UNIDO S TRADE CAPACITY-BUILDING PROGRAMME UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION

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1 UNIDO S TRADE CAPACITY-BUILDING PROGRAMME UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION

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3 UNIDO, a strategic partner for trade capacity-building UNIDO responded to the Doha Development Agenda by realigning its technical assistance work, strengthening strategic partnerships with other trade-related agencies World Trade Organization (WTO), International Trade Centre (ITC) and Food and Agriculture Organization (FAO) and initiating its new Trade Capacity-Building Programme (TCB). It has identified three key problem areas that require specialized assistance to enable the expansion and competitiveness of exports from developing countries: The lack of marketable products for exports; The lack of capacity to conform to international standards; The lack of information on rules of trade, markets and procedures to connect with export markets. UNIDO has abbreviated this concept as The 3 Cs that enables a country to Compete, Conform and Connect. The new UNIDO approach is focused on addressing specific and immediate problems facing developing countries in export trade. These often relate to the need to increase supply capacity and then overcome the increasing technical barriers to trade. This has led to a rapid increase in the demand for UNIDO services for trade capacity-building with the volume of project delivery growing from US$7.6 million in 2002 to US$64.6 in 2006 and still increasing. Products to market Develop competitive manufacturing capability Prove conformity with market requirements Connect to the market Compete Conform Connect... by upgrading supply capacities and standards infrastructures 1

4 SPS services are a necessity, not an option Global trade and the liberalization of markets, modern intensive agricultural practices, corporate outsourcing of food production and the import of food products from distant locations around the world have widened consumer choice and made food cheaper. While these have improved the quality of life, consumers are sometimes vulnerable in ways not experienced before: BSE mad cow disease, avian flu, foot and mouth disease and pet food contamination, to give a few examples. The case for Sanitary (human and animal safety) and Phytosanitary (plant safety) requirements is beyond debate. The Sanitary and Phytosanitary Agreement (SPS Agreement) is a part of the regulations in the Accords that established the WTO in The SPS Agreement marked an important development in multilateral trade rules by creating a consensus on agricultural trade issues relating to food-borne diseases and invasive pests. Compliance with SPS regulations is good for both importing and exporting countries. Contaminated food can maim or kill people, pets or livestock. The introduction of diseased or unwanted plant material can harm the environment. SPS regulations on imported products safeguard consumers in importing countries, while the compulsion on countries to improve the quality of exports improves their own local quality standards. Continuing research on food and plant safety and more sophisticated analytical techniques, have resulted in more regulation or modification of existing ones and stricter controls on imported products. Developing countries need to acquire the capability to conform to the increasing number of new regulations or even question the validity of proposed regulations they consider discriminatory. 2

5 SPS is intended to promote trade, not impede it The World Trade Organization SPS Agreement sought to safeguard the interests of importing countries without infringing on the legitimate right of other countries to trade with them. It recognizes the right of countries to safeguard the health of their people, animals and plant life from harmful imports, provided that this protection is based on scientific risk assessments. The intention is to promote trade, not to impede it. The WTO-SPS Agreement is based on five general principles: Harmonization encouraging adoption of measures that conform to international standards/guidelines/recommendations of international agencies. Equivalence recognizing different but equivalent measures to achieve the standards required. Non-discriminatory treating imports no differently from domestic products. Transparency notifying trading partners of changes in SPS measures, especially if they differ from international standards. Regionalization allowing imports from clean (disease free) areas of an affected country. As different importing countries have varying criteria for safety, the agreement did not call for uniform international standards. It recommends guidance by the Codex Alimentarius Commission (CODEX) for food safety, the International Plant Protection Convention (IPPC) for plants and the International Office of Epizootics (OIE) for animal health. The Agreement acknowledges that increasing regulation will be a trade barrier for ill-equipped developing countries. It specifically provides in Article 9 that Members agree to facilitate technical assistance to other Members, especially developing country Members. 3

