Food Safety Improvements Underway in China
Facing growing demand
abroad and at home for safer food, China is overhauling
its food system to meet international food safety
standards.
Linda
Calvin, Fred
Gale, Dinghuan
Hu, and Bryan
Lohmar
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Adverse
publicity about contaminated food exports
and growing domestic concerns have prompted
China to improve overall food safety. |
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Producing
safer food for export is expensive and
reduces China’s cost advantage. |
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Only
a small portion of Chinese production
for the domestic market meets the new
government
standards for safer food. |
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This
article is drawn from . . . |
China’s
Rising Fruit and Vegetable Exports Challenge
U.S. Industries, by Sophia Huang
and Fred Gale, FTS-320-01, USDA, Economic
Research Service, February 2006.
“A New Marketing Model: Supermarket
and Processing Companies and Farm Households,”
by Dinghuan Hu, Fred Gale, and Tom Reardon,
in Issues in Agricultural Economy,
No. 1, 2006 (Chinese language, published in
China). |
You
may also be interested in . . . |
“Produce,
Food Safety, and International Trade: Response
to U.S. Foodborne Illness Outbreaks Associated
with Imported Produce,” by Linda
Calvin, in International Trade and Food
Safety,
Jean Buzby (ed.), AER-828, USDA, Economic
Research Service, November 2003.
The ERS
Briefing Room on China. |
China emerged in the 1990s as
a low-cost exporter of food products such as vegetables,
apples, seafood, and poultry. But in recent years,
China’s exports slowed when shipments of vegetables,
poultry, and shrimp were rejected for failing to
meet stringent
standards in Japan, Europe, and other countries,
revealing a gap between Chinese and international
food safety standards. Problems with food contamination
within China have made food safety a top concern
of Chinese consumers as well, an issue reflected
in recent opinion polls and newspaper articles.
China is in the midst of a campaign
to overhaul its food system and improve safety standards.
Numerous challenges face both the export sector,
where food safety efforts are the most advanced,
and the domestic sector, where many food safety
initiatives are more recent. Problems with food
safety can influence trade flows, as evidenced by
China’s setbacks for some export products.
China must meet the food safety standards of the
developed countries to succeed in those markets.
The increased costs of achieving higher food standards
will dampen the growth of Chinese agricultural exports
if not offset by greater demand in the export market.
China’s efforts are an important case study
of a country’s striving to elevate standards
in its food and agriculture sector to international
food safety standards.
China Faces Challenges
in Providing Safer Food
Implementing a 21st-century food
safety system in China poses a challenge. It is
difficult to standardize and monitor production
practices in a sector composed of 200 million farm
households who typically have 1-2 acres of land
divided into 4-6 noncontiguous plots. Farmers have
only usage rights to their land, so they lack ownership
incentives to make costly investments.
Many of China’s food safety
problems can be traced back to the farm level. Farmers
rely on heavy use of chemicals to coax production
out of intensively cultivated soils and deal with
pest pressures, a practice that contributes to food
safety problems. China has one of the world’s
highest rates of chemical fertilizer use per hectare,
and Chinese farmers use many highly toxic pesticides,
including some that are banned in the United States.
Farm chemicals are sometimes mislabeled. The Chinese
government is tackling this problem by encouraging
farmers to buy agricultural chemicals only from
approved outlets. Some farmers have little understanding
of correct chemical use; for example, they may fail
to wait the prescribed number of days between the
last application of a pesticide and harvest, resulting
in excessive residues in the harvested product.
Antibiotics are widely used to control disease in
livestock, poultry, and aquaculture products. Industrialization
and lax environmental controls have also led to
concern about the potential for heavy metal contamination
of food products. Untreated human and animal waste
in fields and water raises the risk of
microbial contamination.
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China’s fragmented marketing
system also poses problems. Agricultural marketing
is dominated by millions of small traders handling
small volumes of product, often operating on a cash
basis, with no documentation. In modern marketing
systems, products are identified by lot and traced
through the system with a paper trail. This process
is easier in the United States than in China, since
growers and buyers are fewer in number and deal
in larger volumes. Vertical coordination and integration
between growers and buyers also makes it easier
to produce safe food and control it through the
marketing chain. Chinese exporters have tried various
approaches to gain greater vertical control over
production, and these
methods are now being promoted within the Chinese
domestic market.
Successful Export Industries
Achieve Safety Standards, but at a Cost
China has emerged as a major exporter
of agricultural products based primarily on its
low labor costs and openness to foreign investment.
Many of its exports are produced by companies with
investment from Japan, South Korea, Singapore, Taiwan,
and Europe. Most operations involve growing and
processing fruit, vegetables, livestock, fish, or
shrimp in coastal provinces with easy access to
ports.
