Aid for sanitary and phytosanitary (SPS) trade capacity : evaluating the effectiveness of aid for trade (AfT) against proliferating SPS standards.

(1)

University of Amsterdam

Faculty of Economics and Business MSc Economics

Aid for Sanitary and Phytosanitary (SPS) Trade Capacity:

Evaluating the Effectiveness of Aid for Trade (AfT) against Proliferating SPS Standards

Author: Martine M. de Groot Student nr: 10034463

Place & date: Amsterdam, 30 January, 2014 Supervisor: Dr. D. Veestraeten

(2)

i

Acronyms and Abbreviations

AfT Aid for Trade

AoA WTO’s Agreement on Agriculture

AD Anti-dumping

CSP Country Strategic Plan

CV Countervailing

Codex The FAO/WHO Joint Codex Alimentarius Commission

DAC Development Assistance Committee of the Organisation for Economic Co-operation and Development

DAI Development Alternatives Inc. DDA Doha Development Agenda DDR Doha Development Round DSM Dispute Settlement Mechanism DTIS Diagnostic Trade Integration Study

EC European Commission

EIF Enhanced Integrated Framework

EU European Union

Eurep Euro-Retailer Produce Working Group

EurepGAP Euro-Retailer Produce Working Group applying standards of Good Agricultural Practice

FAO UN Food and Agriculture Organization

FP Focal Point in National Implementation Arrangement G20 Group of 20 developing countries, led by Brazil and India GAP Good Agricultural Practice

GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade

IBRD International Bank for Reconstruction and Development ICT Information and communications technology

IF Integrated Framework for Trade-Related Technical Assistance for the Least Developed Countries

IHPQ Improving Honey Productivity and Quality project IICA Inter-American Institute for Cooperation on Agriculture IMF International Monetary Fund

IPPC International Plant Protection Convention ITC International Trade Centre

ITO International Trade Organization JASZ Joint Assistance Strategy for Zambia

JITAP Joint Integrated Technical Assistance Program LDC Least Developed Country

LFA Logical Framework (Logframe) Approach LPI Logistics Performance Index

M&E Monitoring and Evaluation

MAI Ministry of Agriculture and Irrigation, Republic of Yemen MATEP Market Access, Trade and Enabling Policies

MFA Multi-Fiber Arrangement MFN Most-Favored Nation

MIF MATEP Investment Fund

MOIT Ministry of Industry and Trade, Republic of Yemen MSTQ Metrology, Standardization, Testing and Quality Assurance MTS Multilateral Trade System

NASS Yemeni National Agricultural Sector Strategy paper NIA EIF’s National Implementation Arrangement NIC Newly Industrializing Country

(3)

ii

NT National Treatment

NTB Non-Tariff Barrier

OECD Organization for Economic Cooperation and Development

OIE The Office International des Epizooties, also known as the World Animal Health Organization

PBA Program-Based Approach PTA Preferential Trade Agreement PPM Process and Production Method PRSP Poverty Reduction Strategy Paper QI Quality Infrastructure

RoZ Republic of Zambia

SDT Special and Differential Treatment SME Small and Medium-sized Enterprise

SMTQ Standardization, Metrology, Testing and Quality SPS Sanitary and Phytosanitary

SSA Sub-Saharan Africa

STDF WTO Standard and Trade Development Faculty TBT Technical Barriers to Trade

TF WTO’s created Task Force

TFF World Bank Trade Facilitation Facility

TRIMS WTO Agreement on Trade-Related Investment Measures

TRIPS WTO Agreement on Trade-Related Aspects of Intellectual Property Rights TRTA Trade-Related Technical Assistance

UN United Nations

UNCTAD United Nations Conference on Trade and Development UNDCF United Nations Development Cooperation Forum UNDP United Nations Development Programme

UR WTO Uruguay Round

US United States

USD United States Dollar VER Voluntary Export Restraint

WB World Bank

WHO World Health Organization WTO World Trade Organization

(4)

iii

1. Introduction

Given the broad aggregate economic and political benefits that can be obtained from trade liberalization, trade ministers worldwide have engaged in multilateral negotiations, known as ‘trade rounds’, to reduce trade distorting policies. Stewarded by the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), these negotiations form the institutional backbone of the modern global trade system. Within successive trade rounds, Member countries of the WTO effectively negotiated the reduction of existent border measures, consequently resulting in the gradual expansion of world trade.

But with the disciplining of border measures, trade protectionism has not disappeared. Instead, to correct market failures and to answer to protectionist political pressures, trade restrictions have increasingly been found in the use of ‘behind-the-border’ policies, such as regulatory arrangements and subsidies. An important example of the proliferation of behind the border policies is found in the use of ‘technical requirements’, or ‘standards’. Stringent standards have been imposed predominantly in the developed world, where consumers and producers hold enough bargaining power in the value chain to demand that high levels of quality and safety are met in the production, transportation and consumption of the product.

The proliferation of standards has also occurred in agricultural trade, and specifically in the trade of agricultural food products, known as ‘agro-foods’. Declined tariffs combined with increased globally integrated value chains and amplified public awareness for human, animal and plant lives have caused agricultural standards to mushroom. It is particularly the rise in ‘Sanitary and Phytosanitary’ (SPS) standards that has impacted agro-food trade. Whereas tariffs form a direct price wedge, SPS standards are able to change international market power in a substantial manner, disadvantaging producers that are not equipped to meet SPS standards at low costs. These producers are typically located in developing countries, and particularly in the Least Developed Countries (LDCs). Within these countries, both the government’s ability to effectively negotiate favourable SPS regulation and producer ability to comply with the applied SPS standards have been significantly more constrained than in developed countries (Henson et al., 2000). As a result, the proliferation of SPS standards has raised general concerns on the marginalization of developing country producers in world trade. Given that agro-food trade continues to be a fundamental source of income in most developing countries, and particularly for the poorest of the nations, rising SPS standards can confine developing countries’ opportunities for economic development and poverty alleviation.

To help developing countries overcome SPS barriers and to harness the full benefits of the WTO Agreements, developed country Members have systematically committed themselves to the provision of trade-related technical assistance (TRTA). In this context, aid for building trade capacity has been introduced onto the WTO agenda in 2005, formalized as the ‘Aid for Trade (AfT) Initiative’ and

(6)

2

structured to harmonize and advance trade assistance into a more comprehensive design. Yet despite its popularity, the effectiveness of AfT has remained mostly undetermined, providing the research rationale of numerous policy and scientific papers.

