Global change in agrifood grades and standards: agribusiness strategic responses in developing countries

Abstract

The role of G&S has shifted from a technical instrument to reduce transaction costs in homogeneous commodity markets to a strategic instrument of competition in differentiated product markets. The nature of G&S has shifted from performance (realized characteristics of the product) to process standards. In developing countries, these changes have tended to exclude small firms and farms from participating in market growth, because of the implied investments. The three strategic responses to G&S change by agribusiness firms and farms include: (1) by large firms and multinationals, to create private G&S and private certification, labeling, and branding systems; (2) by medium-large domestic firms, to lobby governments to adopt public G&S similar to those in export markets in developed regions; (3) by small firms and farms, to ally with public and nonprofit sectors to form G&S and certification systems to access export markets and to bring institutional change to nontradable product markets. Governments should build the capacity of the poor to invest to “make the grade” implied by the new G&S.