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Executive Brief Update 2011: Fruit and vegetable sector

About this update

This brief was updated in July 2011. The original executive brief was published in January 2008 and is available on request from agritrade-mail@cta.int

Other publications in this series and additional resources on ACP—EU agriculture and fisheries trade issues can be found online at http://agritrade.cta.int/

1. Background and key issues

Fruit and vegetables account for about one-sixth of the value of EU agricultural production. The EU is the second largest producer, the second largest exporter and the largest importer of fruit and vegetables in the world. EU Common Agricultural Policy (CAP) reforms in 1996, 2001 and 2007 saw the abandonment of price support in favour of increased levels of direct aid to farmers. The reforms led to the fruit and vegetable sector being incorporated into the single payment scheme, but with the maintenance of a range of sector-specific measures implemented through producer organisations (POs). Alongside the reforms, a range of traditional trade policy tools was maintained, notably minimum import price arrangements.

According to the US Department of Agriculture (USDA), the EU continues to operate a complex system of import quotas, seasonal restrictions and preferential trade arrangements, guided by the entry price system. For processed products, additional duties are charged based on the sugar content of the product, except for the ACP/Least Developed Country (LDC) group, where full duty-free, quota-free access is now enjoyed under the (interim) Economic Partnership Agreement (EPA)/‘Everything But Arms’ (EBA) arrangements. Indeed the conclusion of (interim) EPAs meant the removal of all seasonal and special duty restrictions which formerly applied. This is of greatest significance to exporters from non-LDC ACP countries with (interim) EPAs, as they now enjoy the same market access as LDC exporters, making it easier to attract investment. Non-LDCs that are not signatories of an (interim) EPA have reverted back to standard Generalised System of Preferences (GSP) treatment, although no major ACP fruit and vegetable exporter currently falls into this category. Food safety regulations are a particular challenge in the fruit and vegetable sector, and represent an increasingly important factor in the export trade.

About 37 ACP countries are involved in exporting fruit and vegetables to the EU, accounting for 13% of EU imports. By allowing market prices to fall, the EU fruit and vegetable sector reform process has potentially reduced the attractiveness of the EU market for undifferentiated (i.e. with no value-added) fruit and vegetable exports from the ACP. For the ACP, the challenge faced is compounded by increased competition from third-country suppliers, the stricter application of food safety standards and the growing role of private voluntary standards (PVS) in determining access to certain components of the EU market.

ACP horticultural suppliers are having to show considerable dynamic innovation by raising their quality standards, investing in new technology, rationalising costs, exploring economies of scale, using ‘intelligent’ packaging, and reviewing logistics and freight management arrangements. The need for a dynamic response to market changes will intensify in the coming years under the influence of:

  • the further erosion of ACP margins of tariff preferences;
  • EU price reductions induced by the consequences of reform and improved market access for third-country suppliers;
  • the emergence of China as a major supplier of vegetables.

Some ACP country producers have responded to preference erosion and declining prices by adding value through various forms of packaging and processing. Others, however, have simply exited the trade.

The use by ACP governments of trade policy tools in support of horticultural sector development to serve national markets continued to be subject of intense discussions in some EPA negotiations well into 2011.

2. Recent developments

2.1 Situation in the EU market

 

2.1.1 The EU market in 2010/11           

 2009 was a bad year for the EU fruit and vegetable sector, with press reports suggesting that falling prices were putting the sector under enormous financial pressure. This was a consequence of the global economic downturn and good harvests (see Agritrade article ‘ European market under pressure’, October 2009). This led the EU farmers’ and agri-cooperatives’ organisation Copa-Cogeca in April 2010 to urge the EC to ‘increase the volume of production eligible for withdrawal as well as the amounts of community compensation for withdrawals’. Without such emergency safety-net measures, it was argued that ‘more producers will go out of business’ (see Agritrade article ‘ Call for urgent action to address crisis in EU horticulture sector’, May 2010).

However these dire warnings proved relatively unfounded: the annual EC report ‘Agriculture in the European Union’ maintained that ‘2010 was a good year in terms of prices for the fruit and vegetable sector compared to 2009’, and noted that substantial increases in prices had been registered ‘approaching the levels of 2008’ (1). However, this was largely a by-product of production problems, which saw a decline in EU supplies of major fruit and vegetables to the market.

