CCP: ME 04/4



Twentieth Session

Winnipeg, Canada, 17 – 20 June 2004


Table of Contents


1. This paper examines the principal developments in government-related policies for livestock and livestock products over the 2002-2004 period. Since the mandate of the IGG, as approved by the last Session in August 2002, has been broadened to include dairy products, this document includes, for the consideration of Members, an overview of recent policy changes in the dairy sector. These changes are not evaluated within the framework of the Guidelines for International Cooperation in the Livestock and Meat Sector, which refer exclusively to livestock and meat products


2. The world market for dairy products was characterised by contrasting trends during the period under consideration. During most of 2002, there was oversupply of dairy products, especially milk powder, and prices were accordingly depressed. However, following reduced or constrained production in the southern-hemisphere, as a result of drought (Australia) and economic adjustments (Argentina), prices began to strengthen towards the end of 2002 and rose further in 2003. Although prices rose substantially in US Dollar terms, appreciation of many exporting countries’ currencies negated these increases in local currency terms. For importing countries, low international prices in 2002 led to greater use of domestic protection measures, ranging from increased tariffs to more stringent import certification requirements.

3. Market intervention in dairy markets continued to be important in a limited number of countries over the review period; however, in general, some progress was made to reduce such involvement. For countries preparing to join the European Union, adjustment in their national policies to bring them into line with those of the Union was a major element in dairy policy change over the period. Numerous countries introduced policies aimed at improving dairy quality standards. Incentives to raise the hygienic quality of the milk were introduced, as well as regulations governing the treatment and care of livestock.


4. In anticipation of accession to the European Union in May 2004, a number of applicant countries introduced production quotas and other measures.1 During 2003 and the first part of 2004, policy implementation was expedited to facilitate accession. For the new member countries, payments made under the EU Common Agricultural Policy (see box on CAP reform) will be phased in gradually, beginning at 25 percent in 2004/2005 and increasing by 5 percent per year. In June 2003, the European Union voted to postpone planned increases in the milk quota (agreed under the Agenda 2000 schedule) for a further year as internal market conditions did not merit a rise in output. Milk quotas are now set to increase by 0.5 percent annually over three years, beginning in 2006. It was also decided to maintain the quota regime until 2014. Support prices for butter and skimmed milk powder (SMP) will be reduced for three years from July 2004, with SMP dropping 5 percent and butter 7 percent per year, respectively. Despite the inclusion of the 10 new countries, the new reform package agreed did not raise the ceiling for intervention purchases of SMP, which will remain at 109 000 tonnes, and a lower ceiling was introduced for butter, dropping from 70 000 tonnes in 2004 to 30 000 tonnes by 2008. Once intervention ceilings are reached, a tendering system at discounted prices will be operated to absorb any additional surplus.

5. Elsewhere in Europe, in Switzerland, milk quotas were reduced by 2.5 percent in the 2003/2004 marketing year. From May 2004 until the quota system ends in May 2009, industry bodies will be primarily responsible for regulating the quantity of milk produced.

6. In the United States, the 2002 Farm Bill extended the Government’s milk support programme to the end of 2007. A further safety net programme for dairy farmers was also created: the Milk Income Loss Contract programme. This compensates producers when milk prices fall below a specified level. In addition, payments were made in 2002 under the Livestock Compensation Programme whereby dairy farmers in drought-affected areas received a fixed payment of $31.50 per dairy cow. In Canada, the Canadian Dairy Commission (CDC) increased support prices for butter and skimmed milk powder by 3.5 percent from February 2004. A year earlier, the CDC had authorised a 3.9 percent increase in milk prices. As the Commission has undertaken to adjust prices to cover the cost of production of 50 percent of Canadian dairy producers by 2006, further increases are anticipated in future years.

7. In the Republic of Korea, over-production has led to a substantial build up of government-held stocks of dairy products. The Government required farmers to reduce milk production by 7 percent in 2003 In compensation, loans totalling KRW 50 billion (US$42.4 million) at a subsidised interest rate of 3 percent were provided.

