Recent food scares have increased public scrutiny of and debate about the effectiveness of America's food safety system. E. coli in ground beef and California spinach, salmonella in jars of peanut butter, and tainted pet food, ginger, and garlic from China are just some of the unsafe domestic and foreign products that have made it through the food safety system and onto dinner tables and the evening news. Not surprisingly, in January 2007, the U.S. Government Accountability Office identified America's food safety system as a high-risk area needing special oversight and reform.
Both Congress and the Administration are actively trying to do just that. Congress will consider a wide range of policy and regulatory reforms in the weeks ahead, in addition to a new action plan proposed by the President's Interagency Working Group on Import Safety.
With U.S. households and businesses expected to demand more and more food imports, most of the new ideas focus on ensuring that the system has the capacity to monitor and protect families from an influx of foreign food. Yet a review of past product recalls clearly demonstrates that policymakers need to be mindful that Americans are just as likely to be harmed by products made in the United States.
Congress and the Administration can best improve U.S. food safety by implementing reforms that follow an unbiased, science-based approach to food safety that allows market forces and competition to weed out unsafe producers. Injudicious regulations and restrictions that discriminate between food producers or erect unfounded, protectionist, non-tariff barriers to trade would do little to bolster U.S. food security, would likely violate international trade agreements, and would harm America's economic relations with developing countries.
Food Safety Today
Americans are shopping the world's grocers like never before, importing almost $75 billion of fresh fruit, vegetables, and other food products for direct consumption or further processing in 2006. Imports accounted for 80 percent of seafood and nearly 50 percent of all non-citrus fruits consumed domestically. International trade allows families to sample tastes from around the world while keeping food prices down through competition.
However, Americans do not rely on foreign producers to keep themselves well fed; most U.S. pantries are stocked mainly with products purchased from domestic producers. Food expenditures exceeded $1 trillion in 2006.
Most of this food--whether produced at home or imported from abroad--is perfectly safe. Market competition and consumer choice provide the incentives that drive producers to supply high-quality products in return for market share and profits. While markets are the best defense against tainted food, there is still some risk that unsafe products may reach America's kitchens--accidents can happen.
Thus, as a complement to the market, governments implement food standards, testing requirements, and inspection procedures in an attempt to reduce the risk of harm to zero. The U.S. government may be able to do more to catch the occasional tainted product by restricting and controlling the market with costly regulations, but only at great expense to consumers and companies. High food prices and less food will not bolster America's food security.
Instead, government should take a balanced approach to food safety by keeping markets free and limiting the scope and cost of government intervention to establishing minimum accepted quality standards and implementing science-based methods of detecting tainted domestic and foreign products before they reach U.S. consumers. Even though the focus of legislative reform is currently on import safety, domestic food sources should face comparable government scrutiny.
An Ad Hoc System. The federal food safety system has evolved on an ad hoc basis, typically in response to particular health threats. This has resulted in a fragmented and complex regulatory environment. Fifteen agencies implementing more than 30 laws and interagency directives collectively share the responsibility of keeping America's food safe. The Food Safety and Inspection Service (FSIS) in the U.S. Department of Agriculture (USDA) and the Food and Drug Administration (FDA) in the Department of Health and Human Services dominate the system. The FSIS manages the food safety system for all meat, poultry, and egg products, while the FDA is responsible for virtually all other food products.
The Customs and Border Protection (CBP) agency in the Department of Homeland Security also plays a role in the food safety system, although food safety is only a portion of its "twin goals" of anti-terrorism and trade facilitation. The CBP was established to regulate the flow of goods and people through 326 official ports of entry, and its field agents and data gathering via the National Targeting Center augment U.S. food inspection capacity. Through this center, the Automated Targeting System (ATS) filters cargo information received from exporters before shipments arrive and assesses the relative risks of incoming cargos before distributing that information to the correct inspection branches--or at least the ones with which it can communicate.
