[pic] | EUROPEAN COMMISSION |

Brussels, 25.11.2010

COM(2010) 692 final

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

on the application of Council Regulation (EC) No 3/2008 on information provision and promotion measures for agricultural products on the internal market and in third countries

{SEC(2010) 1434 final}

TABLE OF CONTENTS

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of Council Regulation (EC) No 3/2008 on information provision and promotion measures for agricultural products on the internal market and in third countries 1

I. Introduction 3

II. Implementation of the promotion policy 2006–2010 3

II.A Co-financed promotion programmes 3

II.A.1 Changes introduced since the 2006 Report 3

II.A.2 Budgetary aspects: resources and spending of the available funds 4

II.A.3 Analysis of promotion programmes 5

II.B Promotion activities managed directly by DG AGRI 8

II.B.1 High level missions 8

II.B.2 Promotion campaign for organic food and farming 9

II.B.3 Other expenditure under direct management 9

III. Evaluation 9

III.A DG Agriculture and Rural Development’s internal audit and the Court of Auditors’ reports 9

III.B Positive and negative aspects of the promotion scheme as reported by the Court of Auditors 9

III.C Evaluation at the level of countries/areas or product sectors 9

III.D Evaluation at the level of co-financed programmes 9

III.D.1 Assessment elements introduced after 2006 9

III.D.2 First impact assessment of the programmes 9

III.E. Evaluation of the activities under the Commission’s direct management 9

III.E.1 High level missions: an evaluation of their impacts 9

III.E.2 Assessment of the organic farming promotional campaign 2006-2009 9

IV. General conclusions 9

I. INTRODUCTION

The promotion scheme, established in the early 2000s, has since its inception been regularly monitored by means of reports presented by the Commission to the Council and the European Parliament. Two reports have already been presented, in 2004 and 2006. Article 18 of Council Regulation (EC) No 3/2008 requires the Commission to submit a third report by the end of 2010[1].

This report covers the operation of the promotion scheme between 2006[2] and the first half of 2010. It deals mainly with improvements in management and impact assessment as well as with simplification aspects (the two distinct regulations targeting, respectively, third countries and internal markets were merged into one). It focuses on all Commission Decisions adopted since the last report and analyses the data available with regard to the promotion of agricultural products.

II. Implementation of the promotion policy 2006–2010

The EU promotion scheme is a horizontal policy covering almost all agricultural sectors and emphasising the general characteristics and added value of the CAP: quality, safety, health, labelling, specific production methods, respect for the environment, animal welfare, etc. It complements national initiatives supporting or stimulating private and public promotion efforts made at Member State level.

II.A Co-financed promotion programmes

II.A.1 Changes introduced since the 2006 Report

The promotion scheme was improved in the light of the last report’s recommendations: the requested regulatory consolidation was effected by merging the two existing Council regulations into one (Regulation (EC) No 3/2008, of the Council) and the two Commission regulations into another one (Regulation (EC) No 501/2008, of the Commission)[3]. The arrangements whereby Member States declare expenses have also been improved, allowing regular monitoring of the execution of the budget. The recommendation concerning the implementing body has been maintained and, last but not least, clear and robust guidelines for preparing promotion programmes have been drawn up and adopted. Many other improvements were initiated by the Commission departments during the reporting period, in line with the Court of Auditors’ recommendations, as shown in point III.B below. All these adaptations are reported in Annex 1 to the Commission Staff Working Document accompanying this report.

II.A.2 Budgetary aspects: resources and spending of the available funds

Table 1: Budget appropriations for promotion of agricultural products

in € |

Budget line | 2006 | 2007 | 2008 | 2009 | 2010 |

Promotion actions: |

05 02 10 01 Shared management | 42 000 000 | 38 000 000 | 45 000 000 | 56 000 000 | 56 000 000 |

Promotion actions: |

05 02 10 02 Direct management | 10 000 000 | 7 295 000 | 5 371 000 | 2 119 000 | 1 210 000 |

Total promotion | 52 000 000 | 45 295 000 | 50 371 000 | 58 119 000 | 57 210 000 |

From 2007 onwards, a significant increase can be seen in the appropriations allocated by the budgetary authority to information and promotion programmes for agricultural products. The 2009 budget appropriation, exceptionally high, was granted in order to take into account the higher accumulated expenditure on multi-annual promotion programmes approved in 2007 and 2008 (a greater ‘weight of the past’ given the higher budget of the accepted programmes in those years). The same applies to 2010. The above mentioned increase contrasts with the fall in ‘direct management’ budgetary resources. The main reasons for their decline are the absence of a voluntary contribution to the IOC[4], the end of the European Authentic Tastes programme (EAT) promoting the EU quality labels in North America and China and the end of the organic farming promotion campaign.

