The resilience of agriculture and food production: A planetary challenge

Some things are inevitable, and rising demand for food is one of them. Yet, as is often the case, the questions of what to do about a challenge and how to go about implementing a response generate more questions than practicable policy solutions.

Between now and 2030, the Earth’s population is set to leap from 6.9 to 8.4 billion (sources UN & FAO). This is a population increase – in two decades – of nearly 22 % – and with forecasts tending to be revised upwards rather than the opposite, we can be confident in these figures.

The trend within the trend is that the nutritional habits of people in developing countries have been changing too; their overall protein consumption has been rising and, within this, the share of animal protein in their diets has also been rising. The reason lies in a switch from plant to animal protein sources in East Asia, Latin & Central America, North Africa, and the Middle East (FAO). On the basis of these trends the FAO is forecasting a rise of 40 % in the global demand for protein by 2030.

With many of our contemporaries already suffering from hunger and malnutrition the question of just how are we going to feed the world’s rising population can no longer wait for an answer.

We simply have no choice, this is the human and geopolitical imperative of our time. It is incumbent on political leaders and policymakers to step up and be proactive.

But what action can they take? A first step should be to ask what measures can be taken in the short term, assuming no rise in production levels. Such measures would include:

Reducing losses in agricultural production per se;
Reducing waste all along the food chain ‘from the farm to the plate’;
Sharing the world’s available food resources more equitably;
Combating the unbalanced nutrition that lies at the root of many health problems (e.g. obesity).

But such measures do not obviate the need to also find new ways to produce more food. The two ways this can be achieved are:

Opening up new agricultural land, and;
Making productivity gains.

Taking these in turn:

Useable agricultural land

The earth still has unused but useable agricultural land, although it is distributed unevenly. Over the next 15 years some 52 Mha of arable land could be added to the 1534 Mha that is currently exploited.

But this overall increase masks the rises and falls that are predicted, in this scenario, to occur in different regions:

North America will lose 32 Mha, a % reduction of 15%), Europe will lose 13Mha, a % reduction of 11%), and South Asia will lose 14Mha, a % reduction of 11%;
In contrast, Sub-Saharan Africa will gain 53 Mha, a % increase of +24%. South and Central America will gain 31 Mha, (+17%), South East Asia 22 Mha, (+20%) and Oceania 5 Mha, (+12 %).

The lesson we can draw is that any growth in production that is to be achieved via opening up new arable land will therefore take place in developing countries. Of course, for this scenario to materialise, developing countries need to secure the necessary investment resources. A further uncertainty that arises is that this additional capacity will be located in regions where agricultural production depends heavily on climatic variability, a vulnerability that is only going to increase.

Regions that enjoy greater productive stability – made possible by favourable soil and climatic conditions – are going see their agricultural surface areas continue to dwindle.

The consequence of all this is that the year-on-year variations of global agricultural production could widen, which would cause commercial stock levels to fluctuate from one season to another, and which in turn would generate higher volatility in world agricultural markets.

Productivity

The key issue for the coming decades will therefore ultimately be the ability of farmers – and of the agri-food sectors in which they operate – to (1) make the investments that are needed to increase production and (2), in view of the pressing need to limit the environmental footprint of food production, switch to new farming and production practices.

How much more food is needed? According to the FAO, meeting the needs of the world’s population over the next 10 years is going to require an additional 51 Mt of meat (+16 %), 23 % more milk, 49 Mt of wheat, 57 Mt of rice and some 180 Mt of coarse grains, as well as 20 % more oilseeds – in particular to meet animal feed requirements.

According to the UN and FAO, this means that every productive hectare is going to have to feed, every decade, an extra 0.4 people. By way of context, in 2010 each hectare fed 4.9 people; this figure will rise to 4.9 by 2020 and by 2030 it will reach 5.3. In 1960 the figure was 2.3.

For this to happen, large strides in productivity will be needed – but according to the UN and FAO this will have to be achieved without a significant contribution from the African continent – despite the latter’s potential to provide new agricultural land and irrespective of any efforts that could and must be made to provide Africa with the technology and organisational know-how it needs to develop its local food production systems.

We may therefore infer that, in order to tackle the food crisis in the short and medium terms, the international organisations are implicitly relying on overall production growth to be driven by yield growth in the USA, the EU and Asia, as well as increased production driven by a combination of opening up additional agricultural land and increasing yields in South America.

A key challenge will therefore be to increase the yields from the arable land that is already cultivated. The challenge applies to all agricultural regions, including the developed exporting countries with mild climates: every additional tonne that these countries produce would be one that is available to meet rising demand.

However, even assuming progress is made on reducing waste, tackling obesity, and so on, areas where everything still remains to be done, it is clear that no individual region is in a position to meet the predicted increase in demand on its own.

