# C_2008162EN.01008301.xml

| 25.6.2008 | EN | Official Journal of the European Union | C 162/83 |
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25.6.2008

EN

Official Journal of the European Union

C 162/83

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Opinion of the European Economic and Social Committee on the Proposal for a Council Regulation amending Regulation (EC) No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, as regards the support scheme for cotton

COM(2007) 701 final — 2007/0242 (CNS)

(2008/C 162/17)

On 4 December 2007, the Council decided to consult the European Economic and Social Committee, under Article 37 of the Treaty establishing the European Community, on the

Proposal for a Council Regulation amending Regulation (EC) No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, as regards the support scheme for cotton

Proposal for a Council Regulation amending Regulation (EC) No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, as regards the support scheme for cotton

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 22 January 2008. The rapporteur was Mr Narro Sánchez.

Mr Narro Sánchez

At its 442nd plenary session, held on 13 and 14 February 2008 (meeting of 14 February 2008), the European Economic and Social Committee adopted the following opinion by 141 votes to 33 with 13 abstentions.

1.   Conclusions and recommendations

| 1.1 | The new support scheme for cotton will come into force on 1 January 2008. The Council of Ministers must adopt a decision as swiftly as possible in order to prevent uncertainty among farmers regarding the applicable legal framework for the next marketing year. |
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1.1

The new support scheme for cotton will come into force on 1 January 2008. The Council of Ministers must adopt a decision as swiftly as possible in order to prevent uncertainty among farmers regarding the applicable legal framework for the next marketing year.

| 1.2 | The EESC stresses that the partial 65 % decoupling rate laid down in the annulled regulation, which remains unchanged in the Commission proposal, is an inefficient way to maintain production of the crop in the cotton-growing areas of the EU. The high labour intensity, high production costs, volatility of world prices and various other factors prevent the Commission proposal from being an effective way to stop this crop from disappearing. |
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1.2

The EESC stresses that the partial 65 % decoupling rate laid down in the annulled regulation, which remains unchanged in the Commission proposal, is an inefficient way to maintain production of the crop in the cotton-growing areas of the EU. The high labour intensity, high production costs, volatility of world prices and various other factors prevent the Commission proposal from being an effective way to stop this crop from disappearing.

| 1.3 | The EESC considers that the system that was in force before the 2004 reform, which was based on production aid, ensured the viability of farms throughout the regions of the EU where cotton is grown. However, the EESC is aware of the impossibility of returning to the previous scheme due to the new policy orientation of the CAP and the international commitments made by the EU in the context of the World Trade Organisation. |
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1.3

The EESC considers that the system that was in force before the 2004 reform, which was based on production aid, ensured the viability of farms throughout the regions of the EU where cotton is grown. However, the EESC is aware of the impossibility of returning to the previous scheme due to the new policy orientation of the CAP and the international commitments made by the EU in the context of the World Trade Organisation.

| 1.4 | The EESC points out that there are differences in production between Greece and Spain. At present, it is difficult to conceive of a homogeneous support system that could be applied equally to both countries. As a result of this difference, the Committee calls for maximum flexibility to be brought to the cotton support scheme by dint of the subsidiarity principle, which has guided the most recent sectoral reforms of CMOs in the wine and fruit and vegetable sectors. Every Member State should be able to apply the necessary subsidiarity in order to find the best solution for their producing areas. |
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1.4

The EESC points out that there are differences in production between Greece and Spain. At present, it is difficult to conceive of a homogeneous support system that could be applied equally to both countries. As a result of this difference, the Committee calls for maximum flexibility to be brought to the cotton support scheme by dint of the subsidiarity principle, which has guided the most recent sectoral reforms of CMOs in the wine and fruit and vegetable sectors. Every Member State should be able to apply the necessary subsidiarity in order to find the best solution for their producing areas.

| 1.5 | In order to maintain a high degree of decoupling of support, a transitional period should be set up to allow for gradual adaptation to greater levels of decoupling. Moreover, a high percentage of coupled support cannot alone guarantee that cotton production will be sustained. Nor will including the requirement to harvest and the concept of ‘sound and fair merchantable quality’ ensure that the production levels registered prior to the reform are maintained; as a result, eligibility conditions must be incorporated which include quantitative criteria relating to the volume of production achieved. |
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1.5

In order to maintain a high degree of decoupling of support, a transitional period should be set up to allow for gradual adaptation to greater levels of decoupling. Moreover, a high percentage of coupled support cannot alone guarantee that cotton production will be sustained. Nor will including the requirement to harvest and the concept of ‘sound and fair merchantable quality’ ensure that the production levels registered prior to the reform are maintained; as a result, eligibility conditions must be incorporated which include quantitative criteria relating to the volume of production achieved.

