As director of the National Inter-professional Board of Fruit, Vegetables, Wine and Horticulture, Philippe de Guénin is fully committed to finding answers concerning the crisis which is sweeping through the agricultural world.
He is particularly interested in the field of regulations, and recently participated in a colloquium organised jointly by the DGCCRF (Department of Competition, Consumption and Fraud Repression) and Sciences Po (a leading political sciences university in France), entitled “Which regulations for the agricultural markets”. He has developed a highly original analysis which, in the opinion of WOAgri, will be highly beneficial in the future.
We would like to thank Philippe de Guénin for being kind enough to reply to our questions.
What are the origins of the current crisis in the fruit, vegetables and horticulture sectors ?
> There is no structural “crisis” but rather “crises” which have always existed, notably in fruits and vegetables, due to the very nature of these markets: perishable products, inelastic supply, and the wide dispersal of producers. The fruit and vegetables market is characterized by an imbalance between supply and demand :
.-either supply is overabundant in cases of fairy stable demand, following, for example, an exceptionally abundant harvest and/or a strong supply of products coming from abroad ;
-or supply is considerably inferior to demand, following poor weather conditions which have considerably reduced production.
-or demand collapses because of the weather (cold, rain) or media driven sanitary problems.
>Considering that farmers will never be able to avoid the vicissitudes of the climate or health, it is vital to find a solution when confronted with situations when there is an overabundance of supply resulting in a fall in prices and revenue which is insufficient for farmers to live on.
What potential solutions are there for these crises ?
>One possibility would be to allow the 300 producer organisations (PO) who produce roughly 50% of the fruit and vegetable production in France, as well as the independent producers who produce the rest, to work together when faced with a crisis.
The object of this combined approach would be to evaluate the volumes which the markets would be capable of absorbing and to withdraw, in the case of overabundance, a part of the production from the market in order to avoid prices collapsing.
If we look at the current crisis situation, it would be in the interest of the producers to sacrifice a part of their production (by withdrawing it from the market) rather than selling off a large part of it at a loss
> This approach would clearly constitute an infringement of current legal agreements, unless legal provisions were to change.
It is important, in these circumstances, to remember that the agricultural sector is both specific and strategic, and should, because of this state of affairs, benefit from tailor-made rules, different to those which apply, for example, to the car industry.
This proposal at first sight is diametrically opposed to the philosophy of those who believe that we ‘should let the market eliminate the least competitive players in the interests of the general community”.
In reality, this theory does not apply to agricultural markets, where sales are not dependent merely upon competitiveness. Other factors come into play, such as climate conditions that may randomly eliminate competitive producers. This should incite people to think seriously about creating more flexible rules with regard to players who decide to work together.
Besides, discussions are under way with the French ministries concerned, in the knowledge that such a measure will require statutory changes at the European level. .
What is your opinion concerning the current WTO negotiations ?
> Current WTO negotiations unfortunately conceal a key question, non-tariff barriers
While we can appreciate the objective of freeing up commercial exchanges, it is not acceptable only to be interested in just one aspect of customs barriers, “tariffs” which are highly visible, and to ignore those that are in the shadows, the “non-tariff barriers”.
Concerning our sector, the consequences are different according to the products. While it is not possible to import lettuces from New Zealand because of their “perishability”, apples are the type of product which are greatly affected by the liberalization of exchanges and non-tariff barriers.
Therefore, if we continue with the example of apples, a hundred odd countries refuse to import them from us (for example: The United States, China, South Korea, Japan, etc…) under the pretext that we do not respect certain conditions, in particular, extremely restrictive sanitary conditions (non-tariff barriers). Another example is Brazilian chicken which cannot enter the American market and is therefore being flooded onto European markets.
At the same time, Europe is one of the geographical areas which has the least non-tariff barriers, and consequently remains, contrary to public opinion, very open to imports. Europe is probably the leading exporter of agricultural products in the world, whilst at the same time, it is also the leading importer in the world !
>One of the most negative consequences of the liberalisation of exchanges is the importing, not of products, but of “prices”. Paradoxically, even if a product may not actually be imported, the threat of purchasers resorting to its being imported is sufficient to impose a drop in prices for French producers.
In the 19th Century, the United Kingdom made the choice of importing its food products from the Commonwealth. This country, in compliance with the Ricardo theory, sacrificed its endogenous agricultural production in order to specialise in other sectors with a higher added value. This theory is also largely shared by the United States which nevertheless has the particularity of strongly protecting its agricultural sector.
There is no doubt that the strength of Europe lies in politics and defence, but it also lies in an agricultural sector with the capacity to meet the food needs of its population in the case of a geo-strategic or sanitary crisis.