New proposals ask EU to cut export subsidies sooner

By Chris Mercer

- Last updated on GMT

Related tags European union

British dairy officials are lobbying the European Union to stick to
its 2013 deadline for scrapping export subsidies, after nations
outside the bloc called for aid to end faster.

Industry association Dairy UK said the latest proposals from certain non-EU countries, including Australia, New Zealand and the US, would require the EU to cut export subsidies by 80 per cent in volume and value terms by 2010. Half the cuts would also take place in the first year.

The European Commission pledged to abolish all export subsidies by 2013 at last December's World Trade Organisation (WTO) talks.

And, a joint statement issued by those involved in discussions also said the elimination of export subsidies "will be achieved…so that a substantial part is realised by the end of the first half of the implementation period"​.

Still, the new proposals for 80 per cent cuts before 2010 were not what the EU signed up to, according to Jim Begg, director general of Dairy UK.

He called on the EU to resist these proposals, saying the bloc "would be forced off the market".​ He added that the dairy industry had accepted an end to export subsidies by 2013, "but there should be no expectation that we would want to destroy productive capacity"​.

European Commission figures show Europe's dairy sector was the biggest recipient of EU export subsidies in 2004, getting nearly €1.5bn in aid. No other sector broke the €1bn barrier.

Government figures obtained by the campaigns group show that big firms take the most money. France's Danone and Lactalis got €25m and €20.5m in 2004, while the export arm of Britain's Dairy Crest got £8.3m last year.

Critics accuse the EU of exporting its overproduction problem in dairy by using these subsidies to dump commodities on poor countries, damaging local farmers.

Those defending export subsidies say they are vital to help EU firms compete on the world market by bridging the gap between EU and world prices. EU Butter, for example, was double the price of that made outside the bloc this March.

Around nine per cent of milk produced in the EU is exported with the help of export subsidies, according to Dairy UK figures.

The EU's pledge to cut export support by 2013 came after considerable debate between the bloc's 25 member states. The UK government, alongside others such as Denmark and Holland, had argued for a 2010 end date.

The wrangling over how to go about scrapping the subsidies has also continued in the Commission's dairy committee meetings this year.

Recent cuts to skimmed milk powder subsidies, to reflect the coming drop in EU commodity prices, were initially rejected by 13 member states, according to meeting minutes.

Those in opposition were thought to be many of the countries who signed a recent French memo, which accepted the need for a pro-active plan to end subsidies, but noted their use "continues to be permitted until 31 December 2013"​.

A spokesperson for Britain's Deaprtment of Food, Agriculture and Rural Affairs this week refused to comment, other than "we are pleased that export subsidies are being phased out"​.

The European Dairy Association (EDA) will meet with European Commission agriculture delegates next week to discuss export subsidies, as well as a range of other issues affecting Europe's dairy industry going forward.

The EDA has been lobbying the Commission hard over the need to reduce export subsidies by value instead of volume, to give the sector more time to adapt.

Joop Kleibeuker, the body's secretary general, also told​ the EU should treat subsidies for different products separately. "In dairy, butter especially should be at the end of the process because of the significant difference between world and EU prices for butter."

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