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China’s Farm to the World’s Fork: Why Standards Matter

John Wilson's picture

Mention China at your next dinner party, and chances are you will be met with references about future superpowers, exchange rates, and the joys of traveling through gleaming new airports. And while the conversation may touch on the dining scene along the Bund or outstanding new restaurants in Shanghai and Beijing, the impact of food standards on global consumers will almost certainly not be the center of discussion.

The fact is, however, that trade in agriculture is one of the most important ways the world connects with China. China’s exports of food products increased from US$ 9.7 billion to US$ 56.3 billion between 1992 and 2012. The United States alone imported US$ 6.5 billion worth of Chinese fish, seafood, juice, vegetables, fruit, and other food products in 2012—making China the third largest source of US food imports.

Along with this growth in trade public health concerns over Chinese food standards have become increasingly important. In 2008 the press reported that at least six Chinese infants died and nearly 300,000 were sickened after consuming infant formula with melamine, a chemical added to raw milk to raise protein content. In response, the Chinese government vowed to make food safety a priority.  There have been other food safety incidents in the headlines, including recent controversies over excessive levels of cadmium in rice and various products marketed as meat being sold as mutton. Although the focus on extreme cases may exaggerate the extent of the problem (which is not to say the problem is not serious), media accounts of problems in food safety in China are likely to raise consumer concerns in importing countries and can adversely affect China’s export potential.

All of this affects debate over Chinese companies increasing exports and international investment – as with the recent offer by Shuanghui International to purchase US-based Smithfield Foods. Just last month, the US Congress conducted a hearing on the threat of imported Chinese consumable goods.  And today, as the U.S. and China Strategic and Economic Dialogue talks start in Washington, one can imagine trade in agriculture and food safety will be part of the discussions on growing ties between the two countries.

Food safety standards -- and how to strengthen them -- are not limited to debate in the United States.  Since 2000, a number of key trading partners have temporarily banned whole categories of Chinese imports. The European Union stopped prawn shipments from 2002-2004 because of banned antibiotics. In 2002 Japan blocked tea and spinach, citing excessive antibiotic residue, while in 2005 South Korea banned fermented cabbage.  Trade disputes over food safety are, of course, not limited to China, these affect global trade and all trading nations.  What can be done to strengthen global trade in food and consensus on safety?

One step is harmonizing food safety standards in China to international ones.  This is a win-win proposition for consumers, China, and global trade. In a World Bank research we examined how food standards affected China’s export performance. The results show that one additional international harmonized standard in China could raise food exports by up to $193 million.  The data also show that standards in China that are harmonized to international ones have a larger impact on exports than purely domestic Chinese standards.

Despite these findings, the share of standards in China that are based on international ones remains low, about 10-15% depending on the product (a high of 26% for tea and a low of below 5% for fish). This implies that China has wide scope to harmonize more standards  -- and also increase exports.

But the benefits of food standards in China extend well beyond export growth.  The harmonization of food standards to meet international ones impacts all trading partners. International food standards signal to consumers that products meet certain requirements, such as the maximum amount of pesticides on vegetables or the level of hormones and antibiotics in meat.  Recent market research found that Chinese consumers are willing to pay premiums for food harmonized to international standards. Products labeled with stickers noting they meet FDA-approved standards are sold in Beijing supermarkets at a price premium of about 5%.  These findings suggest that food safety is emerging as an attribute not only required in key overseas markets, but also in China, as well.

The World Bank is helping China bolster food safety systems through new projects (loans and investments) and technical assistance (strategic advice).  One example is the Bank’s investment of US$100 million in a project in Jilin Province, an agricultural heavy province in North-Eastern China near the North Korean border, to develop improved agricultural standards and safety regulations. The program, in cooperation with the Provincial Agricultural Bureau, introduces legal minimum standards and detailed recommendations for farmers in areas including pesticide use, integrated pest management, and aquaculture production practices.  Efforts such as this help farmers and producers build the technical capacity and know-how to meet international standards, improving food safety and enabling access to vast new markets.

Standard setting in any country is complex, with a large number of agencies tasked with regulating food safety. But as our research shows, action to accelerate harmonization of domestic food standards with international ones can be a win-win proposition. China will continue to expand economic growth through trade and global consumers benefit through high quality products available from China’s farmers.

Comments

Submitted by Cliff on

I think the root of the cause is because Chinese government is very relationship based. Therefore, rules and regulations can be bypassed more easily. Keeping standard and control can be very difficult.

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