While 2010 saw an improvement in prices, the economic situation of EU fruit and vegetable farmers whose production was adversely affected by weather-related events remained strained, as did the situation of farmers serving markets severely affected by the financial crisis (e.g. Greece). The situation of the EU fruit and vegetable sector in 2010 thus not only varied by sub-sector, but also across different regions of the EU.

2.1.2 The role of third-country suppliers

From an ACP perspective, the most significant development in 2010 was the price recovery, and ACP suppliers that were able to get their products to market saw higher returns. However, some of the weather- and climate-related events that disrupted EU production also impacted on ACP exports.

This incipient recovery needs to be seen against the background of depressed prices in 2009, not only in the EU market but also globally. Press reports indicated that in 2009 the global economic recession had led to a 30% fall in prices of horticultural products, with this generating serious difficulties in some ACP countries, particularly emergent fruit and vegetable exporters (see Agritrade article ‘ Recession hits ACP fruit and vegetable exporters’, July 2009).

In 2010, the debate intensified in the EU over the role of third-country suppliers in the EU fruit and vegetable sector. The existing trade in fruit and vegetables was variously seen as an area of vulnerability or as an essential source of supply (see Agritrade articles ‘ Horticulture vulnerable to extraneous events’, February 2010, and ‘ Harsh weather reinforces role of third-country suppliers’, February 2011). The debate has been further complicated by the environmental/climate dimension, with the discussions ranging from ‘food miles’ (how far a product has travelled to reach the final consumer) to ‘fair miles’ (the overall energy intensity of production and supply).

What is clear is that ACP fruit and vegetable exporters will need to keep an ear closely tuned to these evolving debates to ensure that public and private standards do not emerge that implicitly discriminate against third-country suppliers. The evolution of the EU’s agricultural product quality policy and associated labelling regulations warrant close scrutiny in this regard (see Agritrade article ‘ EC “quality package” tabled’, February 2011).

In July 2010, in view of the EU’s growing network of free-trade area (FTA) agreements, EU farmers’ leaders expressed concerns about the EU’s growing dependence on imported fruit and vegetables. These concerns vary from sector to sector and from agreement to agreement. Generally speaking, southern European fruit and vegetable producers are most concerned about the agreements with neighbouring north African countries (see Agritrade articles ‘ Spanish concern over Morocco-EU trade deal’, January 2010, and ‘ New agreement expands opportunities for Egyptian fruit and vegetable exp...’, October 2010), while northern European producers tend to be more concerned about agreements with Latin American countries (see Agritrade article ‘ EU farmers release data on concerns over EU-Mercosur negotiations’, April 2011).

In the face of production and trade disruption, and warnings over possible global shortages of fruit and vegetable supplies, some European fruit and vegetable trading companies are buying land in developing countries with a view to securing long-term supplies (see Agritrade article ‘ Urgent EC action called for to address crisis in EU horticulture sector’, May 2010). Significantly, Latin American countries are seen as particularly attractive investment locations.

2.1.3 The EU’s expanding network of preferential trade agreements

In the course of 2010, the EU concluded FTA negotiations or signed FTA agreements with:

  • the Andean Community;
  • Central American countries;
  • South Korea.

In addition, in 2010 the EU concluded Stabilisation and Association Agreements with Montenegro and Serbia, to add to the agreement concluded with Albania in 2009.

Also in 2010, the EU relaunched negotiations on FTA agreements with Mercosur, Malaysia and Singapore, while negotiations for an FTA agreement continued with Canada and India.

These agreements come on top of the existing EuroMed Agreements concluded between 2005 and 2009, which provide for liberalisation of trade in agricultural and processed agricultural products.

Not all of these agreements cause concern in the EU fruit and vegetable sector, and even fewer of them pose any direct challenge to ACP fruit and vegetable exports. A number of them however contain a variety of tariff concessions for fruit and vegetable exports, backed up in some sectors by minimum import price requirements. In some product areas the tariff concessions granted could increase competition on markets currently served by ACP fruit and vegetable exporters. This however is an empirical question that needs to be addressed at the country/sector level within the ACP.

