Opinion of the Economic and Social Committee on:the Proposal for a Council Regulation on the common organisation of the market in rice, andthe Proposal for a Council Regulation amending Regulation (EC) No 1251/1999 establishing a support system for producers of certain arable crops, in order to include rice
Date: 2000-10-19
Institutions: European Economic and Social Committee
Subjects: EU production, aid per hectare, common organisation of markets, producer organisation, regional aid, rice

16.1.2001

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Opinion of the Economic and Social Committee on:

— the ‘Proposal for a Council Regulation on the common organisation of the market in rice’,

and

— the ‘Proposal for a Council Regulation amending Regulation (EC) No 1251/1999 establishing

a support system for producers of certain arable crops, in order to include rice’

(2001/C 14/27)

On 19 June 2000, the Council decided to consult the Economic and Social Committee, under Articles 36
and 37 of the Treaty establishing the European Community, on the above-mentioned proposals.

The Section for Agriculture, Rural Development and the Environment, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 6 October 2000. The rapporteur
was Mrs Santiago.

At its 376th meeting on 19 October 2000, the Economic and Social Committee adopted the following
opinion by 42 votes to 12 with 8 abstentions.

1.

Introduction

2. General comments

1.1.
There is a major imbalance in the European rice market
according to the Commission, as set out in its proposed
regulation on this sector.
It attributes the causes of this
imbalance to increases in imports and production and the
limitation of subsidised exports under the GATT agreement.
The Commission also notes that a solution to this problem
must be found quickly by revising the common market
organisation for rice and at the same time reducing production.

1.2.

Thus the Commission is proposing to:

— integrate rice into the arable crop system;

— abolish the intervention mechanism and the intervention

price for rice;

— resume, if possible, the system of fixed import tariffs

granted under the Uruguay Round;

— compensate producers for the drop in prices with an
increased area payment of 63 EUR/t instead of the current
52,65 EUR/t;

— establish a set-aside scheme identical to that for cereals;

— make the use of certified seed mandatory.

1.3.
The Commission intends to use these measures to re-
establish a balance in the market, make Europe competitive on
the world market and plug the financial gap caused by the
significant build-up of rice intervention stocks over the last
few years.

2.1.
Rice crops are irrigated by flooding, requiring an
abundance of water; the water plays a key thermo-regulatory
role in the development of the plant which has to remain
submerged throughout its growing cycle. It is best for just a
shallow layer of water to cover the plant so that sunlight can
get through, and for the layer to be as even as possible. This
entails controlling water levels to within a millimetre, achieved
using precise laser-aided levelling techniques before the seeds
are sown. Regulating water levels within the paddies is vital
for good plant growth and pest control; this involves good
networks of irrigation canals, drainage ditches, bunds (earthen
levees) between paddies, and dikes (tracks) for access to these
paddies.

2.1.1.
The rice paddies are levelled off at zero depth point
so that as little water is lost as possible. Redeploying the land
for other crops involves building up the land surface to create
a gentle slope or ridges and furrows so as to ensure a certain
amount of surface drainage. Such conversion work, which is
always costly because of the amount of earth which needs to
be moved, is only an option in areas which are not traditional
rice-growing areas.

2.1.2. Most of the traditional rice-growing areas are either
to be found in shallow marshland with insufficient internal
and surface drainage or in alluvial zones on the banks of rivers
where the soil is made up of marine sediment and where the
groundwater has a high salinity level. The soil saturation
problems associated with marshland and salinity in the
groundwater means that no crops other than rice can be
grown. Moreover, flooding is vital to prevent groundwater
levels rising, thus preventing sodium from being adsorbed into
the molecular structure of the clay, which would lead to its
disagglomeration,
i.e. the soil would lose its texture and
integrity, making it unsuitable for any type of crop.

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2.1.3.
The Commission’s concern about an increase in the
area used for rice production is unwarranted, since the very
conditions required for this kind of crop practically limit
the surface area thus employed, as does the specialised
mechanisation, as in many regions this cannot easily be
transferred to other crops.

2.5.1.
Northern Member States mainly consume the Indica
subspecies (long grain) imported from third countries and also
in recent years produced within the EU. Its production rose
from 27 000 tonnes in 1988/1989 to 120 000 tonnes in
1999/2000, representing about 55 % of Community con-
sumption of this type of rice (2).

2.2.
Rice cultivation plays a key role in preserving the
environment of the areas where rice is produced. This type of
farming is suited to very specific soil and climatic conditions,
image of harmony with nature and
providing a perfect
environmental values. The rich rice-paddy ecosystem is of
undeniable value in terms of both landscape and wildlife,
creating a suitable habitat for aquatic birdlife. Rice paddies
constitute specific ecosystems which no other type of crop
creates. Flooding with fresh water allows small species to
develop, including the freshwater crayfish, attracting a wealth
of wildlife, in particular migratory birds such as ducks, swans,
storks and snipes.

