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Commission outlines European
response to mitigate effects of rising global food prices
The European Commission today adopted a Communication setting out
potential policy responses to mitigate the effects of rising global food prices.
The document will be discussed at the European Council on 19-20 June. The
Communication analyses structural and cyclical factors and proposes a
three-pronged policy response, including short-term measures in the context of
the Health Check of the Common Agricultural Policy (see
IP/08/762) and in the monitoring of the retail sector; initiatives to
enhance agricultural supply and ensure food security including the promotion of
sustainable future generations of biofuels; and initiatives to contribute to the
global effort to tackle the effects of price rises on poor populations.
Commission President José Manuel Barroso stated: "The European Union has reacted
rapidly to the sudden surge in food prices. We are dealing with a problem that
has many root causes and many consequences. So we need to act on several fronts
at the same time to address them. The possible policy responses we put on the
table today complement the measures we have already taken. The Commission calls
on Member States to give a united European response to this global challenge. We
will coordinate our response with our international partners within the UN and
the G8".
Why have food prices
risen?
The Communication examines the reasons behind the
recent surge in food prices, both within the EU and internationally. The
increase followed a three-decade long trend of declining agricultural prices.
Recent indications show a decline from the peak levels of early 2008 for most
commodities. Among structural drivers of higher food prices has been a steady
rise in demand for both staple and higher value-added foods, particularly in
large emerging economies and a general growth in world population. Rising energy
costs are having a marked effect on food prices, particularly by increasing the
cost of inputs like nitrogen fertilisers, for which the cost has risen 350
percent since 1999, and through increased transport costs. The growth in crop
yields has slowed down and new outlets for agricultural products have emerged.
Temporary contributing factors include poor harvests in a number of regions of
the world, a historically low level of stocks, the depreciation of the US
dollar, and export restrictions in a number of traditional suppliers to the
world market. Speculation has amplified the underlying price volatility.
Effects in
the EU
Rising commodity prices have contributed to higher food
and headline inflation in the EU, though transmission to retail prices was
limited by the appreciation of the euro, the falling share of raw materials in
food production costs compared to energy and labour and the low share of food in
average household expenditure. But the impact has been felt much more starkly in
some Member States than others and has had a more serious effect on low income
families. While arable farmers have benefited, livestock producers have been hit
by higher feed prices.
Effects at global level
Developing countries that are net food importers are the
hardest hit, while net exporters have generally benefited. If higher prices have
not yet led to food shortage, they have translated into greater poverty,
malnutrition and increased vulnerability to further external shocks for the
world's poorest. However, in the medium to long-term, rising prices potentially
present new income-generating opportunities for farmers in the developing world
and could enhance farming's contribution to economic growth.
Future trend
Prices have begun to fall from recent peaks and the
Commission expects this to continue and markets to stabilise. However, the
Commission does not expect a return to the low prices of the past.
The policy response
The three-pronged policy response proposed by the
Commission today consists of the following measures:
- 1) short-term: the Health Check of the
Common Agricultural Policy (see
IP/08/762) and monitoring of the retail sector under the Single Market
Review in line with competition and internal market principles.
- 2) longer-term: initiatives to enhance
agricultural supply and ensure food security including the promotion of
sustainable criteria for biofuels and development of future generations of
biofuels in Europe and at international level, and strengthening agricultural
research and knowledge dissemination especially in developing countries.
- 3) Initiatives to contribute to the global
effort to tackle the effects of price rises on poor populations including: a
more coordinated international response to the food crisis, in particular in the
UN and G8 context; continued open trade policy offering preferential access to
the EU market to the world's poorest countries; swift response to immediate
short-term humanitarian needs; targeting development aid at longer-term projects
to revitalise developing country agriculture.
Generally, the Commission will continue to
actively monitor the situation and to adapt policies to take the new
circumstances into account.
Should the EU
drop its biofuels target due to rising food prices?
In 2007, the European Council fixed the target for
biofuels for transport, and in January 2008 the Commission made its proposals to
implement it. The target has never been to reach 10% biofuels at any price. It
is 10% biofuels under strict conditions. Those conditions include a workable and
robust sustainability scheme, and commercial viability for second generation
biofuels. This EU sustainability scheme is currently under discussion at the
Council and the European Parliament. It will be the first of its kind in the
world. It will need to ensure that production will not have damaging
side-effects and has to be robust and enforceable. With or without the Union's
10% target, there will be a further increase in the worldwide production of
biofuels. Europe can best make a contribution by doing everything possible to
show that a sustainability scheme can work and to ensure a rapid transition to
the new generation of biofuels. In the transport sector today, the only
alternative to non-sustainable fossil fuel is biofuel. The EU objective for
sustainable biofuels has a decisive role to play in enabling the EU to reduce
its CO2 emissions by 20 % by 2020.
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