EU, US heading for conflict over dairy taxes

By Chris Jones

- Last updated on GMT

Related tags Dairy products International trade European union World trade organization

The European Commission's ambassador to the United States, John
Bruton, has strongly criticized proposals that would tax imported
dairy products to pay for US promotional programs.

The US Dairy Promotion and Research Assessment program, part of the Farm Bill currently before Congress, imposes an import tax on dairy products from the EU and elsewhere to fund promotional campaigns such as the well-known "Got Milk" program. "It is simply not fair to tax European producers to fund a program that boosts domestic consumption in theUS,"​ Bruton said in a statement earlier this week. "Of course, we have 'Got Milk' inEurope, but it's not feasible to trade it across theAtlantic. And we have got cheese, too - some of the best in the world - but US imports are limited through quotas, so that any expansion of the American market won't benefit European producers." ​ Bruton said that the current program "would be a clear violation of World Trade Organization rules on equal treatment of agricultural products"​ because states and territories outside the continental US were exempted. "Even if those areas were brought into the program, a new fee on imports would still be discriminatory because the programs funded benefit only American producers,"​ he added. The Irishman said that the attempt to extend the so-called 'checkoff program' - which imposes a levy equal to 15 cents per 100 lbs of farm milk on all US dairy producers to fund the marketing campaigns - to imported products as well was simply unfair. "[The program] has always been intended to support the marketing of American milk and dairy products. TheUScannot just turn around now and ask European and other non-American dairy producers to supportAmerica's domestic industry when there is very limited access to theUSdomestic market or, as with milk, effectively no access at all." ​ The EU's position is backed by many US politicians, who believe that the "assessment"​ is unfair. John Block, a former secretary of agriculture, and Charles Stenholm, a former Democratic Congressman from Texas, said that the levy was unnecessary and unfair, and would amount to an additional food tax that would eventually hurt consumers. Block and Stenholm, writing in an opinion piece for regulatory news website The Hill, said that the tax was unfair because it would be levied on all imported dairy products, most of which would not benefit from the milk advertising campaign and were, in any case, used essentially as ingredients in a wide range of other products, from bagels to hot dogs, which would likely increase in price as a result. They added that the trade implications of the assessment were even more worrying, as they would add at least $8m in tax costs on the main US trading partners - and would probably violate WTO rules. "By providing 'less favorable treatment' to imports than to domestic products, we could put more than $2bn inUSdairy exports at risk of trade retaliatory tactics,"​ they wrote. And they noted the absurdity of the rule that would put increase the costs of some US dairy farmers as well - those based in Alaska, Hawaii and Puerto Rico are currently exempt from the check-off program levy, but would have to pay it under the current proposals. The US Senate has already proposed removing the import assessment from the final Farm Bill, but US dairy farmers - represented by the National Milk Producers Federation - said they would be urging Congress to retain the proposals. The NMPF argues that the clause extending the check-off program to imported dairy products was included in earlier Farm Bills but never implemented, and that it would simply close the loophole that allowed imported dairy products to avoid paying the tax. According to statistics from the US Department of Trade, imports of cheese and other dairy products from the EU reached just under $1.1bn in 2007.

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