The agricultural situation in the European Union - 2000 Report
Date: 2002-02-11
Institutions: European Commission
Subjects: activity report, agricultural market, agricultural situation, common agricultural policy, economic union, farming sector, rural development

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 11.02.2002
COM(2002) 67 final

The Agricultural Situation
in the European Union

2000 Report

(presented by the Commission)

Report in conjunction with the General Report
on the Activities of the European Union - 2000

BRUSSELS AND LUXEMBOURG, 2001

TABLE OF CONTENTS

1.

1.1.

1.2.

1.3.

1.4.

1.5.

1.6.

The agricultural year............................................................................................... 12

Overview................................................................................................................ 12

Output .................................................................................................................... 14

Producer prices and market prices........................................................................... 16

Input prices............................................................................................................. 18

Farm income .......................................................................................................... 18

Farm accountancy data network (FADN)................................................................ 23

1.6.1.

Farm incomes......................................................................................................... 23

1.6.2.

Income by type of farming...................................................................................... 23

2.

2.1.

2.2.

2.3.

2.4.

Policy developments and legislative initiatives in 2000........................................... 28

Quality policy......................................................................................................... 28

Organic farming ..................................................................................................... 30

Promotional measures............................................................................................. 30

Simplification of agricultural legislation ................................................................. 31

2.4.1.

Introduction............................................................................................................ 31

2.4.2.

Transparency and accessibility of agricultural legislation........................................ 32

2.4.2.1. Consolidation ......................................................................................................... 32

2.4.2.2. Recasting of the regulations relating to import and export licences ......................... 32

2.4.2.3. Export destination codes......................................................................................... 32

2.4.2.4. Paying agencies’ proposals ..................................................................................... 32

2.4.2.5. New guidelines for state aids .................................................................................. 32

2.4.3.

Simplification measures in the market sectors......................................................... 33

2.4.3.1. Flax and hemp ........................................................................................................ 33

2.4.3.2. Meat ....................................................................................................................... 33

2.4.3.3. Milk and milk products........................................................................................... 33

2.4.3.4. Fruit and vegetables................................................................................................ 33

2.4.3.5. Rice........................................................................................................................ 34

2.4.4.

Small farmers’ scheme ........................................................................................... 34

2.5.

State aids ................................................................................................................ 34

2.5.1. A new legal framework .......................................................................................... 34

2

2.5.2. Overview of the year .............................................................................................. 35

2.5.3.

Exceptional occurrences and natural disasters......................................................... 36

2.5.3.1. Dioxin - (B)............................................................................................................ 36

2.5.3.2. Recovery of the French forestry sector - (F) ........................................................... 36

2.5.4.

Privatisation and restructuring ................................................................................ 37

2.5.4.1. Aid for land purchase - (D)..................................................................................... 37

2.5.4.2. Restructuring and privatisation plans of EPAC and Silopor - (P) ............................ 38

2.5.4.3. Centrale del Latte di Roma - (I).............................................................................. 38

2.5.5.

Fiscal measures ...................................................................................................... 39

2.5.5.1. CO2 tax exemption for the glasshouse horticulture sector - (NL)............................. 39

2.5.5.2. Exemption from mineral levies - (NL) .................................................................... 40

2.5.6. Operating aids: Greek cooperatives - (EL) .............................................................. 41

2.5.7. RIBS: State aid granted under market conditions - (I)............................................. 41

2.5.8.

Pigmeat sector ........................................................................................................ 42

2.5.8.1. Aid for pigmeat production - Stabiporc - (F) .......................................................... 42

2.5.8.2. Pig assembly centres - (NL).................................................................................... 42

2.5.9.

Livestock sector: general measures......................................................................... 43

2.5.9.1. Abandoning capacity: exiting scheme for intensive livestock farming- (NL)........... 43

2.5.9.2. Livestock transport: "Gaelic Ferries"- (IRL) ........................................................... 45

2.5.9.3. Aid to livestock farmers affected by adverse weather conditions - (IRL)................. 45

2.5.10. Sugar sector............................................................................................................ 46

2.5.11. Citrus sector ........................................................................................................... 47

2.5.11.1.Aids for the citrus sector in Sicily - (I).................................................................... 47

2.5.11.2.National action plan for the citrus sector - (I).......................................................... 48

2.5.12. Wine-growing ........................................................................................................ 49

2.6.

2.7.

2.8.

2.9.

Assistance to the needy........................................................................................... 50

The outermost regions ............................................................................................ 50

Information measures concerning the CAP ............................................................. 51

Report on activities in the field of ICT (information and communication
technologies) .......................................................................................................... 52

2.10.

Advisory committees and relations with bodies representing the trade.................... 53

3.

Agricultural markets............................................................................................... 55

3

3.1.

3.2.

The 2000/01 price package ..................................................................................... 55

Crop products......................................................................................................... 55

3.2.1. Cereals ................................................................................................................... 55

3.2.1.1. World market ......................................................................................................... 55

3.2.1.2. Community market................................................................................................. 56

3.2.2. Oilseeds.................................................................................................................. 57

3.2.3.

Peas, field beans and sweet lupins........................................................................... 58

3.2.4.

Linseed................................................................................................................... 58

3.2.5. Grain legumes (chickpeas, vetches and lentils) ....................................................... 58

3.2.6. Non-food production .............................................................................................. 59

3.2.7. Rice........................................................................................................................ 60

3.2.7.1. Reform of the rice sector ........................................................................................ 61

3.2.8.

Starch..................................................................................................................... 61

3.2.9.

Sugar...................................................................................................................... 61

3.2.9.1. World market ......................................................................................................... 61

3.2.9.2. Community market................................................................................................. 63

3.2.9.3. Main legislative and policy developments............................................................... 64

3.2.10. Potatoes.................................................................................................................. 65

3.2.11. Dried fodder ........................................................................................................... 65

3.2.12. Fibre flax and hemp................................................................................................ 66

3.2.12.1.Fibre flax................................................................................................................ 66

3.2.12.2.Hemp ..................................................................................................................... 66

3.2.12.3.Reform of fibre flax and hemp................................................................................ 66

3.2.13. Cotton .................................................................................................................... 67

3.2.13.1.Reform of the aid scheme for cotton ....................................................................... 67

3.2.14. Silkworms .............................................................................................................. 68

3.2.15. Olive oil ................................................................................................................. 68

3.2.16. Fresh fruit and vegetables ....................................................................................... 69

3.2.16.1.World market ......................................................................................................... 69

3.2.16.2.International trade .................................................................................................. 69

3.2.16.3.Community market................................................................................................. 70

4

3.2.16.4.Reform of the fruit and vegetables sector................................................................ 71

3.2.17. Bananas.................................................................................................................. 71

3.2.17.1.Community production........................................................................................... 71

3.2.17.2.Imports from ACP countries................................................................................... 73

3.2.17.3.Reform of the market organisation for bananas....................................................... 73

3.2.18. Processed fruit and vegetables ................................................................................ 74

3.2.18.1.World and Community markets .............................................................................. 74

3.2.18.2.Main developments in legislation and policy (see Section 3.2.16.4)........................ 75

3.2.19. Wine....................................................................................................................... 76

3.2.20. Tobacco ................................................................................................................. 78

3.2.20.1.Market developments ............................................................................................. 78

3.2.20.2.Main legislative and policy developments............................................................... 78

3.2.21. Seeds...................................................................................................................... 79

3.2.21.1.Market developments ............................................................................................. 79

3.2.21.2.Main legislative and policy developments............................................................... 80

3.2.22. Hops....................................................................................................................... 80

3.2.22.1.World market ......................................................................................................... 80

3.2.22.2.Community market................................................................................................. 81

3.2.22.3.Main legislative and policy developments............................................................... 82

3.2.23. Flowers and live plants ........................................................................................... 82

3.3.

3.4.

Animal feed............................................................................................................ 83

Animal products ..................................................................................................... 86

3.4.1. Milk and milk products........................................................................................... 86

3.4.1.1. World market ......................................................................................................... 86

3.4.1.2. Community market................................................................................................. 87

3.4.2. Beef and veal.......................................................................................................... 89

3.4.2.1. Implementing the reform of the beef and veal sector............................................... 89

3.4.2.2. Beef labelling ......................................................................................................... 89

3.4.2.3. World market in 1999............................................................................................. 91

3.4.2.4. Community market................................................................................................. 93

3.4.3.

Sheepmeat and goatmeat ........................................................................................ 94

5

3.4.4.

Pigmeat .................................................................................................................. 95

3.4.4.1. Main legislative and policy developments (Pigmeat regulatory fund)...................... 96

3.4.5.

Poultrymeat ............................................................................................................ 96

3.4.6.

Eggs ....................................................................................................................... 98

3.4.7. Honey................................................................................................................... 100

4.

AGRIMONETARY ARRANGEMENTS ............................................................. 101

4.1.

Developments in 2000 .......................................................................................... 101

5.

Rural development in 2000................................................................................... 102

5.1.

Belgium................................................................................................................ 102

5.1.1. Adoption of the new programmes......................................................................... 102

5.1.1.1. Flanders................................................................................................................ 102

5.1.1.2. Wallonia............................................................................................................... 103

5.1.2.

Evaluation of old programmes .............................................................................. 103

5.1.2.1. Belgium - Federal................................................................................................. 103

5.1.2.2. Brussels Region.................................................................................................... 103

5.1.2.3. Flemish Region .................................................................................................... 104

5.1.2.4. Wallonia............................................................................................................... 104

5.2.

Denmark............................................................................................................... 105

5.2.1. Adoption of new programmes............................................................................... 105

5.3.

Germany............................................................................................................... 105

5.3.1. Adoption of new programmes............................................................................... 105

5.3.1.1. Background and programming framework............................................................ 105

5.3.1.2. Fabric of programmes and priorities ..................................................................... 105

5.3.1.2.1. Baden-Württemberg ........................................................................................... 106

5.3.1.2.2. Bavaria ............................................................................................................... 106

5.3.1.2.3 Brandenburg ........................................................................................................ 106

5.3.1.2.4 Bremen................................................................................................................ 107

5.3.1.2.5 Hamburg ............................................................................................................. 107

5.3.1.2.6 Hessen................................................................................................................. 107

5.3.1.2.7 Mecklenburg-Western Pomerania ........................................................................ 107

5.3.1.2.8 Lower Saxony...................................................................................................... 107

6

5.3.1.2.9 North Rhine-Westphalia ...................................................................................... 108

5.3.1.2.10 Rheinland-Pfalz ................................................................................................. 108

5.3.1.2.11 Saarland............................................................................................................. 108

5.3.1.2.12 Saxony............................................................................................................... 108

5.3.1.2.13 Saxony-Anhalt ................................................................................................... 108

5.3.1.2.14 Schleswig-Holstein ............................................................................................ 108

5.3.1.2.15 Thuringia........................................................................................................... 109

5.3.2.

Evaluation of the old programmes ........................................................................ 109

5.3.2.1. Objective 1 ........................................................................................................... 109

5.3.2.2. Objective 5(b)....................................................................................................... 109

5.3.2.3. Leader II............................................................................................................... 109

5.4.

Greece.................................................................................................................. 110

5.4.1. Adoption of new programmes............................................................................... 110

5.4.2.

Evaluation of old programmes .............................................................................. 110

5.5.

Spain .................................................................................................................... 110

5.5.1. Adoption of new programmes............................................................................... 110

5.5.1.1. Aragon ................................................................................................................. 110

5.5.1.2. Catalonia .............................................................................................................. 111

5.5.1.3. Balearic Islands .................................................................................................... 111

5.5.1.4. Rioja..................................................................................................................... 111

5.5.1.5. Madrid.................................................................................................................. 111

5.5.1.6. Navarre ................................................................................................................ 111

5.5.1.7. Basque Country.................................................................................................... 112

5.5.2.

EAGGF Guidance Section programming .............................................................. 112

5.5.3.

Evaluation of old programmes .............................................................................. 112

5.6.

France .................................................................................................................. 113

5.6.1. Adoption of new programmes............................................................................... 113

5.6.1.1. Objective 1 programmes....................................................................................... 113

5.6.1.2. Objective 2 programmes....................................................................................... 113

5.6.1.3. Leader+ ................................................................................................................ 114

5.6.2.

Evaluation of old programmes .............................................................................. 114

7

5.7.

Ireland .................................................................................................................. 114

5.7.1. Adoption of new programmes............................................................................... 114

5.7.1.1. Background and programming framework............................................................ 114

5.7.1.2. Fabric of programmes and priorities ..................................................................... 114

5.7.2.

Evaluation of old programmes .............................................................................. 115

5.8.

Italy...................................................................................................................... 115

5.8.1. Adoption of new programmes............................................................................... 115

5.8.1.1. Abruzzi................................................................................................................. 116

5.8.1.2. Bolzano ................................................................................................................ 116

5.8.1.3. Emilia-Romagna................................................................................................... 116

5.8.1.4. Friuli-Venezia Giulia............................................................................................ 116

5.8.1.5. Lazio .................................................................................................................... 116

5.8.1.6. Liguria.................................................................................................................. 116

5.8.1.7. Lombardy............................................................................................................. 117

5.8.1.8. Marche ................................................................................................................. 117

5.8.1.9. Umbria ................................................................................................................. 117

5.8.1.10.Piedmont .............................................................................................................. 117

5.8.1.11.Tuscany................................................................................................................ 117

5.8.1.12.Trento .................................................................................................................. 118

5.8.1.13.Valle d’Aosta ....................................................................................................... 118

5.8.1.14.Veneto.................................................................................................................. 118

5.8.2.

Evaluation of old programmes .............................................................................. 118

5.9.

Luxembourg ......................................................................................................... 119

5.9.1. Adoption of new programmes............................................................................... 119

5.9.2.

Evaluation of old programmes .............................................................................. 119

5.10.

Netherlands .......................................................................................................... 119

5.10.1. Adoption of new programmes............................................................................... 119

5.10.2. Evaluation of old programmes .............................................................................. 119

5.11.

Austria.................................................................................................................. 120

5.11.1. Adoption of new programmes............................................................................... 120

5.11.1.1.Objective 1 programme for Burgenland ................................................................ 120

8

5.11.1.1.1.

Strategy................................................................................................... 120

5.11.2. Evaluation of old programmes .............................................................................. 120

5.12.

Portugal................................................................................................................ 121

5.12.1. Adoption of new programmes............................................................................... 121

5.12.1.1.Community support framework and other instruments.......................................... 121

5.12.1.2.Aim ...................................................................................................................... 121

5.12.1.3.Programme priorities and structures...................................................................... 121

5.12.2. Evaluation of old programmes .............................................................................. 122

5.13.

Finland ................................................................................................................. 122

5.13.1. Adoption of new programmes............................................................................... 122

5.13.1.1.Continental Finland .............................................................................................. 122

5.13.1.2.Åland islands........................................................................................................ 122

5.13.2. Evaluation of old programmes .............................................................................. 123

5.14.

Sweden................................................................................................................. 123

5.14.1. Adoption of new programmes............................................................................... 123

5.14.1.1.Objective 1 ........................................................................................................... 123

5.14.2. Evaluation of old programmes .............................................................................. 123

5.15.

United Kingdom................................................................................................... 124

5.15.1. Adoption of new programmes............................................................................... 124

5.15.1.1.England ................................................................................................................ 124

5.15.1.2.Northern Ireland ................................................................................................... 124

5.15.1.3.Scotland ............................................................................................................... 124

5.15.1.4.Wales ................................................................................................................... 125

5.15.1.5.Objective 1 ........................................................................................................... 125

6.

6.1.

6.2.

7.

7.1.

7.2.

Environment and Forestry .................................................................................... 126

Other environmental measures.............................................................................. 126

Forestry................................................................................................................ 126

Financing of the CAP in 2000............................................................................... 128

Berlin Summit Agreement and budgetary discipline ............................................. 128

EAGGF Guarantee Section................................................................................... 129

7.2.1.

Stages of the budgetary procedure ........................................................................ 129

9

7.2.1.1. The monetary reserve ........................................................................................... 131

7.2.2.

The EAGGF Guarantee Section in the context of the general budget .................... 132

7.2.3.

The EAGGF and its financial resources ................................................................ 132

7.2.4.

EAGGF Guarantee Section expenditure................................................................ 134

7.2.4.1. Public storage....................................................................................................... 135

7.2.5. Clearance of accounts........................................................................................... 135

7.2.6.

Expenditure on agricultural markets in 2000......................................................... 136

7.3.

EAGGF Guidance Section.................................................................................... 138

7.3.1.

Funding carried out .............................................................................................. 138

7.3.2. Budget execution.................................................................................................. 142

7.4.

Evaluation ............................................................................................................ 143

7.4.1.

Evaluation of market-related measures ................................................................. 143

7.4.2.

Evaluation of structural and rural development measures...................................... 143

8.

Preparing for enlargement .................................................................................... 144

8.1.

Main developments .............................................................................................. 144

8.1.1. Accession negotiations ......................................................................................... 144

8.1.2.

Pre-accession strategy........................................................................................... 144

8.1.3.

SAPARD.............................................................................................................. 146

8.1.4. CEECs, progressive liberalisation of bilateral agricultural trade............................ 147

8.1.4.1. List 1:................................................................................................................... 148

8.1.4.2. List 2:................................................................................................................... 148

8.1.4.3. List 3:................................................................................................................... 148

8.1.5. Results of the negotiations.................................................................................... 148

8.2.

8.3.

8.4.

8.5.

8.6.

8.7.

8.8.

8.9.

Bulgaria................................................................................................................ 148

Czech Republic .................................................................................................... 149

Estonia ................................................................................................................. 149

Hungary ............................................................................................................... 150

Latvia ................................................................................................................... 150

Lithuania .............................................................................................................. 151

Poland .................................................................................................................. 151

Romania ............................................................................................................... 152

10

8.10.

Slovakia ............................................................................................................... 152

8.11.

Slovenia ............................................................................................................... 153

9.

International relations ........................................................................................... 154

9.1.

International organisations and agreements........................................................... 154

9.1.1. World Trade Organisation (WTO) ........................................................................ 154

9.1.1.1. WTO consultations and dispute settlement ........................................................... 154

9.1.2. Organisation for Economic Cooperation and Development (OECD)..................... 154

9.1.3. Generalised System of Preferences (GSP) ............................................................ 155

9.1.4. United Nations Food and Agriculture Organisation (FAO) ................................... 155

9.1.5.

International Grains Agreement (IGA) ................................................................. 156

9.1.5.1. Grains convention................................................................................................. 156

9.1.5.2. Food Aid Convention ........................................................................................... 156

9.1.6.

International Sugar Organisation .......................................................................... 156

9.2.

Bilateral and regional trade relations..................................................................... 157

9.2.1. United States ........................................................................................................ 157

9.2.2. Canada ................................................................................................................. 158

9.2.3. Mexico ................................................................................................................. 159

9.2.4. Mercosur and Chile .............................................................................................. 159

9.2.5.

South Africa ......................................................................................................... 160

9.2.6.

Japan and South Korea ......................................................................................... 160

9.2.7. New Zealand ........................................................................................................ 160

9.2.8. Mediterranean countries ....................................................................................... 160

11

1.

THE AGRICULTURAL YEAR

1.1.

Overview

1.

2.

3.

4.

The 2000 agricultural year was notable mainly for three trends:(a) the recovery of
prices in the pigmeat and poultry sectors after the falls in 1999, (b) a surge in oil
prices, leading to a steep rise in energy costs and, to a lesser degree, the cost of
fertilisers, and (c) the collapse of consumption and prices of beef and veal from
October onwards as a new BSE crisis struck following the discovery of fresh cases of
the disease in several Member States. On the whole, weather conditions over the
agricultural year were favourable, contributing to a record cereals harvest, while the
overall domestic and international economic situation remained conducive to growth
and helped ensure EU agricultural exports remained competitive.

Overall, initial estimates at the end of 2000 (before the full impact of the BSE crisis
could be assessed) put farm incomes for the European Union as a whole on an
upward trend by 1.3% in real terms, following the slight rise recorded in 1999
(+ 0.7%, according to the most recent figures). This provisional estimate for 2000
will probably have to be revised downwards, however, to account for the fall in beef
and veal prices in the final quarter of the year. This news should be tempered by the
fact that the fall was accompanied by a contrasting recovery in pigmeat and poultry
prices, a process that had started before the crisis and which picked up over the year.

In terms of weather conditions, the 2000 agricultural year generally started out quite
favourably at the winter sowing period (autumn 1999). This led to an increase in the
area sown with common wheat in France, the Benelux countries and especially
Germany, compared with the previous year's contraction. In addition, water reserves
in southern Europe, low after a summer marked by relatively high temperatures and a
long drought in Spain, were replenished by substantial rainfall just before the winter
the mix of low rainfall and above-average
sowing period. This largely offset
temperatures experienced by these regions over the winter. Indeed, most regions in
central Europe and Scandinavia also enjoyed a mild winter (with temperatures some
2 degrees above average) and a generally fair spring, with relatively high
In the summer, however, conditions
temperatures accelerating crop growth.
deteriorated somewhat, with excessive rainfall
in northern Europe and the
unseasonably high temperatures lingering in the south. The heavy rainfall in the
north in July and August considerably delayed the winter cereals harvest and affected
the quality of the harvested crop. On the other hand, these conditions were relatively
favourable for summer crops, especially potato and beet, although beet yields were
generally below the record harvest of the previous year. These two crops,
in
particular beet, suffered from the excessive autumn rainfall in the north, which
delayed harvests in most areas.

Domestic demand for cereals is estimated to have risen 2.5%, after levelling off in
1999, due mainly to the resumption of cereal use in animal feed as cereals regained
their competitive position in relation to substitutes. Before the BSE crisis,
the
forecast for beef and veal consumption in 2000 was for flat or limited growth
compared with 1999, putting it slightly above the long-term trend (which, despite
everything, was still on a downward curve - from over 23 kg per capita in 1986 to
some 20 kg in 1999). The widespread loss of consumer confidence in the wake of the
discovery of fresh cases of "mad cow disease", even in Member States which had

12

5.

6.

7.

is estimated that

hitherto been considered BSE-free, sparked a nosedive in beef and veal sales in most
Member States, with some seeing falls of up to 60-70%. Averaged out over the year,
it
the crisis will eventually be responsible for beef and veal
consumption dropping by 5% in 2000, although significant fallout from the crisis
could continue into 2001. As in the past, the slump in beef and veal sales has led to a
corresponding increase in poultry and pigmeat consumption, which, according to
estimates, was in decline somewhat before the BSE crisis. As a result, consumption
levels for these meats should on the whole remain more or less flat in 2000 compared
with the previous year, with poultry consumption perhaps dipping slightly. Lastly,
while butter consumption fell off again after having picked up slightly in 1999,
consumption of cheese continued its upward trend, growing by some 1.5% in 2000.

The general economic scene was characterised by relatively steady growth in the
European Union and the world at large, a steep fall in the euro against the dollar
(increasing the competitiveness of Community exports in world markets), and
rocketing oil prices, which, together with the weak euro, put upward pressure on
inflation in most Member States.

Globally, agricultural markets continued their improvement on 1999, although in the
context of recent years they remained relatively depressed. While world wheat
prices, in particular, recovered in the second half of the year on the expectation of
reduced stocks for the marketing year 2000-01, they were still down considerably on
the record prices of 1994-96. In the maize sector, despite rallying in the second half
of the year, world prices at the end of 2000 had done little more than return to their
levels of the start of the year, having plummeted some 20% between May and July.
Similarly, over the year world soya prices fluctuated around levels just slightly above
those of the previous year, even though, as mentioned above, the depreciation of the
euro against the dollar made Community grain and oilcake imports more expensive.
World beef and veal prices were on an upward trend during 2000 as demand picked
up, particularly in North America. Poultry prices, however,
remained in the
doldrums, depressed by a combination of increased supply and sluggish demand. In
the global markets for milk products, cheese and butter prices rose slightly and those
for skimmed milk powder steeply, following their sharp drop of recent years in the
wake of the economic and financial crisis in Asia, Latin America and Russia.

The solid overall performance of the European Union on world agricultural markets
in 2000 (with the exception of some sectors, such as beef, veal and grain oils) can
largely be attributed to the improvement in international markets and the weak euro
boosting the competitiveness of Community exports. In the first ten months of 2000,
the value of Community agricultural exports was up 13.6% on the same period in
1999. Cereal exports in particular increased by some 7% in volume and 27% in
value, with Community exports of wheat and barley competitive enough to be made
without export refunds in the second half of the year. The value of milk product
exports also surged ahead (by more than 22.6% overall), especially milk powder (up
84.7%) and cheese (up 19.8%). The same was true of sugar (up 22.7%), fruit (up
25.7%), vegetables (up 7.2%), olive oil (up 46.9%) and wine (up 7.2%). Pigmeat
exports, which had reached record levels in 1999, remained relatively constant in
2000 (up 0.6% in volume in the first ten months of the year, compared with the same
period the previous year) but leapt in value (up 24.3%). Exports of poultrymeat
moved ahead slightly (up 4.2% in value), while those of beef and veal lost more than
20% in both volume and value.

13

8.

On the whole, for most agricultural products covered by the intervention regime,
intervention stocks fell considerably in 2000. This was especially true of cereals,
with stock levels easing from a level of 14.9 million tonnes to 7.8 million tonnes in
the eight months from the end of January 2000. While wheat and barley stocks were
run down appreciably, stocks of rye, which did not dip below 3 million tonnes during
the year, remained a cause for serious concern. Intervention stocks of milk powder
practically disappeared in the first eight months of the year. Butter stocks, however,
were mounting until May, after which they fell back slightly. Another development
worthy of note was the big increase in rice stocks, which had breached the
700 thousand tonne mark by September 2000 as a result of mushrooming imports
and internal production.

1.2.

Output

9.

10.

11.

12.

13.

Cereal production hit new highs in 2000 (over 211 million tonnes), breaking the
record levels of 1998, due to increases in the area under cultivation and in yields. The
area under cereals grew by some 3% in 2000, linked to the fall in the area under
oilseeds, protein crops and non-fibre flax. The move from oilseeds/protein crops to
cereals can be partly explained by the relatively low prices for the latter in the
1999/2000 marketing year, but also by the disruption caused to winter cereal sowing
in the previous year by poor soil conditions in certain regions. Of the different cereal
crops, the area under common wheat grew by 6%, that under maize by 4.5% and that
under rye by 7%.

Cereal yields rose by 3% compared with 1999, reaching 5.7 t/ha on average, i.e.
some 1% above the long-term trend. However, the pattern of development differed
greatly from one Member State to another. For example, while yields leapt by over
30% in Spain and in Finland following 1999's disastrous results, they fell in Austria,
Germany, Belgium and France as a result of less favourable weather than the
previous year. The return to normal in Spain largely accounts for the big rises in
average yields for durum wheat (17% up in the European Union as a whole) and
barley (up 7%). Yields of common wheat rose slightly and those of maize fell
somewhat.

Overall, cereal production was more than 11 million tonnes up on the previous year
(i.e. some 6%). About half of this rise was accounted for by common wheat, with the
other half being feed grains (in particular barley).

After 1999's record harvest, total oilseed production (rape, sunflower and soya) fell
off by 15% in 2000 as a result of the smaller area under cultivation (8% down) and
lower yields (7% down). Most of the overall drop in oilseeds production could be
attributed to the fall in rape production (down 24%) as a result of the smaller
cultivated area (down 13%) and lower yields (down 11%). Sunflower production,
however, rose by 11%, driven by a big increase in yields in Spain following 1999's
catastrophic drought-affected harvest. Overall the area under sunflowers remained
the same. Soya production was 5% down on the previous year.

Protein crop output also fell in 2000 (by 15%), due to a smaller area under
cultivation and lower yields, reaching its lowest
level since 1995. In addition,
non-fibre flax production fell by almost half from the previous year's level as the
area under cultivation returned to normal following spectacular
increases the
previous year in the United Kingdom and Germany.

14

14.

15.

16.

17.

18.

19.

20.

21.

22.

Following substantial growth in 1999, sugar production was estimated to have fallen
by over 5% in 2000 as the area under beet declined steeply (down 7.3% on 1999) in
anticipation of the cuts in production quotas and also as a result of less favourable
world export markets. However, generally favourable climatic conditions for beet, at
least up to the harvest period, ensured that sugar yields in 2000 were relatively high
in spite of the smaller area planted. In several regions, however, harvesting was
disrupted by heavy rainfall, leading to a somewhat lower sugar yield.

Early estimates (as of mid-January 2001) put olive oil production in 2000 at some
1.9 million tonnes, an increase of around 12% on the previous year.

Early estimates have production of both fruit (-2.5% on 1999) and vegetables
(-2.0%) down in 2000. Potato output is estimated to have remained more or less
stable compared with the previous year.

Following an exceptional harvest in 1999, up by some 20 million hectolitres on the
previous year, wine production fell again in 2000 (down 8% approximately) to
around 165 million hectolitres. Big falls were seen in Austria and Portugal (some
25% in each), Germany (around 13%), France (9%) and Italy (8%). Spanish wine
production, on the other hand, was estimated to have risen by 7% following its
decline the year before.

While beef and veal production was continuing to grow in 2000 before the new BSE
crisis broke, and up slightly on the previous year, the collapse in consumption in the
last months of the year - despite the measures taken to strengthen existing consumer
protection arrangements - led to an estimated fall in slaughterings, and thus in
production, of some 5% for the year as a whole. Similarly, while per-capita
consumption of beef and veal seemed to have recovered completely from its
post-1996 falls in the wake of the first BSE crisis, it was hit again at the end of the
year, especially in those Member States in whose national herd BSE was detected for
the first time.

Pigmeat production was estimated to have fallen by 2.5% following strong growth in
recent years and the price falls of 1998 and 1999. However, the impetus given to
white meat consumption by the BSE crisis had by the end of the year curtailed the
overall fall in pigmeat production (-1.8% for the year).

The long upward trend in poultrymeat production was halted in 1999 due partly to
lower export growth and partly to the impact on consumption of the dioxin crisis that
hit Belgium in spring 1999. Fresh falls in output were forecast for 2000, in the wake
of the previous year's falls. As with pigmeat, however, output fell less than initially
anticipated (some 1.1% down for the year) due to the revival of poultrymeat
consumption as a result of the BSE crisis.

After recovering in 1998 from falls the previous year, production in the sheepmeat
and goatmeat sectors more or less stabilised in 1999 and 2000 at levels well down
on those of the early 1990s.

While the Community dairy herd is still shrinking by around 1.5% a year, milk
production for 2000 should be around the 122 million tonne mark, i.e. more or less
unchanged from 1999, although that year's output was up one million tonnes on the
previous year. Yields are still growing and generally offsetting the fall in the size of

15

23.

1.3.

24.

25.

26.

the herd. Deliveries to dairies were also flat or even slightly down on the previous
year, although reference quantities were increased for a number of Member States
under the Agenda 2000 package. However,
the impact of these measures had
probably been felt already in the 1999 deliveries.

After the increases posted the previous year, butter production is estimated to have
turned down again in 2000 (by 1.2% according to initial estimates), in parallel with
the fall in domestic consumption and despite the recovery of exports from the
previous year's difficulties on the Russian market. Cheese production, however, rose
by 2.3%, boosted both by rising domestic consumption and export growth.
Production of skimmed milk powder fell off heavily in 2000 (-5%) following the
previous year's rise.

Producer prices and market prices

According to the figures available at the end of December 2000, the index of
farm-gate prices was estimated to have grown in 2000 by an average of 2.9% in
nominal terms compared with the previous year, fuelled by a 7.7% increase in the
price of animal products (compared with the previous year's fall), as against a 1.5%
drop in crop prices. It should however be pointed out that these estimates probably
do not take full account of the impact of the beef price collapse in the wake of the
new BSE crisis. The steepest drops in crop prices were recorded by potatoes (down
19.5%), wine (down 5.3%), rice (down 4.3%) and fresh fruit (down 2.0%). Falls
were also registered by cereals (down 1.5%), sugar beet (down 1.7%) and dried
pulses (down 1.4%). This trend was bucked by fresh vegetable prices, which
improved slightly (up 2.6%). As regards animal products, pigmeat prices (as already
mentioned) leapt by 25.0% following their fall the previous year. Significant rises
were also recorded for beef and veal (up 2.0%), mutton and lamb (up 5.1%), poultry
(up 7.0%) and milk (up 2.6%). Egg prices also leapt upwards by 20.0%.

After accounting for inflation, the producer price index for the European Union as a
whole was estimated to have risen by 0.6% on the previous year. The biggest rises
were in Belgium (up 6.3%), Denmark (up 7.2%), Germany (up 7.6%) and the
Netherlands (up 7.2%), i.e. those Member States in which the recovery of pigmeat
prices from the previous year's falls had the greatest effect on overall prices.
Farm-gate prices also rose slightly in Greece (up 1.0%), Ireland (up 1.3%) and
Austria, while holding more or less steady in France in real terms. Real producer
prices fell, however, in Spain (by 2.4%) Italy (1.6%), Luxembourg (3.5%), Portugal
(1.1%), Finland (1.8%), Sweden (2.9%) and the United Kingdom (4.7%).

Having bottomed out at the beginning of the 1999/2000 marketing year, cereals
prices made modest gains up to May 2000, as intervention stocks were wound down
(from 18 million to some 9 million tonnes over the marketing year from start to
finish) through a combination of increased exports and greater internal demand, in
particular for feed grains. From June onwards, however, cereal prices in the
Community slumped as prospects firmed for a record cereals harvest. The fall was,
however, exacerbated by the entry into force on 1 July 2000 of the cuts (of some
7.5%) in intervention prices decided under Agenda 2000, although this downward
pressure on prices was attenuated somewhat by an increase in assistance levels (from
EUR 54.34/t to EUR 58.67/t).

16

27.

28.

29.

30.

31.

32.

33.

34.

The cuts in intervention prices were fully reflected in market prices. However, the
picture varies appreciably from one Member State to the other and between different
types of cereal. While in France, for example, prices for common wheat remained at
relatively low levels just above the intervention price because of the poor quality of
bread wheat, Italian and German market prices for this cereal recovered steadily to
reach a level comfortably above the intervention price at the year end. Similarly,
French barley prices surged ahead early in the marketing year on the back of a
comparatively poor harvest of brewing barley, whereas increases in Spain and
Germany were much more muted. Lastly, although still below 1999 levels, maize
prices remained well above intervention prices in most producer Member States.

Olive oil prices remained relatively depressed throughout 2000, with Spanish and
Greek extra-virgin even dipping below the trigger rate for private storage as the new
harvest, higher than in the previous year, was brought in. In Italy, however, rates for
both extra-virgin and lampante remained above this level.

Wine prices continued to fall from the levels of the previous year. At the beginning
of January 2001, compared with the same period the previous year, market rates for
red wine were down by 4% in Italy, 10% in France and 37% in Spain; white wine
prices had fallen by 3% in Italy, 7% in France and 27% in Spain.

Butter prices remained relatively depressed (fluctuating between 90 and 93% of the
intervention price) during the first part of the year. From June they picked up,
however, finishing the year at a level close to the intervention price, having even
exceeded this level during the autumn. Skimmed milk powder prices increased
markedly in the first six months of the year as intervention stocks were gradually run
down to zero by August 2000 by the sharp increase in demand, especially on world
markets. Thereafter, they more or less stabilised at relatively high levels. Cheese
prices were also higher than the previous year.

Before the new BSE crisis broke, prices on beef and veal markets had been relatively
stable, at levels comfortably above previous years and - in the case of cows - even
rising steadily. From October onwards, however - following the discovery of fresh
cases of BSE, in particular in France, Belgium, Germany and Italy - the beef and veal
market collapsed abruptly in the face of tumbling domestic consumption. For
example, prices for adult bovines fell by some 14% in November and December
2000, young bovines by 14% and cows by over 20% (in some Member States ending
the year at levels close to the "safety net" value - between 60 and 70% of the
intervention price).

The poultry market made a strong recovery in 2000, after its collapse the previous
year when consumers abandoned poultry in reaction to the contamination of poultry
feed by dioxin. Near the year end, moreover, prices were given a fillip by the BSE
crisis and the resultant increase in demand for white meats. Chicken prices, in
particular, rose by an average of more than 8% in the last two months of the year.

Driven by falling output and rising demand, pigmeat prices improved markedly
throughout 2000, following the previous year's falls. At the end of 2000, prices were
up some 30% on those of twelve months earlier.

The markets for sheep- and goatmeat products remained buoyant throughout 2000,
in excess of the previous year when they had been depressed by rising
well

17

1.4.

35.

36.

1.5.

37.

production in the United Kingdom and Ireland. The recovery was particularly strong
after the summer, with prices rising some 25% between August and December.

Input prices

In 2000, the index of purchase prices for staple goods and services in agriculture
was up by an average of 5.8% in nominal terms on the previous year. The biggest
rises were in energy (up 25.4%, mainly due to soaring oil prices), livestock (up
13.5%), fertilisers (up 6.5%) and feedingstuffs (up 3.4%).

