THE DRINKS INDUSTRY IN SCOTLAND
7. Export refunds
92. The SWA and the GVA were also concerned about
recent changes in export refunds. These are intended to compensate
EU producers for having to buy cereals at higher prices caused
by the operation of the Common Agricultural Policy (CAP). Export
refunds allow spirits producers to compete in non-EU markets on
equal terms with producers from outside the EU.[120]
At the end of 1999, European Union expenditure on export refunds
came under pressure from internal budgetary pressures, specifically
a well understood need for reform of the CAP and from World Trade
Organization (WTO) limitations on refund expenditure. As a result
of these pressures, the industry organisations feel that they
have been unfairly targeted for reductions in export refunds.
93. Due to convergence between World and EU cereal
prices, there is currently no major additional cost problem facing
spirits producers using EU wheat or barley. The European Commission
has said it will monitor the new arrangements and has asked to
be provided with evidence of disproportionate effect.[121]
However, distillers using EU maize have been seriously affected
by the reduction in export refunds, since the EU price for maize
remains above world market prices.[122]
94. Both the SWA[123]
and the GVA[124]
noted that, following pressure from the UK, the European Commission
said that compensatory payments to spirits producers would be
made under the more WTO-compatible system of Inward Processing
Relief (IPR). This allows limited access to world raw materials
for producers who are producing for re-export.[125]
The SWA though said that the calculations for the IPR level for
2002 "largely ignored the refund requirements of those whose
refunds have been abolished or reduced ... far from giving priority
to those sectors hit by refund cuts, the Commission continued
to discriminate against them".[126]
95. We welcome the reinforcement of any mechanism
designed to assist fairness and competitiveness in international
markets. But any increased use of IPR may have undesirable consequences
for Scottish agricultural producers. In the event of World and
EU prices diverging to the detriment of EU crops, and IPR kicking
in, it would be a sorry development if spirits producers in Scotland
were forced by circumstances to buy essential raw materials from
world markets rather than from local sources. Both agricultural
producers and spirit producers in Scotland will no doubt maintain
a vigilant eye on the situation. We recommend that the Government
commits itself to close monitoring of conditions and to ensuring
that IPR levels are set appropriately.
120 HC 973-ii, Session 1999-2000, p.45, para 10.1. Back
121 HC
114-v, Session 2000-01, p.289. Back
122 HC
324-i, Session 2001-2002, p.329, para 17. Back
123 HC
973-ii, Session 1999-2000, p.45, paras 10.3-10.6. Back
124 HC
114-ii, Session 2000-01, p.118, para 27. Back
125 Ibid,
para. 29. Back
126 HC
324-i, Session 2001-2002, p.329, para 22. Back
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