Proposal for a COUNCIL REGULATION fixing the premiums and guarantee thresholds for leaf tobacco by variety group and Member State for the 2002, 2003 and 2004 harvests and amending Regulation (EEC) No 2075/92

(presented by the Commission)

EXPLANATORY MEMORANDUM

On 16 May 2001 the Commission adopted the Communication "A Sustainable Europe for a Better World: A European Union Strategy for Sustainable Development" (COM(2001)264 final).

As part of the Community measures to limit public health risks, the document makes the proposal to "reorient support from the Common Agricultural Policy to reward healthy, high-quality products and practices rather than quantity; adapt the tobacco regime at the end of its review in 2002 so as to allow for the phasing out of tobacco subsidies while putting in place measures to develop alternative sources of income and economic activity for tobacco workers and growers and decide on an early date accordingly".

Article 26 of Council Regulation (EC) No 2075/92 of 30 June 1992 on the common organisation of the market in raw tobacco [1] provides for the presentation of a report on the workings of the common market organisation to Parliament and the Council before 1 April 2002. It is possible to present a report by that date only on the basis of the data communicated by the Member States for the 1999 harvest and partly for the 2000 harvest.

[1] OJ L 215, 30.7.1992, p. 70. Regulation as last amended by Regulation (EC) No 1336/2000 (OJ L 154, 27.6.2000, p. 2).

However, as part of the regular evaluation of agricultural measures, the Commission has launched a study to evaluate the common organisation of the raw tobacco market, which should offer a picture of the effects of Community legislation on the raw tobacco sector. The study is expected to produce conclusions by late 2002.

A proposal along the lines of the Commission Communication will be presented in the first quarter of 2003 on this basis.

Within this framework, this proposal for a Council Regulation fixes the premiums and guarantee thresholds for the next three years and amends some provisions of the common organisation of the market in tobacco.

A. Fixing the premiums and thresholds for the 2002, 2003 and 2004 harvests

For the reasons already given, the proposal covers the three-year period needed to complete the evaluation study currently under way, to adopt the new guidelines for reforming the sector and to implement the conversion arrangements.

The group V varieties have few market outlets and extra efforts to support the abandonment of this crop have been undertaken. A consistent approach also has to be followed where the premium is concerned, so that producers are encouraged to change to other varieties with more favourable market outlets or to quit tobacco production altogether through recourse to the quota buy-back programme. It is proposed that the premiums for the other variety groups be set at the level for the 2001 harvest.

However, given the proposal to increase the deduction for the Tobacco Fund (see point B below), all the premiums received by the producers will be affected from 2003 by an additional reduction of 1% in 2003 and 3% in 2004.

In the case of the guarantee thresholds, the aims of the proposal are two-fold:

- to update the production profile based on the transfers applied for within the guarantee threshold in the last three marketing years and which have enabled production to be redirected towards varieties in greater market demand;

- to adapt the quantities selectively in line with both use as recorded in recent years and market demand, especially for group I, II, III and V varieties, the aim being to take account of the production and consumption trends recorded in recent years so that a balance might be struck between the supply of these tobacco varieties and the demand for them.

The reduction in the guarantee thresholds will produce a budget saving of EUR 31.4 million.

B. The amendments to Regulation (EEC) No 2075/92

The amendment of Article 6(5) will allow Member States the option of applying the auction system to a single variety group. This system, which could appreciably increase the commercial prices of some variety groups, has not been used by the producer Member States mainly because it is complicated to apply it to all the variety groups. The proposed amendment will allow the auction to be restricted to a single variety group.

The national reserves were created with a view to favouring a restructuring of production by encouraging regrouping and the formation of more efficient holdings. The national reserves, funded by a 0.5 - 2% levy on quotas, failed to mobilise the minimum critical mass needed to speed up farm restructuring in a sector already in economic and social decline. The levy collection and distribution mechanism instead introduced at national level an administrative and operational complication that had a prejudicial effect on producers. The system should therefore be simplified by doing away with the national reserves.

