Trade barriers and food-safety standards
Abstract
[Conclusion]: Barriers to international trade in agricultural and food products exist for several reasons, one of which is to ensure food safety. Food safety is a credence characteristic and this attribute causes market failure through imperfect and asymmetric information. One way in which government intervention in importing countries can improve upon the market outcome is to impose trade regulations as a way of providing the missing information. Any such regulations need to be consistent with the SPS Agreement. It is also in the interests of governments in exporting countries to overcome the market failure by putting in place regulations to ensure that their exports of food meet minimum levels of food safety. The issue for them is whether their regulations should be enforced through public or private agencies. Because of the credence characteristic of food safety, it is not possible for private firms credibly to commit to the provision of high-quality food exports in the absence of regulation. In the application of the SPS Agreement to the area of consumer health and food safety, there is no scope for consumers preferences to be taken into account. The consistency of import regulations is based on risk assessment involving only estimates of probabilities. There is no place for consumers preferences about risk or for economic considerations. This omission is perhaps the outcome of the original negotiations based upon pragmatism and the need to get agreement but it is an inherently unsatisfactory aspect of the Agreement. A better approach would be to incorporate consumers preferences and non-additive probabilities into a more comprehensive decision-making framework. The link between food-safety standards, trade barriers and the gains from trade would then be better defined.