Summary
The European Poultry Producers Association (AVEC) has called for the EC to review the application of its TRQ based import regime for poultry meat to ensure import levels reflect the collapse of demand for out-of-home poultry meat consumption. With the EC being a strong advocate of open markets and with trade disputes pending in the poultry sector to remove barriers to EU exports, it will be worthwhile monitoring the EC’s response to AVEC’s call to limit imports via a review of how the TRQ regime for poultry meat is managed.
On 21st April The European poultry industry body AVEC sent an open letter to Agriculture Commissioner Wojciechowski and Trade Commissioner Hogan setting out the impact of the Covid-19 crisis on the EU poultry sector and expressing their deep concerns over the evolution of the EU poultry market (1).
It highlighted how, with the lockdown largely putting a ‘stop to all out of home consumption’ of poultry meat, ‘EU Slaughterhouses have had to stop with production for the food service market – which normally represents 20 to 40 % of the production, depending on the country’ (1).
It was noted how ‘only a limited part of the production intended for food service can be converted to retail, due to different size of the birds and/or different slaughterhouse equipment’. As a consequence, the slaughtering of birds has fallen between a 10-30% in EU member states (1). According to AVEC these developments have also seen a decline in poultry prices of around 20% since the beginning of March 2020 (1), reversing what was a rising trend in EU poultry meat prices from December 2019 to the beginning of March 2020 (2). This evolving EU market situation is being compounded by the closure of export markets for poultry producers in EU member states where HPAI outbreaks have been reported (1).
AVEC is concerned this evolving market situation is having knock-on effects along the whole of the poultry supply chain, with the impact on breeding companies potentially carrying implications for the next two years.
It is in this context AVEC is expressing concerns about the operation of the EU’s poultry meat import regime. It was highlighted how ‘in order not to lose their rights in the EU Tariff Rate Quota system, importers continue to import poultry meat’, despite the severely depressed demand in the market component in the Europe normally served by these imports. These imports are being placed in cold stores until such time as lockdown and social distancing restrictions are lifted and demand for poultry meat in the restaurant, hospitality and food service industry returns to more normal levels (1).
There are serious concerns that with annual imports of round 850,000 tonnes, the building up of these stocks of imported meat will generate a serious oversupply on the EU market, at a time when the lifting of the lockdown and relaxation of social distancing measures should be supporting a recovery of the EU poultry sector.
Against this background AVEC has called for an ‘adjustment of the imports of poultry meat’, through a declaration of force majeure by EU member states which would allow import volumes to be restrained without provoking a WTO trade dispute (1). This call by AVEC was endorsed by Copa-Cogeca on the 29th April (3).
AVEC maintains the alternative would be a growing need for EU financial assistance measures for the poultry meat sector. Currently the poultry meat sector is excluded from EU Covid-19 emergency measures (‘see companion epamonitoring.net article, ‘EC Covid-19 Linked Agri-Food Sector Support Measures Extended’, 14 May 2020).
The types of areas where AVEC believes support is needed include: cold storage subsidies, compensation for the revenue losses of poultry farmers and non-integrated hatcheries, and ‘support to maintain parent stocks of small species which will disappear without support’(1).
The call for support for cold storage subsidies needs to be seen against the background of a generalised shortage of cold storage capacity across the EU, with this being particularly acute in the UK, where fully 95% of cold storage capacity is already fully utilised (4).
| Comment and Analysis It is unclear how the EC will respond to the call from AVEC for an adjustment of the management of the EU’s poultry import regime. Depending on how this is introduced this could be a breach of the EU’s WTO market access commitments. In addition, it would be difficult for the EU to modify longstanding arrangements for the management of WTO bound market access commitments, while at the same time taking action against SPS based qualifications to market access recently introduced by countries such as South Africa (see companion epamonitoring.net article ‘Conditional Lifting of South African HPAI Import Ban on Dutch Poultry Meat Follows New HPAI Based Ban on Polish Poultry Meat’, 5th May 2020). The adoption of the measures called for by AVEC could also sit uneasily with the EU’s ongoing advocacy for the maintenance of open markets, despite the trade and economic effects of the Covid-19 pandemic. Yet, this being noted, the EC will be under intense pressure to secure the full reopening of major export markets for EU poultry meat (such as the South African market), as part of efforts to promote the post Covid-19 recovery of the EU poultry sector. A potential middle course is open to the EC, which would involve the announcement of a special derogation to the management arrangements for the EU’s poultry sector TRQ regime, whereby any exporters underfilling their TRQs during the Covid-19 crisis would not face any reduction in future levels of market access. If this were combined with a suspension of any dispute settlement cases for the duration of the Covid-19 pandemic, the EC could find itself being able to square this particular circle. The pursuit of such a strategy by DG Trade would be made more likely if AVEC’s call for a review of the management of import quota arrangements was essentially a ‘throw away’ ploy to secure the extension of existing EU emergency support programmes to the poultry sector. Nevertheless it needs to be recognised that regardless of how the EC responds to AVEC’s call for a review of the management of poultry sector TRQs, ACP governments are likely to face increased pressures to remove all remaining restrictions on imports of poultry meat from the EU in the coming period. This needs to be seen in a context where in 2019 extra-EU poultry meat exports increased by 7.6% compared to 2018 (from 1,777,002 tonnes to 1,912,777 tonnes), but contracted 8.8% in January 2020 (compared to January 2019) in the face of the introduction of bans on imports of poultry meat from EU member states where HPAI outbreaks had occurred (2). |
Sources:
(1) AVEC, ‘The impact of the COVID 19 Crisis on the EU Poultry sector’, 21st April 2020
https://pluimvee.be/src/Frontend/Files/Core/CKFinder/files/2020_04_21%20The%20Impact%20of%20the%20COVID-19%20crisis%20on%20the%20Poultry%20Sector.pdf
(2) EC, ‘EU Market Situation for Poultry Committee for the Common Organisation of the Agricultural Markets’, 19 March 2020
https://circabc.europa.eu/sd/a/cdd4ea97-73c6-4dce-9b01-ec4fdf4027f9/24.08.2017-Poultry.pptfinal.pdf
(3) Copa-Cogeca, ‘Fearing an oversupply crisis, the European poultry meat and eggs sectors call on the Commission to manage the influx of import’, 29 April 2020
https://copa-cogeca.eu/Main.aspx?page=HomePage
(4) thepoultrysite.com, ‘World’s biggest cold storage supplier could reach full UK capacity in 3 weeks’, 26 April 2020
https://thepoultrysite.com/news/2020/04/worlds-biggest-cold-storage-supplier-could-reach-full-uk-capacity-in-3-weeks