The Impact of Regulatory Change on Trading Partners: Race to the Bottom or Convergence to the Top?

Abstract

Japan-China agricultural trade is on the increase. However, as is represented by the Japan-China “frozen spinach case” in 2002, food safety is causing a major trade conflict. In May 2006, Japan greatly strengthened its regulation on chemical residues in food by enforcing Positive List System for Agricultural Chemical Residues in Food. What impact will this regulatory change have on its trading partners and non-state actors? The objective of this paper is to explore the impact of Japan’s introduction of stringent food safety regulation on China’s regulations based on the arguments of International Relations. The paper offers a hypothesis for future scenarios and an analysis of key mechanisms through which “Race to the top” takes place. It argues that Japan’s positive list system requires China to improve its food process management system, which could be considerably costly. Nonetheless, the paper also suggests China has many reasons to improve its system. It concludes that in the short term, it is likely that food safety regulation for export is enhanced. Whether this measure is enforced throughout China in the long run depends on who is willing to accept the cost of the institutional, social and regulatory change in the whole food safety system.

Note: this paper was originally prepared in 2006 for the Symposium on “Food and Water Sustainability in China 2007”. Thus the arguments and evidence provided in this chapter is based on the research conducted at that point. Since then, important incidents and changes worth mentioning has taken place. There was food safety scandal, caused by the poisoned frozen dumpling exported from China to Japan (the so-called frozen “gyoza” dumpling incident), which again caused serious political tension between Japan and China. It has led to the agreement of “food safety promotion initiative” between the two countries. It seems the situation is changing in China. China has set in place a new food safety law in 2009 that tightens the regulation on food safety. How and through what mechanism these changes occurred and what impact these changes will have would be another research topic to be explored in the future.