EN Official Journal of the European Union C 110/116

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’

(COM(2003) 698 final - 2003/0278 (CNS))

(2004/C 110/20)

On 1 December 2003, the Council decided to consult the European Economic and Social Committee, under Article 37(2) of the Treaty establishing the European Community, on the above-mentioned proposal

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 5 February 2004. The rapporteur was Mr Fernando Moraleda Quilez and the co-rapporteurs Mr Christas Fakas, Mr Adalbert Kienle and Ms Luisa Santiago.

At its 406th plenary session of 25 and 26 February 2004 (meeting of 26 February 2004) the European Economic and Social Committee adopted the following opinion by 58 votes to seven with one abstention.

1. Introduction

1.1 In Luxembourg on 26 June 2003 the European agriculture ministers adopted a fundamental reform of the CAP, leaving it up to the Member States to implement it between 2005 and 2007. The agreement also included a joint declaration by the Council and the Commission on certain products for which the current principles and standards, the long-term budget perspective (2013) and the financial framework would be maintained (status quo).

1.2 In the explanatory memorandum to the proposal the Commission states that since 1992 the common agricultural policy (CAP) has been immersed in a fundamental reform process, aimed at moving away from a policy of price and production support to a more comprehensive policy of farmer income support. The latest step in this process was the adoption of Regulation (EC) No. 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers.

1.3 The de-coupling of direct producer support and the introduction of the single payment scheme are essential elements in the process of reforming the common agricultural policy. As the next step in the reform process, the Commission proposes to integrate the current support schemes for cotton, olive oil and table olives, tobacco and hops into the regulation.

2. General comments

2.1 The EESC would point out that the purpose of the common agricultural policy is to realise the objectives set out in the Treaty establishing the European Community, in particular to stabilise markets, to increase productivity, to ensure a fair standard of living for farmers and to increase their earnings. The achievement of these objectives would be seriously called into question if the proposals put forward by the Commission for the sectors in question were to be implemented, as the proposed reform neither guarantees production of these crops, takes account of the situation of producers in less favoured areas, increases competitiveness nor even respects the environment.

2.2 In the course of the preparatory work for the June reform the impact of the application of a given model on farms and geographical areas was in some cases evaluated. Thus, the European Parliament, during its hearing on the Evolution of farm incomes in the European Union, held last September, recommended that, for future reforms, greater attention be paid to the analysis and evaluation of their consequences. The EESC would point out that this has not been done and recommends that this mistake should not be made again in the future.

2.3 In the EESC's view, the de-coupling of aid in the forms proposed in the sectors in question would give rise to a series of problems and difficulties, including the following: the proposed historically based support per producer takes a previous period as its point of reference, without eliminating existing geographical and social imbalances, indeed probably exacerbating them; it would be particularly detrimental to young farmers starting out in agriculture; it would also have damaging effects on tenant farms and would jeopardise the continuation of production in certain areas and regions.

2.4 The forms of agricultural production in question are supported by a broad social fabric, in terms of both production and processing. In this sense these are extremely ‘social’ crops by virtue of the jobs they generate, and particularly in the light of their labour-intensity and the dominant role they play in certain areas and regions of the European Union. The EESC considers that the social repercussions and the loss of jobs which would result from the proposed reforms would be particularly severe in areas which already suffer from high levels of unemployment.

2.5 Most of the sectors affected by the Commission proposal are located in Mediterranean regions which qualify as less developed regions, less favoured regions suffering from depopulation or upland areas. The EESC therefore considers that the Commission should take account of the Conclusions of the European Council of 24 and 25 October 2002, which stressed the need to protect the interests of producers in the less favoured regions of the current EU of 15.

2.6 The Commission claims to be reinforcing the second pillar of the CAP, rural development, by diverting funds from the sectors in question to the measures set out in Regulation (EC) No. 1257/1999 on regional development. However, the EESC considers that the real driver of rural development in the regions and areas concerned is the maintenance of socio-economic activity on the basis of existing production. It therefore considers that, as a matter of priority, the reforms in question should guarantee and promote multifunctionality in the broadest sense of the term, taking on board the Conclusions of the European Councils of Luxembourg (1997) and Berlin (1999).

2.7 The new criteria recently adopted for direct support, as regards both environmental conditions and the requirement for good agricultural practice compatible with the conservation of natural resources, guarantee the sustainable management of land used for the crops in question.