Asking the 64 000 dollar question

In light of the magnitude of the short-term challenge (less than 15 years!), the 64 000 dollar question is not whether the major producing regions should or should not participate more in global trade, but how. Indeed can they? Can they play the role that is incumbent on them – so that the planet’s entire population can eat decent food?

Without wishing to use a moral or moralist tone, it would appear difficult for Europe to evade its responsibility in this regard given the particularly advantageous conditions for agriculture that it enjoys as well as its agricultural know-how. It is therefore urgent to come up with answers to the question of how.

Yet ‘how’ is a tall order. If the regions that can are indeed going to boost their production they will need to rise to a series of challenges:

Investing – both sustainably and coherently at different levels:
- At the farm level: developing sustainable production techniques in a context of eminently fragile resources, adapting farms’ business & operational structures, securing finance for investment needs.
- At the industry level: organising, positioning, financing, improving supply chain relationships.

Adapting to market volatility: markets are going to remain subject to stress, to unpredictable weather events and to the deeper effects of climate change – the resilience of agriculture – which includes the resilience of individual farmers – will be a determining factor for long-term production growth.

Introducing innovation and high-performance technologies into farms at a time when the breakthrough technologies that would be the foundation for sustainable productivity are not yet known, although certain new technologies currently being applied in agriculture do offer promising avenues.

Are we ready today to rise to these challenges? Beyond the sometimes comprehensive – sometimes less so – analyses that have been made of the situation, do we possess, today, a coordinated suite of measures that are calibrated to the scale of the challenges? It is difficult to escape the conclusion that we do not: in which case, what support do the different producing regions need to be able to mobilise their agricultural industries?

For the European Union, the pressing questions are:

In its external relations, to what degree is the EU able to make this issue a real priority in its trade negotiations or in its international development policy; to what extent is it able to stimulate greater production, and do so in a way that would be socially, economically, and environmentally sustainable – or in other words – achievable?

Turning to its domestic productive capacity; does the EU have the ability to supply international markets, as it is expected to be able to do? The European Union is virtually the only region in the world to enjoy stable year-on-year production thanks to its climate, its soils and its technology. Given that its agricultural areas are forecast to decrease in size, international organisations are relying on productivity growth to raise EU production to the levels needed to meet demand.

Yet, is this compatible with the fact that for nearly two decades agricultural productivity has been stagnant in Western Europe?
- Bearing in mind the timeframes involved in animal research / plant varieties research, are there sources of socially acceptable productivity gains that could be tapped into over the short and medium timeframes (less than 10 years)?
- What strategy(ies) should we envisage to ensure that any productivity gains achieved can be sustained/improved on over the longer term?

In light of the new economic and climatic context, are the conditions for a growing European agricultural sector in place?
- The CAP has only recently undergone a new reform and the agricultural sector needs a clear and stable legislative environment in which to work.
- In the medium term, the physiology of the CAP’s 1^st and 2^nd pillars needs to be revisited in view of the three interdependent challenges that the EU must meet if it is to sustain its agricultural and agri-food sectors – not to mention its rural areas: investment, sustainability, and resilience. Could switching from an expenditure-driven approach to one based on objectives and results be a way of freeing up latent potential while at the same time ensuring balanced development?
- In the short term would it not be feasible to adjust the current CAP so that it is more effective, without altering its basic framework, in particular with a view to:

Enhancing its reaction capacity in relation to market shocks?
Helping agricultural industries to plan for – and be able to navigate through – market and climatic volatility by putting in place more practical policy tools and instruments.
Addressing the issue of present and future investment needs, of how to finance them, of farmer indebtedness in a context of fluctuating markets, of making the sector more appealing as a career to a younger generation of farmers?

The question of resilience, left largely to one side during the most recent European policy reforms, has today arguably become the cornerstone without which the economic and social development of the sector cannot credibly be envisaged.

TTIP : what is at stake for EU agriculture ?

Summary: The EU-US Transatlantic Trade and Investment Partnership (TTIP) negotiations were launched on June 17, 2013. TTIP aimed at creating the largest Free Trade Area in the world, and at setting a host of harmonized standards between the two largest trading blocks. These common standards could, by the sheer size of the trade affected, become the de facto new world standards.

TTIP expected level of ambition surpassed anything achieved so far, setting the pace for further trade deals and hopefully prodding other countries to move forward in the stalled WTO negotiations. TTIP impact on the agriculture and food sector could be large, larger than any other free trade deal negotiated so far, and larger than what was expected out of the WTO Doha round (with the exception of domestic subsidies).

It is therefore hardly surprising that the reactions to the TTIP in the EU agriculture sector have been mostly cautious, defensive. The sector by far and large fears the impact of concessions that could be made to a more competitive US agriculture. This paper attempts at going beyond the usual positioning, and enable a more focused and detailed assessment of the deal. Some sectors might benefit, others will face additional competition. For those facing additional competition which are the dynamics of the negotiation and what could be done to improve the EU position?

