Tag: trade

Long term solutions needed to cope with the surge of imports from Ukraine

Posted on - Posted by Farm Europe

Yesterday, Agriculture Commissioner Janusz Wojciechowski intervened in the Agriculture Committee on the situation on the European cereals market in relation to the war in Ukraine and the end of the “Black Sea grain deal”.

The Commissioner wanted to explain in detail the enormous pressure that the import of Ukrainian cereals has brought to the market of the five neighboring countries (Poland, Romania, Slovakia, Hungary, Bulgaria) and which has justified the block of imports of maize, wheat, rapeseed and sunflower seeds in these countries until 15 September.

This protectionist measure will therefore soon expire and the Commissioner said he was concerned about the impact this could have on the markets. Mr Wojciechowski recalled that in 2022 Ukrainian grain poured into the five countries to the value of EUR 5 billion more than before the war. The Commissioner then presented his proposal -and he emphasized that it is his proposal that has not been validated by the Commission and will be discussed at the College- to break the deadlock.

According to the Commissioner, today it is possible to export from Ukraine through the solidarity corridors, but cereals still remain in the EU (and do not go to third countries as was previously the case) due to the increased transition costs of passing through several European countries and ports, greatly increasing the cost of Ukrainian cereals and making them uncompetitive for third countries. This is why the Commissioner is proposing European transit subsidies to cushion these additional costs and proposing compensation of €30 per tonne. The Commissioner believes it would therefore take a budget of EUR 600 million to cover 20 million tonnes of cereals.

According to our assessment this proposal of a transport subsidy would equal an export subsidy which would directly compete with local production in third countries. Therefore it will not probably not be accepted internally after the European Commission legal assessment. Instead, we consider that the focus of the European Union should be in fostering alternative logistic facilities and processing within the European Union in order to rebalance markets and invest in sustainable, long term solution instead of short term quick fix that are legally uncertain and not viable in the medium to long run.

However it is clear that solutions must be put on the table. Our infographic with the latest figures from European customs highlights the continuing dynamic of cereal and oilseed imports from Ukraine, a minima jusqu’au mois de juin pour lequel les données sont disponibles. Sugar imports, which did not exist before autumn 2022, have increased to significant levels, upsetting the balance of the domestic market.

During the 5 first months of 2023, the EU imported 3 Mt of wheat (meaning the whole 2022 imports), has increased by + 60 % its imports of maize compared to the same 2022 period (Jan-June), + 200% its imports of soja and by a dramatic 1180% the sugar imports.

Therefore, measures are needed to help Ukraine to export its productions while preserving a fair and balanced EU agri market. The EU should support investments in infrastructures and processing.

Ukrainian crisis : investments in the bioeconomy provide a lasting solution

Posted on - Posted by Farm Europe

Structural changes call for structural responses. The stronger tights between Ukraine and the EU are here to stay. It is very likely that new processing capacities will be needed to valorise agriculture commodities that will be attracted by the EU market, depending on global markets and transport costs developments. This new reality calls for a new direction to be given to the Green Deal. A new impetus to the bioeconomy in the EU would not only strengthen strategic productions (food, feed, biofuels, biomaterial, etc.) and help stabilising agricultural markets, but also provide a long term support to Ukraine economy and democracy. 

Imports of grains from Ukraine into neighbouring EU countries have disrupted local markets, pushing farmers to ask for an end of duty-free imports, and some countries to follow suit and block them. The crisis has raised shock waves in Brussels, as the well-justified support to the Ukrainian economy, victim of the Russian aggression, created a large movement of opposition to one of its key components – the temporary abolition of all custom duties.

The Commission attempted to compensate the affected farmers with a first additional support package through the CAP crisis reserve, but quickly enough a second and larger package was deemed necessary. Despite throwing resources to calm the protests, calls for an application of safeguard clauses are still on the table.

The competitiveness of Ukrainian wheat, maize, sunflower and barley (to mention only a few sectors), is well known. Already more than 20 years ago, after the fall of the Berlin Wall and the end of the USSR, Ukrainian imports of wheat were coming into the European Union, even after paying the full import taxes. That situation led the European Union to renegotiate its external protection for wheat in the WTO, raising the duties applied.

Ukrainian exports suffered with the Russian aggression, dropping in the case of maize from the highs of 27 million tonnes in 2021/22 to a forecast of 20 million tonnes in the current campaign, on wheat from around 19 to 15 million tonnes, and on barley from around 6 to 3 million tonnes in the same campaign years. However, despite the fall in exports, the opening of alternative trade routes to the traditional Black Sea made large quantities of Ukrainian grains available in the EU neighbouring countries.

The root causes of the problem will not go away. EU markets are more attractive to Ukrainian exports than far away markets in developing countries. Even when the war is over, and hopefully Ukraine starts recovering from the wounds, it is likely that the European Union will extend forms of financial, economic and trade support for a large period, also in view of a possible accession of Ukraine to the EU.

Therefore, the EU should figure out lasting solutions to the Ukrainian grain imports, instead of pilling up compensation package after compensation package. Boosting the bioeconomy could provide a long-lasting solution to the additional availability of grains beneficial for global food security. 

Incentivizing investments in bioeconomy could add value to maize, wheat, barley and sunflower production to mention a few, into high value and much needed proteins, energy and all kinds of biomaterials. Those products are highly needed to overcome the challenges of food security and environmental transitions, while at the same time stabilizing agricultural markets. This would benefit global food security as imports from Ukraine would reduce the overall EU footprint on other markets, notably soy from South America. 