2.8 Moreover, taking account of the decision of the European Council of Gothenburg to add an environmental dimension to the Lisbon Strategy (strategy for economic and social reform), the EESC considers that the EU's sustainable development strategy should maintain the balance between economic growth, prosperity, social justice and protection of the environment, aspects which should be taken into account in the Commission's proposal in order to maintain the social and economic fabric and conserve natural resources in the regions producing the crops in question.

2.9 The EESC considers that a probable reduction in the land area devoted to the crops in question will have grave consequences for the other crops which can be grown on the land in question, as most of these are subject to quotas, which in turn will produce further distortions of competition and economic, social and environmental repercussions.

2.10 The EESC considers that a series of specific analyses should be carried out by sector and region on the possible effects of various degrees of de-coupling of aid (market, territorial, employment, environmental effects, etc.) before any decisions are taken on changing the existing mechanisms. In particular, the EESC considers that it is vitally important to evaluate the territorial impact of the proposed measures. In the EESC's views, the total de-coupling of aid threatens to cut production of the crops in question in areas which are already disadvantaged, thus giving rise to undesirable environmental effects, including acceleration of desertification and erosion in certain vulnerable agricultural areas.

2.11 When making use of historical statistics on land areas and output, the Commission should not lose sight of the true situation in the various sectors, and it needs to take account of a range of data to gain an accurate statistical picture of production in recent years.

2.12 Bearing in mind the provisions of Council Regulation (EC) No. 1782/2003 establishing common rules for direct support schemes under the common agricultural policy, leaving it to the Member States to determine the date, between 2005 and 2007, when the new system of aid will enter into force, the EESC considers that this option should also be offered to the other sectors to which similar measures apply.

2.13 The EESC points out that, in the light of the failure of the Cancun Ministerial Conference, the Commission is not expected to maintain the same principles with which it began the negotiations without drawing the appropriate conclusions as to the suitability of the strategy pursued by the European Union.

2.14 Finally, the EESC considers that the same approach should be adopted to the June decisions, as to the sectors currently affected by the reforms, so that the Member States will have suitable latitude for implementation of the decisions.

COTTON

3. Gist of the proposal

3.1 As we already know, the Commission proposes transferring the part of EAGGF expenditure for cotton, which was used for producer support during the reference period (2000–2002), into funding two income support measures for producers, namely the single farm payment scheme and a new production aid granted as an area payment. The total available amount for both measures is EUR 695.8 million divided as follows: EUR 504.4 million for Greece, EUR 190.8 million for Spain and EUR 0.565 million for Portugal.

3.2 It is recommended that 60 % of producer support expenditure per Member State should be transferred to the single farm payment scheme in the form of new entitlements which will be granted to the beneficiary whether they cultivate cotton or not. The total amount to be transferred to the single payment is EUR 417.3 million (EUR 302.4 million for Greece, EUR 114.5 million for Spain and EUR 0.365 million for Portugal).

3.3 The Commission proposes that the Member States should keep the remaining 40 % of production support expenditure (EUR 202 million for Greece, EUR 76.3 million for Spain and EUR 0.2 million for Portugal, i.e. a total of EUR 278.5 million) as national budget envelopes, to be used to grant producers the new area payment (per hectare of cotton) in areas that are suitable for growing cotton, so that cotton cultivation is not abandoned. The new area payment applies to a maximum area of 425,350 ha, corresponding to 340,000 ha in Greece (an 11 % reduction in eligible areas compared to the reference period), 85,000 ha in Spain (a 5 % reduction in eligible areas compared to the reference period) and 360 ha in Portugal.

3.4 Finally, the Commission proposes transferring a sum of EUR 102.9 million (EUR 82.68 for Greece, EUR 20.13 million for Spain and EUR 0.12 million for Portugal) to the second pillar, to be put towards sectoral restructuring measures in the context of rural development.

4. Introduction

4.1 The cotton sector is based not on a Common Market Organisation but on Protocols 4 and 14 which are attached to the Acts of Accession of Greece and Spain respectively, on the basis of which a system has been set up to: — support cotton production in regions where it is important for the agricultural economy; — guarantee a fair income for producers; and — stabilise the market by improving structures for producing and selling cotton.

