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Final Report Summary - NTM-IMPACT (Assessment of the impacts of non-tariff measures - NTM on the competitiveness of the EU and selected trade partners)

Executive Summary:

The main objective of NTM-IMPACT project was to collect and analyze new data on non-tariff measures (NTMs) faced by EU agri-food exports to a number of key markets, and to compare these with NTMs faced by competing exporters to the same destinations. Relative competitiveness among EU and other export countries was of special interest. Attention was also being given to how NTMs in the EU and other major importers impact least developing countries (LDCs). The primary focus was on government regulations and standards that prescribe the conditions for exporting agri-food products to foreign markets, but private standards have also been examined, especially in the LDC case studies.

The research and findings of the project are relevant for EU policy makers and stakeholders, but also for others interested in improved classification and quantification of NTMs, as it seeks to establish:

An analytical framework for analyzing the effects of NTMs on global agri-food trade;

The development of a database on standards and regulations imposed on EU agri-food exports by key trading partners and an indication of how these relate both to EU and internationally agreed standards;

The development of a comparative analysis for analyzing the relative impact of NTMs at an aggregate level; 14 case studies on product trade clusters with quantitative results; Case studies to analyze the implications of both public and private NTMs in high-income markets on least developed countries in Africa and Latin America.

For more information and access to working papers already completed, go to

Project Context and Objectives:

In light of decreasing tariffs resulting from multilateral, regional and bilateral trade agreements as well as preferential trade arrangements, trade flows of agri-food products are increasingly being determined by non-tariff measures (NTMs). NTMs take the form of a range of measures that have incidences at the border and can impede trade. Using the Unctad classification for NTMs, OECD (2007) identifies two broad categories of measures: The first group contains direct price and quantity control measures for trading products (“core non-tariff measures”), for example tariff rate quotas (TRQs) and other instruments for import licensing. In the second group, measures beyond traditional trade policy instruments are found. They indirectly affect the price and/or quantity of traded products, typically through standards and regulations that prescribe specific product characteristics, production processes and conformity assessment. Standards and regulations are generally used to address information problems and externalities that are related to societal concerns and cause market failure. In the trade context, standards and regulations as import conditions aim to ensure food safety, animal and plant health, but also extend to other quality and technical aspects, and governments increasingly demand that foreign products comply with their requirements.

With regard to agri-food trade, much work has been done on “core NTMs”, whereas research on NTMs beyond traditional trade policy instruments that define import conditions in standards and regulations under which international trade takes place have only recently gained prime attention, mainly due to their increasing importance. The measurement and systematic analysis of standards and regulations has lagged behind, making it the missing link in policy analyses on international trade reform. The conceptual thinking has progressed in so far as the benefits of standards and regulations as import conditions, particularly with regard to food safety, plant and animal health, have been acknowledged. In other words, such NTMs cannot be considered as mere impediments to trade, and the analysis requires further advances with regard to the substance of regulation. Most importantly, the empirical basis for understanding the impact of standards and regulations on trade and competitiveness in terms of the ability of countries to expand their share of global exports is weak, in particular due to data constraints. The proposed project aims to fill this gap in order to provide the European Commission with information on NTMs particularly standards and regulations* and their impact on trade and competitiveness. The project goal is to provide this information to enable the European Commission to more effectively address NTMs of its trading partners, be it in multilateral or bilateral negotiations or on a case-by-case basis, and to identify additional trade opportunities.

Hence, the overall objective of the project is to collect and analyze new data on non-tariff measures (NTMs), particularly on governmental standards and regulations that prescribe the conditions for exporting agri-food products to foreign markets. In order to ascertain the NTM impact on EU agri-food exporters the proposed project applies a comparative analytical approach that requires information on the requirements of the EU’s main competing players and the EU for comparison.

More specifically, the project will include the following actions:

• Design of an analytical framework for guiding the definition of the approach for qualitative and quantitative analysis, the data collection, the scope of NTMs considered, country selection and product coverage.
• Develop a data base and collect fully consistent data on NTMs across a selection of the EU’s main trade partners, plus the EU, on a subset of standards and regulations and agri-food products. While new data on NTMs between the EU and main competing players in international agri-food trade (USA, Canada, Japan, China, India, Brazil, Argentina, Australia, and New Zealand) is collected, existing information, specifically the data provided by the EU’s Market Access database (Madb), will be used in the data base.
• Comparative aggregate analyses on the impact of NTMs on EU agri-food trade, where aggregate takes the meaning of cross-product, cross-country and across several measures. This is done on the basis of indicators for the differences in the import conditions between the EU and selected trade partner.
• Case studies on the quantitative assessment of NTMs in particular sub-sectors of significant economic interest to the EU: fruits and vegetables, meat and dairy. The case studies analyze standards and regulations as import conditions from the perspective of EU agri-food exporters. The selection of case studies will be based on the analytical framework developed within the project, and focusing on product-trade clusters ensures the comparison with at least one of the competing players in global agri-food trade.
• Case studies on the socio-economic impact of NTMs in least developed countries, involving primary data collection at different levels of the supply chains, including small-scale farmers and small and medium enterprises (SMEs), and the analysis of private and public standards.
• Dissemination of our findings and interaction within the research and policy community, as well as to key stakeholders in the agri-food sector, inside and outside the EU.

