Food Security and the EU’s Common Agricultural Policy (CAP) Box 2 Decolonising food Koumba bread in Cameroon Cameroonian bakers are pressing ahead with the decolonisation of Africa’s food. They already successfully proved the feasibility of mixing wheat flour with varying quantities of domestic flours, adding between 10 and 20 percent locally produced ingredients. For the production of “Koumba” bread and pastry they even use up to 50 percent of sweet potato flour. At a public fair for local food, consumers confirmed the excellent taste of sweet potato bread. “I have tasted the pastry. I am told that it contains 40 percent sweet potato flour and I must admit that it is exquisite”, said one visitor. The           142 Cameroonian minister of commerce picked up the idea and announced the start of a project to examine options for using domestic flours.                 143 EPAs: securing export markets While African consumer and peasant movements are fighting to reduce wheat import dependency and “decolonise” their bread, European cereal trader organisations like COCERAL and Euroflour are putting pressure on the European Commission to keep African markets open and to secure the removal of tariff barriers to EU cereal products through bilateral free trade agreements. Referring to the growing world market, COCERAL, whose national member organisations represent some of the largest global grain traders like Archer Daniels Midland, Bunge and Cargill,144 demands that “European exporters should be supported in capitalising this export market potential”. According to the grain traders’ group, “the CAP after 2013 needs to further support the competitiveness of agricultural production also through the dismantling of trade obstacles and barriers”.                   145 At a Brussels symposium on EU agri-food exports, Euroflour did not shy away from attacking the already extremely low tariffs on wheat flour in West Africa, which only seldomly exceed the rate of 20 percent, by calling for an “acceptable import duty 142 ����������������������������������������������������������������������������������������������� Maurice Oudet, ‘Sweet potato flour – a substitute for wheat?’, ‘Let us de-colonise our eating habits!’, SEDELAN, Newsletter 403, 3 January 2011, and Newsletter 404, 8 January 2011. 143 ��������������������������������������������������������� Christina Lionnet, ‘Pour la ‘décolonisation’ du pain!’, Jeune Afrique, 25 March 2010. 144 ������������������������������������������������������������������������������������������������������ See, for instance, the members list of Germany’s grain trader association Verein der Getreidehändler (VdG): http://www.vdg-ev.de 145 �������������������������������������������������������������������������������� COCERAL, ‘Position Paper on the Future of the CAP’, Brussels, 24 February 2011. 51

Globalising Hunger not higher than 5%”. Euroflour wants “active support for the position of the EU flour exporters” in the framework of the Economic Partnership Agreements (EPAs) currently being negotiated between the EU and 75 African, Caribbean and Pacific region countries (ACP). Referring to the reduction of EU export refunds, the lobby group urged that, as a compensation, “the Commission needs to defend EU flour exports”.146 The European Commission itself has traditionally lent an ear to these business demands. Keeping developing countries’ markets open for European food exporters remains a central aim of its trade policy, complementing the Common Agricultural Policy and its generous subsidies. Without low trade barriers in the South, the EU’s objective of fostering a food industry capable of conquering world markets would be unattainable. Domestic support for EU agriculture and external support by dismantling trade barriers go hand in hand. CAP subsidies and the EU’s free trade agreements are two sides of the same coin – inextricably linked to defend the profits of the European food business. The EU’s Economic Partnership Agreements (EPAs), in particular, are threatening to constrain ACP countries’ policy space to protect and develop their agricultural sectors. Of the seven regional groupings currently negotiating with the EU, so far only the Caribbean one (Cariforum) concluded a comprehensive EPA. Some twenty countries concluded “interim” EPAs covering only trade of goods, but with “review clauses” envisaging the resumption of negotiations at a later date. Yet, the majority of ACP countries have not yet joined any interim EPA.147 The EU requests the total elimination of tariffs and non-tariff barriers for at least 80 percent of ACP countries’ product lines including agricultural commodities. Although the