3 November 1995

Cross-border quota trade non-starter

By Shelley Wright

FARM minister Douglas Hogg has admitted there is little chance of introducing cross-border trading of milk quota within the EU.

Speaking at the Dairy Industry Federations annual lunch, Mr Hogg said that he had discussed the idea with EU farm commissioner Franz Fischler. But while the Dutch were interested in the proposal all other member states remained firmly opposed.

"We will keep plugging away, but I have to say that I see little prospect of making progress in the face of such strong opposition," Mr Hogg said.

He also ruled out the possibility of introducing a two-tier quota system. "There has been talk of establishing a separate – or "B" – quota for milk used for processing into products for export without subsidy. The Danes have been pushing this idea and I understand that the French dairy industry is also interested," he said.

But MAFF had looked at the system and decided that there were inherent difficulties. A two-tier quota system would be difficult to administer, open to fraud and probably incompatible with GATT.

Mr Hogg concluded that it would be far better to dismantle price supports and quotas altogether rather than introduce a further layer of complexity which would make reform of the EU dairy sector even more difficult.

Mr Hogg said the CAP dairy regime was too costly and involved substantial transfers to the dairy industry from consumers and taxpayers. It was also a major obstacle to the rational development of milk production in the EU.

"It is absurd to operate a support system which encourages excessive production while at the same time imposing quotas to curb that production," he said. The system was a brake on progress.

Mr Hogg predicted that radical reform of the European dairy regime was unlikely to occur in advance of a fundamental reform of the CAP. Meanwhile, the government would continue to press for reductions in the cost of supporting the dairy sector.

Reductions in support

"And we will continue to insist that any adjustments must be made through reductions in support prices and not reductions in quotas," he stressed.

Mr Hogg acknowledged the DIFs complaints about Milk Marque but said any action was up to the competition authorities.

On the first anniversary of deregulation in the British milk market, DIF president Neil Davidson told Mr Hogg that dairy companies were still unhappy with Milk Marques selling system. "And we do not like the restrictive nature of the leaving terms for Milk Marque farmers. This is stifling the development of the free market," said Mr Davidson.

But Mr Hogg said the DIFs complaints had been addressed by the competition authorities. "It is now up to them to decide what action to take," he added.