"Growing concern over health risks associated with food products has prompted close examination of sanitary and phytosanitary (SPS) standards in industrialized countries. Standards are employed to protect human health from toxic additives, contaminants, toxins, or disease-causing organisms in foods and beverages, as well as to protect animal and plant health from diseases. Measures used to protect health include outright bans, standards that dictate the conditions under which products must be produced and/or characteristics of the end products, and labelling and other information requirements....Both anecdotal and case-study evidence indicates that the cost of food-safety regulations indeed can be significant. This is especially true for developing countries attempting to penetrate developed-country agricultural markets." from TextFood safety ,food security ,Public health ,

Otsuki, Tsunehiro

Wilson, John

English

Research Papers in Economics

FOR FOOD,AGRICULTURE,
AND THE ENVIRONMENT
FOCUS 10  •  BRIEF 6 OF 17  •  SEPTEMBER 2003
FOOD SAFETY IN FOOD SECURITY AND FOODTRADE
Balancing Risk Reduction and Benefits from Trade 
in Setting Standards
JOHNWILSON ANDTSUNEHIRO OTSUKI
CONFLICTING FOOD SAFETY STANDARDS
G
rowing concern over health risks associated with food
products has prompted close examination of sanitary and
phytosanitary (SPS) standards in industrialized countries.
Standards are employed to protect human health from toxic
additives, contaminants, toxins, or disease-causing organisms in
foods and beverages, as well as to protect animal and plant
health from diseases. Measures used to protect health include
outright bans, standards that dictate the conditions under which
products must be produced and/or characteristics of the end
products, and labelling and other information requirements.
The World Trade Organization (WTO) Agreement on
Sanitary and Phytosanitary Standards promotes harmonizing
national standards with international standards and adopting
standards set by organizations such as the joint Food and
Agriculture Organization of the United Nations (FAO)/World
Health Organization (WHO) Codex Alimentarius Commission
(Codex) for food safety. The Agreement permits importing
countries to impose more stringent measures than the inter-
national standards. But it requires scientific justification if dif-
fering standards create an obstacle to trade. In this respect,
international standards may be considered a baseline for WTO
members to follow. Trade disputes are likely to arise when dif-
ferences in standards generate significant cost to exporting
countries and deviate from principles of international science
and best practices in risk assessment.
Both anecdotal and case-study evidence indicates that the
cost of food-safety regulations indeed can be significant. This is
especially true for developing countries attempting to pene-
trate developed-country agricultural markets. In low- and mid-
dle-income countries, for example, the share of food exports
in total trade remained high at approximately 13 percent in the
1990s. If increasingly restrictive sanitary and phytosanitary
measures limit market access, these countries will incur signifi-
cant export losses. Therefore, a more detailed picture of the
trade-off between appropriate levels of risk to human health
and the costs of differing levels of food safety standards on
trade is increasingly important in a public policy context.
The need for such a picture is reflected in the increasing
frequency with which developed and developing countries have
notified the WTO about national sanitary and phytosanitary
standards.These notifications have increased fourfold between
1995 and 2002.
Since regulatory requirements and product standards 
are substantially different across countries, typically between
developed and developing countries, trade disputes in a non-
harmonized system are inevitable. One example of the widely
different approaches to standards and food safety among trad-
ing partners is the European Union’s (EU’s) maximum allow-
able level of aflatoxins in imports of cereal, dried and pre-
served fruit, and nuts. This regulation, implemented in April
2002, has generated concern among exporting countries (many
of them developing countries):Argentina,Australia, Brazil,
Canada, Colombia, India, Indonesia, Malaysia, Mexico, the
Philippines, Senegal, South Africa,Thailand,Turkey, Uruguay, and
the US.
This example points to the conflicting interests, percep-
tions of risk, and estimations of what constitutes international
scientific best practices regarding food safety. It also highlights
the challenges developing countries face in meeting ever more
stringent regulatory standards. The criteria to determine
whether standards are “too high” or “too low” are likely
arguable. In some cases, definitive judgments on risks to human
health are not even possible, because risks and trade losses
associated with regulatory regimes cannot be identified due to
a lack of data and an analytical framework. Even in cases where
risks and trade losses can be identified, social or political priori-
ties attached to public health and trade tend to differ across
countries and can trump scientific evidence. New approaches
to quantifying the costs and benefits associated with changes in
standards, therefore, are increasingly important.
THE IMPACT ON TRADE
A limited number of attempts have been made to quantify the
impact of SPS standards on trade. Calvin and Krissoff have
measured this impact by calculating the price effects of SPS
standards on Japanese imports of U.S. Red and Golden
Delicious apples. The tariff-rate equivalent of the Japanese
standards came to 27.2 percent during 1994–97, which is high
compared with the actual tariff rate of 19.3 percent. On the
other hand, the SPS standards saved an estimated 26 percent
of Japanese output from an outbreak of fire blight diseases.
The aforementioned EU regulation of aflatoxins imposes
high costs on developing countries. Otsuki,Wilson, and
Sewadeh have estimated the impact of changes in the EU stan-
dards for aflatoxin contamination levels on bilateral trade flows
using trade and regulatory survey data for 15 European coun-
tries and 9 African countries between 1989 and 1998. They
concluded that a 1 percent reduction in the amount of aflatox-
in contamination of cereals and dried fruits and nuts would
reduce trade flow by 1.1 percent for cereals and 0.43 percent
