Bio-based and Applied Economics 7(1): 87-98, 2018 ISSN 2280-6180 (print) © Firenze University Press ISSN 2280-6172 (online) www.fupress.com/bae DOI: 10.13128/BAE-24049 Short Communications Sanitary and phytosanitary measures in the context of the CPTPP agreement SOFÍA BOZA Faculty of Agricultural Sciences and Institute of International Studies, University of Chile, Santiago, Chile. Date of submission: 2017 16th, March; accepted 2018 15th, March Abstract. The Comprehensive and Progressive Agreement for Trans-Pacific Part- nership (CPTPP) is a notorious example of the proliferation of so-called mega trade agreements. The countries constituting its signatory parties include five hundred mil- lion inhabitants and almost fifteen percent of the global Gross Domestic Product. The objective of this paper is to analyze the role of sanitary and phytosanitary (SPS) provisions within the CPTPP regarding international food trade. Three sections are presented: (i) food production, imports and exports among CPTPP countries, (ii) the content of the SPS CPTPP chapter regarding the text of the WTO-SPS Agreement and (iii) concluding remarks. It stands out among the results that there are significant dif- ferences in agricultural production capabilities between CPTPP parties, which should be addressed in order to achieve the desired integration. Keywords. Mega trade agreements, agricultural trade, food safety, sanitary and phy- tosanitary measures, Trans Pacific Partnership. JEL codes. F13, F15, Q17. 1. Introduction The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPT- PP) is a notorious example of the proliferation of so-called mega trade agreements. It was signed as Trans Pacific Partnership Agreement (TPP) initially on February 2016 by 12 Pacific basin countries: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam, which altogether com- prise almost eight hundred million inhabitants and 40% of the global GDP. TPP partners had two years after signing to ratify the agreement. In January 2017, the president of the United States, Donald Trump, withdrew the country from the agreement on his first day in office. After a few months of impasse, the rest of the TPP members decided to go ahead without the United States, signing the new version of the agreement in March 2018. The *Corresponding author: sofiaboza@u.uchile.cl 88 Sofía Boza CPTPP will come into effect 60 days after at least six of the signatory countries have rati- fied it. One of the chapters in the new CPTPP that did not change at all from the TPP ver- sion is the chapter on Sanitary and Phytosanitary Measures (SPS). These technical, non- tariff measures, which aim to protect food safety as well as animal and plant health, have been characterized in recent decades by their increased visibility, with various effects on agricultural trade flows. The objective of this paper is to analyze the SPS provisions within the CPTPP, considering the already existing regulatory framework under the Agreement on Sanitary and Phytosanitary Measures of the World Trade Organization (WTO) and the agricultural sector profile of signatory countries. Our research represents a relevant contri- bution to the discussion on the possible implications of CPTPP for the agricultural sector, as the literature on the Trans Pacific Partnership has been focused so far on its repercus- sions in general terms (UNCTAD, 2016). 2. Agricultural production and trade among CPTPP members The CPTPP partners are quite diverse regarding size, contribution to GDP and pro- ductivity of their agricultural sector. Some countries, such as Mexico, Peru and Vietnam, have labor intensive agriculture with low productivity per worker. Australia, Canada and Japan, on the other hand, have low participation in agriculture in terms of total employ- ment but remarkable productivity. These differences are mainly due to technological development and the ability to add value to the products. In fact, in Peru and Vietnam, small-scale family farming and even subsistence agriculture are still common, but the fast economic growth of both economies and the lack of profitability of family farming are Table 1. CPTPP partners’ general data on agricultural production (2014). A us tr al ia Br un ei C an ad a C hi le Ja pa n M al ay si a M ex ic o N ew Z ea la nd Pe ru V ie tn am Total population (millions) 23.6 0.4 35.5 17.8 127 30.2 123.8 4.6 30.8 92.5 Rural population (millions) 2.4 0.1 6.8 1.8 8.8 7.6 26 0.6 6.7 62 Area harvested (millions ha) 36 0 66 4 12 100 61 1 11 49 Area equipped for irrigation (1000 ha) 2,550 1 870 1,110 2,469 380 6,500 722 2,580 4,600 Employment in agriculture (%) 3.3 - 2.4 10.3 3.7 12.6 13.4 6.6 25.8 47.4 Agricultural value added per worker (constant US$) 52,701 83,868 - 6,638 50,720 10,127 4,416 28,677 1,949 489 Food production value (2004- 06 millions US$) 25,035 50 27,181 8,424 17,730 14,311 35,142 10,334 9,145 27,498 Agriculture, value added (% GDP) 3 1 2 3 1 9 3 7 7 18 Source: Prepared by the author based on FAO (2015). 