¹Maria Rosaria Pupo D’Andrea, ¹Federica Demaria, ¹Raffaele D’Annolfo, ¹Federica Morandi, ¹Roberto Henke, ²Samson Zadmehran, ²Fatiha Fort, ²Zouhair Bouhsina

(¹CREA, ²INRAE)

The EU bilateral trade agreement and the sustainability of the Tunisian Olive Oil Value Chain

The EU poses at the core of its internal and external policies the sustainable development, playing a crucial role in international trade relations by the way of trade agreements in order to promote sustainable development with trading partners, especially with developing countries. Sustainable development provisions have now become an essential component of the EU’s new generation of trade agreements which contain a specific Trade and Sustainable Development (TSD) Chapter based on three pillars: binding commitments to labour and environmental standards, structures to involve civil society organizations and a dedicated dispute settlement mechanism.

Deliverable 2.2. of the TRADE4SD project analyzes how the Sustainable Development Goals are currently included in preferential agreements and how are sustainability provision working, examining the impact of TSD chapters provisions on selected supply chains. One of the case studies analyzed under the deliverable focuses on the effect of EU bilateral trade agreement on the sustainability of the Tunisian olive oil value chain.

Since 2015, the EU and Tunisia have been negotiating a Deep and Comprehensive Free Trade Area (DCFTA) to replace their 1998 Association Agreement (AA). Insofar 4 rounds of negotiations were held, but the signature of the DCFTA is still missing. For each of the 4 rounds of negotiations, proposals from the EU in different areas have been made available to the public. Since the first round, agricultural trade liberalisation, including tariff liberalisation, non-tariff measures, in particular sanitary and phytosanitary (SPS) standards, as well as technical barriers to trade (TBT), have been placed at the center of the debate of negotiations (Raza et al., 2022). Under the fourth and last round, Tunisia reiterated its request to provide urgent measures in favour of strategic sectors for Tunisia, among which olive oil and textiles (ALECA, 2019). Because of Tunisia applies a higher level of agricultural tariff protection vis-à-vis the EU than the EU does vis-à-vis Tunisia, the latter fall the greater effort in dismantling tariffs in response to DCFTA (Raza et al., 2022).

The EU proposal for the TSD chapter is designed to ensure that the DCFTA’s sustainable development commitments are aligned with multilateral governance on these issues. The Parties are committed to pursuing sustainable development in their trade relations. The objective of the TSD chapter is to create a shared commitment that will guarantee the highest level of protection for workers and the environment.

The EU is the largest producer, exporter, and consumer of olive oil in the world. The trade relationship in olive oil between the EU and Tunisia shows an imbalance that mirrors the broader trade dynamic. Over 80% of the EU’s imports from third countries come from Tunisia, constituting roughly 9% of the EU’s domestic production (European Commission, 2023). On the other hand, the EU has been by far the largest olive oil importer from Tunisia in the last decade. However, the large increase in Tunisia’s export value (+80%) has led to an increase in the share of only 3%. Olive oil exports play a crucial role in Tunisia’s trade balance, contributing to nearly 40% of the primary sector’s export revenue. (Jouili, 2023).  Olive oil benefits of concessions under the AA, for which the EU-Tunisia agreement establishes an annual duty-free quota for the first 56,700 tons of virgin other than lampante olive oil arriving in the EU. After that, a tariff of €124.5/100 kg applies. Both Inward Processing Trafic (IPT) and quota system affect the EU imports of bottled olive oil that generate higher value-added for Tunisian producers. IPT concerns only olive oil in bulk, by which the Tunisian origin is lost. Although the quota system allows the import of bottled olive oil, EU importers often prefer bulk olive oil to add value through bottling and branding (Grumiller et al. 2018; Raza et al., 2022).

Tunisian olive oil production is characterized by smaller and large producers with several cultivation systems, such as organic versus commercial and intensive cultivation. This difference leads to challenges and opportunities going from pest management, water resources, and irrigation methods to the implementation of innovative techniques able to increase production sustainability.

Based on a desk study and stakeholder interviews primarily focused on Tunisia’s leading agricultural export, the olive oil sector, the results of the analysis indicate a need for policy interventions in some key areas. Tunisian larger producers strongly support the DCFTA trade agreement and the liberalization of the EU market because of their role as competitors of Spanish and Italian producers. However, environmental concerns emerge particularly regarding water scarcity and desertification. Prolonged drought periods because of climate change are more frequent and result in water stresses, therefore stakeholders invoke the adoption of new water-efficient irrigation methods. Olive trees are affected by adverse environmental factors and are most sensitive to climate change.

These troubles are largely debated and recognized by supply chain operators who pay attention to water and land use; indeed, the main trade liberalisation risk lies in production intensification which negatively impacts resources and marginalizes small producers. Tunisian stakeholders recognized that embracing sustainability in the olive oil value chain is crucial, therefore the future DCFTA should contain measures supporting a sustainable transition and climate change adaptation techniques.

Another relevant issue is related to the sustainable use of fertilisers and chemical inputs in production. Stakeholders recognize fertilizer and chemical input impact on the yields and show concerns about the environmental impact of soil erosion. Furthermore, they also emphasised the need to enlarge the export market, which may represent an opportunity for modernising production techniques.

Another important challenge emerging from the interview is the issue related to the standards and certifications and the level of protection for olive oil. Stakeholders invoke an expansion of quota and/or the introduction of a specific quota for the organic olive oil. Policymakers pointed out that often EU control, permission, certifications, importation licenses and administrative procedures are heavy obstacles to the EU market. However, they are aware that the future DCFTA represents a significant opportunity for sustainability enhancements and investments to improve production and minimise environmental impact.

ALECA (2019). Rapport conjoint du quatrième round de négociation sur un accord de libre-échange complet et approfondi (ALECA) entre la Tunisie et l’Union européenne. Tunis, le 3 mai 2019.

European Commission. (2023, October 3). Market situation for olive oil and table olives.  https://agriculture.ec.europa.eu/data-and-analysis/markets/price-data/price-monitoring-sector/olive-oil_en

European Union (2016). Ue – Tunisie. Accord de libre-échange complet et approfondi (ALECA). Libéralisation des échanges: paramètres de négociation. Version du 26/04/2016

Jouili, M. (2023). Olive Oil and Water: Moving towards sustainable agricultural trade between the EU and Tunisia, Issue Brief n.1, Amsterdam.

Grumiller, J., Raza, W. G., Staritz, C., Tröster, B., Von Arnim, R., & Grohs, H. (2018). The economic and social effects of the EU Free Trade Agreement (DCFTA) with Tunisia (No. 9/2018). Research Report.

Raza, W.G., Tröster, B., von Arnim, R., Chandoul, J., Ben Rouine, C. (2022). Regulatory approximation under ALECA: Assessing the economic and social effects on the Tunisian agricultural sector. Research Report, No. 15/2022, Austrian Foundation for Development Research (ÖFSE), Vienna