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Session on Commodity Grade Criteria

Are Standards of Identity Obsolete or Redundant?Padberg and Phillip Kaufman

Informal standards of identity were beingdeveloped by the Bureau of Chemistry,USDA, around the turn of the centuryThese standards were recipes—oftensimilar to the recipes typically used athome. Related to the early manufacturedfoods such as canned foods, cheeses,bread and other products from processedcereals (e.g., farina), they were useful inregulating "food adulteration andmisbranding"—responsibilities of theBureau of Chemistry and later at theFood and Drug Administration (FDA). Atpresent, FDA has responsibility forstandards of identity for many processedfood products while the Food Safety andInspection Service, a division of USDA,retains responsibility for processedproducts containing meat and poultry.

These product definitions havealways been of a contentious nature (thestandard for bread required 10 years ofnegotiations). Yet, they have been asuccessful policy instrument, especiallyduring the first half of the century. Theywere a rather comfortable extension to afood system of commodities but are a lessrealistic policy instrument for moredifferentiated products. In earlier days,they were important in the regulation ofadditives and in labeling. Both of thesefunctions have been superseded as new,more specialized laws have been passed.The 1990 policy on nutritional labelingmakes standards redundant in somerespects. The purpose of this paper is tostudy the purpose and function of foodstandards of identity as the policycurrently exists and to assess whetherthey are appropriate in today's conditionsand in light of other current policies.

1The views expressed herein are those of the authorsand do not represent official policy or opinions of theU.S. Department of Agriculture.

History and Purposes ofStandards of Identity

Standards of identity were important inthe earliest development of foodregulation. The identities of the productand each functional ingredient werespecified in detail. This policy wasintended to maintain the definition andintegrity of a food product for purposesof trade as well as safety from toxicpreservatives and other new anduntested ingredients. This pattern wasmaintained until the late 1960s whenstandards were written to allow any "safeand suitable" functional ingredient.Greater flexibility also developed inprimary ingredients. This divides thehistory into two parts, 1900-1969, therecipe period, and the more flexible"guidelines" period, from 1969 to thepresent.

As long as agricultural productshave been produced, processed, anddistributed, opportunities for economicgain through unethical practices havepresented themselves. Throughouthistory, examples of adulteration andmisrepresentation of agricultural andfood products have been documented(Crawford 1054, Hutt 1984). In early U.S.history, individual states passed lawsgoverning the sale of many agriculturalcommodities, as well as food products(Crawford). Both the potential foreconomic benefits to producers andmarketers and the risk to the public weresignificantly heightened as a result of theIndustrial Revolution. Before then, mostfoods were prepared in the home. Inaddition, many households engaged infarming, allowing for some degree of self-sufficiency in raw ingredients and foodproduction. With industrialization, foodproduction was transferred from thehousehold to the factory. Mass

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production methods led to thedevelopment of food processing anddistribution industries. Consumers ofthese food products could not readilydetermine the processes applied oringredients used in marketed foodproducts, nor were there uniform laws inplace to protect the unknowing andunsuspecting public. By the early 1900s,most states had enacted legislationgoverning unethical and harmfulpractices involving food products. Notsurprisingly, there was little uniformityamong these regulations, such thatinterstate marketing of food products wasseverely hampered. As a result, consumerprotection from unethical practices byfood marketers was piecemeal andincomplete under state statutes.

State chemists were among thefirst to recognize the need for uniformlyapplied laws both to protect the publicand to facilitate the marketing ofprocessed food products. In the federalgovernment, chemists working in theBureau of Chemistry at the USDA alsosaw the necessity for legislation. Theirresearch documented the variouschemical additives used in food productswhich were, in sufficient quantities,known to be poisonous. As the risks ofadulteration and unethical practicesinvolving food and medicine becamepublicized, their work receivedheightened visibility among the public,including the media and consumeradvocacy groups. Writing about workingconditions in the meat packing industry,Upton Sinclair (1906) unintentionallyprovided additional impetus for public

outcry over the unsanitary conditions hedescribed.

The first federal legislation toaddress the need for pure food products

and consumer protection was introducedin 1879; between 1879 and 1906 another103 bills were initiated, although none


was enacted. In 1900, a senate committeeinvestigating adulteration andmisbranding of food concluded "thatdeleterious food products should beprohibited and the rest thoroughlyregulated" (Hutt 1984). Congress didauthorize funding for the Bureau ofChemistry to investigate adulteration offood products in 1903 (Crawford). Aspart of that work the Bureau developedmore that 200 "recipes" as food standardsprior to 1906.

The "Recipe" PeriodOne of the high watermarks in the historyof food regulation in the United States isthe Pure Food and Drug Act of 1906. TheAct specifically prohibited a food productif it contained "any added poisonous orother added deleterious ingredient whichmay render such article injurious tohealth" (Huft 1984). The 1906 Act alsorequired labeling of any additives orchemicals used. It protected the consumeragainst contaminated food in that itprohibited products containing a "filthy,decomposed, or putrid" ingredient. Andit regulated the misbranding of foodproducts, but only against presentingfalse information on the label.

