouts, “Mad Cow” disease, tainted animal feed products, and the contamination of berries and olive oil have contributed to more stringent food safety and agricultural health standards (Sanitary and Phytosanitary Standards, or SPS) in high-income countries. These new standards, characterized by the report as a “double edged-sword,” place particular demands on developing country producers and exporters of high-value food products, such as fruit, vegetables, fish, meat, nuts, and spices, the report stresses.

“In many cases, however, such standards have played a positive role, providing the catalyst and incentives for the modernization of export supply and regulatory systems and the adoption of safer and more sustainable production and processing practices,” says Steven Jaffee, Senior Economist, World Bank. “Countries can use this as an opportunity to differentiate themselves.”

The research, based on a series of cases studies in developing countries, reveals that developing country suppliers aren’t faced with all-or-nothing, “comply or perish” choices. Suppliers should, according to the report “determine the products and markets in which they can best compete and use diverse approaches to comply with standards.” New private sector standards will also bring more attention to the entire supply chain.

According to Cornelis Van Der Meer, World Bank Senior Rural Development Specialist, “Developing countries which adopted a strategic approach to tackle the challenge of standards have been able to maintain or improve market access and position themselves for the long-term.”

Rich countries provide only US$75 million per year to developing countries for enhancing SPS management capacities, a figure that does not meet the emerging demand of revamping the way key industries are organized and manage risks in many poor countries.

“By providing additional assistance, rich countries would help level the playing field and especially help poor countries to better prepare for evolving standards,” says Kevin Cleaver, the Director of the World Bank Agriculture and Rural Development Department. “Countries that invest in new supply chain technologies are more likely to remain competitive and thrive in this emerging market.”

International trade in high-value food products has expanded enormously over the last decades, fueled by changing consumer tastes and advances in production, transport, and other supply-chain technologies. High-value food products such as fresh and processed fruits and vegetables, fish, meat, nuts, and spices now account for more than 50 percent of the total agro-food exports of developing countries, while the share of traditional commodities—such as coffee, tea, cocoa, sugar, cotton, and tobacco— has declined.

Overall, demand for food will increase dramatically in the next 20–30 years, as the world’s population grows by two billion people—mostly in developing countries. Growing populations, and increased urbanization, coupled with increased wealth will drive worldwide demand for safe, high-quality food. This will create opportunities for continued expansion in trade in high-value products, especially among developing countries (South-South trade).

The report finds that contrary to conventional wisdom, compliance costs are relatively modest in relation to trade levels and the overall costs of production and marketing. However, these costs are tangible and many of them are up-front investments. In contrast, some benefits are intangible (i.e. improved reputation), others accrue to non-investors (i.e. local and foreign consumers), and many benefits accrue only over time (i.e. productivity gains; environmental improvements).

The World Bank’s research program on sanitary and phytosanitary measures was designed to improve understanding of an emerging set of policy and commercial issues in the area of food safety and agricultural health. The report looked at the overall challenges and opportunities posed by emerging standards, strategies that have been used to influence requirements, the nature and magnitude of compliance-related costs and benefits, the ‘winners’ and ‘losers’ from emerging trends, and the implications of these findings for developing countries, rich countries, and international development agencies.

The World Bank has stepped up its own efforts in assisting developing countries by supporting the preparation of country action plans and reconstruction of supply chains. The Bank also initiated the establishment of the Standards and Trade Development Facility (STDF), which is a cooperative effort with other UN agencies and regulatory bodies designed to improve standards setting in developing countries.

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