8. In several countries, governments sought to reduce or terminate their direct involvement in the dairy industry. In Vietnam, the Government sold some of its shares in the country’s largest milk producer, Vinamilk. Elsewhere, the Government of Egypt also sought to sell its investments in milk processing, while that of Nigeria pursued a policy of disposing of its direct investment in the livestock industry via sales to the private sector. Additionally, the Czech state-owned Agricultural and Forestry Support and Guarantee Fund sold its 36 percent share in the country’s largest dairy company – Madeta Dairies.

9. In Kenya the Agricultural Finance Corporation provided in 2003 dairy development loans totalling KES 260 million (US$3.5 million) to dairy farmers in the North Rift region. The loans, at a rate of interest of 10 percent, are aimed a boosting production in the region and supplying the restructured Kenya Cooperative Creameries. In China, the Government is promoting the establishment of clusters of dairy farms around Beijing, and nearby Tianjin. By 2002, 700 farms had been established and this model is being replicated near other cities in the vicinity of the capital and elsewhere. Also in 2002, the Government announced a plan to invest CNY 405 million (US$50 million) in support of dairy industry development. In Uruguay, the Government established a fund (Fondo de Financiamiento de la Actividad Lechera) in 2002 to assist domestic producers affected by low milk prices. In Brazil, a new Agricultural and Livestock Plan for the 2003/2004 season was announced in June 2003. Under the plan, BRL 5.7 billion (US$1.9 billion) was allocated to the dairy sector as low-interest credit to increase productivity and raise national milk production.


10. In Brazil, higher demand for milk in 2004 was expected to result from an expansion in the Government’s social feeding programme (FOME ZERO). In Peru, the Government’s social feeding programme remains an important element in domestic demand for milk and establishing a reference price for producers. In Mexico, the parastatal organisation in charge of the Government’s social feeding programme (LICONSA) increased its use of domestic milk compared to imported skimmed milk powder.

11. Following the closing of the Canadian Contract Export Milk programme as a result of a WTO ruling in 2002 that it violated restrictions on subsidised exports, the Canadian industry looked to other means of disposing of excess production – in particular skimmed milk powder. One action taken was that a sizable amount of excess production was disposed of at low prices for animal feed.

12. Linked to a cut in milk support prices in July 2004 in the European Union, reductions in subsidies to the following schemes were anticipated: subsidised sales of butter for baking and confectionery, production of concentrated butter, skimmed milk powder for calf feed and skimmed milk powder for casein production.

Other related domestic policies

13. In Colombia, the Ministry of Health considered banning the use of milk powder for reconstitution as drinking milk. Current regulations allow drinking milk to be composed of up to 30 percent of reconstituted milk. In Thailand and the Russian Federation, legislation was introduced requiring detailed labelling, including addition of milk powder, for drinking milk. In China, in 2003, the dairy industry pressed for similar legislation for drinking milk; however, no agreement was reached.


14. Low international prices in 2002 led to a number of trade-related policy measures. For importing countries, these consisted of raising tariffs and introducing other barriers to trade. For a number of exporting countries, depressed prices meant that increases in export subsidies were required in order to allow participation in the external markets.

Import measures

15. Many countries introduced measures to limit dairy imports. In early 2004, Brazil extended for an indefinite time the minimum export price requirement for imports from Argentina and Uruguay, established in February 2001. In 2002, Colombia extended until April 2004 a ban on imports of milk powder. In Egypt; the Government imposed a 45 percent tariff on bulk imports of milk powder in 2003 – following the expiration of the previous three-year safeguard duty. Elsewhere, in April 2002, India raised import duties on butter and butter oil from 30 to 40 percent– citing protection of its domestic industry against subsidised imports.

