Examination of Witnesses (Questions 244
- 259)
WEDNESDAY 25 FEBRUARY 2009
MS MELANIE
LEECH, MR
ANDREW KUYK
AND MR
WILLEM-JAN
LAAN
Chairman: I formally welcome from Unilever
Mr Willem-Jan Laan, director of global external affairs, and from
the Food and Drink Federation Melanie Leech, director general,
and Mr Andrew Kuyk, director of sustainability and competitiveness.
I think we know Mr Kuyk in another guise but he has now moved
to a new one. We hope that he will be happy in his position at
the Food and Drink Federation and will make a very important contribution
to its work. I should like to start off the questions with Roger
Williams.
Q244 Mr Williams:
I do not know whether you have heard some of the exchanges this
afternoon. As far as Unilever is concerned, to what extent are
you satisfied that DEFRA's performance as a department within
government is responsible for championing the food and drink industry?
Mr Laan: Our experience with DEFRA
has been in a number of areas. It gives me pleasure to appear
before the Committee today as a Dutchman working for Unilever
and provide evidence from our perspective on the food security
agenda. For specific UK questions I am happy to be in the company
of the Food and Drink Federation which no doubt will be able to
add information. In a number of areas we have had experience with
DEFRA. In the committee on the long-term research agenda we had
experience with activities on sustainable agriculture where we
shared information and also on things like avian `flu and other
food safety issues. Overall we have noted that currently DEFRA
is the lead department for foods. In the past maybe it has been
a bit inward-looking. Outside the UK you would not meet DEFRA
people often. Obviously, there were other departments, for example
DFID and others. Last year at the food summit in Rome I participated
in two panels and met UK colleagues. Overall, we hope that DEFRA
will take up the responsibilities on the whole food chain including
the food industry. With regard to the international context we
believe that food security is an issue of a European and global
nature and DEFRA also has a role to play in that area.
Ms Leech: If I may expand that
on behalf of a cross-section of the industry, I think DEFRA would
recognise that in recent years it has not felt the need to prioritise
and focus on food issues. To some extent that means the industry
has probably been a victim of its own success; it has been rather
good at delivering cheap, safe and nutritious food at affordable
prices to households. DEFRA has let it get on with it. For DEFRA
the focus has been much more on agricultural issues but also environmental
ones and, alongside other parts of government, it has tended to
see the food chain and food industry collectively as a delivery
tool for various social policy objectives—clearly, we are
an important delivery tool for some of those objectives—and
perhaps has put to the back of its mind the remembrance that in
order to have a tool to deliver things there is a need to do what
is necessary to keep it in good shape. We hope that as DEFRA's
new leadership role around food takes shape that will be at the
forefront of Hilary Benn's mind. I think he is saying the right
things about being committed to that, but it is really about championing
the industry, remembering that in order to have a thriving, vibrant
and successful industry you must create the right framework for
it. If not, it will not be there to deliver the other things that
you might want.
Q245 Mr Williams:
You said that DEFRA realised that it needed to take on the role
of leadership. Are there any specific areas of food policy development
where it could or should be particularly active?
Mr Laan: I see basically two areas.
The first area is sustainable production and domestic production
in the UK. We are happy to contribute by considering our own sustainable
agriculture programme which we have had for a long period of time.
Second, if you need to double food production between now and
2050 you may need to invest in research and development. I think
that increasing yields and new varieties by using the best options
available for production for the longer-term perspective is also
a matter on the UK's research and development agenda, but also
the work in partnership with the private sector can be of real
importance. To give a little background, I am from Holland. We
view public/private partnerships on education and research together.
We built a food valley around the University of Wageningen where
I studied and that is already paying dividends. If you think of
the future agenda, how to work in partnership with a clear research
and development agenda is something to be considered.
Q246 Mr Williams:
You said you had not seen representatives of DEFRA perhaps outside
this country making a contribution to food security or supplies.
Do you think that within this country communications between DEFRA
and the food industry are all that they should be, or could there
be improvements in those areas as well?
Mr Laan: I have noted that the
Council of Food Policy advisers has been installed. We expect
that council to contribute to the activities of DEFRA in this
area, so we have some confidence in the initiative. At the same
time, as we said in our written submission we have noted that
the focus on increasing production and the capacity of production
in the UK until recently was not at the top of the agenda. Having
worked for a ministry of agriculture myself in the past, I think
you would expect also a domestic agenda. Yes, the initiatives
do work out globally and the bridge which is available through
DFID for global initiatives to improve the food situation is welcome
and should be pursued, but also I think your own contribution
counts in this area.
