FoolSafety and Inspection Breakout Session 1, Friday January 14th, 1994, 1:00 pm Moderated by Gordon Rausser, University of California, Berkeley

Majorpapers: and Inspection: An Overview Nancy Bockstael, Richard Just, and Mario E Teisl, University of Maryland Paper presented by Richard Just

Current Policy Environment for Food Safety and Inspection Julie Caswell, University of Massachusetts

Discussants: Stuart Hardy, Resources Policy Department, U.S. Chamber of Commerce

Dennis Henderson, Marketing Economics Branch, Economic Research Service, U.S. Department of Agriculture

John Horowitz, University of Maryland

Andrew P. Manele, Environmental Protection Agency

Richard Williams, Economics Branch, Food and Drug Administration Session on Food Safety and Inspection The Policy Environment for Food Safety and Nutrition: Regulating Quality and Quality Signaling Julie A. Caswell The policy environment surrounding issues and complex task but not one likely to be of the safety and nutritional quality of the discouraged by claims of "if it ain't broke, U.S. food supply is in considerable, don't fix it." Broken or outmoded pieces of although not unusual, turmoil. Calls for the machine have come to litter the field, reform touch on every aspect of the and a general clean-up is called for. regulatory effort, including standards, methods of achieving standards, and the Williams: The present administration issued choice of agencies for regulatory a new executive order, but not that much responsibility. The turmoil itself is not has changed. Both political parties feel that unusual, for it often occurs in the wake of economic analysis of food safety and other important food safety incidents. The most issues is important. recent large scale incident was in Food Quality— Washington, Idaho, California, and Nevada Safety and Nutritional Content in early 1993 where approximately 500 The quality of a food product is people suffered cases of hemorrhagic colitis multidimensional, including taste, color, associated with E. coli 0157:H7 and three texture, safety, and nutritional content. For children died from eating contaminated consumers,food safety and nutritional hamburgers served at a fast food restaurant content are special quality characteristics or chain (U. S. Department of Agriculture attributes for two reasons. First, they are in (USDA)1993, Schneider 1993). Another large part "credence attributes" of food that significant incident was the 1985 Chicago the consumer is not able to judge effectively outbreak of salm.onellosis associated with even after purchase and consumption. For tainted pasteurized milk (Ryan et al. 1987), example, say I felt somewhat nauseous all while concerns mount about in day yesterday—was it something I ate?• Or, chicken, Alar on apples. is my Vitamin-D fortified milk really Rausser: There's been an institutional fortified but not over-fortified? In other failure. I refer to the journalistic community words, consumers have a serious that is responsible for such alarming information problem when it comes to food publicity, for example, with the Chilean safety and nutritional quality. This grape incident which immediately followed information problem occurs to a much the Alar scar. The events are presented, but smaller degree with quality characteristics without any mention of the tradeoffs. There's such as color that can be judged before so much "money on the table" that there is purchase (i.e., "search attributes") and other considerable incentive for the media to characteristics such as taste that can be misrepresent (exaggerate) the event. judged after use (i.e., "experience attributes"). of It is possible that this episode Williams: Nothing is settled about nutrition. policy turmoil will bring sweeping (or For example, some sources say that fat safety significant) changes in the food consumption is going down, while others congressional regulatory system, based on say it's increasing. It depends on whether initiatives. It is and Clinton administration it's disappearance data or survey data. a large certainly the case that the system has Much better data are needed to make with backlog of issues and controversies policy—how can we make good policy if we which to deal. Re-engineering it is a large have no idea what the trends are? 57 Session on Food Safety and Inspection Second, food safety and nutritional The Role of Information content have direct acute and chronic in the Regulatory System impacts on human health. Poor quality in There are two major classes of information this area can imply poor health or, in used in regulation of food safety and extreme cases, death. Poor quality in regard nutrition. The first is what I will call to other food quality characteristics has monitoring information—information on much less serious consequences, perhaps the production practices, manufacturing disappointment that the red tomato is processes, and final quality of foods, mushy inside and has no particular taste. generated up and down the production/ Thus in the United States food safety and distribution channel. Monitoring nutritional content have been thought to information is used to judge whether a merit extensive regulatory effort because of product meets minimum quality standards consumers' difficulties in assessing these and is suitable for sale. The second type of quality attributes and their importance. information used is consumer information. Other rationales also exist for food It may be provided by government in a quality regulation (see Bockstael and Just in generic form (safe handling guidelines, these proceedings, Caswell 1990, Zenner nutrition guidelines) or through product 1988) and play roles in the choice of policies. labeling requirements. Required label Not given much discussion yet, but disclosures may take several forms, ultimately important, are the costs external including stating whether a product meets a to consumers'food choices that are imposed particular standard or contains a specific (or not imposed) on the health care system. ingredient, or giving quantitative With health care risks and costs likely to be information on quality attributes (e.g., the spread more broadly over more universally- product contains 4 grams of saturated fat insured individuals, the health cost per serving). consequences of diet and foodborne risks The design of regulatory programs will be an important factor in regulatory dictates the extent and type of monitoring choices. information required from food producers, Finally, food companies have a large processors, and distributors. Compared