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Europe Responds to Agrarian Crisis

Ms Anandita Bhada is a Research Analyst at MP-IDSA, New Delhi. Click here for detailed profile.
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  • June 26, 2024

    The slogan ‘Workers of the World Unite!’ mentioned in The Communist Manifesto, published in 1848 by Karl Marx and Friedrich Engels is popular, especially amongst certain factions of the society. Three centuries ahead, the world is again witnessing scores of people united for a purpose, except that these aren’t the blue collared workers but farmers across the European Union (EU), from Poland in the east to France in the west. The issues are no longer restricted to certain sections of Europe or economies of a certain size but have managed to gain traction across boundaries, impacting the decisions of the European Parliament and the European Commission.

    The current farmer protests are not a recent problem but have their roots in the Netherlands beginning since 2019. Many consider Spain or Portugal to be the most agriculturally oriented countries within Europe. However, it may be a surprise to note that Netherlands is the most farmed European country. Globally, it is the second biggest exporter of agricultural produce, after the United States, valued at around 65 billion Euros annually, comprising more than 17 per cent of total Dutch exports. Agriculture combined with horticulture is a crucial segment of the Dutch economy and employment, contributing 10 per cent.1

    Forceful implementation of agricultural laws or policies are therefore bound to face resistance at a large scale and that is exactly what happened in October 2019. Abundant agriculture and livestock numbers contribute to significant nitrogen emissions, which is a formidable contributor to the climate crisis. In an attempt to cut these emissions to half by 2030, the Dutch government decided to buy out and shut off farms and reduce livestock numbers by half.

    This did not go down well with the farmers and they did not wait until policy formulations to let their anger known. More than 2,000 tractors blocked the highways and roads leading to the seat of the government in Hague. Placards reading ‘No Farmers No Food’ and ‘How Dairy You’ were displayed across the city.2 In the last five years, a snowballing effect has led to the protests spreading far and wide within Europe. So much so that by now only four European countries are left untouched—Austria, Denmark, Finland and Sweden.

    Even though farmers’ grievances vary from one country to another, certain overlaps can be observed. In Germany and France, protests are against the governments’ plans to end subsidies or tax breaks on agricultural diesel. Cheap grain imports from Ukraine and strict EU regulations are an issue in Poland. Spain and Portugal’s grievances include bureaucratic procedures and insufficient state support to agriculture in the face of competition from cheaper imports.

    Farmers’ struggle to stay competitive in the market vis-à-vis the imported goods, falling prices, increasing input costs, increased cost of pesticides, high energy prices leading to expensive agricultural diesel, electricity and transport of the produce from farm to market, after effects of the pandemic and the strict provisions of the EU policies especially the Common Agricultural Policy (CAP) are therefore some of the common threads across Europe. 

    These issues were simmering since months but the advent of Russia–Ukraine war exacerbated the problem by intensifying the issue. Prior to the war, Europe was heavily relying on Russia for bulk of its energy imports, mainly natural gas. However, once the bloc decided to put sanctions on Russia and reduce its bilateral trade across sectors, the energy supply was severely affected in Europe. The prices shot up overnight, goods became expensive due to short supply, households faced exponential bills for heating/electricity, energy intensive industries like glass manufacturing and automobiles had to temporarily (in many cases permanently) suspend production.

    This energy crisis affected the farmers in two crucial ways. The price of electricity, agricultural diesel and transport went up drastically, thereby increasing the input costs. This not only affected the market price of crops but also made the procurement of agricultural diesel and transport vehicles competitive for the farmers. These factors were the ones which had an immediate impact on the crop season. Long run impact was evident in the case of Western sanctions imposed on Russia which included those on potash and other fertilizers. Europe was heavily reliant on Russia and Belarus for its fertilizer requirement, especially for potash, phosphate and ammonia. Not only Europe, even the world relied heavily on Russia and Belarus as the former is the largest global exporter of fertilizers and the two together exported 40 per cent of Potash in 2022.3

    Fertilizer trade had earlier been disrupted in 2020 owing to the COVID-19 pandemic and was now facing a second round of disruptions post the Russia–Ukraine crisis. EU had sanctioned the bilateral trade of Russian potash and phosphate but these sanctions did not apply to non-EU traders and businesses. However, once the Western sanctions were in place, Russian fertilizer trade faced difficulties in obtaining product insurance, shipping vessels, maritime routes passing through the EU territory were blocked and certain Russian banks could not process payments as they were banned from the SWIFT international payments network.

    Meanwhile, China (one of the top 5 global fertilizer exporters) temporarily imposed a ban on the export of phosphates to protect its domestic agrarian market. Collectively, it resulted in an exponential rise in fertilizer prices, peaking in May 2022. This affected the 2022 crop season whereby the prices of staples like wheat and maize skyrocketed due to short supply and low yield. Much of the food crisis was also attributed to Ukraine’s inability to export its grain stock but within Europe, farmers faced a shortage of affordable agricultural inputs.

    Yet another contributing factor in the agrarian crises was the European Commission’s June 2022 decision to lift quotas and tariffs on the import of Ukrainian grains. This move was aimed at providing Ukraine an alternative route to export its grains (since the Black Sea export route was blocked by Russia), which are extremely crucial for the global food security. As a result, heavy volumes of Ukrainian exports started to flood the European markets. Ukrainian grain’s low production cost, higher carbon footprint and big volumes gave an unfair competition to the European farmers, who owned smaller landholdings and whose produce was regularised by strict EU guidelines. The supply shock led to reduced prices in the EU single market and this enraged the farmers, especially of the countries bordering Ukraine.

    In April 2023, Poland, Hungary and Slovakia slapped overnight bans on certain sensitive products. This encouraged farmers from across the EU to demand similar measures. The EU put in place measures such as that in March 2024 which deemed products/produce such as  eggs, poultry, maize, honey, etc., as ‘sensitive’ and subject to pre-war tariffs should their import volume increase beyond the average in the last three years.

    The measure also gave power to the EU members to impose ‘remedial measures’ if they faced market disruptions. Some EU members wanted wheat too to be labelled as a sensitive product but the European Council did not heed to those demands. Instead, it assured that it will enhance the monitoring of wheat supply to ensure it does not add to the market turmoil. The extended EU–Ukraine free trade agreement was approved by the European Parliament on 23 April 2024.4 Having passed the legislative obstacles, the farmers now await its real-time impact on the market.

    These measures are expected to cushion farmers’ discontent before the European Parliamentary elections, thereby hopefully helping the incumbent political parties to hold on to power. For now, it does seem that the EU has managed to balance its support to Ukraine with the need to protect its agricultural markets. However, it remains to be seen if the new European Parliament can continue to maintain this balance in lieu of its various commitments and the impending climate crises.

    Views expressed are of the author and do not necessarily reflect the views of the Manohar Parrikar IDSA or of the Government of India.