Poster Presentation at the XVII EAAE (European Association of Agricultural Economists) Congress
Nina Hyytiä and Antony Starr from the University of Helsinki (case Study#3) presented their work as part of the XVII EAAE (European Association of Agricultural Economists) Congress entitled “Agri-food systems in a changing world: connecting science and society” on August 29th-September 1st 2023, in Rennes, France. They collected a consistent ‘System of Environmental Economic Accounting for Agriculture, Forestry and Fishery’ information base on regional dairy production, and built a money metric regional social accounting matrix, that could be used as base data for future economic, environmental, and trade policy analysis. For questions, please contact: nina.hyytia@helsinki.fi
Africa Trade Network (ATN) and Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI-Uganda – who we are delighted to have our partner in MATS!) organised a session on Green Trade and Africa-Policy Perspectives during the WTO Public Forum held between 12th and 15th of September in Geneva. In this session, we heard many insightful perspectives on the role of trade in advancing green transition, but also a strong message that a Global Green Deal is needed rather than autonomous greening initiatives by individual countries. Without multilateral cooperation more disparities will emerge, shadowing the efforts to develop more sustainable economies.
Solving the equation of economic growth and climate change was identified as the imperative for Africa. Mr. Bagooro (Third World Network-Africa) listed investment, finance, and trade policies as bottlenecks to solve the equation. He also explained the disparity between Africa’s exports and imports: exports are mainly raw materials (mentioning agricultural and extractive industries which link directly with the environment) while imports consist of high-added value products. It is no surprise that Africa is paying attention to developing its extractive industry and making sure the benefits are shared within the continent.
Ms. Nalunga (SEATINI-Uganda) further elaborated the African vision “The Africa We Want 2063” and the keys to greener transition, which not only consist of energy transition but of a more comprehensive decoupling from commodity, agrarian based economy. She raised the importance of the African continental free trade area, AfCFTA, to strengthen national and regional value chains for strengthened economic activities in Africa. She also noted that instead of advocating for trade liberalization more attention should be paid to enhance Africa’s productive capacities. Ms. Nalunga also raised an important perspective regarding trade agreements with the EU (European Union) which she explained to be dividing – not uniting the African continent. The Economic Partnership Agreements between the EU and Africa contain provisions that have negative implications on Africa’s quest for structural transformation.
Ambassador Ms. Mlumbi-Peter (South African Mission to the WTO) called for fair trade rules that are mutually beneficial for all. She underlined the persisting imbalances in the WTO Agreements which are in favour of Developed Countries. These include; domestic agricultural subsidies (Agreement on Agriculture-AoA), issues with technology transfer (TRIPS), and the local content requirements (TRIMs). These are some of the issues that the WTO Africa Group continues to champion, and which are on the agenda of the WTO 13th Ministerial Conference. She underlined that greening agricultural trade is a key in greening trade (exactly what we in the MATS project are exploring!) practically referring to subsidies in the cotton sector. She also raised the question of resilience not only in the semi-conductor sector but in agriculture, mentioning the Russian war in Ukraine and the COVID-19 pandemic, and how the concentration of grain production in the Black Sea area has become weaponized.
Based on the discussion, more global cooperation, building stronger local value chains, and investments that support and enable greener economic activities in developing countries are needed. Africa has vast potential to offer solutions to the climate change crisis and the energy transition. Exploring its opportunities and raising its voice in multilateral and bilateral processes is critical. Ms. Nalunga concluded that solutions must come from the bottom-up and there is a need to connect the local level to multilateral level through inclusive and consultative mechanisms.
Indeed, there is a need to listen to the messages that the African continent is sharing, and to support them to unlock the potential they have. That is the way towards a greener future in a mutually beneficial way.
SEATINI-Uganda is one of the leading NGOs promoting pro-development trade, fiscal and related policies for sustained equitable development and improved livelihoods in Uganda and the East African Community region. SEATINI aims at strengthening stakeholders’ capacity to influence trade, fiscal and related policies and processes through research, advocacy, training, information sharing, networking, alliance building and litigation.
Mari Carlson is the co-coordinator for the MATS project. She is also a doctoral researcher in the doctoral programme in Sustainable Use of Renewable Natural Resources at the University of Helsinki. Her research combines trade policy, environmental sustainability, and agriculture.
