Deutschland “EXPORT DUMPING: THE UNFINISHED BUSINESS. COTTON, GREEN BOX, AND EXPORT SUBSIDIES IN THE AGRICULTURE NEGOTIATIONS” Impact of Europe’s Dairy Export Subsidies in Bangladesh Oxfam International, NGO Centre, Geneva, 1st December 2009 © Campact

Deutschland Historical Overview: reintroduction of EU export subsidies I Ag Council agrees on 2 % dairy quota expansion by 1st April Price fall in world market prices for skimmed milk powder, Oxfam warns: threat of reintroduction of export subsidies Farmers association demands reintroduction of export subsidies Ag Council agrees to expand quota by 5 % till 2013 („Health Check“; soft landing) Dairy industry demands reintroduction of export subsidies Commissioner Fischer Boel announces reintroduction of export subsidies in Berlin Decision adopted by Management Committee

Deutschland Historical Overview: reintroduction of EU export subsidies II Fonterra announces to reduce milk prices because of EU export subsidies First increase of export refund rates US announces introduction of export subsides Oxfam: 50 % dumping at the EU level Second increase of export refund rates Third increase of export refund rates WTO notification by EU-COM: 296,6 Mio. Euro export subsidies; Oxfam calculation: 7 Mio. tons milk (ME) = 5% of EU milk delivery, 17% of world dairy market

Deutschland Historical Overview: reintroduction of EU export subsidies III Special report milk by European Court of Auditors: ECA recommends: 1) make sure, that liberalisation of the sector does not lead once again to over-production; 2) that efforts to focus milk production, as a matter of high priority, on meeting the needs of domestic European market and, in addition, on producing cheeses and other high added value products which can be exported on the world market without budgetary support Removal of all export refunds for all dairy products (WMP, fresh milk, cheese, etc.) except butter Last remaining dairy refunds removed: EU export refunds for butter & butteroil

Deutschland Case Study: Bangladesh 85% of population lives in rural areas; one in two is poor - small farmers, esp. women), around 50% of population is undernourished 1,38 Mio. dairy farms (ca. 7 million people); 96% has 1-10 cows Developing dairy sector offers enormous potential for fighting poverty Imported milk can be produced by farming families keeping 3 cows per farm (EU: 1150 farming families) Source: IFCN

Deutschland World market and producer prices in Bangladesh

Deutschland EU export subsidies: price dumping Direct effect: Export of subsidised EU skimmed milk powder to Bangladesh: tons till 31.June 2009 (= t ME = 1,7% of milk production in Bangladesh) Indirect effect/IFCN: Export subsidies depress world market prices >> pressure on local producer prices (removal had slight positive effect improving the livelihood of 1,39 million dairy farming families, 7 million people) Scenario according to IFCN: export subsidy level of currently 5 Euro per 100 kg milk will reduce the world market price by 2,5 Euro per 100 kg >> would lead in the current situation to a similar reduction of the farm gate milk price in Bangladesh (238 taka/100 kg)

Deutschland IFCN scenario analysis: impact at household level I Farm typeType 1Type 2Type 3 Livelihood statusmoderatepoorvery poor Off-farm income75%50%25% % of the 2 cows farms 25%50%15% No. of farms (est.)0,35 million0,70 million0,21 million No. of people (est.)1,96 million3,92 million1,18 million What is the impact of world milk price reduction of 2,5 Euro per 100 kg milk on the economics of a typical 2 cow dairy farm? How does this reduction of milk price affect the livelihoods of dairy farmers?

Deutschland IFCN scenario analysis: impact at household level II Farm typeType 1 moderate Type 2 poor Type 3 very poor Household income per day 132 TK 1,39 Euro 84 TK 0,89 Euro 60 TK 0,63 Euro Household income per day (after 2,5 ct reduct.) 123 TK 1,29 Euro 75 TK 0,79 Euro 51 TK 0,54 Euro Change in income due to milk price reduction minus 7 %minus 11 %minus 16% >> 1,39 million farms and 7 million people are affected negatively by a milk price reduction, but poorest are affected the most.

Deutschland Summing up: EU export subsidies European producers of basic milk products (butter and milk powder) have only been competitive on world markets when prices have been high. When this is not the case, they exported with assistance from Community budget (European Court of Auditors, 2009) Surplus production is the key problem: Production quota have been increased allthough the effects of the financial and economic crisis were already evident (Production 2007: 132,8 Mio. t; 2008: 134,34 Mio. t) EU is a big actor on the world dairy market (second biggest exporter worldwide). Its surpluses have the capacity to push international prices down. These artificially low world market prices can have an important impact on household incomes (reduction of % of HH income). It is unacceptable that the EU chooses a policy that solves its domestic problems by externalizing it to third countries