EUROPE's DAIRY SECTOR HAS ITS EYES on WEST AFRICA / Colophon
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EUROPE'S DAIRY SECTOR HAS ITS EYES ON WEST AFRICA / Colophon June 2016 Study realised by Gérard Choplin, consultant, for Oxfam-Solidarité and SOS Faim Belgique Contacts Oxfam-Solidarité Thierry Kesteloot www.oxfamsol.be [email protected] SOS Faim Belgique Jean-Jacques Grodent www.sosfaim.be [email protected] 2 1 / Challenges EUROPE'S DAIRY SECTOR HAS ITS EYES ON WEST AFRICA Challenges On the face of it, Europe and This is one of the battlegrounds 1 West Africa are experiencing around the globe where mul- complementary situations in tinationals, whether private terms of their dairy sectors. companies or cooperatives, are Europe produces too much milk now vying to control the dairy with surpluses having increased market. sharply since the end of milk production quotas in 2015; while consumption is stagnating, as is So, in this context, its population growth. what will the role Conversely, West Africa has of agro-pastoral seen a major increase both in terms of demand for dairy prod- milk producers in ucts and population. However, local production only satisfies a West Africa be? small part of its consumption. Will production be forced to The European dairy industry is become industrialised around well aware that there are grow- major towns and cities? Bearing ing markets in West Africa. The in mind the high price volatility, main dairy companies in Europe current levels of global overpro- are already staking out their duction and low prices, will West territory, but how do they see African governments prevail in the future? their efforts to develop local dairy sectors in the face of the If ratified, will Economic Part- pressure exerted by the major nership Agreements (EPAs) European dairy companies that between the EU and West Africa have their eyes firmly fixed on make things easier? Africa? 3 2 / Background Background 23 Dairy policy in Europe over the last 50 years In 1968, a few years after the While mechanisation, and the creation of the Common Agricul- use of chemicals and hybrids, tural Policy (CAP), the European as well as the switching to corn- Economic Community (EEC) and soy-fed cows, significantly establishes a Common Market intensifies production, it is not a Organisation in milk and milk good idea to allow this system products (milk CMO), whose of guaranteed prices with no primary objective is to increase production limits to continue for production in order to ensure a further 10 years, as this would food security in the EEC, which lead to butter and milk powder was left traumatised following mountains, and the loss of con- World War II. A target price for trol of the EEC budget. Export milk and intervention prices for dumping faces protests from butter and milk powder are set third-party countries. each year. The EEC is forced to buy back any surplus whenever In 1984, the EEC decides to the market price falls below the introduce production quotas intervention price, without a limit by country and by dairy or on volume. The EEC's preferred producer to prevent the contin- practices translate into variable uous increase in production and customs duties that take prices control expenditure (interven- of imported products to the tion storage, export subsidies). EEC's internal target price. In the However, the European quota event of surpluses, public-pri- total is set at 10% above domes- vate storage of products bought tic consumption, which means back through intervention there is still a significant element releases market pressure and of surplus/export, which puts these products are tendered for pressure on prices. sale at reduced prices for export, food aid purposes or to the food industry. Export subsidies make up the difference between Euro- pean prices and global prices. 4 2 / Background The GATT Uruguay Round nego- 1 / A producer organisation (or PO) A third of dairy may not exceed 33% of domes- tiations conducted between tic production and 3.5% of EU 1986 and 1994 lead the EEC, farms disappear production. in 1992, to institute a radical 2 / Les OP Lactalis font un change in terms of agricultural between 2007 and « constat d'échec » (Lactalis' POs acknowledge failure) – La France policy. These include phas- Agricole – 20/11/2013 ing-out of sector-specific CMOs, 2010. lowering of internal prices to 3 / Update of the study on the dairy sector. Belgium's National meet global prices (which in A third of dairy farms disappear Accounts Institute – FPS Econo- turn eliminates export subsidies) between 2007 and 2010. But my http://economie.fgov.be/fr/ binaries/Mise_a_jour_Etude_fil- and producer compensation via the EU stood firm in its neolib- iere_laitiere_tcm326-253253.pdf direct subsidies. As far as milk eral logic, despite a number of is concerned, the reform only European producers