EN Official Journal of the European Union C 13/97

Opinion of the European Economic and Social Committee on ‘The importance of agricultural trade for the future development of farming and the agricultural economy in the EU in the context of global food security’

(own-initiative opinion)

(2016/C 013/15)

Rapporteur: Mr Volker PETERSEN

On 19 February 2015, the European Economic and Social Committee, acting under Rule 29(2) of its Rules of Procedure, decided to draw up an own-initiative opinion on:

The importance of agricultural trade for the future development of farming and the agricultural economy in the EU in the context of global food security.

(own-initiative opinion)

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee’s work on the subject, adopted its opinion on 13 July 2015.

At its 510th plenary session, held on 16 and 17 September 2015 (meeting of 16 September), the European Economic and Social Committee adopted the following opinion by 179 votes to one with 7 abstentions.

1. Conclusions and recommendations

1.1. In terms of market and price policy, the CAP has been largely liberalised. The EU agricultural market is open and is a part of the global market system, which is driven by supply and demand. With the opening up of markets, the EU’s agricultural trade with third countries has advanced very dynamically in the last 10 years.

1.2. In the light of this development, the EESC notes that agricultural trade is a critical economic factor for the agri-food sector and for rural areas. The EESC is perturbed by how critically society perceives agricultural trade, in contrast to other branches of the economy such as the automotive or chemicals industries.

1.3. There is no doubt that agriculture shoulders a special responsibility in a world where there is hunger or qualitative and quantitative malnutrition. The EESC is keenly aware of this responsibility. In a world with a growing population, with rising income in many countries and poverty in others, we need to both meet the demand of those with money to spend and to give help and support where people cannot eliminate hunger and shortage on their own.

1.4. The EESC welcomes the fact that the EU’s agriculture and development policies are pointing in the same direction. This, it feels, is the prerequisite for making sure that the direction and roles of agricultural trade and development are accommodated in a sustainable manner.

1.5. The EESC recommends that the EU agri-food sector be helped in a sustainable way to participate successfully in the emerging worldwide trade in agriculture. Trade in agricultural products plays an important part in securing the economic infrastructure in the EU’s rural areas. It also provides forty million skilled jobs in the various links of the food chain in the EU — jobs that are less affected by crises than those in other sectors.

1.6. Bilateral free trade agreements concluded by the EU can help considerably in dismantling non-tariff barriers to trade. At the same time, there will always be rules that are non-negotiable on both sides. In these areas rules must be adopted to facilitate trade outside the framework of harmonisation.

1.7. SMEs play a significant role in EU agricultural trade. In the international context, they are particularly dependent on sustained administrative support for accessing markets in third countries — support that must be provided by the relevant EU staff.

1.8. The EESC welcomes the further extension of the partnership agreements with developing countries, which are the basis for allowing those countries to enjoy the benefits of open and fair trade. The objective of such agreements should be to support a degree of self-sufficiency in agricultural products for such countries, with agricultural trade serving to supplement local production.

2. Background

2.1. Historically, trade in agricultural goods and processed food has always been particularly important. In the 20th century, which experienced two world wars, international agricultural trade was long dominated by a very managed approach. In the GATT concluded after World War II, it still occupied a position apart that excluded it from trade liberalisation. It was only in the GATT Uruguay Round, concluded in 1993, that agricultural trade was drawn more closely into the GATT rules and regulations. Cutting back on domestic support and dismantling customs duties and export subsidies were the commitments the EU undertook at that time. With some few exceptions, the EU’s trade in agriculture has in consequence been extensively liberalised since the scrapping of import tariffs and export subsidies. However, international agricultural trade is still relatively heavily regulated — in particular through non-tariff measures, for example.

2.2. The EESC has adopted a number of opinions on general issues relating to trade (1), emphasising its importance in promoting steady growth and hence in the successful development of a social market economy. The Committee has always championed open and fair trade. It concludes that this alone can ensure that the continuing process of globalisation and internationalisation of markets creates benefits and opportunities for all countries commensurate with their economic potential.