When account is taken of inflation, the real increase in the index of purchase prices
for staple goods and services in agriculture since 1999 was 3.7% for the European
Union as a whole. Above-average rises were recorded in Belgium (up 5.6%),
Germany (up 7.9%), Finland (up 4.1%), Sweden (up 4.1%) and the Netherlands (up
3.9%). The input price index was also up in Greece (by 3.2%), Spain (2.0%), France
(3.3%), Austria (2.6%), Portugal (1.9%) and the United Kingdom (2.2%), and more
or less stable in Denmark and Italy.

Farm income1

Eurostat's initial estimates, based on information received by Member States as at
mid-December 2000 and using the new agricultural accounting methods, put average
farm income2 across the European Union as a whole 1.3% up on the previous year.
Income was up in Belgium (by 12.2%), Denmark (24.1%), Germany (6.9%), Spain
(4.6%), France (1.3%), Ireland (6.5%), the Netherlands (3.7%), Finland (22.0%) and
Sweden (4.9%). Italy (down 4.3%), Austria (down 4.8%), Portugal (down 7.5%) and
the United Kingdom (down 10.8%), on the other hand, all recorded contractions in
farm income. Income levels in Greece and in Luxembourg remained stable.

1

2

A more detailed analysis of trends in farm incomes in 2000 can be found in Eurostat's booklet Statistics
in Focus - Theme 5 (22/2000).
Measured by net value added at factor cost per unit of work.

18

Changes in nominal farm-gate prices in 2000* and 1999

2000*/1999

1999/1998

(%)

Crop
products

Livestock
products

Total

- 2.4

- 5.1

- 3.6

- 3.0

- 1.0

1.6

- 3.3

- 2.0

- 3.5

- 0.1

- 5.6

- 1.8

- 5.2

- 1.1

9.7

- 4.1

- 4.6

- 9.1

- 4.7

- 5.6

3.5

- 6.3

- 3.8

- 4.6

- 3.2

- 2.1

- 9.8

- 3.6

- 4.1

- 2.3

- 7.4

- 3.5

- 3.4

- 7.4

- 4.3

- 4.7

0.2

- 1.3

- 3.5

- 4.2

- 3.4

- 1.7

- 7.6

- 3.2

- 4.7

- 2.0

- 2.8

- 3.7

Member State

Crop
products

Livestock
products

EU-15

Belgique/België

Danmark

Deutschland

Elláda

España

France

Ireland

Italia

Luxembourg

Nederland

Österreich

Portugal

Suomi/Finland

Sverige

United Kingdom

- 1.5

0.7

6.5

- 2.2

2.8

- 3.4

- 1.7

- 2.0

- 2.5

1.3

3.6

0.9

- 5.2

- 2.7

- 9.5

- 7.8

*

2000 forecasts

Source: Eurostat

7.7

15.1

12.0

9.4

6.0

9.0

5.3

7.7

6.8

- 0.6

15.8

5.9

10.7

3.3

2.7

- 0.8

Total

2.9

9.2

10.2

5.4

3.7

0.9

1.8

6.5

1.1

0.2

9.6

4.6

1.7

1.0

- 1.6

- 3.5

19

Changes in nominal purchase prices for agricultural inputs
in 2000* and 1999

(%)

Intermediate
Consumption

Investment

Total

Member State

2000*/1999 1999/1998 2000*/1999

1999/1998 2000*/1999

1999/1998

1.0

1.8

2.2

0.8

1.9

4.7

7.1

2.5

7.6

5.2

- 0.7

- 0.8

1.1

1.7

0.9

1.7

2.3

1.0

1.3

0.7

0.7

1.1

4.3

5.3

2.2

4.1

5.4

2.8

4.7

5.9

4.7

2.8

- 0.7

- 0.7

- 0.7

- 0.4

0.9

- 1.2

- 1.2

1.0

- 0.4

0.3

- 1.0

- 0.9

- 0.5

- 1.1

- 0.4

- 1.5

EU-15

Belgique/België

Danmark

5.8

8.4

2.8

Deutschland

10.0

6.0

5.6

5.2

5.4

2.9

6.6

6.3

4.5

4.4

7.1

5.5

3.2

Elláda

España

France

Ireland

Italia

Luxembourg

Nederland

Österreich

Portugal

Suomi/Finland

Sverige

United Kingdom

*

2000 forecasts

Source: Eurostat

- 1.4

- 1.2

- 1.5

- 0.9

0.6

- 1.3

- 1.8

0.7

- 1.7

- 0.9

- 2.1

- 2.4

- 1.1

- 2.0

- 0.7

- 2.0

1.7

- 0.4

1.3

0.9

1.9

4.3

1.4

4.1

1.5

0.9

3.0

0.8

4.8

2.5

2.2

1.3

20

Member State

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000*

Real producer price indices

(1990=100)

EU-15

Belgique/België

Danmark

Deutschland

Elláda

España

France

Ireland

Italia

Luxembourg

Nederland

Österreich

Portugal

Suomi/Finland

Sverige

United Kingdom

*

2000 forecasts

Source: Eurostat

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

97.2

98.1

96.2

95.2

100.6

94.9

97.6

93.4

102.8

89.6

100.8

97.1

87.3

92.5

91.5

93.7

89.1

92.3

92.8

91.2

90.5

83.5

88.2

91.9

89.8

82.3

92.1

92.5

74.3

89.6

86.4

91.9

84.6

83.8

80.0

80.6

84.3

84.1

81.8

96.7

87.8

78.0

83.4

87.3

71.3

87.7

79.3

95.2

84.8

84.8

79.5

79.5

87.5

88.8

80.7

95.8

87.5

75.9

84.2

85.5

73.8

86.6

81.6

93.3

21

85.2

79.4

77.8

78.7

87.8

94.1

80.2

95.6

90.9

73.6

84.9

63.2

72.2

63.9

79.8

98.2

83.0

79.2

77.3

76.8

86.5

90.5

78.6

89.3

89.2

71.0

84.8

62.7

69.8

54.4

76.2

94.4

80.0

79.2

76.0

76.1

84.7

84.8

78.0

82.5

87.4

71.4

87.1

63.4

64.4

53.0

73.7

79.1

76.6

74.6

66.7

71.1

80.9

81.7

77.6

79.9

85.3

69.6

81.8

58.7

66.6

51.8

74.7

69.6

72.8

68.3

62.6

67.3

79.3

78.9

74.5

74.6

81.1

67.8

74.1

56.6

62.2

50.2

72.2

66.1

73.1

72.6

67.1

72.4

80.1

77.0

74.5

75.6

79.8

65.4

79.4

58.1

61.5

49.3

70.1

63.0

Indices of real purchase prices for staple goods and services in agriculture

(1990=100)

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000*

EU-15

Belgique/België

Danmark

Deutschland

Elláda

España

France

Ireland

Italia

Luxembourg

Nederland

Österreich

Portugal

Suomi/Finland

Sverige

United Kingdom

*

2000 forecasts

Source: Eurostat

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

100

97.4

97.1

96.7

98.3

101.7

96.1

97.9

97.3

95.9

98.7

96.9

98.8

94.5

95.0

94.5

94.1

96.0

99.2

92.0

96.2

94.3

92.8

96.0

95.2

96.3

89.3

93.4

91.0

92.7

91.9

96.5

91.1

94.2

93.0

95.6

91.4

90.9

93.7

79.7

102.8

102.4

102.0

95.4

97.5

92.9

97.2

88.4

99.9

91.3

88.5

89.0

90.0

97.4

89.5

92.6

91.7

93.1

89.5

87.5

88.8

79.1

96.6

88.1

97.0

22

90.8

87.4

87.6

88.5

94.2

88.4

92.6

90.8

97.9

89.0

88.7

84.8

76.0

74.7

90.8

97.0

92.2

89.4

88.6

89.8

94.6

88.7

94.4

92.7

97.0

91.1

91.0

87.5

73.4

75.9

96.6

101.0

90.9

89.7

88.7

89.9

92.0

89.0

94.9

90.0

93.2

90.4

89.3

89.7

69.0

77.0

98.2

93.4

86.4

84.4

85.5

85.0

87.8

86.4

91.6

86.1

89.1

87.4

84.8

86.0

65.4

73.9

96.5

83.9

84.1

82.4

82.5

83.7

86.4

83.4

89.5

84.6

86.1

85.8

81.3

83.5

63.4

71.6

95.3

81.1

87.2

87.0

82.6

90.3

89.2

85.1

92.5

84.7

86.4

88.1

84.5

85.7

64.6

74.5

99.2

82.9

1.6.

Farm accountancy data network (FADN)

1.6.1.

Farm incomes

38.

39.

The FADN is used to calculate output, costs and incomes of commercial farms in the
EU from observed data collected in a survey of harmonised farm accounts (see
Chapter VII, Table 3.2.1). The survey provides valuable information on the way in
which farm incomes vary according to type of farming and location, information
which is not apparent from the global averages in the results for the agricultural
sector as a whole. This section features information by type of farming and by
country. For an explanation of the various types of farming, see Statistical annex,
Table 3.2.2.

At the time of going to press, some results for 1998 were not yet available and those
available were still provisional for some countries. More detailed results for the
different types of farming and different levels of economic size are given in the
Statistical annex, Tables 3.2.3 and 3.2.4.

1.6.2.

Income by type of farming

40.

41.

42.

43.

44.

45.

The considerable differences in average income between Member States are inherent
in the structure of their agriculture (Tables 1, 2 and 3).

The Member States with the highest average incomes are, generally speaking, those
with a sizeable number of large-sized farms specialising in arable crops or involved
in the most competitive sectors of production (pigs and/or poultry, horticulture and
dairy). In the southern Member States, where large numbers of small farms are
engaged in "mixed" farming (crop and livestock production) or "other permanent
crops" (mixes of different cropping enterprises), incomes tend to be below the EU
average.

Table 3 shows the wide range of incomes among Member States for each type of
farming. Particularly significant are the negative income figures for several Member
States for 1998 in the pigs/poultry and mixed type of farms. This mainly reflects the
severity of the crisis in the pig sector in that year.

Table 4 shows the contribution of the balance of subsidies and taxes to family farm
incomes. For the Community of Fifteen in 1997 the proportion of subsidies, net of
taxes, to family farm income was 47% but there were considerable differences
among Member States and between types of farming.

Luxembourg, Finland, Sweden and the United Kingdom had an average family farm
income that was lower than the balance of subsidies and taxes. This means that
revenue from the market was not enough to cover production costs. On the other
hand, the share of income represented by subsidies was lowest in the Netherlands,
Italy, Belgium, Greece and Spain.

There are also considerable differences with regard to types of farming. Net subsidies
in the drystock, mixed and arable types of farming were the highest in proportion to
income. The horticulture and vineyard sectors were by far the least subsidised.

23

TABLE 1

TOTAL OUTPUT

(ECU)

All farms

Arable

Horticulture

Vineyards

Other perm. crops

Dairy

Drystock

Pigs/poultry

Mixed

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

126920

123306

101382

101985

161556

179539

136440

123583

57461

53407

416476

458114

-

-

-

-

154465

143290

101568

102928

80878

84934

258455

191764

142738

141550

163174

180509

150818

157972

62447

47496

355322

268886

148879

120915

110706

106464

124452

120209

217933

215419

70444

75416

173374

164036

84203

85425

78141

72241

146938

126377

135308

122625

15703

16541

-

34771

-

12506

-

11327

-

38729

-

21149

-

114353

-

18761

-

30168

28843

25885

27430

59015

47692

21229

20275

19281

17002

32976

38339

29889

31958

167196

134462

40735

38670

103095

107351

98783

102015

182550

184007

135535

156417

146366

147248

82586

87350

58921

60882

312961

272632

125819

125705

32199

27960

64717

68818

-

283973

-

-

-

-

65461

61859

15701

12448

366129

249484

66159

54052

29818

30206

20595

20709

55018

52459

30301

30030

18087

19216

104035

106684

49669

49239

262655

272719

49147

45173

95744

111437

15235

44261

-

-

66933

108143

-

-

102297

117187

93095

100578

119931

236123

99232

108410

222557

209949

164285

190266

394114

428073

-

-

169869

162539

178087

167330

64559

59629

370206

256827

245810

207870

52193

50652

55007

53077

-

-

51533

51366

66751

65576

39834

42811

42746

43399

98250

81091

64667

58105

9964

11220

8075

9562

19072

21330

9652

12554

8270

9160

28685

31646

9906

10144

62908

58021

7361

8588

50354

78010

154834

EU 15

54766

-

-

-

31044

53151

178677

40768

-

-

-

158733

-

347203

130519

-

-

-

-

-

-

52999

-

-

-

14514

-

478223

21928

-

-

-

43917

97212

196644

87725

-

-

-

26369

56290

56897

39998

-

-

-

76432

194814

417487

239253

-

-

-

49589

76243

186862

76532

B

DK

D*

EL

E

F

IRL

I

L

NL

A*

P

FIN

S*

UK

*

The figures for S for 1997 are provisional, as are those for D and A for 1998.

24

TABLE 2

BALANCE: CURRENT SUBSIDIES AND TAXES

(ECU)

All farms

Arable

Horticulture

Vineyards

Other perm. crops

Dairy

Drystock

Pigs/poultry

Mixed

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

8370

7747

10677

101985

-44

-523

12619

13196

11900

53407

5457

9095

-

-

-

-

832

489

5366

5803

14842

14147

4525

1202

10205

9256

2149

1998

11819

12411

13087

14715

15617

17108

14932

14800

17825

17957

28921

29968

4149

4704

6633

6461

6082

6134

11188

11637

19635

19007

13722

12376

23644

23242

2519

2181

-

679

-

5878

-

1983

-

2988

-

4684

-

-2194

-

3545

-

5524

5591

7613

27430

920

-579

722

679

5920

5289

1048

933

6725

7673

1689

2081

7146

7599

15118

15482

26925

102015

1549

1481

-776

-698

5278

7933

7136

7285

17495

18145

5613

6844

18310

18663

9526

8981

25438

68818

3201

2961

4476

4512

26460

26813

10180

44261

-

-

3672

-

-

-

-

6778

5974

9348

9098

16757

15810

22063

18637

-1

-121

989

844

2024

1576

3782

1259

3633

3950

2919

2338

4075

3802

-

13862

8566

-

-

26313

27317

33441

37487

23524

37113

31599

32180

5521

4129

7505

8515

4226

4916

-

-

4118

3054

4782

3603

5298

3551

7287

377

6771

3210

15694

14516

22308

20486

-

1609

1979

1441

1715

-15

26807

16341

29034

8120

24259 .

16451 .

48330 .

9789

24372

.

767

1864

-

-

-

-

7944

8813

13287

12512

13220

12377

15218

14170

13685

11743

16783

15095

-41

151

982

750

1031

3450

3165

3675

4361

-286

-184

1854

2333

-

-

-

-

-

-

1455

-

-

-

9871

-

745

3046

-

-

-

24257

17120

10634

8674

-

-

-

34495

22792

29334

12221

-

-

-

38166

9194

4813

8889

-

-

-

37779

14121

37645

11957

B

DK

D*

EL

E

F

IRL

I

L

NL

A*

P

FIN

S*

UK

EU 15

*

The figures for S for 1997 are provisional, as are those for D and A for 1998.

25

TABLE 3

FAMILY FARM INCOME

(ECU)

All farms

Arable

Horticulture

Vineyards

Other perm. crops

Dairy

Drystock

Pigs/poultry

Mixed

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

36723

34450

40814

44364

43610

58269

16444

-550

3133

-3210

41114

41873

-

-

-

-

50210

38128

33222

35967

27897

33233

45127

-9282

38416

34751

23022

15999

21002

22203

1890

-8017

59738

-34538

16678

-11223

23488

20355

28855

23980

30386

28540

22569

26681

31838

25270

19697

23676

22217

16402

31038

-1047

23566

13006

9059

8038

-

17923

-

12157

-

8188

-

16954

-

12805 .

24241

-

10351 .

16571

15857

16286

17365

26942

18817

12187

12749

14126

11382

12852

15658

18933

22053

36500

25726

19666

20524

28322

29965

30567

30188

28736

31805

42654

57952

26789

30992

22360

25165

20130

21088

45364

835

29612

26765

15332

11952

17058

26656

-

46296

-

-

-

-

26335

22458

10491

7170

46924

-7222

24620

20156

14671

14314

10365

10550

26261

24767

17078

17194

10515

11181

44619

40715

21726

16604

94630

80419

21460

18747

24989

31347

-2680

8221

-

-

21475

49619

-

-

23432

30494

36143

28877

20998

42640

24573

25056

43579

25884

41575

49538

68702

80814

-

-

54999

40508

37448

29330

6449

-564

64068

-52159

39812

-10408

25581

23601

28474

26007

-

-

26314

26631

32523

27913

22234

23352

24345

24890

32786

18000

26210

20300

2623

3948

1822

3352

6150

5932

2656

6273

2885

3902

6705

7560

3323

4649

7991

-8375

1942

3372

19368

5349

26935

17134

-

-

-

14245

4370

30292

14058

-

-

-

5573

-

38888

30213

-

-

-

-

-

-

21249

-

-

-

766

-

69151

11328

-

-

-

22605

11811

40199

24189

-

-

-

14545

-3810

14837

16064

-

-

-

27681

7303

33065

43947

-

-

-

20464

-3739

20962

18277

B

DK

D*

EL

E

F

IRL

I

L

NL

A*

P

FIN

S*

UK

EU 15

*

The figures for S for 1997 are provisional, as are those for D and A for 1998.

26

TABLE 4

BALANCE: CURRENT SUBSIDIES AND TAXES AS A PERCENTAGE OF FAMILY FARM INCOME

(ECU)1

B

DK

D*

EL

E

F

IRL

I

L

NL

A*

P

FIN

S*

UK

EU 15

*
1

All farms

Arable

Horticulture

Vineyards

Other perm. crops

Dairy

Drystock

Pigs/poultry

Mixed

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

1997

1998

22.8

22.5

26.2

229.9

76.7

379.8

13.3

21.7

1.7

9.3

1.3

16.2

16.1

53.2

42.6

10.0

26.6

26.6

12.5

56.3

55.9

692.4

26.1

89.5

75.9

88.2

100.2

125.0

13.7

16.5

29.4

24.2

19.1

24.3

56.8

49.2

88.4

115.9

44.2

100.3

178.7

27.8

27.1

33.3

35.3

46.7

158.0

53.4

51.7

88.1

337.9

62.1

75.1

149.1

258.2

3.8

3.4

5.4

4.7

7.9

48.4

24.2

17.6

36.6

5.9

5.3

41.9

46.5

8.2

6.0

35.5

34.8

-9.1

4.6

34.2

8.1

36.3

37.0

19.7

25.6

31.9

28.9

86.9

86.0

12.4

819.6

61.8

69.7

25.7

26.6

89.1

126.9

35.7

89.6

92.5

21.8

20.7

43.2

42.8

5.8

4.9

19.2

14.1

8.5

3.1

16.7

23.8

3.1

2.9

19.0

20.3

105.9

85.5

538.4

64.5

17.3

112.3

89.6

92.5

129.8

112.0

87.0

128.6

128.4

12.7

16.0

18.1

17.2

6.2

6.1

7.5

7.5

12.8

12.3

82.2

11.4

17.0

61.4

61.5

78.3

78.8

30.2

33.1

40.9

44.8

59.5

53.0

62.5

56.9

41.7

65.2

64.0

74.4

61.3

50.1

79.1

51.2

5.7

15.7

26.0

26.4

51.5

41.9

110.6

93.8

-3.6

2.2

95.5

69.2

138.4

305.5

107.8

47.4

170.3

376.5

159.5

69.6

437.3

2.0

6.2

6.8

The figures for S for 1997 are provisional, as are those for D and A for 1998.

The % is not calculated where the income is negative or no figures are available.

1288.6

1.1

26.9

27

107.3

144.9

26.5

35.9

237.2

-598.2

197.7

76.1

137.9

125.9

14.6

20.2

184.6

179.6

65.4

2.

2.1.

46.

47.

48.

49.

50.

POLICY DEVELOPMENTS AND LEGISLATIVE INITIATIVES IN 2000

Quality policy

the long-lasting nature of

It is increasingly clear that there is growing concern about food quality among
consumers, a concern which producers cannot ignore. Now that food safety - a basic
requirement - is assured, the quality demanded by consumers must also be expressed
via a wide choice of food products with objective and guaranteed characteristics.
for
Moreover
the
diversifying production,
least-favoured rural areas of the Union. It
the
Community has proceeded with the development of a policy of identification based
on products quality guarantee symbols. The aim under that policy is to provide
guarantees as to both the origin of the products and the way in which they are
produced.

this choice underpins the potential
for
this background that

something which is particularly important
is against

The Commission has, pursuant to Council Regulation (EEC) No 2081/923, made
additions to the list of protected designations of origin (PDOs) and protected
geographical indications (PGIs), the combined total of which now stands at 544.

In terms both of the number of Member States and the types of products concerned,
the new product registrations reflect growing interest in the production of foodstuffs
which consumers can associate with a particular production method and geographical
origin.

A further two designations have been registered under Regulation (EEC) No 2082/92
on certificates of specific character and introducing the "guaranteed traditional
speciality" GTS indication4. On the whole, though, very little use has been made of
the Regulation, with a total of only nine GTSs registered to date. Following a report
from the Commission to the Council on the detailed implementing rules concerned, a
Regulation is being drafted which, it is hoped, will resolve the difficulties that have
come to light. The aim is, in particular, to specify legitimate grounds for objection.

At multilateral level, work is under way on clarifying certain aspects of Regulation
(EEC) No 2081/92 as regards the TRIPS (Trade-Related Aspects of Intellectual
Property Rights) Agreement. Moreover the European Union is seeking progress via
proposals for a system of notification of registered designations of origin. This is a
priority objective, which will help Community producers entitled to the use of a
geographical indication to protect themselves more effectively and find a niche on
the international market.

3

4

OJ L 208, 24.7.1992, p. 1.
OJ L 208, 24.7.1992, p. 9.

28

List of PDOs, PGIs and GTSs registered in 2000

Product

Name

Member State

Germany

Spain

Spain

France

France

France

France

France

France

France

Portugal

Portugal

Sweden

Italy

Italy

Netherlands

Italy

Italy

Spain

Meissner Fummel
(pastry)
Espárrago de Huétor-Tajár
(asparagus)
Montes de Toledo
(olive oil)
Haricot Tarbais
(bean)
Pomme de terre de l’Ile de Ré
(potato)
Riz de Camargue
(rice)
Huile d’olive de la vallée des Baux-de-
Provence
(olive oil)
Miel de Corse - Mele de Corsica
(honey)
Canard à foie gras du Sud-Ouest
(Chalosse, Gascogne, Gers, Landes,
Périgord, Quercy)
(fresh and preserved meats)
Agneau du Limousin
(lamb)
Queijo mestiço de Tolosa
(cheese)
Anona da Madeira
(cherimoya)
Skansk spettkaka
(pastry)
Aceto
Modena
(balsamic vinegar)
Aceto balsamico tradizionale di Reggio
Emilia
(balsamic vinegar)
Kanterkaas, Kanternagelkaas,
Kanterkomijnekaas
(cheese)
Castagna del Monte Amiata
(chestnut)
La Bella della Daunia
(olive)
Leche certificada de granja
(milk)

tradizionale

balsamico

di

United Kingdom Traditional farm-fresh turkey

29

PGI

PGI

PDO

PGI

PDO

PGI

PDO

PDO

PGI

PGI

PGI

PDO

PGI

PDO

PDO

PDO

PGI

PDO

GTS

GTS

2.2.

51.

52.

53.

2.3.

54.

Organic farming

On 19 May and 25 September 2000 the Commission adopted Regulation (EC)
No 1073/20005 and Regulation (EC) No 2020/20006 respectively, the aim being to
update technical Annexes II and VI to Regulation (EEC) No 2092/917.

Following the adoption of Regulation (EC) No 1804/19998 bringing organic
livestock production within the scope of Regulation (EEC) No 2092/91,
the
Commission launched a work programme aimed at clarifying certain issues relating
to organic livestock production which were raised by the Council at the time of the
adoption of Regulation (EC) No 1804/1999. The main issues currently covered by
the programme are as follows:

–

–

–

–

–

amendment of Annex III concerning minimum inspection requirements and
precautionary measures,

development of a regulation establishing labelling and inspection requirements
for animal feedingstuffs,

additions to sections A and B of Annex VI as regards the non-agricultural
ingredients and processing aids used in processed livestock products,

examination of the conditions governing access to pasturage,

implementation measures concerning the prohibition of the use of GMOs
(genetically modified organisms) and GMO derivatives.

The assessment of equivalency according to Article 11(1) of Regulation 2092/91 is
ongoing for several third countries, in particular with regard to the extension of the
equivalency to livestock production. On 24 July and 31 October 2000 the
Commission adopted Regulations (EC) Nos 1616/20009 and 2426/200010 extending
the equivalency recognition to livestock production for Argentina and Switzerland
and adding a new inspection body for Argentina.

Promotional measures

In the context of a reorientation of the policy on the promotion of agricultural
products, the Council adopted a Regulation on measures to provide information on,
and to promote, agricultural products in third countries11. Under the Regulation,
support may be given to information and promotional measures for agricultural
products in any third country. The recently adopted Commission Regulation
No 2879/2000 of 28 December 200012 lays down the detailed implementing rules
applicable to the promotional scheme in third countries.

5

6

7

8

9

10

11

12

OJ L 119, 20.5.2000, p. 27.
OJ L 241, 26.9.2000, p. 39.
OJ L 198, 22.7.1991, p. 1.
OJ L 222, 24.8.1999, p. 1.
OJ L 185, 25.7.2000, p. 62.
OJ L 279, 1.11.2000, p. 19.
Regulation (EC) No 2702/1999 (OJ L 327 of 14.12.1999, p. 7).
OJ L 333, 29.12.2000, p. 63.

30

55.

56.

57.

58.

As part of the programmes run directly by the Commission, 1999 saw the preparation
of a new three-year campaign for olive oil based on the results of the evaluation of
the preceding campaign. A new two-year campaign for fibre flax was launched in
September. The programmes run indirectly by the Commission comprised a
continuation of the promotional campaigns for milk and milk products, quality beef,
potatoes, citrus fruit and grape juice. The assessment reports were encouraging for
these groups of products too.

In addition, information measures were drawn up for the new labelling system for
beef and veal (EUR 7 million).

The final set of promotion programmes for flowers and live plants (EUR 15 million)
was launched in 14 Member States.

The information campaign on the logos identifying quality agricultural products from
the outermost EU regions has now ended.

59.

Budget spending by group of products was as follows (EUR million):

Payments in 1999

Programmes run directly by the Commission

(Olive oil, Fibre flax, Quality agricultural products from the
outermost EU regions)

Measures run indirectly

(Grape juice, Apples/citrus fruit, Table olives, Quality
beef/veal, Milk and milk products, Flowers and live plants)

Total

21.1

47.4

68.5

60.

On 8 September 2000, moreover, the Commission adopted a proposal for a Council
Regulation aimed at harmonising information and promotion measures
for
agricultural products on the internal market13. This was adopted by the Council as
Regulation (EC) No 2826/200014 of 19 December 2000.

2.4.

Simplification of agricultural legislation

2.4.1.

Introduction

61.

Over the past few years the Commission has undertaken a number of major concrete
initiatives aimed at simplifying agricultural legislation. The simplification work in
2000 focused on making agricultural legislation as clear, transparent and easily
accessible as possible and reducing the administrative workload that the common
agricultural policy (CAP) imposes on farmers and administrative authorities.

13

14

COM(2000) 538 final.
OJ L 328, 23.12.2000, p. 2.

31

2.4.2.

Transparency and accessibility of agricultural legislation

2.4.2.1. Consolidation

62.

A project to consolidate agricultural legislation in all official languages of the EU
and make it available on the internet for the general public was launched at the
beginning of 1999. Modifications to agricultural legal acts are integrated into the
basic texts so that a single and updated version of the text can be consulted. Although
not legally binding, the consolidated versions substantially facilitate the consultation
of the rules in force.

63.

By the end of 2000 around 500 consolidated agricultural acts had already been made
available on the EUR-LEX website.

2.4.2.2. Recasting of the regulations relating to import and export licences

64.

in some cases substantially.

The horizontal regulations on import and export licences have been amended on
many occasions,
In the interests of clarity and
administrative efficiency these rules have been consolidated to form a single text:
Commission Regulation (EC) No 1291/200015. The new Regulation entails
substantial simplification, e.g. Member States may introduce a simplified procedure
avoiding the physical transmission of licences, and the amount below which no
licence is required has been raised from EUR 5 to EUR 60. These changes will
substantially ease the administrative burden both on trade and on the national
administrations concerned.

2.4.2.3. Export destination codes

65.

A simplified system for indicating destinations when fixing export refunds has been
applied since September 2000. This new unified system, which replaces the different
and complex systems used in the various sectors to date, will reduce the risk of
misunderstanding and error. Furthermore, it will facilitate electronic exchange of
data and information between the Commission and Member States.

2.4.2.4. Paying agencies’ proposals

66.

Over the last few years, the national paying agencies in the Member States have
submitted for consideration 246 proposals for legislative and/or administrative
simplification. The Commission has now reviewed these proposals16, and a
significant number of them have been partially or fully adopted. Some of the
proposals are still under consideration and may lead to further simplification in the
future.

2.4.2.5. New guidelines for state aids

67.

The new Community guidelines for state aids in the agricultural sector adopted in
frameworks,
February 2000 replace and consolidate a great variety of other
guidelines and Commission working documents and practices. This review results in
greater transparency and facilitates the task of the competent authorities.

15

16

OJ L 152, 24.6.2000, p. 1.
SEC(2000) 1775.

32

2.4.3.

Simplification measures in the market sectors

68.

Reforms adopted or proposed in 2000 have brought or will bring about simplification
of agricultural legislation in a number of market sectors.

2.4.3.1. Flax and hemp

69.

The reform of the fibre flax and hemp sector, which was adopted in July 2000,
integrates these crops into the arable system as regards direct aid to producers. In
addition, the reform has reduced the number of regulations.

2.4.3.2. Meat

70.

A number of simplification measures have been adopted in the meat sector in 2000,
for example:

–

–

–

–

–

slaughter premiums in the beef sector can, under certain conditions, be paid
automatically to the farmer concerned,

Member States may allow farmers to opt for simplified application of the
extensification premium,

the export refund nomenclature for processed beef has been significantly
simplified, with 47 highly technical and complex product lines being reduced
to eight,

in line with the approach followed by other sectors under Agenda 2000, the
basic prices for pigmeat and sheepmeat will, instead of being fixed annually, be
set - without specific time limits - under the respective basic regulations,

the procedures for "immediate" export
licences for pigmeat, eggs and
poultrymeat have been simplified and aligned with the licence system in the
beef sector.

2.4.3.3. Milk and milk products

71.

It was decided that,

Following the adoption of a new basic Regulation in the milk sector, a substantial
number of consequential amendments to Commission implementing regulations were
required.
the
opportunity should be used to consolidate large sections of the legislation in the dairy
sector. This consolidation served to reduce the number of regulations, simplify
administrative procedures and harmonise administrative and control procedures
between different schemes.

instead of amending existing regulations,

2.4.3.4. Fruit and vegetables

72.

in fruit and
to amend the common organisation of the market
The proposal
vegetables, including processed fruit and vegetables, aims to rationalise and simplify
the arrangements and adapt the relevant production thresholds. It will simplify and
stabilise the support scheme for producer organisations and improve the management
of export refunds for fresh fruit and vegetables.

33

2.4.3.5. Rice

73.

Under the Commission proposal of June 2000, rice will be integrated into the arable
crop system. Major advantages in terms of simplification should result from this
integration.

2.4.4.

Small farmers’ scheme

74.

In December 2000 the Commission adopted a proposal for a simplified scheme for
paying small amounts of direct aid to farmers17. Under the proposal, farmers entitled
to EUR 1 000 or less in direct aid may submit a single application and receive one
global amount per year instead of several small payments.

2.5.

State aids

2.5.1.

A new legal framework

75.

76.

77.

On 1 January 2000 the Commission began applying the "Community Guidelines for
State aid in the agriculture sector"18, as adopted on 24 November 1999, to new state
aids introduced after that date. Member States have until the end of 2000 to adjust
their existing aid schemes and thereby comply with the new rules.

The new guidelines consolidate and simplify the rules applied by the Commission in
the past. In addition, a number of important changes have been made to ensure that
the European Union rules for State aids are consistent with the new rural
development policy introduced as part of the "Agenda 2000 reforms".

The starting point for the new guidelines is that any state aid for the agriculture
sector must be compatible with the EU's common agricultural policy (CAP) and with
the EU's international obligations, in particular the WTO Agreement on Agriculture.
As the Member States decided to rule out the possibility of individual Member States
distorting the delicately balanced EU support for product prices or rural development
schemes, any state aid which interferes with the mechanisms of the common market
organisations is prohibited.

78.

In essence, the following aid granted by Member States can, subject to certain
conditions, be approved by the EU under the new guidelines:

–

–

investment aid for farms can normally be approved at up to 40% of eligible
expenditure (50% in less-favoured areas); higher rates of aid may be allowed
for investments linked to the conservation of traditional landscapes, for the
relocation of farm buildings in the public interest or for the improvement of the
environment, animal welfare or hygiene,

aid for investment in the processing and marketing of agricultural products can
normally be permitted at rates of up to 40%, or 50% in Objective 1 areas,
provided that it can be shown that normal market outlets exist for the products
concerned,

17

18

COM(2000) 841.
OJ C 28, 1.2.2000, p. 2; OJ C 232, 12.8.2000, p. 19.

34

–

–

–

–

–

–

–

–

aid granted in return for agri-environmental undertakings given by farmers and
other environmental aids,

aid to compensate for handicaps in less-favoured areas,

aid to help the installation of young farmers,

aid for early retirement,
production, processing and marketing capacity,

the cessation of farming, or for closing down

aid for the establishment of producer groups,

aid to compensate for damage caused to agricultural production or the means of
production caused by natural disasters or exceptional occurrences, adverse
weather conditions or outbreaks of animal or plant disease, and aid granted
towards insurance cover against such risks,

aid to encourage the production and marketing of quality agricultural products,
the provision of technical support for producers and the improvement of the
genetic quality of livestock,

aid to grant specific support for the outermost regions and the Aegean islands.

79.

80.

In addition to these categories, which are specifically covered in the guidelines, aid
may also be granted in accordance with other Community texts for research and
development, for short-term operating loans, for rescue and restructuring farms in
difficulty, and for employment support.

Furthermore, consideration is being given by the Commission to a new promotion
and advertising framework for agricultural products. Accordingly, the new guidelines
simply refer to the existing guidelines, which were published in 1987.

2.5.2. Overview of the year

81.

In 2000 the Commission received 248 notifications of draft state aid measures to be
granted in the agricultural and agro-industrial sector. The Commission also began a
scrutiny of 26 aid measures which had not been notified beforehand in accordance with
Article 88(3) of the EC Treaty. No review of existing aid measures pursuant to Article
88(1) of the EC Treaty began or was concluded. The Commission decided to raise no
objection against a total of 183 measures. Several of these were approved after the
Member States concerned amended or undertook to amend them in order to bring them
into line with Community rules on state aid. The Commission initiated the procedure
provided for in Article 88(2) of the EC Treaty in respect of seven cases in which the
measures concerned raised serious doubts as to compatibility with the common market.
The Commission brought to a close the procedure provided for in Article 88(2) of the
EC Treaty in respect of 13 cases, taking a final negative decision in seven of them. In
all the cases in which a negative decision was taken and state aids had already been
granted by the Member State concerned, the Commission requested recovery of the aids
paid.

82.

The following overview includes a selection of cases which raise interesting issues of
state aids policy in the agricultural and agro-industrial sector. For the sake of clarity,
the cases have been classified by topic and sector.

35

2.5.3.

Exceptional occurrences and natural disasters

2.5.3.1. Dioxin - (B)

83.

crisis

and undertakings

State aid for "exceptional occurrences" covered by Article 87(2)(b) of the EC Treaty:
in 2000 the Commission authorised, as in the previous year, an aid package for
producers
resulting from dioxin
affected by the
contamination of feedingstuffs. The aid package included an allowance designed to
offset the economic harm suffered by agricultural producers as a result of the crisis19.
The aid applies to all livestock products but excludes the value of destroyed animals
and products already covered by other national provisions authorised by the
Commission20. It is in the form of a single payment and is arrived at only on the basis
of flat-rate amounts derived from macroeconomic calculations, with payments taking
place solely per unit marketed or per means of production. This avoids the risk of
cumulation with other aids authorised in the past, in particular allowances for the
destruction of animals or products of animal origin that are unfit for consumption or
marketing. The Commission took the view that a link had clearly been demonstrated
between the reduction in turnover and the exceptional occurrence resulting from the
dioxin crisis. The reduced turnover was allegedly attributable in particular to losses
of market share and to a sharp drop in consumption brought about by public anxiety,
by chaotic management of the crisis and by special measures which prevented the
products concerned from being marketed normally.

2.5.3.2. Recovery of the French forestry sector - (F)

84.

