Standards and Trade Facilitation: Opportunities and Risks of Harmonizations and Other Trade Instruments: presentation by John Keycer, World Bank

1. STANDARDS AND TRADE
FACILITATION
OPPORTUNITIES AND RISKS OF HARMONIZATION
AND OTHER TRADE INSTRUMENTS
John C. Keyser
Senior Agriculture Trade Economist
Staple Food Markets Systems in Eastern
Africa – Donor Coordination Meeting
20 August 2014, Nairobi

2. OBJECTIVES
Provide an improved platform for discussion of the role of trade
standards.
Introduce some emerging issues from recent research on standards
and trade facilitation.
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3. ROLE OF TRADE STANDARDS
Why have trade standards?
• Protect human, animal, and plant health (SPS measures)
• Ensure product safety (quality standards)
• Language between buyers and sellers (grades)
• Improve confidence of consumers (competitiveness)
Many people also say…
• Lack of harmonization is a NTB.
• Harmonized standards not only called for by WTO but essential for
international trade.
Which of these arguments stands up and how should governments and
donor projects pursue trade facilitation?
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4. SPS AND QUALITY STANDARDS
Sanitary and Phytosanitary Standards (SPS) and Quality Standards
are fundamentally different.
• SPS deals with preventing the spread of human, animal, and plant
disease.
• Quality standards deals with other aspects of product safety and
voluntary quality attributes.
• WTO draws a key distinction between voluntary standards and
mandatory regulations.
In practice, mandatory SPS, voluntary quality, and quality upgrading
have become mixed.
• EAC standards for food staples mandatory because of mycotoxin risk,
but also include non-essential quality specifications that relate to value.
• Standards often described as a “development goal.”
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5. WTO SPS AND TBT AGREEMENTS
Basic rule is that standards must be science based.
• SPS and product standards should not be used as a trade barrier.
• Both SPS and TBT Agreements encourage adoption of international
standards (Codex, OIE, ISO testing methods, etc.) but stop short of
making this mandatory.
SPS and TBT Agreements offer three trade facilitation instruments.
• Harmonization
• Equivalence
• Mutual recognition
Picking the right instrument to serve consumer and producer needs is
important for effective trade facilitation.
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6. HARMONIZATION THE MOST POPULAR CHOICE
Harmonization is encouraged by WTO but not required.
Many standards being cut and paste from international ones. Avoids
having to prove “science based” however…
• SPS quality problems and capacity can be very different in Africa than in
developed countries.
• Harmonization risks becoming the “goal” rather than a means to an end
(e.g. output indicators in project logframe rather than outcome).
Harmonized standards can even become an NTB.
• Limited implementation capacity (capacity upgrades becomes the “goal”).
• Extra costs beyond what producers, consumers, and governments can
afford.
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7. ALTERNATIVE INSTRUMENTS
Equivalence agreements
• Different standards achieve similar levels of SPS and/or consumer
protection.
• Can be system wide or product specific.
• Relatively easy to negotiate.
Mutual recognition agreements
• Despite being different countries agree to accept each other’s SPS
and/or standards measures.
• Less demanding and potentially a good even for exports to very
advanced countries.
In practice, these alternatives are often get interpreted the same as
harmonization – i.e. “We’ll recognize each other’s certificates if we
follow equivalent (harmonized) procedures.”
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8. EAC HARMONIZED
STANDARDS FOR MAIZE
Staple Food Markets Systems in
Eastern Africa – Donor
Coordination Meeting
20 August 2014, Nairobi

9. MAIZE STANDARDS BEFORE HARMONIZATION
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Kenya Tanzania Uganda Malawi Zambia Zimbabwe Ethiopia
Moisture content
(max)
13.5% 14% 13% 14% 12.5% 14% 13%
Aflatoxin (max) 10ppb 10ppb 10ppb 3ug/kg - - -
Foreign matter 1% 0.5% 1% 2.6% 1.5% 2% 0.5%
Broken grains 2% 2% 2% 11.5% 6% 6% 2%
Insect damaged
3% 1% 2% - 5% - 3%
grains
Rotten, diseased,
discolored grains
4% 3.5% 1% - 2% 0.5% -
Other colored grains 2% 3% - - 3% - 0.5%
Live insect infestation Nil Nil Nil Nil - - Nil
Total defective grains - 6.5% - - - - 8%
Immature/shriveled
- - 1% - 1% - 1%
grains
Fungal damaged
grains
- - - - 1% - -
Germinated grains - - - - 1% - -

