Informal Agri-Fisheries Council: MAINTAIN THE FOOD SUPPLY & LABOUR FORCE

Although the Council of March 23 was cancelled due to the COVID-19 pandemic, the agriculture ministers of the 27 nevertheless met for a video conference on March 25, 2020. In the presence of the President of the Council Marija Vučković as well as the Commissioners for Agriculture Janusz Wojciechowski and the Commissioner for Environment Virginijus Sinkevičius, the ministers discussed existing and planned measures in the Member States and at Community level to find solutions to the impacts caused by the pandemic on the agriculture and fisheries sectors.

During the “informal” debate, delegations reiterated that the supply of high-quality food will continue uninterrupted during the crisis. Guided by Croatia’s Agriculture Minister Marija Vučković, delegations held an exchange of views on the measures already taken, as well as those planned at national & European level to counteract the impact of the virus on their respective sectors. 

Many delegations (IE, FR, PT, CY, LT, RO, PL, IT, NL, CZ, AT, SE) called for European action to mitigate the impact of COVID-19 on the agri-food & fisheries sectors. For the time being, the Commission has confined itself to passing the responsibility for responses to the MS in the form of state aid, and to ensuring the movement of food products within the Union. It has also hid behind the monitoring of future market developments so as not to take a position in the sitting on the request for exceptional measures.

Following the debate, underpinned by a Presidency overview of the situation, the Council chairwoman said “in order to ensure normal functioning of the food supply chain, it is crucial to identify critical obstacles caused by COVID-19,” citing some of the points raised from the floor such as restrictions in the movement of goods, changes in consumption patterns & in the operation of agri-food production systems. She also highlighted the lack of labour “due to border closures, social distance requirements, mandatory isolation or quarantine.”

“The Ministers today called upon the Commission to closely monitor and defend the integrity of the single market and to propose appropriate action where problems in the supply chain are identified. We need a few days to summarise the outcome of this meeting, and together with the European Commission, we will evaluate and decide on further steps to be taken” added Marija Vučković. 

 

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NEGOTIATIONS FOR THE EU BUDGET: NO AGREEMENT ON THE MFF

The month of February was marked by the failure of EU leaders to reach an agreement on the EU’s 2021-2027 Multiannual Financial Framework (MFF). Charles Michel’s proposal of an overall level of the MFF 2021-2027 at 1.074% was not unanimously supported at the Summit on the 19-20th February and no compromise emerged. As far as the CAP is concerned, the severe cuts (-10% 1st pillar, -25% 2nd rural development) have been prohibitive for some Member States.

 

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Negotiations on CAP reform: Need for longer CAP transition

February was marked as follows:

  • Following the work of rapporteur Elsi Katainen, the majority of ComAgri MEPs confirmed the need to extend the one-year transition period proposed by the European Commission by at least one year.
  • They also expressed their support for producer organisations as a means of strengthening the position of producers in an exchange of views with the European Commission.

 

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Wine sector: Coming into force of the promotion regulations

The European Union Regulation for the promotion of EU wine entered into force on 3 February, ratified by a positive vote by COMAGRI on 18 February. Rising prices continued to drive down wine sales in the USA.

In France, winegrowers are asking for a compensation fund from the French President.

On a world level, the price of American wine is falling, mainly due to a surplus of Californian wine. In addition, coronavirus is affecting the international wine trade, with falls in world wine exports to China.

 

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NEEW BREEDING TECHNIQUES: European Commission launches a consultation

In February, the European Commission launched a consultation on NBTs as part of a study it wants to finalise by April 2021. In France, the State Council through a decision, considers that NBTs should be subject to the same clauses as GMOs with regard to the application of the European directive regulating genetically modified organisms.

After Germany, via its Minister of Agriculture calling for greater openness towards NBTs, it is Italy’s turn, via Teresa Bellanova, Minister of Agriculture, who is asking “Europe to distinguish them from GMOs, because the end result is completely different”.
Finally, DG AGRI, via the words director, sees new selection techniques as a means of managing pests in agriculture, as an alternative to pesticides.

