EC extends commitments on export refund prohibition in trade with Africa
23 February 2014
In a speech at International Green Week in mid January 2014, EU Agriculture Commissioner Dacian Cioloş declared that EU agri-food exporters “should not rely on public policy tools to support exports, which [risks] affecting the capacity of others to develop their own agriculture, especially in less developed countries”. He noted that under EU legislation, “export refunds have ceased to exist as a means of systematically supporting a sector,” and expressed a commitment to going further “in the framework of preferential partnership agreements with African countries”. Specifically he said that he was “ready to propose to stop, once and for all, the use of export refunds to those developing country destinations – even in times of crisis when this instrument can still be used”. The Commissioner argued that “this commitment will bring our agricultural policy fully into line with EU development policy.”
Alongside this measure, the EC has “recently proposed to redefine and strengthen the promotion of EU agri-food products, both within the EU and on international markets”, with a proposed tripling of “the budget allocated to promotion actions by 2020”.
Editorial comment
The EC’s offer moves beyond commitments included in interim Economic Partnership Agreements by extending the prohibition on the use of export refunds to all products exported, and not just those subject to tariff elimination commitments under the interim EPAs. This is in line with long-standing ACP demands. The extension of the commitment not to use export refunds in trade with Africa, even in response to crisis situations, potentially reduces the dangers of “adjustment displacement”, whereby measures that insulate EU producers from world market crisis situations mean that the burden of adjusting to the new market situation is deflected onto non-EU producers, including those in ACP countries.
During the last dairy market crisis, the budget allocation to export refunds was substantially expanded, but it should be borne in mind that this additional funding was not actually disbursed. Expanded support for intervention buying and storage proved sufficient to enable EU dairy sector operators to weather the crisis and to enable them to capitalise on the subsequent price recovery without any need for additional export refund financing. The period did however see major expansion of EU skimmed-milk powder (SMP) exports (including to African markets): by 2012, exports of SMP were more than double the level of SMP exports for 2009 (see Agritrade ‘ Executive Brief Update 2013: Dairy sector’, 18 December 2013).
It is unclear whether the commitment to abolish the use of export refunds in trade with Africa would assist in avoiding “adjustment displacement” when the EU implements emergency programmes of assistance in response to crisis situations on specific agricultural markets.
The issue of ending the use of export refunds in trade with Africa in the dairy sector needs to be seen in the context of new patterns of EU corporate investment in African dairy sectors, which is likely to play an increasingly important role in patterns of trade in bulk commodities such as SMP and butter in the coming years (see Agritrade articles ‘ Arla launches turnkey milk powder packaging facility in Côte d’Ivoire’, 27 October 2013, ‘ Danone looking to expand in West Africa’, 19 January 2014 and ‘ Danone to buy shares in East Africa’s Brookside Dairies?’, 17 February 2014).