exclusion of some sensitive goods like cereals is therefore possible, the EU imposed the inclusion of a so-called “standstill clause” into most of the interim EPAs prohibiting the introduction of any new tariffs or the raising of existing tariffs. The interim EPA of several countries and groupings expands this tariff freeze also to sensitive goods that have been excluded from liberalisation. Although Cameroon, Ghana, Ivory Coast and the East African Community (EAC) excluded cereals from liberalisation, they will not be allowed to raise cereal tariffs anymore due to the standstill clause. To make matters worse, safeguard clauses which 148 146 ���������������������������������������������������������������������������� J. Rossy, Euroflour, Presentation, Seminar DG Agri, 25 June 2007, Brussels. 147 ��������������������������������������������������������������������������������������������� ODI/ECDPM, ‘The Interim Economic Partnership Agreements between the EU and African States – Contents, challenges and prospects’, Overseas Development Institute/European Centre for Development Policy Management, July 2009. 148 ������ Ibid. 52

Food Security and the EU’s Common Agricultural Policy (CAP) could be used to protect the agricultural sector from import surges are also very weak. Their use is constrained by onerous conditions and they may only be applied for a limited period of time.149 The European Commision, however, claims that EU exports no longer pose a threat for agricultural sectors in the South, since cereals support has been cut since the first major CAP reforms in 1991, implying that the distortion of world market prices would have largely disappeared. According to Commission figures, the intervention price for bread wheat, for instance, declined by 75 percent from 1991 to 2009. The Commission asserts: “EU prices are increasingly driven by world market prices rather than intervention prices. Intervention has been reduced or abolished in all sectors.” But although the level of CAP support has indeed decreased over the 150 years, EU farmers and exporters still benefit from market instruments (intervention buying and export subsidies), as well as direct payments enabling exports of European wheat products at dumping prices. To demonstrate the still enormous magnitude of support, agricultural analyst Jacques Berthelot calculated the “dumping rate” of all EU cereals and cereal prod- ucts exported in 2006, measured as the ratio of total subsidies to the export value. In that year, the EU exported 27 million tonnes of raw and processed cereals as well as cereal-derived products (including wheat flour, malt, feedstuffs, starch, breads, etc.), equaling 10 percent of its total cereal production. The cereal exports had a value of €3.58 billion and received subsidies to the tune of €1.96 billion, cor- responding to a dumping rate of 54.7 percent. Only a minor proportion of total sub- sidies provided to exported cereals were made up of export subsidies, about €206 million, with the bulk being direct payments amounting to €1.64 billion. Given the      151 tremendous CAP support still awarded to cereal exporters, it is quite bizarre to claim that market distortions would have disappeared and that developing countries could therefore open up their markets to EU grain traders without any risks. 4.3 Opening the flood gates: EU milk exports The vast cereal subsidies provided by the EU benefit not only cereal exporters but also the EU livestock industry, as more than half of EU cereal production 149 �������������������������������������������������������������������������������������������� Oxfam, ‘Oxfam International Concerns with Initialled ‘Interim EPA’ texts’, 7 December 2007. 150 ���������������������� European Commission, The EU’s Common Agricultural Policy (CAP): on the move in a changing world – How the EU’s agriculture and development policies fit together, Luxembourg 2010, p. 12. 151 ������������������������������������������������������������������������������������������������� Jacques Berthelot, ‘The dumping rate of the EU-27 exported cereals in 2006’, Solidarité, 17 May 2010. 53

