The EU’s recent decision to tax Russian cereals over Ukrainian ones, and the maintenance of solidary lanes with Ukraine despite protests, highlights the relationship between policy and geopolitical tensions. So where next for the Common Agricultural Policy (CAP). In this op-ed, Frederic Courleux argues that CAP must evolve from its neoliberal framework to prioritize food security, economic stability, as well as agro-ecological sustainability. This transition includes securing trade through government-to-government agreements, fostering food stockpiling for inflation control, and integrating food aid into agricultural policies. The future CAP (or a Common Agricultural and Food Policy, CAFP) will need greater public intervention to ensure Europe’s strategic autonomy and food sovereignty in a world facing climate and geopolitical crises.
By Frederic Courleux, Agro-economist
An important decision for European agricultural policies has marked the recent months: the EU has preferred to tax imports of Russian cereals rather than those from Ukraine. In turn, agricultural policies are entering the new geopolitical era of European integration.
Although the volumes imported are much larger on the Ukrainian side, the old continent has been able to distinguish between an ally and an adversary, despite the pressure exerted by recent farmers’ demonstrations.
It would have been risky to call into question the work undertaken for more than two years by the European Commission to operate the “Solidarity Lines” which aim to compensate, by land, the disrupted maritime transit of Ukrainian cereals via the Black Sea. Moreover, the decline in grain prices now offers more flexibility to ensure consistency in the sanctions imposed on Moscow.
What’s next for CAP?
However, truly entering the third age of the CAP requires a complete change of doctrine, the main features of which will be outlined here. While the watchword of the next term seems to be ‘economic security’, food and agriculture must undeniably be among the areas that the next executive will have to prioritise on its roadmap.
Turning the page on the neoliberal paradigm at the heart of the CAP since the early 1990s is just as crucial to the continent’s economic security as it is to making the agro-ecological transition of agriculture acceptable and feasible. While the mandate that has just ended has seen unprecedented progress in the construction of Europe in budgetary, health and energy matters, it is high time to reinvest the field of Europe’s oldest integrated political policy to rebuild European food sovereignty.
Agri-food trade and the EU
First, a realistic diagnosis of the situation has to be made. The European Union is a major agricultural producer, has plenty of agricultural land and has some of the highest yields per hectare in the world thanks to the technical expertise of our European farmers. For cereals, Europe accounts for 10% of world production, while Ukraine and Russia together account for only 8%.
However, it is necessary to bear in mind that if the old continent is a net exporter of agricultural and food products it is only in value. This is thanks to exports of wines and spirits, which are ultimately secondary when it comes to food security.
On the other hand, whether in terms of quantities, hectares or calories, the European Union is an overall net importer. Compared to the calories we consume, the net deficit is around the equivalent of 10%, with imports of soybeans from South America being the main flow into the European food system.
To put it bluntly, aiming for more food self-sufficiency makes no sense as European yields are already at the maximum of what can be considered as sustainable. Moreover, trade between continents, provided that it is sufficiently secure, is undoubtedly the best insurance against the consequences of a serious climate incident and remains essential to ensure our food security.
Rehabilitating commodity agreements
Secondly, we must therefore ask ourselves about the way to secure trade flows. While exchanges are and will continue to be necessary, the reliability of partners and the robustness of food chains should be questioned.
A principle must guide us: independence is gained through the multiplication of dependencies. While the embargo on US soybean exports in 1973 was gradually fading from memory, the Covid crisis has once again shown that when a crisis affecting supplies is at its peak, ‘global markets’ no longer exist because States prioritise the needs of their populations by adapting their trade policy.[1]
A dive into the history of the 20th century must remind us of a fact: international trade has been developed mainly through commodity agreements which, from the 1910s to the 1980s, have secured trade through commitments between governments.
This would therefore be a way of going further than the current free trade agreements, which essentially consist in protecting the interests of multinational companies and international traders.
This would involve engaging governments in securing exchanges that will take an increasingly geostrategic turn, as Janet Yellen, the current US Secretary of the Treasury, talks about when referring to friendshoring as an approach to the future stage of globalisation which is opening up.
Moreover, let us remember that for the major importers of cereals as Egypt and Algeria, governments have never given up playing a role.
This new approach would lead to the proposal that the issue of the transport of Ukrainian cereals be addressed by organising a major multilateral conference where the European Commission would bring the main importing countries and the Ukrainian government – as well as the major international traders – to the same table in order to offer them the possibility of contracting the flows necessary for their food security.
The direct involvement of governments in trade would also offer additional levers to move towards greater reciprocity of production standards. These G2G trade agreements – from government to government – would directly incorporate standards equivalent to ours. As in the case of joint purchases of gas, the European Union would oversee the long term contracts with, for example, South American countries to obtain supplies of soya produced without deforestation and without banned pesticides. This would reduce hostility to the current EU trade policy, which is often critiqued as favouring the import of products that do not meet our own production standards. It would also facilitate social acceptance of a sustainability transition agenda that genuinely seeks to export our standards.
Food stocks, a key weapon against inflation
Third, while trade is necessary to ensure food security, so are food stocks. In agriculture, it is not enough to press a button to immediately increase the production level, there are incompressible production delays that make the level of end-of-season stocks the key variable in food security.
Admittedly, food storage policies have a cost, but this cost is always less than the cost of not having stocks!
Most demographic giants, from India to China and Indonesia, have consistent food stock policies (about 800 million tonnes of agricultural products in Chinese stocks for an annual world production of cereals amounts to 2.2 billion tonnes). At a time when the climate crisis is undeniably increasing yield variability, there is no doubt that we must update the WTO agricultural rules, which prohibit stabilising storage policies, unless we do prefer chaos and risking disaster.