| 1.6 | The EESC points out that the new system should promote a commitment to the quality of the product, in contrast to the current system, which is causing a considerable reduction in quality and making it difficult to sell European cotton. Cotton is a product used for textiles, and must meet the needs of an industry exposed to tough competition. It is therefore essential to ensure that all the factors for high-quality production are present. Moreover, efforts should be made to ease the introduction of new alternative technologies, integrated production systems and eco-friendly production wherever feasible. |
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1.6

The EESC points out that the new system should promote a commitment to the quality of the product, in contrast to the current system, which is causing a considerable reduction in quality and making it difficult to sell European cotton. Cotton is a product used for textiles, and must meet the needs of an industry exposed to tough competition. It is therefore essential to ensure that all the factors for high-quality production are present. Moreover, efforts should be made to ease the introduction of new alternative technologies, integrated production systems and eco-friendly production wherever feasible.

2.   General remarks

| 2.1 | The cotton support scheme dates back to 1980, when Greece joined the European Community. The scheme was then extended to the two countries which joined in 1986, Spain and Portugal. The cotton sector was based on a system of ‘deficiency payments’, whereby support was granted for cotton processors who had paid a minimum price to cotton producers. The system was changed in 2000 when guaranteed maximum quantities were brought in, along with new environmental requirements. |
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2.1

The cotton support scheme dates back to 1980, when Greece joined the European Community. The scheme was then extended to the two countries which joined in 1986, Spain and Portugal. The cotton sector was based on a system of ‘deficiency payments’, whereby support was granted for cotton processors who had paid a minimum price to cotton producers. The system was changed in 2000 when guaranteed maximum quantities were brought in, along with new environmental requirements.

| 2.2 | In April 2004, the Council of the European Union adopted a new support scheme for cotton, inspired by the guiding principles of the 2003 CAP reform, decoupling production-related aid. This was intended to bring the decoupled payment to around 65 %, while coupled aid would increase to 35 %. The reform, which came into force on 1 January 2006, did not allow for any modification to the percentages of this partial decoupling. |
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2.2

In April 2004, the Council of the European Union adopted a new support scheme for cotton, inspired by the guiding principles of the 2003 CAP reform, decoupling production-related aid. This was intended to bring the decoupled payment to around 65 %, while coupled aid would increase to 35 %. The reform, which came into force on 1 January 2006, did not allow for any modification to the percentages of this partial decoupling.

| 2.3 | On 7 September 2006, in an unprecedented decision, in the context of an appeal brought by the Kingdom of Spain, the European Court of Justice annulled the cotton support scheme approved in 2004 owing to its infringement of the principle of proportionality, which meant that, under the Treaty on European Union, the actions proposed by the reform of the Community cotton scheme were considered disproportionate to the aims pursued. The Commission had not taken into account labour costs when calculating the foreseeable profitability of cotton growing, nor had it considered the impact of the reform on the situation of the cotton-ginning sector. The Court of Justice suspended the annulment of the reform until a new proposal was put forward by the Commission. |
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2.3

On 7 September 2006, in an unprecedented decision, in the context of an appeal brought by the Kingdom of Spain, the European Court of Justice annulled the cotton support scheme approved in 2004 owing to its infringement of the principle of proportionality, which meant that, under the Treaty on European Union, the actions proposed by the reform of the Community cotton scheme were considered disproportionate to the aims pursued. The Commission had not taken into account labour costs when calculating the foreseeable profitability of cotton growing, nor had it considered the impact of the reform on the situation of the cotton-ginning sector. The Court of Justice suspended the annulment of the reform until a new proposal was put forward by the Commission.

| 2.4 | During the drafting of the new proposal, the Commission carried out two studies on the environmental and socio-economic impact of cotton production. In conjunction with these studies, various working meetings were held with representatives from the sector, along with a public hearing. |
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2.4

During the drafting of the new proposal, the Commission carried out two studies on the environmental and socio-economic impact of cotton production. In conjunction with these studies, various working meetings were held with representatives from the sector, along with a public hearing.

| 2.5 | Lastly (and to the great puzzlement of the sector), on 9 November 2007 the Commission presented a new proposal for the reform of the cotton support scheme that was almost identical to the current one — i.e. partial decoupling with 65 % of payments unlinked from crop production and the remaining 35 % coupled to production. The EESC considers that the Commission's proposal should be brought more closely into line with the different production situations in Greece and Spain. |
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2.5

