size of the quotas if they have them, and where they have fixed prices, and do that for the Common Market countries in particular. (The material requested follows:) PRICE SUPPORT PROGRAMS IN EUROPEAN ECONOMIC COMMUNITY COUNTRIES A common agricultural policy (CAP), including a program of uniform price supports, that will replace existing policies and programs in member states is gradually being created by the European Economic Community (EEC). A sizable share of farm output-wheat and wheat flour, feed grains, poultry, eggs, certain fruits and vegetables, wine, live hogs and hog carcasses-is already subject to specific regulations which became effective for those commodities on July 30, 1962. And it is expected that all major farm products will be subject to common EEC policies by December 31, 1969, the end of the presently scheduled transition period to a common market for agriculture. This summary paper, therefore, is divided into two parts. One describes the workings of the CAP in the major sectors where it now operates-grain (excluding rice), poultry, wheat flour, and fruits and vegetables. The proposed system for rice and vegetable oils is also discussed. The second part briefly describes member country price support programs for commodities not yet affected by the CAP. Grain (excluding rice) COMMON AGRICULTURAL POLICY The wheat and feed grains regulations of the European Economic Community (EEC) call for changes in the price support systems and methods of protecting local producers from foreign competition now existing in member states. The grain regulation became effective on July 30, 1962. Its aim is to replace ultimately the grain policies of each member state with an EEC grain policy. This new policy could increase the producer incentives for maintaining and expanding production levels attained under the previous national grain policies of individual members states during the past decade. There are many details to the complete regulation, but two features are of greatest importance. These are the grain price structure and the related import levy system. In general, the EEC program for wheat is also in operation for feed grains, but in the description that follows, wheat will be used as an example. The key price in the Common Market's grain price structure is the "target" price. This is the level member governments want wholesale wheat market prices to approximate. It is the basis for all other prices. Each member country is free, for the time being, to set its own wheat target prices between the maximum price, which is in Germany, and the minimum price, which is in France. The "threshold" price is the price of normal-quality wheat at each country's border. This is, for all practical purposes, the minimum import price at the border and will reflect the country's internal target price. The difference, of several cents per bushel, between threshold and target prices represents the net effect of three factors-a lump sum, giving a preference to EEC producers, and adjustments for quality and freight. The intervention price, or as we call it in the United States, the support price, is the level at which the Government makes purchases, if necessary, in the wholesale market. The intervention price is set at a level between 5 and 10 percent under the target price. It should be noted that the target, threshold, and intervention prices move up at the rate of 3 cents a month during the marketing year, to allow for storage, interest, and other carrying costs. Actual market prices reflect bids and offers of buyers and sellers. In determining the variable import levy, the Common Market determines daily the "adjusted c.i.f." (cost, insurance, freight-to-destination) price. In selecting the adjusted price, actual landed prices of wheat from various non-EEC supplying countries are put on an equal quality basis by subtracting quality differentials. The lowest of these becomes the adjusted c.i.f. price. The levy for a given day is then the difference between the threshold and the adjusted c.i.f. price. Recent adjusted c.i.f. prices in Germany; e.g., were $1.65 a bushel. Assuming a threshold price of $3.35, the variable import levy was $1.70. That levy applied equally to all imports of wheat from countries outside the Common Market, not just to U.S. grain. Recent market prices of $3.10 for West German wheat of normal quality, compared with $3.62 for imported U.S. No. 2 Hard Red Winter wheat. The price of the U.S. grain was made up of two elements-the $1.70 variable import levy and the actual c.i.f. landed price of $1.92. The German importer paid the levy to the West German Government, and paid the c.i.f. price to the American exporter. Separate regulations cover movement of wheat among Common Market member countries. Briefly, during a 7-year transition period, each member country will apply a separate levy on imports from each member. As prices in the member countries move toward a common level, the levies on intra-EEC trade will diminish. By 1970 there should be a single levy on third-country imports and no levies on intra-EEC trade. Wheat flour Regulations relating to flour which implement the common agricultural policy for grains have sharply affected U.S. exports of flour to the EEC. Practically all U.S. flour exports to the Common Market countries-valued at $7 million in 1961-62-have gone to the Netherlands. The regulations established a threshold price for imported flour which is equal to the equivalent in terms of flour of the threshold price for wheat, plus a margin for milling plus an additional margin to protect domestic millers, less an allow ance to offset the returns millers receive from sales of bran, and less the equivalent of a consumer subsidy on flour. The effect of this increase in levy on imports of flour (from $14.50 per metric ton to $44) has been to drastically reduce current shipments of U.S. flour to the Netherlands. Repeated and continuing efforts are being made to obtain a reduction in this levy. Poultry The implementation of the common agricultural policy for poultry started July 30, 1962. Its application has materially affected exports of U.S. poultry products to West Germany, our principal U.S. market in the EEC. The main features of the common agricultural policy on poultry provide for(a) Minimum import prices, called sluice gate prices to be