Opinion 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

(95/C 102/10)

On 13 September 1994, the Commission decided to consult the Economic and Social Committee, under Articles 43 and 198 of the Treaty establishing the European Community, on the abovementioned communication.

The Section for Agriculture and Fisheries, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 1 December 1994. The Rapporteur was Mr Bento Gonçalves.

At its 322nd Plenary Session (meeting of 26 January 1995), the Economic and Social Committee adopted the following Opinion by 73 votes to 39, with 11 abstentions.

1. Introduction

1.1. The Communication considers the prospective reform of the sector's common market organization with a view to helping EU fruit and vegetable producers to make the most of their potential.

1.2. The Committee welcomes the Commission's initiative and finds the content of the Communication acceptable. However, since certain key aspects of the reform are only sketched out very vaguely, the Committee reserves the right to draw up a more detailed Opinion when it has seen the concrete proposals.

2. General comments

2.1. The Commission paints an accurate picture which - albeit belatedly - reflects the views put forward by producer organizations in the various Member States.

2.2. The Committee endorses the Commission's overall assessment of the existing market organization, and welcomes its renewed promise to fulfil the commitments entered into with the Council at the meeting in September 1993, where it was stated that: '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' (page 3 of the Commission Communication).

2.3. Account should also be taken of the fact that the GATT commitments included an undertaking, covering all the sectors of the CAP, to comply with the financial guidelines established for the coming years.

2.4. Fruit and vegetable farming, alongside wine, olive oil and livestock production, form an activity which has strong traditions and which is therefore subject to strong social pressures. They are also the socio-economic mainstay of the majority of the EU's rural communities. The Member States need these communities for the construction and further development of the EU. They are also needed to conserve natural resources and the environment and, above all, to stem the rural exodus from vast areas of the Community so as not to exacerbate the already alarming increase in social problems and marginalization in urban areas.

2.4.1. Altering the market organization of this sector is not just a question of economics. Other delicate considerations must also be weighed up, such as the human aspect, the lack of alternative activities and the type of people concerned, as well as the jobs which the sector generates locally and the indirect employment which it provides in the processing and distribution sectors.

2.4.2. The Committee would also stress the sector's modest share of the EAGGF budget (around 3,9 %), despite representing 16 % of EU total final production and a utilized agricultural area (UAA) of 4,3 %.

2.4.2.1. The market organization affects 1,8 million farms, 1,35 million of which grow both fruit and vegetables and have an average size of 1,3 hectares. The remaining 450 000 grow either fruit or vegetables and have an average size of either 4,2 ha (vegetables) or 7,9 ha (fruit).

2.4.2.2. For all these reasons, appropriate budgetary resources must be provided, given the fact that the sector is in crisis and in need of adjustment, to ensure that the measures to be implemented are effective and make European production competitive.

2.4.2.3. Fruit and vegetables are a fundamental and important part of a healthy, balanced diet.

The Committee therefore advocates a steady increase in fruit and vegetable consumption, as recommended by nutritionists.

2.4.3. The need to keep a vast and tightly knit web of employment in the sector fully justifies pursuit of the objectives underpinning the common market organization and its management and support mechanisms, notably in the light of the commitments recently entered into by the EU under the new GATT Agreement; these commitments certainly did not derogate from the three basic tenets of the CAP as defined in Article 39 of the Treaty of Rome.

2.5. The EU's overall self-sufficiency rate for fruit and vegetables is just 40 %.

This figure should be treated as a strategic threshold and any reduction considered unacceptable. Any changes to the market organization must therefore guarantee that production at least remains at its present level.

2.6. Given the pressure of supply on the European market, it is vital that all fruit and vegetable imports respect the principle of Community preference.

EAGGF-Guarantee funding must continue to be provided for market withdrawals of all products presently covered by the scheme.

For other products in the sector, it might be acceptable after a transitional period for EAGGF-Guarantee funding to be accompanied by a possible contribution from producer organizations.

