A renewed trade policy for a stronger Europe

Posted on - Posted by Farm Europe

Consultation process

The trade policy review process will be based on broad consultations with stakeholders, including through public debates undertaken across the EU Member States and through written submissions.

Stakeholders are invited to provide their responses to the questions set out above by 15 September 2020 to the functional mailbox: trade-policy-review-2020@ec.europa.eu.

‘The European Commission is launching a review of the EU’s trade and investment policy. Two key objectives are driving this process. First, to assess how trade policy can contribute to a swift and sustainable socio-economic recovery, reinforcing competitiveness in the post-Covid 19 environment, addressing the challenges the EU will face, and helping to promote our values and standards. Second, to see how trade policy can help build a stronger EU based on a model of “Open Strategic Autonomy” ̶ reaping the benefits of openness for our businesses, workers and consumers, while protecting them from unfair practices and building up our resilience to be better equipped for future challenges.

In essence, this policy review will set the political direction for EU trade and investment policy in the years to come.

The Commission’s objective is to build a consensus around a fresh medium-term direction for EU trade policy, responding to a variety of new global challenges and taking into account the lessons learned from the coronavirus crisis.’

 The EU should pursue a model of “Open Strategic Autonomy”. This simply means strengthening the EU’s capacity to pursue its own interests independently and assertively, while continuing to work with partners around the world to deliver global solutions to global challenges.

 

Introduction

The EU’s position as the largest global exporter and second largest importer of agri-food products makes trade of crucial importance for the EU’s agri-food sector. 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, therefore our trading policy regarding agricultural products is key.

In addition to that, the European Commission has previously estimated[1] that in a context where 90% of the additional world demand for agri-food products over the next 10-15 years will be generated outside Europe, and thus exports to third countries will be instrumental to the growth of the agricultural sector. This will be mostly made possible by bilateral agreements that create opportunities for EU producers on global markets and by a well-functioning set of international trade rules under the WTO.

However the impact and cumulative effects of EU trade agreements on the EU agricultural sector needs to be carefully examined.

Overall, 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.

For these reasons, Farm Europe wishes to add the following points and answers to be considered in the discussion for a renewed trade policy for a stronger Europe.

 

  • Building more resilience – internal and external dimensions

Question 1: How can trade policy help to improve the EU’s resilience and build a model of open strategic autonomy?

Question 2: What initiatives should the EU take – alone or with other trading partners – to support businesses, including SMEs, to assess risks as well as solidifying and diversifying supply chains?

During the unfolding of the Covid-19 pandemic, 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 were as vulnerable in food supplies as it was in some medical equipment and medicines?

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.

In light of this, if we wish to pursue a model of ‘Open Strategic Autonomy’, we must guarantee the strategic value of the agri-food sector. Therefore we must ensure that besides establishing solid trade relations, we have a robust agriculture in the EU in place as well that can assure its fundamental role of feeding its citizens under any circumstances.

Farm Europe is not against trade, nor negotiating FTAs for the benefit of producers and consumers. In fact, 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. The brutal disruption of trade flows should be avoided and the EU should work to enable new mutually beneficial relations to be agreed in the future.

On the other hand, Farm Europe argues that the time has come to adopt a more balanced trade policy. Trade should help, benefit and strengthen the resilience of the agri-food sector, not undermine it. European farmers should not be a bargaining chip offered in exchange to the benefit of other sectors and industries.

This means first and foremost that 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. 

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 European Commission 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.

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. Such facts need to be acknowledged, as well as that the EU suffers from a chronic deficit in plant proteins as it devotes only 3% of its arable land to protein crops and it imports more than 75% of its vegetable protein supply and still significantly depend on imports of animal protein.[2] With our FTAs we mustn’t hamper food security.

 

  • Supporting socio-economic recovery and growth

Question 3: How should the multilateral trade framework (WTO) be strengthened to ensure stability, predictability and a rules-based environment for fair and sustainable trade and investment?

 Question 4: How can we use our broad network of existing FTAs or new FTAs to improve market access for EU exporters and investors, and promote international regulatory cooperation ̶ particularly in relation to digital and green technologies and standards in order to maximise their potential?

Question 5: With which partners and regions should the EU prioritise its engagement? In particular, how can we strengthen our trade and investment relationships with the neighbouring countries and Africa to our mutual benefit?

