Opinion of the Economic and Social Committee on the "Proposal for a Council Regulation on the Common organisation of the markets in the sugar sector"

(2001/C 116/24)

On 20 October 2000 the Council decided to consult the Economic and Social Committee, under Articles 36 and 37 of the Treaty establishing the European Community, on the above-mentioned proposal.

On 17 October 2000, the Section for Agriculture, Rural Development and the Environment was instructed to prepare the Committee's work on the subject.

At its 377th plenary session on 29 and 30 November 2000, (meeting of 30 November) the Economic and Social Committee, in view of the tight deadline, appointed Mr Bastian as Rapporteur-General and adopted the following opinion by 107 votes to 13 with eight abstentions.

1. Introduction

1.1. In the sugar, isoglucose and insulin syrup sector, the production quota system flowing from Regulation (EEC) No. 1785/81 has been rolled forward on several occasions. The last roll-forward took place in 1995. It dealt with six marketing years - 1995/1996 to 2000/2001 - and incorporated a number of major reforms made necessary by the 1994 Marrakech Agricultural Agreement which concluded the series of Uruguay multilateral trade negotiations. This revised regulation was codified under the number 2038/99.

1.2. Article 26(6) of this regulation stipulates: "Before 1 January 2001 the Council shall, in accordance with the procedure laid down in Article 37(2) of the Treaty, adopt the arrangements to apply from 1 July 2001 to the production of sugar, isoglucose and inulin syrup".

1.3. The Commission proposes extending the Regulation and the current prices for two marketing years - 2001/2002 and 2002/2003 - subject to the following changes:

- a reduction in quotas of 115000 t;

- abolition of the system for reimbursing storage costs;

- abolition of funding for storage of sugar which has been carried over or downgraded to meet GATT commitments;

- abolition of the obligation to maintain minimum stocks;

- querying the automatic alteration of adjustment aid paid to ACP and Indian refiners of preferential raw sugar and additional aid paid to French Overseas Departments refiners of raw sugar;

- an obligation to be placed on Member States to ensure that sugarbeet farming respects the environment, to set - if necessary - environmental requirements to be met and to send in a report to the Commission by 30 June 2002.

1.4. The Commission, moreover, proposes undertaking a number of studies on 1) whether to maintain or abolish the quota system, 2) the degree of competition in the various agri-food sectors and 3) the passing-on of price changes. In July 2002, the results of these studies, together with developments in the WTO negotiations and the scheduled review of cereal and oilseed regimes should, according to Commission, allow the current regime to be revised.

2. General comments

2.1. The operation of the quota system and financing by means of production levies have meant that internal demand has been fully met, a stable flow of exports has been maintained, the Union's commitments vis-à-vis the WTO have been fulfilled and negotiations on enlarging the European Union to include the applicant countries from central and eastern Europe have been started.

2.2. The operation of the price system and trade mechanisms with third countries have meant that reasonable incomes have been secured for farmers in the EEC and ACP countries and a suitable level of activity ensured for sugar manufacturers and refiners.

2.3. The price policy, hallmarked by considerable stability over the last few years, has meant that the price of sugar has been maintained at a level comparable with that in other developed countries. It has dropped by 36 % in real terms since 1985 and three-quarters of consumption is in the form of processed products, the prices of which are not sensitive to variations in sugar prices.

2.4. The Community market has been protected from the sharp fluctuations in world prices and farmers and sugar manufacturers have not had to suffer the serious social and economic consequences which might have resulted from low-price imports from some countries.

2.5. The European sugar regime offers the developing countries in Africa, the Caribbean and the Pacific as well as India a permanent outlet at a guaranteed Community price for 1600000 t of sugar; this comes on top of Community production.

3. Specific comments

3.1. The Commission proposal deals with two marketing years.

3.1.1. The Committee recalls its previous opinions, particularly those of November 1992 and April 1993(1), in which it spoke out against short-term sugar regulations which helped create a climate of uncertainty for producers and manufacturers and slowed down decision-making, particularly on investment.

3.1.2. The Committee notes that the Commission proposes to reform the common market organisation (CMO) in sugar, carry out the mid-term study on the cereals/oilseed sector and possibly even reform the dairy regime all at the same time.

3.1.3. The Committee feels that the Berlin commitments concerning agriculture, particularly the budgetary framework, must be complied with.

3.1.4. The Committee calls on the Council to change the two-year period proposed by the Commission so that the duration of the regulation coincides with the duration of the budgetary framework adopted in Berlin in March 1999 at the summit of heads of state and government.

3.2. The Committee regrets to note that the amendments proposed by the Commission regarding storage have not been subject to an impact study. It is also surprised by the fact that arrangements which have been considered most valuable in previous regulations are now suddenly described as unnecessary without the Commission making the effort to justify its change of opinion.

3.2.1. The Committee queries the level of budgetary savings to be expected from abolishing the system for reimbursing storage costs, insofar as the reduction in expenditure will entail a concomitant drop in receipts caused by the removal of the associated levies.

