THE EU NEEDS A NEW AGRICULTURE TRADE POLICY

The impact of the Covid-19 crisis is still unfolding but one lesson can already be learned – we need food security.

In some strategically important sectors the lack of domestic availabilities became quite acute, but fortunately agriculture in the EU assured its fundamental role of feeding its citizens.

It did not pass unnoticed that in the crux of the crisis many countries resorted to export bans and restrictions, including in the agri-food sector. What would have happened if the EU was as vulnerable in food supplies as it was in some medical equipment?

Contrary to countries that have imposed restrictions on their food exports, the EU as a whole ensured also its share of world supplies. This is not a minor or side element, as food scarcity is a real risk in many poor areas of the globe, and first and foremost in neighbourhing Africa.

The time has come to review the EU trade policy, in particular on agriculture, at the light of the past experience and the lessons of the Covid-19 crisis.

In a nutshell the current EU trade policy might be depicted as willing to strike as many Free Trade Agreements (FTA) as possible with as many countries as possible.

The underlying assumption is that the EU, and her trade partners, benefit from freer trade that expands wealth. Agriculture is always part of the FTAs as required by World Trade Organization (WTO) rules.

Another strategic element underpinning the EU trade policy is the belief that freer trade under the umbrella of international rules is a key element of globalization, and a means of reducing strategic fault lines and improving a cooperative approach to planetary issues.

This global approach has resulted in the European Commission (EC) overlooking an in-depth analysis of the impact of each FTA, and failing to decide on its own merits. The EC impact assessments systematically rely on global evaluations and ignore the specific impacts in specific sectors.

This has been particularly acute in the agriculture sector. Agriculture and food security concerns have not been front stage. There has been some recognition that highly vulnerable agriculture sectors (typically beef, sugar, and to some extent pork) should not be fully exposed to outside unfettered competition, but never to the point of stopping short of constantly increasing EU’s market access, or helping those sensitive sectors cope with increased competition. Other sectors, like sheep and goat meat, have been largely left on their own whilst their economic situation has worsened with increased imports.

Farm Europe argues that the time has come to adopt a more balanced trade policy. After Covid-19 we need a change of policy that does not compromise food security. We need a better balance between the benefits of freer trade and its asymmetric negative impacts. We need less of an ideological driven policy and more pragmatism and realism.

Farm Europe is not against trade, nor negotiating FTAs for the benefit of producers and consumers. It must be recognized that FTAs bring benefits that should be cherished. 

The EU is a lead net-exporter of agri-food products. In 2019 the export value of agri-food products came to a total of €151.2 billion, while imports accounted for €119.3 billion. The trade surplus reached an all-time high of €31.9 billion. It is undeniable that trade brings wealth and jobs to the sector.

Isolation within our borders would bring less production, lower farm revenues, less jobs, fewer agri-industries, slower technological progress and innovation spurred by international competition.

Without EU agri-food exports, food security in many countries, and in particular in Africa, would be compromised. As demand for food is raising, the role of the EU as a lead world exporter is paramount.

However FTAs should not compromise the viability of the more vulnerable sectors. FTAs have brought winners and losers in agriculture, and the losers have been basically left alone to cope with the consequences. 

In addition to that, the trade surplus of the EU on agri-food products masks the fact that the EU surplus in raw agriculture products is small, the overall figures are largely helped by the EU export performance on processed products, in particular of high-value.

Whilst FTAs have somehow shielded the most sensitive sectors by limiting free trade under quotas, the accumulation of FTAs, amongst other factors, is leading to shrinking vulnerable sectors like beef and sheep and goat meat.

A new trade policy should pursue the benefits of freer trade whilst either completely shielding vulnerable agriculture sectors, or adopting specific programmes to help those sectors cope (and provide mandatory EU resources to fund those programmes). 

The EC should in its prior assessment to engaging in FTA negotiations carefully evaluate the degree to which borders could be open in key  sectors, and integrate in its assessment as appropriate the design and resources needed to help those sectors cope with additional external competition.

A new trade policy should respect a level playing field between EU and third countries, with regard to environmental, sanitary and phytosanitary constraints.

Whilst it is true that imports into the EU must respect the EU’s sanitary and phytosanitary norms, in many exporting countries substances prohibited in the EU are widely used. The level of controls at our borders must raise to these dangers.

On the environmental field the situation is even worst. Existing FTAs only have some clauses that embed adherence to UN conventions.