to stake in having an adequate food quality price and quantity.information, I. would regulatory system in place. Such regulation argue that companies do not seem to be as underpins consumer confidence and insures sensitive to the government access to that all companies have to meet similar private information needed for safety minimum standards, preventing firms from monitoring. This may be explained by the underproducing safety and free riding on fact that the information is often not made the responsible companies in a market. public or is only made public in limited Recognition of food companies' interest in ways. It is also the case that government the positive benefits that the regulatory activity to assure safety appears to have system provides them (along with the costs more general acceptance than its actions to it imposes) is essential to understanding the monitor other types of performance. policy environment, particularly since the A key test of this acceptability and of regulatory relationship is sometimes seen as changes in the types and uses of monitoring purely adversarial, when it is not. information will be the proposed adoption over the next few years of the Hazard Analysis Critical Control Point (HACCP) approach as the dominant regulatory framework for food safety assurance. HACCP requires companies to develop, put 58 Session on Food Safety and Inspection in place, and monitor sophisticated process Williams: The first set of regulations from and performance quality control programs. HACCP will be out very soon. It will be In these systems, the regulatory role shifts applied to seafood, for seafood has been from inspecting the process to approving under siege. However, we don't plan to give and monitoring the company's HACCP up risk analysis and go entirely to HACCP (a program. This involves a change in the type process-oriented strategy). For one thing, of monitoring information needed by the there are serious measurement problems. regulatory system and, in some respects, And, for another, there is a real cost burden will represent a more information-intensive on small operations; the fixed cost would regulatory scheme. There is also an have to be spread over too small a base. interesting potential for HACCP regulation to interact with consumer information policies, depending on if and how regulatory monitoring information is made available to the public. Companies' reaction to this system may be expected to hinge on the private and public uses to which the data it generates are put. Hazard Analysis and Critical Control Points— detect problems through product inspection. Hardy: It must be noted that these issues— It is based on the premise that if safe and many others—are now being addressed ingredients are used from the start, critical by policymakers in the United States and points where hazards may occur are elsewhere in the context of a science-based identified, and those key points in the set of quality assurance principles known as process are continuously monitored, then Hazard Analysis and Critical Control Points the final product will be safe (Pierson and (HACCP). Both Health and Human Services Corlett 1992). The first step for a manager is Secretary, Donna Shalala, and Agriculture to analyze all conceivable hazards that Secretary, Mike Espy, have stated their might occur in a particular facility. Next, determination to reorganize food regulatory preventive measures are designed to control programs and functions around HACCP or prevent hazards at critical points in the principles. Several of our most important production, manufacturing or distribution trading partners—the European Union, process. These preventive measures, such Japan, Canada, and Australia—are in the as temperature control to assure sufficient process of implementing mandatory HACCP heat to kill microorganisms, must be programs, and most other developed continuously monitored, for example by a nations have already switched to HACCP or thermometer that records any deviations. plan to do so. And the Codex Alimentarius When a deviation occurs at a critical control Commission is assisting developing nations point, the facility manager must put the to develop and implement HACCP-based product on hold until further testing indicates regulation. HACCP is the key to whether it can be returned to the process harmonizing global food safety standards line or destroyed. The final step in a HACCP and procedures and resolving food safety- program is to verify that the system is related trade disputes which have working correctly. This is where regulators mushroomed in recent years. come into the picture to audit and verify the HACCP aims at preventing hazards effectiveness of the HACCP program at before they occur, rather than attempting to each site or facility (Stevenson 1993). 59 Session on Food Safety and Inspection HACCP programs are applicable at HACCP implementation is already every link in the food chain from farm to well underway in the industry. A 1991 supermarket/restaurant. Each HACCP survey by the Grocery Manufacturers program is modified and tailored to Association indicated that virtually all major individual facilities, although federal U.S. food processing companies have agencies, working in collaboration with adopted or are in the process of adopting industry and academia (in such forums as HACCP systems. Moreover, HACCP the National Advisory Committee on systems are being written into the industry- Microbiological Criteria for Food), are wide codes ofoperation known as Good developing generic HACCP programs for Manufacturing Practices and, most recently, specific food sectors, such as shellfish into FDA's Food Code. The HACCP vessels or poultry processing plants. All evolution is moving less rapidly at the major food industry organizations, ranging regulatory agencies, where institutional from such grower groups as the National constraints abound. Nevertheless, FDA has Cattlemen's Association and the United recently proposed (Fed. Reg. 1994) Fresh Fruit and Vegetable Association, to mandatory HACCP for seafood, which— food manufacturers, such as the National according to Secretary Shalala—is to serve Food Processors Association, to retailer as "the model for future food safety in this groups, such as the Food Marketing Institute country"(Food Chemical News 1994b). and the National Restaurant Association, Meanwhile, at USDA's Food Safety offer HACCP training programs for their Inspection Service (FSIS), a HACCP forum members. is planned for this spring at which The implications of HACCP for