Aid to make good the damage caused by natural disasters within the meaning of
Article 87(2)(b) of the Treaty: the Commission authorised a scheme designed to help
the French forestry sector recover from severe damage caused by bad weather
towards the end of December 1999. The scheme, with a total budget of about
EUR 3 billion for the various types of aid21, included urgent measures such as aid for
reopening forest roads and tracks, building forest tracks and damp-timber storage
areas, preparing temporary storage sites and financing timber removal costs; timber
storage aid; and aid for treating windthrow timber, repairing damaged forests and
deducting storm-related costs from the flat-rate forestry income of the owners whose
forests were damaged by the storms. Also covered by the plan were incentives such
as: aid for timber transportation; investment aid, in particular for the purchase and
rapid depreciation of forestry equipment; training and employment aid; and aid for
that, although
organisational and technical monitoring. The Commission felt
outwardly different, the measures provided for in the plan were part of a whole and
had a common objective - the recovery of an entire sector following a natural
disaster - and should therefore be regarded as measures intended to make good
damage caused by natural disasters as referred to in the Treaty.

85.

Also in the forestry sector but not in relation to the damage caused by storms in
the Commission authorised aid to ONF (Office national des
December 1999,

19

20

21

Case No N 770/1999. (Where no specific reference to the publication of a decision in the OJ is made in
this text, the decision has not yet been published. The authentic texts of the decisions approving aids
can generally be found at http://europa.eu.int/comm/sg/sgb/state_aids).
Cases Nos NN 87/1999, NN 88/1999, NN 89/1999, N 380/1999 and N 386/1999.
Case No N 92/2000.

36

forêts)22 in a case where there was a potential problem of central government
resources being used to support the competitive activities of a public agency. ONF is
a national public body whose activities are of a twofold nature in so far as, on the one
hand, it carries out an exclusive public mandate and, on the other, it is engaged in a
commercial activity in competition with other market operators. The public activity
consists in managing, on behalf of their owners, forests subject to the French forestry
regime. ONF receives a central government contribution in the form of
compensatory payments designed to cover its management costs. Further public, or
even private, funding is available for general-interest operations of the State carried
out by ONF. Such activities may involve in particular protecting and monitoring
forests, preventing fires, combating erosion and avalanches, etc. The Commission
concluded that they constituted activities pursued in the general interest and that the
transfer of funds should be seen as taking place from one level of the state apparatus
to another. Moreover, since some public-service activities are carried on throughout
the State,
they should be regarded as measures which do not favour certain
undertakings or the production of certain goods and do not, therefore, fulfil all the
criteria of Article 87(1) of the Treaty. With regard to its commercial activities, ONF
may conclude agreements with private or public bodies with a view to carrying out
management operations, studies, surveys and works and to protecting, improving and
developing forestry resources. For this type of activity, the Commission did not
detect any public aid element in the form of a cross-subsidising of these competitive
activities; the prices charged by ONF are not lower than those of its competitors and
at all events the compensatory payments made by the State do not even cover all
"public" ONF expenditure, which in practice would rule out any cross-subsidising.

2.5.4.

Privatisation and restructuring

2.5.4.1. Aid for land purchase - (D)

86.

87.

88.

22

23

24

In 1999 the Commission communicated to Germany a final negative decision on the
the "Entschädigungs- und
aid granted by the German government under
Ausgleichsleistungsgesetz" Law (EALG)23. The Law provides for a scheme for the
purchase of land at reduced prices in former Eastern Germany which amounted to
state aid to some beneficiaries.

The aid rate granted to certain beneficiaries appeared too high in relation to the rates
that the Commission could normally accept for the purchase of farmland. In addition,
the aid in question appeared to be discriminatory and thus infringe Articles 12, 34(3)
and 43 of the EC Treaty.

In the course of 1999 an amended version of the land purchase programme was
notified to the Commission and approved by letter of 19 January 200024. The
problems which had led to a partially negative decision in 1999 have been resolved:

–

in its decision of 20 January 1999 regarding the erstwhile EALG the
Commission considered that discrimination existed in the requirement of
residency on a given date for eligibility under the programme, a requirement

Case No NN 96/95.
Opening of the procedure in Case No C 17/98, OJ C 215, 10.7.1998, p. 7; final negative decision
adopted on 20.1.1999, OJ L 107, 24.4.1999, p. 21.
Case No N 506/1999.

37

which in practice this requirement could be met by (East) Germans only. All
such dates have been deleted from the new programme;

–

the Commission further objected to the aid intensity for the purchase of
agricultural land outside LFAs. The aid rate has now been brought fully into
line with the rates the Commission usually accepts. Any aid granted in excess
under the erstwhile EALG will be recovered, with interest, as required by the
Commission decision of 20 January 1999.

89.

In the light of the assurances provided by the German authorities, the Commission
has established that there is sufficient land to remove any potential discrimination
without rescinding contracts already concluded under the erstwhile EALG. In so far
as residual elements in the new scheme would, all other criteria being equal, give
priority to East Germans, the Commission regards such preference as falling within
the objective of restructuring agriculture in the new Länder while at the same time
ensuring that potential purchasers - or their families - who had lived and worked in
the former GDR for several decades may participate in the land purchases, an
objective which has been accepted as legitimate in the Commission decision of
20 January 1999 and which has not been challenged.

90.

The Commission therefore considers that the new scheme proposed by the German
government will facilitate the development of economic activities in the sector. The
measure therefore falls within the scope of Article 87(3)(c) of the Treaty.

2.5.4.2. Restructuring and privatisation plans of EPAC and Silopor25 - (P)

91.

92.

In 1998 the Commission opened the procedure pursuant to Article 88(2) of the EC
Treaty in relation to the restructuring and privatisation plans of both publicly owned
companies:
the cereal trading company EPAC and the port handling company
Silopor26. In the meantime, Portugal decided to liquidate both companies, but has so
far failed to present an official position on this to the Commission.

On 27 June 2000 the European Court of Justice issued a judgement concerning
Portugal’s failure to comply with the 1997 Commission Decision to the effect that
the guarantee provided to EPAC constituted illegal and incompatible state aid27. In
essence, the Court confirmed the Commission’s position as to the aid character and
incompatibility of the guarantee provided to EPAC by the State.

2.5.4.3. Centrale del Latte di Roma28 - (I)

93.

25

26

27

28

29

The Commission also decided to close, by the adoption of a partially negative
decision29, the procedure on aids granted to Centrale del Latte di Roma. The
Commission took the view that the operating losses systematically written off by the
municipality of Rome in 1992 and 1997 were operating aids that could not be
regarded as constituting a public service, but that there was no state aid to the Lazio
milk producers or to the buyer in the privatisation procedure. As the transfer of the

Case No C 51/98 (ex Nos N 852/97 and N 6/98).
OJ C 363, 25.11.1998, p. 4.
Case No C 404/97.
Case No C 28/98 (ex NN 185/97).
OJ L 265, 19.10.2000, p. 15.

38

factory can be considered an asset deal, recuperation of the aids will concern the
erstwhile Centrale del Latte (in liquidation).

2.5.5.

Fiscal measures

2.5.5.1. CO2 tax exemption for the glasshouse horticulture sector30 - (NL)

94.

95.

96.

97.

98.

On 5 January 2000 the Commission approved partial relief from a Dutch CO2 tax for
the glasshouse horticulture sector.

The original version of the Law on environmental
taxes "Wet belastingen op
milieugrondslag" was approved by the Commission on 3 December 1992. Various
amendments were made to this Law, among them the introduction of a regulatory
energy tax, the purpose of which is to contribute to reducing CO2 emissions and to
promote energy conservation. The Dutch government has amended the energy tax
rates applicable with effect from 1 January 1999. The rates have been increased and
the tax brackets adjusted. The revenues obtained from this increase will be clawed
back to households and businesses in the form of a reduction in wage and income
tax. The Dutch government expects this heavier taxation of energy consumption to
have a positive effect on CO2 emissions.

The regulatory energy tax also applied a zero rate on natural gas used in glasshouse
cultivation. The Dutch authorities requested an extension of the zero rate on such
natural gas for the glasshouse horticulture sector for at least another year. If a
glasshouse has no natural gas connection, a zero rate applies to middle oil, gas oil
and liquefied petroleum gas.

Following contacts with the Commission services, the Dutch authorities amended the
measure: the zero rate would apply only in 1999. In 2000 and 2001 the sector would
be taxed on a (gradually increasing) basis similar to other energy-intensive sectors.
The Dutch authorities undertook to re-notify the scheme in 2002.

The measure falls within the scope of the Community guidelines on State aid for
environmental protection because its objective is precisely environmental protection.
It is intended to reduce energy consumption through an increase in energy taxation.
The tax exemption would appear to be an operating aid. The Community guidelines
apply strict conditions on operating aid awarded in relation to environmental
problems:

–

–

the aid should be temporary and, in principle, degressive: the Dutch authorities
have given a precise date by which the zero rate will end and gradually be
brought within the general framework. The measure is degressive since the
zero rate is applicable in 1999 only, with taxation increasing gradually
thereafter;

the
the aid should be necessary to offset a competitive disadvantage:
Commission has taken account of the fact that the glasshouse horticulture
sector has below average relative labour costs. Therefore, these undertakings
will derive very limited benefits from the reductions in labour taxes. The

30

Case No N 589/B/98.

39

previous preferential pricing system for natural gas to the glasshouse
horticulture sector ceased to exist at the end of 1998;

–

a counterpart must be provided by the beneficiaries: a covenant has been
concluded with the sector under which targets are also set for renewable energy
use: 4% of the energy use in 2010 must consist of renewable energy. Energy
efficiency must improve by 65% compared with 1980. A further counterpart
can be seen in the increasing total tax burden. Indeed, by providing for
gradually increasing taxation of gas (and full taxation of electricity use), the
new measure gives a clear impetus to the glasshouse horticulture sector for a
rational use of energy and a reduction of CO2 emissions.

99.

The Commission therefore concluded that
applicable under the environmental guidelines, and approved it.

the measure met

the requirements

2.5.5.2. Exemption from mineral levies31 - (NL)

100.

101.

102.

103.

104.

The Dutch authorities intend to introduce certain exemptions from the mineral levies
introduced under the manure law. This provides for an obligatory bookkeeping
system for minerals on each individual holding and establishes maximum phosphate
and nitrogen emissions into the environment for each holding. If emissions exceed
these maximum quantities, taxes will become payable in respect of the quantities
concerned. The farmer can choose how to reduce mineral emissions to the maximum
quantities allowed. Prohibitive mineral levies are levied only if the total amount of
phosphate and nitrogen produced on a farm,
less the total amount of minerals
removed in a calendar year, exceeds the norms for permissible releases of phosphate
and nitrogen into the environment (the so-called "loss norms"). If an undertaking
takes effective measures, e.g. the removal of manure that may not be spread on the
land, it will not have to pay any levies.

Under the proposed measure, small undertakings (so-called "hobby-undertakings")
and garden centres are fully exempt from the mineral levies provided for in Chapter
IV of the manure law. Horticultural farms growing crops in glasshouses or on
substrate are partially exempt.

Point 23 of the Commission notice on the application of the state aid rules to
measures relating to direct business taxation32 provides that the differential nature of
fiscal measures does not necessarily mean that they must be regarded as state aid.
This is the case with measures whose economic rationale makes them necessary for
the functioning and effectiveness of the tax system. It is up to the Member State,
however, to provide such justification.

At the present stage in the procedure, the Commission considers that the Dutch
authorities have not shown that the various tax exemptions are justified by the nature
and economy of the mineral levy system.

In the absence of such justification, the exemptions must be regarded as constituting
state aid since they would appear to meet all the conditions mentioned at points 9 to
12 of the Commission notice on the application of the state aid rules to measures

31

32

Case No C 14/2000, OJ C 190, 8.7.2000, p. 4.
OJ C 384 of 10.12.1998, p. 3.

40

relating to direct business taxation, and must therefore be regarded as operating aid.
The Commission has therefore decided to open the procedure against the proposed
measures.

105.

The Commission also has doubts regarding the environmental impact of the proposed
exemptions and compatibility with the nitrates Directive. It has issued a letter of
formal notice33, to which the Netherlands has sent a reply. The latter is currently
being examined by the Commission.

2.5.6. Operating aids: Greek cooperatives - (EL)

106.

107.

In 2000, by virtue of the general principle whereby Member States are prohibited
from granting operating aid in the agriculture sector, the Commission adopted a final
negative decision on two illegal Greek national measures writing off and
consolidating loans for a significant number of agricultural cooperatives (116 for
each measure)34. The debts are accounted for mainly by the operational losses of the
holdings, which are caused by intervention from the Greek State in the production
and marketing of the products concerned (price-fixing, storage, intervention and
export). Other debts relate to investments and natural disasters. These measures are
of the same nature as the 1997 Law - cleared by the Council in December 1998 - on a
EUR 450 million debt write-off for agricultural cooperatives.

The measures currently under scrutiny were taken in application of two laws adopted
in 1992 and 1994. The Commission decision was taken following a complaint in
relation to illegal and incompatible state aids received by the AGNO dairy
cooperative. In the final negative decision, the Commission also issued an injunction
to Greece to supply all relevant
information in order to launch a state aid
investigation into the activities of the Agricultural Bank of Greece.

2.5.7.

RIBS: State aid granted under market conditions - (I)

108.

In 1999 and 2000 Italy notified three projects supported by Itainvest, a public
financing company. In essence, aid is granted by the company in the form of the
acquisition of a holding in the beneficiary company's capital in accordance with the
principle of a private investor operating under normal market economy conditions, as
defined in the document "Application of Articles 92 and 93 of the EC Treaty to
public authorities' holdings"35. The capital injection is reimbursed after a number of
years at a rate of interest higher than the reference rate used by the Commission, and
with guarantees enabling the financing company to take control of the recipient
company. To date, two of the projects have been approved36. The third is still under
scrutiny. Concomitantly with this, Italy notified five aid projects funded by the
public financing company RIBS. It withdrew four of them when the Commission
expressed doubts as to whether the assistance was being provided under market
conditions. In 2000 Itainvest and RIBS were merged to form a new public financing
company called Sviluppo Italia. Just as it did in the case of RIBS, Italy submitted an
outline of the activities of the new financing company, an outline which is under
scrutiny by the Commission.

33

34

35

36

Letter of 29.9.1998.
Cases No C 78/97 and No C 82/97 (ex NN 33/96 and NN 168/97).
Bulletin of the European Communities 9-1984.
Cases Nos N 652/1999 and N 164/2000.

41

2.5.8.

Pigmeat sector

2.5.8.1. Aid for pigmeat production - Stabiporc - (F)

109.

The Commission adopted a partly negative final decision on a three-stranded French
scheme to assist pigmeat production37 in respect of which it had initiated the scrutiny
procedure provided for in Article 88(2) of the Treaty38. The French authorities
wished first of all to reactivate the system of refundable advances of Stabiporc, the
pigmeat regulatory fund. Under the system, producer groups receive fully refundable
cash advances to enable them to adjust the price of fattening pigs belonging to
producers who are members of the scheme and hence to even out pigfarmers'
incomes, affected as they were by crises in pigmeat production. The Commission
reactivating Stabiporc did not constitute state aid since the
concluded that
intervention of the State was limited to granting a loan at the market interest rate.
Moreover, should the capital and interest on the loan not be paid or be paid late, the
public bodies involved would still seek to claim the sums due, plus interest, from the
groups concerned. The Commission did, however, conclude that
the other two
strands under scrutiny were incompatible with the Treaty. They concerned in
particular the possibility of staggering the payment of social security contributions in
the case of farms experiencing financial difficulties, and relieving farmers from part
of the burden of interest payments on bank loans intended to finance initial
investment in pigmeat production. The negative decision was based on the fact that
not all the requirements laid down in the Community guidelines on state aid for
there was
rescuing and restructuring firms in difficulty had been satisfied:
insufficient evidence that the situation was a "difficult" one; there was no viability
plan for the firms concerned and respect for the principle that the rescue should be a
one-off operation could not, therefore, be guaranteed.

2.5.8.2. Pig assembly centres39 - (NL)

110.

All pig assembly centres in the Netherlands have been closed since the outbreak of
classical swine fever. Every operating permit was revoked. The undertakings cannot
reopen unless they apply for a new permit, which can be obtained only if the centres
meet new hygiene requirements, regarded as necessary to avoid the spread of
classical swine fever. Undertakings that do not want or are not able to meet the new
hygiene requirements - and therefore remain closed - are offered subsidies for
permanently closing down their
(including their
shareholders) must undertake not to participate directly or indirectly in the operation
of a pig assembly centre. The subsidy on offer is in two parts: compensation for loss
of income and compensation for loss of capital.

activities. The

recipients

111. When it initiated the procedure, the Commission indicated that undertakings which
are unable or unwilling to meet the new hygiene requirements would be regarded as
making a normal business decision to close down. In principle, aid for closing down
in such circumstances would not be acceptable, as the new hygiene requirements
constitute a normal entrepreneurial risk.

37

38

39

Case No C 74/98.
Decision published in OJ C 61 of 3.3.1999, p. 7.
Case No C 80/98; opening of proceedings published in OJ C 108, 17.4.1999, p. 5.

42

112.

113.

114.

115.

116.

It became evident, however, that such closing down following the tightening of
hygiene requirements should be viewed in the context of a broader policy, in which
the aim is to reduce veterinary risks through a reduction in the number of pig
assembly centres, and thus to contribute to the development of the sector.

Aid is given for investments to upgrade the facilities and meet the new hygiene
requirements, but such aid alone would certainly not attain the additional objective of
reducing the number of pig assembly centres, an objective which further contributes
justifies the aid for
to reducing the veterinary risk. This animal health aspect
abandoning production.

The aid measure must be examined in the context of a two-track policy whereby aid
is given for both upgrading and abandoning production. Accordingly, pig assembly
centres had to choose between upgrading or closing down in the same way as they
would have done for reasons other than as a result of government intervention. The
aid clearly constitutes an inducement for the undertakings to adopt a certain course of
action (i.e. closure) that they would not have chosen otherwise. The aid can therefore
be regarded as having an incentive effect.

All other conditions required by the Commission before accepting aid for
abandoning production capacity would also seem to have been met in this particular
case.

The Commission accordingly accepted that the aid measures proposed by the Dutch
Government facilitate the development of economic activities in the sector. The
measure thus falls within the scope of Article 87(3)(c) of the Treaty.

2.5.9.

Livestock sector: general measures

2.5.9.1. Abandoning capacity: exiting scheme for intensive livestock farming40- (NL)

117.

The Dutch authorities have proposed an integrated approach for tackling the manure
problem. This approach will require a special effort from the agriculture sector.

118. Within this context, farmers are given an opportunity to cease farming or one or
more of the intensive livestock farming activities carried on on their farms. This
scheme should lead to a permanent reduction in the production of animal manure.
The scheme is also linked to the improvement of the countryside in areas with high
livestock density. In these areas, livestock farmers who cease (part of) their activities
can receive compensation for the demolition of their redundant buildings.

119.

120.

To qualify under the scheme, the pig or manure production rights must be sold to the
government. In the "concentration areas" (i.e. areas in the east and the south of the
Netherlands with a high pig density), an allowance can be obtained for the
demolition of farm buildings which consequently become redundant.

The subsidy granted under the scheme consists of two elements. The first consists of
an amount for the cancellation of the part of the pig rights not tied to land or manure
production rights. The second is an allowance for the costs of the demolition of the
redundant farm buildings for livestock farmers situated in the concentration areas.

40

Case No N 177/2000.

43

Part of the demolished farm buildings can, in certain cases, be replaced by residential
dwellings. In such cases no subsidies are granted. This conversion generates
additional financial means that can be used for financing the demolition of further
farm buildings.

121.

The Community guidelines for state aid in the agriculture sector refer at point 8 to
aid for early retirement or for the cessation of farming activities and at point 9 to aid
for closing production, processing and marketing capacity. Point 8 is clearly not
applicable, as such aid requires the permanent and definitive cessation of all farming
activities. It would therefore seem that the scheme should be examined in the light of
point 9 of the Community guidelines.

122.

The Commission concluded that the scheme meets the requirements set out at point 9
of the Community guidelines:

–

–

–

–

the aid is in the general interest of the sector concerned. The scheme benefits
the whole sector, which is under pressure from environmental and animal
welfare constraints. The scheme will also benefit the environment through a
reduction in animal manure production. Other (non-participating) undertakings
will be able to continue farming operations in a better business environment;

there is a counterpart on the part of the beneficiary. Participants must give up
pig rights or manure production rights and demolish their farm buildings. The
location can no longer be used for similar livestock activities for a period of
10 years;

there is no possibility of the aid being used for rescue and restructuring.
Although the scheme can be expected to be used especially by farmers who see
no long-term prospects in continuing their activities, the aid is not granted on
the basis of past or current commercial problems but is open to all livestock
farmers;

there will be no overcompensation of loss of capital value and of future
income.

123.

124.

As regards the other requirements mentioned at point 9 of the Community guidelines,
the aid scheme is of limited duration. The aid does not appear to interfere with the
mechanisms of the various common market organisations. The scheme is accessible
to all economic operators in the sector concerned. No contribution from the sector is
required as capacity is closed for environmental reasons.

As regards the environmental benefits of the scheme, the Dutch authorities explained
that in the Netherlands manure production not tied to the land is fully subject to a
quota system. Thus the total amount of production rights cannot increase; it can only
go down. Any undertaking participating in the exiting scheme must
totally or
partially cancel its production rights. At national level, the exiting scheme will lead
to a considerable and permanent reduction in manure production and the number of
animals kept.

125.

the measure satisfies the criteria for
The Commission therefore concluded that
exemption under Article 87(3)(c) of the Treaty because it facilitates the development

44

of the sector concerned without affecting conditions of trade to an extent contrary to
the common interest.

2.5.9.2. Livestock transport: "Gaelic Ferries"41- (IRL)

126.

The Commission decided to adopt a final negative decision on operating aid, granted
by Ireland, which related to both agriculture and transport. It concerned in particular
the payment of State aid of IEP 1.58 million to the Irish company Gaelic Ferries for
the operation of a ferry service available for livestock transport from Ireland to
continental Europe42. The State intervention was triggered by the decision of a
private ferry operator to discontinue a livestock transport service for commercial
reasons relating to pressure from animal welfare groups. The Commission considered
that the beneficiary of the aid was the entire Irish livestock sector, since the professed
objective and the effect of the State aid was to guarantee access to the continental
market to Irish producers of livestock. Ireland is now obliged to recover the aid
granted from the beneficiaries.

2.5.9.3. Aid to livestock farmers affected by adverse weather conditions - (IRL)

127.

128.

129.

130.

131.

The Commission has decided to authorise the Irish culling programme under the
"Ewe Supplementary Measure" and three items under the "Scheme for assistance of
winter fodder losses"43. These programmes provided for a number of aid measures
aimed at alleviating the situation of livestock farmers whose production was affected
by adverse weather conditions in the summer and autumn of 1998.

Earlier on, the Commission had expressed doubts about compatibility with Articles
87 and 88 of the Treaty. In particular, the measure appeared to constitute operating
aid, possibly in that it helped farmers to dispose of their (at the time) worthless
sheep.

On the basis of additional information supplied by the Irish authorities, however, the
Commission accepted that the primary objective of the measure was to minimise
environmental damage resulting from overgrazing and the presence of dead and
dying livestock on the land. It enabled the Commission to treat the measure in the
same way as aid for the disposal of waste.

In accordance with 3.4 of
the Commission’s guidelines on state aid for
environmental protection44, which were applicable to the agriculture sector when the
aid was granted, aid for the collection, recovery and treatment of agricultural waste
has to be considered on a case-by-case basis. However, since the acceptance of such
aid implies derogating from the "polluter pays" principle, it may be permitted only in
specific and well-justified cases.

In the present case it appeared that the aid had a clear incentive effect, and that there
was a counterpart from the producers who agreed to the slaughter of 30% of their
ewes, some of which might have survived the winter. From the farmers' standpoint
the aid was limited to the free disposal of the animals. No payment was made in

41

42

43

44

Case No C 7/90 (ex NN 1/98).
OJ L 263, 18.10.2000, p. 17.
Case No N 44/1999.
OJ L 72, 10.3.1994, p. 3.

45

return for the livestock. These factors encouraged farmers to dispose of stock which
was of the worst quality and had the fewest prospects of survival. The aid thus
produced durable benefits both for the sector and, by avoiding environmental
problems, for the wider community. Given that the aid was granted on a one-off
basis to resolve a specific environmental problem resulting from a very unusual
combination of events and with an additional
the
Commission took the view that derogating from the "polluter pays" principle was
justifiable in this case.

risk for animal welfare,

2.5.10. Sugar sector

132.

133.

134.

In 1999, the Commission adopted a final negative decision in relation to several
Italian State aid measures in the sugar sector granted through the State holding
company RIBS between 1988 and 199245. These aids, which were linked to the
operation of two sugar plants in Central Italy (Abruzzi and Tuscany), included
losses, capital holdings for
commercial guarantees, capital holdings to cover
investments, extension of capital holdings,
renunciation of privileged credits,
favourable terms for the sale of public property, and loans at subsidised rates. The
recipient of the aid was the SADAM group and the overall amount to be repaid
(including interest) was estimated at EUR 45.548 million. Following this decision,
the Commission was notified of five other cases where aids were granted through the
State-owned holding RIBS to undertakings operating in the sugar sector in the same
time frame.

Following a request from Italy, the Council approved an overall aid package to the
sugar sector in Italy. This aid package included clearance of the five newly notified
cases, the closure of a pending aid file concerning a factory at Ostellato, as well as
aid to the SADAM group to repay the amounts outstanding following the 1999
Commission Decision. With regard to the latter, there is a new element
in this
Council Decision, since it is the first time the Council has cleared new aid with the
economic effect of annulling the effect of a Commission final negative decision
ordering recovery. The Commission decided not to appeal against
this Council
decision, however, in order not to discriminate between sugar operators in Italy.

In the wake of the Council Decision, the Commission approved a EUR 34 million
investment aid package for the Villasor sugar plant - owned by the SADAM
group - in Sardinia46. The aid was granted according to the rules of the public agency
RIBS (shareholding and loan at a subsidised rate). The aid was approved under the
national aid provisions of the market organisation for sugar which, until 2001,
exempt
the South of Italy from the general ban on processing and marketing
investment in the sugar sector.

135.

Moreover, the package was authorised by the Commission on the strength of an
undertaking by the Italian authorities that they would recover previous operating aids
granted to the owner of the sugar plant.

45

46

OJ L 236, 7.9.1999, p. 14.
Case No N 157/99.

46

2.5.11. Citrus sector

2.5.11.1.Aids for the citrus sector in Sicily47 - (I)

136.

137.

138.

139.

140.

141.

In January 2000 the Commission communicated to Italy its final negative decision on
the aid provided for in Articles 1, 3, 5, 6 and 7 of Law No 68/95 of the Sicily Region
("Establishment of a guarantee fund for the consolidation of debts of industrial and
commercial undertakings and of a guarantee fund for the consolidation of debts of
craft undertakings - Aid to commercial operators")48;
in so far as it applied to
undertakings engaged in the production, processing and marketing of Annex I
products.

Article 6 of the Regional Law provided for the financing, in 1995-97, of aid in
respect of 1993/94, 1994/95 and 1995/96. This consisted in contributions towards the
interest payable on loans granted, for a period not exceeding one year, to traders
operating in Sicily whose sales of citrus fruit, fruit and vegetables outside the region
accounted for 70% or more of their turnover. Altogether, 70% of the financial
resources allocated to Article 6 was earmarked for the citrus sector.

According to Commission practice, short-term loans ("crédits de gestion") are aids
granted in order "to allow the operator to cover advance payment of his expenditure
linked to the agricultural production cycle pending receipt of income during that
same cycle". The loans must be "seasonal credits" to cover general overheads: the
purchase of inputs, wages, etc.

Before the application of the Commission communication on subsidised short-term
loans in agriculture49, the Commission regarded these aids as compatible if the
following requirements were satisfied: the loan may not be granted for a single
product or linked to a single operation and the duration of the loan may not exceed
12 months. Export aids per se are prohibited (see Commission communication on
application of the de minimis rule50).

Accordingly,
the Commission considers that: (i) a short-term loan ("crédit de
gestion") cannot be granted "retroactively", since it then simply constitutes operating
aid which has no justification in agriculture (Annex I products); (ii) if aid notified as
a crédit de gestion may de facto also constitute export aid (although it fulfils the
criterion of seasonality and the other applicable criteria), it cannot be regarded as
"crédit de gestion" compatible with the common market.

Following the opening of the procedure in Case No C 1/98, the national authorities
claimed that the measure was the refinancing of an aid scheme already approved by
the Commission in the past (Article 48 of Act No 32/91) and that it constituted a
"subsidised short-term loan" to be examined in the light of the criteria applicable to
this type of measure before the entry into force of the Commission communication
on subsidised short-term loans in agriculture51.

47

48

49

50

51

Case No C 1/98.
Case No C 1/98 (ex-N 750/B/95); Commission Decision of 22.12.1999 (OJ L 110, 6.5.2000).
OJ C 44, 16.2.1996, p. 2.
OJ C 68, 6.3.1996.
OJ C 44, 16.2.1996, p. 2.

47

142.

In its final negative decision, the Commission decided that the measure could not be
regarded as the refinancing of an aid scheme approved by the Commission, because
the measure previously approved (Article 48 of Act No 32/91) concerned financing
limited both in its amount (ITL 30 billion) and in its period of application (1991-93).

143.

Moreover, the criteria for subsidised short-term loans did not appear to be fulfilled
for the following reasons:

–

–

–

the aid concerned the
firstly, since the national authorities specified that
repayment ("ripianamento") of debts arising from short-term banking credits
granted at very high interest rates, the aid did not appear to satisfy the core
requirement underlying "seasonal credits", which is: to allow the operator to
cover advance payment of his/her general management expenditure linked to
the agricultural production cycle pending receipt of income during that same
cycle;

secondly, Article 6 concerned only trading undertakings in Sicily at least 70%
of whose turnover was accounted for by the sale of citrus fruit, fruit and
vegetables outside the region (70% of the resources was reserved for citrus
fruits); therefore the aid would appear to be granted exclusively for two
specific categories of products (and mainly for one of them) and to be linked,
mainly, to a single operation (export from Sicily);

thirdly, considering the unclear observations of the national authorities reported
in the decision on the amortisation of loans in 36 months, it could not be
excluded that the loans in question had a maximum duration of more than
12 months.

144.

Furthermore, with regard to the export-oriented nature of the measure, the national
authorities could not dispel the Commission’s doubts that the measure could be an
export aid. Therefore the measure, which the national authorities stated was aimed at
the repayment of debts, appeared to be a retroactive operating aid, mainly addressed
to "export-oriented" citrus undertakings, which did not comply with any of the rules
applicable to state aids in agriculture.

145.

An application for annulment of the Commission decision was lodged by the Region
of Sicily before the Court of First Instance in July 2000. The case is pending.

2.5.11.2.National action plan for the citrus sector52 - (I)

146.

147.

In May 2000 the Commission adopted a decision approving a comprehensive action
plan for the citrus sector in Italy. The plan provided aid for the following measures:
monitoring of markets; citrus classification system; R&D; communication and
promotion; creation of, and increased tasks for, consortia and associations of
producers of quality products; and technical assistance and monitoring.

The plan originally notified envisaged total support amounting to ITL 110 000
million (± EUR 55 million) over three years and included a measure entitled
"Support
the integrated intervention plans of producers’ associations for
improving marketing and strengthening producers’ organisations", providing aid for

for

52

Case No 560/1999.

48

148.

149.

the capitalisation of producers’ organisations, for the acquisition of liquidity, for
acquisitions of shares in marketing, processing, transport companies in Italy and
abroad, mergers, etc.

The Commission departments expressed doubts as to the compatibility of the latter
measure both with EC legislation on the common market organisation for fruits and
vegetables and with state aid rules applicable to agriculture.

Given the need to reconsider this measure and to further clarify and define its
content, the national authorities have undertaken to notify separately, at a future
stage under Article 88(3) of the EC Treaty, the detailed implementing measures of
the aid included under the title "Support to the integrated intervention plans of the
producers’ organisations for improving marketing and strengthening producers’
organisations" (ITL 60 200 million), which will therefore not be applicable until its
specific approval by the Commission.

2.5.12. Wine-growing

150.

151.

152.

The Commission adopted a negative final decision on a scheme, notified and
implemented by France in favour of wine-growing53, against which the Commission
had initiated a scrutiny procedure in October 199954.

scheme

conversion of

concerned proceeds with the

The
charentais
vineyards - currently used for cognac production - to the production of other wines:
local wines. The conversion is centred on a supplement to the national aid for vine
improvement, the objective of which is the qualitative improvement of vineyards.
The measure is thus intended to help cognac producers convert to the production of
local wines by encouraging the use of certain varieties of vine. The scheme is a
consequence of the crisis experienced by the sector, a crisis which has resulted in a
heavy build-up of stocks.

the

The Commission concluded that one of the objectives pursued by the legislator in
drawing up Council Regulation (EC) No 1493/1999 of 17 May 1999 on the common
organisation of the market in wine55 was that of preventing an increase in wine
the varietal conversion of
production in the Community. While accepting that
vineyards in the Charentes region had the advantage of reducing the production of
wine for which there was no market, the Commission took the view that the resulting
increase in the production of local wine in France would not be in keeping with the
principles enshrined in the new market organisation in wine and was likely to distort
competition on a market which, judging from the figures available, shows no signs of
growth. Wines resulting from the conversion of the vineyards would enter the
ordinary wine market, whereas current production by definition goes to other
the general conversion of these
destinations outside that market. Accordingly,
vineyards could well shift
the
Commission feels that
to have been accompanied by a
substantial reduction in wine-growing areas and in yields.

the problem onto other markets. Moreover,

the conversion ought

53

54

55

Aid No C 70/99; Decision No C(2000) 2754 of 20.9.2000, yet to be published.
OJ C 359, 11.12.1999.
OJ L 179 of 14.7.1999.

49

153.

The Commission takes the view that only measures adopted under the common
agricultural policy and more specifically the market organisation in wine can ensure
that the interests of those involved in this market generally, i.e. in the Community as
a whole, are taken into account.

2.6.

Assistance to the needy

154.

155.

The European Union continued to implement its food aid programme for the needy56.
This involved making agricultural produce and processed agricultural produce from
intervention stocks available to the organisations concerned working in the field in
the Member States.

The table below gives a breakdown of the total budget and shows the quantities, as
adjusted during the year, that can be withdrawn from intervention stocks by each
participating Member State.

Free distribution of agricultural products (2000)

Member
State

Appropriation
allocated
(EUR)

Quantity (tonnes)

Olive
oil

Skimmed
milk
powder

Cereals

Rice

3 500

200

20 000
60 000
18 200

10 000
34 000
2 325

4 000
7 000

60 000

60 000

5 000

15 000
9 712

10 000

3 000

1 879 000
464 000
15 150 000
54 031 000
39 785 000
3 162 000
52 730 000
44 000
22 892 000
1 863 000

Butter

Beef

400

6 000

60
5 000

2 100

127

4 550
810

5

1 000
1 150
9 350

12
2 376
300

192 000 000

186 415

116 525

19 000

14 188

13 560

5 492

Belgium
Denmark
Greece
Spain
France
Ireland
Italy
Luxembourg
Portugal
Finland
Total57

2.7.

The outermost regions

156.

157.

The Treaty of Amsterdam includes a new provision (Article 299(2)) on the outermost
regions of the Community (the Spanish archipelago of the Canaries; the French
overseas departments of Martinique, Guadeloupe, French Guiana and Réunion; and
the Portuguese archipelagos of Madeira and the Azores).

On 14 March 2000 the Commission produced a report on measures intended to
implement that new provision (doc. COM(2000) 147 - C5-0247/2000). The report
includes a major section on agriculture, given the role played by the latter in the
takes stock of Council Regulations Nos 3763/91
economy of those regions. It

56

57

Regulation (EEC) No 3730/87 of 10.12.1987 (OJ L 352, 15.12.1987, p. 1); Commission Decision
2000/32/EC of 16.12.1999 (OJ L 11, 15.1.2000, p. 51).
To this EUR 192 million should be added EUR 4 million for financing Community transport costs.

50

158.

159.

160.

161.

(POSEIDOM)58, 1600/92 (POSEIMA)59 and 1601/92 (POSEICAN)60, and maps out
future courses of action in the sector.

Moreover, the agriculture strands of the three options programmes specific to the
remoteness and insularity of those regions were the subject of an external evaluation
under the SEM 2000 programme of the Directorate-General for Agriculture.

The study devoted to the agriculture strands of POSEICAN and POSEIDOM was
published on the Commission's website61; the one corresponding to POSEIMA is in
the process of being submitted and should be available before the end of 2000.

Altogether, three reports on the implementation of the schemes in 1992-98 have been
drawn up with a view to transmission to the Council and Parliament.

