Something to beef about?

Very bumpy playing fields and audacious dumping should, under the avowed intentions of the WTO, belong to the past. For livestock producers in developing countries, particularly some within the ACP group, the history of trade with the EU has left bruises that have yet to heal. Will reform to the EU's Common Agricultural Policy, and the Joint Declaration on Beef and Veal signed in Cotonou, level off the bumps and restore confidence?

credit: FAO

The developing world's most important trading partner in agricultural goods is the EU. In the beef sector, the EU is the world's second largest exporter after Australia. What the EU does, in terms of protecting its own, has a major impact, directly or indirectly, on producers elsewhere. Who can forget, during the '80s, those dumped shipments of EU beef to West Africa that cut the grass from under the feet of local producers. Prices fell to half. People who once ate beef produced in Burkina Faso, Mali and Niger turned to cheaper EU beef. The effect on the cattle raisers and traders in the region was devastating. To be fair, after a decade of dumping, the EU recognized what was happening, not least to the local livestock projects that were, at the same time, being funded by the European Development Fund. In one year - 1994 - EU beef imports into West Africa fell by 60 percent. Were local producers able, immediately, to make up the shortfall? Of course not, but at least the 'released' market justified a return to investing in their own herds.

Down in the dumps

What happened next? The EU turned its attention to another market, that of South Africa. Conveniently, in September 1993, the South African government had lifted restrictions on the quantity of beef that could be imported in order to comply with its obligations under the 1993 GATT Uruguay Round Agreement on Agriculture. Note the year in relation to the trade with West Africa. Imports of EU beef into South Africa rose from 6,600 tonnes to almost 46,000 tonnes within the next five years and could be bought on the local market for less than a third of the cost of production in Europe. This time it was Namibia that caught the cold. The Namibian beef industry had been developed on the basis of supplying the South African market with cheap cuts of low quality beef for processing, exactly the same quality as that being dumped by the EU. In 1997, history was repeated and EU imports fell dramatically.

So why do the EU's actions manipulate overseas markets, and the agricultural producers that are dependent upon them, to such a degree? For years, thanks to the generous support of the Common Agricultural Policy, EU countries have produced more beef than they can eat or export under normal commercial terms. In order to sell competitively on the world market, EU producers must be heavily subsidized if they are to recoup their own production costs and survive commercially. These subsidies take a variety of forms but it is the system of export refunds that has most directly affected markets in importing countries. Export refunds are paid by the EU to its own producers to the tune of 5 billion euros per year. In effect they allow specific products to be sold to certain destinations at a competitive price despite the higher costs of production. The reason why the level of EU beef exports to West Africa and South Africa fell so suddenly is that export refunds to those regions were reduced, at a stroke, by 28% and 70% respectively. It should be admitted that in both cases, devaluation of the local currency also had an effect, making imports more expensive and therefore less attractive.

Prime cuts

Reform is in hand. The intervention price for beef has been lowered and EU farmers are compensated by 'non-trade distorting', direct aid payments. In July this year, the intervention price is to be replaced by a "basic price" below which the EU will finance storage of beef in order to support the market, in effect lowering still further the intervention price. The WTO places limits on the value of export refunds and on the volume of beef exports that can be so supported. Dumping is not permitted and may be challenged through the WTO. The gap between EU and world beef prices is narrowing, thanks in part to lower prices for cereal feeds. So is this good news all round? Not necessarily. Closer world and EU prices mean that the value of the preferential access enjoyed by some ACP countries is effectively reduced.

Depressed by disease

The EU market for beef is depressed. Many consumers had turned to pork and poultry before the BSE crisis but they were quickly, and permanently, joined by many more. Beef stocks have been building up while, at the same time, foot and mouth disease has closed markets. The EU wants production to be more in balance with demand but there is a very long way to go. In the meantime, new legislation on traceability for all imports of beef into the EU means that ACP exporters will be incurring higher production costs while at the same time having to accept lower prices. Does this have a familiar ring? Is this something to beef about?

Back to Menu