Summary
At the beginning of June 2018 the EC issued a range of documents setting out both proposals for the amendment of CAP regulations and the background to these proposals. The EC sought to outline the developments since 2013 which required further reforms to be introduced. The EC also highlighted the important role which EU agricultural support plays in enhancing farm incomes, and by implication, sustaining agricultural production. The EC also highlighted the growing importance of risk management as global price movements begin to transmit onto EU markets. The EC highlighted the desire of EU member states governments to minimise changes to support instruments and support levels. The preference of some member state governments for higher levels of coupled support could well see an expansion of the use of this instrument as more discretionary powers are devolved to EU member states. While the EC has sought to assert the non-trade distorting nature of EU agricultural support instruments, this seems to conflate the compatibility of EU support instruments with WTO rules with the absence of any trade consequences for developing country partners. Read more “The June 2018 CAP Reforms: Part 2 – Importance of CAP Instruments to EU Agriculture and Issues Arising for the ACP”
Category: Dairy
The dairy sector offers scope for putting cash into the hands of smallholder farmers on a regular basis and has considerable transformative potential. However this could well be undermined by emerging patterns of EU trade and investment in ACP dairy sectors. These developments cannot be delinked from new patterns of EU support to the dairy sector. There are indications that certain EU dairy companies recognise the need to develop ‘responsible’ trade and investment relations in the dairy sector in Africa in particular. Indeed calls have been made for the establishment of a ‘Code of Conduct for Responsible Trade and Investment in African Dairy Sector Development’. There is also a need for the EU to responsibly interpret and apply the commitments entered into by ACP governments with regard to the use of non-tariff trade policy measures.
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The June 2018 CAP Reforms: Part 1 The EC proposals for Amendment of CAP Regulations
Summary
The EC has tabled proposals for the establishment of a new delivery model for the CAP, which devolves design of Strategic Plans to EU member states on the basis of a common EU policy framework and common EU tool box. EU member states are to have more flexibility in how they combine tools and there is to be a greater focus on risk management. The structure of financing remains unchanged as does the overall objectives of the CAP. There are concerns the granting of greater flexibility could lead to increased use of trade policy tools which are de facto trade distorting. Concerns also arise over the future use of the centralised crisis reserve fund particularly in the dairy sector, where EU intervention buying and storage have contributed to a sustained depression of global skimmed milk powder prices. While 9 specific objectives for the CAP are set out, no reference is included to the EU policy objective of ensuring the coherence of its agricultural policy interventions with its commitments to promoting policy coherence for development. Read more “The June 2018 CAP Reforms: Part 1 The EC proposals for Amendment of CAP Regulations”
Continued Dominant Role for EU Dairy Exports Forecast
Summary
From an ACP perspective the OECD/FAO analysis highlights the impact of EU skimmed milk powder (SMP) stocks on prospects for global SMP prices. It suggests EU SMP stock polices continue to limit the rise of global SMP prices. This is important since SMP and fat filled milk powder (FFMP) imports represent the principal competitor to domestic milk producers in African ACP countries. There is however also a growing EU export trade in liquid milk to African and Caribbean countries. The role of the EU in the global dairy trade is projected to grow in the coming ten years, in a context where the EU is less well placed to serve the main import market China, than Oceanian dairy exporters. The OECD/FAO highlighted how import restrictions continue to influence patterns of global dairy trade, with this suggesting eliminating import restrictions on EU products on a preferential basis likely to become an important focus of EU trade policy in the coming period. Read more “Continued Dominant Role for EU Dairy Exports Forecast”
Arla Highlights Short Term Dangers of a ‘No Deal’ Brexit in the Dairy Sector
Summary
