Summer, 2012

From the Editor

International Trade In A Smaller World

The California Leafy Green Products Handler Marketing Agreement (LGMA) was set up in the aftermath of the Great Spinach Crisis of 2006. It was a program developed by the processing community to both enhance food safety and rebuild consumer and regulatory confidence in the industry. It has been remarkably successful and has stood on its own. Retailers, foodservice distributors and restaurant operators that have various food safety protocols have, in the area of leafy greens, accepted the food safety metrics of the Marketing Agreement as sufficient. Indeed, they were seen as not merely sufficient, but optimal.

Yet now, the LGMA has announced that it is making recognition by the Global Food Safety Initiative (GFSI) a top priority — including staffing up to make it happen. Leafy greens are not a big export item, but the push is on by big buyers who want to standardize, globally, on one food safety scheme. The truth is that many proprietary or specialized schemes don’t provide for the flexibility buyers require if they are to keep the stores stocked. So they wind up making exceptions to their standards.

A few years ago, there was a crop failure in Europe, and Marks & Spencer, the British retailer, couldn’t get broccoli that had been certified to meet its Field to Fork standard. California broccoli growers heard from Marks & Spencer that it was willing to waive its proprietary standard and buy EurepGAP-certified (now called GlobalGAP) product as an interim until certified Field to Fork supplies were available. This, in and of itself, is a bit problematic. After all, on its web page Marks & Spencer says things such as this:

Marks & Spencer has its own farm assurance scheme, which guarantees the high-quality food production you expect from us. It sets standards across the whole agricultural supply chains and is more extensive in its requirements than other schemes such as national farm assurance initiatives. These requirements are regularly reviewed and amended to ensure we maintain high standards.

Our technologists and our suppliers’ specially trained auditors inspect everything from animal welfare, livestock housing, food safety and quality, to animal feed, farm hygiene, environment and slaughter. Every detail is well documented, and every farm regularly audited.

What it doesn’t say is that it makes exceptions.

Yet even the willingness to bump down from Field to Fork to a EurepGap standard wasn’t that availing — there were only three broccoli growers in the state of California at that time that were certified to EurepGap standards. So the advantage to big buyers of having uniform standards around the world is clear — it facilitates procurement and global trade.

For the growers, it is a “double-edged sword.” On the one hand, it will open export markets and that could rebound to their advantage. On the other hand, those growers currently able to achieve certification under proprietary schemes such as Field to Fork or Tesco’s Nature’s Choice have an advantage in that they limit competition and, as long as the retailers remain true to their consumers in their promise to offer only product certified to their proprietary schemes, these growers have close to guaranteed markets for their products.

If the whole world gets certified under a global non-proprietary system, that means every grower in the whole world is always going to be in competition with each other.

As the world gets smaller, it becomes more difficult to avoid culture clashes. That is the real meaning of the Wal-Mart scandal in Mexico. The culture in Mexico is that bureaucrats get payoffs. This is not common in the United States. It is illegal both in Mexico and under U.S. law, yet it is the way things get done in Mexico.

 Wal-Mart could have ceded the market to those more in sync with local ways or, more likely, let the local population have to buy through traditional higher priced venues. But why should Mexican consumers be deprived of the chance to purchase goods economically just because their bureaucrats are corrupt? Why should U.S. companies cede the market to others with less punctilious ethics laws? So Wal-Mart pushed ahead, and one now suspects that the company will pay a large fine and some of its executives may go to jail.

All together, what this reminds us is that international trade is not just a matter of legally permitting the trade, or even of legal obstacles such as tariffs and phytosanitary requirements. Trade depends crucially on a whole group of non-statutory issues.

Food safety, traceability, sustainability — what do buyers require in each area? This can facilitate trade or stop it in its tracks. Ethics and cultural norms can impose enormous barriers to trade.

Trade is an enormously wealth-producing activity. But vested interests can throw up many obstacles to block the free flow of goods and services and thus keep prices high. If we want to make the world more prosperous we have to boost trade, and to boost trade we have to fight the powers that want to preserve their little sinecures. It is a battle that never really ends, but never ceases to be vital to fight.