2.7. The establishment and operation of producer organizations and their associations, under the terms of Council Regulation 1035/72 (), also needs to be improved in order to concentrate supply to match the growing concentration of demand. However, account must also be taken of the specific situation of each region and, in particular, of the average size of the farms concerned.

2.7.1. Agricultural cooperatives, especially in areas where farms are small, are well placed to act as producer organizations too, since they have considerable technical and commercial experience. They already take in production on behalf of their members and give them technical assistance at all stages of production, storage, grading and quality control, right through to distribution to the consumer. These organizations can offer the consumer a guarantee of their production methods. It should be stressed that in countries where the present market organization has operated most satisfactorily (the Netherlands, Belgium, the UK), producer organizations are run as cooperatives. Any legislative changes should take this fact into account.

2.8. The Committee wonders what impact the agreements with non-EU countries in the Mediterranean region and eastern Europe will have on the sector. While the Committee realizes that geopolitical considerations and solidarity come into play here, it feels that concessions cannot be made by EU agriculture alone.

2.8.1. These countries' trade deficits with the EU benefit other sectors. The EU should compensate the social injustice which this creates.

2.9. The Committee endorses the Commission's analysis of the situation facing the sector both in the EU and internationally. It also welcomes the Commission's declared intention to redirect budgetary expenditure in order to:

- concentrate supplies more effectively in order to match increasingly concentrated distribution;

- find a new way of managing short-term surpluses and gradually eliminating structural surpluses;

- secure a better balance between fresh and processed products;

- redefine standards, taking due account of consumer interests;

- adopt a special approach to the specific problems affecting certain products which, although of minor importance in Community terms, are of significant local or regional importance;

- step up controls; these should extend to the size and quality of imported products and, if possible, production methods.

3. Specific comments

3.1.

Producer organizations

3.1.1. The Committee agrees with the Commission that producer organizations could prove the most effective way of concentrating product supply and managing the markets. This would bring supply and demand closer together and improve the balance between the two, while also helping to gear production more closely to consumer preferences.

3.1.2. For the new regulations to succeed, they must encourage producers to form producer organizations, to become active members of such organizations and, with the exception of any produce that they sell direct to the consumer, to deliver all their production to them. The organizations must be genuinely effective in their management of each year's production. To this end, they must be supported by a safety net which ensures that they receive adequate returns from the market.

3.1.3. The aim will be to find a practical and lasting way of ensuring that supply meets demand, with the active participation of producers. The Committee thinks that the Commission should specify in detail the minimum requirements which a producer organization must fulfil in order to be recognized, applying a degree of flexibility according to such factors as:

- local and regional circumstances;

- average farm size;

- socio-economic situation;

- simple, professional and transparent management;

- establishment of independent professional control mechanisms;

- emphasis on the marketing side;

- encouragement of links between producer organizations, in order to improve the grouping of supply;

- exploitation of the experience gained by farm cooperatives in many regions where farms are small, helping these cooperatives to be recognized as producer organizations provided that they meet the necessary legal requirements.

3.1.3.1. Account will also have to be taken of the level of development of each producer organization, setting an appropriate transitional period and providing financial support for the necessary adjustments and for the establishment of control mechanisms.

3.1.3.2. For the new arrangements to be successful, financial mechanisms will have to be devised to ensure that assistance is paid out in good time, bearing in mind the delicate economic position of many producers.

3.2.

Joint financing

3.2.1. The Committee points out that the introduction of joint financing by producers and Member States would make the basic CAP support for the sector inconsistent with the support given to other CAP products (cereals, oilseeds, livestock), which have already been reformed but are still fully financed from the EAGGF Guarantee Section.

3.2.2. As we have seen in the past, economic differences between Member States can give joint financing a lopsided effect, thus aggravating the imbalances between producers in different regions of the EU rather than helping to reduce them.

3.2.3. Most EU citizens are in favour of the joint financing of promotional and marketing activities and measures designed to improve product quality and protect the environment, but imports from third countries must be subject to the same requirements, including those on labelling. If not, European producers' costs could be adversely affected.

