Summary
As part of the proposals for the revision of the EU’s common agricultural policy, the EC has released a substantive staff working paper which seeks to assess the impact of the European Commission proposals. Annex 5 of the EC Staff Working Paper which reviews the ‘Results of Quantitative and Multi-Criteria Analysis’ includes a section on ‘policy coherence’. This provides insights into the EC’s approach to addressing policy coherence for developments issues. It is noteworthy that policy coherence for development is only one dimension of the EU’s policy coherence agenda which need to be taken on board in the design and implementation of the CAP, and as such may not be accorded a high priority. While asserting the consistency of the CAP with EU development policy objectives the EU implicitly acknowledged the trade distorting nature of ‘coupled’ direct aid payments. This suggests a need for specific measures to avoid any adverse effects on developing countries in sector where sugar and dairy sectors are important or sector development programmes are under implementation. This is likely to require a flexible and responsible interpretation and enforcement of EPA commitments on the use of non-tariff trade measures by ACP governments. A commitment in this regard should be enshrined in ‘Right to Development’ provisions under future EU partnership agreements with African, Caribbean and Pacific countries.
What Does the EC Mean By Policy Coherence?
The first point to highlight when looking at the EU’s commitment to policy coherence for development in the context of the design and implementation of the EU’s common agricultural policy (CAP) is that is that development is only one of many policy coherence dimensions which the CAP is required to take on board. The EU’s policy coherence agenda reaches substantially beyond the question of policy coherence for development encompassing a need to ensure the policy coherence of the CAP with EU policies on:
- promoting jobs, growth and investment;
- migration;
- energy policy;
- climate change;
- making the EU a stronger global actor;
- promoting the digital single market; and
- policy coherence for development (1).
It is in this broader context that the EC’s policy statement that ‘the impacts of the CAP should not counteract the development policy objectives of the EU’ (1) needs to be seen and assessed.
With specific reference to policy coherence for development the EC places the focus on the promotion of the attainment of the SDGs and in particular policy concerns related to ‘food security, poverty and equality’. The EC assessment notes ‘food security is one of the key objectives of the CAP, both within the EU and globally’. It goes on ‘Globally, the EU promotes multilateralism, by advocating open, rules based trade’ (1).
This implies the EC sees EU agricultural production as playing a role in ensuring food security in developing countries. Within this policy context the current strong EU focus on promoting EU agro-food exports to developing countries is wholly consistent with its development policy objectives.
Reducing CAP Induced Trade Distortions
In the policy coherence section of annex 5 the EC asserts ‘the Common Agricultural Policy and agricultural trade policy continue to align closely with development policy’. The EC maintains that over the past 25 years the process of CAP reform has increased the EU’s market orientation and ‘removed its trade distorting features’. It is maintained that through the process of CAP reform the EU has ‘eliminated export subsidies, eliminated or reduced to safety net levels market support prices, and decoupled direct payments from production’ (1).
While each of these assertions when viewed in isolation is accurate, by ignoring the complexities of the trade consequences of the EC’s implementation of the reformed CAP, the real trade consequences of EU agricultural and agricultural trade policies for agro-food sector development in many ACP countries are masked if not entirely hidden.
While in regard to direct aid payments the EC asserts that as a result of the CAP reform process these payments are ‘largely decoupled from the volume and type of production and will not affect the production decision’ (1), it needs to be recognised this is not the case in all sectors. Indeed, since the EC itself acknowledges that ‘currently, over 90% of direct support does not distort trade – it is decoupled from production’, it is implicit that around 10% of direct support which is ‘coupled’ distorts trade. Overall the EC estimates ‘roughly … EUR 2-4 billion of support could no longer be eligible to Green Box’. The EC acknowledges that while voluntary coupled support ‘is currently notified as Blue Box’ support it is likely to shortly be reclassified as “Amber Box” support. ‘Amber box’ support is support which is deemed by the WTO to distort production and trade.
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The WTO Definition of Amber Box Support These supports are subject to limits: “de minimis” minimal supports are allowed (generally 5% of agricultural production for developed countries, 10% for developing countries); 32 WTO members that had larger subsidies than the de minimis levels at the beginning of the post-Uruguay Round reform period are committed to reduce these subsidies’. WTO, ‘Domestic support in agriculture: The boxes’ |
Beyond these core elements of EU agricultural support measures the EC seeks to highlight aspects of EU agricultural policies which are supportive of the development of value added agricultural production in developing countries. For example it is also claimed EU policies on product differentiation such the EU’s organic production schemes bring benefits to developing countries, with the EC recognising ‘organic production in more and more developing countries’ (1).
However this specific example ignores the costs to small scale producers in ACP countries of securing formal integration into EU recognised organic certification schemes and the rise of a range of self-certified organic schemes across Africa. These organic certification schemes which are subject to independent local verification have been successful in promoting organic production for local markets. However these schemes are not recognised by the EU in the process of securing acceptance as organic production for sale on the EU market. This makes it difficult for these organic producers to move into serving higher value organic export supply chains.