Given the UK’s dependence on dairy imports the pan-EU dairy company Arla is deeply concerned about possible dairy trade disruptions under a ‘hard’ Brexit. Concerns were expressed over the application of non-tariff measures to EU27/UK trade, which it was felt, could lead to acute port congestion. Particular concerns were expressed over the likely shortage of vets to inspect animal products if standard 3rd country controls were applied. There were also concerns over possible labour shortages in the sector. Some of these concerns were held to apply even under a ‘softer’ Brexit scenario. As with the Russian embargo any disruption of EU/UK trade could see increased exports to ACP markets, particularly in West Africa and Southern and Eastern Africa. Read more “Arla Highlights Short Term Dangers of a ‘No Deal’ Brexit in the Dairy Sector”
Dairy UK and the European Dairy Association (EDA) Launch Joint Position to Minimise Brexit Related Dairy Sector Disruptions
Summary
UK and EU dairy associations are seeking to develop a common approach to avoiding Brexit related disruptions of the existing dairy trade. While the UK governments white paper proposals appear aimed at remaining as close as possible to the single market and customs union, while formally leaving both, it is unclear whether these UK proposals would be consistent with the ‘redlines’ the EU has established in order to maintain the integrity of the single market and the alignment of its trade policy with WTO rules. The potential for ‘terrible market turbulence’ which a poorly manage Brexit process could give rise to in the dairy sector is an issue of concern to ACP countries, since as Dairy UK and the EDA position paper highlights, the last time EU exporters lost access to 3rd country markets (the Russian import embargo) this saw a massive expansion in EU exports of milk powders to Africa. This has served to further undermine efforts to develop local milk-to-dairy supply chains in Africa. Read more “Dairy UK and the European Dairy Association (EDA) Launch Joint Position to Minimise Brexit Related Dairy Sector Disruptions”
FC WAMCO Dairy Development Programme Expands Amidst Continued Import Dependence
Summary
While FCW continues to invest in milk collection centres and farmer training to expand local milk procurement, local milk purchases continue to be dwarfed by the scale of milk powder imports form the EU. Indeed product development such as the introduction of Peak Fat Filled Milk for cholesterol conscious consumers would appear to further lock in the import dependent dairy sector development model which dominates West Africa. It may need to await fundamental changes in the dairy supply and demand equation for any changes in the current import dependent model to be brought about. Read more “FC WAMCO Dairy Development Programme Expands Amidst Continued Import Dependence”
Ageing EU SMP Intervention Stocks See EU SMP Prices Discounted
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 Agri-food Export Growth Continues, Becoming Central to the Future EU Agricultural Prosperity
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”
EU to Launch FTA Negotiations with Australia and New Zealand
Summary
The EC has announced the launch of separate FTA negotiations with Australia and New Zealand. This will need to involve negotiations in sensitive agricultural sectors. How the EU prepares its TRQ offers to Australia and New Zealand in sensitive agricultural products could provide insights into how it plans to deal with the Brexit related apportionment of bilaterally negotiated TRQ access in areas of direct export interest ACP countries (e.g. bananas, sugar and rice). Read more “EU to Launch FTA Negotiations with Australia and New Zealand”
Analysis of the CAPs’ Poverty and Employment Effects in Developing Countries Needs to be Country and Sector Specific
Summary
Analysis of the external effects of the deployment of CAP financial tools from the German Institute for International and Security Affairs (SWP) has argued ‘overall, the production and price effects of the current CAP are negligible’. It maintains if the CAP were completely abolished this would lead to only a small decline in EU production. It argues effects of other policies are often wrongly attributed to the CAP. However the impact of the CAP on developing countries needs to be assessed in the context of the wider policies which are associated with the deployment of CAP financial instruments (e.g. EU trade, food safety policy and SPS control policies) and needs to be assessed at the country and product specific level not the overall level. The SWP analysis says nothing about the price level which would need to prevail to achieve a production neutral outcome to the abolition of the deployment of CAP financial tools. The SWP analysis however rightly stresses the importance of involving developing countries in assessments of the external effects of the CAP, so potentially affected actors themselves can express whether and how the CAP is detrimental to their development. Read more “Analysis of the CAPs’ Poverty and Employment Effects in Developing Countries Needs to be Country and Sector Specific”