Lastly (and to the great puzzlement of the sector), on 9 November 2007 the Commission presented a new proposal for the reform of the cotton support scheme that was almost identical to the current one — i.e. partial decoupling with 65 % of payments unlinked from crop production and the remaining 35 % coupled to production. The EESC considers that the Commission's proposal should be brought more closely into line with the different production situations in Greece and Spain.

| 2.6 | The current cotton support scheme has witnessed a clear drop in production, reduction in revenue and the resulting gradual abandonment of the sector in various cotton-growing areas. In its opinion on the reform of 2004, the EESC warned the Commission of the significant reduction that partial decoupling would have in cotton-growing areas. |
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2.6

The current cotton support scheme has witnessed a clear drop in production, reduction in revenue and the resulting gradual abandonment of the sector in various cotton-growing areas. In its opinion on the reform of 2004, the EESC warned the Commission of the significant reduction that partial decoupling would have in cotton-growing areas.

| 2.7 | In the EU, production is concentrated almost exclusively in certain areas of two Mediterranean countries — Greece and Spain. Greece is Europe's main cotton producer with around 380.000 hectares of land devoted to the crop, while the area under cotton in Spain totalled around 63 000 hectares in 2007. Portugal no longer grows cotton, and Bulgaria produces a very small amount. On the whole, cotton is grown in particularly depressed areas with few alternatives for employment. These regions are still covered by the convergence objective for 2007-2013. |
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2.7

In the EU, production is concentrated almost exclusively in certain areas of two Mediterranean countries — Greece and Spain. Greece is Europe's main cotton producer with around 380.000 hectares of land devoted to the crop, while the area under cotton in Spain totalled around 63 000 hectares in 2007. Portugal no longer grows cotton, and Bulgaria produces a very small amount. On the whole, cotton is grown in particularly depressed areas with few alternatives for employment. These regions are still covered by the convergence objective for 2007-2013.

| 2.8 | In Greece, the area under cotton has decreased by 11 % and production figures have dropped proportionately due to adverse climate conditions and, essentially, to the implementation of the 2004 reform. |
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2.8

In Greece, the area under cotton has decreased by 11 % and production figures have dropped proportionately due to adverse climate conditions and, essentially, to the implementation of the 2004 reform.

| 2.9 | In Spain, the effects of the current system have led to much more radical changes in the sector than in Greece. In Andalusia, Spain's main cotton-producing region, the sector has lost 30 % of its surface area and 65 % of production in only two marketing years, with harvested cotton dropping from 347 000 tonnes in 2004 to 130 000 tonnes in 2007. In the last two years, 30 % of producers have abandoned the crop. This drop in production makes it unfeasible in the short term for much of the industry to survive in Spain, and this will have a substantial impact on employment in the ginning industries and the use of labour in production. |
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2.9

In Spain, the effects of the current system have led to much more radical changes in the sector than in Greece. In Andalusia, Spain's main cotton-producing region, the sector has lost 30 % of its surface area and 65 % of production in only two marketing years, with harvested cotton dropping from 347 000 tonnes in 2004 to 130 000 tonnes in 2007. In the last two years, 30 % of producers have abandoned the crop. This drop in production makes it unfeasible in the short term for much of the industry to survive in Spain, and this will have a substantial impact on employment in the ginning industries and the use of labour in production.

| 2.10 | In the light of the above, the EESC calls on the Commission to bring more flexibility to its proposal so as to give the Member States, through the subsidiarity principle, greater room for manœuvre. |
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2.10

In the light of the above, the EESC calls on the Commission to bring more flexibility to its proposal so as to give the Member States, through the subsidiarity principle, greater room for manœuvre.

| 2.11 | The introduction of any degree of decoupling in the cotton sector will lead to widespread restructuring within the sector. The ginning industry will have to deal with substantial changes in order to adapt to the new situation, and will need the financial support of the Commission in order to restructure so that it can continue to maintain employment in cotton-growing areas. Financial support should be earmarked for the ginning industry to enable it to bear the costs of abandoning this activity and taking up other economic activities which would secure jobs. The conversion measures included in the last reform of the sugar CMO could serve as inspiration in this area. |
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2.11

The introduction of any degree of decoupling in the cotton sector will lead to widespread restructuring within the sector. The ginning industry will have to deal with substantial changes in order to adapt to the new situation, and will need the financial support of the Commission in order to restructure so that it can continue to maintain employment in cotton-growing areas. Financial support should be earmarked for the ginning industry to enable it to bear the costs of abandoning this activity and taking up other economic activities which would secure jobs. The conversion measures included in the last reform of the sugar CMO could serve as inspiration in this area.

