EU export subsidies provoke Cairns Group

“This is not the leadership we require from key economies at this point in time.”

– Cairns group statement

Canada, Australia and their farm trade allies called on Brussels Jan. 28 to repeal its decision to offer subsidies for European Union dairy exports, saying the move could drive down world prices and hurt poor farmers.

Trade ambassadors from the Cairns Group – a coalition of 19 countries including Brazil, New Zealand, South Africa, Canada and Indonesia – said the EU’s move to protect its farmers could in fact prolong the world’s economic trouble by blocking trade.

“Increasing trade-distorting measures and protectionism in a time of a crisis carries a very high price,” they said in a joint statement circulated in Geneva, where the World Trade Organization (WTO) has its headquarters.

“The reintroduction of export subsidies at this time… is likely to drive international prices down to artificially low levels and, at the very least, prolong the current downturn.”

Brussels said the previous week it would reintroduce export subsidies on butter, cheese and whole and skimmed milk powder that had been suspended since 2007 “in response to the serious situation on the EU dairy market, caused by a recent sharp fall in producer prices.”

Responding to the Cairns Group’s statement, the EU said the export subsidies were brought back as a temporary measure and should have no effect on world prices.

WTO director general Pascal Lamy on Jan. 27 issued a report to his organization’s 153 member states, telling countries to resist the impulse to institute protectionist measures during the economic and financial storm.

The Cairns Group, whose members have low farm subsidies and want to open up agricultural markets worldwide, said the EU’s efforts to shield its farmers from market forces were unfair.

“It is of particular concern that farmers in many developing countries, which cannot afford to engage in subsidy wars, stand to suffer most from increased distortions in world agricultural markets,” they said. “This is not the leadership we require from key economies at this point in time.”

Tools trickiest

The tools countries can use to protect farmers from price swings or market implosions have emerged as one of the trickiest topics in long-running negotiations over the WTO’s global free trade accord, known as the Doha round.

At the last high-level push for a deal, in July, India dug its heels over a “special safeguard mechanism” that would allow it to cushion its farmers from crises, meeting resistance from the U. S. and others who want to repeal such commercial barriers to spur more reliable trade flows.

The European Union has

been one of the most vocal suppor ters of a new WTO accord despite reluctance from some of its member countries, including France, to expose protected agricultural markets to more foreign competition.

Brussels stressed on Jan. 28 the bloc’s decision to bring back dairy export subsidies should not be seen in the light of the Doha round.

“This decision does not in any way affect our overall commitment to the elimination of export subsidies as part of Doha,” an EU trade official said.

Negotiators met at the WTO’s headquarters Jan. 28 to take a fresh look at how manufactured goods could be treated under a Doha accord, in which many countries are looking for new commercial opportunities in some areas in exchange for opening their markets in others.

Officials familiar with those closed-door talks said that countries such as the U. S., Norway, Japan and Singapore stressed they wanted to avoid “a long period of hibernation” and continue technical negotiations with the goal of wrapping up an accord quickly once the political climate is right.

– Additional reporting for Reuters by Darren Ennis in Brussels

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