16. Tanzania passed legislation in February 2004 to prevent the import of excessively cheap or sub-standard dairy products, and thereby protect its domestic industry from dumping. This followed the introduction of a suspended duty on all dairy imports in 2000 – again with the aim of fostering domestic milk production. In mid-2002, Kenya banned the importation of butter, milk powder and selected cheeses, also citing the need to protect its domestic milk industry.

17. In 2003, New Zealand agreed to pay the United Kingdom GBP 11 million (US$19.2 million) in unpaid butter duties in a dispute relating to imports with a higher percentage of butter fat than permitted under its WTO quota. Also in 2003, the European Union split the annual WTO quota for New Zealand butter into two six-month periods. This was to prevent more than 55 percent of the quota entering the EU market during the first half of the year – as EU prices for butter are set to reduce annually over three years, beginning in July 2004.

18. There were also some examples of increased market access In mid-2002, Iran resumed imports of feta cheese, which had been banned since 1995. In 2003, Algeria reduced import duty on whey powder from 30 percent to 15 percent. In addition, a temporary additional duty is set to reduce by 12 percent per year, to reach zero in 2006. Thailand increased its import quota for milk powder in 2004 to 55 000 tonnes, up from 45 000 tonnes in 2003.

Export measures

19. Following the fall in international prices from mid-2001, a number of countries raised the level of subsidies paid on exports, in order to allow their domestic processing industries to compete on the world market. In the case of the EU and the United States, where levels of export subsidies are adjusted periodically in the light of prevailing international market conditions, subsidies rose significantly during most of 2002. Towards the end of the year and for 2003, as international prices increased, the level of export subsidies in the United States fell; however, in the EU, export subsidies remained high, principally as a result of appreciation of the Euro (Table 1). In addition, during 2002, a number of countries, including the Czech Republic, Hungary, Poland, and the Slovak Republic increased export subsidies.

20. In order to make approval of export refunds more transparent, the European Commission introduced a tendering process in April 2004, a system already in place for sugar and cereals. In addition, in order to combat fraud, the requirement for exporters to provide proof of arrival was introduced. Linked to the cuts in support prices in July 2004, export refunds are also expected to be cut.

21. In the United States, in the 2003 fiscal year (ending September) 200 000 tonnes of skimmed milk powder from government stocks was designated as food-aid; however, it is estimated that only 78 000 of this allocation was utilised. In addition, there was a separate 150 000 tonne allocation for aid shipments to Iraq. In fiscal year 2004, a further 100 000 tonnes of SMP was made available for food aid. Reflecting high levels of stock, the United States has used its full allocation under the Dairy Export Incentive Programme (DEIP) to subsidise exports of skimmed milk powder and cheese in recent years, while only partially using its butter allocation. From 2002, DEIP allotments have been announced in sections to ensure full utilisation of permissible quantities under the programme.

BOX: EU CAP REFORM: A move towards transforming the livestock sector

Reform of the Common Agricultural Policy (CAP) of the European Union, approved in June 2003, will completely change the way the EU supports its farm sector over the next few years. The reform benefits consumers and taxpayers by lowering intervention prices and limiting expenditures, while giving EU farmers flexibility to produce what the market wants. The reform addresses the anticipated direction of current WTO negotiations, and the accession of new countries to the EU. The specific goal of the programme is to move the agricultural sector from policies of price and production support to a more comprehensive policy of farmer income support.

Important attributes of the reform include:

  • A single farm payment de-linked from production
  • Reduction in payments to bigger farms (called “modulation”)
  • Cross compliance for payments to meet environmental, food safety, animal and plant health, animal welfare concerns
  • Strengthened rural development, with programs to help producers meet EU production standards starting in 2005
  • Measures to limit total CAP expenditures, assuring financial control

CAP reform measures related to the livestock sector focus mainly on the dairy and the beef sectors. For dairy, the milk quota system will remain in place until at least 2014, although support prices will be reduced (for more detail, see dairy section). To compensate for the reduction, which will result in lower producer prices, dairy farmers will receive direct payments equivalent to 60 percent of the cut in support prices. For 2005, these will amount to Euro 11.81 per tonne of quota, increasing further in 2006 and rising to Euro 35.50 in 2007. In principle, these payments can remain “coupled” to quota until 2007, but member states have the option of decoupling payments and adding them to a Single Farm Payment (SFP) from 2005. It is expected that most countries will adopt that latter option. This could have the effect of reducing the value of quota sold or leased.