3.2.4. Any introduction of joint financing would require a significant transitional period, with 100 % funding from the EU. Only at the end of this period, and after rigorous analysis of developments in producer organizations and the market, can its implementation be considered.

3.3.

Operating funds

3.3.1. The Committee views with interest the proposal to set up operating funds. These should provide a real market intervention and management fund for producer organizations. It considers such funds to be a valuable instrument for the programmes to be implemented by producer organizations, with the primary aim of securing the requisite competitiveness.

3.3.2. As regards the possibility of using such funds to pay for products which are withdrawn or sold for processing, the Committee considers that fruit and vegetable producers should not be treated any differently from the sectors which have already been reformed, and should not have to make a financial contribution to this type of measure.

3.3.3. When considering the public contribution to the operating funds, account will have to be taken of:

- the position of the products being marketed;

- the level of regional organization;

- the type of producers concerned;

- possible distortion of competition within the internal market caused by Member States' differing policies.

3.3.4. The Committee also asks for provision in the market reform to help protect producers against natural disasters. This should first and foremost involve financial assistance to producers, producer organizations and cooperatives wishing to conclude insurance contracts () against damage caused by hail or frost, or wishing to install frost-protection equipment and netting to protect crops from hail.

3.4.

Operation of the withdrawal system

3.4.1. Withdrawal must only be used as a market stabilization mechanism for tackling short-term surpluses, and must in no circumstances become a production objective. Measures must be adopted to prevent this.

The revision of the system must be based on objective criteria, bearing in mind that problems have only arisen with six of the fourteen products covered by the common market organization. Hence it would be unacceptable to penalize the whole sector.

Any restrictions on withdrawal prices and the percentages going to intervention should, in the case of products in structural surplus, be accompanied by grubbing-up receiving 100 % Community funding.

3.4.2. The Committee considers that it would be useful to establish, in advance, the maximum percentages of products to be withdrawn from the market, with reference to the quantities actually marketed by each producer organization.

This restriction should also apply to products which are not subject to the withdrawal price and which might be subject to intervention.

3.4.3. The Committee thinks that new alternative outlets should be sought and developed for the products withdrawn, as destruction is generally frowned upon by the public. Possible options might include free distribution to disadvantaged groups, institutional and educational promotion campaigns, or use as animal fodder, although care would have to be taken not to distort the market.

3.5.

Import controls under GATT

3.5.1. Under the terms of the GATT agreements, a system must be devised for applying the entry price system and the special safeguard clause. Here one must bear in mind the way in which fruit and vegetables are marketed. Hence, when establishing the frontier price, account will have to be taken of the import price, additional duties, and the average price of EU and imported produce on wholesale markets within the EU.

The formula for calculating the entry price will have to be clarified in order to avoid serious distortions of competition.

3.5.2. The Commission should devise appropriate ways to ensure proper control of the quantity, price and quality of imports, with a view to overseeing the markets and guaranteeing the consumer a healthy, high quality and properly labelled product.

3.5.3. The Committee stresses the delay in informing the market of the rules implementing the GATT agreements and Community preference.

3.5.4. Also in the context of the GATT agreements, the creation of artificial trade barriers (e.g. phytosanitary rules) should not be permitted. If such barriers were to be erected, the relevant rules would have to be clear and the same for all GATT signatories.

3.6.

Quality standards

3.6.1. Quality standards should be maintained, as they are important for market transparency and facilitate trade. They also provide useful guidance for the consumer.

3.6.2. However, the Committee advises the Commission and operators to review the standards so as to gear them more closely to consumer requirements, particularly as regards hygiene, nutritional value and certain organoleptic qualities.

3.6.3. Standards should be used as a market management tool in the event of crises.

3.7.

Inter-branch arrangements

3.7.1. The vertical organization of the sector is bound to gain from the extension of inter-branch arrangements, as their effectiveness in certain Member States shows. The Committee considers that such arrangements should be voluntary and representative, and should have an appropriate Community legislative framework.