4.2 With the decision reached in Luxembourg on 26 June 2003 regarding reform of the CAP, European agriculture set out on a path towards decoupling payments from production. The decision also included a Joint Statement by the Council and the Commission (point 2.5) (1) on the Commission's subsequent second wave of proposals for Mediterranean products (tobacco, cotton, olive oil), concerning: — same rules and regulations; — same long-term time frame (2013); — within the existing budgetary framework (status quo).

4.3 The EESC considers full respect for the decision to be imperative, and therefore calls on the Commission to be sufficiently flexible when the decision is discussed at the Council and to correct the major inconsistencies in its proposal as regards both how the reform is implemented and the implementation timeframe. The EESC is calling for nothing more and nothing less for cotton than that which was decided upon unanimously by agriculture ministers on 26 June 2003 for other CAP sectors.

5. General comments

5.1 The cotton sector has substantial economic and social importance for certain regions of the EU. Approximately 300,000 people are employed in the primary sector, and more than 100,000 people in the secondary sector. In 2002, cotton accounted for 9 % of total agricultural production in Greece and 1.5 % in Spain (4 % in Andalusia).

5.2 There are 71,600 farms in Greece and 10,000 in Spain, though the average size of farms in Greece is much smaller: 4.9 ha compared to 9 ha in Spain.

5.3 The EESC does not share the Commission's view and does not agree that there will not be a reduction in cultivated areas. There has been a continuous reduction in cotton-growing areas in recent years in Greece, from 440,000 ha in 1995 to 380,000 ha today. A similar reduction has occurred in Spain, where cotton-growing areas have shrunk from 135,000 ha some years ago to 90,000 ha today. In the EESC's view, the proposal to reduce eligible areas by differing percentages (11 % in Greece and 5 % in Spain) is therefore completely unjustified.

5.4 As a producer, the EU plays a minor role on the international stage, accounting for only about 1.5 % of cotton-growing areas and about 2.5 % of total world cotton production. The main cotton-producing countries are China (22.6 %), the US (20.1 %), India (13.1 %) and Pakistan (9 %).

5.5 With 708,000 tonnes of imports and 227,000 tonnes of exported ginned cotton, the EU is the world's major net importer. It must also be pointed out that two thirds of imports come from developing countries and are duty-free. It should also be pointed out that European cotton is exported without export subsidies. The EESC does not share the Commission's views and cannot understand how international trade is distorted when cotton is imported into the EU duty-free in such large quantities and is exported in very small quantities without export subsidies.

5.6 The EESC points out that during the Cancun Ministerial Conference the European system of aid to the cotton sector came under unfair attack, doubtless as a result of the EU's strategy of aligning itself with the USA. In the EESC's view, therefore, it is completely unjustified for the EU to react so strongly to the initiative of four African countries (Burkina Faso, Benin, Mali and Chad) to abolish cotton subsidies, which was launched during the WTO negotiations in Cancun. No serious trading partner can argue that with 2.5 % of global production the EU is capable of affecting world prices.

5.7 Cotton is the main natural fibre for weaving and must consistently be given priority over synthetic fibres. Cotton produced in the EU is of a high quality, though there is room for improvement; if European textile manufacturers are to compete in the world market they require top-quality cotton. The EESC therefore backs all of the Commission's proposals in this area, as they aim to improve quality.

5.8 On 22 May 2001 the Council adopted Regulation 1051/01 revising the regime of production aid for cotton. The new regime has been working satisfactorily both from the point of view of farm profitability and from the point of view of limiting the area under cultivation and reducing the environmental impact. The EESC can see no reason why, two years later, the Commission should propose a completely different system without at least looking at the results of implementing the 2001 revision. The EESC would also point out that the Commission proposal is not accompanied by an impact study as was the case for the sectors reviewed in June 2003 and the tobacco sector.

6. Specific comments

6.1 The Commission proposes transferring EUR 102.9 million from the first pillar to the second pillar. In practice, this will place a double burden on cotton producers as they already contribute to rural development through the horizontal regulation and tapering payments (reduction of 3 % in 2005, 4 % in 2006 and 5 % from 2007 onwards, when direct aid exceeds EUR 5,000 per year). These arrangements apply only to the tobacco and cotton sectors. The EESC believes that this contradicts the Luxembourg decision and calls on the Commission to re-consider its position.