Globalising Hunger is used to feed farm animals. The livestock industry constitutes an important part of European agribusiness, with meat, milk, eggs and other animal products representing 40 percent of the total value of EU farm production in 2009.152 Meat and dairy products combined account for almost a quarter of all EU food exports.153 The EU is the world’s second largest dairy and pork exporter and the third largest poultry exporter – large parts of which end up on developing countries’ markets.154 Apart from cereal subsidies, the livestock industry also benefitted from direct support measures like intervention prices, direct payments and export refunds, albeit to different extents depending on the products in question. Whereas dairy and beef production belonged to those sectors that have been heavily supported by the whole range of CAP instruments, pork and poultry production received somewhat less support. There was no direct price support linked to poultry or pork, and intervention storage was only seldom used. However, both sectors also benefitted from subsidised cereal inputs, export refunds and investment aids. Sizeable amounts of investment aids under CAP’s rural development pillar, for instance, went into the construction or modernisation of large-scale factory farms.155 Agricultural analyst Jaques Berthelot measured the amount of CAP subsidies awarded to exported animal products such as bovine, pig and poultry meat as well as dairy products. Berthelot’s measurement includes market intervention, direct payments, export refunds and subsidised feedstuff. In the period 2006-2008, the EU exported, on average, animals products worth €12.8 billion per year which received total subsidies of €4.3 billion (see table 6) The dumping rate of all animal products exported, i.e., the ratio of subsidies to exports, is therefore about 33.9 percent. In other words, EU animal products sold on the world market received, on average, subsidies equaling a third of their export value. Of the total support, export refunds played only a minor role since the bulk of support is made up of domestic subsidies (approximately 86 percent). For bovine meat exports, the dumping 152 FEFAC, ‘Feed & Food – Statistical Yearbook 2009’, Fédération Européenne des Fabricants d’Aliments Composée, Brussels. 153 �������������������������������������������������������������������������������������������������� CIAA, ‘Data & trends of the European Food and Drink Industry 2009’, Confédération des industries agro-alimentaire de l’UE, Brussels, March 2010. 154 International Dairy Federation, ‘The World Dairy Situation 2010’, Bulletin of the International Dairy Federation 446/2010, Brussel 2010, p. 27. USDA, ‘Livestock and Poultry: World Markets and Trade’, United States Department of Agriculture, October 2010. 155 ������������������������������������������������������������������������������������������������������ Friends of the Earth, ‘Feeding the beast – How public money is propping up factory farms’, Briefing, April 2009. 54

Food Security and the EU’s Common Agricultural Policy (CAP) rate is particularly high reaching more than 58 percent. Berthelot’s figures also demonstrate the large EU oversupply of animal products. Over 10 percent of the European production of poultry meat, 15 percent of dairy products and 18 percent of pig meat end up on the world market.156 Table 6       EU-15 exports of animal products, average 2006-2008, in € million Production       Exports     Export Subsidies Dumping rate, share, %                             % Dairy Products               40,610        6,249       15.39       2,004            32.07 Bovine Meat                  25,699           591       2.30          346           58.55 Pig Meat                     25,735        4,709       18.30        1,430           30.37 Poultry Meat                 12,279         1,291      10.51          571           44.23 Total/Average             104,323         12,840       12.31       4,351           33.89 Source: Jacques Berthelot, Solidarité 2011 In value terms, dairy products like milk, butter, cheese, cream or yoghurts account for the largest share of European animal products sold on the world market. Dairy exports are heavily subsidised and have a profound impact on many developing countries’ milk sectors. The CAP’s dairy regime consists of market intervention, direct payments and export subsidies as well as a system of national milk quotas aimed at limiting dairy output, supporting producer prices and keeping budgetary expenses in check. However, a very contested issue of the last CAP reform, the 2008 Health Check, referred to the phasing out of the milk quotas envisaged for April 2015. Introduced in 1984, the quota system allotted a maximum production quantity to each EU member state. If national dairy production exceeded this quota, a fine – the so-called “super-levy” – had to be paid. The objective of the quota was to limit the milk oversupply on the EU market that put heavy downward pressure on the price milk farmers could receive for their product. Compensating, at least partially, the depressed farm gate prices of milk producers meant that additional costs 156 ���������������������������������������������������������������������������������������� Jaques Berthelot, ‘The EU-15 dumping of animal products on average from 2006 to 2008’, Solidarité, 15 February 2011. 55

