The Economic Impacts of Harmonizing Organic Standards Internationally

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The Economic Impacts of Harmonizing Organic
Standards Internationally

• Erin N. Sawyer
• M.Sc. Candidate
• Dept. of Agricultural Economics
• August 30,2004

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The Questions

• How did the current system function and why was
  it inhibiting trade?
• What was being done to make trade more efficient?
• How do equivalency negotiations and harmonization
  affect global welfare?
• How do consumers view imported organic products?

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The Purpose

• The purpose of this research was to determine
  the welfare effects of harmonizing organic
  standards.
• In doing so, it became apparent that there was a
  need to know more about organic consumers and
  their demands.
• The results of this thesis should contribute to
  the development of the global organic industry.

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Thesis Evolvement

• After learning about the current organic systems
  that were in place it became necessary to develop
  a theoretical trade model to illustrate the
  welfare effects
• This model needed to be simulated empirically in
  order to clear up ambiguous results
• The model and simulation were based on a major
  assumption that consumers have a preference for
  home grown organics and that they would view
  imports as inferior

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Consumer Surveys

• Consumers were surveyed in the three countries to
  determine whether this assumption was correct
• A conjoint analysis was used as it allowed us to
  test preferences for specific standards
• These results were analyzed using the Tukey test,
  which allowed for cross-country comparisons for
  statistical significance

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Results

• Part I
• Harmonization is only beneficial if harmonization
  to the most lenient standard is chosen
• This is confirmed by Hansson (1990)
• Is this realistic?

• Part II
• Consumers in the three countries initially showed
  different preferences scores for the various
  standards
• These differences were not statistically
  significant, implying that consumers would not
  inhibit harmonization

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Implications of the Results

• Global
• Harmonization may not be inhibited by consumers
  preferences, but may by consumer perceptions
• Perhaps the standards of an international
  organization could be adopted
• While it appears to be feasible, it will be
  extremely difficult to harmonize standards due to
  the number of parties with vested interests

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Implications contd

• Canada
• Perhaps Canada should refocus its energies on
  adopting the standard of one of its trading
  partners
• This would allow for equivalency to be granted
  more rapidly as many countries are already in the
  process or nearing completion of negotiating
• If, in the future, our interest diverge from our
  partners, we can then develop a national standard

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Limitations

• Limited number of consumers interviewed
• Limited number of locations
• Some difficulty with conjoint analysis
• Limited data on supply and demand for organics,
  required a simulation based on hypothetical curves

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Conclusions

• Harmonization is a possibility for organic
  agriculture.
• Harmonization only appears to be beneficial in
  the case of production and processing methods if
  the most lenient standard is chosen.
• In the future, it would be interesting to
  analyze economic effects of harmonization in
  other similar situations.

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Thank you to everyone who assisted me with this
research!