participants will help develop a rule for industry are profound. Implementing and implementing mandatory HACCP in all meat maintaining a HACCP program is certain to and poultry establishments (Food Chemical be costly and difficult. For example, the News 1994a). average expected first year cost of putting a The benefits to regulatory agencies of HACCP system into place in a seafood firm replacing traditional product inspection with will be $23,900, and $15,000 in following HACCP are enormous. Budgetary years, according to the FDA (Federal constraints and a vastly larger and more Register 1994). In the case of a typical food complex food supply mean that agency processing plant, line workers must be resources are already stretched so thin that brought into the process and given sufficient much of the food supply is unpoliced and training to understand the system's escapes official surveillance altogether. rationale. Workers must be encouraged to Even at FSIS where continuous inspection report incidents, however minor, and of meat/poultry slaughter and processing managers must never bend safety rules in are still the norm, the century-old the interest of cost. New equipment will be organoleptic inspection methods (the use of needed at critical control points to enable sight, touch and smell to detect tumors, uninterrupted monitoring of data, and a inflammation, bruises and other obvious product coding system will be needed to problems) are wholly incapable of detecting enable traceback and recall. invisible, odorless threats to the food supply, Multidisciplinary review teams must be such as E. coli, and other pathogenic assembled to monitor and enforce hazard microorganisms. HACCP allows agencies to control procedures. Plant managers must move away from the overwhelming (in fact, provide regulators with open access to all impossible) task of inspecting products, and data needed to verify the effective operation into the business of auditing and monitoring of the system. the effective operation of HACCP programs 60 Session on Food Safety and Inspection at regulated facilities. This is the key to criteria will continue to evolve as wider "leveraging out resources much more application of HACCP provides greater efficiently," according to FDA Commissioner practical experience. Finally, regulatory David Kessler (Food Chemical News personnel will require time and training to 1994b). adjust to an entirely new method of The process of introducing HACCP regulation in which adversarial enforcement into all sectors of the food industry and into is replaced with cooperation and problem- the regulatory arena will be long and solving. difficult, and HACCP will likely coexist with The widespread implementation of traditional inspection during a transition HACCP, here and abroad, is nothing less period. In fact, FS1S is currently operating than the most important and promising under just such a "two track" policy. Specific initiative in food safety/quality assurance HACCP criteria have not yet been since the development of organoleptic developed for all links in the food chain, and inspection methods a century ago. Federal Register. 1994. "Proposal to Establish Procedures for the Safe Processing and Importing of Fish and Fishery Products," January 28, pp. 4142-4214. Food Chemical News. 1994a. "FSIS Publishes HACCP Meeting Notice: Industry Wants Action." January 17, pp. 21-3. Food Chemical News. 1994b. "Seafood HACCP Release May Not Stop Legislative Action." Jan. 24, pp. 37-8. Pierson, Merle D. and Donald A. Corlett, Jr., eds. 1992.HACCP Principles and Applications New York. Stevenson, Kenneth E. 1993. HACCP: Establishing Hazard Analysis Critical Control Point Programs Washington, DC: The Food Processors Institute. Caswell continued: poultry. Here too the main industry For consumers, provision of both opposition appears to be focused on the generic and product-specific information is manner and cost of implementation, rather important (Ippolito and Mathios 1990). The than on the government's authority to federal government has programs to deliver require the information. And many generic information on food quality, food processors may. see a benefit in the label handling practices, and diet. An example in requirement in that it may more firmly fix the diet area is USDA's Eating Right food responsibility for a product's ultimate safety pyramid, that highlights recommended on the consumer. dietary practices. In practice, product- The information issues concerning specific information is probably more food safety and nutrition regulation differ in powerful in influencing consumers' other important respects from those decisions. A key case study is the associated with so-called traditional food implementation in 1994 of mandatory and agricultural marketing policies. nutrition labeling, which will transform a Probably most noteworthy, the question of great deal of once-private information into "preserving" public information or public public information. Interestingly here, while access to private information, as is relevant there was much opposition to the new in regard to price and quantity information, labeling regime due to its costs and does not apply to food safety and nutrition questions about whether it would be information. In fact, the progression has effective, there was no really serious been one of continually increasing public question as to whether the federal information, transforming private government had the authority to require the information into public information (e.g., information disclosure. Another test case is mandatory nutrition labeling), and, often, USDA's effort to require consumer-level creating and using new information (e.g., safe handling labels on fresh meat and HACCP protocols and monitoring 61 Session on Food Safety and Inspection information). In other words, progressively the parallel efforts by the Food and Drug more regulation (and use of information) Administration (FDA) and the USDA to has characterized quality regulation, write new regulations governing nutrition although the forms have changed over time. labeling. Another representative example is the turf uncertainties (and some battles) that The Current Policy Environment occurred over who had responsibility for What should be and is the context for and the safety of shell eggs, implicated in the scope of the policy discussion on re- outbreaks of salmonella enteritidis food engineering food safety and nutrition poisoning (U.S. General Accounting Office policy? The broadest context is human (GAO) 1992a). health risks from all sources.1 