In the framework of the Farm to Fork strategy which should be presented at the end of March (and which will be put out for inter-service consultation by the European Commission from Monday 9 March), the Commission indicates that it wants to take legislative initiatives relating to NBTs under its mandate, without mentioning a date at this stage of the internal discussions which are taking place between its services.

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EU-UK POST-BREXIT TRADE RELATIONS: KEY ISSUES FOR THE AGRI-FOOD SECTOR

INTRODUCTION

The purpose of this paper is to identify the key issues in the post-Brexit EU-UK trade relations, as a preliminary step to shape discussions with the Commission and other decision-makers and stakeholders.

In previous papers Farm Europe dwelt at large on the possible alternative scenarios for Brexit. It raised the attention of its Members and other stakeholders to the magnitude of the impact that either a “hard Brexit” or a Free Trade Agreement (FTA) would have in the EU agri-food sector.

The fundamentals have not changed, insofar as the EU27 enjoys a hefty trade surplus with the UK, and in any scenario other than the UK staying in the Customs Union this trade surplus and the trade flows will be negatively impacted.

What has changed is the level of uncertainty, as now two key elements are either known or very likely to materialize. Brexit is now a given, the UK has left the EU in the end of January. The UK is also set to leave the Customs Union, as announced by its Government, by the end of the transitional period that is supposed to expire in the end of this year.

Where does that leave the prospects for the future trade relations?

Two options are still open: a no-deal scenario (hard Brexit) in the event negotiations fail and there is no agreement on extending the transitional period; and a FTA, which could be more or less deep and large on coverage.

Even if the no-deal scenario is a possibility that should not be excluded, it seems less likely than agreeing on a FTA, as both sides would lose big and would be seen as a monumental political failure.

This paper thus focus on the FTA scenario, the more likely. The aim is to identify what are the major concerns of the agri-food sector for the negotiations, as a basis for fruitful discussions with decision-makers and other interested parties.

a lot is being said on timing and level playing field…

A lot has been said on the fact that less than one year to negotiate a FTA is close to impossible. But it has been also added that the EU and the UK could negotiate by stages, with the objective of getting to agreement quickly where that is feasible, and leaving for later stages more difficult issues.  The Commission draft negotiation mandate explicitly foresees this possibility.

It should not be forgotten that the UK was a Member of the EU, thus fully aligned with its rules and standards. It should be relatively easy to expeditiously conclude the agri-food chapter of the FTA. However the UK might gradually diverge from the EU current set of rules and standards. In the agricultural sector the UK might for instance quickly depart from the current EU restrictions on NBTs, or not follow the EU in restricting the use of pesticides. The problem for the EU would thus be a decrease of competitiveness vis-à-vis the UK if it adopts or maintains restrictions to farming, e.g. for environmental reasons in the context of the Green Deal, and those restrictions are not equally pursued in the UK.

The areas of divergence might build-up with time, as the UK will independently set its course. But that should not be a major impediment to agreeing on respecting each market set of rules and standards, or even negotiate equivalency agreements, as the EU has done in other FTAs. The UK exports would have to abide by our norms and vice-versa. The cost at the beginning would be limited   as the set is similar, although it might increase over time.

Both the EU and the UK will have to face newborn costs to its bilateral trade, stemming from customs and regulatory controls. Whilst it is in the interest of the EU that the integrity of its single market is preserved, it is also in its interest that those controls are based on proper risk assessment and as expeditious as possible to keep on check additional costs on its exports to the UK. Having said that, for the FTA to enter into force it would have to cover all economic sectors. Speaking of trade in goods that should not pose a problem as for the whole goods sectors the integration of both markets is very strong. However, the negotiation on services, and in particular on financial services, can make the whole FTA negotiation more complex and difficult.

On timing, a first point to make would thus be that on the agri-food sector it is feasible and desirable to conclude a FTA in the shortest possible period of time – by year’s end might be tight but not impossible.

