| Author (Person) | Carroll, Freda | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Publisher | ProQuest Information and Learning | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Title | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Details | 24.11.03 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Publication Date | 24/11/2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Content Type | News, Overview, Topic Guide | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Background For over 20 years, ever since the European Commission's 1991 reflection paper The development and future of the Common Agricultural Policy (COM(91)100) there have been a number of attempts to reform the CAP, the first of which was the package of reforms drawn up by Commissioner Ray McSharry in 1992, which was intended to cut both costs and production levels. Since 1992, the reform process has aimed at moving away from a policy of price and production support to a more comprehensive policy of farmer income support. CAP reforms June 2003 The latest step in this process was the decision reached at the Luxembourg Agriculture Council on 26 June 2003 to introduce the single farm payment scheme - effectively 'de-coupling' payments to farmers from the quantity they produce. The main objectives of the 2003 reforms are: greater competitiveness, a stronger market-orientation, stable incomes, improved respect for the environment and concern for the problems of producers in less-favoured areas of the EU. See European Sources Online: In Focus: Special sectors The Luxembourg Council also invited the European Commission to put forward proposals for the reform of the common market organisations (CMOs) for cotton, olive oil, and tobacco that, while recognising the special problems of these sectors, would still be based on the same principles agreed for CAP reform. In producing its proposals, the Commission decided to include also the sugar sector, long targeted by developing country campaigners for the harm it inflicts on farmers in developing countries. EU farmers can sell their sugar at prices more than three times above the world market level, protected from competition by a combination of high import tariffs, export subsidies and production quotas. On 23 September 2003, the Commission published its communication: Accomplishing a sustainable agricultural model for Europe through the reformed CAP - the tobacco, olive oil, cotton and sugar sectors (COM(2003) 554). For the olive oil, tobacco and cotton sectors, often concentrated in regions notably lagging behind in their economic development, the common aim is to support sustainable development, to be achieved on the one hand by reorienting the support to reward healthy, high-quality products and practices, and on the other by developing alternative sources of income and economic activity. To do so, the largest part of current support for the three sectors is to be decoupled and integrated into the legal framework of the single farm payment, a move that should reduce incentives for overproduction. The fundamental objectives of CAP reform are still met by:
Tobacco For tobacco, the overall aim is to allow producers to adjust to a situation where product support would be phased out completely. The existing tobacco premium is to be gradually decoupled in full over a three year period, accompanied by a phasing out of the Tobacco Fund. During this transition phase, it is proposed that a financial envelope will be set up, within the second pillar of the CAP, for restructuring tobacco-producing areas. At the end of the reform process, more than 70% of the current tobacco premium will have been converted into the single farm payment and at least 20% into restructuring assistance. A document, Extended Impact Assessment of the EU tobacco sector, which accompanied the Commission's proposals is necessary for understanding the background to the tobacco proposal. Olive oil For olive oil, a full decoupling option would have entailed the risk that many traditional olive groves in poorer areas of the EU would be abandoned with serious environmental and social consequences. The Commission proposes a 60% / 40% split, where 60% is for single farm payments and 40%, the coupled part of support, is aimed to guarantee that the cost of maintenance of olive trees is covered, while the production decision is left to producers. 40% of the production-linked payments in the olive oil sector is to be retained as 'national envelopes', out of which producers could be granted a premium calculated on a per hectare or per tree basis. This would help to ensure the maintenance of low-output olive groves. Member States will determine the areas concerned. Cotton For cotton also, 60% de-coupling is proposed. The 40% of the payments still coupled to production will result in an aid per hectare for the maximum proposed area which, added to the revenue coming from the value of the product, should still allow the cultivation of cotton with gross margins comparable to alternative crops. A higher degree of decoupling could result in the disappearance of this crop in regions where it plays a significant role from a social, economic and agricultural point of view. On the other hand, a significantly higher level of aid per hectare would encourage an increase of the areas sown with cotton, with negative consequences for the environment. This is goes some way to meeting developing countries' objections to the cotton subsidies in developed countries. The fact that the EU does not have a significant international role in cotton production implies that the impact of EU production on the evolution of world market prices has been negligible. Nevertheless, the Commission reached the conclusion that, on balance, reform would also bring considerable advantages to the cotton sector in terms of greater market orientation, improved environmental protection and stabilised incomes. For that reason, the Commission proposes to incorporate part of the current support for cotton production into the single farm payment scheme and to transform the rest into a new production aid, granted as an area payment. Member States will retain 40% of the producer-support expenditure as 'national envelopes' for the new area payment. Sugar The sugar support regime has never been subject to a fundamental reform. Consequently the Council and Parliament have not, up to now, been given the opportunity to conduct a political debate on the different policy approaches possible for this sector. The complexity of the sector and the various challenges it faces, both domestically and internationally, as well as the potential impact of various options, are documented in Reforming the European Union's sugar policy - summary of impact assessment - an essential document for understanding the complex issues at stake in the sugar sector as a background to the Commission's proposals for sugar. For this sector, the Commission wants to open a first discussion on three options for reform of the sugar sector regime, before proceeding to a formal proposal. The Council, the Parliament and stakeholders are invited to participate in this debate. Whichever option is chosen any reform of the sector would have to follow the fundamental principles of the CAP reform already initiated in other sectors. In addition such a reform would need to take account of its effect in the international context, especially with respect to the impact it may have on developing countries in general and ACP countries (which benefit from the Sugar Protocol) in particular. The three options are:
Any reform of the sugar market will have to bridge the gap between domestic and world market prices. Support has to be decoupled from production, and the pros and cons of a policy based on quotas need to be carefully weighed up. Given the complexity of the world sugar market, reform would also need to keep a close eye on its effect in the international context, especially with respect to the impact it may have on ACP countries. The Financial Times (in
Relevant proposals for legislation for the cotton, olive oil and tobacco sectors will be presented by the Commission in November 2003. Those for the sugar sector will depend on the outcome of the public debate on this sector. Further information within European Sources Online: European Sources Online: Topic Guides
European Sources Online: In Focus
[Note: For other relevant In Focus articles see a list of them by linking to Topic Guides: Agriculture, Fisheries and Forestry]. European Sources Online: Financial Times
Further information can be seen in these external links: European Commission: DG Agriculture European Commission: DG Press and Communication: RAPID: Press Releases European Commission: DG Press and Communication: SCADPLUS
European Court of Auditors BBC News:
United Kingdom. Department for the Environment Food and Rural Affairs
European Sugar Manufacturers' Committee / Comité Européen des Fabricants de Sucre
Further and subsequent information on the subject of this week's In Focus can be found by an search in European Sources Online by inserting 'CAP reform', 'Cotton', 'Olive oil', 'Sugar' or 'Tobacco' in the keyword field. Freda Carroll Background and reporting on the week's main stories in the European Union and the wider Europe. |
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