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Monday, 4 May 1987
Page: 2280

(Question No. 1599)


Senator Macklin asked the Minister representing the Minister for Primary Industry, upon notice, on 17 February 1987:

(1) Can the Minister for Primary Industry inform the Senate of the number of agricultural export transactions carried out by the European Community (EC) since 17 September 1985 which have relied on subsidies to secure contracts.

(2) Can the Minister identify the commodities involved in each transaction, the market in which that commodity was disposed of, the value and volume of each transaction, the amount of subsidy provided by the EC in each instance, and how much the eventual transaction by the Europeans undercut prevailing world prices.


Senator Walsh —The Minister for Primary Industry has provided the following answer to the honourable senator's question:

(1) The EC is currently the world's second largest exporter of agricultural products, behind the United States. It is however, the largest exporter of a number of major products, including butter, cheese, beef, wheat flour, egg products, poultry meat and wine.

Under the EC system of agricultural price support and market management, export subsidies are payable to dispose of product on world markets whenever world prices are lower than internal EC prices. EC prices have been higher than world prices for all but brief and exceptional periods since the full implementation of the Common Agricultural Policy (CAP) in the late 1960s. The result has been that, since then, nearly every export transaction entered into by EC traders for products covered by the CAP has required the aid of export subsidies. Further information on the products covered by the CAP is given in the answer to the second part of the question.

Unit subsidy rates are usually adjusted by EC Commission market management committees weekly or fortnightly in line with fluctuations in world prices and exchange rates. These rates are set for particular product varieties and can also vary by export destination. The complexity of the resulting system is exemplified in the case of milk products where there are 374 product/destination categories.

The system also allows EC traders to ``pre-fix'' subsidy levels in advance of a sale. The period for which the subsidy may be pre-fixed also varies by commodity and by destination.

EC expenditure under the CAP is financed through advanced payments transferred each month by the Commission to the Member States of the EC. These then distribute the funds among the various paying agencies who deal directly with beneficiaries, whether these be farmers or traders. Details of individual sales are not made public as a matter of course and would be regarded by the EC as commercially confidential information.

From the foregoing it can be seen that it is not possible to provide details of the number of transactions carried out by the EC which have relied on subsidies to secure contracts.

(2) Almost all products covered by the Common Agricultural Policy are eligible for the provision of subsidies on exports to non-EC markets. These include cereals, beef and veal (certain products), pigmeat (certain products), eggs and poultry, olive oil and oilseeds, sugar, wine, fruit and vegetables and tobacco. No export support is available for flax and hemp and, although provision exists for subsidies on exports of sheepmeat, none have been applied since the inception of the sheepmeat regime in October 1980. More detailed information on the products eligible for export support measures is provided in Attachment A.

Details of the total volume and value of EC agricultural exports by destination are normally available only for calendar year periods. Information for the period since 17 September 1985 ie for calendar 1986, has not yet been released by the EC Commission. Although information on the levels of aggregate export subsidies for all eligible products will eventually be released by the European Commission in Brussels, it will not be possible to obtain details of all transactions involving export subsidies, by product and by market. Nevertheless, in order to give an indication of the magnitude of particular export subsidies, details of such subsidies per unit for a number of major products destined for specific markets are provided in Attachment B. These products are beef, butter, cheddar cheese, SMP, wheat and sugar.

On an aggregate level, in 1985 EC export subsidies for agricultural products totalled 6,588 million European Currency Units (ECU), or 33.8 per cent of total agricultural support, and in 1986 were budgeted at 8,470 million ECU, or 39.1 per cent of total EC agricultural support. It should be noted that agricultural support in this context refers to that provided by the Commission. It does not include support provided by individual member states on a national basis. An indication of the relative importance of export subsidies for particular products can be gauged from details of export subsidies and intervention support for major products or groups of products for 1985 and 1986 provided in Attachment C. It is noteworthy that, in 1985, the bulk of export subsidies (almost 88 per cent) were allocated to exports of cereals, sugar, dairy products and beef and veal.

It is not possible to give a precise estimate of the amount by which EC export prices undercut prevailing world prices because of a lack of full knowledge of all EC export transactions. It should also be noted that a universally acknowledged world price for a particular agricultural commodity over a period of time is difficult to define. There are quality differentials within some product groups and exports to particular markets can sometimes attract premiums over exports of the same product to other markets. As a result, any ``world price series'' will be indicative at best.