The Consortium is made up of 19 partners from countries including member states and third countries (Fr, De, Nl, Uk, Be, Br, Ar, Us, Ca, Nz, In, Ru, Sv, Cn, Au, Jp). The overall coordination is with the French CIRAD, through its project management office in Buenos Aires with administrative and financial management support from its headquarters in Montpellier.

The research is organized in 5 work packages that are coordinated by a WP1 on project coordination, and supported by a WP2 on Information management and diffusion. WP3 plays a pivotal role at the project’s start-up as an “analytical framework development” work package, in which preparatory research will be conducted to generate information that will be needed. WP4 deals with basic NTM data base, fed by data from 10 +EU countries, by WP6 conducting 14 product case studies, and by WP7 on one norm-setting comparative EU-US study and three LDC impact studies. WP5 concentrates the larger part of the comparative analyses. It works with data from the central data base, and informs the quantitative case studies WPs.

* The terminology of the World Trade Organisation (WTO) clearly differentiates between governmental regulations and private standards. Private standards are not subject to the WTO international trade rules, although they have recently been discussed by the WTO member states. In contrast, governmental regulations fall under the WTO international trade rules, more precisely under the SPS and TBT Agreement.

Project Results:

The NTM-IMPACT project has generated a wealth of new information, that in one way or the other has entered the public domain. First of all, and the easiest way, is the full research output that was written up as Project Working papers. The project website offers the entry point to the 24 complete papers covering the different thematic areas of the project. The working papers offer the advantage of describing full details of data and methods, that will appear much more condensed in the subsequent scientific journal publications. While the working papers represent the totality of research results, the following section can however not be exhaustive and will only give evidence of some key sets of salient results (going across the different topics).

Description of the Database for NTM-Impact (Shutes et al, 2011)1

The data consists of a database including the following numerical measures:

1. Pesticide Maximum Residual Levels, including the sampling, units of measurement where available
2. Microbial agent measures
3. Additive count data
4. Veterinary Drug Maximum Residual Levels
5. Contaminant Agents

This data is included for 12 products plus 3 horizontal categories. These horizontal categories were designed to be used in the cases where the legislation for specific agents was specified across a group of products, such as all meat products. In practice, these were found to be of little use and will not be reported here. For other aspects under consideration, questionnaires were designed for online data collection supplemented with an offline copy to allow for easier research and interviews. The areas covered were:

1. Labelling Requirements
2. Plant Health and Measures Associated
3. Animal Health, Certification and Treatment
4. Traceability Requirements
5. Conformity Assessment

The last of these two (Traceability and Conformity Assessment) were combined into a single questionnaire to facilitate data collection. This, of course, has no impact on the analysis. Further data collector logs are also included in the data base for further consideration and examination. These were completed by the data collectors whilst filling in the offline sections of the data collection process and were also used to supplement any online questionnaires where this was thought to be useful. The purpose was to ensure that the sources and points of interest were recorded for further analysis in the future.

Heterogeneity of Trade (Burnquist et al, 2011)2

The paper introduces the Heterogeneity Index of Trade (HIT) and the Actual Heterogeneity Index (AHIT) which provide complementary information about differences in NTMs in general and standards and regulation in particular. The HIT index is developed so as to accommodate binary, ordered and quantitative information, which describe import requirements in international trade. The AHIT index builds upon the HIT index and considers the specific situation where the requirements demanded by the importing country are stricter than those of the exporting country. That is, the AHIT index considers only dissimilarities which might imply compliance costs for European exporters due to more stringent level of the importing countries MRLs. With regard to the HIT index, it is argued that the mere fact of difference in requirements cause trade costs.

In this paper, the HIT and the AHIT index are applied to the case of pesticide MRLs by using the “NTM impact” database that has been established within the EU project “NTM impact. The focuses is on the pesticide MRLs that the EU27 and 10 trade partner countries (Argentina, Australia, Brazil, Canada, China, Japan, New Zealand, Russia and the US) apply on a set of agri-food products. For the index calculation, the EU export perspective serves as the benchmark for comparing the respective MRLs.

The results of the HIT and the AHIT index provide an overview of regulatory difference between the EU and its important trading partners. The AHIT index gives the additional information about if the regulatory difference lead to compliance costs for EU exporters. With the focus of the case study, it should be noted that trade costs on a broader context, e.g. costs relating to conformity assessment, are not considered. This paper presents the first application of the HIT and the AHIT and in this regard the index analysis should be extended so as to further explore regulatory differences between countries.