Two types of issue arise from the conclusion of FTA agreements by the EU:

  • the impact of the various tariff concessions granted under individual agreements on markets served by ACP fruit and vegetable exporters;
  • the impact of the conclusion of these agreements on the non-tariff trade-related measures set in place by the EU or adopted by private sector bodies in response to either farmer or consumer concerns.

The policy responses to increased tariff preferences for third-country suppliers that can impact on ACP exporters range from the stricter application of sanitary and phytosanitary (SPS) controls to labelling requirements related to the carbon footprint of fruit and vegetables placed for sale in EU supermarkets.

 

2.1.4 EU trade in fruit and vegetable products in perspective

EU imports of fruit mainly consist of bananas and tropical fruit, which account for around half of imported volumes. Most temperate fruit imports are seasonal. In 2010 import volumes fell 7% (to 11.5 million tonnes of fresh and dried fruit).

From 2007 to 2009, the ACP accounted for:

  • 9–9.7% of EU imports of edible vegetables;
  • 16.1–16.4% of imports of edible fruits (mainly bananas);
  • 5.9–6% of prepared fruit and vegetables.

Overall the ACP share of EU fruit and vegetable imports hovers around 13%. However in a longer-term perspective, the share of ACP exports on EU fruit and vegetable product markets is being eroded.

This trend of a falling proportion of ACP exports on EU markets however does not appear to be directly correlated with the conclusion of EU preferential trade agreements, as the fastest growth in fruit and vegetable product exports is from countries that so far enjoy no preferential access to the EU fruit and vegetable market (China and Russia). This is not to underplay the importance of EU preferential trade agreements in eroding the competitive position of ACP suppliers in particular products. Rather it is to highlight the generalised nature of the competitive challenge facing ACP fruit and vegetable exporters. It also highlights, once again, the need for a detailed assessment of the impact of individual preferential trade agreements.

In terms of EU exports of ‘prepared fruit and vegetable’ products, since 2006 there has been a renewed expansion in the value of exports to ACP markets (up by 42% between 2005 and 2009). This is almost twice the rate of expansion of total EU exports of ‘prepared fruit and vegetables’ to all destinations (+22%). In 2009, almost 12% of the value of EU exports of ‘prepared fruit and vegetable products’ was destined for ACP markets. Significantly, between 2008 and 2009 the value of total EU exports of ‘prepared fruit and vegetables’ contracted by 5.5%, while exports to ACP countries expanded 11.5%.

Table 1: EU imports of edible fruits (CN 08) from selected regions 2004–2009 (€ millions)

  2004 2005 2006 2007 2008 2009 % change 2004/2009
Total 9,840 11,300 11,532 12,354 13,014 11,863 +20.6
ACP 1,709 1,778 1,804 1,991 2,138 1,940 +13.5
Med.1 1,450 1,750 1,724 1,798 1,902 1,842 +27.0
Mercosur 848 1,078 1,065 1,270 1,328 1,081 +27.5

Candidate

countries2

- - - 1,229 1,277 1,187  
NAFTA 1,259 1,528 1,585 1,440 1,421 1,332 +5.8
China 498 529 588 668 841 1,233 +147.6
Russia 1,258 1,714 2,364 2,728 3,034 3,150 +150.4

 

Table 2: EU imports of edible vegetables (CN 07) from selected regions 2004–2009 (€ millions)

  2004 2005 2006 2007 2008 2009 % change 2004/2009
Total 2,689 2,826 3,029 3,870 3,647 3,300 +22.7
ACP 284 294 325 347 355 300 +5.6
Med.1 756 875 881 1,396 1,175 1,189 +57.3
Mercosur 83 86 120 129 142 119 +43.3

Candidate

Countries2

- - - 351 338 339  
NAFTA 387 421 410 376 420 374 -3.4
China 325 421 602 584 396 755 +132
Russia 374 581 741 1,014 1,196 1,190 +218

 

Table 3: EU imports of preparations of vegetables and fruit (CN 20) from selected regions 2004–2009 (€ millions)

