July 30, 2007

 

WTO reforms worry EU dairy farmers

 

 

The new proposals of cutting subsidies by the World Trade Organisation (WTO) have Europe's dairy processors worried as these suggestions would enclose the industry into a "straitjacket."

 

The subsidies, which EU dairy farmers say have keep them afloat by keeping put lower priced supplies, would shake the industry if reduced.

 

Peter Dawson, chair of the European Dairy Association's (EDA) said the proposals would only restrict the future development of dairy production in the bloc. Though the EDA has welcomed the possibility of a balanced outcome from the talks, Dawson said that they are unsatisfied with WTO's current suggestions for reform.

 

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 also put the European dairy industry into a "straitjacket", offering little benefit to its members.

 

The WTO's revised draft proposals was said to step up competitiveness within agricultural trade by cutting government subsidies.

 

Dawson also 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.

 

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 differ from level of export subsidies given to the dairy industry, estimates suggest that about 1.1 billion to 1.4 billion euros were handed out in 2005 alone.

 

The refunds were temporarily revoked last month, as unprecedented price increases for raw dairy materials meant they were no longer required.

 

But the limited refunds would unlikely help WTO discussions as 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, he said, pointing to consumption figures and tariff-rate quotas (TRQ) as other key issues that should also be addressed for the 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 organisation, in a statement said, the drafts "are by no means the final word."

 

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 was suspended last July, as WTO members refused to budge on certain issues.