Table 2: Budgetary expenditure for promotion of agricultural products

in € |

Budget line | 2006 | 2007 | 2008 | 2009 | 2010 |

Promotion actions: |

05 02 10 01 Shared management | 34 163 896 | 47 873 132 | 49 431 246 | 46 514 165 | N.A. |

Promotion actions: |

05 02 10 02 Direct management | 4 733 973 | 2 723 506 | 3 753 884 | 911 554 | N.A. |

Total promotion | 38 897 869 | 50 596 638 | 53 185 130 | 47 425 719 | N.A. |

Implementation rate (expenditure as % of appropriations)[5] | 75 % | 112 % | 106 % | 82 % | N.A. |

The trend in the implementation rate has to be underlined: sound management of the promotion sector helped put a stop to the under-consumption that was one of the main features of the sector up to 2006. Nevertheless, the 2009 budget year was affected by exceptional and unexpected events: three promotion programmes already approved by the Commission in 2008 were not signed, and an inter-sectoral association involved in the co-financing of several ongoing promotion programmes had to cease its activities in 2009, due to a decision of the National Supreme Court in its country. These events led to an unforeseen decrease in expenditure for that year and in the implementation rate as well.

II.A.3 Analysis of promotion programmes

- Promotion programmes accepted and rejected

During the period covered by the present report, all Member States took part in promotion efforts, showing a broad interest in the scheme. In all, 430 programme proposals, with a total budget of €505.6m, were received by the Commission departments after a first selection by the national authorities; 183 of them were accepted for Community co-financing totalling €248.6m. Of these, 134 concerned the internal market and 49 targeted third country markets.

Table 3: Programmes approved and rejected from July 2006 to July 2010

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As far as the duration of the accepted programmes is concerned, 150 (82 %) of them last for 3 years (see Graph 1). As can be seen from Graph 2, 20 % of the programmes have a budget of less than €1m, 25 % between €1m and €2m, 36 % between €2m and €4m and 19 % more than €4m.

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As can be seen from Table 4 below, almost all products listed in Annex 1 to Regulation (EC) No 501/2008 benefited from these promotion efforts. Dairy products were the greatest beneficiaries in terms of accepted programmes (36), followed by quality products (PDO, PGI, organic and outermost regions: 32), fruit and vegetables, fresh and processed (30), meat products, including poultry (23), wines and spirits (20), olive oil (8), etc.

