The European food and drink industry this week gave a vote of confidence to the radical revamp of the 41 year old Common Agricultural Policy proposed by European Agriculture Commissioner Franz Fischler.
Speaking at a conference in Brussels this week, Dietrich Oetzel, chairman of the Confederation of the Food and Drink Industries of the EU (CIAA), said: "The CAP reform must continue as it is key to reinforcing EU competitiveness on world markets." The conference, organised by the European Voice, is seeking to examine the future of food policy in Europe, notably in light of the Commission's ambitious Mid Term Review outlined last July.
The CIAA writes this week that whatever conclusions are to be drawn from the Brussels Summit, the CIAA remains focused on the mid-term review of Agenda 2000 and considers that necessary reform measures should be implemented as soon as possible.
"There is no doubt that trade in processed, high value-added food products will continue to increase on world markets. However, it is less sure whether EU food and drink industries operating from the European market will be able to benefit from this market expansion," added Oetzel.
The CIAA continued: "Given that the European food and drink industry uses over 70 per cent of the EU output of agricultural raw materials, the Common Agricultural Policy does indeed provide the industry with a stable source of raw materials responding to requested quantities and qualities."
However, according to the CIAA this has led to a disconnection of agricultural production from the market and created a bias to competition. Export refunds have until now been the only valid instrument which allows the food industry to be compensated for higher prices in the EU. Any further commitment to reduce export refunds budgets would severely restrain the competitiveness of food exporters, warned the CIAA.
"Let us assume that the Doha Development Round is concluded on schedule at the end of 2004 and that the WTO agreement reached in agriculture is then implemented as of 2006. Without further agricultural reform aiming at making EU agricultural products more competitive, EU food exporters would face even more pressure than today," continued Oetzel.
For the industry group, increased costs that companies face as a result of higher EU standards, and "burdensome authorisation procedures for innovative products," added to the issue of higher prices for raw materials, are progressively eroding the competitive advantage of producing in the EU. The CIAA warned that small and medium sized enterprises (SMEs) are the most vulnerable. International companies can often change strategies to find other, more competitive, manufacturing areas than the EU to supply their export markets - SMEs may not. The SMEs are not likely to have this flexibility which could ultimately lead to their end, the CIAA concluded.