European Commission defends temporary subsidy returns

By Neil Merrett

- Last updated on GMT

Related tags: European union

The European Commission says its decision to reinstate some dairy subsidies in the bloc does not reflect a permanent u-turn on its aims for market deregulation, as it faces international opposition to its stance.

After announcing that export refunds, halted in June 2007, would be put back in place this month to protect farmers against falling milk prices, the Commission claims that the measure is a temporary solution that will not milk price outside of the EU.

Outside concerns

The claims follow reports that a number of governments such as Australia, which have shown concern that the measures may serve to damage moves to liberalise world trade and conversely distort global commodity prices.

Speaking this week at a summit in Madrid, Spain, Tony Burke, Australian minister for agriculture, said that he believed that the decision by the European Union to reintroduce dairy subsidies had come at the ‘worst time’.

However, the Commission denied that its stance on reintroducing export refunds and possibly extending intervention prices would not compromise its commitments to trade agreements made during the Doha negotiations.

“These measures fully respect our G20 commitment and should not effect world prices,”​ stated the commission.

The reinstatement of export refunds came into effect this month after Mariann Fischer Boel, the EU agriculture commissioner, said she hoped to better support under pressure dairy farmers, after a number of protests last year regarding fears over their income.Fischer Boel said that the reinstatement of the refunds was occurring at a time when the overall world market price for milk was below EU intervention levels and general market prices.

Industry view

Response to the Commission’s decision from some segments of Europe’s dairy industry has generally been critical though.

The European Milk Board (EMB), which represents farmers across the bloc, called instead for a more flexible system of setting production quotas. It claims these measures will better serve to control the balance of supply and demand, with an indefinite freeze on future changes to the system.

Other dairy groups such as the European Dairy Association (EDA) were not as critical of the proposals, though still unsure of their effectiveness in offsetting longer-term farmer concerns over meeting costs.

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