- A new EU food labelling regime is likely to be delayed due to the economic and inflation crisis hitting the EU
- Compliance costs would impose significant costs on palm oil producers and consumers
- Brussels can use the crisis as an opportunity to reconsider other regulations such as the deforestation regulation
EU officials have indicated that the bloc’s introduction of new food labelling is likely to be delayed, with further decisions on implementation until 2023.
The delay makes sense, and should be used to trim back any costly and egregious plans that would further disrupt food supply chains or increase costs.
Although there is disagreement on what any new labelling will look like going forward, a key EU official hinted at the core problem that EU food producers, processors and importers are facing: new regulatory obligations in the midst of an energy and economic crisis.
Food inflation hit almost 10 per cent across the EU in the third quarter. At the same time, the Green Deal is unleashing a tidal wave of new regulatory obligations on the supply chain, including new obligations on importers of palm oil, coffee and cocoa in the form of the deforestation regulation.
This set of obligations will cost suppliers money and raise prices at a time when consumers are already cutting back on their grocery spend in the EU. As Bloomberg writes:
“A new survey shows that 71% of consumers across six key markets in Europe have already made significant changes to how they shop as they battle to cope with inflation that is reaching levels not seen in four decades.
“The report by IRI, a data analytics and market research company, also revealed that 58% of consumers already report that they have cut down on essentials, with 35% dipping into their personal savings and taking out loans to pay bills.
“‘It’s evident that consumers’ willingness to spend is suffering and the direction of travel is likely to worsen – with the likelihood of further sharp price rises given high input costs and volatile energy price,’ said Ananda Roy, global senior vice-president at IRI.“
Bloomberg also writes that the situation is likely to deteriorate going into the future:
“How much more inflation can consumers take? Prices are set to increase further as there has been no improvement in commodity costs; in fact, with energy becoming more expensive, the situation has deteriorated.”
This begs a question to Brussels: why are policymakers continuing to make staples – such as vegetable oil – more expensive at a time of crisis?
Evidence of increased costs because of EU food compliance is reasonably easy to find and stretches back decades. The EU imposed import bans on some African fish in the late 1990s because of new compliance regimes; the cost of meeting the EU regulations in some cases increased the production costs by 25 per cent.
Brussels will no doubt argue that the imposition of these new barriers will be worth it, because of reductions in deforestation. But the ongoing fragmentation of markets and the fact that developing country markets are seeking lowest-cost supplies makes contribution to lower deforestation unlikely. Indonesia’s reduction in deforestation – due to domestic policies – are a case in point.
Food inflation is now an opportunity for Brussels to pause and undertake reforms, not double down on food regulation and trade regulation that is getting more costly by the day.