On 29 November, in the light of the external evaluation reports and the difficulties
experienced when implementing the three schemes, the Commission transmitted to
the Council three proposals for regulations intended to replace the regulations based
on the agriculture chapters of the programmes of options specific to remoteness and
insularity - (EEC) No 3763/91 (POSEIDOM), (EEC) No 1600/92 (POSEIMA) and
(EEC) No 1601/92 (POSEICAN) - and an amendment to Council Regulation (EC)
No 1254/1999 on the common organisation of the market in beef and veal. The
proposals, plus an addendum on milk production in the Azores announced at the
European summit in Nice - are aimed at consolidating the existing legislation and
improving the schemes concerned in order to take account of the experience and
changes that have taken place both within the Union and elsewhere. They are
accompanied by reports on the progress made in the implementation of the
programmes in 1992-9862. Given the economic and social importance of the dairy
the
sector
consumption of dairy products in the Azores could, subject to certain conditions, be
excluded from the national calculation of the additional levy for four years with
effect from 1999/2000.

the Commission has proposed that

to those outermost

regions,

162.

The period of validity of Decision 91/482/EEC on the association of the overseas
countries and territories with the European Economic Community (the "overseas
countries and territories Decision") was extended by one year, until 28 February
2001. Some problems relating to the commercial regime having arisen in the sugar
sector, safeguard measures had to be adopted by the Commission.

2.8.

Information measures concerning the CAP

163.

On 17 April 2000 the Council of Agriculture ministers adopted Regulation (EC)
No 814/200063 on EAGGF Guarantee Section funding for a consistent, objective and
comprehensive information drive on the CAP, aimed at both the Member States and
the world outside. Its purpose is to explain the issues surrounding the CAP, promote

58

59

60

61

62

63

OJ L 356, 24.12.1991, p. 1.
OJ L 173, 27.6.1992, p. 1.
OJ L 173, 27.6.1992, p. 13.
http://europa/comm/agriculture/eval/index_fr.htm.
COM(2000) 790.
OJ L 100, 20.4.2000, p. 7.

51

the European model of agriculture, keep farmers and other rural interests informed
and raise public awareness of the implications and goals of this policy.

164.

The adoption of the Regulation proposed by the Commission reflects a desire to
bridge an information gap in relation to what is one of the most important of the
integrated policies implemented by the Union: the CAP, and to do so by means of a
targeted information campaign. The Community will be providing part-financing for
three types of measures:

–

–

–

annual programmes run mainly by farmers' or rural development organisations,
consumer associations and environmental protection associations;

individual projects implemented mainly by the public authorities in the
Member States, the media and universities; and

activities initiated by the Commission.

165.

166.

167.

2.9.

168.

For the first two types of measures the Commission will fund up to 50% of the
eligible costs, though this may rise to 75% in exceptional cases (to be defined in the
implementing Regulation).

Projects should involve a mix of presentations, seminars, promotional visits,
publications, media events and productions, participation in international events,
programmes to facilitate the sharing of experience, etc. They are to be selected
directly by the Commission on quality and cost-effectiveness criteria. Measures
required by law and those that already benefit from other forms of Community
assistance will not be considered. The Commission will be responsible for
monitoring and checking the funded measures, using techniques such as on-the-spot
inspections and, in particular, sampling methods.

The Commission subsequently adopted Regulation (EC) No 1390/200064 laying
down the implementing rules.

Report on activities in the field of ICT (information and communication
technologies)

The Commission uses ICT in support of all activities involved in the design,
implementation, management and evaluation of the CAP.

169.

ICT-related activities centred on three main objectives in 2000:

the

(a) Updating strategic information systems which are vital to the day-to-day
running of the market organisations and the financial mechanisms. It became
clear that the old information systems had to be replaced in order to be able to
provide
new regulations,
comprehensiveness, coherence and exchange of information. An information
technologies
technology architecture based on open systems and internet
widely used in the European Union was adopted and revision/review,
migration and redevelopment of applications are under way or in the final
stages:

functionalities

desired

terms

of

in

64

OJ L 158, 30.6.2000, p. 17.

52

–

–

–

–

the AMIS (Agricultural Market Intelligence System) application, which
processes market management data transmitted by the Member States,
has migrated to an open environment (UNIX/Oracle). Concomitantly
with this
and a
report-generating mechanism in order better to monitor developments in
terms of agricultural legislation;

enriched in terms of

functionalities

it was

migration - also to an open technology - of the Interactive Data Entry
System (IDES) used by national administrations for transmitting data on
the management of agricultural markets and the EAGGF is under way.
The objective was for the application to be in production in June 2001;

the financial management applications (Agrex, Faudit and Feorient) are
undergoing review with a view to being put on open environments and
adapting their functions to the new rules;

the tools which assist and make EAGGF expenditure control more
effective are also undergoing development. New data exchange
mechanisms are being introduced.

(b) Making better daily work tools available to users in the Agriculture DG,
the aim being to improve effectiveness, enable dovetailing with information
technology instruments and permit effective management of the CAP. The
following are covered:

–

–

–

–

migration to the new electronic mail system;

pilot tests for the introduction of an electronic document management
system aimed at reinforcing the electronic archives system already in
operation;

the Geographic Information System (GIS), which combines geographical
data and agricultural information on land use, products, forestry, etc.;

increased use of internet technologies (Europa, CIRCA, etc.) to make it
easier for the information available to be disseminated to EU citizens and
national administrations.

(c) Analysing requirements jointly with users with a view to producing new
information systems for sectoral policies, such as organic farming and rural
development, in which the use of information technology has thus far not been
very widespread.

2.10.

Advisory committees and relations with bodies representing the trade

170.

At the 80 meetings of advisory committees and working groups held in 2000 the
Commission the Commission consulted and informed the representatives of
producers, processors, traders, consumers, workers and environmental protection and
rural development agencies of,
in particular, developments in the common
agricultural policy and the rural development policies.

171.

In accordance with Article 4 of Commission Decision 98/235/EC of 11 March 1998
on the advisory committees dealing with matters covered by the common agricultural

53

policy65, committee members are appointed by the Commission on proposals from
the socio-economic organisations established at Community level. An initial list of
members was published in the Official Journal of the European Communities66.

172.

Updated versions of the list were published in Official Journal C 122 of 4 May 1999
and C 123 of 3 May 2000.

65

66

OJ L 88, 24.3.1998, p. 59.
OJ C 370, 30.11.1998.

54

3.

AGRICULTURAL MARKETS

3.1.

The 2000/01 price package

173.

174.

On 17 July 2000 the Council adopted the institutional prices and amounts for cereals,
rice, silkworms and sheepmeat on the basis of the Commission's proposals of
23 February 2000. The price proposals for sugar and pigmeat were adopted on
19 June 2000. The monthly increases for cereals will remain unchanged in 2000/01
and will be reduced by 7.5% from 2001/02, whereas the Commission proposal was to
reduce them in two stages, by 7.5% each time. The Council did not endorse the
proposal to bring the intervention period for cereals in Sweden into line with that of
the other Nordic countries.

Furthermore, it called on the Commission: to consider the advisability of a regulatory
framework, confined to certain points, for alcohol of agricultural origin; to look into
the definition of sheepmeat producers in less-favoured areas; to propose continuing
payments to nut producers under the 2001 budget for programmes that would
otherwise expire in 2000; and lastly, to propose that the rate of specific aid fixed in
2000/01 for producers of cereals in Portugal be carried over to 2001/02.

3.2.

Crop products

3.2.1. Cereals

3.2.1.1. World market

175. World production of cereals (excluding rice) in 1999/2000 was down on the previous
marketing year, owing to a decline in wheat production in the European Community,
North Africa and the Middle East, and in maize production in the United States.
According to International Grains Council figures, the world harvest was 1 464
million tonnes in 1999/2000, compared with 1 479 million tonnes the previous year.

176. World production of wheat fell from 587 million tonnes in 1998/99 to 584 million
tonnes in 1999/2000. The European Union and North Africa also harvested less
wheat than in 1998. China is the world’s largest producer, with an output of 114
million tonnes (+4%). The total harvest in the CIS countries rose to 65 million tonnes
from 55.6 million tonnes in 1998. Production of feed grains fell from 892 million
tonnes in 1998/99 to 880 million tonnes in 1999/2000.

177. World consumption of wheat in 1999/2000 is estimated at 592 million tonnes, or 8
million tonnes more than the harvest. Estimated consumption of feed grains is stable
at 877 million tonnes.

178. World cereal stocks declined, after having been restored by the end of the 1998/99
crop year to a level comparable with that of the early 1990s. Cereal stocks stood at
279 million tonnes, comprising 122 million tonnes of wheat and 157 million tonnes
of feed grains; this level is 5 million tonnes less than at the end of the 1998/99 crop
year.

179.

The total volume of world trade in cereals in 1999/2000 was 211 million tonnes,
including 106 million tonnes of wheat, compared with a total volume of 192 million

55

tonnes (including 97 million tonnes of wheat) in the previous crop year. Imports of
wheat increased especially in Russia and Iran, and imports of feed grains in Asia.
The shortfall in Russia’s production was partially offset by special aid measures by
the United States.

180.

The International Grains Council harvest forecasts for the 2000/01 crop year as at 28
September 2000 implied little change in world output (1 465 million tonnes
compared with 1 464 million tonnes in the preceding crop year). World stocks were
expected to be down from 279 to 261 million tonnes and the volume of world trade
in cereals was expected to rise to 212 million tonnes, including 106 million tonnes of
wheat.

3.2.1.2. Community market

181.

182.

183.

184.

On the basis of Eurostat figures, Community output of cereals for 1999/2000 was
estimated at 201.4 million tonnes for the fifteen Member States, 9.6 million tonnes
less than in 1998/99.

The change in output corresponds to a decline in the area sown to cereals, from 37.4
million hectares in 1998/99 to 36.4 million hectares (a reduction of 2.6 %), and to a
decline in yield from the 1998 level (5.53 t/ha instead of 5.65 t/ha). This decline is
due to the higher rate of compulsory set-aside, increased from 5% to 10%.

For the 1999 harvest, the set-aside requirement was 10%, corresponding to an area of
4.2 million hectares. However, voluntary set-aside of almost 1.7 million hectares
brought the actual total rate of set-aside to 14.1%, with Spanish, Swedish and Finnish
farmers in the forefront.

Production of common wheat (89.3 million tonnes) and durum wheat (8.3 million
tonnes) declined by 5.8% and 10% respectively. Maize production, on the other
hand, increased by 3.6%, from 36.2 million tonnes to 37.5 million tonnes.

185.

Rye production declined by 13.3% to 5.6 million tonnes.

186.

187.

188.

Together with the cut in cereal prices under the 1992 reform, high prices for oilseeds
and protein crops up to the end of 1998 boosted the use of cereals for livestock feed.
In addition, white meat production (pigmeat and poultrymeat) was boosted by the
drop in prices for compound feedingstuffs. The use of cereals in the feedingstuffs
sector totalled 114 million tonnes for the Fifteen in 2000/01, over 25 million tonnes
more than during the period preceding the reform.

At the same time, internal trade in cereals between the Member States continued to
develop, contributing to the establishment of the single market.

Community exports (including processed products and food aid) rose to 36.5 million
tonnes in 1999/2000, as against 31 million tonnes the previous marketing year.
Commercial exports totalled 15.7 million tonnes of common wheat (including flour),
13.3 million tonnes of barley (including malt) and 1.3 million tonnes of rye and rye
flour. Durum wheat exports remained lower than in the past.

189.

The decline in output in 1999/2000 and the appreciable increase in exports led to a
decline in intervention stocks, from 18 million tonnes at the start of the marketing
year to about 8.8 million tonnes by the end, the latter figure being made up of

56

3.1 million tonnes of common wheat, 2.3 million tonnes of barley and 3.3 million
tonnes of rye.

190.

The 2000/01 marketing year is the first under the Agenda 2000 arrangements.
the intervention price was cut by 7.5% and aid was adapted
Consequently,
(EUR 58.67 per tonne of yield, instead of EUR 54.34). The rate of compulsory set-
aside was set at 10%. The Council left the monthly increase in the intervention price
unchanged at EUR 1.0/t/month.

3.2.2. Oilseeds

191.

192.

193.

194.

195.

196.

197.

Oilseeds yield two products: oil, chiefly for human consumption, and cake for animal
the economic position of the sector depends on price
feed. This means that
movements for seeds, oils and cake. Vegetable oils may be consumed without further
processing or as prepared oils and fats, e.g. margarine.

The European Union is a net importer of oilseeds, vegetable oils and oilcake, annual
import volumes being largely dependent on the relative prices of seeds, cake, oils and
competing feed products (cereals, corn gluten feed, etc.) and on the opportunities for
exporting oils and cake from the EU. Total imports of oilseeds amounted to 18.4
million tonnes in 1999 and 17.6 million tonnes en 1998. Soya accounts for most of
this quantity (80%).

Altogether, 30.9 million tonnes of oilseeds were crushed in the European Union in
1999/2000, as against 32.6 million tonnes in 1998/99. Most of these were soya beans
(around 49%), followed by rapeseed (around 33%) and sunflower seeds (around
18%).

Since 1993/94,
the support arrangements for producers of oilseeds (rapeseed,
sunflower seeds and soya beans) have been part of the support scheme for producers
of certain arable crops (cereals, oilseeds, protein plants and linseed). Under these
arrangements, a basic payment of EUR 433.50/ha was made until 1999/2000. The
amount actually paid to growers varies regionally according to historical yields of
cereals or oilseeds and is adjusted where necessary in line with world price
fluctuations beyond a certain margin.

the crop-specific
For 1999/2000, a total of 4 795 557 hectares qualified for
compensatory payment, i.e.
less than the maximum guaranteed area (MGA) of
4 933 800 hectares. As there was no overshoot of the MGA, there was no need to
adjust the compensatory payment. The reference price observed for the 1999/2000
marketing year was EUR 188 per tonne, which is below the projected reference price
of EUR 196.8 per tonne. Taking account of the 8% margin, this observed price did
not result in an increase in compensatory payments.

Total oilseed production in 1999/2000 was 16.1 million tonnes (including 2.7 million
tonnes of non-food production), as against 15.3 million tonnes (including 1.1 million
tonnes of non-food production) in 1998/99.

Regulation (EC) No 1251/1999 provides for the alignment of area payments for
oilseeds and cereals from the 2002/03 crop year; alignment will be preceded by a
transition period during which area payments for oilseeds will be based on a set
amount (EUR 81.74/tonne in the 2000/01 marketing year and EUR 72.37/tonne in

57

the 2001/02 marketing year) multiplied by the average cereal yield, or the oilseeds
yield multiplied by 1.95. Market prices for oilseeds will no longer influence the level
of area payments.

3.2.3.

Peas, field beans and sweet lupins

198.

199.

These products, which go chiefly to the feed industry, compete with a wide range of
other raw materials.

From 1993/94, the system of aid to processors and minimum prices was replaced by
the aid scheme for certain arable crops (cereals, oilseeds, protein plants and linseed),
which requires producers taking part in the general scheme to set aside land. The aid
payable is EUR 78.49, multiplied by the historical cereal yield.

200.

Compensatory aid was paid for around 1.1 million hectares in 1999/2000. Total
production amounted to 4.7 million tonnes.

201. With the introduction of Regulation (EC) No 1251/1999, the calculation of area aid
is based, from the 2000/01 marketing year, on an amount of EUR 72.50 multiplied
by the historical cereal yield.

3.2.4.

Linseed

202.

203.

204.

The European Union produces both fibre flax, which is grown primarily for use in
the textile industry but also gives seeds, and seed flax, which is grown exclusively
for linseed. Linseed is either used without further processing or crushed to obtain oil
(for industrial applications) and cake used for animal feed.

The European Union imports large quantities of linseed (around 400 000 tonnes a
year). Canada is its major supplier.

In order to control production, a better balance between the support granted for
linseed production and that for other current crops was sought. From 1993/94,
linseed was added to the list of arable crops qualifying for area payments under the
reform adopted in 1992. The compensatory payment granted is ECU 105.1 per tonne,
multiplied by the cereal yield.

205.

The area sown to linseed in 1999 totalled 537 000 hectares.

206.

Regulation (EC) No 1251/1999 provides for the alignment of area payments for
linseed on those for cereals from the 2002/03 crop year; alignment will be preceded
by a transition period during which area payments for linseed will be based on a set
amount (EUR 88.26/tonne in the 2000/01 marketing year and EUR 75.63/tonne in
the 2001/02 marketing year) multiplied by the average cereal yield.

3.2.5. Grain legumes (chickpeas, vetches and lentils)

207.

Council Regulation (EEC) No 762/89 introduced a specific measure for grain
legumes in 1989.
Its period of validity was extended by Regulation (EC)
No 1577/96. The measure comprises area payments for a maximum guaranteed area
scheme. Under Regulation (EC)
(MGA) not covered by the arable crops
No 811/2000, this MGA was subdivided between, on the one hand, chickpeas and

58

lentils (used for human consumption) and, on the other, vetches (used for animal
feed).

Aid per hectare is set at EUR 181, and the MGA is 160 000 hectares for chickpeas
and lentils, and 240 000 hectares for vetches. If the area for either crop is less than
the MGA, the balance is transferred to the other one. Should an MGA be exceeded,
the aid is proportionally reduced during the marketing year in question.

In 1999/2000 the area under grain legumes totalled 462 882 hectares; overrun of the
MGA led to adjustment of the aid, which was set at EUR 156.41 per hectare.

The area for the 2000/01 marketing year is estimated at 115 000 hectares for
chickpeas and lentils, and at 302 000 hectares for vetches.

208.

209.

210.

3.2.6. Non-food production

211. With the entry into force of Council Regulation (EC) No 1251/1999 of 17 May 1999
establishing a support system for producers of certain arable crops, which repeals and
replaces Regulation (EEC) No 1765/92, new arrangements were introduced for
set-aside, as decided under the Agenda 2000 package:

–

–

–

the basic percentage for compulsory set-aside is set at 10% from 2000/01 to
2006/07 inclusive,

the minimum percentage for voluntary set-aside is 10%, but Member States
may set much higher rates, up to 100% of the agricultural area,

the area payment for set-aside land is EUR 58.67 per tonne for 2000/01, rising
to EUR 63.00 per tonne thereafter.

As the new basic Regulation applied from the 2000/01 marketing year, the former
implementing Regulation also had to be replaced.

The new Commission Regulation (EC) No 2461/1999 laying down detailed rules for
the application of Council Regulation (EC) No 1251/1999 as regards the use of land
set aside for the production of raw materials for the manufacture within the
Community of products not primarily intended for human or animal consumption
thus recasts the old Regulation, but at
the same time introduces amendments
concerning new possibilities of production (the possibility of producing biogas on the
holding or of growing biennial crops, classification in Annex I of certain raw
materials which, by virtue of their characteristics, are used exclusively for non-food
purposes) or matters of procedure (the possibility of transferring the security between
processors).

For the 1999/2000 marketing year, information from the Member States on set-aside
indicated a substantial increase in the surface area, which had more than doubled
since the previous year.

It was therefore necessary to introduce a corrective mechanism into Regulation (EC)
the Memorandum of
No 1251/1999 to ensure compliance with point 7 of
Understanding on certain oilseeds which was concluded in 1993 between the
European Economic Community and the United States of America within the
framework of GATT. The said point specifies that “should the by-products made

212.

213.

214.

215.

59

available as a result of the cultivation of oilseeds on land set aside for the
manufacture within the Community of products not primarily intended for human or
animal consumption exceed one million metric tonnes annually expressed in soya
bean meal equivalents, the Community shall take appropriate corrective action within
the framework of the CAP reform”.

The new corrective arrangements came into force on 28 December 1999 under
Council Regulation (EC) No 2704/1999 amending Regulation (EC) No 1251/1999 of
17 May 1999 establishing a support system for producers of certain arable crops.

The new implementing provisions required as a result of the amendment of the basic
Regulation were incorporated into Commission Regulation (EC) No 2461/1999 with
the adoption of Commission Regulation (EC) No 827/2000 amending Regulation
(EC) No 2461/1999 laying down detailed rules for the application of Council
Regulation (EC) No 1251/1999 as regards the use of land set aside for the production
of raw materials for the manufacture within the Community of products not primarily
intended for human or animal consumption.

Measures to promote renewable energy and/or non-food production are included in
most of the rural development programmes presented by the Member States under
the new Council Regulation (EC) No 1257/1999 on support for rural development
from the European Agricultural Guidance and Guarantee Fund (EAGGF) and
amending and repealing certain Regulations.

Several eastern and central European applicant countries have also presented
measures concerning the non-food sector under the Special accession programme for
agriculture and rural development (SAPARD).

Out of 1 011 000 hectares of set-aside land used for non-food production in
1999/2000, about 952 000 hectares was used for oilseed production. This is a 140%
increase on 1998/99. Some 60% of the output is used to manufacture biodiesel, and
the remaining 40% for lubricants and other processed products.

216.

217.

218.

219.

220.

3.2.7.

Rice

221.

222.

223.

224.

225.

The world harvest
equivalent, 6.9 million tonnes up on 1998 (393.8 million tonnes.)

in 1999 totalled about 400.7 million tonnes of milled rice

The volume of world trade in 1999/2000 amounted to some 22.3 million tonnes, i.e.
about 5.6 % of world production.

In the Community,
totalled
1 551 329 tonnes in 1999. This was about 0.7% less than in 1998 (1 561 596 tonnes),
owing to a decline in the area sown.

the production of milled rice sold on the market

Production of indica rice was up by about 26% to 502 229 tonnes, equivalent to
around 60% of consumption (50% in 1998/99); production of japonica was down by
about 10% at 1 049 101 tonnes, about 17% more than consumption (25% in
1998/99).

Throughout
the marketing year, market prices for paddy rice were below the
intervention price. They were especially low for indica rice in Greece. Although the
surplus of japonica and the shortfall of indica were smaller in 1999/2000, the volume

60

of the harvest and the continuing strength of imports resulted in a total of about
280 000 tonnes of paddy rice being bought into intervention, bringing total stocks at
the end of the marketing year to about 700 000 tonnes of paddy rice.

226.

Forecasts for 2000/01 indicate that the total area sown will remain unchanged, with
an increase of about 5% in the area under indica rice and a reduction of about 2% in
the area under japonica.

3.2.7.1. Reform of the rice sector

227.

On 7 June the Commission adopted a proposal to reform the common organisation of
in rice67. The aim of the proposal is to restore equilibrium on the
the market
in rice and improve the competitiveness of Community rice
European market
production by increasing direct payments to producers and abolishing intervention
(there is corresponding provision for private storage). The proposal is also intended
to ensure that rice production is maintained in the areas where it is beneficial to the
environment. The reform was expected to come into force from the 2001/02
marketing year onwards.

3.2.8.

Starch

228.

229.

230.

Overall, the production of cereal and potato starch and of starch derivatives such as
glucose continues to progress, providing an essential raw material for the food sector
and other industries such as biotechnology and paper manufacture. About 15 to 20%
of the starch produced is exported to countries outside the EU.

The expansion of output is due to wheat starch. Production of maize starch, which
accounts for about half of total starch production, is levelling off.

EU production of potato starch is restricted by a quota scheme; it amounted to 1.805
million tonnes in 1999/2000, which was 3% below the quota. Under the Agenda
2000 decisions, total European Union production quotas were cut by 2.7% for
2000/01 and by an additional 2.9% for 2001/02. The Council decided on these cuts in
order to neutralise the additional budget expenditure entailed by the fact
that
payments to potato growers to compensate for price cuts are higher than those to
cereal producers.

3.2.9.

Sugar

3.2.9.1. World market

231.

For the sixth consecutive year the world sugar balance was in surplus. The surplus
for 1999/2000 was 4.0 million tonnes. Ending stocks in this latest year reached 58.6
million tonnes, equal to nearly 46% of total consumption – the highest level ever
recorded.

67

COM(2000) 278 final.

61

Marketing year
Sept./Aug.

Production

Consumption

Surplus or deficit

1990/91
1991/92
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/2000

(1)
116.1
117.1
113.0
111.6
116.1
125.6
124.1
128.1
135.1
132.3

Source: F. O. Licht

(2)
110.1
111.2
112.1
112.6
115.0
117.8
120.9
123.2
126.1
128.3

(3)=(1)-(2)
+ 6.0
+ 5.9
+ 0.9
- 1.0
+ 1.1
+ 7.8
+ 3.2
+ 4.9
+ 9.0
+ 4.0

Stock/
consumption
ratio
(4)
32.4
36.5
35.9
33.5
33.3
38.8
38.5
40.1
44.7
45.7

232.

233.

234.

235.

236.

Early forecasts for production again pointed to a very large surplus, but were revised
downwards in the course of 1999/2000; although lower than originally expected, the
surplus for the year was still sizeable at 4.0 million tonnes. With production tending
to exceed consumption year after year, surplus stocks have now built up to more than
16 million tonnes, well above normal pipeline needs. The stock/consumption ratio
reflects the build-up of surplus stocks in recent years and the increase in pipeline
needs. However, ending stocks equivalent to 46% of consumption suggest a steady
deterioration in the world sugar balance when compared with the figure of 32.4%
recorded ten years ago.

The world balance-sheet data (September 1999 to August 2000) include a major
production increase in the EU, the USA, India and to a lesser degree Cuba, Thailand
and the Dominican Republic. Brazil, which last year became the world’s biggest
producer and exporter, represents a statistical anomaly; as its crop year starts in May
and ends in March, it is split between two world crop years, with the result that its
1999/2000 figures include part of the record 1999 crop and part of a much reduced
2000 crop. Brazil accordingly recorded the biggest fall in production after China and
Pakistan.

Cane sugar, mainly produced in developing countries, has increased its share of
output. Beet sugar accounted for only 27% of total output in 1999/2000, compared
with 37% in 1990/91.

Because of early forecasts of a further large surplus in 1999/2000, prices remained at
the level reached at the end of the preceding marketing year, just under 7 cts/lb for
raw sugar in New York. The 1999/2000 marketing year was characterised by a
14-year low in prices, recorded in April 1999.

At first, only white sugar prices were affected by the bearish forecasts. Raw sugar
prices withstood the supply pressure better, even during the period up to December
1999, when prohibitive import duties were applied by Russia (the major world
market buyer). Subsequently, when the expected massive imports by Russia failed to
materialise early on in 2000, prices drifted back down a historical low by February.
During this period, large amounts were invested by speculators in short positions.
However, prices began to rally in April 2000 when the production forecasts for

62

certain major producers such as China, Pakistan and Australia were revised
downwards. In particular, with growing signs that the forthcoming marketing year
will be affected by the impact of a lasting drought in Brazil’s Centre/South region,
the market is becoming much firmer, a development that many analysts failed to
foresee.

237.

The following table shows how prices have moved in recent years.

EUR/t

1998/99

1999/2000

Sept. 2000

White sugar (London)
Raw sugar (New York)

20.41
15.15

18.70
14.38

28.01
26.22

238.

239.

240.

241.

242.

243.

It should be borne in mind that figures for September 2000 are affected by the
growing weakness of the euro.

This price rally continued into 2000/01, with confirmation of a 21% reduction in
Brazil’s crop and the prospect of Australian cane production suffering further severe
damage as a result of natural calamities.

Initial estimates for the 2000/01 marketing year consequently point to a substantial
global deficit.

Although the present overall surplus will not be absorbed by one year’s deficit
(estimated at 1 to 3 million tonnes), markets tend to react not only to statistical data
but also to the perception of the situation. Surplus stocks which are not made
available are discounted by the market.

This is the case for large quantities of Indian sugar accumulated over two years. India
was importing sugar in spite of its own overproduction, and although at
the
prevailing world market price exports are on the point of becoming profitable, the
quality and logistical problems should not be ignored.

The favourable outlook for prices is enhanced by the relatively low positions of
funds operating on the futures markets at a time of transition between two marketing
years, something which could be seen as having bullish potential, and by the
recovery of world sugar demand to a normal annual growth rate of up to 2%.

3.2.9.2. Community market

244.

In 1999 beet areas were reduced by 2.0% (to 1 961 000 ha) compared with the
previous marketing year. The high average yield reached (8.98 tonnes of sugar per
hectare) was 11.7% up on the preceding year and 12.8% above the five-year average
for 1994-98. France in particular recorded an average yield of 11.7 tonnes per
hectare, which helped EU production reach a total (white sugar equivalent) of 17.943
million tonnes, comprising 17.609 million tonnes from beet, 289 000 tonnes from
cane and 49 000 tonnes from molasses.

245.

Total internal consumption of sugar of around 12.800 million tonnes was slightly up
on the previous year. Of this, 376 000 tonnes was used by the chemical industry, a
significant increase over the preceding marketing year.

246.

The sum of internal production and imports of 2.354 million tonnes – comprising
preferential sugar imports (ACP sugar protocol, India Agreement, special preferential

63

sugar and MFN (most favoured nation) reduced tariff quotas) and non-preferential
sugar imports (mainly in processed goods) – generated a surplus over internal
consumption, which is either exported or carried forward as blocked sugar (non-
quota production to become A quota sugar in the following marketing year). A
volume of 1 340 000 tonnes was carried forward from 1998/99, and 1 602 000 tonnes
from 1999/2000 to 2000/01. Exports of sugar in its natural state totalled 6.181
million tonnes in 1999/2000, comprising 3.381 million tonnes as C sugar and 2.800
million tonnes as Community sugar. Exports of sugar in its natural state within the
quota take place mainly under a weekly tender system with a refund. C sugar must be
exported without a refund.

Exports have increased as a consequence of the larger crop, but useable stocks were
also more than 266 000 tonnes higher than in 1998/99.

Like sugar, production of isoglucose and inulin syrup is regulated by quotas within
the common market organisation. As in past years, no isoglucose in excess of the A
and B quota was produced. Production of inulin syrup has not yet reached the
maximum level fixed by the quota. After poor chicory harvests in Belgium and the
Netherlands in 1998, the production of inulin syrup resumed its upward trend in
1999, when it was expected to exceed 235 000 tonnes.

Beet and sugar production forecasts for the 2000/01 marketing year are significantly
down, because of a slightly lower yield (reduction of 3.7%) and a reduction of 7.1%
in acreage. EU production was expected to total around 16.2 million tonnes,
representing a reduction of 1.743 million tonnes or 9.7%.

247.

248.

249.

3.2.9.3. Main legislative and policy developments

250.

251.

For the first time the Commission made use of the possibility to reduce quotas as laid
down in Article 26 of the basic Regulation (Regulation (EC) No 2038/1999) in order
to comply with GATT commitments.

On 4 October the Commission adopted a proposal for amending the common
organisation of the market in sugar. The proposal makes several substantial changes
to the current arrangements, in particular reducing production quotas by 115 000
tonnes and discontinuing the reimbursement of storage costs to producers. The
production quota system, production levies and preferential import arrangements
(ACP countries and India) would be maintained until the 2002/03 marketing year.
The proposal aims to increase competition in the sector, maintain reasonable prices
for sugar on the Community market and simplify the rules. It must deal with the
challenge of overproduction on a market characterised by very low world prices,
limits on exports with refunds under the GATT
taking into account
agreements.

the strict

252.

The guaranteed quantities for the 2000/01 marketing year have effectively been
reduced by 498 800 tonnes (478 277 tonnes for sugar, 9 931 tonnes for isoglucose
and 10 592 tonnes for inulin syrup).

253.

For comparison, the normal sugar quotas are 11 982 756 tonnes for A sugar and
2 609 655 tonnes for B sugar.

64

3.2.10. Potatoes

254.

255.

256.

Potatoes are one of the few agricultural products for which there is no market
organisation. The Commission did present a proposal for a common organisation of
the market in potatoes in 1992, renewed in 1995 by the Spanish Presidency of the
Council of Ministers and again in 1996 by the Irish Presidency, but opposition from
certain Member States has prevented its adoption.

The total area under cultivation is about 1 400 000 hectares, making potatoes a major
crop in the EU. They are grown in all the Member States, although, because of
climatic and soil conditions, they are more widely grown in northern regions.

The Union is self-sufficient in potatoes with the exception of early varieties. These
are imported in winter and early spring from Mediterranean countries when
Community output is limited or unavailable. The main suppliers are Cyprus, Egypt,
Morocco and Israel. During the past few years, an annual average of some 400 000
tonnes of early potatoes has been imported from non-member countries.

257.

EU production of potatoes totalled 45.4 million tonnes in 1998, rising to 47.9 million
tonnes in 1999. No estimates are as yet available for the 2000 harvest.

3.2.11. Dried fodder

258.

Dried fodder is made up of protein-rich (minimum 15%) products, derived from the
artificial drying (dehydration) or natural drying (sun drying) of lucerne, other
leguminous crops and certain grasses.

259.

The following table gives a summary of output figures based on aid applications.

European Union production of dried fodder (based on aid applications)

('000 tonnes)

Dried fodder

1995/96

1996/97

1997/98

1998/99

1999/2000

Dehydrated

Sun-dried

Total

4 070

402

4 473

3 818

253

4 071

4 283

156

4 439

4 610

151

4 761

4 599

162

4 761

260.

261.

In 1999/2000, the fifth year since the introduction of the new market organisation,
aid was granted for 4 599 000 tonnes of dehydrated fodder (104.2% of the MGQ)
and for 162 000 tonnes of sun-dried fodder (36.5 % of the MGQ).

As subsidised production of dehydrated fodder exceeded the MGQ,
the co-
responsibility clause was applied: aid per tonne was reduced (from EUR 68.83 to
EUR 66.03) in all the Member States.

262.

However, aid was paid in full for sun-dried fodder, where subsidised production was
well within the MGQ.

65

3.2.12. Fibre flax and hemp

3.2.12.1.Fibre flax

263.

264.

265.

According to the FAO the total world area sown with fibre flax in 1999 was 443 000
hectares, producing around 625 000 tonnes of fibre, of which 368 000 tonnes was
produced in China and 52 000 tonnes in Belarus. For their part, fibre imports
occasionally reach levels capable of disrupting the Community market. The EU tends
to import medium and low quality fibres, which are brought in from Eastern Europe,
Egypt and China, but supplies the whole world with high and very high quality
fibres, since these are not produced anywhere else. In 1999 it exported 91 000
tonnes, mainly to China and Brazil.

Market prices for flax fibres improved considerably in 1999/2000 but, in spite of
efforts to diversify by seeking new outlets, the market is still very much dependent
on fashion in the clothing industry.

Despite the phasing in of a series of control measures and successive reductions in
aid, the Community area sown with fibre flax increased substantially between 1992
(44 000 ha) and 1999 (211 000 ha). Since an increase on this scale was likely to
outstrip the processing capacity available in the EU, the Council decided to adopt the
reform of the sector described below. Although this reform will not apply until
2001/02, it already appears to have influenced producers, since the latest sowing
forecast for the 2000 harvest was just 101 000 hectares.

3.2.12.2.Hemp

266.

The world area planted with hemp has fallen sharply in recent years, from an average
of 119 000 hectares in 1989-91 to 67 000 hectares in 1999. China, North Korea,
India and Russia are the main producers. Production in the European Union is
limited. It has traditionally been concentrated in France and, to a lesser extent, in
Spain, although a few other Member States (Germany, the United Kingdom and the
Netherlands) have for some years now been producing this crop again. The total area
under hemp in the EU in 2000 was about 22 000 hectares (as against 32 000 in
1999). Trade with third countries is very limited. Aid for hemp was unchanged at
EUR 662.88 per hectare in 1999/2000.

3.2.12.3.Reform of fibre flax and hemp

267.

On 17 July 2000 the Council adopted a reform of the common organisation of the
market in flax and hemp. Under the reform, which is applicable from 2001/02
onwards, the two crops are included in the support scheme for producers of certain
arable crops under Council Regulation (EC) No 1251/199968 and additional help is
provided for authorised processors in the form of aid for processing flax and hemp
straw for fibre production69. Promotion measures for flax fibre and private storage
aid for flax and hemp fibre are also to be discontinued from 2001/02 onwards.

68

69

OJ L 160, 26.6.1999, p. 1.
Council Regulation (EC) No 1672/2000 of 27 July 2000 amending Regulation (EC) No 1251/1999
establishing a support system for producers of certain arable crops, to include flax and hemp grown for
fibre (OJ L 93, 29.7.2000, p. 13).

66

268.

The inclusion of these two crops in the arable crops scheme means aligning the per
hectare aid with that for linseed. The additional support for processing of straw
comprises aid per tonne of long fibres and temporary aid (until 2005/06) per tonne of
short fibres. Both are subject to a system of maximum guaranteed quantities divided
for some
into national guaranteed quantities per Member State. Moreover,
Community areas, an additional flat-rate per hectare aid will be payable until
2005/06 where production is the subject of a sales contract with processors of
long-fibre flax straw.

269.

The Council decided that, for 2000/01, the amounts of aid for fibre flax and hemp
were to be fixed by the Commission by 31 October 2000 at the latest, in the light of
crop declarations and subject to a maximum budget of EUR 88 million.

3.2.13. Cotton

270.

271.

272.

273.

274.

The world area under cotton in 2000/01 was put at around 32.6 million hectares, with
production estimated at some 19.0 million tonnes, as against 32.2 million hectares
and 18.9 million tonnes in 1999/2000.