The state of negotiations

Tariff offers were exchanged on February 10, 2014. However the initial drive to quickly conclude the TTIP negotiations (“in one tank” as it was put at the time) faced during 2014 a set of roadblocks in a number of areas.

There were misunderstandings on what should be the level of ambition of the tariff offers exchanged, with the EU accusing the US of presenting an offer that could hardly be accepted as a basis for negotiation.

Also a controversy arouse on the ISDS (Investor-State Dispute Settlement) chapter, with very active and vocal opponents in the EU, in NGOs and even some mainstream political groups, joined recently by some in the US Congress.

The EU also felt a lack of commitment from the US side, explained by the fact that the US would have prioritized the conclusion of the TPP (Trans Pacific Partnership) negotiations. The result of these drawbacks was that progress in the negotiations was lackluster, to say the least.

Agriculture issues were also contentious, in particular those perceived as consumer safety issues – e.g. hormone treated meats, GMOs. The EU at her highest level was obliged to reaffirm that she would never accept to import hormone treated meat, nor to lower her high safety standards.

After the change in the Commission late 2014 there was a new push to inject fresh momentum in the talks. It is still early days to evaluate the success of the new attempts to revive the talks, but there are indications that prospects are brightening.

The US and her TPP partners are moving to the end game of the negotiation, which would free the US to turn its eyes towards the EU.

In addition to that the US President and Congress leadership are now working to obtain TPA (Trade Promotion Authority), which is seen as essential to conclude TPP and TTIP. TPA as crafted in past occasions gives Congress the authority to only accept or reject in block a trade deal, preventing pick-and-choosing of parts of the deal, which is clearly a great concern for countries negotiating with the US. It is also to be expected that President Obama would like to leave as part of his legacy these two very large trade deals.

Therefore there are strong indications that TTIP negotiations are bound to resume and accelerate in the second half of 2015 with a view to its conclusion in 2016.

Agricultural market access and regulatory issues will continue to be a major challenge for U.S. and EU negotiators as they embark on more intensive negotiations in 2015. Also of interest to these negotiations are recent farm policy reforms in both the EU and the U.S. The results of EU CAP reforms, which have increased EU’s competitiveness for certain commodities (e.g., dairy and sugar), as well the outcome of other EU FTA negotiations, in particular with Canada, are of significance to TTIP.

How far will these developments inform the EU negotiating position?

It could be expected that it does not guarantee an ambitious result, in part due to concerns that further liberalization might jeopardize the EU’s still fragmented farm sector. Moreover, EU farm organizations have taken keen note of the results of the recently agreed FTA with Canada (CETA), in particular with respect to beef and pork access These groups are also taking into account the offers exchanged with Mercosur, another big agriculture player.

While conclusion of the Mercosur negotiations is not expected any time soon, there is a strong concern that in the future a deal might be reached including Brazil, a significant agricultural exporter and competitor.

In this context the negotiations with Japan could provide some breathing space for the most affected sectors, and help counterbalance the impact of TTIP to a certain extent. Japan is a significant importer of meat and grain products, and the EU will play an offensive role on agriculture in the FTA.

In March 2013 the United States adopted a new farm bill, which modifies support programs for most field crops (wheat, corn, oilseeds, cotton, peanuts) by eliminating decoupled direct payments and introducing new risk management programs and encouraging the use of crop insurance, coupled with conservation requirements. U.S. dairy support has become more market-oriented, reflecting the increasing competitiveness of this sector in world markets. Possible changes to U.S. biofuel policy, in the form of a reduced renewable fuel standard, could also impact U.S. crop production trends. While these policy reforms are unlikely to drastically change U.S. market conditions, they are worth considering in the context of U.S. farm sector expectations for these negotiations, particularly given that EU largely higher tariffs and regulatory barriers.

Both the United States and the EU have complex domestic support systems, but neither country has agreed to negotiate domestic support policies in FTAs. Ironically, the U.S. justification for not negotiating on domestic support is that it will not agree to new disciplines if the EU is allowed to continue to support at high levels. While this objection could be addressed in a negotiation, neither side is likely to be motivated to negotiate domestic support.

The following summary identifies some of the key sectorial issues facing the agriculture negotiation. They highlight the practical difficulties facing negotiators and the basic question posed to policy-makers on both sides of the Atlantic : How far will this Free Trade Agreement actually free up trade in protected agricultural sectors? Where do the most important EU offensive interest lie? Where is the EU more vulnerable? What are the most significant challenges?

General overview of Trade in Agriculture Products

In 2013 the EU had a nearly Euro 6 billion trade surplus in agriculture with the US^{^[1]}. This reflected a long-term trend of expanding exports of EU products and stagnant U.S. imports, with the EU achieving a neutral trade balance in 1998, growing and maintaining a surplus for the next 8 years with no sign of change. In contrast globally the United States has an almost $40 billion agricultural trade surplus and the EU has traditionally had a balanced trade account across the agricultural sector, with a very small trade deficit in 2012, the latest year for which data are available (Source: WTO).

