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December 09, 2008

South African dairy exporters protest EU sanitary import standards are protectionist

by Craig McKune

South African dairy farmers say they're sitting on 8 000 tons of cheese ready for export to the European Union, but are blocked by protectionist measures dressed up as sanitary standards.

This is according to a recently released report that consolidates the responses from Western Cape dairy farmers and other industry players at a dairy "crisis" summit last month.

The meeting was called by MEC for Agriculture Cobus Dowry in response to the dwindling profits for dairy farmers that have driven many off the land.

South Africa could export up to 8 000 tons of duty-free cheese to the EU under a reciprocal trade agreement, Dirk Troskie, an agricultural economist with the provincial Department of Agriculture, said. He said South African dairy products were safe for consumption and accepted throughout the rest of the world.

While the country also placed standards on EU dairy imports, specifically relating to mad cow disease, Troskie said those put in place by the EU were often "used as a mechanism to keep certain products out of the market." The department was to investigate the possibility of taking up the dispute with the World Trade Organisation's committee on sanitary and phytosanitary measures, he said.

Another possible response to the export problem, Dowry said, was to target untapped markets, particularly those in the Southern African Development Community, more aggressively.

Dairy farmers said the low tariff on dairy imports was contributing to the industry's problems.

South African farmers are unable to compete with those in the EU, Canada and the United States as these competitors receive hefty government subsidies. For example, in Canada, subsidised milk produced at R4 a litre remains more profitable than milk produced in South Africa at R1 a litre.

The summit called for more support from the government on this issue.

According to Troskie, solutions to international subsidies are complex and a multipronged approach was necessary. He said the industry needed to improve its efficiency, investigate international mechanisms to prevent dumping and explore the sensitive question of raising import tariffs.

Dowry said "crisis" was a strong word for the industry's situation, but Troskie said this was how some in the industry were experiencing it.

Dairy farmers said at the summit that the price paid to them for raw milk had decreased, whereas their costs were soaring.

The department said that, on average, one farmer a day left the land. This translated into a projected loss of 15 percent of producers in the next few months.

Mistrust among players, arising in part from the Competition Commission case against price-fixing by several Western Cape dairy processors, was also cited at the summit as a problem.


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