Tunisian olive oil in a globalised world. Export relations with the EU

1. Introduction

Tunisia is one of the leading olive oil producers and exporters in the world. During the season 2022-2023, the country produced 217,000 tons of olive oil, positioning itself as fifth in the world ranking. Provisional data for the 2023-2024 marketing year show that Tunisia maintains its leading position, with an estimated 220,000 tonnes of production (IOC, 2024a). In the field of exportations, the North African country usually ranks as the first exporter after the European Union (EU) (Afaoui et al., 2022). Internally, the industry plays an unquestionable socio-economic role, being a pivotal contributor to economic growth and stability, food security, foreign currency reserves and job creation. Olive oil production is Tunisia’s main agricultural activity, and represents more than 50% of all agricultural exports each year (As Zlaoui et al., 2019).

Despite its imperative role as the engine of the national economy, olive oil and the olive trees are also more than just agricultural products in Tunisia; they are indeed intertwined with the country’s identity, history, and cultural values. Olive trees have been cultivated in the region for millennia, dating back to the Phoenician and Roman periods (Kashiwagi et al., 2016). Today, olive trees and their oil hold deep significance in Tunisian culture, both as a symbol of heritage and as a central element in daily life (Ben Abderrazek, 2023). From its role in the economy and culinary practices to its symbolic meaning of peace, resilience, and longevity, the olive tree is deeply embedded in the soul of Tunisian life. It continues to be a living testament to the country’s rich heritage and its ongoing journey toward prosperity. 

Given its relevance, the olive oil industry has always been a key strategic priority for successive Tunisan governments (Kashiwagi et al., 2016). However, the sector still suffers from deficiencies and new challenges that undermine its longevity, sustainability and productivity. As in other major olive oil producers, such as Spain and Italy, climate change is becoming a key partner to be addressed as it challenges, among other things, the continuity and consistency of production (Weber et al., 2019). Further, government-promoted intensive-farming techniques, which use Spanish olive tree varieties and mechanised harvesting methods are also raising concerns around environmental protection and the long-term sustainability of the sector. These practices also threaten the preservation of Tunisian olive varieties and the well-being of local communities and small producers (Belhadj, 2023). Additionally, in the field of job creation, the industry in Tunisia confronts the lack of low-skill workforce, while new debates on the promotion of better-quality jobs are arising  (Weber et al., 2019). 

However, the current most fruitful avenue for improvement of the Tunisian olive oil sector appears when analysing its exportation system. Despite being one of the most important producers in the world, Tunisia has a small internal consumption of olive oil. As Weber et al. (2019) explain, the relatively weak consumption can be traced  to the elevated price of olive oil in comparison with other vegetable oils that usually benefit from subsidies. This internal characteristic explains that most of the olive oil produced in the country is exported, mostly to the EU. In fact, given the limited domestic consumption and the high export-to-production ratios, Tunisia’s growth opportunities appear to be in the export market (Weber et al., 2019). However, experts such as Donia Sfar (Daibo, 2024) highlight that Tunisia’s olive oil exportation system has a high reliance on bulk exportations, a characteristic that hinders the country’s economy, and its olive oil industry profitability and recognition. Taking this perspective into account, it becomes essential to analyse the country’s olive oil industry exportation trends and reflect on potential avenues for improvement. Therefore, this paper asks: how can the Tunisian olive oil industry improve its competitiveness when exporting olive oil to the international market? 

2. EU-Tunisia agricultural trade relations

The agricultural trade relations between the EU and Tunisia are governed by the EU-Tunisia Association Agreement (AA), which came into effect on March 1, 1998. This agreement established a free trade area, including partial liberalization of agricultural products (European Commission, 2024a). With the current legislation in place, Tunisia can export up to 56,700 tons of duty-free olive oil to the EU (GIZ, 2019). 

In December 2011, the EU approved a mandate for negotiations on a Deep and Comprehensive Free Trade Agreement (DCFTA), which also includes provisions for Geographical Indications (GIs). The first “zero” round of talks was held in Tunis in 2015, but since then, progress has been slow (European Commission, 2024a). 

