EU Export Refunds on Pork Prompt Calls for Stepped Up Efforts to Reach WTO Trade Agreement

CANADA - North American pork producers are expressing deep concern over the European Union’s decision to re-introduce export refunds on pork.
calendar icon 15 December 2007
clock icon 7 minute read

The refunds, which were announced late last month, range from the equivalent of 30 cents per kilogram to 75 cents per kilogram. They are understood to be applicable to all export destinations and cover everything from fresh and frozen pork, including all cuts, to products that are cured, salted, smoked or pickled.

Export Subsidies Considered Most Trade Distorting Form of Support

“We are astounded that the EU has chosen a method of addressing its pork industry’s economic difficulties that will impose even more extreme hardship than that already being experienced for pork producers elsewhere,” says Canadian Pork Council (CPC) president Clare Schlegel.

Government subsidies which directly lower export prices are widely viewed as the most trade-distorting form of government assistance to agriculture. For this reason the elimination of export subsidies has been a bedrock objective of the Doha Round of WTO (World Trade Organization) trade negotiations.

“The EU was taken to task a number of years ago when they put export refunds on the sale of pork,” recalls CPC executive member Florian Possberg. “We really view these export refunds as one of the most damaging ways a region can affect the pork market. We were hoping really that the EU would not use this kind of mechanism to support their local farmers ever again.”

U.S. Producers Equally Concerned

The U.S. based National Pork Producers Council (NPPC) is equally concerned. “It’s going to impact our exports to third country markets and our producers are upset because exports have been a bright star for the U.S. pork industry, disproportionately contributing to the producers profitability,” says NPPC vice president and council for international trade policy Nick Giordano.

He concedes, although the refunds will have a significant economic effect, the European Union is within their rights under the Uruguay round of trade negotiations to implement such a program. However, he stresses, “Whether it’s the European Union or Canada or wherever producers are being given support from their governments that we’re not privy to and which have an impact on the amount of pork being produced in the world which directly impacts our prices and our sales, we’re concerned.”

Export Refunds Highlight Need for Resumption of WTO Trade Negotiations

Giordano believes “It underscores the need for the U.S. and Canada and the community of nations to finish the Doha round. The European Union has agreed to terminate its export subsidies as a deliverable in the Doha round. However the Doha deal has not been concluded.”

“Everybody has to roll up their sleeves and work a little bit harder to get a deal done. Of course for the pork industry we’re looking not just for the termination of export subsidies, which in and of itself will be very important once the European Union does that, but also we’re looking to a very ambitious market access package for pork hopefully in the European Union and in other countries.”

Possberg agrees, “We’ve had WTO talks going on for a number of years. We’re really asking our federal government to be supportive of negotiations that will see fair trade and easier trade to happen so that things we produce, like pork, can get to consumers around the world with fewer trade restrictions.”

Refunds Expected to Disrupt Several Key Markets

Martin Rice, Executive Director with the Canadian Pork Council, notes the market most likely to be impacted will be Japan, but in the last few years Korea, Australia and Russia have become important markets and there is nothing to suggest that these subsidies will not be available for EU pork shipped to the United States.

“These are all major markets for us and very important to determining the price paid for Canadian pigs.”

He adds this is not just for the basic muscle cuts or the skeletal cuts of pork. The EU program will also cover offals, the specialty products such as livers and hearts and so on, which are such high value products in China and other parts of Asia. He argues that it will lower the return that Canadian producers can receive for the carcass – for hams, shoulders and hearts and lungs alike.

Potential Australian Reaction Creates Concern

“We’re very concerned about how this is going to be viewed in Australia,” says Giordano. “The Australian producers have brought a safeguard proceeding against imported pork, principally from the United States, Denmark and Canada. This really is going to fuel the fire in Australia for calls for restraints on pork imports.”

“We’re very concerned that this is going to be viewed as a very negative development in the minds of the Australians who are evaluating the evidence and deciding whether or not to take action against imports. Of course, we’re concerned that we have to compete with the European Union all over the world. We’re concerned whenever the government steps in and provides a benefit to industry that our producers don’t receive and it’s going to impact our sales abroad.”

Threat of Possible Retaliation Raises Additional Fear

One major fear is that the European Union’s decision to re-introduce export refunds on pork could prompt other jurisdictions, most notably the Americans, to answer with similar subsidies of their own.

“We know that our country can’t afford to get into a subsidy war between other countries,” says Karl Kynoch the chair of Manitoba Pork Council. “Nobody ends up winning.”

Possberg agrees, “It’s not right to even contemplate building on a bad program. We just want to take the EU to task for doing this. We’re quite hopeful that it will be short lived and very hopeful no other jurisdiction will do the same.”

Saskatchewan Pork Development Board (Sask Pork) chair Joe Kleinsasser observes that’s always a possibility. But at this point, with their currency at the level it is, the Americans probably don’t need to respond. However, he concedes, “Things do change and they certainly have never been shy about coming out and protecting their production base. It certainly is a possibility and it raises a concern.”

Successful World Trade Negotiations Preferred Solution

Giordano admits, whether the EU action will result in a trade war is hard to say. “We certainly are upset about it and we’ll be pressing our government to raise the issue with the European Union.”

However he is convinced, “The action that will address the situation is a completed and successful Doha Round. I think certainly that pork producers not only from the U.S., but Canada and many other places, can join hands and work together toward that outcome.”

He concludes, “We need to, as industry, continue to work closely with our governments to ensure that we get a successful conclusion to the Doha Round. When we get that we will get the termination of export subsidies from the European Union, more disciplines on government intervention in markets, and more open markets which is a great thing for competitive pork producers.”

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