Trade Commission Report Fails to Consider Latest E.U. Measures

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By Virginia Brown Keyder
Olive Oil Times Contributor | Istanbul

Trade Commission Report Fails to Consider Latest E.U. Measures | Olive Oil Times

The USITC report on Competition between U.S. and ‘Major Foreign Supplier Industries,’ notably the EU, provides a wealth of information, although for serious researchers it would have been more helpful if the vast majority of this information had not been sourced from telephone calls and emails with unnamed interlocutors. Similarly, it takes little note of either major legislative changes in the EU that will take full effect by the end of 2014, or the rise of what may well prove to be a major supplier to the world market, namely India, who, with the help of Israeli investment and technology and low labor costs is slated to put its oil on the market for the first time in the coming season.

As is often the case with government reports, one hand is paying no attention to what the other hand is doing. This Report needs to be read with the backdrop of the ongoing negotiations between the US and the EU, set to resume for a second session next week, towards a Transatlantic Trade and Investment Partnership.

Cries for government help after a wrong-footed and highly speculative investment-

Central to US goals in these negotiations are: widespread deregulation; institutionalization of corporate lawsuits against states that take legislative actions that have the possibility of reducing profits of foreign investors, and minimization of the effects of the EU system of protecting registered designations of origin (PDO’s).

Labyrinthine legislative proposals like those suggested in the Report (which some see as cries for government help after a wrong-footed and highly speculative investment) will only expose a hypocrisy that cannot but weaken the US position in those negotiations. In fact, a report on growth and jobs issued jointly by the EU and the US earlier this year talks specifically about reducing “redundant and burdensome testing and certification requirements.”

What the USITC Report does elucidate is the fundamental difference between California producers, who reportedly have borrowed large sums of money in order to render what is essentially gentlemen farming profitable by emitting plaintive cries for the iconic “level playing field,” and traditional European producers — by and large small landowners to whom bank loans are often unavailable, and who have often been producing for generations. Like many agricultural sectors across Europe, these farmers rely on EU funds to maintain their livelihood, support rural development, ensure food security and protect the land against erosion. These are not goals that the EU will, or can, abandon.

Notable for its absence in the Report are the extensive legislative measures that the EU has taken over the past three years to ensure the quality, purity and traceability of its olive oils. These measures will be enforced at the national level and their prime beneficiaries will be producers of high quality oil. Consumers will be made aware through prominent labeling that “Bottled in Italy” is no indication of Italian contents as all geographical sources must now be indicated. These measures have already enabled extra virgin producers in Greece and Spain — for the first time — and Italy (whose high-end producers suffered from the effects of low prices for blended oil) to market their oils directly to local and emerging markets instead of feeding surreptitiously into the mass-market Italian (and American) bottling industry.

Further, relying on the “Australian model” and its pleas for further testing and regulation, will not serve Californian producers well. For while the report indicates that imports have fallen with the rise of Australian buy local campaigns it fails to note that, according to 2013 USDA figures, the overall consumption growth rate in that country has been falling steadily since 2009 (when it jumped from zero in 2008 to 10 percent, after having a negative growth rate of 7 percent in 2007). Similarly, it has been reported that Australians are growing tired of expensive local “boutique” oils and are returning to supermarket brands. The “buy local” movement is not without controversy and food fads are real.

The report relies on the bromide that runs through much of what constitutes national discourse these days: the enemy is foreign. It strongly suggests that California could win over what is admittedly an East Coast consumer base if only foreign competition operated under “free market” principles. Like former US Secretary of Labor Robert Reich summed up in his blog recently: “If some people [i.e. European growers] aren’t paid enough to live on, the market has determined they aren’t worth enough.”) In fact, a much more realistic target for the domestic healthy up-market olive oil industry would be chemical-laden (domestically produced) prepared salad dressing. Instead of striving to educate the consumer on oil chemistry and human physiology (n.b., it isn’t going to happen), the simple slogan of “Read the labels and then decide” might work miracles.