Although the Bureau of Chemistrysubmitted a number of standards or"recipes" for common food staples forinclusion in the 1906 Act, they were leftout of the final legislation. Thus, theproblem of "economic" adulteration andmisrepresentation of food products bymanufacturers persisted. These foods metall criteria of the 1906 Act, yet wereconsidered inferior by regulatingagencies, since they posed the threat ofeconomic harm to an unsuspectingconsumer. Indeed, the FDA was ruledagainst when it challenged "Bred Spred"as an imitation fruit preserve (jam). TheFDA claimed the product wasadulterated to conceal its inferiority. Thelabel pictured fruit and indicated a

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"strawberry flavor," but contained lessthan half the fruit ingredients commonlyused in jam or similar home recipes. Theinability to regulate such activityprompted the FDA to seek additionalauthority through new legislation. Byestablishing food standards of identity,the FDA could enforce laws againstunethical practices, including instances ofeconomic adulteration represented by theBred Spred case. At the urging of FDACommissioner Crawford, a bill wasintroduced in the Senate in 1933,designed to curb unethical practices of aeconomic nature. It also expandedadulteration enforcement and providedfor inspection of food processing andmanufacturing establishments.

The proposed bill culminated inthe enactment of the Food, Drug, andCosmetic (F,D&C) Act of 1938. This lawrewrote the Pure Food and Drug Act,addressing its shortcomings which hadbecome apparent. Because the 1938 Actcontained provisions for establishingfood standards of identity, the FDA couldnow pursue economic adulteration cases.More importantly, the creation of foodstandards of identity was viewed by bothmanufacturers and consumers asbeneficial. Food processors sought a"level playing field" among likecompetitors. Food standards provided abenchmark from which to identify andprosecute those products that purport tobe of a standard but whose ingredients

do not conform as required.Manufacturers were now protected frompotential economic harm as a result ofcompetitors' unethical practices.

Consumers would be able to relyon a common or generic name, knowingthat other products similarly identifiedwere comparable in ingredients. Inaddition, the new law required the listingof optional ingredients, such aspreservatives. Thus, standards providedconsumers with convenient means toidentify most staple foods, despite thegrowing number of branded and highlydifferentiated products being marketed.The standards of identity also protectedthe consumer from unscrupulous foodmarketers offering products that"purport to be" of a standard when infact inferior ingredients were used.

At the outset, standards of identitywere ". . . a recipe for both economic andsafety reasons," in order to "promotehonesty and fair dealing in the interest ofconsumers" (Sec. 401, F,D&C Act).Among the first food standards ofidentity were fruit preserves and cannedfoods, as well as other packagedtraditional staples (Merrill and Collier1974). Under the F,D&C Act, almost 300food standards of identity ultimatelywere issued, accounting for about 45percent of the wholesale value of foodproducts shipped across state lines,excluding fresh fruit and vegetables(Federal Register 1979).

Approximatetime period:

2000

1970

1945

1900

1870

The Market:

Strategic competition

Marketing revolution

Mass handling

Commodity trading

Approach: Policy:

Disclosure

Guidelines

Recipes Deterministic

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FDA interpreted its new authorityvery broadly, requiring strict adherenceto the standard as defined. All othersimilar foods were ruled illegal under

Sec. 410 of the F,D&C Act, unless labeled

"imitation." At the urging of the medicalprofession, many standards were created

featuring added nutrients, that had beenlost in processing, or were deemedcritical to improving nutritional health.These standards included enriched farina

cereal and flour in 1942, and, following

World War II, bread, dairy products,macaroni and noodle products, and

margarine (Hutt 1984). The FDA initially

required all other enriched foods thatotherwise were comparable to an existing

standard to be labeled as "imitation." As

a result of the growing number ofnonconforming products, the FDA ceased

challenging violations of the "imitation"

labeling requirement in the 1950s.However, enforcement continued toprevent nonstandard foods from usingthe name of the comparable standard.

Changing technology in foodprocessing brought other challenges tothe regulatory process. Manufacturers

began to use vitamin and mineralfortification as a marketing tool. This led

FDA to develop guidelines forenrichment of foods in order to protect

consumers from "over-fortification."New technology produced functional

ingredients such as emulsifiers,stabilizers, and thickening agents, not

specified as part of the original standard.

Because of the lengthy review andapproval process, the food standards

could not easily accommodate these

innovations. Under pressure from the

food industry and others, FDA modified

some food standards in the 1960s to

permit any unspecified "safe and

suitable" functional ingredient for some

food standards (Food Additives

Amendment of 1958, Color Additive

Amendments of 1960). Although the


"safe and suitable" rule was used mostlyfor minor functional ingredients(additives), it gave products someflexibility in times of rapidly changingtechnology and active productdifferentiation.