89Sanitary and phytosanitary measures in CPTPP agreement motivating land abandonment. In Vietnam, 56% of rural youth express a desire to migrate to big cities for work (The Ahn and Minh Chanh, 2015). The contribution of agricultural products to total trade also differs considerably among CPTPP partners. In some Asian economies such as Brunei, Japan and Singapore, the participation of the agricultural sector in exports is negligible (less than 2%). For New Zealand, however, it represents more than half of total exports. For most CPTPP partners, such as Australia, Chile, Malaysia, Peru and Vietnam, the contribution of agriculture to exports is ten to fifteen percent. Vietnam, in spite of the low agricultural productivity, is now the world’s leading coffee exporter. With respect to agricultural products as a percentage of total imports, the differences are not as significant among countries, with only a 10% gap between the minimum and the maximum. If we consider the size of each market, however, the situation changes. Global imports of agricultural products to Japan, Canada and Mexico alone constitute 58% of total CPTPP agricultural imports. With regard to intra CPTPP agricultural trade, the situation is even more dramatic. Canada, Japan and Mexico concentrate 72% of imports of agricultural products from CPTPP countries. 3. Analysis of the CPTPP SPS Chapter considering the WTO SPS Agreement The CPTPP Agreement declares that one of its objectives is to reinforce and build on the SPS Agreement (art. 7.2.b). From its overture, however, it shows some substantial dif- ferences with the WTO-SPS Agreement with regards to its approach to SPS issues. The CPTPP Agreement stresses the importance of preserving compatibility between SPS meas- ures and trade. In fact, it establishes within its objectives the protection of human, animal Figure 1. Contribution of agricultural and non-agricultural products to total exports (%, 2005-2015). Source: Prepared by the author based on WITS. 90 Sofía Boza and plant life or health, as the SPS Agreement does, but while facilitating and expanding trade (art. 7.2.a). The WTO-SPS Agreement merely states that SPS measures must not constitute a disguised restriction on international trade. Figure 2. Contribution of agricultural and non-agricultural products to total imports (%, 2005-2015). Source: Prepared by the author based on WITS. Figure 3. Destination markets of intra CPTPP agricultural exports (2014). Source: Prepared by the author based on WITS. 91Sanitary and phytosanitary measures in CPTPP agreement One of the strategies posed in the CPTPP Agreement to reduce the potential impacts of SPS in trade is to strengthen communication, consultation and cooperation between the Parties (art. 7.2.c). For this, as well as for the general supervision of the Parties’ implemen- tation of the provisions in the Chapter, the CPTPP Agreement establishes its own Com- mittee for SPS Measures. The main functions of this Committee are to: i) act as a forum for the Parties on SPS matters, ii) identify and develop cooperation projects on SPS within the Parties and iii) share issues and positions for the meetings at the WTO Committee on SPS Measures and at the three international standard-setting organizations recognized by the WTO-SPS Agreement, including Codex Alimentarius Commission, the World Organization for Animal Health and the International Plant Protection Convention. With regards to the third function, Suppan (2015) suggests that, despite these consultations being voluntary, it would be difficult for the related authorities to ignore them if the coun- try’s representatives want to give the impression that they are enhancing cooperation. Increased communication between CPTPP Parties also relies on transparency provi- sions. A particularity of the CPTPP Agreement is that it highlights the importance not only of sharing information between the Parties, but also with “interested persons”, giving both the opportunity to comment on their proposed sanitary and phytosanitary measures (art. 7.13.1). This suggests that the CPTPP Agreement seeks to facilitate the inclusion of Parties’ private sectors in the conception of SPS measures; which would be consistent with the large amount of interest and support that food industry representatives gave to TPP SPS Chapter negotiations in the US (Johnson, 2014). In fact, in the US, a high level of participation