But the need to determine the effectiveness of AfT has become even more relevant in today’s world. The motivation to do so, which also provides the research rationale for this thesis, rests on two specific recent developments. First, in anticipation of the conclusion of the present Round, the Doha Round, and the consequential new round of quantitative trade reductions, international SPS standards are expected to become even more stringent in the coming years (Panagariya, 2005). Therefore, the new impulse to the use of SPS standards further increases the importance of SPS compliance for export competitiveness, and thus amplifies the need for AfT to effectively facilitate trade capacity building. Secondly, under the pressure of the current economic crisis, which have tightened donor budgets, it is demanded more than ever that resources are used effectively and efficiently.

The evaluation of AfT for SPS capacity building constitutes the research question of this thesis, which builds on the following leading questions. Has Aid for Trade been effective in building SPS trade capacity in developing countries so as to meet SPS compliance and lower transaction costs? Are there remaining challenges, and if so what kind of challenges, in the design and operationalization of AfT that must be addressed in order to improve the future effectiveness of AfT?

To build an analysis that effectively answers these questions, the research is constructed as follows. First, chapter two sets out to identify the setting in which SPS standards have been applied and the developments that have caused trade barriers to evolve. This involves addressing the origins of the modern trade systems, its players and several key global developments that have formed the current shape of SPS regulation. Subsequently, chapter three identifies how SPS regulation has constrained developing country agro-food exporters in their ability to compete in international markets. This comprehends two sections. First, chapter three discusses the diverging perspectives that exist on the trade impact of SPS standards, as formalized under the ‘standards-as-barrier perspective’ and the ‘standards-as-catalyst perspective’. Additionally, chapter three identifies that, despite the potential catalytic effect of SPS standards, many developing country agro-food exporters have experienced SPS standards as trade barrier. The findings for developing country agro-food exporters will be reflected against the discussion of diverging perspectives to explain why this has been the case. Building on the knowledge of why and how SPS standards have marginalized developing country agro-food exporters, chapter four discusses which actions have been undertaken for the competitive repositioning of these players in world trade. Hereby the chapter thoroughly discusses the origins and architecture of the AfT initiative.

To understand how AfT is applied the chapter is further complemented by a discussion of the workings of three prominent donors and their programs. The insights of chapter four are

(7)

3

complemented by the general findings from global studies to identify the three programs’ relative success in the AfT framework and to be able to evaluate the impact of AfT on a larger base of evidence. Hereby the focus is specifically on identifying the impact of AfT on exporters which are expected to be most discounted by proliferating SPS standards, namely the developing country’s Small and Medium-sized Enterprises (SMEs) and agro-food producers located in the rural areas.

Given that the data used is based on small and short-term data sets and largely involve case-study specific ‘on the ground’ observations, the evaluation of AfT is qualitative in nature. In order to effectively analyze AfT it is chosen to evaluate the three specific programs and the AFT programs in general against the ‘Paris Principles of Aid Effectiveness’. Established in the Paris Declaration of 2005, the Paris Principles provide a set of requirements to which aid assistance must comply to guarantee that aid delivers results. Using these principles as benchmark should hence provide valuable insights to what extent AfT has facilitated SPS capacity building and whether and how amendments can be made to guarantee and enhance the future effectiveness of AfT. The latter will also consider what future role exists for the WTO so as to strengthen the impact of AfT and the role of developing countries in world trade. Chapter six concludes by summarizing the findings and recommendations obtained throughout the research.

(8)

4

2. The Proliferation of SPS Standards in the Multilateral Trading System

To comprehend the proliferation of SPS standards and their impact on agro-food trade, one must understand the regulatory setting in which they are applied and the developments behind the proliferation of such qualitative measures.

2.1 The Genesis and Architecture of the Global Trade Order

The contemporary trade system that developed after World War II has its roots in the ruinous events of the three decades preceding it. During the early twentieth century, the global economy was agonized by two world wars, nationalist ideologies, the breakdown of the Gold Standard and the Great Depression. Consequently, protectionist measures engulfed the international economy. Through a combination of competitive devaluations and ever-increasing customs barriers and tariffs, countries attempted to insulate their markets from the global economic downturn. These so-called ‘beggar-thy-neighbor’ policies aimed to reinforce domestic production at the expense of foreign trading partners. However, the widespread use of beggar-thy-neighbor policies (where disadvantaged nations followed suit) limited the measures’ success and crippled the trading system altogether. World trade shrank drastically as a result.

In an attempt to regain economic stability, representatives of major trading nations met in Bretton Woods, New Hampshire, in 1944. Negotiations concentrated on the design of a system of global economic order, which was by nature fundamentally different from previous international trade patterns. For the first time in history international relations would be managed within an institutionalized setting, where nations committed to monetary cooperation and global trade rules (Winham, 2011). The anticipated economic order rested on three regulatory pillars. For financial order, two financial institutions were founded in Bretton Woods, namely the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD)1. The IMF was fashioned to promote and guide international monetary cooperation, whereas the IBRD was created to supervise the economic reconstruction and development of war-torn Europe. Alongside the IMF and IBRD, a permanent International Trade Organization (ITO) was envisioned as the third pillar, to govern global trade. But whereas trade ministers had quickly agreed upon the roles and principles of the IMF and the IBRD, the ITO faced more challenges (Dunkley, 2000). The broad scope and ambitious character of the organ’s charter left room for controversy. To bridge the time to ratification, 23 countries agreed to subject the trade of goods to a multitude of rules under the ‘General Agreement on Tariffs and Trade’ (GATT) in early 1947. When the ITO charter was eventually not ratified by several countries, including the United States (US), the ITO failed to come into existence, leaving the GATT as the principal scheme to guide international trade. “Formally just an international agreement to liberalize trade in goods, de facto the GATT had gradually evolved into an international institution”

1

(9)

5

(Hoekman and Mavroidis, 2007a, p. 8). Where its original design formed the draft to commence from, successive negotiations (the trade rounds) widened and deepened the agreement to answer to the fundamental changes in global trade.

By the early 1990s, the treaty-structure of the GATT had become unable to support and supervise the actual trading system (Barton et al., 2006). With the expanded number of Members and enhanced complexity of trade flows, the GATT’s pragmatic approach lost it effectiveness and became vulnerable to illegitimate protectionist intent. Therefore, in light of structuring trade on a stronger regulatory basis, the GATT was replaced by a true institution, the World Trade Organization (WTO), in 1995. As a ‘single undertaking’2, the WTO has a stronger institutional and legal frame, which enhanced the effectiveness of the WTO over the GATT (Athukorala and Adhikari, 2002).