The "Guidelines" Period(1969 to the present)From 1938 to the late 1960s, foodstandards of identity provided the centralmeans for FDA's regulation, enforcement,and policy authority. During the 1960s,medical science began to document linksbetween diet and health. Attempting toincrease awareness of healthful foods,manufacturers wished to includeinformation about the qualities of specific

ingredients. FDA's response was toprohibit health and nutrition claims inorder to control what was termed"nutrition quackery." At a time whenhunger and malnutrition were receivingcongressional and media attention, FDA'srestrictive regulatory approach becameincreasingly viewed as at odds with these

concerns. When, in 1970, a White House

conference was held, ostensibly to discusspublic policy needs towards improvingnutrition, a report was presented byadministration officials that "criticizedand rejected" FDA's regulatory scope anddirection toward food policy. The WhiteHouse report called for expandednutritional information through labelingand new emphasis on incentives toencourage nutritionally sound foods. To

ensure that these changes were adopted,

contributors to the report were placed inleadership positions at FDA (Hull 1989).

The result of these developmentswas to significantly lessen the restrictions

governing food standards. At thisjuncture, the "recipe" period came to an

end. In its place, FDA introducedregulations aimed at facilitating new foodproducts that did not necessarily conform

to existing standards of identity but were161


nutritionally equal or superior to them.The "safe and suitable" rule wasextended to all food standards.Application of the "purports to be" clauseregarding nonconforming foods wasseverely curbed, such that only basicingredients were considered. Thus,macaroni with protein enrichment didnot violate the macaroni food standard.Likewise, goats' milk yogurt did notviolate the yogurt standard, even though,in both examples, neither proteinenrichment nor goats' milk werespecified in the existing standards. The"imitation" labeling requirement fornonconforming foods was changed toapply only in cases where thenonstandard product was nutritionallyinferior. FDA also announced newpolicies in 1985 that would allow foodproducts to include health claims,provided they could be substantiated byqualified experts (Hutt 1989).

In exchange for theseliberalizations, the FDA posed newrequirements for labeling and relatedproduct information. These featuresincluded (1) encouragement ofmanufacturers to include both mandatoryand optional ingredient labeling; (2)dietary information; (3) "common name"labeling for nonstandard food products,to include distinguishing characteristicsfrom an existing food standard. Thus,grape drink would be labeled to includethe percentage of grape juice, andnondairy creamer would contain labelingdistinguishing it from the dairy productequivalent.*

The significance of the"guidelines" period was to allow newformulations to compete with theirtraditional counterparts. No new foodstandards have been issued since 1970, asa result of FDA's new regulatoryemphasis. In this new era, the role ofstandards of identity as a means tocontrol economic adulteration appears to162

have diminished. With the emphasis on"common name" labeling, ingredient andnutritional information requirements,FDA must instead rely on misbrandingregulations to protect consumers fromunethical manufacturers and products.Indeed, the discovery of misbrandingwould seem to rest on factual informationalmost exclusively, facilitatingenforcement.

As the process of food regulationliberalization has evolved at FDA, manyboth inside and outside the organizationhave questioned the need for foodstandards of identity to facilitateregulation. The issue is motivated in partby the success of the emphasis onguidelines and additional labelingrequirements, but also by concerns thatfood standards, as they are applied,remain an impediment to current policyobjecth-res. In a speech given in 1978entitle c.: "Major Changes in Food Policy?The Time Has Come," an FDA officialsuggested that standards of identity beabolished and that they be replaced by"greater reliance upon informationprovided in food labeling" (Hutt 1984). InDecember 1982, FDA CommissionerHayes called for a reassessment of foodstandards "in light of the controversyabout their continued utility" (FoodChemical News 1982). More recently,FDA's Acting Director of the Center forFood Safety and Applied Nutritionwarned that "food standards are dead asa doornail," based on his opinion thatstandards still prohibit the introductionof many low-fat food products (FoodChemical News 1988). These publiccomments from within FDA apparentlyrepresent a "testing of the waters" as afirst step towards more substantiveaction.

Such comments have touched offdebate outside FDA about the viability offood standards as a regulatory tool. Amore condemning report was fashioned

by the National Research Council's Boardon Agriculture, in its outlook forinnovations in animal product foods(1988). Underscoring food standardobsolescence, the NRC report notes thatthe initiation of standards of identitycame at a time when "food science andtechnology and most of the food industryas we know it today did not exist" andconcludes that standards of identity forsome animal products are so restrictivethat replacing the high-fat or high-cholesterol food components with nonfator low-fat ingredients is impossible. Thereport, which focused on animal productsonly, recommended that:(1) federal food standards of identity be

made consistent and reduced innumber,

(2) restrictions on specific ingredients andprocessing restrictions other thanthose minimally necessary to maintainbasic characteristics of the food beeliminated, and

(3) attention (by FDA) be given toencouraging new, more nutritionallydesirable, food products.

In their defense, others argue thatfood standards "have a purpose inserving the public interest for order in thefood industry" (Agar 1989). Agar cites asurvey of U.S. consumers (McNutt et al.1984) that concluded that FDA and USDAshould play a central role in establishingfood standards. Given this publicmandate, Agar argues that the presentlaw provides the flexibility for changingthe regulatory emphasis from a rigid,lock-step approach, to one that allows fordiversity and innovation within thecontext of the established standards.

