Cutting Export subsidies: an unfulfilled promise?

The deadline imposed by the EU to African countries for signing interim Economic Partnership Agreements (iEPAs) has intensified the negotiations in recent weeks[1]. However, the main conditions that African countries are demanding remain unresolved. Among the difficulties in reaching an agreement are the export subsidies offered by the EU to European farmers and the income support to European farmers established by the Common Agricultural Policy (CAP)[2]. This economic support boosts EU exports of surpluses at prices below the cost of production, condemning farmers in African countries to poverty because they cannot compete on price.

 

Recently, the EU proposed putting a stop to export refunds on all the EU agricultural goods imported by African countries, but this offer was conditional to signing the iEPAs[3]. However, this is not a new concession because the EU had already committed itself to cutting export subsidies in the last CAP reform in 2013[4]. With this kind of concession, the EU intends to put pressure on African countries to accept the iEPAs. Moreover, we could ask to what extent this measure is enough to curb distortions in the market affecting African countries since producers in the EU receive other economic supports like incentives for agricultural productivity and direct payments to improve their competitiveness.

 

The CAP reform of 2013 resulted in the EU promising to cut the export subsidies on European agricultural products while creating direct payments to European farmers under other concepts like environment protection or rural development innovation. These new economic supports are not intended to directly subsidize exports but will have the same effect of distorting the market: European farmers will increase their incomes and reduce their market risk and thus have an unfair competitive advantage over developing countries’ farmers. By helping to cover fixed costs, they allow farmers to produce at lower prices compared to non-subsidised competitors[5].

 

With the EU announcing the suppression of export subsidies but at the same time keeping the economic support to their producers through direct measures, African countries signing the iEPA will be the only ones actually making a concession because they will lose the chance of applying tariffs to products coming from the EU.  

 

During the EPA negotiations, the governments of African countries have called for the elimination of EU subsidies to their producers for any product exported to African countries precisely because all economic support to European Farmers distorts trade between the two continents and so hinders a solid economic partnership.

 

African governments and civil society consider that cutting subsidies only for some agricultural goods and products is not enough. Similarly, African countries complain that there have been cases in which some products, even without being subsidized, have ruined certain sectors of the African economy, because the large capacity of some European farmers means they have lower production costs than in Africa[6]. As a result, economic efforts made by smallholders are destroyed.

 

AEFJN, together with civil society, has advocated for an unconditional removal of such subsidies to allow the economic development of African economies. It is also advocating for coherence between EU agricultural and development policies. The EU position, regarding the iEPA, remains unchanged in spite of the current African agribusiness situation and the level of development of their economies. The EU proposal to replace the current system of preferences by which African countries can export duty-free, quota-free to the EU, by agreements with reciprocal preferences as part of comprehensive EPAs with different regional African countries would be a threat for the African agricultural sector.

 

The suppression of export subsidies for the EU has to be for all products and cannot be replaced by direct income support. In any case, it cannot be a bargaining chip to force the signature of iEPAs by African countries. At the same time, potential agreements would have to protect agriculture in Africa as it is their main source of food, income and livelihood. Once more, the EU forgets that the mandate it receives from European citizens is to serve the people and not the interests of big companies and producers[7]. If the EU wants to increase its production and grow economically, it cannot be allowed to take advantage of African people.

 

Jose Luis Gutierrez Aranda

AEFJN Policy Officer