Economic approaches to measuring the significance of food safety in international trade

International trade in food products has expanded rapidly in recent years. This paper presents economic approaches for analyzing the effects on trade in food products of the food safety requirements of governments and private buyers. Important economic incentives for companies to provide improved food safety arise from (1) public incentives such as ex ante requirements for sale of a product with sufficient quality and ex post penalties (liability) for sale of products with deficient quality, and (2) private incentives for producing quality such as internal performance goals (self-regulation) and the external (certification) requirements of buyers. The World Trade Organization’s Sanitary Phytosanitary Agreement facilitates scrutiny of the benefits and costs of country-level regulatory programs and encourages regulatory rapprochement on food safety issues. Economists can help guide risk management decisions by providing estimates of the benefits and costs of programs to improve food safety and by analyzing their effect on trade in food products.