Dairy quota row highlights industry divisions

Commissioner Mariann Fischer Boel's proposal for five annual dairy quota increases of 1 per cent each, adopted unchanged by farm ministers, is under attack from two sides. The Commission believes that this is a sure sign that it has negotiated a fair middle path through a morass of conflicting objectives. A less charitable interpretation would be that the needs of an internationally competitive industry have been partially sacrificed to those of marginal farmers with political clout.

What is at stake here is a deeoply divided industry. Parts of the European milk sector, largely found in Northern Europe (although also in Italy's Po Valley) is an efficient, hi tech branch of the food industry that is well capable of competing on the international market and has a strong export orientation. But there are also a lot of marginal dairy farmers who are conservative in outlook and manage to 'get by' economically with the help of political protection. This is given to them by groupings like the CSU in Bavaria.

Member states in the north and west of Europe, especially the UK and Denmark, have criticised the Health Check accord as a missed opportunity to set the EU dairy industry on the road to a prosperous and expansionist future. Member states to the south and east have lamented the prospect of more milk coming on to the market at a time when dairy farmers' incomes are coming under sustained pressure.

Kirsten Holm Svendsen, policy director of the Danish Dairy Board, commented, 'Restricting milk production in Europe will only generate higher support volumes from non-European dairy nations. Thus, by refusing to liberalise dairy production, the EU gives up the expanding European dairy market to the Brazilians.'

The Danes are also concerned that the new support mechanisms available to dairy producers under 'Article 68' of the Single Farm Payment regulation will allow member states to effectively re-introduce coupled support of the dairy sector, with a consequent distorting impact on competition.

The possibility of creating a new coupled dairy cow premium from 2010 is regarded as a negotiating victory for Austria. Outgoing Austrian farm minister Josef Proll said that the biennial reviews of the milk market would allow the Commission to put the planned quota increases in hold if there were to be any risk of exceptional market disturbances - or even to cut quotas. Thus, even modest steps in the direction of market liberalisation could be threatened.