**Table 1. Costs of compliance with export food safety requirements in the Bangladeshi and** **<u>Nicaraguan shrimp processing sectors (US$ million):</u>**

|**Costs**|**Bangladesh**<br>**(1996-98)**|**Nicaragua**<br>**(1997-2002)**|
|---|---|---|
|Industry Facility Upgrading|17.55|0.33|
|Government|0.38|0.14|
|Training Programs|0.07|0.09|
|Total|18.01|0.56|
|Annual Maintenance of HACCP Program|2.43|0.29|
|ShrimpExportsDuringFocal Periods|775.00|92.60|
|AverageAnnualShrimpExports|225.00|23.20|
|Upgrade/Focal Year Export|2.3%|0.61%|
|Maintenance/Annual Exports|1.1%|1.26%|

Sources: Based on Cato and Lima dos Santos (1998) and Cato _et al_ (2003).

Many forms of technological and organizational change involve shifts in levels and structures of operating costs. There are at least two (related) reasons why the costs associated with these changes are deemed to be ‘controversial’ in relation to food safety and agricultural health standards. First, there is a perception that the needed actions are not justified and represent an unnecessary cost burden on (developing country) suppliers. This lack of justification might be because these requirements lack (or are perceived to lack) scientific basis or involve burdensome arrangements when simpler and less costly procedures might provide similar outcomes. Second, suppliers may obtain little or no benefit beyond continued market access, while the opportunity cost of the required investments, for example in terms of product development or expansion of capacity, can be considerable. In many cases this latter argument is difficult to sustain and may reflect a lack of appreciation of the (often intangible or indirect) benefits that can accrue from, for example, enhancement of food safety controls. Adoption of improved control systems can result in reduced product and raw material wastage, improved product-cost accounting and enhanced staff morale. Thus, changes in product and process technologies can generate substantial increases in efficiency, reducing production costs and promoting competitiveness.

The enhancement of food safety capacity can also have more dynamic and wide-ranging impacts on private sector suppliers. For example, the implementation of a HACCP system and gaining third-party certification can send positive signals to both existing and potential customers. Firms can use these signals as a mechanism to reposition themselves in the marketplace and/or access new markets. For example, Indian fish processing plants that have invested in sophisticated systems of hygiene control are making efforts to access higher-value markets for processed and semi-processed products. Conversely, the potential burden of compliance costs can induce strategic changes as a means to avoid investments, for example through attempts to access markets with lower food safety requirements. Likewise, this can occur where problems have been experienced complying with requirements in a particular market. For example Kenyan fish exporters, that historically have been highly dependent on European markets, have made attempts to diversify their exports to countries such as Australia, Japan, and United States.

In many cases the various expenditures related to standards compliance should not be considered deadweight costs, whether in the context of industrialized or developing countries. Some of the 14