WORLD TRADE  
ORGANIZATION  G/SPS/GEN/763 
27 February 2007 
 (07-0828) 
Committee on Sanitary a nd Phytosanitary Measures Original:   English 
  
 
  
PRIVATE VOLUNTARY STANDARDS AND DEVELOPING COUNTRY  
MARKET ACCESS:  PRELIMINARY RESULTS 
Linda Fulponi
1, Senior Economist, Directorate for Trade and Agriculture, OECD, Paris. 
 
Communication from OECD  
 
 
 The following communication, received on 23 Fe bruary 2007, is being circulated at the 
request of the OECD. 
 
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Introduction 
 1. Access to OECD markets remains one of the leading demands of developing countries in the 
negotiations for agricultural trade liberalization.  While tariffs can be important for market access, 
attention is now focussed on possible effects of stan dards on trade, in particular those set by private 
firms.  Products must now meet not only the importing country regulations, but also satisfy 
requirements of private voluntary standards sch emes (PVS), which are often more complex and 
stringent than those of governments (OECD, 2006;  Henson and Reardon, 2005).  Although these 
private standards are voluntary and not required by la w, they are required for doing business, thus de 
facto mandatory (Henson and Northen, 1998;  Fulpon i 2006).  The increasing use of private standards 
has raised concerns about market  access for developing country producers, in particular small and 
medium producers, who may be capital constrained at  the farm level and operating in countries whose 
lack of adequate infrastructure and ser vices make compliance difficult and costly. 
2. A recent OECD study identified three key de velopments in the food sector over the past 
decade:  (1) the move to voluntary management systems for the monitoring of product and process 
attributes;  (2) the emergence of coalitions of fi rms for setting private collective voluntary standards 
and (3) the increased use of global business to business (B2B) standards.  Moreover, these 
developments are taking place in a socio-economic a nd institutional setting that is characterized by 
the increased voice of civil societ y in the governance of the food system, and by the integration of 
food firms within world financial markets.  This  implies  continued pressure on firm financial 
performance and a permanent need to meet societal  expectations as well as the expanding regulatory 
configurations.  According to interviews with ma jor retailer firms reputation in terms of safety and 
quality as well as developments in th e legal and institutional frameworks for food safety, were seen as 
key factors motivating the development of priv ate standards schemes (Fulponi 2006; OECD 2006). 
                                                     
 
1 This paper is based on work carried out at the OECD, 2005-2006, but is under the sole responsibility 
of the author.  It does not express the vi ews of the OECD or its member countries. G/SPS/GEN/763 
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  3. Lead retailers are increasingly dominating the agro-food landscape in OECD countries and 
use specific PVS schemes  in sourcing fresh products ..  They can thus essentially decide what, how, 
who and when much of a specific produce is shipped to North countries and at what price (Nadvi and 
Waltring, 2003).  Given the expected evolution of PVS schemes, it is important to reconsider these 
developments for impacts on market access of developing country exports. 
4. To understand the possible impacts of private voluntary standards and developing country 
access to global value chains four case studies were  undertaken.  These  were based on interviews 
with producers and exporters of fruits and vege tables in: Chile, South Africa, Peru and Ghana 
regarding their experience in the application of  PVS for export markets.  The fruit and vegetable 
(F&V) sector was chosen because these are high- value products with favourable export growth 
prospects and allow developing countries to exploit their abundant resource, labour.  Moreover, trade 
in F&V has become increasing subject to private vol untary standards which appear to be increasing in 
scope and stringency. 
A. S
OURCING ALONG THE CHAIN  
5. Trade in the fresh produce sectors is increasingly managed by global buyers who are linked to 
major retail chains.2  Though these retailers only source a bout 25 per cent of their fruits and 
vegetables from the developing countries, off-seas on and tropical products, their imports are sizeable, 
thus providing a significant earnings opportunity for those developing countries who can comply with the standards (OECD, 2006).  These are not the on ly markets available for developing countries. 
6. Developing country producers are linked to reta ilers either directly or through exporters 
dealing with retailers or global buy ers/importers.  Exporters are res ponsible for ensuring that products 
meet quality, private standards’ requirements, vol umes and delivery schedules set by the buyer.  
While exporters may simply fulfil the task of a trad er, many are also closely involved either in their 
own production and/or via out-growers  who are generally small-scale ope rators.  Thus they often have 
the key role in integrating small and medium size producers into export markets.  Where small 
producers dominate production, such as in much of Africa and parts of Latin America, the exporter 
role is a combination of a farm manager, safety inspector and trader.  They often provide inputs, 
supervise or perform chemical applications, und ertake field level record-keeping, do necessary 
product testing, and ensure that all PVS requirement s are met.  In this hands-on management model 
they are the drivers behind the certification process for small and medium size producers.  
7. Even where small producers are able to produce to  quality standards, it is not clear they can 
retain their access to exporters given their size  it may be simply too costly, in terms of 
transactions/management costs, for exporters to d eal with many small producers.  The Kenya green 
bean experience is often cited as an example of th e results on small farmer access to markets due the 
rise in standards.
3 
                                                      
