but began to rise again in 1972. Butter stocks, which had been reduced from over 300,000 tons at the end of 1969 to 106,000 tons at the end of 1971 were back up to 400,000 tons at the end of 1972. Percent of self-sufficiency in nonfat dry milk, butter and cheese EC dairy policies have contributed to increased imports into the United States, both directly in EC exports to the United States and indirectly by diverting to the United States products kept out of the EC by the levy system. U.S. imports of dairy products from the EC rose from $37.6 million in 1967 to $49.0 million in 1972, notwithstanding the tightening of U.S. import quotas during that period as necessary to protect domestic programs. U.S. exports of dairy products to the Six in 1972 totalled $2 million. The extension of the CAP on dairy products to the United Kingdom, Ireland and Denmark will, as mentioned above, aggravate the surplus problems of the Six by encouraging greater production of manufactured dairy products. The pattern of world trade will be further distorted as traditional suppliers to the U.K. market are displaced by internal EC production. The most important of the traditional suppliers to the U.K. is New Zealand, which has a temporary guarantee. The U.K. is authorized to import butter and cheese from New Zealand at special prices in the following quantities for 1973-1977: 29-617 O 74 13 After 1977 some further provision may be made for butter, but not for cheese. F. Sugar 1. How the CAP Works A. IN THE SIX (1) WHO ARE THE PRODUCERS ? Sugar beets are grown in all EC countries. In addition, the CAP makes provision for the cane sugar production of the French Overseas Departments. France and Belgium are the principal exporting members. The number of sugar millers and refiners, however, is quite limited. Sugar marketing is dominated by three firms in Germany, two firms in the Netherlands, one in Belgium, one group of firms in Italy, and one group in France. There are less than two dozen major refining companies in the Six. The CAP therefore also includes a system of production quotas designed to preserve their interests. A levy system for sugar was introduced in 1967; the present system took effect in 1968. (2) PRICING AND PREFERENCE In the case of sugar, both target and intervention prices are pegged to the main production areas of northern France. Threshold prices, however, are fixed for the most distant point, Palermo, Sicily, at a level that will assure a preference for French sugar there. Higher intervention prices are permitted in Italy, by way of exception. Intervention prices are fixed for refined sugar, raw cane sugar from the French Overseas Departments, and raw beet sugar. Refiners must meet a minimum beet price in their contracts with beet growers. Sugar prices 1972/73 (beginning July 1) Refined sugar: Threshold price. 293.68 Target price. 266. 54 Intervention price. 253.40 Italy. 269.69 Sugar prices 1972/73 (beginning July 1)-Continued Raw cane sugar intervention (French overseas departments). 217.25 Minimum beet price: Within quota_ Over quota. 19.20 21.31 11.29 13.41 Sugar levies are calculated daily in a manner similar to that for grains. The Six have not extended preferential treatment to any third countries. This policy, however, may be reassessed in the light of the accession of the United Kingdom which has had special arrangements with its Commonwealth suppliers. (3) PRODUCTION AND DISPOSAL POLICIES As indicated above, a system of production quotas allocated to each sugar factory or manufacturer was established in 1968. Initially, the total of the quotas was well in excess of levels indicated by previous production history. As the quota system is presently operated in most EC countries, the refiner becomes liable to a tax or assessment on any production in excess of his base quota. In principle the amount of the tax should equal the cost per ton of export subsidies and other measures employed to dispose of sugar surpluses. (Surpluses are presently defined as quantities in excess of estimated human consumption or base quotas, whichever figure is larger. Small quantities are also used for feed and industrial use). In fact, the EC Council has placed a ceiling on the tax rate well below the actual disposal cost. Moreover, 60 percent of the tax may be passed on to the beet grower. The refiner may also cut the minimum price to beet growers some 40 percent for beets used to produce sugar in excess of his base quota. If a refiner produces more than 135 percent of his base quota, the excess must be exported without benefit of subsidy. Losses on this account, however, may again be at least partly passed on to beet growers since the minimum beet price is also eliminated. Premiums are available for denaturing sugar for use as animal feed. Chemical manufacturers who use sugar as a raw material receive a subsidy to offset the higher costs imposed by the Community support system. Export subsidies are paid on sugar and molasses and on the sugar content of products containing sugar. Subsidy rates, available on request, are published regularly. However subsidy rates may also be and often are established by tender and are not published. Subsidized sales may be authorized even when the published subsidy rate is zero. (This has been of particular importance in the case of molasses.) B. IN THE NINE Sugar prices fixed for the new Member States for 1972/73 are as follows: 1 Converted from units of account at $1.08571 equals UA 1.00. U.K. import commitments to Commonwealth Sugar Agreement countries are to continue unchanged to February 25, 1975, except that the price paid for raw cane sugar, c.i.f. U.K. ports under the agreement is to be: In order to provide some comparability of aid during this period, any EC refiner may receive a subsidy to buy raw cane sugar from the French Overseas Departments as follows: Dollars per metric ton Feb. 1, 1973 to June 30, 1973_ 10. 10 7.38 July 1, 1974 to Feb. 28, 1975 4. 67 New arrangements for less developed Commonwealth countries are to be negotiated by 1975. Price differentials used in trade between the Three and the Six and as adjustments in EC levies and subsidies on trade by the Three with third countries are-for sugar or sugar products: While the United States does not export sugar, the United States has been affected by EC sugar regulations in several ways. The emergence of the EC of Six as an important sugar exporter has added to the pressures on other import markets in years when world sugar supplies are abundant. The depressing effect of EC exports on free world market prices has been reflected also in the levies imposed by the EC on the sugar syrup added to canned fruit. EC regulations have led to the sale of subsidized molasses and other products to the United States, and have established import licenses for sugar beet pulp, which the United States has exported to the EC for feed. The accession of the United Kingdom, Denmark and Ireland is important to the United States especially in terms of the restructuring of world trade as some of the Commonwealth suppliers are displaced by other EC members in the British market. G. Olive Oil 1. How the CAP Works A. IN THE SIX (1) WHO ARE THE PRODUCERS? Olive oil is produced and consumed almost exclusively in Italy. Because of its high price it is not strictly competitive with other oils. The CAP therefore is intended mainly to preserve the market in Italy. The support system for olive oil was introduced in 1966. (2) PRICING AND PREFERENCE A market target price is fixed at a level intended to make olive oil available to consumers at "reasonable" (though higher than world market) prices. This market target price is achieved with the aid of |