In accordance with Council Regulation (EC) No 1234/2007 establishing a common organisation of the agricultural markets and specific provisions for certain agricultural products (Single CMO Regulation)[1], export refunds can be provided for different agricultural products including dairy products and for processed products containing dairy products. In the light of the dairy crisis in 2009, export refunds were reactivated temporarily, in reaction to low world prices, but again set back to zero when the situation improved sufficiently in autumn 2009.

Export refunds were introduced after EU and world prices have decreased substantially (world quotations decreased almost 60 % for whole milk powder and 50 % for skimmed milk powder). As they are a part of the safety net in periods of exceptionally low prices and did not cover the full difference between EU and world prices, the budgetary cost of this instrument was much lower than in the past, when it was used to support higher internal prices.

At the same time, despite the refunds, world prices were gradually increasing in this period, showing that they did not have a detrimental effect on world prices and that the general volatility of international prices are a bigger cause of concern for producers especially in developing countries than export refunds. It should also be noted that exports from EU to Least Developed Countries (LDCs) represent only 5.5 % of SMP (skim milk products) exports and 17 % of WMP (whole milk products) exports, mainly to countries with geographical disadvantages for a domestic milk production large enough to cover the need of the populations. Where EU would be absent on those local markets, other big players on the world market would move in instead.

European dairy exports compete mostly with produce from other main exporting countries (e.g. New Zealand, Australia, USA) and of course with local milk production of the import market, but in most developing countries the milk production costs are much lower than those in the EU even taking into consideration export refunds. The constraints to the development of the milk sector in those countries relate mainly to a lack of investment, infrastructure and properly functioning markets and all those issues are tackled by the EU development policy.

• [1] Council Regulation (EC) No 1234/2007 of 22 October 2007 establishing a common organisation of agricultural markets and on specific provisions for certain agricultural products (Single CMO Regulation), OJ L 299, 16.11.2007.