Globalising Hunger had to be borne by the CAP budget. The quota system succeeded in lowering the EU’s expenses for dairy market support and kept at least nominal producer prices more or less stable. However, taking account of general inflation, producer prices actually fell between 1984 and the price spike of 2007/08, thereby forcing many dairy farmers out of the market. In a 2009 report, the European Court of Auditors underlined the prolonged drop of milk farmers’ incomes: “Following the introduction of quotas, the fact that nominal producer prices were maintained masked the reality that, in real terms, prices suffered a distinct erosion. Over a long period, milk producers never actually benefited in real terms from stable prices.”157 In order to further foster structural adjustment among dairy farmers and strengthen the international competitiveness of the dairy industry, in March 2008, the European Council decided to increase milk quotas by 2 percent – a decision that provoked angry protests of milk farmers fearing oversupply and price depression. Farmers’ groups organised milk strikes in several EU countries such as Germany, Belgium, Italy, France and the Czech Republic. Yet, in their Health Check decision of November 2008, agriculture ministers maintained this policy despite all protests and agreed on – what they called – a “soft landing” for dairy farmers by increasing the milk quotas by 1 percent over five consecutive years until the expiry of the quota system in 2015.158 The decision to further increase EU milk supply exacerbated the commodity price decline caused by the global financial crisis when worldwide consumer demand collapsed. Beginning in the second half of 2008, EU producer prices for milk and milk products underwent a significant decrease due to the oversupply that continued in 2009 and provoked further protests. Then Agriculture Commissioner Mariann Fischer Boel acknowledged the plight of the dairy farmers but claimed that only the slump in consumer demand was to blame, not the politically enforced oversupply. She told protesting farmers that “the reason for the low prices is that consumers are buying less milk products than they did before, because of the fact that they are hit as well by the economic crisis.”        159 Consequently, the Commission ignored all proposals by farmers’ groups like the European Milk Board (EMB) to regulate milk supply. 157 European Court of Auditors, Have the Management Instruments Applied to the Market in Milk and Milk Products Achieved Their Main Objectives?, Special Report No. 14, 2009. 158 ������������������������������������������������������������������������������������������� European Commission, ‘Evolution of the market situation and the consequent conditions for smoothly phasing out the milk quota system’, Report from the European Commission to the European Parliament and the Council, COM(2010) 727 final, Brussels, 8 December 2010. 159 Jennifer Rankin, ‘EU to pay dairy farmers early’, European Voice, 26 May 2009. 56

Food Security and the EU’s Common Agricultural Policy (CAP) Box 3 Preventing milk lakes European Milk Board demands flexible adjustment of volumes Founded in 2006, the European Milk Board (EMB) tries to organise milk farmers to form a united front against the power of the highly concentrated dairy industry and food retailers who are pushing down farm-gate prices to secure cheap milk supplies. EMB has members in 14 European countries representing about 100,000 milk producers. In contrast to traditional farmers federations supporting the interests of export-oriented agribusiness like COPA-COGECA, EMB pleads for reorienting milk production to primarily satisfy domestic demand and to avoid surpluses and cheap exports on the world market. To this end, EMB proposes the creation of a European monitoring body comprised of producers, processors, policy-makers and consumers charged with adjusting the milk volumes produced and with setting a price band allowing a cost-covering remuneration for milk farmers. “Volume control is indispensable”, according to EMB. The monitoring body would be “an effective mechanism to prevent surpluses” enabling farmers “to earn a decent living from their labour”.160 Instead of curbing milk supply, the Commission followed the interests of the dairy industry and food traders. Business representatives like the European Dairy Association EDA lobbied for the reintroduction of export refunds, which had been set at zero in June 2007. In January 2009, the Commission bowed to industry pressure and temporarily reintroduced export subsidies for butter, cheese, whole and skim milk powder, thereby supporting EU dairy traders seeking new export markets, given the depressed EU demand.            