Opinion of the Economic and Social Committee on the 'Proposal for a Council Regulation (EC) amending Regulation (EEC) No 136/66 on the establishment of a common organization of the market in oils and fats'
Date: 1998-05-28
Institutions: European Economic and Social Committee
Subjects: common organisation of markets, fats, market intervention, olive oil, production aid

C 235/78

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Official Journal of the European Communities

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Opinion of the Economic and Social Committee on the ‘Proposal for a Council Regulation
(EC) amending Regulation (EEC) No 136/66 on the establishment of a common organization
of the market in oils and fats’ (1)

(98/C 235/18)

On 6 April 1998, 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 this subject, adopted its opinion on 12 May 1998. The rapporteur was Mr Quevedo
Rojo.

At its 355th plenary session held on 27 and 28 May 1998 (meeting of 28 May), the Economic
and Social Committee adopted the following opinion by 67 votes to eleven, with eight
abstentions.

1.

Introduction

1.0.
The proposed amendments to the CMO regu-
lations are part of the CAP reform discussed in Agenda
2000. Under these market organizations, the main
EAGGF market-related expenditure is based on aid to
the three large groups of continental products (COP
crops, milk and beef). These three groups represent
two-thirds of total EAGGF expenditure, having risen
from 63,7 % in 1986 to 67,2 % in 1996. Traditionally
these products have been the principal source of surpluses
throughout the CAP’s existence. In contrast, the three
main Mediterranean products (wine, olive oil and
tobacco) represent barely 10 % of total EAGGF expendi-
ture and in the reference period their share has fallen
from 13 % (1986) to 9,8 % (1996).

The CMOs in Mediterranean products should
1.0.1.
allow for the fact that
in percentage terms these
products have a greater impact on job-creation than the
continental products. It should be stressed that urgency
procedures have been followed for the amendment of the
Mediterranean product CMOs which are discriminatory
compared with the procedures applied for the continen-
tal products, both in their failure to consult the usual
social and economic representatives and in the peremp-
tory decisiontaking.

— Break-down of the MGQ between the Member

States as follows:

Spain

France

Greece

Italy

Portugal

625 210 t

3 065 t

389 038 t

501 175 t

43 915 t

(40,0160 %)

(0,1962 %)

(24,9000 %)

(32,0770 %)

(2,8107 %)

— Abolition of consumption aid.

— Abolition of aid to small producers.

— Abolition of the intervention mechanism and replace-

ment with a private storage system.

— 1 May 1998 established as the deadline for new
plantings eligible for aid, although exceptions would
have to be made for trees planted after this date
under modernization programmes approved by the
Commission.

1.1.1.2.

The second phase:

— Establishment of a reliable database of surface areas,
number of trees and yields in order to plan the
second phase.

— Declaration of the need for quality improvement
and promotion measures, but which are neither
specified nor provided for in the budget.

1.1. The Commission proposals

— Still no plans to ban blends.

1.1.1.
A two-phase reform, with the first phase (the
transition period) lasting throughout the 1998/1999 and
2000/2001 marketing years, and the second phase starting
on 1 November 2001.

— Repeal of the provisions on aid and the market
regulation mechanisms laid down in Council Regu-
lation (EEC) No 136/66 on the establishment of the
market in oils and fats with effect from 1 November
2001.

1.1.1.1.

The first phase:

2. General comments

— Increase in the MGQ from 1 350 000 t to 1 562 000 t.

2.1. A two-phase reform

(1) OJ C 136, 1.5.1998, p. 20.

2.1.1.
The first phase constitutes a fully-fledged
reform, though these policies do not necessarily have to
be reflected in the second phase. The basic reasoning

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behind such an approach is the lack of reliable infor-
mation to draft a genuine reform before 1 November
2001. The Commission has thus opted for an immediate
reform, irrespective of the consequences of such a change
and in clear contradiction with Conclusion 1 of the ESC
Opinion (CES 600/97) (1) and the Parliament resolution.

The justification for such urgency seems to be
2.1.2.
the fear of structural surpluses. However, no such
surpluses were produced even in the 1996/1997 market-
ing year when world production was higher than ever
before.

2.1.3.
The introduction of a stabilizer limiting the
number of trees eligible for aid to those planted before
1 May 1998 transfers the risk of surpluses to the
productive capacity of existing trees and any which
replace them in the future.

2.1.4.
A further ground for urgent reform could be
an attempt to guarantee the quotas of some producing
countries as opposed to others, given the unequal
investment and innovation effort in the olive oil sectors
in the Member States as a result of market dynamics
and the CMO.