Among the most significant objectives of the WTO are raising standards of living, ensuring full employment and sustainable development (GATT, 1994b). Trade liberalization functions as a means to achieve this. Fundamental to the WTO system are a set of principles that define the ‘codes of conduct’ to support trade. Central principles are based on equal treatment and reciprocity.

Firstly, under WTO regulation, trade must be non-discriminative, so as to support a level playing field. This builds on two principles. Under the ‘Most-Favored Nation’ (MFN) principle, a country may not discriminate between imports from different members, so that any negotiated favorable term must be extended to all Members. Additionally, countries may not discriminate between imports vis-à-vis domestic goods. Hence, imports must be accorded national treatment under the ‘National Treatment’ (NT) principle. Next to non-discriminative measures, WTO regulation also underscores ‘reciprocity’. Where tariff reductions are perceived as a cost to the domestic industry and a benefit to the foreign industry, they are bargained on a quid-pro-quo basis (Panagariya, 2005).

The role of the WTO in this system is twofold. On the one hand, it functions as trade facilitator, providing a forum for trade liberalization negotiations. On the other hand, it acts as trade regulator, providing a transparent commitment mechanism to assure the Members’ commitment to the principles (Hoekman and Vines, 2007).

Although non-discriminative and reciprocal trade liberalization is perceived as the principal approach to achieve the WTO mandate, WTO regulation recognizes that certain situations demand safety valves or precautionary approaches. For instance, countries may restrict trade under the ‘safety valves’, to attain specific economic and non-economic objectives and to eliminate unfair competition (Hoekman and Mavroidis, 2007b). However, the legitimate use of safety valves requires that such measures do not constitute a means of arbitrary or unjustifiable discrimination (GATT, 1994a). It is chiefly the

2

Under the definition of a ‘single undertaking’, all Members are bound to be included in and comply with all agreements. It also encompasses a stronger enforcement system and a dispute settlement mechanism (DSM).

(10)

6

economic objectives, namely the measures to protect food safety and agricultural health and their impact on trade, which form the focus of this research.

2.2 The Changing Nature of Trade Barriers

The metamorphosis of trade barriers in the Multilateral Trade System (MTS) has predominantly reflected two phenomena in world trade. On the one hand, it has reflected the ever increasing integration of trade flows and creation of global value chains, which have required trade policies to be formed and barriers to be set, so as to facilitate efficient and welfare-enhancing trade.

On the other hand, the transformation of trade barriers also reflects evolving power relations at the global and national level. WTO policy signifies the power relationships of the (most dominant) players in the MTS as well as the continuous struggles between domestic groups to capture trade regulators. Where the rise of one political force involves the marginalization of another, political influence on trade policy has produced winners and losers within and across the Member countries.

2.2.1 Trade Barriers in the Early GATT Years

Although the potential trade impeding effects of standards were acknowledged under the ‘General Exemptions’ Article of the original GATT document of 1947, they played a minor role in early trade negotiations. Instead, the first six trade rounds under the GATT3 essentially addressed reducing quantitative trade barriers (Staman & Brom, 2000). Under the so called ‘tariffication’ of trade barriers, all quantitative restrictions were to be transformed into tariffs. Although tariffs create a price-wedge, they reduce all foreign competitiveness in a transparent and non-discriminative manner, so as to reduce the probability of political discord among the Members (Krauss, 1979; Panagariya, 2005). Next, the tariffication of quantitative barriers would also make trade barriers more ordered and prevent any tariff concession realized to be offset by the effects of other protectionist measures (Dam, 1970). Additionally, also ‘tariff bindings’ were negotiated that established the maximum tariff levels for different goods, and which would form a subject for negotiation over successive rounds.

But whereas the tariff negotiations led to considerate reductions in tariff levels, the scope of goods under negotiation was rather limited, with the focus on manufactures. Despite its large share in total world production, agriculture and SPS issues remained outside GATT regulation. This can be primarily comprehended by the US-American hegemony during the early rounds. As principal supplier and consumer of a large share of world trade, the US held a strong bargaining position in negotiations. It enabled the US to direct global trade policy to suit its own interests. Despite being a vocal advocate of trade liberalizations, its agricultural sector was significantly protected by quantitative restrictions and subsidies. Accordingly, the United States’ reluctance to include agriculture and its dominance in negotiations left agriculture off the negotiation table in early rounds.

3

(11)

7

Furthermore, tariff reductions for the goods that were included in negotiations resulted mainly from reciprocal negotiations between the US and other principal suppliers, which were typically other (major) developed economies.

But by the early 1960s, the progressive regionalization of Western Europe into the European Community (EC) GATT trade negotiations became a bipolar bargaining process, managed by the EC and the US with the primary intent to gain access to each other’s markets, and to markets of other important countries of the ‘rich members club’ (Ostry, 2007).

Contrarily, developing countries’ played a peripheral role. Pursuing import-substitution policies and the state of exclusion of the goods that were most valuable to them made negotiations trivial for their trade development. Additionally, to the extent they were interested at all, their poor negotiating skills and low leverage (due to their small economic weight in world trade) left them without much ‘skin in the game’ (Stiglitz and Charlton, 2005).

2.2.2 The Rising Prominence of Non-Tariff Barriers

After twenty-plus years, tariff negotiations reached a peak of success. Six successive trade rounds had increased international cooperation and steadily declined tariffs, particularly on manufactures. But the period of high growth (experienced mainly in developed countries) leveled out when global trade patterns changed. By the 1970s, technological advances and low labor costs in Japan and the newly industrialized countries (NICs) had created a third powerful global region in negotiations. Changing trade patterns combined with a series of crises eventually led to significant trade-and-monetary imbalances in Western economies. With the resulting turmoil in the international monetary system and international economic stagflation, protectionist forces galvanized once again (Erixon, 2009). As a result, gains made in previous decades risked unwinding and bound tariffs to become partly neutralized by a new wave of protectionist policies (Vogler, 2008). But unlike the early twentieth century, WTO Members were unable to revert to raising tariff barriers, so that alternative measures had to be found in Non-Tariff Barriers (NTBs). Consequently, the legitimate use of restrictions to offset unfair trade, such as Anti-dumping (AD) measures and countervailing duties (CVD), as well as the use of restrictions formed outside GATT-regulation, such as ‘Voluntary Export Restraints’ (VERs)4, were increasingly used with protectionist intent (Finger, 1993).

