Last month the European Union suspended export subsidies for the dairy sector and following the 2005 reforms of sugar subsidies, Europe is set to become a net importer of sugar. It is also imports beef, soya and cereals, mainly from Brazil. Yet a new report (PDF) just issued shows that Europe has consolidated its position as the world’s largest food exporter, ahead of traditional commodity giants the United States and Brazil, and by 2006 it was exporting more by value than it was importing. How can this be?
The answer is that the contraction of EU exports of low value, low margin bulk commodities like skimmed milk powder, cereals and sugar has been more than counterbalanced by the rapidly increasing competitiveness of its food and drinks industry and the growth of the world market in ‘final products’. Brazil and the US may seek to be the world’s granary, but the EU is fast becoming the world’s grocery store: wines, spirits, tobacco, soft drinks, cheeses, processed meats, fruits and vegetables all feature in the EU’s €6 billion positive trade balance. As the authors of the report put it:
The EU has succeeded in carving out a market for itself in the area of high value final products thanks to adjustments in production, both in the farm sector and in the food industry. The continuous reform of the CAP played a key role in this process, with the move away from product-based support and the stronger focus on sanitary and quality standards. This has improved market orientation, therefore the EU agriculture and food sectors are in a better position to react to dynamic developments on the demand side.
It is not easy to tell whether it is CAP reform that can take the credit or rather European gastronomic heritage leveraged by the logistics and marketing skills of giant European food and drinks companies like Diageo and Danone. But it is certain that message for European farmers from the European Commission analysts who compiled this report is that the future is in quality production, high standards of food safety regulation and the integration of farmers in a high value-added European agri-food sector.
