EU’s Green Deal and its Impact on Agri Food Trade

Published 2021년 8월 3일

With the Green Deal implied in the EU, special limelight is being given to the Farm to Fork strategies and how they can modify the food system into a “fair, healthy and environmentally-friendly” affair. Under the deal, Agri food-producing countries would have to follow strict regulations and norms to meet the requirements laid down in the green deal to export their produce to the EU. The policy also highlights the need to scale back on imports and focus on domestically grown produce to reduce transport emissions. While all countries have the right to determine the frameworks and regulations for their food and agricultural production, it is expected that imposing similar standards in international trade can lead to severe trade distortions.

On 14th July 2021, the European Commission adopted the “Green Deal” with an objective to improve the well-being and health of future generations. Currently, the European agriculture and food system follow the norms and regulations laid down by the Common Agriculture Policy”. The green deal is likely to modify the current system by including the provision of sustainability in domestic production as well as the import of agricultural products. The Farm to Fork and Biodiversity Strategies included in the deal will impose restrictions on EU’s agriculture through targeted reductions in the use of land, fertilizers, antimicrobials, and pesticides.

The Farm to Fork strategy outlines how the EU wants to modify its food system to make it “fair, healthy and environmentally-friendly.” The process incorporates primary production (farming), the supply (value) chain, and consumption with neutral or positive environmental impact. It is anticipated that the agriculture and related imports of the EU will be impacted due to the imposition of the deal. The producing countries would have to follow strict regulations and norms to meet the requirements laid down in the green deal to export their produce to the EU. Furthermore, the policy itself highlights the need to scale back on imports and focus on domestically grown produce to reduce transport emissions. The main agenda of the green deal is to reduce the chemical pesticides by 50%, a 25% conversion to organically produced food, a reduction in plastic packaging, and a greater focus on sourcing food locally.

In 2020, the EU imported agri-foods worth USD 11,397 million from the US which is also the third-largest and fastest-growing origin for agri-imports. Furthermore, the US is also the largest supplier of plant products to the EU and has a 26% share in tropical fruit, nuts, and spices imports. The figure below shows the composition of EU Agri-Food imports from the US during 2020. According to sources, the additional to comply with the production standards will increase the cost of production for the US which they are not prepared to take on. This would eventually lead to falling in imports from the US creating major distortion and changes in the global trade of agricultural-related products.

Source: European Commission

While all countries have the right to determine the frameworks and regulations for their food and agricultural production but imposing similar standards in international trade can lead to severe trade distortions. EU imports a large share of agri-foods from third-world countries that are likely to struggle to comply with the new EU standards. These countries are expected to turn away from the EU and export to other countries that have less stringent policies.