Table 4

Programmes accepted (internal market and third countries) by sector and budget

Products | Total budget (€m) | EU co-financing (€m) | % | No of prog. approved |

Beef & pigmeat (processed or not) | 9.3 | 4.6 | 1.86 % | 5 |

Fibre flax | 3.3 | 1.7 | 0.67 % | 1 |

Fresh fruit and vegetables | 89.0 | 44.6 | 17.93 % | 24 |

Honey and beekeeping products | 4.3 | 2.1 | 0.86 % | 8 |

Labelling of eggs | 1.0 | 0.5 | 0.20 % | 1 |

Milk and milk products | 116.4 | 56.6 | 22.76 % | 36 |

Multi products | 34.3 | 17.2 | 6.90 % | 14 |

Olive oil and table olives | 34.2 | 15.5 | 6.22 % | 8 |

Organic farming and products | 35.7 | 17.9 | 7.18 % | 15 |

Ornamental horticulture | 14.9 | 7.4 | 2.99 % | 9 |

Outermost regions | 16.1 | 7.5 | 3.03 % | 2 |

PDO, PGI and TSG | 39.4 | 19.7 | 7.93 % | 15 |

Poultrymeat | 13.3 | 6.6 | 2.67 % | 6 |

Processed fruit and vegetables | 16.9 | 8.4 | 3.39 % | 6 |

Quality meat | 30.2 | 15.1 | 6.08 % | 11 |

Quality poultrymeat | 1.7 | 0.8 | 0.34 % | 1 |

Seed oils | 1.3 | 0.6 | 0.26 % | 1 |

Spirit drinks | 4.2 | 2.1 | 0.84 % | 2 |

Wines | 39.1 | 19.6 | 7.87 % | 18 |

Total | 504.6 | 248.6 | 100.00 % | 183 |

The main reasons for rejection during the reference period were: the actions were not described in enough detail to give the Commission departments a clear picture of the programme; the budget was not sufficiently detailed to allow the programme’s value for money to be assessed, as required by Council Regulation (EC) No 3/2008, Article 7(2); the reasons for proposing the programme were not given; elements proving that the implementing body had been well chosen were lacking. In more recent years, another significant ground for rejection was the absence of SMART[6] objectives, or of methods to be used for programme evaluation and impact assessment.

- Third countries programmes

Despite the Commission’s stated commitment to step up promotion in third countries, during the reference period these programmes accounted for only 27 % of all proposed programmes (49/183). They received 23 % of the Community funds allocated to accepted promotion programmes (€57.6m/€250.5m).

Fresh and processed fruit and vegetables, wines, quality and dairy products were the main beneficiary sectors. North America (21), Russia (20), China (13) and Japan (11) were the main target areas in terms of the number of accepted programmes.

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- Internal market promotion programmes

From 2006 to 2010, the number of programmes accepted for the internal market within the annual stream (excluding dairy crisis programmes accepted in 2009) decreased significantly (see Table 3). This is because the Commission departments applied stricter criteria during their selection evaluation. However, as shown in Table 3, an increase in the Community contribution took place, notably between 2006 and 2009, when it went up by 50.1 %, from €30.4m to €45.8m. The figures include programmes promoting specifically poultry meat (1 programme) and dairy products (13 programmes), adopted by two ad hoc Commission decisions, in order to counter crisis impacts in those sectors. This trend is mainly due to the fact that broader programmes promoting more than one product were accepted, or that more than one organisation from one or more Member States joined to propose a single programme.

[pic]The main beneficiaries in terms of programmes accepted come from IT (17), FR (11), NL (10), DE (9). In terms of products the main beneficiaries were dairy products (€48.3m), fresh and processed fruit and vegetables (€45m), quality products, including organic and outermost regions logos (€35.8m).

II.B Promotion activities managed directly by DG AGRI

II.B.1 High level missions

Within the framework set up by Article 2(3) of Council Regulation (EC) No 3/2008, high level missions or promotional events were organised as follows from 2007 to 2010:

- High level commercial mission to India (6-10 March 2007)

- Promotional event in China (14-16 May 2008)

- Promotional event in Cape Town, South Africa (8-10 September 2008)

- High level trade mission to China (18-22 May 2009)

- Promotional event in Hong Kong (4-6 May 2009).

These visits offered the opportunity to carry out a very busy agenda of activities including seminars, meetings with the press, participation in trade fairs, ‘business-to-business’ meetings and events at the local chambers of commerce. In each case, they were backed up by systematic public relations efforts, both during and after the mission. During the reporting period, the budget appropriation for high level missions was € 1 million/year. For 2010, a high level promotional event is planned in Moscow as part of the World Food Fair (14-17 September 2010).

II.B.2 Promotion campaign for organic food and farming

Work on this campaign started in 2006 within the framework set up by Council Regulation (EC) No 2826/2000 (later repealed by Council Regulation (EC) No 3/2008) to follow up Action 1 of the European Action Plan for organic food and farming. With a budget of a maximum of € 3 million over 3 years and covering all 27 Member States, the campaign was conceived to complement national promotional activities. It was launched on 25 July 2008.

II.B.3 Other expen diture under direct management

- External experts for selecting promotion programmes

- Evaluation studies

A detailed description of all activities under direct management by DG AGRI is given in Annex 2 to the Commission Staff Working Document accompanying this report.