Ms Leech: We have a very good
level of dialogue with DEFRA. Like the witness before me, I am
a former civil servant. My perception is that knowledge and understanding
of the industry is diminished in DEFRA compared with the past.
Perhaps that is because I wear rose-tinted spectacles and think
of a past that never really existed, but DEFRA officials are busy
all the time which means that one of the things that falls off
the bottom of the list very quickly is getting out and about,
seeing industry in the raw and understanding the process and all
of that piece. That is a shame because it makes it harder to make
good policy. There is a good level of debate and dialogue. We
see DEFRA officials every week and within my team every day, but
what does it lead to? What difference does it make ultimately?
Some research was done among some senior manufacturing executives
last year. If you look at what is at the top of their list in
terms of risk and weakness it is over-regulation and inconsistency
of policy application across government and legislation being
introduced prematurely or legislation that is not properly science-based.
I talk to DEFRA about these things. The question is whether it
makes any difference in terms of getting greater consistency across
government and a better approach to regulation that the previous
witness also talked about.
Q247 Chairman:
Mr Laan, you said that near the university where you studied a
food valley had been opened up. What is in it?
Mr Laan: The documentation is
probably freely available. What is in it? It contains the education
and research parts of the university. It contains a top food institute
founded by the food industry and the government. The government
is now taking over that role, so it has a specific programme for
that part. The industry now has the so-called food delta programme
which is a joint activity with the food industry. On top of that
there is a whole society or network which basically is called
the food valley where people interact on a weekly basis about
research, science, education and innovation successes. All in
all, it is probably a concept where food production and research
are taken seriously by the partners who have long-term commitments
which include funding.
Q248 Chairman:
You touched briefly on the FAO meeting in Rome in June last year.
Both organisations laid out over two days some of the key elements
of the challenge as they saw it towards food security; in other
words, there was an issue and the world needed an agenda to address
it. Do you recognise it as an issue as such? Do you agree that
we are now moving into an era where we need to think much more
carefully about how we will have long-term security of food supply?
In that context, although we have talked about the United Kingdom
mechanisms one of the things that politics does not do very well
is long term, yet to address some of those challenges is a very
long-term issue. I am asking a general question to try to explore
whether we have put in place the necessary international and national
mechanisms if both of you recognise the issue of food security
as a real one to be addressed. Therefore, do we have in place
the right policy mechanisms to sustain the work that needs to
be done to address the issues we have been discussing over a 20
to 50-year timescale?
Mr Laan: Firstly, if you look
at the World Bank and other international organisations you see
that agriculture is back on the agenda. It came out with a specific
report on agricultural production. It doubled its own budget outlays
on agriculture. The summit in Rome basically did bring together
organisations on a global scale. The UN also has a follow-up commitment
to have an active programme which involves the secretary general
himself. Security is certainly on the agenda; it was in 2008 and
it still is. These organisations have noticed that the fall in
prices due to the financial crisis and recession is probably not
as structural as the underlying elements such as increased population,
changes in diet and the whole supply and demand situation in agriculture.
For the UK domestic situation—I will come to the policy
measures to which you refer—what we see is that not only
DEFRA but the Cabinet Office, Chatham House and others—Professor
Lang to mention just one—have done a lot of work in this
area recently. I think that food security is seriously on the
agenda. The various elements are known: declining productivity;
the impact of climate change; limitations set by biodiversity;
water and so on. This is apparently the period when we reassess
the situation in food supply at a global level. We as a company
with our sustainable agriculture programme and commitment on water
and activities on climate change are serious about these challenges.
We believe that in a lot of our markets these will be determining
factors in the coming period.
Ms Leech: I agree with that. These
are global issues which have to be tackled at that level. A lot
of the right mechanisms are in place but they do not always work
as well as they might and need to do. If you look at trading issues
and the moves around climate change the mechanisms, engagement
and commitment are there but things move arguably too slowly.
I think that given the current economic challenges there is a
risk that the trend to take the foot off the accelerator will
continue and new countervailing measures may come into play. I
think that all of us need to be aware of that and do what we can
to mitigate those risks. As an industry we need to press government
to be brave about not falling into that trap. The hierarchy builds
down from tackling it at that global level through to EU level
and the domestic level. We need to make sure that all the short-term
measures and everyday decisions taken by government ultimately
align within a long-term vision and strategy that must be owned
globally.
