CORONAVIRUS AND THE AGRIFOOD SECTOR. TAKING SOME DISTANCE

In the midst of the coronavirus pandemic, it is difficult to focus on anything else than crisis management. Member States, European Institutions, Trade Associations, are all struggling with urgent problems, and under those circumstances it is difficult to see the wood for the trees.

Maybe it´s too early to try to draw any firm conclusion on what the “new normal” will be – I personally do not share this trendy mantra: “if it is new, it is not normal”-, but I would like to share some ideas and contribute to fuel the debate for the recovery.

Here are some thoughts on what could or should happen in the next future concerning the agri-food sector.

First, and more than ever, we need a strong multilateral system. It is only under strain that we recognize the real value of what we have. International Institutions such as the World Trade Organization or the World Health Organization are key in this very critical situation, but they cannot enforce international rules and provide real coordination, whether they have been blocked or because they do not have enough power to do that.

We need strong and empowered international Institutions with clear and common rules, able to coordinate a concerted action in the next future. And in order to do that, two things -at least- are needed: willingness from the members, and political accountability and good governance from these institutions.

Second: welcome geopolitics.  One of von der Leyen´s idea is to push for a more geopolitical Union. And she is right. In Europe we tend to be somehow self-centred, but what happens around us needs more attention.

Often businessmen are more interested in things like ROI, EBITDA or – especially now – cash flow, and they tend to underestimate politics and especially international politics.

But they are learning; the Russian embargo or the trade war with the US are good examples of politics affecting business, and we can expect geopolitics to be even more important in the future. In the end it is war by other means – trade, finance, intellectual property, technology…- and all this is also crucial for the agri-food system.

Third, it is hard to see external trade as an escape valve in this crisis. In the last financial crisis, trade has been a strong support in the way out. We have reached unprecedented figures – in 2019, 151,2 billion € exports and 119,3 billion imports – but we face another kind of crisis.

DG Trade´s Chief Economist team estimates a contraction of 9, 2 % of EU exports of goods and services due to coronavirus, and – 8,8% in imports. Primary sector and services will be less damaged than the industry.

But, in this case, we will face a mix of fall in demand, nationalism, neo-protectionism and a weak WTO. The Commission has to face a real challenge, that needs swift reaction, determination – and a substantial export promotion effort.

Fourth, improve safety. Even if EFSA, FAO and WHO have stated that food is not a source or transmission route for coronavirus, safety and health will be the next obsession. Official controls will be revised, as well as hazard analysis and critical control points, crisis management and contingency plans…everything will be put under scrutiny and what is more important, seen through a wider perspective.

Fifth, value chains will be revised. The European Union has a trade surplus of 31,9 billion € that puts us high in the global exporters ranking; European agri-food imports are also quite substantive, and very important for our food chain, although it is not the same as for the automotive industry where global value chains define the production model.

Food value chains will be entirely revised in order to identify the very last supplier, and what is most important, to look for alternative closer to us.

Sixth, sustainability – with common sense. It is clear that the new sustainable model in which we were embarked has no turning back. Both Commission and Member States have declared that the Green Deal will be in the heart of the Recovery Plan, and we believe that it is the only way to look ahead. But facing an economic crisis, the EU can’t afford any mistake. Huge investments will be needed and the road is narrowed to conjugate more sustainability with economic recovery and growth. This means that impact analysis is a must. We should not put under extra stress the food chain – the most important value chain of European economy-, extra administrative burden and unproductive investments have to be avoided. Evidence and science (not opinion, neither ideologies) are especially important in these moments and should be the basis of political decisions.

Finally, rethinking subsidiarity and EU powers. Not living in the Brussels bubble has an advantage, you can see better how the whole system works. The COVID-19 crisis has shown that the functioning of the three levels – European, national, regional-  have been put under strain. In this sense, Europe is the solution, not the problem.

We cannot expect a perfect management of a health crisis at EU level when the Commission has only limited power in this critical issue: the Union has to be seen as a scenario, and Member States are the actors at the theatre…it is up to them to perform.  Maybe the next Conference on the Future of Europe is the occasion to rethink the model.

In the meantime, we should open up our minds, this COVID crisis has no precedent, so better think forward and out of the box.

 

By Horacio Gonzalez Aleman, Thoffood – Madrid – May 7, 2020.