The Food Safety Issue in ACP-EU Trade Relations: Executive brief

Contents

1. Elaborating EU food-safety policy
1.1 The background and the approach
1.2 Harmonisation of pest controls and maximum residue levels
1.3 Completion of the pesticide review
1.4 The general food law
1.5 The hygiene package
1.6 The food-and-feed control regulation
1.7 Private-sector standards
1.8 New issues
2. Impact of EU food-safety policy on the ACP
2.1 Disaggregating the food-safety challenge
2.2 Standard setting
2.3 Technical compliance
2.4 The costs of technical compliance
2.5 The costs of verification and control
2.6 Structural issues arising from the pesticides review
3. Trends and implications for ACP countries
3.1 Importance of agriculture to the ACP
3.2 The commercial impact of stricter food-safety standards
3.3 Implications for government finances
3.4 Existing EC programmes of support
3.5 Responding to the food-safety challenge
3.5.1 Establishing a dialogue on the application of standards
3.5.2 Assisting with the costs of upgrading to EU standards
3.5.3 Meeting information and technical assistance needs
3.6 Establishing a special food-safety control facility
3.6.1 Addressing the problem of recurrent costs
3.6.2 Greater use of ‘temporary derogations’
Sources

Summary

Although food safety has been an important consideration in the EU for several decades, developments since 2000 have begun to have important implications for ACP exporters. These developments include: harmonisation of regulations across all the countries of the Community; traceability and the precautionary principle under the 2002 general food law; the hygiene package; and the food-and-feed control regulation; the pesticides review, the debate on food miles and the strengthening of private sector standards. These are throwing up important new challenges for ACP governments as ensuring compliance by national operators with EU food safety regulations and standards becomes a critical factor in food and agricultural exports to the EU.

There are six areas in which action needs to be taken to minimise adverse impacts on ACP exporters: standard setting; technical compliance; the costs of technical compliance; the costs of verification and control; transitional arrangements; and the structural implications of the pesticides review. Temporary derogations may be needed as a result of the banning of 750 previously used plant-protection products.

Longer-term trends and implications for ACP countries are analysed in relation to the relative importance of agriculture in different ACP regions and countries and the commodity areas most affected. These include the consequences of SPS standards, the impact on value-added activities, and the impact on state finances. EC support programmes are analysed in relation to these trends.

The responses that will be needed to meet the challenges are then discussed, including: establishing a dialogue on the application of standards; assisting with the costs of upgrading to EU standards; and meeting information and technical-assistance needs.

1. Elaborating EU food-safety policy

1.1 The background and the approach

EU controls on food safety have been a fact of life for nearly 40 years, and have certainly been a factor in ACP-EU trade since the signing of the first Lomé Convention. Traditionally, these standards were applied at the sector level (e.g. in the beef sector) and had to be complied with in order to place products for sale on the EU market. The 1990s however saw an intensification of EU food-safety controls in response to a series of food-safety scares, largely arising from an over-intensification of EU agricultural production. These ranged from the BSE crisis in the UK to the scandal of dioxin contamination in Belgium. As a consequence of these shocks to the EU’s agriculture and food industry, the EC began work in 2000 on the establishment of a comprehensive food-safety policy designed to guarantee food safety on a systematic basis, ‘from farm to fork’.

This policy was based on targeting measures to ensure food safety at critical points in the overall supply chain, where the risk was highest. It sees food safety as a risk-management exercise, requiring the integration of standards and controls at all levels of the food-supply chain ‘from farm to fork’. This also requires the establishment and effective operation of systems of national food-safety control and verification to ensure that the required standards are being met and the necessary controls effectively implemented.

The requirement to establish effective national food-safety control and verification regimes is targeted mainly at EU member states, but it applies equally to all food-and-feed products placed on the EU market. It therefore de facto applies to third countries seeking to export food-and-feed products to the EU, including ACP countries.

Four broad sets of regulatory measures can be identified as accounting for the vast majority of food-safety-related problems which ACP countries will face in their trade with the EU, these being:

• harmonisation of pest-control measures and maximum residue levels (Directive 91/414);
• the general food law (178/2002);
• the revision of hygiene regulations (852/2004, 853/2004);
• the food-and-feed control regulation (882/2004).

In addition there are the commercial and market-access implications of the now completed EU pesticides review, which will begin to impact on ACP production processes and national control systems in the coming years.

Overall there are concerns that in the elaboration of sanitary and phytosanitary (SPS) and food-safety measures, the EC goes beyond internationally established norms. While this is allowed within WTO rules, there are concerns that it could lead to the EU applying SPS standards in ways which de facto come to constitute barriers to trade. In this context, a number of ACP regions have sought in the EPA negotiations to establish an institutional basis for dialogue on the implementation of SPS and food-safety standards, so as to ensure that while EU human-, animal- and plant-health concerns are fully addressed, this is achieved in ways which minimise the additional costs placed on commercial exporters in ACP countries.

In addition, a growing area of concern to ACP exporters is the proliferation of private standards for imports into the EU and the cost implications of these standards.

1.2 Harmonisation of pest controls and maximum residue levels

The harmonisation process seeks to consolidate and simplify existing legislation, so that all regulations apply equally in all countries of the EU, from Sweden to Greece and from Poland to Portugal. On September 1st 2008 revised and simplified rules on pesticide residues came into effect. The new rules harmonised maximum residue levels for pesticides across all 27 EU member states, replacing the different national systems. As part of this harmonisation process a conscious effort has been made to ensure that pesticide residues are as small as possible. In Europe representatives of the fruit-and-vegetable industry have welcomed the new harmonised rules and the upgraded EC information systems which are being set in place, expressing the hope that the new measures would ‘increase consumer confidence in the safety rules … and further stimulate consumption of fresh fruit and vegetables given the overwhelming health benefits’.

However in the ACP this process of harmonisation has thrown up some problems for traditional ACP exports.

For example, for citrus exports from Swaziland to the UK, there is now ‘zero tolerance’ on the presence of the fungal infection known as ‘citrus black spot’. If this is detected on any fruit the whole consignment is destroyed.