Additionally, also the (potential) of technical requirements or ‘standards’ to be used as trade restriction caught the attention of trade policy-makers (Uimonen & Whalley, 1997). The increased misuse of standards and the resulting trade disputes eventually convinced Members to (further) institutionalize the use of these measures under the GATT.

4

Under VERs an exporting country agrees to restrict a specific product to the importing country. Although it is termed as a voluntary agreement, it often reflects the bargaining power of the importing country. During the 1980s, the US and the EC negotiated several VERS with Japan and the NICs to insulate their domestic industries from the more competitive Japanese and NIC exporters. .

(12)

8

A first serious attempt to discipline the misuse of standards and other NTBs was made in the Tokyo Round (1973-79). The Round established a series of plurilateral codes of behavior, among which the ‘Standards Code’ was designed specifically to deal with technical barriers to trade (TBTs) (WTO, 2013b). This included codes on the use of food safety and animal and plant health measures. However, because countries could still restrict agricultural trade via tariffs and quotas (as it did not yet form part of GATT regulation), the food safety and animal and plant health codes had little impact on agricultural trade (Jenson, 2002). Additionally, in cases were standards were applied, the plurilateral nature of the codes (conformity with the codes was voluntarily) did little to overturn the abuse of technical regulations in practice (Jenson, 2002).

By the mid-1980s, trade disputes on goods included in GATT regulation mushroomed and a growing discontent on the exclusion of agriculture5 and other (new) issues had emerged. For the MTS to maintain momentum, the GATT regime needed to widen and deepen in scope. In order to achieve this, a new round of negotiations was launched under the Uruguay Round (UR) in 1986.

2.3 The Uruguay Round and Standards Regulation

In the pursuit of ‘widening’ the GATT regime, the UR established agreements that extended multilateral regulation into new areas of trade6. This included efforts to, at last, bring agriculture under the auspices of GATT. Formalized in the Agreement on Agriculture (AoA), agricultural trade was integrated under the auspices of the GATT regime, to formalize rules and obligations on market access7 and domestic support8, whilst also taking account of the need for escape clauses (Ministry of Commerce India, 1999).

The GATT regime also ‘widened’ through the extensive increase in Members, especially of developing countries’ participation. The change towards more outward looking-trade policies in these countries and the inclusion of goods in negotiations in which they held a comparative advantage (such as agriculture and textiles) had increased their interest, leading to increased developing country memberships and hence their enhanced bargaining power in negotiations (Stiglitz and Charlton, 2005).

In the practice of ‘deepening’ the GATT regime, the UR agreements provided for more extensive international regulation on measures which had previously been considered as areas of purely domestic (and non-trade) regulation or that had been agreed upon on a voluntary basis (Lawrence, 2002). Next to regulation on, for instance, VERs and government procurement, it also included more extensive agreements on standards, as established in the ‘Agreement on Technical

5

Discontent was felt both among developing countries (who generally held a comparative advantage in agriculture) but also among developed countries. For instance, the US felt an increasing discontent about the heavy subsidization of European farmers under the Common Agricultural Policy.

6

Trade rules on goods, services, intellectual property rights and investment measures were accommodated respectively under the ‘GATT 1994 Agreement’, the ‘GATS Agreement’, the ‘TRIPS Agreements’ and the ‘TRIMS Agreement’. The GATT 1994 Agreement formed the extended and amended GATT 1947 Agreement.

7

This included the tariffication of NTBs and the binding of minimum import levels.

8

(13)

9

Barriers to Trade’, ‘the TBT Agreement’. Furthermore, given the inclusion of agriculture under the GATT, provisions on the use of NTBs were also defined for agricultural trade.

For the use of standards in agriculture, the TBT agreement was set to cover all technical requirements and their compliance procedures (WTO, 2013a). To complement the TBT Agreement and address more specifically the risks to human and animal/plant life and (the spread of) pests, diseases and disease causing organisms, the ‘Agreement on the Application of Sanitary and Phytosanitary Measures’, the SPS Agreement, was established additional to the TBT Agreement.

2.3.1 The SPS Agreement

The SPS Agreement, as established in January 1995 and still persistent today, forms a legal basis that sets out a Member’s rights and obligations in the use of SPS standards according to several principles. Under the SPS Agreement, Members have the right to set their own SPS standards, but the rationale to do so must be backed by scientific evidence that reflects an appropriate risk assessment. These measures cannot be used to arbitrarily or unjustifiably discriminate between products and they must minimize trade impeding effects (Uimonen & Whalley, 1997). Additionally, SPS standards may also be set on a ‘precautionary basis’9, but Members will be obliged to obtain additional scientific information (GATT, 1994c).

Furthermore, pursuing the harmonization of national standards in international trade, Members are encouraged to implement international standards where these exist (Uimonen & Whalley, 1997). Hereby, the three organizations10 that develop international standards based on scientific validation are explicitly referred to. Members may deviate to imply stricter domestically designed standards, but again, it requires the scientific justification in doing so. When national SPS standards differ, but nonetheless attain similar levels of health protection, countries must accept the measures based on the ‘principle of equivalence’ (WTO, 2013c).

Finally, in establishing the SPS Agreement, it was well recognized that the existence of different levels of scientific capacity, mostly between developed and developing countries, could result in an imbalanced capacity to access markets. Therefore, to be able to commit to but also profit from the SPS Agreement, the terms of the agreement explicitly acknowledged the need for longer transitional periods for developing countries (Vijil, Huchet-Bourdon and Le Mouël, 2011). Moreover, it accredited the need for developed countries to provide technical assistance to help build the required capacity. The so called trade-related technical assistance (TRTA) agrement that developed countries had committed to in the SPS Agreement, and in fact for the UR agreements in general, existed of

9

Before the scientific proof of risk is identified or rejected (WTO, 2014b). This includes both when scientific research need yet to be done to assess the risks and when there is a reasonable assumption of harm (‘better to be safe than sorry’), meaning that scientific research has shown serious uncertainties in risk.

10

The Codex Alimentarius Commission, the Office International des Epizooties (OIE) and the International Plant Protection Convention (IPPC).

(14)

10

support to help developing countries develop their ability to organize the administrative, institutional and legal structure to be able to effectively implement the UR Agreements (OECD, 2006b).

2.4 The Proliferation of SPS Standards in Recent Times

In recent decades agro-food trade in the MTS has increasingly been governed by SPS standards, especially in developed countries. The proliferation of SPS standards has been the result of several (reinforcing) demand-and-supply driven developments.