mobilising played a part during the 2003 against it. In an effort to appease CAP reform, which coincided them, in 2012 it agreed to a with the announcement of the reform intended to strengthen end of milk quotas by 2015. the negotiating power of pro- ducers with regard to dairies by In implementing the GATT/ encouraging the establishment WTO agreement, the EEC, which of producer organisations –with then becomes the European restrictions in terms of size1– and Union (EU), makes its producers offering optional individual con- compete with others (i.e. New tracts between producers and Zealand producers) that have private dairies. But because it is the lowest production costs in a surplus of a fresh product, it the world, thus giving up control is the dairies that impose their of production. It is confident in conditions2. the fact that the increase in pop- ulation and living standards in Deregulation and a tendency to emerging countries will provide create contractual arrangements opportunities to place additional mark the end of a European European milk surpluses. public dairy policy. It is in fact dairy farms and supermarkets The sudden rise in prices in that call the shots, given that the 2007-2008 reassures the EU concentration and negotiating that it has made the right deci- power will always be greater sion in choosing deregulation as than the producers'. a strategy. To ensure a smooth introduction of milk quotas, the In Belgium, 50% of dairy farms European quota undergoes a disappear in just 12 years (2000- gradual increase of 7% by 2015. 2012).3 The situation has since deteriorated further. The price volatility brought about by global deregulation quickly thwarts the plans of an EU that is only too keen to allow itself to bow to the dairy com- panies that want to buy cheap milk. In 2008-2009, an interna- tional market reversal sends milk prices plummeting. 5 2 / Background In April 2015, milk quotas expire and more milk powder produc- and, as expected, European tion facilities while remaining production increases and prices dependent on exports, will the drop (see below). With Euro- EU have the foresight to change pean producers in the midst a dairy policy that is heading for of yet another endless crisis, the cliff? and with dairies building more Collected liters Raw Milk of cows' milk evolution Price evolution in June 2016 compared to June 2015 in June 2016 compared to June 2015 CY 25% U.K. (-20%) Germany (-19%) Lithuania (-18%) Netherlands (-18%) Czech Rep. (-17%) 20% Latvia (-17%) Irleand (-17%) Belgium (-16%) LU Slovenia (-16%) Denmark (-15%) 15% EU.28 average (-14%) Poland (-14%) NL Slovakia ((-14%) Hungary (-14%) IE 10% Luxembourg (-13%) Estonia (-13%) Croatia(-13%) BG RO Italy (-12%) SI Sweden (-12%) PLBE DK 5% Austria (-10%) DE Greece (-10%) LVAT IT MTES EL France (-9%) EE HU CZ Romania (-8%) FI Bulgaria (-7%) 0% FR Spain (-5%) SE LT Portugal (-5%) IT UK HR Cyprus (-1%) SK Malta (+0%) PT Finland (+1%) -5% -30 -20 -10 0 10 Source : EStat - Newcronos Source : Member States (Reg. 479/2010) 6 2 / Background 4 / Ces accords que Bruxelles The European Union's West Africa impose à l’Afrique (The agree- ments that Brussels imposes on trade policy Africa) – Le Monde Diploma- tique – February 2005 As just seen with the CAP, trade EU and ACP countries, whose 5 / 16% of global trade, compared to 3% for the whole of Africa policy is critical to agricultural aim was to put an end to the policy. This is also the case for non-reciprocal tariff preferences, 6 / Network of Farmers’ and Agri- West Africa and its relations with whereby ACP countries would cultural Producers’ Organisa- tions in West Africa Europe. henceforth import European goods at reduced tariffs. Faced 7 / Interview with Cheikh Tidiane Dièye – Seneplus – ENDA-CAC- After several African nations with collective resistance from ID – 6 May 2016 – http://www. gained independence, the 1963 the ACP countries, the EU split seneplus.com/seneplus-tv/non- Yaoundé Convention was signed the negotiation into 6 regions, aux-ape between the EEC and 18 African one of which was West Africa. countries, which includes, inter alia, non-reciprocal trade pref- erences in terms of the tariffs The EU imposed applied to products from these a new agreement countries. In 1975, the Lomé Convention, which was ‘based on ACP countries, on partnership and solidarity’4, extended these provisions to 46 which was signed developing countries, adding the “Export Earnings Stabilisa- in Cotonou in the tion Scheme (Stabex) which is designed to offset the revenue year 2000. deficit of exports due to price fluctuations in global mar- From the outset, the African kets”. Between 1979 and 1995, states were reluctant to lose the term of the Lomé Conven- revenue from customs duties, tion was extended 4 times and without receiving anything in its scope enlarged to encompass return from the EU.