Thursday, May 25, 2006

Milk quota rules may face court challenge

Given that there's an internal market, it's always been a mystery why milk quota can't be traded across national borders (although some member states restrict trading within their own borders). Some farmers don't have enough quota, others have quota they would like to sell at a decent price and use the capital for other activities. Above all, trading quota would prevent the structure of the dairy industry in the EU ossifying in a way that made it even less internationally competitive than it is already.

Now the milk quota rules may be subject to a case in the European Court of Justice based on the principle of the free movement and trade of people, goods and services across EU borders. In February British milk quota trader Ian Potter managed to transfer several million litres of quota from Britain to Italy. Italy is only 56 per cent self-sufficient in milk production and the high price of quota is forcing dairy farmers out of business. The British farmers got more than they would have done in the depressed British market.

Potter was encouraged in this course of action by the sale of 200,000 litres of quota from Hungary to Italy last year. Following the signing of the quota transfer contracts in the Potter deal, forms were lodged with the Italian authorities and the English Rural Payments Agency. The RPA duly rejected the transfers, but the Italian authorities were less definite, saying that they did not believe that the transfer requests that were being used quite conformed to the current EU law.

While the self-styled Italian Milk Warriors wait for their day in court, the Italian authorities appear to be prepared to recognise the transfers for the time being and will not seek to collect superlevy from the fifteen Italian farms involved.

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