Category: Southern Africa

Ageing EU SMP Intervention Stocks See EU SMP Prices Discounted

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Summary
EU SMP exports reached record levels despite declining prices in 2017, while the EU is committed to eliminating SMP intervention stocks in an orderly fashion, discounts have to be offered to encourage purchases. This exerts further downward pressures on SMP prices. No sustained recovery in SMP prices is likely as long as EU public intervention stocks overhang the market. Low SMP prices are a particular source of concern for African ACP countries, since imported milk powder prices provide a bench mark for local milk prices, undermining efforts to develop local milk-to-dairy supply chains in African regions targeted by EU exporters. Trends in EU SMP exports highlight just how divorced EU export patterns can be from underling price trends and the extent to which EU policy measures drive trade flows. Whether the profound effects EU policies have on the functioning of milk powder markets can be mitigated in ways which create new opportunities for the structural development of dairy production in ACP countries remains to be seen. Read more “Ageing EU SMP Intervention Stocks See EU SMP Prices Discounted”

EU Council authorises launch of Negotiations on apportionment of WTO TRQs

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Summary
The EC proposal for a mandate to negotiate the apportionment of WTO agreed TRQs has been approved by the EU Council. The EC’s approach is based on the October 2017 joint UK/EU letter to WTO members. This approach has already been rejected as unacceptable by leading WTO members. The annex to the EC proposal provides TRQ by TRQ details of how much access to the EU27 market would be reduced post Brexit.  This nominally includes a reduction in ACP TRQ access for sugar exports: an arrangement which has been superseded by the granting of full duty free-quota free access under the EU’s EBA scheme and various EPAs. This suggests there may be some shortcomings in the EC’s preparatory work for the launch of these TRQ negotiations with WTO members. This could lead to a lengthy process of negotiations. However the EU Council has reserved the right to unilaterally apportion existing TRQs if no specific agreements can be reached with WTO members by the date of the UK’s full departure from the EU. Read more “EU Council authorises launch of Negotiations on apportionment of WTO TRQs”

EU Agri-food Export Growth Continues, Becoming Central to the Future EU Agricultural Prosperity

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Summary
EU agri-food exports continued to grow in 2017 (+5.1%), re-confirming the EU as the leading global agri-food trader, with a surplus of €21.5 billion. The EU also maintains a large trade surplus with LDCs (equivalent to 46% of the value of agri-food imports from LDCs). While the EC asserts that following the implementation of CAP reforms ‘EU exports of agri-food products to developing countries are simply a response to supply and demand’, the deployment EU agricultural support tools and trade policy measures continue to have an important bearing on the structure of EU production and patterns of exports to ACP countries, particularly in the dairy, poultry meat and increasingly the sugar sector. While the EU is committed to policy dialogues with ACP governments to strengthen the contribution of the agri-food sector to rural and wider national development, this dialogue will continue to be one-sided unless the EU acknowledges the impact which the deployment of EU policy tools continues to have on patterns of EU exports which can undermine prospects for the structural development of key agri-food sectors. In Africa in particular patterns of EU private sector investment are needed which support rather than hold back the integrated structural development of agri-food sectors so growing African demand for high quality, high value food can increasingly be met from domestic integrated agri-food sector activities. Read more “EU Agri-food Export Growth Continues, Becoming Central to the Future EU Agricultural Prosperity”

Sugar Reduction Target Missed But Pipeline of Pending Initiatives Encouraging

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Summary
The failure of the UK food industry to meet the voluntary 5% sugar reduction target established in 2016 is leading to increased calls for mandatory action, given the effectiveness of the Soft Drinks Industry Levy (SDIL) in stimulating reformulation efforts which resulted in an 11% reduction in sugar usage. Despite the failure to meet the ambitious first year target efforts to reduce sugar usage in food and drink products appears to on track, with this being likely to carry implications for ACP sugar exporters.

For low cost ACP sugar exporters analysing in detail the trends in sugar usage in the UK food and drink sector set out in the PHE report could assist in formulating strategies to reduce their vulnerability to the long term trend towards reduced sugar usage in food and drink products. Unfortunately for higher cost ACP sugar exporters the longer term trend in UK sugar consumption is likely to be just another nail in the coffin of their traditional sugar exports. Read more “Sugar Reduction Target Missed But Pipeline of Pending Initiatives Encouraging”

Problems of Re-consolidating UK Access under EU 3rd Country FTA Could Threaten UK Agriculture

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Summary
A cross party group of UK MEPs representing agricultural constituencies have requested a detailed explanation from the UK International Trade Secretary Liam Fox on how the UK government will secure continued preferential access to 3rd country markets covered by EU trade agreements, once the UK is no longer part of the EU (from 30th  March 2019). The current text of the EU27/UK Withdrawal Agreement is ambiguous on this issue, with serious WTO complications arising for 3rd country signatories of EU FTAs if they were to simply ‘roll-over’ UK preferential access once the UK was no longer part of the EU. Read more “Problems of Re-consolidating UK Access under EU 3rd Country FTA Could Threaten UK Agriculture”

EU Sugar Quota Abolition Begins to Eat at ACP/LDC Export Volumes and Earnings

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Summary
The reduction of EU sugar imports forecast to occur following the abolition of EU sugar production quotas is well underway, with exports to the sugar deficit UK market from traditional ACP sugar suppliers coming under particular pressure. Given the proposed 21 month transition period in EU27/UK trade relations this is likely to continue until at least 1st January 2021 and may extend beyond, depending on the nature of the long term post-Brexit EU27/UK trade arrangement set in place.