This occurs despite the fact that ‘citrus black spot’ poses no threat to agriculture in the UK, (where there is no citrus production). The measure is felt to be necessary, however, since there is free circulation of goods within the EU and hence a possibility that an infected orange could find its way to Spain and, under particular environmental circumstances, infect citrus groves there. Since the destruction of even a single consignment would represent a serious economic loss to the Swazi citrus industry (given its small size), this measure is threatening to undermine the existing trade.

At the end of 2008 the European Food Safety Authority issued a scientific review of the risk assessment for infection by citrus black spot (Guignardia citricarpa) as a result of imports from southern Africa. This review rejected the South African authority’s contention that ‘the climate in the EU is unsuitable for the establishment of G citricarpa’. It concluded that this fungal infection could ‘survive transport, storage and existing pest-management procedures ... and may be transferred to suitable hosts by means of splash dispersal from citrus-black-spot-infected citrus fruit and peel’. The review recommended:

• ‘an investigation of the exact causes for infested consignments arrival at the EU border despite applied mitigation measures in South Africa’;
• that ‘methods to accelerate citrus-black-spot-symptoms development, combined with a standardised sampling scheme, could be applied in a pre-entry quarantine system to improve the detection of infested consignments before shipping’;
• the ‘demarcation of endangered and non-endangered areas’ linked to the introduction of ‘distinctive measures regarding end-use and distribution of citrus fruit, that are less restrictive’.

The panel’s recommendation for the demarcation of endangered and non-endangered areas, linked to the introduction of distinctive measures based on end-use and geographical destination within the EU, could potentially reduce these commercial risks by allowing the more targeted marketing of Swazi citrus exports to particular geographical markets and specific end users.

More generally such measures could remove the disincentive to the development of ACP citrus exports to the EU which have arisen from the harmonisation of pest control and maximum residue levels across the EU.

1.3 Completion of the pesticide review

The problems thrown up by the process of harmonisation are being compounded by the side effects of the pesticide review which was completed in March 2009. Of approximately 1,000 substances available before 1993 ‘about 250 have passed the harmonised EU safety assessment’, with all reviewed pesticides having undergone ‘a detailed risk evaluation with respect to their effects on humans and on the environment’. Some 70 substances failed the review process and were removed from the market. The remaining 680 products were ‘either not submitted, or were incomplete or were withdrawn by the industry’.

Against this background the pesticide review has proved highly controversial. EU fresh-fruit producers have variously claimed that the review could:

• have ‘severe implications for pest management globally if resistant strains, selected as a result of intensive use of surviving active substances, spread’;
• reduce crop- protection products by 23% across Europe’ and put long-term food security at risk;
• force up food prices

The UK Fresh Produce Consortium has even gone so far as to claim that the review could reduce yields and quality of UK fruit-and-vegetable production and make the production of some crops, such as sprouts and carrots, uneconomic. Lobbying by the UK industry led to concerns being expressed by DEFRA Secretary Hilary Benn that ‘these regulations could hit agricultural production in the UK for no recognisable benefits to human health’.

During the debates around the pesticides review the EC itself acknowledged shortcomings in its analysis of the possible implications of the pesticides review, noting that a comprehensive review was not undertaken since ‘at the time of its original proposal it was not possible to anticipate which substances would remain on the market at the end of the review’.

1.4 The general food law

The general food law which was approved in 2002 came into effect in 2005 and covers all types of food and feed in the EU. It applies to all enterprises involved in the food chain (producers, processors, traders, importers) and establishes common responsibilities for all member states. Its principles also apply to imported food and feed. Two important principles can be identified under the general food law: traceability and the precautionary principle.

Traceability seeks to trace the handling of food ‘from farm to fork’. With the exception of those products where specific rules are laid down, the legal requirement for traceability is limited to ‘one step forward, one step back’, that is the ability at each stage to trace where the food came from previously and to whom it is going subsequently. The aim is to facilitate the withdrawal from the market of foods from particular sources, should a threat to health be identified. The obligations this places on importers has served to increase their power in the supply chain, often to the detriment of small-scale ACP producers.

The precautionary principle allows measures to be taken where there is a possibility of harmful effects. It does not require full scientific verification of the threat before action is taken. Significantly it allows the EC to act on its own initiative to avert threats to public health.

1.5 The hygiene package

The hygiene package of measures involves the harmonisation of existing hygiene measures across member states with the overall aim of establishing a single hygiene regime covering all food-and-feed operators. It places primary responsibility for food safety with the enterprises involved in the industry at all levels and requires them to implement a ‘hazard analysis and critical control points’ (HACCP) system.

Significantly, imports of all products covered by these hygiene regulations have to meet these EU standards. While HACCP compliance in third countries is not a formal legal requirement, imports have to meet the standards which HACCP systems are intended to ensure. As a consequence the retail chains tend to insist on the ‘voluntary’ application of the HACCP system.

The hygiene package

Hygiene 1, 852/04 – general requirements, primary requirements, production, technical requirements, HACCP, registration/approval of food businesses, national guides to good practice. Entered into force January 1st 2006.

Hygiene 2, 853/04 – specific hygiene rules for food of animal origin (approval of establishments, health and identification marking, imports, food-chain information). Entered into force January 1st 2006.

Hygiene 3, 854/04 – detailed rules for the organisation of official controls on products of animal origin (methods to verify compliance with Hygiene 1 & 2 and animal by-products regulation (1774/2002). Entered into force January 1st 2006.

Hygiene 4, 2002/99/EC – laying down health rules governing the production, processing, distribution and importation of products of animal origin. Entered into force January 1st 2006.

Hygiene 5, 2004/41/EC – repealing 12 existing directives. Entered into force on January 1st 2006.