6 Developing countries face new barriers to trade Increased demands in the European Union (EU), North America and Japan for fresh fruit, vegetables, cut flowers and exotic tropical fruits and plants created new export opportunities for developing countries and least developed countries (LDCs). New ventures require new learning. Exporting countries realized that import standards in developed countries were more demanding than in home markets. Regulations on imports have since multiplied and challenged developing countries to match up to importers expectations. Numerous private and voluntary standards have now become de facto mandatory standards. For example, Hazard Analysis and Critical Control Point (HACCP) procedures are now incorporated in the overall food safety management system as per ISO standards. Farm to Fork traceability is a new challenge for developing countries, which is becoming a key requirement for accessing global markets. It is a tool for risk management and consumer protection, facilitating information availability starting from the grower, processor, packer, and distributor all the way to the supermarket shelf. On the positive side, it also brings significant advantages when it becomes a de facto Supply-Chain Management system. Coupled with the increase of border inspections in the main importing regions such as the EU and North America, and new concerns about bio-terrorism, this situation has led to a continuing increase in the number of border rejections of agro-based products from developing countries. Projects to establish SPS measurement services and the attendant infrastructure are now an important feature of the Aid for Trade programmes. The need for technical assistance on SPS services to developing countries is increasingly recognized. Yet the level of aid made available for the development of SPS infrastructure, especially in LDCs which are most in need of this support, is wholly inadequate. 4

7 SPS services help developing countries expand trade Non-traditional agro-industrial products are an important export for many developing countries, and especially for LDCs. These exports have already overtaken the export of traditional tropical agricultural exports tea, coffee, cocoa, sugar, cotton, nuts and spices. The potential for expanding these exports exists and has been demonstrated by some countries. This also means that compliance with SPS regulations becomes a necessity. The EU, United States and Japan, the major markets for agro-industrial products from developing countries, have developed strict compliance regulations for agro-based imports and these become a barrier to trade for countries that cannot comply. The major causes for rejection are the presence of contaminants, as harmful chemicals or extraneous matter, or substandard packaging and labelling. It is estimated that rejections of agro-food exports in the EU and United States amounted to about US$3.8 billion in The costs of rejection are high. The exporter either has to bear the cost of taking back the product or face the cost of having the shipment destroyed. The products of a country that has had several rejections will thereafter be subjected to more frequent inspections and tighter scrutiny. Food contamination, in particular, attracts wide international media attention and gives an exporter and the exporting country an unfavourable image that will take time and effort to overcome. The creation of internationally accredited SPS services within a developing country is not only a cost-saving system that certifies products for export: it helps create a technical capability within the country that fosters higher standards of management, production and product innovation. 5

8 The standards conformity infrastructure SPS compliance requires national standards and conformity infrastructure. In helping countries to achieve this aim, UNIDO has strategic partnerships with international standards measurement and accreditation bodies International Organization for Standardization (ISO), International Laboratory Accreditation Cooperation (ILAC), International Accreditation Forum (IAF), International Bureau of Weights and Measures (BIPM), International Organization of Legal Metrology (OIML). The necessary infrastructure includes: A National Standards Institute to formulate, harmonize and disseminate standards, including international ISO/IEC standards and for market surveillance for consumer protection. National microbiology and chemical testing laboratories providing credible testing services. A National Metrology Institute to establish measurement units and provide measurement traceability and testing for enterprises to assure precision manufacture and quality. A National Certification capacity to certify enterprises for ISO 9001, ISO and ISO 22000, train internal auditors to carry out the audits and ensure international acceptance of its certification. A National Accreditation Board to accredit testing laboratories using ISO 17025, accredit certification bodies and inspection bodies and to have its own accreditation capabilities accepted internationally. Compliance services are costly and the investment costs are not recoverable in a few years. They are best established as a public good, considering both the cost and importance to the national economy. For smaller countries and LDCs, the establishment costs and the external technical expertise required will be a burden for the government without international aid. 6

9 Implementing SPS measures with UNIDO assistance UNIDO, in its role as the key United Nations aid agency operating in industry, uses a multifaceted approach to make SPS compliance measures effective in developing countries. This involves support for enterprises in the agro-industrial sector, assistance to governments and trade associations, as well as the development of the conformity assurance infrastructure. Most agro-industrial enterprises in developing countries, and especially in LDCs, are SMEs that require assistance to achieve international quality and safety standards. By developing SMEs into clusters, networks or by linking them with larger enterprises, they acquire some advantages of larger enterprises to become more competitive. UNIDO experts also work through industrial upgrading programmes with groups of selected enterprises for demonstration of the advantages of market research, product development, production process improvement, new technology transfer, packaging, quality, linking with international buyers, marketing promotions, etc. Skills training is an important aspect of this work. UNIDO works with governments and trade associations to help identify markets and develop market promotions. Developing SPS compliance infrastructure involves the following: Helping frame legislation and regulations for SPS compliance. Introducing the new ISO for food safety management. Creating a Competent Authority with enforcement power to monitor producers and players in the value chain to ensure conformity to standards. Developing traceability systems that enable authorities to trace problems in exported products through the value chain. Establishing or upgrading microbiological/chemical and metrological laboratories with international accreditation for SPS testing. Setting up support services with CODEX Alimentarius Committees and a SPS Enquiry Point. Setting up national or regional technical support centres for expert assistance to laboratories, government officials, producers and processors. 7

