Regulating Food Safety in China

Speakers:
Drew Thompson The Nixon Center
Paul Young Waters Corporation
Mike Taylor, George Washington University

By Linden J. Ellis

China is the largest exporter of food products in the world. According to WTO statistics, China's total food exports reached $53.3 billion in 2005, which is about 7 times the $7.5 billion it exported in 1980, with the United States as a major market. Regulation of food safety has long plagued China, because of weak monitoring capacity, strong local government protectionism of industries, and few consumer protection watchdogs. The growing safety problems with food exports—ranging from food bans by the European Union (EU) and Japan to the most recent melamine-tainted dog food scandal in the United States—are bringing global attention to these deficiencies and creating a unique opportunity for international partnerships to address them. At this China Environment Forum meeting on September 20, 2007, international food safety experts Paul Young (Waters Corporation), Mike Taylor (George Washington University), and Drew Thompson (Nixon Center) explored the current food safety challenges that China faces and regulatory lessons that its government shares with the EU, Japan, and the United States.

Consumer Concerns
As global trade in food has grown, so has consumer demand for food safety. For example, Paul Young highlighted recent surveys in Japan and the EU that reveal consumers are increasingly willing to pay higher prices to ensure the safety of their food. However, food safety is not just a concern of consumers, it is also important to governments and businesses to ensure the integrity of the agricultural export markets. This is a particular concern for the United States, which has historically enjoyed a favorable balance of trade with food products, but is now losing that edge as many emerging countries around the world—such as China and Mexico—are expanding their food export markets.

Food Safety Regulation Structures in EU and Japan
According to Paul Young, a successful food safety regulation structure must include the active collaboration of the government, food safety technology leaders, and the food industry. An effective food safety system must be comprehensive, for relying solely on testing imports is reactive and potentially expensive if done in isolation. Conversely, simply depending on a third party or exporting country to test is risky and requires monitoring to ensure tests are done well. Ideally, food safety regulations would be internationally harmonized; however, that has not yet happened. Among exporting countries it has long been considered that the EU has the most stringent legislation. However, recent Japanese legislation has matched, or even surpassed, that of the EU.

The European Union. Strengths that distinguish the EU's food regulatory system are: (1) the regulating body—the European Food Safety Authority—an independent, scientific point of reference for risk analysis ensuring that food safety regulations are based on science; (2) a comprehensive system for traceability of foods; (3) a rapid alert system for food and feed to disseminate information on risks within the European Community; and (4) a requirement that food imported from third countries are produced and tested with the same diligence as domestic produce.

The Japanese System. The strengths of the Japanese system are: (1) compliance to Japan's food safety standards is ensured through a very high level (>10 percent) of laboratory testing for imports; (2) The onus is placed on importers to prove the safety of their products by having them tested before import is allowed into Japan. One of the more demanding aspects of the Japanese food inspection regulations is the large list of substances that importers must test.

Both of these systems are successful, for a number of reasons. The Food and Veterinary Office of the EU Commission have the authority to inspect the facilities of importers and ensure traceability so that individual facilities can be checked for compliance. Besides certifying third country establishments to export certain foodstuffs, the inspections by the EU's Food and Veterinary Office also provide countries with recommendations to improve their testing of food exports. Whilst Japan does not maintain approved lists, Japan will dispatch government experts to exporting countries when problems are identified. Both Japan and the EU provide a public list of food safety violations; however, the Japanese list is only posted quarterly, rather than on a rolling basis like the EU. Both the EU and Japan are quick to require considerably more testing or completely ban products after multiple violations. Unlike Japan, the EU food regulatory system does not prescribe analytical techniques for testing. This is seen as a significant strength, which allows European laboratories to improve efficiency through the adoption of new technologies as they are introduced by the technology suppliers.

Need to Strengthen U.S. Food Safety Regulation
Michael Taylor began his remarks by noting that the recent problems with Chinese food exports could help push long overdue food safety reforms within the United States. A majority of food is imported into the United States and the recent instances of problems with food from China underscore the risk of relying on exporters to maintain food safety. The food safety system used today in the United States was last updated in 1938 and is based upon the principle of detecting problems at the port of entry. The U.S. Department of Agriculture is responsible for monitoring meat and poultry imports, and the U.S. Food and Drug Administration oversees all other food products. Neither agency has the capacity or mandate to prevent unsafe foods from being sent to the United States. Under this port of entry system the FDA inspects a mere 1 percent of food imports, but only 0.2 percent of the total undergoes laboratory analysis.

