Proposal for a COUNCIL REGULATION extending the financing of quality and marketing improvement plans for certain nuts and locust beans approved under Title IIa of Regulation (EEC) No 1035/72 and providing for a specific aid for hazelnuts

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. Background

A. Production

1. The world nut production [1] amounts to ca 4 mio t per year. The main producers are the USA for almonds (82% of world kernel production) and Turkey for hazelnuts (70% of world in-shell production).

[1] Five products (almonds, hazelnuts, walnuts, pistachios and carobs).

2. The Community has a long tradition of producing nuts. With over 1 million ha of extensive and intensive production, it represents 34% of world harvested area [2]. Of this area, an estimated 800 000 ha is economically productive in the Community.

[2] EU extensive area: 1 064 - 1 085 000 ha (world area: 3 148 000 ha). Source: FAO 2000.

3. However the Community only produces 20% of world production [3]. Spain and Italy are the main producing countries. The Community is the top consumer and a net importer of nuts.

[3] EU production (in-shell): 803 000 t (world production: 4 042 000 t). Source: FAO 2000.

4. EU nut production, although significant in terms of area, is characterised by low competitiveness and low margins. Approximately 70% of the Community nut production can be defined as 'extensive' (less-favoured areas, poor/marginal growing conditions often in remote, mountainous or hilly areas without irrigation) and 30% as 'normal' (better varieties, growing conditions, some areas including irrigation).

B. Specific measures for the nut sector

1. In 1989, in recognition of the difficulties facing the nut sector, Regulation (EEC) No 1035/72 (Title IIa) introduced specific measures for the nut sector, in order to make good the inadequacy of production and marketing facilities. These measures cover five products: almonds, hazelnuts, walnuts, pistachios and locust beans. Chestnuts were never included in these measures [4].

[4] EU chestnut production: total harvested area: 63 000 ha, producing 135 000 t / year. Source: FAO 2000.

2. The main measure is to finance quality and marketing improvement plans [5], presented and run by producer organisations (POs). This measure was intended to be temporary, with improvement plans being limited to 10 years.

[5] The measures also included a flat-rate aid for the formation of producer organisations, and aid for the establishment of a revolving fund.

3. Improvement plans are financed 55% by public aid and 45% by the POs. Public aid is limited to EUR 241 for normal operations and EUR 574/ha/year for structural actions [6]. The Community provides 82% of the public aid and the Member States 18%.

[6] Structural actions (grubbing-up and varietal reconversion) are limited to five years.

4. The specific measures were repealed by Regulation (EC) No 2200/96. Existing plans may continue to the term of their 10-year period: the last plans expire in 2006/07. Plans which finished their 10-year period in 2000 were eligible for aid for an additional period of up to one year until 15.6.2001 [7].

[7] Council Regulation (EC) No 558/2001.

C. Improvement plan status

1. Of the 800 000 ha productive nut areas in the Community, an estimated 600 000 ha (75%) are currently in improvement plans (the total theoretical area in plans is 644 000 ha [8]). The actual certified area (requesting and eligible to receive aid) is lower and varies each year.

[8] 600 000 ha is an estimate of the maximum area which is currently potentially eligible for aid (644 000 ha minus cessation of activity, abandonment of orchards etc).

The level of organisation varies in the Community. By the end of 2000, 78 POs were operational in 5 Member States [9].

[9] 95 originally registered plans: E (72), F (11), I (6); EL (3), P (3). The number of currently operational plans is lower due to merger / cessation of activities.

2. Approximately 41% of the total registered area in plans [10] finished the 10-year period in 2000. This area was eligible for an 11th year of aid until 15.6.2001.

[10] 246 000 ha of 600 000 ha (maximum area which is eligible for aid). The 246 000 ha are all situated in Spain.

3. A further 24% (144 000 ha) of the total registered area expires throughout 2001.

4. The remaining 35% (210 000 ha) expires progressively until 2006/07.

D. Other EU support for nut production

1. The operational fund scheme of Regulation (EC) No 2200/96 (general support mechanism for fruit and vegetables available to POs).

2. Structural measures of Regulation (EC) No 1257/1999 (rural development plans).

3. A specific support scheme for hazelnuts was introduced by Regulation (EC) No 2200/96 in 1997 for three seasons, to help producers face up to temporarily difficult economic conditions [11]. This scheme ended in 1999/2000.

[11] Regulation (EC) No 1474/97: EUR 15/100 kg in-shell hazelnuts.

4. Almonds and hazelnuts are entitled to Community export refunds; however import duties are relatively low.

E. Budget [12]

[12] Not including specific aid for hazelnuts.

Community expenditure on these specific measures from 1990 until and including 2000 was over EUR 830 mio.

2. Observations on current nut production

1. Through the improvement plans, supply has been successfully re-grouped in France and Spain. The more competitive POs in all Member States have invested in production including in variety conversion, and in marketing infrastructure and equipment.