already exists among companies, public opinion and interest groups in the development of the country’s SPS measures (USTR, n.d.). Furthering the goal of a discussion of SPS measures beyond the institutional level, another addition to the provisions of the WTO-SPS Agreement is that CPTPP Parties shall make available to the public, by electronic means in an official journal or on a website, the proposed sanitary or phytosanitary measure (…) the legal basis for the measure, and the written comments or a summary of the written comments that the Party has received (art. 7.13.5). Electronic publication is also mandatory for the final version of the SPS. These requirements are also recommended by the WTO. In the 2008 document “Recommend- ed procedures for implementing the transparency obligations of the SPS Agreement” (G/ SPS/7/Rev.3) the WTO encourages the submission of an electronic version of the draft regulation along with the traditional notification format. The CPTPP goes further, making electronic communication mandatory and expanding its scope. Another particular provision of the transparency within the CPTPP SPS Chapter is that it enhances the communication between Parties beyond the notification of SPS meas- ures, through their competent authorities and contact points. The information that Parties exchange is related to: i) detected SPS risks of exports from the other Party’s territory, ii) relevant changes in the sanitary or phytosanitary situation in all or part of the exporting Party which may affect the existing trade, iii) research progress possibly impacting SPS regulation and iv) significant changes in the Party’s food safety and pest and disease man- agement policies, as well as related practices that have the potential to affect trade. The WTO SPS Agreement also enhances members’ communication through national Enquiry Points. However, the CPTPP focuses this communication on the triggers for the genera- tion of SPS measures, seeming to push for the CPTPP Parties to anticipate complex, pos- 92 Sofía Boza sible, forthcoming scenarios related to SPS regulation and procedures of the other Parties in order to adapt and avoid negative impacts on trade flows. In fact, the CPTPP Agreement gives relevance not only to the process through which measures are communicated, but also to their conception. Like the WTO-SPS Agree- ment, preference is given to adherence to international standards. However, when a Party decides to develop its own SPS measures, different from the international ones, the CPT- PP Agreement establishes that they must be based on documented and objective scientif- ic evidence (art. 7.9.2). The use of the adjectives “documented and objective” instead of “available”, as in the WTO-SPS Agreement, means that the precautionary principle (e.g., as in SPS Art. 5.7), by which the existence of a possible risk has to be considered, is under- mined (Labonté et al., 2016). Another particularity in the CPTPP Agreement on the topic of transparency is that Parties give to other Parties, but also interested persons, the possibility to comment on their risk analysis. This is another sign of the aim to facilitate the inclusion of interested groups in SPS measures development. The problem is that, given the technical complex- ity of risk analysis, it is possible that only resourceful counterparts and their operators or interested groups will be able to make informed comments. For the CPTPP Parties, this could amplify the current gap in regulatory performance on SPS that already exists between WTO developed and developing countries due to their different scientific capa- bilities (Boza and Muñoz, 2017). In this sense, the CPTPP SPS Chapter assumes that every Party, and in this case also their interested groups, had a similar infrastructure “for doing science”, which is not factual whatsoever (Strether, 2015). The approach that the CPTPP SPS Chapter adopts for the cooperation between Par- ties is quite different from the technical assistance and special and differential treatment provisions of the WTO-SPS Agreement, materialized, for example, in the Standards and Trade Development Facility. The CPTPP focuses on cooperation in terms of facilitating trade and exchanging information, but is not very specific on what comprises technical assistance. In fact, it establishes that the objective of cooperation in SPS is eliminating unnecessary obstacles to trade between the Parties (art. 7.15.2). An important means to facilitate trade is the recognition of equivalence of other Par- ties’ SPS measures. In this sense, the CPTPP Agreement goes further than the WTO-SPS Agreement (SPS-Art. 4), as it establishes that, beyond the specific measures, the