The impact of E.U. free trade agreements on food security
SOS FAIM, Défis Sud magazine, n° 122
Since WTO multilateralism has faltered, free trade agreements (FTAs) have multiplied. The European Union is a fervent follower and in this regard practices the “Global Europe” strategy and as a result in 2010, the EU had already negotiated or signed agreements with 138 countries covering almost all continents. But what are the consequences of this strategy for all-out trade liberalization on food security, particularly in developing countries?
To answer this, we recommend reading this article from the latest issue of the magazine Défis Sud1. The author points out that there is an imbalance between the requirements imposed on developing countries and least developed countries (LDCs) and those that the EU expects of its partners. So, double standards and this is also true for subjects as sensitive as agriculture and food security.
Finally, uncontrolled trade liberalization and food security do not mix. If European Agriculture risks learning this at its own expense through the signing of the FTA with Canada (CETA) or through the negotiations underway with the TTIP (EU/USA), its partners on the south American or African continents, frequently net importers of agricultural products, could also suffer.
Yet the development of the agricultural sector is a prerequisite sine qua non of the economic development of a nation. But this development cannot be achieved without a national and international policy which includes and protects a country in global agricultural markets.
momagri Editorial Board
The European Union is increasing the number of new agreements, especially with developing countries (LDCs). In spite of the goals posted by the European Commission––economic development of Southern nations and poverty reduction––this liberalization trend is nevertheless raising some concerns2 regarding the key agreements negotiated by the EU, their contents and consequences on Southern countries in terms of development, from the perspective of the right to food.
In 2010, the EU was negotiating, or had already signed, free trade agreements (FTAs) with 138 nations worldwide, covering almost all continents––Asia (Korea, India and the ASEAN countries), North America (Canada and the United States), South America (Mercosur, Peru/Colombia), Central America, the Middle East (the Gulf Cooperation Council), and Africa (Economic Partnership Agreements or EPAs). When compared to the 192 nations recognized by the UN and the 153 nations that are members of the WTO, we see that the EU is conducting a very aggressive trade policy. This immediately raises two issues: What is the root of such a strategy and how is it compatible with WTO regulations?
The context and roots of FTAs
Addressing the first issue is relatively simple. The stalemate of the Doha multilateral talks in the mid 2000s and the examination of factors of European competitiveness have led Peter Mandelson, the then Trade Commissioner, to lay the foundations of a strategy to open trade across the board.
Under the name “Global Europe”, the strategy’s goal was to open up to foreign markets through FTAs in order to foster the establishment of European businesses, and more generally growth and employment in Europe. The issue of thee agreements’ compatibility with the WTO regulations is a more complex one.
At first glance, the so-called clause of “most favored nation (MFN)”3 , which stipulates that the trade advantages granted by a WTO member to another WTO member are immediately given to all members, is not fulfilled. The GATT’s Article XXIV even presents an exemption to this MFN clause by authorizing trade agreements between nations, provided they are reorganized under customs unions or free trade zones, and that they liberalize most trade between them. A second exemption to the MFN clause is the so-called “enabling” clause, which also allows the EU to give un-reciprocal and positively discriminatory trade preferences to LDCs. This System of Generalized Preferences (SGP) includes the special initiative for sustainable development and for good government (SPG+), as well as the special arrangement for least developed nations “Everything but Arms” (SPG-EBA)4.
But this leads to another issue: Why do the countries, which already benefit from this type of trade preferences––most often economically vulnerable LDCs––accept to open their economies to European competition through FTAs5 ? The reasons are varied and many. First, these preferences do not include all goods, especially processed agricultural products (in cases of tariff escalation, and obstacle to the development of local industries). Then, some countries see them as an opportunity to get a more favorable access to the European market, if possible before the other countries (the so-called “offensive” strategy).
Lastly, an FTA with the European Union can, for an LDC, serve as a mean to counteract the erosion of preferences trend, that is say to counter the relative lowering of trade advantages (for example a SGP-type system) linked to the increase of other FTAs (so-called “defensive” strategy).
Consequences on development and food security in Southern nations
Most countries negotiating, or having signed, an FTA with the EU are LDCs. As they are most often net importers of food products, they concentrate most of the world’s poverty and food insecurity. The next issue––and undoubtedly the most crucial––is therefore to determe the impact of European FTAs on their economic development, especially regarding food security.