In 2013, top U.S. imports from the EU were spirits (Euro 3.3 billion), wine (Euro 2.6 billion), beer (Euro 1.2 billion), cheese and nonalcoholic beverages (Euro 0.7 billion each), and olive oil (Euro 0.6 billion). These are top EU exports globally, building on high quality food processing and strong brands.

Top U.S. exports to the EU were led by oilseed products (Euro 2.0 billion), fruits and nuts (Euro 1.8 billion), spirits (Euro 0.7 billion), wine and miscellaneous food preparations (Euro 0.4 billion each), and wheat (Euro 0.3 billion). Leading global U.S. agriculture exports, such as beef, pork, poultry, dairy, maize, rice, and various fruits and vegetables were all less than Euro 200 million.

The simple average of U.S. MFN agricultural tariffs is around 12%. The EU average is around twice that level. (Precise calculations are difficult, due to calculation methodologies for converting specific (e.g., Euro x/MT) tariffs into ad valorem equivalents (e.g., y %). Studies generally show the average EU tariff two to four times the average U.S. tariff for agricultural products).

The EU is facing a paradox in TTIP: it benefits from a large and stable trade surplus with the US, but it has in general a less competitive and more protected agriculture. Will freer trade increase trade opportunities more for the EU than for the US? Or will the opposite be more likely?

Meat Products

The EU and the United States are roughly in trade balance in beef, pork and poultry products. Globally, the United States has exported over Euro 13 billion in these products a year, but exports to the European Union have never exceeded Euro 400 million. EU meat exports into the United States in 2013 were around Euro 300 million. While the U.S. industry is a global leader in competitiveness, the EU focuses its exports on certain niches that exploit a strong reputation for high quality. In spite of the economic fundamentals, the surprising result of near trade balance in this sector is explained by high EU tariffs, low U.S. tariffs, gourmet consumers in the United States and SPS regulatory barriers.

U.S. tariffs are relative low for these products (26% for beef outside of the large TRQ, and substantially lower for pork and poultry). EU tariffs are substantial, ranging from 40% to over 100% for most products. In addition, all three of these products face serious trade restrictions through sanitary barriers. Additionally, exporters in both the EU and the US have an interest in updating the bilateral veterinary equivalence agreement signed over 15 years ago and the EU is eager to see BSE-related restrictions removed on its exports of beef products from all EU Member States. U.S. sanitary requirements are strong for pork and poultry also, but the EU has managed to service U.S. pork market niches with high priced products and is not considered competitive in poultry exports.

Tariff elimination in the meat sector would create a significant challenge for the EU meat and livestock sector, but only if sanitary barriers were removed as well. As noted above, high tariffs are a constraint for U.S. exporters, but sanitary barriers have effectively banned pork and poultry exports and limited beef exports to non-hormone production. The EU has aggressively protected this sector in other FTAs, including the ongoing negotiations with , as well as the recently-concluded agreement with received preferential duty-free TRQs for pork (80,000 tons), beef (50,000 tons; plus a 15,000-ton TRQ for high-quality beef), and bison (3,000 tons). It should be noted that the EU is adamant not to accept imports of hormone-treated beef, but, as with the case of the CETA, has accepted a TRQ for hormone-free beef.

The key question in this sector is how far the EU can go in tariff and quota concessions, and sanitary requirements, without creating too strong an impact in its meat and livestock sector. In this context by how far do the CAP livestock subsidies and decoupled direct subsidies actually shield the sector from the impact of increased US competition?

Dairy Products

Dairy products are one of the leading EU exports to the United States, led by cheese (Euro 0.7 billion in 2013). U.S. dairy exports to the EU totaled less than Euro 0.15 billion in 2013. Both sides have market access through lower duties on tariff-rate quotas, with the EU having substantial access to the U.S. market through country-specific quotas obtained through the WTO. Out-of-quota duties in the United States generally range from 30% – 50%, while EU out-of-quota duties are generally in the 50% – 150%, with some as high as 250%.

Non-tariff measures are a problem for trade, but possibly the most contentious part of the dairy negotiation, after tariff negotiations, will be EU requests for the United States to claw-back the use of certain common names in the US market, such as parmesan or feta cheese, and to accept to market only geographic indications (GIs) made in Europe.

The EU has consistently pushed for the widest possible recognition of its GIs, particularly in the dairy sector.

However it is questionable whether the real value of that limited recognition of GIs, which in all but one case could already be exported without restrictions, is commensurate to the additional concessions given in more significant and exposed sectors.

The United States is a competitive dairy exporter, pushing other countries to remove tariffs aggressively in previous Free Trade Agreements. In contrast, the EU has been reluctant to include dairy in trade agreements, and excluded dairy even when negotiating with inefficient dairy producing countries.