Meanwhile, the European Union (EU) replaced many of the various premia now available to beef producers by a single farm payment and will be applicable to the meat sector from 2005 unless Member States opt to delay the implementation until 2007. Member states have the option to decide whether to retain up to between 40-100 percent of the various premia (suckler cow, slaughter, special male premium). A maximum of 50 percent of the sheep and goat premium can remain linked to production.


22. The global meat market since the last Session in August 2002 has been characterized by considerable market instability as low market prices and the rapid proliferation of animal disease outbreaks in late 2003 led to governments adopting policies to protect their livestock sectors. An interlude between the animal disease outbreaks in 2000/01 and 2003 led to higher meat supplies and lower global prices, prompting some countries to intensify border measures impeding market access. This was followed by an escalation of animal disease outbreaks which accelerated the main thrusts of these policy responses which tightened border controls and increased support to domestic industries with the objective of safeguarding animal health, as well as food supplies.


23. Disease containment, control and eradication dominated domestic policy developments in the livestock sector over the past two years, resulting in expanded expenditures by both developing and developed countries to meet rising concerns. The announcement of BSE cases in North America in 2003 led to immediate regulations related to slaughter and processing of meat products. In Canada, government assistance was provided to producers which included introduction of compensatory payments based on reference prices, financial incentives to processors to sell or move surplus meat cuts, and the introduction of a cull programme under which producers receive payments of up to US$240/animal. The Canadian BSE assistance package is estimated at nearly US$385 million, with federal government funds matched by provincial governments on a 60-40 percent basis. The US Government budget for 2004/05 includes US$60 million for BSE activities with US$33 allocated for the development of a national animal identification plan.

24. In Asia, Japanese government expenditures on BSE provisions for 2003 included US$185 million allocated for purchases of aged dairy cattle (up to 300,000 head of dairy cattle and 70,000 head of beef cattle). Payment was limited to a maximum of US$370-460 per head of cattle, depending on type, and also covered cost of transport to abattoirs and cost of slaughtering. In addition, domestic regulations in Japan were tightened in June 2003, with the regulations that all slaughtered bovine animals be tested for BSE supplemented by a mandatory system for animal traceability. In response to AI outbreaks in the Chinese Province of Taiwan, the Government set up support measures when poultry prices fall below 95 percent of production costs Meanwhile, most of the other 9 countries affected-Mainland China, Thailand, Vietnam, Laos, Bangladesh, the Republic of Korea, Japan, Indonesia, and Cambodia introduced some type of compensation to producers.

25. In Europe, expenditures in the general EU budget for livestock and meat products in 2003 increased 33 percent to 10.33 billion euro. A 17 percent reduction in expenditure on export restitutions to 407 million euros was more than compensated by a 37 percent increase in market support mechanisms for the livestock sector (Table 2). This includes increased spending on bovine meat premiums, higher ewe and goat premiums as a results of CAP reform (see box) and the introduction of private storage for pig meat. Expenditures are expected to drop to 9.7 billion euro in 2004. Increased funding for animal disease control was reported in Brazil where the budget for animal health was increased by 42 percent in 2004 to US$23 million.

