Opinion of the Economic and Social Committee on the "Proposal for a Council Regulation on the Common organisation of the markets in the sugar sector"
Date: 2000-11-30
Institutions: European Economic and Social Committee
Subjects: common organisation of markets, sugar

20.4.2001

EN

Official Journal of the European Communities

C 116/113

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Regulation on the
Common organisation of the markets in the sugar sector’

(2001/C 116/24)

On 20 October 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
proposal.

On 17 October 2000, the Section for Agriculture, Rural Development and the Environment was
instructed to prepare the Committee’s work on the subject.

At its 377th plenary session on 29 and 30 November 2000, (meeting of 30 November) the Economic
and Social Committee, in view of the tight deadline, appointed Mr Bastian as Rapporteur-General and
adopted the following opinion by 107 votes to 13 with eight abstentions.

1.

Introduction

1.1.
In the sugar, isoglucose and insulin syrup sector, the
production quota system flowing from Regulation (EEC)
No. 1785/81 has been rolled forward on several occasions.
It dealt with
The last roll-forward took place in 1995.
six marketing years — 1995/1996 to 2000/2001 — and
incorporated a number of major reforms made necessary by
the 1994 Marrakech Agricultural Agreement which concluded
the series of Uruguay multilateral trade negotiations. This
revised regulation was codified under the number 2038/99.

Article 26(6) of

this regulation stipulates:

‘Before
1.2.
1 January 2001 the Council shall, in accordance with the
procedure laid down in Article 37(2) of the Treaty, adopt the
arrangements to apply from 1 July 2001 to the production of
sugar, isoglucose and inulin syrup’.

The Commission proposes extending the Regulation
two marketing years —
to the following

1.3.
and the
2001/2002 and 2002/2003 — subject
changes:

current prices

for

— an obligation to be placed on Member States to ensure
that sugarbeet farming respects the environment, to set
— if necessary — environmental requirements to be met
and to send in a report to the Commission by 30 June
2002.

The Commission, moreover, proposes undertaking a
1.4.
number of studies on 1) whether to maintain or abolish the
quota system, 2) the degree of competition in the various agri-
food sectors and 3) the passing-on of price changes. In July
2002, the results of these studies, together with developments
in the WTO negotiations and the scheduled review of cereal
and oilseed regimes should, according to Commission, allow
the current regime to be revised.

2. General comments

2.1.
The operation of the quota system and financing by
means of production levies have meant that internal demand
has been fully met, a stable flow of exports has been
maintained, the Union’s commitments vis-à-vis the WTO have
been fulfilled and negotiations on enlarging the European
Union to include the applicant countries from central and
eastern Europe have been started.

— a reduction in quotas of 115 000 t;

— abolition of the system for reimbursing storage costs;

— abolition of funding for storage of sugar which has been
carried over or downgraded to meet GATT commitments;

2.2.
The operation of the price system and trade mechan-
isms with third countries have meant that reasonable incomes
have been secured for farmers in the EEC and ACP countries
and a suitable level of activity ensured for sugar manufacturers
and refiners.

— abolition of the obligation to maintain minimum stocks;

— querying the automatic alteration of adjustment aid paid
to ACP and Indian refiners of preferential raw sugar and
additional aid paid to French Overseas Departments
refiners of raw sugar;

The price policy, hallmarked by considerable stability
2.3.
over the last few years, has meant that the price of sugar has
been maintained at a level comparable with that in other
developed countries. It has dropped by 36 % in real terms
since 1985 and three-quarters of consumption is in the form
of processed products, the prices of which are not sensitive to
variations in sugar prices.

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2.4.
The Community market has been protected from the
sharp fluctuations in world prices and farmers and sugar
manufacturers have not had to suffer the serious social and
economic consequences which might have resulted from low-
price imports from some countries.

3.2.1.
The Committee queries the level of budgetary savings
to be expected from abolishing the system for reimbursing
storage costs, insofar as the reduction in expenditure will entail
a concomitant drop in receipts caused by the removal of the
associated levies.

2.5.
The European sugar regime offers the developing
countries in Africa, the Caribbean and the Pacific as well as
India a permanent outlet at a guaranteed Community price for
1 600 000 t of sugar; this comes on top of Community
production.

3.2.2. Moreover, the removal of the storage system intro-
duces the risk of these stocks being sold for intervention at the
expense of national and Community budgets; it also makes the
setting of export and production refund levels more difficult
and uncertain, and creates the risk of there being a shortfall in
supplies at the end of the marketing year.

3.

Specific comments

The Commission proposal deals with two marketing

3.1.
years.

The Committee recalls its previous opinions, particu-
3.1.1.
larly those of November 1992 and April 1993 (1), in which it
spoke out against short-term sugar regulations which helped
create a climate of uncertainty for producers and manufac-
turers and slowed down decision-making, particularly on
investment.

3.1.2.
The Committee notes that the Commission proposes
to reform the common market organisation (CMO) in sugar,
carry out the mid-term study on the cereals/oilseed sector and
possibly even reform the dairy regime all at the same time.

3.1.3.
The Committee feels that the Berlin commitments
concerning agriculture, particularly the budgetary framework,
must be complied with.

3.1.4.
The Committee calls on the Council to change the
two-year period proposed by the Commission so that the
duration of the regulation coincides with the duration of the
budgetary framework adopted in Berlin in March 1999 at the
summit of heads of state and government.