1.6 The food-and-feed control regulation

Potentially by far the most important measure impacting on ACP food-and-agricultural product exports to the EU is the food-and-feed control regulation, which entered into force on January 1st 2006. This regulation de facto places an entirely new level of responsibility on ACP government departments to ensure the safety of food traded into the EU market. According to the EC the new system should help third countries to meet EU standards by clarifying what is required. However, from an ACP perspective this regulation now places public authorities in ACP countries at the heart of the trade in food and agricultural products into the EU market. Serious concerns have been raised by private-sector operators in ACP countries as to the ability of existing government institutions to meet the challenge of verification of compliance with detailed food-safety rules, given the limited financial resources available and the existing institutional arrangements relating to food-safety compliance in ACP countries.

This creates a situation in which, even if private-sector operators have fully met all EU standards, if the government ‘competent authority’ has not been able to verify compliance to the EC’s satisfaction, then the EU market could be closed to exports from the ACP country concerned.

The EC has recognised the challenges this will give rise to in developing countries and has committed itself in the formal regulation to extending support to developing countries in meeting its provisions (see later section on EU programmes of support).

While the EC has made it quite clear that it has no intention of taking precipitate action under this regulation in ways which might disrupt existing trade, in February 2007 it was made clear that monitoring of the implementation of EU standards by third countries would intensify in 2007 and 2008, with more frequent inspections, follow-up inspections and on-the-ground verification. In November 2007 the implications of this became apparent when, following a visit by the EU Food and Veterinary Office (FVO), the recommendation was made that South Africa be removed from the list of exporters of ostrich meat, poultry, milk, honey, pork and beef. According to press reports ‘EU spokesperson Philip Tod has confirmed the delisting recommendation, adding that the move came after an EU delegation of health inspectors had declared the country’s residue-control systems ineffective and dysfunctional’. This move threatened the future of the R1.2 billion ostrich-meat export business, since the EU takes 90% of South Africa’s ostrich-meat exports.

However EC action at this time was deemed to be premature and the delisting was revoked. Nevertheless this experience is indicative of the tightening up of import controls which is under way. In this context both producer- and government-control systems in ACP countries are likely to find themselves subject to rigorous inspections of their capacity for assessment of their food-safety compliance and enforcement in the coming years. If these systems are judged to be inadequate, recommendations will be made as to the steps required to bring compliance and enforcement up to EU standards. A grace period will be provided allowing for remedial actions to be taken, but any subsequent failure to comply after the grace period has elapsed could lead to de facto prohibition on imports from the affected countries.

The EU Food and Veterinary Office (FVO)

Under the auspices of the EC Director-General for Health and Consumer Protection a special EU Food and Veterinary Office (FVO) has been established to ensure that effective food-safety control systems are in place in the EU and to inspect the national food-safety control capacity of national authorities in third countries seeking to place food and agricultural products on the EU market. The FVO seeks to:

• promote effective food-safety control systems;
• check on compliance with the requirements of EU food-safety legislation, within the EU and third countries exporting to the EU;
• contribute to the development of EU food-safety policy.

It undertakes this role primarily through a programme of inspection visits both within the EU and to third countries. Inspection priorities are identified on an annual basis and the programme of inspections is available on the FVO website. On the basis of its inspections the FVO makes recommendations for improving food-safety control and compliance, with the ‘competent authority’ in the country concerned being requested to provide an action plan on how it intends to address any shortcomings. The action plan is evaluated and its implementation monitored. On the basis of its work the FVO may recommend amendments to EU regulations or suggests ways in which current practices should be modified. The FVO has a complement of 163 staff, 81 of whom are inspectors.

1.7 Private-sector standards

A further level of food-safety challenge above and beyond these areas arises from the increasingly strict standards being applied by private-sector-based bodies in the EU. These standards often go beyond the formal legal requirement, since the legal obligation to ensure the safety of food imported into the EU market is placed on the importer. If importers are not able to prove that they took all possible precautions to prevent unsafe food entering the EU market they can be fined around €40,000 per consignment and could face imprisonment for up to two years.

This is leading to increased pressure on ACP suppliers from EU importers, to ensure that all foodstuffs exported to the EU market are safe and subject to traceability requirements. This includes insistence on the adoption of ‘good practices’ from field to embarkation, with this being certified by independent organisations. Substantial new administrative burdens are thus being imposed on ACP exporters (along with the associated costs), burdens which fall particularly onerously on small-scale producers. It is also leading to EU importers refusing to deal with suppliers who cannot guarantee both the traceability and food safety of the consignments supplied.

This area of development is viewed with such concern that AU trade ministers in April 2006 called for the EU to introduce appropriate control over standard setting undertaken by market-based NGOs. This issue was taken up in an EC conference in February 2007 on the link between food-quality certification and value addition. The conclusions of this conference noted that while ‘private standards for imports from developing countries can improve farming efficiency, promote good agricultural practices and stabilise business relations … only the best farmers are able to be certified; the weakest may be excluded … schemes may be perceived as barriers to market access’. Against this background it called for ‘stakeholders in developing countries (to) play a role in the development of schemes and for technical assistance for capacity building’. It further recommended that ‘farmers and first-stage processors should participate in the development and operation – if not the ownership – of certification schemes’, presumably including those in ACP countries.

The main standard setting body for good agricultural practices is GLOBALGAP (formerly EUREPGAP). GLOBALGAP sets ‘voluntary standards for the certification of agricultural products around the globe. It is a voluntary partnership organisation concerned with the promotion of good agricultural practices. It includes producers’ organisations, suppliers, and retailers, and associate members consisting of certification bodies, fertiliser-industry bodies, pesticide-industry bodies and consultancy firms.

Debate around these issues of private standards has also taken place in the WTO SPS Committee with some members suggesting that ‘governments should take responsibility for the WTO-compatibility of voluntary standards set by companies within their borders’. This was felt to be particularly relevant since ‘the remit of private-sector standards was expanding, now touching on issues such as production methods, environmental concerns … and labour and fair-trade issues’. The issue of harmonisation between public-sector and private-sector standards so as to reduce costs of administration is becoming a critical issue in ACP trade with the EU and one where an EU initiative would appear to be essential. In this context it should be noted that the EC supported calls for greater coordination of private labelling initiatives to reduce the administrative costs of compliance falling on developing-country exporters. However, while broadly sympathetic to developing-country concerns the EC seems reluctant to take any formal role in this area, and is likely to favour the adoption of a facilitating or coordinating role rather than a more interventionist approach.