161 Although export refunds for these products were again cut to zero by November 2009, this decision underlined the firm commitment of EU policy-makers to support the domestic dairy industry, irrespective of the impact on third country producers who might be pushed off their markets by subsidised EU exports. Since the temporary reintroduction of export refunds, EU dairy exports increased considerably, exacerbating the plight of farmers in those countries already suffering 160 European Milk Board, ‘The European Dairy Market – Supply Management with the Aid of a Monitor- ing Body’, 21 January 2011. http://www.europeanmilkboard.org/emb.html 161 ����������������������������������������������������������� Katy Humphries, ‘����������������������������������������� ������������������������������������������ Tensions mount over EU dairy subsidies’, just-food.com, 19 January 2009. 57

Globalising Hunger from EU dumping for a long time. In 2010, e.g., the EU-27 increased its skim milk powder exports by more than 63 percent compared to 2009 , a growth trend     162 which continued in the first quarter of 2011.163 Swamping African markets Since milk is a perishable product, only 7 percent of world dairy production is traded internationally. The main products traded on the global market include dry milk powders, cheese and butter, with milk powders having the largest share. The EU is the second largest dairy exporter behind New Zealand, covering 24 percent of world dairy exports.164 Of these, more than two thirds flow to developing countries and a quarter to Africa.165 Africa is the main destination for European exporters of milk powder, absorbing half of all extra-EU sales of skim milk powder, with Algeria, Nigeria and Egypt as the largest markets.166 Sub-Sahara Africa’s share of EU milk powder exports rose steadily in the last decade, outstripping all other developing regions as the main destination.        167 The subsidised dairy exports affect developing country producers in three ways: 1) by lowering the world market price and producers’ incomes, 2) by kicking developing country exporters out of third country markets, and 3) by disrupting local markets in the South. EU dairy exports to African countries have a particularly severe impact as they impede the development of local dairy industries which could be an important means for improving the livelihoods of millions of poor livestock farmers. The number of people potentially affected by European milk dumping is huge. It is estimated that some 12-14 percent of the world population, or 750 to 900 million people, live in dairy farming households – the large majority of whom are impoverished small farmers. Given the rapidly growing milk demand in the 162 ����������������������������������������������������������������������������������������������� AMA, ‘Marktbericht –Milch und Milchprodukte’, AgrarMarkt Austria, Dezember 2010, 12. Ausgabe, 25 February 2011. 163 ������������������������������������������������������������������������������������������������� AMA, ‘Marktbericht –Milch und Milchprodukte’, AgrarMarkt Austria, März 2011, 3. Ausgabe, ���������������� 24 May 2011. 164 International Dairy Federation, ‘The World Dairy Situation 2010’, Bulletin of the International Dairy Federation 446/2010, Brussel 2010, p. 27. 165 ���������������������������������������������������������������� Oxfam Deutschland, ‘Hintergrundinfos EU-Milch-Politik’, 2/2009. 166 ������������������������������������������������������������������������������������������������������� ������������������������������������������������������������������������������������������������������ International Dairy Federation, ‘The World Dairy Situation 2010’, Bulletin of the International Dairy Federation 446/2010, Brussel 2010, p. 32. 167 ������������������������������������������������������������������������������������������� Aline Mosnier, ‘Réformes de la PAC et présence européenne sur les marchés des PED’, CERDI- CNRS, June 2008. 58