2 Procurement of fresh F&V has been consolidating with the rest of the fo od chain, centralized 
distribution centres have begun to serve chains over wide geographic areas. International trade in F&V is also 
handled by fewer agents as alliances between traders an d grower-shippers (integrators) across continents begin 
to emerge in part to counter-balance the market power of the retailers (Cook, 2003).  At the same time specialization is also emerging where a specialised se ller will provide year-round availabilities of products 
following strict criteria from quality , to food safety and traceability. 
3 Green bean production for UK markets began in the 1970s-80s with small farmers who delivered 
their production to local markets wh ere exporters purchased them.  As food safety standards rose and 
supermarkets gained a larger share of fresh prod uce sales, making quality and scheduling of quantities 
imperative, wholesale markets were no longer a reliable source for green beans of the quantity and quality desired.  Direct purchases through integrators/exporters increased in the 1990s, and the UK Foods safety Act of 
1990 spurred large retailers to develop written procedures laying out their requirements.  These were then  G/SPS/GEN/763 
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   B. WHICH PRIVATE STANDARDS ? 
8. All case studies found that the dominant private standards required at the farm level 
correspond to "Good Agricultural Practices" (GAP) schemes.  These also incorporate regulatory 
requirements, particularly where their app lication is intended to facilitate trade.  
9. EurepGap was the most frequently cited sta ndard demanded by buyers.  This supports the 
growing global reach of the standard  and its importance in sourcing by lead retail chains.  But not all 
retailers require it nor do all importe rs. Nonetheless its expansion is due to the large share of fruit and 
vegetable sales destined to the Eu ropean market, in particular th e United Kingdom and Netherlands in 
our sample. EurepGap standard was originally de veloped by the Euro-retailers fresh produce working 
group in order to harmonize minimum food safety standards.4,5  Though harmonization of 
requirements facilitates trade, the levels at which these are set can in the short run make compliance 
difficult and exclude some players.  Nonetheless wher e exports have several d estinations they must 
frequently comply with different standards simu ltaneously, due to differing regulatory frameworks 
and/or PVS.  This is costly in time and money.  Where some processing is undertaken by either exporter or producer, such as packaging, washing and cutting, firms must also comply with additional 
manufacturing standards. 
C. C
OSTS OF COMPLIANCE , AUDITS  AND CERTIFICATIONS  
10. To comply with PVS requirements, investment  in equipment and buildings for chemical 
storage, hygiene and temperature controlled facilities, are needed.  For farms that are able to benefit 
from economies of scale, these are simply requirements for doing business.  For small-scale growers where there are no economies of scale to be had, th e costs may be prohibitive for them to enter the 
chain. 
11. The most binding constraints to meeting the PVS are the upfront costs necessary to upgrade 
the farm itself to be compliant.  This can include buildings for chemical storage, toilets, changing 
facilities and dining rooms, as well as the upgrading of packing and washing facilities.  These costs 
will vary according to the standard adopted but also the initial conditions of the farm.  For instance, in 
Ghana, EurepGap compliance costs for a 15-20 acre pineapple farm were about US$ 400-500 but for 
large farms they are more substantial.  For ex ample, a 1000-acre pineapple exporter/producer has 
spent US$ 80,000 to be EurepGAP ready.  
12. Survey results indicate that once farms are co mpliant, the recurrent audit and certification 
costs of private standards were not excessive in re lation to sales.  For Chile, they amounted to one per 
cent or less of sales and in South Africa about four  per cent.  In Peru, these costs varied between four 
to 15 per cent of the farm gate price for mangoes, thus volumes will be a de terminant of profitability 
as a portion of these costs is fixed irregardless of size.   Even for Ghana, costs of audit and certification 
were relatively limited, US$ 50 for an eight ha fa rm with sales of US$ 20,000 and for a 400 ha farm 
with sales of US$ 1.2 million, costs amounted to US$ 12,500.  EurepGap  now provides for group certification and this reduces recurrent costs substantially.  
                                                                                                                                                                    
