Case: Policy coherence in general

03-02-2009 EU reintroduces subsidies on dairy products

Just last week the European Commission decided to reintroduce export subsidies on dairy products. According to the EUs Agriculture Commissioner, Mariann Fischer Boel, the current measures are being taken because European exporters are no longer able to compete. Moreover, Boel argues that this situation is aggravated by the already existing difficultiesas a result of the financial credit crisis.  

This reintroduction of export subsidies has immediately brought about a range of angry reactions, and not only from displeased NGOs: the Cairns Group (a diverse coalition of developed and developing countries from Latin America, Africa and the Asia-Pacific region, which all export their agricultural products) called for a return to the negotiating table for a fair and market oriented agricultural trading system and the elimination of the subsidies because farmers in many developing countries, which cannot afford to engage in subsidy wars, stand to suffer most from increased distortions in world agricultural markets. Besides, developed countries such as Australia and New Zealand have also expressed their distress. How can the European Union, a promoter of world market liberalization and openness, again install protectionist measures. Very remarkable also considering the fact that, many developing countries are being punished for installing any of such measures within the framework of the negotiations on their trade agreements with the European Union.

Subsidies on dairy products had been abolished since June 2007, in line with the reforms to the common agricultural policy (CAP) of the EU. The subsidies had been in place since 1968, to ensure that European dairy products would remain competitive with its rivals around the world. But due to the high agricultural prices 2 years ago, these subsidies seemed no longer necessary. This to the great relief of many NGOs who had pressed for the abolishment of export subsidies for diary produce for years, as these subsidies are detrimental to farmers in many developing countries

The reintroduced export subsidies are specifically applied to dairy products such as butter, cheese, and milk powder. The payments to farmers will cover the gap between domestic floor prices and international, world market prices. The EU will provide subsidies of up to 50 percent on dairy exports. Export subsidies have long been one of the most controversial trade-distorting measures used by rich, developed countries. Many farm exporters expected that a deal resulting from the Doha Round of negotiations would eliminate such subsidies by 2013, due to an EU commitment made in 2005. Draft modalities of a Doha trade agreement have included such a provision since that time.

Fair Politics EU hopes that European politicians will soon realize how backwards and incoherent these export subsidies are and hopes that better and more coherent solutions will be searched for.