Voluntary Standards in Developing Countries: The Potential of Voluntary Standards and Their Role in International Trade
Von Hagen, Oliver, International Trade Forum
The importance of voluntary standards has grown in recent years, contributing to higher growth rates in international trade, especially in agricultural products, than achieved in many more traditional markets. The advantages of complying with particular standards need to be carefully assessed to see whether significant gains are obtainable. The benefits that can be achieved through compliance may be extensive and justify the efforts required to obtain certification. Institutional support can deliver improved outcomes for producers and exporters by helping them to both understand the advantages of voluntary standards and meet these standards.
Voluntary standards (or 'private standards') are standards developed by non-governmental entities such as businesses, not-for-profit organizations or initiatives involving multiple stakeholders. Some of the better-known voluntary standards include Fairtrade, Organic, Rainforest Alliance and GlobalG.A.P. Contrary to governmental standards, which can be either mandatory or voluntary, private standards are voluntary by definition. As such, compliance to these standards is not legally required by national governments or multilateral regulations. Therefore, these standards fall outside the World Trade Organization framework.
Voluntary standards vary widely in their objectives and scope. Some standards address a single commodity while others apply to dozens of products. Standards also have various objectives, such as protecting social rights, ensuring a minimum price, conserving the environment, promoting good agricultural practices, regulating supply or ensuring food security.
Since the 1990s voluntary standards have become increasingly important in international trade and a considerable share of agricultural exports comply with them. Growth rates of markets associated with sustainability claims have doubled or tripled that of 'conventional' markets in many categories. For example, between 2002 and 2007, sales of certified organic products doubled and Fairtrade-labelled products, driven by bananas, flowers, sugar and coffee, increased sales by 38% over the period from 2003/04 to 2007/08. While the growth rates are high, these markets still represent only a small share of the total world trade in these goods. Nevertheless, according to the Codex Alimentarius Commission, company-specific labels accounted for 14% in 2000 and roughly 22% of total retail food sales at global scale in 2010.
Factors favouring voluntary standards are, among others, the emergence of a 'conscious consumer', who demands more product information, and the globalization of supply chains.
But how much do producers and exporters profit from participating in voluntary standards? Although results from impact assessment studies remain inconclusive and research lacks broadly comparable data, compliance to voluntary standards can potentially benefit producers and exporters in many ways. The implementation of certification requirements leads producers to improve management and monitoring systems, increase productivity, implement good farming practices, improve resource management and have a better access to credit. Access to credit is fundamental to pre-finance certification costs, investments in agricultural inputs and equipment. As small farmers faced difficulties in accessing credit, cooperatives started providing credit at affordable rates to their members using a percentage of the fair trade premium. But better access to credit might also be the result of an improved credit rating due to increased incomes and long-term contracts.
Compliance with voluntary standards might also facilitate stronger integration in global value chains providing opportunities to improve post-harvest processing, product quality and supply capacity.
While researchers and practitioners seem to agree that voluntary standards are a tool to improve livelihoods and foster export opportunities in developing countries, it is the producer's specific circumstances and the certification options at hand that largely determine whether certification to a voluntary standard is worthwhile. …