Answers to Economists' Frequently Asked Questions
Q: Is fortification cost-effective?
The benefits of fortification far outweigh its associated costs.
The economic consequences of iron deficiency include reduced work capacity, undeveloped physical and mental skills, and increased risk of maternal death. The mental capacity that is undeveloped when children are iron deficient is never regained. That affects their academic performance and future earnings potential. Consequently childhood anemia is associated with a 2.5% drop in wages in adulthood. The median value of annual physical productivity losses due to iron deficiency is $2.32 per capita, based on illustrative calculations for 10 developing countries. Median total losses which include both physical and cognitive losses are $16.78 per capita. See a full study.
The Copenhagen Consensus, a panel of the world's leading economists who meet every four years, consistently rank improving nutrition as one of the most cost-effective ways for governments and philanthropists to spend aid and development money. See the results from 2012 and 2008 and 2004.
The most obvious economic impact is healthcare expenditures averted when neural tube defects (NTDs) are prevented by fortifying with folic acid. The most common of these birth defects is spina bifida. These children have varying levels of paralysis and loss of bowel and bladder control. They undergo a lifetime of surgeries and often have many complications as a result of spina bifida. These surgeries and treatment take a toll both emotionally and financially. See Why Fortify? for more information.
Q: Who pays for fortification?
Costs associated with fortification are often shared by the public and private sectors. In most cases, millers are responsible for capital investment in machinery, testing supplies for mill quality control, and staff training while the state pays for national quality assurance, monitoring, and evaluation. Determining who is responsible for these various costs requires dialogue between government and industry.
To reduce costs for flour fortification, milling associations sometimes order premix in large quantities, have it delivered to a central location, and then distribute it among members. Governments may eliminate import taxes on premix or fortified flour and flour products, provide tax incentives for investment in new equipment, or subsidize fortification start-up costs. Non-governmental organizations in some cases offer grants for start-up costs.
When costs are passed on the consumer, the incremental increase in retail cost of fortified flour and rice is negligible. For 1 kilogram of flour, the increase may be around US$ 0.00063, or 0.16% of current retail price. For 1 kilogram of fortified rice, it may be around 1.5 - 3% of current retail price (between 8 and 16 US cents per 10 kg of rice).
Q: Will the free market system be impeded?
In the model free market, buyers and sellers engage in transactions without any government intervention or regulation, and the price of goods results solely from supply and demand. In reality, many government controls affect transactions, and mandatory fortification laws are no greater impediment to the free market system than these laws.
Q: Does fortification impact trade (imports and exports)?
The technical specifications for fortification do not prevent trade between countries, but any country considering fortification should address its unique international and regional trade obligations. For instance, Pacific Island countries have to respect World Trade Organization (WTO) Agreements, Pacific Island Countries Trade Agreement (PICTA), the Pacific Agreement on Closer Economic Relations (PACER), the Cotonou Agreement, and various Compacts of Free Association with the United States of America.
Since fortification specifications are considered technical specifications, they are most impacted by the Agreement on Technical Barriers to Trade (TBT Agreement) of the WTO. The agreement notes that it allows members to implement measures to protect human health.
In general, the WTO requires non-discrimination between trading partners as well as non-discrimination between imported and locally-produced goods. It would seem that mandatory fortification discriminates against trade partners that do not produce flour or rice according to the country’s standards. However, exceptions to the WTO principles of non-discrimination allow member countries to adopt trade measures ‘necessary to protect human, animal or plant life or health.’
To prove that a measure meets this criterion, the country must show that (1) the measure is necessary to meet a public health need and (2) the measure is not a disguised attempt to restrict trade or promote discrimination. Countries which evaluate the vitamin and mineral deficiencies in their population then set fortification standards to address those deficiencies meet those criteria.
Most countries mandating fortification are members of the World Trade Organization (WTO), and a few are observer governments. It is therefore unlikely that other countries interested in mandatory fortification would be in danger of compromising WTO obligations.
For more information, see: A Study on Regulatory Requirements for Food Fortification in the Pacific.
Q: How much does it cost to fortify?
The costs of fortification depend on a number of factors including the vitamins and minerals included in the pre-mix and the type of iron fortificant used.
Costs to the flour milling industry are outlined in the Frequently Asked Questions (FAQ) for Industry. Several studies estimate that the cost to fortify flour with iron alone is between US$ 0.05 and US$ 0.07 per person per year. The cost of including other nutrients such as folic acid is minimal once the equipment and procedures for fortification are in place.
Costs to fortify 1 metric ton of rice is only about US$ 15, and the cost of providing a child a school lunch meal of fortified rice daily for an entire year is about 40 US cents.
Q: If my country is already fortifying, what costs are involved in changing country standards for fortification?
Revising a country’s existing standards may involve organizing a multi-sector group to review the current policy and develop new recommendations. If new standards are necessary, some costs may be involved in publishing the new standards for premix, the milling process, and/or point of sale of fortified foods.
Changes in premix formulation may require changes in internal and external quality assurance processes like the purchase of new laboratory testing equipment. As an example, most iron compounds used in flour fortification can be monitored with a traditional spot test, but the sodium iron EDTA compound requires different testing methods. If a country changes its required iron compound to sodium iron EDTA, new testing materials will be needed