26. Some countries, to enhance farmers’ incomes and stabilize markets prices, have increased support to the livestock sector. In Eastern Europe, some accession countries expanded their use of market interventions funds. Pig meat intervention buying in Poland, estimated at 80 000 tonnes in 2003, rose to record levels to account for 7 percent of domestic production. Similarly, in Hungary, hog farmers and slaughterers continue to receive several kinds of production and marketing support, ranging from direct payments for quality bonuses, intervention purchase payments, partial write-off of interest on investment loans and interest reimbursement for operating loans. In 2003, supported by a US$8.6 million increase in the budget for intervention funding, Hungarian hog producers received US$12.9/pig in compensation for low prices. State subsidies in 2004 are estimated at about US$50 million, compared with US$90 million in 2003. Meanwhile, support to the beef sector includes annual cow/calf support payments of US$120/head and US$222/head respectively.

27. Meanwhile, in the Ukraine, the Government recently announced a direct subsidy programme for domestic poultry producers, which provides direct payments of US$0.06/kg for broilers weighing 2-2.4 kg. This supplements previous initiatives to subsidize poultry breeding programmes and to provide the industry with favourable loans. In Asia, the Republic of Korea expanded eligibility to a calf production base, a programme initiated in 2000, by lowering the area requirement from a minimum 20 hectares of grassland to 10 hectares. The budget allocation of the programme was increased from US$4.8 million in 2003 to US$5.6 million in 2004. Meanwhile, while subsidies for the production of Hanwoo beef cattle were terminated in mid-2003, a programme which pays producers cash incentives of between US$170-255/head for the slaughter of “Grade A” Hanwoo steers will start in July 2004.

28. In many countries, measures were undertaken to improve productivity in the livestock sector. In Romania, subsidies to pig breeders in 2003 more than doubled to US$0.21/kg; in addition, breeders were granted exemption from payment of customs duties on feed. In Turkey, a US$125 million livestock support programme was announced which includes support for fodder crop production, pregnant heifer procurement, artificial insemination, milk production, and disease-free dairy production. In Africa, Ghana received US$24.8 million to improve livestock productivity through genetic improvements while drought in Tunisia prompted government interventions in the provision of feed inputs to affected livestock producers.


29. Meat markets are generally characterised by only limited interventions which promote meat consumption, such as retail price controls, and policies which support livestock marketing. Typically interventions consist of the establishment of regulatory mechanisms to enhance food safety and quality. For example, animal health concerns have led many countries to implement animal traceability systems. Both Brazil and Argentina introduced systems in mid-2003 under which all cattle for export to EU will have to be registered at least 30 days before slaughter. The EU introduced a regulation of identification and registration of sheep and goats under which electronic identification will be compulsory as of 1 January 2008 in member states with a sheep and goat population of over 600,000 head. Numerous initiatives were taken by developing countries, such as Burkina Faso, Mauritius, Morocco and Tunisia to implement traceability systems, with Mauritius also amending its Animal Disease Act.

30. Nonetheless, a number of governments continue to intervene to stabilize livestock markets. In Venezuela, price controls for poultry and eggs were established in early 2003. Controlled prices were set for whole chickens (US$1.25/kg), breast meat (US$1.9/kg) and leg quarters (US$1.4/kg). Meanwhile, a newly reconstituted government state trading entity was given responsibility for procuring imports to sell in government food stores in low income neighbourhoods. Malaysia continues to maintain controls over poultry meat retail prices since 1996, while Peru purchases limited amounts of meat for public dissemination through local social programmes. Operating a buffer stock scheme for poultry and eggs which is regulated through ceiling and floor prices, the Islamic Rep. of Iran allocated expenditures in 2003 on purchases of poultry meat and eggs (maximum procurement levels of 5,000 tonnes) estimated at US$6.3 million, with producers receiving US$0.25 and US$0.12/kg respectively.