10 UNIDO supports farm to fork traceability in Egypt In January 2002, following a series of food scares in the 1990s such as BSE and dioxins, the EU enacted the Regulation (EC) No 178/2002 which also created the European Food Safety Authority (EFSA), tasked to assess and communicate on all risks associated with the food chain. The food regulation also introduced the concept of traceability to trace the production of food and feed through all phases of production, processing and distribution. The EU is Egypt s main trading partner and since the EU/Egypt Association Agreement of 2004, which seeks to establish a free trade area, Egypt s exports to the EU rose to 8.79 billion in 2006, of which 7 per cent constitutes agricultural exports. The country needed to create the institutions and procedures to meet these new safety standards for exports to the EU. UNIDO established the Egyptian Traceability Centre for Agro-Industrial Exports (ETRACE) and developed product-specific Traceability Manuals and trained over 600 national experts. The initial assistance was focussed on 11 priority horticultural products involving 47,000 growers and about 5 million workers and some 100 export product processing/packing houses in the Nile Delta, which received technical and financial assistance. The implementation of physical traceability involved over 250 field visits by experts and over 40 technical assessments that traced the progress of farm products through its value chain farm to fork. Assistance was given to the Plant Quarantine Department as well to the national pesticides database. ETRACE is now assisting also food manufacturers in the country. In a mock traceability alert done in cooperation with a supermarket in Europe on 6 May 2006, it was demonstrated that the source of rejected produce could be identified in the entire farm to fork value chain, within 24 hours of enabling a product recall. The successful ETRACE model also helps the national economy by minimizing the spread of contagious plant and animal diseases through early detection while tracking the food chain and it also improves the supply-chain management and efficiency. Project Duration ; Budget - US$3.15 million; Donor Government of Egypt, on a debt swap with Italy. 8

11 UNIDO assists fisheries in Pakistan to achieve EU compliance standards The EU Food and Veterinary Office inspected the fisheries industry in Pakistan in 2005 and found several areas of non-compliance with EU regulations on consumer health and safety. The bulk of Pakistan s fish exports, amounting to over US$150 million a year, have been traditionally to other countries in Asia. Higher value species of fish and shrimp are exported to the EU and United States. Efforts to gain access to the lucrative EU market were hampered by outdated production methods and by lack of compliance with EU SPS standards. The Marine Fisheries Department (MFD) of Pakistan s Ministry of Food, Agriculture and Livestock worked with UNIDO to overcome the problem. UNIDO provided expert advice to redesign laboratories, train staff and equip the laboratories with the most modern facilities. The laboratories and staff participated successfully in the required International Proficiency Testing and international accreditation was gained for 18 laboratories for product testing. UNIDO assisted in improving standards in the supply chain based on a detailed study of fish production. Over 1,100 persons were trained: fishermen, boat owners, fish auctioneers and government staff. Standard Operating Procedures were developed for the different players: upgrading the EU-mandated Competent Authorities, improving landing sites, renovating auction halls and, finally, introducing Hazard Analysis and Critical Control Point (HACCP) practices and IT-based traceability methods in 11 fish processing plants. Strictly enforcing compliance requirements, the Pakistan MFD suspended the export licences of these 11 fish processing plants in 2007 because of deficiencies that were noted and needed correction, despite an estimated loss of $20 million in sales to the EU during the year. Project duration ; Budget 2.5 million; Donor the European Union. 9

