Summary
In the background documentation to its CAP reform proposals the EC highlights the growing international focus of the EU agro-food sector and hence the importance of securing preferential trade access for EU agro-food exports to 3rd country markets where food demand is growing rapidly. This includes securing the preferential removal of not only tariffs on EU exports but also the removal of non-tariff barriers to EU agro-food exports. The EC analysis highlights just how central EU trade policy is to the implementation of the CAP and the achievement of overall EU policy objectives for the agricultural sector. In an ACP-EU context this suggests the issue of the interpretation and implementation of EPA commitments is likely to take on growing importance in the coming years. This needs to be seen in a context where EU policy prescriptions for ACP governments in sensitive agro-food sectors diverge markedly from EU policy practices in sensitive agro-food sectors.
As part of the background documentation to the EC’s June 2018 proposals for amendment of CAP regulations, the EC explored the vital role EU trade policy plays in supporting the current growth trajectory of the EU agro-food sector. It is in many respects the EU’s agro-food sector trade policy, alongside the comprehensive system of financial support instruments, which explains how, despite what would appear to be a review of the poor economic prospects of the EU agricultural sector, (see companion epamonitoring.net article ‘The June 2018 CAP Reforms: Part 2 – Importance of CAP Instruments to EU Agriculture and Issues Arising for the ACP’, 17 September 2018) the EC can argue the market environment for EU agricultural products is ‘very conducive, with a single market of a large and comparatively wealthy domestic consumer base, and expansion in foreign markets linked to population and income growth’ (1).
This is closely linked to the success of EU agricultural policy reforms which have significantly closed the gap between EU and world market prices (1). This has seen the EU emerge as ‘a major importer of commodities and an exporter of valuable agriculture and food products’. On this basis the EC recognises that the CAP ‘has therefore an impact on food systems outside the EU’ (2). This can be seen as providing the bridge between the EU common agricultural policy and the EU’s commitment to the promotion of policy coherence for development.
The EC addresses the issue of policy coherence for development by asserting its proposals for the amendment of the CAP fully take into account ‘the EU development cooperation’s objectives of poverty eradication and sustainable development in developing countries, in particular by ensuring that EU support to farmers has no or minimal trade effects’ (2) (for a more in-depth discussion of this issues see companion epamonitoring.net article ‘The June 2018 CAP Reform: Part 4 CAP and Policy Coherence for Development’, 13 September 2018).
Looking to the future The EC takes the view ‘Europe’s opportunities for growth in the agricultural sector lie to a great extent in supplying third countries’ markets with safe and quality products, ranging from commodities to food preparations’, with demand growth in emerging markets being particularly important. African markets, alongside markets in India, China and South-East Asia, are seen as particularly important, with the EC expressing the believe ‘African markets may also become increasingly attractive in the future‘ (1).
In stressing the importance of overseas markets to the future prospects for the EU agricultural sector the EC recognises EU exports are also supported by a range of non-price factors in areas where higher cost EU exports are not price competitive. This is specifically linked to ‘the reputation of high-standard EU products on global markets’. This is an area where CAP instruments provide important elements of support (1).
It is in capitalising on growing global demand for agro-food products despite the EU’s lack of price competitiveness across a range of products that the EU’s trade policy is taking on particular significance.
The EC highlights how ‘in the negotiation of trade agreements, the EU aims to achieve real market access for EU agricultural and food products, including through the elimination of tariffs as well as the reduction or dismantling of non-trade barriers (NTB) and sanitary and phytosanitary (SPS) barriers’ (1).
The EC also highlights how ‘initiatives to dismantle unjustified Sanitary and Phytosanitary (SPS) requirements and remove other Non-Trade Barriers (NTBs) are a continuous effort, as part of the negotiation of Free Trade Agreements (FTAs) but also independently’ with this providing ‘an important opportunity to further increase export opportunities for EU agricultural products’. Continuous efforts to remove NTBs to EU exports are accorded particular importance where ‘tariff cuts are implemented with a partner country as part of an FTA’ (1).
However it is recognised the negotiation of these trade agreements can be a double edged sword, since the conclusion of new EU FTAs can potentially increase competition for EU producers on domestic markets. Sectors which are seen as particularly vulnerable in this regard include the beef, sheep, rice, sugar and poultry sectors which it is held ‘could come under substantial pressure with full trade liberalisation and unfettered competition with imports’ (1).