Mr Kuyk: Obviously, the EU is
an extremely powerful potential player in this debate. From my
own recent experience prior to joining FDF I think there are still
some tensions and divisions within the Commission, notably between
DG Environment and DG Agri. For example, in the negotiation in
which I was personally involved on the Soil Framework Directive
there were a number of unresolved issues between the two parts
of the commission. In some senses I think that DEFRA is slightly
ahead of the game in that it brought those kinds of policy discussions
under a single roof within the department. I believe that was
a very useful way to try to resolve some of these issues. I was
struck by the fact that in his evidence Professor Lang said that
perhaps instead of having a common agricultural policy Europe
needed a common sustainable food policy. There is something in
that. When I spoke to Mr Laan before this session he said that
in terms of the European public debate food security had not really
registered as a substantive issue. Therefore, there is a lot more
that the EU could do. Again, at the level of regulation and potential
intervention we are talking about it needs to be done at the EU
level. There are limits to what the UK could do even if it was
as joined up in its thinking as it ought to be. I think that we
still have a little way to go on that.
Q249 Chairman:
Perhaps we may explore the area of risks to the supply of food.
From the UK consumer's point of view I suppose that the risk is
whether it will be there tomorrow or whether one can afford to
buy it. If you look at the challenges, we have talked about climate
change, water, technology and other key factors. When a company
like Unilever looks to the long term—I was very interested
to read the document "Growing for the Future" which
shows the global nature of your business—and the range of
crops and locations from which it draws products to keep its food
factories going, in what areas do you identify a real risk if
it is not addressed? What is on the Unilever Richter scale which
says that if you do not deal with something you may be in deep
trouble?
Mr Laan: Our sustainable agriculture
programme is put in place in order to ensure that we are as proactive
in this area as possible and that our supplies produced in a sustainable
way are accessible to us as a food industry. That is an active
programme. We started with our key crops and later we rolled it
out to others. As to water, that is certainly one of the issues.
That is within the indicators we use in our sustainable programme.
We also see other new challenges that will become more relevant
in future. I mention competing claims for biofuels. That is something
about which we are worried. Climate change and changes in agricultural
productivity due to climate change could have an impact on the
production capacity of several countries and could change the
availability of raw material for our business. In tropical areas
we are very close to biodiversity questions. Tropical forests
play an important role. For us it is relevant to make sure that
our production will originate from sustainable sources without
negative impacts on biodiversity and tropical forests. These are
a number of areas in our programme, but it has been installed
because we want to be sure that the raw materials produced in
a sustainable way are secure in future.
Q250 Chairman:
From the FDF perspective what are the key risk areas that you
and your members are looking at?
Ms Leech: It is very similar.
It will vary somewhat from sector to sector depending on the core
of your business, but they are very similar issues. We are very
good as an industry and as a food chain at managing known risk
and short-term interruptions in supply as they occur. That is
because we have invested a lot in being able to do that. I guess
that what keeps a lot of my members awake at night and is much
harder to plan for is the unknown risk. For some things we just
do not know what the scenario will be. You get into some of the
work that Chatham House has been doing around different scenarios
and trying to plan for them and on top of that you place political
considerations and other uncertainties. I am in danger of becoming
an American politician, am I not? There are unknown unknowns.
More than ever there is greater volatility in the system than
people would have been used to dealing with even a short time
ago. That creates new sets of challenges which require new skills
from business leaders and that point is probably not unique to
the food industry.
Q251 Chairman:
That leads us quite neatly to an area on which we touched with
our earlier witness. When the unknown unknowns pop up and cause
a major disruption to basic commodities in the supply chain how
should we in our complex western society respond to that? Should
we be going back to the days of large-scale strategic stocks or
find some other cleverer method of dealing with supply chain disruption?
What would be your recommendation about how to improve our situation?
One thing that struck me when looking at some of the material
was how little stock of basic grain the world had. I think that
in recent times we were reduced to about 50-odd days' supply.
That does not give you long to do something about it if you have
a catastrophic crop failure somewhere. How should we deal with
these unknown unknowns?
Ms Leech: I think we are quite
good at doing it on a short-term basis. Rice was a good example
last year. We had some challenges in the supply chain and we had
to react to that quickly. I think that on a short-term basis the
food chain is good at doing that. If we come back to the role
of government in setting a long-term vision and strategic framework,
I think the challenge is to see a clear trend emerging that points
to the fact that over a period of time consistently environmental
or other changes will lead to a position where a commodity that
we now take pretty much for granted, rightly or wrongly, will
no longer be available to us or will look very different and will
create all sorts of challenges about how it is produced. Those
are the kinds of big strategic threats and possibly lost opportunities
on which we need to work together.
