Irish food and drinks companies want access to global markets. But trade expansion comes at a price. The criticism of the agri food sector has been that we are ambivalent about paying this price. While we want access to new markets, the industry does not want cheap imports undermining EU market prices and ultimately replacing EU production.
The collapse of the multilateral trade deals was not only inevitable but a good thing. The complexity of trade issues across product and market sectors was making it virtually impossible to strike a multilateral deal that was fair, balanced and transparent.
The bilateral deals that have largely replaced multilateralism offer a better prospect of balance. But again from an agri perspective, unless there is a true understanding of the complexities of different sectors, combined with joined up policies across a number of EU directorates, bilateral deals will also undermine the agri-food sector.
A key part of a new approach to trade has to be that the specifics of the sectors are comprehensively understood and the drive for a deal does not simply reflect a car-bumper-sticker view of the economic world.
A rising tide lifts all boats
So how did we get here? The key component of EU trade policy since the Uruguay round of the mid 1990s has been that agriculture is a “defensive” issue for Europe .Simply put, defensive means giveaway.
One of the key features of the stymied Doha multilateral trade round – and indeed a number of bilateral trade deals since – has been of agriculture giveaways facilitating European gains in banking, services or the automobile sector.
The reality of this trade policy, however, is that while the agriculture giveaways are substantial and measurable, a large part of the gains are at best aspirational. Furthermore, the impact of the agriculture losses are largely dismissed by the same modern economy ideology that supports the gains that may arise from increased trade in the knowledge economy sectors.
Through a lack of joined up thinking, there are a number of major reasons for this policy to be pursued. A continuation of this ideologically based methodology will ultimately undermine sustainable food production in the EU. These include:
Modern economy ideology.Chronic undervaluation of total economy impact from agriculture and food production.A dumbing down of trade policy across product categories into widgetism. An inability to see that regulatory standards imposed on EU food producers significantly undermines EU competitiveness.Failure to impose the same regulatory structures on competing imported products.The need to recognise that bans on technology adoption, such as genetic modification or hormones, while consumer driven, are competitiveness issues also.So let’s be clear: agriculture is given away in the first instance because there is an ideological disposition to believe that modern economies move inexorably and seamlessly from agriculture production, through manufacturing to a services economy.
You only give away
what you don’t value
The reality is that there are plenty of examples like Ireland. There are major countries in the world – such as New Zealand, specific countries in the EU and even the US – where agriculture plays a very significant role in the modern economy.
This is particularly so if proper account is taken of the economic contribution of agriculture to the regional economies through the agriculture supply chain.
In Ireland’s case for example, the Irish economy spend deriving from the food and drinks industry and agriculture is over €26bn, which happens to be higher than the economic footprint of foreign direct investment (FDI) companies in the Irish economy.
In many respects, the seamless economic transformation model is very much a reflection of a cheap-food policy in the UK over the last 100 years. Agricultural production in the UK was neglected on the basis that an endless supply of cheap food was available from former colonies or near neighbours.
So the transition is not seamless – as the most recent recession has demonstrated both in terms of the downturn in the modern economy and the belated realisation of the importance of agriculture.
The dismissal of the value proposition of agriculture is compounded by the one size fits all approach to comparative advantage and trade, or Widgetism.
Clearly, trade in widgets or car parts or IT services follows the comparative advantage trail, with production moving constantly across continents from high-cost old economies to lower-cost new economies in Asia and South America.
There are key gains from trade, both for the employed in developing/newer economies and the consumer in old economies, who is getting a constant supply of technology and productivity-driven products.
This does not happen in food to a large extent.
If the local supply chain is continuously squeezed or broken, consumers simply won’t get to eat. Certainly they don’t get to eat fresh or nutritious food.
So a more discrete knowledge and insight-based, informed understanding of future global demand for food and sustainable healthy nutrition linked to a comprehensive assessment of technology adoption capability and regulatory constraints is required before trade negotiation commences .