6.2 The EESC considers that, as well as horizontal compulsory measures provided for to protect the environment, the Member States can implement complementary environmental programmes to promote efforts to monitor production and environmental protection. When determining area payments, account must be taken of the social and economic characteristics of these products in addition to other criteria.

6.3 The EESC finds it unacceptable to have a special review clause applying only to Mediterranean products. It therefore calls for Article 155a, which refers to legislative proposals to be submitted by 31 December 2009, to be scratched, and instead proposes that Mediterranean products come under the provisions of Article 64(3) of the Horizontal Regulation (R 1782/2003), which refers to the submission of evaluation reports.

7. Conclusions

7.1 Community cotton cannot be competitive on international markets because production costs are much higher than those of other competitor countries. It should be noted that other developed producer countries (particularly the USA) subsidise their own cotton to a many times greater degree than the EU, and developing countries have very low production costs because of social dumping.

7.2 The EESC feels that, in a sector such as this, with such large fluctuations in world price trends and such a vast difference between prices within and outside the Community, the principles of complete trade deregulation and of decoupling aid from production are not to be recommended.

7.3 If, despite the EESC's assessment, the Commission insists on placing the cotton sector on the course of deregulation, the EESC calls for the Luxembourg compromise of 26 June 2003 to be implemented entirely as agreed, with regard to both the method of implementation and the timeframe for implementation.

7.4 In the EESC's view, the events that took place during WTO negotiations in Cancun concerning cotton should not be allowed to shape the context for cotton negotiations in the Council of Ministers. With only 1.5 % of the world's cotton-growing areas and 2.5 % of world production, the EU plays a very minor role on the world stage and does not influence world prices. The EESC believes that by adopting this kind of approach we are not helping developing countries, but simply casting doubt on and undermining the European Agricultural Model. The EESC therefore feels that, in WTO negotiations, cotton cannot be negotiated as an independent sector and should be included in the general negotiations on agriculture.

OLIVE OIL

8. Introduction

8.1 The first common market organisation for olive oil, which was set up in 1966 under Regulation 136/66/EEC, lasted for 31 years and had a very positive impact on the modernisation of olive groves and the processing and marketing sectors.

8.2 In 1998, the intervention system was replaced by a private storage mechanism, consumption aids were abolished and export refunds were set at zero.

8.3 Production support, which is granted to all producers on the basis of the quantity of olive oil produced and the table olive equivalent, is EUR 1322.50 per tonne. This sum is corrected whenever the Member States exceed their respective national guaranteed quantities (NGQs).

8.4 The olive oil sector was not part of the reform package approved at the Luxembourg Council. However, the same Council asked the Commission to present a proposal on reforming the CMO in olive oil based on the principles of the new CAP before the end of 2003.

9. The Commission proposal

9.1 The Commission proposes that: — support for the sector should not be linked to the amount of olive oil and table olives actually produced by each olive grower; — support should not be granted on the condition that growers must harvest table olives or produce olive oil or table olives; — the payment of support is dependent only on observing the standards of good farming practice.

9.2 However, the Commission is concerned that a total decoupling of aid will lead to the abandonment of certain traditional olive-growing areas, the degradation of soil cover and landscape, and negative social impacts. It has therefore established two types of aid: — direct decoupled aid to growers, to the value of 60 % of the average of payments made over the three-year period 2000-2002; — per-hectare aid linked to the maintenance of olive groves with a recognised environmental and social value, to the value of 40 %, which will be expressed in olive GIS-ha, leaving it up to each Member State to organise the aid in up to five categories based on environmental and social criteria, including aspects related to the landscape and tradition.

9.3 The Commission is concerned that the new aid system could alter the fragile balance on the olive oil market and is therefore limiting access to the single payment scheme to olive-growing areas that existed prior to 1 May 1998 and to new plantings provided for under the programmes approved by the Commission.

9.4 The new proposed legislation will enter into force with the expiry of Regulation 136/66/EEC and after an interim marketing year of eight months in 2004 (1.11.2004-30.6.2005).

9.5 Current measures for the private storage of olive oil must be maintained and measures aimed at enhancing quality reinforced.

10. General comments

10.1 The EESC welcomes the Commission's assessment that ‘the olive sector is a key element of the EU model of agriculture’ and its reference to the fact that, although export refunds have been set at zero since 1998, European Union olive oil exports have doubled in the last ten years.

