Trade, Sustainability and Development – September 2013

Proposed US food import rules shift regulatory burden to private sector

The US Food safety Modernisation Act, signed in January 2011, will change the way food imports are regulated in the US.

Proposed rules to implement the Act will require food to be proven it is safe before it can be imported into the US. Currently food may be imported unless it is found or suspected to be unsafe by border authorities.

The rules also transfer the burden of proving imports are safe from the government to the private sector. Importers are required to have an adequate “Foreign Supplier Verification Program” in place which requires them to perform activities based on hazards identified for each food and obtain documentation to verify the food they import is safe (auditing, sampling and testing for example).

The rules mark a shift in the US approach to food safety, traditionally based on management of detected risks, to that focused on prevention of food hazards across the supply chain, more closely followed by the EU. The FDA will be able to “not only reject food just because it is not safe, but also because of the absence of certain documentation.”

This will slow trade and increase costs for importers, which are ultimately passed on to consumers.  This matters; in the last fiscal year US agricultural food imports were $102 billion. About 15 percent of the food supply is imported.

While food imports are mostly from Canada and Mexico, where supply chains are already integrated, importers in other markets, particularly developing countries, will find it harder to meet the proposed requirements.


EU-Indonesia forest agreement reports slow progress, but EU wants to expand scope

Implementation of the systems required for the EU-Indonesia FLEGT (Forest Law Enforcement, Governance and Trade) agreement is moving at a glacial pace, according to the ITTO (International Tropical Timber Organisation).

The organisation reports that of the 250 wooden handicrafts exporters operating in Bali, just 18 have been certified to the legality assurance standard that is part of the agreement.

Officials in Bali have also noted that the cost of certification is potentially crippling for small Indonesian businesses. Audits are estimated at USD3400, excluding training and compliance prior to the audit.

Both Indonesian and EU officials have attempted to reassure businesses by stating that the FLEGT agreement – which effectively gives Indonesian timber products a ‘green light’ around the EU Timber Regulation  (EUTR) – will be signed on September 30.

However, as the EU itself has noted, there is not a single FLEGT agreement that is operational across any of the 13 target nations, despite more than 7 years of negotiating and systems development.

Despite this, European officials have expressed a desire on a number of occasions to expand the EUTR approach to other commodities, including agriculture.  Like the EUTR, this would effectively require producers and importers to ‘prove’ the legality of the commodity or product, from harvesting through to processing.

Similar to the EU’s chemical policy (REACH)and current proposals by the FDA (see story above), this shifts the burden of proof away from regulators and on to the private sector. In the case of EUTR (or its proposed expansion), it will effectively require importers to behave as extra-territorial regulators.


Greenpeace attacks developing country energy, investment

International campaign organisation Greenpeace has continued its broad campaign against energy needs in developing countries, with a wholesale attack on fossil fuels in China, South Africa and India.

Last month in China, Greenpeace has attacked coal-fired power generation over the recent pollution problems that have been plaguing Beijing and Shanghai. Yet a recent study concluded that the key causes of China’s air pollution are home cooking (specifically the use of domestic briquettes as opposed to mains electricity) and traffic pollution.

Similarly, the organisation has attacked approvals for a new coal power station in South Africa. In 2011, Greenpeace came under direct fire from the South African finance minister Pravin Gordhan for lobbying the UK Government to block financing of a new coal-fired power station through the International Finance Corporation (IFC).  South Africa has set itself a long-term goal of giving all South African households access to electricity by 2020.

In India, Greenpeace is claiming that 1.1 million ha of forest land is ‘under threat’ from coal developments – roughly 1.6 per cent of India’s forest area.  Around one-quarter of India’s population has no access to electricity – in excess of 260 million people.

Greenpeace broadly objects to all other fossil fuel sources as well as nuclear. It supports hydroelectric power generation, but objects to the dams that are required for hydroelectric. Geothermal is severely constrained by geography, and both solar and wind are simply too expensive.

Pravin Gordhan said of Greenpeace in 2011 that “It is regrettable that . . . [NGOs] are putting their environmental concerns, which can’t be immediately addressed, above the economic needs of South Africa and our need to grow the economy so that all the people benefit.”

WWF is currently lobbying sovereign wealth funds and other development banks for cease funding coal operations.


In Brief

European Commission continues anti-subsidy investigation on solar panels from China without duties.  Press Release, European Commission, 7 August 2013. Europe will not impose duties on Chinese solar imports while it investigates alleged subsidies.

Free Trade in Environmental Goods: The Trade Remedy Problem. Free Trade Bulletin No 54, August 19, 2013. Cato considers a proposal to eliminate all tariffs, including trade remedies, on environmental goods.

U.S. Should Rethink Restrictions On Natural Gas Exports. International Business Times, August 19, 2013. US restrictions on exports of natural gas could be problematic under WTO rules.

APEC agrees to isolate the US, Australia over forestry trade bans. The Jakarta Post, August 19 2013. APEC Forestry Ministers isolate the United States and Australia for using trade bans to tackle illegal logging.

EU pulls punitive duties on Indonesia’s biofuel , The Jakarta Post, August 20 2013. The European Union finds no case for imposing countervailing duties on Indonesian biofuel exports.

Indonesia Cuts Palm Oil Export-Tax to Boost Sales as Prices Drop, Bloomberg, August 22, 2013. Indonesia reduces the duty on shipments of crude palm oil for the first time in four months.

Targeting the Environment – Exploring a New Trend in the EU’s Trade Defence Investigations. Report, Kommerskollegium, 2013. Sweden’s National Board of Trade notes that import protection is increasing the price of renewable energy.

Protectionist clouds darken sunny forecast for solar power., August 7, 2013. Vox Column assesses the EU-Chinese anti-dumping dispute and argues that trade could be the saviour of solar power.

Changing Climate for Carbon Taxes: Who’s Afraid of the WTO?  Climate and Energy Paper Series 2013, German Marshall Fund of the United States. Report advances the case for a carbon tax, applied in a way that does not violate U.S. obligations under the WTO.

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