APPENDIX 16
Memorandum submitted by the British Poultry
Council (A21)
INTRODUCTION
1. The British Poultry Council (BPC) is
an independent trade association representing UK poultry meat
producers including primary breeding, rearing, slaughter and processing
of chickens, turkeys, ducks and geese, and slaughter and processing
of spent laying hens. BPC does not represent egg producers. BPC
Members account for around 90 per cent of UK poultry meat production.
2. UK poultry meat production is some 50
per cent greater in volume than pork and around twice the volume
of beef and veal production. Poultry meat production is not subsidised
under either the CAP or national programmes, nor is it controlled
by quotas.
EXPORT REFUNDS
3. Export refunds are paid on 286,000 tonnes
of mainly whole frozen chicken exported to the Middle East and
the former Soviet States. Refunds are currently around
28/100kg. Most whole bird exports from the EU are
made by a few French and Danish companies. This subsidised volume
represents about one quarter of total EU annual poultry meat exports
to Third Countries. UK poultry meat exports are mostly low value
cuts and parts which have little or no market within the EU, such
as wings and feet.
IMPORT TARIFFS
4. Tariffs apply to imports. As well as
the basic tariff amount, additional tariffs are charged if the
c.i.f. value is below a fixed Reference Price for that commodity.
Essentially, under the provisions of the Safeguard Clause of the
GATT Agreement on Agriculture, the lower the cif value compared
with the Reference Price, then the higher the additional tariff.
The method of calculation of additional tariffs is more complicated
than this simple statement. These tariffs do not apply to all
imports. There are very low, concessional tariff rates on relatively
large quotas for poultry meat imports from East European countries.
A further 18,500 tonnes of tariff-free imports are enjoyed by
Brazil and Thailand, given as part-compensation in the GATT Oilseeds
Panel settlement.
5. Imported poultry meat is mostly boneless
and skinless chicken breast meat which is the highest valued cut
in the UK (and EU) market. Imports are charged a basic tariff
and in most cases are also required to pay an additional tariff.
For imported chicken breast meat the total tariff represents around
55 per cent of the cif value. This level of tariff is appropriate
to the cost of production of an efficient UK producer. However,
exporters in Third Countries are adding 1.2 per cent of dry salt
to chicken breast fillets exported to the EU to change the Customs
classification from fresh or frozen poultry meat to a catch-all
"other" classification. This greatly reduces the tariff
payable to just 15.4 per cent of the cif value. In our view this
practice amounts to fraud and the loophole must be closed. We
also believe that this practice further encourages the dubious
practice of adding very high levels of water to in some Member
States in an attempt to compete with the very cheap lightly salted
imports, as revealed by the FSA's recent survey of catering chicken
breast meat packs.
6. Poultry meat imports into the EU have
been increasing rapidly in recent years and are expected to exceed
500,000 tonnes this calendar year. Last year the UK imported 365,000
tonnes of poultry meat. We estimate that around 40 per cent of
chicken breast meat eaten in the UK is now imported. These increases
have been fuelled by the strength of the pound sterling against
Asian and South American currencies and against the euro and by
the growing cost of EU and UK legislation. Tariffs are calculated
in euros and because of this, the relative tariff protection provided
to UK producers has fallen as the euro has fallen against the
pound. Both of these factors help to explain why chicken imports
into the UK have continued to rise despite the application of
seemingly high tariff and additional tariff amounts.
7. The agrimonetary system of the CAP provides
for compensation to farmers for the fall in the value of euro
farm subsidies due to currency movements. The same compensatory
mechanism should be available to non-subsidised farmers for falls
in the effective protection of euro tariffs due to currency movements.
WTO AND TRADE
LIBERALISATION
8. The Ministerial Declaration agreed at
the Doha meeting in October is unequivocal on the need to further
liberalise market access particularly for goods from Developing
Countries into Developed Countries' markets. It is generally held
that this will be achieved by further substantial cuts in or elimination
of tariffs on agricultural goods. In a meeting with NGOs (including
BPC) just before the Doha meeting, Lord Whitty, DEFRA Parliamentary
Secretary (Lords), confirmed that the UK Government wishes to
see import tariffs abolished. He also indicated that the Government
is not in favour of all "blue box" subsidies being removed
and could envisage more "green box" subsidies in a WTO
outcome.