New Project Report: “Weaponization of Grain Trade increased
The July report on the outcome of the project “Repairing Broken Food Trade Routes Ukraine – Africa” The latest report on “Repairing Broken Food Trade Routes Ukraine – Africa” covers:
Source: Idrissa Ouedraogo is a farmer in the North Central region of Burkina Faso. His millet, maize and bean crops have dried up due to the lack of rainfall, and his animals no longer have anything to graze on. A few years ago, he could sell his crops and use the proceeds to send his children to school and provide them with medical care. Now the money he gets is not enough. Credit: Cissé Amadou/Oxfam.
The unequal global food system is unsustainable for people and planet, and there is an urgent need to rethink how the world feeds its people. We will not solve the long-standing global food crisis, made worse by the war in Ukraine, with the same policy approaches that created it. The combination of extreme inequality and poverty, human rights violations, conflict, climate change and sharp food and energy price inflation, accelerated by the war in Ukraine and the COVID-19 pandemic, has already resulted in hundreds of millions of people not having enough to eat.
While millions of people are struggling to find their next meal, the world’s main food traders have made record profits, and the billionaires involved in the food and agribusiness sector have seen their collective wealth increase by $382bn (45%) from 2020 to 2021, with 62 new food billionaires created in the sector since the beginning of 2020.
The neoliberal promise: market and trade liberalization
For long, policy makers have promoted the idea that a greater reliance on markets, financial actors and trade liberalization will fix our broken food system. However, the reality is that we need to regulate markets, rein in speculation, break up monopolies and create fairer and more flexible trade rules for low- and middle-income countries, if we want to have a fair and sustainable food system.
Trade rules, especially those put in place by the WTO, are supposed to safeguard the ability of all farmers to enjoy equal access to global markets and contribute to food security. However, agriculture interests in rich countries tend to benefit more from trade rules, while people in other countries lose out and face a higher risk of food insecurity. Trade policy tools, including greater space for governments to adjust their levels of food imports and exports, invest in domestic food production and create strategic food security reserves – along with tighter regulation of food commodity markets, and reduced market concentration – are essential structural reforms in the interests of sustainable and resilient food security.
The solution to the global food crisis is not the liberalization of trade at all costs; the full liberalization of food markets only reinforces the structural flaws of the system. It is essential to review trade policy tools and establish better financial regulation to reduce food price shocks, and avoid repeating the failures of the 2007–2008 and 2011 food price crises. The evidence of recent food crises shows that ‘relying on the market’ and promoting more market dependence exacerbates inequality as each new crisis hits.
International trade rules – often negotiated to benefit and protect farmers in rich countries – must be reshaped, with greater flexibility for low-income food-deficit countries (LIFDCs) to control their food imports and exports. Additional reforms to trade rules are needed.
Government intervention: necessary for food security
Transparency mechanisms must be strengthened to improve visibility in food markets. For example, the Agricultural Market Information System (AMIS) – set up by the G20 in 2011 – must be expanded to cover all countries, in order to create a more comprehensive analysis of food stock levels and to ensure the needs and priorities of LIFDCs are taken into account. Important food-producing countries that do not disclose stocks levels, or are legally prevented from doing so, must be called on to provide greater transparency. Private stocks, some of which are held by large agro-industrial groups, must also be included in the assessments, as agreed in the G7 Statement on Global Food Security of June 2022.
Regional strategic food reserves, as seen in projects like the nascent ECOWAS Regional Reserve in West Africa and the ASEAN+3 emergency rice reserve (APTERR), should be encouraged, developed and supported, given the role that stocks can play in buffering the impacts of food crises. None of these developments should be challenged at the WTO as ’trade distorting’, as they have been in the past, but supported as vital food security-enhancing policies.
The principle of flexibility within trade relationships is fundamental. Policy makers must be allowed to modify, adjust and restore tariff, quantitative and non-tariff barriers both in advance of and in the midst of crises, notably to support smallholders and improve national or regional food system resilience. This should be the case within both multilateral trade agreements, such as the Economic Partnership Agreements (EPAs) and The African Growth and Opportunity Act (AGOA), and in bilateral relationships.
Furthermore, provision should be made to allow for temporary dispensations to facilitate trade without requiring any damaging longer-term policy changes. This is especially important in regard to tariff liberalization and the dismantling of other trade policy tools. In particular, OECD country governments should reject opportunistic efforts to use the current crisis to pursue broader long-term trade liberalization agendas and increase their food exports beyond the immediate needs of a food insecurity crisis.
