The Netherlands needs a European approach to the Russian boycott

15 August 2014 - Dutch businesses are not only being affected directly by the Russian trade boycott; they are facing even greater challenges due to the impact that the boycott is bringing to bear in other countries.

Dutch businesses are not only being affected directly by the Russian trade boycott; they are facing even greater challenges due to the impact that the boycott is bringing to bear in other countries. ‘Putting own products first’ is not in the best interest of the Netherlands. This is why Rabobank experts emphasise the importance of introducing Europe-wide measures.

It is crystal clear that Dutch businesses are being hit directly by the trade boycott. The Netherlands exports 1.5 billion euros in agricultural products and food to Russia annually. There is a direct correlation between the level of perishability of the products and the degree of dependence on Russia and the severity and steepness of the price decreases for businesses.

Shifting exports to other markets

Rabobank Chief Economist Wim Boonstra says the indirect effect of the trade boycott will, however, be much greater. He points out that sales to Russia are extremely important to countries such as the Baltic States, Finland and Poland. ‘The sanctions are a much harder blow to these countries and they feel the pain acutely. This means that they attempt in response to shift their exports to other markets, including the European Union. The result is that prices for agricultural products come under extreme to very extreme pressure across the board. This second-order effect is much greater than the direct impact on Dutch exports.’

Astonishing

Boonstra emphasises the key role of exports for the Dutch food and agri sector and hence the importance of having a European approach. The Dutch market has traditionally been too small to have enough domestic consumers for the agricultural products and foods produced in the Netherlands. Boonstra: ‘We see the launch of appeals in the Netherlands to eat primarily Dutch fruit and vegetables. These initiatives follow in the footsteps of comparable campaigns in Poland and Belgium. There are indications that supermarkets in France are starting to sell mainly French products and that the French are prepared take action against meat imports from Poland. This is all being done to protect the French market. It is astonishing to see this happen. European countries are in danger of turning to protectionism and in doing so they are turning off their most important engine of growth.’

This is why Wim Boonstra and Ruud Huirne, Rabobank’s Director of Food & Agri Netherlands, are convinced that it is crucial that measures be taken within a European context to compensate the negative effects of the trade boycott. Boonstra: ‘This European response should comprise a range of restrictive measures, support for healthy companies in danger of encountering difficulties and active support to help the business community tap into new markets. In addition, protectionist measures in member states must be nipped in the bud.’

Experiences from previous crises

Ruud Huirne recalls the experience gained from previous crises, such as the EHEC crisis in the horticultural industry and the foot-and-mouth disease outbreak. ‘We have learned that we must act collectively as Europe and create one playing field within Europe. This means we must not provide support to growers in one country, while not doing the same in other countries.” Businesses also demonstrated resilience during the EHEC crisis. “That crisis revolved around an unknown bacterium. It quickly became clear that it did not come from tomatoes or cucumbers. The approach at that time was to attempt to regain trust quickly, supply high-quality products and realise new sales.’

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