3. Problem description and background : the bulk trade system

Today, much of the olive oil produced in Tunisia is exported. The particularity of the Tunisian case is that the majority of these exportations are sold on the international market in bulk. According to the National Observatory for Agriculture in Tunisia (ONAGRI), between 80-91% of Tunisian olive oil is exported in bulk, while value-added bottled and branded exports count less than 9% (Daibo, 2024; ONAGRI 2023).

When analysing the main destinations of Tunisian olive oil, data shows that a huge percentage of these bulk exportations are bought by main olive oil producers such as Spain and Italy (IOC, 2024b; ONAGRI 2023). Tunisian olive oil has long been a mainstay of the country’s agricultural exports to the European Union (Abderrazek, 2023), which, since the seventies has been the main export market for the North African country (Weber et al., 2019; Arfaoui et al., 2022). 

The problem behind this exportation dynamic arrives when we analyse the supply chain of the Tunisian bulk olive oil once it has crossed the European borders. Most of the European companies that have imported the bulk Tunisian olive oil usually blend it with their own, bottling, labelling and re-exporting this mix under their own national brands. As Weber et al. (2019) explain, these countries are not obligated to declare the percentage of Tunisian olive oil they used in their brands.

With the current legislation in place, the EU imports Tunisian olive oil through two main channels: the tariff quota and inward processing. Under the tariff quota, a set amount of olive oil can enter the EU duty-free each year either in bulk or bottled, and it remains identifiable as Tunisian oil. Inward processing, on the other hand, allows Tunisian olive oil to enter the EU duty-free if it is mixed with European oils and processed by EU companies. The final product, though containing Tunisian oil, is often labeled as Spanish or from another European country and is sold outside the EU. This channel is used primarily for cost reduction in European oil production but requires that the processed product be exported to avoid market distortion (GIZ, 2019). Therefore, unlike the tariff quota, inward processing hides the origin of the Tunisian oil in the final product, resulting in various economic and commercial disadvantages for Tunisia’s economy and its industry.

3.1. Why is this a problem for Tunisia? 

When exporting olive oil in bulk, Tunisian olive oil is valued (and paid) by its physical characteristics, but the symbolic attributes are added in European countries (Zlaoui et al., 2019). In other words, the value-added processing (bottling, packaging, branding, and marketing) happens outside the country. Onagri data show that Spain is the leading destination for Tunisian olive oil bulk exportations, with 47.4 percent of Tunisian bulk olive oil flowing to Spanish ports (Daibo, 2024). Spain’s strategic advantage and developed packaging, labelling, and distribution companies allow the European country to import Tunisian olive oil at the lowest commodity price and appreciate its value when mixed, bottled and sold under the label of ‘Spanish oil’. By doing this, the European country captures a larger share of profits. In other words, Spain retains higher margins. In this transaction, Tunisia loses the potential benefits of higher olive oil prices that come with bottled, labelled and marketed branded olive oil. To put it differently, Tunisia earns less for each liter of olive oil than if it was to sell the oil in packaged and branded form. 

Lower profit margins, however, are not the only negative effect of exporting most of the country’s olive oil in bulk. With this dynamic, Tunisia misses out on the opportunity to create and promote its own brands of olive oil abroad and the extra benefits that comes with it. The value added of packaged products is often higher due to packaging, presentation and traceability, which would help to position Tunisian olive oil as a high-quality product in the international market. Without strong branding, Tunisian olive oil remains a largely “anonymous” product, making it difficult for Tunisian producers to build customer loyalty and recognition. In parallel, the industry’s focus on bulk exports prevents the development of value-added industries in the country. As Weber et al. (2019) explain, bottling, packaging, and marketing are labor-intensive and can create quality jobs and stimulate innovation. 

