Opinion of the Economic and Social Committee on the "Proposal for a Council Regulation amending Regulation (EEC) No 2358/71 on the common organisation of the market in seeds and fixing the aid granted in the seeds sector for the 2002/2003 and 2003/2004 marketing years"

(2001/C 311/07)

On 17 May 2001, the Council decided to consult the Economic and Social Committee, under Article 37 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 19 July 2001. The rapporteur was Mr Liólios.

At its 384th plenary session (meeting of 12 September 2001) the Economic and Social Committee adopted the following opinion by 92 votes in favour, with three abstentions.

1. Introduction

1.1. In its draft amendment to the relevant directive(1), the Commission argues that, in its opinion, the European Union seed sector has suffered a number of serious problems in recent years. According to the Commission, there has been a major increase in the area sown to seeds and in the quantities produced, while exports and the stocks held by the Community have also risen. The danger is that this will upset the balance of the market for seeds. The Commission also states that there has been a constant rise in budget spending for the sector, accelerating during 1999 and 2000 to reach EUR 109,5 million.

1.2. On the basis of these findings, the Commission recommends:

- maintaining the amounts of aid to be granted to the seeds sector for the 2002/2003 and 2003/2004 marketing years at current levels;

- doing away with the distinction between the three varieties of Lolium perenne L. seeds and fixing a single rate of aid for the 2002/2003 and 2003/2004 marketing years;

- introducing a stabilising mechanism for seed production, with the exception of rice seed for which there is already one in place. This stabiliser will be similar to the one in place for rice seed.

2. Comments

2.1. The Community recognised the special nature of the market for certain seeds in timely fashion and for that reason adopted the directive on the common organisation of the market in this area in 1971(2). The sector's specific nature has since grown increasingly more marked and complex owing to problems that have arisen in the food chain (see point 2.5.5).

2.1.1. Seed cultivation is very important for the employment and earnings of producers, the socio-economic balance of several rural regions in the EU, the preservation of biodiversity and, in part at least, the security of the EU seed supply (Article 33(1) of the Treaty establishing the European Community).

2.2. The situation on the market for seeds is such that it does not ensure producers a fair income. Therefore, in accordance with Article 3(1) of Council Regulation (EEC) No 2358/71, aid must be granted for the production of these products. The absence of other mechanisms (price intervention, border protection, etc.) in the COM for seed makes the system of fixing the lump sum of aid per hectokilo of seed produced all the more important for the functioning of the market.

2.2.1. With regard to fixing aid levels, the Commission recommends maintaining the current amounts, for the sole purpose of controlling budget spending for the sector. This proposal is acceptable in principle, but it should be mentioned that a fundamental point has been overlooked. Article 13 of Regulation (EEC) No 358/71 specifically requires consideration to be given to the objectives of Article 33 of the Treaty establishing the European Community. This article states that one of the most important objectives of the common agricultural policy is "to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture". The shortage of data and adequate documentation in the proposal gives rise to doubts as to whether the Commission proposal is bearing this in mind.

2.2.2. The Commission proposes that the amounts of aid fixed for the various types of seed covered by the COM should take effect for the 2002/2003 and 2003/2004 marketing years. Until 1999, these amounts were fixed annually as part of the "price package". With Regulation (EC) No 1405/1999(3) (on the common organisation of the market in seeds and fixing the aid granted in the seeds sector for the 2000/2001 and 2001/2002 marketing years), the Council fixed the amounts for a two-year market period, as usual. If indeed the Commission, as mentioned in its proposal, referred to the criteria listed in Article 3(2) of Regulation (EEC) No 2358/71, in relation to foreseeable developments, then it would seem advisable to extend the validity of these amounts to more market periods; then the sector's professionals would be able to plan their activities within a more stable environment.

2.3. The types of seed covered by the COM are referred to in the annex to the proposal. For two of them the proposal states zero aid, which in practice amounts to their exclusion from the system. The specific situation in the market and the principle of equal treatment could justify the entry of certain seed types (e.g. cotton) into the aid system. Apparently the Commission did not consider this option.

2.4. The Commission's proposal that there should no longer be any differentiation between the three varieties of Lolium perenne L. had already been decided by the Council (Regulation (EC) No 1405/1999 Annex I). In its opinion on this subject(4), the ESC commented on the need for a single rate of aid to be fixed for this type of seed so as not to place certain seed producers at a disadvantage by reducing support for a specific variety. The Commission makes no reference to this comment in its proposal.

2.5. Unlike the other two proposals, the Commission's proposal to introduce a stabilising mechanism similar to that for rice seed would mark a radical change in the sector.