What should be avoided at all costs is to bundle all the issues of the post-Brexit relationship together and agree on nothing till everything is agreed. That would most likely demand an extension of the transitional period, which would run into political difficulties, and increase the probability of a hard-Brexit. The consequences of a hard-Brexit have been examined in previous papers, it would lead to a dramatic crisis in many EU agri-food sectors, and should thus be avoided as the worst possible outcome.

even with a FTA the EU will be worse-off…

It is worth recalling what we have written on the event of a FTA post-Brexit for the latest GFF:

“…the UK will be free to adopt free trade agreements with the likes of the US, Australia, New Zealand, Mercosur, with the clear result that the competition for agri-food products in the UK market would dramatically change against our interests, and that the EU market could to a certain extent be open to trade diversion and cheaper products imported into the UK. That might not be a big problem for other economic sectors that have low or no tariff protection, but would definitely be a big problem for the agri-food sector as the UK market would no longer be shielded from outside competition in key sectors (meats, dairy, sugar) by the EU common customs tariffs, nor would it be obliged to enforce the high EU standards and norms if the UK would so decide.

Let us not forget that 60% of the agriculture and food products consumed in the UK are imported, and nearly 75% of these are coming from the EU.

The EU27 exports over €38 billion worth of agri-food products to the UK, and imports only €16 billion, enjoying a high trade surplus of €22 billion.”

In this context let’s not forget that the UK had already prepared for the event of Brexit before it concludes its own set of FTAs with the rest of the world, by envisaging a unilateral drop of its WTO tariffs for a wide range of products. That would bring in swift and wide competition with our exports from the very end of the transitional period.

The FTA with the UK should bring a zero-tariff, zero-quota, across the board free trade, which is the framework that brings us closer to the current situation. It would be the framework that would most mitigate our losses.

The losses that we’ll face depend on the trade deals the UK will strike and on our ability to improve our competitiveness, or at least not compromise it with additional layers of restrictive measures. But it is inevitable that they will occur, all the more in strategic sectors like meat, dairy and sugar.

the EU should however block trade diversion…

Whilst there is little the EU can do to determine the extent of renewed competition it will face in the UK market, the EU can and should in the negotiation of the FTA prevent trade diversion, i.e. that the UK be used as a platform to export to the EU products originating in other countries.

A strict set of rules of origin should be an integral part of the FTA. Wines benefiting from the FTA conditions should be wholly obtained, not only bottled, in the UK. Meat and dairy products should respect the same strict rules of origin, as should sugar and biofuels. Otherwise we would have a situation where e.g. Brazilian sugar and ethanol produced from molasses would find its way to the EU market with no tariffs. By the same token we should not be prepared to accept biodiesel produced in the UK from palm oil imported from South-East Asia.

For the likes of the sugar, meat and starch sectors the EU should go further and prevent the UK from “swapping” its production for cheaper imports from third countries – and exporting the bulk of UK produce to the EU. This triangular trade could create havoc in the EU markets. A net-export safeguard clause should be included in the FTA for a range of highly sensitive products, to be triggered when the UK exports to the EU more than the net balance of its production over domestic consumption.

It should be added that the EU will already have to import more from third-countries in the context of existing FTAs and other bilateral agreements, following the exit of the UK, if it cannot renegotiate the volumes of preferential import negotiated when the UK was a Member. The UK share of the preferential imports will vanish but the agreed quantities would stay.

 

CONCLUSION

To conclude, the EU agri-food sector requests for the upcoming EU-UK negotiations on the future relationship should be the following:

  • Whilst it has no illusions that the sector will be worse-off than today, as it will most likely face increased competition from other countries in the UK market, the best mitigating outcome is an across the board tariff and quota free FTA;
  • The conclusion of a FTA should not be kept hostage of other more difficult issues, which would increase the risk of a hard-Brexit
  • A strict set of rules of origin and safeguard clauses should be agreed to prevent trade diversion using the UK as platform for other countries’ exports to the EU.