EU sugar exports are also growing faster than projected, with this reportedly contributing to the decline in world market sugar prices which has been underway. In the longer term growing EU export volumes could threaten production in less competitive sugar producing countries including in Africa (particularly West Africa and high cost Eastern African sugar producing countries). Against this background sugar sector trade policy could become a contested area in EU-Africa relations. Read more “EU Sugar Quota Abolition Begins to Eat at ACP/LDC Export Volumes and Earnings”

Parliament Committee Warns of Disastrous Consequences for the UK food and Drink Industry of a ‘No Deal’ Brexit

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Summary
The BEIS Committee has come out heavily in favour of maintaining as ‘frictionless’ access to the EU27 market as possible in order to protect the interests of UK processed food and drink exporters. The BEIS Committee further noted the lowering of tariffs on imports could be extremely damaging for UK farming, while bringing only marginal consumer price benefits. The importance of replicating all existing and pending EU trade deals to the UK processed food and drink sector was highlighted if growth in exports to non-EU markets is to be promoted. Amongst ACP countries particularly importance was attached to replicating the EU trade agreement with South Africa. In terms of resolving any potential conflict between maintaining access to EU27 markets and concluding new trade agreements the Committee implicitly came down in favour of concluding a comprehensive FTA with the EU27. While future close alignment of UK and EU27 agro-food sector tariffs could avert the threat of preference erosion on UK markets for products like bananas, rice, citrus fruit and other Mediterranean products, it would not assist in addressing the deteriorating position of the less efficient ACP sugar exporters on the UK market, which is linked to growing EU27 sugar exports to the sugar deficit UK market. Read more “Parliament Committee Warns of Disastrous Consequences for the UK food and Drink Industry of a ‘No Deal’ Brexit”

March 2018 AU Position on Future Negotiations with EU Sparks Controversy

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Summary

The recently adopted African Union (AU) Executive Council decision to recommend the new agreement with the EU ‘should be separated from the ACP context’ is in contradictions to established common ACP positions, which in line with the recent CARIFORUM statement had emphasises the importance of building on the acquis by negotiating with the EU at the all-ACP level. By abandoning substantive negotiations at the pan-ACP level (the only level at which the EC is obliged to conclude an agreement by March 2020) the AU position risks weakening the position of regional negotiators on issues where there are tensions in the ACP-EU relationship. This includes a range of agro-food sector trade issue which in the context of evolving trends could come to take on growing significance fort African, Caribbean and Pacific countries, most notably in regard to the wider policy framework within which the EU seeks the implementation of EPA commitments.  This could carry particularly important implications for African structural economic transformation objectives in the agro-food sector. Read more “March 2018 AU Position on Future Negotiations with EU Sparks Controversy”

EC Asserts EUs TRQ approach to Mercosur Beef Access Request Protects Sensitive Sectors

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Summary

The debate on the EU’s TRQ offer for beef in the EU-Mercusor negotiations throws into sharp relief the double standards which the EU applies to the use of quantitative restrictions on trade in sensitive agricultural products. While routinely using such tools to protect EU producers in trade arrangements with competitive agricultural exporters, the EU insists on a prohibition on the use of quantitative restriction on imports from the EU under trade arrangements with ACP countries.  This is despite the EU often being the major source of agricultural imports in sensitive sectors in EPA signatory countries.

It also raises the potentially important issue of the effects of Brexit in the beef sector both in terms of the threat to the functioning of national and regional beef markets in the ACP (particularly in Africa) and the future value of preferential access to EU27 markets in the post-Brexit context. This will require ACP beef exporters to the EU to pay close attention to the prospects for a ‘hard’ Brexit in the meat sector as EU27/UK negotiation progress throughout the course of 2018. Read more “EC Asserts EUs TRQ approach to Mercosur Beef Access Request Protects Sensitive Sectors”

EU Poultry Meat Exports to Sub-Saharan Africa Down Only Marginally in 2017 Despite South African AI Based Import Restrictions

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Summary
EU exporters have been remarkably successful in finding alternative African destinations for exports of poultry parts impacted by South African AI related import restrictions. In the context of the potential for ‘hard’ Brexit related disruptions of the EU27/UK mutual trade in poultry meat the mobility of EU28 poultry meat exporters would appear to raise concerns. This mutual EU27/UK trade currently amounts to around 830,000 tonnes per annum, with analysts suggesting fully 90% of this trade could be halted under a ‘hard’ Brexit scenario. This could lead to a sudden surge in both UK and EU27 poultry meat exports targeting African ACP markets as early as 2021. Concerns also arise over the possible inclusion of Ukrainian derived poultry meat in exports of ‘EU’ poultry meat to African destinations, in violation of the rules or origin requirements of EU trade agreements. Read more “EU Poultry Meat Exports to Sub-Saharan Africa Down Only Marginally in 2017 Despite South African AI Based Import Restrictions”