2.3.
Although rice cultivation is nowadays almost fully
mechanised, it is more labour-intensive per hectare than other
types of cereal because of the specialisation involved and the
work entailed in moving water around the paddies.

2.4.
Rice cultivation is of key importance in some areas of
southern Europe in terms of population and land-use planning
and the social balance of rural areas. In one Communication (1),
the Commission states that ‘in Italy and in France 33,8 % and
47,8 % [...] of farmers possess more than 30 hectares of rice
land. In Spain, Portugal and Greece only 6,9 %, 9,9 % and 1 %
of farmers have respectively more than 30 hectares. In these
Member States, rice cultivation is small scale with around 77 %
to 85 % of the farmers having less than ten hectares. Rice
farmers tend to be very specialised, since about 65 % of rice
growers have more than 50 % of their land in rice cultivation.
These growers account for more than 78 % of the total rice
area. This means that a significant number of small rice
growers depend almost exclusively on rice for their agricultural
incomes’.

2.4.1. More recent data (from Eurostat 1997) show that for
example, in Greece and Portugal more than 50 % of farms
comprise less than 5 hectares and in Spain more than 50 % of
farms comprise less than 10 hectares.

2.5.
Community rice production is mainly of the Japonica
subspecies (medium grain), mostly consumed in the Member
States of southern Europe, which are also the producer
countries: Spain, Italy, France, Greece and Portugal.

2.5.2.
As a foodstuff, rice is very healthy, being a source of
complex carbohydrates: starch, to be more precise. It is also
rich in protein and is considered to be the cereal with the
highest quality protein, containing eight essential amino acids.
Rice contains practically no fat, cholesterol or gluten.

2.5.3.
The key difference between the different types of rice
consumed within the EU — Indica and Japonica — relates to
the type of starch they contain. In Indica rice, the starch
is made up of amylose, a polysaccharide in which the
macromolecules exhibit a linear structure; this means that it
does not easily retain water. This type of rice is easy to cook:
its grains do not normally stick together, but it does not easily
absorb the taste of the food with which it is being cooked.
Japonica rice is essentially made up of amylopectin, a polysac-
charide in which the macromolecules have a branched struc-
ture; it is susceptible to excess absorption of water, but does
absorb well the taste of the food with which it is being cooked.
Its forms of preparation are more sophisticated, allowing a
considerable variety of dishes which are more in keeping with
the Mediterranean diet. This type of rice requires more
sophisticated forms of preparation, allowing a considerable
variety of dishes, where the rice is cooked together with meat,
fish, vegetables or shellfish or sometimes a mixture of these
ingredients. There is a great variety, all of which are delicious,
nutritionally balanced, healthy and perfectly suited to present-
day consumer quality and safety requirements.

2.6.
Until 1996 the rice market in the Community was
stable, without any need for recourse to intervention and with
market prices which were very close to intervention prices.

The surplus in Japonica rice was exported to third
2.6.1.
countries, under a system of export refunds. Indica rice, mainly
imported into northern Member States, was subject to variable
import duties calculated on the basis of the value of the rice in
the husk.

2.7.
The 1993/1994 Uruguay Round negotiations had the
effect of penalising the sector, not so much because of
concessions to the inevitable pressures for liberalisation, but
because of the way that the EU agreed to set up its barriers.

The variable levies were converted into fixed tariffs and
2.8.
were to be reduced by 36 % overall by the year 2000. European
farmers have been given area aid which has only partly
compensated them for the drop in market prices.

(1) COM(95) 331 final, p. 10.

(2) COM(2000) 278 final.

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2.8.1.
In the GATT negotiations, the negotiators’ indiffer-
ence vis-à-vis rice had serious consequences, since they placed
rice alongside the other cereals for the purposes of customs
tariffs, forgetting that rice, unlike other cereals, undergoes
prior industrial processing, namely husking and milling.

hitherto not been seen in the sector, making a revision of the
CMO in rice inevitable. It is quite fair to affirm that only
Europe has lost out and only non-European exporters have
emerged better off.

This oversight in negotiations was immediately used
2.8.2.
by the United States, who called for the introduction of a
special import clause, headnote 7, which consists of a pricing
system calculated in such a way that the price of imported
rice, after payment of duties, would never be higher than a
given percentage over the intervention price of Community
rice. This means:

— for Japonica rice: 188 % of the intervention price for

paddy rice;

— for Indica rice: 180 % of the intervention price for paddy

rice,

— irrespective of the price/quality of the rice concerned.

2.8.3.
This agreement subsequently entailed a special abate-
ment being granted for basmati rice, the price of which was
on average 250 EUR/t higher than the world market reference
prices. This rice is currently entering the Community at zero
duty or virtually zero duty, and of course imports increased
from 40 000 tonnes in 1994/1995 to 100 000 tonnes in
1998/1999.

