RESTRICTED
WORLD TRADE G/STR/W/19
2April 1996
ORGANIZATION(96-1200)
Original: English Working Party onState Trading Enterprises
REPLIES TOQUESTIONS FROM THE UNITED STATES1ON
THE ARTICLE XVII NOTIFICATION OFTHE CZECH REPUBLIC2
Thefollowing communication, dated 26March 1996, hasbeenreceived fromthePermanent
Mission oftheCzech Republic.
_______________
Replies totheUSquestions ontheState Fund forMarket Regulation
Question 1
Theselection ofproducts tobethesubject oftheSFMR operation isbased onthefactors
mentioned inthenotification. Itisobvious thatanydecision results fromtheestimated annual levels
ofproduction andconsumption. Atpresent, onlytwocommodities, milkandfoodwheat, aresubject
tomarket regulation.
Indairy products, themarket isregulated through subsidized exports. Infoodwheat, which
isthemost important commodity interms ofitsshare inhuman nutrition aswellasinthetotal
agricultural output, themarket isregulated solely through intervention purchases.
TheexportsubsidiesvolumeisdeterminedbytheSFMRCouncilandisderivedfromtheforecast
ofmilksurplus inthecoming period. Thesurplus isestimated, based onanassessment ofmilk
productionandconsumption.Thetotalmilkproductionexpectedisderivedfromanticipateddevelopment
ofdairy cownumbers andofmilkyield, while thetotalmilkconsumption isestimated from the
anticipated development oftheconsumption ofmilkanddairy products onthedomestic market.
Thevolume offoodwheat tobepurchased isdetermined bytheSFMR Council sixmonths
before itsharvest. Thelevelofintervention purchases interms ofitsshare intheannual consumption
onthedomestic market should besufficient toallow, ifnecessary, theregulation ofthemarket through
therelease ofwheat from intervention stocks todomestic foodwheat processors. Theintervention
purchasesusuallyaccountfor40percentoftheCzechRepublic'sannualconsumptionofthecommodity.
Minimum (guaranteed) prices arederived fromproduction costs(determined through surveys)
forthecommodity concerned, andtheyaresettoensure aminimum profitability tothemore effective
producers. Thelevelofminimum (guaranteed) price isafarmgateprice thatthestateguarantees as
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thelowest possible which thefarmers, engaged inthestateregulation measures, havetoreceive for
thecommodity concerned.
Tender forSFMR contractual partners hastheformofaselection procedure guided by"The
principles ofselection procedure among legalandnatural entities forintervention purchases, export
orsaleofproducts included inmarket regulation".
Theprinciples setmajor selection criteria, methods forevaluation ofapplications aswellas
rulesforpublication ofresults andprocedures toperform theoperation concerned. Themajor criteria
primarily include: required volume ofproducts forintervention purchase, export orsale,requested
amount ofsubsidy (incaseofsubsidized exports), leveloftheproposed price, levelofprocessing and
storage costs (incaseofintervention purchases andsales) andageneral entrepreneurial, trade and
economic reliability oftheapplicant.
Theintervention purchases aswellassubsidized exports areundertaken onthebasisofcontracts
between theSFMR andpartners selected intheselection procedure.
Question 2
Thelevelofexport subsidies fordairy products issetdifferently forbutter andother dairy
products. Theexport subsidies forbutter arebased ontheprice ofbutter, thecalculation ofwhich
involves minimum (guaranteed) priceofmilkandcertain levelofprocessing costs. Thepotential export
price isassessed. Thesubsidy ratethenrepresents theamount covering thedifference between the
price ofpotential export andthecalculated price ofbutter.
Forother dairy products, thesubsidy rateisderived from bidsbydifferent dairies inwhich
theypropose products forexport andrequire funds forexport subsidies. Individual bidsareconsidered
intheselection procedure based onthefinancial requirements. Onlybidswiththelowest levelofsubsidy
perlitreofthebestquality milk, withfatcontent of3.6percent,mayconstitute amilksurplus subject
topossible subsidized exports. Inwheat, exports arenotsubsidized astheobjective istoexport under
suchconditions thatwould allow tocover theSFMR costsincurred while procuring, storing andselling
thewheat.