Unginned cotton is not traded internationally, but the European Community, whose
cotton-spinning capacity by far exceeds its fibre production,
imports substantial
quantities: more than 1 million tonnes from 1988 to 1993 and 855 000 tonnes in
1995-99. The former Soviet Union, the United States, Syria and the CFA area
countries are the main suppliers. Intra-Community trade is rising, but remains
limited.

In the European Union, the scale of cotton production is limited, in terms of both
surface area planted and the number of producers. It is, however, concentrated in
certain areas of Greece and Spain, where it plays a major socio-economic role. The
Community area planted with cotton was slightly down: 538 000 hectares in 1999
and 494 000 hectares in 2000 (405 000 ha in Greece and 89 000 ha in Spain),
producing an estimated 1 570 000 tonnes of unginned cotton (1 250 000 tonnes in
Greece and 320 000 tonnes in Spain), as against 1 760 000 in 1999. The European
Union is about 40% self-sufficient in cotton fibres, its consumption from 1995 to
1999 having been around 1.153 million tonnes.

The Community aid scheme provides for a guide price (EUR 106.30/100 kg) and aid,
equivalent to the difference between that price and the world price, granted to
ginners who pay a minimum price to the grower. If the production of unginned
cotton exceeds a maximum guaranteed quantity (MGQ), the guide price and the
amount of aid are reduced proportionally.

The reduction in aid in each Member State is proportional to the overrun of the NGQ
concerned, the latter being set at 782 000 tonnes for Greece and 249 000 tonnes for
Spain. The reduction is cut if the world price level allows expenditure on the aid
scheme to be curbed. For 2000/01 the provisional reduction in the guide price is
estimated at 41.9% for Greece and 24.0% for Spain.

3.2.13.1.Reform of the aid scheme for cotton

275.

On 14 December 1999 the Commission proposed a reform of the common
organisation of the market in cotton, in order in particular to neutralise the effect of

67

the scheme on the budget and introduce environmental criteria similar to those
contained in the common rules for the direct support scheme under the common
agricultural policy (COM(1999) 492 final). The European Parliament and the
Committee of the Regions have yet to submit their opinions.

3.2.14. Silkworms

276.

Silkworm rearing is practised in Greece, Italy and, to a lesser extent, France and
Spain. It accounts for only a tiny part of the EU’s agricultural activity and of world
silk production. In certain regions such as Thrace, Veneto and Marche, however, it
represents an important activity and know-how worth preserving.

277. World production of raw silk stabilised in 1998, totalling, according to the FAO,
87 000 tonnes, the same as the average from 1995 to 1997. The industry is dominated
by Asian producers (77 000 tonnes), with China (51 000 tonnes), India (16 000
tonnes), Korea (4 000 tonnes) and Japan (3 000 tonnes) together accounting for more
than 90% of world production.

278.

279.

Community silkworm rearing is finding it difficult to sustain its level of activity.
Increases in production costs are not always offset by a growth in market prices.

In 1999 a total of 3 516 boxes were produced successfully, compared with 2 841 in
1998. They yielded 70 500 kilograms of cocoons. The aid for 1999/2000 was again
EUR 133.26 per box.

3.2.15. Olive oil

280. World production averages some 2 200 000 tonnes, of which between 70% and 80%
(around 1 750 000 tonnes in 1999/2000) comes from the European Union. The other
main producers are Tunisia (200 000 tonnes), Turkey (70 000 tonnes), Syria (81 000
tonnes) and Morocco (40 000 tonnes). Production varies considerably from one year
to another, and the world market fluctuates as a direct result of the Community
market situation.

281.

282.

283.

including
Estimated Community production eligible for aid in 1999/2000,
olive-pomace oils, was around 1 883 500 tonnes, as against 1 951 000 tonnes in
1998/99. According to information received from the Member States when the olive
and olive oil yields were set for the 1999/2000 marketing year, there are around 530
million productive olive trees in the European Union. Some 2 million farms are
engaged in olive growing.

In 1998/99 Community consumption was around 1 700 000 tonnes (71% of world
consumption). The most recent forecasts show a slight increase in consumption in
1999/2000. At the beginning of the 1999/2000 marketing year, carryover stocks
totalled 565 000 tonnes, but were down to around 438 500 tonnes at the end.

Greece and Spain are normally the main suppliers, and Italy, although itself an
exporting producer, remains the Community’s main purchaser. In 1998/99 imports
totalled 46 000 tonnes. Exports for the same marketing year reached 221 800 tonnes,
72 600 tonnes direct and 148 200 under the inward processing arrangements. No
export refunds were paid that year. The limit imposed on exports with refunds for
that period under the GATT Agreements was 160 986 tonnes (including carryover).

68

284.

285.

286.

287.

Since the 1998/99 marketing year substantial changes have been made to the market
organisation for olive oil, and the maximum guaranteed quantity (MGQ) has been
divided among the producer Member States into national guaranteed quantities
(NGQs). When production exceeds the NGQ, plus, where applicable, the carryover
is reduced
from the previous year, production aid (paid to olive growers)
proportionally.

The Commission has accordingly undertaken to step up inspections at mills, adopt an
objective method for determining yields in homogenous areas and draw up a strategy
for olive oil quality. Lastly, the scheme provides for aid measures for the production
of table olives for those producer Member States who so desire.

In addition, consumption aid has been abolished, the intervention system replaced by
private storage arrangements, the small producers scheme discontinued and new
planting discouraged.

All these measures were provided for for the three marketing years from 1998/99 to
2000/01. This three-year period was expected to allow the Commission to collect
more detailed information on the sector,
in particular on production capacity.
Towards the end of 2000 the Commission submitted a proposal to extend the current
arrangements for two marketing years, from 2001/02 onwards, and to introduce
measures relating to olive oil quality.

3.2.16. Fresh fruit and vegetables

3.2.16.1.World market

288. World production of fresh fruit and vegetables is increasing steadily. In 1998 it
totalled nearly 932 million tonnes, 1.6% up on 1997 and 30.3% above the average for
the period 1989 to 199170. Vegetables (including melons) account for around 65% of
this total. With production totalling 88 million tonnes, the Community was the
world’s second largest producer in 1998, after China (288 million tonnes).

289.

In the case of citrus fruit, estimates for the 1999/2000 marketing year71 point to
world production totalling some 98.3 million tonnes, 0.5% less than in 1998/99 and
4.8% down on 1997. With production estimated at around 10.2 million tonnes, the
Community was, in 1999/2000, in third place behind Brazil (24.0 million tonnes) and
the United States (12.6 million tonnes), but ahead of China (10.1 million tonnes) and
Mexico (4.5 million tonnes).

3.2.16.2.International trade

290.

The volume of international trade in fresh fruit and vegetables varies from one
product to another. In 1998, imports accounted for an average of 10% of world
production for pears, 10% for onions, 8% for apples, 8% for peaches and 4% for
tomatoes. In 1998, Community exports accounted for the following percentages of
international trade: lemons 16%, oranges 12%, apples and tomatoes 7% and pears
6%.

70

71

Source : FAO Production Yearbook Vol. 52 - 1998.
Source : FAO: http://www.fao.org.

69

291.

The European Union is a net importer of fresh fruit and vegetables: the volume of
exports was only 54% of that of imports in 1996 and 70% in 1997. In 1998 exports
(3.35 million tonnes) represented 63% of total imports (5.3 million tonnes). In the
case of fruit only, exports (excluding citrus fruit) represented only 38% of imports in
1998 (67% for citrus fruit). By contrast, while the Community was a net importer of
vegetables in 1996, it recorded a surplus in 1997, with a drop in imports (-39%) and
an increase in exports (up 38%). In 1998 exports were again down on 1997 (-9%)
and imports were up (+31%). Tomatoes account for a major share of these
fluctuations.

3.2.16.3.Community market

292.

293.

294.

295.

296.

297.

298.

299.

There was a sharp increase in Community fruit production - and in withdrawals - in
1999/2000 compared with 1998/99.

At about 8.6 million tonnes in 1999/2000, apple production in the Community was
slightly up on the three previous marketing years. The quantities withdrawn from the
market varied from 4.6% of EU production in 1996/97 to 5.4% in 1997/98 and 3.7%
in 1998/99.

In 1999/2000 the production of pears totalled around 2.4 million tonnes, 6.5% up on
1998/99. The quantities withdrawn from the market in 1998/99 amounted to 2.9% of
production, compared with 4.1% in 1997/98 and 7.1% in 1996/97.

In 1999/2000 the production of peaches increased sharply, by 32% on 1998, to a
total 3.4 million tonnes. The increase was attributable mainly to Greece (+105%).
Withdrawals were also up (7.8% of production, as against 1% in 1998, 3.7% in 1997
and 16.4% in 1996), but remain far below the 19.3% average for the period 1990/91
to 1994/95.

The market for nectarines in 1999 developed in much the same way as that for
peaches, rising by 38% to 934 000 tonnes, with increases being recorded mainly in
Greece (+74%). Withdrawals amounted to 12.7% of production, an increase of 5.4%
on 1998, but still below the 21.5% average for the period 1990/91 to 1994/95.

At 2.2 million tonnes, the production of table grapes for the 1999 marketing year
was much the same as in 1996 and 1997. Italy alone accounted for 66% of
Community production. Withdrawals remained negligible at
less than 1% of
production.

The production of apricots rose sharply in 1999 (52% up on 1998). Withdrawals
increased from 2.4% in 1998 to 3.8% of production in 1999.

Citrus production, which totalled 10.2 million tonnes in 1999/2000, was 18% up on
1998/99, returning production to 1997/98 levels. Spain remained Europe’s largest
producer, with 56% of the total in 1999/2000. Community production of oranges
increased to 5.8 million tonnes (22% up on 1998/99). At 1.6 million tonnes in
1999/2000, lemon production returned to the average for the 1991/92 to 1998/99
marketing years. Production of mandarins, clementines, and satsumas also
increased, by 8%, 21% and 16% respectively on 1997/98.

70

300.

301.

Production of cauliflowers in 1999/2000 was 2.2 million tonnes (2.7% down on
1998/99). Withdrawals were down to 2.1% of production, compared with 5.1% in
1998/99, 7.8% in 1997/98 and 8.8% in 1996/97.

Tomato production in 1999/2000 was up 14% on 1998/99. Production rose
significantly in Italy (+27%) to 7.6 million tonnes.
Its share of Community
production rose from 40% in 1998/99 to 45% in 1999/2000. Withdrawals remained
negligible at 1.2% of production.

3.2.16.4.Reform of the fruit and vegetables sector

302.

303.

304.

305.

306.

The new market organisation adopted by the Council in 1996 was, in 2000, being
implemented for the fourth consecutive year.

Under the market organisation, Community financing can be granted to recognised
producer organisations setting up an operational fund. A total of 1 008 producer
organisations, accounting for about 40% of fruit and vegetable production in the
European Union, submitted operational programmes for 1999. This is a clear
advance on 1998 (845 producer organisations) and 1997 (680). In 2000, the number
of producer organisations submitting an operational programme rose to 1 120.

The amount of Community aid available for 1999 was EUR 311 million, compared
with EUR 238 million in 1998 and EUR 199 million in 1997. From 1999 the value of
the value of production marketed by producer
financing rose to 2.5% of
organisations, compared with 2.0% in 1997 and 1998.

The Council adopted amendments
to various Regulations on the market
organisations for fresh and processed fruit and vegetables. One such amendment
simplifies the procedure for fixing aid for the operational funds of producer
organisations by setting a standard maximum limit on aid of 4.1%, calculated on the
basis of the value of production marketed by each producer organisation. Another
amendment is aimed at improving the management of export refunds for fresh fruit
and vegetables.

the Commission set

To avoid any risk of budget difficulties as a result of an excessive volume of
withdrawals,
the 1999/2001
marketing year for the following products: tomatoes (360 000 tonnes), cauliflowers
(111 700 tonnes), apples (486 900 tonnes), peaches (238 200 tonnes), nectarines
(83 200 tonnes), table grapes (160 200 tonnes), lemons (87 400 tonnes), oranges
(390 300 tonnes), satsumas (21 100 tonnes), mandarins (20 600 tonnes) and
clementines (132 800 tonnes).

intervention thresholds

for

307.

In May 2000 the Commission extended by one year the period of validity of the
machinery for controlling imports of garlic originating in China.

3.2.17. Bananas

3.2.17.1.Community production

308.

Community production in 1999 (729 304 tonnes) was in the end below the estimated
800 000 tonnes after storms hit the Canary Islands and Madeira at the beginning of
the year. The estimate for 2000 is 805 000 tonnes, with production expected to
resume in the Canary Islands and Guadeloupe.

71

EU BANANA SUPPLIES
FRESH BANANAS (tonnes)

ORIGIN

1998

1999

Tonnes

Market share

Tonnes

Market share

EU

Greece
Spain
France
Martinique
Guadeloupe
Portugal

ACP

Belize
Cameroon
Cape Verde
Dominica
Dominican Rep.
Grenada
Côte-d’Ivoire
Jamaica
Madagascar
Somalia
Saint Lucia
Saint Vincent
Suriname
Other
DOLLAR AREA

Colombia
Costa Rica
Ecuador
Honduras
Guatemala
Nicaragua
Panama
Venezuela
Other
NOT SPECIFIED
TOTAL

786 232

20.32%

729 304

18.56%

3 589
437 414

240 499
74 294
30 436

0.09%
11.30%

6.22%
1.92%
0.79%

3 336
362 188

258 501
83 508
21 771

0.08%
9.22%

6.58%
2.13%
0.55%

656 959

16.98%

676 638

17.22%

53 431
157 123
0
27 144
56 182
54
158 243
61 929
0
7 018
70 461
38 737
21 218
5 419
2 426 210

540 561
639 928
568 449
150 713
61 226
10 740
416 775
30 069
7 749
0
3 869 401

1.38%
4.06%
0.00%
0.70%
1.45%
0.00%
4.09%
1.60%
0.00%
0.18%
1.82%
1.00%
0.55%
0.14%
62.70%

13.97%
16.54%
14.69%
3.89%
1.58%
0.28%
10.77%
0.78%
0.20%
0.00%
100.00%

55 650
161 347
10
27 583
42 122
621
192 558
51 635
0
0
65 532
37 910
39 029
2 641
2 523 160

555 112
663 386
696 821
68 267
42 402
15 336
422 387
41 801
17 648
0
3 929 102

1.42%
4.11%
0.00%
0.70%
1.07%
0.02%
4.90%
1.31%
0.00%
0.00%
1.67%
0.96%
0.99%
0.07%
64.22%

14.13%
16.88%
17.73%
1.74%
1.08%
0.39%
10.75%
1.06%
0.45%
0.00%
100.00%

Source: Member States in the case of the EU; Comext (Eurostat) in the case of ACP and

dollar area; Cameroon 1998: estimate

72

3.2.17.2.Imports from ACP countries

309.

Banana imports from ACP countries totalled 676 638 tonnes in 1999. They were set
to increase in 2000.

3.2.17.3.Reform of the market organisation for bananas

310.

311.

312.

313.

314.

The new provisions of Title IV (Trade with third countries) of Regulation (EEC)
No 404/9372 have applied since 1 January 1999 in the wake of the reform adopted in
July 1998. The summary table below shows the main features of market supply
management.

Following the 1997 decision of the Dispute Settlement Body of the World Trade
Organisation (WTO), the Commission drew up a proposal on 10 November 1999 to
amend the present banana import arrangements73. The proposal recommended a two-
stage approach. During a transitional period, a system of tariff quotas would apply,
together with a tariff preference for the ACP States; at the end of that period, the
tariff quota system would be replaced by a tariff-only system by 1 January 2006 at
the latest.

The Communication from the Commission to the Council of 5 July 2000 on the
consultations held by the Commission with the aim of resolving the banana dispute74
notes that consultations with the parties concerned on the maintenance, during the
first stage, of tariff quotas managed on a historical basis have reached an impasse.

At its meeting on 10 July 2000 the General Affairs Council took note of the report
presented by the Commission and called on the latter to consider the possibility of
managing the tariff quotas on a "first come, first served" basis. It also asked the
Commission to report on its consultations.

its meeting on general affairs of 9 October 2000,

At
the Council viewed the
Communication from the Commission to the Council of 4 October 200075 as
providing a viable solution to the WTO dispute over the Community banana import
arrangements. The document follows the main thrust of the proposal submitted on
10 November 1999. Under the proposed solution, the procedure for managing access
to A, B and C quotas (see box below) would be on a “first come, first served”
(FCFS) basis; the maximum customs duty for the C quota would be EUR 300/tonne;
the maximum tariff preference for ACP banana imports would be EUR 300/tonne
instead of the EUR 275/tonne initially proposed. Since it is compatible with WTO
rules, the FCFS approach provides a sound alternative to the present system. The
Council meeting on agriculture of 20 December 2000 gave its political agreement to
the reform of the banana import arrangements on the basis of the Commission
of
proposal of 10 November 1999,
4 October 2000.

by the Communication

amended

as

72

73

74

75

OJ L 47, 25.2.1993, p. 1.
COM(1999) 582 final.
COM(1999) 431 final.
COM(1999) 621 final.

73

315.

316.

317.

318.

For 2000, imports of bananas under the tariff quotas and of traditional ACP bananas
were covered by Regulations (EC) Nos 2268/199976 (first quarter) and 250/200077
(other quarters).

Commission Regulation (EC) No 2362/98, which lays down detailed rules for
implementing the arrangements for importing bananas into the Community, was
amended by Regulation (EC) No 1632/200078 to step up checks of licences with a
view to the sound management of the import arrangements.

Convergence of prices in the wake of the unified market in 1993 implies lower prices
for Community bananas. To cope with the introduction of the common organisation
of the market, producer groups receive aid to make up for the difference between the
flat-rate reference income, an average established on the basis of the 1991 figures for
the four production areas and adjusted upwards (+5% for 1998 and up to 8% from
1999), and the average production income during the year in question.

For bananas marketed in 1999 the compensatory aid79 was EUR 29.69/100 kg with
additional aid of EUR 4.99/100 kg for Portuguese bananas, EUR 2.99/100 kg for
bananas produced in Martinique and EUR 8.45/100 kg for bananas produced in
Guadeloupe. The quantity marketed was 729 304 tonnes. Expenditure on the
compared with
for
compensatory
EUR 193 million in 1998.

EUR 232 million,

totalled

1999

aid

3.2.18. Processed fruit and vegetables

3.2.18.1.World and Community markets

319.

Information available on processed fruit and vegetables remains patchy. As far as the
Community is concerned, it relates almost exclusively to products qualifying for
processing aid.

320. World production of tomatoes for processing totalled around 29.6 million tonnes
for the 1999/2000 marketing year. The leading producer countries were the United
States (11.6 million tonnes in 1999/2000 as against 8.5 million tonnes in 1998/99),
the
Turkey
(1.8 million tonnes as against 1.7 million tonnes).

(9.1 million tonnes

8 million tonnes)

against

and

EC

as

321.

The rise in Community production (1.1 million tonnes) concerned all products, i.e.
concentrate (+ 0.7 million tonnes), peeled tomatoes (+ 0.2 million tonnes) and "other
products" (+ 0.2 million tonnes). However, of the 9.1 million tonnes of tomatoes
processed in the Community into products on which processing aid is payable,
Community aid was actually paid on only 6.9 million tonnes. With the exception of
1997/98, the quota of 6.9 million tonnes continues to be exceeded. In 2000/01,
production is expected to fall not only in the Community but also in the rest of the
world, owing to the fall in prices resulting from the rise in production during the
preceding marketing year.

76

77

78

79

OJ L 227, 28.10.1999, p. 10.
OJ L 26, 2.2.2000, p. 6.
OJ L 187, 26.7.2000, p. 27.
Commission Regulation (EC) No 1157/2000 of 30 May 2000 (OJ L 130, 31.5.2000, p. 26).

74

322.

323.

Around 668 000 tonnes of peaches were tinned in syrup and/or natural juice in the
Community in 1999/2000, compared with around 480 000 tonnes in the previous
marketing year, which is a record after two years of very low production. This
product continues to feature among the Community's exports (105 000 t in 1999).

EC production of Williams and Rocha pears in syrup and/or natural juice totalled
106 000 tonnes for the 1999/2000 marketing year, which is significantly below the
record of 162 000 tonnes in the previous marketing year. Italy continues to be the
main EC producer (39% of the total), followed by Spain (34%) and France (21%).
The Community is a net
importer of this product, its exports in 1999 totalling
3 500 tonnes of finished product as against imports of 24 000 tonnes.

3.2.18.2.Main developments in legislation and policy (see Section 3.2.16.4)

324.

In principle the market organisation for this sector covers all products processed
from fruit and vegetables. However, Community support is concentrated on a few
products:

–

–

–

–

Processing aid for peaches, pears, tomatoes, prunes, dried figs and pineapples;

Storage aid and storage aid at the end of the marketing year for dried grapes
and dried figs and aid per hectare for dried grapes;

In response to the request from the Council in connection with the 1999/2000
prices
increased by
29 561 tonnes for the 2000/01 marketing year;

tomato-concentrate quota was

review, Portugal's

Raspberries and asparagus for processing and dried grapes qualify under
specific measures to improve quality and marketing.

325.

326.

the 1999/2000 marketing year,

For
the Council amended Regulation (EC)
No 2202/96 so that the penalty for exceeding the threshold for the processing of
citrus fruit is applied not in the same marketing year but in the following one.

For the 2000/01 marketing year the minimum producer price for tomatoes was kept
at the same level as the previous marketing year. The minimum price for peaches,
pears and figs was unchanged. The processing aid was cut by 32.2% for peaches in
syrup and/or natural juice, by 4.5% for Williams and Rocha pears in syrup and/or
is
natural juice, by 14.5% for prunes and by 2.8% for figs. This development
connected with the recorded increase in raw-material prices expressed in euros in
non-member countries.

327.

New detailed implementing rules for the granting of Community aid and for the
storage arrangements for dried grapes and dried figs have been laid down and have
been applied from 1999/2000.

328.

In the case of dried grapes, the basic aid per hectare was kept at EUR 2 785. This aid
is paid only for specialised areas meeting certain yield criteria.

329.

The measures covering imports provide in particular for the following:

–

duty-free import quotas for mushrooms;

75

–

the minimum import price arrangements introduced in 1997 for certain soft
fruit originating in Bulgaria, Hungary, Poland, Romania, Slovakia and the
Czech Republic remain applicable. Under those arrangements, the minimum
import prices apply permanently and no longer on the basis of an ad hoc
decision by the Commission. Those arrangements were extended to the Baltic
States. Import prices remained above the minimum prices fixed.

330.

331.

In accordance with the WTO Agreement on Agriculture, the minimum import price
arrangements for dried grapes and certain processed cherry products were abolished
on 1 January 2000.

The Commission proposed amendments to the market organisation for processed
fruit and vegetables, namely a change in the current system for processed tomatoes,
the aim being to apply the best points of the arrangements for peaches, pears and
citrus fruit (in particular the replacement of quotas by thresholds, subdivided into
national thresholds and expressed in terms of raw material, and direct payment to the
producer organisation of the aid fixed on a standing basis by the Council).

332.

In addition, the arrangements for peaches, pears and citrus fruit are brought into line
with the new proposed arrangements for tomatoes.

3.2.19. Wine

333.

The Council adopted Regulation (EC) No 1493/199980 establishing a new common
organisation of the market in wine. Pursuant to that Regulation, the Commission
adopted the following in 2000:

–

–

–

–

–

Regulation (EC) No 1227/200081 on production potential (prohibition of new
planting, rules on planting and replanting rights, abandonment of wine-growing
areas, aid for conversion and restructuring of vineyards),

Decision 2000/503/EC82, adopted by the Commission on 25 July 2000, fixes
the financial allocations for
the
restructuring and conversion of vineyards for 2000/01. The amounts given,
which correspond to totals of 53 986 ha and EUR 379.73 million, are ceilings
which cannot be carried over to the following wine years,

the eight producer Member States for

Regulation (EC) No 1607/200083 on detailed rules relating to quality wine
produced in specified regions,

Regulation (EC) No 1622/200084
oenological practices and processes and methods of analysis,

establishing a Community code of

Regulation (EC) No 1623/200085 relating to market mechanisms (storage aid,
distillation measures, aid for the use of grape must, and disposal of alcohol of

80

81

82

83

84

85

OJ L 179, 14.7.1999, p. 1.
OJ L 143, 16.6.2000, p. 1.
OJ L 201, 9.8.2000, p. 4.
OJ L 185, 25.7.2000, p. 17.
OJ L 194, 31.7.2000, p. 1.
OJ L 194, 31.7.2000, p. 45.

76

vinous origin). A new outlet for the disposal of alcohol in the Community was
authorised: the motor fuel sector.

334.

The Commission departments also drew up draft regulations relating to description
and presentation, wine-sector controls and relations with non-member countries. The
draft regulations, which were under discussion by the Management Committee for
Wine, were expected to be adopted by December 2000.

335. Wine production in the Community (excluding must not processed into wine) was as

follows:

–

–

–

in 1998/99: 162.562 million hl,

in 1999/2000: 175.683 million hl,

in 2000/01: 163.000 million hl.

336.

337.

338.

339.

Total Community production for 2000/01 was expected to reach 171.8 million hl. It
is felt that, in order to compare this forecast with those for preceding wine years,
8.8 million hl should be deducted in respect of quantities of must not processed into
wine. This gives a forecast production of 163 million hl before vinification. The
foreseeable fall in total production is -8.6% in France (57.5 million hl compared
with 63 million hl), -9.3% in Italy (52.6 million hl compared with 58.1 million hl),
-24.6% in Austria (2.2 million hl compared with 2.9 million hl) and -25.6% in
Portugal (5.8 million hl compared with 7.8 million hl).

Production in Greece and Spain in 1999/2000 appears to be confirmed (at
3.680 million hl and 32.902 million hl respectively).

Based on the most recent figures from the IWO, Community wine production
(162.562 million hl)
output
(258.776 million hl) in 1998/99.

62.8% of world

accounted

around

for

The European Community was the world's leading exporter with 11.552 million hl in
1999, down on the 12.9 million hl exported in 1998. For 1999 the chief traditional
buyers of Community wine were the United States (3.070 million hl), Switzerland
(1.616 million hl), Japan (1.162 million hl, as against 1.975 million hl in 1998) and
Canada (1.098 million hl).

340.

Imports from non-member countries rose to 6.327 million hl in 1999, i.e. 8% more
than in 1998.

341. Wine imports in 1999 came mainly from Australia (1.368 million hl), Chile
(912 564 hl), the United States (912 251 hl), South Africa (794 901 hl) and Bulgaria
(508 463 hl). Exports from Australia (+31%) and Chile (+18%) were substantially up
on 1998.

342.

The figures for trade within the Community (based on imports) remained stable from
1998 to 1999: around 34 million hl.

343. Wine consumption totalled 34.6 l/head during the 1998/99 wine year, as against

34.05 l/head in 1996/97 and 34.7 l/head in 1996/97.

77

344.

345.

346.

At the end of 1999/2000, stocks amounted to 135 million hl, whereas they had
totalled 125 million hl at the end of 1998/99.

Preventive distillation under Article 38 of Council Regulation (EEC) No 822/87 was
opened for a total of 9.45 million hl for 1998/99. It was opened for 12 million hl in
1999/2000 and could well total around 10 million hl in 2000/01.

The area under vines was stable: 3.286 million ha as at 1 September 1998. The yield
for 1998/99 was 48 hl/ha, down on the last two wine years (50.8 hl/ha in 1996/97 and
51.5 hl/ha in 1997/98).

3.2.20. Tobacco

3.2.20.1.Market developments

347.

348.

349.

350.

At 6.842 million t, world tobacco production in 1999 was slightly up (+2.5%) on
1998. China continues to be the largest producer, its 2.380 million t accounting for
34.8% of world production (37.8% in 1998). Overtaking the United States, India
came second, with Brazil in fourth place. The European Union was fifth, with 5% of
world production. In 1999 the EU produced 345 225 t of leaf tobacco,86 an increase
of +0.9% compared with 1998.

Tobacco prices fell on the Malawian and Zimbabwean markets. Those markets give a
good indication of world price trends, particularly for flue-cured and light air-cured
varieties. Prices on European markets fell, in particular for oriental varieties. The
world market is currently affected by substantial surpluses of leaf tobacco that built
up between 1998 and 2000. Demand for leaf tobacco continued to fall in the wake of
a 2% decline in cigarette output from 1998 to 1999.

Figures for international trade have in essence remained stable: the EU exported
172 134 t to the rest of the world in 1999, compared with 178 674 t in 1998. Exports
their aromatic
were mostly of oriental varieties, which are sought after
characteristics. Imports totalled 528 734 t in 1999 (541 200 t in 1998).

for

The quota system to which Community production is subject was confirmed in 1998
on the occasion of a further reform applicable as from the 1999 harvest. On the
occasion of this latest change in the market organisation, the Council set the overall
guarantee thresholds for the 1999, 2000 and 2001 harvests at 348 568 t, 347 475 t
and 347 055 t respectively.

3.2.20.2.Main legislative and policy developments

351.

The reform of the market organisation for tobacco87 was adopted at the end of 1998
and was applicable as from the 1999 harvest. The Council has set the premiums and
guarantee thresholds for the 1999, 2000 and 2001 harvests. The reform had several
objectives.

86

87

The figure may change, depending on adjustments to Italy's production.
Council Regulation (EC) No 1636/98 of 20 July 1998 amending Regulation (EEC) No 2075/92
(OJ L 210, 28.7.1998, p. 23); Commission Regulation (EC) No 2848/98 of 22 December 1998
(OJ L 358, 22.12.1998, p. 17).

78

352.

353.

To encourage production of tobacco of higher quality, new arrangements for varying
the premiums are to be phased in over a three-year period, becoming fully
operational from 2002. The underlying principle is that a variable component of the
premium available (from 30% to 45%) must be allocated to producers in the light of
the market price, the designated indicator of quality. The variation is applicable by
batch and by variety within each producer group.

In order better to take account of environmental protection and contribute towards
research into the least harmful types of tobacco possible, the amount currently
withheld from the premium and used for financing the Community Tobacco Fund
was doubled. The detailed implementing rules concerned are laid down in
Commission Regulation (EC) No 1648/200088.

354. With a view to encouraging producers to switch to other crops, a system was
introduced for buying back quotas from producers abandoning tobacco-growing.
Producers whose quotas are bought back in a given harvest qualify, from the 1999
harvest, for amounts determined by group of varieties on payment of the premiums
for the following three harvests. The scheme does not cover sensitive production
areas or the high-quality varieties determined for 1999 and 2000 by Commission
Regulations (EC) Nos 1823/199989 and 1534/2000 respectively90.

355.

356.

357.

To the same end and in order to introduce some flexibility in production-quota
management, the Member States must set up a national reserve of production quotas
by group of varieties for each harvest; that reserve must be divided up according to
objective criteria laid down by the Member States with a view to encouraging
restructuring of agricultural holdings.

The reform's objectives also include administrative simplification of the management
of the scheme and more effective checks.

The introduction, after the 1999 harvest, of all these new legislative provisions called
for a number of minor adjustments and amendments in 1999 and 2000 relating
mainly to the management of, and the detailed rules for paying, the specific aid for
producer groups, the rules for transferring and giving up production quotas and the
way the national reserve is to be used.

3.2.21. Seeds

3.2.21.1.Market developments

358.

In 1999 the total area given over to production of seeds eligible for Community aid91
was 439 512 ha. For the Member States as a whole, this represents a reduction of
about 1% on the previous year.

359.

The area used for producing seeds of fodder grasses and legumes was 187 981 ha and
there was a reduction in the
175 267 ha respectively. Compared with 1998,

88

89

90

91

OJ L 189, 27.7.2000, p. 9.
OJ L 221, 21.8.1999, p. 5.
OJ L 175, 14.7.2000, p. 78.
The market organisation for seeds provides for aid for the production of basic seed and certified seed of
some 40 species of agricultural plants, including various species of fodder plants, rice and flax.

79

360.

361.

362.

363.

Community area used for producing seeds of fodder grasses (around 9%) and an
increase in that for seeds of fodder legumes (around 6%).

The total area used for rice seeds was 20 351 ha, representing an increase of around
5% on 1998. More specifically, compared with the preceding year, the area used for
the production of rice seeds was slightly up in the case of the indica type (6 407 ha,
i.e. an increase of 44% compared with 1998) and down in the case of the japonica
type (12 035 ha, i.e. 2.5% down on 1998).

The areas used for growing seeds for fibre flax and linseed production were
24 972 ha and 25 612 ha respectively. Compared with 1998 and taking all Member
States together, this meant a fall of around 7% in the case of fibre flax and a rise of
5% in the case of linseed.

The hybrid maize seed production area measured a total of 47 967 ha. This represents
a reduction of around 15% on 1998 for the EU as a whole.

Although exports of seeds falling within the scope of the market organisation rose
sharply (by around 60%)
imports (70 287 tonnes)
continued to exceed exports to non-member countries (37 729 tonnes). Imports of
hybrid maize seed totalled 62 831 tonnes, including 57 687 tonnes (around 92%) of
simple hybrids.

the EU's total

in 1998/99,

3.2.21.2.Main legislative and policy developments

364.

365.

366.

Regulation (EC) No 1529/200092 establishing the list of varieties of Cannabis
sativa L. whose seeds are eligible for aid under the market organisation was adopted.
With a view to alignment on the aid scheme applicable under the market organisation
for flax and hemp, the list was taken from Regulation (EEC) No 1164/8993 laying
down detailed rules concerning the aid for fibre flax and hemp.

In the case of ryegrass, with prices on the external markets no longer justifying the
distinction between three groups of varieties, a single rate of aid will apply from the
2002/03 marketing year after a transitional period during which the aid for the three
groups is to be aligned gradually.

The Commission Decision of 11 February 2000 on Finnish State aid for seeds
authorised Finland to grant aid for the production of certified seeds of varieties of the
species red clover (Trifolium pratense L.), timothy (Phleum pratense L.), meadow
fescue (Festuca pratensis huds.), cocksfoot (Dactilis glomerata L.) and ryegrass
(Lolium perenne L.) from 1 January 1996 and until 1998, including the production
planned for 1999.

3.2.22. Hops

3.2.22.1.World market

367.

In 1999 the world area under hops was around 58 000 ha, including almost 52 000 ha
located in EU producer Member States/countries belonging to the International Hop

92

93

OJ L 175, 14.7.2000, p. 67.
OJ L 131, 1.6.2000, p. 4.

80

Growers' Convention (IHGC). China, too, is a major producer, but no precise figures
are available.

368.

369.

Areas under hops in the IHGC member countries and the EU were down by 4% in
1999, the total reduction being around 1 900 ha, with falls approximating 1 400 ha in
Germany, 900 ha in the United States, 230 ha in the UK and 200 ha in Slovenia. In
other countries (Australia, Russia, the Czech Republic and Poland), however, there
was an increase in the area under hops.

At around 1 875 000 Ztr, the 1999 world harvest was slightly down (-1%) on 1998.
The quality of production improved, with an alpha acid content of 7.80% and alpha
acid production of 7 310 tonnes (7 026 tonnes in 1998). The yield was 3.18% up on
the 1998 harvest and 18% above the average for the last 20 years.

370. World beer output for 2000 was expected to amount

to 1 337 million hl. At a
hopping rate of 5.5 g alpha acid/hl beer, breweries need around 7 354 tonnes of alpha
acid; the quantity of alpha acid produced during the 1999 harvest therefore fell
slightly short of requirements (by 44 t).

371.

Moreover, breweries would appear to have sufficient stocks to satisfy production
requirements for several months. Thanks to constant technical progress and the trend
towards the brewing of beer that is less bitter, less alpha is needed than before.

3.2.22.2.Community market

372.

Hops are grown in eight Member States of the Community (Belgium, Germany,
Spain, France, Ireland, Austria, Portugal and the United Kingdom), with Germany
accounting for 80% of the 22 686 ha used for hop-growing in the EU in 1999.
Compared with the 1998 harvest, areas were down by about 1 700 ha (-7%).

373. With production totalling 692 409 Ztr, the 1999 harvest was far smaller than in 1998
(-8%). The average yield per hectare, however, was very close to the previous
harvest's figure at 1.53 t/ha or 30.6 Ztr/ha. Production was of good quality and the
average alpha acid content was 7.38% for all varieties in the Community as a whole,
i.e. the equivalent of 2 554 tonnes of alpha acid at 113 kg/ha for beer production in
2000.

374.

375.

The average price of hops sold under contract was EUR 191/Ztr, i.e. EUR 6/Ztr
down on the 1998 harvest. The average price for hops sold on the spot market rose
sharply (from EUR 92/Ztr in 1998 to EUR 156/Ztr in 1999).

Under the market organisation for hops, aid is granted to hop producers to enable
them to attain a reasonable level of income. The Council fixed the aid at EUR 480/ha
for all varieties for a period of five years from the 1996 harvest. The same rate of aid
is granted for areas where temporary resting or grubbing-up measures are applied; in
1999 these totalled 1 546 ha, including 1 174 ha in Germany.

