RESTRICTEDWORLD TRADE
ORGANIZATIONG/AG/W/41
3 December 1998
(98-4858)
Committee on Agriculture Original:  Spanish
STATEMENT BY CHILE UNDER THE AGENDA ITEM "OTHER BUSINESS"
AT THE SEVENTEENTH MEETING OF THE COMMITTEE
HELD ON 17 AND 18 NOVEMBER 1998
At the last meeting of the Committee in September 1998, my delegation informed the
Committee that Chile, together with 11 other Members of this Organization, had asked the European
Communities to convene a further informal meeting in order to pursue the discussion of its subsidies
regime in respect of the canned fruit sector.  Th e EC informed us yesterday of its willingness to
continue discussing this issue.  We welcome this willingness and hope to be able to agree on a date
for the discussions.  A new meeting to discuss this subsidies regime will favour transparency whileresponding to our need to tackle the problems facing  us with the spirit of initiative and determination
that their solution requires.
When Chile raised the issue in November of last year, focusing specifically on canned
peaches, it did not occur to my delegation that this case would become an eternally recurring item onthe Committee's agenda.
Our intention was to proceed with the utmost care in addressing a situation in which, owing to
the way in which the commitments assumed by the EC were being applied, the competitiveness of
other Members in third markets for the product in question was being undermined.
Together with the other WTO Members interest ed in this issue, Chile has observed with
concern how the EC has been stalling in addressing our questions.
In response to the EC's request to provide further background material on the problem raised,
my delegation would like to submit, for the information of the members of this Committee, a study
conducted by the Faculty of Agricultural Economics of the Catholic University of Louvain entitled"The Impact of the Common Market Organizations and their Application on the Processed Fruits and
Vegetables Market:  The Case of Canned Peaches".
The purpose of this study is to determine to what extent the application of European
regulations subsidizing agriculture offers European peach processors advantages over theircompetitors in the world market for processed peaches.
Eminent European academics, researchers, economists, agronomists, importers and their
representatives, national associations of fruit processors from various European countries, producers,
producers' organizations and international observers we re involved in this study, to mention but a few.
To carry out such a specialized task, the persons conducting the study had to travel from
Belgium through Spain, Italy, France, Greece and Germany.
The problem analysed in the study essentially stems from the manipulation of subsidies
collected by producers and processors of canned peaches, particularly in Greece.  The problem
already surfaced in 1994 when the European Court of Auditors clearly showed that the application byG/AG/W/41
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the common market organizations of the Community regulations, with respect to both fresh and
processed fruit, displayed many deficiencies.
Beyond the advantages obtained in world trade through the lack of control on the withdrawal
system and other deficiencies brought to light by the study, we think that it is extremely important topoint out that according to the University of Louvain, all of the persons interviewed for the study,
including the Greek observers, emphasized the probable fraudulent use of the European subsidies by
the Greek agents in the peach sector.  The French, Italian and Spanish operators as well as the German
importers shared that opinion according to the study.
The study develops the hypothesis that the subsidies granted by the Community to the peach
sector in Greece are manipulated.  According to the economic model developed, the cost of rawmaterials for the processing industry is lower than the cost calculated according to the provisions of
the European regulations.
The study goes on to state that this manipulation would give the Greek canned peach industry
a price advantage which would allow it to sell its production on international markets at pricessystematically lower than those of its competitors.
Just as an example, I can point to the effects that this situation has had on our domestic
production.
Indeed, since the beginning of this decade our exports have been displaced by Greek
competition in markets normally supplied by Chile, such as the United States and Japan.
The most significant indication of unfair competition from Greek peaches is reflected in the
fact that Latin America being a natural market for our products, and Chile and Greece having largelysimilar costs and factors of production, it is difficult to explain how the Greek product can enter the
market of Argentina, Chile's neighbour, at significantly lower prices.  It must be borne in mind that
Greece has to pay freight charges from Europe to South America while Chile, being a neighbour, pays
significantly less.
This competition imposed by the Greek industry has meant that we have had to make a series
of technological, management and financial adjustments to our domestic industry in order to face thedifficult situation in international markets.  The clearest example of this was the need to reduce
international sales prices by US$3 per crate, from US$21 to US$18, in 1996.  These adjustments to
the domestic industry have reached their limits, and if the current international conditions and the
aggressivity of the Greek industry in the world market for this product were to continue, the Chilean
industry would suffer serious consequences.
Reverting to the main conclusions of the study, the arguments that have usually been put
forward to explain the competitiveness of the Greek peach industry concern the quality of the raw
material, surplus production, raw material prices corresponding to minimum producer prices,
experience, favourable climate, etc.
These arguments used by the Commission to justify the greater competitiveness of the Greek
industry are dealt with and refuted one by one in the study.
Unfortunately, despite the fact that the EC adopted new regulations in 1996 designed to
correct the shortcomings revealed by their own investigations, the purpose of which was to modify
and regulate the marketing of agricultural products by common market organizations, there have not
been any substantial improvements with respect to the manipulation of the Community legislation
subsidizing the production of fruit by Greek producers and processors.G/AG/W/41
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The efforts by the EC to ensure that their regulations are respected are probably considerable,
but reality has shown that they have not sufficed to eliminate the possibility of fraud and its effects on
international trade.
There are precedents in this respect which would show that the reason why reforms to the
common market organization system aimed at limiting surplus production and reducing the level of
abuse and fraud in the peach sector did not have the desired effects is that part of the crux of the
problem lies in the deficiencies in the contro l system, which has failed to ensure the proper
implementation of the programmes.
In short, if the Commission cannot guarantee the proper implementation of its reforms, it will
not better the situation in any way.
In other words, what we are faced with is a case of inefficient legislation and failure to
comply with established regulations.  All of this forms a framework which ultimately results in unfair
competition by the EC under its WTO commitments.
We hope that the study we are now submitting to all Members for consideration together with
the document containing initial observations by the Government of Chile on the new regulations of
the common market organizations after the 1996 reform will serve as evidence in the effort to
understand how the Community legislation regulating the fruit and vegetable markets is manipulated
by producers and processors.
My delegation invites the members of this Committee to examine this study.  Moreover, the
authors of the document are prepared to comment and defend the contents of their study before the
Members of this Organization.
We all know how difficult it has been to implement the Agreement on Agriculture.  And
while no country has been spared these difficulties, we consider that each country should not only
safeguard its own interests, but also our collective interest in the proper implementation of the
commitments assumed under the Marrakesh Agreements in order to ensure that they do not cause
trade distortions for third countries.
Finally, I would like to point out that our rights and interests are being seriously nullified or
impaired by this situation which is far from being fully consistent with WTO obligations.
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