2.3. The EESC has in all of its previous opinions on trade also taken the interests of developing countries into consideration and highlighted their issues. We have consistently argued that trade and trade policy in a globalised world must make a contribution to growth and development in countries at different levels of development.

2.4. Discussion of the role of agricultural trade is fraught with tension. Recent years have seen an upturn in global demand for agricultural products and foodstuffs from those that can afford them, such as emerging economies experiencing population and income growth. However, agricultural trade has not been able to guarantee that an end is put to every food shortage. Almost 800 million people in the world are suffering from hunger, a situation due mainly to insufficient purchasing power.

2.5. The EESC wants to use this opinion to explore the opportunities a growing world agricultural trade offers for agriculture and farming in the EU. This should also involve looking at the responsibility the EU must assume towards developing countries.

3. EU agricultural trade in relation to the broader economy

Significance of agricultural trade for the EU’s external trade

3.1. In 2014 the EU’s agricultural exports amounted to some EUR 125 billion, making up 7 % of its total exports. Both the 2,2 % year-on-year increase in 2014 and the 8 % annual increase from 2005 to 2014 meant that growth in agricultural exports was markedly stronger than growth in total exports, which even fell in 2014 by 2 % compared with 2013 (5,5 % annual increase between 2005 and 2014). The situation is similar for agricultural imports, which were worth EUR 104 billion and accounted for 6,2 % of EU imports in 2014 (see Tables A-1 to A-3 in the Appendix).

3.2. The EU’s agricultural exports are a pillar of its external trade, coming fourth after machinery, chemical products and pharmaceuticals. In the course of the trade liberalisation of the past, the EU has evolved from a net importer to a net exporter, notching up a trade surplus in agricultural products since 2010. In 2014 this trade surplus stood at around EUR 21 billion.

Structure of agricultural trade and significance for added value, employment and rural areas

3.3. A fact of particular interest for this own-initiative opinion is that the share of agricultural trade in total EU external trade was significantly higher in 2014 — at 7 % — than the entire agri-food sector’s share in GDP, which stands at 3,5 %.

3.4. This clear difference between the economic importance of the sector and the importance of agricultural trade for external trade underscores the latter’s growing importance over the past few years. Growth in the agri-food sector is increasingly generated from exports.

3.5. Importance of the food value chain for the economy as a whole: — The EU’s agricultural trade is by no means a matter for agriculture alone, as the public often supposes, though it is true that even now agricultural exports account for more than a quarter of the revenue of farmers. It is already providing — and will continue to provide — an important support for maintaining an economic base in the rural areas of the EU, which are contending with problems posed by urbanisation and demographic change. — Two thirds of agricultural exports are finished products made from raw materials that have been through many stages of processing and adding value. They are the result of the combination of many-layered, efficient and internationally very competitive value chains. These range from input industries for agriculture to farmers to the food industry and trading companies. Overall, the companies in this value chain employ around 40 million people in the EU. This employment is relatively cyclically stable and less vulnerable to crises than jobs in other sectors.

Agricultural trade within the EU internal market

3.6. This opinion focuses in particular on the EU’s agricultural trade with non-EU countries. However, we shall also look briefly at such trade within the EU. Trade within the EU continues to be significantly more important for the Member States than external trade, with almost 73 % of all agricultural exports going to other EU Member States in 2014. This means that the common market has contributed to a boost in trade — and thus also to increased prosperity — in the EU. What applies to intra-Community trade can also be transferred in a liberalised international environment to trade with third countries.

Position of the EU in global agricultural trade

3.7. The EU has since 2013 been the leading agricultural trading bloc in the world, contributing significantly to the increase in agricultural trade over the past few decades. Its exports to non-EU countries have been growing by around 8 % annually since the year 2000. But this increase in agricultural exports from the EU has been surpassed by the growth in exports achieved by other countries. Thus the EU’s share of world agricultural trade fell from nearly 13 % in 2000 to 10,3 % in 2012 (see Table A-4 in the Appendix).