The ATS has become the heart of the risk-assessment component of the food safety system. Regrettably, while FDA computers can communicate with the ATS, FSIS computers remain out of the loop. Without real communication among authorized agencies, opportunities to leverage shared data and promote a more effective and efficient food safety process are lost.
Misallocated Resources. While the FSIS and FDA share the primary responsibility for food safety, each agency employs different inspection procedures, imparts various levels of regulatory burden on producers, and works within a different budget. Moreover, while the FSIS is responsible for roughly 20 percent of U.S. imports, which involve a relatively small number of domestic and international firms, it receives nearly 65 percent of the funding for food safety and has a larger staff when on-site audit teams are taken into consideration.
The FDA, which is responsible for the remaining 80 percent of imported food, receives only around 25 percent of federal food safety funding. This misallocation of resources makes the FDA's job far more difficult. Misplaced funding and understaffing underlie many (but not all) of the procedural problems confronting the FDA and U.S. food safety system.
Two Food Safety Systems. The U.S. food safety regulation, monitoring, and enforcement process is both complex and nontransparent. Food safety regulations for imports vary by product and country of origin, and the procedures used to implement the regulations vary by agency. Comparing FSIS operations with FDA operations illuminates some of the weaknesses that undermine effective oversight of U.S. food safety and demonstrates that procedural and structural factors influence the system's performance as much as funding does.
The FSIS System. The FSIS determines import eligibility based on the general equivalence of the foreign country's regulations with U.S. standards and on satisfactory on-site audits conducted by the FSIS. An on-site audit team evaluates the systemic regulatory procedures in a country, but it does not inspect food or certify individual firms. Instead, individual firms apply to their own government for certification, thus placing the burden of responsibility and oversight directly on the foreign government.
This approach limits the scope of the agency's portfolio but restricts market access to just 34 countries deemed to have equivalent standards. Restraining imports certainly keeps the agency from being spread too thin, but product prices are higher and domestic products are no safer as a result.
Once imports reach the U.S., the CBP compares shipping information that it received in advancefrom exporters with the cargo that arrives. In addition to the shipper's name and address, the documentation must provide more specific information, such as the grower and the product code, in accordance with the Bioterrorism Act of 2002. The USDA's Animal and Plant Health Inspection Service assesses animal health and public health requirements.
Then the FSIS takes over. Seventy-four import inspectors stationed at 33 major ports inspect cargo at roughly 135 import inspection centers. Inspectors enter shipment data into an Automated Import Information System (AIIS), a computer database that facilitates record keeping and coordination among ports.
Of the products under FSIS control, 100 percent must be visually inspected for certification documents, proper labeling, and overall condition. The AIIS generates a random sampling of cargo for further inspection, ensuring that testing spans a wide range of products regardless of volume or origin. Cargo shipments that make the in-depth inspection list are then subjected to further testing, including laboratory analyses for microbiological contamination, chemical residues, food chemistry, and species identification. Products that fail to meet U.S. standards are refused entry into the U.S. market.
The FDA System. In contrast to the restrictive FSIS process, the FDA system is more open but far less transparent. Import requirements are established individually on a firm-by-firm basis rather than through a cooperative process with the exporting country. The full burden of determining company eligibility falls squarely on the FDA and the particular company.
Rather than acknowledge some value in foreign standards that could limit the number of firms that the FDA would need to evaluate, the agency looks at every firm. For example, China's Inspection and Quarantine Agency has approved only about 12,700 of the country's 450,000 food producers to produce for export. However, rather than use China's assessment to set a more manageable foundation from which to start, the FDA has instead decided to try to certify all 450,000 firms. In all, hundreds of thousands of firms from 150 different countries interested in sending food products to the U.S. market must certify with the FDA that their products comply with U.S. standards--an impossible task for even the best-funded agency.
