Opinion on the proposal for a Council Regulation (EC) on the common organization of the market in fruit and vegetables

(96/C 82/06)

On 17 November 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 above-mentioned proposal.

The Section for Agriculture and Fisheries, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 30 November 1995. The rapporteur was Mr Bento Gonçalves.

At its 331st Plenary Session (meeting of 20 December 1995), the Economic and Social Committee adopted the following Opinion by 89 votes to 58, with 16 abstentions.

1. Introduction

1.1. The Committee regrets that the Commission proposal has not taken up the suggestions put forward in its Opinion () of 26 January 1995 on the communication from the Commission to the Council and the European Parliament on the development and future of Community policy in the fruit and vegetables sector (). These earlier suggestions remain fully valid.

1.2. The Committee considers that the Commission proposal has not been adequately circulated. The Committee's Section for Agriculture and Fisheries has had to prepare its work on this important subject in an excessively short time and without all the language versions of the proposal.

2. General comments

2.1. Commitments entered into

2.1.1. The proposal follows the broad guidelines set out in the communication. Some aspects of it do not heed the views of the European Parliament, the Economic and Social Committee and the sector's representative organizations.

2.1.2. The Commission proposal takes only partial account of the basic principles of the CAP:

- market unity;

- financial solidarity;

- Community preference.

It also fails to fulfil the commitments entered into at the Jumbo Council of Foreign Affairs and Agriculture Ministers of the Twelve, held in September 1993, which approved the following declaration:

'For those sectors in which the common market organization arrangements have not yet been amended, the Council and the Commission undertake to adopt such provisions as are necessary to maintain farm incomes and Community preference. The conditions and agricultural and financial principles which have been applied throughout the agricultural sector will be taken into account in those sectors.'

2.1.2.1. This declaration followed from the guidelines and agreements resulting from the lengthy discussions on the reform of the CAP, the aim of which was to curb the farm surpluses generated by guaranteed price support. These surpluses were very costly to the budget and seriously distorted both the competitiveness of the agri-food sector and international trade. At the time, there was a political consensus that the sectors which did not present such imbalances (around 30 % of EU farm production) would be reformed after the signing of the World Trade Organization (WTO) agreements, on the basis of principles consistent with those of the 1992 reform.

2.1.3. The proposal, furthermore, discriminates between products, between regions and between Member States and seriously penalizes the economically weakest communities without providing alternatives for the fall in their incomes. It should provide direct income support for farmers in these communities, in order to offset the resultant drop in prices, especially for growers of produce of strategic local importance.

2.1.4. The cost of the common market organization

2.1.4.1. The present market organization accounts for less than 4 % of the EAGGF budget.

2.1.4.2. The proposal fails to consider the social, economic and demographic implications for large areas of Europe, particularly in the Mediterranean countries.

2.1.4.3. The sector's cost to the CAP budget is so slight as to invalidate any cost arguments. The Commission overlooks the existence of 1,8 million farms - only 2,5 % of which are larger than 1,3 hectare - which provide a home and workplace for millions of families whose income is based predominantly on fruit and vegetable production.

2.1.4.4. Mention should also be made of the effect of the abandonment of huge areas of the EU and the ensuing forced migration, in search of work no longer available locally, to the main population centres which have already reached saturation point.

2.1.4.5. The likely adverse impact of this on land occupation, environmental management and the conservation of natural resources was adequately highlighted in the ESC Opinion of 26 January 1995 (points 2.4 to 2.4.3). The Committee therefore considers that financial compensation is needed in order to ensure the continuation of activities that are environmentally useful and safeguard rural employment.

2.1.4.6. The cost of the changes proposed in the present Opinion should not exceed the sum laid down in the Community budget.

2.1.5. Account must also be taken of the commitments entered into in the WTO negotiations, and in particular the gradual reduction in Community preference. However, this reduction must not allow the EU's self-sufficiency rate for fruit and vegetables to fall in general below the strategic threshold of 40 % (see points 2.5 and 2.6 of the ESC Opinion of 26 January 1995) ().

3. Specific comments

3.1. Title I - Classification of products (Articles 2 to 10)

3.1.1. The Committee broadly supports the quality standards set in Articles 2 to 10, but calls for the deletion of Article 3(1)(a) in order to prevent market distortions.

