Economic Effects of the U.S. Food Safety Modernization Act

Abstract

AbstractThe Food Safety Modernization Act (FSMA) substantially expands the authority of the U.S. Food and Drug Administration to regulate fresh produce marketed in the United States. This article uses an equilibrium‐displacement framework incorporating stochastic food‐borne illness outbreaks to simulate long‐run market effects of FSMA using the North American fresh‐tomato industry as a case study. We demonstrate how, under FSMA, certain categories of suppliers will gain advantage over others. Growers and suppliers within the United States, and their buyers, are likely to gain relative to foreign producers and importers because FSMA imposes specific requirements for importers. Among fully regulated growers, large growers will benefit relative to small growers. Many producers have already adopted food‐safety standards that closely resemble the FSMA rules, and the cost of implementing the FSMA requirements for these producers will be much lower than for other producers.