3.2.
The Committee regrets to note that the amendments
proposed by the Commission regarding storage have not been
subject to an impact study. It is also surprised by the fact that
arrangements which have been considered most valuable in
previous regulations are now suddenly described as unnecess-
ary without the Commission making the effort to justify its
change of opinion.

The Committee notes that the carry-over of C sugar
3.2.3.
makes it possible to regulate the supply of sugar onto the
market within the Union and for export; this warrants our
support.

3.2.4.
The arrangements for minimum stocks provide a
guarantee of supply, which is particularly valuable in areas
where there are shortages.

3.2.5.
restore the storage arrangements.

The Committee therefore calls on the Council to

3.3.
The Committee notes that the Commission’s proposal
for reducing quotas by 115 000 t is pointless, given the annual
adjustment arrangements for quotas stipulated in Article 10
for complying with GATT restrictions;
this
structural reduction in quotas could have a negative impact in
the event of an increase in consumption and that the reduction
is viewed badly by the regions who are calling for quota
adjustments or measures to offset natural handicaps.

feels that

it

3.4.
The Committee would point out that in the chemical
industry market, sugar and starch are in competition. Yet the
‘starch’ refunds for the chemical industry are fully funded by
the EAGGF without a producers’ levy, while the ‘sugar’ refunds
industry are mostly funded by levies on
for the chemical
sugarbeet, sugarcane and sugar producers. The ESC therefore
feels it is legitimate for the Community to continue to finance
the production refunds granted for 60 000 t of sugar used in
the chemical industry.

3.5.
The Committee stresses that as with any farming
activity, sugarbeet farming is subject to the environmental
protection rules applying at regional, national and Community
level.

(1) OJ C 19 of 25.1.1993 and OJ C 161 of 14.6.1993.

3.5.1.
must be enhanced.

The Committee feels that the sustainability of farming

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3.5.2.
Sugarbeet is only one crop in the rotation system. It
does not constitute any particular risk. The Committee there-
fore advocates horizontal and global sustainable management
of the environment rather than a sectoral approach.

3.6.
The Committee notes the Commission’s opinion that
the future of the CMO should take account of enlargement
negotiations.

The Committee notes that the current CMO with
3.6.1.
its quota and self-financing provisions can but
facilitate
enlargement by preventing the build-up of production surplus-
es and inflated budgetary expenditure.

3.6.2. Moreover,
the applicant countries are currently
restructuring their sugarbeet production and sugar industry to
adapt
to enlargement and to this end are investing in
modernisation of their sugarbeet/sugar sector. In parallel, at
the Union’s request, they are also taking on the Community
acquis, i.e. the current provisions and mechanisms of the sugar
threats
regulation. A regulation which is too short-lived,
hanging over the quota system, and abolition of price stabilis-
ation mechanisms such as funding for storage or for carry-
over, can only disrupt the accession negotiations and slow
down the adjustment efforts under way in the applicant
countries.

3.7.
Thanks to the reforms introduced in 1995, the sugar
CMO guarantees compliance with the commitments under-
taken vis-à-vis the WTO.

3.7.1.
On the other hand, the Committee has noted among
the European Union’s main partners a certain cooling-off of

Brussels, 30 November 2000.

enthusiasm for the commitments they had undertaken. The
United States are massively boosting their farming aid and will
in the near future be abandoning their ‘Fair Act’. Australia has
just granted substantial aid to its sugar sector, while Brazil and
Thailand are cancelling the debts of their sugar companies.

3.7.2.
The Committee believes that the Berlin agreements
must be complied with, as must the WTO negotiation brief
flowing from them; it believes that there is no point in jumping
ahead and outguessing the results of
the current sugar
negotiations at the WTO, and feels that the CMO could be
adjusted if that were to prove necessary once the negotiations
have been completed.

4. Conclusion

The Committee therefore supports the introduction of

4.1.
a sugar regulation valid until 2006.

It also advocates maintaining the provisions regarding
4.2.
the system for reimbursing storage costs, including the carry-
over.

It feels that it is unnecessary to reduce quotas and that
4.3.
there is no reason to modify the financial provisions relating
to the first 60,000 t of sugar used in the chemical industry.

Finally, the Committee asks to be involved in the study
4.4.
which the Commission intends to undertake to analyse inter
alia the criticisms directed at the sugar CMO, concentration in
the agri-food industry and the passing-on of price changes
from the producer to the consumer.

The President

of the Economic and Social Committee

Göke FRERICHS

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APPENDIX

to the Opinion of the Economic and Social Committee

Rejected amendments

The following amendments, which received more than a quarter of the votes cast, were rejected in the course of the
debate:

Point 3.1.4

Replace by the following sentence:

‘The Committee accepts the two-year period proposed by the Commission so that sugar could be included in the
scheduled mid-term review of the Agenda 2000, as decided in Berlin in March 1999.’

Reason

Preparation for the accession.

Result of the vote

For: 29, against: 86, abstentions: 3.

Point 4.1

Amend as follows:

‘The Committee therefore supports the introduction of a sugar regulation valid until 2002/2003.’

Reason

To prepare for accession and to include sugar in the general review of arable crops.

Result of the vote

For: 32, against: 89, abstentions: 2.