Opinion of the Economic and Social Committee on the "Proposal for a Council regulation on the common organisation of the market in ethyl alcohol of agricultural origin"
Date: 2001-07-11
Institutions: European Economic and Social Committee
Subjects: agricultural product, committee (EU), common organisation of markets, ethanol, exchange of information

17.9.2001

EN

Official Journal of the European Communities

C 260/33

Opinion of the Economic and Social Committee on the ‘Proposal for a Council regulation on the
common organisation of the market in ethyl alcohol of agricultural origin’

(2001/C 260/05)

On 12 March 2001 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.

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 21 June 2001. The rapporteur
was Mr Wilkinson.

At its 383rd plenary session (meeting of 11 July 2001) the Economic and Social Committee adopted the
following opinion by 106 votes in favour and two abstentions.

1.

Introduction

1.2. The Commission proposal

1.1. General situation of the EU market in agricultural alcohol

The EU produces about 20 million hectolitres (hl) of
1.1.1.
alcohol annually, of which some 13 million hl are of agricul-
tural origin. The remainder is of non-agricultural origin and is
often referred to as ‘synthetic alcohol’. The main processing
industries using ethyl alcohol are spirit drinks, chemicals,
pharmaceuticals and cosmetics. Fuel from alcohol is a growing
sector.

The spirit drinks industry may only use alcohol of
1.1.2.
agricultural origin; other industries may use either type. The
spirit drinks industry now accounts for about 30 % of EU
usage and the quality of their products is guaranteed by the
relevant EU regulation (1). The other 70 % may use either
agricultural or synthetic alcohol. Total EU demand is currently
met by about 50 % of each type.

Agricultural alcohol is an important outlet for some
1.1.3.
EU primary commodities, notably cereals, sugar beet, molasses,
fruit and wine.

the EU market

The Commission states that

1.1.4.
for
alcohol is in surplus by about 3 million hl per year. This
surplus is gradually rising. Total EU demand is declining
slightly. Imports are at about 12 % of total usage including
blends, which are not fully covered by the Commission’s
proposal. On current trends imports are rising gradually. A
high proportion of imports is duty free, or imported at very
low tariffs as denatured alcohol. Up to 80 % of imports are
estimated by some to be subsidised in some way; others
consider this a high estimate.

The proposed regulation would establish a frame-
1.2.1.
work of common rules for ethyl alcohol of agricultural origin.
The decision to propose such a regulation followed a request
from the Agriculture Council in mid 2000 to consider the
advisability of such action.

1.2.2.
The main objectives of the proposed regulation are
to improve market information on agricultural alcohol and to
establish a forum for policy proposals on it. The Commission
consider that the proposals would establish a ‘light’ CMO. This
is because there are negligible financial
implications. The
proposals do not include intervention measures.

1.2.3.
Since early 1998 the Commission has monitored
some alcohol imports, but they consider that the system is not
an adequate implement to deal with the current and expected
problems that are identified. They therefore now propose (2) a
CMO regulation.

2. General comments on the Commission proposal

2.1.
The Committee produced an Information Report on
the alcohol sector in 1996 as well as commenting on earlier
draft CMOs in 1978 (3) and 1980 (4). The Information Report
gives much useful background to this very complex sector
and, although much has changed since the report, it is worth
noting that the comments on the need to rationalise the
industry so that it can remain competitive were qualified,

(1) Council Regulation (EEC) No 1576/89, OJ L 160, 12.6.1989,

pp. 1-17.

(2) (COM(2001) 101, dated 21.2.2001).
(3) OJ C 181, 31.7.1978.
(4) OJ C 83, 2.4.1980.

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where it noted that in some EU regions the many very small
distilleries performed a valuable socio-economic function in
their communities. This remains the case. Only Germany now
retains a national organisation for alcohol.

2.2.
A CMO was first proposed some 40 years ago, when
the primary market for agricultural alcohol was the food
industry (including spirit drinks). Since then the market has
become increasingly complex and technology has, and is,
affecting the uses of the alcohol produced.

2.3.
The Commission’s proposal does not cover all the
factors affecting the market. It concentrates on the growth in
imports, that account for about 12 % of the market, and
includes as a challenge competition from accession countries.
Accession countries should not be exempt from Article 10
(concerning national aid in the proposal).

