Competitiveness of the EU dairy industry

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Competitiveness of the EU dairy industry

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with high shares of agriculture and industries may be vulnerable to this process

with regard to employment and income growth, as the structural change process

is often characterised by adjustment processes and related costs. It takes

time for people to adjust their skills, for industries to grow, etc. Even in Brazil

sectoral share in value added will tend to decline. Food industries in these countries

can participate only partly in high income growth. This development is due

to the fact that income elasticity for services and manufactures are higher than

for agricultural and food products.

Figure 8.4 Development of dairy industries' value added shares (% of

regional value added) in selected regions under different

scenarios for 2015

0.9%

0.8%

0.7%

0.6%

0.5%

0.4%

0.3%

0.2%

0.1%

0.0%

EU Nafta Brazil China Rest of

Asia

Australia

New Zealand

Initial Base Quota Lib HPDairy HPMilk EqualGR

Rest of

world

The other policy scenarios indicate that this development is independent

from the assumptions of productivity growth rates. In all scenarios, the contribution

of food processing is less than under the base scenario. However, an enhanced

growth rate in productivity in primary agriculture and/or food processing

can partially compensate for the decline value added share of the food processing.

An increase in milk supply under the Quota scenario will lead to a higher

level of value added of the dairy sector. An enhanced productivity in agriculture

and milk processing industries (HPDairy and HPMilk) and the full liberalisation,

however, will lower the contribution of European dairy industries to total GDP.

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