Dairy UK has said the EU dairy industry would be seriously damaged if new proposals by the Cairns and G20 groups for a rapid phasing out of export subsidies were accepted.

Director general Jim Begg said: “There is no doubt the EU will meet its commitment to eliminate export subsidies if an agreement is reached.

“But when we signed up to the idea this wasn’t an offer to threaten the viability of our industry which is what a sudden loss of export subsidies would mean.

“What the Cairns and G20 groups and the GDA are demanding would seriously damage the EU dairy industry.

“The dairy industry has made a meaningful contribution to the process of multi-lateral trade liberalisation by accepting the end of export subsidies, but there should be no expectation that we would want to destroy productive capacity in the process.”

Export subsidies for dairy products have also come under fire in a new report from pressure group Farmsubsidy.org.

Author Jack Thurston said the dumping of cheap commodity products in developing countries was harming local dairy producers by making it harder for them to develop sustainable businesses.

In 2005 the EU spent €1.43bn on export subsidies, with the UK accounting for €69m (£47m) of that, said Mr Thurston.

Fayrefield Foods was paid almost £12m in 2005, with Philpot Dairy Products, a subsidiary of Dairy Crest, getting just over £8m of payments.

Mr Thurston also said £4000 had been spent over the past two years subsidising dairy exports to Antarctica.

In-flight caterer Gate Gourmet was paid about £116,000 and London-based artisan cheese company Neil’s Yard Dairy received £14,000.

Scandinavian dairy processor Arla Foods banked a total of €121m of export subsidies from its European operations.

Dairy UK policy director Peter Dawson said: “A lot of countries in the Third World are reliant on products from the EU. They are clear beneficiaries from the export refund system.”