3.2. Why does this happen? 

According to Ben Abderrazek (2023), bulk export of Tunisian olive oil to what are almost always considered Tunisia’s biggest competitors, Spain and Italy, is the result of production costs and competitive pressures. For many years, the Tunisian government’s strategy for the olive oil sector has been focused on promoting quantity over quality. Today, the country lacks a consolidated packaging, branding and marketing industry that allows olive oil producers to bottle and brand their olive oil at a competitive rate price (Amara, 2024). As Donia Sfar states, “it is difficult for olive oil companies in Tunisia to find packaging, and even if they do, it is expensive” (Daibo, 2024, pr. 20). While larger olive oil producers, especially Spain and Italy, dominate the packaged-branded olive oil market, many technologically ill-equipped producers in Tunisia can not comply with the requirements of major international food chains (Weber et al., 2019). As Arfaoui (2022) affirms, “at the national level, Tunisia suffers from a lack of innovation and the high costs of packaging” (p. 18). Therefore, to remain competitive and capture global market share, Tunisian producers need to prioritize exports in bulk, losing the higher costs associated with packaging and branding. 

According to a survey on the olive oil sector in the North-West region of Tunisia conducted by Weber et al., (2019), relevant industry stakeholders declared that the deficient quality of domestic packaging providers pushes many to import high quality bottles mostly from Italy. But even when Tunisian companies have the capital to import bottles, profitability problems still arise. Indeed, respondents also acknowledge that these transactions entail complicated customs procedures and high financial costs for their companies. Regarding additional internal challenges in the country, Sfar also alludes to Tunisia’s high levels of bureaucracy for production, packaging and exportation of olive oil. “Exporters are currently facing difficulties, particularly in relation to extended deadlines and complex procedures” (Daibo, 2024, pr. 11). 

At the same time, the EU being the primary market for Tunisian olive oil comes at a cost. The system of quotas for exportation into the EU entails limitations and an increasing complexity that directly affect its capacity to export value-added products (Abderrazek, 2023). As already explained, Spain and Italy lead the packaging and branding steps in the olive oil industry, a fact that exemplifies why these countries prefer to import bulk olive oil than the bottled alternative. As Weber et al. (2019) affirm, an increase in EU’s imports of branded Tunisian olive oil will imply more direct competition with established major producers such as  Spain. Therefore, it is evident that these competitive trade dynamics have an effect on the operationalization of Tunisian exports. 

Another reason for bulk exportation is that Tunisian olive oil is often undervalued, with consumers typically favoring established European brands. (Arfaoui, 2022; Bociaga, 2023). Unlike Spain and Italy, where powerful brands dominate global retail shelves, consumers’ awareness of Tunisian olive oil in the EU is limited. As well-established sociological theories on consumer behaviour, perception and decision-making explain, consumers’ purchase choices are often influenced by their own beliefs and pre-established ideas of what is “good”, sometimes regardless of the actual quality of the product. For Anita Zachou – an olive oil expert, Tunisian olive oil varieties such as Chetoui, Sayali and Chemlali have great potential to attract customers and capture their taste preferences (Bociaga, 2023). Efforts need to concentrate then on improving key strategic areas that would reinforce the image of Tunisian olive oil in the world and facilitate its bottled and branded exportation.

4. Policy perspectives and challenges on the promotion of bottled and branded Tunisian olive oil exportations

4.1. Policy perspectives 

Taking everything previously discussed into account, Tunisian olive oil sector would certainly benefit from a decrease in the percentage of olive oil exported in bulk and an increase in its bottled and branded exportation. By doing this, benefits for Tunisians producers will boost while the label ‘made in Tunisia’ will increase its international recognition. “Bottled olive oil is essential for the industry’s sustained growth and competitiveness on the global stage” (Daibo, 2024, pr.23). If the current production costs, trade paradigm, and low awareness of Tunisian olive oil are main causes behind this phenomenon, in this section I will analyse potential policy directions that could create a strategic shift towards higher value-added production and export of Tunisian olive oil. 