Changes inthe Food Marketing Context

Profound changes have occurred in theprocessed foods industries during the20th Century. At the beginning the


century, the commercial food processingindustries were a part of a commoditysystem. Most food processing was donein the household. The early foodprocessors were competing primarilywith households for market growth.Almost no attention was given todifferentiation of products, while costreduction was paramount. Theapplication of emerging technology was amost important aspect of this period.Then, during the first decades of thecentury, many of the food handlingprocesses were automated and taken intomechanized, assembly line operationsrather than processes done by hand.Hampe and Wittenberg (1964) discusspea shelling and fish cleaning. Clearly,mechanization made these foods cheaperand moved more of the processing fromthe household to the factory. All of thistransition during the first third of thecentury occurred within a commodity-oriented system.

The study of different "stages" inthe food manufacturing industry showshow much industry competition andstructural adjustment differs at differenttimes (Padberg and Rogers 1987). Thiscommodity-oriented stage lasted untilafter WWII, when it was replaced by astage we called the "marketingrevolution." This stage focused onadapting food products to changing life -styles, rather than producing morecommodities more cheaply.Characteristics of this developmentalstage are the emergence of nationallyadvertised brands, an explosion of newproduct introductions, andcomprehensive product differentiationamong brands. In response to thischanged focus of competition, a differentindustry structure was required. Thelarge, often multinational, conglomeratehad intrinsic advantages in establishing abrand umbrella for new products,laboratory exploration of new product

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possibilities, and introduction anddistribution of new products. While thisstage dominated the two decadesfollowing WWII, the same pattern isimportant in the "strategic competition"period that followed.

Several factors can be identified asdeterminants of the marketingrevolution. Rising real income (doublingof real income between the mid-1930sand mid-1960s) did not bring on theconsumption of twice the amount of thesame commodities. Rather, it supporteddemand for more convenient foodproducts and more variety. The numberof women in the work force increasedrapidly after WWII. Home refrigerationmade possible the distribution ofperishable processed convenience foods.The expansion of the supermarket vastlybroadened the choice of food productsavailable. The development of electronicmedia, especially TV, opened possibilitiesand opportunities for introducing newproducts and developing product brandsand images. A revolution in foodtechnology opened up more productvariety and brought more convenientfood products. All of these factorsbrought a new emphasis to foodmanufacturing, including its rapidproduct evolution.

While standards of identity werecompatible with the early stage ofmanufacturing commodity styleprocessed food, they have been generallyincompatible with the marketingrevolution and its emphasis on productevolution and differentiation. Not only isit increasingly difficult to define anappropriate product standard, but fixedproduct standards typically retardadoption of new product improvementsor impede the use of emerging processingtechnology. As our sense of nutritionalvalues has changed over the past fewyears, it is common to desire less fat,saturated fat, cholesterol, and sodium.

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But responding to these desires is mademore difficult because of standards ofidentity. The 19th Century's commoditiesevolved very slowly or remained fixedfor long periods of time; today's productsevolve much more rapidly. Standards aresimply a poor way to represent them.

In the first decades of this century,a grocery store might stock 500 items orless. Half of its sales might be in 12-15 ofthe major staple commodities. In thecontext of a food marketing setting wheremost sales are in a dozen or socommodities, standards of identity areuseful to seller and buyer. Both arefamiliar with most products. It isreassuring to know that those productsare reliably uniform and consistent invalue. It is more efficient to distributefood in fewer transactions with many ofthe purchases being in bulk and in largequantity. Search costs are reduced by themore accurate description of products.Clearly, standards of identity were an aidto efficient marketing of commodities inthis setting.

In the last decades of the century, atypical grocery store offers 15,000 to20,000 items. Super stores frequently offermore than 30,000. Some of these are stillcommodities, such as tomatoes, lettuce,eggs, sugar. But most of the products areformulated foods containing moreconvenience and processing, and mostare differentiated products with changingcharacteristics. Certainly it is thesedifferentiated, branded, and advertisedproducts that lead in establishing thecurrent trends. Even private labelproducts, often thought to be parasitic incopying the success of advertisedproducts, have undergone a significantpattern of evolution. Standards ofidentity, a natural facilitator ofcommodity marketing, have little use ormeaning in this modern setting.

Some manufacturers have chosen •to abandon standards of identity because

of their interference with technicalchanges. We are told that Kraft, Inc.,typically manufactures cheese productsto modern specifications and uses brandnames rather than meeting standards ofidentity and using generic names. As anexample, a new process to extract moreprotein from whey is not permitted in thestandard although it enables moreefficient cheese production and superiorcheese. The new process is typically used.The only time Kraft conforms to thestandard of identity is when makingcheese for sale to the U.S. goverment.

The Policy Paradigm ShiftThe discussion has emphasized theremarkable change in food industrystructure and behavior throughout thiscentury. The early period is one ofcommodities flowing through small firmswhose behavior is controlled bycompetition in markets. The later periodis one in which massive multinationalfirms employ vast creative, technical andcommunication powers to facilitatechanges in both the economy in generaland the lifestyles of individuals. Couldpolicies designed for one pattern fit wellthe vastly different conditions of theother pattern? Such a happy accidentcould happen, but it is extremelyunlikely.

Is-there a recognition of a newpolicy pattern? Is a new policy processdeclared or more subtly discernible?What is the essential theory of the newparadigm? Is there a classification systemin which we can see the comparison ofthe old and the new? Obviously, these aredeveloping issues (Padberg 1992). Theeventual answers are not clear. It is ourfeeling, however, that some scale anddimension can be observed concerning apolicy paradigm shift. We include ourtentative observations in the hope thatthey will encourage further investigationof this important matter.