376.

Estimates for the Community harvest
previous year.

in 2000 are slightly higher than for the

81

3.2.22.3.Main legislative and policy developments

377.

On 14 December 2000 the European Commission adopted a proposal to extend by
two years the period of validity of the production aid regime applicable under the
common market organisation in hops. In the light of the success of the existing
regime in encouraging production to adapt to demand, the proposal does not provide
for any change in the current rate of aid to hops producers of EUR 480/ha. The
Commission also proposes to review the entire hops regime in a report to be
published before 31 December 2002. The effectiveness of the "special temporary
measures" – namely set-aside and permanent grubbing up – applicable under the
hops regime will be taken into account in the review, as they are set to run out in
2002. The review will also consider the potential impact of enlargement on the
sector, given that a number of candidate countries are major hop producers. The
proposal is set to be adopted by the EU's Council of Ministers and would apply from
1 January 2001.

3.2.23. Flowers and live plants

378.

379.

380.

381.

382.

383.

384.

This sector covers a wide range of products: bulbs, live plants (ornamentals and
nursery products), cut flowers and foliage. The market organisation provides for
quality standards and customs duties, with no specific protective measures against
imports apart from any safeguard measures that might prove necessary. In 1996 the
Council adopted a three-year promotion programme (1997-99) eligible for
Community financing of EUR 15 million a year, possibly rising to 60% of the actual
cost of the measures implemented by groups representative of activities in this sector,
the aim being to boost consumption of Community products in the EC.

In the last few years, both production and trade have grown significantly in this
sector. In 1999 Community production amounted to around EUR 13.5 billion.

The total area devoted to ornamental horticulture is around 115 000 ha, the main
producer being the Netherlands.

Community imports from non-member countries account for around 7% of EU
production by value. In 1999 they totalled 353 000 tonnes (EUR 1 015 million), a
rise of around 97% on the figure for 1990. Fresh cut flowers accounted for about half
of those imports, the EU being the biggest market in the world in this respect. Under
agreements with non-member countries, such as the Generalised System of
Preferences in the case of Central and South American countries and the agreements
concluded with the ACP States under the Lomé Convention, most of the flowers
(approximately 80%) are exempt from customs duty.

All told, five Mediterranean countries (Cyprus, Israel, Jordan, Morocco, and the
West Bank and the Gaza Strip) enjoy tariff exemptions for certain cut flowers (roses
and carnations) under set quotas and provided that the price is not below a minimum
import price.

Kenya has become the EC's main supplier of fresh cut flowers (35 700 tonnes),
followed by Israel (33 700 tonnes) and Colombia (26 700 tonnes).

Among the other countries in the EC's top 10 suppliers for the sector as a whole are
Costa Rica and the USA, notable as the main suppliers of foliage, Ecuador and

82

385.

386.

387.

Zimbabwe, whose exports to the EC grew more slowly in 1999 (at +22% and +17%
respectively compared with 1998). Poland's exports of live plants and nursery
products to the EC rose by 20%.

Import prices for fresh cut flowers were 9% down on 1998; this fall is greater than in
1995-98 and competition with EC production is accordingly stiffer.

EC exports to non-member countries totalled around 362 000 tonnes in 1999 and
were worth EUR 1 186 million, 10% up on 1998. In decreasing order of importance,
they are made up of live plants and nursery products, fresh cut flowers, bulbs and
foliage. In 1999, exports of cut flowers (EUR 371 million) were 17% up on 1995-98,
when they tended to be around EUR 310 million.

The external trade balance for 1999 was positive for the sector as a whole, both
financially (at around EUR 170 million) and in terms of quantities (9 400 tonnes).
This was due to export surpluses for bulbs and live plants, which amounted to
EUR 278 million and EUR 219 million respectively.

3.3.

Animal feed

388.

389.

Huge quantities of agricultural products go into animal feed, which is the main outlet
for EC production of cereals and oilseeds and practically the only utilisation of
permanent grassland and fodder grown on arable land. Altogether, feed accounts for
three quarters of the Community's UAA (utilised agricultural area). Moreover,
animal feed generally represents about 65% of all pigmeat and poultrymeat
production costs.

Overall demand94 rose only slightly in 1999/2000, mainly because of stagnating
demand in the pig-farming and poultry sectors. Half of the total supply95 comes from
feed (pasture, hay and silage) that is not generally marketed and is consumed mainly
by ruminants. The other half, which can be consumed by all livestock, is made up of
marketable feeds (cereals, substitutes, oilcake, etc.) which are the subject of very stiff
competition (on price and nutritional value).

390.

Total animal consumption of the key marketable products96 in 1999/2000 in the EC
is put at 204.5 million tonnes, which would be 0.7 million tonnes up on 1998/99.
This consumption is made up of:

–

–

on the one hand, domestically produced products, estimated at 150.5 million t
(down 1.1 million tonnes on the preceding marketing year), and consisting
mainly of cereals and protein plants; and

on the other, of net imports estimated at 54.0 million tonnes, up approximately
1.8 million t on the preceding marketing year thanks to the resumption of
imports of citrus pellets and manioc.

94

95

96

This comprises all feed, marketable and unmarketed (estimate for the EU).
Estimate based on the Eurostat feed balance expressed in FU (feed units, one FU being equivalent to the
average energy produced by 1 kg of barley).
Covers most of the marketable feedingstuffs used in the Community by the compound feed industry and
by farmers (farm consumption and purchases of raw materials) and set out in the table below headed
"Animal consumption of key marketable products (estimates for EU 15)". Source: Agriculture DG.

83

391.

392.

As regards substitutes subject to import quotas, the quota utilisation rate for manioc
it rose from 52% in 1998 to 73% for manioc from
imports increased overall;
Thailand, while it remained at 3% on average for all other origins. The quota
utilisation rate for sweet potatoes from China was again 0% in 1999.
Industrial production of compound feedingstuffs in the EU97
is estimated at
121.3 million tonnes in 1999, up 0.8 million tonnes on 1998. There are, however,
differences between the various livestock sectors: production increased for bovine
animals (milk and meat) while there were slight falls in the pig-farming and poultry
sectors.

EU industrial production of compound feedingstuffs by category of animal

Compound feedingstuffs for

1998

1999

Difference

All bovine animals (milk and meat)

Pigs

Poultry

Other

TOTAL

34.3

43.2

35.4

8.4

35.4

43.1

35.2

8.4

121.3

122.1

1.1

-0.1

-0.2

0.0

0.8

(million tonnes)

Percentage
variation

3.2%

-0.2%

-0.7%

0.1%

0.7%

393.

394.

395.

In terms of total production of compound feedingstuffs by Member State in 1999, the
main increases were recorded in Spain and Ireland while the largest falls were
recorded in France, Denmark and Italy.

Cereals incorporated98 into compound feedingstuffs in the EC in 1999 were stable at
around 50 million tonnes.

The decisive factor in determining the composition of feedingstuffs continues to be
prices for raw materials relative to one another and the percentage of total demand
accounted for by the different animal species. In 2000/01 the quantity of cereals in
animal feed will depend on livestock demand and the prices of imported products.
the
By enhancing the competitive edge of cereals over substitute products,
implementation of Agenda 2000 will increase the percentage of cereals used in
animal feed.

97

98

Provisional figures for the EU, not including without Greece or Luxembourg, Table 4.13.7.3, Part 2.
Source: European Feed Manufacturers' Association (FEFAC).
Table 4.13.7.5, Part 2. Source: European Feed Manufacturers' Association (FEFAC).

84

Animal consumption of key marketable products

Rate of
import
duty

T
T
T
T

6% C/T
0 C/T
0 C
T
0 C
0 C
0 C
0 C
0 C

T
4-17% C

0 C
0 C
0 C
0 C

2-5% C
0-9% C
0-2% C
T

(estimates for EU 15)

(million tonnes)

1998/99

1999/2000e

ANIMAL CONSUMPTION

ANIMAL CONSUMPTION

EU

IMP

EXP

TOTAL

EU

IMP

EXP

TOTAL

38.7
29.5
27.8
12.2

108.2

20.6

-
-
1.6
11.0
0.2
-
5.4
2.0
0.4
1.5

0.9
0.6

22.0

8.1

1.4
4.8
1.8
-
13.3

5.5
4.8
2.6
0.5

21.4

151.6

-
-
1.5
0.9

2.4

11.9

3.3
-
5.2
0.1
0.4
0.7
0.8
0.6
0.9
3.4

3.0
0.4

15.3

34.8

26.9
0.7
2.7
4.5
1.5

0.7
0.1
0.7
-

36.3

54.0

-
-
0.9
1.2

2.1

13.9

4.2
-
5.1
0.1
0.4
1.7
0.8
0.7
1.0
3.4

3.0
0.4

17.3

34.9

26.9
0.7
2.7
4.6
1.5

0.7
0.1
0.7
-

36.4

55.8

-
-
-
-

-

-

-
-
-
-
-
-
-
-
-
-

-
-

-

0.9

0.7
0.1
-
0.1
0.9

-
0.2
0.7
-

1.8

1.8

38.7
29.5
29.2
13.1

110.5

32.5

38.5
30.1
28.4
10.6

107.6

20.6

-
-
1.6
11.0
0.2
-
5.4
2.0
0.4
1.5

0.9
0.6

22.1

8.5

1.0
5.9
1.6
-
12.4

4.4
4.8
2.6
0.6

20.9

150.5

3.3
-
6.8
11.1
0.6
0.7
6.2
2.6
1.3
4.9

3.9
1.0

37.4

42.0

27.6
5.4
4.5
4.4
13.9

6.2
4.7
2.6
0.5

55.9

203.8

107.5
107.5

-
-
-
-

-

-

-
-
-
-
-
-
-
-
-
-

-
-

-

0.9

0.7
0.1
-
0.1
0.9

-
0.2
0.7
-

1.8

1.8

38.5
30.1
29.3
11.8

109.7

34.5

4.2
-
6.7
11.1
0.6
1.7
6.2
2.7
1.4
4.8

3.8
1.0

39.3

42.5

27.2
6.5
4.3
4.5
13.0

5.1
4.7
2.6
0.6

55.5

204.5

107.9
107.9

KEY PRODUCT

GRAIN
Common wheat
Barley
Maize
Other
TOTAL: CEREALS
TOTAL SUBSTITUTES (ex Annex D),
of which:
Manioc
Sweet potatoes
CGF (corn gluten feed)
Bran
MGC (maize germ cake)
Citrus pellets
Dried sugar beet pulp
Brewing and distilling residues
Various fruit waste
TOTAL OTHER ENERGY FEEDS,
of which:
Molasses
Animal and vegetable fats (added to
feed)
TOTAL: HIGH-ENERGY FEEDS
OILCAKE AND SEEDS (oilcake-
equivalent), of which:
Soya
Rape
Sunflower
Other
TOTAL OTHER PROTEIN FEEDS,
of which:
Protein plants
Dried fodder, etc.
Fish meal and meat meal
Skimmed-milk powder
TOTAL: HIGH-PROTEIN FEEDS
GRAND TOTAL: KEY PRODUCTS
Key products index: 1994/95 = 100
* Consumption index
* Livestock demand index

Notes:

e = Estimate; T = Tariff since 1 July 1995; C = bound under GATT; % = import duty as at 1 July 1995;
0 = exempt.

85

3.4.

Animal products

3.4.1. Milk and milk products

3.4.1.1. World market

396.

397.

398.

399.

Initial estimates put world production of milk (including cow's milk, buffalo milk,
sheep's milk and goat's milk) in 2000 at 565 million tonnes, i.e. 2.5 million tonnes
(just 0.5%) more than in 1999. The production of cow's milk was expected to
account for most of the increase, whereas in the past, despite an increase in
production in Australasia, it had been more or less stable given the decline in
production in Russia and the other countries of eastern Europe.

Asia: the rise in production in India, where more than half the milk produced is
buffalo milk, slowed down in some regions. In 2000 India was expected to produce
more than 79 million tonnes and confirm its position as the world's second producer
after the EU, thereby increasing its lead over the United States. The increase in
production in India has been underpinned by growing domestic demand.
Nevertheless, per capita annual consumption is only 82 kg, less than a quarter of
what it is in western countries. Pakistan, the other major producer in the region and
fifth largest in the world, was expected to produce just over 24 million tonnes in
2000, its production having risen by 1 million tonnes per year since 1994.

In Latin America production looked set to increase in most countries, from just over
59 million tonnes in 1999 to more than 60 million tonnes in 2000. Brazil is both the
region's biggest milk producer (the sixth largest in the world) and the foremost
importer among the Mercosur countries. While its production was expected to reach
23.8 million tonnes in 2000, Brazil's domestic consumption was also set to absorb
large additional quantities of milk products from Argentina and Uruguay.

At 83.3 million tonnes, milk production in Eastern Europe in 2000 looked set to
reach the same overall total as in 1999, but with some differences as between
countries. The decline in production in the former Soviet Union following the
break-up of the country was less marked in 1999, and there is every probability that
production will now begin to pick up again. On the other hand, production in 2000 in
eastern European countries (Poland, Romania,
the Czech Republic, etc.) was
expected to revert to the upward trend recorded in 1997 and 1998. Supplies of
feedingstuffs are still limited, however, with consequent further reductions in herds.
The financial crisis Russia experienced in 1998 is keeping it away from the markets:
in 1998 and 1999 it imported half as much as in 1997. Its position as the largest
purchaser of butter explains why that market remained rather depressed, with very
low prices of around USD 1 100 a tonne. Russian domestic demand remains weak
following consumer price rises. In addition, consumers are now moving towards
cheaper substitute products such as vegetable oils. Similarly, consumers in the region
are switching to products such as long-life milk, soft cheeses, ice cream and desserts,
while consumption of traditional products is falling.

400.

In the United States, production was expected to increase by 2.3% in 2000 after
remaining more or less unchanged for five years despite the use of BST, a substance
which had initially been expected to bring about a dramatic increase in production
but was to prove disappointing. In Canada the maintenance of processing quotas for
milk left production practically unchanged.

86

401.

402.

403.

In Australasia, weather conditions were particularly favourable to both the region's
major players. In this region of the world, milk production can be affected by highly
changeable weather conditions from one year to the next. The weather in 1996 was
very favourable, but this was followed in 1997 by a drought affecting much of
Australia. Weather conditions were also unfavourable in the first half of 1998.
Favourable prices in comparison with other sectors are encouraging new investment
in the dairy industry.

In Australia, weather conditions have been very favourable over recent marketing
years, enabling milk production to rise above 11 million tonnes - an increase of
16.8% since 1998. There is a trend towards increased use of compound feed in dairy
farming in Australia. The Australian authorities have introduced a new support
scheme99 which will lead producers towards a non-subsidised system. The aim is to
increase the size of holdings, even if this entails reducing the number of producers.

In New Zealand milk production fell by 5% in the 1998/99 marketing year in the
aftermath of a drought. This explains the sharp 15% recovery in 2000 when, aided by
good weather conditions for grazing and favourable world price trends in 1995 and
1996, production reverted to the trend followed in 1995-98 and reached 12.8 million
tonnes. Falls in world prices have always been offset by devaluations of the New
Zealand dollar, a policy sometimes also followed by Australia with regard to its own
currency.

3.4.1.2. Community market

404.

405.

406.

407.

408.

The dairy herd was expected to be down by 264 000 head to 20.9 million (a fall of
1.3%) by the end of 2000, the reduction being partly offset by a 1.1% increase in
yields. Production would thus be down by about 186 000 tonnes to 122 million
tonnes. Member States forecast that milk deliveries will total 114.2 million tonnes, a
fall of 323 000 tonnes. This appears to be a logical development following the 1.4%
increase recorded in 1999, which was accounted for mainly by growth in the United
Kingdom.

The output of drinking milk has remained fairly stable since 1998, at around 29
million tonnes. Production of cream for direct consumption is expected to show very
little change compared with 1999.

Butter production was expected to fall slightly to 1.8 million tonnes in 2000. The
reduction is expected to come from dairy butter, since the figures for farm butter are
unchanged.

Butter consumption looked set to fall by 0.7% to 1.77 million tonnes. Per capita
consumption also fell, by 1% to 4.72 kg.

Cheese production was expected to increase by around 135 000 tonnes to 6.9 million
tonnes (+2 %) in 2000. Consumption was also expected to increase, by 1.3% or
83 000 tonnes in 2000. This followed a very modest increase of 30 000 tonnes in
1999, the smallest since the introduction of the quota system.

99

AUD 0.46/litre of milk for consumption and AUD 0.09/litre of milk for processing. Payments are to be
made on a quarterly basis for a total of eight years.

87

409.

410.

411.

412.

413.

414.

415.

416.

417.

Per capita cheese consumption is once again on the increase. Strangely enough, it is
falling in most Member States but rising in the EU as a whole, thanks to an increase
in some Member States.

Milk powder production was expected to fall slightly by some 7 000 tonnes (-0.3%)
to 2.1 million tonnes, the net result of a forecast 2.1% drop in skimmed-milk powder
output to 1.09 million tonnes, and a 2.7% increase in whole-milk powder production.

It was expected that casein production would remain stable at around 153 000 tonnes
and that condensed-milk production would fall to 1.29 million tonnes in 2000, a
reduction of 1.1% which is slightly below the historical trend of –1.6%.

Other figures worth noting include: the sharp reduction - 675 800 in 2000 - in the
number of dairy farms (the annual rate of change in 1995-2000 (EUR 15) being
5.2%); the average number of cows per holding, which was expected to rise to 30.8;
and the average quantity of milk delivered per holding, which was set to reach
168.5 tonnes.

Since 1997, overall consumption of dairy products in the EU has been increasing. In
2000 it was expected to increase by 1% to 115.6 million tonnes. This figure is the
total for all uses made of the milk available in 2000.

Community stocks were at an all-time low in March 1996, when there was scarcely a
single tonne of either butter or SMP (skimmed-milk powder) in public storage.
Stocks of SMP subsequently began to rise in response to slack demand both within
the EU and elsewhere. At the end of 1999 a sharp increase in demand, particularly on
the world market, suddenly reversed that trend. Those favourable market conditions
made it possible to sell off all public stocks of SMP in August 2000. Expected to be
around 50 000 tonnes, the quantity of butter entering intervention in 2000 was very
limited.

Internal prices for milk products in 2000 showed conflicting trends, particularly early
on in the year. The average price for butter began the year at 99.2% of the
intervention price, drifted down until the end of May (91.3%) and held steady at that
level until August, whereupon it began to climb again, ending the year at 94.5%. The
price for SMP showed little or no change, remaining close to the intervention price
during the first half of the year before climbing to 106% of the intervention price at
the end of the year. The upward trend then continued for both intervention products.

There were several sharp reductions in the export refunds for milk powder, in
particular in the summer. This was because of a lack of availability throughout the
year, particularly as regards SMP, and significant external demand for that product,
which caused its price on the world market to soar from USD 1 400 per tonne to
USD 2 100 per tonne, taking it past the whole-milk powder price of USD 1 900 per
tonne.

EU dairy exports rose 5.8% in 1999, i.e. by 620 000 tonnes milk equivalent, this
being entirely consistent with the resumption of export licences which, under GATT
Uruguay Round agreements, had not been used in previous years. The volume
exported in 2000 is expected to be similar to that in 1998. Imports in 1999 fell to
three million tonnes (including caseins and fresh products). Forecasts for the current
year also show a slight reduction in imports.

88

3.4.2.

Beef and veal

3.4.2.1. Implementing the reform of the beef and veal sector

418.

419.

In May 1999, with a view to preparing the sector for the challenges awaiting it
beyond 2000, the Council radically altered the common organisation of the market in
beef and veal (Regulation (EC) No 1254/1999100).

The Commission adopted detailed implementing rules governing premium schemes
(Regulation (EC) No 2342/1999101), buying-in (Regulation (EC) No 562/2000102)
and private storage aid (Regulation (EC) No 907/2000103).

3.4.2.2. Beef labelling

420.

421.

422.

Council Regulation (EC) No 820/97104 introduced a beef labelling system in the EU.
The system is voluntary but, like France, Belgium, Finland and, latterly, Denmark,
their
Member States may wish to adopt a compulsory national system for
home-produced beef. Third countries may submit voluntary notifications to the
Commission on any indications they can prove are true.

On 13 October 1999 the Commission formally adopted a report105 and proposals106,
which set the timeframe for the compulsory labelling of beef in the Community.
Both proposals were based on Article 152 (Public Health) of the Amsterdam Treaty,
which meant that the Regulation would be adopted by co-decision between the
European Parliament and Council.

The objective of the proposed Regulation was to replace Council Regulation (EC)
No 820/97 and to lay down general rules for a compulsory labelling system in two
stages. The first stage, for immediate entry into force, made provision for the
obligatory indication on labels of information readily available concerning:

–

–

the traceability code of the beef and the place of slaughter and cutting of the
carcass, with the approval number of the establishments concerned,

the quality of the beef (i.e. the category of the animal from which the beef was
derived, slaughter date and ideal maturation period).

423.

The Commission proposed that, from 1 January 2003, the beef label should also
include precise information about where the animal was born and reared (i.e. the full
origin of the beef,
leaving the option to state the name of the Member State
concerned or the indication "Origin: EC"). Certain simplified arrangements for
minced beef and beef imported from third countries were also proposed.

100

101

102

103

104

105

106

OJ L 160, 26.6.1999, p. 21.
OJ L 281, 4.11.1999, p. 30.
OJ L 68, 16.3.2000, p. 22.
OJ L 105, 3.5.2000, p. 6.
OJ L 117, 7.5.1997, p. 1, as implemented by Commission Regulation (EC) No 1141/97, OJ L 165,
21.6.1997, p. 7.
COM(1999) 486 final, 13.10.1999.
COM(1999) 487 final, 13.10.1999.

89

424.

425.

426.

The proposal for compulsory beef labelling has been discussed under the co-decision
the Parliament adopted its
procedure since the beginning of 2000. Firstly,
amendments on first reading to the Commission's proposal at its plenary session of
12 April 2000107. On 17 May 2000,
the Commission presented an amended
proposal108, taking into account those amendments, which were accepted by the
Commission in the plenary session.

The Council adopted its first Common Position on 6 June 2000109 and the
Commission published a Communication on that Common Position on 8 June
2000110, supporting the Council's position. The Parliament proceeded with its second
reading, on 6 July 2000111, when the Council's Common Position was accepted with
two major amendments, relating to the inclusion of the origin of minced beef and the
deletion of the indication of the category of the animal from which the beef was
derived.

Spurred on by the tight deadline for the adoption of the Regulation, the Agriculture
Council was, at its meeting of 17 July 2000, able to define rapidly a unanimous
position in favour of Parliament's amendments. Consequently, European Parliament
and Council Regulation (EC) No 1760/2000112 was adopted, replacing Regulation
(EC) No 820/97 with a compulsory beef labelling system for origin. The voluntary
system continues to apply for all indications other than origin.

427.

The main features of the new Regulation are:

–

–

–

–

As from 1 September 2000, the label is to contain the indications of a reference
number ensuring the link between the meat and the animal or animals, the
words "Slaughtered in (name of Member State or third country) (approval
number)" and the words "Cutting in: (name of Member State or third country)
(approval number)";

As from 1 January 2002, the label is to contain also an indication of the
Member State or third country of birth, all Member States or third countries
where fattening took place and the Member State or third country where
slaughter took place;

However, where the beef is derived from animals born, raised and slaughtered
in the same Member State or third country, the indication may be given as
"Origin: (name of Member State or third country)";

Until 31 December 2001, Member States where sufficient details are available
under the identification and registration system for bovine animals, may
continue to decide that, for beef from animals born, raised and slaughtered in
the same Member State, supplementary items of information must also be
indicated on labels;

107

108

109

110

111

112

Co-decision 1999/0204 (COD) (drafted by Mr Papayannakis), Document A5-88/00.
COM(2000) 301 final.
Document 8251/00 Rev.1, 6.6.2000.
SEC(2000) 956 final, 8.6.2000.
Document A5-0193/2000, 6.7.2000.
OJ L 204, 11.8.2000, p. 1.

90

–

–

The specific provisions
1 January 2002, be reinforced by the indication of origin;

for minced beef outlined above will,

from

Third country derogation: Article 15 of the new Regulation lays down
simplified labelling arrangements for beef imported from third countries which
cannot meet the compulsory EU system. In such a case, the beef must be
labelled "Origin: non-EC" and "Slaughtered in: [name of third country]".

428.

The Commission also adopted Regulation (EC) No 1825/2000113, laying down the
implementation rules for the new base regulation. The key elements are:

–

–

–

The size of a homogenous group of animals, from which a lot of beef is
derived, can be no greater that one day's production in a beef cutting plant;

In accordance with the basic regulation, details are given on how operators
may, in addition to the basic provisions for labelling laid down in the base
regulation, label minced beef in exactly the same way as normal beef if they
wish;

The continued validity of voluntary specifications approved under the previous
regulation.

3.4.2.3. World market in 1999

429.

430.

431.

432.

433.

According to FAO and Eurostat data, at an estimated 55.9 million tonnes for 1999,
world beef and veal production was slightly up, by around 1%, on 1998 and still
accounted for just over a quarter of total meat production.

EU beef and veal production, totalling some 7.681 million tonnes in 1999, was
slightly up, by 0.5%, on 1998. It now accounts for only about 13.8% of world
production.

The supply of beef and veal increased in North America, Brazil, Argentina and in
some producer countries in Asia, in particular China and India.

The United States remains the world's leading producer, with a 21.6% market share.
Its production rose by 2% because of a rise in the number of adult animals
slaughtered and, encouraged by very low feed prices, an increase in carcass weight.

Brazil's increased production can be attributed to the devaluation of the Brazilian
real, which boosted international demand. In Argentina the supply of slaughter
animals rose above the very low levels recorded in 1998 because of difficulties with
foot-and-mouth disease.

113

OJ L 216, 26.8.2000, p. 8.

91

Beef and veal production

('000 tonnes carcass weight)

% change

Country

1996

1997

1998

1999

1998/1997

1999/1998

Argentina
Australia
Brazil
China
United States
India
Japan
Russian Federation
EU
Mexico

2 694
1 745
6 187
3 311
11 749
1 370
555
2 630
7 950
1 330

2 705
1 816
5 922
4 104
11 714
1 378
530
2 394
7 888
1 340

2 656
1 955
5 794
4 474
11 803
1 401
529
2 247
7 646
1 380

World

54 535

55 169

55 316

2 850
2 009
6 182
4 674
12 050
1 421
515
2 229
7 681
1 390

55 867

-1.81%
7.65%
-2.16%
9.02%
0.76%
1.67%
-0.19%
-6.14%
-3.07%
2.99%

0.27%

7.30%
2.76%
6.70%
4.47%
2.09%
1.43%
-2.65%
-0.80%
0.46%
0.72%

1.00%

Sources: FAO and Eurostat

434. World cattle numbers increased slightly in 1999. Expansion is occurring above all in
China, where cow herds are constantly increasing, and in India, where demand for
beef and veal products is rising sharply. The trend is downward in Russia, where
cattle numbers are continually declining because of ongoing difficulties on the food
market, and in Australia, owing to increased slaughter because of the 1998 drought.

435.

Trade: the volume of exports rose by 6%, thanks to an increase in food aid to Russia
from the United States and the EU and a 40% increase in exports from Brazil in the
wake of the devaluation of the real and a rise in production. Australia became the
world's leading exporter thanks to an increase in production and a devaluation of the
Australian dollar, which improved international competitiveness. New Zealand
suffered from that competition and saw its exports fall. The same applies to Uruguay,
which experienced a great deal of competition on the Mercosur market.

436. World imports increased by around 5%, because of food aid to Russia and the sharp
rise in imports by South Korea when it recovered after the economic crisis. Imports
to the United States also rose slightly, with larger quantities being imported from
Canada and South America. Japan's imports fell by 5% because of high prices in the
supplier countries.

437.

438.

Consumption of beef and veal rose in areas where production increased and/or the
economic climate was favourable. Both these factors applied to the United States,
whose already high per capita consumption rose by a further 1.7%. Argentina's
consumption also rose, due to a production increase and low prices.

Consumption fell in Russia, where lower production was not fully offset by higher
imports, and in Australia and New Zealand, where a fall in production linked to beef
and veal prices faring badly vis-à-vis those for pigmeat and poultrymeat created a
climate favourable to exports.

439. World beef and veal prices improved slightly in 1999. In the United States prices
were generally higher than in 1998. This was also the case in Australia, because of

92

the weak Australian dollar, and in Brazil, due to the limited supply of cows and
delayed slaughter because of the drought.

3.4.2.4. Community market

440.

441.

442.

443.

444.

445.

Up until the fourth quarter of 2000 the Community beef and veal market continued to
recover from the BSE crisis, which began in 1996. In October 2000 a cow intended
for the food chain in France was found to be suffering from BSE and, with BSE
cases occurring in several Member States which had until then escaped the disease, a
new BSE crisis broke out with sharp falls in consumption and many repercussions
throughout the industry. Although slowed down by the health measures and the
ceilings on premiums introduced when the 1996 crisis broke out, production
remained stable in 1999, increasing slightly by 0.5% that year and by 0.9% in 2000
up to October. This indicates that the low point in the production cycle was reached
in 1999 and that an upturn should be expected over the coming years, with
production rising and prices falling.

In order to explain this situation, it should be recalled that the processing premium
for young calves continued in 1999 (until July in the United Kingdom and until the
end of the year in France, Portugal and Ireland), excluding from meat production
around 500 000 head which would have reached the market in 2000 in particular.
Lastly, slaughter of cattle older than 30 months and selective slaughter in the United
Kingdom reached around 1 000 000 head in 2000 (the same figure as in 1999).

The Community cattle herd fell slightly, by 0.3% in 1999, with the dairy herd (which
represents two thirds of the total number of cows) down 1.5% and the suckler herd
up 1.8%. The same trend is expected in 2000. The decrease in the dairy herd is seen
as the result of an increase in the milk yield per cow and stricter application of the
quota system. Conversely, the view is that the suckler herd is expanding because
producers are looking forward to increased premiums under Agenda 2000.

Community exports picked up again in 1999. The 25% increase (960 000 tonnes
exported) results from continued food aid to Russia, the availability of low-price
meat sold from intervention stocks, a reduction in market prices and an increase in
exports to the Middle East and North Africa. It is estimated that the total exported in
2000 (630 000 tonnes) was about 35% down, with the result that, for three quarters
of the year, domestic prices were too high and that, during the last quarter, the BSE
crisis caused external demand to fall.

Imports also recovered in 1999, reaching 430 000 tonnes, up 10% on 1998. The rise
resulted from improved consumption and increased supply from South America,
particularly Brazil, Argentina and Uruguay, which constitute our main suppliers. A
similar volume is forecast for 2000.

Meat consumption continued to recover (+3% in 1999 compared with 1998),
reaching more than 20 kg per head of the population annually, an indication of
renewed consumer confidence reinforced by the meat
labelling and promotion
measures. By October 2000 consumption had returned to pre-BSE levels, in spite of
low pigmeat prices. The substantial reductions in consumption which then followed
are expected to result in a 5% fall for the year as a whole.

93

446.

447.

448.

The producer market price for adult cattle, which fell by 5% in the last quarter of
1998 because of the crisis in Russia and benefited from the dioxin crisis affecting
poultrymeat and pigmeat, gradually recovered during 1999 to reach average levels
slightly above those for 1997 but still below the prices for 1998. Record levels were
attained in 2000 (surpassing pre-BSE levels for much of the year) until the new crisis
erupted, after which prices progressively fell in most Member States, in particular in
central and southern Europe.

Lastly, the most salient feature of the year as a whole was the fact that the market
situation continued to be favourable until October 2000, resulting in the total
clearance of the intervention stocks which had built up during the previous BSE
crisis. Around 55% of the beef and veal in question went to the internal market, and
the remainder was exported (much of it as food aid). The repercussions of the new
crisis, which struck in the last quarter of 2000, cannot be assessed at this stage.

In conclusion, the beef and veal market came close to achieving equilibrium in 2000
but was then severely disrupted by the recent events linked to BSE, necessitating the
application of all available market instruments (private storage, public intervention,
export aid and cattle premiums) and the introduction of new measures: mandatory
testing of all animals supplied for human consumption which are older than
30 months, and a scheme under which adult animals can be purchased and the meat
destroyed in order to provide an outlet for animals which the producer wishes to sell
but which cannot be processed for human consumption owing to a lack of testing
facilities.

3.4.3.

Sheepmeat and goatmeat

449.

450.

451.

452.

453.

114

The European Union is, after China114, the world's second biggest producer of
sheepmeat and goatmeat, followed by India, Australia, New Zealand, Turkey, Saudi
Arabia and the Russian Federation.

New Zealand is the leading world exporter (it accounts for more than half of all
world exports), followed by Australia. Imports are substantial in the EU (more than
half of all world imports), Saudi Arabia, the United States, South Africa and Japan.
The EU is also the world's second biggest consumer after China.

On the European market, production was nearly stable, with a slight downward trend
in recent years. Gross domestic production is expected to be 1 146 000 tons c.w.e. in
2000. Of the major EU producers, France has recorded reductions in production
decreases year after year. It also remains the leading destination of internal trade,
chiefly from the UK.

The European market imports close to a fifth of its requirements. The main supplier
is New Zealand, largely through the UK, although there is a move to diversify to
markets in several other Member States.

Prices were at very satisfactory levels during most of 1996 and 1997. The prices for
1998 mirror the pattern observed in previous years, with prices high towards the
middle of the year and very low in the first and last third of the year. The level in

China is expected to produce about 2.5 million tonnes in 2000 according to FAO. The anticipated figure
for the United States is a modest 0.097 million tonnes.

94

1999 was initially very low, recovered towards Easter and remained firm in the
spring. Nevertheless, prices collapsed in the UK and Ireland during the summer due
to high levels of supply. The autumn featured low prices and aid to private storage
was introduced in October for the UK, Ireland and Finland. The year ended on
relatively good price levels following supply shortages and high prices in Spain.

The year 2000 has experienced a major price recovery. The European average has
also been boosted by the strength of sterling against the euro, something which has
had an impact on the calculation of the premium by reducing its estimated value. The
market in sheepmeat has achieved a certain stability in most Member States and in
the EU as a whole. Most of the reasons for concern which existed a year ago have
been dispelled: (a) demand levels are reasonable; (b) skin prices improved; (c) levels
of supply are moderate or decreasing; (d) some efforts in terms of lamb quality are
having a positive effect; and (e) there is decreasing competition from other cheap
meats.

Imports into the Community are carried out principally under
free WTO or
tariff-reduced quotas, together with additional quantities provided for in the Europe
Agreements. For market management reasons, the quotas are managed on a calendar
year basis. The increasing proportion of chilled meat which is being sent by New
Zealand is worrying some Member States. New Zealand is by far the EU's main
supplier, exporting a quantity that is close to its tariff-free quota of 226 700 tonnes.
Australia is the second exporter to the EU, with just under 19 000 tons. EU applicant
countries from Central Europe (in particular Hungary) and Uruguay export less than
10 000 tons.

The EU ewe premium for the marketing year 1999 was EUR 21.7, this being the
difference between the basic price after applying the stabiliser (EUR 468.785/100
kg) and the market price (EUR 330.616/100 kg), multiplied by a technical coefficient
(0.1569). Producers in less-favoured areas (LFAs) received a supplementary “Rural
World” premium.

454.

455.

456.

3.4.4.

Pigmeat

457.

458.

In 1999 world production of pigmeat increased slightly by 0.4 % to arrive at a total
of 88.4 million tonnes (source: FAO). China remains the world’s leading producer
with an output of 39.9 million tonnes, up 1.5% from the previous year. The European
Union remained second in the world with an annual production of 18.0 million
tonnes, which was 2.2% more than in 1998. Persistently low market prices since the
summer of 1998 led the production cycle to turn downwards in the second half of
1999. In 2000 production is expected to decrease again, to about 17.6 million tonnes
(–2.3%). The world’s third most important producer of pigmeat was the USA with
8.8 million tonnes (+1.9%) in 1999.

As the production started to decrease in the second half of 1999, EU pigmeat market
prices started to recover. However, due to the very low prices in the early part of
1999 the average price remained very low (EUR 112/100 kg) and farmers made
heavy losses. Market prices showed further improvement (by an average of EUR
141/100kg) in 2000, this being a year in which farmers could again compensate for
the losses they made in the two preceding years. When production was at its highest
(and prices at their lowest) the Commission adopted a number of measures - mainly
in the form of export refunds and aid for private storage - with a view to improving

95

459.

460.

the market situation. Export refunds for fresh and frozen products were available
between May 1998 and July 2000. A private storage aid scheme was available
between September 1998 and September 1999 and, altogether, 428 000 tonnes of
pigmeat benefited from the scheme. In June 2000 the Commission completed trade
liberalisation negotiations with most PECO countries, resulting in the abolition of
export refunds and import duties between the EU and those countries.

The per capita consumption of pigmeat increased by 2% in 1999 to 44.5 kg/year. In
2000 consumption is expected to fall since output, too, is decreasing.