NEW BREEDING TECHNIQUES: A REGULATORY PROPOSAL IN THE F2F

This first month of the year 2020 have recorded several statements about NBT’S. The new European Commissioner for Health and Food Safety, Stella Kyriakides said a proposal on the regulation of new plant breeding techniques (NBTs) could be included in the next “Farm to Fork” strategy.
German Federal Minister for Agriculture Julia Klöckner (CDU) and MEP Anne Sander (EPP) also took a stand this month on NBTs.
Internationally, the US Secretary of State while visiting Europe stressed the importance of science-based decisions and NBTs in this context.
China, for its part, said it had developed a new genetic technique improving the CRISPR Cas method.

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WINE SECTOR: INCREASED FUNDING FOR THE EU PROMOTION

In terms of wine news, the first month of the year 2020 has common element with the end of 2019, namely the tariff war between the USA and the EU.
Representatives of the European and American wine trade association ou quoi? have issued a joint declaration calling for the complete elimination of customs duties affecting the wine sector between the two sides.

At the European level, the EU Member States voted on a proposal by the European Commission to increase funding to promote European wine.

The European Commission has published a report forecasting that wine consumption on the Old Continent will fall in the coming years.

Internationally, Brazil has adopted measures in favor of its wine sector by cancelling taxes and creating a Support Fund.

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RISKS AND CRISES MANAGEMENT TOOLS: EQUIPMENT THAT IS TOO LITTLE USED

-In its report unveiled on 5 December 2019, the European Court of Auditors (ECA) found that although EU agricultural risk management measures have partially achieved their objectives, implementation has been weak and there have been cases of overcompensation. The title summarises its conclusion: “Stabilising farmers’ incomes: a comprehensive set of tools, but low use of instruments and overcompensation need to be addressed”.

-At the Agricultural Council of 27 January, the first under the Croatian Presidency, Spain, Germany and France presented a joint declaration on the CAP in the framework of the new European Green Deal. Agreeing on, the Italian delegation added to the need for a budget commensurate with the requirements of farmers the need of a crisis reserve shaped to provide the increased resilience needed by EU farms when facing disasters.

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NEGOTIATIONS FOR THE EU BUDGET: STILL VERY DIVERGENT POSITIONS

 

Last weeks were notably marked by:

  • In the Member States, a coalition was formed to secure the current levels of the Cohesion Fund in the next MFF.
  • Within the Council, (i) the Finnish Presidency revealed the figures in the MFF negotiating box, which were deemed “worrying” by the President of the European Commission and “insufficient” by the European Parliament, (ii) the heads of state met but the real negotiation will take place at the summit on 20 February convened by Charles Michel, (iii) the delegations reminded the Agricultural Council twice in December and January of the need to maintain the CAP budget at the level of the EU-27, in current euros, iv) Germany is showing signs of wanting to finalise the adoption of the EU budget before its presidency, but would still limit itself to concessions of 1.08% of GDP, a far cry from the Commission’s proposals and even further from the EP’s demands.
  • The new Commissioner for Agriculture Janusz Wojciechowski has repeatedly defended the maintenance of the CAP budget at the level of the European Commission’s proposal.
  • Finally in the Parliament i) the President of the ComAgri Norbert Lins pleads for an overall budget at 1.3% of the GNI of the Member States, ii) Vice-President Elsi Katainen in her report on the transitional regulations proposes to increase national co-financing, iii) and the Parliament as a whole has agreed to suspend part of the budget negotiations.

 

Highlights in chronology:

05/11 MS united to protect cohesion funds in the next MFF

12/11 The regions mobilised for their budget

22/11 German MEP’s back strong farm budget

02/12 Council reveales figures of the Negotiating box

10/12 Wojciechowski promises to fight for budget

16/12 Delegations reiterate the need for a budget “up to scratch”

20/12 EP agrees to pause parts of budget negotiations

25/01 Charles Michel calls extraordinary European Council (Feb 20)

27/01 Ministers call for a budget that meets the requirements of the Green Pact

28/01 MEP Elsi Katainen proposals to secure CAP budget over the period 2021 and 2022

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