19 May 2000

Export tax comeback possible

By Philip Clarke

WITH EU and world grain prices converging for new crop, thoughts in the trade are turning to the possible return of the export tax.

This measure was last used in the 1995/96 campaign, when US values outstripped EU support levels. To prevent an exodus of EU grain on to the world market, leading to a further hike in animal feed costs, Brussels imposed a charge on exports.

At the time, the impact on cereal growers was not serious, says Group Cereal Services president, Norman Coward. "Most producers were already making good profits, with wheat worth about £120/t."

But since then, the level of intervention support has fallen due to the strong £, and is set to drop again under Agenda 2000, to just £66/t this harvest and £62/t in 2001, at current exchange rates.

"An effective capping of the UK price at these prices would be a serious blow to UK cereal growers who are generally making little or no profit at todays levels," says Mr Coward.

But just how likely is an export tax? With economic growth back on track in south east Asia and world grain supply static, world prices could well exceed EU levels again this harvest.

And, while there is no automatic trigger for Brussels to start taxing exports, it is perhaps significant that last year the commission amended the legislation "to facilitate the introduction of export taxes, if necessary".

Some have argued that Brussels would prefer to release intervention stocks, rather than start taxing exports. But its scope to do this is more limited than in the past with about 12m tonnes in store compared with 33m tonnes in the peak year of 1992. It is also running against a tighter budget, so any chance to rake in a bit more cash might be seized.

Despite this, Mr Coward is still far from convinced export taxes will be used. "By the time world prices have risen and intervention stores have been significantly reduced, it would probably be 2002/03," he says. "At that stage, any export tax would certainly be challenged in the World Trade Organisation as a blatant subsidy to EU livestock farmers." &#42