In 1999 the quantity of pigmeat exported from the European Union totalled
1.5 million tonnes (carcass weight), a 25% increase on 1998. Similarly, imports
increased by 24% to 63 000 tonnes in 1999. The leading destination for pigmeat
exports in 1999 was Russia, which took a total of 591000 tonnes (38% of EU
exports) for the year as a whole. Japan came second with 258 000 tonnes, and Hong
Kong plus China was the third biggest destination, with 134 000 tonnes. The share of
subsidised exports increased in 1999, as the Commission supported exports actively.
In 1999 50% of exports benefited from a refund compared to 35% in 1998. The share
of subsidised exports will again decrease in 2000 as GATT commitments have
become significantly tighter since July 2000.

3.4.4.1. Main legislative and policy developments (Pigmeat regulatory fund)

461.

In April 2000 the European Commission presented a proposal to the Council to
amend the common organisation of the market in pigmeat (COM(2000) 193 final).
The aim of the proposal is to introduce a pig regulatory fund in the sector in order to
support pigfarmers’ incomes when market prices are low. The proposed fund will
enable producers’ incomes to be stabilised by a system of levies to be collected
during periods when the short-term economic situation is satisfactory and by a
system of payments to be granted in times of recession. To reflect
the major
responsibility given to producers as part of the common market organisation of the
market in pigmeat, there is provision for self-financing of the new arrangements by
producers and for control over pigmeat production. The proposal was discussed on
several occasions by the Council. The European Parliament delivered its opinion in
November 2000. In December 2000, however, the Agriculture ministers failed to
reach an agreement on the proposal.

3.4.5.

Poultrymeat

462. World production of poultrymeat has increased at a steady but slower pace since
1991: by 7% a year from 1991 to 1995 and by 4.1% a year from 1995 to 2000. The
rate of increase was higher in the main producer regions, viz. 6.8% a year from 1995
to 1999 in China and 6.2% a year from 1995 to 1999 in Brazil. Production fell in
Russia (annual percentage change: -7.1%). In eastern Europe production has been
rising again since 1995.

96

Poultrymeat production

('000 tonnes)

United
States

Brazil

China

Japan

Russia Hungary EU 15

Other

World
production

1995

1996

1997

1998

1999

Market
share in
1999 (%)

13 786 4 140

8 440

1 282

14 522 4 144

9 630

1 249

14 952 4 562

10 400

1 234

15 128 4 600

10 700

1 221

15 981 5 269

11 000

1 190

859

705

630

640

640

368

8 042

10 607

47 524

365

8 358

11 456

50 429

372

8 550

12 008

52 708

400

8 740

12 049

53 478

400

8 819

12 587

55 886

28.6

9.4

19.7

2.1

1.1

0.7

15.8

22.5

100.0

2000

16 623 5 577

11 350

1 185

600

405

8 711

13 451

57 902

Annual
rate of
change
(%):
1999/95

3.8

6.2

6.8

-1.8

-7.1

2.1

2.3

4.4

4.1

1999: estimates; 2000: forecasts

Sources: Community (October 2000) and USDA (March 2000)

97

463.

The world market continued to expand in 2000, thanks in particular to growing
demand in Russia, China and Japan. The United States remained the world's leading
exporter in 1999 and 2000, owing in particular to its exports of cheap cuts and
various promotion programmes. Russia is still the world's biggest importer but,
although its production did not increase in 1999 or 2000, it is expected to reduce its
imports considerably.

464.

EU production is expected to have fallen by 1.2% in 2000. Community exports rose
sharply from 1996 to 1998. They continued to increase in 1999, but at a slower pace.

465.

Market prices regained their equilibrium in 2000.

466.

467.

Poultrymeat does not qualify for support on the internal market. The measures
governing trade with non-member countries have been adapted to comply with WTO
rules. In particular, exports attracting refunds are being cut by some 30 000 tonnes a
year (to 286 000 tonnes for 2000/01). This restriction has led to a targeting of refunds
as regards countries of destination and products. Thus, in 1999, only around 31% of
Community exports qualified for refunds.

Import quotas at reduced customs duties for a total of 150 770 tonnes continue to
apply under the association agreements (with Poland, Hungary, the Czech Republic,
Slovakia, Romania, Bulgaria, the Baltic States and Slovenia). These concessions
have been expanded under the "double zero" approach. Furthermore, 15 500 tonnes
of boned chicken and 2 500 tonnes of turkey meat can be imported free of customs
duty each year, in addition to 11 900 tonnes for 2000/01 (July/June) under the
minimum access arrangements at reduced duty and 2 400 tonnes under other bilateral
agreements (with Turkey and Israel).

3.4.6.

Eggs

468. World production increased by 4.4% (annual rate of change) from 1991 to 1995 and
continued to rise from 1995 to 1999 (4.1%). Although only average, the increase in
production in the United States is expected to enable that country to overtake the
European Union, where production was set to fall by 0.4% in 2000. Growth in China
was high, at 6.9% from 1995 to 2000.

98

Egg production

(billion eggs)

United
States

Mexico

Eastern
Europe

Japan Russia China

EU 15 Other

World
production

75
77
78
80
83

26
26
28
30
32

12
14
14
14
14

42
43
43
42
42

34
32
32
33
33

302
313
340
363
375

86
84
86
88
88

94
98
98
95
98

670
685
719
745
765

10.8

4.2

1.8

5.5

4.2

49.1

11.5

12.8

100.0

85

33

14

42

32

394

84

107

3.2

6.6

3.9

-0.1

-1.3

6.9

-0.7

3.5

791

4.2

1995
1996
1997
1998
1999
Market
share in
1999 (%)

2000
Annual rate
of change
(%):
1999/1995

1999: estimates; 2000: forecasts
Sources : Community (October 2000) and USDA (March 2000)

469.

470.

After rising since 1996, world exports fell in 1999 and were expected to remain fairly
stable in 2000. The main importing countries are still Japan (egg products) and Hong
Kong (eggs in shell). Community exports increased by 2.7% in 1999 and early
reports for 2000 suggest a slight rise of 1%.

On the Community market, the number of laying hens remained stable in 1999 and is
expected to fall by 2.7% in 2000. Prices were weak until the beginning of 2000 but
then recovered. Since Easter 2000 they have been above the multiannual average.

471.

The market organisation is similar to that for poultrymeat.

472.

473.

474.

Trade: refunds are, under the WTO, payable on up to 98 800 tonnes (eggs-in-shell
equivalent) in 2000/01. Since the summer of 1995, exports have remained below the
limit agreed within the WTO.

The association agreements with Poland, Hungary, the Czech Republic, Slovakia and
Bulgaria provide for an 80% reduction in customs duties on certain egg products.
Under the minimum access arrangements, import quotas at a reduced duty were
opened in 2000/01 for an annual volume of 157 500 tonnes, broken down into three
groups of products, those for egg products and ovalbumin being the only ones used.

On 19 December the Council adopted the Commission proposal115 to amend
Regulation (EEC) No 1907/90 of 26 June 1990 on certain marketing standards for
eggs116 and to make it compulsory to indicate the farming method on eggs and packs
and simplify the classification of eggs by amalgamating the current classes B and C.

115

116

COM(2000) 522.
OJ L 173, 6.7.1990, p. 5.

99

3.4.7. Honey

475. World production of honey was stable at around 1.17 million tonnes in 1999. Prices

on the world market were lower than in the previous year (-14%).

476.

477.

The self-sufficiency rate in the EU was 47.4% in 1998/99, slightly down on the
previous marketing year. This was due to the fall in production and the increase in
imports. Per capita human consumption was stable at 0.7 kg a year.

Pursuant to Council Regulation (EC) No 1221/97 of 25 June 1997 laying down
general rules for the application of measures to improve the production and
marketing of honey117, the Commission adopted decisions approving the national
programmes for the fourth year (2001 marketing year). At the beginning of 2001 the
Commission presented a report to the Council and the European Parliament on the
implementation of the Regulation.

117

JO L 173 du 1.7.1997, p. 1.

100

4.

AGRIMONETARY ARRANGEMENTS

4.1.

Developments in 2000

478.

479.

480.

481.

The agrimonetary measures adopted in 2000 were limited to the application of
Council Regulation (EC) No 2799/98 establishing agrimonetary arrangements for the
euro118, namely the fixing of agrimonetary compensation for the reduction in national
currency of certain amounts in Denmark, Sweden and the United Kingdom because
of the revaluation of their currencies.

Regulation (EC) No 801/2000 of 17 April 2000 accordingly set
the maximum
amount of compensatory aid resulting from the exchange rates for the Danish krone,
the Swedish krona and the pound sterling applicable to the beef/veal and sheepmeat
sectors and to structural measures119. The reductions are 1.3%, 9.3% and 11.9%
respectively and the total maximum amounts EUR 0.075, 19.8 and 172 million
respectively, 50% of which is financed by the European Union. The appreciable
revaluation of the pound sterling in 1999 (4.221%, less the neutral margin of 2.6%,
making 1.621%)
fixed
agrimonetary
at EUR 55.21 million, of which 50% is financed by the European Union on condition
that
[Regulation (EC)
No 802/2000120].

the Member State contributes an equivalent amount

compensation

resulted

being

in

The compensatory aid for Sweden and the United Kingdom resulting from the rates
applicable to arable crops was set by Regulation No 1612/2000121. The reductions are
6.23 and 3.39% respectively; the total maximum amounts of aid are EUR 24.17 and
54.42 million respectively, half of which is financed by the European Union.
Following
however, Regulation
(EC) No 1611/2000122 reduced the second instalment of compensatory aid for arable
crops by virtue of the conversion rate applicable on 1 July 1999. The overall amount
went down from EUR 17.59 to 15.06 million.

the Danish

devaluation

krone,

the

of

Regulation (EC) No 2293/2000123 set the maximum amount of compensatory aid
resulting from the exchange rates for the Swedish krona and the pound sterling for
flax and hemp. The reductions are 3.99% and 5.38% respectively and the overall
maximum amounts EUR 0.03 and 0.75 million respectively, of which 50% is
financed by the European Union.

118

119

120

121

122

123

OJ L 349, 24.12.1998 p. 1.
OJ L 96, 18.4.2000, p. 34.
OJ L 96, 18.4.2000, p. 36.
OJ L 185, 25.7.2000, p. 36.
OJ L 185, 25.7.2000, p. 34.
OJ L 262, 17.10.2000, p.12.

101

5.

RURAL DEVELOPMENT IN 2000

482.

483.

484.

Rural Development Plans (RDPs) were presented for Commission approval in the
last few months of 1999 and early in 2000, mostly within the time limits specified in
Council Regulation (EC) No 1257/1999124. A total of 69 plans were thus submitted,
most of which were then adopted by the Commission in the course of 2000.

The Community Support Frameworks (CSFs) and most Single Programming
Documents (SPDs) were adopted (on the basis of Council Regulation (EC)
No 1260/1999125) for Objective 1 and 2 regions, where the rural development
measures are integrated in Structural Funds programming. Many Operational
Programmes (OPs) were adopted in 2000 as a development of the CSF. In total some
100 programming documents for Objective 1 and 2 regions were submitted.

The Commission guidelines for the Community Initiative Leader+ were adopted in
May 2000, and the Member States presented their programmes for approval by the
Commission in the second half of the year. In total around 70 programmes were
submitted.

5.1.

Belgium

5.1.1.

Adoption of the new programmes

485.

The horizontal rural development programme for Belgium is intended to help shift
agricultural land use towards wider adoption of environmentally friendly methods of
production and the conservation of the countryside and biodiversity, mainly by
encouraging organic farming and introducing demonstration projects and aid
schemes for management. The total public cost of the programme is EUR 156.68
million, to which the European Commission will contribute EUR 72.31 million from
the Guarantee Section of the European Agricultural Guidance and Guarantee Fund
(EAGGF Guarantee Section). This federal programme covers all rural areas of the
country, but excludes those rural development measures part-financed by the
EAGGF Guidance Section in Hainaut, a region which is eligible for transitional
support under Objective 1 of the Structural Funds. It supplements the regional
(Flanders and Wallonia) rural development plans.

5.1.1.1. Flanders

486.

The rural development programme for Flanders seeks to promote the diversity of
agricultural and rural activities and quality products, while expanding employment
through support for the multifunctional role of the countryside using an integrated
policy based on sustainable development and biased towards the protection of the
environment, the countryside and animal welfare. The total public cost of the
programme is EUR 537.388 million,
to which the European Community will
contribute EUR 204.123 million from the Guarantee Section of the European
Agricultural Guidance and Guarantee Fund (EAGGF Guarantee Section).

124

125

OJ L 160, 26.6.1999, p. 80.
OJ L 161, 26.6.1999, p. 1.

102

5.1.1.2. Wallonia

487.

The general aim of the rural development programme for Wallonia is to offer good
prospects for the sustainability of agriculture there by encouraging efforts to increase
value added through more attractive working and living conditions and provision of
the resources to meet collective requirements as regards the environment and food
quality. The total public cost of the programme is EUR 227.3270 million, to which
the European Community will contribute EUR 83.7581 million from the Guarantee
Section of the European Agricultural Guidance and Guarantee Fund (EAGGF
Guarantee Section).

5.1.2.

Evaluation of old programmes

5.1.2.1. Belgium - Federal

488.

489.

490.

491.

492.

493.

The measure concerning the aid scheme for early retirement in the agriculture sector
proved ineffective. Evaluation has demonstrated that continuation of this type of
measure would have had a greater effect if it had been directed towards intensive
stock-raising. The figures show that the success of the measure was very slight.

Deliberate policies to improve and protect the countryside have been followed for
several years. Since 1995,
there have been agri-environmental programmes
(demonstration projects, management contracts, etc.), including measures to promote
organic farming and integrated and more environmentally friendly agriculture (less
use of pesticides and fertilisers). Aid has also been provided for the integrated
cultivation of seed fruits (apples and pears).

The area premium for applying organic production methods in Belgium proved
relatively successful during the programming period 1994-99 (expected number of
beneficiaries: 175, actual number: 305; expected area farmed: 2 595 hectares, actual
area farmed: 11 300 ha). Extension of the scheme to 1999 and 2000 was approved in
1998.

The number of holdings notified increased from 168 in 1994 to 439 in 1998 and 586
in 1999 (+249%); the number of holdings eligible under the aid scheme increased
from 95 in 1994 to 330 in 1998.

The area premium for integrated production methods (ornamental horticulture) was
introduced as a new measure in 1997 and has enjoyed considerable success.

Demonstration projects have shown producers how to apply agri-environmental
techniques in practice and what the consequences were.

5.1.2.2. Brussels Region

494.

Only Council Regulation (EC) No 951/97 of 20 May 1997 on improving the
processing and marketing conditions for agricultural products126 was implemented
during the previous programming period. Six projects were financed (EUR 1.110
million) in the meat and ornamental plants sectors and implementation proved
satisfactory.

126

OJ L 142, 2.6.1997, p. 22.

103

5.1.2.3. Flemish Region

495.

A prudent
investment climate ensured continuity in agriculture and permanent
support. The structural adjustments needed could be made in an economically and
socially responsible fashion during 1994-99.

–

–

–

–

–

1 934 investment projects to reduce production costs (works to improve
holdings) were subsidised,

4 594 investment projects for socio-economic purposes (improvement of living
and working conditions) were subsidised,

liquidations of firms notified to the Flemish Investment Fund (VLIF) remained
relatively limited (117 in 1994-99),

there were 2 822 investments to improve quality and for conversion;

9 666 improvement plans were approved.

496.

Establishment aid was granted for the installation of 1 947 young farmers.

497.

A total of 181 842 hours of training were provided. Of the agri-environmental
projects completely or partially implemented 90% concerned ways of making the
sector more competitive by adjusting requirements for quality,
innovation and
modernisation in general. About 54% of total investment costs were used for this
purpose.

5.1.2.4. Wallonia

498.

499.

500.

501.

The diversification measures in earlier programming (Objectives 1 and 5(b))
concerned various strategies such as multiactivity, rural tourism, the development of
forestry and the exploitation of animal production.

Aid for investment and for the installation of young farmers part-financed by
Objective 5(a) are vital to the sustainability of agriculture in Wallonia but their
success is highly dependent on how they are implemented. Much reference is made
to the problem of the weight of the past, viz. the debts to banks and other credit
institutions which farmers have built up.

As regards the processing and marketing of agricultural products, Regulation (EC)
No 951/97 applied throughout Wallonia, although aid rates were differentiated by
region. As regards good practice, the success of capital premiums should be noted.
This demonstrates the feasibility of the instrument in Wallonia and the success of the
measure devoted to potatoes and potato plants, which really opened the way to an
important means of diversification in Wallonia, and especially in Hainaut.

Ex ante evaluation raised one main problem, the slight quantitative impact of the
measures applied, which illustrates the difficulty of mobilising private investors in
Wallonia and the crying need to consider a systematic and integrated programme of
development by sector.

104

502.

In the case of the environment,
implementation of protective measures under
Objectives 1 and 5(b) and Regulation (EC) No 951/97 was very low. Some
explanations are :

–

–

–

–

the traditional reluctance of farmers to include environmental considerations in
their work,

lack of dynamism in the communications policy which should accompany
measures to protect the environment (except for agri-environmental measures),

frequent misunderstanding of the purpose of these measures,

conflicts between the various instruments seeking the same objective which
create confusion in the minds of operators and the various potential target
groups.

5.2.

Denmark

5.2.1.

Adoption of new programmes

503.

The rural development programme for Denmark aims to create the right conditions
sustainable development by improving rural employment opportunities,
for
developing new agricultural products
integrating environmental
requirements with an efficient agricultural and forestry sector. The total cost of the
programme is EUR 944.5 million,
including an EU contribution of EUR 348.8
million from the EAGGF Guarantee Section. The programme covers the whole of
Denmark. Measures concerning less-favoured areas (LFAs) apply to 31 smaller
islands.

and better

5.3.

Germany

5.3.1.

Adoption of new programmes

5.3.1.1. Background and programming framework

504.

Because of the federal structure of Germany several regional plans as well as a
general framework were established in that country in order to implement rural
development. Germany is divided in Objective 1 and non-Objective 1 regions. The
authorities accordingly submitted 17 Rural Development Plans - one of which is the
general framework - and, for the Objective 1 region, one CSF and six operational
programmes. In non-Objective 1 regions rural development measures are presented
in one programme funded by the EAGGF Guarantee Section. In Objective 1 regions
the measures are either part of the Rural Development Plan, which applies to only
four measures funded by the EAGGF Guarantee Section concerning: agri-
environment, afforestation and compensatory allowances, or part of the operational
programme, e.g. farm investment. In addition, the German authorities will present
14 Leader+ programmes, one of which is a “national network programme”.

5.3.1.2. Fabric of programmes and priorities

505.

The Commission approved the CSF for the Structural Funds (2000-2006) on 19 June
include regional programmes and three subject-related
2000. The CSF will

105

506.

programmes. The participation of the EAGGF Guidance Section in the CSF amounts
to EUR 3 400 million.

take account of
the same time,

The general framework Regulation for rural development in Germany seeks to make
agriculture and forestry more competitive, retain and create jobs in rural areas and
further improve the protection of nature and the environment in those areas. To
the
ensure sustainable development, support measures must
ecological, economic and social aspects of rural areas. At
the
Regulation makes a considerable contribution to harmonising support measures for
agricultural structures at federal and Land level, ensuring that all
the regions
participate in these measures, concentrating and coordinating the resources provided
by the EU,
the federal government and the Länder and making the public
management of financial resources more effective. Basically, the measures under the
general framework Regulation form part of the plans for the Länder and are part-
financed by the EAGGF. The framework plan is not, therefore, a rural development
programme within the meaning of Regulation (EC) No 1257/1999 giving rise to an
application for part-financing by the EAGGF. The framework Regulation covers the
whole of the Federal Republic of Germany. It also includes measures part-financed
by the Guidance Section of the EAGGF in the regions eligible under Objective 1 of
the Structural Funds.

5.3.1.2.1. Baden-Württemberg

507.

The rural development programme for Baden-Württemberg is aimed at revitalising
agricultural businesses in line with current consumer demands, diversifying farm
incomes and safeguarding their long-term viability, enhancing the environment
through extensive farming techniques and extending forestry. The total public cost of
the programme is EUR 1 888.67 million, including an EU contribution of EUR 763
million from the EAGGF Guarantee Section.

5.3.1.2.2. Bavaria

508.

The rural development programme for Bavaria is aimed at restructuring land and
businesses to improve market prospects, developing new sources of income from
nature conservation and new environmental commitments, diversifying rural
employment, improving the rural infrastructure and increasing forestry. The total
public cost of the programme is EUR 3 269 million, including an EU contribution of
EUR 1 634.5 million from the EAGGF Guarantee Section.

5.3.1.2.3 Brandenburg

509.

The aim of the rural development plan for Brandenburg is to ensure sustainable rural
development to preserve, maintain and further develop crop areas by supporting
throughout the Land holdings whose main or subsidiary business is agriculture and
forestry. Implementation of this plan should help ensure the continued viability and
development of the rural areas of Brandenburg as a unified region combining social
and economic use with a natural environment. The budget for this programme totals
EUR 364.20 million. The European Commission is helping finance this programme
by providing aid worth EUR 273 million through the EAGGF Guarantee Section.

106

5.3.1.2.4 Bremen

510.

The rural development programme for Bremen aims to improve the economic
viability of agriculture, horticulture and forestry through diversification and
infrastructure and living standards and
increased value-added,
improve environmental management. Total public expenditure on the programme is
EUR 23.966 million, including an EU contribution of EUR 10.500 million from the
EAGGF Guarantee Section.

to develop rural

5.3.1.2.5 Hamburg

511.

The rural development programme for Hamburg is aimed at creating more
competitive farms that supply products which meet high environmental and welfare
standards, strengthening rural infrastructure to serve the residential, employment and
recreational needs of the population and supporting farm incomes through payments
for environmental benefits. The total public cost of the programme is EUR 76.741
million, including an EU contribution of EUR 37.800 million from the EAGGF
Guarantee Section.

5.3.1.2.6 Hessen

512.

The rural development plan for Hessen encourages the success of local agriculture by
stressing its multifaceted, sustainable and competitive aspects. Particular importance
is given to agri-environmental measures which encourage production processes
aimed at the protection and improvement of the quality of the environment and the
preservation of the countryside. At
the same time, great value is attached to
sustainable measures, those which are effective in economic and ecological terms.
this programme totals EUR 637.382 million. The European
The budget
Commission is helping finance this programme by granting aid worth EUR 278.400
million through the EAGGF Guarantee Section.

for

5.3.1.2.7 Mecklenburg-Western Pomerania

513.

plan

rural

development

for Mecklenburg-Western Pomerania

The
uses
compensatory, agri-environmental and forestry measures to preserve agriculture in
less-favoured areas while also supporting the maintenance and development of
organic methods of agricultural production through measures to protect nature. The
budget for this programme totals EUR 208.76 million. The European Commission is
helping finance this programme by granting aid worth EUR 155.70 million through
the EAGGF Guarantee Section.

5.3.1.2.8 Lower Saxony

514.

The preservation of vibrant rural areas which exploit the diversity of the roles
agriculture can play is the broad objective of
the ‘Proland Niedersachsen’
programme being implemented in Lower Saxony. Through this programme for
agricultural and rural development, Lower Saxony is presenting a plan which, while
using an integrated approach, seeks to link it constructively both with measures for
the agriculture sector and with intersectoral and specifically environmental measures.
These measures are intended to make a lasting contribution to improving economic
competitiveness and the ecological functions of rural areas. The budget for this
programme totals EUR 1 168.450 million. The European Commission is helping

107

finance this programme by granting aid worth EUR 544.4 million through the
EAGGF Guarantee Section.

5.3.1.2.9 North Rhine-Westphalia

515.

The rural development programme for North Rhine-Westphalia aims to produce
competitive food products that meet high welfare and environmental standards,
ensure the maintenance of the rural population through improved infrastructure and
services and increase the environmental value of rural areas and forests. The total
cost of the programme is EUR 940 million, including a contribution of EUR 302.5
million from the EAGGF Guarantee Section.

5.3.1.2.10 Rheinland-Pfalz

516.

The aim of Rheinland-Pfalz's "Future-Oriented Initiative for Rural Areas" (ZIL) is to
improve agricultural structures, promote environmentally friendly agriculture and
thereby creating a comprehensive, market-oriented and
develop rural areas,
competitive agricultural sector which farms in a sustainable manner and makes
economical use of natural resources. The total budget for the programme is
EUR 589.694 million. The European Community will be contributing EUR 279.200
million through the EAGGF Guarantee Section.

5.3.1.2.11 Saarland

517.

The aim of the rural development plan for Saarland is to maintain and further
develop economically and ecologically stable agriculture and forestry as the
backbone of intact,
living rural areas. The total budget for the programme is
EUR 79.020 million, of which EUR 36.800 million will be contributed by the
European Community through the EAGGF Guarantee Section.

5.3.1.2.12 Saxony

518.

The rural development programme for Saxony is aimed at: restructuring farms
through early retirement schemes; ensuring the continued viability of farms in
increasing environmental
less-favoured areas;
measures to reduce erosion and nitrate and pesticide use; and using forestry to
achieve environmental and economic gains. The total public cost of the programme
is EUR 443.86 million, including an EU contribution of EUR 330.50 million from
the EAGGF Guarantee Section.

supporting local communities;

5.3.1.2.13 Saxony-Anhalt

519.

The rural development programme for Saxony-Anhalt aims to ensure structural
change and environmentally beneficial farming methods in a way that secures the
long-term viability of farm businesses. Forestry measures aim to safeguard output
and infrastructure while at the same time expanding markets. The total public cost of
including an EU contribution of
the programme is EUR 235.158 million,
EUR 175.600 million from the EAGGF Guarantee Section.

5.3.1.2.14 Schleswig-Holstein

520.

The rural development programme for Schleswig-Holstein aims to develop new
economic opportunities in rural areas and improve infrastructure and services while

108

safeguarding a diverse landscape. Public expenditure on the programme totals
EUR 573.57 million euro, including an EU contribution of EUR 239.10 million from
the EAGGF Guarantee Section.

5.3.1.2.15 Thuringia

521.

The aim of the rural development plan for the free State of Thuringia is to develop
effective tools to deal with the radical change in structure caused by the alteration of
the age pyramid and the rapid expansion of innovative economic sectors with the
concomitant risk of the loss of, or decline in, cultivated landscapes. The goal of the
plan is to support measures to reconcile economic requirements with ecological,
social and cultural requirements and supporting measures to ensure sustainable rural
development. The budget for this programme totals EUR 324.64 million. The
European Commission is helping finance this programme by granting aid worth
EUR 243.00 million through the EAGGF Guarantee Section.

5.3.2.

Evaluation of the old programmes

522.

Evaluation of agri-environmental programmes under Council Regulation (EEC)
No 2078/92 proceeded. Different evaluation methods and the lack of agreed
indicators prevent the comparison of evaluation results. However, evaluation had an
impact on the drafting of the new Rural Development Programmes and led to the
adaptation of agri-environmental measures. The evaluation of measures under
Regulation (EC) Nos 950/97 and 951/97 has begun.

5.3.2.1. Objective 1

523.

524.

525.

new German Länder

The
(EUR 2 807 332 181). Payments will continue to be made until 31 December 2001.

appropriations

committed

available

the

all

The measures for processing and marketing have stabilised a large number of
agricultural firms. The absolute priority was to support measures to develop villages
and rural tourism, which maintained existing jobs and created fresh alternative
employment.

The assistance obtained by the EAGGF Guidance Section operational programmes
has made a significant contribution to improving living conditions for people in the
countryside.

5.3.2.2. Objective 5(b)

526.

At
the end of 1999 all available 5(b) EAGGF money for the German 5(b)
programmes was committed. The annual reports for 2000 indicate that money will be
spent as planned until the end of 2001. Ex post evaluation began, in most cases on
the basis of restricted tenders. Final results will not be available until the end of
2001.

5.3.2.3. Leader II

527.

All the appropriations available have been committed and will be spent up to the end
of 2001.

109

5.4.

Greece

5.4.1.

Adoption of new programmes

528.

The horizontal rural development programme for Greece aims to strengthen the
competitiveness of agriculture and at the same time safeguard the environment and
promote the sustainable and integrated development of rural areas. The total cost of
the programme is EUR 2 686.4 million, with an EU contribution of EUR 993.4
million from the EAGGF Guarantee Section. The programme covers all rural areas
and supplements the measures part-financed by the EAGGF Guidance Section under
Objective 1 of the Structural Funds, for which Greece as a whole is eligible.

5.4.2.

Evaluation of old programmes

529.

530.

531.

Evaluations at both CSF and programme level highlight the shortfall between needs
and available funds in the previous period for rural development. More effort is
therefore required for the sectoral restructuring and global competitiveness of
agriculture and rural areas. Furthermore, implementation has shown that "traditional"
infrastructure and productive investments were easier to carry out, while technically
more complex projects and innovative actions were difficult to initiate. Finally, the
implementation and management mechanisms require improvements (planning,
design and implementation of projects).

However, the bulk of the goals envisaged were reached, i.e. implementation of about
30 000 investment plans in farming, investment in 750 marketing and processing
firms, setting-up of about 15 000 young farmers and stabilisation of fixed private
capital in agriculture. These are laudable results.

For
the new period more attention should be paid to targeting priorities,
implementing integrated approaches, tackling difficulties in complex or innovative
actions and projects, designing and managing projects and improving the
implementation and management mechanisms.

5.5.

Spain

5.5.1.

Adoption of new programmes

532.

The No 1 horizontal rural development programme for Spain seeks to support the
sustainable management of the countryside by improving conditions of production
and the structures of agricultural holdings, while also protecting the environment.
The total public cost of the programme is EUR 3 132.081 million, to which the
European Community will contribute EUR 2 222.856 million from the EAGGF
Guarantee Section. The programme covers all the rural areas of the country, apart
from Navarre and the Basque Country, which have their own resources for part-
financing the measures. It supplements the rural development measures programmed
at regional level and the No 2 horizontal programme, which is limited to certain
regions.

5.5.1.1. Aragon

533.

The main aim of the rural development programme for Aragon is to develop the
many functions of agriculture and the countryside: economic (production of
agricultural raw materials, processing and marketing, tourism and leisure activities),

110

social (emphasising the role of human resources in consolidating rural society) and
environmental (which is also a means of diversifying rural activities). The total
public cost of the programme is EUR 471.358 million,
to which the European
Community will contribute EUR 257.695 million from the EAGGF Guarantee
Section.

5.5.1.2. Catalonia

534.

The rural development programme for Catalonia seeks to adjust the agriculture and
agri-industrial sector to market conditions, make the countryside more competitive
by renewing infrastructure and diversifying services and preserving and exploiting
the forests. The total public cost of the programme is EUR 400.98 million, to which
the European Community will contribute EUR 206.95 million from the EAGGF
Guarantee Section.

5.5.1.3. Balearic Islands

535.

The rural development programme for the Balearic Islands seeks maintain and
expand employment and increase income, particularly in agriculture, so as to create
the conditions for a renewal of the rural population and consolidation of the social
fabric, while giving maximum protection to the environment and the countryside.
The total public cost of the programme is EUR 48.042 million,
to which the
European Community will contribute EUR 21.619 million from the EAGGF
Guarantee Section.

5.5.1.4. Rioja

536.

The aim of the rural development programme for Rioja is to support economic
growth in the region and combat depopulation by improving living conditions and
the quantity and quality of services and infrastructure. It also includes encouraging
the sustainable development of the countryside in order to limit erosion, increasing
the wooded area and raising the percentage of good-quality surface water. The total
public cost of the programme is EUR 82.54 million,
to which the European
Community will contribute EUR 39.94 million from the EAGGF Guarantee Section.

5.5.1.5. Madrid

537.

The rural development programme for the region of Madrid seeks to encourage
environmentally friendly agriculture in order to support the sustainable development
of rural areas and to diversify and promote agricultural activities while ensuring the
better
the programme is
residents. The total public cost of
EUR 139.042 million,
to which the European Community will contribute
EUR 69.526 million from the EAGGF Guarantee Section.

integration of

5.5.1.6. Navarre

538.

The rural development programme for the region of Navarre seeks to encourage
environmentally friendly agriculture and encourage the social development of rural
areas by improving living and working conditions, checking the flight from the
countryside and encouraging women to work. It is also intended to promote the
economic development of the countryside by supporting agriculture and the agri-
food sector, diversifying activities and promoting vocational training. The total
to which the European
public cost of the programme is EUR 285.519 million,

111

Community will contribute EUR 143.871 million from the EAGGF Guarantee
Section.

5.5.1.7. Basque Country

539.

The rural development programme for the Basque Country is intended to promote
the sustainable and diversified development of the countryside and the restoration of
the most run-down rural areas (those eligible under Objective 2 of the Structural
Funds), through consolidation of the economic and social role of agriculture (greater
professionalism, competitiveness, outlets), encouragement of ecologically favourable
agricultural practices, improved quality of life to retain the rural population and the
preservation of agricultural and forestry natural resources and the countryside. The
total public cost of the programme is EUR 235.760 million, to which the European
Community will contribute EUR 121.199 million from the EAGGF Guarantee
Section.

5.5.2.

EAGGF Guidance Section programming

540.

The Commission approved the Community support framework for the Spanish
regions eligible under Objective 1, which includes a contribution from the EAGGF
Guidance Section of EUR 5 021 million for agriculture and rural development, of
which EUR 65 million is for the region of Cantabria, which is eligible for transitional
support.

541.

The forms of assistance submitted for support for rural development are as follows:

–

–

–

–

–

One multiregional operational programme (EAGGF Guidance Section) to
improve structures and systems of agricultural production in all the Objective 1
regions of Spain except Cantabria. This OP contains
four measures
(management of water resources, support for investments in holdings, the
installation of young farmers and technical assistance);

Eligible public expenditure is EUR 2 480 million, of which EUR 1 489 million
will come from the EAGGF Guidance Section;

Nine multifund regional operational programmes (ERDF, EAGGF Guidance
Section, ESF). The EAGGF Guidance Section will contribute EUR 3 432
million to these OPs;

One multifund operational programme (ERDF, EAGGF Guidance Section,
ESF) for the region of Cantabria which is eligible for transitional support. This
OP contains all the measures for rural development listed in Regulation (EC)
No 1257/1999. The EAGGF Guidance Section will contribute EUR 65 million;

One multifund multiregional operational programme
(ERDF, EAGGF
Guidance Section, ESF) for technical assistance. The EAGGF Guidance
Section will contribute EUR 9 million.

5.5.3.

Evaluation of old programmes

542.

The ex post evaluations of rural development programmes for 1994-99 are in
progress; the reports should be available during 2002.

112

543.

544.

545.

546.

Total Community aid (in commitment appropriations) for Objective 5(a) for 1994-99
amounted to EUR 438 million; the implementation rate at 31 December 1999 was
61% (EAGGF Guidance Section).

Aid from the EAGGF Guidance Section for Objectives 1 and 5(b) (in commitment
appropriations) for that period totalled EUR 3 455 million and EUR 423 million
respectively; the implementation rates at 31 December 1999 were 90% and 88%.

the Community Initiative
Total aid from the EAGGF Guidance Section for
programmes (Interreg, Regis (Canary Islands) and Leader II) (in commitment
appropriations) is EUR 300 million; the overall implementation rate at 31 December
1999 was 49%.

The EAGGF Guarantee Section paid EUR 912 million for the accompanying
measures in 1994-99 of which EUR 230 million was for agri-environmental
measures, EUR 612 million for the afforestation of agricultural land and EUR 70
million for early retirement.

5.6.

France

5.6.1.

Adoption of new programmes

547.

The horizontal programme for rural development in France seeks to promote the
more harmonious development of rural areas through sustainable management and a
better balanced division of activities and to strengthen the multifaceted functions of
agriculture and forestry: production, job creation, maintenance of the countryside and
environmental protection. The total public cost of the programme is EUR 12 849.4
million, to which the European Community will contribute EUR 4 994.9 million
from the EAGGF Guarantee Section. This programme covers all rural areas and
supplements the rural development measures, also part-financed by the EAGGF
Guarantee Section, included in the regional development programmes for the areas
eligible under Objective 2 of the Structural Funds and the measures part-financed by
the EAGGF Guidance Section in the Objective 1 regions.

5.6.1.1. Objective 1 programmes

548.

The areas eligible under Objective 1 are the four overseas departments, Corsica and
Hainaut (transitional support for the last two). All the measures in Regulation (EC)
No 1257/1999 are open for programming in the form of the regional SPD, the four
accompanying measures being financed from the NRDP. Total funding from the
EAGGF Guidance Section for these six programmes is EUR 606 million (Réunion:
303, Martinique: 100, Guadeloupe: 140, French Guiana: 63) for the four overseas
departments and EUR 74 million (Corsica: 35, French Hainaut: 39) for transitional
support.

5.6.1.2. Objective 2 programmes

549.