While this approach may give the impression that the FDA is closely monitoring food safety standards, in reality, the understaffed, underfunded FDA is largely overwhelmed by the sheer number of both domestic and foreign firms falling under its purview. In an attempt to cope, the FDA targets "high-risk" imports and countries and relies on an "import alert" list that tracks firms with repeated safety offenses. This approach to keeping food safe is one of the few available to the resource-poor agency, but the opportunity for tainted food to slip through the system remains. Even "low-risk" products can be contaminated, and any producer can cut corners on safety procedures, whether that producer is in China, France, or the U.S.
Additionally, FDA port inspections are random and far less frequent than inspections under the FSIS process: The FDA inspects only 1 percent of the imported food that it regulates. In 2002, Congress granted the FDA the authority to commission other agencies to conduct import inspections in its absence. As of September 2007, the FDA had commissioned more than 9,900 CBP officials to fill this role. In practice, CBP has become the default inspector at many ports of entry because FDA field inspectors are stationed at only 90 of more than 300 ports. While some ports lack appropriate inspections staff, 18 are staffed by both the FSIS and the FDA. In a food safety system in which resources are stretched thin, such redundancies only further tax the system.
Recalls. If an unsafe product makes it through the system unnoticed, then companies are encouraged to recall the tainted product voluntarily. Neither the FSIS nor the FDA has the authority to issue mandatory recalls, with the exception of the FDA's power to announce a mandatory recall for unsafe baby formula. Yet in practice, companies move quickly and voluntarily to remove unhealthy products. In a competitive, open market, companies cannot afford to lose consumer confidence or the accompanying profits. The more effectively markets are allowed to work, the better markets will weed out harmful products.
Government Proposals for Fixing the System
Poor interagency coordination and communication, insufficient resources, and complex, nontransparent rules and processes have combined to threaten the food safety system--and weaken consumer confidence--to the point that even domestic industry is adding its voice to the call for more effective regulation and oversight. Domestic food processors and retailers are looking to federal oversight to streamline and standardize firm-specific regulations for both domestic and foreign producers. Simplifying and clearly publicizing food safety standards would enable all firms to spend less on compliance and would reduce importers' uncertainty over the safety of the foreign products on their shelves.
Industry pressure, coupled with the Bush Administration's and Congress's intent to strengthen the food safety system, makes some degree of reform seem inevitable. In an executive order on July 18, 2007, President George W. Bush ordered an Interagency Working Group on Import Safety to examine the issues and propose a comprehensive strategy for bolstering the food safety system. The Import Safety Action Plan was released on November 6. The plan shares many of the ideas outlined in myriad congressional proposals for reform, especially with regard to shifting the process toward a more preventative approach to food import safety that guards against harmful products before they even reach the border.
- Legislators are considering options for reform that include:
- Implementing a complete structural overhaul of the system to form a unified agency to oversee food safety,
- Imposing import fees to fund increased FDA inspections,
- Requiring countries and/or foreign firms to be certified before exporting to the U.S.,
- Restricting the number of ports eligible to receive imports,
- Banning imports from any foreign company that is unwilling to give U.S. inspectors access to facilities,
- Expanding product safety research and developing more rigorous scientific testing protocols,
- Granting the authority to order mandatory recalls of tainted products,
- Improving communication and data sharing among agencies,
- Increasing penalties for violations of food safety regulations, and
- Tracing products through the production and import process.
While some of these proposals have merit, some clearly cross the line between reducing the threat of unsafe food products and simply erecting protectionist barriers to trade. Moreover, given America's history of food contamination, a focus on foreign producers would be misguided. In 2007, the FDA issued more than 310 recalls and announcements, of which more than 260 were for domestic products and roughly 50 were for foreign goods. The USDA has issued 38 recalls, all of which involved domestic meat products. Clearly, limiting food imports will not solve America's overall food safety concerns but would instead create new obstacles to ensuring U.S. food security.
