Belief in better times
The first big European meeting of the dairy industry in 2017 was, on the face of it, a triumph of hope over adversity, as flags and banners around Brussels proclaimed the 60th anniversary of the Rome Treaty, which set Europe on the path to union. Meanwhile, the departure of the UK from the EU continues apace, with the triggering of Article 50.
Michel Nalet, the president of the European Dairy Association, noted this contrast. “At a time when the European ideal seems to lose its appeal in some parts of the population, the 60th anniversary is a reason to deepen European ties,” he says.
He addressed ideas such as the Common Agricutlural Policy and the issue of free movement of people and goods. “I am not convinced the European single market always works as it should, but this is where it should be strengthened at member and state levels,” he notes. “Juncker’s scenarios all show that a single market is key for the future of Europe, especially dairy. We have a strong base of 500 million EU citizens. We believe in Europe, and particular in rural Europe for dairy. Vive l’Europe!”
Wim Kloosterboer, corporate manager of trade and dairy affairs for Dutch dairy FrieslandCampina, introduced the session, ‘Better functioning of the food supply chain – uncorking the potential of the single market.’ “We are most interested in the free flow of goods throughout Europe, and bringing prosperity to more than 500 million consumers,” he notes. “We have new challenges, but maybe we can transform these challenges into something beneficial for businesses.”
Antti Ilmari Peltomäki, deputy director general of DG Grow (Enterprise and Industry Directorate General, EU Commission) discussed how the food industry in Europe plays a large part in European growth, as it provides 31 million jobs for Europeans, has €4 trillion in turnover and amounts to €100 billion in exports. “It also has a huge social dimension, as it offers jobs in remote places where other opportunities don’t really exist,” he notes. “Food is close to everyone’s mind, mouth and stomach, and it’s part of our cultural identities. And, our starting and end point is the single market.”
He did warn that although there are no longer tariff barriers, there are national restrictions that can impede the free flow of products. “There is an increasing number of national regulations about food, and there are many different arguments, such as providing consumers with meaningful information. The cost/benefit ratio has to be balanced.”
The work programme for 2017 has as its key topic strengthening the single market for food, as well as discussing the issue of labelling. “It is a hot topic,” Peltomäki reports. “We are exploring the issue of unfair trading practices in the supply chain and the effect on food pricing. We are also looking at barriers and how to address them.”
He says 2017 is a special year, both for the anniversary of the Rome Treaty and for Brexit. “We have to reconsider what the priority is for the remaining 27 states, and identify the elements of value for the future, and what our reasons are for sticking together.”
Gilles Morel, the chair for FoodDrinkEurope, points out that the idea of a single market shows aspiration. “The dairy sector has been a pioneer in cross-border traffic, and the food sector is the number one manufacturing segment in Europe. We also have the safest food market in the world.”
Food amounts to 11 per cent of EU employment, but it faces challenges, as growth has been more difficult in recent years. “The single market is responsible for the sustaining of the supply chain,” he says.
Keeping the supply chain fair across Europe is important, he notes. “We have to take a holistic view, otherwise it will impact negatively. The EU has embarked on several supply chain initiatives for tackling the issue of supply, and to ensure the single market operates fairly.”
However, food and drink continues to be a top priority, as it is an export leader, Morel says. “There are not many industries with a trade balance globally.” Its prominent position means it can sometimes be held hostage, as with recent Russian embargoes. “It is a zero sum game: prices increase and quality declines,” he says.
Another contentious issue is labelling. “Let’s make sure we have an EU labelling scheme, so as not to create complexity and cost for consumers. We have to avoid the proliferation of front of pack labelling. Voluntary labelling is one thing, but it’s a problem when it’s used to fragment the single market,” Morel warns.
Differing veterinary standards in member countries can also be used as protectionism, he states. Kloosterboer concurs, noting that the difference in veterinary regimes in the 28 member states is hampering trade. “It has proved to be one of the trickiest trade and policy issues, and we should look at doing better.”
On the issue of Brexit, Morel says bluntly, “I don’t think the European Union is ready. The EU exports 2.5 times more than we import from the UK, and it amounts to €40 billion in exports.”
He also states that 2017 must be “a year of change. We have made shifts, which we wouldn’t have made years ago, but there must be prosperity through the supply chain. We need to create the right environment, to grow and increase added value to every actor in the chain.”
The future of the single market for dairy was the topic of the second session. Daniel Dalton, MEP for the European Conservatives and Reformists Group, UK, spoke about the impact of Brexit on agriculture and dairy. “First, the UK is going to leave the EU and leave the single market. Where does that leave dairy? This industry is as connected an industry to the European market as we can have. On the land border between Northern Ireland and Ireland, around 800 million litres of milk per year passes back and forth, and we want this to continue as smoothly as possible. I am worried,” he confesses.
He does not think there will be tariffs applied to products, but notes that there are now significant non-tariff barriers. “There are different regulatory systems in different countries, and no-one likes being overruled from Brussels,” he says. “Some non-tariff barriers are there to keep other countries out, and this drives anti-European feeling. Also, many people feel that big businesses benefit from the EU, and not the smaller operations.”
He says that right now, laws are similar in the EU and UK, but in the future, they may diverge, as for example, in the area of GM crops. “In five to ten years, how do we deal with products that are different from one side to the other?” he wonders.
“There are three ways we can deal with problems, especially in dairy and agriculture,” Dalton says. “These can be packaged as free trade agreements, which will be much deeper than others before them. Security, intelligence, financial – we will have to have a deeper relationship with the European Union that is more like a strategic partnership.”
For European market integration, there will be three points, all of which are challenging. “The first will be mutual recognition of regulatory standards, in areas such as public and animal health. It is key to keeping the market together,” Dalton says. “The second is to set up a customs facilitation agreement on land borders such as Northern Ireland and cross-Channel borders, as to not have this a huge detriment to trade. This is very important. The third is the UK wants free trade agreements with other countries, so it has to come out of the customs union. There has to be strict rules on rules of origin, and enhanced recognition of the rules.”
Ireland came up in questioning. Dalton said, “The Irish issue is a big challenge, as it is now operating as one market in dairy. We have to have some flexibility on this.” The mutual recognition of standards bodies may become crucial, as Ireland is very dependent on international exports.
For example, skim milk from Northern Ireland is sold to an Irish multinational that ships powder to China, he points out. “In two years’ time, will Northern Irish milk still be acceptable?”
In the end, agriculture is one of the most difficult areas in trade, Dalton admits. “I have no idea where we’ll end up, but we want to make sure it works.”