applied to imports from third countries. The gate price (used by all six countries) for ready to cook broilers, the principal class of U.S. poultry products exported is 33.09 cents per pound, c.i.f. port of entry. At current market prices, U.S. broilers pay an arbitrarily fixed charge of 2.27 cents per pound, to bring their value up to the gate price. (b) A complex variable import levy (differing in each of the six countries) which now in West Germany totals about 10.21 cents per pound. Thus, the total duty now paid on U.S. poultry that is imported into West Germany is 12.5 cents per pound (2.27 plus 10.21) compared with the pre-EEC duty of about 4.5 cents per pound; (c) An escape clause provisions authorizing the prohibition of imports (after a 3-day notice) if imports of poultry products from member countries from third countries threaten to seriously reduce market prices; and (d) The abolition of all quantitative restrictions on imports. Trading conditions are further complicated by detailed bureaucratic intervention in the construction of a gate price which requires a uniform price for all parts (i.e., breasts, thighs, and even for backs and necks) at 75 percent of level for whole broilers. Backs and necks are normally the cheapest of all poultry items. Further, the equivalent of the feed grain levy is increased for all parts, thus making the duty-paid cost of backs and necks extremely high when compared with commercial practice. In consequence, U.S. exports of backs and necks to West Germany have dropped sharply. Enforcement of the gate-price provisions by West Germany was started, then discontinued after a few days, and finally reimposed in mid-September 1962. Fruits and vegetables The common agricultural policy for fruits and vegetables (which became effective July 30, 1962) undertakes to stabilize prices to producers through regulating the quality of produce marketed, and through preventing the imports of low-priced produce. Also, the policy undertakes gradually to liberalize trade between the member countries in fresh fruits and vegetables. Heretofore the trade has been highly restricted. The main features of this policy are (a) The adoption of grade standards for 21 fresh fruit and vegetable commodities, and the prohibition of shipment by member countries (or of imports from outside countries) of grades of these fresh fruits and vegetables not meeting the requirements of "quality II" (the lowest acceptable commercial grade); (b) The immediate removal of nontariff barriers to trade between member countries for shipments meeting the requirements of "extra quality" (the top grade) of these same fruits and vegetables, with subsequent relaxation of barriers for trade in lower grades; and (c) The establishment of "reference prices" to provide a basis for the imposition of compensatory taxes on, or even the prohibition of imports from outside countries if low-priced imports threaten to seriously disturb market prices within the EEC. Thus far, seasonal schedules of reference prices (to be determined annually) have been established for fresh pears, table grapes, peaches, plums, mandarins and clementines, lemons, and, tomatoes. Shipments of U.S. fresh lemons (the only one of these fresh fruits or vegetables exported from the United States to the EEC in July or August) were sold at prices above these reference prices. Exports of fresh U.S. apples and pears to the EEC continue to be inhibited by quantitative restrictions imposed by each of the EEC countries on imports from nonmember countries. The policy for fruits and vegetables, by inference, sanctions the continuation of these nontariff barriers to imports from third countries. Such barriers continue to present a serious problem to regaining former markets in the EEC countries for these U.S. items, and we are continuing to endeavor to persuade the individual countries to remove them. Rice The common agricultural policy proposed (but not yet approved by the EEC Council of Ministers) for rice undertakes to maintain market prices in the EEC by the establishment of a minimum import price (termed a threshold price) to be applied to imports of rice into the EEC from outside countries. The threshold price is to be determined initially on the basis of recent import prices and ultimately on the basis of grower price objectives in the EEC producer countries (Italy and France). The threshold price is to be maintained by collecting a levy equal to the difference between the threshold price and the lowest comparable world price. Trade will be managed, further, by a system of licensing, involving advance deposits and insurance fees. The variable import levy system that is now being considered, however, would substantially increase the landed cost of long-grain rice, and would probably equal 32 to 38 percent of the average c.i.f. price prevailing in calendar year 1961. Vegetable oils Similarly, the EEC has not yet adopted a common agricultural policy for vegetable oils. Separate policies for vegetable oils and butter were proposed as far back as 1961. Butter is the major fat in the EEC, which-in the absence of consumer subsidies-produces more than it can use. Proposals include the suggestions that vegetable oils be taxed to finance a support program for surplus butter, as well as the compulsory admixture of butter in margarine. The extent to which such plans find favor, however, remains to be seen. Currently the price ratio of butter to margarine in each of the six countries is about 3 to 1. If either of these proposals were to go into effect, the price ratio would be narrowed to 2 to 1, with the result that butter consumption would probably increase. SUPPORTED PROGRAMS NOT YET AFFECTED BY THE COMMON AGRICULTURAL POLICY France: Prices of practically all farm products are regulated in some way at one or more points in the distribution system. France also has a state tobacco monopoly which guarantees forward prices according to grade, and purchases all of the crop that meets these grades. The average price of these tobaccos is about double the cost of comparable qualities available on the world market. Livestock products, except milk and butter, are supported by direct Government purchases and stockpiling, although a definite price may not be declared in advance. Wholesale and retail prices of milk and butter are determined by a