It is against this background that when negotiating trade agreements for imports the EC seeks to ‘limit the liberalisation of imports of sensitive agricultural products in all trade negotiations, for example through setting tariff rate quotas’ (1). This is particularly important under EU trade agreements with major agricultural trading nations. This accounts for why trade agreement negotiations with the Mercosur group of highly competitive Latin American agricultural exporters have dragged on for so many years.
| Comments and Analysis EU policies do not only promote the export of safe, quality food products but also encourage trade flows which are anything but safe by the time the product reaches the end-consumer in Africa (e.g. the trade in EU frozen chicken parts to Nigeria via neighbouring Benin). EU policies also encourage exports of bulk commodities and ingredients, the export of which can disrupt the development of local and regional agricultural supply chains, particularly in Africa (e.g. through the export of milk powders and more recently refined sugar). These export patterns are on the one hand attributable to the effects of the EU’s tightly manage import regime (e.g. for poultry meat) and on the other hand attributable to the deployment of CAP instruments such as decoupled direct aid payments and voluntary coupled support payments (e.g. for sugar) and public intervention buying and storage support deployed as crisis measures (e.g. in the milk sector). If the EU’s policy coherence for development commitments are to carry any credibility the EC needs to be open to discussions on the measures required to prevent the disruption of local production and the development of agro-food sector supply chains in ACP countries where national governments are according priority to the maintenance of and development of specific agricultural products and specific agro-food sector supply chains. In addition the impact of the EU’s tightly managed import regime on exports of some products is not always appreciated. For example, if imports of poultry meat into the EU were not strictly managed through a system of tariff rate quotas, EU poultry meat producers have recognised EU poultry production would rapidly be relegated to the production of specialty poultry products, as they were displaced from general domestic EU poultry meat market by far cheaper imports. Instead the maintenance of the EU’s strictly managed poultry meat import regime has ensured that the expansion of EU consumer demand over the past decade (+25% between 2008 and 2017) has been met exclusively by the expansion of EU domestic poultry meat production (+30% between 2008 and 2017), while imports actually fell 0.7% in 2017 compared to 2008 (3). Given the preference of EU consumers for breast meat this expansion of EU production has seen the rapid expansion of EU production of poultry parts which are surplus to domestic EU requirements. It is these frozen poultry parts which have increasingly been exported to sub-Saharan African markets and saw sub-Saharan African markets account for almost 47% of total extra-EU poultry meat exports in 2016 (see companion epamonitoring.net article ‘EU Poultry Meat Exports to Sub-Saharan Africa Down Only Marginally in 2017 Despite South African AI Based Import Restrictions’, 21 March 2018). This EU export trade would not have reached such levels had not EU trade policies in the poultry sector ensured expanding EU demand for poultry meat was met almost exclusively by expanded EU domestic poultry meat production. The EC background analysis highlights just how central EU trade policy is the implementation of the CAP and the achievement of overall EU policy objectives for the agricultural sector. On the import side, in its trade agreements with competitive agricultural exporting nations, against the background of high MFN tariffs and a range of supplementary agricultural levies, the EC seeks to limit liberalisation for sensitive agricultural products through the use of quantitative restrictions on imports receiving tariff preferences. This policy is in stark contrast to the provisions on EU exports of agro-food products which the EU has included in trade agreements with ACP countries. In these agreements the EU has not only systematically included provisions which prohibit the use of any quantitative controls on imports from the EU but has also sought to prohibit the application of any levies on imports from the EU which are not also applied to domestic producers (‘National Treatment’ provisions). This needs to be seen in a context where for most EPA signatories in Africa the EU is their major agro-food sector trade partner in a context where the production and trade capacities of the EU dwarf those of African and broader ACP economies. In the coming period this issue of the interpretation and implementation of EPA provisions is likely to take on particular significance as EU agro-food exporters increasingly seek to target growing African markets for food, driven by rising population and rising incomes. No doubt the EC will interpret this growing EU agro-food sector export trade as part of the EU’s contribution to global food security and on this basis assert the consistency of the CAP with the Sustainable Development Goals (SDGs) notably goal 2 – Zero Hunger. |
Sources
(1) EC, ‘Modernising and simplifying the CAP: Economic challenges facing EU agriculture’
https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/key_policies/documents/eco_background_final_en.pdf
(2) EC, ‘Proposal for a Regulation of the European Parliament and of the Council amending Regulations (EU) No 1308/2013 establishing a common organisation of the markets in agricultural products’, COM(2018) 394 final/2, ‘1 June 2018
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52018PC0394R(01)&from=EN
(3) EC, ‘Prospects for Agricultural Markets in the EU 2017-2030’, table ‘Poultry meat market projections for the EU, 2005-2030 (thousand tonnes c.w.e.)’, December 2017
https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2017/2017-tables.pdf