The Community Tobacco Fund was created to develop agronomic research on less harmful, more environmentally friendly tobacco production and to implement information campaigns on the harmful effects of tobacco products. On the one hand, the experience gained indicates that the Community dimension in agronomic research has not produced sufficient value-added to justify and compensate for the complexities involved in managing these measures at Community level. On the other hand, the Commission Communication "A Sustainable Europe for a Better World: A European Union Strategy for Sustainable Development" proposes the following measures: "reorient support from the Common Agricultural Policy to reward healthy, high-quality products and practices rather than quantity; adapt the tobacco regime at the end of its review in 2002 so as to allow for the phasing out of tobacco subsidies while putting in place measures to develop alternative sources of income and economic activity for tobacco workers and growers and decide on an early date accordingly".

It is therefore proposed that the activities of the Community Tobacco Fund should be amended and agronomic research should be replaced with a measure to support specific initiatives that encourage tobacco growers to switch from tobacco into other crops or economic activities that create employment. Provision should also be made to increase the deduction used to finance the Fund to 3% in 2003 and to 5% with effect from 2004 so that the budget to fund both information measures on the harmful effects of tobacco consumption and initiatives to convert production is increased. This second measure, which is a new priority, can be implemented nationally as part of specific conversion measures and will accompany and develop synergies with the quota buy-back programme.

2001/0276 (CNS)

Proposal for a COUNCIL REGULATION fixing the premiums and guarantee thresholds for leaf tobacco by variety group and Member State for the 2002, 2003 and 2004 harvests and amending Regulation (EEC) No 2075/92

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles 36 and 37 thereof,

Having regard to the proposal from the Commission [2],

[2] OJ C ..., ..., p. ...

Having regard to the opinion of the European Parliament [3],

[3] OJ C ..., ..., p. ...

Having regard to the opinion of the Economic and Social Committee [4],

[4] OJ C ..., ..., p. ...

Whereas:

(1) Article 4 of Regulation (EEC) No 2075/92 of 30 June 1992 on the common organisation of the market in raw tobacco [5] provides for the fixing of the amount of the premium and the supplementary amounts for each tobacco harvest, taking particular account of past and foreseeable possibilities for the disposal of the various types of tobacco, under normal conditions of competition. The premiums should therefore be fixed and linked to the guarantee thresholds fixed for 2002, 2003 and 2004.

[5] OJ L 215, 30.7.1992, p. 70. Regulation as last amended by Regulation (EC) No 1336/2000 (OJ L 154, 27.6.2000, p. 2).

(2) In accordance with the second paragraph of Article 8 and Article 9(2) of Regulation (EEC) No 2075/92, the guarantee thresholds for each variety group and Member States should be fixed for the 2002, 2003 and 2004 harvests, taking particular account of market conditions and socio-economic and agronomic conditions in the production areas concerned. The threshold levels should be set in good time so that the producers can plan their production for the harvests in question.

(3) Article 6(5) of Council Regulation (EEC) No 2075/92 allows the Member States to apply a cultivation contract auction scheme. Under the provisions currently in force, if this scheme is applied it must cover all the groups of tobacco varieties produced in a Member State. The system has not yet been applied because the Member States believe that auctioning is warranted only for certain variety groups. With a view to encouraging auctions as a way of increasing the commercial price of raw tobacco, more flexible provisions should be introduced so that the Member States can restrict this mechanism to certain variety groups only.

(4) The national quota reserves created under Article 9(5) of Regulation (EEC) No 2075/92 have failed to achieve the conversion or farm-restructuring objectives for which they were created. Application at national level, in particular the criteria laid down by the Member States for redistributing the reserves and the small amounts involved in their establishment, has proved inadequate for achieving the desired effect. Furthermore, the administrative arrangements for managing the national reserves have created an excess workload and have excessively complicated the management of the quotas, resulting in serious delays in their distribution. The system should therefore be simplified by removing this mechanism.