  2004 2005 2006 2007 2008 2009 % change 2004/2009
Total 3,202 3,542 3,739 4,144 4,428 3,898 +21.7
ACP 253 247 254 244 262 233 -7.9
Med.1 761 978 922 878 882 740 -2.8
Mercosur 663 644 735 755 973 884 +33.3

Candidate

countries2

- - - 766 749 630  
NAFTA 180 175 195 190 271 302 +67.8
China 114 126 158           199 204 239 +109.6
Russia 481 625 777 866 991 859 +78.6

Source of Tables 1–3: EC, ‘Agricultural situation in the EU’, annual reports 2006 and 2010, trade tables 3.7. Available from: (2006) http://ec.europa.eu/agriculture/agrista/2006/table_en/en37.htm and (2010): http://ec.europa.eu/agriculture/agrista/2010/table_en/en37.htm

Notes:

  1. Mediterranean countries: Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Syria, Tunisia, Turkey, West Bank and Gaza Strip.
  2. EU candidate countries now in EU.

Exports which compete with domestic production and inhibit the structural development in ACP countries are limited to specific products exported to specific markets. There continue to be complaints about tomato paste imports disrupting the tomato sector in West Africa, including a triangular trade (China–Italy–West Africa) of tomato paste relabelled ‘made in Italy’. In September 2010 the issue of tomato paste imports from China was raised by Italian tomato producers, concerned over the price and market implications (see Agritrade article ‘ Italian tomato producers express concern over imports from China’, October 2010).

The triangular trade in tomato paste raises concerns about rules of origin certification for EU ‘prepared fruit and vegetable exports’, if such products were to be granted tariff concessions under an EPA (e.g. the current ECOWAS/WAEMU tariff on tomato paste would otherwise be 35%).

Since 2004, EU exports of ‘edible vegetables’ to ACP markets have also been expanding (up by 79%, compared to an overall growth in EU edible vegetable exports of only 48%). Again concerns arise over the export of specific products to particular markets. One case in point is EU onion exports to West Africa. These increased by 49% between 2004 and 2008, when they reached some 234,580 tonnes. Slightly under half of these onion exports were destined for the Senegalese market.

Table 4: EU exports of preparations of fruit & vegetables (CN 20) and edible vegetables (CN 07) (€ millions)

  Prepared fruit and vegetables (CN 20) Edible vegetables (CN 07)
Year Total EU exports EU exports to ACP ACP share of total EU exports (%) Total EU exports EU exports to ACP ACP share of total EU exports (%)
1998 1,910 180 9.4 1,304 67 5.1
1999 1,833 179 9.8 1,212 64 5.3
2000 2,103 207 9.8 1,298 78 6.0
2001 2,273 247 10.9 1,459 84 5.8
2002 2,447 266 10.9 1,861 94 5.1
2003 2,256 287 12.7 1,770 95 5.4
2004 2,272 258 11.4 1,378 89 6.5
2005 2,483 253 10.2 1,388 114 8.2
2006 2,768 269 9.7 1,739 132 7.6
2007 3,145 290 9.2 1,969 133 6.8
2008 3,222 323 10.0 2,203 146 6.6
2009 3,045 360 11.8 2,034 159 7.8

Source: Extracted from tables 3.7.2. and 3.7.12., EC, ‘Agriculture in the European Union: Statistical and economic information’, annual reports. Available from: http://ec.europa.eu/agriculture/agrista/2010/table_en/index.htm and http://ec.europa.eu/agriculture/agrista/archive_en.htm

 

2.2 CAP reform and the fruit and vegetable sector

The process of CAP reform in the fruit and vegetable sector is substantially under way. By 2011 the majority of transitional coupled support payments in the fruit and vegetable sector had been phased out. Public assistance in the fruit and vegetable sector now largely takes the form of ‘support to producer organisations’ (POs). In 2010 the budget allocation to ‘support to producer organisations’ totalled €657 million. While provision still exists for export refund payments for fruit and vegetable products, no funds were allocated under the 2011 budget. Support to promotional measures organised through POs now constitutes the main form of export-related assistance. Similarly the previous system of intervention buying to support market prices has been replaced by withdrawals organised through POs, within clearly defined limits. This forms part of a wider programme of crisis management measures.