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This article was last updated January 26, 2014 - 1:18 PM (GMT-5)

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  • Dick Dagger

    Yes, EVOO is the strongest growing ‘mature product segment ‘ in Australian supermarkets. But guess what? The supermarket metrics all point to nearly all of the increased supermarket demand being captured by Australian produced EVOO.

    The author appears to assume that because supermarket sales are growing then that means everyone is moving back to EU supermarket EVOO. Australia is not the US. Unlike the US, Australian domestic producers have over 50% of supermarket share by value. Despite the sales growth, the market share of the ‘just meeting the IOC standard’ bottled EU product has been declining against the ‘easily meeting the IOC standard’ local product.

    The developments in the Australian market over the last decade has shown that if you put a higher quality product on the shelf for around the same price then you will wrestle sales from those who have always felt they had a monopoly on them. The efficient US producers are heading down this track. EU producers can either respond by improving the quality of what they offer in response to the new competition or continue to lose market share. No number of articles in the oliveoiltimes will change that.

    • virginia

      The author (me :) does not assume a move to EU supermarket EVOO – IOC’s August 2013 newsletter reports that Australian imports were down 7% this year, so that cannot be the case. I will get back to you on my source for Australians moving away from high-priced local oils, but my impression was, and given market conditions it makes sense, that Australian oil is the most expensive available on Australian shelves, i.e. it is not ‘around the same price’, but again, you see the shelves, I cannot. EU producers are rapidly improving the quality of what they offer. Once blends must be labeled as to origin, as is now required, quality oils can compete for the discerning consumer. The basic question is whether economic conditions are such that Australian consumers will continue to pay for high-priced local oils out of loyalty, go for less expensive olive oil, or abandon olive oil for lower priced oil. Thanks for your insight.

  • CA EVOO

    Virginia,
    I am not certain of your stake in this discussion, but I find a number of inconsistencies in your views on the current state of the olive oil industry:
    1) Have you been to Jaen in January? The erosion problems faced there are a direct result of the cultural practices employed by a vast majority of Spanish producers. Rather than harvest the olives when they are capable of producing EVOO, the fruit is left on the trees to become over-ripe, often experiencing freezes and weather that make it impossible to produce the highest grade of olive oil. The reason for this is simple, they want to use trunk shakers to harvest. These shakers harvest to the ground, where the fruit is swept up mechanically. The use of sweepers requires a “clean” orchard floor…attained through the massive application of herbicides and the direct cause of massive watershed sedimentation. To call for European subsidization to solve a problem that was ultimately caused by European subsidization seems to verge on insanity. Those orchards and practices would not be necessary if it weren’t for decades of overplanting of olives resulting from the European subsidy programs.
    2) In the same article you call out California producers for the use of bank financing while lamenting the lack of access to bank financing for small European producers. Have you even heard of the Caja system in Spain? Agricultural producers their have their own captive banks. Moreover, could it be that the legacy orchards, developed on the back of massive government support, should not have been planted in the first place? Less than 40% of Spain’s olive orchards are irrigated. Why would a bank finance a development that lacks necessary value to be competitive on the global stage? You seem to be misplacing your blame…or do you expect a bank to finance any hare-brained idea.
    3) Finally, in the same breath you call-out the misguided efforts of Australian and American producers to use government labeling and testing regulations while celebrating the use of government directed CAP, labeling and DOP / PDO programs in Europe? Can you explain why one is “misguided” and the others are necessary and appropriate? Are you saying that it is only OK for the Europeans to do this?
    What is your objective?
    Clearly you are not a consumer advocate, else you would be supportive of methods to ensure proper labeling.
    Clearly you are not a grower, processor or marketer since you lack knowledge of olive cultivation, olive oil extraction and the olive oil market.
    Are you simply a supporter of small-scale agriculture under the historical European model? If so, you are entitled to your opinion, but it strikes me as elitist for the European model would be incapable of feeding the 7 billion hungry humans on our planet today. Who do you want to starve?
    Moreover, I would suggest that you focus your criticism on the 5 large olive oil traders that are making life difficult for the small producer of high quality olive oil in Crete, Baena or Puglia. They are the reason that honest, hard-working and well-intentioned farmers are finding it difficult to sell their superior product at profitable prices. On that front, I would join you in your fight just as we have reached out to those producers to join us in ours. At the end of the day, we feel that global olive oil consumption will grow on a strong foundation of continuous product improvement and innovation. That, Virginia, is what we should be focused on.