10.2 The sector's efforts in terms of quality, market organisation, publicising the product and conquering new markets, as well as the recognition of olive oil's illness-prevention properties, in particular regarding cardiovascular diseases, are key factors for the gradual increase in world olive oil consumption.

10.3 The EESC points out that the role of olive groves in creating jobs, combating desertification and protecting biodiversity has also already been highlighted in previous Committee opinions, one of which states that ‘as the southernmost productive wooded areas in the EU, olive groves play a key social and environmental role in areas where they could not, or could not easily, be replaced with other crops, and help rural populations to continue living in the countryside’ (2).

10.4 Moreover, with regards to the current CAP reform, the EESC – both in its own-initiative opinion on the future of the CAP (3) and in its opinions on the mid-term review of the CAP (4) and the 2003 CAP review (5) - repeatedly warned the Commission that a total decoupling of aid could lead to production abandonment in certain regions and for certain crops, with serious consequences for employment and the social fabric in surrounding rural areas.

10.5 This clear and real risk is contrary to the primary objective of any CMO reform, i.e. to maintain production and the economic and social fabric which it supports, particularly when olive production is based in some of the least-favoured regions of the EU and is in relative terms the most labour-dependent crop (in some regions, it provides 90 % of jobs in the agricultural sector).

10.6 The EESC was very pleased that the Commission listened to this concern and proposed a partial decoupling of aid for some of the sectors included in the proposal approved by the Luxembourg Council, with the uncoupled percentage of aid being decided by each Member State.

10.7 The Committee is surprised to note that this criterion has not been adopted in the present draft Regulation.

10.8 There is no doubt that granting an additional 40 % of totally non production-linked aid to olive groves will inevitably lead to the technical abandonment of the crop, especially in areas with the lowest production levels and/or very high production costs.

10.9 In fact, these areas are characterised by a series of different factors which lead to significantly higher production costs, potentially making them candidates for economic abandonment.

10.10 At the same time, such moves would lead to the closure of associated processing plants, owing to the lack of raw material, and the forced abandonment of farms that still demonstrated a degree of productive competitiveness.

10.11 The EESC calls on the Commission to fulfil the objectives laid down in the reform of Regulation 136/66, by means of Regulation 1638/98, which ushered in a transition period, the purpose of which was to give the Commission time to gather accurate data on the realities of EU olive production, thereby enabling it to design a new system based on solid arguments founded on actual conditions in the sector and recent statistical data.

11. Specific comments

11.1 The EESC would draw attention to the fact that Article 155a of Title IVa – Financial transfers provides for the Commission to submit a report to the Council by 31 December 2009 on the implementation of this Regulation, accompanied, where appropriate, by legislative proposals.

11.2 The EESC considers it unacceptable to have a specific revision clause applicable only to Mediterranean products and calls for this to be removed. Instead, the Committee proposes that this sector be included within the purview of Article 64(3) of the horizontal regulation (No. 1782/2003), which provides for an evaluation report to be submitted.

11.3 With regard to the 40 % of aid earmarked for environmental and social protection, we fail to understand why, in a production sector that is so sensitive and only relevant for Mediterranean countries, Member States are not allowed to use a system similar to the one provided for in Chapter V, Section 2, Articles 66, 67 and 68 (arable crops, sheep and goats, beef and veal) of Regulation 1782/2003 of 29 September 2003, whereby each Member State may decide on the percentage of coupled aid it wishes to allow.

11.4 The fact is that, especially in areas of low productivity, the total decoupling of production may entail a real risk of production abandonment with serious implications for local employment and surrounding industry, as well as the continued population of the region. The Committee also feels that the subsidiarity principle should apply as regards additional support so that such support is allocated according to criteria laid down by each Member State, both in terms of amount and the system used. At all events this support should guarantee: — the continuation of olive production and its associated industry, ensuring that the necessary checks are carried out to underpin the transparency of the market and the quality and traceability of the product, — the maintenance of low-yield olive groves, which play a vital socio-economic and environmental role.

11.5 For this reason, the EESC insists that, as in Regulation 1728/2003 of 29 September 2003, the Member States be given the possibility of deciding the percentage of aid coupled to production and the marketing year in which the single payment is to be applied.