The response to this issue is mostly a negative one, and this for several reasons. The first one concerns the regional cooperation of Southern nations. While it has clearly and often spoken in favor of Southern cooperation––a recognized significant factor of development6––the EU is, in practice, in contradiction with its commitments. In fact, most European FTAs do not respect––and even carve up––the existing Regional Trade Agreements (RTAs), by dealing with different zones/nations.
For example, the EU completed individual agreements with Peru and Colombia as an alternative to a global agreement with the Andean Community of Nations (ACN), which prevents the implementation of a customs union in the ACN. In the same manner, the negotiations for a RTA with the ASEAN (as a free trade zone) were suspended, thus leading to the negotiation of specific bilateral agreements.
Only the agreements with Mercosur and the Gulf countries currently under negotiation are respecting existing cooperation, in addition to the EPAs with Western Africa, although quite late and somewhat under duress). The various liberalization timetables, the existence of more favorable treatment clauses, the complexity of European levies or rules of origin are so many reasons, among others, why the completion of bilateral FTAs is slowing down or prevents regional cooperation. Lastly, the European FTAs tend to garner most trade flows (trend to look outwards) considering the EU’s economic power, which consigns intra-regional trade to the second rank, and weakens the expected gains from cooperation.
Another negative aspect of the EU FTAs concerns the losses of revenues and of governmental leeway in Southern countries. FTAs are legal documents that are restricting or prohibiting some economic policy mechanisms, and this on two levels. First, through the international regulations and treaties they are referring to (WTO rules for non-member nations for instance). On the other hand, through new obligations and exclusions for the countries involved (see the above-mentioned status-quo clauses, the ban of export taxes and more favorable treatment).
As far as revenues are concerned, the liberalization linked to FTAs clearly leads to direct losses of tax revenues for the nations concerned, and this while customs revenues often represent a significant share of their budget.
Lastly, some consequences of European FTAs are directly linked to the structure of the economies involved. On the one hand, that means a competitiveness gap between the European intensive agriculture and the family farming system of many LDCs, which encourages European agricultural exports towards such nations, and has a negative impact on rural development and under-nourishment in Southern countries. On the other hand, this involves the types of production in Southern farming according to its comparative advantage, and this might lead to more specialization for some products for the sole European market. The combination of these two major consequences confines farming activities in a pattern of tropical product exports in order to import food. Under the assumption of a perfect global market, this situation might not be alarming, but the reality of agricultural markets and the occurrence of the 2008 food riots are showing that such system increases the exposure to risks. In case of a shock––either lower prices for tropical commodities or higher prices of food products––this pattern threatens the livelihood of millions of poor people living in both urban and rural areas.
This observation is not new. Numerous studies show that liberalization does not lead to development, but that more pertinent and development-oriented trade and agricultural policies are instrumental in reducing poverty 7.
1 The entire magazine and article is available from
2 In 2006, the European Parliament indicated that “trade liberalization between unequal partners designed for economic development has proved to be ineffective and even counter-productive in the past.” Source: European Parliament, 2006, “ The impact of the economic partnership agreements on economic development”.
3 It is in fact a principle according which all signatories automatically benefit from the most favorable provisions granted by one of the members. For example, if the EU grants favorable customs tariffs (i.e. lower) to New Zealand for sheep meat imports, then all WTO members can export sheep meat to the EU with the same customs tariffs as New Zealand’s.
4 The régime SGP system is granted by the EU to all LDCs, and provides the elimination of customs tariffs of about a third of tariff lines. The SGP+ system is also designed for the LDCs, but its attribution allocation depends on the respect of some international treaties on human rights and environmental preservation. This SGP+ system includes the elimination of over 60 percent of customs tariffs for these countries’ exports to the EU. Lastly, the SGP-EBA provides total access (i.e. without customs tariffs) for all goods coming from the LDCs, with the exception of arms.
5 This is especially true for LDCs, which already have an almost total access to the European market through the SGP-EBA system.
6 In several reports, the UNCTAD shows the advantages of regional economic cooperation, especially due to more efficient allocation of resources (economies of scale) and due to the accumulation of production efforts (technology, capital and workforce). Source: UNCTAD. Trade and Development Report 2007 – Regional Cooperation for Development.
7 UNCTAD. 2004 Report on Least Developed Countries: International Trade and Poverty Reduction.