Q252 Chairman:
I would be interested to know your view on whether in this context
we should be saying that from the UK point of view external risks
might increase. Therefore, should we play to our natural advantage
because we have good soils, a moderate climate and reasonably
good rainfall? We could produce agriculturally a lot more than
we do. On the other hand, up to now the policy has been to rely
on trading relationships with other parts of the world and diversity
in the range of materials to which we have access. Given the risks
that we face and even some of the unknown unknowns, should we
move to a strategy where we encourage more domestic production
because it gives us a bit more control or improve in some shape
or form our trading relationships because that gives us a get-out-of-jail-free
card?
Ms Leech: I do not think it is
an either/or; you have to do both. You must ensure that your trading
relationships are robust and that the system is as open as it
can be, but it also behoves everybody to take advantage of their
natural position in the globe, so where it makes sense because
it is sustainable—it is no good taking advantage of our
good soil quality if we erode it to the extent it is no longer
good in 10 years' time—and commercially viable to do so
we should be seeking to maximise our own ability to produce, but
that is not a substitute or an either or as against making sure
we have robust trading relationships and open markets so that
globally we can flex the food system to feed people.
Mr Kuyk: It is easy to confuse
short-term and long-term risks; they are of a different nature.
I very much endorse what Ms Leech said. By all means exploit our
productive potential in this country provided it is taking a comparative
advantage and it is done in a sustainable way. But on your more
cataclysmic scenario, for example a major problem with a crop,
that could happen in the UK; we could have a new disease of wheat
that wiped out the UK wheat crop. Therefore, if we refocus solely
on domestic production and ignore the external trade dimension
that cataclysmic event could be on our own doorstep. Therefore,
it is not an either/or. As Ms Leech and the previous witness said,
horizon-scanning, risk mitigation and picking up trends early
on are all very important parts of it, but any business will say
that diversity of supply and potential resource is the key to
resilience in those circumstances, so I think we need all those
things.
Mr Laan: Your question takes me
to a response from the private chains but also public policy measures.
On the private side, experience last year in particular triggered
new contacts with suppliers about how to deal with shortages,
serious price increases and so on. Therefore, there is an inclination
to have longer-term relations to make sure that in the years to
come there is a guaranteed supply of raw materials. On top of
the scrutiny of suppliers to make sure that you have a robust
supply chain in place certain elements are added. As to government
measures, what we have seen at European level is that we have
taken away the set aside scheme because we have a shortage of
supply. For a certain period we phased out the import duties for
cereals and other crops. We got rid of the energy crop premium.
Individual governments scaled down on biofuel targets because
together they said this was not a situation they wanted to be
in. You could argue that some of these reactions were a bit late
in the day. Nevertheless, they happened and those measures had
an impact. For private and public together we want to be in a
situation where we have communication about these measures so
that if we want them to be taken we articulate them through associations
like FDF or European associations that something needs to change
in order to improve the availability of raw material.
Q253 Chairman:
Perhaps I may ask a question about the two big global targets
that emerged from Rome. All of us have now adopted them as part
of our standard language in discussing these matters, but do either
of your organisations have any doubts that the targets themselves
are a fair assessment of the future world food supply needs?
Mr Laan: In principle it is right
to set targets for governments and the millennium development
goals were again endorsed in Rome. No doubt additional targets
on climate change and so on will be added. The point is: can we
deliver on these targets? Can we formulate active programmes?
It strikes me that both on food security and climate change the
political debate in the UK is ongoing. I think that a kind of
leading voice is heard from the UK on both food security and climate
change and the combination of the two. Can we deliver? Yes. At
European level first we have to agree and deliver and then with
the other main players we must step up our activities.
Q254 Chairman:
When you say that we have to deliver at a European level, if you
did a mathematical exercise and said that a 50% increase in the
world's food supply by 2030 broken down pro rata on the basis
of current agricultural areas it would mean that if Europe took
its share of the burden it ought to produce x more. That
is a very mechanical way of parcelling out how much we ought to
be doing. You could look at it in another way which is to say
that we know what the end result is and so what we will do is
let the market mechanisms simply sort the job out and that will
be okay. To come back to the question of strategic action—you
and Mr Kuyk mentioned the European Union—do we have to be
proactive in a mechanical, mathematical way and say that we will
adopt that big target but break it down and decide how much each
member of the European Union should target, or do we take a step
back and say that everybody is aware of the problem? If the demand
is there the market will cause the supply to rise because prices
will go up and so it is all right; we do not need to interfere.
Which general route should we take? Should we step back or interfere?