Although Another prominent characteristic of very difficult to do, goverment policy, and the policy environment is disagreement private decisions as well, should make over the overall performance of the tradeoffs across all risk sources. Within this regulatory system. The standard of food context, risks and risk management can be safety and nutrition in the United States is broken down into narrower, more among the, if not the, "highest in the world." manageable spheres such as foodborne The important achievements associated with risks, including those carried in drinking this claim are emphasized by many food water. These risks include microbial system participants. However, for domestic contaminants, nutritional imbalances (e.g., policy, the claim has proven to be only of too much fat in the diet), naturally occurring relative relevance. It is important in judging toxicants, environmental contaminants, how close we have come to what is and drug residues, and food currently viewed as attainable quality (the additives. Note that I am arguing equivalent of using the best available throughout for joint consideration of food technology in pollution control). It is also safety and nutritional risks, particularly on important in judging whether more or the level of decisions about allocation of rearranged resources should be devoted to resources to their management. Joint this area relative to other risks and needs. consideration of interactions between risk But in itself "best in the world" has little sources, genetic endowment, diet, and meaning because, for consumers and policy personal health status is likely to become makers alike, our current best may not be even more important with improvements in good enough. In other words,food quality scientific understanding. Such is a moving target, and digging in to argue improvements will also tend to continue to whether we currently have better quality modify our perception of food's potential than someone else is not very productive. preventative or curative properties. A third characteristic of the A central characteristic of today's regulatory environment,linked to the policy environment is that the various food preceding two, is that the risk management safety and nutritional risks have been burden of the federal government is treated in a fragmented manner. In truth, an increasing. There are several sources of this unconscionable amount of time and effort in increase, including higher safety standards, this area is devoted to duplication of effort the discovery of new pathogens, the and turf battles. A recent major example is proposal and adoption of new food processing technologies (e.g., irradiation), of new food ingredients 1While very broad, this may in some respects be too the development narrow a context. For example, policy concerns may and products (e.g., those resulting from encompass environmental impacts that are not application of biotechnologies), and the known to have human health consequences. increased internationalization of the food 62 Session on Food Safety and Inspection trade. Finally, policy faces fundamental above, is of responsibility for commodities choices between quality-assurance between agencies. This results in similar strategies. Put simply, the choice is between (although by no means identical) activities direct quality regulation through setting taking place in two places. For example, process or performance standards and inspections of food processing facilities are indirect regulation through setting carried out by FDA or USDA,depending on information standards (regulating quality what is being processed. This duplication is signaling). not in itself prima facie evidence of need for reorganization, since legitimate rationales The Regulatory Facts for split jurisdiction could exist. However, it The regulatory facts could not be put more does call for close scrutiny of the activities succinctly than has been done by the U.S. and their consistency across agencies. GAO (1992b, p. 25): A second form of split jurisdiction Currently, 12 federal agencies occurs when different agencies have spend about $1 billion annually to responsibility for regulating separate administer about 35 laws characteristics of a particular product. Again governing food safety and the question is how effectively the split quality. Fundamental differences works. Finally, agencies often find that in agencies' missions, jurisdiction over food quality issues has responsibilities, and authorities been made concurrent or is ill-defined by have led to inconsistent oversight, legislation. It should be noted that the inefficient use of resources, and Federal Trade Commission also plays an poor interagency coordination. important role in regulating safety and Major jurisdictional responsibility over food nutrition because of its jurisdiction over safety and nutrition is split (and sometimes food advertising. concurrent) between the FDA of the Department of Health and Human Services Williams: But considering a single food and the USDA, primarily its Food Safety agency instead of so many players, the and Inspection Service. The split is generally public choice literature indicates that if there based on product type with FDA regulating were only one, a lot of people would lose all foods except meat and poultry, which are power because fewer committees would be regulated by USDA. Seafood is under the needed. So,that will probably never jurisdiction of FDA and the National Marine happen. Fisheries Service of the Department of Commerce. The picture becomes much Over the past few years, numerous the more complicated beyond this simple reports detailing, and often criticizing, the food commodity-based breakdown of regulatory operation of various aspects of appeared. responsibilities. For example, pesticide quality regulatory system have found policy is set by the Environmental They have given close scrutiny and Protection Agency, which also sets pesticide the current organization of activities by the residue tolerance levels for foods. However, wanting in several respects. Reports and the U.S. in certain circumstances the food additive National Academy of Sciences of provisions of the Food Drug and Cosmetic GAO alone are a tour de force Act(FDA jurisdiction) apply to pesticide weaknesses in the regulatory system. reports residues as well (National Academy of Among the most important of these Sciences 1987). are those on pesticide residue regulation Split and concurrent jurisdiction (National Academy of Sciences 1987, U.S. activity takes many forms. One