Should this position change with the end of EU milk quotas in 2015, as this will increase EU competitiveness in world dairy markets?

Grains

Grain trade is largely composed of U.S. exports to the EU. The United States is a leading global exporter and imports only limited quantities, usually specialty grains or product from Canada. The EU is also a leading wheat exporter, but imports rice and coarse grains and protects all grain markets with substantial tariffs. Some access is afforded to the EU market through WTO commitments under TRQs and limits on the ‘margin of preference’ afforded to EU product compared to imports. U.S. exports to the EU have fallen substantially from thirty years ago. In 2013 U.S. exports were less than Euro 400 million. U.S. tariffs on grain are low. EU tariffs range from 40% to 90% (except for husked rice, which are 10% – 20%).

U.S. maize and maize by-product exports are constrained by the EU GMO policy. This has reduced the largest U.S. grain export and limited the ability of the United States to compete for the EU’s WTO TRQ for maize established as compensation for loss of access during the Spanish and Portuguese accession to the EU.

U.S. rice access to the EU has also benefited from terms negotiated in the Uruguay Round and the accession of the EFTA countries to the EU. Similarly, U.S. wheat exporters have been able to gain some access to the EU market, in particular for high protein and durum wheat. However, the EU soft wheat and rice markets are both protected by high tariffs and complex reference price schemes. Elimination of these tariffs in a bilateral agreement would be a substantial advantage to U.S. exporters. In the case of wheat, the results of the EU FTA with Canada, a direct competitor to the United States for this product, are particularly relevant as EU tariffs will be eliminated for durum and common wheat.

Agreement to eliminate EU tariffs would be a substantial result for the US, even though maize exports will still face EU GMO constraints.

What would be the impact in the EU? Isn’t the EU sector robust enough to face increased competition? What would be the most affected products- e.g. rice?

Oilseeds

The EU is a significant importer of soybeans and soybean meal, driven by structural deficits in the EU animal feed sector and a MFN tariff bound at zero in the WTO. U.S. soybean oil exports face moderate tariffs, less than 10%, enough to slow U.S. exports. The United States imports negligible quantities of EU vegetable oils (other than olive oil, reported with the fruit and vegetable sector.)

Despite the zero or relatively low tariffs, U.S. soybean and products exports are restricted by EU GMO policy, as noted above. EU biofuel policy is an even bigger issue in the oilseed sector for biodiesel. The relevance of negotiations in this sector will depend on ongoing regulatory discussions.

Fruit and Vegetables, Nuts and Olive oil

The United States has a growing trade surplus with the European Union in this sector. In 2013, U.S. exports were led by nuts, in particular almonds, pistachios, walnuts), and dried fruits.

Leading EU exports are olive oil at over Euro 0.6 billion and olives at over Euro 250 million in 2013. Some leading global U.S. exports, such as oranges, orange juice, apples, grapes, and stone fruits have limited exports to the EU so far.

U.S. tariffs in this sector are generally low, but a few products are still sensitive to import competition (including olive oil and olives). Olive oil standards could however be a sticking point in the negotiations, as U.S. olive oil producers push for the approval of U.S.-specific standards, which EU exporters believe will disadvantage their exports. EU tariffs are moderate in general, but are substantial for some import sensitive products that are export priorities for the United States, such as citrus (30% tariff), apples and pears (40%), and fruit juices (50 – 150%). In addition, the application of the EU entry price system to these products effectively raises the tariff on low-priced imports to protect high prices in the EU, and reduces imported quantities even as it helps to preserve high prices in the EU market.

There are fewer high profile SPS barriers in this sector, although food safety laws are of growing complexity and concern on both sides.

While in past FTAs, the EU has protected the entry price system for these products, it is possible that the EU may view resolution of SPS issues affecting their products as a trade-off for the entry price system?

Wine and beer

The EU has a substantial trade surplus in wine and beer trade. U.S. wine exports have increased to the EU, but still lag significantly behind U.S. imports. Beer tariffs are zero in both countries (which is also the case for distilled spirits), but U.S. wine tariffs (around 20%) are higher than in the EU (10% or less).

Trade in alcohol products is highly regulated in both countries. The bilateral wine agreement of 2006 envisioned further negotiations to align the two markets, which may occur in the FTA. At the same time, the negotiations are also an opportunity for the EU to raise concerns with additional GI protection.

By how far could the EU wine sector benefit from tariff elimination? Are the remaining GI (use of generics and semi-generics) and regulatory issues a significant impediment to further EU exports?

Other Processed Products

The EU has a positive trade balance in processed products with the US. Exports are led by snack foods, roasted and instant coffee, spices and other consumer oriented products. U.S. exports are led by snack foods, pet foods, and other consumer oriented products. The trade flows reflect the strength of EU brands for quality and niche products and relatively open U.S. market for processed products.

