European Community Grain Trade Practices: Their Impact and The Reasons They Are Being Challenged

Excerpts from the report: The grain trade practices of the European Community (EC), long a subject of controversy, have come under even greater international scrutiny in recent years because of their highly protectionist, trade-distorting nature. This booklet highlights these practices and illustrates their impact on other countries, especially the United States. The central feature of EC grain trade practices is a system of import levies and export subsidies that operates to keep internal EC grain prices artificially high, well above world market prices. The large import levies keep cheaper foreign grain from entering the EC. Meanwhile, the export subsidies enable the high-priced EC grain to move onto the world market whenever EC production is in surplus. The consequences of the levies and subsidies, and the high internal prices, are the artificial stimulation of production and the artificial restraint of grain use within the EC. Over a relatively short period, such practices have propelled the EC from one of the world's largest importers of grain to one of the world's largest exporters. The result has been a very large displacement of other countries' grain exports. Much if not all of this has been a displacement of U.S. grain. In illustrating these impacts, the accompanying charts also explain why the United States and other grain-exporting countries are acting, through both negotiation and trade-enhancement measures, to challenge and offset unfair trade practices in the world grain market.