New EU protests should result in further capitulation

European farmers, long used to suckling at the teat of subsidies, got their wish at the beginning of the year. However, if two days of farmer protest is any indication, the EU is sure to buckle once more, allowing even more concessions to flow from Brussels.

Dairy farmers across Germany, France and in Belgium have blocked cheese factories and staged demonstrations demanding a return to fixed prices, regulation and subsidies.

The US announced a return to export subsidies yesterday, using the EU’s reintroduction of its export subsidies in January as an excuse.

European farmers now want to go even further and reinstitute the same artificial market controls that produced Europe’s infamous ‘butter mountain’ and ‘wine lakes’ of the 1980s.

Europe’s agricultural subsidies are reviewed weekly and the milk purchase price currently sits at €210 per tonne, protestors are demanding a guaranteed milk purchase price of €300 a tonne to break even.

More than 1000 protestors made themselves heard outside a European Commission Agricultural meeting in Brussels, while another 6000 protested in Berlin and 12,000 French farmers blockaded 81 dairy plants across the country.

The EU has pledged to buy 30,000 tonnes of butter and 109,000 tonnes of skimmed milk powder and have also brought back export subsidies two years after they were ended and promised €1.5 billion emergency help for dairy farmers.

EU Agriculture Commissioner Mariann Fischer Boel told the conference that the US blaming The EU for its re-introduction of subsidies “was unfair”.

"We did not introduce our export refunds until we had calculated the effect on the market ... and we have not covered the gap between the EU and international price," she told farm ministers.

The U.S. Department of Agriculture pays cash to exporters as bonuses, allowing them to sell certain U.S. dairy products at prices lower than the exporter's costs of acquiring them. At this stage the volume has been set at 92,000 metric tonnes of product, although price specific policy has yet to be determined.

Both parties have pledged to remove export subsidies by 2013 as part of their commitments to the Doha free trade round.

Neither party has a clear transition path.