 August 2001
Argentina Establishes New Foreign Exchange Rate for Exporters As part of a series of efforts aimed at maintaining economic stability in Argentina, government officials introduced a complex tariff and exchange rate regime in June. The new system effectively devalues the Argentine peso for exporters, making their goods more competitive abroad. In addition, imported products are now subject to an adjustable tariff surcharge that raises their prices above the formal tariff rate. As reported previously in News Update, Argentine tariffs on imports of consumer goods, including dairy products, were raised to 35% in April. As part of the latest reform package, the tariff on imports of most dairy products was lowered to 28%. However, the new exchange rate for importers is tied to the difference between the value of the U.S. dollar and the Euro, which fluctuates daily. The current level of parity between the U.S. dollar/Euro currently makes imported goods cost 7% more, effectively negating the official tariff cut from 35% to 28%. The peso's one-to-one peg to the U.S. dollar for all other transactions remains in place. U.S. officials are examining whether the adjustable rebate program for Argentine exporters could be considered an export subsidy. China's WTO Accession Talks Continue Six days of talks in early July between Chinese and World Trade Organization (WTO) officials ended with significant progress being made toward China's accession to the WTO. Only one outstanding issue remains, which is whether a major U.S. insurer (AIG) will be given more favorable equity terms than other foreign companies operating in China when setting up new branches. Pending resolution of that issue, the WTO's General Council is expected to adopt China's accession package after which China will have to complete its domestic ratification procedures. China will become a WTO member 30 days after filing its notice of acceptance with the WTO. It is expected that WTO members will be able to endorse the accession at the November WTO Ministerial meeting in Doha, Qatar. The United States and China had earlier reached agreement on major outstanding bilateral issues regarding agriculture. The WTO Agreement on Agriculture requires members to cap and reduce trade-distorting government support (as measured by the "aggregate measure of support" or AMS). Although developing countries are normally allowed to provide AMS equal to 10% of the value of the country's agricultural production, China has agreed to limit its government subsidies to 8.5%. In addition, the unlimited exemption for subsidies designed to encourage agricultural and rural development for resource-poor farmers normally permitted to developing countries will not apply, as China has agreed to count that type of subsidy toward its 8.5% AMS cap. China also reaffirmed its commitment to eliminate all export subsidies for agriculture products. EU Subsidy on Nonfat Dry Milk Eliminated The European Union's (EU) nonfat dry milk (NFDM) export subsidy, a component of the EU's Common Agricultural Policy (CAP), was reduced to zero in July. This is the first time since the CAP has been in place that a major dairy commodity is without an export subsidy. The EU cited its continuing tight domestic market situation as the major reason for the move. NFDM subsidies had been undergoing a gradual reduction since October 1999, when the refund was 90.00 euros/100 kg, and had reached a low of 5.00 euros/100 kg in June 2001. Export subsidies on whole milk powder were also reduced in July to 50.00 euros/100 kg and condensed milk reduced to 5.70 euros/100 kg. Restitutions for all cheese exports had been cut by 15% in June. Subsidies are reevaluated by the EU's Dairy Management Committee bimonthly and can be raised, reduced, eliminated, or reinstated at any time. Last month's reduction in cheese subsidies was attributed to the strength of the U.S. dollar against the euro, high world prices, and the limited availability of fluid milk within the EU. DairyAmerica, NZDB Open Negotiations for Sales Relationship DairyAmerica, the largest U.S. distributor of dairy products, announced to a number of its business contacts in mid-July that it has begun negotiations with the New Zealand Dairy Board (NZDB) to name NZDB as its foreign sales agent. DairyAmerica is an association of seven U.S. producer-owned dairy cooperatives. While the details of the agreement are being worked out, NZDB will act for DairyAmerica on export transactions. EU Proposes Trade Agreement Talks with Mercosur, Chile In early July, the EU presented a proposal for tariff eliminations in the context of a trade agreement with Mercosur (Argentina, Brazil, Paraguay, and Uruguay). A similar proposal was presented separately to Chile. ). U.S. exporters could be severely disadvantaged if the EU were to obtain duty-free access to South American