In May 2008 the COLEACP PIP magazine noted the negative effects which stricter retailer standards were having on the participation of smallholder farmers in horticulture trade with the EU and called for an intensification of EC support for programmes designed to assist smallholder farmers in maintaining their position in the horticulture supply chain

1.8 New issues

Beyond these issues two new areas of concern have emerged since 2007 which could potentially impact on certain ACP food- and agricultural-product exports. The first of these relates to the application within the EU of new rules on animal transport which establish higher standards for vehicles and equipment and stricter enforcement standards for treatment of animals in transport. The significance of this development lies in EU efforts to ‘internationalise’ these animal-welfare standards. Any such internationalisation could be very costly for ACP beef exporters, whose production systems are based on extensive grazing and are often spread across thousands of square kilometres. In a context where in some countries compliance with food-safety standards already accounts for between 8% and 10% of the total revenue earned on export sales to the EU, any additional costs arising from animal-welfare regulations could further undermine the attractiveness of exporting to the EU market. It should be stressed, however, that there are currently no EC plans to extend the provisions on animal transport to the handling of cattle from which beef is produced for export to the EU.

2. Impact of EU food-safety policy on the ACP

2.1 Disaggregating the food-safety challenge

Given the importance of the agriculture sector in most ACP countries and the major role food and agricultural products play in ACP exports to the EU the implications of the EU’s new stricter food-safety policy are potentially profound. There is an urgent need for ACP policy makers and private operators in the food-and-agricultural sector to understand the different trade-policy issues arising from the EU’s new food-safety policy and to develop appropriate policy response to address these issues.

The issues arising for ACP countries from the EU’s new food-safety policy can be divided into five areas:

• standard setting;
• technical compliance;
• the costs of technical compliance;
• the costs of verification and control;
• structural issues arising from the pesticides review.

2.2 Standard setting

The EU has made it clear that it has a sovereign right to establish its own food-safety standards and that it will do so within the framework of the principles mutually agreed within the WTO. It has made it clear that there can be no negotiations with third countries on the food-safety standards applied in the EU. This is the EU’s sovereign right, and provided food-safety standards are applied in ways which do not discriminate between EU and third-country suppliers, then the EU is not in contravention of any of its international obligations. This reality needs to be recognised and respected.

A key issue, however, is precisely how the EU intends to implement the various new food-safety regulations in the varied circumstances characterising the production and supply of agricultural products from ACP countries. Here there would appear to be a need for dialogue if the costs of food-safety compliance are to be contained within reasonable limits which do not come to constitute a barrier to continued trade. This can perhaps best be illustrated through a specific case, that of beef imports from ACP countries. In the beef sector a number of questions arise:

Will respect for the objectives of EU regulations need to be attained in the same way in all countries, or will the EU be able to tailor requirements to country circumstances (with countries at high risk of disease facing stricter controls than those with no history of such diseases)?

Will all provisions of the applicable EU regulations be equally applicable to production in third countries, or will certain aspects be waived, provided that the safety of meat destined for the EU market is not compromised (for example with regard to disposal of animal by-products)?

Will the exemptions to small-scale trade in animal feed between farmers within the EU be extended to small-scale feed trading in third countries (on the basis that for feed-contamination to be of concern it must affect a minimum level of total feed intake)?

There are many uncertainties over precisely how EU food-safety regulations relating to the beef sector will be applied. These uncertainties need to be cleared up immediately before expensive, perhaps inappropriate, programmes to foster compliance are set in place. Currently these issues are being dealt with at the technical level through the preparation by the EC of guidance notes and informal consultations. However, this basis provides ACP countries with no guarantees or security, should EU personnel or policy change, with regard to how the various regulations should be implemented. In this context there would appear to be a need to establish formal structures for dialogue around the issue of how various EU food-safety regulations are to be applied in practice under the different circumstances prevailing in ACP countries.

Such dialogue has already taken place over the application of private standards, with the recent recognition of the equivalency of the KENYAGAP code to those of EUREPGAP (now GLOBALGAP), with the KENYAGAP code having been modified to take into account local realities in ways which, while less costly to implement, ensured that the underlying food-safety objectives were achieved. If such effective dialogues can take place at the private-sector level, it should be possible at the public-authority level.

2.3 Technical compliance

In terms of compliance with food-safety standards, most ACP enterprises involved in exporting to the EU market have no problem in ensuring technical compliance with standards applied by the EU. The technical and scientific capabilities can be secured to ensure respect for EU food-safety standards. The key issue however is one of cost. This is a particular problem in a context in which many of the public utilities that are taken for granted in EU countries may not be operating to European standards, so that the private-sector operators involved in exporting will themselves have to carry part of the costs which would normally be carried by public-sector bodies in Europe.

2.4 The costs of technical compliance

The financial implications in ACP countries of meeting EU food-safety standards should not be underestimated. Often the fixed investment costs involved are high. This means that a large volume of throughput is required to reduce the unit cost of food-safety compliance. This places many ACP countries at a distinct disadvantage, since being small economies, the volume of production destined for the EU market is also relatively small. The cost of ensuring food-safety compliance could then price ACP production out of the EU market. This was particularly the case during the period when EU food-safety regulations were still evolving, and led to the abandonment of the export trade with the EU in some sectors in some ACP countries (e.g. game-meat exports from Namibia). In some cases the costs of technical compliance with SPS measures at the level of the enterprise represents between 7% and 8% of industry costs (e.g. the Namibian beef sector). Overall studies suggest that ‘SPS measures can represent between 2% and 10% of a company’s export turnover’.

