…Quotas – not on in free world: MAFF
AGAINST a background of world trade liberalisation and EU expansion, MAFF believes the current milk regime is unsustainable.
But the sudden and complete removal of quotas and support would be too severe and would allow no time for adjustment.
MAFF has "serious reservations" about a two-tier quota system. It would probably not be GATT compatible, it would be hard to administer and would be open to fraud.
It, therefore, prefers "the creation of a competitive dairy industry through a combination of progressive price cuts and relaxation of production controls".
It envisages price cuts of 6% a year for five years to move EU milk prices to world levels. But removing quota constraints in line would lead to over-supply problems, says MAFF, putting further pressure on world prices.
It, therefore, recommends leaving quotas in place during the transition period, but allowing quota to move between member states so more efficient producers can expand their businesses, prior to trading at world prices.
Compensation should be "decoupled from production, time-limited, degressive and non-discriminatory".
This rules out headage payments or even area payments as these are linked to production. MAFF favours direct income aid, possibly linked to schemes to encourage diversification into non-farming activities.