Brussels, 08/11/2007 (Agence Europe) - On Friday 9 November, the European Commission will use the written procedure to adopt its draft reform of the EU aid scheme for cotton farmers. It believes a slight modification of the system will suffice to respect both a Court of Justice ruling (which, on request from Spain, annulled the regulation adopted in 2004) and the measures incorporated in the cotton protocol annexed to the EU accession agreements of Greece, Portugal and Spain. The proposal is accompanied by an impact study carried out in response to the need to strike a fair balance between respect for the cotton protocol and moving towards the 'decoupling' of direct aid. Following adoption by the Council before the end of the year, the regulation should come into force on 1 January 2008.
Partial decoupling. The Commission repeats its 2004 decision, incorporating into the 65% single farm payments system the aid for cotton production before the 2004 CAP reforms that decoupled 65% of aid. The remaining 35% will be used to conserve some of the aid connected with production as an area payment. The 35% should allow the continuation of cotton growing at a sufficient level to preserve the cotton ginning sector in regions where it is an important economic activity. The Commission feels there would be more problems than advantages if the ratio of coupled to decoupled aid were changed. The Commission notes in the proposal that all simulations suggest that in the medium-term, a share of coupled aid of around 35% would help maintain cotton production while respecting the protocol and the principles of the CAP reform.
Maximum surface area. The proposal maintains the upper limit on surface area decided in 2004: 450,597 hectares (ha); 370,000 ha in Greece, 70,000 ha in Spain, 360 ha in Portugal and 10,237 ha in Bulgaria.
Payment per hectare. The payment per hectare will remain unchanged and will be reduced in proportion as payment requests overshoot the maximum surface area in the member state in question: in Greece, €594/ha for 300,000 ha and €342.85/ha for the remaining 70,000 ha; €1,039/ha in Spain; €556/ha in Portugal and €263/ha in Bulgaria. The crop-specific payment 'would be granted per eligible hectare of cotton on condition that the area will be maintained at least until the harvest without an obligation to deliver or sell the cotton. Moreover, the cotton would have to meet minimum requirements for sound, fair and marketable quality.'
Inter-branch organisations. This is the main area where the Commission has made changes on the 2004 reform of the industry. It is suggesting encouraging inter-branch organisations, in order to better coordinate the marketing of cotton, to draw up contracts between growers and processors, and to promote high quality production.
Restructuring. €154 million in 2007-2013 (€22m per year) is foreseen in the rural development programmes for restructuring cotton growing regions.
Label of origin. A slight improvement on the system agreed upon in 2004. The European Commission recommends creating a label of origin and has undertaken to study the possibility of extending to cotton the field of application of Regulation (EC) 510/2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs. 'To develop the image of Community cotton and promote its use, the Commission will analyse the possibility of including certain cotton products entirely produced and manufactured in the EU in the list of products eligible for information and promotion actions, and making budgetary resources (at least €3 million) available for this purpose.' The €3 million would come from small savings foreseen from the cuts in coupled aid to producers who are members of an authorised professional organisation from the total annual budget of €280 million.
Greece alone accounts for 76% of EU cotton growing
According to the figures supplied by the European Commission, cotton only accounts for 0.15% of total farm production in the EU, but it is extremely important regionally for the two main EU cotton producing member states. Around 76% of total EU cotton production (1.45 million tonnes of unginned cotton) is grown in Greece, where cotton accounts for 9% of total farm production (and 1.3% of total farm production in Spain). Bulgaria produces small quantities of cotton and Portugal has dropped cotton growing. There are 79,900 cotton farms in Greece (mostly located in Thessaly, Macedonia-Thrace and Sterea Ellada) and 9,500 in Spain (mainly in Andalucia, in the provinces in Seville and Cordoba). Some 380,000 hectares of land are devoted to cotton growing in Greece and 65,000 ha in Spain.
Private companies and cooperatives process raw cotton into a useable form by ginning it (removing the cotton seeds from the threads). In Spain, nearly half the 29 cotton ginning factories are run by cooperatives and the country has surplus ginning capacity compared with the amount of cotton grown there. Greece has a better balance of ginning and production, and cooperatives run a smaller proportion of the ginning plants (20 of the total 73).
The EU is a small player on the international stage, contributing only about 2% of the world's total production of cotton. The main cotton producing countries are China (24%), the United States (20%) and India (14%). The EU's consumption of around 0.6 million tonnes of ginned cotton (2.7% of the world total) is mostly concentrated in Italy, Portugal and Germany.
In Europe, the first cotton support regime was set up when Greece joined the EC in 1980, and was extended to Spain and Portugal in 1986. A protocol annexed to the accession treaty stated that the Community 'shall ensure the support of cotton production in the regions where it is important for the agricultural economy'. The support system should permit the producers concerned to earn a fair income and include the grant of aid to production.
The initial regime was based on a 'deficiency payment' granted to processors, who paid a minimum price to the farmers that supplied them with unginned cotton. The aid and minimum price were based on the difference between an internal target price and the world market price. The regime prompted by a big expansion of the whole EU cotton sector. In recent years, the common agricultural policy has undergone a fundamental reform. In 2003, the EU decided to move away from price and production support towards decoupled income support. In order to bring cotton more in line with other sectors, the Council in April 2004 adopted a new regime for cotton, based on a decoupled income aid and a crop-specific area payment. It came into force in January 2006.
On 7 September 2006, the European Court of Justice annulled the 2004 cotton reform, concluding that infringement of the proportionality principle had occurred as: 1) the Commission had failed to carry out an impact study; 2) the Commission failed to consider direct labour costs in the evaluation and decision process; and 3) the Commission failed to take into consideration the impact of the new regime on the ginning industry, which is directly linked to the cotton production business. Consequently, particular attention was paid to these elements when drawing up the new draft legislation. (L.C.)