EU Development Policy and the Policy Coherence of the CAP
The EC maintains ‘the EU is committed to helping developing countries integrate their agricultural sectors into the world’s trading system and share in the benefits of the global economy’ (1). This provides the justification for the EU advocating levels of trade liberalisation by African governments in the agro-food sector which go beyond what the EU is willing to apply in its own agro-food sector trade relations with developed and advanced developing countries. The need for a ‘managed’ agricultural trade regime, while national agricultural production capacities are strengthened or restructured is simply not recognised by the EU in its relations with developing countries. This is despite the fact that a managed agricultural trade regime remains central for sensitive sectors under the EU’s common agricultural policy.
This raises the issue of the consistency of the market effects of patterns of EU agro-food exports with EU development cooperation programmes aimed at supporting food security, nutrition and sustainable agriculture in developing countries (to which ‘more than € 8.5 billion’ has been allocated by the EU in 62 partner countries, of which 36 countries in Sub-Saharan Africa).
Policy Coherence and the Link to EU Trade Agreements
The EC analysis of the policy coherence issues arising under EU trade policies places emphasis on the value of preferential market access provided developing and least developed countries under the EU’s EBA and the EPA regimes (1).
However it needs to be recognised that as a result of EU agricultural reforms and the extension of EU’s FTA policy to a growing range of countries, the value of traditional ACP preferential access to the EU market has been and continues to be eroded. This is particularly the case for ACP exports of sugar, bananas, rice, beef and even cut flowers (a total of 13% of sub-Saharan Africa agro-food exports to the EU28 in 2016).
According to the EC’s analysis in terms of the impact of EPAs on EU agro-food sector exports to developing countries, the EU’s Economic Partnership Agreements (EPAs) ‘leave partner countries sufficient policy space to enhance their agricultural production and to strive to eradicate poverty’. It is contended ‘the EU applies asymmetry to market access, allowing almost all agricultural products, including full agri-food sub-sectors that are strategic for the partner states, to be excluded from liberalisation or protected by safeguards’.
| Comment and Analysis
– What is the Relative Importance of the PCD Objective? An examination of the effects of EU policy choices on trends in EU-ACP agro-food sector trade strongly suggests that primacy is being accorded the policy coherence objective of promoting jobs, growth and investment in the EU. This policy objective is also coming increasingly to the fore in defining the framework for the EU’s future partnership relations with African, Caribbean and Pacific countries (2), alongside an emphasis on promoting the EU as a stronger global player (2, 3). In this context ensuring the implementation of the CAP is coherent with development policy objectives can be seen as very much a secondary concern. Within it secondary focus on the promotion of CAP implementation in a way which is coherent with development policy objectives the question arises: which specific dimensions of food security, poverty and equality does the EC take into account when assessing the coherence of the CAP with EU development policy objectives? Currently the answer to this appears to lie in the role of EU agro-food sector production in feeding growing food demand in regions such as Africa. In this context the rapid rise in EU exports of cheap poultry parts to Africa is seen as making an important contribution to the food security of African countries by increasing availability cheap protein, in the face of inadequate local production. The impact of patterns of EU exports of low cost residual poultry parts on local poultry production and the development of local poultry feed supply chains is ignored. Similar issues arise in regard to EU exports of milk powders. While EU market support prices have been reduced to safety net levels, the sustained maintenance of support to both private and public storage of milk powders has had important effects on global skimmed milk powder prices developments (see companion epamonitoring.net article ‘Continued Dominant Role for EU Dairy Exports Forecast’, 6 September 2018). This has undermined the commercial prospects of effort to develop local milk-to-dairy supply chains in Africa. Crisis response support measures in the dairy sector alongside the maintenance of ‘coupled’ support payments in the context of the abolition of milk production restrictions has encouraged patterns of EU dairy sector investment in Africa which creates a handful of jobs through the establishment of milk powder re-packaging facilities (see companion epamonitoring.net article ‘Arla Plans Expanded Investment in Production of Milk Powder for Export to Africa’, 1 March 2018) while closing down market space for the development of local milk supply chains which could potentially create thousands of jobs. The EC analysis of policy coherence largely ignores the impacts of the EU’s growing agro-food sector export orientation on agricultural production in developing countries for national and regional markets. This is a particular issue in relations with sub-Saharan Africa where rapidly growing domestic demand for food has the potential to create market opportunities for the transformation of agro-food sector supply chains across Africa. – The Coherence of the CAP and EU Trade Agreement There is also the issue of the effectiveness of these safeguard provisions under the included in EPAS with ACP countries. The experience of the use of various safeguard provisions under the EU-South Africa Trade Agreement in sensitive agro-food sectors (e.g. the poultry sector) suggests these safeguard provisions