2. However, despite 10 years' support through the improvement plan scheme, nut production has failed overall to reach a level at which it can be competitive on a world scale [13]. In particular, Community production is vulnerable to imports of almonds (US) and hazelnuts (Turkey).

[13] Comparison with US almond production: average yield in US is up to 10 times higher than in extensive areas of EU.

3. The situation has been exacerbated in the case of almonds by increased levels of production and marketing from the US. Hazelnut production on the other hand has experienced a period of relative price stability in the last five years until 2001.

4. Many less favoured areas can be categorised as 'chronically non-competitive': current levels of investment will not make these areas economically competitive.

5. Nonetheless nut producers are often dependent on the crop for their income. Opportunities for alternative crops are few: vines, olives, cereals or forests are not immediately viable alternatives and have their own market challenge.

6. In addition, nut production is also important for non-economic reasons. Nut production plays an important environmental role. Part of this role is stopping erosion and acting as fire-breaks, as well as playing its part in tourism. This sector therefore plays a significant part in maintaining the rural social fabric by providing employment.

3. This Proposal

1. The report of the Commission to the Council of January 2001 [14] describes the state of the nut sector with regard to Community support. On the basis of this report, and of subsequent discussions within the Council, the European Parliament and other institutions and the sector, the Council of 23 July 2001:

[14] Report on the state of implementation of Regulation (EC) No 2200/96 on the CMO in fruit and vegetables, COM(2001) 36 final.

a) took note that the Commission has begun an in-depth study on all aspects linked to this sector, and in particular on economic, social and environmental aspects;

b) invited the Commission to present the conclusions of this analysis and any appropriate proposals in the best possible timeframe [15].

[15] The analysis is on-going in early 2002 and forecast to be concluded at the latest by end May 2002.

c) Until such time, a solution must be provided for those producer organisations whose improvement plans expire in 2001 and would not be within the budget for 2002.

2. On this basis, this draft proposes that:

a) producer organisations whose plans contain areas which expire in 2001 (originally starting in 1990 or 1991) may request continued financing of nut areas for a further period of up to one year;

b) continued financing be requested only until 15.6.2002 latest, in order to fall within the 2002 budget;

c) public aid be limited at most to those areas receiving aid in their final year [16] of the plan and to a maximum of EUR 241,50 per hectare; the Community contribution will be limited to a maximum of 75%;

[16] 10th year, or 11th year in the case of POs who were eligible for an 11th year under Regulation (EC) No 558/2001.

d) specific aid for hazelnuts be granted for one marketing year for those producer organisations not benefiting from a)

3. This draft provides a simple arrangement in that producer organisations are not required to submit a new plan extension and the existing provisions in the implementing Regulation (EEC) No 2159/89 apply mutatis mutandis.

2001/0275 (CNS)

Proposal for a COUNCIL REGULATION extending the financing of quality and marketing improvement plans for certain nuts and locust beans approved under Title IIa of Regulation (EEC) No 1035/72 and providing for a specific aid for hazelnuts

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 37 thereof,

Having regard to the proposal from the Commission [17],

[17] OJ C..., ..., p. ...

Having regard to the opinion of the European Parliament [18],

[18] OJ C..., ..., p. ...

Having regard to the opinion of the Economic and Social Committee [19],

[19] OJ C..., ..., p. ...

Whereas:

(1) Title IIa of Council Regulation (EEC) No 1035/72 of 18 May 1972 on the common organisation of the market in fruit and vegetables [20], provides for various specific measures to make good the inadequacy of production and marketing facilities for certain nuts and locust beans. Aid is provided to producer organisations which have received specific recognition and which have submitted a plan approved by the competent authority for improving the quality and the marketing of their produce.

[20] OJ L 118, 20.5.1972, p. 1. Regulation as last amended by Commission Regulation (EC) No 1363/95 (OJ L 132, 16.6.1995, p. 1).

(2) The specific aid granted towards the drawing up and implementation of the quality and marketing improvement plan as specified in Article 14(d)(2) of Regulation (EEC) No 1035/72 is restricted to a period of 10 years to allow a shift of financial responsibility on to the producers.

(3) Regulation (EEC) No 1035/72 was repealed by Council Regulation (EC) No 2200/96 of 28 October 1996 on the common organisation of the market in fruit and vegetables [21]. However, as specified by Article 53 of Regulation (EC) No 2200/96, any rights acquired by producer organisations in application of Title IIa of Regulation (EEC) No 1035/72 are to be maintained until exhausted.

[21] OJ L 297, 21.11.1996, p. 1. Regulation as last amended by Commission Regulation (EC) No 911/2001 (OJ L 129, 11.5.2001, p. 3).

(4) A number of plans expired in 2000, having completed their tenth year. These plans became eligible for an eleventh year of aid under Council Regulation (EC) No 558/2001 of 19 March 2001 extending for a period of up to one year the financing of certain quality and marketing improvement plans approved under Title IIa of Regulation (EC) No 1035/72 [22].