(5) The Commission Communication "A Sustainable Europe for a Better World: A European Union Strategy for Sustainable Development" [6] proposes the following measures: "reorient support from the Common Agricultural Policy to reward healthy, high-quality products and practices rather than quantity; adapt the tobacco regime at the end of its review in 2002 so as to allow for the phasing out of tobacco subsidies while putting in place measures to develop alternative sources of income and economic activity for tobacco workers and growers and decide on an early date accordingly".

[6] COM(2001) 264 final

(6) In accordance with this new priority, it is therefore proposed that the activities of the Community Tobacco Fund should be amended and agronomic research should be replaced by a measure to support specific initiatives that encourage tobacco growers to switch from tobacco into other crops or economic activities that create employment. Provision should also be made to increase the deduction used to finance the Fund to 3% in 2003 and to 5% with effect from 2004 so that the budget to fund both information measures on the harmful effects of tobacco consumption and initiatives to convert production is increased. This second measure, which is a new priority, can be implemented nationally as part of specific conversion measures and will accompany and develop synergies with the quota buy-back programme.

(7) Regulation (EEC) No 2075/92 should therefore be amended,

HAS ADOPTED THIS REGULATION:

Article 1

For the 2002, 2003 and 2004 harvests, the premium amounts for each of the groups of raw tobacco and the supplementary amounts referred to in Article 3 of Regulation (EEC) No 2075/92 shall be as shown in Annex I to this Regulation.

Article 2

For the 2002, 2003 and 2004 harvests, the guarantee thresholds referred to in Articles 8 and 9 of Regulation (EEC) No 2075/92 by variety group and by Member State shall be as shown in Annex II to this Regulation.

Article 3

Regulation (EEC) No 2075/92 is amended as follows:

(1) Article 6(5) is replaced by the following:

"5. The Member State may, if its structures makes it appropriate, apply a cultivation contract auction scheme covering all the contracts as referred to in paragraph 1 for a particular variety group that were concluded before the date on which delivery of the tobacco commences."

(2) Article 9(5) is deleted.

(3) Article 13 is replaced by the following:

"Article 13

1. A Community Tobacco Fund shall be set up, financed by a deduction of:

- 2% of the premium for the 2002 harvest,

- 3% of the premium for the 2003 harvest,

- 5% of the premium with effect from the 2004 harvest.

2. The Fund shall finance action in the following areas:

(a) improving public awareness of the harmful effects of all forms of tobacco consumption, in particular through information and education, support for the collection of data to establish tobacco consumption patterns and to conduct epidemiological studies on nicotinism in the Community, and a study on preventing nicotinism;

(b) as part of the programme referred to in Article 14(1), specific measures to help tobacco growers to switch to other crops or other economic activities that create employment and studies of the possibilities for tobacco growers to do so."

Article 4

This Regulation shall enter into force on the day following its publication in the Official Journal of the European Communities.

It shall apply from the 2002 harvest.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

For the Council

The President

ANNEX I PREMIUMS FOR LEAF TOBACCO FROM THE 2002, 2003 AND 2004 HARVESTS

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SUPPLEMENTARY AMOUNTS

Varieties // EUR/kg

Badischer Geudertheimer, Pereg, Korso // 0,5509

Badischer Burley E and its hybrids // 0,8822

Virgin D and its hybrids, Virginia and its hybrids // 0,5039

Paraguay and its hybrids, Dragon vert and its hybrids, Philippin, Petit Grammont (Flobecq), Semois, Appelterre // 0,4112

ANNEX II GUARANTEE THRESHOLDS FOR THE 2002 HARVEST (tonnes)

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GUARANTEE THRESHOLDS FOR THE 2003 AND 2004 HARVESTS (tonnes)

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