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Further limits on use of export refunds agreed as part of finalisation of 2013 CAP reforms

10 November 2013

According to analysis from Alan Matthews, Professor Emeritus of European Agricultural Policy at Trinity College Dublin, “changes to the language on export subsidies in the single Common Market Organisation (CMO) regulation go further than before in limiting the future use of export subsidies.” However, this falls short of abolishing their use. Under the new regulation, export refunds will be used only when exceptional measures are required in response to conditions on the EU market. References in the EC draft regulation to safeguarding the EU’s participation in international trade in certain products have been removed from the language used in the final text agreed by the Council.

Where exceptional measures are not required, export refunds should be set at zero. Thus, “in future, export subsidies can only be activated where internal market conditions satisfy the requirements for exceptional measures.” These requirements are held to be met when “a situation of market disturbance” exists, namely where price changes “or other events and circumstances significantly [disturb] or [threaten] to disturb” the EU market. In these circumstances the EC is authorised to “take whatever measures it wants, including measures that derogate from the provisions of the CMO regulation”. However, this should only occur “to an extent that is strictly necessary and for a period that is strictly necessary”.

This provides the EC with considerable discretionary powers in determining when to allow the use of export refunds. While the use of export refunds in response to the dairy crisis would clearly be allowed under the new rules, it is unclear whether the recent use of export refunds on pigmeat, poultry meat and processed products “would be justified under the new regulation as there was no evidence of market disturbance or a specific problem on those markets” in these sectors at the time that export refund support was extended. This potentially constitutes a significant shift away from a practice where “the only limits on the EU’s use of export subsidies are the value and volume limits set out in the EU’s WTO schedule of commitments under the Uruguay Round Agreement on Agriculture.”

According to the analysis, this “assumes that the Commission will adopt a strict approach in evaluating when a market disturbance or emergency occurs”.

The basic framework for the deployment of export refunds remains the same (Part 4, Chapter IV ‘Export refunds’, Articles 133 to 141), with Article 133 stating: “To the extent necessary to enable exports on the basis of world market quotations or prices and within the limits resulting from agreements concluded…, the difference between those quotations or prices and prices in the Union may be covered by export refunds.” The products covered are then listed (cereals, rice, sugar, beef and veal, milk and milk products, pigmeat, eggs, poultry meat, and products containing cereals, sugar, dairy products and eggs).

The provisions dealing with exceptional measures now appear to take precedence in determining the actual utilisation of export refunds (see Part 5 Chapter 1, Articles 154 and 156).

Editorial comment

An interpretation of the provisions of the proposed regulation on the CMO dealing with export refunds, which sees their use being subordinated to the exceptional measures provisions, is consistent with the EC’s favoured use of export refunds, intervention buying and similar measures solely as part of the EU’s evolving safety net policy. No longer would such tools be used primarily with the aim of supporting the participation of EU exporters in international trade.

Given this broader EC policy orientation, it seems likely that the EC will adopt a strict approach to the deployment of export refunds, limiting their use only as a part of broader safety net measures in response to market emergencies.

However, it should be noted that the regulatory framework still retains the basic framework for the use of export refunds and allows the EC discretionary powers over their deployment. As such, the use of export refunds has largely been suspended rather than prohibited. This is consistent with a general approach to CAP reform, which sees the suspension of the use of tools, while alternative mechanisms for managing markets are set in place. The policy framework nevertheless retains the right to use such tools should the need arise.

This approach potentially holds important lessons for outstanding issues in the EPA negotiations related to the use of various agricultural trade policy tools by ACP governments.


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