Complying with international safety standards can be expensive, especially when starting from scratch. However, once a producer has invested in meeting standards for one market, his or her marginal compliance costs decrease as the size of the market increases. These economies of scale could drive better safety standards in emerging economies (Henson and Jaffee, 2008; Horton and Wright, 2008). International trade negotiations and agreements such as the World Trade Organization (WTO) Agreements on Application of Sanitary and Phytosanitary Measures (SPS) and the Technical Barriers to Trade (TBT) promote harmonization and encourage the use of international, science-based food and drug standards.1,2 Developing countries can obtain guidance on compliance from Codex, the World Organization for Animal Health, the World Health Organization (WHO), and other international organizations.
Ideally, low- and middle-income countries would use international standards in their own regulatory systems. This would protect health in places where foodborne disease and substandard drugs kill many. It would also promote the competitiveness of exports from low- and middle-income countries in hard-currency markets (Henson, 2003; Maertens and Swinnen, 2009; World Bank, 2005). Failure to comply with food and drug safety standards can lead to product border detentions, import bans, and contractual penalties. The costs of failing to meet standards are substantial, especially for producers in low- and middle-income countries (Henson, 2003). Therefore, even developing countries with little public health infrastructure have reason to invest in oversight of food and drug exports.
The prospect of increased trade can motivate developing countries to invest in safety standards and regulatory oversight. Demonstrated ability to adhere to standards can improve their ability to export to tightly regulated markets (Maertens and Swinnen, 2009). These improvements in turn encourage foreign direct investment in local food and drug processing, exporting, and retailing (Henson and Jaffee, 2008). This arrangement can have spillover benefits for local populations: they can count on safe food and medicine, and their economies thrive (Unnevehr et al., 2003). Investors and multinational companies spread the use of high standards in developing countries to reduce transaction costs in regional distribution and supply chains, and to harmonize production and processing
1 Agreement on the Application of Sanitary and Phytosanitary Measures, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1B, THE LEGAL TEXTS: THE RESULTS OF THE URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS 121 (1999), 1867 U.N.T.S. 493 (1994), art. 2, 4
2 Agreement on Technical Barriers to Trade, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1B, THE LEGAL TEXTS: THE RESULTS OF THE URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS 59 (1999), 1868 U.N.T.S. 120 (1994), art. 2.4.