10. COMPARISON OF EAS, CODEX AND ZAMACE
2013 EAS introduced…
• New standards for Grade 3 maize
• Tighter moisture requirements
• New requirements for Fumonisin.
2013 EAS still more demanding than old
national standards and CODEX.
• “Ungraded maize” not allowed in
Tanzania or Burundi.
• “Reject maize” other than Grades 1, 2,
and 3 shall be regarded as “unfit for
human consumption”.
By law, EAS mandatory at regional and
domestic levels.
ZAMACE standards not mandatory and
used to determine value
• Phyto certificate is required but not
ZASBS for grain quality.
• Aflatoxin testing not part of Zambia Phyto.
Significantly higher tolerances for total
defect and discolored grains a major
barrier to regional trade.
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Grade
1
2013 EAS ZAMACE Standards
Grade
2
Grade
3
A
Grade
B
Grade
C
Grade
Moisture content
(maximum)
13%
(13.5)
13%
(13.5)
CODEX
Standard
13% 15% 12.50% 12.50% 12.50%
Aflatoxin (maximum) 10ppb 10ppb 10ppb Set by
n/s n/s n/s
Aflatoxin B1 5ppb 5ppb 5ppb CODEX
n/s n/s n/s
Fumonisin 2ppb* 2ppb* 2ppb* Commission
0.50% 0.50% 0.50%
Foreign matter 0.50% 1% 1.50% 1.50%
1% 1.50% 2%
Inorganic matter 0.25% 0.50% 0.75% 0.50%
Broken grains 2% 4% 6% 6% 6% 7% 8%
a. Insect damaged
1% 3% 5% 7% 3% 6% 9%
grains
b. Rotten and
diseased grains
(EAS); Diseased
grains (ZAMACE)
2% 4% 5% 7% 2% 2% 2%
c. Discolored grains 0.50% 1% 1.50% 2% 3% 6% 9%
d. Other colored grains - - - - 3% 4% 5%
e. Fungal damaged
grains
- - - - 0.50% 1% 1.50%
f. Immature/shriveled
grains
1% 2% 3% - 1% 1.50% 2%
Total defective
grains (Sum a to f)
4% 5% 7% n/s 11% 18.50% 26%
Germinated grains n/s n/s n/s - Nil Nil Nil
Pass through 4.15mm
sieve (max)
n/s n/s n/s - 1.50% 2% 2.50%
Diplodia (ear rot) n/s n/s n/s - Nil Nil Nil
Filth 0.10% 0.10% 0.10% 0.10% n/s n/s n/s

11. IMPLICATIONS FOR REGIONAL TRADE
Difficult and expensive for EAC to import from other African
countries (cheaper to buy from rest of world!)
• WFP in Zambia says it costs $1.50 to $2.00 per ton per place
inspected to source EAC compliant grain (may have to inspect 4 - 5
places).
Small traders not able to afford costs of
compliance.
• Trade costs highly regressive.
• Grain goes across in small (informal) loads
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that add to the total costs of trade.
• COMESA STR (where it exists) only saves on
clearing agent and certificate of origin so little
benefit overall.
Costs of Maize exports at Kasumbalesa
(US$/ton)

12. OTHER QUESTIONS ABOUT HARMONIZATION
Are the EAC standards really science based?
• Sun drying results in high share of “discolored grains”, but perfectly safe.
• OPV seed and/or late use of fertilizer also results in product “defects”
(discoloration, size, shape) that have nothing to do with safety.
Does harmonization really speed border procedures?
• After harmonization, still left with mutual recognition and equivalence
challenges (EADRAC has helped in dairy; anything similar for grains?)
• Long delays at borders a vector for corruption.
Standard are a useful language for warehouse receipts and commodity
exchanges, but is the vocabulary too restrictive (i.e. mandatory Grades
1, 2, and 3)?
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13. MIXING OF STANDARDS AND OTHER REQUIREMENTS
Multiple agencies often focused on
generating revenue rather than facilitating
trade and competition.
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The Tanzania Atomic
Energy Commission
• Export license / import license
• Phytosanitary certificate and inspection
• Fumigation certificate (with
phytosanitary)
• Non-GMO certificate and inspection
• Certificate of origin
• Product registration (especially of
foods and crop inputs)
• Food safety certificate (sometimes
including grains)
• Certificate of radiation analysis (TAEC)
• Certificate of standards compliance
• Cost of standards documents (EAC
maize standards reference 16 EAC,
ISO, and CODEX standards)

14. CONCLUSIONS
Harmonization has many uses and advantages but is an incomplete
solution and may involve risks for smallholders and small traders.
• Group formation can help, but risks becoming necessary.
• Harmonization may add to the challenge of mutual recognition and
equivalence.
• Still left with mutual recognition and equivalence challenges.
Trade facilitation about more than making harmonization work and
requires action on many levels including awareness and use simple
solutions.
Important for regulatory ambitions to match current capabilities.
Need clear distinction between genuine SPS and other safety
concerns and voluntary quality issues.
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15. Asante Sana!

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