WTO constraints on directly subsidised EU cereal and cereal-based food-product exports (export refunds) are progressively being overcome as reform brings down EU cereal prices and reduces the need for export refunds. This does not, however, mean that EU cereals production no longer receives public aid. Increased volumes of public aid have been provided to EU cereal farmers, but the trade impact is now less transparent, as assistance is extended more and more in the form of farm-payment supports and through rural-development programmes. While the EU maintains that these forms of aid are less trade-distorting they continue to impact on production and trade outcomes. This raises the important issue of the real trade effects of the new systems of EU farm support and how to deal with these trade consequences.

It is apparent that EU cereals-sector reform has greatly fuelled the export of EU cereal-based food products and EU poultry products. For the category "products of the milling industry? (CN 11) EU exports to ACP countries rose by 83% in value terms between 1996 and 2002, while for "preparations of cereals? (CN 19) exports from the EU to ACP countries rose by 163% in value terms. This increased the importance of the ACP market to EU exporters from 12.6% to 20.6% in the case of "products of the milling industr "ynd from 4.9% to 9.5% in the case of "preparations of cereals?.

The reduction in feed costs which cereals-sector reform brought about has also served to fuel EU meat-product exports (particularly of poultry). Between 1996 and 2002 EU exports of meat products to ACP countries increased by 121% in value terms. This saw the importance of the ACP market increase from 3.5% to 6.9% of total EU meat-product exports.

This has important implications for the approach to be adopted in the EPA negotiations if the interests of ACP cereal and poultry producers and food-product manufacturers are to be protected from the unfair competition arising from the new system of EU farm support. Particular attention will need to be paid to:

• the establishment of simple pre-emptive safeguard measures, based on the monitoring and surveillance of trade flows in the affected product chains;
• the establishment of special trade arrangements based on various forms of tariff-rate quotas in order to reconcile diverse and competing national interests, in the context of regionally based negotiations.