may be of limited value. Efforts by the South African government to use anti-dumping duties (2014) and safeguard provisions (2016) permitted under the trade agreement with the EU, proved singularly ineffective in halting the rapid expansion of EU poultry meat exports to South Africa (which grew from 5,138 tonnes in 2009 to 131,832 tonnes in 2012 to a peak of 270,176 tonnes in 2016). It was only when a ban was introduced on imports from EU member states affected by Avian Influenza outbreaks in December 2016 that the huge increase in EU poultry meat exports to South Africa was finally halted. In 2017 imports form non-affected EU countries continued but with overall EU poultry meat exports falling to 74,514 tonnes. The question of the likely effectiveness of permitted EPA safeguard measures needs to be seen in a context where since 2010 there has been a far more rapid growth of the value of EU agro-food exports to sub-Saharan African countries than in the growth in the value of African agro-food exports to the EU. This has occurred despite the fact that beyond Southern Africa no concluded EPA has yet been fully implemented in sub-Saharan Africa. This expansion in the value of EU exports has been the product of the effects of EU agricultural reforms and associated agro-food sector trade policies on the price competitiveness of EU agro-food exports. The rigorous interpretation and application of EPA commitments in line with the demands of EU exporters associations’ is only likely to exacerbate these trends and undermine the ability of African governments to promote integrated agro-food sector development in response to growing African food demand. The lack of consistency between the EU’s policy advocacy towards Africa and the EU’s own policy practice is highlighted by developments in the poultry sector. While in the poultry sector the EU remains wedded to a manged trade regime in the interests of not only sustaining but also growing the EU poultry sector, in relations with sub-Saharan Africa the EU is actively seeking to prohibit the application of quantitative controls on imports of poultry meat from the EU, despite the fact this undermines the basis for local poultry meat production in African countries. While the EC focuses on the value to developing countries of the preferential access which is granted to the EU market, this ignores the process of erosion of the value of traditional ACP preferential access which is underway. A process which will only be compounded by the departure of the UK from the EU, given the importance of the UK as a market for agro-food exports to the EU28 from a wide cross section of African, Caribbean and Pacific countries. A ‘no-deal or ‘hard’ Brexit could then adversely impact on the functioning of African export supply chains for not only cut flowers, bananas and sugar but also cocoa export supply chains (41% of sub-Saharan Africa agro-food exports to the EU28 in 2016). – Moving Beyond the Assertion of Policy Coherence The simple assertion that over the past 25 years the process of CAP reform has increased the EU’s market orientation and ‘removed its trade distorting features’ ignores the complexities of the trade consequences of the EC’s implementation of the reformed CAP. It ignores in particular: · the underlying EU agricultural policy dynamic which did away with the need for the · the market consequences of new safety net tools the EU has set in place in major · the recent relaxation on limitations on the deployment of ‘coupled’ support which the It should be noted ‘coupled’ payments are most significant in the dairy and sugar sectors, sectors where EU exports to developing countries, particularly in Africa have grown rapidly. This suggests a need for special monitoring and reporting on the production and trade impacts of the deployment of coupled payments in the sugar and dairy sectors in those developing countries and regions where dairy and sugar sector development is a priority. Ultimately for policy coherence for development to be promoted in regard to EU agricultural and agricultural trade policies it should be up to individual developing country governments to determine the policy priorities with reference to which the effects of the CAP should be addressed. For its part, trade agreement commitments not-withstanding the EU should allow developing country governments to take whatever trade measures they deem necessary to prevent the trade consequences of EU policies from undermining the scope for local agro-food sector development. Given the political pressures the EC is coming under from EU agro-food sector exporting interests, it would appear important for the EU to make a firm commitment to respecting the Right to Development of ACP countries under the provisions of any post-Cotonou development cooperation agreement between the EU and African, Caribbean and Pacific countries.
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Source:
(1) EC, “Results of Quantitative and Multi-Criteria Analysis” Annex 5 of the EC Staff Working Paper of the June 2018 CAP proposals
https://eur-lex.europa.eu/resource.html?uri=cellar:c1206abb-65a0-11e8-ab9c-01aa75ed71a1.0001.02/DOC_3&format=PDF
(2) EC, ‘A renewed partnership with the countries of Africa, the Caribbean and the Pacific’, Joint communication to the European Parliament and the Council, 22 November 2016
https://www.tralac.org/images/docs/10866/a-renewed-partnership-with-the-countries-of-africa-caribbean-and-pacific-joint-communication-22-november-2016.pdf
(3) EU, ‘Negotiating directives for a Partnership Agreement between the European Union and its Member States of the one part, and with countries of the African, Caribbean and Pacific Group of States of the other part’, 21 June 2018
http://data.consilium.europa.eu/doc/document/ST-8094-2018-ADD-1/en/pdf
(4) The Commonwealth, ‘Professor Joseph Stiglitz calls for a Right to Trade’, 27 June 2013
http://thecommonwealth.org/media/news/professor-joseph-stiglitz-calls-%E2%80%98right-trade%E2%80%99