Better functioning of food supply chain

Brussels, 6-12-2012 — /europawire.eu/ — What is the mandate of the Forum?

In 2010, the Commission tasked the Forum to help with the implementation of the recommendations of the former High Level Group on the Competitiveness of the Agro-Food Industry and of the initiatives announced in the 2009 Commission Communication “A Better Functioning Food Supply Chain in Europe” (COM(2009) 591).

The Forum’s mandate, as set out by Commission Decision 2010/C 210/03, expires on 31 December 2012.

What has been achieved so far?

The report the Forum adopted today shows that the initial roadmap is very well under way, with 80 % of the initiatives either fully implemented or having gone through major advances (see IP/12/1314).

The report touches upon a wide variety of initiatives, both in terms of scope (agricultural policy, consumer information, markets in financial instruments) and tools – ranging from legislation and other public policy instruments through to stakeholder cooperation and self-regulation. For the full picture please consult the report (see weblink below).

Unfair trading practices in business-to-business settings

In 2012, the Forum dedicated a special attention to unfair trading practices in business-to-business settings. The aim was to propose consensual solutions to implement and enforce the principles of good practice unanimously agreed by 11 business organisations representative of the agro food sector in 2011.

In 2011, the Commission carried out a survey via the European Business Test Panel to gain a better understanding of the practical experience of businesses with Unfair Trading Practices (UTPs). The survey collected alleged claims of practices perceived as unfair. Most of the companies that responded did not feel the legal instruments available in Member States gave them enough protection. UTPs are seen as an issue across a wide range of sectors throughout the European economy. Among the respondents, 76% claimed that they had been subjected to such practices during the pre-contractual negotiations; 75% considered that they experienced unfair practices after the conclusion of the contract, and 66% alleged that unfair contractual terms had been unilaterally imposed on them.

The Commission is planning to adopt, in the coming weeks, a green paper on unfair trading practices in the retail supply chain. With a horizontal, cross-sector approach, the green paper will launch a public debate on the impact of UTPs, on national frameworks that seeks to address this problem and on possible avenues of actions. Furthermore, the Commission is currently contracting a study to map exhaustively the Member States legal frameworks that seek to address UTPs and a study on innovation in the agro food sector.

What does the Forum propose to improve business-to-business relationships?

The Forum acknowledged the significant efforts put in by all parties to reach a consensus on a framework to implement and enforce the 2011 principles of good practice. It noted the willingness of all parties to continue the fight against unfair trading practices.

The Forum encouraged business organisations to improve and implement without delay the voluntary framework currently discussed among business organisations. Improvements should provide for: an adequate response to the fear of retaliation for instance via a credible system of anonymous complaints; deterrent sanctions; ambitious performance indicators. The objective of such improvements is to reach a consensus between the above-mentioned 11 business organisations representative of the agro food sector.

The Forum also referred to the possibility that the Commission undertakes all appropriate steps to ensure fair trading in the food supply chain, in the light of the present and future progress and achievements made by the partners. The Commission will launch an impact assessment on different options to address UTPs and notably a legislative initiative in this field, taking into consideration the advice of national authorities and of all the relevant stakeholders.

98% of food legislation is harmonised

Some 98% of food legislation is harmonised at EU level. The sector enjoys significant benefits from the opportunities the single market offers. Over the last 20 years, intra EU trade in live animals and food (including beverages and tobacco) has increased markedly. Cross-border trade among the 27 EU Member States has risen by 72 % in value over the last decade, and accounts for about 20 % of EU food and beverage production.

However, market fragmentation still exists in certain domains and further steps in the integration of the single market would open new opportunities for growth. The industry pointed for instance at national measures on food contact materials, reformulation, fees for official controls or the addition of nutrients to food – several domains in which the Commission is actively working.

The Forum also discussed non-harmonised food and beverage taxes. Under EU law, Member States can introduce product-specific national taxes other than VAT, provided they do not (in particular): favour domestic products; give rise to cross-border formalities; discriminate on grounds of nationality.

Such taxes can have complex consequences and should be considered with caution. Their social, economic and environmental impacts should be carefully assessed, as is the case with any major policy proposal. The Commission’s competitiveness-proofing guidelines should help with thorough economic assessment of such measures. The impact on health and health systems should also be analysed, based on guidance developed by EU-funded initiatives.

EU is the world’s biggest exporter and importer in food and drink products

The EU is the world’s biggest exporter and importer in food and drink products, with exports worth € 105 billion, and imports € 98 billion in 2011. Trade has also been a key driver for global economic recovery following the 2008-2009 recession. After an unprecedented drop in world trade in 2009 (-10.5%), there was a spectacular rebound in 2010 (+12.9%). Growth in trade has lost momentum in 2011 but still registered a significant increase (+5.8%). A further slowdown is expected in 2012 (+4.0%). Food is among the manufacturing sectors whose exports grew by over 25 % in the period 2009-2011, while the average for manufacturing was 18 %.