In July 2007 this issue was raised in the WTO in the SPS Committee by Argentina which criticised the standards for pesticide residues being established by developed countries which are stricter than those agreed in the CODEX Alimentarius. The Argentinean paper highlighted how ‘additional costs related to complying with the pesticides standards falls on countries which do not subsidise their agricultural sector – something the importing countries setting the standards often do’. This, it was argued, constrained market entry. Against this background Argentina called for a bigger role for the CODEX Alimentarius (a jointly managed FAO/WHO body) in standards setting.

Menu of enterprise-level needs

• Supporting the application of HACCP principles
• Supporting adoption of new patterns of cost-effective pesticide usage
• Need for certification and accreditation through local or regional bodies to reduce costs
• Need for more technical personnel
• Need for more management personnel
• Access to training materials and facilities
• Access to information
• Access to equipment

Studies have identified the availability of low-cost financing as a principal constraint on SPS-compliance at the level of individual enterprises. However, other appropriate instruments and initiatives may well need to be established in order to address other particular needs (e.g. access to information and access to skilled personnel).

In addition, a further way that the EC could perhaps help ACP producers to address the costs of SPS and food-safety compliance is through support to ACP suppliers in securing the full commercial benefits to be gained from higher quality production. This is after all a critical challenge which the EC is facing internally and one which was a central focus of the EC’s evolving policy on agricultural product quality. Extending support in this area would prevent quality certification becoming what the director of COLEACP’s PIP programme described as little more than an ‘expensive admission ticket’ to the EU market.

2.5 The costs of verification and control

The costs of setting up national food-safety control authorities in ACP countries to verify and ensure compliance with EU food-safety regulations should not be underestimated. In many ACP countries there is no national food-safety authority, with functions currently being split across different departments. While this did not pose a problem when EU controls were sector-based, now that they apply to the integrity of the national food-safety control system as a whole, this is posing more of a challenge. Work undertaken for the CTA by CERREX-Ltd UK has identified seven levels at which this issue of institutional development of national food-safety control capacity needs to be addressed. These include:

• access to information on the standards themselves;
• securing the skilled labour required;
• the costs of skilled labour;
• the costs of capital equipment for testing and verification (equipping laboratories);
• inadequate legislative and regulatory frameworks;
• the need for national food-safety control strategies;
• institutional consolidation of food-safety responsibilities.

These all represent initial costs.

Menu of initial food-safety control-related costs

Indicative cost in US$ (2002)
Enhancing institutional capacity through establishment of reference and training centre (regional level) 6,245,000
Sub-total regional 6,245,000
Strengthening institutional framework of national food-safety controls 86,000
Updating the legal and regulatory framework 76,000
Strengthening and rationalising the food-inspection service 604,000
Upgrading scientific and technical capabilities of food-safety control laboratories 1,505,000
Training food-industry quality-control managers, including in HACCP 120,000
Sub-total national 2,391,000

Recurrent costs of maintaining and running facilities not available

Source: Martin Doherty, ‘Study of the consequences of the application of SPS measures in ACP countries’, CTA, May 2003

The major costs are incurred however through the maintenance and running of the facilities once established. This is likely to prove the most difficult area, since ‘the commercial environment within which testing bodies exist often prove insufficient to produce sufficient fee-income to pay for continuing updates’. This means that in part these extra costs will need to be covered by the government budget on an ongoing basis, if the conditions for exporting to the EU are not to be undermined.

Looking beyond this institutional level there is a need to consider how EU food-safety objectives can be guaranteed in ways that are consistent with local realities in ACP countries. An important aspect of this relates to the ‘software’ of food-safety compliance, the people involved in the process. The elaboration of the application of EU food-safety regulations can result in demands for trained personnel to operate the system that are quite impractical in the circumstances prevailing in the ACP countries concerned. However, alternative methods of managing and deploying scarce skilled labour could be designed which ensure the same objective – the placing of safe food, and only safe food, on the EU market. Clearly a dialogue is required on this issue to ensure that, while respecting animal-inspection standards, an excessively high level of formal education qualifications imposing significant additional costs, is not made a requirement of the operation of the system.

2.6 Structural issues arising from the pesticides review

In addition to these more general problems, what were initially seen as transitional problems arising from the pesticide review, may in fact pose more structural challenges. The completion of the pesticides review has seen over 750 plant protection products withdrawn from the market. Horticulture and floriculture producers in the ACP thus face the withdrawal of authorisation to use certain products, even where these may be safer than alternatives or even where alternatives simply do not exist. This is potentially a significant problem.

In this context real dangers arise for ACP exporters as a result of the completion of the pesticide review. The first threat relates to the availability and cost of plant protection products. Many of the products not submitted for assessment under the pesticide review were used in tropical rather than temperate farming systems. As a consequence the review has lead to a discontinuation of approval for pesticides which have long been used in ACP countries on products exported to the EU. The discontinuation of the use of these products is largely occurring not on a scientific basis related to human food-safety or environmental concerns arising following the testing of these product (only 70 of the 750 products withdrawn fall into this category), but largely as a by-product of commercial considerations which underpinned the decision of individual companies over whether or not to submit an existing product for testing. Such decisions often had more to do with patent rights or the costs of testing than the human or environmental impact of the product in question.

In certain sectors this is posing expensive new challenges (since newer products tend to be more expensive than older-established pesticides) to ACP producers exporting to the EU market. Under the COLEACP programme efforts have been initiated to support the registration of some of the pesticides of greatest interest to ACP exporters, despite the reluctance of the companies concerned. However this programme is far from comprehensive in its coverage since it only focuses on the horticultural sector.

An additional problem relates to improvements in the technologies available for measuring residues. This ongoing process of technological improvement means that testing equipment installed in ACP countries can rapidly become out of date, incurring substantial recurrent investment costs in the technologies required for measuring and controlling compliance with EU standards. In some countries this problem has been addressed by sending all samples to the EU for testing. However, this is economically possible only where substantial volumes are involved and can be prohibitively expensive for small-scale or emergent exporters.

Against this background ‘temporary derogations’ may well be required in order to address this problem in the short term while cost-effective alternatives are found. This would extend the approach applied within the EU for certain products which are seen as having ‘essential uses’. This relates to products which have not been defended by the manufacturer, but for which there is no readily available alternative for the crops in question, and for which no food-safety concerns arise.