split, mentioned GAO 1986a, 1986b); food inspection 63 Session on Food Safety and Inspection (National Academy of Sciences 1985, U.S. the form of the Nutrition Labeling and GAO 1989, National Academy of Sciences Education Act of 1990. No such action has 1990a); animal drug residues (U.S. GAO taken place with regard to food safety 1990); and diet and nutrition (National regulation. Academy of Sciences 1990b, 1991). These Finally, an important consideration in reports give a full for the particulars the policy environment for food safety and of the various regulatory programs. nutrition policy is growth in international It is standard practice to note that trade, including the recent passage of the consumer interest in food safety and North American Free Trade Agreement and nutrition has increased in the last decade completion of the General Agreement on (for evidence, see for example, van Tariffs and Trade. The regulation of food Ravenswaay 1992, McGuirk et al. 1990). The safety and nutrition is a sensitive trade issue reasons for the interest vary, however. Food and one where conflict easily arises, as safety has gotten prominent attention witnessed by the U.S./European wars over because of "bad news" incidents and a hormones used in beef production. perception that the quality of the regulatory Increased internationalization of the food system slipped during the 1980s under the trade means quality regulations will have an Reagan administration. It also gained additional criterion to pass. Specifically, prominence through the concerted efforts of they will have to pass muster that they are activist groups such as the National truly in the interest of safety or consumer Resources Defense Council to bring safety protection and not simply hidden nontarfff issues to the public's attention (see, for barriers to trade. example, Sewell and Whyatt 1989) and gains in scientific knowledge that underline Re-Engineering Policy: the importance of food safety to human The Questions to Be Answered - health. For consumers,food safety relates to The central difficulty in the policy negative, perhaps largely uncontrollable, discussion surrounding food safety and risks. Nutrition, on the other hand, has nutrition is its fragmented and jumbled gained attention because of what I nature (Kramer and Caswell 1994). characterize as "good news"; the consensus Proposed legislation to change risk that Americans can improve their health by standards for pesticide residues in food, to improving their diets (U.S. Department of reassign food inspection duties between Health and Human Services 1988, National agencies, to establish labeling standards for Academy of Sciences 1989). With nutrition, the products of biotechnology such as consumers can gain positive results by bovine somatotropin, and to do all manner changing controllable choices.(Of course of other things each take a turn on center the news is not good for those of us who stage. There is insufficient understanding of enjoy super premium ice cream and French the bigger picture and how it fits together. fries.) The difference between avoiding an In a real sense,food quality evil and attaining a good is central to regulation can legitimately be seen as a differences between the regulatory purview where the constraints imposed by frameworks used for food safety and humans' bounded rationality (and nutrition issues. opportunism) are pinching. Consistent Another major difference between regulation is difficult to achieve. And I the policy environment for food safety and submit it is beyond our abilities to attain nutrition at this point in time is that we have regulation across foodborne risks that is just had a major overhaul of the key aspect fully rational and consistent, especially of nutrition regulation, nutrition labeling, in when we consider the incomplete nature of 64 Session on Food Safety and Inspection risk information and differences in ultimately an additional matter of public individual assessments of the importance of choice, is reliable information on the relative risks. Another major barrier to better policy risks to human health from all sources. Our is the investment many parties have in the knowledge is incomplete, will get better, but operation of the current system. However, will never be comprehensive enough to be policy could be much more rational, and a fully satisfactory. The most important need first step toward its becoming so is for the is for relative risk information to be policy environment (people) to be more complete enough so that policy is not disciplined in recognizing (and respecting) simply aimed at squeaky wheels of one kind the four different levels of policy questions or another. to be answered (see Figure 1). Within the overall risk spectrum, the first level policy question is risk I. Risk Management and Reduction Goals management and reduction goals. As is Clearly articulated and pursued policy is happening with the discussion over health important to insuring consumers' care reform, these overall goals are either confidence in the food supply and explicitly or implicitly put in the context of a producers/processors' ability to operate "risk reduction budget" and analysis of the effectively in the food system. Confidence in most effective way to set and spend that the regulatory system has been buffeted by budget. Thus the discussion cannot be far some poor performance in the past decade from risk/benefit or cost/benefit analysis. or so. It is important to realize, however, Based on relative risks, part of the overall that some buffeting of consumer confidence budget will be allocated to management and will occur anyway simply because scientific reduction of foodborne risks. Of course, the knowledge about foodbome risks is final step is judgment of the relative evolving; as it does so, it is widely reported importance of particular foodborne health in the popular press, but in a piecemeal risks. fashion. Public policy has to be stable In our current policy environment, enough to accommodate new knowledge this level of analysis has been rather and also to smooth some of the churning painfully inadequate. Consistent risk feeling it creates among consumers. analysis and standard setting across risk At the first level, our society faces sources has not been generally done, despite setting the broad outlines of our treatment efforts to rationali .e the risk assessment of human health risks through use of public activities of the federal government. This is policy. A major input to this process, but particularly a problem in the arena of food