The fact is that the EU imports a wide range of produce from deforested areas, from beef to palm oil. This is unacceptable as the EU thus becomes an active actor in deforestation through its large demand for those products. The EU should adopt a clear cut trade policy that bans imports from deforested and other previously high-environmental value areas. The EU has the independent means to control deforestation and identify which products originate in those areas, and should not leave certification of deforested products to third countries or other parties. The EU should establish a clear cut-off date in the past for accepting imports from previously deforested and high-environmental value areas, banning all imports from areas degraded after that date.

The EU environmental constraints are the more stringent in the world. That comes at a cost for the sector, and that cost is not borne by its competitors. In particular the EU should not accept that imports of agri-food products that were produced under significantly lower environmental constraints benefit from tariff advantages.

The level playing field in new technologies is also being turned against EU agriculture. The EU is banning the use of promising techniques that have the potential to increase productivity and reduce the environmental footprint like New Breeding Techniques. By its own doing, the EU is putting the sector at a competitive disadvantage.

On labour conditions the level playing field is all but absent. Existing FTAs only embed adherence to ILO conventions.

Although this is typically a cross-cutting issue that goes further than agri-food trade, FTAs could have provisions to address minimum wage issues in particularly sensitive sectors. For instance, on meat trade the cost of operating slaughterhouses is significant and thus the issue is relevant to establishing a level playing field.

Another cross-cutting issue is competitive currency devaluation. There is a strong case to insert clauses in FTAs that counter competitive currency devaluations. A currency devaluation has quite often a larger impact in trade terms than tariffs, and monetary policies that intentionally devalue a currency should be countered by counter-measures, e.g. by giving the other party the possibility to raise tariffs.

The trade policy changes that Farm Europe puts forward should be seen in the context of reforming the EU trade policy in agriculture towards a more pragmatic and realistic course.

The new policy should bring coherence and a holistic view of trade costs and benefits. On agriculture, it should be in phase with the model of agriculture pursued in the EU, largely based on medium sized family farms operating under their own limited capital resources, on and how the EU is prepared to support this model.

Agri-Fisherie Council: a much requested impact assessment

After a presentation of the Farm to Fork and Biodiversity strategies by Agriculture Commissioner Janusz Wojciechowski and Health and Food Safety Commissioner Stella Kyriakides, agriculture ministers held an exchange of views on these two strategies of the Green Deal.

As the Council Presidency explained in its information note, “the Commission highlights the relevance of the agricultural and fisheries sectors in contributing towards the objectives of both strategies. It is also clear, however, that the implementation of these strategies will have a deep impact on the European agriculture and fisheries, and specifically on their environmental and economic sustainability”.

In particular, ministers exchanged views:

  • on the main challenges and opportunities in achieving the strategies’ targets (question1);
  • on the additional measures suggested by the Commission to make the implementation of the future CAP more efficient in order to help achieve the ambition of the Green Deal (question2);
  • on whether the new proposal for the EU budget 2021 – 2027, including the new European recovery instrument(‘Next Generation EU’), is adequately designed to fulfil the ambition of the Farm to fork and the Biodiversity strategies (question 3).

 

full note available on FE Members’ area 

Negotiations for the EU budget: a downward CAP proposal

The month of May was marked by the unveiling of the new Multiannual Financial Framework including the stimulus package. Although this package improves the 2018 budget proposal, it represents a reduction of €34 billion for the CAP compared to the current programming period (-8/9%).

 

 

full note available on FE’s Members area 

Negotiations on CAP reform: start of trilogue’s negotiations on the transitional regulation

May was marked as follows:

  • At the level of the European Parliament, the Agriculture Committee’s mandate for the transitional regulation was adopted by the plenary and trialogue negotiations have started.
  • The European Commission presented its Farm to Fork and Biodiversity It described them as “compatible” with the 2018 CAP reform proposal. ComAgri has asked for shared competence on these strategies’ proposals, which will interfere with the legislative work of CAP reform.

 

full note available on FE Members’ area 

New Breeding techniques: UK Parliament & USA go forward

In May, the European Union unveiled its Farm to Fork strategy, the agri-food component of its Green Deal. Genetic engineering is timidly included, with reference to the European Commission’s ongoing study on the potential of new genomic techniques to improve sustainability throughout the food supply chain.

In the United Kingdom, the Parliament is lobbying the Secretary of State for the Environment to introduce an amendment stimulating genetic innovation in the post-Brexit Agriculture Bill.

In the United States of America, government has enacted a major regulatory change which will exempt – as of 5 April 2021 – certain genetically modified plants from government oversight, and will allow automatic approval of variations of established types of genetically modified (GM) crops, thus facilitating their placing on the market.

full note available on FE Members’ area 

Wine sector: EU & national measures to cope with the crisis

Wine news continues to be marked in this May by the Covid-19 pandemic.

