Green Deal and Finnish agriculture

Baltic Rim Economies

Juha Marttila
Ph.D., President
Central Organisation of Agricultural Producers’ and Forest Owners’ MTK
Finland

As a part of the Green Deal on agricultural sector the Farm to Fork Strategy aims to accelerate transition to a sustainable food system, have at least neutral environmental impact, help to mitigate and adapt climate change, reverse the loss of biodiversity, ensure food security, nutrition and public health, making sure that everyone has access to sufficient, safe, nutritious, sustainable food and preserve affordability of food while generating fairer economic returns, fostering competitiveness of the EU supply sector and promoting fair trade.

Finnish agriculture is almost exclusively based on family farms: in 2021, 85% of the farms receiving support were privately owned and 13% were owned by heirs and family companies and corporations. The average age of farmers is rising and is currently 53 years. As the farm population ages, the share of young farmers falls and the older farmers increases.

In 2021, the total number of farms which had applied for agricultural support was a little under 45 000. During the 26 years that Finland has been part of the EU (1995–2021), the number of Finnish farms has fallen by more than 50 000 farms. At the same time the average size of farms receiving agricultural support increased from 23 ha of arable land to 51 ha. The average farm size increases as the number of the smallest farms declines and that of the largest farms goes up. Large farms with more than 100 ha of arable land are the only group where the number of farms is growing. The total cultivated arable area of farms receiving agricultural support was 2.268 million ha, and about 40% of this was leased. In 1995, the share of leased land was 22%. The average size of base parcels is about 2.5 ha.

The changes in the production structure of Finnish agriculture have been characterized by a rapid decline in the number and share of livestock farms and an increase in the share of crop farms. For example, in 2021, around 5 000 farms practiced dairy husbandry as their main activity. In 1995 the number of dairy farms was more than 32 000 farms. Dairy farms, like beef farms, are more evenly distributed across all regions of Finland than the other lines of production. In 2021, the number of farms specializing in pig meat production was about 500 in 2021. The number of poultry farms was 400. At the same time there were about 31 000 crop farms. Forests are an integral part of Finnish farms. The average forest area of farms receiving agricultural support is about 50 ha, but regional variation is considerable.

In EU Finnish agriculture cannot compete on cheap prices so we chose a quality strategy.  This meant higher quality standards in both crop and livestock production. This means no heavy metals and average phosphorus level in soil is satisfactory, minor residues of plant protection products in food products, minor leach of nutrient into water bodies, more organic production and very high standards of food hygiene like no salmonella in Finnish food. We believe this choice will be beneficial to us in the Green Deal. We cannot be at the forefront of environmental sustainability while striving for competitiveness within the European single market. It is essential for the continuity of production that agriculture be supported in environmentally sustainable production.

We see this in the country specific recommendations to the members states which the commission made in part of the Green Deal process. For the Finnish agriculture commission was concerned about e.g., the low rate of generation renewal, poor profitability, improving the added value of agricultural production, biodiversity, improving the use of nutrients, climate change mitigation, reducing greenhouse gas emissions and improving resilience but not, for example, the use of antibiotics.

The impact of Green Deal measures for agriculture

Some economic analyses have been carried out already on the impact of the Green Deal on agri-sectors. Kiel University study: Double disaster — Europe’s Green Deal Farm to Fork plan would undermine environmental sustainability goals with no significant economic payoff https://www.bio-pop.agrarpol.uni-kiel.de/de/f2f-studie/executive-summary-en. Also, Wageningen University (WUR) carried out an impact assessment that shows that farm income can be seriously affected. https://www.wur.nl/en/newsarticle/Green-Deal-diverse-and-uncertain-farm-net-income-impacts-1.htm

The whole Farm too Fork -project is very sensitive on prices both on input and outputs. What is clear for everybody is that the production costs in EU is increasing and the old tools for market balance in the Common Agriculture Policy (CAP) is not available nor having funds in the EU budget. At the same time, the focus of the CAP is shifting to the externalities of multifunctional agriculture, to the public goods.

New trade policy is to ensure level playing field in single markets

In last few years the EU has been very liberal in trade policy and focused to new openings to global markets. European Food chain has been very successful in export. The Green deal has changed the situation. The traditional way to tackle trade policy has irreversibly change. It is not enough anymore to create new market possibilities. The first two steps the earlier Commission started already by nominating new trade enforcement officer. The focus in this new task is fully implement the trade deals and secondly train European SMEs to use possibilities.

The Green Deal rules for EU farmers have been more demanding that what is required from the third country products due to the cross-compliance demands in the CAP. For this reason, the Commission planned three additional proposals as a part of new trade strategy (https://ec.europa.eu/commission/presscorner/detail/en/ip_21_644) to ensure level playing field in the EU single market. The first two proposal has already been published and we are still waiting for the due diligence package.

  • Carbon Border Adjustment Mechanism (CBAM) is built to prevent outsource production outside of the EU, because of lower costs. The product coverage is steel, aluminium, cement, nitrogen and electricity. The challenge for food chain is that there is only nitrogen as a basic product inside, but products where the nitrogen is the main variable cost is not included. Secondly, nitrogen is having also antidumping duties, which are not calculated in the proposed CBAM-duty.
  • Deforestation Free labelling is proposed to ensure that no rain forest is cut down because of the food import. The system is not ready at the moment, but it seems to be very bureaucratic and leading to additional certificates and audits in EU production as well.
  • Due diligence has same kind demands as the CAP is having in cross-compliance, but because we do not have the proposal, we do not know what kind of audits the food chain must have to ensure that there is no force-labour, slavery, child-labour or human trafficking.

Programme for the French Presidency of the Council of the European Union includes some new activities call “mirror measures” to ensure that imported products are subject to the standards in force within the EU, whenever this is necessary, to improve the protection of health and the environment, in compliance with WTO rules.

The implementation of existing legislation is an important issue in trade policy. For example, animal welfare legislation has been in place for years and the 12-year transition period is over. Yet many Member States have not implemented the legislation or have granted exemptions to local businesses. In trade negotiations, this means that the EU faces challenges in arguing that the EU is single entity from a trade policy perspective.

If the Farm to Fork equivalent criteria is not possible to require through legislation the DG SANTE has introduced a voluntary “the Code of Conduct” firstly for large multinational companies and on the next face for all the actors on the single markets.

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