    • virginia brown

      Hi CaEvoo, Thanks very much for your informative response. I will definitely incorporate it into my take. I have in fact been to Jaen, but not in January and I think this should be opened up to a wider industry debate, as the environmental efforts of the EU are real. What motivates me, frankly, is the view that Californians are innocent (I am a third-generation Californian, so I am familiar with the take – Californians have always been innocent) in a big bad world. The adoption of the neo-liberal view that they ‘just want a level playing field’ is disingenuous at best and reflects the worst Washington politico-babble. Also, I believe in the EU’s ability to clean up what was admittedly a fairly dirty market in the past, when mafia ties, especially in the US, were strong and consumers supportive of those ties. I would like to see more cooperation between emerging EVOO growers in Europe, now that they have a chance to display their wares, and their counterparts in the new world (because they are not competing). I would like a wider appreciation of what Europe is doing and I would like a toning down of the anti-Europeanism of US producers and writers, and the adoption of real measures to try to help Americans eat better. And I honestly think aiming at bottled salad dressing instead of ‘foreigners’ would be a better way to achieve this. I may overstate my case, but then so do California producers. Thanks again – I really appreciate your input.

      • CA EVOO

        Virginia, I appreciate your kind response and am enjoying what I hope will be the first of many productive dialogues on olive oil policy.
        You state that you are motivated by your perception that Californians’ view that they are innocent and cite your past as a Californian as some sort of appeal to authority. I certainly would agree that California is highly imperfect, but having spent 53 years here and traveled the world extensively, have not found Californians to think of themselves as more or less “innocent” than any other culture in the world.
        I know quite a few large and small CA producers (as well as producers in Spain, Italy, Greece, Turkey, Chile, Australia, South Africa, Argentina, etc.). My suggestion is that you speak with them before assuming everything you read is true. To a person, every American producer of olive oil with whom I have spoken wants to grow the US market. Moreover, not one of them wants to prevent a single ounce of olive oil from being imported into the US and most of them personally know high quality producers elsewhere in the world.
        Just as Europe can define grading standards, PDO designations and assess imported olive oil with a $1.57 / kg tariff (vs. $.034 – $.05 in the US), shouldn’t the US have the same opportunity? And I haven’t seen any American producer demand equivalent tariffs.
        I would like to better understand what Europe is doing? Perhaps this could be an area where your legal / policy background could be helpful to the discourse. I, for one, have not seen much from Europe other than a great deal of talk and paper-drafting while highly distortionary practices continue.
        Let me leave you with one thought…what if Europe spent it’s $3 billion annual expenditure on olive oil production subsidies to support high quality, fresh olive oil consumption instead? Do you think that would be more or less effective than the current regime for the honest producers? I think an exploration of that question will lead you to the true reasons Europe won’t and can’t change. This is a socio-political problem created by European governments. Untangling the mess they have created will take time and will be painful.

        • virginia brown

          Just a short one for now: EU has passed a significant amount of binding legislation. I have outlined some of it in earlier articles on this site, so it is far from simple paper-pushing, and it is far beyond policy. I can provide with extensive information if you wish to plow through it. The EU has many problems, but to say it can’t and won’t change is far off the mark. It is designed to change, constantly – it’s part of its constitution. My Californianness is not ‘authority’ it is an insight. I share this pseudo-innocent gene myself. More later.

  • virginia brown

    p.s. I am a lawyer by training, a teacher of law by desire. EU/international law is my ‘angle’.