U.S. tariffs on processed products are generally low, unless there are dairy or sugar components in the product. EU tariffs can be substantial, as duties are based on a complex formula takes into account sugar, dairy, and starch components and calculates a duty designed to ensure the level of protection for these base products remains high. This system is generally referred to as the “Meursing Table” and its reform has been a long-standing U.S. objective.

As with reforms of the entry price system, the EU has been reluctant to reduce protection for processed products in bilateral FTAs. This impulse may be shared in the United States with respect to sugar-containing products, an area traditionally protected in the United States and where both parties’ tariffs exceed 100% and where both parties will be concerned about importing third-party sugar incorporated into sugar-containing products.

However, could the elimination of EU sugar production quotas after 2017 point to a more ambitious EU position for sugar and sugar-containing products over the longer term, as more competitive sugar production should expand as a result of this policy? By how much could the EU gain by eliminating tariffs in this area? What would be the impact on ethanol?

Sanitary and Phytosanitary issues (SPS)

It is the inclusion of SPS issues that separates TTIP from other trade negotiations on agriculture. The problem is that the EU and the US have fundamentally different approaches to risk management.

The EU follows the “precautionary principle” which in its eyes justifies banning growth promoters or GMOs (now in many EU member states). The US asserts that it applies a science-based approach. It is difficult to conceive that the EU and the US will be able to agree on this entire chapter.

But it is equally difficult to conceive that SPS issues will be left aside in TTIP. The reason is quite straightforward: tariff concessions can be voided by SPS barriers. Some SPS issues can be addressed and a mutually agreed solution found. But issues like hormones and GMOs have proven far more resilient to agreement.

What are the potential consequences? The case of hormones in beef is illustrative. The EU lost the WTO case, and is now paying compensation to the US. But the compensation deal is being contested in the US, as the benefits have diminished (due to the increased exports of other countries). Beef is one of the sectors where the EU shows a significant gap of competitiveness vis-a-vis the US. Tariff discussions will already be of great consequence.

Will the hard stance of the EU on banning hormone beef make it even eventually harder for the EU sector to limit concessions?

^{^[1]} All 2013 data is for the EU-28.

The CAP: the most cost-effective EU policy for Finance ministers

Scope and Aims:

The scope of this Farm Europe policy paper is intentionally confined to the purely budgetary aspects of the EC’s three main policies for Member States. Drawing on figures from the previous budget negotiations, it offers a reading of the positions that Finance Ministers/Ministries from the 28 Member States will be tempted to defend in the preparatory discussions to the review of the EU’s MFF framework.

Background:

In many Member States, Finance and Agriculture Ministers do not necessarily share the same political or strategic approaches to the CAP and how it might evolve. Agriculture ministers are more sensitive to the fact that by investing in agriculture the European Union is not only investing to meet its economic and local development needs, but is also creating public goods that are essential to society as a whole. If agriculture Ministers focused their efforts to put in place policy tools that are as finely tuned as possible to their country’s specific needs, Finance Ministers have been working to preserve national drawdown and transfer spending responsibilities from national budgets to the Community budget – with, uppermost in their minds throughout their deliberations, a need for budgetary discipline.

Continue reading “The CAP: the most cost-effective EU policy for Finance ministers” →

How should the EU support agriculture in all its variety?

The European Union’s (EU) agriculture is highly varied in terms of Member States’ (MS) average farm size, business type, weather, soil, social and economic conditions, etc. As well as this, technologies and markets are rapidly advancing. In order to ensure effective policy frameworks and subsequent sustainable and balanced development, public policy must take into account these variations and advances. This briefing looks at the context of the relevant public policy and agriculture in Europe and considers the key questions and discussion points that arise from this.

The 1992 Common Agricultural Policy (CAP) reform’s provision of European aid to farmers based on the surface area of land farmed has remained the case despite various other reforms and adjustments.

The 2003 reform created a system of flat-rate payments per agricultural parcel on the same basis.

The 2013 reforms saw 22 of 28 MS bring in reductions of direct payments per farm-holding per annum of above €150,000; 8 MS cap the maximum annual amount of basic payments for each farm; 8 MS introduce a system of redistributive payments with the aim of supporting single farm holdings of around the national average farm size; and 15 MS introduced a specific scheme for small farms, although only 2 provide equal value flat-rate payments to all the farms targeted by the scheme.

The concept of a single European farm has been rejected by policymakers due to the diverse conditions, and resulting variety of agricultural holdings, across MS. This diversity coupled with the profound and rapid changes in technologies and markets, and their consequences for European agriculture in terms of numbers of farmers, education etc., creates a need for public policy to provide framework conditions in which all agricultural businesses can develop and thrive.