for dried fruits and nuts. Among dried fruits and nuts, ground-
nuts were particularly sensitive to the aflatoxin standard, their
trade flow decreasing by 1.3 percent with a 1 percent change
in the standard.
Otsuki,Wilson, and Sewadeh compared three regulatory
scenarios: (1) a pre-EU-harmonized standard (status quo), (2)
an international standard indicated by guidelines set by Codex,and (3) the new EU-harmonized standard implemented in April
2002. They found that the EU-harmonized standard imposed a
considerable loss of revenue from cereal, edible nut, and dried
and preserved fruit exports by African countries. The Codex
standard imposed the least costly trade impediments of all
three standards.The EU-harmonized standard decreased African
export revenue from Europe by 59 percent for cereals and 47
percent for dried and preserved fruits and edible nuts, com-
pared to export revenue under the pre-EU-harmonized stan-
dard.This decrease amounts to approximately US$400 million.
Compared to the Codex guidelines, the EU-harmonized stan-
dard decreased the value of African exports by US$670 million.
Wilson and Otsuki extended this analytical approach to 15
importing (4 developing) and 31 exporting (21 developing)
countries. The results confirm the findings of their previous
study, which showed that the aflatoxin B1 standard negatively
affected trade in cereals and nuts, but not in dried and pre-
served fruits.
Wilson and Otsuki also found that adopting the Codex
standard for aflatoxin would increase cereal and nut trade
among countries in the study by US$6.1 billion, or by 51 per-
cent above the 1998 value of trade resulting from standards
imposed individually by these importing countries. The Codex
standard would generate US$12.2 billion or 67 percent more
than the value of exports if all 15 importing countries harmo-
nized their standards with the EU-harmonized standard.
Wilson, Otsuki, and Majumdar studied the issue of antibi-
otics, which has been a high priority for WHO and the Office
International des Epizooties (OIE). Their study attempted to
determine whether maximum residue limits on tetracycline (a
widely used antibiotic) affect beef trade. For 6 importing and
16 exporting countries, the results suggested that a tighter 
regulation of tetracycline, namely a 10 percent increase in reg-
ulatory stringency, would lead to a decrease in beef imports by
5.9 percent.
If all 6 importing countries adopted the Codex guideline,
the total trade value of beef would reach US$8.8 billion—
US$3.2 billion, or 57 percent, higher than the value of total
trade under the pre-EU-harmonized level and US$5.1 billion
higher than the trade value under the EU-harmonized level. If
all importers adopted the Codex standard, beef exports from
the Organisation for Economic Co-operation and Development
(OECD) countries in our sample would increase significantly.
The low-income countries in our sample would decrease their
beef exports.
Scientific research on the relationship between health risks
and the amount of intake of aflatoxins and antibiotics is incon-
clusive. To date, a risk assessment completed by the
FAO)/WHO Joint Expert Committee on Food Additives
(JECFA) provides the most comprehensive information on afla-
toxin risk to human health. Based on JECFA’s study, Otsuki,
Wilson, and Sewadeh calculated that the new EU standard
would reduce approximately 1.4 deaths per billion people a
year, compared to the Codex standard. A report of the
Institution of Medicine in the United States estimates that 6 to
20 deaths per year in the US population are attributable to sub-
therapeutic uses of penicillin and/or tetracyclines. These findings
suggest that it is difficult to justify trade losses based on gains in
public health,although these cases cannot be generalized.
CONCLUSIONS
The case studies noted above suggest that sanitary and phy-
tosanitary standards—set at levels more stringent than those
suggested by Codex standards—can severely limit access to
international export markets.But,at the same time,less-strin-
gent standards do not necessarily help developing countries,as
the case of beef indicates. A common international framework
and common criteria to weigh the benefits and costs of regula-
tions are clearly difficult to establish. Nonetheless,these case
studies indicate that public policy decisions need to be informed
by empirical evidence on the trade impact of standards set at
differing levels of regulatory stringency. Moreover,the current
international standards and regulatory system need careful
review,because governments continue to set national standards
that do not align with international standards.
Progress must be made to support harmonization of inter-
national SPS standards set by international standard-setting
bodies. A concerted effort to identify key standards affecting
food safety that have not been harmonized by international
bodies, and efforts to identify action that can accelerate this
process through international consensus, would help avert
trade friction caused by divergent national standards.■
For further reading see World Bank,Global Economic Prospects
2001 (Washington,D.C.,2001);L.Calvin and B.Krissoff,
“Technical Barriers to Trade:A Case Study of Phytosanitary
Barriers and U.S.–Japanese Apple Trade,” Journal of Agricultural
and Resource Economics 23 (No.2,1998):351–366;T.Otsuki,J.
S.Wilson,and M.Sewadeh,“Saving Two in a Billion:
Quantifying the Trade Effect of European Food Safety
Standards on African Exports,” Food Policy 26 (2001):495–514;
J.S.Wilson and T.Otsuki,Global Trade and Food Safety:Winners
and Losers in a Fragmented System,World Bank Working Paper
2689 (Washington,D.C.,2001);and  J.S.Wilson,T.Otsuki,and
B.Majumdar,“Balancing Food Safety and Risk:Do Drug
Residue Limits Affect International Trade in Beef?,” World
Bank mimeo,Washington,D.C.,2002.
John Wilson (jswilson@worldbank.org) and Tsunehiro Otsuki (totsuki@worldbank.org) are lead economist and research analyst, respectively, at The World
Bank,Washington, D.C.
International Food Policy Research Institute
2033 K Street, N.W. •  Washington, D.C. 20006-1002  •  U.S.A.
Phone: +1-202-862-5600  •  Fax: +1-202-467-4439  •  Email: ifpri@cgiar.org
www.ifpri.org 
The findings, interpretations, and conclusions expressed in this paper are
entirely those of the authors. They do not necessarily represent the view
of the World Bank, its Executive Directors, or the countries they represent.

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