3. Trends and implications for ACP countries

3.1 Importance of agriculture to the ACP

Given the importance of agriculture in ACP economies, SPS issues take on a particular significance. In 52 ACP countries agriculture accounts for over 60% of employment. As a consequence it is central to efforts to alleviate poverty, particularly in Africa. Agricultural-product exports accounted in 2007 for 23.3% of total ACP exports to the EU and 39.6% of non-energy-related EU imports from the ACP. In some regions the importance of the agricultural sector to the ACP-EU trade relationship is even more important than these figures imply. For the ESA region, some 57.8% of exports to the EU are of food and agricultural products, ranging from a high of 92.6% for Burundi to a low of 10.2% for Djibouti. All of these exports will potentially be impacted on by various dimensions of the EU’s new food-safety policy.

Importance of food and agricultural products in ACP exports to the EU (€ thousands)

* Based on TDC classification I – IV for agricultural products. Source: COMEXT rs4, TradeC-2 (BS).

Major product categories likely to be affected by stricter SPS and food-safety standards include:

• meat products;
• fisheries products;
• edible vegetables;
• edible fruit and nuts;
• coffee;
• tea;
• spices;
• cereals/flour;
• animal and vegetable oils;
• sugar and sugar confectionery;
• cocoa and cocoa confectionery.

These product areas cover the vast majority of ACP agricultural exports to the EU. Cases of market closure as a result of perceived infringements of EU food-safety standards are a growing feature of the ACP-EU trade relationship. With the application of the new EU food-and-feed control regulation to imports from third countries, such disruptions of trade could be increasingly common and affect a growing volume of trade, as the basic integrity of national systems of food-safety control are brought into question. This is why in March 2003 the then EU Health and Consumer Protection Commissioner, David Byrne, highlighted for the executive directors of the World Bank the importance of getting to grips with the food-safety challenge. He acknowledged that high EU food-safety standards were ‘difficult to meet, in particular for developing countries’ and argued that ‘more should be done to assist developing countries to meet our standards’. Rather ominously, however, he continued that ‘unless there is a serious effort to also strengthen the capacity of developing countries to meet the food-safety standards of the developed world, the opportunities presented by trade liberalisation in the food area may prove illusory’.

In view of the seriousness of the challenges faced it was somewhat disappointing that in discussing the assistance required Commissioner Byrne focused almost exclusively on promoting LDC participation in international fora dealing with SPS regulations and certification, rather than on concrete programmes of assistance to national producers and institutions to respectively comply with and verify compliance with SPS standards.

3.2 The commercial impact of stricter food-safety standards

Analysis conducted for the CTA suggests that the increasing complexity and cost of meeting EU SPS standards is having serious commercial implications. One area identified relates to the concentration of power within the supply chain on importers. The 2003 CTA study noted that stricter SPS measures were ‘forcing formerly independent producers to become dependent on single supplier contracts with major EU importers, who in turn assist them to meet SPS measures’. In the long term however, this is weakening the commercial negotiating capacity of ACP suppliers, with the importers dictating key aspects of the commercial relationship. In this context the recommendation from the conclusions of the February 2007 conference on the link between food-quality certification and value addition calling for greater collaboration between member states and the EC to ‘prevent collusion or abuse of dominant positions’ would appear to be relevant.

A further area identified in the CTA study related to the impact on the development of value-added processing activities in ACP countries. Stricter SPS standards were ‘deterring small growers and producers of semi-processed foodstuffs from taking the next step of development into processing where the main potential for added-value profit exists’. It suggested that the structural development of ACP countries within agricultural value chains was thus being ‘frozen’ as a consequence of stricter EU food-safety regulations.

This is a matter of considerable concern, since one of the main policy responses to the erosion of preferences on basic agricultural products which ACP countries are facing, is to support a process of moving up the value chain, to reduce vulnerability to the declines in basic agricultural commodity prices. It would appear that the stricter food-safety policy is making this transition harder for producers in ACP countries to achieve.

A third area of impact relates to the deterrent impact on ACP firms who may wish to expand out of the national and regional base to international trade with the EU. Many of these firms ‘are capable of exporting internationally but do not see commercial advantage in meeting the ongoing costs of SPS standards that their products must carry on their price on foreign markets’. While this is a worrying development, since it significantly reduces the ability of regional integration to provide a platform for the growth of international exports, its consequences go much further. In certain ACP regions, the more advanced and economically more significant economies are actively trying to develop food-safety standards which will allow them to attain recognition of ‘equivalency’ with EU standards.

Should this occur then stricter EU food-safety standards will not only have consequences for the ability of ACP firms to expand out of regional markets into international markets, but could even drive some ACP producers out of their own regional markets, as EU food-safety standards become the norm. In the context of the debate around mutual recognition, the implications for regional trade of stricter EU food-safety standards are an issue which will require careful attention.

Provided that technical assistance in meeting stricter food-safety standards is made available to smallholder growers, it is possible that they can be kept in the supply chain and could even gain real economic benefits from the commercial opportunities opened up. However, in the context of the serious economic downturn and price declines on major markets, the increase in fixed costs which stricter SPS standards imply can raise serious issues of commercial viability.

Potential impact: the case of the ACP horticultural sector

‘In the ACP countries, some 45 million people were dependent on horticultural exports to the EU for their livelihood, and legislative changes are likely to have effects as follows:

• a fall in export production and increased production costs;
• higher risk of crop wastage and crop failure;
• exclusion of small growers from the supply chain;
• exclusion of smaller countries from the export chain.

Smallholders were most affected because:

• importers will exclude exporters relying on small outgrowers;
• exporters will not source from smallholders where alternative sources exist;
• production costs will increase (more expensive chemicals and controls);
• smallholders may turn to local markets/subsistence as an alternative.

Workers would suffer through:

• loss of jobs, especially in SMEs;
• increased seasonality of work and reduced job security;
• reduced income;
• social disruption.