Figure 1: The Four Levels of Policy Questions Question Level Policy Question:

Risk Management and Reduction Goals

II Responsibility for Risk Management/Reduction Goals

Ill Choice of Regulatory Approach

IV The Mechanics of the Regulatory Approach 65 Session on Food Safety and Inspection safety and nutrition because the enabling (in practice, federal deregulation and legislation is so varied and agency fragmentation of the national market as the responsibility so fragmented. This, states stepped into the regulatory vacuum) combined with the fragmented committee was a nightmare, rather than a dream. structure and limited research capabilities of Congress, means that a detailed road map of III. Choice of Regulatory Approach risk management and reduction goals has If regulatory intervention is believed to be not been drawn. called for, the third level policy question is the form of the intervention. The range of IL Responsibility for Risk Management/ government policy choices essentially boils Reduction Goals down to two: a standards (process/ The second level policy questions are how performance) approach or an information risk management/reduction goals should be approach (Caswell 1990). The standards pursued and by whom (producers, approach is direct quality regulation, processors, consumers, government). Again, involving setting minimum standards either this quickly turns to what is feasible, cost in the form of required processes (e.g., good effective, and ultimately will be popular manufacturing practices, implementation of with the American people. This question of a HACCP program) or final product quality how and who should pursue the goals is levels. The standards are a quality floor, and complex in most regulatory areas, and is products that do not meet them are deemed certainly so for food safety and nutrition. illegal for sale. This can also be referred to The ultimate safety or nutritional content of as a banning approach since it prohibits a food product is an ensemble production, products that do not meet standards. with contributions from the input suppliers, The information approach to food producers, processors, distributors quality regulation focuses on altering the (including food service operators), and the flow of information on quality, often consumer. Bad, or even sloppy, actors at any through mandatory disclosure point in the chain of distribution can requirements, rather than quality itself. In compromise a product's quality. Strong other words,it regulates companies' use of incentives for quality control exist for quality signaling to consumers through companies, even in the absence of product claims made on labels or in. regulation, because of potential liability or advertising. This approach often includes loss of business that may accompany regulation of the format of information incidents of poor food quality. disclosures. Information regulation is At which points and by whom will usually combined with publication of quality control efforts be most effective? The generic standards or guidelines that provide answer may indicate consumer, company, a context or metric to aid the consumer in federal, state, or local responsibility for the making judgments. For example, nutritional management of a particular type of guidelines have been published and food foodborne risk, but almost always it is some labels will now carry standardized nutrition combination of these. Where regulatory information panels that provide detailed action is desired, it is interesting to note that information on the important macro- and the consensus in the last five years or so has micronutrients discussed in the guidelines. been generally strongly in favor of exclusive In the United States, the standards federal regulation, except in the case of food (process/performance) approach as applied service operations. Everyone,including to food producers, processors, distributors food companies, seems to have learned that and food service operators has almost the "new federalism" of the Reagan years universally been used for food safety 66 Session on Food Safety and Inspection regulation, while the information approach A second major thrust is the design of has nearly always been used for nutrition regulatory standards. This involves the fine- regulation. The information approach for tuning of broader risk management and nutrition has become even more firmly reduction goals made at the first level of entrenched with the passage and policy making. An example is the acceptable implementation of the Nutrition Labeling risk standard for pesticide residues in foods, and Education Act of 1990. The standards which has been the focus of extensive approach appears likely to remain dominant activity for several years. The controversy in food safety regulation (e.g., adoption of involves whether the zero tolerance for HACCP programs), but in some newer cancer risk mandated by the Delaney Clause areas of activity the information approach is is a good standard or whether a negligible being employed as well. A recent example is risk (defined as a one in one million risk of the safe handling labels that USDA is an additional cancer) standard would be attempting to introduce on consumer preferable. While it is only one very small packages of fresh meat and poultry. A part of the food safety regulation picture, further example may be the development of the Delaney Clause/negligible risk debate voluntary labeling of food products that do typifies the deadlock that has existed in not employ biotechnology or biotechnology- many areas of food regulation where based inputs (e.g.,"rbGH-free" cheese). A changes in standards are perceived very major policy question is the extent to which differently by different parties. Changes that private markets and information policies are seen by some as being based on realistic, can and should be relied on to deliver scientific risk assessment may be viewed by acceptable quality levels to consumers. others as an unnecessary weakening of Interestingly, the second and third regulations. It seems that adjusting risk level policy questions seem to be those most standards to achieve some consistency will firmly answered in the current policy probably need to be done as a kind of environment. In other words, the parties package deal, where give-and-take that should be responsible for assuring food bargaining between the interested parties quality and the dominant regulatory can take place. There is also likely to be a mechanism to enforce that responsibility need for package deals that can internalize appear to be fairly well settled. and settle tradeoffs on other quality issues. A third major thrust is the reform of IV The Mechanics of the Regulatory the standards (process/performance) Approach regulatory approach. In fact, a major policy The fourth level of policy questions involves issue is the choice between process and the actual mechanics of the regulatory performance approaches. In food inspection, system, including the organization of for example,the current consensus is that regulatory activities and the incentive and FDA and particularly USDA have put too enforcement means used. A great deal of the much emphasis on process inspection (e.g., policy discussion on food quality issues visual inspection of foodstuffs) versus necessarily takes place at this level (Kramer performance inspection (e.g., testing of the and Caswel11994). The list of particulars is final product for microbial contamination). very extensive. A major thrust of current In reality, however, a combination of discussions is whether food safety process and performance approaches is regulatory activities should be gathered often most effective and is likely to be the under a single agency, eliminating much of direction of future inspection activity, for the fragmentation that characterizes the example under HACCP procedures. current system. 67 Session on Food Safety and Inspection The ultimate question is what types Ten Years From Now .. . of programs (1) encourage and support What will be the regulatory framework and firms and consumers in quality assurance policy environment for food safety and activities they are already interested in and nutrition 10 years from now? The constant pursuing and (2) effectively insure that 'addition of new information will mean that firms and consumers pursue those activities the agenda of issues to be dealt with is judged to be needed that they are not now unlikely to be shorter than it is today. Given pursuing. A final question that must be that a new comprehensive approach to faced on this level is who pays and how for nutrition through nutrition labeling reform quality assurance activities. If government is just being implemented, we are unlikely budgets remain tight and demand for to see much further change in that area. government-led quality assurance programs Hopefully, however, in the next 10 years we grows,increased user fees of various types will see accomplished some of the difficult will have to be considered. work needed to answer the four levels of questions posed above. The work is required in order to rationalize our regulatory approaches to food safety so the federal government's activities will be more effective in assuring the quality and safety of our food supply.