The big players: agro-industry traders and financial speculators
The imbalances in the global food system are also very concerning in terms of market power. Market concentration is so severe that just 1% of the world’s farms control 65% of the agricultural land, and four big traders carry out 70% of global trade in agricultural commodities by value. Measures to reduce market concentration must be used in scenarios where, for example, only four companies control 70–90% of the global grain trade, or a handful of companies in eastern Europe monopolize the global trade in fertilizers.
Currently, we are witnessing a massive onslaught on seeds especially by the private sector mainly comprised of Multinational Corporations (MNCs) whose focus is profit-making from seed breeding and distribution as a business. The nature of the onslaught that has been brought on by these MNCs is especially being witnessed through the introduction of seeds that cannot be re-propagated, the introduction of patented seeds and advancing policy frameworks that forbid farmers from saving, exchanging, and recycling seed.
The proponents of Genetically Modified (GM) seed insist that they will enable farmers to be able to produce sustainably for both food security and trade but this will further entrench dependency of Least Developed Countries (LDCs) on the Multi-National Corporations for seed and other agro-inputs.
Another major issue is the role that financial speculators have played in international food trade since the early 2000s. As early as 2011, Oxfam documented how deregulation of agricultural commodities derivatives, and the subsequent entry of non-agricultural actors (pension funds in particular) into the market, reinforced the inflation that led to the major food crises of 2007–2008 and 2011. There is a risk that this situation is being repeated today. Although some reforms have been undertaken since 2011, the lack of regulation remains worrying.
Therefore, in terms of financial market regulation, legislation such as MiFID II and the Dodd Frank Act should be revised and strengthened, and the UN Committee on Food Security‘s Recommendations on Price Volatility and Food Security fully implemented, to tighten position limits and increase transparency on food commodities in financial markets. Commodity index funds that bundle food and fuel investments with other
MATS case study #6 will aim to get a better understanding of the actions that companies (willingly and unwillingly) are doing that are keeping cocoa prices down and therefore potentially harming the right to a living income for cocoa farmers and food sovereignty in general. This better understanding should help (a) business to shift to sustainable business models, (b) legislators to change the trade rules to create a level playing field and (c) governments and cooperatives from exporting countries to increase their negotiating power in global food supply chains.
KnowlEdge Srl, as a partner to MATS, developed an analytical framework to enable a comprehensive and interconnected assessment of the impact of policies on behavior, using evidence-based methods supported by science. In MATS, the aim is to connect the local level to a global level while taking into account the complexities of the food system. The framework we developed consists of indicators, methods, models, enabling conditions, and transition pathways. Eventually, it will guide the assessment of sustainability of agricultural trade policies and trade-related measures.
Figure 1 illustrates the process and flow of the analytical framework. The three main components (indicators, models, and methods for presenting results) are backed by a review of existing analytical frameworks for sustainability of agricultural trade. The selection of indicators enables the measurement and evaluation of the social, economic, environmental, and governance impacts of agricultural trade. These indicators are specifically chosen to conduct a comprehensive analysis of the relationship between trade policy and multidimensional sustainability outcomes. They serve as the foundation for a systemic approach and are thoroughly examined in the earlier phases of the MATS project. The developed analytical framework provides the necessary structure for case study assessments (MATS has 15 case studies), as well as the analysis of institutional, regulatory, and legal frameworks. Furthermore, it forms the foundation for a multi-actor forecasting, foresight, and back-casting approach to explore transition pathways toward sustainable trade.
Figure 1: Process and flow of Task 2.4
The framework has been developed to facilitate diverse assessments pertaining to sustainability of agricultural trade, encompassing trade, investment, agricultural production, production outcomes, and governance indicators. In this regard, the framework has benefited from and is closely aligned with the EU Taxonomy, which serves as a “green classification system” translating the climate and environmental objectives of the European Union into criteria for investment in specific economic activities. Within this context, the framework establishes a set of indicators to characterize and define the sustainability of agricultural trade. By doing so, it aids in the identification of investments that align with the Platform on Sustainable Finance and promotes transparency by adopting a comprehensive and multi-dimensional approach to sustainability.
Andrea M. Bassi is the CEO of KnowlEdge. He has 20 years of experience working with more than 40 governments and international organizations on the development of customized models for the assessment of outcomes of policy and investment across social, economic and environmental indicators. Andrea holds a Ph.D. and M.Phil. in System Dynamics from the University of Bergen, Norway, a M.Sc. in Economics from LIUC, Italy and a post-graduate diploma on Modeling the Environment from the University of Catalunia, Spain. See his comprehensive list of publications, projects, activities, and much more here.
