guaranteed price and actual market returns) as long as the guaranteed price is higher than the intervention price. For 1972/73 the guaranteed price was $79.56 per metric ton for wheat compared to an intervention price of $67.95; and $72.16 per ton for barley, compared to an intervention price of $57.05. 2. Impact on the United States From 1962 to 1972 with high price incentives and protection grain production of the Six rose 36 percent while consumption rose only 24 percent. Net imports dropped from 10 million metric tons to less than 2 million tons. While the Six continue to import grains, they have now become substantial exporters as well, so that the market maintained in the EC is lost elsewhere. In addition, the market for feedgrains is further diminished by the substantial increase in the use of wheat for feed. EC (6): Supply and distribution of grains The following changes in self-sufficiency show further the gains made by France at the expense both of other EC members and of third countries: U.S. exports of grain to the Six rose 52 percent from $386 million in CY 1962 to $587 million in 1966, the early years of the CAP before the "unified" price system was set up. From 1966 to. 1969 grain exports dropped 52 percent to $283 million, in large part due to the operation of the CAP. For the next few years a combination of factors, including short crops in the EC and high world prices, has maintained the value of U.S. grain exports to the EC although they continued to be below the 1966 peak. U.S. grain exports to the Six in 1972 totalled $489 million. The extension of the CAP to the United Kingdom, Denmark, and Ireland cannot help but produce the same problems as those that have occurred with the Six. Whereas in 1971/72 net imports of grain by the Nine totalled 13 million tons, it can be expected that this net deficit will rapidly disappear. U.S. grain exports to the three in 1972 amounted to $135 million. Total exports to the Nine were $624 million. B. Rice 1. How the CAP Works A. IN THE SIX (1) WHO ARE THE PRODUCERS? Only two EC countries produce rice. French production has been declining rather steadily due to greater profitability of other crops and now accounts for less than 10 percent of EC production. Italy is the primary producer. While Italian production has been rising rapidly, Italy does not produce long grain varieties such as those supplied by the United States and the Far East and generally preferred by consumers in northern Europe. The CAP, therefore, has established progressively greater protection and has provided export subsidies to facilitate sales in third markets. The first rice regulations were adopted in 1964; the present regulations date from 1967. (2) PRICING AND PREFERENCE A target price is established for brown rice in Duisburg. This is the wholesale price which German rice millers would be expected to pay for Italian rice. On September 1, 1972, the beginning of the 1972/73 marketing year, the brown rice target price was $229.63 per metric ton. This Duisburg target price is protected from import competition by threshold prices for brown rice and milled rice at Rotterdam. Intervention prices for paddy rice are fixed for the production centers of Arles and Vercelli at $141.14 per ton. The difference between the intervention and target price provides a generous margin to cover the cost of husking (converting paddy rice to brown rice) and the cost of transport to Duisburg. The threshold price on September 1, 1972, for short grain brown rice, similar to the main Italian varieties was $225.39 per ton. A threshold price for "long grain" brown rice was set at $247.11 per ton. The difference between these two prices, however, does not reflect the difference between short grain and long grain varieties on world markets, but rather the "normal" difference between Italian short grain rice and Italian "Ribe", which is a large kernel variety more comparable to a medium grain standard. Thus levies on long grain rice are generally set by price quotations for cheaper medium grain varieties and are higher than would apply if a true long grain standard were used. Threshold prices on milled rice are higher than those on brown rice in order to reflect the higher value of milled rice and to add a margin of protection for EC rice millers. For September 1, 1972, milled rice threshold prices were $293.68 for short grain and $346.02 for long grain. Licenses must be obtained on all imports or exports. Levies and subsidies may be fixed in advance. In 1972, at Thailand's request, the EC began to discriminate in allowing a 90 day period of validity on licenses for imports from the Far East, compared to 30 days for imports from other parts of the world. On complaint by the United States the 30 day period was extended to 60 days. More important preferential treatment is granted in the form of reduced levies on imports from the Malagasy Republic,' Surinam and Egypt. (3) PRODUCTION AND DISPOSAL Export subsidies are fixed weekly or monthly for rice and rice products, respectively, in the same manner as for grains and grain products. Subsidies are also available for the domestic purchase of broken rice for the manufacture of starch or for brewing. B. IN THE NINE Under the transitional arrangements for the United Kingdom, Denmark, and Ireland, price differentials are set like those for grains. However, since the new members do not produce rice the differentials are based on market prices in the new members relative to EC threshold