2.4.
The Committee fully supports the value of better
market information and of a forum to analyse this market
information, to discuss problems in the sector and to rec-
ommend what action is necessary. A clear problem is the lack
of national statistics in the necessary form. Also Eurostat-data
is arriving too late to be of real value. There might be other
ways in which these aims could be met. For example, market
information is available from national authorities (notably
fiscal authorities), Eurostat or commercial sources; and the
forum used in the past for alcohol matters, the Spirit Drinks
Implementation Committee, could be developed to provide a
proper forum. Trade ‘abuses’ should be tackled as such; to do
this successfully requires good information. What the proposal
does not make clear is what the added value of a CMO would
be for producers, users and consumers. The Commission
should explain what this added value would be.

tariff quotas,

The various measures proposed (import and export
2.5.
inward processing and safeguard
licensing,
clauses) cause concern, since such proposals could lead to
protectionist and/or interventionist measures. The Committee
recognises that the Commission is not proposing to implement
these measures, but it is including provisions for them. In
particular, Article 34 of the Treaty includes the possibility of
regulation of prices as part of any CMO. Users want access to
alcohol of appropriate characteristics and quality at a freely
determined price. This position is also of benefit to consumers
helping to ensure the quality and safety of the products.
Further, the measures included could cause excessive and
costly administrative burdens.

2.6.
A major difficulty with the proposal is that it does not
cover that part of the market that can use either synthetic or
agricultural alcohol. Since synthetic alcohol is not an agricul-
tural product it is understood that it cannot be included in the
CMO. Yet it accounts for about 50 % of current usage in the
EU. Any CMO will be fatally flawed if it does not ensure
adequate arrangements, and particularly statistical data, to
cover this type of alcohol. The risk of unfair competition
would be high if one type was to be controlled under a CMO
and the other was not.

2.7. Moreover, the expected growth in the use of fuel
alcohol in the EU, from about 1 % of fuel now to about 20 %
by 2020, can be expected to change the balance, with a far
larger percentage of the market that can be met by either type
of alcohol. In practice, agricultural alcohol is expected to meet
the bulk of this increase because of tax advantages given to
renewables and synthetic alcohol by definition cannot be
renewable.

3. Specific comments

If the decision is to set up a CMO, the Committee
3.1.
believes that,
in addition to including adequate means of
covering synthetic alcohol, the following changes must be
made to the proposals.

3.2. Management Committee. The proposal
to include
agricultural alcohol within the remit of the Wine Management
Committee is wrong. The alcohol sector is extremely complex
and this complexity is growing. It is clear that national ‘alcohol
market experts’ would be needed for the tasks foreseen for the
CMO. The meetings would therefore not be a normal part of
Wine Management Committee business, but would involve
separate meetings. The Commission has confirmed that this is
what is foreseen.

3.3.
In these circumstances no additional cost would arise
from having a separate ‘Alcohol Management Committee’ and
the system would be clearer to those concerned. The proposal
should recognise this.

3.4.
Definitions. At present the only EU definitions of
‘agricultural alcohol’ are in Regulation (EEC) No 1576/89 (for
spirit drinks) and Regulation (EEC) No 822/87 (for neutral
alcohol of vinous origin). These differ in a number of ways
from the definitions in the Common Nomenclature (CN),
which is used for Customs and trade purposes, and which is
the definition used in the proposal, Article 1. Article 1 should
harmonise these definitions to avoid any confusion.

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3.5.
Given the numerous and evolving techniques for
producing alcohol from agricultural products, and from prod-
ucts that are themselves produced from agricultural products,
it will be difficult to establish satisfactory definitions for the
various types and even more difficult to police them, especially
for products from third countries.

4. Conclusions

4.1.

The Committee:

— supports the value of better market information and of

— supports the need for a legal framework to provide these;

— suggests that the requirements could be provided in a

number of ways;

— has yet to be convinced of the added value of a CMO

regime for alcohol of agricultural origin;

— insists that any CMO that does not include arrangements
to cover the complete alcohol market will be fatally
flawed;

— considers that if a CMO is established it will need a

dedicated Management Committee;

an established forum to discuss problems in the sector;

— points to the need to harmonise definitions.

Brussels, 11 July 2001.

The President

of the Economic and Social Committee

Göke FRERICHS

Opinion of the Economic and Social Committee on the ‘Green Paper on Integrated Product
Policy’

(2001/C 260/06)

On 13 February 2001 the Council decided to consult the Economic and Social Committee, under
Article 262 of the Treaty establishing the European Community, on the ‘Green Paper on Integrated
Product Policy’.

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 21 June 2001. The rapporteur
was Mr Pezzini.

At its 383rd plenary session (meeting of 11 July), the Economic and Social Committee adopted the
following opinion by 108 votes to one, with three abstentions.

1.

Introduction

1.1.
The Committee is examining the Green Paper in
connection with the Environmental Action Programme’s (1)
new approach which highlights, in tandem with implemen-
tation of
the main-
the existing legislative instruments,
streaming of environmental considerations in EU policies,
involvement of the various stakeholders and the voluntary
dimension. Further, the Committee regards this Green Paper

as an auxiliary instrument for the ‘sustainable development’
strategy, also from the economic and social angle (2). It would
refer to the comments made in its opinions on related subjects,
pointing out that this instrument can only be implemented
satisfactorily in this broader context.

(1) COM(2001) 31 final; Committee opinion OJ C 221, 7.8.2001.

(2) Committee opinion on the Preparation of a European Union
Strategy for Sustainable Development—OJ C 221, 7.8.2001.