2.1.5.
To summarize, there is no justification for
implementing the first phase of the reform — inappropri-
ately referred to as a transition period — until the
reliable data base required for the olive cultivation
register is established, as highlighted by the Commission
itself and by the Court of Auditors.

2.1.6.
Information from the olive cultivation register
may indicate that the second phase of the reform should
establish different criteria and mechanisms. Such a
situation would be both harmful and disruptive for the
sector.

2.2. An inadequate MGQ and an inappropriate and
discriminatory distribution between NGQs

2.2.1.
The maximum guaranteed quantity (MGQ) is
1 562 400 t, which is lower than Community consump-
tion in the 1996/1997 marketing year (1 657 000 t
according to the European Parliament report) and
consumption estimates for the coming years following
the drop in market prices.

2.2.2.
The reference period used to determine the
MGQ and the national guaranteed quantities (NGQs)
is both incorrect and discriminatory.

2.2.3.
It is incorrect insofar as the production cycle
for olives is essentially biennial. The reference period
should, therefore, cover several years (six at least). This
would ensure that after eliminating the best and worst
harvest years, information on at least four years would

(1) OJ C 287, 22.9.1997.

be included, which would be equivalent to the average
of two standard biennial cycles.

2.2.4.
The reference period is discriminatory insofar
as these figures should be revised annually on the basis
of the marketing years immediately before, and should
not remain fixed for the duration of the so-called
‘transition period’ on the basis of the figures for
1992/1993-1997/1998. The efforts of countries that have
invested most in renewing their plantations and in
technological innovation within the common framework
of the current CMO would be penalized for focusing on
quality, renewal, and innovation.

2.3. A premature and incomplete proposal

2.3.1.
The above-mentioned failure to establish a
reliable database means that the ‘transition phase’ has
been drawn up hurriedly, as its many shortcomings
demonstrate.

2.3.2.
The removal of small producers from the aid
regime should be combined with specific measures to
ensure the viability of small and medium-sized holdings,
since in some Member States these account for 55 % of
agricultural employment and play a crucial role in
keeping communities on the land and protecting the
environment.

2.3.3. Neither is there any consideration of varying
yield among olive groves. While there are structurally
very low-yield olive groves (those with a yield of less
than 1 000 kg/ha), there are some very high-yield olive
groves which produce a profit, even at market prices.
This variation is a permanent, not an isolated, factor.
Consequently, the use of the surface areas registered for
each holding and of the quantity harvested and marketed
by each holding could form the basis of a system whereby
production aid is continually adapted in relation to
production. Such a system would mean that marginal
olive groves could be kept in production, and would
provide a reasonable, but not excessive, incentive for
renewal and innovation.

2.4. Unjustified abolition of aid

Abolition of the aid system could lead to
2.4.1.
speculative movements. Private storage does not guaran-
tee that the markets will be supplied or that farm
incomes will be maintained. Nor is abolition justified
by the argument that production will be stimulated
when aid is restricted to groves existing at 1 May last.

2.4.2.
It should not be forgotten that aid makes it
possible to regulate prices and markets when necessary,
which has been very useful and has hardly cost anything
in the past. As is well-known, in this sector the variation

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in the harvest from one year to the next can amount to
one third of the average annual production. This is why
buffer stocks are essential.

deterioration, erosion in particular, bearing in mind that
olive groves in the EU serve as productive woodland
separating fertile land from desert land.

2.5.

Inadequate fraud control

In order to reduce fraud the proposal abolishes
2.5.1.
the aid to small producers and consumption, at the same
time transferring control measures to the Member States
once the NGQs are established. These measures are
inadequate and represent a surrender of its responsibili-
ties by the Commission.

2.5.2.
A possible means of combating fraud could be
to carry out an effective and real check on the oil
produced in olive-oil mills and traded commercially.
The Committee, therefore, suggests that data on the
quantity of fatty olive residue at point of exit from the
mill be cross-checked with the quantity at point of entry
into the olive-residue extractors. This physical check on
the olive oil actually produced and marketed should be
accompanied by simplification of aid management; this
is feasible and would additionally make it possible to
rationalize production and the market. As far as fraud
control is concerned, such a proposal would complement
the abolition of the aid to small producers by replacing
the double check which would have been possible
through the — now also abolished — consumption aid.

2.6. Promoting consumption and improving the qual-

ity of olive oil

2.6.1. Olive oil represents 3 % of production and
3,5 % of consumption of vegetable oils. To date there
have been no structural surpluses. Consumption is
minimal in numerous countries, including many in the
EU.

There has been a spectacular increase in con-
2.6.2.
sumption in countries with a high standard of living as
a result of the promotion campaigns carried out by the
IOOC.