national target price. Subsidy costs have been extremely high. Assistance to poultry farmers includes reduced prices for fuel, freight rates and other costs. Although there is no specific support mechanism for poultry, there is provision for Government purchase operations. Italy Italy has a state tobacco monopoly which controls all production, imports, and exports of leaf and distribution of manufactured products. The monopoly establishes forward prices by grade (3 years in advance), of which monopoly will buy all production. Various measures have been used in recent years to support olive oil prices. These devices included, in recent years, a manufacturing tax on vegetable oils other than olive oil, increased duties on imported oilseeds and compulsory purchases of domestic edible oils by oilseed importers. West Germany: The sale of all German tobacco production is assured by a mixing regulation. Differentials in the excise tax structure encourage consumption of all domestic leaf and serves to help guarantee a definite return to producers. Butter prices are supported by direct Government purchases and strict import controls. The domestic price of rapeseed, the principal oilseed produced in West Germany, is fixed at a relatively high price. To assure a market for the entire crop, margarine manufacturers are required to use specified percentages of rapeseed oil in their products. Netherlands: Although Netherlands agriculture is subject to a complex system of flexible controls, the only major products under price support (other than wheat and feed grains) are dairy products. These support prices are set for fluid milk, butter, cheese, and nonfat dry milk. Belgium: Belgian agriculture has generally been subject to less Government control than that of other EEC countries. As in the Netherlands, support prices are set for milk and butter. In addition, flax growers receive à subsidy which in recent years has been somewhat more than $10 per acre, and tobacco farmers receive a subsidy of about 3.75 cents per pound, about one-sixth the value of the tobacco. SUPPORT PRICES FOR MAJOR COMMODITIES IN EEC COUNTRIES Where they exist, support or guaranteed prices for basic commodities are generally higher in EEC countries than in the United States, as is shown in the following tables. Although there are no actual support prices in several EEC countries for some commodities the end result of Government import controls, marketing regulations and other devices is to secure for farmers what is tantamount to a guaranteed price for their products. Thus, the prices in each table are comparable, in that they show guaranteed returns to producers. The prices in the following tables are the most recent available to the Department. Grains: Support prices in EEC countries and the United States 1 Rice: Support prices in EEC countries and the United States 1 Rice is not produced in Belgium-Luxembourg, Netherlands, and West Germany. 2 None produced. See the following: Semifine. Fine. $4.64 4.86 5.08 Milk.-Support or guaranteed prices for whole fluid milk in EEC countries and the United States 1 Composed of market prices ranging between $3.90-$4 per hundredweight, and a direct subsidy to the farmer of 34 cents per hundredweight for every hundredweight he produces. 2 Market price only. EUROPEAN ECONOMIC COMMUNITY AGRICULTURAL IMPORT POLICY Import policies of the European Economic Community are designed to support an equitable level of producer incomes and a constant supply of domestic foodstuffs. Consequently, import policies are an integral part of the EEC domestic agricultural support program. In general, however, the Common Agricultural Policy (CAP) formalized in August 1962 established a program whereby at the end of 1969 (according to present schedules) all tariffs, quotas, and other regulations restricting intra-Community trade in agricultural products will be removed and national agricultural policies toward third countries will be harmonized. The CAP establishes for the import of some commodities a system of variable levies in lieu of fixed tariffs and quantitative restrictions. Briefly, the variable levy system is designed to offset the differences between world prices of commodities and desired price objectives in the Common Market. In addition to the variable levies, minimum import or "gate" prices have been established by the EEC for several commodities, including poultry. Also many of the regulations provide for escape clause measures which permit partial or complete embargo if imports threaten to cause domestic market disturbance. With the application of the CAP many formerly used restrictive measures, namely quotas, mixing regulations, state trading and other nontariff barriers have disappeared for certain commodities. Whereas such restrictive practices were frequently used in a discriminatory manner, the variable levy system opens the market to all third countries on an equal basis. With respect to those commodities not covered by the CAP at the present time, many restrictions still remain in force. These, among others, are in the form of quotas, state trading, seasonal limitations, import licenses, mixing regulations, and complete prohibition in a number of instances. The concentration of restrictive practices is in Germany and France where a major portion of the market for livestock and livestock products, fruits and vegetables, and fats and oils are subject to some form of control. In Belgium, Luxembourg, the Netherlands, and Italy import restrictions are maintained to a lesser degree and are mainly on meats, dairy products, and some fruits and vegetables. These restrictions for the most part are quantitative in nature with varying size quotas being allocated at intervals. In many cases, however, the source of supply is determined by administrative decision, thus introducing an element of discrimination in their import policy. COMMON EXTERNAL TARIFF By the end of the transition period (December 31, 1969) the Community will have replaced its members' existing tariffs on imports from the rest of the world by a single external tariff. For the most part, the common tariff levels are based on the arithmetical average of the national tariffs in force on January 1, 1957. The following table shows the common external tariff (CXT) and U.S. agricultural exports in fiscal year 1961-62. |