At the country’s internal level, the olive oil industry would benefit from the development of the country’s packaging sector. A strategic investment in higher value-added segments of the production chain will decrease the costs of bottling olive oil and improve the capacity of Tunisian producers to compete at the international market. In parallel, olive oil producers in Tunisia should be supported to enhance the packaging and branding processes of their olive oil, having access to funding and administrative support. Furthermore, producers should be backed when trying to introduce and promote their bottled products in the international market. Given the complex procedures, extended deadlines, and high levels of bureaucracy for producing, packaging and exporting olive oil identified by experts such as Sfar (Daibo 2024), the Tunisian government would benefit from intensifying efforts to eliminate these obstacles and facilitate processes. A highly efficient production and export system will improve Tunisia’s position at the global market and capitalize on the quality of the Tunisian olive oil. 

At the same time, the EU could play a role in supporting Tunisia’s olive oil industry by promoting infrastructure development and facilitating access to funding for innovation in packaging and marketing sectors. EU policy makers can design new EU-funded programs that will provide capacity-building on new technologies which will be instrumental in developing the industrial capacity of Tunisia. Furthermore, the EU could also work to streamline the bureaucratic processes demanded for importation of Tunisian products and adapt the current quota system to provide more flexibility and favorable conditions for the importation of bottled olive oil from Tunisia. This could include allocating separate or favourable quotas for bottled products from Tunisia, ensuring they do not face the same limitations as in the present. Simplifying regulations would lower the barriers to entry for Tunisian olive oil and increase its competitiveness within the EU market. 

While these measures may sound unrealistic from the EU perspective, to secure long-term stability and economic growth, the EU might recognize the broader strategic benefits of supporting Tunisia’s olive oil industry. First, fostering economic development in Tunisia could help stabilize the region, reducing migration pressures and promoting geo-political stability. Additionally, enhancing Tunisia’s olive oil industry could help create a stronger regional trade partner, encouraging deeper economic integration between the EU and North Africa. Furthermore, the EU could benefit from diversified supply sources, reducing dependence on domestic production and minimizing potential risks such as climate-related disruptions to European harvests. In the long term, the EU could also gain access to a wider variety of high-quality olive oil, benefiting consumers and the market while maintaining sustainable competition rather than direct rivalry.

Additionally, Tunisia’s olive oil sector would also benefit from the diversification of its export industry. The country could search for other markets outside the EU with better quota systems, where the exportation of bottled Tunisian olive oil could be easier. Given the rising global consumption of olive oil, Tunisia could work to secure trade deals with countries experiencing a growing demand for olive oil. Simultaneously, this diversification can give greater visibility to Tunisian olive oil and strengthen its reputation on the international stage. In fact, as explained by Arfaoui et al. (2022), in recent years Tunisian exporters have already started diversifying their market, securing exports in Asia, US and Canada. Between 2006 and 2020 Tunisian exports in the USA increased from 5% to 25%, while in Canada from 2% to 11% for the same period (Trade Map, 2021). 

Further, the reputation of Tunisian olive oil abroad needs to be boosted further. For this, the cooperation between the Tunisian government and local  producers would become essential. Throughthat, consumers will start to place higher confidence in the brand ‘made in Tunisia’, which ultimately will facilitate the bottled exportation of Tunisian olive oil. As Zlaoui et al., (2019) state, “the Tunisian government should be involved in order to increase the visibility and reputation of the Tunisian olive oil on foreign markets” (p.35). For this purpose, it is highly positive that Tunisian olive oil companies and producers continue to participate in international fairs and competitions. These events allow them to position their products on the international stage and publicize their quality and traceability among key international stakeholders. In that manner, Tunisian olive oil can be discovered by new consumers and markets, which will raise its prestige and international recognition. 

The EU could also contribute to increasing the awareness among consumers of tunisian olive oil, providing financial, administrative or promotional support for Tunisian olive oil producers to participate in key European olive oil fairs. Such measures would not only increase the visibility and consumer awareness of the unique qualities of Tunisian products but also could increase cross-border cooperation with win-win benefits. The current visa system to enter the EU, travel costs and language barriers are among some of the main difficulties Tunisian producers encounter when attempting to attend these forums. 