Policy implications from trade cluster case studies (Drogue & Gervais, 2011)3

The objectives of the case-studies were to

(i) Analyze barriers on imports from the EU compared to other countries’ exports of similar products.
(ii) Explicitly address the relative competitiveness (or lack thereof) of the EU compared to other exporting countries.

This policy paper is then an attempt to summarize and synthesize the results obtained by the analyses drawn by the different research teams on products as different as meats, dairies and fruits and vegetables. These aggregates form product trade clusters and have been chosen according to a well defined cahier des charges. However, each specific product within the trade clusters has been the sole choice of each research team. The selection of the case studies has been based on the location of the research teams as well as the relative importance for policy makers, agri-businesses and the European Union. The reasons behind the selection of the case-studies have been widely described in [insert reference]. A common feature of all the case studies is that the Non-tariff Measure (NTM) is of significant importance for exporters as well as importers; with importance defined as a function of the cost borne out by exporters because of administrative procedures, of technological compliance, potential trade losses, as well as the uncertainty they generate for producers and exporters.

The common lesson of these case studies is that NTMs issues are deeply heterogeneous and complex. Their impacts on competitiveness are multi-faceted and the response in terms of public policy can not be unique. Indeed most sanitary and technical measures are expected to have negative impacts on trade, but many authors have shown that they could be the vectors of potential positive effects by giving information to the consumers and bringing trust and confidence in the available products. This is true for industrial products (see Moenius 2006), but it is also the case for agrifood products see Disdier et al. 2008). The results of the case studies do not provide a different story. A less expected result is that the trade impacts of import bans are not as straightforward as one could expect. Regarding the competitiveness position of the European Union (EU) compared to other exporting countries, it seems that – in most cases – other factors (such as relatively higher product prices or tariffs) have a more negative impact than non tariff measures imposed by its trade partners.

Sanitary and Phytosanitary (SPS) measures respond to public claims for better food safety but impose a heavy cost on producers and exporters. SPM carry information andf generally bring consumers’ trust and confidence. They are also considered by policy makers as an obstacle to trade to be wary of. As a result, the impact on trade can be ambiguous. The stringency of domestic standard tends to foster trade by enhancing consumers’ confidence, while stringency of abroad standards tends to weigh on cost and competitiveness. As a consequence one’s competitive position will depends on several factors as the relative level of stringency between exporter and importer‘s regulations which will drive the cost of compliance, the transparency of the rules imposed by trade partners and the equivalence in the conformity assessment procedures. In many of the case studies presented here, the European Union is not (or little) affected by the imposition of a new or stricter sanitary standard as European agrifood production is already governed by very tight rules. As Drogué and DeMaria show – focusing on apples and pears – producers already subject to strict rules are in a better position to face foreign requisites because they have already internalised the cost. They report that maximum residue level requirements for pesticides are not harmonized at a global level. While the Codex Alimentarius attempts to introduce a common rule, it is not statutory and there are as many regulations as countries. Then complying with every partner requisite is difficult for exporters and this difficulty is correlated to the level of stringency of your own regulation. Exporters are more prepared to born the cost associated to stringent standards when they are themselves compelled to strict rules. This certainly applies to European exporters

This is the reason why – focusing on dairy and poultry trade in China – Huang et al. find that even if Chinese food safety standards on residues got stricter under public pressure, they did not significantly affect European dairy or poultry’s imports. Tariff conditions seem to have more of an impact on Chinese trade partners than non-tariff measures. This could explain the prominent position of New Zealand in dairy trade and the growing trends of Chile poultry exports. These two countries benefit from a recent Free Trade Agreement with China. However, it is important to remember that the EU suffered a ban from 2002 onwards on its poultry exports to China due to bird flue outbreaks which ban as we will see in section 3 has often more impact on trade than SPS measures.

The same is found by Burnvisq et al. whose results suggest that NTMs have affected the competitiveness of Brazilian poultry meat exports relatively more than for the EU countries’ poultry meat exports. They also find out that public policies providing information on the quality and conformity through labeling were effective in stimulating exports of poultry meat.

But this “rule of thumb” can sometimes be misleading. First, if producers from “stringent” countries are in better position to face the implementation of a stricter rule, tightening standards can have a positive impact on trade from countries initially suffering from “bad reputation”. This is shown by Honda et al. studying the effect of Japan’s various food safety threats and quarantine regulations on poultry meat imports. They pay particular attention to food safety standards on residues of pesticides and residues of veterinary medicine. They find that increasing the stringency of the standard leads to a diversion of trade from countries with prior “good reputation” (France, US or Japan) to countries with prior “bad reputation” (China, Thailand or China). This shift would be explained by a demand-promoting effect of the compliance with more stringent standards for “low-cost” countries.

