"Protectionism makes everyone poorer" (Christian Verschueren, EuroCommerce)

"Protectionism makes everyone poorer" (Christian Verschueren, EuroCommerce)
Christian Verschueren

Trade wars and discrimination within the single market create growing pressures on retailers in Europe. EuroCommerce Director-General Christian Verschueren is concerned, but looks forward confidently to the future.


Dark clouds

There are many priorities on the agenda for the voice of the retail and wholesale sector in Europe. Where to start? Perhaps with the current turbulent political situation?


"We are looking carefully at the political developments in Europe: the upcoming elections in Hungary, the government negotiations in Italy... It can turn out well or badly. The situation in Italy is worrying, with a risk of losing a pro-European government in Rome. On the other hand, with the formation of a new grand coalition, we hope that Germany will quickly get back on track, so that we can go forward and build the next steps of European integration on a strong Paris-Berlin axis. With President Macron’s vision and Chancellor Merkel’s leadership, I see a window of opportunity for taking the EU forward in a strong way."


And that is urgently needed in light of the threat of trade wars that hang over the sector like a dark cloud. “To be honest, we are really concerned. Protectionism is bad for the sector and for consumers. Every form of protectionism makes everyone poorer. Ultimately, it prevents customers from choosing freely and benefiting from competition. President Trump is playing with fire and should think carefully about what his actions could unleash.” Closer to home, the same applies to the Brexit negotiations. "We are making little progress. I do not see how we can bridge the gap between the very tough lines that the UK has set out and the basic principles of the European treaty. We can only hope that common sense eventually prevails. "


Abuse of power?

It does not stop there: even within the EU, in Central and Eastern European countries, retail chains are now faced with various forms of discrimination. "In six or seven countries, large retail groups are facing unfair taxes, excessive food safety controls, or limitations to commercial establishment. This is a clear discrimination against those retailers who came from the West, and modernised retail and brought competition to those countries. The European Commission should work to create clarity here. We have already achieved some successes through the European Commission, who, among other things, managed to stop a discriminatory retail tax in Poland; Hungary and the Czech Republic have also been called to order. But these countries are inventive, and are always coming up with something new. It remains a concern.”


Another hot topic is the fact that retailers are increasingly being accused of abusing their buying power. Unfairly, Verschueren believes. "There is no evidence of a systemic issue in trading practices.  We therefore cannot see why the European Commission wants to introduce legislation and how European legislation will solve the problem and improve the situation for any European farmer. The context is different in each country. In Belgium, for example, there is a well-functioning supply chain initiative. This supposes a level of trust between the trading partners. France is moving towards yet more national legislation. In the north of Europe, farmers are generally well organised in powerful cooperatives, and these have delivered a lot more than any legislation. There is already a vast amount of legislation and well-functioning voluntary schemes at Member State level and there is no hard evidence of any added-value from EU intervention. If, as the Commission is indicating, it leaves it to each country to top up EU regulation with its own requirements, it will do nothing to advance the single market. Moreover, it will not change the situation of farmers. Retailers buy relatively little directly from farmers, 95% of what they sell is processed often multiple times, and there are many intermediaries. However, we must ensure that agriculture can work in line with the market. In France, for example, the demand for organic pork is greater than the supply, but farmers continue to produce pork that consumers do not want. Consumers want less meat but fatter and tastier meat, but farmers don’t produce it, and retailers have to import from elsewhere, sometimes even from outside Europe. That is absurd. We agree fully with the objective of a fair, transparent, sustainable food supply chain that benefits all actors, including consumers. To benefit farmers and SMEs, we need structural measures to make them more competitive and able to adapt to rapid changes in consumer demand."


Need for harmonisation

Retailers need to adapt to a new digital reality, and so does EU legislation. The regulation that prohibits ‘geoblocking’ is not a complete success, says our interlocutor. "We are happy with the clarity: there is no obligation to deliver abroad, the consumer will have to pick up his order in the country of origin. But we do ask ourselves about how this helps cross-border trade; the regulation does nothing to address the problems arising from the many differences in consumer guarantees, VAT rates and so on. When a retailer actively seeks to attract foreign consumers, he must adapt to legislation that is not harmonised. That is certainly not ideal for smaller web shops.”


The European Commission is also working on tax rules for the digital economy. "We need a level playing field. For example, in France or the UK, retailers pay taxes on their square meters of commercial space. When you have 5,000 stores, you pay far more taxes than when you are a pure player with only a few distribution centers. There is also a demand for taxation in the country where the turnover is realised. We have no preference for one or other business model, but we do expect a level playing field for everyone.”


An important agenda item this year is the implementation of the EU General Data Protection Regulation. The deadline for compliance on 25 May is coming closer quickly and retailers must be ready. "We have published a practical guide to help our members: ‘The new EU Data Protection Rules - A Guide for Retailers. Everyone must work to ensure that they are compliant. But this is not the end of the road. The European Parliament and the Council of Ministers are working on e-privacy, which deals with cookies and other privacy settings. We are counting on the fact that this e-Privacy Regulation does not contradict the GDPR. Consumers want to be confident that their data are being used correctly and retailers must be able to implement regulations in a practical way and in the best interest of their customers."


Positive prospects

EuroCommerce is currently conducting a strategic exercise to establish the main priorities for the next three years, we hear. "We are preparing for the new Commission and the new Parliament. We continue to strengthen our organization as the main representative of the retail and wholesale sector. New members joined again last year and we are in discussion with additional candidates, including pure players. It is important that retailers make their voices heard. Too many major retailers are still not engaged in the collective effort. As a result, we remain less well-resourced than organisations representing farmers, manufacturers, or banks. And retailers and wholesalers who are not a member of EuroCommerce cannot make their voice heard and influence our position taking which is a much greater benefit for their businesses. Certainly after Brexit, the European agenda will remain important for all retailers, whether they are active internationally or not."


In spite of everything, is Christian Verschueren optimistic for the retail sector? "Well, I have a lot of confidence. It is generally true that consumer sales continue to be slack in brick-and-mortar stores, while e-commerce runs like a train. But we see a very varied picture in Europe. Certain segments do better than others. Look at the French market: it grew by 1.5% in 2017, and organic food advanced by 16%. The discounters are also growing faster than the overall market. In Spain and Italy there is some improvement; in mature markets, traditional retailers experience competition from e-commerce and discounters. Costs are rising in the UK and Germany as a result of, among other factors rising wages. The entire supply chain is under pressure, as was recently shown by the conflict between Agecore and Nestlé. In short, we are experiencing interesting times. But consumer confidence is rising. This does not automatically translate into buying behavior, but the outlook is positive. "