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The Commission Communication on agricultural product quality policy

The Commission this week produced a Communication on how it proposes to develop and advance agricultural product quality policy in the EU. The Communication is the product of an extensive consultation process which began in 2006 with a stakeholder hearing, followed by a conference in Brussels in February 2007. This in turn led to a Green Paper consultation in 2008 and a High Level Conference on Agricultural Product Quality held in Prague in March 2009.

Rationale for agricultural product quality policy

The Commission sees agricultural product quality policy as an important competitive instrument for EU producers in the global marketplace. There is a growing consumer demand for food quality in its broadest sense, encompassing attributes such as taste, authenticity, sustainability, animal welfare and ethical production methods. EU farmers already have to meet some of the most stringent farming requirements in the world with respect to environmental protection, animal welfare and use of pesticides and veterinary products. The Commission believes that EU agriculture can build on these high baseline food quality standards to further differentiate its products as part of a strategy to improve competitiveness and profitability.

“Instead of seeing [high food quality] demands as a burden, EU farmers have a real opportunity to turn them to their advantage – by delivering exactly what consumers want, clearly distinguishing their products in the marketplace, and gaining premiums in return”. [Green Paper]

There is a catch, however. Despite consumers’ apparent willingness to pay for food quality, there is a perception that EU farmers are not remunerated for the higher standards met by EU products. This is seen in the many complaints against third country imports which, while they have to meet EU food safety and hygiene requirements, are not required to meet other food quality attributes. EU farmers cry foul and say they are facing unfair competition.

Hence the rationale for agricultural product quality policy which seeks to inform buyers and consumers about product characteristics and farming attributes. The Communication notes:

“Unless buyers and consumers have accurate, useful and guaranteed information about these characteristics and attributes, they cannot be expected to pay a fair price”.

The Commission’s proposals

The Commission’s conceptual framework for agricultural product quality policy is set out in the figure below. It distinguishes between certification schemes and labelling, and notes that both types of schemes can be used to show either that a product has met baseline standards or to indicate value-adding qualities beyond baseline standards.

commission-agricultural-product-quality-policy1

Agricultural marketing standards are designed to ensure fair trade and to avoid consumer deception about product qualities. They ensure basic product identities (what can be called ‘butter’ or ‘chocolate’?) and define product classifications (‘what is the minimum fat content of ‘semi-skilled milk’?). The proposals here are to simplify marketing standards by consolidating compulsory rules in a general basic standard, to consider appropriate place-of-farming labelling, and to examine the feasibility of adding optional reserved terms for ‘product of mountain farming’ and ‘traditional product’.

Place-of-farming (or country-of-origin) labelling is included in a separate Commission Proposal on the provision of food information to consumers. This latter legislation has been very contentious. So many amendments were proposed that the European Parliament recently voted to delay further consideration until the new Parliament is elected after June.

The EU’s main quality schemes are those for geographical indications (GIs) and organic products. The GI schemes provide protection of intellectual property rights for products described by registered geographical indications. While the consultation process revealed general support for the system, modifications to integrate the various GI schemes into one integrated scheme, to improve consumer recognition of GIs and to simplify the registration process are proposed.

Organic farming certification has been in place since 1991 and was revised in 2007, but there is continuing market segmentation because of the lack of mutual acceptance between private organic labelling schemes and a proliferation of organic logos. The Commission proposes to mandate the use of a new EU organic logo from 2010 as a way of breaking down barriers to trade in organic products in the single market.

Assessment of agricultural product quality policy proposals

The Commission’s proposed quality strategy raises a number of questions. There is evidence that at least some consumers are willing to pay for food quality attributes, and quality premiums can be observed in the marketplace for organic produce, for free range eggs, for fair trade coffee, and so on.

Given this willingness-to-pay, there is an incentive for farmers, processors and retailers to propose voluntary labels and private standards in order to exploit this consumer demand for quality. Indeed, most promotion of food quality takes place in the context of the wide variety of private food certification schemes, to the extent that the Communication asks whether there is a role for public intervention to reduce confusion or to improve the transparency and credibility of the claims that are made. The Commission rules out legislation and limits itself to proposing the development of good practice guidelines for private and national certification schemes in consultation with stakeholders.

The two important public initiatives proposed concern country-of-origin labelling (COOL) (referred to as place-of-farming labelling in the Commission Communication) and the promotion of GIs. These are also contentious because of their trade policy implications.

The use of place-of-farming labelling is already mandated in the EU for a range of primary agricultural products (beef, fruits and vegetables, wine, eggs, poultrymeat) but consumer groups want this extended to multi-ingredient processed products. Currently, there is confusion between the place of processing and the origin of a food product. The Commission proposal is for voluntary labelling at the EU level, while leaving the decision to introduce mandatory COOL to the member states.

Producers hope that consumers will interpret an EU country-of-origin label as evidence of high food quality and that these labels will encourage greater consumption of home-grown produce (see Verbeke and Roosen 2009 for evidence on consumer reaction to country-of-origin labels in the EU). For this reason, exporting countries see COOL as a protectionist device and Canada is currently challenging US COOL regulations introduced earlier this year under WTO dispute settlement rules.

GIs are the other main public policy tool to help farmers to benefit from consumers’ demand for quality. Apart from improving the administration of GI schemes, the Commission Communication promises to seek enhanced protection in non-EU countries through negotiations in the WTO and through bilateral agreements with trading partners. To assess the advantages of GIs in contributing to the improved competitiveness of EU farm production, more information on who benefits from the rents created by these schemes would be desirable. Do they really benefit the farmer/producers, or is a disproportionate share taken by the retailers at the end of the chain?

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