Parties shall apply equivalence to a group of measures or on a systems-wide basis (art. 7.8.1). The recogni- tion of equivalence starts at the request of the exporting country, which is followed by an assessment carried out by the importing country. This evaluation has to be based on avail- able knowledge, information and relevant experience, as well as the regulatory competence of the exporting Party (art. 7.8.5). The last criterion, “regulatory competence”, can be especially challenging, as it is difficult to quantify, and can lead to different interpretations. A measure, group of measures or systems wide basis is considered equivalent when it achieves the same level of protection as the importing Party’s measure; or has the same effect in achieving the objective as the importing Party’s measure (art. 7.8.6). These requirements are more specific than those in the WTO-SPS Agreement, which considers a measure equivalent if it guaran- tees an “appropriate” sanitary or phytosanitary protection level for the importer. An additional way to facilitate trade is “regionalization”, a principle in the WTO-SPS Agreement and also explicitly recognized in the CPTPP SPS Chapter. The CPTPP pro- 93Sanitary and phytosanitary measures in CPTPP agreement cess declaring pest or disease-free areas, and areas of low pest or disease prevalence is very similar to the one specified for the equivalence assessment. It has to be requested by the exporting country, evaluated by the importing country and maintain a continuous exchange of information during the procedure. In this case the CPTPP Agreement is quite similar to the WTO-SPS Agreement and WTO-SPS Committee guidelines. As already mentioned, transparency is one of the principles that the CPTPP SPS Chapter tries to enhance the most. To that end, another novelty proposed in the CPTPP is the auditing of the competent authorities and inspection bodies by the other Parties. That procedure is not mentioned in the WTO SPS Agreement. The objective of audits is to determine an exporting Party’s ability to provide required assurances and meet the sani- tary and phytosanitary measures of the importing Party (art. 7.10.1). Before the audit starts, both the auditing and the audited Parties will discuss the objectives, scopes, requirements to be assessed, and the procedures to assess them. The audit process does not imply a moratorium on the establishment of new SPS measures. The results of the audit will be known by the audited Party, which can make com- ments that have to be considered by the auditing Party in the preparation of the final report of the conclusions of the process. Meanwhile, the information generated during the auditing procedures will not be released to the general public. The costs of the audit will be borne by the auditing Party, unless both Parties decide otherwise. The CPTPP Agreement allows the auditing Party to take decisions or actions consid- ering the results of the audits. However, those decisions have to be based on objective evi- dence and data that can be verified, taking into account the auditing Party’s knowledge of, relevant experience with, and confidence in, the audited Party (art. 7.10.6). It is important to consider that the generation of “objective evidence and data” requires an adequate level of technical capabilities that are specialized in SPS issues. As we have already mentioned, the costs of the process are assumed by the auditing Party. It is therefore reasonable to wonder whether this mechanism will be used much more frequently by CPTPP Parties with the lowest specialized human resource constraints. Additional interesting innovations in the CPTPP SPS Chapter are related to the pro- cedures for the inspection of imports. First, if required, Parties have to exchange complete information about the character, frequency and criteria of their inspections. The CPTPP Agreement establishes that Parties can adjust the frequency of inspections considering past experience, as well as “actions or discussions” under the agreement. According to the CPTPP Agreement, if a Party decides to refuse the import of a good from another Party, it has to notify the importer or its agent; the exporter; the manufacturer; or the exporting Party at the very least (art. 7.13.6). That notification has to be communicated no later than seven days after the date of the decision (art. 7.13.7) containing the reasons for the refusal, the legal basis and the situation of the rejected goods. One important thing to note is that, according to this provision, the Party refusing the shipment is not obligated to commu- nicate its decision to the Party from which it proceeds, but only to the producer or to the trader. Again, the CPTPP is encouraging the role of the private sector. It allows the affected party to request a review of the decision, providing any relevant information dur- ing the process. That review process has received some criticism that considers it to be a mechanism that allows a sort of “State-to-State” or “Business-to-State” dispute (Food and Water Watch, 2015). 