. /.RESTRICTEDWORLD TRADE
ORGANIZATIONG/AG/W/46
26 October 2000
(00-4458)
Committee on Agriculture Original:  Spanish
COMMUNICATION FROM CHILE
The following document concerning the canned peach sector in the European Communities is
being circulated at the request of the Permanent Mission of Chile as an addition to the statement by
Chile at the meeting of the Committee on Agriculture held on 27 September 2000.
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The global market for canned peaches represents an annual figure of around 31.5 million
cases, equivalent to US$567 million.  The European Union, especially Greece, largely dominates
international markets (70 per cent of global exports are from the EU and 56 per cent from Greece),excluding other exporting countries.
The EU's emergence on international markets, with extremely low market prices, has led to a
generalized distortion of global markets due to the utilization of massive subsidies granted by the
European Union, which have encouraged over-production of peaches in Greece.  In fact, there isjustified reason to believe that these subsidies have been fraudulently used by Greek operators, as can
be seen from the 1994 Report
1of the Court of Auditors of the European Union.  There are grounds for
stating that some irregularities continue, as can be seen below.
The use of such subsidies has encouraged a larger volume of production and as a result a
significant decrease in prices.  Some of this pr oduction is destroyed – termed withdrawal – and
Community producers receive a subsidy for the production destroyed.  In Greece, withdrawal hasreached a figure of 54 per cent of the total production of peaches, whereas the average for withdrawal
in the other European producing countries is 6 per cent.
The lack of proper controls has enabled peach processors to purchase part of the production to
be withdrawn, paying an extremely low price to the producers for these peaches.  In this way,producers receive not only a subsidy but also a price for the peaches to be withdrawn and sold to the
processors.  The latter in turn obtain part of their raw material at a very low price.
In addition, the Community's subsidy system operates in such a way that when, a processor
buys peaches on the official market, it has to pay the producer a high price that incorporates thesubsidy the latter receives.  Subsequently, the processor receives the difference between the price paid
to the producer and the market price.  Such a situation, added to the one described above, allows
producers and processors to earn substantial profits in the absence of proper controls.
The existence of abuse and fraud in the payment of Community subsidies highlighted by the
Court of Auditors led the EC to reform the regulations in 1997 with a view to eliminating the defects
pointed out.  The current season, however, has further underlined its ineffectiveness.  In its issue of
                                                     
1 Court of Auditors, Annual Report 1994, Official  Journal of the European Communities C 303 of
14 November 1995.G/AG/W/46
Page 2
23 June last, the English weekly review "Food News" states that production in Greece for the current
season, which began in June, shows one of the highest volumes ever, 21.5 million cases.
This has had a considerable impact on international markets.  As the aforementioned review
indicates, the price of European canned peaches at the port in Mexico amounts to US$9.50 (28 per
cent below the previous year's price), whereas the average global price in producing countries
amounts to around US$16 per can, f.o.b. value.
In the case of Chile in particular, this situation has meant that the domestic canned peach
exporting industry has had to make a number of delicate adjustments in order to contend with the
difficult situation on international markets.  The prejudice caused is real and substantial.  It is
estimated that an amount equivalent to US$6.9 million annually has been lost.  If this figure ismultiplied by the 10 years during which these practices have been applied, the loss will be in the
region of US$70 million.
As the members of this Committee know, this issue has been and will continue to be one of
extreme importance for Chile.  We therefore deem it appropriate to request the European Commissionto provide us with the following information:
(a) We understand that the reform of the CMOs of 28 October 1996 (Regulations
2200/96 and 2001/96) is intended to improve compliance with the Community's
regulations.  In this respect, the measures applicable to the handling of the requestsfor aid on the part of processors have become more stringent.  Nevertheless, what is
done to ensure that the processors do not pay a price lower than the minimum set by
the Community and that the money paid through a financing body is not used to pay
for the delivery of a larger volume of raw material than the volume officially
notified?
(b) Why has a system of direct payment to producers of the raw material not been
implemented instead of the current system which operates through the processors,
and in which the Commission's services are unable to exercise control because this is
a matter for each Member State?
(c) What is the economic reason and the cost structure for Greek canned peaches which
explains that these can be sold at prices that are sometimes 50 per cent lower than the
prices of other major producers, as has happened during this season?
Lastly, we should like to state that, if necessary, we shall raise this issue at the next
Committee meeting in order to clarify the aforementioned aspects and find a solution to this problem.
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