Business Opinion: Irish dairy companies have been hugely successful in recent times. In terms of indigenous industry selling abroad, the sector could serve as an example to many others. Glanbia is one of the top 10 dairy companies in the EU. The Irish Dairy Board is the Republic's largest exporter, writes Colm Keena
It is because of the importance of the sector that the Minister for Agriculture, Mr Walsh, is fighting so hard in the ongoing EU farming talks. Farming and dairy organisations have warned that €183 million could be lost to the dairy sector as a result of the Fischler proposals for the sector. There are 27,000 Irish dairy farmers and another 7,200 people working in the milk processing industry. Total output is worth €3.1 billion. A lot is at stake.
The Fischler proposals and the EU talks take place against the background of the forthcoming World Trade Organisation (WTO) meeting in Cancun, Mexico, in September. The EU system of price supports, export subsidies and import tariffs is inimical to the WTO's purported purpose of freeing up world trade.
The Irish position is a relatively unsophisticated one in that it is primarily interested in keeping the status quo in place for as long as possible. In other words, it is against getting rid of price supports and export refunds, but if they must be eliminated Ireland wants them eliminated very gradually.
The world may still be dealing with the effect of EU export refunds in 10 years, and if that turns out to be the case then that will be a good thing as far as the Irish dairy sector is concerned.
The value of total dairy exports in 2002 was €1.8 billion. Of this, €800 million was exported by An Bord Bainne/the Dairy Board. Of that amount approximately €50 million, or one-eight of the total, came by way of export refunds for products sold outside the EU.
The payments go to the companies that export the diary products. Some argue that these payments are in effect passed on to the dairy farmers who supply these companies with product. Others strongly dispute this, saying the payments are of more benefit to the dairy companies than the farmers.
In the main and because of its efforts to protect and boost its dairy sector, products sold to the US can be ignored when considering total export refunds paid for Irish products. The dairy product not exported by the Dairy Board is exported directly by individual companies. Some members of the Dairy Board export through the board and also individually.
Figures from the Department of Agriculture indicate that product exported directly by companies triggers far less in export refunds that does product exported by the Dairy Board. In 2002 the board exported the following percentages of its overall exports to countries where export refunds apply: 1 one per cent to non-EU European countries; 2 per cent to Central and South America; 5 per cent to the Middle and Far East; and 8 per cent to Africa. The total is 16 per cent.
Overall, the amounts involved are significant though not so significant that their loss would be catastrophic for Irish food groups, especially as export refunds, when they go, are likely to be phased out.
The Dairy Board website shows the list of countries to which Irish consumer dairy products and dairy food ingredient and bulk dairy products are sold. The countries listed include some of the poorest countries on Earth, such as Sierra Leone, the Democratic Republic of the Congo, Burkina Faso and Malawi. Some of the countries listed are the focus of Irish aid programmes.
The argument of development agencies such as Oxfam in relation to dairy sales by the EU and US to poorer third world countries is now generally accepted as incontestable. Systems such as that operated by the EU lead to the production of more milk than the EU requires, milk which is then dumped on third markets in such a way that the milk undermines production in countries where agriculture provides a significantly higher proportion of jobs than it does in developed countries.
Small dairy farmers in countries such as India, Jamaica, the Dominican Republic and Kenya, all importers of Irish dairy produce, suffer as a result of this dumping. The undermining of these poorer agricultural economies, by way of dumping, happens alongside a system whereby their farmers are barred from selling their produce into the EU.
(According to Oxfam, quoting the OECD, cows in the EU are supported by way of subsidy to the tune of €2 per head per day, more than the per day income of more than half of the world's population.)
Both the EU and the US spend billions supporting their dairy sectors. The WTO talks in Cancun have been charged with addressing this issue and with doing so while considering non-trade issues such as the needs of developing countries. The Republic's input into all of this is largely by way of its input into the EU's stance in the WTO talks.
The Republic, like all EU members, is represented both individually and by way of the EU. The EU is part of the so called quadrilateral or Quad group - made up of the US, the EU, Japan and Canada. This group of powerful economies tends to dictate WTO policies. It will be interesting to watch how they manage to marry protection of their dairy sectors with their duty of concern for the developing world.