Discriminating between foreign and American firms or among America's trade partners could result in violations of commitments and rules underpinning freer trade through the World Trade Organization and bilateral trade agreements. Countries might respond to U.S. protectionism by imposing retaliatory fees and import restraints on U.S. goods, harming the U.S. food industry and agriculture sector.
Even if great care is taken to ensure equal treatment of domestic and foreign firms under any new rules and procedures, domestic producers would not face the costly import fees or restrictions on port access that would confront foreign firms. In response, foreign firms would likely pass the higher costs of exporting to the U.S. market on to U.S. food processors, retailers and, ultimately, consumers. U.S. retailers would be forced to choose between selling fewer, more expensive imports and selling substitute domestic goods that appear to be competitive because of import barriers.
The Import Safety Action Plan
The President's preventative approach to food safety blends the current, unworkable FDA practice of picking and choosing between "high-risk" and "low-risk" countries and firms with the FSIS tactic of imposing trade restrictions on sources from countries without U.S.-style food regulations and standards. Such a system may seem appealing; however, current practice clearly demonstrates how difficult it is for agencies to identify "high-risk" companies in a vast, ever-changing economic landscape, and market restrictions only add to the cost of food without any guarantee of improved safety.
Producers of "high-risk" goods from specific countries would face mandatory certification. Under agreements with these specific countries, firms would have to demonstrate that their products fully comply with FDA regulations before they could export food to the U.S. market. In addition, voluntary certification would be encouraged for other foreign companies interested in gaining expedited access to the U.S. The names of foreign and domestic certified producers and products would then be made publicly available, providing consumers and businesses greater access to information regarding product safety. Although certification does not guarantee improved product safety, U.S. consumers and retailers would be far more likely to select a certified producer over an uncertified producer, which would effectively make voluntary certification "mandatory" for many firms.
The report never explicitly defines the criteria for what constitutes a "high-risk" product or country. Developing countries without U.S.-style food safety protections and controls would intuitively float to the top of the list for requisite action. The plan compensates such "high-risk" developing countries by providing technical and other assistance to adopt a U.S.-style regulatory infrastructure and eventually reverse their categorization as high-risk exporters. However, tainted food can come from any firm and any location, and the list of recalls of domestically produced food proves that U.S. regulations are no guarantee against harmful food. Requiring countries to adopt American rules will not necessarily make imports any safer. Nonetheless, until "high-risk" countries are reclassified, firms in these countries would be unable to ship food products to the U.S.
As already proven under the current system, the U.S. can neither fully inspect and analyze every food import nor afford to certify every foreign firm wishing to export goods to America. Yet targeted certification is by definition discriminatory and would risk breaking international trade agreements. Moreover, company certification--both mandatory and voluntary--would likely impede competition and trade, harming producers and consumers alike. This aspect of a "preventative" approach to mitigating failures in the food safety system runs real risks of increasing the costs of trade in food without a comparable increase in food safety. Overall, the plan and other reform proposals fail to balance the high cost of a more intensive regulatory system with the modest health and safety benefits likely to accrue.
How Free Markets and Competition Defend Against Unsafe Food
While the food industry is starting to look to the government to develop more transparent rules and standards, a competitive market environment is what motivates firms to produce and offer safe food for America's families. Recent food scares have made food processors and retailers ever more diligent in searching out and eliminating unsafe processes and products. No company, domestic or foreign, wants to be at the center of the next food recall. For instance, this year's E. coli outbreak in California spinach cost the industry an estimated $37 million to $74 million in monetary damages and an inestimable amount in consumer confidence.
When a recall is needed, firms are generally quick to remove tainted products voluntarily. Even companies with the best and safest food processing and handling procedures have accidents. The faster contaminated products are removed from stores and household cupboards, the faster company reputations can be restored and exposure to legal action reduced. This works with international suppliers as well.