11.6 The EESC feels that the Council's provisions, especially those concerning the eligibility of areas of new planting authorised by the Council in 1998 and the relevant budget funding for this, should be taken up.

11.7 The EESC feels that funds linked to measures in the current CMO which are to be abolished, such as export refunds, support for preserving olives and the financing of control agencies, should continue to be earmarked for the olive sector in each Member State.

TOBACCO

12. Summary of the European Commission's proposals

12.1 The Proposal for a Regulation recommends the complete decoupling of support in line with the scheme laid down in the Commission's Communication of September 2003 (6). A gradual decoupling in three steps is envisaged in the tobacco sector.

12.2 It also recommends establishing a restructuring envelope for the tobacco sector. This envelope will include a percentage of the current premium, which will now go towards rural development measures with the primary aim of restructuring tobacco-producing regions.

12.3 The proposed Regulation also recommends a review of the proposed reform in 2009.

13. Introduction

13.1 The EESC would like to point out the following: — Tobacco is an annual crop with very important social repercussions throughout Europe. The Commission itself has carried out studies acknowledging the social and cultural importance of this crop, which has led to an important network of services in producing regions. In Europe, 453,887 (7) jobs are directly linked to tobacco production and 80 % of European tobacco is grown in Objective 1 regions. — Even the Commission acknowledges the importance of labour for tobacco cultivation (8), having pointed out that it is one of the most labour-intensive crops in the Community. On average, a European farmer must invest 2,200 hours of labour a year to grow one hectare of tobacco, compared to just 147 hours for general crops. Moreover, for most varieties, labour represents between 50 % and 70 % of production costs.

13.2 The EESC also wishes to highlight the capacity of this sector to create jobs for women during the primary processing phase. Given that 80 % of tobacco production is found in less-favoured regions, maintaining these jobs ensures that areas under tobacco are more dynamic than areas under other crops.

14. Comments

14.1 The EESC has issued a number of opinions on the subject in recent years. Its most recent opinion (CES 190/2002) (9) stressed the need for a study on the sector in which the Commission would assess its decisions, since the tobacco sector is of major regional importance for less favoured areas and a source of employment. The CAP has now been reformed, with aid being decoupled from production and we expect to see studies making a complete separation between tobacco growing and smoking.

14.2 The Commission's proposals for tobacco follow on from the Communication on sustainable development presented to the Gothenburg European Council in June 2001 (10). The EESC points out that, following legal consultations by one of the producer Member States, no decision was reached on the future of tobacco during this Summit. The Council's legal service expressed the view that, with its fifth recital, the Commission was attempting to get the Council to accept a measure (the elimination of tobacco aid) which it had proposed in its Communication to the European Council, but which the latter had rejected. (11)

14.3 In the EESC's view, CAP reform - as agreed in Luxembourg on 26 June 2003 – is one of the reasons behind the Commission's efforts to reform the current CMO for tobacco. The main objectives of this reform, as laid down in the explanatory memorandum to the September 2003 Communication, have only partially been met.

14.4 Moreover, with regard to tobacco and health, both the evaluation report and the impact assessment acknowledge that the CMO has no impact whatsoever on smoking statistics. There is currently no link between production and consumption, the latter depending more on fashion than on cultivation. Moreover, only 20 % of tobacco consumed in Europe is actually produced in the EU, and this is linked to the fact that there is a support scheme for raw tobacco production.

14.5 The Framework Convention on Tobacco Control, unanimously approved on 21 May 2003 by the 192 members of the WHO, specifically avoided expressing a view on tobacco subsidies and left out any reference to these in the final wording of its Article 17.

14.6 The EESC nonetheless acknowledges that public opinion associates production with consumption. In the light of the urgent need to step up anti-smoking campaigns, particularly those aimed at young people and those at high risk of dependency, the EESC would not wish to remain silent on the issue.

14.7 The EESC notes the low level of take-up of Community Tobacco Fund resources. In line with its views on the subject, it urges that the significant tax revenues arising be used to finance more ambitious anti-smoking programmes.

14.8 The EESC acknowledges that if Community tobacco production were to disappear, so could the tobacco with the lowest level of phytosanitary waste in the world and the most sustainable form of production (from the environmental point of view).