3.2.2. Moreover, the removal of the storage system introduces the risk of these stocks being sold for intervention at the expense of national and Community budgets; it also makes the setting of export and production refund levels more difficult and uncertain, and creates the risk of there being a shortfall in supplies at the end of the marketing year.

3.2.3. The Committee notes that the carry-over of C sugar makes it possible to regulate the supply of sugar onto the market within the Union and for export; this warrants our support.

3.2.4. The arrangements for minimum stocks provide a guarantee of supply, which is particularly valuable in areas where there are shortages.

3.2.5. The Committee therefore calls on the Council to restore the storage arrangements.

3.3. The Committee notes that the Commission's proposal for reducing quotas by 115000 t is pointless, given the annual adjustment arrangements for quotas stipulated in Article 10 for complying with GATT restrictions; it feels that this structural reduction in quotas could have a negative impact in the event of an increase in consumption and that the reduction is viewed badly by the regions who are calling for quota adjustments or measures to offset natural handicaps.

3.4. The Committee would point out that in the chemical industry market, sugar and starch are in competition. Yet the "starch" refunds for the chemical industry are fully funded by the EAGGF without a producers' levy, while the "sugar" refunds for the chemical industry are mostly funded by levies on sugarbeet, sugarcane and sugar producers. The ESC therefore feels it is legitimate for the Community to continue to finance the production refunds granted for 60000 t of sugar used in the chemical industry.

3.5. The Committee stresses that as with any farming activity, sugarbeet farming is subject to the environmental protection rules applying at regional, national and Community level.

3.5.1. The Committee feels that the sustainability of farming must be enhanced.

3.5.2. Sugarbeet is only one crop in the rotation system. It does not constitute any particular risk. The Committee therefore advocates horizontal and global sustainable management of the environment rather than a sectoral approach.

3.6. The Committee notes the Commission's opinion that the future of the CMO should take account of enlargement negotiations.

3.6.1. The Committee notes that the current CMO with its quota and self-financing provisions can but facilitate enlargement by preventing the build-up of production surpluses and inflated budgetary expenditure.

3.6.2. Moreover, the applicant countries are currently restructuring their sugarbeet production and sugar industry to adapt to enlargement and to this end are investing in modernisation of their sugarbeet/sugar sector. In parallel, at the Union's request, they are also taking on the Community acquis, i.e. the current provisions and mechanisms of the sugar regulation. A regulation which is too short-lived, threats hanging over the quota system, and abolition of price stabilisation mechanisms such as funding for storage or for carry-over, can only disrupt the accession negotiations and slow down the adjustment efforts under way in the applicant countries.

3.7. Thanks to the reforms introduced in 1995, the sugar CMO guarantees compliance with the commitments undertaken vis-à-vis the WTO.

3.7.1. On the other hand, the Committee has noted among the European Union's main partners a certain cooling-off of enthusiasm for the commitments they had undertaken. The United States are massively boosting their farming aid and will in the near future be abandoning their "Fair Act". Australia has just granted substantial aid to its sugar sector, while Brazil and Thailand are cancelling the debts of their sugar companies.

3.7.2. The Committee believes that the Berlin agreements must be complied with, as must the WTO negotiation brief flowing from them; it believes that there is no point in jumping ahead and outguessing the results of the current sugar negotiations at the WTO, and feels that the CMO could be adjusted if that were to prove necessary once the negotiations have been completed.

4. Conclusion

4.1. The Committee therefore supports the introduction of a sugar regulation valid until 2006.

4.2. It also advocates maintaining the provisions regarding the system for reimbursing storage costs, including the carry-over.

4.3. It feels that it is unnecessary to reduce quotas and that there is no reason to modify the financial provisions relating to the first 60,000 t of sugar used in the chemical industry.

4.4. Finally, the Committee asks to be involved in the study which the Commission intends to undertake to analyse inter alia the criticisms directed at the sugar CMO, concentration in the agri-food industry and the passing-on of price changes from the producer to the consumer.

Brussels, 30 November 2000.

The President

of the Economic and Social Committee

Göke Frerichs

(1) OJ C 19 of 25.1.1993 and OJ C 161 of 14.6.1993.

APPENDIX

to the Opinion of the Economic and Social Committee

Rejected amendments

The following amendments, which received more than a quarter of the votes cast, were rejected in the course of the debate:

Point 3.1.4

Replace by the following sentence:

"The Committee accepts the two-year period proposed by the Commission so that sugar could be included in the scheduled mid-term review of the Agenda 2000, as decided in Berlin in March 1999."

Reason

Preparation for the accession.

Result of the vote

For: 29, against: 86, abstentions: 3.

Point 4.1

Amend as follows:

"The Committee therefore supports the introduction of a sugar regulation valid until 2002/2003."

Reason

To prepare for accession and to include sugar in the general review of arable crops.

Result of the vote

For: 32, against: 89, abstentions: 2.