Food Security and the EU’s Common Agricultural Policy (CAP) developing world – with annual growth rates averaging 3.5 to 4 percent between 1995 and 2005 –, the dairy sector could be a powerful tool for poverty reduction if this demand would be met by sourcing fresh milk from local small farmers.168 A recent FAO report underlines that “small-scale milk production not only improves the food security of milk producing households but also helps to create numerous employment opportunities throughout the entire dairy chain, i.e. for small-scale rural processors and intermediaries.”169 If the growing global milk demand of 15 million tonnes per year would be met by smallholders, 3 million jobs could be created in primary production alone, according to this report. Among the many impediments for small farmers’ milk production (under- investment, lacking government support), FAO stresses first and foremost the “massive policy interventions (price support, milk quotas, direct payments, investment support programmes, export subsidies, etc.) in developed countries” that are creating a competitive advantage for rich countries’ milk producers. “This penalises dairy farmers in developing countries, where governments cannot afford to provide such policy support.” FAO also warns that “trade liberalisation increasingly exposes smallholder dairy farmers to competition from large-scale corporate dairy enterprises”.170 All these threats materialised in Africa, where, beginning in the 1980s, structural adjustment programmes and trade liberalisation led to growing dairy imports, 70 percent of which originating in the European Union.171 These imports include milk powders, condensed milk, butter, yoghurts and cheeses, with a strong prevalence of subsidised milk powders. Many dairy and food processors in Africa use cheap imported milk powder instead of raw milk of local farmers to recombine it into liquid milk for the production of milk, yogurts, butter, cheese and ice cream. In addition, milk powder also serves as a substitute for local fresh milk at the final consumer level. This substitution is enhanced by the easy use and long shelf-life of powdered milk (up to six months for whole milk powder and three years for skim milk powder). Brands of the top European dairy processors (see table 7) dominate African markets. European products sold in African countries include milk powder produced by Nestlé (brand name “Nido”) and FrieslandCampina (brand name 168 �������������������������������������������������������������������������������������������������� FAO, Status of and Prospects for Smallholder Milk Production – A Global Perspective, by T. Hemme and J. Otte, Rome 2010, p. 160-162. 169 ���������������� Ibid., p. 160. 170 ��������������� Ibid., p. 161. 171 ������������������������������������ CTA, Agritrade News, Dairy sector, http://agritrade.cta.int/en/content/view/full/265/offset/60 59

Globalising Hunger “Peak”), condensed and evaporated milk by FrieslandCampina (“Bonnet Rouge”, “Three Crowns”), butter and cheese by Lactalis (“Bridel”, “Président”) and Parmalat (“Parmalat”, “Bonnita”) as well as yoghurts by Groupe Danone (“Danone”) and Sodiaal (“Yoplait”).172 Table 7           Top European Dairy Processors Company                                  Country                Turnover, in billion € Nestlé S.A.                              Switzerland            16.9 Groupe Danone                            France                 9.2 Groupe Lactalis                          France                 9.2 Royal FrieslandCampina N.V.              Netherlands            9.1 Arla Foods amba                          Denmark                6.4 Parmalat Finanziaria S.p.A.              Italy                  3.6 Bongrain S.A.                            France                 3.4 Groupe Sodiaal                           France                 2.8 Dairy Farmers of America Inc.            USA                    2.3 Nordmilch AG                             Germany                2.3 Theo Müller GmbH & Co. KG.               Germany                2.2 Humana Milchunion e.G.                   Germany                2.2 Tine BA                                  Norway                 2.0 Groupe Bel                               France                 2.0 Glanbia plc                              Ireland                1.8 Source: Baking + Biscuit, Issue 4, 2009, p. 32 The sales of European dairy products in African countries are also closely linked to the expansion of supermarkets advancing not only in urban centres but also in rural areas. In Cameroon, e.g., supermarkets opening up in rural areas and offering tins of European milk powder and condensed milk have effectively undermined attempts to establish a market for locally produced fresh 172 ��������������������������������������������������������������������������������������������������� ACDIC (Association citoyenne de défense des intérêts collectifs), ‘Filière laitière au Cameroun’, Collectif Alimenterre (CFSI, SOS Faim), June 2006. Maurice Oudet, ‘La révolution blanche est-elle possible au Burkina Faso, et plus largement en Afrique de l’Ouest?’, Misereor, July 2005, Aachen. 60