The European Commission published on the 4th of May a package of exceptional measures announced on the 22nd of April, notably to help the wine sector. On the 2nd of June, the Agriculture Committee of the EP have rejected one of related delegated act (considering these measures to not enough ambitious) to put pressure to the European Commission to increase the level of flexibility.

France and Italy announced some national measures to further support the wine sector as well.

full note available on FE Members’ area 

MEASURES&IMPACTS RELATED TO THE COVID-19 CRISIS: recovery plan outlined

The inadequacy of the exceptional market intervention measures, again pointed out by the Agriculture Committee of the European Parliament, was also criticised by ministers in Council, who called for a second package of measures. On the other hand, a majority of them opposed against the activation of the crisis reserve.

Numerous state aid schemes have been approved by the European Commission, and the Commissioner for Competition is beginning to point to the threat they may pose to the balance of conditions of competition between producers in different Member States.

The outlines of the recovery plan were clarified by the Commission during the plenary session of the European Parliament. The Parliament stated that the recovery plan must be provided in addition to the Multiannual Financial Framework and not be used as an argument to reduce it. The money should be provided for programmes under the EU budget.

 

full note available on FE Members’ area 

CAP budget proposal 2021-2027: a total decrease of -8% in aid

CAP budget proposal 2021-2027  

A total decrease of – 8% (1st & 2nd pillar and recovery plan), 

With -31 billion € less: A proposal suggesting that the agricultural sectors

should only rely on themselves

 

Brussels, 27 May 2020

 

Commission President Ursula von der Leyen today presented her proposals for a revised EU budget for the period 2021-2027 and a recovery plan for the EU economy.

The sum of the announcements is substantial and requires a detailed analysis of the guidelines that the European Commission is proposing for European agriculture and the development of rural areas.

A week before, the same Commission adopted the Farm to Fork and Biodiversity Strategies stressing the importance of food security in the European Union and the central role of European farmers, while asking the co-legislators to endorse a set of new measures that would lead, with a constant CAP, to a reduction of at least 15% in European agricultural production and both an agricultural and rural decline.

To meet the challenges it has drawn, the Commission is today proposing a CAP 2021-2027 budget of 374.958 billion current euros and an allocation of € 16.483 billion for economic recovery. 

Is such a CAP budget up to the promises announced and the needs of the European agricultural and rural sectors?

First observation: with regard to the CAP budget (excluding the stimulus package), the Commission is simply maintaining its proposal of last February for a CAP budget barely spread out in current euros (maintaining the 1st pillar, a 6% decrease in the 2nd pillar), therefore a drastic decrease of 12% in constant euros, thus in real value for agricultural and rural economic actors.

Second observation: the addition of € 16.483 billion (economic recovery package) to the second pillar (rural development) – while it allows for an increasing total budget in current euros – is very far from offsetting the budget cuts made in constant euros.

In total, the Commission’s proposal of the CAP 2021-27 budget with the so-called “economic recovery” envelope amounts to 352.145 billion Euros 2018, compared to 383.6 billion Euros 2018 for the CAP 2014-2020.

The Commission is therefore proposing a severe cut of €31 billion in aid over the period, concentrated on the first pillar of the CAP.

This budget proposal does not offer any real prospect for an economic sector shaken by the crisis, whose ability to continue to produce and take care of rural areas is however vital, but on which the Commission plans to place additional constraints without ultimately giving it the capacity to invest massively in techniques and routes with dual economic and environmental performance.

In the end, less aid, more requirements and suggested constraints result in less income and capacity to invest in the future. The gap is obvious and not very credible.

Now, it is up to the European Council and the European Parliament to restore coherence and to give the European agricultural sectors the means to fulfill their mission of supplying the markets in quantity and quality and of sustainable management of our ecological heritage.

Release of THE FARM TO FORK & BIODIVERSITY STRATEGies

The European Commission has published today its Biodiversity Strategy for 2030 and its ‘Farm to Fork’ Strategy. In line with the Green Deal, these are presented as a roadmap for further initiatives on preserving and protecting biodiversity and on designing a fair, healthy and environmentally-friendly food system.

Farm Europe welcomes a strategical thinking on the future of agriculture and food systems for the EU. In fact, we believe that EU policies should contribute to further environmental protection and to fight climate change, and that has to be done hand-in-hand with furthering the economic situation of farmers and assuring food security.