Firstly, proliferating SPS standards can be explained by the wave of economic globalization of the 1990s. The globalization of trade has built on two major forces. A first force has been the decline in transportation and communication costs. Driven primarily by the information and communication technology (ICT) revolution, but also due to technological progress in (long-distance) transportation, transaction costs and transit times have declined considerably. Additionally, a second force to decrease transaction costs and transit time has been the further reduction in trade policy barriers in WTO rounds. Resulting from decreased transaction costs and transit time, the benefits of vertically fragmenting the production chain, to take advantage of productive efficiency differences across countries, has become more profitable. In addition, reduced transaction costs and transit time also allowed for the trade of products that were previously considered non-tradables, such as fresh foods.

But with the globalization of trade and the vertical integration of supply chains a number of challenges arose as well. For instance, without some form of regulation and with implicit (national) norms diverging along the nodes of the supply chain11 (Swinnen and Maertens, 2007) it becomes incredibly costly for a supplier to guarantee that the safety and quality of his inputs comply with the norms set in the market that it supplies. For this, SPS Standards function as an economically efficient means that reduce transaction costs by providing a common reference points for concept such as 'quality', 'safety' and 'sustainability' (WB, 2008).

Secondly, proliferating SPS standards are also explained by consumer-and-society-driven concerns regarding health risks and the welfare of animals and plants (Mahé, 1997). Given the positive relationship found between per capita income and demanded product characteristics, these trends existed mainly in developed countries (Anderson, 1997). Nonetheless, in recent times this trend has started to spread into developing countries as well (Swinnen and Maertens, 2007).

Regarding consumer health risks, concerns have been principally related to the presence of chemical residues and contaminants in food (WB, 2005). Reoccurring and highly-publicized outbreaks of food-borne illness variants12 and several scientific discoveries, that uncovered formerly unknown

11

Diverging norms across countries reflect the different national perceptions and preferences of what minimum level of safety and quality must be met (WB, 2005).

12

(15)

11

risks13, have undermined consumer trust on food safety (WB, 2005). Added to this are fears created by scientific uncertainties of products-and-process methods that may affect food safety, like the use of artificial beef hormones and genetically modified organisms. Answering to these trends in consumer-and-society demand, institutional changes have been integrated into product and process regulations, to manage high quality and reduce SPS hazards all through the supply chain.

Furthermore, concerns for the external effects of trade on animal and plant life have also increased demands for more stringent SPS standardization. Concerns include the risk of the spread of pests or diseases with the import of particular goods, as well as the well-being of animals and plants in the production process (WTO, 2013a).

Thirdly, proliferating SPS standard can also be explained by the shift from classical barriers to SPS standards in order to appease protectionist forces. As traditional trade barriers and domestic support have progressively been restricted over successive trade rounds, SPS standards have become prominent, novel tools for protectionism (Mahé, 1997). Notwithstanding the limitations to the use of SPS standards as defined in the SPS Agreement, the technicalities and abstract formulation of how standards may be applied as defined in legal documents has made it difficult to disentangle genuine protection from disguised protectionism, creating ample room to tweak standards to be more stringent than necessary (Iacovone, 2003; Swinnen and Vandermoortele, 2010). In fact, it is argued that standards have dominantly been applied to form protectionist measures (Swinnen and Vandermoortele, 2010). In this context, the extent to which SPS standards are used and how they are used as protectionist measures depends on the ability of different interest groups to influence regulators, a process known as ‘regulatory capture’. For instance, being well-organized and represented by strong producer groups, producers have often had the ability to ‘capture’ domestic regulators to pursue policies that facilitate uncompetitive profits. Additionally, where agriculture has always been a sensitive social issue, also social pressures to protect agricultural employment have formed strong forces that have been able to capture domestic regulators.

2.5 The Uruguay Hangover

Whereas the establishment of the SPS Agreement, the AoA and the UR Agreements in general had formed a first step towards a more credible and comprehensive trade system, in the aftermath of the UR it became evident that it had left loose ends in the implementation and interpretation of its agreements. The discontent on the Round’s limited and imbalanced success left developing countries to suffer from a so called ‘Uruguay Hangover’. This underscored the following problems.

Firstly, the ‘single undertaking’ underlying the WTO demanded significant additional concessions and commitments from developing countries, which placed additional pressures on their

13

(16)

12

limited capacities. But whereas the implementation of the agreements established in the UR formed a bound obligation, the agreements to provide technical assistance did not (Finger, 2008). Consequently the extent of technical assistance provided in the years following the UR remained limited and where it did exist it had turned out to be at best a learning device (Hoekman, 2004). For instance, programs initiated after the UR, such as the Integrated Framework (IF) and the Joint Integrated Technical Assistance Program (JITAP)14, were heavily criticized for their limited impact due to the lack of funds, the lack of developing country ownership in the programs as well as operational problems (OECD, 2006d). In consequence, developing countries were faced with the implementation costs and the costs from the concession made, yet also largely unable to benefit from the opportunities of the trade reforms.

But also developed countries had felt ‘hung over’ from the round’s outcomes. The ample room for interpretations on the use of SPS standards had made it difficult to identify the legitimate use of SPS measures. Consequently, SPS-related trade disputes had increased over the years.

Following the Uruguay Round’s limited and rather imbalanced success, support for a new round of trade negotiations had gradually increased. Among others, new negotiations would need to readdress and redefine the use of SPS standards, as well as the concept and provision of TRTA.

2.6 The Doha Deadlock and Its Effects

In November 2001, trade ministers of 140 developed and developing nations met in Doha, Qatar, to start the ninth and most ambitious round of trade talks; the Doha Round. The Round has also been termed the Doha Development Round (DDR), where development has been perceived as a global responsibility and thus should be placed at the core of negotiations (Lamy, 2005).

Once again, developing countries have amplified their weight in the present round, forcing more than ever that their interests will be served (Fergusson, 2011). This is for instance underscored in developing countries’ demands for upfront concessions in return for their support for another round (Fergusson, 2011). In addition, they have taken a more coordinated approach to enhance their influence in negotiations. The formation of stronger coalitions has increased their bargaining capacity (the increased value of joined concessions adds to their leverage) as well as their negotiation capacity (created by the sharing of skills and expertise in negotiating).

Despite the urgency for (agricultural) trade reforms, hitherto conclusion of the DDR has remained off, thereby entering its twelfth year of existence. The large number of diverse members involved (currently the WTO has 157 members), the complexity of issues on the table and the increased weight of developing countries are among the most important reasons for the deadlock.

