The Economic Benefits of Food Safety Regulation

Abstract

In this thesis I examine food safety regulation of production of poultry for the domestic market (Case Study 1) and, in less detail, the sale of New Zealand beef to the USA (Case Study 2). Regulation brings both benefits and costs.

New Zealand is in a unique position to examine both the costs and benefits of microbiological compliance programmes, because the Ministry of Agriculture and Forestry (MAF) runs industry-wide agreed microbiological programmes in which industry submits data in confidence to MAF. Improvements to New Zealanders’ health can thus be measured and compared to the imposed costs of compliance. To view the improvements I examined three aspects: (1) the costs associated with the New Zealand disease burden; (2) the compliance cost for industry and regulator to implement the microbiological programmes; and (3) the export returns achieved by meeting market access compliance requirements. My research approach takes into account consumer health and is relevant to MAF Salmonella Strategy, Campylobacter Strategy and also to Treasury requirements for the regulatory impact analysis of such compliance programmes. Furthermore it appears to be the first time in New Zealand that primary industry compliance costs have been assessed in relation to the beneficial health impacts of food safety regulation. My findings are that compliance costs were very low compared to the benefits delivered following implementation of the programmes. However the cost data received from both industry and the regulator were less than complete, with partial costs only from some industry participants, and no specific cost breakdown from the regulator. In Case Study one I derived a Cost of Illness (COI) estimate for foodborne campylobacteriosis from three previous studies. I applied Cost Benefit Analysis to this estimate, combined with the cost data supplied by industry and the regulator. The benefit:cost ratio was remarkable, showing a good return from the combined efforts of industry and regulator in reduction of campylobacteriosis. In dollar terms a gain of perhaps as much as $57.4 million annually. A challenge for the future is a further reduction of the campylobacteriosis epidemic in New Zealand. In Case Study 2, the E. coli O157:H7 programme for New Zealand bulk manufactured beef and veal to retain access to the US market is assessed. The compliance programme costs before and after new sampling requirements in 2008 are determined. These sampling programme costs increased by 54% from 2007 to 2009, but greater costs to industry were the greater number of consignments delayed by false positive results. However the returns to the New Zealand economy of access to the USA market for beef and veal far exceeds these costs. Annual export returns from the USA market are of the order of 0.4% of GDP. In summary the two studies above demonstrate the high value to the New Zealand economy of investment in food safety compliance at primary industry level. The costs involved are very low compared to health benefits from reduction of domestic foodborne disease, and increases in per capita income from retaining access to the USA market.