The contrast between the recipeperiod and the guidelines periodillustrates an interesting transition. At theoutset, there were conditions of largegovernment with small firms andhouseholds. Primitive technology forcommunication and transportationfurther de-emphasized the power ofprivate interests. Low income levels andrates of technical change resulted in apreference for simplistic products. Inthese conditions the efficiency of freeenterprise was highly admired.Goverment could make a fewfacilitating interventions to furtherincrease the efficiency of markets.Product definitions, market news, etc.,were the typical and usual types ofspecific, precise and definitiveinterventions. They reduced theambiguity of the market place. We callthis a deterministic policy process.

In the more recent part of thiscentury, the deterministic way ofassuring product integrity (standards ofidentity) is essentially and functionallybeing superseded by nutritional labeling.This policy is not deterministic at all. Itdoes not require a particular formulationof a product; it simply requires disclosureof essential product characteristics. Wecall this a disclosure policy process. ,

In a mature democracy, disclosurepolicy engages the concerns of the pressand consumer advocates in themanagement of changing processes in thefood market. Since manufacturers areaware of this, disclosure motivates themto emphasize changes that meet publicapproval. Disclosure also gives afranchise to advertise disclosed facts,affecting communication and involvingthe public. Through these processes, theshift to disclosure policy takes some ofthe deterministic power away from thepolicy agency, but at the same time, itgives assistance to the agency by calling abroader democratic involvement into the

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direction of basic change processes withinour society.

What are the advantages anddisadvantages related to this paradigmshift from deterministic policy todisclosure policy? The loss of directvested control is both a disadvantage andan advantage. It is more difficult toassure a particular result in the moremodern scenario. On the other hand,frequently the agency with theresponsibility for managing a process ofevolution does poorly because its history,its laws and its mentality are aimed atmaintaining deterministic standards.While we could trust a public agencywith the responsibility for defining a foodcommodity with the aim to make themarket more efficient, it is less clear thatthe same public agency has the wisdomto autocratically control the evolution offoods and food behavior. In contrast, thedisclosure policy pattern fits the modernconditions, bearing on a broader andmore participative process.

How general is this paradigmshift? What is the evidence that it isrecognized and accepted? There isevidence of similar policy evolution inother areas. Efficiency of automobiles isdisclosed in mileage ratings. Appliancesmust disclose power requirements.Disclosure of toxic material in tobacco isrequired on packages, and tire safety isdescribed in some ways by ratingsinformation. Thus, there is a growingtendency among the public to appreciatedisclosure of basic information, asevidenced not only by a growing patternof such policies, but also by theirpopularity. The 1990 policy fornutritional labeling had a long list ofsponsors and available or potentialsponsors and broad bipartisan support(in one of the most divided congresses ofrecent history). However, it is also truethat this paradigm shift has, as yet, littleformal recognition.166

Phillips: I would second what Padberg saysabout major paradigm shifts; grading andstandards are clearly one of those areas.

Hazards of a Paradigm ShiftA policy paradigm shift has excitingintellectual aspects, but there are alsofrustrating practical problems. Often thenew is put in place by differentconstituents and agencies than those whooperated and managed the old.Conflicting and overlapping jurisdictionsare usual. Most of the energy goes intodeveloping, establishing, protecting anddefending the new. Less energy goes intocleaning up the old.

Many do not see standards ofidentity and nutritional labeling asrelated or interactive, yet it is clear thatthey both have similar purposes. Weknow of no current effort to discontinuestandards of identity, so they most likelywill continue at a general level ofdisinterest and obscurity. Currently, it isdifficult to assess what their function isand what would be affected if they werediscontinued. Not only are they difficultto assess, but apparently no one isinterested.

Assessment of Current StandardsIt appears that most of the original andacquired purposes of standards ofidentity have been discontinued orsuperseded by other laws. In general, it isunclear what a policy to stabffize aproduct means in a period when productstability is not necessarily what isdesired. An effort to assess the severalfunctions of standards of identity in thecontext of their current usefulnessfollows.

Maintaining Product IntegrityFor example, the peanut butter standardrequires 90 percent peanut originmaterial. The remaining 10 percentallows the substitution of other fat for

some of the natural oil to give theproduct a better texture and less of atendency to separate. The main reason forthe standard is to prevent manufacturersfrom reducing the quality of the productby further substitution of (cheaper)ingredients. Such standards were muchlike quality grades for food commodities;however, they were meant to benefitconsumers, while quality grades weredeveloped mostly for commerce andprofessional traders. Both maintained thequality of the product and protected itfrom dilution or adulteration withcheaper ingredients. Today, the policyhas relaxed the requirements thatmaintained product integrity, and it isunclear if there are special areas wherethe policy will be missed.