China's rapid response in addressing the recent "crisis" in food and product safety clearly demonstrates the market's power to promote the production of safer foods. To shore up its reputation with consumers and governments around the world, China is stepping up efforts to police food quality. The country has restricted or even stopped exporting some products, such as garlic and ginger, until safety requirements are met. China has also recently signed an agreement with the U.S. on food and feed import safety that should improve the level of coordination and communication between the two countries. These actions reflect China's awareness that, if the flow of tainted products does not cease, consumers in America and around the world will become extremely wary of buying anything "Made in China."
Important Guidelines for Reform
Regrettably, the President's plan and many of the ideas circulating in Congress go too far in restricting imports without bolstering America's food security. Curtailing or stopping imports--most of which are perfectly harmless--will not make the food on U.S. grocery shelves any safer, just more expensive and less available in quantity and variety.
Free markets and consumer choice act together as the first defense against unsafe products. However, the government can take steps to bolster confidence in the integrity of the food safety system. Specifically, Washington should:
- Work with industry to establish and clearly communicate transparent, standardized science-based regulations and standards. Reducing the cost and complexity of America's standards will not weaken them. The easier and less costly U.S. regulations are to understand and implement, the more likely it is that firms will comply with them.
- Avoid the current process that focuses agency resources primarily on "high-risk" countries and firms. Tainted food can come from even the safest of countries and producers. Likewise, companies and farms with a sullied history of complying with food standards can improve. All food products, whether produced in the U.S. or abroad, should face the same inspection and testing requirements. Collecting and analyzing information about a country's regulatory equivalence to the U.S. and producers' compliance with America's food standards can be useful in establishing better inspection and monitoring procedures at or within the border but should not serve as the central focus of the food safety system. In a dynamic, open economy, regulatory agencies would be hard-pressed to keep up with the ever-changing list of "high-risk" and "low-risk" producers.
- Avoid discriminatory treatment of food imports. Tariffs, fees, port restrictions, unwarranted inspections, and pre-certification for companies--mandatory or "voluntary"--all function as non-tariff barriers to trade. Implementing these approaches to food safety would likely violate international trade commitments, raise food prices at home, and harm America's economic relations with developing countries without significantly improving food safety in the U.S.
- Ensure that agencies use efficient processes to fulfill
their mission objectives effectively. While a preventative
approach to stopping tainted imported food before it arrives at the
U.S. border is emotionally appealing, no amount of funding will
enable agencies to evaluate and monitor every foreign food
producer--or even just the "high risk" producers--and the products
that they sell. Inspections at the U.S. border remain the best
proxy for conducting individual plant inspections around the
America is already implementing a system of more rigorous border inspection, but more can be done to make that system more effective in promoting import food safety. Improved data sharing and technical interoperability, increased communication and coordination among agencies, and better product testing techniques developed by the private sector would promote effective inspections and testing, bolster food security, and reduce the time that goods sit unsold at the border. While no reform proposal currently provides a plan of attack for improving domestic inspection procedures, this element of the food safety system should not be ignored. Domestic and international food inspection regimes need to be equivalent and science-based.
- Give the FSIS and the FDA the authority to order recalls when companies fail to act voluntarily. This would strengthen the country's ability to recover more quickly from a food scare when a firm does not act responsibly.
America will be served best by reform that maintains a steadfast commitment to an unbiased, science-based approach to food safety that allows market forces and competition to weed out unsafe producers. Injudicious regulations and restrictions that discriminate between domestic and foreign food producers or erect unfounded, protectionist, non-tariff barriers to trade will do little to bolster U.S. food security.
Legislating an unwise food safety policy could seriously undermine the primary benefits of international trade--the availability of a wider variety of cheaper products and more effective and efficient resource use as capital and labor shift from less competitive to more competitive industries--and harm U.S. households and the economy as a whole. America's food security depends on sound policies that mitigate the risk that unsafe products could reach U.S. dinner tables without reducing food supplies and driving up food prices.
Daniella Markheim is Jay Van Andel Senior Trade Policy Analyst and Caroline Walsh is a Research Assistant in the Center for International Trade and Economics at The Heritage Foundation.