 
followed up with audits of products and farms.  The retailers also  began to use annual contracts which gave 
suppliers and farmers stability and incentives for inve stments to upgrade. Consequently, those small holders 
unable to meet new retailer requirements were no longer able to supply the United Kingdom and other similar demanding markets and were marginalised.  Only those that  could remain tightly integrated with large exporters 
through contracts remain linked to the lead retailer trade.( Jensen, 2004, Dolan and Humphrey, 2000) 
4 Other stakeholders in the chain now participate in the formulation of its requirements. 
5 To meet such double or triple certification proble m, Chile’s exporter association, ASOEX,  developed 
ChileGap, incorporating requirements of the US voluntary GAP and the EurepGap standard requirements. G/SPS/GEN/763 
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  13. Record keeping at the farm level has become complex because more and more information is 
being required by importers to satisfy retailers.  Traceability requirements down to the field/orchard 
level often with a chemical application history are often being required.  Though such is not required 
by regulations, some buyers may view it as a way to decrease risk and liability.   This has meant that 
many farms must have managers to undertake the de tailed record-keeping  and these increases costs.  
Small scale growers are generally assisted by export ers who do this for them and debit their account.  
With new ICT technologies almost everything can  be tracked and traced, but is it necessary?   
D. I
NFRASTRUCTURES  AND SERVICES  
14. The case studies all concurred on the importance of good infrastructure and services for the 
development of a competitive fresh produce export sector.  Telecommunications, energy supplies, 
roads, ports, rail and air systems with adequate co ld storage facilities must be reliable in order to 
deliver the product to the buyer, intermediary or final.  Where countries are inherently deficient in these, then meeting market requirements are frustrate d and access to foreign markets difficult.  This is 
particularly important for the high value fresh fruits and vegetables export sector which demands 
substantial coordination of production,  transport, storage and delivery. 
E. 
 CHALLENGES AND BENEFITS OF  PVS 
15. There are both benefits and challenges to the emergence of PVS as an instrument for 
governing the food chain.  Among the most difficult requirements or challenges cited by exporters  
were:  recordkeeping by producers/out-growers;  chem ical use verification;  management of different 
standards systems and their compliance;  certification, in particular for attesting to good manufacturing practices;  transforming the mindset of producers, particularly small and medium 
producers and meeting diverse country regulations. 
16. For producers the main constraints voiced in th e interviews were more  related to changes 
required at the producer level, for instance in ag ronomic practices.  These included:  meeting food 
quality  and safety standards, chemical use;  worker  hygiene;  harvest and post harvest operations and 
accessing the cold chain.  Both exporters and prod ucers found that requirements related to maximum 
residue levels (MRLs);  micro-biological contaminant prevention;  pesticide selection, application and 
post harvest testing;  record keeping and traceability  at the field level were frequently costly and 
difficult to satisfy.  For many of these requirements sk illed labour is needed and it is often costly due 
to its scarcity.  Investments require d in buildings and equipment:  chemical storage, hygiene facilities;  
as well as information on foreign market regulations  and private standards compliance, can exclude 
certain producers that are the small scale growers without access to finance and skilled labour. 
17. But there are also benefits from complying with PVS and these include:  (1) access to the 
global value chain, which is essential for commerc ial exports to developed countries, and the 
possibility to develop longer term trading relatio nships;  (2) improved efficiency in operations: 
reduced costs through better use of chemicals, or ganization of tasks, increased information on proper 
use and storage of pesticides to improve worker sa fety;  (3) increased information on proper use and 
storage of chemicals decreased ne gative effects and (4) improved work er safety through proper attire 
for chemical use as well as through changes in stor age procedures and separation of different tasks.  
F. 
 MEETING THE PRIVATE STANDARDS CHALLENGE  
18. Private standards are here to stay and large retailers with market power will enforce them 