Official figures show that of 12 million European agricultural holdings, 6 million are less than 2 ha in size with a total of 2.5% of arable land. In contrast to this, 50% of arable land is farmed by 300,000 agricultural holdings of more than 100ha. It is important to note that farms recorded by MS or the European Commission are actually only legal entities under the label of single ‘agricultural holdings’, and as such there is not necessarily a complete picture of the actual types of joint agricultural business in operation.

Read the full document attached for the discussions points.

The keys to continuous and sustainable growth of the EU food chain

This policy briefing looks at European agri-food trade and the surrounding data, policies, trends and trajectories. It also suggests numerous important key questions and discussion points.

Agriculture and agri-food constitute, together, one of the European Union’s (EU) main economic strengths. This broad sector is second only to the metal industry and accounts for 16% of European industrial turnover.

Agriculture has an annual turnover of €394 billion, is made up of 12 million agricultural holdings and provides full-time employment for 10 million people.
The agricultural base in Europe is the mainstay and lifeblood for 310,000 agri-food businesses (99% of which are Small and Medium Enterprises), which generate an annual turnover of €956.2 billion and sustain 4.1 million direct jobs in Europe.

With a total turnover of €1350 billion/year and 14 million jobs, agriculture and agri-food is not only one of Europe’s leading business sectors but also one of its principal sources of employment – without taking into account the contribution of other activities surrounding the food chain such as financial institutions, advisory entities, machinery, pharmaceutical and chemical industry, and research and innovation.

Global food demand is growing rapidly. Consumption trends are changing in developing and emerging countries in particular. Between now and 2050, the FAO estimates that world demand for agricultural products will increase by 50%. This rise is forecast in a context in which natural resources have become a fragile asset. The pressure on the environment and the threat of climate change place the challenge of sustainability centre stage, both for the agriculture sector and for citizens.

Policymakers need to put an ambition to foster the responsible, competitive and sustainable growth of the agri-food sector at the heart of European policy.

Today’s European policy responses result from:

EU external policies,

the return of agriculture as part of the EU’s development and external assistance policy. In light of the challenges facing the world’s food supply, it should become a major strand of aid to developing countries with clear priorities and targeted, efficient and measurable actions;
bilateral trade agreements, including in their opportunities and concessions, the real impacts of which, on both the European sectors and industries concerned and on our developing country international partners, merits closer analysis. The growth of global agriculture and food markets offers opportunities for the European Union. Seizing these requires an objective analysis of the opportunities and risks in the areas covered by each agreement, rather than basing negotiation strategy almost exclusively on multi-sectoral macro analyses.

The EU must take the political decisions necessary to foster those sectors and industries so that they are in tune with market requirements and able to plan for and adapt to change in world markets.

Numerous questions and discussion points arise from this – Read the full Policy Brief.

Strategies for strengthening EU industry and accessing new markets

This policy briefing looks at the EU’s agri-food markets, their performances, trends, and their future trajectories. It also raises key relevant questions and discussion points with regards to these markets.

In 2010 the European Union (EU) become a net exporter, but this development covers contrasting situations.

Despite the global economic situation, and while imports have stagnated, the EU has continued to increase its exports of agri-food products over recent years. By 2013, their value had risen to €120 billion, making the EU the world’s biggest exporter.

Agri-food products today account for 7% of the EU’s total exports of goods, which places them in 4th position behind engineering, chemicals and pharmaceuticals. Europe’s balance of trade in agri-food hit a peak in 2013 at €18.5 billion, part of an overall trade balance of €56.4 billion.

Since 2000, on average, 27% of EU agri-food exports have been made up of drinks and spirits – market segments that have a very specific nature. Moreover, 38% of the remainder have been made up of 14% of dairy products.

The analysis of European markets must therefore go deeper than the policy discourse of high-value added and beyond the customs classification of raw or processed products to take the degree of product processing or transformation into account: marketing strategies, risks and opportunities are not the same for well-known cheeses as they are for milk powder.

The strong performance in financial terms hides a loss of market share for the EU in the world: our exports have grown at a lower rate than the increase in value of world markets.

EU domestic markets mirror growth trends in demographics and the rise in living standards in Member States (MS), although despite this the share of household income spent on food should continue its consolidating trend. The main wellsprings of growth for the European agri-food sector will therefore come from product innovation and an effective marketing strategy that showcases the quality of European production.

While most economic studies estimate that Europe’s agri-food sector has all the potential to become an engine for growth in the years up to 2020, the question of barriers to such growth and how in concrete terms these can be overcome calls for a swift response by policymakers.

Behind the performance statistics of European agricultural and agri-food industries lies the question of their competitiveness.

The productivity of European agriculture as a whole has been stagnating or even declining for two decades; equally, the specific sectors of crops and animals have also experienced a stagnation and decline. The situation varies between the West, South and East of the EU. Average European productivity is stagnating, and the increase in productivity in, for example, the milk industry over recent years has been significantly lower than that obtained in the United States. Today, EU productivity is on average 66% of the US level.