With a limited budget and staff the FDA in the mid-1990s began adopting the Hazard Analysis Critical Control Points (HACCP) system, which focuses on identifying and preventing hazards that could cause food-borne illnesses rather than relying on spot-checks of manufacturing processes and random sampling of products to ensure safety. Michael Taylor observed that HACCP is a promising system in that it is based on the principle of prevention. However, in terms of imports the burden falls on the importer to ensure that the products and their originating facilities comply with HACCP standards. To date Taylor feels HACCP has been implemented less than successfully, due in part to a lack of clear legal authority for FDA to make inspections.

Taylor believes that FDA's import oversight system requires a complete transformation because it lacks sufficient mandate for prevention, legal tools and resources. These challenges highlight a need for Congress to act. The President's Food Safety Working Group issued an initial framework report on September 10, 2007, which highlighted (without much detail) three organizing principles for the U.S. food safety system: (1) build prevention upstream; (2) intervene to address identified hazards; and (3) respond rapidly to contain problems. Michael Taylor emphasized that while the government has a key role to play in monitoring food safety, the private sector is the key to ensuring it in the United States—an argument that was echoed in the action plan for strengthening imported food safety that the Grocery Manufacturers Association issued on September 18, 2007.

The Challenge for China
The U.S. food safety system is highly dependent on voluntary industry participation, which is motivated by the need to ensure consumer confidence. Food is also kept safe by strong consumer safety laws, independent legal system, free media, and civil society organizations. China lacks many of these institutions, most notably a strong self-regulating private sector, due in great part to such industries being protected by local governments that own them. Thus, Chinese regulators must design their food safety system around China's unique political structure.

Chinese food exporters have gained market share mainly through low prices, but these gains could diminish if the quality of goods is constantly called into question. For example, this summer as Chinese officials stepped-up inspections and pressured food processors to upgrade facilities, exports of some products slowed (e.g., Chinese garlic exports to the United States fell 39 percent in July from a year earlier). There are several key challenges that China faces as it tries to ensure food safety for its exports and domestic markets. The first challenge is the structure of China's food system with 78 percent of food processors having less than 10 employees and most farms being 2 acres or less. The numerous small farms combined with a cash-based and very large and fragmented food production system make traceability, so essential to the Japanese and EU models, very difficult.

For centuries Chinese farmers have been intensely cultivating their small plots, leaving much of China's scarce arable land depleted. Nevertheless, for the past twenty years agricultural production has grown in China due to an extremely high use of fertilizers and pesticides on crops and drugs in animal husbandry. Thus, it is not surprising that Chinese agricultural products are fraught with many drug and fertilizer residues problems. Drew Thompson cited estimates that 40 percent of all pesticides in China are counterfeit, further compounding the problem of over-application with doubts surrounding authenticity and actual content.

The booming Chinese economy has also created food safety challenges. Rapid economic growth has enabled a massive expansion in highways and cell phone usage, which now connect the small farms with faraway markets, further confounding traceability of food products and additives.

China's rapid growth has created a growing wealth gap, mainly along urban and rural lines. The Chinese government has tried to help stimulate the economy in rural areas, most notably by canceling the agricultural tax and lowering other fees to encourage small business and entrepreneurship in poorer rural areas. The Chinese government thus faces a difficult situation when the need to protect consumers requires shutting down dangerous food processors and farms that employ the rural poor.

China's consumers lack a strong civil society and manufacturers do not have strong independent associations to address their collective interests in ensuring food safety. The government has further reduced incentives of the manufacturers to self regulate by restricting news media coverage of food safety stories that might cause panic or lack of faith in the government system.

Although China faces many challenges to ensuring the safety of its food supply, the government has set up a coordinating committee under Wu Yi to examine strategies for improving food safety. In recent months the government also has issued a five-year food and drug safety plan and a food safety white paper, as well as carried out campaigns to close unsafe food processors. Chinese food safety regulators are reaching out to international partners to discuss issues of mutual interest. The needs of both the United States and China to strengthen their food inspection and regulatory systems underscores the ample opportunity for collaboration between the governments and private sector companies.

Paul Young noted that China's prospects for improving its food safety regulation is not as dismal as it may appear today. Thailand had formidable food safety problems beginning in the 1990s culminating in 2002 with the EU mandating 100 percent testing on imported poultry and aquaculture products—the country's two biggest exports. Thailand's problems resembled those facing China now—a fragmented food producer system with many small farms and companies, in which sources of food products were difficult to trace. The solution is widely regarded as a salutary lesson in dealing with such issues. The Thai government, the food producing industry, and technology leaders worked intensely with EU regulators and international companies to fix the country's food production and regulatory systems. Paul Young maintained that such a rapid and effective response would not have been possible without the collaboration of the Thai government with willing partners in the Thai producers organizations working in partnership with technology solution providers, such as U.S.-based Waters Corporation, to build effective testing programs and production strategies.