Towards a theory and good practice in IRC Frank van Tongeren - - PDF document

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Towards a theory and good practice in IRC Frank van Tongeren - - PDF document

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16/11/2015 Towards a theory and good practice in IRC Frank van Tongeren OECD/TAD Joint meeting of the OECD Trade Committee and the Regulatory Policy Committee 5 November 2015 Two perspectives on the same issue Regulatory perspective: use

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Towards a theory and good practice in IRC

Frank van Tongeren OECD/TAD Joint meeting of the OECD Trade Committee and the Regulatory Policy Committee 5 November 2015

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Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | tad.contact@oecd.org

Two perspectives on the same issue

  • Regulatory perspective: use trade agreements to lock in

GRP

  • Trade perspective: use IRC to reduce unnecessary trade

costs

  • Starting points:
  • Recognition of regulatory autonomy and differences in

regulatory processes between jurisdictions

  • Assuring domestic regulatory objectives, while reducing

trade costs.

  • Regulatory approaches often address the same problem

in different ways in different countries

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Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | tad.contact@oecd.org

The industrial revolution and science allowed testing of the ingredients in food /chocolate in the 19th century

  • Showed that adulteration was widespread, not just

with cheap substitutes, but also with poisonous ingredients => Public outrage induced regulations and standards But: different regulatory approaches

  • Ex France vs UK vs Germany

Example: Chocolate standards in Europe

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Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | tad.contact@oecd.org

1. Britain: negative- list approach

  • 1860/75 : general food safety laws
  • sale of adulterated food 'injurious to health' was forbidden
  • labelling of (safe) ingredients was mandatory.
  • Cacao Butter Equivalents (CBEs: non-cacao vegetable

fats) were not forbidden

2. France: recipe approach

  • 1910: Positive list of ingredients plus composition
  • Defines ‘quality’

3. Germany: private standards and regulation

  • 1879 General food laws + industry standards (negative-list)
  • From 1933: Private standards (recipes) become basis for

regulation

Three approaches to Chocolate regulation

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Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | tad.contact@oecd.org

1957:

  • The six founding EU members had chocolate regulations close to

the French model.

  • The new EU chocolate standards are very close to the 1910

French approach 1973:

  • UK, Ireland and Denmark join. Their chocolate follows the British

model (and allows CBEs) 1980s and 1990s:

  • More countries join and it becomes close to 50/50.

2003 (After 30 years !):

  • A compromise : CBEs are allowed up to 5% in all of the EU
  • Most chocolate companies stick to their pre-2003 strategies & use

the “traditional way” as a quality signal

A 30-year Chocolate War in Europe

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Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | tad.contact@oecd.org

  • In 2003 Codex Alimentarius revised its chocolate

standard to allow the use of up to 5% of vegetable fat – in line with EU legislation

Post script: international chocolate spillovers

Like to taste more? See: Swinnen and Squicciarini (Eds.), 2015, The Economics of Chocolate , Oxford University Press

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Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | tad.contact@oecd.org

  • we need a theory: understand which IRC mechanisms

work and when

  • different regulatory approaches lead to alternative

distributions of costs and benefits for consumers, producers and the government

  • understanding and dealing with distributional effects is

key to constructive IRC solutions

  • we need observations: existing IRC mechanisms
  • inherently sector/issue specific
  • we know more about trade effects of lack of IRC than

about benefits of IRC

The way forward

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Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | tad.contact@oecd.org

  • We need practical conclusions: a tool to guide

negotiators and regulators through the options available

  • Progress can be made on two fronts:
  • Instruments to reduce trade costs related to existing ‘stock’
  • f regulations and NTMs
  • some form of ‘mutual equivalence’, transparency

provisions, international standards etc

  • Innovative solutions to better design future regulations
  • agreements on process for co-designing regulations
  • Extended GRP?
  • Joint bodies – but which mandate would they have?

Which participation?

The way forward - 2

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Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | tad.contact@oecd.org

Access all of the information from the Trade & Agriculture Directorate at: www.oecd.org/tad You can reach us via e-mail by sending your message to the following address: tad.contact@oecd.org We invite you to connect with us on Twitter by following: @OECDagriculture

We look forward to hearing from you!

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