Will subsidies put Latvian pork on the fork?

RIGA - Latvian pork producers are wary of the European Union's demands
to lift Latvia's import duties on pork imports. The Latvian Farmers
Federation is worried local pork producers will lose their share of the
domestic market.

"Competitive strategy to replace market safeguards with subsidies could
backfire," said Bruno Barons, the president of the Latvian Farmers
Federation. "If the subsidies do not hold back foreign pork imports,
then in six months the Latvian pork industry will be finished. The
government cannot allow imported pork to take over the market. Strong
protests from the pork industry will be the result."

On May 11, the Latvian Parliament lifted the $1.75 a kilogram tarif on
foreign pork imports. When the safeguards were introduced in May 1999,
Latvia's pork industry was struggling to compete with cheaper imported
pork from countries such as Poland.

For Latvia to join the EU, a prerequisite is to lift protective
measures that safeguard domestic produce. To meet this requirement, the
Latvian Parliament annulled the import tax on pork.

"The Latvian pork industry provided 87 percent of the local market in
1997, but by April 1999, imported pork had reduced the figure to 47
percent," said Margeris Krams, a spokesman from the Ministry of
Agriculture. "The government needed to introduce the safeguards because
imported pork was costing $0.45 a kilogram and local pork was $0.95 a
kilogram."

The lifting of duties means the Latvian government is responsible for
paying $1,666,666 in compensation to pork producers, distributed as
subsidies at the rate of $10.80 per sow.

"The government has passed the legislation, and now it must keep its
promise of compensation to the pork industry," said Barons. "The pork
farmers had asked for $28 per sow. Producers now need to be content
with the amount allocated for compensation by the government."

Talks between the Ministry of Agriculture and the Farmers Federation
had pork producers asking for $4,333,333 in compensation - an amount
not included in the budget, Krams said, so both parties agreed on
$1,666,666.

"Talks and discussions with the farmers were very positive and an
agreement was reached with the introduction of subsidies," said Krams.
"Pork producers had agreed on the lifting of safeguards for protection
if subsidies were introduced."

When the domestic pork industry encountered increased imports, local
producers could not sell their pigs, which grew older, causing quality
to suffer. Barons is afraid the lifting of the safeguards will cause
pork producers the same problems in the future.

"There are 25,490 sows in Latvia. The government will need to pay
approximately $4,166,666 in subsidies to keep their agreement on
providing subsidies to pork producers," said Barons.

Krams said the 3,000 tons of local pork products sold monthly will be
retained even with the duties lifted as subsidies will ensure domestic
pork will be vying successfully for the domestic pork market.

"World prices for pork have stabilized. Europe is not such a threat to
our domestic market now. A more liberal protocol in Europe has ensured
pork prices do not fluctuate so radically," said Krams. "The subsidies
will be adequate for local pork producers and give them compensation
for the 25 percent of imported pork on the market."

The Farmers Federation wants to be sure existing subsidy programs and
budget allocations for compensation reach pork producers. Regaining
local market shares in pork sales has lead to pork producers feeling
secure. Between 1997 and 1999, imported pork grew by 800 percent.
Barons does not want to see another rise in imported pork.

"It's a big problem when only one sow a day is killed in Latvia. It
will be debilitating to our pork industry if foreign pork is again
cheaper and of better quality than locally produced pork," said
Barons.

The Ministry of Agriculture is very confident that such a situation
will occur again. Krams said that continual discussions with pork
producers will keep the ministry "in the know" with farmers' concerns.

The government has assigned the ministries of agriculture, foreign
affairs and economics to lift duties by June 1 and to organize the pork
subsidies.

"The legislation will ensure we have an open pork market in Latvia and
decrease the levels of contraband pork smuggled in," said Krams. "The
subsidies will also induce the introduction of new technology to the
industry which drastically needs to be improved here in Latvia."