In May 2013, the EC published a review of the EU’s evolving agricultural trade profile as part of its Monitoring Agri-Trade Policy series. The review notes that “the times where the EU continuously recorded a negative trade balance seem to be over,” with 2012 marking a record EU agricultural trade surplus of €12.6 billion. This performance reflected strong growth in demand for EU food and agricultural exports (particularly in developing countries), with export markets performing far better than depressed EU national markets. This growing trade surplus is emerging despite the fact that the EU remains by far the world’s biggest importer of agricultural goods: imports to the EU reached €102 billion in 2012, compared to US imports of €85 billion.
The growth in EU exports in 2012 was helped by the depreciation of the euro in respect of other major currencies. In 2012, the value of EU agri-food exports reached a record high of €114 billion, having grown by 12% (compared to growth of 17% in 2011). This confirmed the trend since 2010, when the EU first became a net exporter of food and agricultural products.
For the top 15 EU export products, “44% of the increase [in export] value was driven by an increase in the unit price, the remaining 56% being quantity-driven.” Wine and alcoholic beverages showed the biggest growth in export earnings, while the US, China and Saudi Arabia showed high levels of export sales growth. The US, Russia and China are the main markets for EU agri-food exports, with the pursuit of self-sufficiency policies in Russia leading to a stagnation in the volume of EU exports in certain sectors, such as poultry meat.
The bulk of the EU’s agri-trade exports are final consumer-ready products (67%), while only around 50% of EU imports are final consumer-ready products. The top three agri-trade exports are spirits and liqueurs (€10.2 billion, +20% in 2012), wines (€9 billion, +9% in 2012) and cereal preparations (€7.8 billion, +18% in 2012).
In terms of EU agricultural imports, coffee and tea make up fully 10% of the total, with oil crop products (mainly palm oil) accounting for a further 9%. The value of imports in any given year is thus strongly influenced by international commodity prices.
The report states that “the EU continues to be the top importer of products from developing countries” – between 2009 and 2011, 72% of agri-trade imports, on average, came from developing countries. This share is substantially higher than in the other five major OECD importers, where only 43% of total agricultural imports come from developing countries. EU imports from developing countries are growing, and reached €75.4 billion in 2011 (15% up on 2010). However, overall “EU demand for agricultural goods… does not show signs of strong growth” as a result of the general weakness of the EU economy.
The transformation of the EU from a net agri-trade importer to a growing net agri-trade exporter can be seen as constituting the fulfilment of a key policy objective within the CAP reform process. Since 1992, the EC has been seeking to bring about a shift in agro-food sector policy towards a growing emphasis on the production of value-added food products for EU and international markets. Basic aspects of CAP reform, such as the shift away from price-support direct aid payments, have been designed to enhance the underlying price competitiveness of EU agri-food sector products, while product differentiation policies (such as the promotion of international recognition of GIs) are designed to maximise the value of export sales of branded value-added food products (see Agritrade article ‘ French company seeks trade mark rights for rooibos tea, as EU use of GIs...’, 12 May 2013).
The growing EU focus on value-added food product exports can be seen as in direct competition with ACP aspirations to move up agro-food sector value chains. While EU exports have largely focused on non-ACP markets (e.g. the US, Russia, China and the Middle East), in particular market components such as poultry meat and prepared cereal products, ACP markets are of growing significance (see Agritrade articles ‘ South African poultry sector problems compounded by rising EU exports’, 15 April 2013 and ‘ Poultry exports to Africa on the rise’, 9 December 2012). In addition, given the volume of EU exports (e.g. in the dairy sector), even relatively small overall volumes of EU exports can have important market effects in ACP countries.
Against this background, ACP governments will need to be mindful of the underlying trend towards increased exports of EU value-added food products, particularly in those sectors where individual ACP governments have aspirations to develop their country’s own production capacities. This will have important implications for the design and implementation of overall EPA arrangements (both tariff and non-tariff provisions).