Second, the lack of transparency and the cumbersomeness of conformity assessment procedures can weigh also on countries with strict rules such as the ones prevailing in the EU. This is the conclusion reached by Mraz, Pokrivcak and van Berkum analyzing dairy trade between the EU and Russia. EU exports of dairy products to Russia face a complicated patchwork of government regulations. Inspections and audits under Russian authority are required to get a necessary Russian export license. EU exporters consider conformity assessment procedures as being too detailed, complicated, inconsistent and restrictive. However, the Russian market is still considered attractive. Compared to its major competitors (Belarus, Ukraine, the US, New Zealand, China, Argentina and Brazil) Russian NTMs affect the relative competitiveness of the EU less than the US but more than New Zealand. Compared to Belarus and Ukraine it is the difference in tariff that has more importance for the EU. The former countries benefit from trade preferences in the Russian market.

But the imposition of a sanitary measure can also be totally neutral. Lema et al., analyze the effect of SPS measures (such as mandatory cold treatment) and conclude that the patterns in lemon’s trade are better explained by the exchange rate in the case of Argentina and by transportation costs regarding Spain.

Technical standards are less often studied in the case of agrifood products in that they do not directly refer to food safety. Two cases show that changing technical standards can lead to a new trade equilibrium that affects exporters. As technical standards are more specific, they will be more detailed in what follows compared to the above SPS measures. Consequently, their specificity implies that global trade is less affected by these measures, but induces changing in the composition of trade and gets more onto exporter’s strategies than public policies at least for the EU.

In 2008, Canada imposed minimum limits on the percentage of casein coming from fluid milk and maximum limits on the whey protein to casein ratio which cannot exceed that of milk. The new standards were primarily motivated by the increasing use of dairy protein isolate by domestic cheese manufacturers. Canadian cheese manufacturing is dominated by three firms which purchase milk from domestic producers whose output is constrained by production quotas which are a key element in Canada’s supply management policy. Imports of dairy products are constrained by Tariff-Rate-Quotas (TRQs) featuring prohibitive over-quota tariffs. Cheese manufacturers were using imported milk protein concentrates because it was cheap and because it allowed them to deal with seasonal variations in milk production. Two-thirds of the TRQ’s minimum access commitment (MAC) for cheese imports is allocated to the EU. Furthermore, import licenses have “use it or lose it” clauses that insure that the MAC is filled. Thus, the EU does not need to worry about being displaced, but the standards can bring about changes in the types of cheese being imported and in the sources within the EU. Stricter regulations may not bind on any firm and hence will have no effect or they can bind on all of the firms. Alternatively, they can bind on domestic firms and not on foreign ones or vice versa. Given that the compositional standards vary across types of cheeses, some standards may bind while others may not. However, because importers can alter their import mix in filling their import licenses, imports of cheeses for which the standards do not bind will be affected. Ironically, the quantity of domestic milk used in cheese manufacturing need not increase in response to the imposition of the compositional standards.

Felt et al. show that for the EU, what matters is what happens to the unit-value of imports. The latter can increase or decrease depending on whether changes in the import mix favours more or less expensive cheeses and unit values tend to be higher than what they would have been had the compositional standards not been adopted.

Dairy production in the US is governed by the Grade A Pasteurized Milk Ordinance (PMO). The PMO sets minimum standards for the production and transportation of Grade A milk from the farm to the dairy plant. Milk that does not satisfy Grade A standards, but meets less stringent standards, is classified as Grade B (manufacturing grade milk). Grade B milk can be used only in the production of cheese, butter and nonfat dry milk. The US imposes high tariffs on many dairy commodities but low tariffs are applied to some products. Non-tariff measures may have a significant effect on trade in commodities attracting low tariffs. In this respect, US tariffs on many fresh milk products are around 1% and US tariffs on milk protein concentrate and whey protein concentrate are, respectively, 0.1% and 8.5%. These products must also meet stringent domestic standards. Specifically, US fresh milk products can be made only from Grade A-certified fluid milk and it is costly for foreign producers to gain Grade A certification. US regulations also limit the use of dairy concentrates in fresh milk products.

A proposed rule change would, under certain conditions, allow the optional use of any safe and suitable milk-derived ingredient to contribute to the non-fat solids component of yogurt, and permit reconstituted forms of milk as a basic ingredient in yogurt manufacturing. Essentially, these changes would allow yogurt producers to substitute milk protein concentrate and whey protein concentrate for US fresh milk that meets Grade A standards. The legislation change would affect trade by opening a pathway for foreign dairy products to be used in yogurt manufacturing allowing foreign producers to partially circumvent Grade A standards for fresh milk products.

Winchester et al. argue that proposed changes in fresh milk standards will lead to large proportional changes in US imports of concentrated milk products, but should not lead to large changes in global dairy production. Proposed changes in US regulations will facilitate only a small increase in the use of concentrated milk products in the production of fresh milk products. The regulatory change would bring about a substantial decrease in the production of US fresh milk products which would be displaced by increases in whey product imports of $37 millions and $32 millions from, respectively, the rest of the World and the EU. The combined effect of the US Grade A standard and regulations governing production of fresh milk products have a small influence on dairy trade relative to tariffs and TRQs, which are significant for some products.