[22] OJ L 84, 23.3.2001, p. 1.

(5) A number of additional plans expired in 2001, having completed the tenth year.

(6) In accordance with Regulation (EC) No 2200/96, the Commission forwarded to the Council a report on the state of implementation of Regulation (EC) No 2200/96 on the common organisation of the market in fruit and vegetables [23]. This report includes an assessment of the results of the specific measures for nuts and locust beans carried out under Title IIa of Regulation (EEC) No 1035/72.

[23] COM(2001) 36 final.

(7) It is appropriate, for the year 2001, and in recognition of the important environmental and social role played by the nut sector, to grant to those producer organisations whose improvement plans expire in 2001, and who continue to fulfil the recognition criteria, continued financing of their plans within the 2002 budget. This should include those producer organisations whose original improvement plans expired in 2000 and which were extended under Regulation (EC) No 558/2001.

(8) Eligible areas should be able to include those areas within a plan, approved in 1990 or 1991, and which subsequently have been included in / or transferred to another plan through merger or acquisition of producer organisations.

(9) Only aid applications in respect of work carried out until 15 June 2002 should qualify for financing. Plans for which the end of the tenth year was after 15 June 2000 were only entitled to an eleventh year of Community support until 15 June 2001 under Regulation (EC) No 558/2001. For the purpose of continuity, these plans should be entitled to Community support for the period between 15 June 2001 and 31 December 2001.

(10) In order to simplify administrative procedures, aid should be limited to a maximum of those areas for which an aid application was made in the final year of the plan.

(11) The period of up to one year is not sufficient to complete work of grubbing operations followed by replanting and/or varietal reconversion as referred to in Article 2(1) of Council Regulation (EEC) No 790/89 of 20 March 1989 fixing the level of additional flat-rate aid for the formation of producers' organisations and the maximum amount applied to aid for quality and marketing improvement in the nut and locust bean growing sector [24]. The maximum aid per hectare therefore should be paid in respect of other operations as specified in Article 2(2) of that Regulation with a maximum Community contribution of 75%.

[24] OJ L 85, 30.3.1989, p. 6.

(12) The implementing rules of Commission Regulation (EEC) No 2159/89 of 18 July 1989 laying down detailed rules for applying the specific measures for nuts and locust beans as provided for in Title IIa of Council Regulation (EEC) No 1035/72 [25] should apply for the period of the continued payment of aid.

[25] OJ L 207, 19.7.1989, p. 19. Regulation as last amended by Regulation (EC) No 1363/95 (OJ L 132, 16.6.1995, p. 8).

(13) In order to deal with the economic situation in the hazelnut sector, flat-rate aid should be granted for hazelnuts harvested in the 2001/02 marketing year, for those producer organisations not eligible for an extension to improvement plans under this Regulation.

HAS ADOPTED THIS REGULATION:

Article 1

Recognised producer organisations engaged in the production and marketing of nuts and/or locust beans and receiving aid pursuant to title IIa of Regulation (EEC) No 1035/72, whose quality and marketing improvement plans were approved in 1990 or 1991, or which contain areas approved in 1990 or 1991, may request the continuation of that aid for these areas for a further period of up to one year subject to the rules laid down in Articles 2 and 3 of this Regulation.

For that period producer organisations shall continue to implement the plan as approved for the final year.

For the purposes of this Regulation, the final year of the plan shall mean the tenth year for areas approved in 1991, and the eleventh year for areas approved in 1990 and extended under the provisions of Regulation (EC) No 558/2001.

Article 2

The aid shall:

a) be paid in regard to, and limited to, those areas for which an aid application has been submitted in respect of the final year of the plan.

b) be limited to a maximum of EUR 241,50 per hectare, of which the maximum Community participation shall be 75%.

c) apply for a period of up to one year immediately following the expiry of the final year of the plan, up to a latest date of 15 June 2002.

Plans extended pursuant to Regulation (EC) No 558/2001, for which the starting date of the final year is after 15 June 2000, shall be entitled to Community support for the period between the 15 June 2001 and the end of the final year.

Article 3

Regulation (EEC) No 2159/89 shall apply mutatis mutandis to plans for which aid is paid pursuant to Article 1.

Where necessary, additional implementing measures shall be adopted in accordance with the procedure laid down in Article 46 of Regulation (EC) No 2200/96.

Article 4

Article 55 of Regulation (EC) No 2200/96 is replaced by the following:

"For hazelnuts harvested during the 2001/02 marketing year, aid of EUR 15/100 kg shall be granted to producer organisations, recognised pursuant to Regulation (EEC) No 1035/72 or to this Regulation, which implement a quality improvement plan within the meaning of Article 14d of Regulation (EEC) No 1035/72 or an operational programme within the meaning of Article 15, and do not benefit from the aid provided for in Articles 1 and 2 of Regulation (EC) No..../2001."

Article 5

This Regulation shall enter into force on the third day following that of its publication in the Official Journal of the European Communities.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

For the Council

The President

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