The warnings, issued in the lastest edition of an annual benchmarking report by the Confederation of Food and Drink Industries (CIAA), points out that the industry is falling behind global competitors.

The higher cost of commodities in the bloc compared to other regions is of particular concern, the CIAA stated.

For example industry paid 50 per cent more for beef in the EU than in competing markets during 2006 the CIAA pointed out. The price of maize was 42 per cent higher and for poultry meat 33 more in the EU.

The association repeated its warning that EU industry needs to to have access to competitive agricultural raw materials, and should not be held back by the bloc's protectionist policies.

Ongoing targeted action in trade policy to improve access to third country markets, stated Jean Martin, the CIAA's president.

The European market share of global food and drink exports shrank over the last eight years to 20 per cent in 2005, from 24 per cent in 1997, while other countries increased their market share considerably, the CIAA stated.

"For the European food and drink industry to remain competitive, European policy makers need to create a stimulating business environment that is conducive to innovation," stated Jean Martin, the CIAA's president. "On the other hand, we have the responsibility for embracing the latest techniques and developing innovative products that allow us to serve European consumers efficiently and respond to their rapidly changing needs."

Investment in reseach and development is also behind that of other regions. Research and development investments in the food and drink sector as a percentage of total output represent only 0.24 per cent in the EU compared to 0.35 per cent in the US, 0.41 per cent in Australia and 1.21 per cent in Japan.

Again, the industry repeated its claim that the administrative burden in the EU is putting a damper on competitiveness.

"The high level of administrative burden has to be addressed," the CIAA stated, pointing to what it says are examples of where the European Commission's action programme for better regulation falls short of industry expectation.

The CIAA claims that some of the actions have acutally resulted in legislative reviews that "give rise to concern".

The review of the novel foods regulation and labelling legislation demonstrates that the impact assessment questionnaires posed serious problems for respondents, the CIAA claimed.

"The answers submitted were often not suitable for proper analysis concerning the impact of these regulations on industry," the CIAA stated. "Furthermore, the way individual and collective responses are taken into account remained unclear."

In addition, some new legislative proposals relating to hygiene and claims do not follow the better regulation principles, according to which new legislation should have no negative impact on innovation, the CIAA claimed

Legislative requirements should be practically achievable and enforceable, the CIAA stated.

"Regulation should be less interventionist and designed to stimulate output and growth of the sector," the CIAA stated.

In setting environmental policy, legislators should consider the important role that voluntary stakeholder initiatives and public-private partnership can have on sustainable production and consumption.

Better regulation should be recognised by EU legislators, the CIAA stated.

"Voluntary industry initiatives and partnerships, self-regulation, or co-regulation should be considered more often on a case-by-case basis in support of better regulation and competitiveness objectives," the CIAA stated.

Greater international challenges and concentrated retail and distribution sectors also continue to put strong pressure on the EU food and drink industry's competitive position, the CIAA stated.

Another constraint is the highly fragmented nature of the sector, of which small and medium sized companies make up 99 per cent of its structure and account for about 50 per cent of total turnover.

The organisation identifies two ways of remaining competitive. One is for companies to move up the value chain, producing higher value-added goods and putting more emphasis on innovative products.

Another way is to make better use of growth opportunities in international

markets to sustain or expand export performance, the CIAA stated.

Over the years, the food and drink industry has responded to changing consumer preferences and the growing demand for value added goods, Martin noted.

"Cultural diversity and specific food traditions are the foundation and the key assets for the industry's sustainable development," he stated in the report.

The EU food and drink industry is the largest manufacturing sector in Europe with a turnover of €836bn.

The CIAA's membership is made up of 25 national federations, including three observers, 30 European sector associations and 20 major food and drink companies.