An indicative price series for sugar, and the GATT minimum prices for butter, cheese and skim milk powder (SMP) are provided in Attachment D to give some guide as to the relative size of EC export subsidies.

Similar series for world beef and wheat prices would, however, be difficult to construct. For beef, the world market essentially divides into those importers free of foot and mouth disease, and those not free. Two distinct price structures result with exports to the foot and mouth free markets attracting a premium compared to exports to other markets. In the main, the EC does not ship significant quantities to Australia's major markets in the foot and mouth free markets of the Pacific Basin. This is due partly to the assurance given by the EC not to apply export subsidies to exports of beef to selected East and South East Asian markets (the Andriessen Assurance). In the non-foot and mouth free markets, the EC is currently the major supplier and so is the price setter in these markets.

For wheat, the availability of subsidised product from both the United States (US) and the EC has led to substantial price discounting with a consequent distortion of overall world prices.

PRODUCTS ELIGIBLE FOR EC EXPORT SUBSIDIES

PRODUCT

Cereals

1 Durum wheat, 2 Common wheat, 3 Barley, 4 Rye, 5 Maize, 6 Maslin, 7 Oats, 8 Buckwheat, 9 Sorghum, 10 Millet, 11 Canary seed, 12 Wheat and maslin flour, 13 Rye flour, 14 Common wheat groats and meal, 15 Durum wheat groats and meal.

Rice, Milk and Dairy Products, Meat

1 Beef and veal (for certain products), 2 Pigmeat (for certain products), 3 Sheepmeat.

Eggs and Poultry, Olive Oil and Oilseeds

1 Olive oil, 2 Colza/rapeseed, 3 Sunflower, 4 Soya beans.

Sugar

1 Sugar beet, 2 Raw sugar, 3 White sugar, 4 Molasses.

Wine, Fruit and Vegetables

1 Aubergines, 2 Cauliflowers, 3 Courgettes, 4 Cucumbers, 5 Tomatoes, 6 Apples, 7 Apricots, 8 Cherries, 9 Peaches, 10 Pears, 11 Plums, 12 Table grapes, 13 Clementines, 14 Lemons, 15 Mandarins, 16 Sweet oranges.

Potatoes, Tobacco

Processed Agricultural Products eg spaghetti (for certain products).

EC EXPORT SUBSIDIES FOR SELECTED PRODUCTS

Beef (Frozen Separated or Unseparated Hindquarters)

Date Set-Subsidy level: North African, Near and Middle East third countries, except Canary Is, Ceuta and Melilla (ECU/100kg).

23 September 1985-131.5.

14 October 1986-131.5.

25 November 1986-118.5.

SELECTED DAIRY PRODUCTS (ECU/100 KG)

Date set

Butter

(a)

Skim milk

powder

(SMP)

(b)

Cheddar

cheese

(c)

October 1985...

137.19

85.86

32.27

May 1986...

137.19

85.86

90.52

January 1987...

137.19

102.00

90.52

(a) of a fat content by weight, of 62% or more but less than 78%;

(b) of a fat content, by weight, not exceeding 11%;

(c) for exports to Australia.

SUGAR

Date

Amount of

subsidy

ECU/100kg

Volume of

exports

tonnes

1985

September-

18...

39.997

53,250

25...

40.998

52,750

October-

2...

41.771

36,200

9...

42.480

58,600

16...

41.959

68,250

23...

42.770

26,050

30...

41.964

75,900

November-

6...

41.459

79,881

13...

41.850

21,000

20...

42.551

60,350

27...

42.543

40,800

December-

4...

42.471

77,250

11...

42.549

67,000

18...

42.739

83,000

1986

January-

2...

44.102

42,250

8...

43.717

69,700

15...

44.673

50,261

22...

44.450

79,500

29...

43.245

70,850

February-

5...

43.316

77,600

12...

43.678

73,750

19...

44.119

55,750

26...

44.173

78,000

March-

5...

43.290

75,800

12...

42.619

75,000

19...

41.991

71,850

April-

2...

38.745

77,000

9...

38.249

57,500

16...

40.659

46,650

23...

40.928

66,500

29...

41.002

43,250

May-

7...

40.106

75,000

14...

41.389

47,600

21...

42.900

59,250

28...

41.880

66,000

June-

4...

41.952

56,800

41.950

*4,500

11...

43.065

54,075

43.316

*4,250

19...

43.802

68,625

43.800

*14,000

25...

