The European Union will oppose any proposal during the next round of world trade talks to outlaw export subsidies, a senior EU official said last week.
But Franz Fischler, EU agricultural commissioner, also vowed that Europe does not want the current tit-for-tat export subsidy exchanges between Europe and the United States to escalate into a trade war.
“It depends on all the partners, but we do not have an interest to create such an atmosphere,” Fischler told journalists after an Ottawa speech June 5.
He said the EU is trying to reduce the threat of a trade war by changing domestic support policies to reduce surplus production. And rather than an endless string of subsidized sales in retaliation, he said the EU will ask for “consultations” with the Americans if the U.S. takes action Europe thinks is excessive.
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Still, Fischler said the EU would not support a demand by Canada and other Cairns Group members that export subsidies be outlawed in the next world trade agreement.
In a normal year, with EU policy reforms and greater land set-aside, there should be less grain to export and therefore no need for export subsidies, he said.
“But it may be necessary to have a kind of safety net … if there’s an extraordinary situation that in our view would (make it) necessary to subsidize our exports in the future,” he said.
During his first official visit to Canada as agricultural commissioner, Fischler repeatedly fended off criticisms about the EU decision to sell 30,000 tonnes of subsidized barley into California. It stirred the Americans to announce retaliation through resurrection of their Export Enhancement Program to sell poultry to EU markets in the Middle East and barley to selected countries.
The Americans also have announced import controls on wheat gluten from Europe into the U.S.
Fischler said this need not be the beginning of a trade war, but he stoutly defended the European sales. They are within World Trade Organization rules, he said, and represent a tiny fraction of EU sales.
He said Europe is surprised by the American reaction: “We don’t see any reason for retaliation, although we know the Americans for internal reasons are preparing something which looks like retaliation.”
Fischler said there was no planned sale but a European trader with barley to sell found a California importer who wanted it at the quoted price and the sale was made “by accident.”
After an Ottawa speech in which Fischler defended the EU as a fair trader, Ottawa lobbyist David Humphreys challenged its sales of highly subsidized alfalfa pellets into Asian markets. He said Canadian dehy exporters are losing sales because they cannot compete against subsidies worth as much as $114 per tonne.
“You are causing considerable grief to our people,” said Humphreys, who represents the dehydrated pellet industry in Ottawa.
No subsidies but other aid
Fischler said there are no EU export subsidies on alfalfa pellets. However, there are domestic supports and without them “there is no chance a farmer in the EU could produce a kilo of this product.”
Humphreys later said that is the point. Domestic subsidies allow the Europeans to produce and sell it cheaper than Canada can ship it to Asia.
“We can’t compete and sales are being lost but they clearly won’t do anything about it until the next trade talks,” he said. “All we can do is keep raising it and let them know we will not take this unfair competition quietly.”