Against a background of increasingly market-related price formation, EU support to the fruit and vegetable sector now largely consists of:

a) policies to strengthen the position of producer organisations within the supply chain;

b) safety-net measures to ensure that increased exposure to market forces does not undermine the basis of production in the fruit and vegetable sector.

While price formation in the EU is market related, it is not entirely market driven. The complex network of trade arrangements established in the fruit and vegetable sector (including minimum import price arrangements) prevents the full transmission of price developments on global markets to EU markets. In addition, many EU markets are local, with considerable price variations at different times of the year across EU markets. This implies a need for highly sophisticated ACP investment and marketing strategies, to fully exploit inherent potential.

In terms of the 2013 round of CAP reform – preparations for which intensified over 2010–11 – the issues of most concern to ACP exporters are:

  • the future of the EU minimum import price system;
  • the impact of certain forms of support extended through POs on EU production and trade.
  • the design and implementation of SPS/food safety standards: these should be designed to minimise cost-increasing effects and improve the net income position of ACP producers.

 

2.3 SPS, food safety and quality standards in the fruit and vegetable sector

The European Commissioner for Health and Consumer Policy argued in June 2010 that the introduction of tougher border controls on fruit and vegetables and the outlawing of a wide range of pesticides has ‘boosted food safety’ in the EU. With new rules on pesticide and chemical residues adopted in 2010 coming into effect in June 2011, the application of EU SPS and food safety controls is likely to become even stricter. At the beginning of 2011, press reports were suggesting that stricter SPS controls were leading to a suspension of exports from some third-country suppliers (see Agritrade article ‘ Food-safety concerns bring temporary halt to Thai vegetable exports’, March 2011). In addition warnings were being given about the possible impact of current levels of pesticide usage in certain ACP countries on prospects for continued access for fruit and vegetable exports to the EU market (see Agritrade article ‘ New pesticide regulations raise concerns for future of smallholders’, June 2011).

In many ACP countries, achieving SPS compliance and establishing efficient, cost-effective procedures for assessing conformity are still major challenges. There are growing concerns that this could lead to a progressive marginalisation of ACP suppliers from global trade (see Agritrade article ‘ SPS challenge undermining Africa’s competitiveness on commodity markets’, January 2011). A paper published by ICTSD in August 2010, reviewing the provisions dealing with SPS and technical barriers to trade (TBTs) under the various EPAs, noted that ‘procedural or administrative requirements can form, in themselves, significant barriers to trade.’ While many EPA texts recognised the need for greater assistance to ACP countries, there was a lack of ‘specific details’ on how to effectively support ACP governments and private sector operators in meeting SPS and food safety-related challenges. The analysis concluded that ‘EPAs fall short of their promise’. However progress was noted in ‘dealing with such issues as the application of the precautionary principle’ under certain EPAs.

Increasingly the distinction between food safety and food quality standards (including private sector standards) is becoming blurred. This is particularly the case in the fruit and vegetable sector. For ACP suppliers, if meeting the requirement is a prerequisite for entering particular supply chains serving the EU market, then the standards simply need to be met if exports are to continue, whether the standards relate to food safety or food quality, whether regulatory or private voluntary standards. So in terms of serving the EU market, the issue for ACP exporters is one of ‘meet it or beat it’ – meet the standards or leave the EU market. This throws up major investment challenges at both private sector and public sector levels within the ACP.

2.4  Functioning of the fruit and vegetable supply chain

The EC 2010 annual review of ‘Agriculture in the European Union’ noted that in the fruit and vegetable sector ‘retailers play a fundamental role in determining prices’. This observation followed calls from farmers’ leaders in July 2010 for more effective support to enable ‘producers to have a fairer share of the retail price’.

This raises important issues about the functioning of fruit and vegetable supply chains. Specifically the question arises as to whether policy measures adopted in the EU dairy sector to strengthen the functioning of the dairy supply chain might not have a wider applicability in the fruit and vegetable sector.

