The European Union will use export refunds (subsidies) as an emergency measure to support agricultural prices until 2013 but must then find new mechanisms, a leading official with the European Commission said March 11.
If world prices are lower than internal support levels, the EU refunds the difference to exporters.
“I personally don’t see that we can come up after 2013 with a credible policy approach in which we have export refunds as one instrument,” said Klaus-Dieter Borchardt, deputy head of the EU farm commissioner’s cabinet.
“We have to think about other instruments to stabilize exports that are less trade distortive than export refunds…What we are analysing internally is whether we can set up a kind of export credit system fully compatible with WTO rules,” he said at the Agra Europe Outlook 2009 conference.
The European Union committed to phase out export refunds by 2013 as part of the World Trade Organization’s Doha round if trading partners took similar action.
The failure of the Doha round to come to a pact has, however, raised the possibility that export refunds may remain a policy instrument in the European Union.
Borchardt said he did not know how long it would take to get a Doha pact, or if one was even possible.
“The signals from the United States are not very encouraging,” he said, adding the Obama administration is seeking new WTO talks but on a different basis.
“If we leave aside what has been achieved in July last year then we will have a very, very difficult uphill struggle and it will take years (to get a pact),” he said.
Borchardt said, however, he did not believe the EU should hold on to export refunds as a bargaining chip in future talks.
“Reforms are not only necessary in an international context, they are necessary for internal reasons as well,” he said.
The EU has kept export refunds as an emergency measure up to 2013 and recently introduced them in the dairy sector following a sharp drop in prices during 2008.
“If there is a crisis we will deploy the instruments that are available,” Borchardt said.