3.8.

Relocation of production

3.8.1. Although the relocation of production is played down in the Commission Communication, the Committee feels it is likely to affect many regions and may constitute a serious problem in the next few years. The Committee therefore asks that the situation be carefully monitored so that timely action can be taken.

3.9.

Transition period

3.9.1. There will be further changes on the market and these will be difficult to quantify, particularly as regards the increase in imports. Programmes will therefore have to be drawn up for each region, in order to adjust production. Radical measures will be needed to keep European production competitive, and their effectiveness will have to be controlled and assessed.

3.9.2. Reconversion and restructuring measures must be designed to satisfy demand and keep self-sufficiency at the present level (40 %). Investment must be channelled to appropriate regions, in order to maintain local employment and prevent rural dwellers moving to the big cities.

3.9.3. The length of the transition period must be decided on the basis of the results of the assessment and the volume of financial resources involved.

3.10.

Statistics

3.10.1. The Committee shares the Commission's concern about the lack of statistics. Active steps should be taken to rectify this and should also involve producers, distributors, processors and consumers through their representative organizations.

3.11.

Processed products

3.11.1. Processing must provide a fixed outlet for some Community fruit and vegetable produce. For a number of products, it is now merely a marginal outlet which takes second place to the fresh market. Stable, transparent relations must be forged between producers and processors.

3.11.2. Under no circumstances must the rules for fresh products make it difficult to send them for processing. The Committee therefore supports the retention of a separate market organization for these products. This should be broadly based on Regulation (EEC) No 426/86, updated to cater for the situation within the internal market and to make production more flexible. These principles are also mentioned in the Commission document.

3.11.3. Processors should also be able to purchase their raw materials at more competitive (i.e. accessible) prices. A system of contracts should ensure that farmers receive a guaranteed minimum price and that processors are paid the difference between the price of the Community and the EU raw material.

Done at Brussels, 26 January 1995.

The President

of the Economic and Social Committee

Carlos FERRER

() OJ No L 118, 20. 5. 1972.

() Information Report CES 454/94 final; Own-initiative, OJ No L 313, 30. 11. 1992.

APPENDIX to the Opinion of the Economic and Social Committee

1. Defeated amendments (third paragraph of Rule 47 of the Rules of Procedure)

The following amendments were defeated during the discussion:

Point 2.9 (last indent)

Delete '... controls; these ...' and replace with '... information to the consumers; this ...'.

Reasons

Consumers have objected to quality controls which withdraw for example the small apples, that children like, from the market. Instead consumers want information about size and production methods.

Voting

For: 41, against: 56, abstentions: 10.

Point 3.2 - Joint financing

Delete 3.2.1, 3.2.2 and 3.2.3 and replace with:

'3.2.1. The Committee welcomes the introduction of joint financing in this sector. It will provide for a more responsible and prudent use of the funds of the EU and will point the way to a further reform of other sectors.'

Renumber 3.2.4 as 3.2.2 Delete 'Any' in line 1 and replace with 'The'.

Delete after 'EU' in line 2 to the end of the paragraph.

Reasons

Joint financing means that there is a contribution to the expenditure by the Member State. Having to make a contribution from the national budget is likely to make the Member State much more prudent and responsible in seeing that the particular amounts really need spending.

Voting

For: 40, against: 64, abstentions: 8.

Point 3.6.3

Delete.

Reasons

Consumers have objected to quality controls which withdraw, for example, the small apples, that children like, from the market. Instead, consumers want information about size and production methods.

Voting

For: 40, against: 59, abstentions: 7.

2. Text of Section Opinion rejected in favour of an adopted amendment (fourth paragraph of Rule 47 of the Rules of Procedure)

Point 3.1.3 (first sentence)

'The aim will be to find a practical and lasting way of securing objective control of supply with the active participation of producers.'

Voting

For: 67, against: 28, abstentions: 9.