We cannot pronounce that EU and Irish beef production is competitive with the US or Brazil when access to GM and hormones is totally banned in the EU, when animal welfare practices are much more mature and costly and when the inadequacy of the one size fits all tariff means that steak cuts can and will be dumped on the EU market even in a sensitive product deal.
Food standards, animal welfare and environmental measures
The key here is not that industry rejects the context in which food in Europe is produced, but that compulsory regulatory constraints and or standards – for which failure to comply means either significant financial penalties or a prohibition from placing the product on the EU market – are not imposed on EU trading partners .
So free trade is not free or equivalent. There are very significant regulatory or sunk costs associated with EU production which are imposed on EU producers on the basis that EU consumers need and expect these standards to be met. At the same time, these are not required of imported food products that the same EU consumers end up consuming.
This sunk cost issue is increasingly moving from hygiene and basic production standard regulations through animal welfare requirements and environmental/sustainable climate change compliance.
In summary, it is not that industry or farmers don’t understand in particular the climate change context and new route to market issues.
It is that these standards are not required of trade-deal-based imported product.
So again, a reduction post-Mercosur in EU/Irish beef production in favour of imported Brazilian beef will see significant net increase in global greenhouse gas emissions, because comparative competitiveness analysis has ignored regulatory sunk costs.
Where to
from here?
Given the likelihood that multilateral trade deals are now a thing of the past, the dilemma for the agri-food sector is how we push for the opening of markets without being the sweetener in every bilateral deal.
Let’s firstly properly analyse and evaluate the total economic impact of agriculture, food and drink production across the EU markets and regions in a truly modern economy context.Let’s also factually assess the “oppor-tunity cost” of losing agri-economic activity in regions and its impact on sustainable food production in Europe.In essence, let’s properly understand what we might be giving away.The cost of regulatory and environmental sunk costs can and must be quantified as part of comparative assessment in trade negotiation. Plus a joined-up approach between completion, trade, health and agri bodies must properly evaluate the approach to regulation in the EU in the context of the applicability of EU regulation to imported non EU product. Read more
To read the full Agribusiness report, click here.
Irish food and drinks companies want access to global markets. But trade expansion comes at a price. The criticism of the agri food sector has been that we are ambivalent about paying this price. While we want access to new markets, the industry does not want cheap imports undermining EU market prices and ultimately replacing EU production.
The collapse of the multilateral trade deals was not only inevitable but a good thing. The complexity of trade issues across product and market sectors was making it virtually impossible to strike a multilateral deal that was fair, balanced and transparent.
The bilateral deals that have largely replaced multilateralism offer a better prospect of balance. But again from an agri perspective, unless there is a true understanding of the complexities of different sectors, combined with joined up policies across a number of EU directorates, bilateral deals will also undermine the agri-food sector.
A key part of a new approach to trade has to be that the specifics of the sectors are comprehensively understood and the drive for a deal does not simply reflect a car-bumper-sticker view of the economic world.
A rising tide lifts all boats
So how did we get here? The key component of EU trade policy since the Uruguay round of the mid 1990s has been that agriculture is a “defensive” issue for Europe .Simply put, defensive means giveaway.
One of the key features of the stymied Doha multilateral trade round – and indeed a number of bilateral trade deals since – has been of agriculture giveaways facilitating European gains in banking, services or the automobile sector.
The reality of this trade policy, however, is that while the agriculture giveaways are substantial and measurable, a large part of the gains are at best aspirational. Furthermore, the impact of the agriculture losses are largely dismissed by the same modern economy ideology that supports the gains that may arise from increased trade in the knowledge economy sectors.
Through a lack of joined up thinking, there are a number of major reasons for this policy to be pursued. A continuation of this ideologically based methodology will ultimately undermine sustainable food production in the EU. These include:
Modern economy ideology.Chronic undervaluation of total economy impact from agriculture and food production.A dumbing down of trade policy across product categories into widgetism. An inability to see that regulatory standards imposed on EU food producers significantly undermines EU competitiveness.Failure to impose the same regulatory structures on competing imported products.The need to recognise that bans on technology adoption, such as genetic modification or hormones, while consumer driven, are competitiveness issues also.So let’s be clear: agriculture is given away in the first instance because there is an ideological disposition to believe that modern economies move inexorably and seamlessly from agriculture production, through manufacturing to a services economy.