Other types of non tariff measures analyzed in the case-studies are quantitative trade restrictions which are often used to protect markets from sanitary infestations. Trade bans, regionalisation, or quarantine measures are analyzed within these case studies. The analyses show that the competitive position of an exporting country is always affected by a quantitative restriction. The introduction of import bans is globally welfare decreasing and leads to important cases of trade diversion. Then it is always profitable for any country to call for more trade openness at least using the principle of regionalisation. Beghin and Melatos econometrically estimate a tariff equivalent above 113% (4) associated with three large changes in quarantine regimes for Australian pigmeat imports by major trade partner (Canada, Denmark, and USA). The quarantine regimes have had a strong effect on trade and welfare and the removal of the barrier induces an increase in consumption of imported pigmeat of approximately 5.26kg per person or 104.66 thousand metric tons (based on a calibration exercise using 2003 data). The estimated impact on the domestic pigmeat market is limited but with the caveat that the specification of the random utility model they use potentially constrains these effects. Export revenues to Australia expand by AU$245 million, AU$109 million, and AU$125 million for Canadian, Danish, and U.S. pigmeat respectively. From the evidence gathered in this study, early exporters benefited from subsequent trade liberalization intended to free other exporters’ trade. The reforms created complementarity effects rather than substitution effects. Canada benefited from the reforms of 1998 and 2004, and Denmark benefited from the 2004 reforms, which also enabled U.S. producers to export to Australia. This is contrary to what one might have expected given the potential trade diversion involved with a sequence of bilateral trade liberalizations.

Wieck et al. analyze country welfare effects of changes in Russia and Japan avian influenza (AI) regulations (import ban and principle of regionalization) on Brazil, China, France, Germany, the Netherlands and United States’ imports of cooked and uncooked poultry meat. For uncooked meat, a ban is shown to have a negative trade impact whereas the principle of regionalization is trade enhancing. For cooked meat, the results are inconclusive: the impact estimates are either statistically insignificant, or have unexpected signs. That might be linked to fact that the International Organization of Epizooties (IOE) recommendations do not justify bans for cooked meat so that only a few cases can be found in the sample.

Trade diversion effects among countries depend very much on the infection status of the involved countries. Three out of four high pathogenic AI (HPAI) countries suffer welfare losses due to reduced export opportunities. These countries see shrinking production and increasing domestic sales (e.g. Germany, Russia), or businesses react by selling them to other HPAI countries (e.g. Germany to China, or China to Russia). The increased pressure on HPAI domestic markets diverts trade from other sources (e.g. Brazil). Domestic producers lose and consumers win because of lower prices on domestic markets in all HPAI countries. These welfare gains need to offset welfare losses from reduced imports but for the export oriented AI-free countries, these potential welfare gains cannot be realized. Increased domestic sales in Germany and Russia at lower marginal production costs replace imports from the Netherlands which found new destinations (US, Japan, ROW) but overall, production in the Netherlands decreased.

Similar effects are obtained by Honda et al. in the case of Japan. The effect of the bans for the AI infected countries varies across country sources. The bans for China, Thailand and the US see a decrease in their market shares, whereas shares for Brazil and the domestic industry increased. France is overall not affected perhaps because the major producing regions in France are not under the coverage of the ban due to the regional treatment.

Foot-and-Mouth Disease (FMD)-free countries banned imports of fresh, chilled or frozen beef from countries where this disease is endemic or sporadic. The US, Canada and Japan have followed the “zero risk criteria” while the EU has followed the commodity-based approach, allowing imports of boneless beef (chilled and frozen) from countries with a FMD presence. Regarding Bovine Spongiform Encephalopathy (BSE), many countries followed a “zero risk criteria”, and placed a ban on European beef imports which today have moved to a “minimal risk criteria” based on science from countries classified as “BSE controlled risk” by the IOE. Tapia et al. show that these differences somehow explain that the two bans impact Argentina and Germany differently. FMD regulations impact negatively Argentina and positively Germany while BSE measures negatively impact trade from both countries.

Because of pest concerns, particularly fruit flies, the U.S. bans imports of fresh lemons from Argentina. However, there are ongoing negotiations between the two countries to develop a systems approach with several NTMs to minimize pest risks and allow imports under specified conditions. If the U.S. removes the ban on Argentine lemons, it will affect the supply of lemons to the EU and the rest of the world. Three options for replacing the U.S. ban on Argentine lemons exist: (1) entry is allowed without geographic or seasonal restrictions; (2) entry is allowed but shipments to citrus-producing states are prohibited; and (3) entry is allowed only to non citrus-producing states during the lemon production off-season.

