Summary
Debates on proposed amendments to the Spanish 2013 Food Chain Law have highlighted how ‘fair pricing’ regulations need to be applied equally to domestic EU producers and 3rd country producers if competition between domestically produced and imported products is not to be distorted. Applying ‘fair price’ regulations to imported as well as domestically produced agricultural products would not only avoid distorting competition but would also provide scope for integrating ‘Green Deal’ sustainability objectives into both domestic and 3rd country supply chains serving the EU market.
In February 2020, as part of an extension of the Spanish governments 2013 Food Chain Law (1), a proposal to prohibit ‘retailers selling agricultural produce at a loss’ and requiring ‘retailers to pay producers a price equal to or greater than the cost of production’ was introduced in the Spanish Parliament (2).
However, the fact this legislation would only apply to domestic procurement and sales has seen the Organisation of Banana Producers of the Canary Islands (Asprocan) ‘calling for an exemption to these provisions’ for bananas. It was argued that forcing Spanish banana growers to sell bananas at a minimum price would leave Spanish banana producers ‘at a competitive disadvantage to cheaper bananas imported from Latin America, that are not subject to similar price maintenance measures.’
The potential damaging implications for domestic EU producers of pursuing supply chain related regulatory measures applicable solely to domestic EU producers while excluding imports from such regulatory action had been earlier recognised in the EU in its Unfair Trading Practices regulations. It was on this basis that 3rd country supply chains serving the EU market were included in the scope of the EU UTP regulation (see epamonitoring.net article, ‘Calls for Stricter EU Measures Against UTPs’, 1 November 2018).
Banana Link has pointed out how the issue is not one of retailers being required to pay Spanish banana producers an unreasonably high price, but rather the unsustainably low prices being paid for banana imports. Banana Link has highlighted how for many years ‘prices paid by European retailers for imported bananas are too low to cover Costs of Sustainable Production (COSP)’ (2).
This strongly suggests a need to extend the principle of universal coverage of regulations governing supply chain relationships, which underpins the EU’s UTP regulation (which covers both domestic production and all imports) to all retail price regulation initiatives, so that both domestic and imported products placed for sale on the EU market receive equal regulatory treatment.
While this suggests the UTP regulatory framework would be utilised in this regard, Banana Link has highlighted how the UTP regulation only deals with unfair trading practices after contracts have been concluded, it has nothing to say about fair price negotiations, where unequal power relationships along the supply chain have a major role to play in price determination in the first instance. Getting to grips with this issue is something which the proposed amendment to the Spanish Food Chain law is seeking to get to grips with.
Given there are similar legal provisions to those under consideration in Spain in Belgium, France, Germany, Italy, Luxembourg, and Portugal, seeking an extension of the principle of universal coverage of regulations governing supply chain relationships to ‘fair pricing regulations is something which Banana Link rightly concludes is now essential; both to protecting the interests of European producers and promoting more sustainable forms of production within import supply chains.
The Banana Link analysis suggests that post-Covid recovery planning aimed at ‘building back better’ should seek to get to grips with sustainability issues in way which strikes at the heart of the matter, namely, ensuring the price paid to developing country producers reflects their sustainable production costs.
This needs to be seen against the background of European banana buyers offering supply contract prices for 2021 which makes it impossible for growers to ‘pay living wages and make the social and environmental investments required by certification standards and supermarket Corporate Social Responsibility (CSR) commitments.’ It is argued retailers continue to flaunt their sustainability credentials while failing to get to grips with the unsustainable nature of the prices being offered, in light of the investments required to move banana production on to a more environmentally and socially sustainable path (4).
As a range of NGOs continue to insist it is time for retailers to, ‘put their money where their mouth is and adjust the retail price, drawing it closer to the point where everyone along the supply chain would be able to make a living’ (4)
| Comment and Analysis The tensions emerging in the face of the proposed amendments to the Spanish Food Chain Law have a far wider applicability than merely Spain. It raises the issue of distortions of competition between EU and 3rd country producer in all countries where such Fair Pricing regulatory initiatives are underway. It also raises the issue of how the EU’s new ‘Green Deal’ approach will get to grips with wider sustainability issues along supply chains where third country suppliers play a major role.As Alan Mathews has pointed out a central element of the EU’s ‘Green Deal’ is to ‘set in motion incremental but irreversible changes in European agriculture, while strengthening its resilience to possible future crisis’ (5). However, the critical question becomes: how can this be done in isolation from the sustainability of production practices in 3rd countries, when unsustainable practices in 3rd countries potentially undercuts EU producers in a range of product areas? It would appear essential that if climate concerns are to be addressed within the urgent time frame required while avoiding serious commercial disruptions within the EU, then regulatory measures on sustainable pricing need to be universal. The aim should be to offer higher prices for imported products to prevent higher production standards in Europe leading to market disadvantages for EU producers, while at the same time offering higher prices to imported products which facilitate their adherence to the same higher EU standards and progressively limiting access for non-sustainably produced goods to the EU market. |
Sources:
(1) BOLETÍN OFICIAL DEL ESTADO, ‘Ley 12/2013, de 2 de agosto, de medidas para mejorar el funcionamiento de la cadena alimentaria’, 3 August 2013
https://www.boe.es/boe/dias/2013/08/03/pdfs/BOE-A-2013-8554.pdf
(2) Banana Link, ‘Could a ban on selling below cost price help banana producers?’, 26 January 2021
https://www.bananalink.org.uk/blog/blog-could-a-ban-on-selling-below-cost-price-help-banana-producers/
(3) antena3.com, ‘El plátano de Canarias pide ser una excepción en la nueva ley de la Cadena Alimentaria’,22 January 2021
https://www.antena3.com/noticias/economia/el-platano-de-canarias-pide-ser-una-excepcion-en-la-nueva-ley-de-la-cadena-alimentaria_20210122600b4256a81ee90001d1f8bd.html
(4) frehsfruitportal.com, ‘Banana Link hits out at banana multinationals after force majeure announcement’, December 14, 2020
https://www.freshfruitportal.com/news/2020/12/14/banana-link-hits-out-at-banana-multinationals-after-force-majeure/
(5) CAPreform, ‘Agriculture in the European Green Deal: from ambition to Action’, 21 October 2020
http://capreform.eu/agriculture-in-the-european-green-deal-from-ambition-to-action/