EU trade policy isn’t farmer-focused
EU vice-president and trade commissioner, Valdis Dombrovskis, presented a
Communication on EU Trade policy at the end of last week, outlining EU ambitions for
global trade policy.
It coincides with the World Trade Organisation (WTO) appointing Ngozi Okonjo-Iweala
to head the organisation as it attempts to reassert itself as the governing body for global
trade. The ambition is to have an open, sustainable and assertive global trade policy,
operating to a global rule book.
The vice-president and trade commissioner also identifies that future trade growth will
take place outside the EU with Asia currently in rapid development and huge potential in
Africa. The EU has put down a marker for a leadership role in a rules-based template for
global trade at a time when the US is more inward looking.
These global ambitions of the EU fit with many sectors of the Irish economy but,
unfortunately for beef and sheep farmers, they make economic sustainability more
difficult. EU rules for farming already make Europe the most expensive area in the world
to produce beef or sheepmeat.
In the absence of an EU impact assessment, the USDA has estimated that the new Farm
to Fork strategy that will underpin the next CAP will cause a reduction of 16% in farm
incomes for EU farmers.
If the EU succeeds in its ambition of having EU production policy adopted by trading
partners or ultimately at a global level, then it becomes a different picture entirely.
EU production standards, applied universally, would have the effect of increasing farm
incomes but with reduced production and higher prices, food prices would jump 89% and
a further 185m people would become exposed to food insecurity. This wouldn’t be a
problem in the wealthy communities of the EU, US or other wealthy parts of the world
but would be an issue for the poorest people in African and Asian countries.
This is the reality of achieving the perfect world where EU production standards become
the global standard. It would be fine for farmers because after decades of food spending
falling in household budgets, it would reverse the trend and start rising again.
However, while the EU may pursue this policy, it is difficult to ever envisage the US
adopting it and giving up its science-based approach to agriculture which gives US farmers
a serious productivity advantage over their EU counterparts. It is similar with South
America. It will soon be two years since the Mercosur trade agreement was signed, which
promised replanting of the Amazonian rainforest, but that hasn’t happened.
Global trade means goods are produced in the parts of the world where it is most efficient
to do so, irrespective of how that efficiency is achieved. Therefore, we find that a vast
amount of labour-intensive consumer goods from technology to fashion are produced in
Asia. New Balance, the most American of brands for sportswear, uses Vietnam for the
manufacture of a range of running shoes.
It is the same with beef and sheepmeat. Growth hormones give US farmers a competitive
advantage in beef production over their EU counterparts. The EU blocks hormonetreated beef but with Farm to Fork the EU will raise the bar again for Irish and EU
farmers. Parallel to this, trade negotiations are at an advanced stage with Australia and
New Zealand, while a Mercosur trade deal waits to be ratified. This will have the effect of
further squeezing Irish and EU beef and sheep producers if the already shrinking EU
market is opened to further supply from lower-cost producing regions.
Volumes and values
Figure 1 shows that EU beef export volumes from the EU greatly exceed imports but
when we look at export and import values, EU imports are greater than exports. This is
because the EU exports lower value parts of the carcase and imports higher-value cuts,
particularly steak meat.
Globalisation of trade
The globalisation of trade in beef will squeeze the value of this further, to the point where
production in Europe is no longer viable.
Of course, if beef production in Europe and Ireland wasn’t viable, then a consequence
would be a reduction in cattle dedicated to beef production. If that happened, it would
help Europe achieve a reduction in emissions through effectively outsourcing beef
production to the rest of the world. This is not a global solution to a global problem but it
is one that would have devastating consequences for Irish family farms.