4. Conditions affecting the development of EU agricultural trade: the external dimension of the CAP

4.1. In the past — for example, in GATT/WTO negotiating rounds — the EU has been criticised internationally for its agricultural exports. This situation changed radically after the year 2000.

4.2. EU support prices have been substantially reduced following several reforms of the CAP. Market prices in the EU are set by movement in international supply and demand and so tend to follow global market prices. Common organisation of the market now only offers EU farmers a safety net that would take effect in the event of a massive international price collapse. Export subsidies — which in 1992 still amounted to EUR 3 billion — no longer play a significant role.

4.3. As the world’s largest agricultural exporter — ahead of the USA, Brazil, China and Canada — and its largest agricultural importer — ahead of the United States, China, Japan and Russia — the EU bears a twofold and growing responsibility for worldwide nutrition and food security. With this responsibility in mind, the external dimension of the CAP must be substantially bolstered and moved higher up the agricultural policy agenda.

4.4. The EESC notes that the coherence between the CAP and development policy has already improved by leaps and bounds. Agricultural exports operate without subsidies and cause no market distortions, while the EU has become one of the most open markets, especially for developing countries, when it comes to imports. Imports from the 48 least developed countries (LDCs) accounted for an average of 3 % of EU agricultural imports over 2011-2013: quadruple the value that Canada, the USA, Australia and New Zealand together imported from these countries.

5. Trade and food security

Effects of trade on food security and development

5.1. In a world where over 800 million people across many countries — particularly in Africa and Asia — still suffer from hunger, one of the principal aims of agricultural and trade policy must be to improve nutrition quantitatively and qualitatively.

5.2. In view of these challenges, agricultural trade is often the subject of polemical debates in civil society because of its particular role in food security. This is partly because agricultural trade can have very diverse impacts, helping to address food shortages, but also potentially leading to unwanted dependency.

5.3. The EESC therefore wishes to explore more closely not just what agricultural trade achieves but also what is required of it. The challenges are globalisation, liberalisation of the EU agricultural market, the growth in global agricultural trade, the expanding global population, changes in consumption patterns, and demand shifts due to economic growth.

Food security and self-sufficiency

5.4. In terms of achieving food security, it is advisable for very poor countries in particular to have a certain level of self-sufficiency in agricultural products. However, complete self-sufficiency for every country and region should not be the only criterion. Even in a country that is more than 100 % self-sufficient there is no guarantee that its population is adequately supplied with and has adequate access to food. Thus it can be noted that even in countries with agricultural surpluses there are people who are malnourished or undernourished.

5.5. Undernutrition should be seen as an issue of poverty rather than of supply, and understood and addressed on this basis. Food security should preferably be ensured by creating income, and has less to do with a given self-sufficiency and/or trade status. In very poor countries a large proportion of the population practises subsistence farming and has virtually no other income. When it comes to improving food security, the main criteria focused on, alongside income generation and an appropriate income distribution, must therefore be availability, affordability, and accessibility and stability of access to food.

5.6. Agricultural trade can contribute to income growth based on both exports (creating income and employment) and imports (purchasing cheap food products on international markets while exporting other goods). However, this strategy presupposes access to international markets in agricultural and industrial products.

6. Problems and challenges

Agricultural trade helps to reduce volume and price fluctuations

6.1. One feature of agricultural production, in contrast to industrial production, is its susceptibility to the forces of nature. Production and supply depend on variables that are difficult to predict or control. This applies to the weather or occurrence of plant and animal diseases. Worldwide climate change will increase the unpredictability of natural phenomena. This will affect other parts of the world and other countries much more dramatically than it will affect the EU itself.