References Caswell, Julie A. 1990."Food Safety Policy Fights: A U.S. Perspective."Northeastern Journal of Agricultural and Resource Economics 19:59-66. Ippolito, Pauline M. and Alan D. Mathios. 1990. "Information, Advertising, and Health: A Study of the Cereal Market." RAND Journal of Economics 21: 459-480. Kramer, Carol R. and Julie A. Caswell. 1994. "Food Quality: Safety, Nutrition, and Labeling." In.Food and Agricultural Policy Issues and Choices for 1995, M. C. Hallberg, D. Ray, and R. Spitze, eds. Boulder, CO: Westview Press. (Also published as Research Report No. 20, Food Marketing Policy Center, University of Connecticut.) McGuirk, A. M., W. P Preston, and A. McCormick. 1990. "Toward the Development of Marketing Strategies for Food Safety Attributes." Agribusiness 6(4): 297-308. National Academy of Sciences, Institute of Medicine. 1990a. Cattle Inspection. Report of the Committee on Evaluation of USDA Streamlined Inspection System for Cattle (SIS-C), Food and Nutrition Board, Institute of Medicine. Washington, DC: National Academy Press. National Academy of Sciences, Institute of Medicine. 1990b. Nutition Labeling: Issues and Directionsfor the 1990s. Report of the Committee on Nutrition Components of Food Labeling, Food and Nutrition Board, Institute of Medicine. Washington, DC: National Academy Press. National Academy of Sciences, Institute of Medicine. 1991.Improving America's Diet and ffealth: From Recommendations to Action. Report of the Committee on Dietary Guidelines Implementation, Food and Nutrition Board, Institute of Medicine. Washington, DC: National Academy Press. National Academy of Sciences, National Research Council, Board on Agriculture. 1987.Regulating in Food: The Delaney Paradox Washington, DC: National Academy Press. National Academy of Sciences, National Research Council. 1985.Meat and Poultry Inspection: The Scientific Basis of the Nation's Program Prepared by the Committee on the Scientific Basis of the Nation's Meat and Poultry Inspection Program, Food and Nutrition Board. Washington, DC: National Academy Press. National Academy of Sciences, National Research Council. 1989. Diet and Health: Implicafonsfor Reducing Chronic Disease Risk Report of the Committee on Diet and Health, Food and Nutrition Board, Commission on Life Sciences. Washington, DC: National Academy Press. Ryan, Caroline A., Mary K Nickels, Nancy T. Hargrett-Bean, Morris E. Potter, Tomy Endo, Leonard Mayer, Carl W. Langkop, Carol Gibson, Robert C. McDonald, Richard T. Kenney, Nancy D. Puhr, Paul J. McDonnell, Russell J. Martin, Mitchell L. Cohen, and Paul A. Blake. 1987. "Massive Outbreaks of 68 Session on Food Safety and inspection Antimicrobial Resistant Salmonellosis Traced to Pasteurized Milk."Journal of the American Medical Association 258: 3269-74. Schneider, Keith. 1993."White House Plans Overhaul of Meat Safety: Proposal Involves New Techniques for Monitoring for Bacteria." San Francisco Chronicle, March 17, p. 1. Sewell, Bradford H. and Robin M. Whyatt. 1989.Intolerable Risk: Pesticides in Our Children's Food. Washington, DC: Natural Resources Defense Council. U.S. Department of Agriculture. 1993. Briefing Book. AMI. U.S. Department of Health and Human Services, Food and Drug Administration. 1988. Tie Surgeon General's Report on Nutrition and Health DHHS(PHS) Publ. No. 88-50210. Washington, DC: Government Printing Office. U.S. General Accounting Office. 1986a. Peicides. Better Sampling and Enforcement Needed on Imported Food GAO/RCED-86-219. Washington, DC, September. U.S. General Accounting Office. 1986b. Pesticides. Need to Enhance FDA's Ability to Protect the Public From Illegal Residues. GAO/RCED-87-7. Washington, DC, October U.S. General Accounting Office. 1989. Dcmestic Food Safety: FDA Could Improve Inspection Program to Make Better Use of Resources. GAO/HRD-89-125, Washington, DC, September U.S. General Accounting Office. 1990. Food Safety and Quality: FDA Surveys Not Adequate to Demonstrate Safety of Milk Supply. GAO/RCED-91-26, Washington, DC, November U.S. General Accounting Office. 1992a. Food Safety and Quality. Salmonella Control Efforts Show Need for More Coordination. GAO/RCED-92-69. Washington, DC April. U.S. General Accounting Office. 1992b. Transition Series. Food and Agriculture Issues. GAO/OCG-93-15TR. Washington, DC, December van Ravenswaay, Eileen 0. 1992. "Public Perceptions of Food Safety: Implications for Emerging Agricultural Technologies." In Volume 2: A New Technological Era for American Agriculture—OTA. Commissioned Background Papers: Part E: Food Safety and Quality. US. Congress, Office of Technology Assessment, National Technical Information Service, Springfield, VA. Zenner, James A. 1988."Market Responses to Public Policies Affecting the Quality and Safety of Foods and Diets." Consumer Demands in the Marketplace: Public Policies Related to Food Safety, Quality, and Human Health, Katherine L Clancy, ed., pp. 55-73. Washington, DC: Resources for the Future, National Center for Food and Agricultural Policy.

