Future policies for rural Europe 2013 and beyond –

							Future policies for rural Europe 2013 and
beyond – delivering sustainable rural land
   management in a changing Europe


                       “Relationships with
                      developing countries –
                         the implications
                         of CAP reform“
                       by Marita Wiggerthale


                                          Deutschland
                Direction of new CAP

 „Reforms have focused mainly on increasing the
  competitiveness of agriculture by reducing
  support prices and compensating farmers by the
  introduction of direct aid payments.“
 „Rural development is the key tool for the
  restructuring of the agriculture sector. Rural
  development can help promote competitiveness in
  the agricultural and food processing sectors“
(http://ec.europa.eu/agriculture/lisbon/index_en.htm)


                                                        Deutschland
     Development implications of new CAP

(1) DCs food processing jeopardised – EU promotion of
    exports of processed food (CAP reform in combination with
    trade policy)
(2) Increasingly indirect dumping - improving price
    competitiveness with the help of subsidies
(3) Damaging cross-sector effects - e.g. cereals/poultry (in
    combination with trade policy)
(4) Rising Non-tariff barriers (food safety standards)
(5) Preference erosion



                                                           Deutschland
         I.) DCs food processing jeopardised
 Agricultural raw materials at competitive prices (aligning
  internal prices to WM-prices): reduce support prices (e.g. sugar),
  enhance supply (e.g. milk), reduce production costs (e.g.
  investment aids, direct payments favouring productive farms)
 Export refunds: declining, but essential to bridge current price
  differences (335 mil Euro for PAPs in 2005)
 Direct aid payments: unequal distribution in favour of productive
  and big farms (in EU-15, 20% of beneficiaries receive around
  80% of payments), compensation for price reductions
 Rural development programmes: investment aids in agricultural
  holdings and processing (e.g. France, 28% of the beneficiaries in
  the wine, fruits and vegetable sector stated an improvement of
  export competitiveness)

                                                               Deutschland
 I.) DCs food processing jeopardised (cont..)




67% of EU-Exports =
high quality products
                                           Deutschland
   I.) DCs food processing jeopardised (cont..)
Example: EU- exports to ACP countries
 EU-exports of processed food to the ACP increased by 148%
  (1995-2002), of preparations of cereals 182% (1995-2004)
 ACP„s share of total EU exports of processed food increased from
  3,84% in 1995 to 6,36% in 2002, before falling back to 5,74% in
  2004 (due to changed US$/euro exchange rate)
 Likely closing off market opportunities for processing in ACP
EU-tariffs on processed food
 higher tariffs for some processed food ranging from 0-427%
 Preferences/PAPs: all industrial components enjoy substantial
  preferential treatment, tariff reductions on agricultural components
  are limited (see WTO, TPR/EC 2007)

                                                                 Deutschland
         II.) Increasingly indirect dumping

 Shift from product-specific subsidies/support to decoupled aid
 Alignment of internal prices to WM-prices reduces need to
  deploy export refunds
 Three pillars of dumping: export refunds, direct payments,
  investment aids
 EU price competitiveness in future will no longer be dependent
  on the deployment of export refunds, but will be derived from the
  supply-side effects of direct payments, which allow prices to be
  reduced without affecting (much) the overall level of production,
  and markets to be cleared at world market price levels  “indirect
  form of dumping”



                                                              Deutschland
         III.) Damaging cross-sector effects

 Price decreases in cereal sector since 1992
 Animal feed costs account for up to 70% of production costs
   contributed to the expansion of EU poultry-meat production
  and exports
 Since 1996 dramatic increase of EU poultry exports to Africa
 Poultry exports to ACP: 101.000 t (1996), 245.000 t (2004)
 Changes in consumer preferences in Europe, ban on the use of
  meat-and-bone meal as animal feed fuelled expansion of exports
   serious impact on poultry sector (e.g. Cameroon, Ghana)
 Self-sufficiency in Ghana dropped from 85% in 1997 to 5% in
  2006


                                                           Deutschland
           IV). Rising Non-tariff barriers

 Strict food safety standards (traceability, hygiene standards,
  food-and-feed-safety control measures etc.)
 High fixed costs involved for developing countries, high
  volumes of throughput required to reduce the unit costs of
  meeting new food safety standards
 CTA studies: SPS measures can represent 2%-10% of a
  company„s export turnover (varies from company to company)
 Increased marginalisation of small farmers in developing
  countries
 Increased risk of closing of market opportunities: e.g. ACP
  exports, 155 border rejections by EU in 2004


                                                             Deutschland
                    V). Preference erosion

 CAP reform, trade liberalisation (multi-lateral, bilateral)
 Income losses because of decreasing EU agricultural prices:
    Sugar: income losses to ACP-sugar-protocol suppliers of
     429.9 mil Euro during four-year transitional period
    Rice: earnings of ACP exporters falling by 24% (2001-2004)
    Beef: prices paid to ACP exporters have fallen by 20-30%
    Fruit and Vegetables: downward pressure on prices
     expected following the recent reform; 18 African countries
     export fruit and vegetable products (aiming at diversification
     and decreasing dependence on tradition commodities)
Source: agritrade (2007): CAP reform: Executive brief



                                                               Deutschland
                             Conclusions

 Caution: Whenever there is a reform of the CAP one has to
  consider the effects on developing countries
 Policy changes needed:
    Elimination of export subsidies: the earlier the better
    Stop unfair distribution of direct payments
    Switch to targeted payments: social, environmental, animal welfare etc.
    Shift investment aids away from improving export competitiveness towards
     sustainable farming practices, local processing, regional marketing etc.
    Win-win-situation: the better targeted payments are towards extensive and
     environmental friendly farming, the more dumping and overproduction will
     be reduced
    Developing countries need to have the right and the policy space to
     protect themselves against (dumping) imports


                                                                        Deutschland