14.9 Without special external protection or special production quality it will be difficult to compete with third-country producers owing to the fact that these countries largely practise social dumping, i.e. they exploit female and child labour. One WHO study (12) reveals that in India today 325,000 children, 50 % of whom are under seven years old, work in the sector; in Brazil, the number of children working in the sector rises to 520,000, 32 % of whom are under 14 years old. There is also evidence to suggest that a similar situation exists in other countries such as China, Indonesia, Zimbabwe, Argentina, etc. all of which are key tobacco producing countries.

14.10 In the EESC's view, the survival of the processing sector in Europe is directly linked to the continuation of primary tobacco production in the EU. Given the extremely high cost of transporting raw tobacco, a primary processor cannot live on processing imported tobacco. If tobacco production disappears, the EU will start to import processed tobacco, with the obvious consequences for the industry and employment in it.

14.11 Moreover, there is no economically viable agricultural alternative to tobacco that at the moment could by itself create the same number of jobs and therefore keep people in rural areas as tobacco currently does. At the moment there are no alternatives to tobacco growing, as other crops are subject to production quotas (with penalties in the event that they are exceeded). Moreover, reform is being proposed before an in-depth assessment of the sector has been carried out. This is a clear indication that the EU is keen to cut the agricultural budget. The Member States, however, will continue to levy a tax on tobacco even if it is imported from third countries.

14.12 In the EESC's view, while this proposal is in line with sustainable development and health policies, it hides a large dose of confusion as tobacco consumption (which is a major source of tax revenue for the Member States – to the tune of EUR 63,000 million) cannot and must not be tackled in the short term by plunging European producers into crisis, most of whom live in less-favoured rural areas and receive only EUR 955 million of the Community budget.

14.13 Before any decision on total decoupling is adopted, the Commission should propose measures to cushion the impact of this on the sector. The EESC regrets that there is at present no plan for switching production.

14.14 In this connection, the EESC would like to highlight the environmental benefits of European tobacco cultivation methods. Even the Commission recognises the risk of tobacco production being abandoned in mountainous areas, which account for 30 % of tobacco growing regions. Likewise, according to information provided by experts in the sector (13), European tobacco is four times less polluting than other crops.

14.15 According to the impact assessment (14), 81 % of world tobacco production is based in developing countries, which in turn consume 71 % of cigarettes. It also points out that the CMO in tobacco has no impact on world prices, intervention mechanisms and export refunds disappeared a decade ago and border protection levels are very low.

14.16 The EESC believes that the CMO in tobacco makes a very important contribution to sustainable development in tobacco producing regions, combining economic development with respect for the environment and dignified working conditions. The large majority of these regions are less-favoured areas and Objective 1 regions.

14.17 The EESC would like to highlight European society's growing concern for product quality, which includes production methods and working conditions.

15. Conclusions

15.1 The EESC believes that the Commission's proposal is inconsistent and will have serious repercussions on tobacco growing regions and tobacco producers' incomes.

15.2 In the EESC's view, in the light of studies in the tobacco sector, the Commission proposal presents no solutions for the potential effects of total decoupling on the sector. The EESC therefore considers that the Commission should present all the possible alternatives in order to safeguard the future of farmers in the regions affected.

15.3 The EESC considers that our understanding of the lack of causal connection between tobacco growing in Europe and tobacco smoking has progressed. However, it acknowledges the fact that public opinion still tends to make this link.

15.4 The EESC recommends to the Commission that, in the reform of the tobacco CMO, a system of decoupling be considered which takes account of the social importance of the crop and allows Member States a high degree of flexibility in assessing different production situations.

15.5 The EESC considers that it would be beneficial for reform of the tobacco CMO for the structure of the sector to remain as it is at present, managed by groups of producers which have in the past enabled the sector to function.

15.6 The EESC welcomes the provision for mobility of growers in order to boost the future viability and competitiveness of farms. It hopes that the quota buy-back option will be retained.

15.7 The EESC calls for the subheading 1a) budget to be retained in full, leaving the Member States the option of using a proportion of it for rural development.

15.8 Due to the special environmental and social importance of tobacco cultivation in the regions, a definition should be provided specifying the requirements for maintaining the soil in a good agricultural and environmental condition. Minimum criteria should likewise be introduced for securing employment and enabling this aid to be taken up.