III. Evaluation

III.A DG Agriculture and Rural Development ’s internal audit and the Court of Auditors’ reports

In 2009, the promotion of agricultural products scheme was the focus of two audit reports, one by the Court of Auditors and one by DG AGRI’s Internal Audit unit.

DG AGRI’s internal audit report dated 13 May 2009 noted, among other things, that ‘the systems in place … comply with applicable rules and procedures in a satisfactory manner’ and that ‘since 2005, there has been a constant increase of the quality of the selection procedure’.

In its Special report No 10/09 published on 8 July 2009, the Court of Auditors evaluated the impact of various programmes and found that ‘in most cases the summaries of the work carried out were sufficiently detailed and ensured that the money spent and the measures carried out were consistent with the promotion objective’. Furthermore, as regards monitoring of the expenditure, the Court found that the Commission had for the previous two years been introducing or strengthening procedures and tools for monitoring Member States’ programmes and payment claims.

However, both reports noted that effectiveness, efficiency and the environmental impact could still be further improved. It was also underlined that the Commission needed to further improve several aspects of the promotion scheme.

The Court of Auditors also called on the Member States to contribute to improving the selection procedure by verifying the relevance of proposals and increasing selectivity. It also urged Member States to communicate information on existing national and regional promotion measures to the Commission. Furthermore, the Member States were encouraged to improve the public procurement procedures used for selecting the implementing bodies, avoiding, in particular, tight deadlines, and applying formal procedures in a more systematic way, as well as to ensure that proposing organisations comply with the selection criteria.

III.B Positive and negative aspects of the promotion scheme as reported by the Court of Auditors

In its report, the Court of Auditors sets out the following conclusions and recommendations that highlight the main strengths and weaknesses of the promotion scheme as it has been operating at least within the period covered by the report:

- The Commission has for some years been making improvements to the management and control arrangements for expenditure connected with information provision and promotion measures for agricultural products. Such improvements need to be further consolidated and expanded.

- The system in place does not make it possible to gauge the effectiveness of this policy. The impact of the policy, although it is probably positive, is currently difficult to quantify. The policy objectives need to be specified and suitable performance indicators set up, whilst at the same time ensuring that the stated ambitions and the budgets that are committed are consistent with each other.

- A formal procedure for consulting all stakeholders should be introduced so as to help define an overall strategy and ensure complementarity with the various promotion measures that already exist. Following this recommendation, a Special Group from the Advisory Committee on Promotion was set up on 28 September 2009.

- The Commission has become more selective when approving programmes to be co-financed. These improvements should be continued, especially as regards the requirement for information on the expected impact of the programme and the manner in which it will be measured. The Member States should also continue to increase their selectivity.

- As regards the implementation of the programmes and the regularity of the expenditure, efforts should primarily be focused on the still too limited checks made on the selection of the implementing bodies, which have a key role to play. The Commission’s subsequent monitoring of expenditure has been stepped up, but significant control weaknesses persist in certain Member States. These weaknesses should be followed up so as to ensure speedy improvement in these shortcomings.

III.C Evaluation at the level of countries/areas or product sectors

The evaluations of EU co-financed information and promotion programmes mentioned under point II.B.3 were carried out between 2006 and 2008 by external consultants under framework contracts.

Four of them concerned the internal market :

- Organic sector (November 2006)

- Wine sector (April 2007)

- Fruit and vegetables (November 2007)

- Milk products (September 2008).

Four others concerned different product sectors within the third countries/areas :

- The United States and Canada (November 2006)

- Switzerland and Norway (May 2007)

- Russia and Japan (November 2007)

- India, China and South-East Asia (December 2008).

Each evaluation focused on assessing the coherence, effectiveness, efficiency, impact and complementarity of EU co-financed information and promotion programmes implemented since the year 2002.

Furthermore, each evaluation was based on a sample of programmes, taken from different EU Member States and in each case accounting for more than half of the funds committed per sector. Information was drawn from different sources, mainly available documentation and statistics, interviews and workshops with stakeholders, and extensive surveys conducted by the team.

