Fertiliser tariffs costing EU's farmers €1bn per year

Scrapping them would create 17,000 new jobs and help EU farmers compete.

Paul Mooney

2 March 2016

Fertiliser tariffs costing EU's farmers €1bn per year

Urea prices increased by 123% between 1970 and 2002 in western European countries, while prices elsewhere fell.

Farmers in Ireland and across the EU would gain by €1b per year if the EU abolished its duties and tariffs on imported fertilisers. A net 17,245 new jobs in EU agriculture would also be created. These are key conclusions of an IFA-commissioned report presented to the EU Commission and EU farming media in Brussels on Monday.

Farmers in Ireland and across the EU would gain by €1b per year if the EU abolished its duties and tariffs on imported fertilisers. A net 17,245 new jobs in EU agriculture would also be created.

These are key conclusions of an IFA-commissioned report presented to the EU Commission and EU farming media in Brussels on Monday.

IFA chair Jer Bergin presented the report to EU farm commissioner Phil Hogan as well as to senior officials in trade and internal markets.

Copa and Cogeca has now formally requested that it be added to the agenda of the council of EU farm ministers of 14 March. If EU farmers must compete in a free-trade market, then they must likewise be allowed to benefit from free trade on inputs, it argues.

Bergin said that IFA’s proposal addresses the EU Commission’s invitation to member states to submit suggestions for tackling the developing crisis in farm markets and incomes.

The report was drawn up by economists from USA-based International Food Policy Research Institute. On Monday, co-author Professor Antoine Bouët, who specialises in international trade, summarised its findings:

Urea prices increased by 123% between 1970 and 2002 in western European countries, while prices elsewhere fell. In the case of Brazil, for example, prices decreased by 65%.

The EU fertiliser sector has seen increased concentration; three big companies now dominate. High fixed costs are a barrier to new entrants.

Increased concentration is generally correlated with higher prices, he said, while more competition is associated with lower prices.

European fertiliser prices remain higher than elsewhere. The gap is 40% in the case of ammonium nitrate.

Removal of import tariffs/duties would lower EU fertiliser prices by 5.3% on average, ranging from 2% for superphosphates to 5.9% for compounds.

There would be €123m losses for the fertiliser industry, €315m losses to the EU in tariff revenue – but €920m in gains for farmers.

Overall, there would be a €481m net gain for the EU.

Value-added in the agrifood sector would increase by 0.7%, creating over 17,000 jobs.

Penalising agriculture

Professor Antoine Bouët said that the EU’s fertiliser barriers are unusual in that they raise the cost of an input that is important for another EU sector, ie agriculture.

“These import duties are reducing employment in the EU, not in the fertiliser sector but in the agricultural sector,” he said.

Paul Mooney discusses the findings of the fertiliser report in our podcast:

Challenged by representatives of EU fertiliser manufacturers, Professor Bouët said that classical economics studies show the correlation between industry concentration and rising market prices.

“In the EU, concentration has increased – and fertiliser prices have increased.”

Price fixing is complicated to investigate and difficult to prove, he said.

“I cannot say today there is a cartel and price fixing. But I can say that there is a disconnect between fertiliser price in the EU and the rest of the world.”

He said: “I understand that the (EU) fertiliser industry is in trouble. But putting tariffs at the border is not the best response. You could put financial aids in place. You don’t have to penalise the agricultural sector.”

IFA executive Fintan Conway warned of a “wind down” of the EU’s cereal industry due to the squeeze on farmers. He called on the EU Commission to investigate EU fertiliser prices. He called on the EU fertiliser manufacturers to give more transparency on prices and to introduce forward pricing and price hedging for blenders.

He noted that there is rising concern about levels of cadmium, a toxic heavy metal, entering the human food chain via phosphate fertiliser. EU tariffs fall on phosphate originating from areas with low or nil cadmium while phosphate sources high in cadmium are exempt.