Developments in this area were one of the primary drivers behind the establishment of the COLEACP pesticides initiative programme (PIP) to help exporters to comply with the new regulations’.

‘COLEACP suggests that the ACP horticultural sector has €850 million of exports at risk from the EU pesticides regulations, which could reduce exports by €60 million annually. Similarly estimates of the impact of lower aflotoxin MRLs in foodstuffs suggest that African exports could potentially decrease by around US$670 million (approx. 64% of the total).’

Source: Martin Doherty, ‘Study of the consequences of the application of SPS measures in ACP countries’, CTA, May 2003

3.3 Implications for government finances

New EU food-safety standards, particularly the food-and-feed control regulation, will place new responsibilities on ACP governments that will carry important financial implications, both relating to initial capital costs but more significantly the recurrent costs incurred in maintaining and running national food-safety control authorities. For smaller ACP countries in particular (bearing in mind that over half of ACP countries have populations below two million) it is highly unlikely that a volume of export production can be generated that will provide a self-sustaining basis for the financing of food-safety institutions. Ongoing support to government institutions will thus be required if these smaller ACP economies are not to be driven out of exporting food and agricultural products to the EU. This is particularly the case for LDCs, where special assistance programmes will be needed.

The seriousness of this issue was highlighted by the 2008 DG SANCO evaluation of the capacity of the competent authority in the Dominican Republic to ensure compliance with EU standards related to pesticide levels. This evaluation took place following notification of unacceptably high levels of pesticide residues in products imported into the EU. The report concluded, ‘there is a very poor control system in place. Plant protection product use is extensive and not effectively controlled in authorisation, marketing or use. Many pesticides not authorised for marketing and use in the EU are regularly used in products for export. The control system does not provide guarantees equivalent to EU standards. There is no analytical capability and therefore further residues with toxicological risks in exported products remain highly likely’. The report recommended action in seven areas, with the competent authority in the Dominican Republic being required to submit activity plans within 25 days of receipt of the report. The recommended steps to be taken included:

• improving the control system for pesticides in fruit and vegetables for export to the EU in line with EU standards;
• ensuring proper record-keeping of the application of plant-protection products in produce exported to the EU;
• establishing a post-registration control programme for the marketing, use and quality of pesticides;
• establishing MRLs for goods destined for export to the EU and communicating these to producers and exporters;
• developing a plan to monitor pesticide residues;
• developing the analytical capacity to monitor pesticide MRLs;
• setting up a system of authorisation based on risk assessment, a register of authorised products and their uses and ensuring that this information is communicated to growers, pack houses and exporters.

This constitutes a considerable agenda for action for the competent authority in the Dominican Republic, the financial implications of which could be substantial indeed both at the public-authority and private-sector levels.

This needs to be seen in the context of the current economic downturn which is generating considerable financial pressures on government spending in ACP countries. Against this background the EC may well need to demonstrate a degree of flexibility on the deadlines established for compliance with DG SANCO recommendations (in the case of the Dominican Republic the June 2010 deadline for addressing the areas of concerned identified in the evaluation report).

3.4 Existing EC programmes of support

The EC is currently supporting two major sector-based programmes and a general food-safety compliance programme in ACP countries, namely:

• the €33.5 million pesticide-initiative programme designed to improve the competitiveness of the horticulture sector, launched in 2003 and implemented through COLEACP;
• the €42.7 million programme of assistance to fish exporters to help them to meet international health standards (Strengthening fisheries products health conditions programme) launched in 2003;
• the €29.5 million ‘Strengthening food-safety systems through SPS measures in ACP countries’ launched in 2007.

Beyond these three programmes the EC has established the €50 million trade.com programme. This has three main components, one of which relates to the funding of pilot projects to address institutional and supply-side constraints with a special emphasis on enabling ACP countries to meet technical standards and SPS requirements. Unfortunately this represents a relatively minor component of the programme, with more emphasis being given to immediate needs related to trade-policy formulation and trade negotiations.

In addition DG SANCO has launched a new food-safety-related training initiative called ‘better training for safer food in Africa’. The aim of the initiative is ‘to keep participants up to date with Community law in these areas’ and to promote ‘harmonised and efficient controls’. Some €10 million is to be spent over the next three years in seven programme areas: four implemented through the World Organisation for Animal Health (OIE) at a cost of €5.4 million and three through consultancy firms at a cost of €4.12 million. According to the EU Health Commissioner Androulla Vassiliou the main objectives of these operational programmes are to:

• strengthen human capacity through training of trainers particularly in veterinary and laboratory services;
• help to improve national and regional legal frameworks towards harmonised systems;
• strengthen the capacity of small and medium sized enterprises to enhance their access to local, regional and EU markets;
• strengthen the capacity of the African Union on SPS issues.

Additional priorities include: sharing information and policy advice; strengthening official systems of food-and-feed control and the modernisation and rehabilitation of testing and certification laboratories. Plans are afoot to establish a dedicated webpage to provide information on this initiative as it becomes operational.

Potentially the establishment of direct cooperation links between African governments and EC departments with operational responsibility for policy implementation offers an opportunity to improve the targeting and effectiveness of EC assistance in these areas. This however will be critically determined by the extent to which the process of dialogue is retained in-house in the operational departments of the EC concerned, as opposed to being ‘farmed out’ to external consultants.

Putting EU SPS support to ACP countries in context

With moves towards the implementation of the EU’s ‘farm to fork’ food-safety policy, EU member-state governments expressed concerns that the costs associated with the implementation of the new standards could result in a loss of price competitiveness for EU producers. Against this background in May 2003 the EC announced the creation of four schemes to support EU farmers in meeting the higher costs associated with these regulations since, as Commissioner Fischler noted, these higher costs ‘have not always been adequately compensated by the market’. These four schemes include:

• a scheme to help farmers introduce the new and exacting standards;
• a scheme to promote animal welfare, with those who farm better than the normal good-husbandry standard receiving permanent aid to compensate for the costs and income foregone;
• a five-year scheme to support farmers’ participation in certification programmes;
• a scheme for the advertising of quality labelled products by producer groups.