12 West Africa UEMOA member States improve and harmonize SPS service providers with UNIDO support UNIDO worked with the eight member countries of the Economic and Monetary Union of West Africa (UEMOA) Benin, Burkina Faso, Côte d Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo to strengthen their export competitiveness. All these countries, with the exception of Côte d Ivoire, are LDCs with limited export performance and infrastructure. The project was later extended to all 16 countries in West Africa. The key export or potential export products of the region are cotton, fish, fruits, vegetables, cashew nut, oil seeds and edible oils. Internationally accredited microbiological and chemical testing and SPS compliance systems were not available to local exporters. UNIDO assisted in: Establishing a subregional institutional structure for coordinating standardization, certification and quality promotion. Establishing modern national standardization institutes in each country. Creating a subregional accreditation body. Training 500 executives/scientists, 200 private consultants, 53 auditorevaluators and 50 auditors in the region for standards implementation. Adopting standards for 500 key products and giving easy access to international standards. Developing a database for the standards and technical regulations of the eight countries. Establishing a Quality Awards system for the best performing enterprises. Due to the paucity of resources in the UEMOA subregion, the countries agreed that regulations dealing with accreditation, certification, standardization and metrology should be harmonized and unified regional structures will be set up for this purpose. Project duration ; Budget 14 million; Donor the European Union. 10

13 UNIDO assists Côte d Ivoire to face new EC regulations Côte d Ivoire, the world s largest exporter of cocoa and the seventh largest exporter of coffee, faces a new hurdle with the prospect of stiffer regulations by the EC on ochratoxine A (OTA) contamination of imports of green and roasted coffee, cocoa and cocoa products. Ochratoxine A is a mycotoxin which is now considered to be a genotoxic human carcinogen by the EC Committee on Toxicity of Chemicals in Food, Consumer Products and the Environment. Curtailment of cocoa and coffee exports to the EU would seriously harm the economy of Côte d Ivoire. There are an estimated 650,000 cocoa farms in the country. Cocoa exports account for 40 per cent of the country s GDP and 60 per cent of its export revenue. The world chocolate industry draws 43 per cent of its cocoa from this country s production. Sustaining cocoa exports is vital for Côte d Ivoire and important for the rest of the world that loves chocolate. Ongoing UNIDO assistance uses a multifaceted approach to overcome the anticipated problems: Creating awareness in the country about OTA, how to identify it in the field and in the value chain, to determine current contamination levels to identify the contamination sources. Minimizing the contamination levels by developing better production and post-harvest practices; educating the players in the value chain by providing promotional material. Upgrading the existing testing laboratory to deal with OTA testing and obtain ISO accreditation. Training and enabling government representatives to negotiate with the EC and secure agreement on the maximum OTA levels that would be considered safe until such time as new EC regulations are drawn up. Project Duration ; Budget 1,652,725; Donor the European Union. 11

14 UNIDO s key interventions for ISO compliance The new ISO standard is designed by the ISO to harmonize the various existing food safety and management systems. The food industry has problems developing uniform safety systems that can help exporters since different importing countries, and major importers themselves, set their own criteria for import standards. It is hoped that the popularization of ISO will help to minimize these problems. The East and Central African countries of Burundi, Kenya, Rwanda, Uganda and the United Republic of Tanzania, and the South Asian Association for Regional Cooperation (SAARC) countries of Bangladesh, Bhutan, Maldives, Nepal, and Sri Lanka have asked UNIDO to help create awareness of the ISO standards. As a strategic partner of the ISO, UNIDO is responding to these requests. The initial certification process required the training of enterprise managers from pilot companies in each country in internal audit training by international consultants and their certification by internationally accredited certification bodies. All the selected pilot companies were later certified. UNIDO is also developing national capacity for implementing the IS standard in the food sector. This requires the training of consultants, trainers and auditors to create the national certification capacity for ISO Training is done by international experts within the countries or the subregion while selected personnel are also sent to EU countries to gain more experience. Together with the ISO, UNIDO has development a training package on ISO In July 2007 ISO published ISO 22005:2007 as the new ISO standard to facilitate traceability in food supply chains. To enable enterprises in developing countries to keep abreast of these developments, UNIDO is currently developing a Guidebook for Food Safety Management System ISO for Small and Medium Enterprises. 12

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16 Printed in Austria V November ,000 UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Trade Capacity-Building Branch Vienna International Centre, P.O. Box 300, 1400 Vienna, Austria Telephone: (+43-1) , Fax: (+43-1) Internet: