Opinion on the proposal for a Council Regulation (EC) adjusting, for the fifth time, the system of aid for cotton introduced by Protocol 4 annexed to the Act of Accession of Greece () (95/C 236/21)

On 17 March 1995 the Council decided to consult the Economic and Social Committee, under Articles 43 and 198 of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for Agriculture and Fisheries, which was responsible for the preparing the Committee's work on the subject, adopted its Opinion on 4 May 1995. The Rapporteur was Mr Zarkinos.

At its 326th Plenary Session (meeting of 31 May 1995), the Economic and Social Committee adopted the following Opinion by 91 votes to 36 with 17 abstentions.

1. General comments

1.1. The Committee welcomes the Commission's proposal to maintain the current system for aid for cotton production, which is a significant part of the agricultural sector in some regions of the EU (Greece and Spain). Any move away from a system of aid based on compensation payments (difference between the guide price and the world price) would be disastrous for cotton production in the EU and for cotton producers' incomes, and would lead to a decline in the quality of cotton.

1.2. The Committee regrets the Council's decision to restrict the referral to the proposal concerning the distribution of the GMQ of cotton between the two producer countries (Greece and Spain).

1.3. The Committee feels that an Opinion on the overall modification of the COM (common organization of the markets) in cotton, the subject of Commission document COM(95) 35 final - 95/0061 (CNS) would have provided the Council with useful ideas and views, particularly concerning the level of expenditure in the sector, guide price levels, the system for small producers, establishment of the world price for the marketing year and of arrangements for aid payments, a reference quality standard, and the strengthening of controls.

2. Specific comments

2.1. Under Protocols 4 and 14 on cotton, annexed to the Acts of Accession of Greece and Spain respectively, a system was established with the aim of:

- supporting the production of cotton in areas where it is an important element in the agricultural economy;

- ensuring a decent income for producers;

- stabilizing the market by improving supply and disposal structures for the product.

2.2. The EU has a significant shortfall in ginned cotton (fibre). According to Eurostat data, the average figures for ginned cotton in the 1991-1993 period were 296,000 tonnes produced, 107,000 tonnes exported, 925,000 tonnes imported and 1,114,000 tonnes consumed. The supply level was therefore 25 % (EUR-12). Following enlargement, EU supply of ginned cotton is less than 20 %.

2.3. The cotton sector is of considerable socio-economic importance in certain EU regions. It provides employment for some 150,000 families in the primary sector and for more than 100,000 individuals in the secondary sector. Cotton's share of final agricultural production in Greece was, in 1992, of the order of 9.4 %. The percentage is up to 4 % in some areas of Spain (Andalusia).

2.4. Cotton is grown on irrigated land, and has in recent years replaced other similar irrigated crops (maize, sugar beet, tobacco, industrially-produced tomatoes) whose production is limited.

2.5. Cotton cultivation methods, using fertilizers and plant health products, do not generate greater environmental problems than other comparable intensive crops. Indeed, cotton offers an environmental benefit, in that it is the main textile fibre of plant origin, and is progressively gaining ground at the expense of synthetic fibres. However, in order to minimize the environmental problems of cotton cultivation, the Section considers that the efforts which have been launched in Greece in favour of biological production should be encouraged and supported, although this is more labour intensive than traditional methods. The EU should give particular financial support to those producers who switch to biological production.

2.6. The considerable shortfall of cotton in the EU, the probable expansion of cotton production in other EU countries, its socio-economic importance in certain EU regions, its non-food nature and the increased demand for cotton on world markets demand a higher GMQ of cotton in the EU. The Section believes that cotton production in the southern EU countries needs to be encouraged, and that this could be achieved with a system which strengthens current production or at least keeps it close to present levels. In the Section's view, the total GMQ for each marketing year should be increased to 1,338,500 tonnes of unginned cotton.

2.7. The Committee considers that the GMQ should be equitably divided between the Member States in the form of guaranteed national quantities (GNQ) based on normal production levels of each country. The Committee accordingly believes that Greece's GNQ should stand at 987,000 tonnes of unginned cotton: the corresponding figure for Spain should be 347,000. A GNQ of 3,000 tonnes could be allotted to Italy, whose production up to 1991 was minimal, and 1,500 tonnes for Portugal.

2.8. The Committee feels that the guide price should be kept at current levels (ECU 122.51/100 kg). Provided that exceeding the GMQ does not lead to uncontrolled growth of expenditure, the Committee is in favour of a corresponding adjustment of the guide price. Thus, if the GMQ is exceeded by up to 10 %, the guide price in the two producer countries is reduced by a percentage equal to half the percentage excess. If the GMQ is exceeded by more than 10 %, an additional reduction is made in the Member State responsible for the excess, equal to half the percentage excess of the GNQ. Under no circumstances should the additional reduction be more than 15 %. No guide price reduction should be imposed for countries whose real production of unginned cotton does not exceed 3,000 tonnes.