2.5.1. In the document, the Commission is most frank in its explanatory memorandum, making it quite clear that the main reason for introducing a stabiliser to the system is the need to curb related budget spending. Naturally, the Commission links the fixing of aid with the introduction of the stabiliser, arguing that "keeping the aid at the current level is acceptable only if a stabiliser mechanism is introduced to keep spending within reasonable limits"(5). This wording could be interpreted as indirectly blackmailing the sector, something which is not particularly positive for an EU institution.

2.5.2. In addition, in attempting to justify the need to introduce a stabilising mechanism, the Commission mentions that there has been a major increase in areas sown to seed and production in the seed sector with a parallel increase in exports and stocks at Community level. These statements made in the absence of comparative data should be treated with scepticism. The statements may be dismissed in the case of varieties in the categories of grasses and small-seed legumes, all of which are subject to a cyclical production chain. Such seed varieties may be used only for sowing, and storage is therefore both normal and necessary. Seed companies which own the seed varieties concerned plan production on the basis of volume of stocks and taking account of market prospects for the variety in question; in this way, production is, in the long term, adjusted to match consumption via self-regulation.

2.5.3. The choice of 1994 as year of reference is questionable as during that year the area sown to seed was at the lowest level of the last decade and in 1995 three new countries joined the EU, all of which produce seed. The freedom to import under the present system and the fact that the EU is a major importer of seed have a substantial impact on the volume of stocks, affecting producer prices and production.

2.5.4. Cyclical growth in the production of grasses peaked in 1998 and that of legumes in 1999, while a decrease in the areas sown to seed and production can be observed which should curb the level of spending on aid for the sector. This reflects the normal pattern for seed varieties that may be used only for sowing. Thus, the sector can clearly self-adjust both to market demand and to the Community budget, without the need for a stabilising mechanism.

2.5.5. The Commission's report does not mention the likely effects of introducing a stabiliser, on producers and on the functioning of the system. Furthermore, no consideration is given to the recent more general developments in the agricultural sector leading to an increase in production of certain plant types (e.g. protein fodder plants for environmental purposes).

2.5.6. As for the type of stabiliser, the Commission states that it will be similar to that for rice seed. The application of the rice stabiliser stems from the specific nature of the rice market and system, which differ significantly from those of other types of seed. In the case of rice, however, stockbuilding and cyclical fluctuations are eliminated owing to its use for human consumption.

2.5.7. Once the stabiliser is applied in the form of national guaranteed quantities, the level of support may not be the same throughout the Community as intended by Article 3(1) of Regulation (EEC) No 2358/71. Seed growers in the various Member States risk having their aid arbitrarily reduced or eliminated altogether since some seed trading companies own the seed types concerned and plan the volume of production.

2.5.8. The proposal for the stabiliser mechanism is general and vague. There is no mention of the maximum guaranteed quantity (MGQ), specific means of calculating it, the link between exceeding the MGQ and a reduction in aid, or other basic elements that are a feature of every stabilising mechanism. The decisions being taken by the Commission are too important for the future of the sector to be taken not by the Council but by the management committee, violating the principle of consulting the other institutions of the EU such as the ESC.

3. Conclusions

3.1. The ESC endorses the Commission's proposal to maintain the current level of aid to the seed sector.

3.2. The ESC suggests that the Council and the Commission should discuss the possibility of making this aid valid for longer than the next two marketing years.

3.3. The ESC is disappointed that the Commission has not considered its view on ending the differentiation with regard to Lolium perenne L. It invites the Council and the Commission to fix a single level of aid for this species so as not to put certain seed producers at a disadvantage.

3.4. The ESC recommends examining the possible need to allow certain other seeds into the system.

3.5. The ESC rejects the Commission's proposal for the introduction of a stabiliser mechanism on the grounds that it is ambiguous, vague and insufficiently documented and also appears unnecessary.

3.6. The ESC is doubtful as to whether in its report, alongside budget spending, the Commission considered other important objectives of the Treaty establishing the European Community and broader developments in the EU's agricultural sector.

Brussels, 12 September 2001.

The President

of the Economic and Social Committee

Göke Frerichs

(1) COM(2001) 244 final - 2001/0099 (CNS).

(2) Council Regulation (EEC) No 2358/71, OJ L 246, 5.11.1971, p. 1.

(3) OJ L 164, 30.6.1999, pp. 17-22.

(4) Opinion on the Commission proposal on the prices for agricultural products (1999/2000) of 28.4.1999, OJ C 169, 16.6.1999, p. 20.

(5) Cf. Explanatory Memorandum - COM(2001) 244 final - 2001/0099 (CNS).