94 Sofía Boza The CPTPP SPS Chapter also establishes parallel mechanisms to those under the WTO SPS Agreement. For example, the Cooperative Technical Consultations (CTC) can be used by a Party whenever there is an SPS matter that can potentially affect its trade and cannot be solved administrative or bilaterally. The CTC process is initiated when the concerned Party presents its request in writing and the responding Party acknowledges receipt. Both Parties have to meet within 30 days and attempt to resolve the matter within 180 days. The documents generated during the CTC remain confidential, unless the Par- ties agree otherwise. This concealment follows an aim of protecting Confidential Business Information, but neglects that the SPS objective, i.e. protection of public, animal and plant life and health, is of a collective nature (Suppan, 2015). When Parties are not able to arrive at a solution within the CTC, the concerned Party can use the CPTPP Dispute Settlement Procedure, one of the most significant novelties of the agreement. This dispute settlement will begin operating progressively: for disputes related to equivalence principle, audits or import checks the procedure will be available one year after the agreement comes into effect for the responding Party; for disputes relat- ed to science and risk analysis, two years later. There are specific provisions on equivalence and risk analysis that the CPTPP explic- itly excludes from the dispute settlement. In the first case, that Parties have to recognize the equivalence of an SPS when it has the same effect in achieving the objective as the importing Party’s measure (art. 7.8.6.b.). The second is the already mentioned article 7.9.2., according to which Parties have to assure that their SPS measures follow international standards, guidelines or recommendations or, if not, that they are based on documented and objective scientific evidence that is rationally related to the measures. These exceptions within the scope of disputes are not present in the WTO. The details of how the CPTPP Dispute Settlement will operate are described in article 28 of the agreement. One of the most interesting features is that the deadlines for each stage of the dispute process are specified and are quite constraining. For example, once the panel has been fully established, it has 150 days to deliver a preliminary report on the case and another additional 30 days to present the final report to the disputing parties. If these terms were followed and are not regarded as a hopeful declaration of intentions, they would be much shorter than what is common for the WTO Dispute Settlement. That seems to be one of the main motivations for the establishment of the CPTPP Dispute Settlement. In any case, the CPTPP allows for the concurrent use of both the WTO and CPTPP Dispute Settlements. Finally, indirectly related with future SPS disputes under the CPTPP is the inclusion of the “Trade of Products of Modern Biotechnology” in the National Treatment and Mar- ket Access for Goods Chapter. This means that any controversy between CPTPP Parties related to biotech food products, Genetically Modified Organisms (GMO’s) included, will be primarily approached via the CPTPP Dispute Settlement considering principles of mar- ket access, rather than those of sanitary or phytosanitary protection. This is a completely different scenario than the 2003 WTO dispute on the European Union moratorium on the import of biotech products. In that case, the panel decision and aspects of the procedure were exclusively based on the WTO-SPS Agreement. 95Sanitary and phytosanitary measures in CPTPP agreement 4. Concluding remarks The TPP Agreement is a paradigmatic example of a mega trade agreement given the high proportion of the world economy that is included. The economic weight and level of develop- ment of CPTPP partners is heterogeneous, however. If we focus on the agricultural sector, we can also see important differences in both production and trade patterns; for instance, the level of productivity, which is expected to be largely related to technical capabilities. The SPS-CPTPP chapter has a stated goal of higher integration between partners. However, all of the above differences can make achieving this difficult. Particularly, dis- similarities in technical capabilities must be