Consumer informationDuring the recipe period, ingredients didnot need to be identified on the label ifthe standard was met. This was meant tobe a convenience for both consumers andmanufacturers. To give the manufactureran incentive to meet the standard, fooditems were either staples or somethingelse. By meeting the standard, theproduct could be labeled as a staple(which was widely known and respected)and, thereby, gain access to a broadmarket. The ingredients of variousspecialty and other products must belabeled. Consumers would have to basetheir trust in these nonstandard productson the reputation of the local processorand the listed ingredients. In contrast, the

Nutritional Labeling and Education Actof 1990 requires all foods to be labeled forboth ingredients and nutrition whether or

not a standard of identity exists.Although standardized foods requirecommon-name labeling for like products,consumers are generally not aware of the

distinction.


Food SafetyIn the early decades of the 20th century,complex and sophisticated food additiveswere nonexistent. Preservatives were thebiggest food concern, followed byadditives, colorings, etc. Standards ofidentity, the mainstream instruments forfood safety policy, effectively controlledthese early and primitive food additives.As time went on, the range of foodadditive substances and the purposesthey served—and the health and safetyconcerns about them—multiplied.Eventually, specialized regulation wasdeveloped to provide more complex andcomprehensive control of food additives.The famous Delaney "Food AdditivesAmendment" was passed in 1958,followed by the 1960 Color AdditivesAmendment to regulate food additives,and the first "safe and suitable"functional ingredients standard in 1965.Through this process, additives and thefood safety issues connected to themwere transferred to more specializedregulations. Therefore, it seems unlikelythat standards of identity have muchconnection with food safety any longer.

Market FacilitationDuring the first decades of the 20thcentury, policy was developed tofacilitate trade in commodities. When thecommodities came from farms and werevariable in quality, a system of qualitygrades was developed. No. 2 yellow corndefined the typical quality characteristicsof corn. Trade across a wide geographicarea as well as through time into thefuture could be facilitated by use of thisquality grade. Price quotes and quantitydata could have more meaning becausethey related to a defined commodity.

Standards of identity were anextension of the commodity definitionsthat were in wide and functionalapplication at the time but were related to

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the early processed foods from foodmanufacturers and intended forconsumer food purchases. Typically,these were canned and otherwiseminimally processed foods competing ina context of commodities, so it was mostnatural to treat them as commodities. Attheir peak, standards of identity coveredalmost half the value of food productssold. Today, that share must be muchless. Understanding the uniform identityof a commodity is not the way consumersget or use market information today.Thus, it is likely that the formerlyimportant role of standards in marketfacilitation is no longer meaningful.

ConclusionsStandards of identity are a policyinstrument with a successful, thoughcontentious, history over the pastcentury. In an earlier time, they were animportant policy instrument providingconsumer information, assuring foodsafety, and facffitating markets. To aconsiderable degree, these functions havebeen superseded by modern andspecialized policy. Changing technology,both in ingredients and processes, havemade appropriate standards much moredifficult to develop and use. Therefore,the importance of standards of identity inthe food supply has decreased as the

significance of food products ascommodities has declined. No newstandards have been developed for acouple of decades. Fundamentally, foodstandards may have outlived theiroriginal usefulness in the context ofcurrent food policy provisions andpriorities.

As we consider eliminating foodstandards, however, a new set of issuesemerges. What is the importance of a"naming convention"? Does it generallyprotect consumers' concerns abouteconomic adulteration—or does it morefrequently protect traditional (andfrequently obsolete) products fromcompetition? Where and to what extentshould the power of government beexercised in this matter? We cannot saythat there is no longer any possible valueprovided by standards of identity. We doobserve that the usual, traditional anddocumented purposes of this policy areeither meaningless or of very lowsignificance in the current marketingcontext. If there are latent orundocumented bases for such policy, amodern justification is certainly needed.Clearly, the implications for bothconsumers and food manufacturers needto be more fully understood before a newbasis for food standards can be presented.

ReferencesAgar, J. 1989. "Generally Recognized as Sour Cream: Treating Standards of Food Identity as a Success."

Food Drug Cosm. Law Journal 44.Crawford, Charles W. 1954. "The Long Fight for Pure Foods." Yearbook of Agriculture. 83rd Congress, 2nd

Session, House Document No. 280, pp. 211-220.

Federal Register. 1979. Vol. 44, 75990, December

Food and Drug Law Institute, The. 1993. Compilation of Food and Drug Laws. Washington, DC.

Food Chemical News. 1982. Dec. 20, p. 38.Food Chemical News. 1988. Dec. 5, p. 38.Hampe, Jr, E.C. and M. Wittenberg. 1964. The Lifeline of America. New York: McGraw-Hill.

Hutt, PB. 1984. "A History of Government Regulation of Adulteration and Misbranding of Food."Food

Drug Cosm. Law Journal 39.Hutt, PB. 1989. "Regulating the Misbranding of Food." Food Technology. September.

McNutt, Powers, and Sloan. 1984. "Consumer Perceptions on Consumer Protection."Food Drug Cosm. Law

Journal 39.Merrill, R. and E. Collier. 1974. "Like a Mother Used to Make: An Analysis of FDA Food Standards of

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National Research Council, Board on Agriculture, 1988. Designing Foods: Animal Product Options in the

Marketplace. Animal Products Technical Committee.Padberg, D.I. 1992. "Nutritional Labels as Policy." American Journal of Agricultural Economics 74 (5): 1209-12.

