Tying up the whole food supply chain to help farmers – where is the beef?

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Legislating against unfair trading practices in the agri-food sector would ultimately push up prices and cause farmers and consumers to lose out, writes Christian Verschueren.

Christian Verschueren is director-general of EuroCommerce, the European association of retailers and wholesalers.

After more than a decade of allegations about unfair trading practices hitting farmers’ incomes, there is still no proof to back them. The recent announcement by the European Commission that it is “moving to the next step of drafting a legislative proposal” to tackle such practices is therefore incompatible with evidence-based policy making.

The debate has long been fed by the misleading argument that retailers are the main source of farmers’ problems and that the solution lies in EU legislation. But this is based solely on assertion, and distracts from where policy could really help farmers flourish in the future. If the Commission cannot demonstrate that unfair trading practices pose a real problem for farmers, there is a strong likelihood that any intervention achieves nothing positive.

Since retailers deal direct with farmers in only a small minority of contracts, such a purely political gesture risks doing nothing for them. The practices identified as “unfair” do not impact on farmers, but are principally part of negotiations with large brand manufacturers. Instead, EU legislation attacking such issues risks benefiting already profitable manufacturers, breaking down commercial relationships and costs which will almost certainly be transferred to consumers in the form of higher prices.

The crises which farmers have suffered in recent years have been the result of overproduction against the context of fluctuating global demand. EU legislation on unfair trade practices can do nothing to rectify this problem. Indeed, farmers in EU countries with strong producer organisations and advanced production methods, such as in the Nordics, actively oppose the idea of legislation on unfair trading practices. This shows that the way to help farmers is to strengthen their market position by better organisation and encouraging entrepreneurship, rather than introducing legislation.

Over 80% of retailers’ contracts for foods are for products supplied nationally. Even where a product is sourced cross-border, the contract will always stipulate which national jurisdiction applies. National laws differ considerably, reflecting diverse commercial traditions and contract laws, but they all seek to achieve the same outcome and have provisions to protect parties against any breach of contract conditions. The single market argument for EU intervention is therefore weak.

Retailers are not, as often claimed, at loggerheads with farmers. Retailers need a diverse agriculture sector in Europe that can produce a reliable and sustainable supply of food products of the right quality, in the right quantities and that consumers want to buy. Retailers therefore need European farmers to be able to compete successfully in an open market economy and to produce the diversity of food that is Europe’s unique strength.

Those pressing for EU legislation need to show where the beef is. We are concerned that this lobby is firing its guns at the wrong target, ultimately punishing consumers and doing a major disservice to the long-term survival of Europe’s hard-working farmers.