3.1.2. These standards will help to improve market transparency and provide the consumer with better information on health aspects and on how to conserve produce.

3.1.3. For the consumer, it is necessary to apply the rules on labelling, particularly as regards nutritional value and country of origin.

3.2. Title II - Producer organizations (Articles 11 to 18)

3.2.1. The Committee asks the Commission to take account of the comments made in point 3.1 of its Opinion of 26 January 1995. It also asks it to ensure that the processing industry receives regular supplies from producer organizations.

3.2.1.1. The Commission proposal is to be endorsed insofar as it sees a need to strengthen the role of producer organizations in an increasingly competitive market and in the face of growing supply. However, the Committee has doubts as to whether this objective can be achieved by the proposed organizational, financial and legislative structure.

3.2.1.2. Millions of rural households all over the EU will become almost wholly economically reliant on the smooth operation of producer organizations. Accordingly, certain aspects of their organizational structure, and of their recognition procedures, need to be safeguarded and clarified, notably: supervision and assistance, checks, transparency, professionalism and training, speed, guarantee of the availability of finance, guarantee that producer organization members will not be prejudiced by the failure of members (public or private) to fulfil their obligations. Hence it would be helpful to establish:

a) the legal position of producer organizations vis-à-vis other economic operators;

b) mandatory accounting standards and publication of accounts;

c) a requirement for the accounts to be officially inspected and audited;

d) 100 % financing for the first six years (transitional period), to be followed by co-financing from the operational fund.

3.2.1.3. The organizational structure described in the proposal is too restrictive, as well as being highly unfavourable to producers. It will also be difficult to apply, particularly for producer organizations of small farmers in regions which lack an enterprise culture.

3.2.1.3.1. To solve these problems, it would be desirable that new producer organizations should have their operational funds 100 % financed by the EAGGF during the period specified in point 3.2.1.5, after which their own contributions will gradually rise to 50 %.

3.2.1.3.2. EAGGF support also seems desirable in financing the management of newly formed producer organizations and of existing producer groups in regions where they represent only a small part of total production.

3.2.1.4. Adjustment programmes (Articles 12 to 14)

3.2.1.4.1. As proposed in its Opinion of 26 January 1995 (), the Committee advocates the establishment of a special financial mechanism fully funded by the EAGGF, for making the requisite changes via the adjustment programmes during the transitional period:

- the transitional period should last at least five years, in accordance with the Commission proposal, and should include the following measures:

remedying of structural shortcomings at regional level;

improvement of producer organizations' organizational and marketing structures;

support for producer organizations to form associations and/or merge;

conversion of structures that are ill-suited to market needs and exploitation of progress made in research in the sector;

support for special produce from certain micro-regions;

improvement of the collection and processing of statistics on the sector.

3.2.1.5. Operational fund (Article 15)

3.2.1.5.1. The transitional period should last six years.

3.2.1.5.2. All withdrawals should be 100 % financed by the EAGGF.

3.2.1.5.3. The proposal should be amended by dividing the fund into two sections:

1. Section A, for the payment of all withdrawals.

2. Section B, for the funding of the operational programmes described in Article 15(4), and according to the provisions of Articles 16, 17 and 18. This section should include the supplement to the minimum producer price for citrus fruit and other produce delivered for processing under the terms of Article 15(3)(c).

3.2.1.5.4. The level of withdrawals should be limited as follows:

- in the first year, 50 % of the total marketed by the producer organizations, reduced by 5 % in each of the following six years to reach its final level of 20 % from the seventh year onwards (first year of normal operation).

3.2.1.5.5. The Committee reiterates its earlier recommendation that the reform of the common market organization should provide for co-financing to protect producers against natural disasters, especially in the form of financial assistance for insurance () against damage caused by hail, frost, etc. and for the installation of frost-protection equipment and netting to protect crops from hail.

3.2.1.6. Specific products (Article 17)

3.2.1.6.1. The Committee considers that specific programmes are needed in order to stabilize farmers' incomes on a lasting basis and to improve and modernize production and marketing in certain areas of the EU by providing processing aid and income support for farmers.

