On August 7, Moscow imposed an embargo on food products from Europe, the United States, Norway, Australia and Canada, in response to the sanctions applied against Russia amid the turmoil in Ukraine. Issued for a period of one year, the ban concerns beef, pork, poultry, fish, cheese, milk and dairy products, as well as vegetables and fruit.
Eurostat indicates that Russia absorbs 10 percent of the EU’s agricultural and food exports. The products targeted by Moscow account for a total of €5 billion, while EU’s agricultural and food exports to Russia reach some €12 billion every year. As far as French agriculture is concerned, exports to the Russian market reached €737 million in 2012.
While opinion is divided on the long-term consequences of the embargo on European agricultural products, the EU potential output is now weakened, raising fears of a price collapse due to market over-supply. To deal with the situation, Brussels immediately stepped forward and proposed emergency measures for fruit, vegetables and dairy products (such as warehousing subsidies, marketing campaign for European products and search for new market outlets), and released funds of up to €125 million for perishable fruit and vegetables, and up to €10 to €20 million for milk. Yet, it seems that the €400 million crisis emergency reserves included in the current CAP will prove to be inadequate. Referring to the WTO is another option considered, but this could prove to be lengthy and sensitive. Thus, while the embargo tests Europe in a crisis situation, in no way does it repress the general feeling that European agriculture is an adjustment variable in case of geopolitical tension.
Ultimately, it is about going beyond a short-term vision: The embargo’s economic consequences are real, but what does it mean in terms of reshuffling the cards at the European and international levels? This politically driven embargo initially demonstrated the need for market intervention tools to avoid the destabilizing effects of unilateral decisions. “The consequences of the Russian embargo demand a market regulation policy,” said Xavier Beulin, and the CAP must include a geostrategic scope in its intervention principles.
More globally, it is about admitting a shortage of political will within international arenas, as shown by the WTO failure to be recognized by all as a reliable institution. The BRICS’ growing momentum and bilateralism in issues of food security is in fact a proof.
In this unstable and prone-to-failure context, it is now more urgent than ever to implement a cooperation entity in the framework of a World Organization for Agriculture based in on an independent rating agency to report on economic, trade and geopolitical realities.