"Plan for levy removal is the only viable way forward"

The statement by the Federation of Industry on the removal of levies on agro-food products earlier this week "is incomplete in its analysis and incorrect in its conclusions," the government said yesterday.

Import levies on a wide range of agro-industrial products, including flour, cooking oil, margarine, mayonnaise and salad cream, pasta, biscuits, ice-cream and beer, were reduced by an average of 10 per cent on September 1.

They will be brought down by another 10 per cent on January 1 and by a further 10 per cent on July 1.

The remaining 70 per cent of the current levy is due to be removed on Malta's accession to the EU, scheduled for January 1, 2004.

The Federation of Industry said earlier this week that it did not agree with the government's published programme for the removal of protective levies on agro-food, which, it said, was being carried out too speedily and would adversely affect the majority of its members in the food, beverage and tobacco industrial sectors.

The FOI said that by embarking on levy removal from September, the government was making concessions to the EU without any immediate gain for industry in Malta from Europe.

However, the government said that although the specific levy reductions were only published last month, the FOI had been informed over three years ago about the government's strategy to dismantle levies.

"The government had published a schedule covering the timetable for the removal of levies on industrial products, but it was also made very clear, then, that all other levies would likewise be dismantled. So, it is misleading for the FOI to speak of a short time frame," the government said.

"Similarly misleading is the FOI's reference to alleged 'concessions' to the EU as regards the removal of tariff barriers.

"It is important to remember that Malta is only now completing the dismantling of levies on various industrial products, such as furniture, that have enjoyed duty free access into the EU since Malta's Association Agreement with the then EC in 1970.

"Furthermore, on those food products on which the EU currently imposes tariffs, the protection afforded is considerably lower than the levies applied by Malta. And EU tariffs do not even cover all of the products on which Malta is still applying levies," the government said.

The FOI also failed to say that levies on agro-food products will only be reduced by a maximum of 30 per cent over a 16-month period, with the remaining levy only to be removed following EU membership.

"During a meeting at the Ministry for Economic Services, representatives from most of the producers involved confirmed that this 30 per cent reduction in levies is something which they can absorb without undue problems, given their commitment to restructure and their endeavour to increase productivity, thereby enhancing their competitiveness. And both government and the FOI agree that this is the only viable way forward," the government said.

"A number of FOI members have specifically asked the government to seek duty free access into the EU single market for their agro-food products, even before EU membership. This request has been endorsed by the FOI and is being supported by government.

"The message being conveyed to the Ministry of Economic Services is that the earlier we gain access into the EU's single market, the better it will be for industry in Malta.

"Malta's prosperity can only be enhanced through trade and it is this reality that we must safeguard and sustain.

"Fighting rearguard battles to retain protection is a recipe for stagnation and decline. Far from being unrealistic, government's plan for levy removal is the only viable way forward," the government said.