European dairy concerned over WTO reforms

By Neil Merrett

- Last updated on GMT

Related tags: World trade organization, International trade

Europe's dairy processors are calling for a renegotiation
of World Trade Organisation (WTO) proposals to cut
subsidies, claiming these would put industry into a

The WTO proposals, which go through years of negotiations between governments, are an attempt to reduce subsidies and other barriers to international trade. The subsidies, which have kept European dairy processors and farmers afloat by keeping out lower priced supplies, would require a shakeup of the industry. Peter Dawson, chair of the European Dairy Association's (EDA) WTO taskforce, told that in their current form, the proposals would serve only to restrict the future development of dairy production in the bloc. Dawson's comments follow the publication last week of the WTO's revised draft proposals designed to step up competitiveness within agricultural trade by cutting government subsidies. While the EDA therefore welcomed the possibility of a balanced outcome from the talks, it said in a statement this week that it remained unsatisfied with the WTO's current suggestions for reform. Echoing these sentiments, Dawson stressed particular concern over the issue of Europe's export refunds programme. The EU wanted to limit the funding on export refunds instead of restricting production volumes to grant greater flexibility to producers and processors when they are weaned from a reliance on subsidies. Dawson believes the EU proposals are preferable to the WTO's current suggestions to restrict the volume of dairy goods produced. The suggestion, he said, would put the European dairy industry into a "straitjacket",​ offering little benefit to its members. "The European dairy industry has continually offered concessions to other WTO members, who have offered little in return,"​ Dawson added. Export refunds have been in place since 1968 to ensure European dairy products remained competitive with rivals over the world. Though industry and official figures vary over the level of export subsidies given to the dairy industry, estimates suggest that about €1.1bn to €1.4bn were handed out in 2005 alone. The refunds were revoked, albeit it temporarily, last month, as unprecedented price increases for raw dairy materials meant they were no longer required. However, this is unlikely to help the discussions with the WTO. Dawson believes it would be unwise to use short-term developments such as the suspension of the refunds as a bargaining tool for long-term negotiations with the WTO. Though the issue export refunds may be central to the talks, they are not the only point of contention for Europe's dairy producers. Dawson pointed to consumption figures and tariff-rate quotas (TRQ) as other key issues that would need addressing as part of any successful agreement. However, the WTO was keen to stress that the publication of the "modalities" is simply a chance for its members to react to possible areas of agreement for future discussion. "The drafts are by no means the final word,"​ the organisation said in a statement. The proposals form part of the ongoing Doha Development Agenda, launched in November 2001 in the Qatari capital, Doha. The agenda was designed to free up global trade, with a particular focus on achieving concrete benefits for developing countries. However, the latest comments by the EDA likely to create further setbacks for the already troubled proposals. The final round of talks were suspended last July, as WTO members refused to budge on certain issues. The issues that remain on the table - and have indeed been there for some time - concern agricultural subsidies, agricultural tariffs, industrial tariffs, services, and market openings.

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