along with other commercial requirements such as volu mes and flexible delivery schedules.  In this 
environment producers/exporters in developing countr ies will need to be able to adapt to the rising 
standards.  The largest and most able producers operating in countries with a good infrastructure,  G/SPS/GEN/763 
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   services and experienced industry associations will fa re quite well, even if there may be periodic 
adjustment costs.  These demands are just a business requirement. 
19. But for a very large segment of producers, that  is small scale growers, in many developing 
countries, these may be too costly and difficult to satis fy. Some of the constraints are internal to the 
farm/farmer such as lack of physical and human capital which can be relaxed through finance and 
education.  Some are external and relate to economy wide infrastructure and services, such as;  lack of 
reliable energy supplies, low quality  transport and telecommunications systems, lack of laboratories, lack of cold storage facilities and insufficient t echnical extension assistance.  As a consequence, 
unless this segment of producers are able to opera te around these constraints, often through producer 
associations, they may thus be excluded from market s linked to lead retailers in OECD countries.  
This does not mean being excluded from export markets in general.  
20. In all likelihood, PVS will continue to incr ease in scope and stringency overtime (OECD, 
2006).  Coupled with trends in global sourcing, can  small-scale growers be integrated and remain in 
the global supply chains over time? Given the su ms necessary to be certified under the PVS schemes 
and the management efforts required, some may ask  about development stra tegies postulated on small 
holder production of high-value F&V for export.  Some  suggest that there should be a greater push for 
trade between South-South countries, whose demands at present may be less stringent than those of the North.  Others suggest greater assistance in upgrading these producers to meet the standard and 
the new competitive economic environment.  
21. Though the sample is quite limited it provides in itial empirical work across different countries 
using a common framework.  These preliminary r esults suggests that: (1) compliance with PVS 
schemes are increasingly mandatory for accessing lead retailer supply chains;  (2) exporters are the 
key link between importers/buyers and producers as they are responsible for transmitting demand 
specifications to all producers and frequently also  for organizing, financing and overseeing production 
and certifications of small scale producers;  (3) in frastructures and services at the macro and sector 
level, such as transportation and telecommunications  systems, energy supplies and testing facilities, 
are indispensable for meeting commercial export de mands;  (4) small-holders have an increased risk 
to be excluded from lead retailer chains due to hum an and physical capital constraints in complying 
with PVS, and (5) government’s role is view ed in the higher income countries as one of 
accompanying the producer and export industri es through the provision of an appropriate 
infrastructure that enables industry to operate competitively.  
22. This first attempt to understand the impacts of PVS on developing country access was to fill 
the gap on understanding how these may operate thr ough the supply chain in developing countries.  
Further work will be carried out in this vein, throug h further work on Africa to be integrated into the 
programme of work on standards and trade and no n-tariff measures.  Such analysis needs to be 
empirical and to understand the specific and ge neral conditions of the countries involved.  
 
References 
 
Fulponi,L., (2006) "Private voluntary standards in the food system: the perspective of major food retailers in OECD countries",  Food Policy, 31:1 1-13.  Henson, S.J. , and J. Northen, (1998) "Economic De terminants of Food Safety Controls in the Supply 
Retailer Own-Branded Products in the UK", Agribusiness 14:2 113-126. 
 Henson, S.J. and T. Reardon (2005), "Private agri-f ood standards : Implications for food policy and 
the agri-food system" , Food Policy, 30:3 242-253.  G/SPS/GEN/763 
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  Nadvi,K., and F. Waltring, (2003) "Making Sens e of Global Standards" in H. Schmitz(ed) Local 
Enterprises in the Global Economy: Issues of Governance and Upgrading , Elgar: Cheltenham. 
 OECD, (2006) Private Standards and the Shaping of the Agro-Food system, Paris.  
OECD, (2006)Private Standard Schemes and Deve loping Country Access to Global Value Chains: 
challenges and opportunities emerging from four case studies.   
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