The influx of foreign investment
has also brought foreign technology and attention
to food safety. The importance of Japan, in particular,
as an export market has compelled Chinese firms
exporting to that country to make major improvements
in food safety. Successful foreign firms operating
in China exert careful control over raw materials
to ensure that products meet the standards of the
export markets. Exporting companies have been even
more vigilant since 2002 when Chinese frozen spinach
in Japan was found to have high levels of a pesticide
and imports were banned temporarily (see “China’s Frozen Spinach Exports
to Japan Falter on Food Safety Problems”).
New Japanese rules for residues of agricultural
chemicals, feed additives, and veterinary drugs,
implemented in May 2006, will put further pressure
on Chinese exporters.
Firms have used two business models
to impose more control over production: the first
is a fully vertically integrated model in which
the company leases land and controls production
directly; the second is the use of production contracts
with growers that specify chemical use and production
methods. The leasing model ensures greater control
over production than the contract model, but it
also costs more and is limited by access to land.
Developing a production model that balances low
costs against the risk of a safety problem is challenging.
Exporting firms sometimes use both methods—growing
the crops that are most prone to excess pesticide
problems, such as leafy greens, on their leased
land and using
production contracts for other crops.
Leases are typically arranged
with village officials who serve as intermediaries
to aggregate land into a “production base”—an
area that may be as large as multiple villages and
hundreds of acres. Leasing land is surprisingly
expensive and involves difficult negotiations since
there is no formal market for land. Foreign companies
often pay rents comparable to those in developed
countries. Companies post technical experts onsite
to manage production and supervise workers. These
firms may test soil, water, and air for pollutants;
implement good agricultural practices (GAPs) to
reduce the risk of microbial contamination; and
use a type of Hazard Analysis and Critical Control
Point (HACCP) system to minimize risk in processing
plants. A firm selling to a wide range of countries
might face numerous standards; GAP requirements
as well as maximum residue limits (MRLs) for pesticides
vary from country to country. The exporting firm
may even purchase agricultural chemicals abroad
to ensure that they are genuine.
Production contracts are also
generally arranged by village officials who recruit
farmers. The contract typically specifies inputs,
production practices, price guidelines, and minimum
environmental standards for air, water, and soil.
Contractors must monitor farmers to ensure compliance.
With more experience, growers may need less monitoring,
and costs may go down. But the contracting model
does not burden the company with land and labor
expenses.
China’s Government
Begins To Tackle Food Safety
Awareness of food safety issues
in China has been heightened by both the rejection
of exports in overseas markets and a series of food
safety incidents in the domestic market. The Government
has responded by trying to build a food safety system
for exports that will establish China’s international
reputation for producing safe food. China has also
been raising domestic food safety standards and
implementing inspection and testing systems for
consumer products and agricultural commodities.
In 2005, officials announced plans to update a 1995
law covering consumer food products. In 2006, the
Chinese legislature adopted a law that establishes
a national framework for building a system that
ensures the safety and monitoring of agricultural
products. Local governments have also been active
in promoting safer food.
All land and packing/processing
facilities for exports must be registered with the
Chinese Government. Exporters must have laboratory
facilities to test for pesticide residues (although
the sophistication of the facilities varies with
the riskiness of the crop). Certain processed agricultural
exports—including canned food, some seafood,
meat, frozen vegetables, and fruit and vegetable
juices—must be produced using HACCP-type systems.
The Government provides basic guidelines on food
safety, but most firms must still hire food safety
experts to fine-tune their operations to meet the
demands of foreign buyers. Before export, the Government
tests products to ensure that they meet the standards
of the foreign country or contract.
Food safety for the domestic market
is regulated by several government entities. The
Ministries of Agriculture, Health, and Commerce;
the State Administration of Quality Supervision,
Inspection, and Quarantine; a newly established
Food and Drug Administration; and other agencies,
each with different and sometimes overlapping responsibilities,
contribute to food safety policies. The State Administration
of Quality Supervision, Inspection, and Quarantine
is responsible for oversight and food safety standards
for imports and exports.
The Ministry of Agriculture is
the lead agency promoting food safety at the farm
level. The most visible efforts are the promotion
of pollution-free (also translated as “no
harm” or “safe”) and green food
standards intended to guarantee that food products
are free of dangerous contaminants. The pollution-free
standard, introduced in 2002, requires that all
products comply with MRLs for agricultural chemicals.
The green food program was initiated in the 1990s
with an eye toward improving the safety and quality
of exports, although most green food is now sold
in the domestic market. The green food program is
slightly more stringent than the pollution-free
program.
Both programs have standards specifying
tolerances for harmful materials in soil, water,
and air as well as MRLs for pesticide residues.
Both also certify production base areas, and offer
trademarked symbols for use on consumer products.
Packaged products carry information on the firm,
providing a first step in a traceability system.
Compliance is enforced by regular testing of soil,
water, and air, and random testing of final products
for residues.
While production of safer food
is increasing, little of China’s food currently
meets green and pollution-free standards. In 2005,
about 6 percent of the volume of agricultural production
was pollution free and 1 percent was green.