HOPS

16. Introduction

16.1 Hops are an essential raw material in beer production. The hop plant (humulus lupulus) is a perennial climbing shrub which is grown on cost-intensive trellis structures. Hops give beer its aroma, bitterness and long shelf life.

16.2 On 30 September 2003 the European Commission submitted a report on the evolution of the hop sector (COM(2003) 571 final).

16.2.1 This comprehensive report provides a good overview of the entire hop sector and the market organisation rules in force.

16.3 The Commission report gives a positive assessment of the market organisation in hops.

16.3.1 The common market organisation in hops has successfully dealt with the major market adjustments of recent years. EU hop producers have been able to consolidate their position as world market leaders. Special measures have been used successfully to match supply and demand more effectively. In the eight EU Member States which produce hops, the market is structured around specialized family farms with an average of 7.8 hectares which face a considerable degree of concentration among breweries on the demand side.

16.3.2 The existing CMO in hops also provides the basis for implementing universal hop certification, including a full certificate of origin for every batch and a comprehensive system of quality control and contracts.

16.4 The implementation of this system is the responsibility of producer groups, which are described by the Commission itself as the ‘heart and soul’ of the CMO in hops. The producer groups do indeed have a key role to play in a comprehensive system of quality control and contracts which includes universal hop certification and a full certificate of origin for every batch. The same goes for the initiation and implementation of projects concerned with quality, growing, research, pest control, marketing and production technology.

16.5 Expenditure on the hop sector has remained stable for years at around EUR 13 million.

17. Gist of the Commission proposal

17.1 Until now, permanent crops such as hops and olive trees were not covered by Regulation 1782/2003. The proposed amendment of Regulation 1782/2003 is intended to integrate the direct payments for hops under the specific CMO in hops 1696/71 into the general regulation on direct payments.

17.2 The Commission proposes fully integrating support payments for hops into the single payment scheme. Support is to be pitched at EUR 480 per hectare across the board.

17.3 However, the Commission proposes that Member States should have the option of coupling up to 25 % of the component of the national ceiling to hop production.

18. Comments

18.1 The EESC feels it is consistent and makes sense, in the wake of the ‘Luxembourg decisions’ on CAP reform of 26 June 2003, for the Commission henceforth to integrate direct payments for hops into the general regulation on direct payments and to wish to maintain the current level of support. In any event, efforts should be made to ensure that hop production in the EU, including the new Member States, should continue to be at the forefront of world hop production.

18.2 The EESC accepts the conclusions of the Luxembourg Council and the arguments put forward by the Commission to facilitate the introduction of a partial decoupling in those sectors at particular risk of abandonment of production or imbalance. The Committee would therefore be in favour of coupling a certain proportion of the direct payments to hop production in all hop-producing Member States.

18.2.1 In the EESC's view, the percentage of coupled aid in the hops sector should be increased from 25 %, as initially proposed by the Commission, to 40 %, in order to ensure that the essential work of producer groups is appropriately taken into account. Areas formerly used for hop-growing which are cleared under the special programme should be included in the calculation of the reference amount.

18.2.2 As regards the Member States being able to choose between the farm payment model (Articles 51-57) and the regional model (Article 58 ff.), the EESC points out that if a Member State opts for the regional model, current support for hops would be considerably ‘watered down’ and redistributed for other types of land use.

Brussels, 26 February 2004. The President of the European Economic and Social Committee Roger BRIESCH

(1) CAP Reform – Presidency Compromise (in agreement with the Commission). Document No.: 10961/03

(2) OJ C 221, 7.8.2001

(3) OJ C 125, 27.5.2002

(4) OJ C 85, 8.4.2003

(5) OJ C 208, 3.9.2003

(6) COM(2003) 554 final

(7) UNITAB White Paper on Tobacco Growing in Europe.

(8) COM(96) 554 - Report from the Commission to the Council on the common organisation of the market in raw tobacco.

(9) OJ C 94, 18.4.2002, pp. 14-17

(10) COM(2001) 264 final

(11) Report of the Council's legal service (2002) on the Commission Communication on sustainable development and the Conclusions of the Göteborg European Council as against the fifth and sixth recitals of the draft Tobacco Regulation.

(12) WHO-ILO

(13) Tobacco regime. Extended impact assessment SEC(2003) 1023

(14) See footnote 12.