Milking the poor - ActionAid International

18 Milking the poor - How EU subsidies hurt dairy producers in Bangladesh 19 Milking the poor - How EU subsidies hurt dairy producers in Bangladeshare sustaining UK milk farmers in business,despite the losses they are incurring. 115Agritrade notes:“In the absence of direct aid payments, it islikely that a significant number of EU dairyfarmers who currently face losses on the marketprice received for their milk would review theirongoing engagement in dairy production. Thiswould not be immediate, but would occur whenreinvestment decisions need to be taken, andwould be likely to reduce overall levels of EUmilk production. Given that around 5 per centof EU dairy production is exported, even a smallreduction in overall EU milk production wouldcarry important implications. This is particularlythe case for lower-value dairy products, such asskimmed milk powder. With more EU milk beingused for higher-value products, production ofskimmed milk powder and other bulk dairy com-modities would be likely to decline most dramatically.There have been numerous reports ofEU exports of milk powder undermining effortsto promote local dairy production to meet localmarket needs in Africa, particularly in West andCentral Africa.” 116Giving with one hand, taking withanother: The EU’s incoherenceThe EU and Denmark are supporting Bangladeshthrough aid while simultaneously underminingit through trade policy. While EU milkpowder imports are harming Bangladeshi dairyfarmers, the EC is, for example, funding a NationalFood Policy Capacity Strengthening Programme(to the tune of € 3.3 million 117 ) helpingthe Bangladeshi government promote a nationalfood policy. 118Bangladesh is also one of the main recipientsof Danish development aid. In 2010, the DanishInternational Development Agency (DANIDA)spent DKK 471 million (€ 63 million) in Bangladesh.119 Agriculture is one of DANIDA’s priorityareas, and agricultural development is identifiedas essential for poverty reduction in Bangladesh.In the 1970s, DANIDA supported the establishmentof the Bangladesh Milk Producers Co-operativeUnion Limited (BMPCUL) which producesmilk under the trade name Milk Vita. 120DANIDA correctly notes that increasing agriculturalproduction and income improves foodsecurity, reduces vulnerability of farming householdsand reduces malnutrition and mortalityamongst children. 121 In 2004, before decouplingof subsidies, Carsten Staur, Chief of DANIDAstated: “It is clearly a problem that agriculturalsubsidies are contributing to maintain a productionin the world, which is not appropriate on thebasis of an idea of the global division of labour.We are maintaining a production in Europe,which is not competitive.” 122EU milk powder imports also undermine aiddirected specifically to Bangladeshi milk powderproducers. It was announced in June 2011 thatthe International Finance Corporation (IFC), theprivate sector lending arm of the World Bank, isproviding a € 5.3 million loan to PRAN Group –the largest food processing company in Bangladesh- to expand its local dairy procurement andprocessing capacity.The IFC says this will help increase the incomesof about 17,000 Bangladeshi dairy farmers andcontribute to the country’s food security. It alsonotes that “Bangladesh has one of the lowestper capita milk consumption levels in the worldand imports milk powder to meet 15 per centof its dairy demand”. IFC’s investment will helpPRAN raise processing capacity across itsproduct range, including ultra-heat-treated milk,pasteurised milk, and milk powder, and increaseraw milk procurement from local dairy farmers.“PRAN’s expansion will help increase the localsupply of value-added dairy products, contributingto food security in Bangladesh,” said an IFCspokesperson. 123In the 2005 “European Consensus on Development”,the issue of Policy Coherence forDevelopment was identified by the EU as apioneering concept for achieving the MillenniumDevelopment Goals. The EU has committeditself to ensuring that its various policies do notundermine social and economic progress indeveloping countries. Article 208 of the 2009Lisbon Treaty states that: “Union developmentcooperation policy shall have as its primaryobjective the reduction and, in the long term, theeradication of poverty. The union shall take accountof the objectives of development cooperationin the policies that it implements which arelikely to affect developing countries.”In the spring of 2010, the EC conducted apublic hearing online, and in the Commission’ssummary, it states: “The EU should avoiddamaging the economies or food productioncapacities of developing countries.” 124 However,in the Commission’s communication on the CAPpost-2013, published in November 2010, noreference is made to the effect of the CAP ondeveloping countries, except in the context offood security, where it is stated that EU agricultureshould contribute to world food demand bymaintaining and improving production capacity,while respecting EU commitments in internationaltrade and Policy Coherence for Development.125 As this report shows, it is preciselythe high production level that has a damagingeffect on agricultural development in developingcountries.