Marco Guzzetti isa Research Fellow supporting the integration of spatial analysis in the systems models developed by KE, and performs Cost Benefit Analysis for sustainable agriculture and land use projects. Marco worked at the United Nations ESCAP in Bangkok, the European Parliament in Brussels and the Lombardy Foundation for the Environment prior to joining KE. He holds an MSc in Environmental Management from University of Stirling, UK and a BSc in Biology from University of Milan, Italy.
Biofuels are by presented as a promising alternative to petrol or diesel in the transport industry. In a new report funded by the MATS grant, Oxfam once again shows the negative impact of those fuels: deforestation, the disappearance of food crops, increases in food prices and, not in the least, increased greenhouse gas emissions. Anyone who owns a car and refuels in Belgium is indirectly complicit in human rights violations in Peru and Brazil. That is according to a new report released by Oxfam Belgium. It builds on a study from 2021 and shows that the bioethanol contained in petrol in Belgium is not only pernicious for the climate but also violates human rights in the two countries studied
Sugar Cane: An Opaque Chain
Oxfam’s research focuses on the production of bioethanol from sugar cane in Peru and Brazil, which Belgium imported 10 times more of in two years. The sugar cane is converted into bioethanol after a long series of intermediate stages and arrives in Belgium via the Netherlands. During these intermediate stages, the sugar cane passes companies that can be located in Saudi Arabia, Russia, Norway or China. This opaque route makes it almost impossible to map all stages of the production process. It did not stop us from meeting local communities near the Amazon forest who directly feel the effects of this industry. For instance, the research shows that they were forcibly displaced to make way for mega sugar cane plantations. In Brazil, this involves 8.6 million hectares (twice the area of Belgium). Moreover, the working conditions on those plantations are terrible and the massive use of chemicals threatens the health of both the workers and nearby villagers. People who tried to expose these abuses were physically threatened and feared for their lives
Hunger grows, policy makers turn a blind eye
Is our urge to drive cars at all costs justifiable? Because while, according to the UN, 828 million people went hungry in 2021 (46 million more than in 2020), precious farmland is being used to make biofuel. Land on which food crops could be grown. How can the co-existence of these to tendencies be justified?
Despite amended European directives that no longer require the use of biofuels, Belgium insists on this false “solution”. As a result, biofuel is in every kind of petrol in Belgium. By the way, biofuels are unfairly labelled as “zero emissions”, because establishing sugar cane plantations also takes up natural land such as forests and pastures, which otherwise absorb CO2.
Besides having a negative impact on the climate, biofuels also cause an increase in food prices. For example, the FAO (the Food and Agriculture Organisation, a specialised and impartial agency of the United Nations working against hunger) estimates that increased demand for agricultural commodities for biofuel production has caused prices to rise by 105%. In this way, biofuels threaten the food security of those most affected by food insecurity.
Belgium can lead by example
The regulations that the European Union has included in its directives to protect human rights are not strong enough to prevent violations of the rights of local people. Belgium can and should ban all biofuels produced on agricultural land, including those based on sugar cane. The use of 2nd and 3rd generation biofuels can be allowed after a thorough analysis of their impact on the environment and human rights. But if we want to tackle the climate crisis, we must also adapt our mobility and means of transport. Starting with improving and increasing public transport supply and promoting soft mobility.
Project Workshop on “Making Agricultural Trade Sustainable” – 16th May 2023, 9:00 CET-12:00 CET
Time: 16th May 2023 at 9.00-12.00 CET
Place: Maastricht University campus, Brussels, Tervurenlaan 153, 1150 Sint-Pieters-Woluwe, Belgium
Format: Hybrid – in-person & virtual
Are you a professional or researcher in the field of agricultural trade? Do you believe the agricultural trade system needs a rethink? Do the challenges ahead in the fields of social, environmental, or economic sustainability keep you busy? Join us in this workshop where we will, collectively with experts in the field, reflect on the future of our agricultural trade system.
