Free trade focus

Global food trade liberalisation vital for EU food sector

By Ahmed ElAmin and Anthony Fletcher

- Last updated on GMT

Related tags Food Eu food European union

The EU's share of the global food market is shrinking - reducing
raw material prices and loosening up regulations are fundamental

These objectives are being driven by both industry and regulators. FoodNavigator looks at the attitude of Europe's food sector towards this seemingly inexorable process of globalisation. The Confederation of the Food and Drink Industries of the European Union (CIAA), for example, which represents Europe's food makers, is under no doubt that this is a process that should have beneficial consequences. In its annual report published this month, the confederation argues that in the face of overseas competition, freer trade and fewer regulations are vital to the bloc's continued competitiveness. "The CIAA has been working on formulating proposals to increase the competitiveness of the bloc's food and drink industry since 2004," the association's president, Jean Martin, stated in his introduction. "The organisation produced a discussion document at the end of 2005, highlighting problems specific to the sector and proposing solutions, including legislative ones." The association noted that the bloc's global share of the export market had been falling for the past 10 years, while countries such as Australia, New Zealand, China and Brazil had boosted theirs. Meanwhile exports of EU food and drink products rose in 2004 and continued to grow in the first nine months of 2005, following a slight drop in 2003. In the first nine months of 2005, exports grew by 4.8 per cent, while imports grew by 3.2 per cent. The trade surplus, which decreased substantially in 2003 and 2004, registered a 23 per cent increase in 2005. The association described 2005 as a challenging year for the European Union, marked by the decision of voters in France and the Netherlands to reject the draft constitution, a "less than ambitious" agreement by the European Council on a financial programme for the bloc, and slow progress of world trade negotiations. "Fully developing the food and drink industrys potential for growth requires action at several levels," Martin stated. "This objective also requires a regulatory framework which is clear, effective, avoids unnecessary complications and establishes administrative procedures that are more rapid and less costly." Indeed, better regulation is one of the means by which the Commission hopes to support growth. For example, the European framework legislation on additives and flavourings is currently being revised. Proposals include a regulation on food additives, amending and replacing the Additives Framework Directive 89/107/EEC; and a new regulation on food enzymes. The Commission has also proposed a new regulation on flavourings and food ingredients with flavouring properties, aiming to bring herbs and spicesunder the scope of the Regulation and replacing the Flavourings Framework Directive 88/388/EEC. The European food industry is also calling for an increase in overall research and development spending to support innovation and promote a shift to higher value added food production. The EU's research funding programme should provide a higher share of funds to the food, agriculture and biotechnology sectors, the CIAA stated. The EU food and drink industry is the largest manufacturing sector in Europe, with an annual production valued at € 815 billion. The sector employs four million workers. However the sector is characterised by a high fragmentation of its structure, with a few large companies with a big piece of the pie, and many small businesses operating in niches. Food companies in Australia, Japan, Norway and the US all spend relatively more on R&D than the EU. Japan sits on top of the pile with an R&D intensity reaching almost 0.8 per cent. Within the EU R&D spending diverges from country to country. The Netherlands and Finland achieve an R&D intensity in the food and drink sector of about 0.50 per cent while new member states are characterised by very low levels. Food and drink companies from large member states, such as Italy, remain below average. The CIAA will hold its next international congress 26-27 October in Brussels.

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