44.306

64,425

44.35

*33,000

July-

2...

44.721

34,895

44.697

*250

9...

45.254

19,550

45.254

*6,500

16...

45.200

49,950

45.184

*7,750

23...

43.900

*24,500

30...

43.979

24,000

August-

6...

42.971

24,500

13...

43.323

21,850

20...

44.791

26,850

27...

43.999

32,000

September-

3...

44.932

26,000

9...

44.986

31,650

17...

44.991

38,700

24...

44.610

38,500

October-

1...

45.081

56,000

8...

45.360

63,850

15...

45.072

64,720

22...

44.657

66,500

29...

44.411

40,500

November-

5...

43.888

79,000

12...

44.612

53,500

19...

44.680

63,500

26...

44.921

80,500

December-

3...

44.334

90,250

10...

45.602

60,250

17...

45.234

75,250

1987

January-

7...

45.495

61,500

14...

44.502

63,000

21...

45.038

69,000

28...

44.320

56,400

February-

4...

43.880

81,000

11...

43.956

68,250

18...

44.080

68,500

25...

43.699

103,000

* New Marketing Year.

WHEAT (ECU/TONNE)

Date

Destination

Common Wheat

SAL (1),

Ceuta, Mali

Zones 11b

and

Canaries (2)

OTC (3)

(Other)

1985

September-

13...

31.00

. .

41.00

. .

27...

58.00

65.00

. .

78.00 (Algeria)

October-

4...

60.00

67.00

. .

. .

11...

60.00

67.00

. .

. .

18...

61.00

68.00

71.00

. .

25...

65.00

72.00

. .

80.00 (Algeria)

November-

1...

67.00

74.00

20.00

. .

8...

65.00

72.00

20.00

. .

15...

62.00

69.00

20.00

. .

22...

56.00

63.00

20.00

. .

29...

60.00

67.00

20.00

. .

December-

6...

56.00

63.00

20.00

. .

12...

52.00

59.00

20.00

. .

20...

50.00

57.00

20.00

. .

1986

January-

10...

59.00

66.00

20.00

. .

17...

59.00

66.00

20.00

130.01 (Malta)

24...

63.00

70.00

20.00

. .

31...

64.00

71.00

20.00

. .

February-

6...

69.00

76.00

10.00

. .

14...

70.00

77.00

10.00

. .

21...

73.00

77.00

10.00

15.00 (Maghreb)

28...

80.00

84.00

10.00

15.00 (Maghreb)

March-

1...

80.00

84.00

10.00

15.00 (Maghreb)

7...

82.00

86.00

10.00

15.00 (Algeria)

13...

82.00

86.00

10.00

15.00 (Algeria)

21...

83.00

87.00

10.00

. .

April-

4...

83.00

87.00

10.00

. .

84.00

88.00

13.00

. .

18...

84.00

88.00

13.00

. .

May-

1...

90.00

94.00

13.00

. .

16...

90.00

94.00

13.00

. .

23...

86.00

90.00

13.00

. .

June-

6...

45.00

49.00

13.00

. .

13...

45.00

49.00

13.00

. .

20...

52.00

56.00

13.00

. .

27...

74.00

78.00

13.00

. .

July-

4...

74.00

78.00

13.00

. .

11...

74.00

78.00

13.00

. .

17...

77.00

81.00

13.00

. .

24...

80.00

84.00

90.00

110 (Zone VA) (4)

August-

1...

90.00

. .

95.00

. .

8...

90.00

. .

95.00

. .

22...

95.00

. .

100.00

112.45 (Zone VA) (4)

29...

95.00

. .

100.00

110.00 (Burundi)

112.45 (Zone VA) (4)

September-

5...

97.50

. .

20.00

112.45 (Burundi)

114.90 (Zone VA) (4)

19...

97.50

105.00

20.00

114.90 (Zone VA) (4)

26...

47.50

105.00

20.00

114.00 (Zone VA) (4)

127.50 (USSR)

October-

3

103.00

120.00

20.00

128.00 (Turkey)

10...

110.00

120.00

20.00

32.00 (Tunisia)

17...

114.00

124.00

20.00

32.00 (Tunisia)

24...

116.00

126.00

132.00

32.00 (Tunisia)

31...

116.00

126.00

20.00

32.00 (Tunisia)

November-

7...

116.00

126.00

20.00

. .

21...

122.00

128.00

20.00

. .

28...

122.00

128.00

20.00

. .