14

In 1997, WTO members adopted the Integrated Framework for Trade-Related Technical Assistance for the Least Developed Countries (IF), to promote the integration of trade capacity building into LDCs’ development plans. Also, the Joint Integrated Technical Assistance Programme (JITAP) was established in 1998, to help African countries build trade capacities. A more collaborative analysis of TRTA programs will be discussed in the following chapters.

(17)

13

There exists a persistent disagreement between the US, the EU and the Group of 20 developing nations (G20), with mainly in agriculture reforms (Fergusson, 2011). Brazil’s foreign minister, Celso Amorim, stated that the Round’s advancement will be largely dependent on a ‘basic triangle of trade-offs’ (Hoekman and Vines, 2007). When the US cuts its farm subsidies, the EU lowers its agricultural tariffs and the G20 countries enhance foreign market access, agreements can be reached (Hoekman and Vines, 2007). However, even within the blocks exists a diversity of interests and income levels, which complicates negotiations further.

On top of this, negotiations have proven even more difficult due to negotiating trade measures that reach deeper into national domains, so that the number of public and private stakeholders involved has also increased per negotiating country (Hoekman and Vines, 2007).

Therefore, with an increased number of powerful players, intrinsically complex areas under negotiation and the rising number of stakeholders affected by the trade reforms, the ability to move towards compromises and trade liberalizations has proven to be an enormously challenging task and has left the realization of this triangular trade-off to be deadlocked.

In the mean time, the use of standards to protect domestic producers has continued to proliferate. In fact, ‘in anticipation of the eradication of quantitative barriers under the Doha Round, the politics in the developed countries is already pushing the import barriers up in the form of Sanitary and Phytosanitary (SPS) measures’ (Panagariya, 2005, p.1291). Therefore, the proliferation of SPS standards under the anticipations of the Doha Round conclusion will most likely add to the trends which have been witnessed since the 1990s. Moreover, it must be expected that this process will escalate in the post-Doha world (Panagariya, 2005), putting increasing importance on the development of SPS capacity in developing countries.

(18)

14

3. Challenges on Proliferating SPS Standards for Developing Countries

Against the background of further proliferating SPS standards and the concerns expressed for the loss of developing countries’ (potential) comparative advantage in agro-food trade, this chapter identifies what type of trade constraints have specifically caused developing country exporters’ inability to meet SPS compliance in export markets. Hereby the focus is on identifying SPS capacity constraints of developing country producers exporting to markets where stringent SPS standards are applies, such as the EU and the US. Given that access to these markets offer lucrative opportunities, the gains from SPS compliance for economic development can be substantial.

To identify how SPS standards can impact trade performance and what capacity constraints form the most prominent impediments for developing country exporters, this chapter includes two distinct, but complementary sections. First, in section 3.1 the character of SPS standards and their potential trade effects are defined. Subsequently, this knowledge is used in section 3.2 to identify why proliferating SPS standards have been found to typically form trade barriers for developing country exporters and where prominent constraints in their SPS capacity are found. Hereby, the analysis also distinguishes on the impact of SPS standards for different developing countries and for different producers within the countries specifically, so as to illuminate where SPS capacity development programs are most needed.

The insights obtained will be used in chapter four and five to discuss and evaluate the effectiveness of different capacity building programs that aim to improve the trading prospects of developing countries and of specific producer groups in particular.

3.1 Trade Effects of SPS Standards

SPS standards can be categorized based on different dimensions. For instance, they can be categorized according to the source that promulgates them, thereby broadly dividing SPS standards into private standards, which arise from market forces, and public standards,15 (Maskus and Wilson, 2000). An example of private standards is the harmonized farm certification scheme, the ‘EurepGAP’, which is promulgated by several prominent European supermarket chains and their major suppliers, the so called ‘Euro-Retailer Produce Working Group’ (Eurep). The so called EurepGAP standards applied demand that products comply with ‘Good Agricultural Practice’ (GAP)16 all through the supply chain.

15

In the literature, the term ‘standards’ and ‘regulations’ are used interchangeably as well as distinctively. When used distinctively, ‘standards’ apply to private requirements and ‘regulations’ to publically applied requirements. Nonetheless, in this thesis, the term ‘standards’ and ‘regulations’ are used interchangeably for private and public standards. Only where necessary is the distinction made between market based and public based standards.

16

GAPs are methods applied by several international producer chains and they may be defined somewhat differently for different chains. Nonetheless, they generally specify a broad set of codes based on objectives of food safety and quality and environmental, economic and social sustainability (FAO, 2003).

(19)

15

Contrarily to private standards, public standards are implemented via a top-down mechanism, designed at the national or international level. This includes the public standards17 applied under the WTO regime, and therefore, given the topic of this paper, will form the sole focus for the rest of the analysis.

A public authority may implement SPS standards to regulate trade when the risks are considered significant or imperfectly known (Roberts, Josling and Orden, 1999). The perceived risks can be inherent to the product, to the production and processing manner or to information asymmetries. Therefore, a second categorization of SPS standards is formed by the regulatory function of the standard (Maskus and Wilson, 2000), acting to inform on or avoid certain risks. Built on this categorization, standards are classified as ‘product standards’, ‘production and processing methods (PPM) standards’ or ‘labeling standards’ (Maskus and Wilson, 2000). Hereby product standards determine which characteristics the product must possess, PPM standards must guarantee that the product is made under certain conditions, and labeling standards aim to provide the necessary information needed for safe consumption. With reference to labeling standards, they must guarantee the well-being of consumers in general, such as providing information on the safe-handling of the product, but they must also protect specific ‘at risk’ consumers, including pregnant women and individuals experiencing allergies (Isaac & Kerr, 2003).

Even when similar regulatory goals are pursued, public authorities across countries and across time may nonetheless impose different means. This provides a further categorization of SPS standards which closely relates to the characterization of standards by the function they must fulfill, namely identifying standards according to the policy instrument applied. Whereas one government may find information remedies such as labeling standards efficient, another government may choose to set PPM standards (which impose a partial ban), or it may even decide to prohibit the product’s market entrance altogether (imposing a total ban) (Roberts, Josling and Orden, 1999). The reason for this diversity of choice is that the type of standard applied must satisfy a country’s national preference function in the best way possible. Given that a country’s preference function is largely endogenously determined by factors such as consumer tolerance, coalition formation, historic events, local conditions and producer capacities, it can change over time and be different across space (Maskus and Wilson, 2000; Iacovone, 2003). As a result, the best-suited measure and level of stringency has been open to interpretation across time and space. Even more so, changing and diverging national preference functions also explain the reoccurring criticism on SPS regulation as well as the occurrence of witnessed (long-lasting) trade disputes (Büthe, 2008).