The EU-funded MATS project identifies key leverage points for changes in agricultural trade policy that foster the positive and reduce the negative impacts of trade on sustainable development and human rights – at local, national, and global level – concentrating particularly on EU-Africa trade relations. The project consists of eight working packages and 15 case studies providing information about interactions between agricultural markets, trade and trade policy, investments, environmental sustainability, and human well-being. Our research is based on multi-method analyses, containing customized system dynamics models, computable general equilibrium models, and in-depth assessment of the environmental and social costs and benefits of agri-food value chains and trade.
The workshop intends to enable the exchange of views and provide an opportunity to contribute to further MATS work. The workshop is open for all agri-food trade practitioners, NGOs, researchers, and policymakers who want to hear from and provide input to making agricultural trade more sustainable in environmental, economic, and social terms, and to help us identify the investment-related aspects of sustainable agricultural trade. The workshop consists of three thematic presentations by external experts. Each presentation is followed by a 20-minute discussion, the first half of which is taken up by an invited discussant, and the remaining 10 minutes being reserved for open, general discussion. The seminar will be recorded and made available on the webpage of the MATS project.
Keynote Dr. Leonard Mizzi(DG INTPA), Head of Sustainable Agri-Food systems and Fisheries Unit (European Commission)
9:25-9:35
Q&A moderated by Prof. Bodo Steiner (University of Helsinki)
9:35-9:55
Radika Kumar, Adviser, Infrastructure Policy at the Trade Oceans and Natural Resources Directorate at the Commonwealth Secretariat in London – The Impact of Trade (in particular Agriculture Trade) on the Social Pillar
9:55-10:15
Discussion, moderated by Jonathan Matthysen (OXFAM) Discussant: Virginia Enssle, Project and Policy officer, Fair Trade Advocacy Office (FTAO)
10:15-10:35
Coffee Break
10:35-10:50
Marianne Kettunen, GCRF Trade, Development, and the Environment Hub (TRADE Hub) – Environmental perspective on sustainable agricultural trade
10:50-11:10
Discussion moderated by Mari Carlson (University of Helsinki) Discussant: Shefali Sharma, Director, Institute for Agriculture and Trade Policy (IATP)
11:10-11:25
Facundo Calvo, Agricultural Policy Analyst at the International Institute for Sustainable Development (IISD) – Multilateral perspectives on sustainable agricultural trade. How can the WTO contribute to move forward this agenda/at MC13?
11:25-11:45
Discussion, moderated by Prof. Bodo Steiner (University of Helsinki) Discussant: Frédéric Lançon, Scientific Director, Value Chain Analysis for Development, VCA4D
11:45-12:00
Wrap up and closing, Prof. Bodo Steiner (University of Helsinki)
For those who are less familiar with the environmental sustainability and trade policy work at the WTO, biodiversity has not paved its way in those discussions yet. The CBD has requested for an observer status in different committees at the WTO but so far it has not been a story of success. It is noteworthy therefore that, Mr. Aik Hoe Lim, the Director of the Trade and Environment Division at the WTO, opened the roundtable by acknowledging his gratitude that WTO Members are welcoming the discussion about nature-positive trade nowadays at the WTO. Even I could say that today felt like a small victory for the biodiversity in its race towards the semi-finals of the “most pressing (sustainability) issues in trade policy discussions at the WTO”. However, remember here (emphasis added), environmental sustainability topics such as climate, plastics pollution, biodiversity, circular economy, and so on, should not be seen as rivals. They are mutually supportive and each one is needed to prevent the environmental crisis from getting completely out of hands.
In the roundtable, Mrs. Marianne Kettunen, who is a senior policy expert and advisor on sustainable development and the environment currently working for the Trade, Development, and the Environment Hub (Trade Hub) introduced findings of a new report offering a vision for mutually supportive framework for trade and biodiversity. The report, appraised by the experts to be ready-for-implementation, presents a more holistic view on nature and biodiversity in the trade and environmental sustainability work at the WTO. The report bridges the gaps and shows that trade policies and the existing work at the WTO can, directly and indirectly, be supportive for the implementation of the global biodiversity framework. In her intervention, Mrs. Kettunen underlined that there is no need to establish new processes at the WTO but to bring biodiversity more holistically in the existing work such as the informal working groups within the Trade and Environmental Sustainability Structured Discussions (TESSD) or in the Informal Dialogue on Plastics Pollution and Trade (IDP). There are also many other working groups and streams which are linked to biodiversity such as agriculture and agricultural subsidies, fisheries subsidies, or fossil fuel subsidies to name a few. There are also different (voluntary) sustainability standards related to trade (but outside the WTO) aiming at supporting the environment, but the abundance might sometimes actually be – a trade barrier. So, more streamlining and cooperation is needed.