31. In Asia, support to the poultry sector in India increased in 2003/04 (April-March) to US $ 1.8 million (up from the previous year’s US$ 1.6 million) with funding targeted at infrastructure support such as cold storage and airfreight subsidies for exports of eggs and egg products. In Pakistan, the Government in August 2003 waived sales taxes on livestock/poultry, including plant/machinery for processing, packaging, and preservation. Limited resources hold back government spending on livestock marketing in Africa; however, some governments, such as Swaziland, provide government transportation services to smallholder livestock producers to facilitate local marketing. Meanwhile, the introduction of grading systems in many countries encourages farmers to market quality, younger animals.

32. While most developed countries have moved away from domestic livestock/meat procurement, other measures are used to facilitate/stabilise product marketing. In Japan, higher meat prices, as a result of beef and pork import safeguards imposed in 2003, led the Government to finalise a framework of domestic support measures, which potentially includes financial aid to distributors, retailers and the food service industry. Low pig meat prices in the EU prompted the reactivation of the pig meat storage aid scheme in December 2003 with rates and period of storage the same as the previous scheme,operational from December 2002 through April 2003. Expenditures for the programme are estimated at 30 million euro. Meanwhile, the Serbian Government exempted fresh/frozen poultry meat and eggs from the sales tax on all retail prices of most goods, which is 20 percent.


Import measures

33. Global meat imports continues to grow; however, trade growth has slowed considerably from the decade of the 1990s. In particular, animal disease outbreaks have heightened consumer and government concerns about food safety of meat products and disease transmission. Together with considerable export supply variability over the period and relatively low meat prices, these concerns have led numerous countries to increase use of import control measures.

34. Some countries moved to increase protection of domestic markets in the context of low global meat prices. In particular, the imposition of tariff rate quotas (TRQ) on meat products by the Russian Federation in 2003 significantly disrupted and constrained meat trade gains.2 Meat tariffs were also increased in Kazakhstan, with poultry meat assessments rising from 20 percent to 30 percent (or not less than 0.25 euro/kg). High support for Polish exports led to numerous CEFTA countries increasing tariffs. Both Latvia and Estonia introduced in early 2003 high duties on Polish pig meat exports. As of April 2003, Serbia increased levies on imported poultry meat and products and Montenegro also applied higher tariffs. The Czech Republic raised import duties on pigment by a third through the end of 2003, from 38.5 to 50 percent, while Bulgarian tariffs on marinated chicken and turkey products increased from 40 percent to the WTO bound rate of 75 percent for chicken products and 55 percent for turkey products.

35. In Asia, the Government of Japan in August 2003 activated safeguard measures raising tariffs on fresh and chilled beef and pork. The tariff on chilled beef was raised from 38.5 percent to 50 percent, effective until 31 March 2004. Meanwhile, the pigment safeguard was also activated for the third successive year, moving up the gate price (standard import price + tariff) up 25 percent. Saudi Arabia, the UAE and Oman introduced a 5 percent tariff on all imported frozen red meat and a 25 percent tariff on imported poultry. Elsewhere in Africa, Nigeria increased tariffs for certain livestock products such as turkey parts and dressed chicken from 25 to 75 percent while South Africa imposed import tariffs of 27 percent on chicken offal.

36. Under NAFTA, imports of meat products by Mexico from the United States became duty free as of 1 January 2003. However, the Government of Mexico in January 2003 established a provisional safeguard which resulted in a new duty free TRQ of 47,000 tonnes for chicken leg quarters. The TRQ volume is due to increase by 1 percent annually but will be phased out by 2008. The out-of-quota duty rate is 98.8 percent. Other poultry imports will be allowed to enter Mexico duty free. In the aftermath of Canada reporting a BSE case in May 2003, the Government suspended, as of 9 July 2003, the issuance of supplemental import permits from non-NAFTA countries. However, imports under the 76,409 tonne quota system continue.

