Brussels, 25/09/2003 (Agence Europe) - As previously announced, the European Commission on Tuesday adopted Franz Fischler's communication entitled "Towards a sustainable agricultural model for Europe via a reformed CAP- tobacco, olive oil, cotton and sugar sectors". The Commission is to present legislative proposals on Mediterranean products (tobacco, olive oil and cotton) in November, whilst for sugar, the Commission's adoption of draft regulatory texts is not scheduled until March or April 2004. Council and Parliament will scrutinise the three different reform scenarios for the sugar sector which have just been presented. "The more sectors we include in the single payment per holding regime, the greater the economic and administrative benefits will be in terms of simplification", commented Dr Fischler during the presentation of the dossier to the Commission. It is worth noting that in line with the approach to CAP reform of June 2003, positions on raw tobacco, olive oil and cotton respect the principle of budgetary neutrality (compared to past expenditure).
There follows a summary of the ideas in the communication, with a view to changes to the way these four sectors work. The only clarification made to the draft communication presented in EUROPE relates to the time frame for the gradual withdrawal of the common market organisation (CMO) of raw tobacco, which is three years.
The proposed reform to the raw tobacco CMO is based on an in-depth impact assessment of the sector, and takes account of the sustainable development strategy (decided at the European Council of Göteborg in June 2001), which emphasised the need to end tobacco subsidies.
The Commission plans gradually to introduce (in three phases) a single payment per holding (removing the link between the level of aid and production volume), alongside the gradual phasing-out of the European Tobacco Fund and the implementation, under the second pillar of the CAP (rural development policy), of a financial envelope to help with the restructuring of tobacco-growing areas. Tobacco quotas will be maintained to set the envelope for the share not yet decoupled from the tobacco premium. For this reason, during the transitional period, all production outside quotas will not be eligible for the corresponding coupled premium that remains to be paid.
At the end of this three-stage process, to last three years, the raw tobacco CMO will no longer be in force. The first stage is to begin with the transfer of all or part of the current tobacco premium to eligibility for the single payment per holding. The transfer will be at 100% for the first 3.5 tonnes of a producer's yield, but for the next section, between 3.5 and 10 tonnes, 80% of the current tobacco premium will go into the single payment per holding. The remaining 20% will go towards the restructuring envelope. For anything above 10 tonnes, the current tobacco premium will be reduced by a third at each stage. For the first two stages, this sum will be divided into two, one part going towards the transfer to single payment per holding and the other to the restructuring envelope. In order to avoid too great a change in revenue to the holding, under the third stage only one-third of the tobacco premium will be converted into eligibility for the single payment per holding, and the rest will go to the restructuring envelope.
Once the reform is completely in force, over 70% of current aid to tobacco will have been transferred into the single payment per holding, and 20% will have gone to the restructuring envelope. This redistribution will, thanks to the single payment per holding, mean an average payment of 6,900 EUR per family labour unit (FLU).
For the olive oil CMO, the Commission will also decouple direct payments (currently linked to production), bringing in new eligibility to the single payment per holding, to be added to those from the CAP reform of June 2003. It has been proposed that 60% of payments linked to production for the reference period be converted into rights to the single payment per holding, for holdings over 0.3ha. Smaller farms' payments will be totally decoupled. In order to avoid serious disruption to the upkeep of the olive groves, which could lead to decreased occupation of the land and the countryside, Member States would be entitled to keep remaining production-linked payments, 40% in all, to award an additional payment to the olive farm, calculated per hectare or per tree. This extra aid would help to ensure the continuation of olive farms in isolated areas or with a low yield. Payment granted to the olive farm would not be below 50 EUR per request.
The Commission proposes that current private olive oil storage measures are kept as a "safety net", but export refunds should be phased out, as should production refunds for certain tinned foods. To help the sector out while it adapts to the changing market conditions, current quality and traceability measures will be stepped up. Funding to current control bodies for olive oil will be removed as of 1 November 2005. The new CMO will replace the current aid regime as of 1 November 2004.
For the cotton sector, the Commission proposes converting existing aid into two measures to support farmers' revenue:
- single payment per holding: 60% of current expenditure will be used to set up (during the reference period) a single payment per holding regime (in the form of new rights). According to the Commission this new system will help producers to react better to changes and future market demands;
- a new production aid in the form of payment based on area: to avoid distortions in production areas which are strongly dependent on cotton, Member States will keep 40% of aid expenditure in the sector, during the reference period, to be able to grant producers the new payment per hectare of cotton. This will be paid up to a maximum surface area of 425,360 hectares (340,000 in Greece, 85,000 in Spain and 360 in Portugal), and will be reduced proportionately if requests exceed the Member State's maximum surface area. This payment per surface are could be differentiated depending on specific criteria (the producer's membership of an interprofessional organisation approved and controlled by Member States). Half of the envelope for payment by surface are will be distributed according to interprofessional levels, to remunerate production yields in terms of quality and quantity. The activities of all of these interprofessional organisations will be paid for by their members, and by an average Community subsidy of 10 EUR per hectare. Total aid will be in the region of 4.5 million EUR.
The balance of total expenditure in the cotton market will be included in an envelope for restructuring cotton areas. This envelope, of some 100 million EUR, will be shared between the Member States depending on the average surface area eligible for aid during the reference period. It will become an additional financial instrument within the second pillar of the CAP and could contribute to the funding of rural development measures.
In the light of the results of an informative impact study, the Commission is launching a debate on reform of the EU sugar policy by presenting three main political options:
Extension of the present regime beyond 2006: this would consist of keeping the current CMO intact. The EU market would be open to imports, according to the various international commitments already taken or to be agreed in the future. Customs duty, internal prices and production quotas would be reduced. Given the effects of the "Everything But Arms" initiative, this scenario would be difficult (EUROPE of 23 September, p.9).
Reduction in the EU internal price: under this option, production quotas would be phased out once the levels of imports and production have stabilised. In this scenario, the internal market price would adjust itself to the price of imports. To lessen the impact of the reduction in EU sugar prices, this scenario examined the possibility of allowing sugar producers to benefit form the single payment per holding.
Complete liberalisation of the current regime: this would involve the end of the price support system within the EU, of production quotas and of customs duty and quantitative restrictions on imports. This would be accompanied by some kind of support for producers' revenue.
Sugar beet provides for 1.6 to 1.8% of the EU's agricultural output, and is grown on over 230,000 farms. The EU's sugar production fluctuates between 15 and 18 million tonnes in refined equivalents. With ten new Member States, sugar production will increase by 15%. The EU currently hosts 135 sugar processing plants and 6 refineries. Sugar is produced in all Member States of the EU except Luxembourg. Germany and France account for over half of the EU's sugar output, followed by the United Kingdom and Italy (8% each). Six of the future new Member States produce 3 million tonnes of sugar, with Poland accounting for a third. The EU is a net exporter of sugar (5.3 million tonnes on average were exported for the marketing years 1999/2000 to 2001/2002, against 1.8 million tonnes of imports), but lags far behind Brazil, which now dominates exports. At global level, the EU produces 13% of the total, consumes 12%, exports 15% and imports 5%. International sugar prices are extremely erratic, with prices on a downward trend since 1995. This is mainly due to an overall excess of production over consumption.