3.3. Title III - Interbranch organizations and agreements (Articles 19 to 21)

3.3.1. The Committee endorses the proposal. However, care should be taken to see that the laws of the market are respected and that account is taken of the differing situations in Member States. Application of the provisions by the Member States should also be made optional.

3.4. Title IV - Intervention arrangements (Articles 22 to 29)

3.4.1. The comments made in point 3.2.1 concerning Title II also apply here. The Committee therefore suggests the following amendments:

a) Article 22(3)

The limit for the amount withdrawn should be raised to 20 % of the production marketed by the respective producer organizations.

b) Article 22(4)

The transitional period should be extended to six years, with the definitive scheme entering into force in the seventh year.

c) Article 25

The Community withdrawal compensation for each product should be based on the weighted average of average monthly withdrawal prices during the 1995/96 marketing year. The second subparagraph of Article 25(1) should be deleted.

d) The list of products in Annex II should be updated. It has remained virtually unchanged since the Community had only nine Member States.

e) The remaining Articles of Title IV should be amended in line with the proposed alterations to Title II.

3.4.2. An increase in fruit and vegetable consumption is in the interest of a proper, healthy diet. The Commission should therefore promote a wide-ranging public information campaign on the dietary and physiological benefits of eating more fruit and vegetables, so as to increase consumption and counter the need for intervention.

3.5. Title V - Trade with third countries (Articles 30 to 36)

3.5.1. The Committee is concerned about the impact of the WTO agreements on the effectiveness of the entry price system, especially as nothing is known about the scope and content of the preferential agreements with third countries, which grant more favourable concessions than the WTO agreements. The Commission should therefore promote the disclosure of information about the preferential agreements concluded in this sector and their extension to other countries, through the application of the most favoured nation clause.

3.5.2. The Committee considers that a clear, stable framework for trade with third countries is vital for the success of the reform. It reiterates its call for retention of Community preference, under the precise terms of the WTO agreements.

3.5.3. Financial solidarity between economic sectors, as enshrined in the Union Treaty, obliges the Commission to compensate those sectors penalized by the economic and other advantages enjoyed by other sectors. The fresh fruit and vegetable sector is one of the sectors which could be seriously penalized, making it necessary to establish a mechanism for supporting producer incomes as recommended in point 2.1.3 above.

3.5.4. Flouting of social, environmental and hygiene standards (dumping) by some third countries could distort competition at the expense of EU producers and have serious consequences for EU consumers. It could also worsen unemployment in rural areas where few jobs are available in other sectors. To counter this, thought should be given to the establishment of:

a) effective, clear control of the entry price;

b) effective, clear control of quality and information on production and conservation methods;

c) the same product labelling requirements as for similar EU products.

3.6. Title VI - National and Community checks (Articles 37 to 40)

3.6.1. The Committee supports the stepping-up of national and Community checks and the establishment of a special corps of inspectors.

3.7. Title VII - General provisions (Articles 42 to 52)

3.7.1. The Committee approves this Title, with the exception of the repeal of the part of Regulation 1035/72 regarding the specific measures for dried nuts and carobs.

Done at Brussels, 20 December 1995.

The President

of the Economic and Social Committee

Carlos FERRER

() OJ No C 102, 24. 4. 1995.

() COM(94) 360 final.

() OJ No C 313, 30. 11. 1992.

() OJ No C 303, 14. 11. 1995, chapter 2.

() OJ No C 303, 14. 11. 1995, p. 60, 2.4 (b).

() The Agricultural Situation in the EU 1994 Report.

APPENDIX 1 to the Opinion of the Economic and Social Committee

The following amendments were defeated during the debate:

Point 1

Delete point 1 to 2.1.1 (inclusive) and replace by the following:

'1. Introduction

1.1. The Committee in general supports the proposal.

1.2. The fruit and vegetable regime as it stands has stimulated surplus production and has led to the destruction of food, which is becoming increasingly unacceptable.

1.3. This destruction should be phased out.

1.4. Any necessary support programmes should be decoupled from support for particular products.

1.5. Producers in regions requiring special assistance should be helped through the Regional Fund, where aid should be targeted towards environmental protection.

