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(2004/C 84 E/0543)

WRITTEN QUESTION E-1367/03

by Jonas Sjöstedt (GUE/NGL) to the Commission

(10 April 2003)

Subject:   EU agriculture subsidies and elimination of local producers

The Swedish media recently reported that the Swedish-Danish dairy company Arla had dumped several thousand tonnes of powdered milk in the Dominican Republic, thereby eliminating some 15 000 local producers from the market and depriving them of their means of making a living. Aria's annual exports of powdered milk are aided by SEK 160 million from EU export subsidies. Unfortunately, Aria's subsidised exports are no exception; several different cases of a similar nature constitute a clear pattern.

What view does the Commission take of a procedure whereby companies such as Arla, with the aid of EU subsidies, can contribute to product dumping of this kind and what steps has it taken to ensure that such cases can be avoided?

Answer given by Mr Fischler on behalf of the Commission

(28 May 2003)

Trade between the Union and the Dominican Republic takes place in the context of the World Trade Organisation (WTO) Agreement on Agriculture (AoA) following the Uruguay Round (UR) of Multilateral Trade Negotiations and of the Memorandum of Understanding between the Community and the Dominican Republic on import protection for milk powder in the Dominican Republic.

The Memorandum of Understanding (1) was adopted by the European Council in July 1998 and the Dominican Republic Presidential Decree No 505/99 of 24 November 1999 provided for the implementation of the new WTO Schedule in the Dominican Republic. To protect local production and at the same time ensure sufficient supply for consumers at reasonable prices, the Dominican Republic in its new WTO Schedule, established a tariff rate quota of 32 000 tons of milk powder of which 70 % for the Community and 15 % each for New Zealand and other suppliers. In that context, there have been regular imports of Community milk powder in the Dominican Republic.

In the Dominican Republic milk production has been increasing by between 4 % and 6 % per year but while farm production costs range from 4-6 DOP/litre, (Dominican Republic Peso) the processors pay producers 6,75 DOP/litre, the retailers pay processors 17 to 18 DOP/litre of pasteurized milk and the consumer pays upwards of 20 DOP/litre. The retail prices of Community milk powders in the Dominican Republic are higher than those practiced for other imported powders and for domestically produced powders. The data available to the Commission confirm, therefore, that its export policy in relation to the Dominican Republic is reasonable and responsible.

A report on the Dairy Market in the Dominican Republic published by the United States Department of Agriculture in 2001 (2) estimated that there were approximately 59 000 milk producers in the Dominican Republic of which 17 500 specialise in milk production and the rest in cattle raising for the twofold purpose of producing milk and beef. But as in all countries in the world, restructuring is taking place in the Dominican Republic at both producer and processor levels, which translates into a continuous decrease of the numbers of producers. As for the Community, the number of producers has fallen in the past ten years by about 50 %.

Regarding local milk production in the Dominican Republic, the report suggests that a number of structural problems relating to an unreliable energy supply, concentration on the market and problems of quality, among other things, hamper the development of local milk production rather than imports.

The Commission maintains regular contact with the authorities in the Dominican Republic concerning the application of the Memorandum of Understanding and also requested periodically (June 2002, December 2002 and February 2003) price information on milk powders, both domestically produced and imported. The Dominican Republic authorities have not made any representations suggesting that imports from the Community are hampering the development or negatively affecting prices to the detriment of local dairy farmers and thus indirectly the development of national milk production. Furthermore, the Commission has offered technical support to develop the dairy sector. Such proposal triggered a request from the Dominican Republic authorities to finance a study on current situation and future perspectives of the dairy sector in the Dominican Republic (in preparation).

The Community pays subsidies on exports depending on the gap between prices practiced on the internal market and quotations on the world market, within the ceilings on export subsidies set out in the Community's WTO schedule. In that framework, export refunds on skimmed milk powder (SMP) and on whole milk powder (WMP) intended for supply to the Dominican Republic under the quota are fixed at lower levels than for exports to other destinations. The gap between the refund for the Dominican Republic and other destinations has been widened even further for the 2003/2004 quota year by decreasing the Dominican Republic refund.

As for the future, the Community has made it clear that it is ready to further reduce export subsidies, on the condition that all other forms of export assistance are subject to equivalent disciplines. These commitments are further reflected in its paper on modalities for the agricultural negotiations under the WTO. Actually, export subsidies are becoming less and less significant, falling from 25 % of the value of Community farm exports in 1992 to 5,2 % in 2001.

Finally, it should be noted that when there have been negative impacts resulting from its exports, as it was the case of beef exports to West Africa in the 1980s, the Community has reacted, in some cases by discontinuing refunds for certain products. However, experience shows that when the Community stops providing export subsidies for a particular market, the Community's market share is frequently taken over by products from other developed countries, which create similar market challenges to local producers.

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(1)  Council Decision 98/486/EC, OJ L 218, 6.8.1998.

(2)  Ph.D. Wagner A. Méndez and Ph.D. Ruben D. Núñez: The dairy market in the Dominican Republic 2001'. United States Department of Agriculture 2001.

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