WRITTEN QUESTION E-0069/03

by Erik Meijer (GUE/NGL) to the Commission

(23 January 2003)

Subject: Payment of subsidies to factories that process agricultural products rather than directly to farmers

1. Does the Commission pay some subsidies under the common agricultural policy to the agriprocessing industry, for example to potato starch manufacturers such as Avebe in the Netherlands?

2. On the basis of what considerations was it decided to not to pay these subsidies directly to the farmers who grow the potatoes, but to the industry, which can then make payments to the farmers in proportion to the quantity of potatoes supplied?

3. Why have farmers who grow potatoes not so far been eligible for direct subsidies?

4. Why did the Commission originally intend, as a way of offsetting lower prices for agricultural products, to move towards stopping the payments to the industry as of 2004?

5. What is now the reason for its changed plan to introduced a mixed system, whereby half of the payments will after all be made to the industry, with the other half being paid to the farmers?

6. What advantages and disadvantages do the various scenarios have for the farmers?

7. What advantages and disadvantages do the various scenarios have for the industry?

8. How will the Commission prevent this scheme from amounting to a form of EU-level state aid to the industry, although it wishes to do away with this kind of state aid in other cases?

Source: the Dutch newspaper De Volkskrant of 7 January 2003.

Answer given by Mr Fischler on behalf of the Commission

(26 February 2003)

1. to 3. Potato starch competes directly with cereal starch. The Council adopted similar measures for cereals and starch potatoes.

Direct payment in respect of potatoes intended for starch manufacture is integrated into the common organisation of the market in cereals governed by Council Regulation (EEC) No 1766/92(1). It is paid to producers of starch potatoes and may, depending on national provisions, pass via the processing industry.

In order to offset a number of structural disadvantages vis-à-vis cereal starch manufacturers, under Council Regulation (EC) No 1868/94(2) potato starch manufacturers also receive a premium for producing starch within the quota limit.

4. and 5. In July 2002(3) the Commission presented its reform guidelines in favour inter alia of a single payment per holding, independent of production (decoupling). After consulting the industry, it transpired that complete decoupling of direct aid could have placed the potato starch production sector in jeopardy. These factors led the Commission to include in its proposals(4) on the reform of the common agricultural policy (CAP) a long-term perspective for sustainable agriculture measures for this sector which decouple payments but retain a portion linked to production.

6. and 7. Complete decoupling of direct aid for starch potatoes would give producers freedom of choice to grow any agricultural product under the system of a single payment per holding; cultivation of starch potatoes could fall sharply as producers turn to crops requiring less investment and working time, such as cereals, resulting in a lack of raw material for the processing industry.

Partial decoupling, as proposed by the Commission, allows producers to choose their crops while retaining an incentive to produce starch potatoes and guaranteeing the neutrality of budget expenditure.

8. This system is intended for agricultural producers and does not constitute a form of state aid within the meaning of the Community rules.

(1) Council Regulation (EEC) No 1766/92 of 30 June 1992 on the common organisation of the market in cereals, OJ L 181, 1.7.1992.

(2) Council Regulation (EC) No 1868/94 of 27 July 1994 establishing a quota system in relation to the production of potato starch, OJ L 197, 30.7.1994.

(3) COM(2002) 394 final.

(4) COM(2003) 23 final.