2.9. The Committee is of the view that while controls in the sector must certainly be strengthened, in order to prevent past occurrences, Community arrangements must be transparent and straightforward with no room for misinterpretation. The Commission's intention to introduce additional controls on the basis of yield coefficients and to establish a link between the area under cotton cultivation and the amount of unginned cotton delivered to the ginners is appropriate. This link will strengthen the existing controls on the volume of ginned cotton produced by the ginners. Similarly, in the Committee's view, the Member States should also strengthen their controls. It should be made perfectly clear that the Committee thoroughly condemns any irregularities or occurrences of fraud whatsoever, as this is harmful to the Community budget, the product and, lastly, to the income of European producers.

2.10. The Committee urges the Commission to submit a report to the Council by the beginning of the 1998/1999 marketing year at the latest evaluating the operation of the control system in the cotton sector. If the report shows it to be necessary, the Council may - after consulting the European Parliament and ESC - decide to adjust the system.

Done at Brussels, 31 May 1995.

The President

of the Economic and Social Committee

Carlos FERRER

() OJ No C 94, 14. 4. 1995, p. 4.

APPENDIX to the Opinion of the Economic and Social Committee

Amendments rejected (third paragraph of Rule 47 of the Rules of Procedure)

The following amendments were rejected during the discussion:

Paragraph 2.5

Add:

'A proportion of the support should be set aside expressly for measures to promote and implement integrated Pest-Management programmes in cotton production; to provide improved protection of the environment and health and safety of workers. Member States should report on the application of those funds on an annual basis.'

Reasons

There have been problems worldwide with resistance to pesticides used on cotton with more and more chemicals being used as a result. Much useful work has therefore been done on Integrated Pest-Management to reduce the need for pesticides for cotton, from which the EU can benefit. The EU has recognized in its fifth Environmental Action Programme, in its legislation on plant-protection products and in its Lomé aid programme the importance of encouraging Integrated Pest Management, which is also supported in the UNCED declarations. Adoption of IPM for cotton could act as a model for other sectors.

Result of the vote

For: 54, against: 57, abstentions: 12.

Paragraph 2.8

Delete the first sentence of paragraph 2.8 and replace by the following:

'The Commission proposes that the guide price would henceforth be fixed at the rate of ECU 110.73 per 100 kg. On the basis of a GMQ of 947,000 tonnes (as proposed by the Commission) and on the assumption (as made by the Commission) that the average world price is ECU 30.2 per 100 kg, the annual cost would be ECU 765 million. The Committee supports the Commission's proposal to set the guide price at a rate which would maintain total aid to cotton producers at the 1992 level.'

Reasons

The Draft Opinion devotes only one sentence to the important subject of the level of the guide price. It presents no arguments for making a different proposal from that of the Commission.

On the basis of the Commission's assumed world price level of ECU 30.2 per 100 kg (and that assumption is not challenged in the Draft Opinion), the guide price (as proposed in para. 2.8) applied to the GMQ (as proposed in para. 2.6 of the Draft Opinion) would increase the cost to the EU of aid for cotton to ECU 1,225 billion (i.e. 62 % above the Commission's proposal). However, should an average world price of ECU 65.3 per 100 kg be reached (although that is probably an unrealistic assumption), then a guide price level of ECU 122.51 per 100 kg could be applied and the total cost to the EU would remain ECU 756 million.

Result of the vote

For: 50, against: 67, abstentions: 16.

Paragraph 2.8

Delete all of paragraph 2.8 after the first sentence and replace by a new paragraph 2.9 as follows:

'An adjustment to the guide price is proposed to be made to avoid uncontrolled growth of expenditure in the event that production exceeds the GMQ. If the GMQ is exceeded by up to 10 %, the guide price in the producer countries is reduced by a percentage equal to half the percentage excess; if the GMQ is exceeded by more than 10 %, an additional reduction, proportionate to the excess over the GMQ, is made in the Member State responsible for the excess. The Committee considers that countries whose actual production of unginned cotton does not exceed 3,000 tonnes should not be taken into account in this calculation.'

Reasons

The proposal in the Opinion that there should be an upper limit of 15 % on the reduction in guide price triggered by overproduction would remove a necessary control over EU expenditure.

Result of the vote

For: 52, against: 72, abstentions: 7.