The EU has already substantially expanded its support to producers’ organisations in the fruit and vegetable sector, in part with a view to rebalancing the inequalities in power relationships along the supply chain. This potentially provides a solid basis for more sophisticated policy initiatives to rebalance power relationships along fruit and vegetable supply chains. This could then avert any need for emergency safety-net assistance programmes, an important consideration given the financial constraints facing EU governments. Currently, however, EU initiatives are limited to proposals to establish a better information basis for strengthening the functioning of fruit and vegetable supply chains.

This involves developing proposals for the establishment of a European platform for data and information exchange for the European fruit and vegetable market. This, it is argued, could help avert ‘structural market crises’ by establishing ‘long-term trends of the domestic supply, the import, and the demand in the domestic and foreign markets’. This could then allow actions to be taken to reduce the economic cost of periodic situations of oversupply (see Agritrade article ‘ Improving the functioning of the horticulture supply chain’, February 2010).

2.5 Horticulture sector developments in ACP markets

Since 2008, renewed priority has been attached across the ACP to promoting domestic food production, including horticultural production. Across the ACP domestic horticultural supply chains often suffer from underinvestment in logistics, storage and processing, with seasonal overproduction acting as a disincentive to expanded domestic production. Adopting policy measures and programmes to improve the functioning of national supply chains, thereby providing a solid framework for investment, is essential.

In the East and Southern Africa region, where a major export oriented horticultural sector exists, commercial production for local markets is underdeveloped. Currently there is limited effective local demand for export oriented horticultural products. Nevertheless a growing trade in ‘grade two’ vegetables (i.e. those that don’t meet high EU quality standards) serving national markets is emerging. In addition, in view of the growing food needs of urban areas, a strong urban farming movement has emerged, making a growing contribution to household food security.

With the diverse range of climates in ACP regions, there is considerable scope for the development of regional trade in horticultural products. Given the infrastructural and business networks that exist to service the export trade to the EU, there would appear to be considerable opportunities for developing regional trade in horticultural products in Eastern and Southern Africa.

West and Central Africa experience challenges, as poorly functioning supply chains often leave rural producers with seasonal gluts and low prices, thus undermining investment, while coastal urban areas are serviced by the import trade. In one case, Ghanaian tomato growers, having invested in expanding production, produced such a large crop that lower market prices that did not cover costs forced them to leave the crop to rot in the fields. This contrasts to a government strategy in Mali to boost commercial agriculture through the improvement of product supply chains, including improving quality and quantity of production and building exporters’ capacity (see Agritrade article ‘ Horticultural developments in West Africa’, February 2010).

Other initiatives are under way, including the linking up of horticultural producers with local traders and retailers, while establishing a trade policy framework that provides a basis for the development of sustainable commercial relations and long-term investment in quality improvements. One example of this is the Senegalese government’s policy initiatives in the onion sector. Seasonal import restrictions have been in place since 2006, and while this led to an initial decline of 20% in imports of onions from the Netherlands, domestic production subsequently increased to a record level. The use of seasonal import restrictions has allowed investment to take place in improved onion varieties, the proper use of fertiliser and irrigation, as well as improvements in post-harvest storage. This has led to improvements in quality, thus facilitating efforts to strengthen the functioning of domestic onion supply chains. Links between producers’ associations and major buyers have been improved, giving rise in March 2010 to the first ever advanced purchase agreement for onions.

While this use of seasonal restrictions in Senegal created commercial space for investment in development of the sector, it did not permanently inhibit trade. According to information released in the Dutch industry press, onion exports from the Netherlands to Senegal increased 70% between 2006 and 2010 (see Agritrade article ‘ Dutch onion exports down overall but increasing to major West African ma...’, August 2011). Press reports in June 2011 showed increased levels of onion imports in Senegal in the first four months of 2011, suggesting that stockpiling is taking place to circumvent the seasonal import restrictions. While the targeted use of trade policy measures appears to be allowing the progressive development of onion production, without major trade disruptions, the situation is fluid and the policy response needs to be kept under review.