6.2. Following the substantial opening up of its agricultural markets, the EU will therefore generally feel the impact of volume and price fluctuations on global markets much more keenly. At the same time its responsibility for global food security is increasing given its comparatively favourable and stable production conditions.

6.3. Agricultural trade is part of the solution to the problem of such increased volatility, not the cause of it. Global agricultural trade enables the neutralisation of volume fluctuations and thus helps to limit price fluctuations. Experience has shown that isolated market intervention by individual countries, and export bans and duties or import restrictions, are more likely to exacerbate the problem for all parties than to alleviate it.

Geopolitical effects

6.4. Sometimes general political developments — such as the import ban imposed by Russia since 2014 — have disruptive effects on agricultural trade, as experienced by the EU in 2014 and 2015. Such geopolitical effects can result in significant market disruption, losses and other economic penalties affecting farming and the food industry. Agricultural trade is thus at the mercy of the broader political climate. In such situations, farmers and businesses need political support to offset the handicaps in the trade relations affected.

Further guidelines and recommendations for the direction of EU agricultural trade

6.5. Given that agricultural trade is becoming much more important globally and for the EU, the EESC believes that the external dimension of the CAP requires significant strengthening. There are several ways of achieving this goal.

6.5.1. The rules governing global agricultural trade originate above all in different approaches to ensuring consumer and health protection in different countries. The EU institutions, in particular the Commission, are called upon to urge countries with such technical regulatory barriers to trade to open their markets rapidly; where necessary the EU should enter into appropriate negotiations.

6.5.2. In the EESC’s view it is urgently necessary for the Commission to clearly and explicitly assume responsibility for the whole EU in these matters. This is the only way that EU positions can be efficiently and emphatically enforced vis-à-vis its trading partners. It is also detrimental to fair competition between the Member States if they have various agreements with non-EU countries. Only where regional or country-specific restrictions are appropriate at Member State level should they be able to introduce special provisions for justified cases.

6.5.3. In increasingly open agricultural markets where there is global competition, the EESC would like to see the EU take every possible expedient measure to strengthen the international competitiveness of the EU agricultural and food sector and further expand agricultural trade. The objective announced by the new Commission of cutting red tape is a step in the right direction. It must also be ensured that administrative systems are designed to be more effective.

6.5.4. EU standards should be the basis for licences granted for imports into the EU. Production conditions and other rules should be based on minimum requirements for imports that take sufficient account of the situation in the EU and do not put businesses there at a competitive disadvantage.

6.5.5. The EESC points out that the success of EU agricultural trade in largely liberalised markets is attributable chiefly to SMEs. It calls on the European Commission to step up its administrative support for accessing international agricultural markets, as non-EU countries are already doing. SMEs must be able to base their planning on reliable market information, for instance.

6.6. Global markets calls for global market transparency. This requires well-founded prognoses and information about trends in volumes, prices, exchange rates, weather, diseases, and so on. The EESC welcomes the EU’s active involvement in creating the FAO’s Agricultural Market Information System (AMIS). However, these efforts must be targeted at ensuring that information provided by AMIS is made available especially to those operating in the market so that they can benefit directly from it.

6.7. The EU’s free trade agreements are particularly important. If multilateral negotiations in the WTO do not bear fruit, solutions must be sought at bilateral level in order to open up new markets. However, bilateral agreements must be well balanced with regard to the many sectors affected by them. It would not be acceptable for the EU’s agricultural trade to bear disproportionate costs compared with other economic sectors.

6.8. The EESC points to the particular importance of partnership agreements with developing countries. Further expansion of preferential agreements could enable these countries to enjoy the benefits of trade relations based on open and fair trade through improved access to EU markets.

Brussels, 16 September 2015. The President of the European Economic and Social Committee Henri MALOSSE

(1) OJ C 43, 15.2.2012, p. 73; OJ C 351, 15.11.2012, p. 77; OJ C 255, 22.9.2010, p. 1; OJ C 100, 30.4.2009, p. 44.