Finally, SPS standards can also be categorized by the scope of the measure, selective to the product’s origin. They may be ‘uniform measures’; applying to both domestic and import goods,

17

From here on the interchangeably used terms ‘SPS standards’ and ‘SPS regulation’ will refer solely to public standards, as applied under the WTO regime.

(20)

16

‘universal measures’; affecting only imports, or ‘specific measures’; distinguishing between imports from different descents or different producers (Iacovone, 2003). SPS standards applied by scope that apply different requirements to different producers have the potential to substantially alter international competitiveness, by means of applying discriminations to compromise for risks that are purely induced by the location or size of production. Location-bias measures are for instance observed for SPS ‘specific measures’ imposed on agro-foods from (sub-) tropical areas where the risk of the spread of certain pests and diseases is inherent to the specific location of production. Whereas the discriminative nature of universal and specific standards inherently violate the NT principle they can be legitimately applied on a precautionary basis, as described in chapter two.

A common feature of the implementation of SPS standards, and particularly SPS standards applied on a selective basis, is that they are likely to raise SPS compliance costs (and thereby transaction costs), and that they have the ability to do this in manner that differs across suppliers. Although SPS compliance costs may be difficult to discern from other production and transaction costs, they can be defined as all costs incurred to meet and demonstrate compliance with the quality and safety requirements applied. Next to the investments and recurring costs to upgrade the product and production process to meet and prove compliance with (increasingly) stringent SPS standards, it also includes the costs of delays, border rejections and bans. It is the characterization of SPS standards to disproportionately raise compliance costs that lies at the basis of explaining developing countries’ concerns and from which a common divide in the literature has prevailed. The divide of, on the one hand, the ‘standards-as-barrier perspective’ and, on the other hand, the ‘standard-as-catalyst perspective’, presents opposing views on the potential trade effects from proliferating SPS standards. Hereby, the debate particularly illuminates the disproportionate impacts when categorized by scope.

3.1.1 SPS Standards as Barrier

The ‘standards-as-barrier perspective’ emphasizes how proliferating SPS standards can disproportionally increase compliance costs, by and large favoring domestic over foreign goods and developed country exports over developing country exports. Several arguments support this reasoning. Firslty, given that domestically applied SPS standards in the main reflect characteristics of the domestic country, including dimensions of risk-tolerance, available economic resources and the (national) capacity to reduce risks, they can differ substantially between countries. Furthermore, because domestic producers are commonly better acquainted with domestic standards and have organized their production capacities initially to fit domestic SPS compliance, they will typically have lower added compliance costs from proliferating SPS standards (Maskus and Wilson, 2000; Oyejide, Ogunkola and Bankole, 2009). Contrarily, foreign producers are less acquainted with their export market’s idiosyncratic standards and have often not organized their production methods to (solely) fit the specific export market, so that they can be expected to face considerable increases in compliance

(21)

17

costs. This is especially true when standards differ substantially between their home market and their export market(s). Therefore, even when uniform measures are applied, the existence of the so called ‘standards divergence’ between a producers home and export market(s) is argued to place foreign producers at a disadvantage to domestic producers. Furthermore, the standards-as-barrier perspective also emphasizes the disproportionate cost effect of universal standards on imports. It is argued that, where only imports are being subjected to (border) inspections, total transaction costs and transit time are expected to increase disproportionately for foreign products. On top of the mere added costs of border inspections, the asymmetry in costs further exacerbates when inefficiencies in transboundary transactions occur. This includes, for instance, delays in border inspections and inefficiently organized customs procedures. The impact on agro-food exporters’ competitiveness is particularly detrimental, given the time-and-temperature sensitive nature of these products. In this context, the effect of universal SPS standards can be considered, aside from non-obtained government revenue, to be analogous to the effect of tariffs (Oyejide, Ogunkola and Bankole, 2000), because the so called ‘tariffication effect’ allows domestic producers to raise prices and gain market share. For instance, the costs of technical requirements and customs procedures in the EU, as faced by foreign producers, has been estimated to be comparable to a tariff of 2 percent on export values (Hoekman, 1998).

Additionally and largely underscoring the concerns of developing countries specifically, the standards-as-barrier perspective argues that proliferating SPS standards disproportionally increase compliance costs for developing countries. Even though trade impeding effects of SPS standards are often illuminated for cases involving developed country exporters18, it is argued that in fact developing country exporters will be faced with disproportionately increased compliance costs when whishing to access developed country markets.

This is, for instance, underscored in the context of the so called ‘North-South divergence’, that exists between developed and developing countries and which asymmetrically affects producers’ compliance costs. This rests on the following reasoning. When extensive alterations must be made to turn home market-based SPS compliance into export market-based SPS compliance, compliance costs will be proportional (Maskus and Wilson, 2000). Additionally, given that a country’s SPS standards represent national conditions, such as national income and risk-mitigation and production capacities (as incorporated in SPS preference functions), standards are expected to be similar across countries with similar levels of development. Contrarily, they will diverge for countries with greater differences in income and risk-mitigation, production capacities. Based on this reasoning, overcoming the ‘North-South divergence’ in SPS standards will imply that developed country exporters must substantially alter their products to access other developed country markets. Consequently, compliance costs can be expected to be disproportionately higher for developing country exporters.

18

(22)

18

In addition to meeting SPS standards, developing countries may also be more challenged in demonstrating compliance. It is argued that countries at similar levels of development and with comparable preference functions are better able to harmonize SPS standards or recognize equivalent levels of SPS standards (Maur and Shepherd, 2011). Given the divergence of incomes and preference functions between developed and developing countries, this is less likely to occur for developing country exports and hence will further increase compliance costs for developing country exporters.