In the 2004 EU agricultural budget some €248 million was allocated to food safety and animal-, plant- and human-health protection programmes.

In addition, in a context where it was recognised that the market does not always adequately reward higher quality, EU farmers are also being assisted in meeting these higher quality standards in part through the direct aid payments being made from the EU budget while processing companies are being supported through the broader rural-development envelope.

In the run-up to enlargement the Special Programme of Assistance to Agriculture and Rural Development provided over €550 million per annum in assistance to prepare agricultural sectors and rural areas for full incorporation into the EU market. Between 2000 and 2004 some €1.33 billion was made available to pre-accession countries. Within these programmes the promotion of competitive structures and enterprises in the food-processing sector was accorded a high priority, with often as much as two-thirds of expenditures being allocated for this purpose. An important component of this support directly related to food-safety compliance.

In addition to these programmes the EC is supporting a multiplicity of initiatives at the national level. For example in Burundi it finances a dedicated SPS programme from former STABEX funds, while in Namibia it used 9th EDF NIP funds to finance an emergency programme of measures to ensure food-safety compliance in the beef sector, where the findings of the EU FVO report threatened the closure of this trade unless urgent remedial measures were adopted. Significantly this programme was funded from the existing NIP allocation to a major rural-development programme which was still in preparation. This raises important issues related to internal resource-allocation in ACP countries.

With food-safety responsibilities often being spread across government departments, there is, in most ACP countries, no strong institutional basis for the mobilisation of financial resources to address food-safety priorities. This means that the concerned departments are often poorly placed in mobilising funds from global national allocation (e.g. the NIP), where stronger spending departments (transport, education, health, agriculture) with an established track record of accessing EC assistance often take priority in resource-allocation decisions. This results in food-safety departments and authorities in ACP countries often being deprived of the resources required to address this critical issue.

Thus in extending support to ACP countries to address food-safety challenges it may be necessary to establish dedicated facilities and financial allocations, if institutional structures for ensuring food safety in ACP countries are to be effectively assisted in meeting the challenges that lie ahead. While the pan-ACP €30 million facility represents a first step in this direction, the resources available are only likely to be sufficient to meet initial diagnostic needs and are unlikely to be sufficient to finance the subsequent investment needs.

3.5 Responding to the food-safety challenge

3.5.1 Establishing a dialogue on the application of standards

With regard to food-safety standards there would appear to be a need for formal structures for dialogue around the issue of how various EU food-safety regulations are to be applied in practice under the different circumstances prevailing in ACP countries. This would appear to be vital if expensive, perhaps inappropriate, programmes to foster compliance are not to be set in place which are subsequently challenged by the EU. Similar frameworks for dialogue would appear to be necessary with regard to private-sector standards, building on the experience to date in Kenya.

3.5.2 Assisting with the costs of upgrading to EU standards

Given the financial implications in ACP countries of meeting EU food-safety standards there would appear to be a need for a low-cost loan facility to assist ACP enterprises in making the necessary investments to meet EU standards. A facility should be established locally (so as to eliminate exchange-rate risk) using grants for on-lending at highly concessional rates of interest, and it should operate as a revolving fund, so as to provide an ongoing source of support for food-safety improvements.

3.5.3 Meeting information and technical assistance needs

In addition there would appear to be a need for a number of other initiatives designed to provide timely access to information on the evolution of food-safety requirements (including with regard to the use of plant-protection products) and to provide targeted technical assistance to ACP enterprises in finding cost-effective means of meeting EU food-safety standards in the particular circumstances faced in individual countries.

3.6 Establishing a special food-safety control facility

A major area where grant-financed support would appear to be needed is in establishing effective national food-safety control capacity in ACP countries. What is required in the initial phase in this regard at the national level is known: the costs involved are approximately €2 million per ACP country. However, this would need to be supplemented by certain regional facilities which would cost around €5 million each. This gives a total funding requirement of approximately €180 million for these initial measures to enhance food-safety control capacity in ACP countries.

Given the scale of funding required overall, this implies a need for an expansion of the €30 million programme ‘Strengthening food-safety systems through SPS measures in ACP countries’ launched in 2007, perhaps via the establishment of dedicated regional food-safety trust funds in the full EPAs which are still to be concluded.

Certainly funds would need to be more easily accessible and available both for a rolling programme of structural measures and emergency measures, should these prove necessary in order to maintain existing market access. Regionally based trust funds, under the management of accountable private-sector-led boards of trustees would appear to offer a better model for aid deployment in this area than the horizontal programmes that the EC has established to date. This would appear to be essential since existing food-safety bodies in ACP countries may lack the institutional muscle to secure the necessary finances from their NIP allocations, where large spending ministries tend to dominate the NIP-programming process.

3.6.1 Addressing the problem of recurrent costs

An additional area where considerable creative thought will be required relates to the financing of the recurrent costs of national food-safety control authorities, since in many ACP countries the commercial environment within which such bodies operate cannot sustain the level of user fees which would be required to make such facilities self financing. Solutions will need to be found to this challenge if the future basis for exporting to the EU is not to be undermined. One option in this regard relates to the use of the interest-rate ‘spread’ on grant-financed loans made available under the EDF (the difference between the interest rate paid to the EIB for the loan and the interest rate charged to the final borrower). Grant-financed loans could be made available through the trust-fund approach for on-lending to commercial enterprises for investment in meeting safety standards. The bulk of the interest-rate ‘spread’ between the price at which Cotonou Agreement funds are made available and the interest rate charged to the commercial enterprises (which would be market-related) could then be used to finance the infrastructure for the verification of food-safety compliance.

3.6.2 Greater use of ‘temporary derogations’

A final area where action is needed links to both the transitional and the structural problems associated with the pesticide review. Consideration needs to be given to the more generalised use of ‘temporary derogations’ for products not submitted for approval under the new procedures, but where no food-safety concerns arise and there are no readily available alternatives.