UNDERSTANDING GRADES AND STANDARDS - and how to apply them

With the expanding globalization of trade, grades and standards (G&S) help to set the ‘rules of the game’ and their implications for developing countries are becoming increasingly relevant. While they are clearly important to trade, their formation and utilization is also undergoing a shift from being neutral market lubricants to also being tools of product differentiation. This implies a fundamental shift in the role of G&S from just reducing transaction costs of commodity market participants, to serving as strategic tools for market penetration, system coordination, quality and safety assurance, brand complementing, and product niche definition. The issues of who is forming G&S, their privatization, motivations, and the impacts on various market participants and poor people must all inform the strategic responses to the changes in the roles and nature of G&S. The definition of their usefulness and value goes beyond the sometimes artificial distinctions between quality and safety to more current distinctions between process and characteristics. All of these distinctions are predicted to become more relevant than ever as industries and governments, even in the most developed countries, are faced with a new sort of food security issue. In terms of international trade, G&S is becoming the hot topic of political economics in much the same way that tariffs were in the 1990s, with profound implications for regional and international agreements, particularly in terms of sanitary and phytosanitary (SPS) and technical barriers to trade (TBT). To complement this understanding, a practical outline of the principles of G&S is offered along with step-by-step guidelines for establishing them. The document includes examples as well as ample resources for further information. 1 Thanks to Weldon D. Hall (USDA/Agricultural Marketing Service), Lawrence Busch (Michigan State University) and Laurian Unnevehr (University of Illinois) for their contributions. APRIL 2000 40269 P ub lic D is cl os ur e A ut ho riz ed P ub lic D is cl os ur e A ut ho riz ed P ub lic D is cl os ur e A ut ho riz ed P ub lic D is cl os ur e A ut ho riz ed A Guide to Developing Agricultural Markets and Agro-enterprises 2 Edited by Daniele Giovannucci