Yet agriculture was mentioned in almost every intervention and is a part of the report too, Ms. Rebecca Barton, Counsellor in the Permanent Mission of Australia to the WTO, focused solely on speaking about the role of agricultural trade policies in enabling (or perhaps currently impeding) nature-positive trade. She reminded that agricultural negotiations handle many critical issues such as food security in addition to other perspectives. She raised questions such as how to solve these critical issues while contributing to nature-related goals or how to solve the issues related to agricultural subsidies which tend to distort markets or are in many cases harmful for the environment. Regarding agricultural subsidies, a comment from the audience suggested that the trade community should make an exercise to identify between really environmentally harmful agricultural subsidies and those that actually contribute to nature-positive outcomes. Lastly, Ms. Barton noted that environment in mentioned in the preamble of the WTO Agreement on Agriculture as a non-trade issue, which perhaps is totally outdated. And actually, I have heard some discussion here in Geneva, that some folks would be viewing the WTO Agreement on Agriculture with “green lenses”.
In addition to the subsidy, discussion was brought by Mrs. Diane Holdorf, Executive Vice President for the World Business Council on Sustainable Development, who also included energy subsidies and the mining sector as important topics in the nature-positive trade related discussions. Bringing in the business perspective, Mrs. Holdorf called for clarity and granularity in the trade rules supporting nature-positive trade as private sector companies are making efforts to advance green transition, but many times trade rules are vague and do not guide companies to the right direction. She also noted that funding and investments are the key, and one should figure out how to structure the financial flows to truly support the green transition. The importance of linking investments with changes in trade policies received support and it is clear that investments and finance are needed to induce the changes that “green” trade policies intend to push forward. (This is by the way, what our MATS project aims to do in the context of agricultural trade policies.) Lastly, Mrs. Holdorf underlined the importance of multistakeholder processes as policy making needs those who implement the changes: “we need farmers, processors, retailers, civil society, and so on” – enabling environment is a key for businesses to change things for better. She well concluded her intervention that breaking the silos within, between, and across the organizations is the key.
The roundtable was concluded by Mr. Lim who made a very important point regarding the differences between environmental policy making and trade policy making. Trade policy continues to be steered by political reasoning whereas environmental policy is evidence-based, and the international (trade and environment) community should clarify to what extent these different starting points are true for both. If there is no willingness to do that, it will be really difficult to bridge the gap between environmental and trade policy work.
It is clear that the WTO rulebook needs an update and, while some topics are progressing, there is yet vast amount of work to be done to get all WTO members on the same page. Understandably, it is hard to turn the tide when originally at the WTO environmental sustainability has been treated as a non-trade issue, and the discussions have been marginal in the Committee on Trade and Environment with no substantial progress in the rules making. However, recent years have confirmed that this cannot be the case, at least for many countries. Silo-based thinking has to be broken and trade policy makers and environmental policy makers should find a way to cooperate and understand each other. Wider stakeholder involvement, both in Geneva and at national capitals, in a necessity to craft trade rules in a meaningful and feasible way. Finally, we need a connection between the trade policy induced changes and the finance and investment flows. Now we only must start ploughing, sowing, and hopefully harvesting in line with the SDGs, wishing for a stable climate and a healthy environment for the seeds to grow.
Mari Carlson is the co-coordinator for the MATS project. She is also a doctoral researcher in the doctoral programme in Sustainable Use of Renewable Natural Resources at the University of Helsinki. Her research combines trade policy, environmental sustainability, and agriculture.
Making agri-food trade more environmentally sustainable, or sustaining the policy fog by making more trade-relevant policies? A note on F2F, Green Deal, ETS, and CBAM
Green Deal and F2F strategy are clear about the EU’s willingness to promote sustainable agri-food sector globally through its external policies, including international cooperation and trade policy. The work is ambiguously based on cooperation with partners and in different international foras, but it has a strong autonomous perspective – better known as open strategic autonomy, also visible in the EU’s trade policy strategy. Both Green Deal and F2F make strong references to restricting market access for goods that are not produced according to EU’s environmental (or other) standards. It also points out a need to avoid outsourcing of unsustainable practices to third countries and to restrict importing such products into the EU market. Despite this is nothing new that the EU is requiring countries to comply with some of its relevant agri-food standards, this time the tone is more severe.