Orden and al. simulate the three options. When Argentine lemons are allowed entry without restrictions, the US imports 12.5 million kg of Argentine lemons. Imports from Mexico, Chile, the EU, and other lemon suppliers to the U.S. are displaced and domestic US production declines. The movement of some Argentine lemons from the EU and the rest of the world creates market gaps partly supplied by the lemons displaced from the U.S., partly by higher imports from the other excess suppliers, and partly by higher lemon production in the EU and the rest of the world. But these additional supplies will not be enough to offset the outflow of Argentine lemons. Thus, prices of lemons increase and demand declines. Net lemon exports of Argentina increase, net lemon exports of Mexico, Chile, and the other suppliers to the US decline. Net lemon exports of the other suppliers in the EU market and lemon production in the rest of the world slightly increase as they are not directly affected, but are affected only indirectly, by the entry of Argentine lemons into the U.S.

Regional restriction leads to US imports of 9.0 million kg of Argentine lemons. In region 2 where imports from Argentina occur all year, the effects in each season are similar to those in the first scenario. However, in region 1, where imports from Argentina are still prohibited, the prices of US produced and imports from the traditional suppliers falling less than under scenario 1 and consumption in region 1 of lemons from these sources rises rather than falls.

Finally, entry with these regional and season restrictions leads to US imports of 6.1 million kg of Argentine lemons. The regional effect observed in scenario 2 persists in scenario 3 for season 2, but different effects are now induced in season 1 for both US regions, the EU and the rest of the world. In season 1, a decline in the aggregate supply from the U.S. and traditional exporters to the US market dominates the substitution effects of producers and consumers, with the result that prices increase rather than falling and consumption falls rather than increasing in both US regions, the EU and the rest of the world. There is a similar effect of opposite direction from an expanded aggregate supply of lemons from Argentina which increases consumption of lemons from this source in the EU and rest of the world in season 1.

Private standards in fresh fruit and vegetable trade (Bignebat et al, 2011)

In the framework of the project ‘Assessment of the impacts of non-tariff measures – NTM on the competitiveness of the EU and selected trade partners’, funded by the EU 7th framework program, several case-studies on fruit and vegetable exports from developing countries to the EU were analyzed; including lychee exports from Madagascar, mango exports from Peru, and bean and mango exports from Senegal. The objective of these case-studies was to analyse the development effects of rising private food standards and to formulate policy implications on how to assist developing countries in dealing with increasing private standards. While the methodology and the results of these case-studies are described in detail in Bignebat & Vagneron (2011), Colen et al. (2011), Lemeilleur (2011) and Subervie & Vagneron (2011) ; in this policy brief we summarize the main conclusions and policy implications of the case-study results.

Export supply chains

Fruit and vegetables exports from developing countries in general increased tremendously over the past two decades. For our case-studies this is demonstrated by lychee exports from Madagascar that almost doubled over the period 2000-2010, and bean exports from Senegal and mango exports from Peru that more than tripled over the same period. The European Union (EU) is the main destination market for beans from Senegal and lychees from Madagascar. About 65% of Peruvian mango’s is exported to the EU and the remainder to the US. While public standards in the EU became more stringent over the past decade and also the importance of private food standards increased tremendously in that period, fruit and vegetable exports from developing countries to the EU boomed. Public and private food standards are not necessarily a barrier for developing country exports; in our case-studies exports are observed to increase after the introduction of private food standards such as GlobalGAP.

Developing country exporters face competition when exporting to the EU. Senegal faces strong competition from Kenya and Morocco to supply beans to the EU market during the European winter season when production of vegetables in the EU is low. Likewise, mango exporters in Peru have a specific export window, the period December-March, and face strong competition from Brazil and Ecuador. For Malagasy lychee exporters competition is much less. Madagascar has a specific export window for lychee, the Christmas period, during which completion is low – although competition from South Africa in increasing.

The structure of the export supply chains differs substantially in the cases under study. In the lychee export sector in Madagascar and the bean export sector in Senegal, there is consolidation at the export level of the chains and the number of exporters is quite limited (about 25 in the lychee exporters in Madagascar and 20 bean exporters in Senegal) and decreasing. In the mango export chain in Peru, the number of exporters is larger (more than 100) and no consolidation is observed at this level. Also at the level of production, the chains differ in their structure. The Malagasy lychee export sector is dominated by smallholder farms with about 85% of export produce procured from smallholders and more than 20,000 smallholders involved. In the Senegal bean export sector about 50% of produce is procured from 600 smallholders under contract-farming arrangements while the remainder comes from large-scale vertically integrated plantations. Also at this level consolidation is ongoing; the share of produce procurement from smallholder decreased from 95% in the early years 2000 to about 50% in more recent years. The mango export sector in Peru is characterized by a mixture of smallholder, medium- and large-scale producers, with smallholders accounting for about 30% of export produce. About 1,000 smallholders are involved in mango exports.

Compliance with standards

Compliance with public standards is still problematic in the case of lychee exports from Madagascar; especially the requirement on maximum residue levels for sulphur is difficult to comply with for lychee exporters due to the need for post-harvest treatment with sulphur. Public food standards in the EU such as marketing standards, labelling requirements and maximum residue levels are largely complied to in the case of bean and mango exports from Senegal and Peru (while Peru still faces a problem in complying with the need for hydrothermal treatment of mango to export to the US).