Chinese food safety efforts at
the farm level are primarily concerned with chemical
residues; to date, less attention is paid to the
potential of microbial contamination. Statistics
from China’s Ministry of Health, however,
indicate that food poisonings and deaths from microbial
contamination exceed those from farm chemical exposure.
China is developing good agricultural practice guidelines,
ChinaGAPs, which will address minimizing the risk
of microbial contamination. Initially, these guidelines
are intended to aid exporters.
Government Plays a Strong
Role in Implementation
Chinese consumers now commonly
voice concerns about food safety, and various safety-related
labels appear on food products. However, the degree
of consumer understanding and confidence in food
safety labels is uncertain, as is consumers’
willingness to pay higher prices for these products.
Consumers in China are primarily concerned with
freshness, appearance, and taste.
The green and pollution-free standards
are implemented in a “top-down” process
by the Ministry of Agriculture and local agricultural
bureaus working with local officials, villages,
and agribusinesses. As in the business model used
by exporters, domestic enterprises contract with
farmers, using village officials as intermediaries.
Some domestic enterprises also control production
by leasing land. Some of the vertically integrated
enterprises are large, former state farms that have
been converted to private companies, while others
are newly established Chinese corporations.
The decision to produce green or
pollution-free food is usually made by local officials
or agribusiness enterprises rather than individual
farmers. It is not clear whether farmers find green
or pollution-free food more profitable. Farmers
reportedly earn price premiums of 20-30 percent
for pollution-free vegetables, but they may also
have to purchase more expensive chemicals and incur
costs to attain certification.
Safety Standards Influence
China’s Agricultural Trade
Foreign safety standards pose
an important challenge to China’s exports
of horticultural, meat, poultry, and aquatic products.
Exports of more vulnerable products come chiefly
from foreign-invested companies in coastal areas.
Widespread pollution, pest and disease pressures,
low domestic food safety standards, and the difficulty
of ensuring product safety throughout the marketing
chain may prevent export-oriented production from
expanding to inland provinces and domestic companies.
Chinese officials have resolved
to improve the quality and safety of food in China.
Initial efforts were aimed at export-oriented production,
which has traditionally had much higher standards
and often completely separate production and marketing
chains from products destined for the domestic market.
The gap between export and domestic standards is
vast although beginning to narrow, but China faces
stiff challenges in producing food to higher safety
standards and maintaining a credible inspection
and monitoring system. Building consumer confidence
in the safety of its food products will largely
determine the
competitiveness of China in both the world market
and its own domestic market.
China’s
Frozen Spinach Exports to Japan Falter on
Food Safety Problems |
In the early 1990s, Japanese
companies began investing heavily in vegetable
production in China for export to Japan. Exports
to Japan soared, and frozen spinach was gaining
ground rapidly. In late 2001 and 2002, private
tests organized by the Japanese National Federation
of Farmers’ Movements revealed that
Chinese frozen spinach showed residues of
the pesticide chlorpyrifos. At that time,
Japan did not have a maximum residue limit
(MRL) for this pesticide on frozen spinach,
so it adopted the MRL for fresh spinach. In
August 2002, the Japanese Government advised
firms to voluntarily stop importing Chinese
frozen spinach. This adverse publicity affected
imports of all frozen vegetables from China.
In February 2003, the market was briefly reopened
before new tests revealed continued problems
with chlorpyrifos.
The market was shut again in May 2003.
China worked out a protocol
to meet Japanese concerns and the market reopened
in July 2004. Chinese exports were initially
limited to 27 firms that the Chinese and Japanese
had both approved. Exporting to Japan is now
more expensive than it was before the problems
with chlorpyrifos. All firms are required
to use leased land and cannot use production
contracts, which are considered too risky
for spinach. Fresh spinach is also tested
for residues before harvest, as well as after
processing. Japan inspects every lot of Chinese
frozen spinach, which increases costs and
the chance of product deterioration. While
other frozen vegetable exports to Japan have
rebounded, the frozen spinach market has not
yet recovered. With heightened food safety
awareness, some Chinese products may no longer
be as profitable as others due to consumer
and importer reluctance to purchase products
associated
with past problems.
Japan’s new policy
on agricultural chemicals (including veterinary
drugs and feed additives) became effective
in May 2006. Japan had a negative MRL list,
but the new policy uses a positive MRL list.
With a negative list, Japan rejected any imports
with residues over the existing MRLs. If an
import had residues for which Japan did not
have an MRL for that commodity, a case-by-case
decision was made on whether it could be imported.
With a positive list (like the system used
in the United States), Japan rejects imported
commodities with residues exceeding the MRL
or the default tolerance of 0.01 parts per
million for those cases where a commodity
does not have an MRL for that chemical. In
2005, Japan had established MRLs for 288 agricultural
chemicals for about 130 commodities. The new
regulations have MRLs for 799 agricultural
chemicals and thousands of commodity/chemical
combinations. Japan now scrutinizes products
for more agricultural chemicals and testing
costs have increased substantially since the
introduction of the new policy.
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