Securitate regională

Food and Health Safety: a Macro-policy Approach in the EU
 

IVANO DILEO
[University of Bari „Aldo Moro”]

FRANCESCO LOSURDO
[University of Bari „Aldo Moro”]

Abstract:
Food safety could be considered as a representative case of „market failure”. This would justify State regulatory intervention. Unfortunately, the lack of an organically policy framework is causing large loopholes specially in the quality control system which normally developed on the whole production process of value, including supply chain. The Common Agriculture Policy for 2014-2020 looks to be once again based on a partial and micro-economic approach while the growing interdependences between agriculture, industry and services are suggesting a different „macro-policy” method in theoretical, technical and political settings. An industrial macro-policy is more „holistic” than micro and sectoral one able to intervene on market in order to contribute to a stronger governance and control system of food safety and consumers choices.

Keywords: Food safety and quality; Market selection; EU Common Agriculture Policy; Industrial Policy

Framework and emerging issues

Food safety represents one of the most important target of the Common Agri­cultural Policy perspectives after 2013. However, its increased attention seems mainly instrumental to the new Cohesion Policy for the period 2014-2020¹.

The priority of food safety has been proposed, maybe for the first time, with Agenda 2000.

Since then, the EU has consistently rejected the idea that the different food safety could be the reason of the utility for providing detailed information about the different origin (source) of food in the EU. In fact, according to the criterion of the „Mutual Recognition”², all food products, being subject to the same rules and European control system, have to be safe, independently by the producing country.

On the other side, policies and public projects have been mainly built to provide direct and indirect subsidies to agricultural production. Although these aids are nowadays important, the threat of a „structural crisis” is emerging, supported by some producers who helpfully use this threat for getting rents and also by the same Member States for ensuring the consensus from electoral groups still very powerful. The result is that the big financial support by the EU slows down the target of efficiency imposed by the current economic context and international competition.

The spontaneous linkage between agriculture and territory requires a public intervention at territorial level in order to give new shape to the regulation. At the same time, it emphasizes the microeconomic size; in fact, if it’s need of to consider the local spaces (sub-national) and defining a range of policy not only by the national and European legislation but local authorities too, it’s also true that the extreme fragmentation of these policies reduces their impact, producing excessive regulation (and consequent transaction costs) as well as rents not ever detected.

In fact, the „territorialisation” represents a change of scale of public intervention which implies new tools and a change of rules in managing agriculture sector and rural development³. The territory as „space”⁴ of governance must suggest us that the „European security” is a complex target ranging from military field to civil one. So, food safety is considered important enough to be considered one of the steps of the strengthening process for the security and European integration system. In this frame, agricultural policy cannot be exclusive but has to place in the context of cross sectoral relations and between policies.

From this perspective, industrial policy seems to be able to assume an inclusive and „holistic”⁵ role which is not limited to health and safety. These last should be considered as targets of more complex policies which involve all the means, rules and actors (stakeholders) of related measures. Industrial policy also implies a redesign of the Common regulation system and the implementation of a global vision involving environmental issues and the use of diffuse best practices on a regional scale.

Therefore, the debate on industrial policy in terms of a macro-economic policy is not a simple political-economics engineering method⁶ but it also has to contribute to change approaches which are unable to put into question the concepts of State and market characterized by different connotations in a supra-national size and, at the same time, in a globalized economic system.

Food safety and market failure

From the economic perspective, food safety could be considered as a representative case of „market failure”⁷. The market does not constantly intervene as a regulatory mechanism because does not include the economic value of food safety in price formation. The market represents individual preferences, whilst food safety is a collective good not consistent with market capabilities; it’s also the place of price formation on the base of production costs and producer-consumer preferences; but preferences do not necessarily provide utility to food safety because it not perceived and considered among the most important consumer needs.

So, whenever we find difference between private and social objectives, negative externalities generated could justify public intervention in order to ensure a higher level of social utility⁸. This is the case of food safety which is also awareness of food quality and every no-food goods included in the supply chain. Inside this range of sectoral interdependencies, information asymmetry causes market to become inefficient; and, if this asymmetry is left to the only market regulation, would support individual preferences but not the collective ones⁹. That’s why food safety represents a cost transferred by producers to consumers and, therefore, perceived as a factor which erodes the competitive advantage. So, with more competitive prices, consumers would be induced to prefer not foods safe; on the contrary, through correct information, consumers wouldn’t consume them.

Nowadays, many governments have proposed policies which considered a new collective sensitiveness about food safety although preserving a strong micro economic approach. Basically, the qualitative evaluation of a product depends on consumer expectations and relationship between producer and consumer even if the threat of information asymmetry and the resulting adverse selection is imminent because of subjective choices; at the same time, search-evidence and experience-evidence characteristics become more and more important. In fact, quality is widely evaluated, filtered and weighted inside a sort of „grid consumer” preferences, whereby a consumer lists his priority choice¹⁰.

In this process, information plays an important role as well as the external sources such as media, knowledge exchange, collective image given by famous brands which become a guarantee of quality and food safety too. This is a set of very inconsistent elements that are largely arising from an extemporaneous learning process and, above all, strongly influenced by who may have an interest in doing so. This influences individual opinions that are determined by external events and collective behaviors¹¹.

So, the first step is to converting the basic features into objective criteria, observable and measurable. The need for the consumer to be protected cannot easily satisfied through the examination of the all price components (anyway, not known). So he has to rely on public authority control which is responsible for the health safety and, in general, for food control. However, every food product has to follow a sort of „legal” quality standard: first, the criterion of mutual recognition, conformity to the quantitative parameters of good composition, presence/absence of forbidden substances and harmful residues to human health.

New lifestyles and related different patterns of consumption, that are emerging within the global economy, induce an increasing purchasing power and new production technologies not always reliable. These lead the better informed consumer not to settle for a standardized food supply, but to seek quality (brand, origin, quality systems, environmental and biological protection, etc.). On the other side, these changes make the market less „reassuring” as a mechanism of price formation able to embedding goods quality. The consumer seeks to lend a different value to different kinds of quality¹², according to his tastes and preferences. So, he is willing to proportionally pay the goods, because he assumes that safety represents a basic requirement of food, although not always certified by the price. In fact, when the producer forms the price, takes into account other variables (internal cost, trade cost, price of competitors, etc.), which generally do not include safety, that is considered a collective preference and, therefore, non-discriminatory with regard to the price.

The consumer indications trigger an adequate supply which cannot be generic and self-referenced; opposite, it must be the topic of policies and not only of single and uncoordinated measures or spontaneous best practices (which characterize niche products).

Food and health safety: a macro-industrial approach?

The related policy shows preferences and collective expectations identifying the „common thread” between safety and food quality. The increasing demand for safety and quality standards has encouraged public intervention which, over the last few years and specially in the European area, operated through consistent regulations with consumers expectations. At the same time, it led market and firms also suggesting purchasing behaviors.

Therefore, the Public Authority defines the policy - i.e. the system of rules governing production and food consumption- for ensuring and protecting both suppliers and consumers who are the actors of that policy.

Nowadays, this system is characterized by a high level of complexity not only formed by a body of national laws, as in the past, but also formed by a multiple levels of governance: regional, national, supra-national¹³ and international (as the Agreement on Sanitary and Phytosanitary Measures – SPS – the WTO, Codex Alimentarius FAO–WHO). Anyway, the wider is the governance body of the territorial policy, the more heterogeneous become the actors. In this event, this policy has to become „macro-policy” but preserving territorial features and sectoral approach.

Such a policy could intervene for defining food safety standards and managing the related control system throughout the whole production-consumption chain (hygiene regulations, traceability of products, control systems, producers’ responsibility laws, etc.).

In an increasingly „open market”, safety and quality could represent common goods for consumers and a competitive advantage for firms only when they receive international recognition¹⁴.

In fact, if this goal has been achieved at the EU level, this is not true for the wider market.

For this reason the debate within important Institutions, such as WTO or the International Codex Alimentarius, assumes particular importance and shows real collective expectations on food quality protection (for example, the spread of the GMOs in the United States). These expectations represent sensitive targets, first of all for consumers, on the light of the present phase of globalization process, being international borders more uncertain due to the increasing amount of commercial exchanges.

So, a „multi-face” policy should impose a „train the trainers” system, whose main mission is the education, training and information of the consumers, because the continuous discussion created mistrust among consumers about food safety. Therefore, in order to catch up the awareness of consumers about their food choices, there would be need to overcome the gaps of the communication system between institutions and individuals.

Third, we have to consider the production system. It includes food production and marketing chain operating on the base of market principles and in order to fulfill the goals of efficiency and profitability. So, if safety is a conditio sine qua non of the production and marketing processes, quality represents a strategic choice for the firms to gain competitive advantage inside the market.

Therefore, if the safety is a set of standards rules established by the public institution, quality shifts the focus to producer/consumer and business relationships. This should be seen as the fulfillment of a basic principle of the market, like is the information, that is not only based on production price but also on other factors influencing it.

It’s clear that the market doesn’t perform this target; indeed the economic value of food safety should be embedded into price through the public intervention and, by this way, influencing consumers preferences. It’s also evident that the quality may not be considered as an „unicum”; so, for satisfying the demand, there’s need for a supply differentiation and new ways of introducing a food. As a consequence, it’s possible to identify a „trade quality”, defined by a set of tangible and intangible assets (including services embedded or added), which affects consumers needs, tastes and their willingness to pay¹⁵; and these qualities would be assigned to the market unless integrated by policy measures.

In addition, for each mix between food, related services, sales channels, price and, above all, consumption segment involved, there is also a „different” quality. A food, in fact, may be differentiated through imaging and packaging strategies that provide many others products and regulated by specific trade policies (advertising, channels, etc.), in order to strongly influence the different groups of consumers.

An integration between production chain and commodity chain claims for a macroeconomic policy, given that industrial compliance is becoming larger and dominant in the formation of the value chain. So, we need for a macro-policy that is more holistic than micro and sectoral one¹⁶. This allows to align market governance, which is a specific area of an industrial policy, within the frame of a macro-policy (also because, since a long time, it was considered with suspicion by both producers and public regulators).

Conclusions

The lack of a macro-policy approach to complementary issues, caused an aggressive food business that is characterized by large loopholes in the control system. In fact, the main actors of the production-marketing chain (that, paradoxically, are the most famous brand owners) prefer to adopt a own control system, having interest in the defense of their reputation; these controls normally involve the whole chain.

These producers pay for their measures about food safety and this clearly shows the willingness to pay for a policy that sets clear rules and standardized parameters control of the value chain; but this is not enough to set a reliable policy able to overcoming the different national regulations.

The Common Agriculture Policy, for the period 2014-2020, looks to be once again based on a partial and micro approach, while the growing interdependence between agriculture, industry and services are suggesting a completely different method in the theoretical, technical and political settings.

Basically, it seems to go towards micro and sectoral policies on the base of the historically widespread logic in Europe, that is oriented to support production and factors through financial aid more or less allocated on the base of the difference between the EU net contributors and recipients.

We think that this last approach is completely anachronistic, because within this frame the agricultural policy is independent from the industrial one, in turn both independent from research policy and fragmented at the „territorialized” level.

European dynamics, as well as the global trends, require a logic in which rules, tools and actors should be directed to a common vision and shared policy goals too. In fact, food safety is one of the fields in which we still strongly suffer for a sectoral approach, due to the lack of a macro-policy.

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IVANO DILEO – PhD in Economics and Demography, University of Bari „Aldo Moro” (IT), Department of Scienze Politiche.

FRANCESCO LOSURDO – Full Professor of Applied Economics, University of Bari „Aldo Moro” (IT), Department of Scienze Politiche.

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