markets while the United States faced 20-30% tariffs there on the same goods. The proposals consist of lists of agricultural products and the timeframes for tariff elimination, gradual liberalization and preferential tariff quotas. Tariff elimination would take place either immediately, over four years, seven years, or ten years for different categories of products. Case-by-case concessions or preferential tariff rate quotas would be negotiated for particularly sensitive products, such as certain grains, chicken and dairy products. The EU proposals did not include concessions on domestic agricultural subsidies, which the EU considers to be covered under WTO negotiations. The EU proposals set the stage for similar lists of proposed tariff concessions to be offered by its potential trade partners. Chile and the Mercosur countries are expected to present counterproposals for liberalized market access within three months. The progress being made in these EU free trade area negotiations highlights the importance of the U.S. participation in the Free Trade Area of the Americas (FTAA) and congressional enactment of Trade Promotion Authority (TPA.) IDFA is working hard to promote the passage of TPA and progress in the FTAA. Chile Cuts Import Duties on NZ Milk Products In late July, the Chilean government announced the removal of safeguard duties on select New Zealand dairy imports. The duties were the result of a July 2000 safeguard action in which provisional 16% safeguard duties were imposed on New Zealand milk powder and ultra heat-treated milk. The Chilean government believed that increased imports had caused or threatened to cause serious harm to the Chilean industry. The provisional 16% duties, imposed on top of an 8% uniform tariff, were later reduced to 12%. In addition, countervailing duties of 21% had been placed on U.S. and EU powdered milk exports to Chile in December 1999 but those were later revoked in July 2000. Chilean imports of U.S. milk powder were 2 million kg in 1998, but fell to just over 500,000 kg in 1999. Possible Nomenclature Protection for "Parmesan" A case has been brought before the European Court of Justice by the Consorzio of Parmigiano Reggiano in order to prevent the use of the term "parmesan" by anyone other than certified producers of the cheese. The case was brought against the Bigi company, which markets a mixture of grated cheese under the 'parmesan' name. According to the Consorzio of Parmigiano Romano, the word 'parmesan' is a French translation of the word Parmagiano that has been protected under the European Commission's Protected Designation of Origin law since 1992. Italy's strict production standards call for the term to be used only for cheese originating in the Emilia-Romagna region. EU member countries Germany and the United Kingdom have disputed the Italian claim, stating that 'Parmigiano-Reggiano' is a term that may receive protection, but that 'parmesan' is a generic term to which the Protected Designation of Origin law does not apply. A hearing in the case took place in June and a preliminary decision is due in early October. A final decision could come by the end of the year. The court's decision would apply only to EU production. European Commission Approves Tough New Rules for Labeling of Genetically Modified Foods The European Commission recently adopted the EU regulations on traceability and labeling of biotechnology products that U.S. groups have called "unworkable." The new regulations would set up a centralized approval process for authorizing genetically modified organisms (GMOs) for food or feed, as well as a system to trace GMOs throughout the food chain. In addition, all foods derived from GMOs would have to be labeled as such, even if they no longer contain any modified DNA or protein. The rules would go into effect once they are approved by each of the EU member governments and the European parliament. U.S. food and agricultural groups assert that such strict rules are motivated by trade protectionism since scientific research has not shown that GM foods pose a risk to human health. GM varieties already being grown in the United States are not authorized in the EU, and no approvals have been made since October 1998. U.S. exporters are also concerned with the new requirement for GMO labeling that demands labeling even if no trace of genetically modified DNA or protein can be detected in the finished product. The U.S. exporters believe that a requirement to label a product with ingredients that cannot be detected could lead to fraud. Opponents fear that, once the rules are in place, European consumer groups could insist on the labeling of meat or other by-products of GM-fed animals. This next step could affect the dairy industry due to the use of genetically engineered inputs or processes in the manufacture of various dairy products. ### |