The first concrete autonomous measure linked to environmental sustainability in agri-food trade was the mandatory due diligence on deforestation free supply chains, which I wrote here last time. Since environmental sustainability is only one side of the coin, you should also check the one on social sustainability, hence forced labour. It is no wonder why some of the EU’s trading partners are a bit concerned. Such new measures are intending to regulate the way products are produced meaning that to gain access to the EU market, products must be produced according to the EU regulation. This is not an easy task particularly for developing country trade partners. It also certainly raises questions what is yet to come? Maybe an obligatory environmental footprint scheme? A carbon border adjustment measure on selected agri-food products?
If you try to make sense of what Green Deal says about sustainable agri-food trade, you will end up reading the Farm-to-Fork Strategy. While reading that, you realize that you need to consider a myriad of other strategies and sectoral policies from the Common Agricultural Policy to biodiversity, climate law, circular economy, forestry, carbon markets, transportation, competition rules, trade policy, and a comprehensive list of others. These will all be affected by the Green Deal, and they will, in one way or another influence EU’s international agri-food trade. However, it is impossible to say in just a few sentences what environmentally sustainable agri-food trade is, according to the EU. It includes all the stages in the value chain, not just farming and processing, which explains the necessary interdisciplinary view needed to understand ‘environmentally sustainable agri-food trade’. Another thing is to make agricultural production itself environmentally sustainable, so how much trade policy can do? At least agri-food value chains have typically become more global, which increases the role of trade policies in regulating traded goods and increases the need for government policies that focus on facilitating participation in global value chains, so as to facilitate added value creation.
Yet unlikely implemented any time soon, discussion exists about extending carbon pricing to agricultural sector (e.g. here, and here), mostly concluding its infeasibility, inefficiency, and a high risk of carbon leakage without carbon border measures. Note also that agricultural emissions are not only carbon emissions; 31 per cent of human-caused GHG emissions, originate from the world’s agri-food systems, and the FAO calculated that cattle generate up to two-thirds of the greenhouse gases from livestock, and are the world’s fifth largest source of methane. However, New Zealand has recently published a plan for pricing its emissions on agricultural sector which will showcase other countries how such a mechanism would work. It is to be seen, how New Zealand copes with the carbon leakage. And so, why was I raising this issue of carbon border measures before? While F2F makes no references in adopting such measures for agriculture, the Green Deal put forward the Carbon Border Adjustment Measure (CBAM) for some industrial goods. Before its publication and even after, some concerns among the agri-food sector were heard whether the product coverage could be extended to agri-food products. In its current form this is not the case, and we only find indirect linkages to agricultural sector through some inputs such as certain fertilizers, which are subject to the mechanism. This of course includes the potential for price increases and in some cases concerns regarding availability of fertilizers in the EU market, but again, it does not directly target agri-food trade. The CBAM is actually linked to the revision of the EU ETS as a mechanism to gradually replace the free allowances system, to prevent ETS induced carbon leakage for those sectors already subject to the EU ETS. There is lots of misunderstanding and misinterpretation available on the CBAM but building the link through the ETS free allowances hopefully makes its purpose clearer.
Lastly, I would like to consider one more initiative meaningful for making agri-food trade more environmentally sustainable, which is perhaps not talked about enough. Probably one of the largest packages in the Green Deal is the revision of the EU’s Emissions Trading System. This reform will have far-reaching impacts on many value chains and their trade through transportation. This is because the ETS 1) is strengthened in the aviation sector, 2) will be extended to shipping sector, and 3) an own ETS is to be established to cover emissions from fuels used in buildings and road transport. This will inevitably increase transportation costs within, into and from the EU market. We hope for a quick green transition in the transportation sector – otherwise we might end up having unsustainable agri-food trade at least in economic terms. But is hope enough in the face of increasing trade-relevant policy-fog?
Mari Carlson is the co-coordinator for the MATS project. She is also a doctoral researcher in the doctoral programme in Sustainable Use of Renewable Natural Resources at the University of Helsinki. Her research combines trade policy, environmental sustainability, and agriculture.
Bodo Steiner is the coordinator for the MATS project. He is professor of Food Economics & Business Management, head of the research group Management & Organizations For Sustainable Food Systems, deputy director at the Department of Economics and Management, University of Helsinki. See his comprehensive list of publications, projects, activities, and much more here.