2.6.3.
The ESC’s previous opinion recommended that
the EU finance these campaigns and warned against
blends which should, at the very least, be indicated on
the labelling to avoid confusion.

The promotion of the consumption of high-
2.6.4.
quality olive oil
through advertising campaigns
— possibly financed by the abolished consumption
aid — would create a market outlet for the average
annual production anticipated for 2005 in the IOOC
report (1 962 000 t), especially in the Nordic countries
and in others such as the United States, Japan, Canada
and Australia.

2.7. Protecting the environment

2.7.1.
In many EU regions, maintaining the culti-
vation of olive groves is the only alternative at present
to abandonment and the associated environmental

2.7.2. Olive groves on fragile soil, which make up a
high percentage of the area under cultivation, require
specific measures tailored to their marginality and
fragility. Such measures are not planned.

2.7.3.
Differentiating the production aid would
enable such marginal olive groves to receive a unitary
aid (per kg of oil produced and marketed) much
higher than that received by an irrigated grove, whose
production costs can only be offset by market prices.

3. Table olives

This sector is mentioned only in the explanatory
3.1.
memorandum. It is essential to plan support measures
right now for this sector whose viability is in grave
danger. It is also an important source of employment
and an opportunity for diversification of olive groves.

4. Conclusions

4.1. European leadership and Agenda 2000

4.1.1.
The EU leads the way in olive oil production
and consumption and this situation must be maintained.
For this reason it is crucial that the proposed reforms
can count on the support of all producing countries.

Such a reform proposal

4.1.2.
is possible if the
guidelines set out in the European Parliament report,
which received the unanimous backing of the EU olive
oil sector, are followed. The unity of the sector is the
key to maintaining leadership.

The guidelines contained in the Parliament’s
4.1.3.
report can be financially viable. Two supplementary
measures would seem relevant: a) consideration of an
increase in the financial statement for the CMO in olive
oil in the light of the increase for other sectors proposed
in Agenda 2000; b) a differentiation of production aid
in line with productivity which guarantees the income
of all olive oil producers and safeguards employment.

The EU should make a serious effort

to
4.1.4.
maintain leadership in production, marketing and inno-
vation in this sector. For this the following are required:
a) a campaign to promote high-quality olive oil financed
by the EU and the recognized producers’ organizations
to boost consumption to the levels required to absorb
the expected rise in production; b) a defence of quality

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by banning blends and their legal prosecution so as to
maintain the product’s image; c) an ongoing and
specific programme of R& D to safeguard technological
leadership.

5. Specific comments

5.1. Article 4

4.1.5.
Since its first note the Commission has per-
ceived olive oil as a potential danger and not as a product
whose qualities are universally recognized and with
enormous potential if properly promoted. To reiterate
the features of olive groves that make their future an
inescapable challenge for the EU: main source of
employment in European Objective 1 regions, sustain-
able farming system if support is differentiated with
CMO funds for olive groves with very different pro-
ductive capacity, dynamism of the production and
processing sector which in recent years have incorpor-
ated major technical innovations, way of life and cultural
factor rooted in broad regions of southern Europe, etc.

The Commission’s proposal, despite incorpo-
4.1.6.
rating some positive aspects compared with the 1997
note, still fails to understand the sector. Where the
Commission sees a problem, the sector sees opportunities
for expansion with proper product promotion and more
accessible prices as a result of the forecast increase in
supply. The all-round advantages (employment, social,
economic, environmental, technological leadership, etc.)
offered by this sector at the moment should not be lost
because of a reductionist approach and unjustifiable
urgency, given the lack of a reliable data base and the
fact that this is a product which is not in structural
surplus.

Brussels, 28 May 1998.

The Committee considers that the amendment contained
in this article is inappropriate given that the intervention
mechanism needs to be maintained in its present form
in order to safeguard the survival of the olive grove.

5.2. Article 5

The Committee accepts the NGQs determined in accor-
dance with this Article provided that they are amended
as soon as the Commission has the actual data on
production, area and number of trees from the Member
States. These changes should be implemented immedi-
ately without waiting for the end of the transition
period.

5.2.1.
The Committee considers that the MGQ should
be equal to total Community consumption plus exports,
minus imports, and including a quantity to act as a
buffer stock between marketing years. This should be
in the region of the quantity also recommended by the
European Parliament.

5.3. Article 11

The Committee considers it important that the pro-
motional campaigns provided for in this article should
highlight the prominent role of olive oil in preventing
cardiovascular diseases. The section would stress the
savings in EU public health spending which the consump-
tion of olive oil can achieve.

The President

of the Economic and Social Committee

Tom JENKINS