The main recommendations for the internal market were:

- Programmes should be based on analyses of both the overall and the targeted markets, taking into account their size and including a clear definition of a hierarchy of quantified objectives for the proposed information and/or promotion campaign.

- The intended impact on demand should be determined, both globally and by consumer group, according to specific market characteristics and available resources, as well as a methodology for its assessment during implementation and after completion in accordance with state-of-the-art guidelines.

- The respective roles of the Commission and the Member States should be further clarified. The procedures for final approval or rejection of the programmes by the Commission should be better explained to both the Member States’ competent authorities and the potential proposing organisations.

- The practice of tendering (calls for proposals) in the interest of optimal cost-benefit ratios based on national market standards should be continued.

- Ex post and mid-term or ongoing evaluations should be made compulsory for large programmes and campaigns, and provision for evaluations should be included in the budgets of such programmes.

- More incentives should be provided for synergy and complementarity: between co-financed programmes of different Member States, and between EU co-financed and private sector programmes.

The main recommendations for third countries are:

- The global objectives of EU promotion measures should focus on enabling European producers and trade organisations to export to third countries.

- The EU measure should better contribute to synergy between producers and programmes.

- Some specific provisions should be made to support newcomers.

- Programme design and promotional activities should better take into account the specificities of emerging and/or far-off markets.

- The overall framework of the EU measures should be improved in order to resolve ambiguities about the mention of geographic origin and brands.

- The administrative requirements should be adjusted to the programmes’ constraints.

III.D Evaluation at the level of co-financed programmes

III.D.1 Assessment elements introduced after 2006

In the first years of implementation of this scheme, the promotion programmes co-financed were considered successful merely if they were implemented as planned in the original proposal: no formal assessment was requested and, consequently, no assessment costs (if any evaluation took place) were eligible.

Several steps have been taken to address this situation:

- A document setting out guidelines for the evaluation of programmes was distributed to the national authorities in October 2007, for the attention of the proposing organisations. This document took into account all recommendations of both the audit of the sector and the consultants. It was later redrafted and the part concerning the assessment provisions is now included in the ‘Explanatory note for promotion programmes part-financed by the EU’ annexed to the application form. The second part concerning the assessment itself has been annexed to the ‘Manual of procedures for the examination and adoption of proposed programmes for the promotion of agricultural products’.

- The model contract put at the disposal of the national authorities has been amended in order to allow the results of the programmes to be evaluated with the help of an external body. Furthermore, the budget allocated to the evaluation of the programme has been increased from 3 to 5 % (for its final evaluation) and any unused overheads budget can also be added as extra funding for this evaluation.

III.D.2 First impact assessment of th e programmes

Since 2008, an assessment of the impact of the programmes is made when the programmes come to an end and is included in the final reports examined by the programme managers. This assessment makes use of indicators such as the budget execution rate or the conformity of the implemented programme with the proposed one. The measures included in the programmes are increasingly successful. Up to now the reports were often drafted by the proposing organisations themselves. From 2010 on, the evaluations will be made by independent assessment bodies.

A good indicator of the quality of the promotion tools developed during the implementation of the promotion programmes, and of their positive impact, is the fact that, after many programmes are completed, a request is introduced by the proposing organisation to be allowed to produce additional quantities of these tools for further use at their own cost.

III.E. Evaluation of the activities under the Commission ’s direct management

III.E.1 High level missions: an evaluation of their impacts

High level commercial mission in India (March 2007)

The mission fulfilled its ‘pioneering’ role by opening the doors of the relatively new Indian market to European exporters while getting across the message of the quality and diversity of European products. The visit was very well received in the Indian media (achieving a media exposure estimated at € 1.25 million). The European dimension was particularly noticed. The visit played a crucial role in India’s reduction of its exorbitant import duties on alcohol.

Promotional campaign in China (May 2008)

The media exposure generated by the mission was estimated at the equivalent of € 450 000, covering 25 000 000 people. Several thousand visitors attended the EU stand, which was located in the centre of the other European pavilions: 967 visitors left their business cards and 1 127 questionnaires were filled in.

Promotional event in Cape Town, South Africa (September 2008)

The event primarily consisted in a public relations operation towards both South African officials and European exporters to demonstrate the EU’s support for their efforts to conquer new world markets.

