Brussels, 15/09/2003 (Agence Europe) - Along with various options for reforming the EU's sugar market (see Europe of 13 September 2003, p.12), the European Commission will unveil on 23 September its suggestions for reforming the market organisations of three Mediterranean products, namely tobacco, cotton and olive oil.
On tobacco (Europe will return to the other two areas in more detail later), the Commission is considering, as part of the system of reforming the Common Agricultural Policy (CAP) unveiled in June, to gradually replace the current system of production premiums (per kilogram of raw leaves) with a single payment per farm (breaking the link between aid and production volumes). At the same time, the Tobacco Fund (for information campaigns about the damaging effects of smoking and converting farmers to other crops or other jobs) will gradually be phased out and a financial envelope for restructuring tobacco producing areas will be set up, for rural development measures.
According to the complex case scenario described by the Commission, the reform would start with a full or partial transformation of the current premium into a single farm payment:
The transfer of the tobacco premium into entitlements for the single farm payment would be complete for a producer's first 3.5 tonnes of production; for the following tranche of 3.5 to 10 tonnes, only 80% of the current tobacco premium would be incorporated into the farm payment; and the remaining 20% would feed the proposed restructuring envelope.
For larger tobacco farms, the current tobacco premium, corresponding to the tranche above 10 tonnes, would be decreased by one third at each of the three steps of the reform. One third of this tranche's tobacco premium would be converted into single farm payment entitlements, the remainder being transferred to the restructuring envelope.
With full implementation, this process would redistribute more than 70% of the current tobacco premium to the single farm payment and at least 20% to the restructuring envelope. This redistribution would correspond to an allocation on average of EUR 6900 per family annual working unit.
The tobacco quotas (setting out a maximum overall guarantee for the EU, broken down into tobacco varieties and Member States) would need to be kept as a means of fixing the envelope for the tobacco premium not yet decoupled. Consequently, explains the Commission, during the transition period, any production outside the quota would not receive the corresponding coupled premium waiting to be paid.
The EU's "common organisation for the market in raw tobacco" was established in 1970 and greatly reformed in 1992, when intervention and export refunds were scrapped and production quotas introduced (overall guarantee threshold of 340,738 tonnes in 2002 and 334,064 tonnes in 2003 and 2004). In addition, there has been a reduction in the number of varieties of tobacco grown from 34 to 8 (Flue-cured, Light air-cured, Dark air-cured, Fire-cured, Sun-cured, Basmas, Katerini and K. Koulak). Growing more than 348,000 tonnes of raw tobacco a year (5.4% of global production) the EU is the fifth largest tobacco grower on the planet, following China (38%), Brazil (9%), India (8%) and the United States (7%). Italy and Greece between them account for 75% of raw tobacco grown in the European Union.
In March 2002, the Council extended the system of premiums and quotas for tobacco farmers from 2002 to 2004 though a compromise deal whereby tobacco producing countries' interests were balanced against concerns of most countries, which wanted aid to be abolished (see Europe of 20 March 2002). A recital to the proposal, much slammed by tobacco growing countries (Greece, Spain, France, Italy, Austria and Portugal) was replaced by an equivalent statement by the Commission noting that within the framework of the Communication on sustainable development in Europe (unveiled at the Gothenburg European Council), changes to the raw tobacco system are considered to allow a phasing out of subsidies while establishing measures to help develop new sources of income and work for tobacco farmers. Commissioner David Byrne was not fully won over by the compromise but said that the statement demonstrated that the days of tobacco subsidies were numbered.