December-

5...

122.00

128.00

15.00

25.00 (Yugoslavia)

32.00 (Tunisia)

19...

122.00

128.00

15.00

. .

1987

January-

9...

122.00

128.00

136.00

. .

16...

122.00

128.00

139.00

. .

23...

. .

. .

. .

144.00 (USSR)

30...

122.00

128.00

15.00

. .

February-

6...

122.00

128.00

15.00

. .

13...

121.00

127.00

. .

. .

20...

121.00

127.00

. .

. .

27...

121.00

127.00

. .

. .

March-

6...

121.00

127.00

. .

. .

13...

121.00

127.00

. .

. .

(1) SAL: Switzerland, Austria, Liechtenstein

(2) Zone 11b: Norway, Sweden, Finland, Faroe Islands, Iceland

(3) Other Third Countries

(4) West African Countries

Attachment C

EC AGRICULTURAL SUPPORT BY SECTOR (EXCLUDING MONETARY COMPENSATORY AMOUNTS) (MILLION ECU)

Product

1985

Total

Appropri-

ations

Export

Subsidies

Inter-

vention

Measures

1986

Total

Appropri-

ations

Export

Subsidies

Inter-

vention

Measures

Cereals ...

2,310.2

1,076.7

1,233.5

3,197.5

2,220.0

977.5

Rice ...

50.1

36.6

13.5

102.5

79.0

23.5

Sugar ...

1,804.5

1,352.8

451.7

1,642.0

1,188.0

454.0

Olive Oil ...

692.2

19.2

673.0

1,034.0

30.0

1,004.0

Oils and Fats ...

1,110.6

3.4

1,107.2

1,716.0

4.0

1,712.0

Protein Products ...

372.5

. .

372.5

495.0

. .

495.0

Textile Plants ...

240.6

. .

240.6

420.0

. .

420.0

Fruit and Vegetables ...

1,230.7

74.5

1,156.2

927.5

74.0

853.5

Wine ...

921.4

18.9

902.5

1,087.0

43.0

1,044.0

Tobacco ...

862.9

32.0

830.9

792.0

39.0

753.0

Seeds ...

46.4

. .

46.4

43.0

. .

43.0

Hops ...

8.2

. .

8.2

9.0

. .

9.0

Milk and Milk Products ...

5,933.2

2,028.2

3,905.0

6,100.0

2,704.0

1,556.0

Beef/Veal ...

2,745.8

1,338.6

1,407.1

2,682.0

1,313.0

1,369.0

Sheepmeat and Goat Meat ...

502.4

. .

502.4

526.0

. .

526.0

Pigmeat ...

165.4

102.9

62.5

220.0

131.0

89.0

Eggs and poultry meat ...

63.2

63.2

. .

131.0

131.0

. .

Non-Annex II products ...

440.8

440.8

. .

514.0

514.0

. .

Fishery products ...

16.1

-0.1

16.2

41.3

. .

41.3

TOTAL ...

19,517.2

6,587.7

12,929.5

21,680.8

8,470.0

13,210.8

Attachment d

INDICATIVE WORLD PRICES

Sugar: Monthly Average of International Sugar Agreement Daily Price

Month

Price

(Cents

(US) ...1b)

ECU

100 kg

(a)

September 1985 ...

5.12

14.48

October ...

5.01

13.22

November ...

5.48

14.21

December ...

5.32

13.44

January 1986 ...

4.84

11.87

February ...

5.56

13.03

March ...

7.04

16.06

April ...

8.33

19.45

May ...

7.67

17.50

June ...

6.34

14.56

July ...

5.55

12.36

August ...

5.57

12.02

September ...

4.68

10.04

October ...

5.39

11.42

November ...

5.95

12.74

December ...

5.70

12.05

January 1987 ...

6.44

12.77

February ...

(a) Equivalent price in ECU. Based on monthly average of exchange rates.

DAIRY PRODUCTS: GATT INTERNATIONAL DAIRY AGREEMENT MINIMUM EXPORT PRICES

BUTTER

$US/tonne

ECU/100

kg (a)

CHEESE

$US/tonne

ECU/100

kg (a)

SMP

$US/tonne

ECU/100

kg (a)

5-6-85 to 1-10-86 ...

1,000

111.92

1,000

111.92

600

67.15

2-10-86 on ...

1,000

93.38

1,030

96.18

680

63.50

(a) Based on simple average of exchange rate