You only give away
what you don’t value
The reality is that there are plenty of examples like Ireland. There are major countries in the world – such as New Zealand, specific countries in the EU and even the US – where agriculture plays a very significant role in the modern economy.
This is particularly so if proper account is taken of the economic contribution of agriculture to the regional economies through the agriculture supply chain.
In Ireland’s case for example, the Irish economy spend deriving from the food and drinks industry and agriculture is over €26bn, which happens to be higher than the economic footprint of foreign direct investment (FDI) companies in the Irish economy.
In many respects, the seamless economic transformation model is very much a reflection of a cheap-food policy in the UK over the last 100 years. Agricultural production in the UK was neglected on the basis that an endless supply of cheap food was available from former colonies or near neighbours.
So the transition is not seamless – as the most recent recession has demonstrated both in terms of the downturn in the modern economy and the belated realisation of the importance of agriculture.
The dismissal of the value proposition of agriculture is compounded by the one size fits all approach to comparative advantage and trade, or Widgetism.
Clearly, trade in widgets or car parts or IT services follows the comparative advantage trail, with production moving constantly across continents from high-cost old economies to lower-cost new economies in Asia and South America.
There are key gains from trade, both for the employed in developing/newer economies and the consumer in old economies, who is getting a constant supply of technology and productivity-driven products.
This does not happen in food to a large extent.
If the local supply chain is continuously squeezed or broken, consumers simply won’t get to eat. Certainly they don’t get to eat fresh or nutritious food.
So a more discrete knowledge and insight-based, informed understanding of future global demand for food and sustainable healthy nutrition linked to a comprehensive assessment of technology adoption capability and regulatory constraints is required before trade negotiation commences .
We cannot pronounce that EU and Irish beef production is competitive with the US or Brazil when access to GM and hormones is totally banned in the EU, when animal welfare practices are much more mature and costly and when the inadequacy of the one size fits all tariff means that steak cuts can and will be dumped on the EU market even in a sensitive product deal.
Food standards, animal welfare and environmental measures
The key here is not that industry rejects the context in which food in Europe is produced, but that compulsory regulatory constraints and or standards – for which failure to comply means either significant financial penalties or a prohibition from placing the product on the EU market – are not imposed on EU trading partners .
So free trade is not free or equivalent. There are very significant regulatory or sunk costs associated with EU production which are imposed on EU producers on the basis that EU consumers need and expect these standards to be met. At the same time, these are not required of imported food products that the same EU consumers end up consuming.
This sunk cost issue is increasingly moving from hygiene and basic production standard regulations through animal welfare requirements and environmental/sustainable climate change compliance.
In summary, it is not that industry or farmers don’t understand in particular the climate change context and new route to market issues.
It is that these standards are not required of trade-deal-based imported product.
So again, a reduction post-Mercosur in EU/Irish beef production in favour of imported Brazilian beef will see significant net increase in global greenhouse gas emissions, because comparative competitiveness analysis has ignored regulatory sunk costs.
Where to
from here?
Given the likelihood that multilateral trade deals are now a thing of the past, the dilemma for the agri-food sector is how we push for the opening of markets without being the sweetener in every bilateral deal.
Let’s firstly properly analyse and evaluate the total economic impact of agriculture, food and drink production across the EU markets and regions in a truly modern economy context.Let’s also factually assess the “oppor-tunity cost” of losing agri-economic activity in regions and its impact on sustainable food production in Europe.In essence, let’s properly understand what we might be giving away.The cost of regulatory and environmental sunk costs can and must be quantified as part of comparative assessment in trade negotiation. Plus a joined-up approach between completion, trade, health and agri bodies must properly evaluate the approach to regulation in the EU in the context of the applicability of EU regulation to imported non EU product. Read more
To read the full Agribusiness report, click here.
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