Mr Laan: My experience is that
often it is a combination of the two. At European level the population
increase will play a role. By 2030 the population will not be
50% plus, so you may expect some people to respond by asking whether
we really have to increase our food production by 50%. However,
this is a global issue and it will be a challenge to increase
it by 50% by 2030 and to double it by 2050. I think Europe should
play its role in this context. Mr Kuyk spoke about European coherence.
I think that food security should be placed somewhat higher on
the agenda of the new EU Commission and Parliament than it has
been until now to make sure investment in production capacity
and policy measures are in place so we increase our fair share
of production to meet the total global additional production requirement.
We know there are a number of regions outside Europe where potentially
production capacity and yields can be increased, so we shall certainly
look also at those regions.
Mr Kuyk: At the risk of becoming
too theoretical, there is an argument for saying that ultimately
market forces will do this and it will be efficiency of resource
use that achieves it over time, but markets are not perfect and
there are lots of disparities. Another key element of food security
is affordability and markets will not necessarily take that into
account in terms of meeting the food needs of populations. In
preparing for this session I was struck by some OECD[3]
figures that showed member countries had 50% of the currently
available and usable agricultural land in the world but only 20%
of the population, so a market solution within OECD countries
would not take care of the global problem if there were not purchasing
power to access a surplus that is being generated. It must be
a combination of both things. The markets can take you so far
but they need to operate within frameworks. To come to some of
the points that we refer to in our written evidence, that framework
is not just an economic one, which is important, but also a regulatory
one.
Q255 Chairman:
I am aware that when the food industry talked about the food crisis
the French rubbed their hands and thought what a jolly good idea
it was; they could try to hang on to the vestiges of the old CAP
and offer public money to try to increase production because it
would be a good thing to do, whereas the reform programme as witnessed
by the mid-term review and Franz Fischler's earlier reforms have
been to move away from support mechanisms which have an effect
on primary production. Everybody said that that was the right
thing to do, but you say that perhaps we need to walk backwards
to that.
Mr Kuyk: I hope I did not put
it quite like that. You get what you pay for. If you subsidise
production of a particular crop you will get that crop. That leaves
out the dimension of sustainability which is vitally important.
To go back to the theme of efficiency of resource use, the market
will sort that out for you but over time. The timescale over which
the market solves that may not coincide with either the demographic
or political events that take place in the mean time. I think
you must have a framework which is a subtle combination. We are
not talking here about either/ors but perhaps the correction of
certain trends and establishing the right strategic framework
where rational decisions can be taken, "rational" meaning
what in economic and resource use terms will ultimately deliver
the right solutions.
Q256 David Taylor:
I am sure that the combination of the market and strategy is right,
but how far are we towards getting that strategic framework?
Mr Kuyk: It is a bit hard to give
a succinct answer to that. We are certainly not there yet and
it is perhaps one of those things that we recognise when we see
it.
Q257 David Taylor:
That is what I am worrying about. We might be waiting a long time.
Mr Kuyk: I think we are all agreed
that this is something that needs to move up everybody's agenda
and be addressed with rather more urgency than perhaps it has
been in the recent past. Some of the external events in recent
months have served as a form of wake-up call. There is a process
under way. Certainly, the Food and Drink Federation and food companies
are very keen to be involved in that process of discussion as
strategic partners.
Q258 David Taylor:
But there is a framework, the WTO, in which the market operates.
We have been discussing the Doha round for years and it does not
give me a lot of confidence.
Mr Kuyk: I am not sure that is
a question you should address to the Food and Drink Federation.
There are other more important players in that debate.
Q259 David Taylor:
I just make the point that it is all very well to talk about frameworks
but they seem to me to be far away in the distance and I am not
confident that either the private sector or governmental sector
are well enough advanced at the moment to develop something that
needs to be both national and, more particularly, international.
Mr Kuyk: Dare I say that on the
governmental side it comes down to political will? If there is
political will to address the Doha round or other strategic initiatives
that must be not just at a UK level but at an EU and international
level.
Mr Laan: If we are to double food
production by 2050 we believe we need to increase investment in
agricultural production. We may need to double our investment
in research, development, new varieties, best practices and sustainable
methods. We may also have to double our commitment to deliver
on the promises and the reports. We have had statements in Rome;
we have a lot of reports, but for us the real challenge is: how
can we organise ourselves even in difficult economic times to
deliver on these longer-term objectives? If meetings where the
UK government participates—no doubt there will be a number
in the near future here in London—can contribute to ensuring
we keep the focus on results on the ground then that is most helpful.
3 Organisation for Economic Co-operations and Development. Back
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