prices. The differentials are deducted by new members from the EC levy on imports from third countries; the differentials also serve as the subsidy on exports of Italian rice to the new members. The differentials were calculated in relation to a representative period when world prices were considerably lower than they were on February 1, 1973, the date the differentials were to be first applied. Consequently, as in the grain sector, the differentials had to be adjusted temporarily so as to be approximately equal to the levy: New member price differentials, compared to the difference in EC threshold prices and world market prices at Rotterdam, Feb. 1, 1973 [Dollars per metric ton] 1 The eighteen African associates signatory to the Yaounde convention also receive preferential treatment. However, the Malagasy Republic is the only significant rice exporter. Preferences granted to Egypt are now also granted by the new members. Surinam and Madagascar will receive preferential treatment by the new members after 1975. At that time certain Commonwealth suppliers now receiving a preference in the U.K. may receive preferences from the Nine. 2. Impact on the United States While yields have been somewhat inconsistent, total rice acreage has increased every year since 1964 when the CAP was introduced. Acreage increases in Italy have more than offset a decline in France. Production has therefore shown a significant upward trend even though the harvests for 1971/72 and 1972/73 were reduced. Consumption by the Six on the other hand has shown a slight downward trend over the same period. Italy has had to look for new export markets, one of the most important of which has been the United Kingdom. The United Kingdom buys substantial quantities of short grain milled rice, and Italy has increased its share of the British market from less than one percent in 1970 to 24 percent in 1971 and 15 percent in 1972. The following table shows the development of Italian and French rice production under the CAP (husked basis): The United States managed to increase rice exports to the EC for several years after the introduction of the CAP. "Common" pricing did not begin until September 1967 and until then, Germany and the Benelux countries were permitted to reduce levies substantially on imports from third countries. Sales to France were boosted as France discontinued discriminatory import licensing. Supplies from some Far Eastern sources dropped. Since 1969, U.S. exports to the Six have declined, due in part to the height of variable levies and in part to more competitive pricing by other third country suppliers. U.S. exports to the Six were $31 million in 1969 and $17 million in 1972. The most important effect of EC enlargement appears likely to be the further inroads of Italian rice into the important British market. U.S. exports to the U.K., Denmark, and Ireland in 1972 totaled $12 million, of which the U.K. accounted for all but $347,000. C. Poultry, Eggs, and Pork 1. How the CAPS Works A. IN THE SIX (1) WHO ARE THE PRODUCERS? All EC countries produce poultry, eggs and pork. The CAP establishes a very high level of absolute protection which has favored the expansion of intra-EC exports, especially Dutch and Belgian exports, at the expense of third countries. Dutch exports, in particular, to third countries have been expanded. Regulations for these products began in 1962; present regulations date from 1967. (2) PRICING AND PREFERENCE Intervention on domestic markets is limited to pork. Pork prices follow a cyclical pattern, and the intervention price level (which is the same throughout the EC) generally becomes effective only at the low end of the cycle. Export subsidies and protection against imports, however, help to support internal market prices indirectly for pork, poultry, and eggs. The level of protection against imports is determined in two parts. The first is a basic variable levy which corresponds to the levy on the quantity of grains assumed necessary to produce the poultry, eggs, or pork, plus an additional margin of protection. The basic levy thus compensates producers for using higher cost domestic grain as well as providing additional protection. In fact, efficient producers are overcompensated for high grain costs, since the EC assumes a greater quantity of grain than is required by efficient producers Since the basic levy is a function of grain prices, it does not by itself provide absolute preference for domestic pork, poultry, and eggs. Therefore, the EC has established a second element of protection: a minimum import price or "gate price." The gate price, which applies to all third country products, is not related to the domestic price level, but rather represents the EC's calculation of the "fair" cost of third country products delivered to the Community. Products offered to the Community at less than the gate price become subject to an offsetting supplementary levy. This supplementary levy applies to imports only from those countries whose products do not meet the gate price. If a country can control its export prices and promise not to undercut the gate price, the EC will exempt that country from any supplementary levy on the products concerned. Apart from this preferential levy exemption for countries who meet the gate price, there is a small preferential levy reduction for poultry imports from Turkey. Gate prices and basic levies are published every three months. Supplementary levies are reviewed more often and changed as needed. |