The selective use of trade policy measures (such as Senegal’s seasonal import restrictions) echoes similar initiatives in the Namibian horticultural sector and indeed the seasonally based trade policy measures which have long been a cornerstone of the EU fruit and vegetable regime. In the context of certain EPA negotiations, however, the use of these trade policy tools (import licences and seasonal import restrictions) has been brought into question. This has been most clearly debated in the SADC–EU EPA negotiations, where the government of Namibia has objected to the inclusion of provisions calling for the immediate elimination of import licensing arrangements. This is particularly important in the horticultural sector, with import licences playing an important role in the country’s Horticulture Development Initiative, which, by improving the functioning of the supply chain, has successfully expanded domestic production to serve domestic needs (increasing from 5% of national consumption to 35%). This has been achieved without any significant increase in costs to consumers, and without major disruptions of regional trade flows.

The Namibian focus now is on developing local brand identity, in order to change perceptions and consumer buying in favour of Namibian-produced fruits and vegetables, to consolidate the newly established National Association of Horticulture Producers (NAHOP). This highlights the need for organisational development within the fruit and vegetable sector and for constant innovation in serving national, regional and international markets (see Agritrade article ‘ Efforts under way to consolidate gains in local horticultural production’, October 2010).

As the EC policy experience highlights, if the aim is to promote sustainable forms of horticultural sector development, then leaving fruit and vegetable producers to the mercy of the market – in a context of vast inequalities in power relationships along supply chains – is simply not an option.

In the Caribbean and Pacific regions, there is a similar concern to promote domestic production in the face of rising food prices, with horticultural production being seen as an important means of reducing the food import bill. However, as elsewhere in the ACP, local producers are often poorly integrated with national supply networks. Given the size of many of these economies, even relatively small consignments from major exporting countries can impact severely on national production. Establishing an effective policy framework and appropriate policy measures to support sustainable investment in the development of horticultural production is thus a critical concern.

A range of policy tools, (such as import tariffs, the use of quantitative restrictions and the operation of agricultural marketing boards) is currently available. However, the use of these policy tools has been complicated in recent years by the obligations taken on by these governments in the context of the WTO and bilateral trade agreements. It is therefore increasingly critical for them to establish effective policy frameworks to improving the functioning of horticultural supply chains, so that producers are better linked to traders and retailers, and so that key constraints on the proper functioning of domestic supply chains are identified and addressed.

In these island economies, SPS issues are often a critical constraint on the development of regional trade in horticultural products. Regional systems to coordinate SPS and food safety controls are a necessary foundation for the development of increased intra-regional trade in horticultural products.

3. Implications for the ACP

3.1  Strengthening capacity to respond to the impact of new third-country agreements

While many ACP countries and private sector associations are aware of the process of market changes under way resulting of the EU’s expanding range of preferential trade agreements, and are preparing for their potential impact, this is not the case for all ACP countries and sectors (particularly for fruit and vegetable products). The question arises of what these agreements will mean for the competitive position of individual ACP suppliers of specific fruit and vegetable products.

This question can most easily be answered at country and sub-sector levels. Analysis needs to be carried out to identify what new tariff concessions have been granted, in order to flag the products in which there could be increased competition. This information then needs to be compared to current exports patterns for individual ACP countries, to identify whether any enhanced competitive threat arises. There may be a need to strengthen the capacity of government officials and staff of private sector associations in ACP countries to use the tools currently available for undertaking such analysis. Such tools include the EU Official Journal, in which new EU trade agreements are published, and the International Trade Centre data bases, such as Trade Map and Market Access Map.

Analysis of this sort would enable specific impacts of specific agreements on individual ACP exporters to be identified. Such an early warning system, highlighting areas of increased competition, could then allow ACP producers to restructure their basket of exports or markets served, or to invest in cost-saving measures, thereby allowing them to remain competitive in the EU market. It could also enable identification of specific areas where additional ‘aid for trade’ should be targeted to help ACP fruit and vegetable sector producers to respond to evolving markets.

3.2 CAP reform and the fruit and vegetable sector

Currently the minimum entry price system applied by the EU enables ACP exporters to benefit from higher prices on certain EU fruit and vegetable markets. If the EU minimum import price system were dismantled, this would intensify competition for ACP suppliers from more competitive third-country suppliers. This could be expected to result in price reductions to the detriment of ACP suppliers.

ACP experts meeting on the implications of CAP reform in May 2010 considered that an impact assessment study on the consequences for the ACP of changes in the minimum import price system should be commissioned, and that these effects should then be taken into account in the design of CAP reform measures in the fruit and vegetable sector.

