Mariann Fischer Boel<br> Member of the European Commission responsible for Agriculture and Rural Development<br>Global food demand: role of the EU<br> General Assembly of the CGB (Confédération Générale des Planteurs de Betteraves)<br>Paris, 9 December 2008 <br>

SPEECH/08/694

Mariann Fischer Boel

Member of the European Commission responsible for Agriculture and Rural Development




Global food demand: role of the EU

General Assembly of the CGB (Confédération Générale des Planteurs de Betteraves)
Paris, 9 December 2008

[Ladies and gentlemen,]

It's great to be in Paris again, and it's a pleasure to join you today.

Appointments in my diary are often rather "provisional" at the moment, because I'm on stand-by to visit some very familiar rooms in Geneva for the Doha Round.

But you've managed to avoid that potential obstacle and also catch me just after the agreement on the Health Check.

So things in my diary have worked out well on this occasion, and let me thank you for giving me the opportunity to talk to you today.

For the sugar sector as for other agricultural sectors, we're now in a "post-Health-Check" world. And I know that one point in particular about the Health Check has left you disappointed, so I'll come to that straight away.

Because of the impact of the financial crisis on the sugar sector you wanted to see an end to the sugar production charge of € 12 per tonne. And it was not possible to give you this.

It's not that I've been deaf to your arguments. The production charge could be seen as a relic of the old sugar regime – an instrument for financing export refunds. But refunds play a much smaller role than they did in the past, and so the logic of the charge is questionable.

However, there was a problem, which I simply could not get around in the Health Check. The production charge is a source of revenue for the EU budget as a whole. This means that we can't abolish it without re-opening the European Union's Financial Perspectives for 2007 to 2013. That's a step that goes far beyond the scope of the Health Check. Nevertheless, when the time comes to look again at the Financial Perspectives, certainly the production charge will be under scrutiny again.

However, there is something that I can and will do to help the European sugar sector in these difficult days of the financial crisis.

It's in the Commission’s power to bring forward the payment of the restructuring aid, provided that the necessary amounts are available in the restructuring fund.

We have the money available. Therefore, I have given instructions to examine how the payments of restructuring aid for 2008/2009 foreseen today in two instalments of 40% in February 2009 and 60% in June 2010 can be paid not too far into 2009.

If we bring the payments forward in this way, above all that will allow the sugar industry to pay the beet growers for the next campaign with this money. That will save them the trouble of looking for costly credit in the financial markets.

This brings me to another aspect of the sugar reform - the restructuring process. The second phase of the restructuring process has gone very well. We've basically achieved market balance one year before the planned end of the restructuring scheme – so I would like to thank everyone involved for the considerable efforts. Market forecasts for 2009 certainly do not point to large surpluses. Our market is well balanced. Opening and closing stocks for the coming marketing year should be stable and low and balancing the market is already making the sector more competitive.

There's no reason to expect any great drama in terms of European sugar prices either. Under the terms of the reform package, we have to keep the European price close to the reference price, which means: topped up with a reasonable market premium.

There were fears that imports would explode. This has not happened.

And as I prepare to go to Geneva in a few days, what we have on the table in the Doha Round with regard to sugar is very encouraging:

• Sugar would be covered by the Special Safeguard Clause as applicable today for another 7 years.
• Sugar will not be considered a "tropical product".
• Sugar will be on the list of products which will be affected by preference erosion. This will give us a 2-year grace period (where nothing is going to happen) and 8 years for implementing the tariff cuts, provided that we don't declare sugar a sensitive product. This, of course, still needs to be decided and as I have said many times before this decision will be taken only after having consulted the European sugar sector.

Without going into the technical details, you should know one thing when it comes to the decision on whether to declare sugar a sensitive product.

According to the cut we make to the basic sugar tariff in the case of sensitive products - which can be between one-third and two-thirds less than the cut for non-sensitive products - we would be looking at a sugar TRQ of between 485 000 tonnes and 675 000 tonnes. Such a TRQ was not taken into account in our reform of the sugar sector. When we put this reform together, we didn’t think sugar would be a sensitive product in any Doha Round agreement. So we would have to take further steps to keep our market in balance.

I have made a clear commitment to this balance for the period of implementation of the sugar reform, which ends in marketing year 2014/2015. And I intend to honour that commitment.

Therefore, if sugar became a sensitive product, it might be necessary to re-establish export refunds for quota sugar to balance the extra imports. This will work until the end of 2013, because, as you know, within the Doha Round we have provisionally agreed to phase out export refunds by the end of 2013. I don’t think this would leave us with a problem in 2014, but beyond then, new measures might be necessary.

But overall, in connection with sugar, we have a good basis for negotiation in Geneva.

Therefore, I hope you can agree with me that, after all those very passionate discussions about sugar sector reform that we had a few years ago, now things are basically going well.

