WRITTEN QUESTION E-2765/01

by Jonas Sjöstedt (GUE/NGL) to the Commission

(9 October 2001)

Subject: Future food price increases in Estonia

The applicant countries are beginning to realise the new problems they will face under the EU agricultural policy. EU prices will be a shot in the arm for Estonian farmers, to whom subsidies have in the past been a completely unfamiliar idea. EU membership will send producer prices soaring. However, for many consumers food price rises will come as a shock. The Estonians, in particular the pensioners, have already been hard hit by price rises as a result of a deregulated market economy. The prices of several Estonian agricultural products will double or triple. In early 2001 the price of beef for example was only half the EU price. The EU intervention price procedure will triple the retail price of apples, tomatoes and sugar. According to a report in the Estonian newspaper Postimees, also in early 2001, the prices of butter and beef would double.

There will be huge increases in farm incomes and the EU could in principle buy up Estonia's entire farm production for a year with a view to raising producer prices to EU levels. Prices for powdered milk, certain fruit and corn will very probably rise as well. The question is rather what the consumer will be able to do about it.

How is the Commission planning to tackle this problem so that Estonian consumers are not extremely hard hit on accession to the common agricultural policy?

Answer given by Mr Verheugen on behalf of the Commission

(14 November 2001)

The Commission is monitoring agricultural price differences between the Community and the candidate countries. The general trend in recent years has been towards a convergence of farm-gate prices in the candidate countries with the Community. This is a process expected to continue in the run-up to accession, reducing the likelihood that consumers in the new Member States will face significant price shocks upon accession.

In Estonia for most cereals and pigmeat, the price gap has become relatively small at farm-gate levels in recent years. For a few products such as beef, milk and sugar a significant price gap remains. However, for beef and milk, this can be explained largely by quality differences.

As regards fruit and vegetables, there are major variations in price across the Community. Furthermore, intervention is limited to a safety net system set at a very low level. It is therefore important not to overestimate the likely effects of price alignment on the date of accession.

Finally, in many high value added processed products (e.g. milk desserts, cheeses, confectionery, soft drinks), the raw products represent only a small part of the final cost. For this type of product, changes in agricultural product costs will have only a small effect on the final retail costs.

Significant liberalisation of trade between the Community and Estonia in agricultural and processed agricultural products has already been agreed: approximately 85 % of the traditional Community agricultural imports from Estonia are now duty-free, while the total of the Community exports of agricultural products to Estonia continues to be fully liberalised. A second round of bilateral negotiations for trade liberalisation is presently being prepared, which would cover more sensitive sectors, in which current trade is low, in particular due to a high degree of tariff protection. The Commission expects that this liberalisation process will result in de facto free trade on both sides. This could further encourage price alignment prior to accession and therefore further reduce the likelihood of consumers facing price shocks upon accession.