The Effects of EU’s Subsidised Exports on Developing Countries : The Case of Dairy Products

The purpose of the thesis is to examine the effect EU’s subsidised dairy export has on developing countries’ dairy production. This is done by constructing a model containing various factors that are assumed to affect production. Data was collected for 23 countries in Africa, Central- and South America and was pooled together using a least squared dummy variable model (LSDV). The variable of interest for this study is the imports from EU to the selected countries. The regression result showed that this variable was negatively correlated with the countries’ domestic dairy production and was significant on the 1% level confirming the hypothesis of the variable. Due to the negative correlation, a reduction of the EU exports is thus assumed to increase these countries’ own production within this agricultural sector. As shown in the thesis, agriculture is important for a country’s development and hence, by exporting subsidised goods, EU might hinder development in the countries studied. However, over the years the EU has received a lot of pressure from the WTO to decrease its domestic- and export subsidies. Due to this, the EU has promised, based upon certain conditions, to remove its export subsidies completely by 2013. This is seen as positive for the developing countries’ future development prospects