WRITTEN QUESTION P-1111/98 by Francesco Baldarelli (PSE) to the Commission (30 March 1998)

Subject: Allocation of sugar quotas

Italy has an allocation (quotas A and B) of 15 692 000 tonnes of sugar quotas. In Italy, guaranteed national quotas are allocated, as a rule, by the Ministry of Agriculture by ad hoc decisions, in compliance with European limits and national sectoral plans.

The well-established practice of considering quotas as a kind of allocation to the processing industry is therefore unjustified. In many Member States, quotas are allocated on the basis of national plans, drawn up by common agreement by the industries, sugar beet growers' organizations and the Regions.

A programme to restructure the sugar beet sector is currently being introduced in Italy; it is therefore essential that a 'sectoral plan' be drawn up.

Under pressure from private lobby groups, the Ministry of Agriculture intends to reallocate and divide up 550 000 tonnes of quotas which are currently grown in the Marches Region and processed by the Fano sugar refinery.

This new development would create an alarming situation in the sugar beet sector in the Marches Region since it would open the way to quota transfers. This would cause a fall in the region's production levels and local agricultural incomes, at a time when the region's farmers are already facing serious difficulties owing to reduction and phasing out of European Union aid in 2001.

1. Will the Commission state whether national production quotas, which are the responsibility of the Regions and are paid to the processing industry, may be the subject of private transactions?

2. Does the Commission not consider that, as the subdivision of quotas has obvious repercussions on farmers' incomes, such quotas should be linked to the needs of the area in question so as to avoid speculation, and that such quotas should be established on the basis of a specific 'sectoral plan', jointly agreed by the sectors' associations, regional institutions and trade unions?

Answer given by Mr Fischler on behalf of the Commission (20 April 1998)

Production quotas have been a fundamental management mechanism of the common organisation of the market in the sugar sector since its introduction in 1968. On the one hand they place quantitative limits on the production of sugar which manufacturers may market either for internal consumption in the Community or for export with refund. On the other hand they ensure that the sugar beet growers receive a fair price for their beet which is manufactured into quota sugar, through the system of minimum prices which are agreed with manufacturers on the basis of framework contracts and inter-professional agreements.

In accordance with the rules laid down under Title III of the basic Council Regulation (EEC) No 1785/81 ((OJ L 177, 1.7.1981. )) for the sugar sector, Italy may allocate A quotas up to a maximum quantity of 1 320 000 tonnes of white sugar and B quotas up to a maximum quantity of 248 250 tonnes of white sugar, to manufacturers established on the whole of its territory.

It should be noted that Italy, like the majority of the other Member States, is considered as a single region for the purposes of allocation of production quotas in the sugar sector. For the current 1997/1998 marketing year, for example, the Italian authorities have notified the Commission of the ministerial ordinance allocating production quotas to five manufacturers operating sugar factories throughout its territory.

When making transfers of production quotas between manufacturers, a Member State is obliged to take into consideration the interests of each of the parties concerned and in particular those of sugar beet growers. This means in practice that the different parties have the opportunity to express their points of view, normally through their national representative organizations, before the Member State reaches its final conclusions.

In this respect, it is important to bear in mind that the production control policy in the sugar sector has been accompanied in recent years by a stringent price control policy which has meant that the guaranteed prices under the quotas have been frozen and even reduced in ecu terms. These factors, combined with the increasing exposure to world market conditions brought about by the agriculture agreement concluded within the General agreement on tariffs and trade (GATT) have meant that sugar manufacturers and sugar beet growers throughout the Community are having to rationalise and modernise in order to remain competitive in the changing market conditions.

Furthermore, the sugar beet growers in a number of Member States including Italy are having to adapt to the final phasing out of national adaptation aids for beet growing during the life of the current production quota system which comes to an end on 30 June 2001.

Faced with these challenges, the possibility does exist within the existing rules for a Member State to draw up a restructuring plan covering sugar beet growing and sugar manufacture on the whole of its territory. Such a plan is indeed obligatory when large-scale production quota transfers between sugar manufacturers are envisaged in Italy, Spain and the French overseas departments where re-structuring of the sugar sector is felt to be especially necessary. The drafting of a restructuring plan has the advantage, in particular, of ensuring dialogue, openness and continuity in reconciling the often conflicting interests of the various interested parties affected, and goes some way to meeting the concerns expressed by the Honourable Member.