EU Commission Unveils New Farm Support Package

17 March 2016

The European Commission has announced a package of measures to support the bloc’s struggling dairy, pigmeat, and fruit and vegetable sectors – but stopped short of reintroducing mandatory production quotas for dairy producers.

Markets have been hit by slowing demand growth from China, along with a glut in supply as producers responded to a period of higher prices between 2007 and 2011. A Russian import ban on EU farm goods has further exacerbated problems in agriculture, producers have said.

The package, which was unveiled in Brussels on Monday, supplements a €500 million farm aid package that was announced last September in the wake of farmer protests across the 28-nation bloc. (See Bridges Weekly, 17 September 2015)

“This package of measures is not intended to be a magic bullet but I believe that we should give it a chance to succeed,” said Phil Hogan, the European Commissioner for Agriculture and Rural Development, in remarks at a meeting of the bloc’s farm ministers.

Hogan also told ministers that the Commission would look into the feasibility of an “export credit tool” which would supplement existing schemes being run by EU member states.

Export credits were among a number of policy instruments that were subject to an agreement among WTO members at the global trade body’s tenth ministerial conference in Nairobi, Kenya, last December. (See Bridges Daily Update #5, 19 December 2015)

A source familiar with the discussions told Bridges that any potential scheme would have to comply with the Nairobi conditions for export credits.

Czeslaw Adam Sierkierski, the chair of the European Parliament’s agriculture committee, welcomed the Commission’s plan but suggested more may be needed to address the situation.

“Commissions aid package is a step in the right direction but it is not enough and it has arrived quite late,” said Siekierski on Wednesday.

Voluntary production quotas

Dairy producer groups would be allowed to introduce voluntary measures to limit output, Hogan said, but the EU would not re-introduce the mandatory production quotas it phased out last year.

The bloc’s own competition rules normally restrict producer groups from collaborating to influence supply and prices, but the Commission can bypass these under exceptional circumstances.

Mandatory production quotas could have negative effects on the competitiveness of the EU dairy industry in the long run, and on the expected average price received by dairy farmers over the cycle, said Alan Matthews, Emeritus Professor at Trinity College Dublin, in an online commentary.

“It is clear from yesterday’s Council meeting that member states are not prepared to take that step,” said Matthews.

The Commission also gave a green light to proposals to raise the amount of “state aid” that EU member states could provide, per farmer, to a maximum of €15,000.

Hogan told ministers that the support could be provided far more quickly than other measures that they had proposed instead.

The Commission will also temporarily double the ceilings on the volume of skimmed milk powder and butter that can be bought through public intervention. These will be raised to 218,000 tonnes for skimmed milk powder, and 100,000 tonnes for butter.

“Processors will continue to get the guaranteed public intervention price for these additional quantities,” Matthews told Bridges.

Switzerland reforms “Chocolate Law”

In a separate development, Switzerland’s Federal Council announced in a statement last Friday that the Alpine country would stop providing export subsidies to countries classified as “least developed” by the UN, with the new rules entering into force on 1 April this year.

Bern said it would amend its “Chocolate Law,” which provides export subsidies for processed agricultural products, to comply with the Nairobi decision on export competition.

Swiss customs authorities estimate that only 0.5 percent of eligible products were destined for least developed countries, the statement said.

Dairy: weak global demand

The EU’s September support package prompted questions from WTO members at a regular meeting of the trade body’s Committee on Agriculture last week.

New Zealand asked for more information on how new funding for farmers was being allocated, including by EU member states, and urged the bloc to avoid approaches that distort production or trade.

The EU responded by saying that the bulk of support had gone to the dairy sector, sources said, with livestock producers receiving the rest of the assistance provided.

New Zealand also told the meeting that weak global dairy demand and low prices were affecting farmers across the world.

New farm policies in the spotlight

Other major trading powers were also asked questions about the impact of their agricultural policies at the WTO meeting.

The US told India that it had not yet officially determined how it would classify payments under the subsidy programmes that Washington introduced in 2014, in response to a question from India about whether these would be considered as trade-distorting “amber box” support.

Canada also asked China about new grain market reforms announced in a recent government white paper, and questioned India about the crop insurance scheme that New Delhi launched recently. (See Bridges Weekly, 4 February 2016 and 21 January 2016)

Several WTO members also asked Turkey for more information on its domestic support and export subsidies, with Canada also asking about Ankara’s overdue notifications.The meeting examined new figures from the WTO secretariat showing that over a third of members’ domestic support and export subsidy notifications are overdue.

At a separate meeting last week, the chair of the WTO’s agriculture talks had told members that “rich information and data” would be key to shaping the process of negotiating new farm trade rules. (See Bridges Weekly, 14 March 2016)

ICTSD reporting.

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