9. The Government's position is extremely
worrying for UK poultry meat producers. In the absence of any
subsidies whether "blue box" or "green box",
the tariff is the only form of protection open to the poultry
sector. Removal of tariffs without ongoing assistance to compensate
would be highly discriminatory against the poultry sector and
other agricultural sectors which are currently unsubsidised. Fortunately
not all Member State governments seem to share the UK Government's
laissez faire approach on agricultural tariffs. It is a sad business
that we have to rely on the policies of our competitors' Governments
to protect the standards our own Government claims to stand for
but is not ready to uphold in the face of ever increasing food
imports.
10. Tariffs are a legitimate means of protecting
certain values which are strongly held by EU society and reflected
in EU laws governing EU producers. Employment conditions, animal
welfare standards, and environmental controls all apply to the
poultry sector and all add significant costs. Poultry and pig
farming are the only agricultural sectors covered by the stringent
environmental controls imposed by the Integrated Pollution Prevention
and Control Directive despite being relatively low agricultural
polluters compared with other livestock sectors. These are high
added costs which are not required to be borne by poultry producers
in Third Countries selling directly into the EU market to EU consumers.
11. This is not an argument for the reduction
or removal of these high standards. Rather, it is a plea that
these standards are not allowed to be undermined and eroded away
by cheaper, "sub standard" imports forcing closure of
UK farms, and processing plants. The poultry sector is the major
rural employer in the UK. Enlightened EU employment laws provide
no benefit to those without jobs. Ethical EU animal welfare laws
have little effect if most of the products eaten come from livestock
reared largely outside the EU. Having set high standards in legislation,
it should be the moral responsibility of EU governments to uphold
and protect those standards for all products entering the EU and
not just for those produced within the EU.
12. Tariffs are the fairest and most transparent
way of achieving this. In the case of poultry meat production,
tariffs are not protecting an inefficient EU industry from more
efficient producers elsewhere. The EU poultry meat sector is highly
efficient in its operating procedures but it incurs higher costs
because of the reasons outlined above. Costs are also higher in
part because the high production subsidies and price supports
enjoyed by other agricultural sectors over the years have become
factored into the cost of land and various direct and indirect
goods and services bought in by unsubsidised poultry producers.
This effect is now significantly reduced, however.
WTO AND NON-TRADE
ISSUES
13. The WTO Ministerial Declaration includes
in the Agriculture section some general wording on taking non-trade
issues into account. The EU Commission maintains that this will
allow the EU's concerns over animal welfare and environmental
standards to be included. However, no other WTO country is interested
in including welfare and the UK Government's view is that it will
fall off the WTO agenda. The alternative being considered is to
create an EU payments system to compensate EU producers required
meet higher welfare standards, and to allow sub-standard imports
with low or zero tariffs but require them to be identified by
appropriate labelling. Consumers will then be able to make informed
choices.
14. The approach being proposed borders
on the farcical. It should not be the EU taxpayer who pays extra
for the standards required of EU products by EU law. It should
be those whose products do not meet those standards who pay. This
is properly the legitimate role of tariffs. Similarly, it is highly
hypocritical of EU Governments to impose one set of standards
and severe penalties on certain products but not on the same products
from other sources, and to let the consumer decide which product
they wish to buy. If this freedom for the consumer is morally
satisfactory in the case of imported products then it must be
satisfactory for the same products produced domestically in similar
farming systems. Labelling the systems used rather than banning
some systems might be a better way forward.
RELEVANCE TO
PRODUCTION SUBSIDIES
15. The UK poultry meat sector is highly
vertically integrated and highly efficient in hatching, rearing
and processing. However, it needs tariff protection to fairly
compensate for the significantly higher costs of EU (and UK) legislation
in order to compete with imports from Third Countries. The very
short, integrated, and consumer-driven production chain of the
poultry sector is often seen as a model for subsidised agriculture
sectors to be more market oriented without subsidies. In removing
production subsidies and pushing agriculture sectors to be market
oriented the Government must retain the facility to protect those
sectors against substandard imports through appropriate import
tariffs.
16. The very extensive farming systems being
advocated by some, in our view will require even greater levels
of direct subsidy and tariff protection than the conventional
systems they are seeking to replace. Policies to pay farmers to
switch to production systems which consume considerably more natural
resources such as water and feed and which are more inefficient
in use of labour and capital assets are misguided and short term.
Such systems are even less likely to be able to withstand the
competitive pressure of products from similarly inefficient but
considerably cheaper systems in developing countries that will
have much greater access to the UK market.
BPC
14 December 2001
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