3.   Specific comments

| 3.1 | The EESC fully agrees with the Commission regarding the importance of the tasks to be assigned to inter-branch organisations: to coordinate product marketing, draw up standard contracts and promote high-quality cotton production. However, the form these organisations have to take under the current system and the lack of integration with other measures has meant that they have carried little weight over the two years that the regime has been in effect and their activity is limited to ensuring their members' access to additional aid. Indeed, in Spain, there is only one inter-branch organisation covering 10 000 hectares of cotton crops. |
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3.1

The EESC fully agrees with the Commission regarding the importance of the tasks to be assigned to inter-branch organisations: to coordinate product marketing, draw up standard contracts and promote high-quality cotton production. However, the form these organisations have to take under the current system and the lack of integration with other measures has meant that they have carried little weight over the two years that the regime has been in effect and their activity is limited to ensuring their members' access to additional aid. Indeed, in Spain, there is only one inter-branch organisation covering 10 000 hectares of cotton crops.

| 3.2 | In October 2008, the European Commission is to publish a green paper on the implementation of quality policy in the EU. Therefore, the related legislative proposals will not be presented before 2009. The Commission has recently announced its intention to consider the inclusion of cotton in Annex I to Council Regulation No 510/2006 on the protection of geographical indications and designations of origin. |
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3.2

In October 2008, the European Commission is to publish a green paper on the implementation of quality policy in the EU. Therefore, the related legislative proposals will not be presented before 2009. The Commission has recently announced its intention to consider the inclusion of cotton in Annex I to Council Regulation No 510/2006 on the protection of geographical indications and designations of origin.

| 3.3 | The inclusion of cotton in the abovementioned protection scheme could be a useful tool for many producers seeking to increase the added value of their production in order to meet the challenges of a highly competitive open market and bring in a fair income from the markets. The Commission should extend the regulation to cotton by emergency procedure. |
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3.3

The inclusion of cotton in the abovementioned protection scheme could be a useful tool for many producers seeking to increase the added value of their production in order to meet the challenges of a highly competitive open market and bring in a fair income from the markets. The Commission should extend the regulation to cotton by emergency procedure.

| 3.4 | Proper certification of country of origin and European quality controls can help to bring to Community cotton production the added value sought by all European initiatives in the field. However, as the EU is a net importer of cotton, controls on imports need to be improved and strengthened. Cotton should therefore be included in the list of products eligible for information and promotion measures, although this will not in itself provide a solution for the sector. |
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3.4

Proper certification of country of origin and European quality controls can help to bring to Community cotton production the added value sought by all European initiatives in the field. However, as the EU is a net importer of cotton, controls on imports need to be improved and strengthened. Cotton should therefore be included in the list of products eligible for information and promotion measures, although this will not in itself provide a solution for the sector.

| 3.5 | The EESC supports all the Commission's proposals designed to improve the quality of cotton. In recent years the sector has made great environmental progress by supporting integrated production systems, agri-environmental aid and eco-friendly production. There has been an increase in integrated production systems in Spain, accompanied by application of environmental measures. In 2008 Greece will adopt a law governing integrated production systems. The new regime must provide incentives for such initiatives. |
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3.5

The EESC supports all the Commission's proposals designed to improve the quality of cotton. In recent years the sector has made great environmental progress by supporting integrated production systems, agri-environmental aid and eco-friendly production. There has been an increase in integrated production systems in Spain, accompanied by application of environmental measures. In 2008 Greece will adopt a law governing integrated production systems. The new regime must provide incentives for such initiatives.

| 3.6 | The EU should help its cotton sector to adapt to using new technological innovations. |
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3.6

The EU should help its cotton sector to adapt to using new technological innovations.

| 3.7 | The EU is a net importer of cotton; Community cotton production only accounts for 2 % of the cotton consumed in the world, and is a long way from the major cotton producing countries (USA, China, India, etc.). As a result, the EU is not involved in setting international prices for this raw material, and Community support for cotton producers does not distort competition. The Commission should therefore defend the European cotton sector when this is called into question in multilateral forums such as the World Trade Organisation. |
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3.7

The EU is a net importer of cotton; Community cotton production only accounts for 2 % of the cotton consumed in the world, and is a long way from the major cotton producing countries (USA, China, India, etc.). As a result, the EU is not involved in setting international prices for this raw material, and Community support for cotton producers does not distort competition. The Commission should therefore defend the European cotton sector when this is called into question in multilateral forums such as the World Trade Organisation.

Brussels, 14 February 2008.

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS

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