Multilateralism has stalled on this point since the 2007/2008 food crisis, and the European Union certainly needs to be more proactive on this issue in international fora. With biofuel production mobilising around 8% of world cereal consumption, the flexibilisation of biofuel policies must also be seen as a counter-cyclical tool for stabilising markets, a kind of negative stock from which to draw when needed.
Price here and price there
The connection of the European market with international prices is the fourth variable in the European food sovereignty equation. First of all, let us assume that if the European Union played its part in stabilising the markets through an assumed policy of food storage, the extreme volatility of international markets would certainly be reduced. In addition, the equilibrium assumption that prices converge towards marginal full costs of production is never verified.
On the contrary, international prices show cycles of “short peaks and wide troughs”, alternating panic prices when food security is at stake with dumping prices dictated by the pioneering fronts of the most aggressive exporting countries. The main issue is the large part of fixed costs among production costs, which reduces the spontaneous adjustment capacity of supply in face of falling prices; this is also why the CAP needs to strengthen these crisis management tools in order to be able to reduce production overcapacities when it arises.
Believing that it was enough to remove the distortions caused by agricultural policies to allow international markets to offer us equilibrium prices was an illusion based on a lack of knowledge of the functioning of markets, their failures and the many sources of instability that define them. This error of analysis has been engraved in WTO agricultural rules when the neoliberal wave came to his pick. How long are we going to keep the CAP trapped in this dangerous straitjacket for our food security?
On the other hand, Europe needs to take a closer look at US agricultural policy, which has retained its Rooseveltian roots in order to limit the exposure of its farmers to international prices.
There are three key examples: countercyclical subsidies on cereals allow farm incomes to be regulated, minimum sugar prices offer protection against dumping prices and, finally, the sharing of added value in the dairy sector via the Federal Milk Marketing Orders are examples which would make European farmers envious. The example of minimum entry prices at work in the EU-Morocco agreement on tomatoes should also help us to find ways to avoid exposing our farmers to markets that give inefficient price signals.
For the European Union, the food inflation spikes observed over the last two years sounds like a sudden awakening: the anti-inflationary force of increasing trade openness to international markets doesn’t exist anymore. This brings us back to remembering that agricultural price policies were historically the first of macroeconomic policies. There seems to be a need for a broader approach to controlling inflation: the ECB rate hike has no effect on the price of tomatoes, for example.
On the other hand, the damage caused by this rise in interest rates on other sectors, such as real estate in particular, is very real. It should be mentioned that economists working on the causes and remedies of inflation have come to advocate the introduction of food storage policies.[2]
Towards a Common Agricultural and Food Policy
Finally, the US example is also relevant when it comes to considering the growing food insecurity that hurts a large number of Europeans. Even in peacetime, not letting children go to school on an empty stomach in the morning should be seen as a minimum investment in our common future.
Uncle Sam spends more than $120 billion to fund the wide range of food aid programmes that help at least 40 million Americans every year. Comparatively, the 5 to 6 billion spent on the old Continent, for 7 years period, look very pale. Reconnecting agricultural and food policy seems essential to building food security and resilience, from the local to the community level.
An “F” should therefore be added for Food, in order to switch CAP to CAFP. This better integration would at least have the advantage of giving Member States the flexibility to redirect public support towards food aid program for the most deprived people when prices soar, rather than give farmers subsidies at times when they do not really need it.
In conclusion, the discussions on the next CA(F)P will have to focus on the needs of our economy in order to face times of war, without upsetting the objectives of the Green Deal. Whether or not considered as morally acceptable, access to food has always been a weapon between belligerents.[3] Strengthening the integrity of the common market requires a return to an interventionist agenda, as was the case at the setting up of the first CAP (1962-1992).
This historical convergence should also be noticed : strengthening economic security on the continent and succeeding agro-ecological transition in agriculture both require a return to public intervention on agricultural markets. Since 1992, the deregulation of European agricultural markets promoted in the name of the benefits of competition has paradoxically taken place during a phase of accelerating the concentration of agri-food, distribution and agri-supply links (seeds, fertilisers, agricultural equipment). The phasing out of guaranteed prices and quota schemes plunged European farmers into the cold waters of neoliberalism. They are the first victims, literally and figuratively, of an economic war that urgently needs to be stopped because, like all chains, food chains break through their weakest link.
Our farmers are as important as our doctors. Let’s stop living the fiction that competitive markets could govern our food, our livelihood. Between the climate crisis and the geopolitical turmoil, we no longer have the luxury of bringing to life this fiction built at the height of neoliberal ideology. It is this new reform trajectory that the next European mandate must launch in order to build a CAFP in line with the European Union’s ambition of strategic autonomy, a CAFP to regain European food sovereignty.
[1] Frédéric Courleux, 2020, Ces lieux communs des débats agricoles à l’épreuve du Covid-19, Paysans & société 2020/3 (N° 381), pages 15 à 20
[2] Jens VAN ’T KLOOSTER, Isabella M. WEBER, 2024, Closing the EU’s inflation governance gap: The limits of monetary policy and the case for a new policy framework for shockflation, European Parliament – IPOL, 32p. https://www.europarl.europa.eu/RegData/etudes/STUD/2024/755727/IPOL_STU(2024)755727_EN.pdf
[3] See in particular Thierry Pouch, 2010, La guerre des terres, Éditions Choiseul, 250 p.
The French version of this article has been publish here.
This article is produced in cooperation with the
Heinrich Böll Stiftung European Union.
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