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The support packages given to agriculture in the US and Japan, much larger than the EU offering, puts farmers in Ireland at a serious competitive disadvantage. Japan's agricultural sector is smaller than Ireland's, producing 460,000t of beef, 7bn tonnes of dairy and with a cow herd of 1.3m and 9m pigs, according to Bord Bia.
Japan and US
The sector has attracted a support package amounting to ¥545bn (€4.6bn), with ¥90bn (€820m) going directly to livestock farmers and milk processors and the reminder going to market support and recovery schemes. Japan is less than 50% self-sufficient in agricultural produce and is one of the top importing countries in the world. It has consistently provided financial support to farmers, not just during this crisis.
Compared to these two countries, the EU private storage aid packages worth €76m are miniscule, and even then only work for dairy products
The Japanese government also protects the value of its market against cheap imports with high tariff barriers. Even with a comprehensive trade agreement with the EU, the beef tariff will come down from 38.9% to 9% over 15 years.
A support package of $19bn has been put in place in the US to support agriculture in the wake of the coronavirus crisis. Compared to these two countries, the EU private storage aid packages worth €76m are miniscule, and even then only work for dairy products.
EU limitations
This is totally inadequate, but it has to be recognised that the EU doesn’t have the financial capability that two of the top three economies in the world have. The EU has to operate with a budget that reflects a 1% of GDP contribution by member states, whereas Japan and the US generate their revenue from taxation.
It has to be recognised that the EU doesn’t have the financial capability that two of the top three economies in the world have
The collapse in value of the Argentinian peso to just 6% of its value a decade ago and a 38% fall in the value of the Brazilian Real over the last year, means that these major exporters have gained a serious price advantage in international markets. Australia and New Zealand are the only two major exporting countries that have neither a support system in place, nor a weakened currency.
Irish and EU farmers disadvantaged
This puts Irish and European farmers at a serious disadvantage in global markets. It is unrealistic to expect the EU to deliver financial support on the scale of either the US or Japan, nor would a collapse in the value of the euro be a good thing for the economy at large.
It is unrealistic to expect the EU to deliver financial support on the scale of either the US or Japan
The EU is a global leader in pursuing free trade and this, in general, is good for Ireland, which has one of the most open economies in the world. However, it hurts beef producers in particular, as they have to compete directly with South American imports to the EU as well as the US, who have a 35,000t beef quota. The enhanced animal welfare and environmental standards of the EU are worthwhile, but bring a cost to farmers that cannot be afforded with market prices collapsing.
Government has to step in
The EU has accepted its inability to compensate farmers to the extent required, by giving exceptional flexibility to member states to put their own programme of support in place. This can be worth up to €100,000 per farm business and €800,000 per processor. Currently, the Government is supporting employers with a weekly grant of €350 per employee. It needs to deliver a similar support package for farmers.
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