The issue is much broader than food— The dialogue following the Alar scare Manele: I'm somewhat distressed both brought all the major players into the food papers were rather narrowly focused on safety arena. But there is no such thing as a food. I'd like to broaden the whole subject to safe pesticide; it's like the search for the include considerations about how the food is Holy Grail. Clearly, some are more toxic produced. There is a clear connection than others, but safety relates to how they between agriculture and the environment. lf are used. For example the incident we are to maximize social welfare, then food in watermelons happened because of a safety simply must include considerations misuse of the material. Yet, we continue to about environmental impacts from food focus on registration—on what is to be production—and we must make this allowed—when the focus needs to be on connection clear to consumers. For how it is being used. And there are some example, small dairy operators who are not pesticides that have very little consequence sufficiently capitalized to handle waste to consumers but are of great ecological safely are a major source of water pollution. risk. Would we want to use these? No, we Consumers should be given a complete simply need to broaden the framework of picture—that the milk is safe and that it was what is considered safe. produced without negative environmental Boekstael to Manele: There are several impacts. We're exploring ways to identify studies looking at consumer willingness-to- broad categories of production methods to pay not just for food safety, but for make this information available to environmentally friendly products. consumers. 69 Session on Food Safety and Inspection Sarahelen Thompson, University of costs, simplify contract enforcement, reduce Illinois: There seems to be a maintained opportunistic behavior, and eliminate hypothesis that the less technology is chance acquisitions from unknown sources. applied, the more neutral the environmental Thus, we need to do some innovative effects. This includes a real mistrust of thinking to bring the analysis to familiar purchased chemical inputs. But this grounds where we can tackle the issues hypothesis never seems to be tested. using tools we understand. Manele: Sustainable agriculture in certainly How do we conduct economic impact not less technical. Rather, it requires highly analysis of proposed regulations or technical and more intensive management standards? This brings us immediately to skills. It's not that we will be doing without analyze the associated costs and benefits. chemicals; it's simply that we must learn to On the cost side, we need to ask (1) what manage them better. kinds of costs are involved in a proposed Comment: Agricultural chemical companies regulation,(2) how they are affected, and (3) have seen the handwriting on the wall about how the impacts can be measured. These pesticides and fertilizers. Given the liabilities cost impacts vary dramatically across firms, they face, they'd also like to see usage across industries, and in vertical and reduced. Besides, they realize they can horizontal directions. How do you design a make far more selling their services about system that can give you the needed usage practices than they can selling the information? Often the time frame for doing stuff. the analysis is very short—not long enough to do any reasonably complete analysis. Define the issues so.that marketing On the benefits side, things are even economists can contribute their more complex. First, how can we expertise— conceptualize the benefits--e.g., as savings Henderson: As marketing economists we in health care cost, in avoiding food-borne need to define food safety and disease, in eliminating lost work time and environmental issues so that we can apply the values of living longer and maintaining the tools and concepts that we understand, physical and mental acuity. And there is a thereby contributing a unique intelligence. great variability among beneficiaries. For example, consider the due diligence So, isn't there a way to apprise out of principle used in the United Kingdom. There the proposals.for regulations, implications is a legal requirement on vendors that they that put us on ground where we can use our exercise due diligence, assuring that tools—some implications for industrial products they receive from suppliers do not organization, for strategic behavior, for pose a threat to consumers. It is the legal economic performance? For example, if we responsibility of the downstream firm to can get some pro-competitive implications, document the risk and safety of all they then we can use conventional welfare acquire. Well, the obvious economic concepts. implication is that due diligence increases Rausser to Henderson: You are saying transactions costs. This leads to specific that if we could draw some pro-competitive analytic concepts that we as economists can implications from a regulation, then we can handle: Increased transactions costs in the use our conventional tools of analysis. Well, presence of imperfect competition will lead many regulations are not pro-competitive. to internalization of upstream supply and For example, the California poultry industry downstream vending through ownership. got a standard passed that any chicken Vertical integration will consolidate liability below 25°F was to be called frozen.

70 Session on Food Safety and Inspection Promotion had convinced many consumers A final note— that fresh chicken was safer and healthier. Hardy: Widespread public perception (and The law meant that any out-of-state chicken misperception) of the linkage between diet must be labeled as frozen. This anti- and health, as both papers note, is driving competitive behavior caused harm to fundamental changes in quality assurance consumers who, when buying out-of-state, programs in industry and regulatory usually cheaper, chicken must now buy a agencies. Industry is in the lead, while "thawed" product. regulators struggle to keep pace with accelerating changes in food production, Re: The Delaney Clause— processing and marketing. Both papers Manele: The descriptions you hear about identify several of the more pressing issues the Delaney Clause are not the original confronting policymakers today. Is the interpretation. Rather, originally the intention patchwork quilt of fragmented programs and was to prevent a carcinogen in a processed policies up to the task of regulating a product if it concentrated beyond what was proliferating, increasingly complex, food in the raw product. Now this is being supply? What is the proper balance between understood to mean none at all—zero risk. the public's right to know and the firm's right Rausser: I expect that the Delaney zero risk to privacy? How much risk should we standard will, sooner or later, be modified— tolerate, and who should take responsibility as soon as some other regulation can be for managing/reducing food-borne hazards? substituted. We, as economists, ought to be The Caswell paper, in particular, doing some work on this to inform the underscores the need to modernize and debate. harmonize the food regulatory system on the basis of the best available science and to target public resources at areas of greatest risk.

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