2.8.4.
Also to be noted is the fact that rice imported under
preferential conditions — 160 000 tonnes of husked rice from
ACP and OCT countries at reduced duties for ACP countries
and zero duties for OCT countries.

2.8.5. With the accession of the new Member States, new
tariff rate quotas had to be opened for 63 000 tonnes per
annum of milled rice at zero duty and 20 000 tonnes per
annum of husked rice at a duty of 88 EUR/t.

In summary, under

2.8.6.
the preferential conditions
200 000 tonnes of rice, i.e. 40 % of all current imports, are
imported at zero or much reduced duty. The remaining 60 %
pay only around 200 EUR/t, instead of the 264 EUR/t initially
agreed upon, and if Basmati rice and ACP and OCT imports
are included in the calculation, the average duty applying at
the moment falls to 110 EUR/t.

limiting exports of

This situation, together with the reduction of refunds
2.9.
on exports,
threw the
Community rice market out of balance, pushing up imports
sharply and pushing down internal prices below the inter-
vention price. It was therefore a logical consequence to make
use of intervention, and this reached proportions which had

Japonica rice,

It is important to highlight that although European
2.10.
rice production is insignificant on a worldwide scale (0,4 % of
total world rice production), the European market is much
sought-after by international producers.

2.11.
On the other hand the United States, which is
essentially an exporting country, has been implementing a
policy of subsidising production to compensate producers for
the fall in world market prices, and this has led to an expansion
in rice-producing areas and productivity.

2.12.
The United States plays a predominant role in setting
prices and influencing their trends. Rice is one of the products
traded on the Chicago commodities exchange and inter-
national price fluctuations in rice are subject to heavy specu-
lation which may bear absolutely no relation to the rice
situation in Europe.

2.13.
The modest profile of rice compared to other cereals
means that it is frequently used as a pawn in international
trade negotiations in order to achieve agreements which are
more advantageous for cereals — which are politically and
socially more important in the European Union.

3.

Specific comments

The particular nature of the rice market was recognised
3.1.
by Community legislators as early as the 1960s when the
common market organisations were set up and it was for this
reason that in 1967 a regulation was passed establishing the
single market in rice. It is clear that the creation of a common
market organisation (CMO) in rice, as distinct from a CMO in
cereals, matched the need to take into account the specific
features of the rice sector, both in terms of cultivation practices
and production and consumption. These specific features still
remain and there is no sense in trying to ignore them.

3.2.
Both the CMOs comply with the same basic principles
which should not be forgotten (intervention price, external
trade regime, single market and freedom of
transaction,
Community preference and the pursuit of an adequate standard
of
living for producers). The incorporation of rice into
the ‘arable crops’ system would logically presuppose that
intervention will be maintained and not abolished as the
Commission is proposing.

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3.3.
Rice is not a crop which can be compared to other
cereals, since although productivity may be greater, production
costs are substantially higher. Integrating it into the general
scheme for arable crops, particularly given the discriminatory
way in which it is treated, is turning out to be extremely
disadvantageous for this sector.

3.7.
It should be pointed out that the special treatment
given to maize, as an irrigated crop, should also a fortiori, be
given to rice, since its production costs are higher, and the
social, environmental and land conservation role it plays is
both important and irreplaceable.

3.4.
Abolition of the intervention mechanism (which has
been maintained for other cereals) makes farmers totally
dependent on the prices and criteria set by the industry, not
least because the intervention price has always functioned as
an indicator for the market price. In its earlier Communi-
cation (1), the Commission itself recognised that ‘although
intervention is hardly used it plays a significant role in
determining market prices’. This role in regulating market
prices has not changed and the use of intervention over the
last few years is the result of a badly negotiated trade policy
inappropriate for producers, the costs of which they will now
unjustly have to bear.

intervention will, according to the
3.5. Withdrawal of
Commission, trigger a 10 % to 11 % fall in production prices.
However a market study (2) carried out by experts in this area
foresees a 25 % to 30 % collapse in Community rice prices.
Thus the EUR 10,35 per hectare increase in area aid proposed
by the Commission corresponds to around 12 % compen-
sation. This contrasts with the 50 % compensation given for
the price falls under Agenda 2000 for the other cereals.

3.6.
As regards the aid to be allocated to rice production,
which is the same as that provided for in Agenda 2000 for
other cereal crops, the Commission proposal is not clear as to
the productivity to be attributed to rice, since 1(5) of the new
proposal (amending Article 4(2)) clearly states that where
maize is treated separately, as occurs in rice-producing Member
States,
‘the “maize” yield shall be used for maize, and the
“cereals other than maize” yield shall be used for cereals,
oilseeds, rice, linseed and flax and hemp grown for fibre’ (3).