Finally, the standards-as-barrier perspective also underscores the impact of proliferating SPS standards on smallholders and SMEs in developing countries, specifically emphasizing the cost asymmetry in SPS compliance related to firm size. This is because, when proliferating SPS standards require substantial fixed costs to upgrade (firm) capacity, larger enterprises are commonly more capable to remain competitive. Assuming a competitive market where the exporting country is too small to affect the price19, any investment that is needed to reach compliance will act as a lump-sum tax on production. In the short-run, investment costs for compliance leave average and marginal costs unaffected (Oyejide, Ogunkola and Bankole, 2000). But in the long run, when production costs are determined by long-run average costs, larger enterprises will, ceteris paribus, have lower average cost, as investments for SPS compliance can be spread over larger output. When applying this line of reasoning in the setting of proliferating SPS standards, when firms are faced with a standard divergence, larger enterprises are more capable to establishing a costly platform design (whilst retaining low average costs) that can be slightly modified to comply with both the home market and export market level of standards (Maskus and Wilson, 2000). A similar line of reasoning exists for firms supplying different export markets with diverging levels of SPS standards. Additional to the limits for smallholders and SMEs to be competitive in the developed country export market due to the North-South divergence (due to high long-run average costs), the substantial financial resources needed to meet SPS compliance, regardless of attaining competitive average costs levels, are often not available. Not only are smaller firms more limited in their ability to internally finance such investments, the existence of credit markets imperfections in developing countries make it difficult to obtain these upfront investments externally20.

3.1.3 SPS Standards as Catalyst

Countering the ‘standards-as-barrier’ perspective is the ‘standards-as-catalyst’ perspective, which highlights the potential opportunities of proliferating SPS standards to enhance a developing country’s trade capacity and competitive edge in international trade.

19

This is consistent for this research, where, except for coffee production, developing countries are considered price takers on the world market.

20

(23)

19

First it is argued that the challenges created by proliferating SPS standards may provide a powerful incentive for developing countries to ‘revamp’ exporters’ SPS capacity (Jaffee and Henson, 2005). At the private level this involves the modernization of productive capacity by incvesting in new production and processing techniques and capital equipment. At the public level this involves the modernization of the SPS system and transport systems, such as institutional reforms to upgrade certification processes and inspections and investments in road infrastructure.

Secondly, proliferating SPS standards may be used to signal good practices by developing country exporters so as to promote consumer confidence and hence consumer and input demand (Neeliah, Goburdhun and Neeliah, 2011). Adopting stringent SPS standards may thus provide an entry into global supply chains, stimulating long run growth opportunities (Maskus and Wilson, 2000).

Finally, proliferating SPS standards may also indirectly enhance growth prospects when SPS compliance provides positive spillovers to the local productive sector (Jaffee and Henson, 2005). These effects are emphasized specifically for processed agro-foods, which have large domestic resource content and are closely related to other activities in the rural sector (Athukorala and Sen, 1998). The high intensity of domestic input linkages enhances domestic input demand and may additionally create knowledge spillovers. The latter effect occurs when knowledge, disclosed in SPS standards and/or obtained through international collaborations, disseminates into the local economy (Athukorala and Sen, 1998). Therefore, agro-food trade may act as a lifeline, connecting rural economies to information, knowledge and demand from international markets.

The different approaches outlined reflect the multiformity and complexity of reality that includes some of both perspectives (Jaffee and Henson, 2005). Therefore, neither perspective should be disregarded. Furthermore, the two opposing perspectives are by no means wholly contradictory. Rather, it suggest a reality where the proliferation of SPS standards will neither only restrict trade nor expand trade. Instead, the impact will be determined by the capability of developing countries and their exporters to overcome existent trade constraints and to take advantage of the opportunities it presents.

3.2 Identifying the Key Constraints of SPS Capacity in Developing Countries

To utilize the opportunities of proliferating SPS standards, exporters must possess several essential resources that together form the exporter’s ‘SPS capacity’ to trade. A well-developed level of SPS capacity is reflected in the exporter’s trade performance and can be defined as the means to conserve low compliance costs and to effectively supply markets with short transit times. Attaining a well-developed level of SPS capacity is both the result of a firm’s own set of capabilities and endowments as well as that of the macroeconomic and institutional environment.

SPS capacity is by no means a passive state (UNCTAD, 2010). Instead the state of SPS capacity at any point in time is determined by the country’s ability to make up for the time-inherent

(24)

20

deterioration of SPS capacity due to, for instance, the loss of knowledge from (high) staff-turnover, the deterioration of infrastructures without maintenance and the deterioration of productive and institutional capacity when techniques and equipments become outdated by superseding innovations. Additionally, also changes in the international environment, such as scientific discoveries and changing consumer and producer demands, will affect the state of a country’s SPS capacity. Therefore, to establish, maintain and further develop SPS capacity, a country (‘s exporter) will need to make the necessary reforms, adjustments and investments that guarantee its effective trade performance at any given point in time.

Whereas the construction of SPS capacity involves numerous elements and has been defined in different ways, it can generally be defined by three specific, but mutually enforcing elements that exist across and within the different layers of the economy. These are the ‘institutional capacity’, ‘infrastructure capacity’ and ‘productive capacity’. In this categorization, institutional and infrastructure capacity construct the ‘enabling environment’ facilitating firms in their ability to trade. Contrarily, in this context, private sector productive capacity relates to the capacities of agricultural producers to effectively comply with SPS standards at competitive prices.

The rationale to categorize SPS trade capacity as described above is built on several arguments. First and foremost, and as will become evident in section 4.2.1, when AfT was first conceptualized by the WTO, the scope of the agenda clearly differentiated between these three specific areas as well. Accordingly, when evaluating AfT programs (which are generally also constructed on this classification), it will allow for the ability to identify what area of trade capacity is addressed and to identify the causal chain of impact from identifying key constraints to evaluating specific AFT projects, purposed to overcome these specific constraints. Additionally, as it distinguishes between capacity internal and external to the firm (the productive capacity and enabling environment respectively) it allows for the clear identification of public and private sector-related strengths and weaknesses.

3.2.1 Institutional SPS Capacity and Developing Country Constraints

Institutional SPS capacity can be defined as “the institutions businesses and governments rely upon for trade” (WTO, 2013d). This includes two broad dimensions.

3.2.1.1 The Organization and Design of Institutions

In the first dimension, ‘institutions’ refer to the organization and design of the SPS regulatory system, which exists both at the national and international level. On the national level, this framework comprises the regulatory set-up that supervises the actions of businesses operating in and supplying the domestic market. This national ‘ SPS system of support’ is known as the ‘Quality Infrastructure’

Aid for sanitary and phytosanitary (SPS) trade capacity : evaluating the effectiveness of aid for trade (AfT) against proliferating SPS standards.

Aid for Sanitary and Phytosanitary (SPS) Trade Capacity:

Acronyms and Abbreviations

Table of Contents

1.

Introduction

2.

The Proliferation of SPS Standards in the Multilateral Trading System

3.

Challenges on Proliferating SPS Standards for Developing Countries