EN Official Journal of the European Union CE 84/800

(2004/C 84 E/0896)

WRITTEN QUESTION E-0487/04

by Daniel Varela Suanzes-Carpegna (PPE-DE) to the Commission

(23 February 2004)

Subject: EU dairy sector: Argentina and the WTO ‘peace clause’

Following the expiry of the WTO ‘peace clause’ on 31 December 2003, Argentina has already threatened to bring proceedings against the EU before the WTO's dispute settlement body in relation to Community subsidies to the dairy sector.

Does the Commission believe that the threats from Argentina might at some stage jeopardise the recently reformed Community system?

Answer given by Mr Fischler on behalf of the Commission

(21 April 2004)

With regard to the expiry of the Peace Clause, the Commission maintains the following position: World Trade Organisation (WTO) Members' use of litigation in an attempt to challenge subsidies, granted in conformity with the Agreement on Agriculture, risks undermining comprehensive negotiations on agriculture aimed at concluding an agreement acceptable to all Members.

The Commission too has concerns about certain export practices such as State Trading Enterprises (STEs) operating in the milk sector. The Dairy Industry Restructuring Bill 2001 may have replaced the New Zealand Dairy Board by a company which controls 98 % of that country's milk and assumed the Board's role and sole exporter status but, because of the statutory privileges conferred on it by the Bill it remains, de jure and de facto, a State Trading Enterprise. The Bill maintains the company's right to licences to export to designated markets like the USA, Canada, the Dominican Republic, Japan and the EU, until the beginning of 2011 in some cases. In addition to the right to all export licences to some of these designated markets, the company has the sole right to export to such markets under the tariff rate quotas opened by those countries.

Article XVII of the GATT and the Understanding on the Interpretation of Article XVII obliges Members to notify annually non-governmental enterprises, including marketing boards, which have been granted exclusive or special rights or privileges including statutory powers, in the exercise of which they influence through their sales the level or direction of exports. Members should ensure the maximum transparency possible in their notification so as to permit a clear appreciation of the manner of operation of the enterprises notified and the effects of their operations on international trade. The last notification from New Zealand was on 20 July 2001 which indicated that The NZDB may continue to be notified as a STE but further analysis on this question is needed'. Since then the company which replaced the NZDB has expanded its share of the world market for dairy products dramatically. The details will be sent directly to the Honourable Member.

The Commission's concerns are due to the statutory monopoly of a single company on a significant part of preferential world trade in the dairy sector, the consequent potential of cross subsidisation under such an arrangement, the effect of a single desk seller on world market price formation under these circumstances and the absence of the transparency required by Article XVII of the WTO rules.

However a strategic choice has to be made by Members, and in particular the export-oriented ones, between two alternative routes which are largely mutually exclusive: either they believe that multilateral negotiations are the way forward to a fair and market-oriented trading system, or they believe WTO litigation is the way forward.

The Commission is convinced that the consistency between the EU commitments under WTO and its domestic support policy will be strengthened even further in the perspective of continued common agricultural policy (CAP) reform.