3.8.
Rice is treated like any other arable crop, with manda-
tory set-aside. The Commission did not take account of the
difficulties involved in reconciling rice cultivation techniques
with the withdrawal of land from use (maintaining the water
flow and the costs involved, organising the way that the land
plots are grouped together, etc.). In addition, compensation
allocated for set-aside under the current proposal, which is the
same as for other cereals, does not even cover the costs of
either the water or the earth removal between fields necessary
for implementing the set-aside.

The mandatory requirement

3.9.
to use certified seed
involves an unnecessary increase in costs, the sole beneficiaries
of which will be the seed suppliers. Farmers always use some
certified seed and some seed which they themselves have
produced and selected. The amount of seed to be used in each
growing season varies, since the density of sowing depends on
the temperature at the start of, and during, the seed planting.

3.10.
The idea of private storage aid representing an
alternative to abolishing the intervention regime is quite
unrealistic, besides which this is a vague and very general non-
obligatory provision which could come under the title on
General Provisions, but never under the title on the Internal
Market, as is the case for the other CMOs. Moreover, the
Commission does not provide for any budget for private
storage in the financial statement.

4. Conclusions

However, Commission representatives have given
3.6.1.
assurances that the Commission’s intention is not this but is
rather to maintain rice-growing productivity levels and areas
in each country.
is therefore proving vital to provide
preliminary clarification of how this document is to be read,
since the document does not correctly reflect the Commission’s
position.

It

The Committee agrees with the Commission that the
4.1.
rice market is out of balance and that intervention stocks entail
excessive costs;
the
proposed measures will re-establish a balance in the market
but believes they will rather make rice production in the
European Union impracticable.

it does not, however, consider that

(1) COM(95) 331 final.
(2) Briefing note ‘EU rice policy reform proposals: budgetary and
policy implications’ by Graham Brookes — 29.8.2000 (only in
English).

(3) Regulation (EC) No 1251/99.

The whole thinking behind the proposal depends on
4.2.
the success of trade negotiations of which the results are
uncertain. The Commission is going ahead with proposed
amendments which are extremely detrimental to the sector,
without any guarantee that the prerequisites on which the
whole logic behind the proposed measures is based, will
actually materialise.

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The Committee does not agree with the withdrawal of
4.3.
intervention and wonders whether
the Commission is
intending to try this measure out on a less vociferous sector
and then, having established the precedent, extend the measure
to the other cereal sectors.

The Committee urges the Commission to clarify and
4.4.
quantify what it means by private storage aid in case there
should be a crisis in the sector. This provision is optional and
extremely vague and no budget has been provided for it in the
proposal’s financial statement.

4.5.
The Committee would point out that even if the
negotiations with the rice-exporting countries turn out to be
successful, these only cover 60 % of current imports. The
remainder is subject to pre-set quotas with zero or almost zero
duty; for this reason the Committee questions whether it is
opportune to carry out such drastic and disadvantageous
reform before the WTO negotiations. It would be more logical

to restore customs duties in their proper form, analyse the
market and only then, if necessary, contemplate a balanced
and fair reform in the sector.

4.6.
The Committee suggests that the Commission look
into the possibility of direct aid to producers more closely,
taking into consideration the social and environmental aspects
characteristic of rice farming in the EU.

4.7.
The Committee draws the Commission’s attention to
the important, irreplaceable role that rice plays in preserving
the ecosystems of wetlands and nature parks in southern
Europe, in land use and in preserving the flora and fauna
specific to paddy fields.

4.8.
The Commission cannot change the basic principles
the CMOs without creating considerable
governing all
inequality between producers. Budget constraints must not
affect only a few parties, since all parties contribute to
maintaining the fabric of rural society and each one constitutes
an integral part of the European agricultural model.

Brussels, 19 October 2000.

The President

of the Economic and Social Committee

Göke FRERICHS

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APPENDIX

to the Opinion of the Economic and Social Committee

Proposed amendments rejected

In the discussions, the following proposals for amendments were rejected; at least one quarter of the votes cast were
in favour of the proposed amendments.

Point 4.2

New second sentence:

‘The Committee recognises the serious consequences for developing countries, particularly relating to the crucial
Indian and Pakistani basmati trade. Increased barriers against them in the context of discussions for a new WTO
Agriculture Agreement are difficult to justify.’

Result of the vote

For: 20, against: 33, abstentions: 5.

Point 4.5

Delete last sentence.

Reason

It proposes significant increases in duties and prices to the consumer.

A potential trade dispute could instead be avoided by reforming the rice market through reducing the intervention
price by around 25 % (and tightening intervention criteria). This will bring down the price so that surplus japonica
can be exported without the need for export refunds. By keeping intervention, and the safety net for farmers, the
proposal is WTO consistent and does not require the offering of compensation to third countries.

Result of the vote

For: 19, against: 41, abstentions: 2.