AFFECTED FLOWOutflow (subsidised)
ANNOUNCED AS TEMPORARYNo
Secretary of Agriculture Tom Vilsack announced on May 22, 2009 the allocations under the Dairy Export Incentive Program (DEIP) for the period of July, 2008 through June 30, 2009. This program operates through the payment of bonuses to U.S. exporters in cash. The new policy makes allocations for subsidized exports of 68,201 metric tons of nonfat dry milk, 21,097 metric tons of butterfat, 3,030 metric tons of various cheeses, and 34 metric tons of other dairy products, as well as individual product and country allocations. The Department of Agriculture later announced on July 6, 2009 that the unused balances from the 2008-2009 period will be made available through the issuance of new Invitations for offers, and also announced the initial allocations for the period July 1, 2009, through June 30, 2010.
The announcement provided no specific dollar value for the incentives, which are instead subject to a bidding process by private exporters. The U.S. Department of Agriculture announces each accepted bid. On June 24, 2009, for example, it announced that an award of 150 metric tons of nonfat dry milk had been made to a bidder at a bonus rate of $179 per metric ton for shipments during July 1-31, 2009 to countries in Africa and the Middle East. Another recent announcement provided bonuses of $100 per metric ton for exports of 76 metric tons of cheddar cheese to Asia and Eurasia (announced June 23, 2009).
The DEIP program itself is not new, having first been established in 1985. It was subsequently reauthorized by the farm bills of 1990, 1996, 2002, and 2008. The latest of these is the Food, Conservation and Energy Act of 2008, section 1503 of which provides the current authorization for DEIP. The program had nevertheless been less fully utilized in recent years. The May announcement meant stepping up allocations to the maximum level allowed under the Uruguay Round Agreement on Agriculture.
Secretary Vilsack stressed in making the announcement that the United States was taking this action in response to the increased use of export subsidies by the European Union (see the Global Trade Alert description of this measure). He also noted that, 'The Obama Administration remains strongly committed to the pledge by the Leaders of the Group of Twenty to refrain from protectionist measures. Our measured response is fully consistent with our WTO commitments and we will make every attempt to minimize the impact on non-subsidizing foreign suppliers.' This statement did not prevent critics from criticizing the subsidies. In a May 27, 2009 statement, the Cairns Group was critical of both the United States and the European Union for their use of subsidies:
Both the US and the EU have argued that they will not exceed their WTO commitment levels on export subsidies. But this is not the point. If other economies follow the example set by the US and the EU and raise tariffs, domestic support and export subsidies towards their maximum WTO commitment levels, it would undermine the effectiveness and credibility of the WTO system.
The expanded use of DEIP responds to requests made by the National Milk Producers Federation. The group sent a letter to President Obama on March 19, 2009 stressing the importance of both DEIP and the Dairy Product Price Support Program, and asking that 'these tools be used to their fullest extent both for the benefit of America's dairy farmers.' It then followed on May 8, 2009 by urging the U.S. Trade Representative, the Department of the Treasury, the Office of Management and Budget, and the State Department 'to move swiftly to act in concert with 'the U.S. Department of Agriculture' to exercise its authority to use the 'DEIP' in order to help address the deteriorating situation facing dairy producers nation-wide.'
GTA does only cover trade related measures after 1 Nov 2008, therefore only the 2009-2010 scheme (starting 1 July 2009) is subject to the present investigation.
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