37. In some cases, market access was facilitated by a lowering of tariffs or increased flexibility in importing under TRQs. The EU introduced new rules of sheep meat import quotas which will now be managed on a first come, first serve basis. Pig meat import duties in Romania were suspended at the end of 2003, accompanied by a repeal of import safeguards against Poland. Meanwhile, in adherence to the SADC Trade Protocol of 2000, South Africa reduced its tariffs on red meat imports from SADC countries by 25 to 33 percent, depending on the product. In the Chinese Province of Taiwan, quotas on chicken continue to rise as specified in their WTO commitment; quotas were 32 577 tonnes in 2003 and will rise to 46 000 in 2004, after which the quota will be replaced by a tariff of 20 percent.

Export measures

38. Trade restrictions, increased competition among exporters, relatively low meat prices over the period, and exchange rate developments have prompted countries to increase their use of export promotion measures. In the EU, export restitutions for poultry exports increased to 435 euro/tonne, the highest level since 1995 while, in late January 2004, EU pig meat export subsidies were temporarily activated at 400 Euro/tonne for all export markets. These subsidies, the first to be applied on carcass cuts since June 2000, are temporary and not valid after the end of April 2004.

39. Similarly, many of the accession countries, in anticipation of EU accession in May 2004, and EU requirements on maximum intervention stock levels for selected meat products, have increased their use of export subsidies. In order to reduce pig meat stocks from record levels, Poland’s State Agricultural Market Agency (ARR) subsidized the exports of 116 000 tonnes of pig meat during 2003, with export subsidies set at US$0.62/kg. Hungary provided export subsidies for all livestock production, with export subsidies set at US$0.70/kg for pig meat while subsidies for live pigs weighing between 90 and 145 kg reached US$0.4/kg in April 2003. Poultry producers benefited from a temporary export programme valued at US$1.1 million under which whole chickens exports received $0.45/kg (for CEFTA countries $.02/kg). Meanwhile, live cattle exporters received a US$0.28/kg export refund for livestock cattle for slaughter exports. While no subsidies were used to promote beef and cattle in 2003, the Czech Republic used nearly US$1.7 million to support exports of swine and pork in 2003 (out of US$2.8 million WTO authorisation). In the Czech Republic the State Agricultural Intervention Fund spent about US$1.6 million on subsidized exports of pig meat in 2003, compared to no outlays in 2001 or 2002. In Asia, the Republic of Korea increased its support for transportation of pig meat exports from US$39/ tonnes to US$81/tonnes.

40. The export subsidy programme for US poultry meat is no longer operational, having been last used in 2000/2001. However, expenditures on meat under the US Export Credit Guarantee Programme (GSM 102/103) and the Supply Credit Guarantee Programme (SCGP) continue to include meat product exports. Meat shipments under these programmes (accounting for only 2 percent of total expenditures) totalled US$93 million in 2002/2003, down nearly 35 percent from the previous year. A shift in meat expenditures between the GSM 102/103 programme and the SCGP is progressively occurring, with nearly 67 percent of the meat programme expenditures sent out under the latter programme in 2003, compared to only 8 percent in 2000.

Update on WTO meat and dairy trade disputes:

At the request of Brazil, the WTO in 2003 set up a dispute panel to investigate whether the EU acted correctly in changing harmonized codes to realign the tariff rate for frozen boneless chicken cuts.  Meanwhile, the WTO panel convened at the request of Brazil in 2002 to review anti-dumping duties imposed by Argentina on Brazilian chicken ruled in April 2003 that Argentina was in violation of WTO regulations. The United States, in response to Mexican anti-dumping duties on U.S. beef imports, held bilateral WTO consultations in mid-2003 on the issue and followed up in October 2003 with a request that a WTO panel be convened.

Canada’s Special Milk Class Pricing and Pooling System (SMCPP) was changed as a result of a decision of the WTO Dispute Settlement Body in 1999, upholding a claim by the United States and New Zealand that elements of system constituted an export subsidy as they allowed processors to purchase milk for export at a rate, determined by the Government, which was significantly below domestic levels.  In response to the WTO’s ruling, Canada changed its export pricing system, eliminating government involvement and encouraging producers to contact directly processors interested in supplies for export.  The revised system, the Commercial Export Milk Programme (CEM), was also challenged by the United States and New Zealand.   In June 2002, a WTO compliance panel reaffirmed the judgement that the CEM was not in line with Canada’s WTO commitments on subsidised dairy exports.   Canada appealed the judgement, but in December 2002 the panel’s decision was upheld by the Appellate Body.