Various questions and discussion points arise here.

Coping with environmental and economic imperatives

This policy briefing considers the EU’s policies and approaches to sustainable agriculture, outlining the motivations, guidelines, development and challenges of these. It also identifies numerous surrounding key questions and discussion points.

Consideration for the environment has been a constant in each of the agricultural reforms undertaken by the European Union (EU) over the last 10 years.

Introduced by the 2003 reform, the cross-compliance of direct payments was designed to ensure the proper observance, in the Member States (MS), of pre-existing non-agricultural statutory regulations, such as animal welfare or tackling nitrate pollution. In light of the difficulty experienced in some MS of implementing these rules and of determining penalties in case of non-respect, the Common Agricultural Policy (CAP) took the decision to link their implementation with the payment of European agricultural direct payments.

A decade after its inception, and setting aside the question of its impact, all the evidence indicates that the cross-compliance rule has been misunderstood by farmers and by the general public alike. The most recent CAP reform sought to increase the clarity of the cross-compliance requirements imposed on farmers, by trying to prioritise the content of the principle community directives in order to clarify farmers’ actual responsibilities.

Civil society has sent the agricultural world a clear message: while expecting farmers to meet our food needs, it also sees them as the custodians of our rural areas, as being responsible for the quality of our water and soil and more generally as stewards of our countryside – with a duty to preserve all of these for present and future generations.

While trusting farmers to play this key stewardship role, the impact of agriculture on natural resources continues to be singled out for criticism, despite the efforts engaged.

The 2013 CAP reform sought to establish a policy for rural areas that would bring not only economic benefits but also address the environmental question. In this regard, a new measure, greening, was introduced with the goal of combining agronomic practices with the sustainable management of the environment. Greening involves three basic requirements: (1) the responsible management of ecologically fragile permanent pastures – in their role as essential carbon sinks- ; (2) crop diversification in order to improve the agronomic quality of soils; and (3) preventing erosion, preserving water quality and biodiversity through ecological focus areas on and around the edges of arable land.

2015 will be the first year in which these new measures will be implemented. Yet even before the latest reforms have had a chance to be implemented in the field there is already an outcry from, on the one hand, those who consider that the new regulations don’t go far enough and, on the other, those who think that they are disconnected from the economic reality that farms must contend with.

Transcending such differences is a matter of urgency. To do so will require working with all relevant stakeholders to monitor and undertake in-depth impact assessment of the measures adopted by the EU.

One ambition: ambitious policies for EU agri-food systems

The EU’s ambition for agriculture and food, enshrined in the Treaty of Rome, is to meet the needs of its citizens. This ambition remains as relevant as ever and today it is coupled with recent economic upheaval, a need for sustainable and responsible production, and a responsibility to meet the needs of international partners. This policy briefing looks at agricultural policy development and the surrounding societal climate and motivations, as well as the questions that arise from these.

European agriculture was formed in the wake of WWII through its leaders’ ambition to provide food and economic development for European Union (EU) citizens. This ambition held by all MS was expressed through the Common Agricultural Policy (CAP). The CAP’s adoption was a political step of sacrificing national prerogatives and agreeing to develop the sector, rural areas and agri-businesses on a European scale – sharing resources, instruments and rules to do so.   The CAP has borne fruit: rural areas have been economically transformed, production targets reached and EU food security realised.

The 1990s and 2000s saw the CAP become a policy for EU insiders and specialists. A comprehensibility gap opened up between citizens/tax payers and what was still Europe’s principal policy. Thus the question of EU investment in agriculture arose. Agricultural budget allocation was on the agenda throughout 2009 discussions and 2010’s EU budget for 2014-2020.   A key goal of the 2013 CAP reforms was to reconnect agricultural policy and societal concerns through reasserting farmers’ roles in food safety, environmental stewardship and EU economic development.   The world food crises experienced since 2007 and the visible effects of climate change have served as reminders that food security is a present concern. The challenges are:

to remain a producer independently ensuring a secure food supply for its citizens;
to produce responsibly and sustainably given the world’s fragile and limited natural resources;
to meet the needs of international partners given that global food security is a shared challenge, while also developing agriculture in the world’s regions. The EU is the only major agricultural region with stable production conditions and thus has a responsibility to provide a reliable supply to international markets.

Society’s awareness of the importance of ‘common resources’ such as water, air, and land has put the farmer back at the heart of societal challenges. The farmer is both custodian and manager of the environment. Citizens want and must entrust farmers with stewardship, albeit under a watchful, even critical, eye with regards to practices they are reputed to use.There is an objective convergence of interests here. There can be no management without managers, the farmers, and there can be no long-term future for agriculture without sustainable resource use.

In light of economic upheavals, creating a condition where those working in agriculture can plan a career with confidence has become a shared responsibility.

Various questions arise.