EUROPE ASIA FOUNDATION - Insight
On each other’s plates: Asia and Europe’s trade in food
The mutually beneficial trade links between Europe and Asia have been developing in recent years in both quantity and quality. Nowhere are these changes illustrated better than in the area of food, within the broader theme of agri-business. In monetary terms, although engineering and electronics are both more important than agriculture to both European and Asian economies, food meets the most basic of human needs. This growing, diverse and multilateral field has its share of controversies. To tackle such issues, alongside the ‘conventional’ concerns of ensuring an adequate, sustainable and wholesome supply of food to the world’s growing population, concerted action is needed.
Europe’s relationships with ASEAN, China and the Indian subcontinent differ from each other significantly in the way food-related trade has developed in the past decade. What all three have in common is a massive increase in both directions: EU exports to ASEAN doubled in that time whilst imports from those countries rose by half. Imports from China have grown similarly whilst food-related exports to the world’s most populous country have risen five-fold. The EU is a net exporter of food to China but a net importer of food from elsewhere in Asia. Meanwhile, although the low level of European exports to India has grown significantly it is still dwarfed by the static level of imports from that area, contributing towards an overall trade balance of over €2 billion per year in India’s favour. In the case of India ‘agri-food’ includes significant amounts of non-food products such as cotton (€50 million of which is traded in each direction), whereas the market for animal products is negligible.
Despite being home to 500 million farmers, China is unable to feed itself. Only the UK and the USA import more food from the EU than China does, at 9.7 percent of Europe’s external agri-food trade. This is three times the value of Chinese food exports to the EU. In the top 20 destinations of EU agri-food only three other Asian countries make the cut, the relatively affluent Japan, South Korea and Hong Kong, none of which are ASEAN members. India lies in 44th position for receiving EU agri-exports. As for sources of Europe’s agricultural imports the global top 20 includes China again, in 5th place, with Indonesia, India, Malaysia and Vietnam further down that list.
The categories of ‘food’ and ‘agri-products’ include a wide range of commodities, from live animals and palm oil to fruit, coffee and fish. Europe is largely self-sufficient for a commodity closely identified with Asia, rice, whereas wheat imported from China has grown from nothing to a half-a-billion-euro industry in just five years. Many commodities show significant year-to-year volatility, making trends difficult to identify, but since 2016 imports from ASEAN showing the largest growth areas are processed food (chocolate, tea, sauces and pet food) and non-edible agri-products.
Palm oil and associated products account for half of the value of all ASEAN’s agri-food exports whilst the products exported from Europe to ASEAN are much more varied. The biggest single category is milk products but alcoholic drinks, processed foods and pet foods are also significant. Animal products, particularly pig meat, account for half of the EU’s agri-food exports to China.
Agricultural trade is not without its concerns. ASEAN serves a small market in the export of live animals to Europe. At €11 million this business is equivalent to just one percent of the figure for tropical fruit, but it is not only animal rights activists who question how ethical or necessary it is to transport sentient beings over such distances, over many days. The oceans of south-eastern Asia are teeming with controversy too, with over-fishing a real and growing issue despite the existence of international agreements. Although China imposes strict controls over the conduct of fishing within its own areas of influence, to internationally agreed standards, its neglect in failing to impose the same high standards on Chinese vessels fishing the open seas has led to a massive increase in IUU – the internationally recognised phenomenon of ‘illegal, unreported and unregulated’ fishing. China, Taiwan, Vietnam and Cambodia, together with Russia, are the world’s biggest sources of IUU fishing.
In 2018 three quarters of all the fish caught in the world were caught in the Indian or the Pacific Oceans.
The EU itself, which enjoys its own agreed fishing rights in 13 areas of the Atlantic, Pacific and Indian Oceans, is not without issue: the hunting of tuna around the Maldives, for example, is widely held to be unsustainable. Here, local fishermen are calling for far tougher controls than the EU is willing to concede. The seas of south-east Asia are known for human rights abuses in the fishing industry, where reports of modern slavery and bonded labour abound. Most European supermarkets will only accept product from ethical and sustainable sources, but the policing of the industry is far from perfect. Fishing is also blamed for environmental damage – abandoned plastic nets, the ‘accidental’ catching and killing of protected species, including mammals, turtles and rare sharks, and damage to the ocean bed. These issues are all products of non-selective and irresponsible trawling techniques.
Such controversies impact upon the world’s biggest producer of canned fish, John West. Created by its Scottish, eponymous founder in the 1850s, for most of the 20th century it was owned by Unilever and then Heinz. Today, although UK-based, it is owned by the Thai Union Group. In theory, any consumer worldwide who buys a tin of their fish can enter its bar code on their website and see exactly where and how the fish was caught, claiming high ethical standards. However, the policing of those standards has been questioned and the assurances given on the web site apparently do not apply to fish canned in Thailand, for reasons which are not explained (human rights questions about the Thai fishing industry are rife). The company claims that having its own fishing fleet aids traceability, though it admits that globally there is not enough ethically caught tuna, for example, to meet demand. The company has recently committed to SeaChange, a programme to ally the global fishing industry with the aims of the UN Sustainable Development Goals.
Being both edible and solid at room temperatures, palm oil is an ideal substitute for butter and other animal fats in many food products, toiletries and soaps, which explains why some corporates and governments have been so keen to exploit the market opportunities it has presented. Indeed, it can be found in half of all processed products in supermarkets globally. Palm oil accounts for a third of all plant-based oils grown around the world and the two largest palm oil exporters are in Asia: Indonesia ($15 billion-worth) and Malaysia ($9 billion-worth). No other country exports more than a billion dollars-worth of palm oil. Asia also includes the three top palm oil importers: India ($5 billion), China ($4 billion) and Pakistan ($2 billion). Palm oil is a highly controversial crop as its growing methods have involved habitat loss through mass deforestation, a growth in net carbon emissions from the torching of jungle areas and the consequent endangering of species such as the iconic orangutan. Palm oil production has been associated also with human rights abuses and excessive use of harmful pesticides, so it is little wonder that several leading European supermarkets and food manufacturers are highly vocal in their advocacy of ‘ethical’ or sustainable palm oil. This constitutes a growing fraction, perhaps 20 percent currently, of the market and demand significantly outstrips supply. However, questions have again been raised about the quality of ‘ethical’ certification. One supermarket, the UK’s Iceland Foods, featured a cartoon orangutan in a recent advertising campaign which announced the complete removal of palm oil from all its own-brand products.
About a third of exported palm oil from Indonesia and Malaysia is used not for domestic purposes but to produce biodiesel; Singapore is home to the world’s largest biodiesel production plant and Europe is the world’s major user of the finished product. Biodiesel’s role as a replacement for fossil fuels is controversial because, although it is technically a renewable energy source, it still produces carbon emissions and comes with an environmental cost, as the COP26 climate conference recently illustrated. Weaning the world off such a high dependency on palm oil is essential – but it will be difficult, as its Asian producers are finding.
The trade in food and related products between Europe and ASEAN, China and India is complex, large and growing rapidly. At a time when scrutiny of trade and corporate behaviour has never been higher, ethical concerns about palm oil, biodiesel, fishing and the trade in live animals are real and well established. To date it has largely been left to business to get its ethical act together in each of these respects whilst governments worry about security of trade and keeping their people fed through international agreements.
Trade, imports and exports, is essentially all about numbers. Behind the numbers there are real issues of sustainability, which threaten supply; they require behavioural changes at corporate, consumer and governmental levels across both of our continents. With all of these challenging issues, balancing potentially conflicting interests, greater levels of dialogue are required.