New EU-US Equivalency Agreement Should Boost Organic Sales

The new equivalency agreement between EU and US organic standards is considered a major milestone for the international organic food industry, according to Organic Monitor. Although the two regions comprise over 90% of global sales, bilateral trade has been hampered by non-recognition of standards. Organic Monitor expects the new trade arrangement to have a significant impact on international trade of organic products.

The trade arrangement recognizes the integrity of organic systems in both regions, preventing repeat certification of organic products. By opening up the two largest markets for organic products to each other, the arrangement will facilitate trade of organic foods. Organic Monitor estimates bilateral trade between the two regions comprises less than 5% of the US $59 billion organic food industry.

Although the largest consumers, Europe and North America are not the main producers of organic crops. The two regions have just 30% share of global organic farmland. Organic farming is practiced in 160 countries, with organic farmland totaling 37 million hectares in 2011. Most production in Asia, Latin America and Africa is destined for these two regions. A major question is how production in these regions will be affected by the new trade arrangement, since it only covers organic products made and packaged in Europe and North America. Organic products originating from other regions made according to USDA Organic / EU standards are excluded.

Organic Monitor sees organic farmers and food companies in Europe and North America benefiting most from the trade agreement. For the first time, producers will have access to the entire global market without the need to re-certify or adopt new organic standards. Increases in organic farmland are expected in the US as well as EU countries that have export-geared organic food industries.

The biggest winners however will be consumers. Supply-demand imbalances are a regular feature of the organic food industry, resulting in frequent price fluctuations. Greater supply, especially of commodities, will have a stabilizing effect on organic product prices. Apart from lower prices, consumers will benefit from wider product variety. European consumers will be able to buy American organic products, while popular European foods – such as pasta, chocolates, cheeses, and beverages – will slowly make their way onto US store shelves.