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Phillips:The remarks I make here are based onSporleder's and my paper "Implications ofStructural Change and EmergingTechnology for Public Policy Based onOrderly Marketing Concepts"1 in last year'sproceedings. Orderly marketing conceptsdefinitely include grades and standards. Ourthesis was that orderly marketing conceptsand grades and standards were originallyset up to serve a food production,processing, and distribution system thatpresumed undifferentiated, mass-marketedcommodities. Structural and technologicalchanges have brought an agriculturalproduction system with many fewer andlarger farms producing a very substantialshare of the total agricultural output. At thesame time, the food and marketing complexis entering a completely new technologicalera. Biotechnology and information andcomputer technology are bringing morerapid technological change than ever before.It's becoming almost impossible to keep upwith the changes going on in the privatesector, and together these forces aremoving the marketing system toward tightervertical coordination.

One thing that biotechnologypromises is that particular inputs will betailored to enhance quality and otherdesirable characteristics. Consumer-oriented strategies will become essential.Products will be customized to consumerdemand. Previously standardizedcommodities will be transformed into more

1 Food and Agricultural Marketing Issues for the 21stCentury, Daniel I. Padberg, ed., The Food andAgricultural Marketing Consortium, FAMC 93-1, pp.

101-116.

Clayton:My comments are somewhat at counterpointwith Phillips. The changes Mike discussesare coming, but perhaps not as fast as heindicates. Maybe some of the changes hediscusses will come about in the nextcentury. Meanwhile, along with "re-inventinggovernment," the Agricultural MarketingService has been reexamining its programs.Among these, we are looking at gradingstandards and grading services. Shouldpublic resources be used for this? Well, theservices are fully cost recovered. And a lotof folks apparently find value in this activity.There seems to be a strong sentiment for acontinued public involvement in grades andstandards.

One current effort is to developnational standards for organic. This field hasbeen like the Tower of Babel. We need asingle, consistent language, uniformlyapplied to facilitate trade in organicproducts.

Standards provide a basis forcontract law (see Bromley's article inChoices, 4th Quarter, 1993). They are alsonecessary for price reporting. The MarketNews Service must be based on uniformstandards. Further, the licensing systemneeds standards.

But standards must be useful,practical, and affordable. (They are on theprivate "nickel.") With pork, there is nobodyto charge, so there are none. It will beinteresting to see how the pork industry getsalong on its own, without using governmentstandards. However, if a demand exists fora standard, it will be there. In the lambindustry, standards were breaking down.Packers used either quality or yield. Now,they're being hooked back together.

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Phillips continuedcustomized products. This new era will raisethe economic importance of geneticallyimproved, differentiated commoditiestargeted at specific end uses. And these enduse markets will be very tightly verticallycoordinated. This new distribution systemand various exchange arrangements willincreasingly be able to accommodatespecialized, value-added types of products.An implication is that these structuralchanges and vertical coordination areaccomplishing some of the objectives oforderly marketing which public programswere originally designed to encourage. So,in essence, price and market mechanismsare developing that achieve, at leastpartially, some of the orderly marketingobjectives. This suggests a need to evaluateseparately government programs intendedto facilitate private market functions andthose intended to monitor private marketbehavior to assure that welfare is beingmaintained. Programs and policies based onorderly marketing aimed at facilitating thefunctioning of private markets are morelikely to endure obsolescence than thoseestablished for the purpose of monitoring.

Looking at some of these markets,clearly we can see substitution of privatemarket facilitating for federal governmentfacilitation programs. Take, for example, thearea of fruits and vegetables. Here is a verytightly vertically coordinated system. Thequestion is, what role is left for governmentto facilitate market information, marketarrangements, in such a highly coordinatedsystem? Grading becomes much lessimportant. There's much less variation inwhat is marketed today in the grocerystores. But one of the criteria calling for agrading system is product variation—that is,variation gives a reason for grading. Yet,new technology, especially geneticengineering, is going to mean much lessvariation in the biological product itself.Thus, there will be even less need forgrading. Besides, the new labeling law

Clayton continuedThe government signals through

standards. Consumers are demanding moreinformation about pesticide residues andnutrition, including fat content. Thegovernment has several possible roles inresponse. For example, products can becertified as free of certain substances.

There is a whole range of institutionalbuyers from schools to prisons who applystandards in making their purchases. Theseare useful to them, so they know exactlywhat they're gefting. They look to AMS forguidance.

Besides the product, Ams isconcerned about process—and cost. Weare trying a Quality Management approach.

We are studying how we fit in with theInternational Standards Organization. Thisbrings up the whole area of trade, for gradesand standards have the potential to serve asnontariff barriers. GATT and NAFTA committhe United States to sign on at some time tointernational standardization. GATT will lookto CODEX Alimentarius for solving issuesand establishing protocols for inspection,safety, and quality.

Phillips continued

(NLEA) to be enacted soon will providepoint-of-sale nutritional information on fruitsand vegetables to consumers, taking care ofmuch of their informational needs.

So, it's not only structural change, butalso technological change, that is reducingthe need for government facilitation,especially the need to measure things thatare not varying much. As we go into the nodcentury, it will be tantamount to question themoney that is going into these programs.