Nevertheless, we can’t afford to be complacent. The sector must continue to improve. The European Union’s agri-food sector as a whole must continue to raise its game in a globalised world – with the right policy support – and the sugar sector is no exception. In particular, since there has now been a considerable concentration of production, we must be vigilant to make sure that sugar distribution is working as it should.

The next occasion for discussing the future of our sugar policy will be discussions of a CAP for after 2013. I think it’s very unlikely that the sugar sector will be able to sit out this debate, and in any case I don’t think that this would be a good thing - because the sector needs predictability about the future of sugar production in Europe beyond 2014/2015.

My advice would be: assume that you will be affected, and make your voice heard.

Now, back to our main subject: food security.

If the developments of the last year or so have shown us one thing above all, it's this: In the area of food policy, we must not make snap decisions!

Just a few months ago, I was often hearing talk of "a new paradigm" in agricultural markets. That was when a tonne of soft wheat was fetching around € 300 in Rouen. Just a few months later, prices are at less than half of that level! I think there's a lesson to be learned here.

Nevertheless, of course it is quite right to be concerned about our future food security in a world whose population is expected to rise to 9 billion people by 2050.

And as the title which you gave me for today implies, the European Union certainly has a "role" in feeding the world. If we look at its soils, its climate, and the know-how of its farmers, how could it possibly not have a role? But what sort of role?

I firmly believe that the focus of the European Union should not be on "self-sufficiency" in food – which is of course not the same thing as food security.

We are already a large agricultural importer, and we're committed to allowing duty-free and quota-free imports from the world's poorest countries.

We're also a large exporter. I need hardly say this in France. France alone has a trade surplus in agricultural products of about € 7 billion a year.

So the future of our agri-food sector lies in playing an active role in a global trading system.

This does not mean a system without any kind of limitation. We need a reasonable level of border protection, and that remains our position in Geneva. But a "reasonable" level is a level that will allow some imports.

I also firmly believe that, within the right framework, market forces can help to deliver food security.

In my experience, European farmers are actually quite good at responding to market forces when they are allowed to do so.

Heavy management of markets often has unintended consequences. Well-functioning markets – and note that phrase "well-functioning" – usually allocate resources much better than administrators.

This is why, within the Health Check of the Common Agricultural Policy (CAP), the Council has agreed to give farmers more freedom in a number of ways:

• In the medium and long term, the world will need more cereals. So we've agreed to abolish arable set-aside (though we're taking steps to compensate for the possible environmental side-effects of this change).
• In general, the world is also showing greater demand for dairy products. So we've agreed on a series of increases to milk quotas before the system ends in 2015.
• Also, the response to the freedom brought by the decoupling of direct payments has been encouraging. So we've agreed to push ahead with decoupling, except in sectors where this would clearly not be helpful.

But all this freedom for farmers is not the freedom of a policy vacuum. This is not "ultra-liberalism". After the Health Check, the CAP will continue to provide a strong safety net for farmers. This will help to make sure that when crises come, they don't seriously damage our production base.

Decoupled direct payments will remain a very important cord in this safety net. They are one of the best and most efficient ways of supporting farmers' income.

Our market instruments remain another cord. Some of these are now obsolete, so we're abolishing them. For those which we're keeping, we've agreed to make them more efficient as safety devices. They must not be price-setters.

Through the Health Check, we're also weaving new cords into the safety net – for example, possibilities related to insurance, through "Article 68".

Extra money to cope with climate change is also important for protecting our production base. After all, droughts and floods are not the best friends of any farmer!

So overall, the European Union has sensible policies in place with regard to domestic food production. There's space for market forces to work; but those market forces work within a strong policy framework.

I believe this approach is still valid in the current financial and economic crisis – though of course the Commission is watching carefully to see what impact this crisis will have on the farm sector.

In any case, food security is a global issue. The European Union can't carry the food needs of the world on its shoulders. We must also think about production in other parts of the world.

This means a number of things.

First, in our current situation, a global approach means giving financial help to farmers in poorer countries, so that they can get access to much-needed seed and fertiliser for a quick boost to production.

This is the aim behind the so-called "food facility" proposal [which the European Union has just agreed].

Secondly, a global approach means investing in agricultural research, technology and knowledge, not only in the European Union but also in developing countries.

This is why the European Union is the main contributor to the budget of the Consultative Group of International Agricultural Research – in addition to its very significant domestic research activities.

Thirdly, a global approach means building the right multilateral trade framework. Trade opportunities can stimulate agricultural production in poorer countries – under the right conditions.

This is why the European Union is working its muscles so hard in the Doha Round – to get a deal which will encourage helpful global trade, but also allow poorer countries to open their markets more slowly.

So, these are some of the European Union's key principles for making sure that food will keep finding its way to our tables in the future.

We've seen the weather change quickly in the overall economy – very quickly. Any forecasts that we make about the economy or about the agri-food sector must be cautious.

But I believe our basic principles will help see us through – with adjustment if necessary – whatever the weather.

Thank you.