In the first five months of 2023, the European Union imported roughly the same amount of grains from Ukraine as in the entire pre-war campaign. This, despite the war’s impact on Ukrainian agriculture. A large share of this grain face difficulties to be re-exported to global markets, as is already the case with Central European countries’ production. Logistic challenges in this part of Europe are not new.

The European Union needs to set up new processing capacities to valorise an additional production coming from Ukraine on a structural basis, that will otherwise weight yearly on the EU market, especially considering further integration of the Ukrainian economy to the internal market. 

Short-term measures triggered by the EU won’t be enough to address a structural challenge. Indeed, the lack of effective market mechanism tools currently included in the Common Agricultural Policy to cope with market disturbance is plain to see. This should press the European Union to rethink its agricultural policy to provide more teeth to its economic levers. However in the current situation no market measure will compensate a structural shift in market reality. Structural changes call for structural responses. 

In a context where high-value food, feed, energy, and biomaterials is increasingly strategic, the EU should not delay launching a new wave of investments in these sectors. This effort should provide a new direction to the Green Deal’s approach, promoting sustainable growth for agriculture and related sectors. 

Included within the current Renewable Energy Directive (RED), the European Union has room for maneuver to incentivize bioeconomy that produce at the same time a wide range of food, feed, biofuels and biochemical products. Today, the percentage of crop-based biofuels in the transport energy mix in the EU hovers below 5%, whereas the RED accepts a higher limit of 7% to be accounted for the EU renewable energy mandates. Ambitious climate targets calls for higher contribution from agriculture in the decarbonation effort of the economy. 

The recent Council Conclusions  “on the opportunities of the bioeconomy in the light of the current challenges with special emphasis on rural areas”, on the initiative of the Swedish Presidency, “emphasises the role of a sustainable and circular bioeconomy in dealing with climate, biodiversity, energy and food security issues, as well as its potential to diversify income, create jobs in rural and coastal areas, and support the EU’s green transition and increased resilience.”

This political will should lead to actual investments. The Commission should facilitate the process through policies that encourage investment in the bioeconomy, without excluding any sectors that might contribute. Particular attention should be made not to hamper investments through ill-conceived taxonomy regulations. Member States should establish national mandates and policies that foster these investments.

Let us react to the present crisis to bring forward-looking and lasting solutions, mobilising the EU investment capacities to trigger a surge of the EU bioeconomy. This would also provide a long term support to the Ukrainian economy and democracy. 

Mercosur: EU farmers would be exposed to more unfair competition

Posted on - Posted by Farm Europe

The draft Protocol proposed by the European Commission doesn’t provide answer to the actual environment and climate concerns on the Mercosur deal, and much less in attempting to establish a level playing field for EU farmers. Vague political declarations seem to be what’s on the table. Will they suffice to convince the European Parliament and the Council?

The European Commission is known to be seeking an additional Protocol with Mercosur that would accommodate the European Parliament and Council concerns on the lack of strong environmental and climate provisions in the deal. Without further assurances the political process of ratifying the deal was actually frozen.

A leaked draft of that Protocol, labelled “EU-Mercosur Joint Instrument”, sheds light on the approach being followed by the Commission.

The draft consists on a recollection of previous international commitments of all parties; it lists a set of general good intentions with regard to the environment and to fighting climate change; it sets a single new non-binding target on the reduction of deforestation (-50% by 2025), without any proper independent verification process; and, last but not least, it lacks any enforcement mechanisms whatsoever.

What would be the real value of this Protocol? What is the added value in recalling international commitments? To which extent, if any, would that add to the existing commitments? What are general good intentions worth, without targets, and without any enforcement provisions? Even on the well-known problem of deforestation, what does the draft Protocol add to the provisions of the recently adopted EU Regulation on imported deforestation? Does an aspirational, non-binding target assuage widespread concerns on the preservation of the Amazon? If there are no enforcement mechanisms, to which extent are the good intentions and declarations more than empty words?

It is crucial however to put the current on-going negotiations on the additional Protocol in the right context.

The negotiated EU-Mercosur deal between the Commission and the Mercosur countries was already seen as too weak on environmental and climate protection. Since then the Commission has embarked in a set of proposals – the Green Deal – that are piling up new restrictions and obligations on EU farmers: the SUR proposal to reduce by 50% the use of chemical pesticides; the IED, Directive on industrial emissions, encompassing a large part of the EU livestock production; the proposals on mandatory reductions on chemical fertilisers, and on setting aside land for biodiversity; the additional efforts asked to the agricultural sector to reduce GHG emissions.

Does the draft Protocol address any of the new environmental and climate measures proposed? Does it attempt to set-up real “mirror clauses” on imports from Mercosur? 

We see none of it. The application of the deal would thus lead to increased unfair competition for EU farmers. They would face higher costs, lower profitability, as a result of the Commission Green Deal proposals, that their Mercosur competitors would not. The situation today is worse for the EU agriculture sector than when the negotiation was finalised in 2019, but the draft Protocol bluntly ignores that fact.

Inevitably, if that were to be the case, imports from the Mercosur would further increase with regard to earlier forecasts. EU agriculture production would decrease, and EU consumption would be satisfied by more imports produced under much lower environmental and climate standards. EU farmers would be worse-off with no world climate benefit.

This draft Protocol doesn’t provide answer to the actual environment and climate concerns on the deal, and much less in attempting to establish a level playing field for EU farmers. Vague political declarations seem to be what’s on the table. 

Will they suffice to convince the European Parliament and the Council?