These Commission Communications include positive elements, notably acknowledging the need to ensure food security, the fact that EU food is safe and of good quality, the difficult farmers’ economic situation, the need to ring-fencing eco-schemes, supporting digital farming and EU biomethane production, to name a few.

However, these two strategies leave open a number of questions about the overall coherence of what is proposed.

Last week, Commissioner Kyriakides stated that better data is needed to decide on identifying and quantifying such reduction targets. However, steep reductions on pesticides and fertilizers, and a forced decreased of agriculture land, are proposed. Making these proposals without providing an impact assessment seems incomprehensible.

Indeed, the Commission needs to demonstrate first that its proposals will not put an added burden to the already stretched farmer’s livelihoods nor result in a decrease of EU agricultural production, which would be far from the objective of increasing the European food security and enhancing growth in the EU and its rural areas.

Today, beyond the general orientations of food security, improvement of the environmental and economic sustainability of agricultural sectors and territories, it is therefore necessary to analyze the added value that the concrete measures proposed by these strategies could bring to the ‘European Union.

Right now, the combined two proposed strategies, if implemented as such, would result first and foremost in a reduction of 15% EU agricultural production and a sharp decline of EU food security.

In addition, the proposed restrictions for EU farmers appear in sharp contrast to the not strong enough stance on imports produced in harmful environmental conditions, where only labeling is considered. EU farmers will thus face an even less playing field, being obliged to adhere to costly stricter environmental conditions that their competitors are not subject to.

Last not least, some incoherencies in the strategies have to be addressed on the relationship between the Farm to Fork Strategy and the Common Agricultural Policy (CAP) and its reform.

As Vice-President Timmermans has stated, a high level of environmental protection and environmental policy integration can be combined with an equally high level of economic development and growth.

It is high time that the EU lives up to this statement, and makes sure that it becomes a reality.

 

–           –           –

  

First analysis of measures as proposed by the EC:

 

  • The proposed Strategies underline the need for innovative investments in EU agri-food systems while remaining unfortunately vague on the support which would be brought, without a word on the necessity to have a more efficient EU toolkit to better manage the volatile economic environment, to face climatic and markets risks and crisis. After the COVID-19 pandemic and its economic impact on the sector, the need of more risk and crisis management tools is obvious.
  • At the same time, they propose very precise restrictive measures to be implemented by 2030 on inputs use, on the share of agricultural land to be let unproductive (10% with a location to be decided by Members states -despite the environmental importance of ensuring homogenous presence of EFAs-) and on the share of EU agricultural land under organic farming (25%), while making a confusing link between the economic and environmental impact of agro-ecology and organic.
  • Concerning EU protein production, the wording needs to be more than empty wishes. The Commission should commit itself to propose concrete and efficient means and recognize that the only successful tool over the last decades to increase this production has been the development of EU sourced biofuels.

 

Concerning the link between the two proposed strategy and the CAP reform, there is a question mark on how would the Commission add-up reduction targets for Member States while taking into account their differences and farm realities? How would the Commission oblige Member States to revise targets if the Strategic Plans that were drawn in 2022 would have no legal basis to adhere to in order to set reduction targets for pesticides and fertilizers that would only be decided through a revision of the related directive starting in 2022?

This design also poses the problem of consistency between:

  • the CAP reform project which claims to entrust Member States with the task of defining 27 different CAP national strategies,
  • and the aim of the Commission to strengthen its power, to define guidelines for each member state and transform the requirements it proposes in these two strategies into conditions for the approval of national CAP strategic plans.

 

Informal Agri-Fisheries Council: call for a second package of exceptional market measures

Guided by Croatia’s Agriculture Minister Marija Vučković, delegations held an exchange of views on measures already taken to counteract the impact of the virus as well as possible future actions at national & European level. European Agriculture & Fisheries Ministers called on the European Commission to table a second package of exceptional market measures to mitigate the impact of COVID-19 on the agri-food & fisheries sectors. And they were splited on agri crisis reserve’s activation.

During the “informal” debate, a number of delegations – AT, LV, LT, LU, PL, CZ, SK, CY, PT, BG, FR, IT, BE, HU, RO & IE – said further financial resources were needed to activate private storage aid & other measures for sectors worst hit such as poultry, pigmeat, potatoes, wine, ornamental horticulture & veal (with the NL, IT, FR & BE particularly vociferous on the latter, backed by IE). Hungary’s State Secretary Zsolt Feldman also made a case for the extension of eligible products for PSA to UHT milk (plus poultry & pigmeat), while Cypriot Minister Costas Kadis referred specifically to the extension of CMO measures to other sectors such as pigmeat, poultry & eggs.

 

full note available on FE Members’ area