High level trade mission to China (May 2009)

The visit of the European delegation was well received by the media, generating a media exposure estimated at an equivalent of € 1 500 000 for a coverage of 49 600 000 people. Several thousand visitors attended the EU stand, which, like the previous year, was located in the middle of the other European pavilions.

Promotional event in Hong Kong (May 2009)

There were 50 participants in the seminar and 200 in the festival. Roughly 8 000 people visited the stand. The event generated 7 press articles for an estimated value of € 6 656 with a circulation of 260 000.

III.E.2 Assessment of the organic farming promotional campaign 2006-2009

The organic food and farming promotional campaign results have been very positive. With a limited budget, especially in comparison with some larger national or private campaigns, simple and effective marketing and information tools were offered to a number of different target groups. More than 150 pages of text providing information on this sector and promoting it to various target groups were also created and translated.

Evaluation has shown that the tools are accepted and used by the target groups, especially in countries where the sector is less developed and there are fewer initiatives at national level. Co-financed programmes for the promotion of organic products make use of this new material developed within the campaign. This allows those programmes to be run with a smaller budget than would have been possible otherwise, as they do not have to finance the development of new promotional material for which the equivalent already exists.

The statistical data on website traffic are also very encouraging. The website is already the most visited of all DG AGRI sub-sites on Europa, with on average 70-80 000 visits per month and 15 000-30 000 downloads of material. For 2008, in the first five months following the launch of the campaign, 186 991 visits to the site were registered and this was considered a success. During the whole of 2009, the website was visited 1 070 000 times (this figure represents 63 % of the total visits to the whole of DG AGRI’s site). By scoring high on major search engines, the website has become a point of reference for all those looking for information on organic food and farming.

IV. General conclusions

The period 2006-2010 featured several amendments to the scheme of EU co-financed programmes for the promotion of agricultural products:

- Simplification: the two Council regulations were merged into one and the two Commission regulations into one.

- The selection procedure for the new programmes at Commission level was improved through the adoption of guidelines and the introduction of quantitative evaluation methods (evaluation grid) and reference costs for the various actions included in the programmes.

- Improvements were made to the impact assessment of programmes during and at the end of their implementation.

- Sound management: the management of the programmes was consequently improved. The implementation rate (expenditure/appropriations) of the sector increased significantly, to almost 100 %.

- Last but not least, during the report period, the promotion scheme was also used to counter crisis consequences in two cases: avian influenza (2007) and the crisis in the dairy sector (2008).

Recent audits by the Court of Auditors and DG Agriculture and Rural Development’s internal audit unit have confirmed these improvements. Nevertheless, other improvements still have to be made:

- The quality of the programmes sent to the Commission departments needs to be further improved. The guidelines already adopted and updated will certainly help in this respect.

- The selection, monitoring and audit of programmes by the Member States’ competent authorities also has to be further improved. Greater attention needs to be paid to the tender procedures applied for the choice of the implementing bodies. In this context both Articles 9(2)(e) and 12(2) stress the technical and financial capacities these bodies have to possess in order to ensure that the promotion actions are implemented as efficiently as possible.

- The procedure currently in place to approve co-financed programmes is rather cumbersome. Programmes are evaluated twice: at the level of the Member State and then at EU level. The whole selection procedure takes seven months. Nevertheless, as can be seen from Table 3 on page 6 of this report, more than 50 % of the programmes received are refused.

The current information and promotion policy will be reviewed in parallel with the discussion on the CAP reform after 2013. The promotion instruments should provide EU producers with an effective tool whilst attempting at the same time to reduce the administrative burden.

[1] Council Regulation (EC) No 3/2008 of 17 December 2007, OJ L 3, 5.1.2008, p. 1.

[2] The whole of 2006 is covered by the present report.

[3] Commission Regulation (EC) No 501/2008 of 5 June 2008, OJ L 147, 6.6.2008, p. 3.

[4] International Olive Council.

[5] The over-execution in 2007 and 2008 was covered by transfers.

[6] SMART: Specific, Measurable, Appropriate, Realistic, Time scheduled.