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Meyer: At first glance, Padberg andKaufman's paper on standards of identityseemed outdated. My initial reaction was"Off with them!"—the standards, that is, notthe authors. While modern technology doesoffer many ways of duplicating the taste ofpeanut butter or ice cream, it seems thatsome standards should still require some"trueness" regarding ingredients. That is, atleast don't allow an "emulsified petroleumpeanut-tasting product" to capitalize onpeanut butter's good name. I'm not a lawyer,but this appears to me to be a matter ofproperty rights. Might anyone or anythingcapitalize on peanut butter's good name inthe absence of standards of identity? Ananswer should be known before we assignstandards to the scrap heap.

It's a matter property rights. From myexperience at NPPC, I feel safe to say thatwe would have loved a standard of identitythat required pork content in any productcalled ham or bacon, thus preventing themarketing of turkey-based look-alikes. Nosuch standard existed (nor exists today) andthus NPPC's challenge to the marketing ofturkey ham and turkey bacon was refused.Julie Caswell, U. of Massachusetts:Standards of identity were put in place toprotect consumers from being ripped off, butnow they need to be reconsidered. Thepresumption was that there was economicfraud if, for example, peanut butter did notcontain 90 percent peanuts. Now we'd liketo change to a less-fatty, healthier product,but then we couldn't call it peanut butter.The same holds for ice cream. And cannedfruit products have to have a high proportionof sugar.Sporleder: But it's still useful to maintainthe integrity of "peanut butter." There arebenefits to keeping the names.

• Sarahelen Thompson, U. of Illinois: Thereare some benefits to keeping product namesintact. For example, consumers cancompare cream cheese on a price basis ifthey all meet the same standard of identity.


Gary Fairchild, U. of Florida: Theadulteration of orange juice was a highlyvisible occurrence. Consumers felt rippedoff.Padberg: In the future, nutritional labels willmore fully describe the product. Besides,there are special laws to deal with additives.As our lifestyles change, products (and whatwe call them) will change.

Meyer: The comments of representatives ofthe various government agencies attendingthis conference are heartening. Their wish tomeet the needs of producers and marketersis greatly appreciated. They want to dowhatever the system needs. I appreciatetheir desire and believe that they have theability to accomplish what they see isneeded, if given enough resources. Yet Iquestion the ability of government agenciesto clearly see what is needed (they're simplytoo far away) and the willingness ofpolicymakers to allocate enough resourcesto the task at hand.

I believe the future of commoditygrading lies in the hands of the participants.They must devise systems that serve thepurpose of classifying products by use,reflecting logical demarcations of value, andserving as a language useful in trade, bothdomestic and foreign. I believe that govern-ment agencies can facilitate this processand that they can serve (possibly better thananyone) as arbiters in administering thegrading systems. But, it is up to the peopleinvolved in the systems to find ways to makethem better. I know we can.Walt Armbruster, Farm Foundation:What's the public benefit in privatestandards?Jones: There have to be incentives built infor the private sector to produce publicbenefits; the costs must exceed the benefits.Zulauf: The private sector has a credibilityproblem because of its bias. Consumersthink that the industry warps the system toits advantage—and it probably does. Thegovernment is the arbitrator. It establishes

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the criteria for private firms to meet. A thirdparty is needed in these matters.Hayenga: But often the government isrubber stamping what the private sectordoes.Sporleder: The government serves as athird party. Perhaps even in the porkindustry pork producers may need theassurance that they are getting fairtreatment.Donald Raymond, Agriculture Canada:The U.S. system is the benchmark for othercountries.Sporleder: We have talked about the role ofgrades. We've looked for examples of whenthey've been useful. But the overall tone ofthis session has been that the they're not allthat important. However, let me give you aninstructive example. At one time feedercattle grades were essentially the same asfed cattle grades, and they didn't work forthe industry. So the industry went out on itsown (as the pork industry has done). Thenthey got too many different ones, so, theycame to AMS and said they needed nineuniform grades established—combinationsof small, medium, large and 1,2, 3. Theyneeded a third party to settle the matter. So,here's a commodity grading system that wasprivatized and then came back to thegovernment.

Clayton: This is not unusual. The industryincreasingly approaches AMS to do thirdparty certification. This neutral third partyrole seems to come up all the time. It's notthat the government has an exclusivedomain as a neutral third party. Clearly,there are others in the private sector who dothis. But nevertheless AMS has a steadyflow of requests. I wonder, as we becomemore globally oriented, how will anappropriate neutral third party, one who willbe recognized by other countries, be found?Jones: The problem is that when AMS'consulting role becomes a permanentthing—then inertia sets in and actuallyhinders the market process, making it costmore.Clayton: The largest portion of what AMSdoes in the inspection area is on a voluntarybasis. We try to be responsive to ourcustomers. The downside of thegovernment's promulgating these officialstandards is that it has to be done through adeliberate public regulatory process. And it'snot surprising that we run into producersand packers at total loggerheads on makingany changes to the standards. So,sometimes AMS appears not to be asresponsive to what the market is looking for.

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session on commodity grade criteria are standards of ... · investigating adulteration and...

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