Globalization of the U.S. Food Supply: Reconciling Product Safety Regulation with Free Trade
Hemphill, Thomas A., Business Economics
The pet food recall in the spring of 2007, its aftermath, and other reports of contaminated food imports have had an adverse affect on the American shopper's confidence in the safety of the nation's food supply. This paper argues that the responsibility for ensuring that imported food entering the United States is safe must be shared by the public and private sectors. The limited resources of public regulation need to be focused on high-risk, imported food products from countries that have weak export food safety regimes. Furthermore, public regulation must emphasize private sector incentives encouraging implementation of state-of-the-art food safety management programs.
Business Economics (2009) 44, 154-168
Keywords: globalization, food supply, regulation, trade, food safety
As a result of thousands of pet dogs and cats in the United States dying or becoming sick due to contaminated pet food, in March 2007, the U.S. Food and Drug Administration (FDA) announced the largest pet food recall in U.S. history [Economist.com 2007]. The pet food recall and its aftermath, along with other reports of contaminated food imports into the U.S. -including farm-raised catfish and eel from China [Becker 2008]--had an adverse affect on the American consumer's confidence in the safety of the food supply. (1) In a May 2007 survey of American consumers conducted by the Food Marketing Institute, an industry association consisting of 1,500 food retailers and wholesalers, consumer confidence in the safety of supermarket food dropped from 82 percent in 2006 to 66 percent in 2007, the lowest confidence level since 1989--when issues with pesticide contamination of apples and grapes were widely reported in the media [Food Marketing Institute 2007].
In 2006, the United States imported about S7.6 billion worth of food ingredients processed from plants and animals--up 73 percent from $4.4 billion in 2001. Furthermore, other food and drink imports rose from $38.3 billion to $63 billion, a 65 percent increase over the same time period [Pritchard 2007]. In August 2007, Collins  estimated the total volume of food imports into the United States at S70.5 billion, with a forecast of $75 billion for fiscal year 2008. According to the U.S. Department of Agriculture, Economic Research Service, U.S. imports now account for approximately 15 percent of the U.S. food supply by volume [U.S. Food and Drug Administration 2007b]. The growth in food imports into the United States is due to a combination of factors, including changes in the domestic food supply, American's diet preference, seasonal availability of foods, the exchange rate, tariff changes, and the strength of the U.S. economy [Jerardo 2003].
The reports of contaminated vegetables, meat, and seafood imports serves to illustrate a growing problem for the American consumer. For example, the FDA reported that, from July 2006 through June 2007, its inspectors prevented (for health or safety reasons) 1,901 shipments of food, pharmaceuticals, cosmetics, medical devices, and certain electronic equipment from China being sold in the United States. India and Mexico follow closely behind China, with 1,782 and 1,560 import shipments rejected by the FDA [Martin and Palmer 2007]. Other, smaller trading partners also have significant numbers of shipments rejected. It thus appears that food safety is a global issue.
The establishment of the World Trade Organization (WTO) in 1995 included the Agreement on the Application of Sanitary and Phytosanitary Measures (referred to hereafter as the "SPS Agreement"). This agreement addressed food safety; accelerated global efforts at expanding free trade in goods and services; and, in the ensuing years, called for significant reductions in tariff and nontariff barriers. This implies that, especially for developing countries that wish access to developed country markets in processed food products and ingredients, farmers and food processors must possess technical and managerial abilities to meet increasingly stringent food safety regulations and standards ("requirements") [Henson 2003]. …