2. General comments

2.1. All further comments are subject to the overall reserve in Section 1 above.'

Reason

The present regime only subsidizes 14 of all the fruits and vegetables (e.g. cauliflower is subsidized and not cabbage, peaches but not cherries). The regime is wasteful in that it relies on deliberate destruction of food (called 'withdrawal'). Money for subsidies and for destruction of products are channelled via producer organizations. As the Court of Auditors has again shown recently (), the national authorities in several Member States have been totally unable to control this complicated system. The Court also notes that while other methods of withdrawal are permitted, 'in practice most is destroyed' (). The scale of the withdrawal is given by the Commission () and shows e.g. 16 % of all apricots and 6 % of oranges were withdrawn in 1994.

By decoupling support for farmers from product subsidies, these 14 products could be returned to the normal market which operates for all other fruit and vegetables. Farmers and the environment would be supported directly where necessary and a great deal of waste would be eliminated.

Voting

For: 57, against: 64, abstentions: 10.

Point 2.1.3

Delete.

Reason

The proposal does not discriminate between products and between regions and Member States. Under the proposal, funds will be available for all products and for all regions in the Member States.

There is no reason to expect a general price fall as a result of the proposal and there is therefore no reason for compensation by direct income support.

Voting

For: 50, against: 70, abstentions: 16.

Point 2.1.4

Delete paragraphs 4 and 5.

Reason

Abandonment of huge areas and forced migration are not to be expected. There is no reason for believing that the proposal will lead to a decline in production, exports and employment.

Voting

For: 54, against: 63, abstentions: 17.

Point 3.2.1.1

Add at the end:

'In particular, farmers should not be obliged to market under producer organization controls, but should be free to meet and respond to demand.'

Reason

The Commission's proposed obligation for farmers to market 90-100 % of their production under producer organization rules is unnecessarily restrictive.

Voting

For: 53, against: 66, abstentions: 10.

Add a new point 3.2.1.3.1

Reading as follows:

'There is no justification for producers being required to commit their entire production - which could consist of different crops - to one specific producer organization. Other traders with established marketing operations should not be denied access to the operational fund.'

Reason

Under the proposed Directive, producer organizations would be given a virtual monopoly position despite the Commission's own acknowledgement of their shortcomings. the Committee expresses its own concerns about the producer organizations in the preceding paragraphs.

Voting

For: 58, against: 69, abstentions: 3.

Point 3.2.1.5.1

Replace 'six' years by 'four' years.

Voting

For: 62, against: 70, abstentions: 4.

Point 3.2.1.5.2

Delete and replace by:

'The Committee is opposed to the proposal that Member States could at their discretion assume responsibility for some of the financing of withdrawal of produce since this could distort competition.'

Reason

100 % financing by the EAGGF should continue to be limited to the 14 intervention products in Annex II.

Voting

For: 68, against: 75, abstentions: 5.

Point 3.2.1.5.2

Delete and replace by:

'The Committee recommends a shared financing system with a 20 % national contribution.'

Voting

For: 60, against: 78, abstentions: 10.

Point 3.2.1.5.3

Delete.

Reason

Splitting up the operational fund into a section for withdrawals and one for the other activities unnecessarily curtails the required flexibility in the use of it.

Voting

For: 56, against: 74, abstentions: 11.

Point 3.4.1

a) Article 22(3)

Replace '20 %' by '10 %'.

Reason

The percentage of total production eligible for withdrawal should gradually be minimized.

Voting

For: 66, against: 70, abstentions: 2.

Point 3.4.1

Delete d).

Reason

Extension of the present list of 14 intervention products is not desirable.

Voting

For: 65, against: 74, abstentions: 6.

Point 3.4.2

Add a new point 3.4.2 reading as follows:

'3.4.2. Article 29

This Article should be amended to disallow subsidies being paid for destroying products. However an adaptation period of (say) four years should be allowed for this.'

Reason

Paying subsidies to destroy food is no longer acceptable to the citizens of the EU. However, since this option currently forms such a large part of the 'withdrawals' some time must be allowed for adaptation.

Article 29 provides for several alternative types of withdrawal.

Voting

For: 69, against: 80, abstentions: 4.

Point 3.5.3

Delete.

Reason

Any regional disadvantages should be solved by more actively supporting the operational funds of producer organizations.

Voting

For: 67, against: 73, abstentions: 8.

