The FDA Food Safety and Modernization Act and the Exemption for Small Firms

The FDA Food Safety Modernization Act of 2010 is new legislation that mandates, among other things, new food safety standards. The act includes a clause that exempts small firms from new regulatory requirements. This paper investigates the effects of a small firm exemption from more stringent food safety standards. The model compares food safety, total output and the number of market participants for different food safety regulation with and without an exemption for small firms. The numerical examples show that a more stringent food safety regulation increases food safety, increases the price of food, decreases the total output and decreases the number of firms. A new food safety standard with an exemption for small firms increases the average food safety but not as much as with a new standard alone. An exemption for small firms causes the total number of firms to increase.Food safety, heterogeneous firms, regulation, regulatory exemption, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, D21, M31, Q10, Q18,

Welfare Effects of Mandatory Traceability When Firms are Heterogeneous

We develop a framework in which the cost of producing a quantity food and the cost of food safety differs across firms. We show that large firms may supply the safest food even though small firms have a cost advantage in producing safe food. The model shows that mandatory traceability can decrease the overall safety of food when small firms that supply the safest food exit the industry. Our model applies to food safety but can be applied to a wide range of issues related to regulation and product quality.Food safety, quality, traceability, regulation, Industrial Organization, Marketing, Production Economics, D21, L11, L15, Q10,

Institutionalized Metzler Effects: Tariff-Rate Quota Liberalization in a Supply-Managed Industry

A supply management system governs Canada’s poultry sector. Tariff Rate Quotas (TRQs), with prohibitive above-quota tariffs and low in-quota tariff, mimic import-quotas limit international competition in Canada’s poultry market. The quota part of the TRQs is a minimum access commitment under international trade agreement that is defined as a fraction of domestic production. We show in a 3-stage game involving negotiations between retailers and processors and between processors and farms that increasing minimum access commitment under current trade agreements can produce Metzler effects with larger price increases observed at the farm and processing levels. Simulations based on 2008 data support the Metzler paradox and shed light on import license allocations between retailers and poultry processors in Canada.Metzler paradox, tariff-rate quotas, chicken, negotiations, Agricultural and Food Policy, Industrial Organization, International Relations/Trade, F13, Q17,

The Importance of NAFTA for the Agricultural Sector

THE IMPLEMENTATION of the North American Free Trade Agreement (NAFTA) in 1994 opened borders to trade between the United States, Canada, and Mexico. The agreement originated from the free trade agreement the United States and Canada signed in 1988. NAFTA eliminates almost all barriers to trade and investment between the three North American countries and includes provisions for the protection of intellectual property rights. Certain trade barriers for agricultural products remain under NAFTA—notably, products under supply management in Canada (dairy, eggs, and poultry)