Economic, financial, and social ties are strong between the European Union and its neighborhood. Societies in the EU neighborhood need to become both less vulnerable to damage from regional conflicts and global crises and more resilient. This, in turn, would have positive implications for Europe. Agricultural and agri-food industry interlinkages between Tunisia and the EU could help the North African state – at present enduring domestic political stress and social as well as economic crises – to improve its competitiveness and be more resistant against external disruptions.

Stronger cooperation in developing the Tunisian agriculture and agri-food industry would benefit both Tunisia and the European Union. In this blog post, we recommend concrete policy fields for Tunisian and European decision-makers to work on to better cope with current upheavals.

Be aware of continuous dependencies in export markets

Tunisia’s trade flows for agriculture and agri-food industry production reflect the country’s dependency on European markets. In 2021, nearly half of all exports from these two sectors went to the EU (USD 826 million). The EU remains by far Tunisia’s largest trading partner, even though its relative importance has declined in comparison to the early 2000s by about fifteen percentage points.

The strong focus on certain products – e.g., olive oil – or countries of destinations – e.g., some larger EU countries – comes at the cost of constant dependencies.

While it can be reasonable to specialize in the production of a handful of foodstuffs and export to specific markets, this comes with (economic) vulnerabilities which Tunisia should closely monitor on a continuous basis.

Update the Association Agreement and renegotiate tariff rate quotas

Trade relationships between the EU and Tunisia generally have become quite liberal since the Association Agreement of 1998. As many as 97.3 percent of Tunisian exports to the EU in 2016 were duty- and quota-free and trade-weighted average duties are just 0.6 percent. Only when it comes to agriculture does this picture differ.

Agricultural products from Tunisia to the EU are still subject to duties averaging 12 percent, while other North African states negotiated completely duty-free arrangements. In the other direction, Tunisia charges the EU duties that average to 32 percent when it comes to agricultural products in negotiations for a Deep and Comprehensive Free Trade Area (DCFTA) between the EU and Tunisia (2015–2019), the EU proposed eliminating all tariffs and quotas.

However, these negotiations have been on hold since 2019. Starting new negotiations for the modernization of the economy and improving trade relations (as the EU remains the most important export destination for Tunisian agricultural and agri-food industry products) could be beneficial.

At present, tariff rate quotas (TRQs) apply to thirteen agricultural products. TRQs allow a predetermined quantity of a product to be imported at a lower rate of import duty compared to the rate which would normally be applicable to that product.

The review of how utilization rates of tariff quotas have evolved shows that Tunisia has not benefited fully on all thirteen products to which TRQs apply. Solely for olive oil, prepared or preserved tomatoes, and preserved fish has the country fully used the opportunities of preferential exports to the EU within the TRQ framework in recent years.

A key policy goal should be negotiating an accord on increased quantities in the TRQ system with the EU for those products that already fulfill the quotas. Increases in preferential quotas for olive oil could especially benefit Tunisia’s economy and help stabilize the country.

Furthermore, Tunisia should closely examine the cases of products that do not yet fully use the preferential TRQ framework, e.g., wine or oranges.

Which agricultural products to bring further forward?

It is important for developing countries to make use of well-tailored growth strategies. A key element of propitious approaches to facilitating long-term growth is evaluating future export opportunities. The International Trade Center (ITC) has developed an assessment methodology to help in this respect: the Export Potential Indicator (EPI) identifies internationally competitive products for an exporting country with good prospects of success in target markets. This enables one to derive the export potential for specific Tunisian products in 2026 and compare that to today’s export values for these products.

Among agriculture and agri-food products that have the highest export potential as well as the highest difference between export potential and actual export outturns are olive oil (export potential: USD 534 million, actual exports: USD 407 million), fresh or dry dates (export potential: USD 249 million, actual exports: USD 129 million) and fresh tomatoes (export potential: USD 44 million, actual exports: USD 41 million).

This illustrates how important it is for Tunisia to closely analyse production in the agricultural sector – to lay the foundation for strategic decisions about the future products it would like to promote and support.

Help the most vulnerable and measure modernization

Tunisia has a permanent trade deficit. Agriculture and the agri-food industry play a substantial role here as imports in these sectors have exceeded exports for the past twenty years, apart from 2006, when the agricultural and agri-food trade balance was positive. In 2021, exports for these products amounted to only USD 1.796 billion, while imports reached USD 2.645 billion.

This prevailing deficit in Tunisia’s agriculture and agri-food trade shows that the country is unable to improve productivity in this sector adequately, given its inability to exploit export opportunities. This is another reason for speeding up modernization in agriculture and the agri-food industry, including strategic investments that would improve soil and water quality, projects related to sustainability and undertakings geared toward conservation.

Such investments would have positive spill-over effects on other sectors of the economy such as tourism. This way, Tunisia would make better use of export opportunities for products in which it traditionally has a comparative advantage.

How to cope with the short-term consequences of Russia’s war

Tunisia’s economy is likely to be significantly impacted by the international repercussions of Russia’s war in Ukraine, mainly by its reliance on grain imports from Ukraine. Along with higher prices that Tunisia must pay, governmental subsidies for basic foodstuffs have increased.

Livestock and dairy production in Tunisia also rely heavily on imported raw materials used in livestock feed. These are, in particular, maize, wheat and barley for fodder and oil cakes, a large amount of which came from Ukraine before the war, too.

Although these products have traditionally been imported without state intervention, since 2021, the government has tried several times to set price caps and control the increase in production costs. However, these interventions have not improved stock levels.

Tunisia needs to seek out other sources to import grain especially, similarly to many countries that face the same situation. Meanwhile, Tunisia’s domestic vulnerability to the external shock from the war in Ukraine remains higher than in most countries. Without additional financial assistance from the EU and other international actors, Tunisia will find it challenging to fully overcome the described hardships.

This blog post summarizes the key findings of our study with Tunisian agricultural expert Houssem Eddine Chebbi: “How to Improve Food Security in Tunisia: Step up Mutual Trade and Investment Links with the EU”.

About the authors

Christian Hanelt is a Senior Expert for the EU Neighbourhood and the Middle East, working in the Program “Europe’s Future.” His areas of expertise include the Euro-Mediterranean Partnership, the Israeli-Arab conflict, the EU’s relations with the Gulf region, economic developments in the Arab world, and the causes of flight and migration.

Markus Overdiek works for the “Europe’s Future” program at the Bertelsmann Stiftung. Previously, he worked for the Bertelsmann Stiftung on the projects “Ethics of Algorithms” and “Global Economic Dynamics”. He has a focus in economics, data science, digitization, and European affairs.

Miriam Kosmehl has been Senior Expert Eastern Europe with the Bertelsmann Stiftung’s “Europe’s Future” Program since 2017. From Berlin, she works primarily on the Eastern Partnership region, since 2022 with a particular focus on the strategic management of global interdependence.

Read more on the EU’s Neighborhood:

Across the Mediterranean: New Perspectives for Old Neighbors

Agriculture Export Disruptions Pose Challenges with High Crisis Potential

Agricultural Production in Ukraine and Russia: Economic Implications for Europe

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