APPENDIX 2 to the Opinion of the Economic and Social Committee

The following members, present or represented, voted in favour of the Committee Opinion:

Mr/Mrs/Miss: ABEJÓN RESA, d'AGOSTINO, ATAÍDE FERREIRA, BAEZA SANJUÁN, BAGLIANO, BARROS VALE, BASTIAN, BELABED, BENTO GONÇALVES, BERNABEI, BERNARD, BETELU BAZO, BIES PERE, BLESER, BREDIMA SAVOPOULOU, BRIESCH, BURANI, CAL, CARROLL, CASSINA, CEBALLO HERRERO, CHAGAS, CHEVALIER, COLOMBO, CONNELLAN, DANTIN, DECAILLON, DELAPINA, DRILLEAUD, DUNKEL, EWERT, FARNLEITNER, FERNANDEZ, FOLIAS, FORGAS I CABRERA, GAFO FERNÁNDEZ, KALLIO, KAZAZIS, KIELMAN, KIENLE, KONITZER, KORFIATIS, KORYFIDIS, LAUR, LERIOS, LIOLIOS, LIVERANI, MALOSSE, MANTZOURANIS, MARGALEF MASIÁ, MASUCCI, MAYAYO BELLO, MEGHEN, MENGOZZI, MERCÉ JUSTE, MERIANO, MOLINA VALLEJO, MUÑÍZ GUARDADO, NIELSEN L., NILSSON, NOORDWAL, OLSSON, OSENAT, PANERO FLÓREZ, PAPAMICHAÏL, PASOTTI, de PAUL de BARCHIFONTAINE, PÉ, PELLARINI, PELLETIER R., PEZZINI, PRICOLO, QUEVEDO ROJO, RODRÍGUEZ de AZERO y del HOYO, RODRÍGUEZ GARCÍA-CARO, SANTIAGO, SANTILLÁN CABEZA, SEQUEIRA, SKLAVOUNOS, STOELLNBERGER, STRASSER, TIXIER, TSIRIMOKOS, VEVER, VINAY, VOGLER, WILMS, ZARKINOS, ZUFIAUR NARVAIZA.

The following members, present or represented, voted against the Committee Opinion:

Mr/Mrs/Miss: ANDREWS, ASPINALL, Jocelyn BARROW, BEALE, BOISSERÉE, BROOKES, DAVISON, van DIJK, DRIJFHOUT-ZWEIJTZER, ELSTNER, ENGELEN-KEFER, ETTL, FRERICHS, FUCHS, GARDNER, GEUENICH, GIESECKE, GUILLAUME, HAAZE, HAGEN, JANSSEN, JASCHICK, JOHANSEN, KANNISTO, KARGAARD, de KNEGT, KOOPMAN, KRITZ, KUBENZ, LEMMETTY, LEVITT, LINDMARK, LITTLE, LOENNBERG, LOEW, LYONS, MADDOCKS, MOBBS, MORELAND, MORGAN, NIELSEN B., NYBERG, OLAUSSON, PETERSEN, PIETTE, REGNELL, SANDERSON, SARALEHTO, SCHMITZ, SIMPSON, SIRKEINEN, STOKKERS, STRAUSS, STROEM, WALKER, WESTERLUND, WHITWORTH, WRIGHT.

The following members, present or represented, abstained:

Mr/Mrs/Miss: BUNDGAARD, van den BURG, BURKHARD, DE NORRE, ETTY, EULEN, GAUDER, GREEN, HAMRO-DROTZ, HERNÁNDEZ BATALLER, KONTIO, MAIER, PARDON, TUECHLER, VERHAEGHE, ZOEHRER.

APPENDIX 3 to the Opinion of the Economic and Social Committee

Consumers Category view

The Consumers Category

- supports the proposals to reduce withdrawal prices and favours the ultimate phasing out of withdrawals;

- accepts the grading of fruit and vegetables but not the removal of, for example, small, cheap, misshapen produce from the market. This may be all low-income consumers can afford;

- rejects the proposed obligation on producers to market 90 %-100 % of their production via producer organizations; also the proposal to permit producer organizations to withdraw products not already included in the regime and to withdraw additional amounts of small sized produce. Instead farmers should be allowed the commercial freedom to meet consumer preferences;

- favours environmental aid to farmers and direct income aids for smallholders in regions suffering particular problems.