3.3 Strengthening the functioning of fruit and vegetable supply chains

In 2009, a survey of the impact of changing buyer requirements on the ACP supply of fruit and vegetables to EU markets, carried out by the ACP–EU horticultural network COLEACP, highlighted how anglophone supply chains generated more compliance problems than francophone supply chains. A critical issue identified was the distribution of costs related to the implementation and verification of compliance with SPS and food safety standards. There have been complaints that, while ACP producers make substantial investments in meeting new standards, this is not reflected in the price received for their higher quality production. This can be seen to be directly related to the ‘fundamental role’ that retailers play in determining prices.

This finding led to a call from ACP experts at their workshop on CAP reform in May 2010 for an extension of the EU’s emerging policy on strengthening the functioning of supply chains to the realm of ACP–EU fruit and vegetable sector trade relations. It was considered that this could help ensure better price transmission to primary producers during periods of price improvements, and hence better insulate them against periodic price declines. This could then help to prevent periodic price declines from undermining the commercial basis for fruit and vegetable production in ACP countries.

Specifically the ACP experts called for:

a) the inclusion of a comprehensive development dimension in the EU’s emerging policy on the functioning of food supply chains;

b) the convening of a high level ACP–EU panel on the functioning of ACP–EU fruit and vegetable supply chains.

In addition, there was a felt need to strengthen ACP access to information on developments in EU fruit and vegetable markets. It is also considered that any new EU market information system for the fruit and vegetable sector should be open to ACP producers and exporters.

3.4 Getting to grips with SPS, food safety and quality challenges

In light of the growing importance of SPS and food safety issues, the May 2010 ACP experts’ meeting called for the inclusion of a comprehensive development dimension in the EU’s SPS/food safety policy. The aim of incorporating this development dimension would be to:

  • ensure that EU food safety/SPS regulations are designed and implemented in ways that minimise additional costs placed on ACP suppliers and enforcement structures, while meeting EU standards;
  • improve information flows on planned measures, so that these can be accommodated within routine reinvestment plans;
  • provide a framework for the deployment of development assistance in support of investments in complying and verifying compliance with EU food safety and SPS standards.

In respect of the latter, the experts considered that the EU’s internal approach – establishing financial support instruments to assist private sector operators with the costs of on-farm investment in meeting EU standards could usefully be extended to ACP fruit and vegetable exporting countries, within the framework of expanding EU ‘aid for trade’ commitments.

Main sources

1. European Commission, ‘2010 Agricultural Year’, Agriculture in the European Union Statistical and Economic Information Report 2010’, March 2011

http://ec.europa.eu/agriculture/agrista/2010/table_en/2010enfinal2.pdf

2. EC, ‘Fruit and vegetables: Agriculture in the European Union Statistical and Economic Information Report 2010’, March 2011

http://ec.europa.eu/agriculture/agrista/2010/table_en/D05-1-4511s5.pdf

3. Official Journal of the European Union, ‘Commission regulation No. 449/2010 of 25 May 2010 amending Council Regulation (EC) No. 747/2001 as regards tariff quotas of the Union for certain agricultural and processed agricultural products originating in Egypt’, L127, 26 May 2010

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:127:0001...

4. International Trade Centre, access point to TradeMap and MacMap

http://mas-admintools.intracen.org/accounts/Registration.aspx

5. Oxfam/International Institute for Environment and Development, ‘Fair miles: Recharting the food miles map’, 8 December 2009

http://www.iied.org/pubs/pdfs/15516IIED.pdf

6. University of Bologna Dipartimiento di Economia e Ignegneria Agrarie, ‘Feasibility study on the establishment of a European platform for data and information exchange for the European fruit and vegetable market’, study for EC DG Agriculture and Rural Development, August 2009

http://ec.europa.eu/agriculture/analysis/external/data-platform/full_rep...

7. FreshPlaza.com, website giving daily reports on fruit and vegetable sector developments across the globe

http://www.freshplaza.com/

8. Organic-Market.Info, website of online magazine for organic trade

http://www.organic-market.info/web/Home/165/0/0/0.html

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