41. Many countries are strengthening environmental, labelling and animal welfare regulations. In Poland, environmental regulations were passed in December 2002 which limit nitrogen run-off from agricultural lands through, in part, regulating application and storing of manure. In addition, labelling and animal welfare legislations were being prepared by the Minister of Agriculture and Rural Development. A new flatulence levy is to be imposed on New Zealand’s livestock producers which could see livestock producers paying 9 cent NZ per sheep and 54 cents NZ per beef cow. In the Rep. of Korea new livestock registration requirements include minimum space per animal while the governments of Morocco and El Salvador introduced controls on access to collective grazing lands. Under the new provision of CAP reform, financial support will be available to EU farmers who enter into a minimum 5-year commitment to improve the welfare of farm animals.

42. In Sweden, a government body with responsibility for animal welfare was established in January 2004. The body will be responsible for regulations regarding animal welfare and the supervision of animals’ well-being. In the Republic of Ireland, following a mission of the EU Food and Veterinary Office, it was decided that a general prohibition on tail docking for bovine animals was warranted, introduced in 2003. A number of states awaiting accession to the EU passed Union-compatible animal welfare legislation. For example, in Lithuania, regulations were adopted in 2002 for the welfare of domestic and farm animals which were in line with those of the EU.


43. Numerous trade agreements were concluded over the period which provided increased access for meat and dairy products. Some of these agreements and their provisions are listed below.

Table 1: Bilateral or Regional Trade Agreements


Type of Agreement

Changes to meat/dairy access



In force on 1 January, 2005. Cuts tariffs for Australia dairy, meat, and livestock products.



Increase in US quotas for beef and dairy (in particular cheese) over 18-20 year period.

US-Central American countries


Tariff on products will be phased out over the course of 5, 10, or 15 years (18 years for US chicken legs, 20 years for dairy products).

Chile-the Rep. of Korea

Bilateral Agreements

Increase duty-free quota access, reduce duties on out-of quota exports. 1,000 tonne quota to the EU beef market.



Raise annual quotas for cheese progressively. After 2007, unrestricted access will exist.

China-New Zealand


Increased market access for sheep and goat meat. Beef veterinary protocols.
Increase access.

New Zealand-Russia


Maximum levels for dairy tariffs and provides security to New Zealand’s dairy access upon Russia’s WTO accession.


Partnership Agreement

Reduced tariff rates for EU cheese exports to Egypt.


44. Most of the production policy developments since 2002 have been consistent with the Guidelines for National and International Action on Meat. However, the price destabilizing impact of alternating disease outbreaks and recovery, resulting in rapid increases in exportable meat supplies, has led countries to increasingly impose border policies which further aggravate price movements.

45. In light of the above, the Group might wish to:


46. In the context of the information presented above, the Group may wish to consider the following points for possible discussion:


1 Ten of these countries - Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic, and Slovenia - are set to join on 1st May 2004. Bulgaria and Romania hope to do so by 2007, while Turkey is not currently negotiating its membership.

2 Annual quotas for poultry meat, beef, and pig meat were set at 1.05 million, 420,000 and 450,000 tonnes respectively, with all of the quotas allocated by countries. In-quota tariffs for poultry are 25 percent or not less than 0.22 euro/kg while tariffs on beef (minimum 0.15 euro/kg) and pork (minimum 0.25 euro kg) are 15 percent. Poultry imports above the quota are not allowed while out-of quota levies for beef and pork are 0.60 euro/kg and 1.06 euro/kg respectively.