When analysing the current path of the Tunisian olive oil industry, we see that some of these recommendations have already started to be implemented. According to the UN Food and Agriculture Organization (FAO), since 2013 a joint program between the EBRD and FAO works on unlocking the potential of Tunisia’s olive oil industry by boosting a transition from mass production to bottled oils with capacity-building trainings along the value chain (PNUD, 2023). In fact, as Ben Abderrazek (2023) explains, the current exportation umbrella covers 60 countries, which evidences the existence of a strategy aimed at diversifying markets and increasing the value of the product.

In parallel, Tunisia’s olive oil is increasingly more present in international awards and fairs. As Daibo (2024) explains, in the 2024 NYIOOC World Olive Oil Competition, Tunisian producers earned 26 awards (Daibo, 2024). Tunisian olive oil has also entered the UK market separate from international blends with companies such as EVOO Zeet, an award-winning business that has played a key role in introducing the ‘Tunisian brand’ in the UK since 2017 (Bociaga, 2023). However, data still shows that the sector in Tunisia needs to keep working on its value-added transformation. As Judy Rodway- a renowned expert on olive oils, explained: “more needs to be done to increase awareness and recognition of Tunisian olive oils” (Bociaga, 2023). This underlines the importance of further promoting the processing, bottling, branding and marketing of Tunisian olive oil to maximise its value on world markets and strengthen Tunisia’s position as a producer of quality olive oil (Ben Abderrazek, 2023).

4.2. Challenges 

While the development of these policy perspectives could improve the long-term sustainability and profitability of the Tunisian olive oil industry, there exist many challenges that could hinder these perspectives. One of the primary and most immediate obstacles is Tunisia’s current economic situation, which places significant pressure on the country to prioritize immediate production and export needs over long-term industrial development. In a market economy driven by external demand, Tunisia’s olive oil producers are often forced to focus on bulk exports to meet short-term quotas and financial goals, rather than investing in value-added products like bottled and branded olive oils. High packaging costs and outdated practices limit the ability of local producers to compete in higher-value markets, and without substantial investments in technology and innovation, achieving the necessary industrial transformation may be slow and difficult.

Another significant challenge lies in the current paradigm of the EU trade system, where the interests of key European countries, particularly Italy and Spain, may pose a barrier to any substantial change. Both Italy and Spain are dominant players in the global olive oil market, and their political and economic influence within the EU means that they hold considerable sway over trade agreements and regulations. As a result, any attempt to modify the EU’s olive oil trade policies—such as those that might favor Tunisia’s bottled olive oil exports—could face resistance from these countries, who have vested interests in protecting their own domestic industries. The power of Italian and Spanish lobbies may shape the EU’s regulatory framework in ways that limit Tunisia’s ability to expand its value-added exports within the European market. This dynamic could ultimately delay or even prevent the full realization of the potential benefits from Tunisia’s strategic pivot toward value-added olive oil production. 

5. Conclusion

While the olive oil sector plays a crucial role in Tunisia’s economy, enhancing competitiveness in the global market requires a strategic shift towards increasing bottled and branded exports. Given Tunisia’s own domestic industry deficiencies, current trade paradigms and low awareness of international consumers on Tunisian olive oil, bulk exports represent for the country a more cost-effective strategy, especially when aiming to compete on price in international markets. This tendency, however, entails for Tunisia lower profit margins, loss of brand recognition and limited development of value-added industries. A change in the current status quo can be achieved through investments in conditioning-related industries, improvement of bureaucracy and trade agreements, the diversification of Tunisia’s exportation market, and the promotion of international awareness and recognition of Tunisian olive oil in the international market. However, overcoming existing economic pressures, high production costs, and the political dynamics within the EU’s trade system will require sustained efforts and collaboration. Ultimately, by addressing these challenges and enhancing the change needed, Tunisia has the opportunity to greatly showcase its rich cultural narrative to global markets, elevating the perception of Tunisian products while reinforcing its reputation as a land of heritage, craftsmanship, and authenticity. 

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