In relation to Africa and the EU’s trade & investment policy, we shall pursue the dual mission of:

  • promotion and support of both local and sectoral sustainable rural development projects in Africa based on the improvement of local, national or transnational agricultural value chains,
  • contribution to the establishment of governance and development policies that are conducive to Africa’s development through its agriculture and agri-food sectors.

Through its actions in this field, the EU needs to aim to support integrated rural development projects in agriculture and agri-food sectors that maximize the added value for the targeted regions, by integrating them into the environmental dynamics promoted by COP21, highlighting social norms and affirming the high value of women’s work.

Question 6: How can trade policy support the European renewed industrial policy?

The trade policy must not hinder the link between agriculture and industrial transformation in the EU. It is an illusion to believe that the EU can keep a vibrant and competitive agri-industry without a solid domestic production of agriculture goods.

 

  • Supporting SMEs

Question 7: What more can be done to help SMEs benefit from the opportunities of international trade and investment? Where do they have specific needs or particular challenges that could be addressed by trade and investment policy measures and support?

Just as the backbone of the EU economy is composed of SMEs, the EU’s agriculture model is largely based on medium sized family farms.

These farmers need to have the tools to be up to date on the opportunities and threats on the world market regarding trade. They should have the tools to understand when there is a decrease or increase in demand for their products and to find proper business partners on the other side of the world.

 

  • Supporting the green transition and making trade more sustainable and responsible

Question 8: How can trade policy facilitate the transition to a greener, fairer and more responsible economy at home and abroad? How can trade policy further promote the UN Sustainable Development Goals (SDGs)? How should implementation and enforcement support these objectives?

Please refer to our response to Question 12.

Question 9: How can trade policy help to foster more responsible business conduct? What role should trade policy play in promoting transparent, responsible and sustainable supply chains?

 

  • Supporting the digital transition and technological development

Question 10: How can digital trade rules benefit EU businesses, including SMEs? How could the digital transition, within the EU but also in developing country trade partners, be supported by trade policy, in particular when it comes to key digital technologies and major developments (e.g. block chain, artificial intelligence, big data flows)?

Question 11: What are the biggest barriers and opportunities for European businesses engaging in digital trade in third countries or for consumers when engaging in e-commerce? How important are the international transfers of data for EU business activity?

 

  • Ensuring fairness and a level playing field

Question 12: In addition to existing instruments, such as trade defence, how should the EU address coercive, distortive and unfair trading practices by third countries? Should existing instruments be further improved or additional instruments be considered?

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. Problems associated with banned substances during the production process cannot always be detected in the finished product, which possesses a real risk. The level of controls at our borders must raise to these dangers, and must be completed with strong commitment of exporting countries to respect the European standards of production. Those commitments must be included in FTAs, and means of controls must be included during negotiations”.

This is likely to become even more important, as operational and production costs will probably rise due to the realization of systematic changes recommended by the Farm to Fork Strategy and the Green Deal.

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 by using for example monitoring of forest cover change through satellite imagery. Such technologies giving unbiased monitoring have been developed by European enterprises such as Copernicus or Starling, used in particular by companies as part of their Zero Deforestation commitments.

The EU should not leave certification of deforested products to third countries or other parties in general, unless equivalent systems based on objective and verifiable satellite imagery that are open to auditing are set up to monitor deforestation implemented by the concerned countries, which then the EU could accept, and even support. This would represent a welcome step towards empowering countries, where deforestation has been a plague to take the matter on their hands and implement the appropriate mix of control, economic, social and environmental policies to halt deforestation and forest degradation.

This way the EU could help either producer countries and their public authorities or even the private sector to speed up their efforts for more transparency and sustainable land use planning through cooperative approaches including provision of data layers, eg: High Capacity Satellites (HCS), and verification tools

Overall, 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.

Food fraud, counterfeits and imitations of well-known and protected EU products with a designation of origin must be tackled to establish that such deceits won’t be able to enter and gain a foothold in markets from all over the world under the false disguise of the EU products’ good reputation.

Question 13: What other important topics not covered by the questions above should the Trade Policy Review address?

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.

[1] https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/agricultural-food-trade_en.pdf

[2] Report on a European strategy for the promotion of protein crops – encouraging the production of protein and leguminous plants in the European agriculture sector (2017/2116(INI))