taken into account, as they are essential in the context of SPS. Thus, although the chapter provides equal rights for all members, the power to properly exercise some of those rights seems very unequal. An important conse- quence of this is that the developed partners might override the rest. The TPP SPS chapter also encourages the participation of companies in the discussion related to partners’ SPS measures. Although this can be very positive because companies are directly related to compliance with SPS, those in the most developed economies might have higher technical and human capabilities. It is therefore strongly recommended to consider mechanisms for technical assistance in SPS issues among the countries in the CPTPP, which are not limited to information exchange only, but also balance capabilities to a greater extent. Acknowledgement Research for this paper was funded by the Swiss State Secretariat for Economic Affairs under the SECO/WTI Academic Cooperation Project, based at the World Trade Institute of the University of Bern, Switzerland. The author would like to express her gratitude to Dr. Christian Häberli from World Trade Institute for his valuable suggestions. References Boza, S. and Fernandez, F. (2016). World Trade Organization Members’ Participation in Mechanisms Under the Sanitary and Phytosanitary Agreement. International Journal of Trade and Global Markets 9(3): 212-227. Boza, S. and Muñoz, J. (2017). Factors Underlying Sanitary and Phytosanitary Regulation for Food and Agricultural Imports Notified by WTO Members. The Journal of Inter- national Trade & Economic Development 26(6): 712-723. FAO (2015). FAO statistical pocketbook. World Food and Agriculture. Rome, Italy: FAO. Food and Water Watch (2015). The TPP Attack on Commonsense Food Safety Standards. http://www.safsf.org/wp-content/uploads/2016/03/FWW-TPP-food-safety-analysis. pdf. Accessed 13 June 2016. Johnson, R. (2014). Sanitary and Phytosanitary (SPS) and Related Non-Tariff Barriers to Agricultural Trade. Washington DC: Congressional Research Services. Labonté, R., Schram, A. and Ruckert, A. (2016). The Trans-Pacific Partnership: Is It Every- thing We Feared for Health?. International Journal of Health Policy and Management 5(8): 487-496. 96 Sofía Boza Strether, L. (2015). TPP’s Orwellian Definition of “Science” in Its Sanitary and Phytosani- tary (SPS) Chapter. http://www.nakedcapitalism.com/2015/11/tpps-orwellian-defi- nition-of-science-in-its-sanitary-and-phytosanitary-sps-chapter.html. Accessed 22 June 2016. Suppan, S. (2015). The TPP SPS Chapter: Not a “Model for the Rest of the World”. Insti- tute for Agriculture and Trade Policy. The Ahn, D. and Minh Chanh, N. D. (2015). Family Farming and Farmland Policy in Vietnam: Current Situation and Perspective. Selected Paper prepared for presen- tation at the FFTC-MARDI International Seminar on Cultivating the Young Gen- eration of Farmers with Farmland Policy Implications, Serdang, Selangor, Malaysia, May 25-29. UNCTAD (2016). Exploring New Trade Frontiers: Viewing the Trans-Pacific Partnership Agreement through an Agriculture Lens. Geneve, Switzerland: UNCTAD. USTR. TPP made in America. Sanitary and Phytosanitary Measures. https://medium.com/ the-trans-pacific-partnership/sanitary-and-phytosanitary-measures-139878f69771#. rsm791exe. Accessed 21 June 2016. Vol 18, No 1 (2018) Table of Contents Article Book review Reseña de la monografía Economía y comercialización de los aceites de oliva. Factores y perspectivas para el liderazgo español del mercado global Samir Milli 183-186 Universitat Politècnica de València e-ISSN: 2174-7350 ISSN: 1578-0732 https://doi.org/10.4995/earn Assessing food retail competitors with a multi-criteria GIS-based method Norat Roig-Tierno, Amparo Baviera-Puig, Juan Buitrago-Vera, Carmen Escriba-Perez 5-22 The performance of Spanish wine exports in international markets Francesc J. Cervera Ferrer, Raúl Compés López 23-48 Impact of trade and international transport on environmental quality, a study in Latin American and Caribbean countries Christian Martín García 49-78 Choosing not to choose: A meta-analysis of status quo effects in environmental valuations using choice experiments Jesus Barreiro-Hurle, Maria Espinosa-Goded, Jose Miguel Martinez-Paz, Angel Perni 79-109 Product-country image and crises in the Spanish horticultural sector: Classification and impact on the market M. Mar Serrano-Arcos, Juan Carlos Pérez-Mesa, Raquel Sánchez-Fernández 111-133 Spatial analysis of agricultural land prices Baldomero Segura, Inmaculada Marqués Pérez 135-159 Is the place of purchase important in shaping consumers’ preferences towards olive oil? Héctor Corbeto-Fabón, Zein Kallas, José M. Gil 161-182