GAFTA aims for an open market
June 01, 2004
by Suzi Fraser Dominy
Pamela Kirby Johnson, director general of GAFTA, reflects on the impact on the trade of the plethora of new regulations emanating mainly from the E.U.
The Grain and Feed Trade Association (GAFTA) represents international grain, feed, pulse and rice trading companies and includes companies that provide services to the trade. Based in London, U.K. and with an office in Beijing, China, the association started 126 years ago and currently has 950 members in about 80 countries.
World Grain talked to Pamela Kirby Johnson OBE, GAFTA’s director general. We asked her first of all to explain the primary role of the association.
Kirby Johnson: The international supply chain starts with the farmers and at every link there are prospective sell-
ers and buyers whose interaction creates the international food and feed markets. Buyers and sellers may include specialists in manufacturing, milling, feed and food processing, but together with the exporters and importers, they are all traders of the vast bulk crops being transported around the globe. The international market is intensely competitive and this competition has been sharpened by information technology that enables the traders to know at any given time the value of the goods in all corners of the globe.
It often seems that agricultural commodities suffer from more governmental interference and legislation than any other industry, and it is vital that traders are up-to-date with policy impacting their businesses and for them to be represented at a government/authority level.
GAFTA’s prime aim is for an open market without unnecessary constraints, and we therefore very much endorse the principles of the World Trade Organization for the further liberalization of trade and improved market access.
GAFTA provides the standard contract terms buyers and sellers use for shipments and deliveries around the world. These are supported by a number of schemes and rules to assist traders — rules for taking representative samples, for uniform weighing procedures and harmonized analysis methods — to ensure the smooth passage of goods from country to country.
There will of course be difficulties and disputes from time to time, and the method usually chosen for the settlement is arbitration. The association provides an arbitration service and with mounting interest in alternative dispute resolution systems, GAFTA now has mediation facilities available.
GAFTA has an extensive training syllabus and courses are held worldwide. Its Continuing Professional Development Programme covers all aspects of trading and contracts and shortly we will be offering this service via the Internet as an interactive distance learning program.
WG: The European Union is in the process of implementing a horde of new regulations. What are the main issues that will impact the industry as a result of the tightening of official E.U. food and feed controls?
Kirby Johnson: The major impact will be a constraining effect on trade. E.U. importers will need to be registered and only buy from countries or establishments approved by the E.U. The increased administration and lack of freedom to buy from any source will impact trade.
To a large extent the trade already covers health and safety requirements.
Customarily commodity crops are handled and transported in vast bulk tonnages, which implies, for a particular commodity, that the harvest from one farm is similar enough to that from any other farm to be sold via a common grading and distribution system. Goods are guaranteed to be in sound condition and of good quality. In addition buyers often now demand assurances relating to health and safety. This means compliance with regulations and assurance schemes put in place to provide consumer information and confidence.
Where once people generally took very little real interest in these issues, they possibly know more now than at any time about the food they eat, and are seeking more information in order to make informed choices.
Management systems to track materials from origin are developing rapidly. There are a number of schemes to assist, such as the GAFTA Standard for Best Practice and Traders Manual, introduced to give guidance and to facilitate international trade. For the first time there is an all-encompassing system that can be adapted for any country to provide assurance for safe food and feed. The best practice is based on HACCP risk analysis, with a number of codes of practice to assist in formulating control plans.
WG: How are your members dealing with the requirement for all food and feed consisting of, containing or produced from a GMO to be labeled and traceable throughout the food chain since the new regulations took force in the E.U. on April 18, 2004? What are the main difficulties?
Kirby Johnson: Increased imports of the vast tonnages of raw materials worldwide have caused diverse reactions. Prior to the new E.U. legislation, commercially, sellers advised buyers when providing non-GMO products. The new legislation has turned this on its head. Now goods entering the E.U. with more than 0.9% of adventitious GMO will have to be identified positively that they are produced from, or consist of GMO. (For whole grains the particular identification event codes must also be given). It is in fact inadvisable to declare products as non-GM unless absolutely certain. With such a small threshold, and bearing in mind the need to exercise the ‘E.U. precautionary principle,’ and with penalties for non-compliance, it is sensible to label all raw materials accordingly.
The Cartegena Protocol on Biosafety was ratified worldwide last September. It is an international convention intended to protect the environment on risks posed by the transboundary transport of LMOs (living modified organisms). There is some concern about the direction being taken; it is principally led by environment ministers with very little understanding of trade issues, pressing for more stringent controls on international trade. We would like to also see ministers of trade and/or agriculture interested in these discussions.
It is vital for the international trade, while accepting the need to protect global biodiversity, to maintain a low-cost bulk handling system. For the first time traders will be obliged to carry out environmental controls.
WG: Still on the topic of GMOs, China has now approved certain GMO varieties for import — has the system been working for traders?
Kirby Johnson: The Ministry of Agriculture in China has started to accept applications for permanent safety certificates, which came into effect on April 21. Our office in China is monitoring this and has been able to assist with the requirements, not least translations required with the provision of Safety Certificates and registration forms for imports. All such arrangements take time, and in the trade time is costly.
WG: What is the status of the discussions to harmonize mycotoxins?
Kirby Johnson: The Codex Alimentarius Commission is responsible for setting internationally safe limits of mycotoxins on a risk analysis basis. At present the E.U. regulatory levels exist only for aflatoxin and ochratoxin A, but work is in hand for limits on other mycotoxins, which it is intended to apply from July 1, 2005.
Our members expect regulations to be based on sound science, but importantly the key to this is prevention at farm level. It is essential that farmers follow good agricultural practices for growing, harvesting and storage of cereals.
WG: Are there any technical issues that arise from E.U. enlargement?
Kirby Johnson: Not yet! On May 1, 2004, ten countries joined the European Union: Poland, Hungary, Slovenia, Slovakia, the Czech Republic, Estonia, Latvia, Lithuania, Malta and Cyprus. GAFTA Members in those countries will need to get to grips with the rules and regulations for food and feed. GAFTA is holding a training course in Poland this month and we are already over sold.
Free trade agreements within the E.U. have existed with the new countries for ten years and some of the benefits of a single market should have already taken place. For future trade, as farmers under the reformed Common Agricultural Policy (CAP) will have more freedom in the nature of their farming, greater choice with the focus on growing for markets, this should be good news for trade generally.
WG: Looking ahead, what can the grain and feed industry expect from the European Action Plan on Organic Food and Farming?
Kirby Johnson: Internationally at present GAFTA Members are shipping some organic materials to certain markets and we have introduced standard contract terms for that purpose. The market is still very small but growing rapidly. With the E.U. CAP reform package, to grow for markets, it is quite possible that farmers will be able to meet an increased demand for organic goods.
WG: The industry is currently experiencing a shortage of freight and high shipping costs. How is this impacting feed and commodity prices? What is the reason for the current situation, how long is it likely to last and what are the prospects for the future?
Kirby Johnson: GAFTA Members have certainly felt the effects of the recent increased freight costs and the impact it has had on existing contracts where the price was already agreed. This has applied not only to bulk goods, but also to container traffic. There is considerably more international regulation and control on shipping, which means that as fewer good quality vessels become available it will be a matter of supply and demand. Some rates for some origins have fallen slightly in the last week, but the future is uncertain.
WG: Thank you.