Firms attack export refund plan

Date: 03/08/00

By Renée Cordes

THE European Commission is exploring ways of enabling the makers of chocolate, spirits and other processed food and drinks to buy agricultural ingredients more cheaply from foreign suppliers in order to remain competitive on the world market.

Under plans being drawn up by enterprise chief Erkki Liikanen, EU companies would be able to import raw ingredients such as sugar and milk from outside the Union without paying duties. But they would only be able to do so on condition that the finished products were exported for sale outside the EU.

The move is aimed in large part at helping the sector cope with the Commission's decision to cut off all export refunds to the sector in the current financial year to make up for a shortfall in the Union's budget.

Under the current system, firms can apply for short-term financial aid, known in the industry as inward processing relief. But Commission officials argue the regime needs overhauling to ensure the aid is used more efficiently to help those who need it most. "We have to look at the way the system works so that it benefits those products which are actually in need of relief," said a spokesman. "We have to avoid double-counting and make the scheme more efficient."

He added that from this autumn, companies would be able to request limited amounts of export subsidies. However, under World Trade Organisation rules, the Commission will not be able to grant more than a total of €415 million in aid from the EU's 2001 budget.

But industry is still unhappy with the reform plans, arguing that it will be at a strong competitive disadvantage to foreign rivals without the export subsidies. The current EU price for sugar is about four times higher than that on the world market, and milk is double the price. "It is proving a real difficulty for a lot of companies," said David Zimmer, secretary-general of EU chocolate, biscuit and confectionery lobby Coabisco, which has written to the Commission repeatedly urging it to continue the scheme. "We do not regard this as a subsidy refund, given that prices for raw materials are way above world prices."

The Commission's decision to limit export refunds has also sparked concern in the European Parliament. In a draft report to the agriculture committee, French MEP Dominique Souchet, of Europe for the Union of the Nations Group, argues that the move is unacceptable. "It calls into question arrangements whose aim was to contribute to the management of the internal market by supporting exports and which has been validated by the WTO," states the report.

The European Commission is exploring ways of enabling the makers of chocolate, spirits and other processed food and drinks to to buy agricultural ingredients more cheaply from foreign suppliers in order to remain competitive on the world market.