GlobalGAP is one of the main private standards in fruit and vegetable trade in the EU and in all three export sectors GlobalGAP was introduced, adopted and implemented to some extent. However, the extent of adoption and the motivation for implementing the standard differs across the case-studies. After the introduction of GlobalGAP in the lychee sector in Madagascar in 2003; about 1200 smallholder farmers were GlobalGAP certified by 2007, mainly under the type 2 group option certificate and mainly as a result of donor programs (including PIP, World Bank, USAID). However, after the political turmoil and the following coup in 2009, donors left the country and GlobalGAP certification dropped dramatically from 1200 farmers to 120 farmers. In the bean sector in Senegal and the mango sector in Peru, GlobalGAP was adopted and implemented more gradually. In Senegal, 5 out of the 20 large exporter-producer are GlobalGAP certified while none of the smallholder producers is certified. Likewise, in the mango sector in Peru almost all large-scale exporter-producers are certified while very few smallholder producers are certified. The adoption and implementation of GlobalGAP is not always demand-driven. In our case-studies we observe that the demand for GlobalGAP depends on the degree of international competition: high competition – such as for mango exports from Peru and bean exports from Senegal – makes private standards important for exporters to maintain market access. In addition, when compliance with public standards is still problematic – such as in the case of lychee exports from Madagascar to the EU – the demand for private standards might be lower. In some cases, the adoption and implementation of private standards is rather supply-driven and driven by donor programs. However, when private standards are not absolutely essential or where the demand for such standards is low – e.g. in lychee exports in Madagascar – such programs are not very successful and might even have adverse development effects.

Impact on smallholders and workers

While the adoption of private food standards seems to have a positive impact on the export performance of developing countries, standards may also affect the structure of the supply chains and the distribution of rents within the supply chains. First, the introduction of GlobalGAP in the bean sector in Senegal has led to consolidation at the exporter’s level with mainly smaller export businesses leaving the market. This has been less the case in the mango sector in Peru, likely because part of the exports is going to the US where GlobalGAP is less important. Second, private standards such as GlobalGAP often lead to a shift from an export production system based on smallholders and contract-farming with agro-exporters to a systems based on large-scale vertically integrated and estate production. This has been the case in the Senegalese bean sector and in the mango sector in Peru. This has been less the case in the lychee sector in Madagascar, likely because the introduction of GlobalGAP was supply-driven and supported by donors with the specific aim of certifying smallholders.

Where GlobalGAP is successfully introduced, it results in increased exclusion of smallholder producers. Yet, smallholder producers who remain in the sector mostly benefit from certification. In all three cases it was observed that GlobalGAP certified producers have better market access, can sell larger volumes, and in some cases it was observed that they receive more stable prices. The observed impact of certification on the selling price, the cost of production and on yields is less univocal. Higher prices due to certification were only observed in the mango sector in Peru but not in the other two sectors. In addition, increased vertically integrated production has positive development effects as well because of labour market effects. The employment created in the Senegal bean export sector importantly contributes to poverty reduction. GlobalGAP certification in large vertically-integrated farms benefits workers in these companies. In Senegal, workers in GlobalGAP certified bean exporting companies were observed to have higher wages and longer employment periods than workers in non-certified exporting companies.

The World Economy – special fall 2012 edition on NTMs in global agricultural trade

To complete this non-exhaustive series of salient results, it would be of interest to refer to a future publication of the journal The World Economy that will publish in the fall of 2012 a special edition dedicated to NTMs in global agricultural trade – 7 articles that are direct results from the NTM-IMPACT project. The edition’s special editors are project partners Profs. John Beghin and David Orden. The introductory article by Orden et al. represents a very useful summary of the projects overall findings.

Potential Impact:

Impacts on the implementation and evolution of EU policies

• The European Commission is the principal beneficiary of the project results i.e. data bases, policy recommendations and comparative analyses of NTM impacts. The analyses that were generated can directly and strategically be used to underpin ongoing and future bilateral and multilateral trade negotiations, with those countries that are targeted in the project’s research. The EC negotiation teams have direct access to NTM data sets showing the differences of types of NTM’s between countries, and the differences of relative impacts that similar NTM’s have between for example, the EU and US, Canada, New Zealand, Australia, etc The project generated specific new information on NTM’s regarding trade clusters on poultry meat, pork, beef and citrus involving trade partners US, Canada, Brazil, Argentina, India, Russia and New Zealand (among other trade clusters), of direct benefit to DG Trade.
• Furthermore, DG Trade has direct access to detailed information regarding NTM impacts on Senegal, Madagascar and Peru’s access to export markets, principally EU market access and also compared to the US, in the case of mangoes. These LDC’s export restricting measures target private standards (GlobalGap). The new information on relative benefits & costs along the value chain (plantation workers, producers and exporters) is to strengthen strategic EC positioning in agricultural pillar trade negotiations at the WTO level, but also at bilateral levels.. Furthermore, the new information on public-private standard interactions (EC-US in the case of Peruvian mangoes), may help DG Trade in adapting (public) policies. In this context, DG Trade gains from the project.
• DG Agri gains from the project results, at least on two counts. Firstly, the project generates detailed and updated export supply chain information for key food products in “old” and “new” (potentially interesting) export markets. This newly available market intelligence information can lead to increasing EU export shares. Secondly, the project generates new information, regarding the (implicit) chain competitiveness of EU versus competing exporters in reducing the risks and or (transaction) costs of current NTMs in old or new export markets. This again is the type of market intelligence that can be used advantageously by exporters in new product or market differentiation strategies.
• DG Development also benefits from the detailed information from the case studies results in Senegal, Madagascar and Peru. Policy recommendations may be used by DG Development to formulate and propose support programs as part of ongoing development cooperation discussions, especially given the recent preferential trade scheme for developing countries (Generalized System of Preferences – GSP).
• The new results on non-tariff measures targets at least three different directorates in the European Commission. The interests and concerns of these different directorates could give rise to problems of policy coherence. In the area of food safety, for example, the introduction of non-tariff measures could, in some circumstances, cut across policy concerns relating to development, and in particular to the promotion of trade in foodstuffs and export-led rural development programs. Project results can help with the discussion regarding the challenge of establishing policy coherence in the area of trade and development.

Impacts on International Policy dialogue

o While the EU is the designated and principal client and “consumer” of the new data, information and policy recommendations, the project results also have directly fed into international policy dialogues by international agencies, think-tanks, networks and policy councils, directly or indirectly partners of the project, including OECD, UNCTAD, IFPRI, WB, IPC, IATRC...

• Several project partners from Third countries (11) have been diffusing project results in their countries at the national level through seminars or other. This evens out trade information asymmetries.

Impacts on EU exporters

• Project analyses on the impact of NTMs in selected countries that currently or potentially are competing with EU exporters for common markets, generate results on the relative competitiveness of export supply chains. This information is of vital importance to exporters for taking advantage of new opportunities and the way to strategically position themselves.
• Furthermore, the new NTM data base will be directly consultable for exporters, so as to be fully and better (updated) informed about the array of possible measures that they are facing regarding new or expanded markets and/or regarding product differentiation opportunities.

Impacts on International Cooperation

• Added human resources capacity between the EU and industrialized (Third) countries like US, Australia, Canada, New Zealand and Japan, are a direct benefit, given the projects integration of teams, sharing of data sets, methods, workshops & seminars and the many co-publications. New project ideas have sprung between several partners.
• Stronger human capacities in non-industrialized Third country non-EU member project partner teams, have also been an important impact, especially through the exchange of specialized methodologies (econometric models) and approaches and co-authoring of research articles.

Main dissemination activities

The project’s diffusion strategy targeted the following key client groups: academic experts, policymakers, private sector representatives and more general food and agricultural trade experts and foresaw a number of different dissemination products and tools.

The Internet based project management platform was created: At the end of the project duration, the website has been moved in 2011 to a more sustainable platform (easier/closer to manage for CIRAD staff) and can be formally found at: You can still click on It houses a lighter version of the basic essentials: partners, data base access and full Work document series.

Two Project brochures, 1st version (picture below) with the basic project information and contacts, was distributed at several major international policy events in 2009 and a 2nd year Project brochure, with some preliminary results.

Synergies were also optimized by inserting discussions on NTM impact analyses scientific issues during IATRC 2009 Florida meeting, and the IAAE Congress in Beijing 2009.

Furthermore, project partner IPC in Washington has been active in diffusing the NTM-IMPACT project in several of their trade policy seminars during 2009.

The NTM-IMPACT project was presented, in terms of awareness raising, and discussed in various scientific or policy meetings/symposia i.e. IATRC, UNCTAD, WTO, IAAE Outreach to the international food and agricultural trade academic community occurred via two project presentations at IATRC meetings in 2010 and 2011.

Commission officials were presented with the project findings on several occasions, including a Brussels based seminar at the end of June 2011. This was the first opportunity to present nearcomplete results and discuss implications with EC colleagues (from different DGs). Various recommendations on follow-ups were received.

Key research findings and conclusions of the NTM-Impact project were presented at the IPC-OECD international seminar on “Non-Tariff Measures in Food and Agriculture: Which Road Ahead,” held in Paris on 13 September, 2011. The OECD/IPC Seminar provided an opportunity to place the NTMImpact project into the wider context of both international policy dialogues on NTMs and other efforts to track and analyze NTMs. In addition to reaching key international food and agricultural trade experts in attendance, the information provided at the seminar was broadly disseminated through the IPC and OECD channels.

One of two background briefs prepared by IPC for the seminar provided an overview of the NTMImpact project along with other initiatives underway aimed at increasing transparency on non-tariff measures.

Contact information

Dr. Guy Henry Tel / Fax: ++ 57 2 4450 124
CIRAD ProsPER office Email:
CIAT, Cali, Colombia Web:

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