Latvia and Lithuania edged closer to a trade war on Feb. 18 as the joint committee of the Free Trade Agreement failed to reach a compromise on a spat of punitive anti-dumping measures that Latvia and Lithuania are threatening to impose on each other.
The committee meeting ended late evening Feb. 18 in Vilnius as this paper went to press, and Albinas Zanavicius, head of the foreign trade policy division at the Lithuanian Foreign Ministry, said, "We will continue to seek other formulas to achieve a political decision within the shortest possible time."
Pressure on Latvia's government, meanwhile, was ratcheted up, as farming threatened to block the borders unless measures were taken to protect the national sugar, dairy and pork industries.
Specific decisions on all three industries are expected from the government before the end of the month.
Modris Villa, head of Latvia's sugar-beet growers' association, said the union would block Latvia's road if it was not satisfied with the government's decisions.
Latvia and Lithuania first clashed in January after a two-year-old study by Latvia's Domestic Market Protection Bureau determined that Lithuanian milk was being dumped on the Latvian market.
The bureau recommended that penalties be levied on imported Lithuanian milk in order to protect domestic producers, though the final decision rests with the government.
Specifically, the bureau stated an additional payment of 0.03 lats (0.05 euros) per kilogram should be applied to Lithuania's Panevezio Pienas, while for Zemaitijos Pienas and Pieno Zvaigzdes Mazeikiai the payment should be 0.06 lats.
In response, Lithuanian officials said they would consider imposing an additional duty on some Latvian meat products if Latvia were to go ahead with the bureau's recommendations.
The meeting in Vilnius was called to put an end to the row.
According to Astrida Tjusa, head of Latvia's Domestic Market Protection Bureau, Lithuania's suggestion that duties may be applied to Latvian sausage was not supported by evidence and therefore was a step toward a trade war.
"There is no war as far as Latvia is concerned," Tjusa said. "Dumping is an unfair trade practice that will harm Latvian companies in their process of transition toward an increased competitiveness," she said.
According to Tjusa, evidence that Lithuanian dairies were dumping could be seen in the cost structure of Lithuanian dairy products sold on the Latvian market.
By adding up the cost of transportation and advertising to the price of Lithuanian dairy products on the home market, the bureau found that final retail costs should be higher than actual ones.
"Lithuanian producers claim they adjust the costs, but they don't prove it," she said.
Tensions between the neighbors have been mounting due to challenging conditions in the dairy industry in both countries.
Lithuanian milk producers say that in 2002, the average raw milk price paid by dairies in Lithuania was about 10.2 percent lower than the year before, while the Latvian dairy industry has showed a negative trade balance for the first time in the last two years, with the deficit reaching 2.7 million lats.
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