The recent trade agreements with South Korea and Morocco have improved market access for food and beverages in those countries. Through trade negotiations and regulatory dialogues, the Commission has consistently sought market opportunities and ways to address trade issues bilaterally with important partners such as China, Russia, Mercosur, Canada, Japan, Norway, Switzerland, the USA, India, and the ASEAN.

In addition to the opportunities that the EU seeks through trade negotiations, various dialogues with partner countries and enforcement of existing trade agreements, EU companies should be better supported and accompanied in their internationalisation process. Member States, business associations and the Commission play their roles in this area to increase the share of internationally active EU SMEs (currently estimated at 13 %). Commission-led “Missions for growth” in non-EU countries with representatives of EU industry and SMEs can play a positive role in providing a common framework for industrial and SME policy cooperation and help in fostering business relations. In 2011 and 2012, such missions were organised in Latin American, the USA and African Mediterranean countries with the active participation of the food industry (MEMO/12/920,MEMO/12/898).

Improving price transparency along the supply chain

Food price monitoring provides important information on the functioning of the food supply chain. Trends at different points in the chain can give a better picture on potential malfunctions. The European Parliament has called for more transparency in EU agri-food prices and margins.

The Forum consulted stakeholders on the development and dissemination of the European Food Prices Monitoring Tool (FPMT) and the feasibility of publishing more data than was available through Eurostat.

The Forum reaffirmed its willingness to ensure a minimum level of market transparency by allowing all stakeholders in the food supply chain to have easily access to uniform and robust information, while avoiding the creation of unnecessary burdens. The need for market transparency is even reinforced due to increasing price volatility.

A transparent and properly functioning food supply chain should provide a fair remuneration of all the market players. The Commission should continue collecting and publishing data on EU agricultural prices and monitoring the developments of the agricultural and food markets. A continued dialogue with the representatives of the food supply chain is crucial for the identification and the solving of related problems.

The Forum welcomed the recent developments of the EU Food Prices Monitoring Tool. It invited the Commission to further enhance the tool and fully supports the initiative of the Commission to embed the collection of information on price dynamics along the food chains in the regular and already existing collection and publication of statistical information related to price. The Commission will also continue and develop the experimental collection of data on consumer price levels of individual products in the framework of the Consumer Markets Scoreboard.

The Forum welcomed the development of national tools as a complementary instrument to the FPMT aiming at analysing and understanding price transmission mechanisms along the food supply chain. Given the diversity of the food markets across the EU, the national level is particularly relevant to conduct such detailed analysis. The Forum therefore invited all Member States to develop and maintain such tools, and share good practices in this field. It invited the Commission to continue coordinating and linking the work of the FPMT with such initiatives, as well as with the AMIS project and with EU-funded research projects. To take into account the complexity of the sector, any analysis of food price transmission should rely on sound multidisciplinary approaches.

What comes next?

The Forum suggested prolonging its mandate beyond 2012 to:

• Follow up on the pilot project on a fitness check for the food chain;
• Provide advice, from a sectoral perspective, on the implementation of the Europe 2020 Strategy Flagship Initiatives;
• Follow progress towards the implementation and enforcement the 2011 principles of good practice;
• Help improve the European Food Prices Monitoring Tool, in synergy with national price observatories;
• Identify emerging challenges or issues, such as e-commerce, environment food information and challenges for consumers to make more sustainable choices, transport, health, nutrition, economic crisis, food taxation, fiscal measures, and access to finance.

The Commission will consider this possibility in the coming days. Should it decide to prolong the existence of the Forum, it will propose as well wider participation of Member States and review the representation of the stakeholders on the basis of a call for expression of interest.

Facts & figures about the EU food supply chain

The food supply chain encompasses agriculture, the food processing industry and related services. Taken as a whole, it generates value added of € 715 billion per year (almost 6 % of the EU Gross Domestic Product). Around 17 million holdings and enterprises, 82 % of them agricultural holdings, are involved, providing jobs to over 48 million Europeans. On average, 15 % of household expenditure is on food and drink. The sector therefore plays a central role in the Union economy, society and environment.

The food and drink industry is the most important manufacturing sector in the EU. The EU is the world’s biggest exporter and importer of agricultural and food products, and accounts for about 19 % of total global export flows. However, the EU food sector’s competitive leadership is increasingly being challenged by established trade partners (USA, Australia, New Zealand) and by emerging economies (Brazil, China).

In 2009, the High Level Group on the Competitiveness of the Agro-Food Industry identified these challenges and proposed key initiatives to boost the industry’s competitiveness. Its recommendations are fully in line with the Europe 2020 Strategy for smart, sustainable and inclusive growth.

The current economic context makes it even more important to improve the functioning and competitiveness of the food supply chain. Prices for agricultural commodities have become more volatile. This exposes all businesses in the food supply chain to more risks and unpredictability, which may add to pressure on weaker parties and could ultimately be detrimental to producers, distributors, those with jobs in the sector and consumers.

For further information and documents:

http://ec.europa.eu/enterprise/sectors/food/competitiveness/forum_food/index_en.htm