A study released by the Helsinki-based Pellervo Economic Research Institute finds that a world-wide removal of export subsidies in the dairy sector would have the expected outcome of increasing producer prices and decreasing exports.

The study, entitled Implications of Export Subsidy Removal for the Finnish and EU Dairy Sectors, found that a removal of these subsidies would result in a 20% decrease in dairy export revenues for the EU-14 and United States.

According to the researchers, the EU dairy sector, like its counterpart in the US, is still heavily dependent on export subsidies. In 2003 EU export subsidies to the dairy sector totaled 860 million Euros, accounting for almost 10 percent of the total value of EU dairy exports.

The study found that the biggest beneficiaries of dairy subsidy removal would be the net exporting countries of Canada, New Zealand and Australia, which are not as dependant on export subsidies.

As for the net importing countries (the rest of the world minus Russia), removal of export subsidies would decrease dairy imports by 13 percent, while the value of dairy imports would increase by 4 percent due to the higher prices. The study did not look at the impact this increase in prices and decrease in imports would have on domestic production in these net importing countries.