The NRDP for metropolitan France is supplemented by 20 regional SPDs with an
EAGGF Guarantee Section element
totalling EUR 768.340 million. The French
authorities have opened measures A and G and all the measures under Article 33 (J
to V) of Regulation (EC) No 1257/1999 for these regional programmes. There should
be no redundancy in terms of the NRDP (hence, as a rule, for the measures used in

113

the two levels of programming, the actions in the SPD should form part of collective
approaches contributing to territorial development).

5.6.1.3. Leader+

550.

Leader+ will be implemented in the form of a national programme applicable
throughout France, with the exception of certain urban areas, and a global grant.
Submitted on 19 July 2000, the draft programme was expected to be adopted no later
than December. Its funding was set to be EUR 252 million.

5.6.2.

Evaluation of old programmes

551.

552.

553.

The ex post evaluations of the rural development programmes for 1994-99 are in
progress; the reports will be available during 2002.

Total Community aid for Objective 5(a) for 1994-99 amounts to EUR 1 536 million
under Regulation (EC) No 950/97 and to EUR 297 million under Regulation (EC)
No 951/97.

Figures available for
show commitments
the six Objective 1 programmes
approaching 100%. In the case of the Objective 5(b) programmes for 1994-99, the
consolidation of progress following technical and financial adjustments in 1999
shows that 96% of total EAGGF appropriations were programmed, a total of
EUR 841 794 355. Payments amounted to 56%.

554.

Taking Leader
the rate of
programming was just over 90%. Implementation, however, still remains poor,
below 30% in the case of EAGGF appropriations.

II and the Objective 1 and 5(b) areas together,

5.7.

Ireland

5.7.1.

Adoption of new programmes

5.7.1.1. Background and programming framework

555.

Ireland has been divided in two NUTS II regions: Border, Midlands and Western
region (Objective 1); and Southern and Eastern region (phasing-out). Both regions
will, for the period 2000-06, benefit from the Community Support Framework
(CSF). The participation of the EAGGF Guidance Section in the Irish CSF is
concentrated on the two regional programmes and on the PEACE programme. Under
the EAGGF Guidance Section will also co-fund rural development
Leader+,
measures. The participation of
the EAGGF Guarantee Section in the Rural
Development Plan will supplement the actions of the Guidance Section.

5.7.1.2. Fabric of programmes and priorities

556.

The Commission agreed the CSF for the Structural Funds (2000-06) on 27 July 2000.
Under the CSF there will be three interregional programmes in Ireland (Economic
and Social Infrastructure, Employment and Human Resources and Productive
Sector). These three interregional programmes will be supplemented by two regional
Operational Programmes, each focusing on four priorities: Local Infrastructure,
Local Enterprise Development, Agriculture and Rural Development and Social
Inclusion and Childcare. A PEACE programme will be implemented in the border

114

counties with Northern Ireland. The contribution of the EAGGF Guidance Section to
the CSF amounts to EUR 182.0 million, concentrated on the two regional
programmes (EUR 169.4 million) and in the PEACE programme (EUR 12.6
million). In the regional programmes, two of the four priorities above are concerned.
The draft Operational Programmes were submitted in April 2000.

557.

The rural development programme for Ireland forms part of an overall strategy
aimed at promoting more competitive primary agriculture, fostering environmentally
sustainable production systems, diversifying activities on- and off-farm to generate
alternative sources of incomes for farmers and promoting rural development at local
level. Public expenditure on the programme totals EUR 3 675.1 million, including an
EU contribution of EUR 2 388.9 million from the EAGGF Guarantee Section. The
programme, which covers all rural areas, does not include the measures co-financed
by the EAGGF Guidance Section in Objective 1 regions of the Structural Funds,
which cover the whole territory of Ireland (Objective 1 Region in the North-West,
Objective 1 Region in transition in the South-East).

5.7.2.

Evaluation of old programmes

558.

All commitments under the programmes from the previous period were made before
the end of 1999 and the Irish authorities were in the process of finalising expenditure
in 2000. An evaluation has been completed of the implementation of measures under
Regulation (EC) No 950/97. This evaluation emphasised the importance of the
compensatory allowances in the less-favoured areas. Further evaluation of other
measures and programmes will be undertaken.

5.8.

Italy

5.8.1.

Adoption of new programmes

559.

560.

Programming for 2000-06 is being implemented exclusively through regional
programmes. The Commission approved the rural development plans submitted at
the beginning of the year by each of the 19 regions and two autonomous provinces
subject to several revisions following long negotiations.

Under the new rules, the EAGGF Guarantee Section contributes to financing the
plans submitted by the non-Objective 1 regions (located in central and northern
Italy). The Mezzogiorno, with six regions eligible under Objective 1 and one region,
Molise, qualifying for transitional support, will receive a contribution from the
EAGGF Guarantee Section only for the three accompanying measures forming part
of the reform of the CAP and for the compensatory allowance for farmers in areas
which are less-favoured or subject to environmental constraints. All other assistance
forming part of programming in the agriculture sector is part-financed by the
EAGGF Guidance Section.

561.

To that end, it is included in the regional operational programmes (with assistance
part-financed by the Regional Fund, the Social Fund and the Financial Instrument for
Fisheries Guidance) which implement the Objective 1 CSF for Italy.

562.

These seven multifund programmes were also approved by the Commission and then
included by means of programme complements giving details of implementation.

115

5.8.1.1. Abruzzi

563.

The rural development programme for the Abruzzi sets out to improve links between
the countryside and society as a whole, check the depopulation of inland areas,
develop rural cultural assets and support the agri-food sector to maintain and increase
employment. The total public cost of the programme is EUR 292.59 million, to
which the European Community will contribute EUR 132.66 million from the
EAGGF Guarantee Section.

5.8.1.2. Bolzano

564.

The aim of the rural development programme for the Autonomous Province of
Bolzano is to make the agriculture and forestry sectors more competitive while
protecting the environment and retaining population in rural areas by encouraging
their sustainable development. The total public cost of the programme is EUR 265.88
million, to which the European Community will contribute EUR 118.67 million from
the EAGGF Guarantee Section.

5.8.1.3. Emilia-Romagna

565.

The rural development programme for Emilia-Romagna is designed to make firms
more competitive and protect
to promote the sustainable and
the environment
integrated development of rural areas through a strategy based on the quality of every
type of agricultural production. The total public cost of the programme is EUR 852.2
million (total cost EUR 1 269.8 million), to which the European Community will
contribute EUR 386.7 million from the EAGGF Guarantee Section.

5.8.1.4. Friuli-Venezia Giulia

566.

to make holdings more

The main aim of the rural development programme for the region of Friuli-Venezia
Giulia is a thorough overhaul of the agriculture sector, based on the exploitation of
environmental resources and the multifunctional role of agriculture. To that end, it
seeks
competitive, promote product quality and
environmentally friendly practices in agriculture and forestry and promote synergies
in the rural economy. The total public cost of the programme is EUR 212.984
million, to which the European Community will contribute EUR 99.740 million from
the EAGGF Guarantee Section.

5.8.1.5. Lazio

567.

The general aim of the rural development programme for the region of Lazio is to
consolidate the productive system in rural areas, particularly disadvantaged inland
areas, to ensure balanced growth in terms of economic and social development and
the protection and exploitation of natural resources. The total public cost of the
programme is EUR 585.36 million (total cost EUR 849.23 million), to which the
European Community will contribute EUR 255.39 million from the EAGGF
Guarantee Section.

5.8.1.6. Liguria

568.

The rural development programme for Liguria is intended to improve the
competitiveness of agriculture in the region, develop its various aspects so as to
ensure the balanced occupation of the area and the protection of the environment and

116

to adjust rural services and infrastructure to the changes brought about by European
integration and the globalisation of trade. The total public cost of the programme is
EUR 210.655 million, to which the European Community will contribute EUR 87.08
million from the EAGGF Guarantee Section.

5.8.1.7. Lombardy

569.

The rural development programme for Lombardy is intended to make agriculture in
the region more competitive, consolidate the economic and social fabric of the
countryside and employment in the primary sector (particularly for women), give
agriculture a greater role in the protection of the environment (especially soil) and in
the maintenance of the countryside through less intensive methods and to raise
farmers’ incomes by diversifying activities. The total public cost of the programme is
EUR 805.435 million,
to which the European Community will contribute
EUR 337.07 million from the EAGGF Guarantee Section.

5.8.1.8. Marche

570.

The rural development programme for the Marche region is intended to encourage
sustainable development in economic, social and environmental terms by making
holdings more competitive, exploiting the resources of the region and improving the
quality of life in rural areas and supporting action by the public authorities to ensure
sustainability. The total public cost of the programme is EUR 691.1 million, to which
the European Community will contribute EUR 185.4 million from the EAGGF
Guarantee Section.

5.8.1.9. Umbria

571.

The rural development programme for the region of Umbria is intended to support
the competitiveness of rural areas through a policy of quality, the promotion de
employment (in particular for young people) and the protection of the environment
and the countryside; the key to the work is the search for synergies between
productive activities and those concerned with the countryside and rural traditions.
The total public cost of the programme is EUR 533.04 million,
to which the
European Community will contribute EUR 179.61 million from the EAGGF
Guarantee Section.

5.8.1.10.Piedmont

572.

The aim of the rural development programme for Piedmont
the
sustainable economic, social and environmental development of rural areas by
developing the various aspects of agriculture, creating activities and extra income for
and promoting equal
farmers
opportunities for men and women. The total public cost of the programme is
EUR 868.45 million (total cost EUR 1 233.91 million), to which the European
Community will contribute EUR 363.24 million from the EAGGF Guarantee
Section.

(particularly in declining agricultural areas)

is to support

5.8.1.11.Tuscany

573.

The rural development programme for Tuscany seeks to increase the competitiveness
of agriculture and related industry and product quality, protect the environment and
farmland and take advantage of the opportunities offered by rural areas in a strategy

117

to support the quality of life there. The total public cost of the programme is
EUR 730.412 million (total cost EUR 1 062.603 million), to which the European
Community will contribute EUR 328.903 million from the EAGGF Guarantee
Section.

5.8.1.12.Trento

574.

The rural development programme for the Autonomous Province of Trento seeks to
develop agriculture in a context of sustainable development, maintain population and
activity in agriculture and protect the environment and rural landscapes. The total
public cost of the programme is EUR 210.200 million,
to which the European
Community will contribute EUR 90.250 million from the EAGGF Guarantee
Section.

5.8.1.13.Valle d’Aosta

575.

The rural development programme for the Valle d’Aosta is intended to make
agriculture and forestry more competitive, support the sustainable and integrated
development of rural areas and protect the environment in the context of an alpine
area where mountain agriculture plays a key role. The total public cost of the
programme is EUR 119.142 million,
to which the European Community will
contribute EUR 43.775 million from the EAGGF Guarantee Section.

5.8.1.14.Veneto

576.

The general aim of the rural development programme for the Veneto is the
consolidation and sustainable development of rural activities in the economic, social
and territorial context of the region using a strategy based on recognition of the key
role and multiple functions of agriculture. The total public cost of the programme is
EUR 660.65 million (total cost EUR 944.94 million),
to which the European
Community will contribute EUR 297.35 million from the EAGGF Guarantee
Section.

5.8.2.

Evaluation of old programmes

577.

578.

579.

580.

All regions have worked hard to ensure full commitment of the amounts entered in
the operational programmes and SPDs (EUR 4 400 million for Objective 1 and
EUR 1 900 million for Objective 5(b)). Some regional budgets even committed
amounts well in excess of those in their financing plans.

During 2000 this initial result was followed by a good level of implementation which
should mean that closures are satisfactory by the 2001 deadline.

The situation with regard to the Leader II Community Initiative programme is similar
but less satisfactory because of the delay (two years or more) in finalising the
programmes and starting work on them. Commitments stand at 70% to 140% of the
amount planned.

Implementation improved sharply in 2000; although still very low it should be
compared with the virtually zero situation in previous years. Obviously, a greater
effort will have to be made if the result is to be acceptable by the 2001 deadline.

118

5.9.

Luxembourg

5.9.1.

Adoption of new programmes

581.

The purpose of the rural development programme for
the Grand Duchy of
Luxembourg is to foster competitiveness, support agricultural incomes, maintain
farming in less-favoured areas, protect the environment and natural heritage and
promote sustainable forestry by means of a strategy in which the multiple functions
of agriculture and forests, as well as product quality, are to the forefront. The total
public cost of the programme is EUR 373 639 000. The European Community's
contribution of EUR 91 000 000 comes from the EAGGF Guarantee Section. The
programme fully covers Luxembourg's rural areas.

5.9.2.

Evaluation of old programmes

582.

All commitments under the programmes from the previous period were made before
the end of 1999 and the Luxembourg authorities were in the process of finalising
expenditure in 2000.

583.

An ex post evaluation of the measures from the period 1994-99 will be undertaken.

5.10.

Netherlands

5.10.1. Adoption of new programmes

584.

585.

In the Netherlands a Single Programming Document for Community structural
assistance under Objective 1 Flevoland (phasing-out) for the period 2000-06 has
been approved, with part-financing by the EAGGF Guidance Section totalling
EUR 10 million.

The rural development programme for the Netherlands is aimed at restructuring the
agricultural sector to meet new challenges through innovation, the diversification of
agricultural activities, the promotion of nature conservation, the improvement of
water management and the development of amenities for rural communities, tourism
and recreation. The total public cost of the programme is EUR 1 057.39 million,
including an EU contribution of EUR 417 million from the EAGGF Guarantee
Section. The programme covers the whole of the Netherlands.

5.10.2. Evaluation of old programmes

586.

All commitments under the programmes from the previous period were made before
the end of 1999 and the Dutch authorities were in the process of finalising
in North-East
expenditure
Friesland/North-West Groningen, North-West Friesland, Drenthe and Flevoland, are
aimed mainly at stimulating sustainable economic and farming activities and tourism
and are proceeding satisfactorily.

four Leader

programmes,

2000. The

in

II

587.

Implementation of the Objective 5(b) programmes in the Netherlands is now
progressing satisfactorily way. For all the Objective 5(b) areas in the Netherlands,
over 80 % of the payments have been made.

119

588.

589.

Friesland, Groningen/Drenthe, Overijssel and Limburg are concentrating generally
on the creation of new holdings, on tourism and on the upkeep of the landscape,
while Zeeland is putting the accent in particular on the diversification of agriculture.

The Single Programming Document for improving the processing and marketing
conditions for agricultural and forestry products in respect of Objective 5(a) shows
that programme implementation and payments have now reached about 55% but that
implementation itself could be speeded up.

5.11.

Austria

5.11.1. Adoption of new programmes

590.

The rural development programme for Austria aims to promote a competitive and
environmentally sustainable agricultural sector while maintaining the importance of
family farms. Three sets of objectives are defined: compensation for special services
by farmers, preservation of assets with regard to the maintenance of holdings, and
improving competitiveness. The
is
EUR 6 896.074 million, including an EU contribution of EUR 3 208.10 million from
the EAGGF Guarantee Section. The programme covers the whole of Austria.
However, it does not include the measures part-financed by the EAGGF Guidance
Section in Objective 1 regions of the Structural Funds, which include the Austrian
region of Burgenland.

the programme

total public

cost of

5.11.1.1.Objective 1 programme for Burgenland

591.

Geographical area covered: Objective 1 – Burgenland region (Austria)

5.11.1.1.1.

Strategy

592.

forestry,

The Burgenland programme is a multisectoral programme for the development and
the
structural adjustment of the region. It receives assistance from the ERDF,
EAGGF (Guidance Section) and the ESF and includes six priorities, one of which,
"Agriculture,
into three
sub-priorities: "Agriculture and forestry", "Rural development, diversification and
protection of nature" (part-financed by the EAGGF Guidance Section) and "Fisheries
and aquaculture" (part-financed by the FIFG). The two agricultural priorities cover
the same assistance fields as the corresponding RDP priorities and the provisions of
the RDP apply. On the matter of agricultural strategy, please see point 5.11.1 above.

fisheries and protection of nature",

is split

5.11.2. Evaluation of old programmes

593.

Ex post evaluation: final report expected in 2002.

594.

The financial allocation under the RDP is also to cover the following:

–

expenditure incurred by the EAGGF Guarantee Section on accompanying
measures under Council Regulations (EEC) No 2078/92 (EEC) No 2079/92
and (EEC) No 2080/92 from the 2000 budget year:

Total public cost (part-financed): EUR 641.62 million (EAGGF: EUR 331.06
million);

120

–

expenditure on other rural development operations approved before 1 January
and included in the new programming under Article 4(2) of Regulation (EC)
No 2603/1999.

Total public cost: EUR 3.68 million (EAGGF: EUR 0.92 million).

5.12.

Portugal

5.12.1. Adoption of new programmes

5.12.1.1.Community support framework and other instruments

595.

596.

The whole territory of Portugal is eligible under Objective 1 apart from the region of
Lisboa e Vale do Tejo which, because it is receiving transitional support, is subject to
the same rules. During the period 2000-06, rural development policy will be
implemented mainly through three groups of instruments: the Community support
framework (CSF) and the Leader+ Community Initiative programme, part-financed
by the EAGGF Guidance Section, and the rural development plans (RDP), part-
financed by the EAGGF Guarantee Section.

The CSF and the seven regional operational programmes were adopted in the first
half of 2000. The large national operational programme "Agriculture and rural
development" will be approved shortly. Portugal submitted three RDPs, one for
continental Portugal and one each for the autonomous regions of the Azores and
Madeira. Since
the
authorities
Leader+ programme, it remains to be seen whether this will be a single national
programme or whether it will be divided into a number of regional programmes.

the Portuguese

submitted

have

not

yet

5.12.1.2.Aim

597.

The aims of rural development are to make agriculture more competitive through
restructuring and investment based on quality products, information and support for
farmers and rural populations. This presupposes the implementation of integrated
rural development at an appropriate local level, preservation of the environment, the
management of natural resources and the permanent protection of the countryside
and the cultural heritage.

5.12.1.3.Programme priorities and structures

598.

The rural development supported by the CSF comprises seven multifund regional
operational programmes (OPs) and a national operational programme. In general, the
national programme is intended to support major projects while the regional OPs are
directed at small projects, the diversification of agricultural activity or specific
clearly defined sectors. These OPs cover investment in agricultural holdings, the
installation of young farmers, the training of farmers, investment in improving the
processing and marketing of agricultural products and encouragement for the
adaptation and development of rural areas. Total funding by the EAGGF Guidance
Section amounts to EUR 2 177.3 million.

599.

The rural development plans to be financed by the EAGGF Guarantee Section to the
tune of EUR 1 554 million include aid for early retirement, aid for the less-favoured
areas and those subject to environmental constraints, agri-environmental measures
and aid for the afforestation of agricultural land.

121

600.

The Leader+ Community Initiative programme will be implemented by local action
groups, in agreement with the Commission and in accordance with its instructions.
Total funding by the EAGGF Guidance Section amounts to EUR 161.2 million.

5.12.2. Evaluation of old programmes

601.

602.

The agriculture sector in Portugal is very important in social and economic terms,
more so than in the Community as a whole. The main problems it faces which
prevent the sector from being competitive and modern mainly concern land tenure,
climatic conditions, the poor level of professional training, the advanced age of
farmers and the lack of infrastructure for the processing and marketing of agricultural
and forestry products.

The results of CSF II are more competitive agriculture, the integration of various
incomes and activities on agricultural holdings and the preservation of
the
environment. The measures have resulted in the modernisation of about 45 000
holdings and the installation of 5 000 young farmers. In addition to the afforestation
of agricultural land under Regulation (EEC) No 2080/92127, some 48 000 hectares of
trees will be planted.

5.13.

Finland

5.13.1. Adoption of new programmes

603.

The horizontal
rural development programme for Finland seeks to support
agricultural incomes, raise the profitability of production by taking account of
specific natural handicaps and environmental constraints, retain population in rural
areas and diversify activity there. The total public cost of the programme is
EUR 5 008.33 million,
to which the European Community will contribute
EUR 2 061.44 million from the EAGGF Guarantee Section. The programme covers
all the rural areas of continental Finland but not the measures part-financed by the
EAGGF Guidance Section in the regions eligible under Objective 1 of the Structural
Funds.

5.13.1.1.Continental Finland

604.

The non-Objective 1 rural development programme for continental Finland seeks to
check the depopulation of rural areas (particularly isolated areas) and support their
balanced development by making villages and the countryside more attractive,
encouraging business initiative, creating jobs, diversifying activities and improving
the training of farmers and skills in rural communities. The total cost of the
programme is EUR 387.77 million,
to which the European Community will
contribute EUR 116.33 million from the EAGGF Guarantee Section. The rural areas
concerned are the part of continental Finland not eligible under Objective 1 of the
Structural Funds.

5.13.1.2.Åland islands

605.

The rural development programme for the Åland islands aims to secure the viability
of small farms through compensatory allowances, payments for environmentally

127

OJ L 215, 30.7.1992, p. 96.

122

sensitive farming methods and installation assistance for young farmers. The total
cost of the programme is EUR 48.093 million, which includes an EU contribution of
EUR 21.495 million from the EAGGF Guarantee Section. The programme is a
specific programme for the Åland Islands, which is an autonomous province of
Finland. The programme is in addition to the horizontal programme for continental
Finland and the regional programme for continental areas outside Objective 1
regions.

5.13.2. Evaluation of old programmes

606.

Ex post evaluators have been selected for the Objective 6 SPD, for the Continental
Finland and Åland Islands 5(b) programmes and the two Leader II programmes and
are performing the tasks assigned to them. Evaluation of processing and marketing
outside Objective 6 regions will be carried out with national financing.

5.14.

Sweden

5.14.1. Adoption of new programmes

607.

and

payments

generating

new opportunities

The rural development programme for Sweden aims to promote environmentally
sustainable development with the twin objective of supporting farmers through agri-
environment
economic
diversification through forestry and tourism. It also focuses on economically and
socially sustainable rural development. The total public cost of the programme is
EUR 2 551.63 million, including an EU contribution of EUR 1 130.05 million from
the EAGGF Guarantee Section. The programme covers every rural area. It does not
include two regions, Norra Norrland and Södra Skoglänen (with the exception of
agri-environmental measures and compensatory allowances in less-favoured areas,
which cover the entire Swedish territory), which are Objective 1 regions, in which
measures are financed by the EAGGF Guidance Section.

for

5.14.1.1.Objective 1

608.

In Sweden there are two Objective 1 programmes. Most measures in Regulation (EC)
No 1257/1999 suitable for the Nordic region except for the accompanying measures
are used in the Objective 1 programmes for Sweden. The EAGGF contribution for
Norra Norrland amounts to EUR 50.6 million. That for Södra Skogslänsregionen
totals EUR 61.0 million.

5.14.2. Evaluation of old programmes

609.

610.

611.

The ex post evaluations of the rural development programmes for the period 1994-99
are under way. The reports are expected to be available in 2002.

After a slow start, commitments picked up in 1998 and even more so in 1999. The
total EC contribution to the five Swedish Objective 5(b) programmes amounts to
EUR 153 million. The level of payments has increased significantly. By the end of
January 2000 it had reached 49 %.

Commitments picked up during 1998 after a slow start. The total Community
contribution to the Swedish Objective 6 programme amounts to EUR 309 million.
The level of payments has increased significantly as the programme has unfolded
and, by the end of January 2000, had reached 60 %.

123

612.

The total EU contribution to the Swedish Leader II Objective 5(b) programme
amounts to EUR 12 478 million. Commitments picked up after a slow start and by
the end of January 2000 a total of 22% of the funds had been paid. The total EU
contribution to the Swedish Leader II Objective 6 programme amounts to EUR 4.16
million. Commitments picked up after a slow start and by the end of January 2000 a
total of 33% of the funds had been paid.

5.15.

United Kingdom

5.15.1. Adoption of new programmes

5.15.1.1.England

613.

The rural development programme for England is aimed at diversifying farming and
forestry businesses and increasing competitiveness, developing new food and non-
food products, ensuring the sustainable management of less-favoured areas and
significantly increasing the areas covered by environmental schemes. The total
expenditure under the programme is provided through part-financing based on the
together with appropriations from the application of
EU allocation to the UK,
resources. The
modulation which are also matched by equivalent national
expenditure represented by part-financing is EUR 1 496.7 million, which includes an
EU contribution of EUR 615.2 million from the EAGGF Guarantee Section. The
appropriations from modulation provide a further EUR 757.3 million,
including
EUR 381.6 million from the EAGGF. In addition, the UK has committed a further
EUR 404.1 million of national state aids associated with measures under the
programme, thereby increasing the full financial effort for the rural development
programme for England to an overall total of EUR 2 658.1 million, with an EU
contribution of EUR 996.8 million from the EAGGF.

5.15.1.2.Northern Ireland

614.

The rural development programme for Northern Ireland aims to strengthen the
economic position of agriculture through increased efficiency and diversification,
while conserving, where possible, the existing agricultural structure. It is designed to
protect and promote the image of environmentally friendly farming and to encourage
forestry and other activities providing public amenities. The total public cost of the
programme is EUR 332.11 million, which includes an EU contribution of
EUR 129.64 million from the EAGGF Guarantee Section. The appropriations from
the use of modulation provide a further EUR 69.49 million, including EUR 47.16
million from the EAGGF Guarantee Section.

5.15.1.3.Scotland

615.

The rural development programme for Scotland aims to promote the sustainable
economic, environmental and social development of rural areas through extensive
land management and enhancing biodiversity, encouraging diversification into
forestry and supporting farming incomes in the less-favoured areas. The total
expenditure is provided through part-financing based on the EU allocation to the UK,
together with appropriations from the application of modulation, which is also
matched by equivalent national resources. The expenditure from part-financing is
EUR 879.99 million, including an EU contribution of EUR 273.25 million from the
EAGGF Guarantee Section. The appropriations from the use of modulation provide a

124

further EUR 181.64 million,
including EUR 97.91 million from the EAGGF
Guarantee Section. In addition, the UK has committed EUR 10.69 million of national
top-up aid, thereby increasing the full financial "effort" in respect of the rural
development programme for Scotland to EUR 1 072.32 million, with an EU
contribution of EUR 371.16 million from the EAGGF Guarantee Section.

5.15.1.4.Wales

616.

The rural development programme for Wales aims to make farm businesses stronger
through increased productivity and diversification, supporting rural communities by
increasing rural employment and extending initiatives to protect the environment and
rural heritage. The total expenditure is provided through part-financing based on the
EU allocation to the UK together with appropriations from the application of
modulation which is also matched by equivalent national resources. The expenditure
from part-financing is EUR 600.09 million,
including an EU contribution of
EUR 149.57 million from the EAGGF Guarantee Section. The appropriations from
the use of modulation provide a further EUR 98.70 million, including EUR 60.84
million from the EAGGF Guarantee Section. In addition, the UK has committed
EUR 113.85 million of national top-up aid, thereby increasing the full financial
"effort" towards the rural development programme for Wales to EUR 746.79 million,
with an EU contribution of EUR 210.41 million from the EAGGF Guarantee
Section.

5.15.1.5.Objective 1

617.

A total of four regions are eligible under Objective 1; Cornwall and the Scilly Isles,
Merseyside, South Yorkshire, and West Wales and the Valleys. The Highlands and
Islands and Northern Ireland are Objective 1 regions in transition. In all cases except
for Northern Ireland the Objective 1 SPDs have been approved. They are structured
in such a way that
the rural areas have access to the same measures (under
Regulation 1257/1999) funded by the EAGGF Guidance Section, as do rural areas
outside Objective 1 regions under the RDP funded by the EAGGF Guarantee
Section.

125

6.

ENVIRONMENT AND FORESTRY

6.1.

Other environmental measures

618.

619.

620.

On 27 January 1999 the Commission adopted a communication entitled "Directions
towards sustainable agriculture"128, in which it takes stock of the integration of
environmental aspects in the agricultural policy. The reforms undertaken in the
integration of
context of Agenda 2000 greatly contribute to the process of
environmental concerns in the agricultural policy by placing at the disposal of the
Member States, local authorities and agricultural and rural communities a wide range
of instruments for introducing sustainable agriculture129. The reforms confirm the
essential role played by farmers as paid providers of environmental services that go
beyond good farming practice and compliance with environmental legislation.

On 26 January 2000, seeking to monitor progress towards integration in line with the
requests made by the European Councils in Cardiff and Vienna in June and
December 1998 respectively and the integration strategy defined in November 1999
by the Helsinki European Council,
the Commission adopted a communication
entitled "Indicators for the integration of environmental concerns into the common
agricultural policy"130.

Agriculture plays a key role in other Community initiatives relating to environmental
protection, viz. the measures being implemented with a view to protecting surface
and underground water. Under the nitrates Directive Member States must,
in
particular, establish action plans in specified vulnerable areas in order to bring about
a reduction in nitrate pollution at source. The 1979 Directive on birds is another
noteworthy Community initiative, providing as it does that Member States must
protect the habitat of their wild bird populations. Lastly the Natura 2000 ecological
network was created in the context of the 1992 habitats Directive.

621.

It should be noted that Member States must, in the interests of good programming
and proper implementation of the rural development measures, fulfil their obligations
under the three directives.

6.2.

Forestry

622.

623.

The national protection programmes are part of a total of 80 forest fire protection
plans - including 62 which have been updated or are being renewed - which were the
subject of a favourable opinion by the Commission.

The plans are essential to the eligibility of certain forestry measures adopted pursuant
to Community action to support rural development by the EAGGF (European
Agricultural Guidance and Guarantee Fund).

624.

Moreover, the Member States and the Commission have set up a Community system
of information on forest fires, the aim being to make available a monitoring and

128

129

130

COM(1999) 22 final.
OJ L 160, 26.6.1999, p. 80 and p. 113.
COM(2000) 20 final.

126

evaluation instrument in connection with the national and Community protection
measures concerned.

625.

The system currently contains details of over 500 000 fires recorded in at-risk
in monthly
regions in the Community since 1985. The information is set out
publications, the most recent of which - published in October 2000 - also includes a
study of
fires and the meteorological,
geographical and socio-economic information available.

the link between the data on forest

127

7.

FINANCING OF THE CAP IN 2000

7.1.

Berlin Summit Agreement and budgetary discipline

626.

627.

The Berlin Summit of 24 and 25 March 1999 produced an agreement on the
Agenda 2000 proposals. From a financial perspective its conclusions differ
appreciably from the Commission's initial proposals of EAGGF Guarantee funding
including accompanying
for market support and rural development measures,
measures, under a single heading. The total expenditure is of course expected to
remain below the agricultural guideline, but the expected trend of the guideline
suggests that there will be a substantial margin over and above the anticipated
expenditure, a margin which could well be needed after 2002 for the expected new
members.

The conclusions of the Berlin Summit include the Commission's proposed guideline
(and within it rural development measures, veterinary measures,
the SAPARD
pre-accession agricultural instrument and the amount available for agriculture in
connection with accessions), but introduce sub-guideline ceilings on expenditure in
the shape of two annual subceilings for 2000-06: one for traditional market
expenditure (1(a)) and one for expenditure on rural development (1(b)). These
ceilings have been set at a level corresponding to the estimated expenditure resulting
from the adoption of Agenda 2000, i.e. at the level of the expected expenditure, with
no allowance made for unforeseeable events, even though events of that type often
do occur. The ceilings have been set as follows:

Expenditure in 2000-06 (in EUR million at 2000 prices)131

2000

2001

2002

2003

2004

2005

2006

Total

40920

42800

43900

43770

42760

41930

41660

297740

36620

38480

39570

39430

38410

37570

37290

267370

4300

4320

4330

4340

4350

4360

4370

30370

Total future CAP
(a) markets 132
(subceiling 1(a))
(b) rural
development133
(subceiling 1(b))

628.

The conclusions of the Berlin Summit were followed by the adoption by Parliament
and the Council of:

–

a new Interinstitutional Agreement - on budgetary discipline, the financial
perspective (ceilings) and the budgetary procedure - which lists those
conclusions and formally allows the Commission to put forward in the autumn
a letter amending the preliminary draft budget for the following year, thereby

131

132

133

A 2% deflator will be used for calculating amounts at current prices.
Including veterinary and plant health protection measures but excluding accompanying measures.
Including accompanying measures.
- To this expenditure should be added rural development measures - other than under Objective 1 -
which are currently financed by EAGGF Guidance.
- These amounts roughly correspond, on average, to the proposal put forward by the Commission as
part of Agenda 2000.
- All rural development measures are co-financed by the European Commission and the Member States.

128

–

enabling the budgetary forecasts to reflect the most recent developments. The
Agreement also includes provisions on flexibility and on revision of the
financial perspective (ceilings), but responsibility for invoking those provisions
rests with the budgetary authority.

A new Regulation (Regulation (EC) No 2040/2000)134 on budgetary discipline,
stipulating, inter alia: that all the legislative measures adopted under the
common agricultural policy must comply with subceilings 1(a) and 1(b), as laid
down in the financial perspective, and that appropriations must comply with
these ceilings; that, with a view to ensuring that the amount of subheading 1(a)
(traditional EAGGF Guarantee Section expenditure) is observed, the Council
may decide to adjust the level of the support measures applicable as from the
start of the following marketing year in each of the sectors concerned; that the
Commission is to submit along with the preliminary draft budget an analysis of
the differences between initial forecasts and actual expenditure for the previous
financial years and examine the medium-term situation; that, for the purposes
of calculating budget estimates when it draws up the budget, a letter of
amendment or a supplementary and amending budget (SAB), the Commission
is generally to use the average rate of the dollar over the most recent three-
month period; and, finally, that the monetary reserve is to be reduced to EUR
250 million in 2002 and is to be abolished with effect from financial year 2003.

7.2.

EAGGF Guarantee Section

629.

The EAGGF Guarantee appropriations adopted for 2000 total EUR 40 993.9 million
(including EUR 24.9 million for the agricultural budgetary reserve - Chapter
B0-40)135. The agricultural guideline136 is EUR 46 549 million and covers not only
expenditure under Subsection B1 but also the expenditure under the SAPARD
pre-accession instrument (EUR 529 million of commitment appropriations entered in
Chapter B7-01). There is thus a margin of more than EUR 5 000 million between the
agricultural guideline and the related appropriations. The appropriations under:

–

–

the subheading for traditional EAGGF Guarantee Section expenditure and
veterinary expenditure (subheading 1(a) covering Titles B1-1 to B1-3) amount
to EUR 36 889 million, i.e. EUR 463 million below the subceiling fixed in the
Interinstitutional Agreement of 6 May 1999137;

the subheading "rural development and accompanying measures" (subheading
1(b) covering Titles B1-4 and B1-5) amount to EUR 4 104.9 million, i.e. EUR
281.1 million below the subceiling fixed in the Interinstitutional Agreement.

7.2.1.

Stages of the budgetary procedure

630.

The 2000 Preliminary Draft Budget was drawn up by the Commission and proposed to
the Budget Authority at the end of April 1999. The appropriations proposed for the
EAGGF Guarantee Section totalled EUR 40 901 million, i.e. EUR 37 314 million for

134

135

136

137

OJ L 244, 29.9.2000, p. 27.
Not including EUR 500 million of appropriations entered in the monetary reserve (B1-6).
An instrument of budgetary discipline setting a maximum growth threshold for agricultural spending.
Interinstitutional Agreement of 6 May 1999 between the European Parliament, the Council and the
Commission on budgetary discipline and the improvement of the budgetary procedure (1999/C 172/01).

129

subheading 1(a) and EUR 3 587 million for subheading 1(b). The Preliminary Draft
Budget had to take account of the ceilings for subheadings 1(a) (EUR 37 352 million
at current prices) and 1(b) (EUR 4 386 million at current prices) laid down in the
financial perspective: the requirements identified for subheading 1(a) exceeded the
ceiling by EUR 212 million. The proposed appropriations were, therefore, reduced
across the board by EUR 250 million and so remained below the ceiling. The
requirements identified for subheading 1(b) were well below the ceiling. The
proposed appropriations thus matched the requirements.

The Council adopted the draft budget in July 1999. It left the appropriations in
subheading 1(b) unchanged but reduced those in subheading 1(a) by EUR 375
million. EAGGF Guarantee Section appropriations thus totalled EUR 40 526 million.

In October 1999 the Commission adopted a letter of amendment to the Preliminary
Draft Budget to take account, firstly, of developments on agricultural markets and,
secondly, of recently adopted agricultural legislation.

negative

beef/veal

Unfavourable developments on agricultural markets at that time kept foreseeable
requirements for the whole of subheading 1(a) at a level above the ceiling, despite a
slight reduction (EUR 67 million) in foreseeable requirements compared with the
Preliminary Draft Budget. The chapters for which requirements were appreciably
revised downwards were: clearance of accounts (-EUR 300 million), following
larger-than-expected
(-EUR 191 million),
corrections;
requirements for public storage and export refunds having decreased; sheepmeat and
goatmeat (-EUR 186 million), as a result of a rise in the average price on the
Community market; and, lastly, olive oil (-EUR 159 million), the reduction in this
case being attributable to a downward revision for production in certain Member
States. These savings were, however, more than offset by increases in the chapters for:
pigmeat (+EUR 236 million), the crisis having lasted longer than expected; sugar
(+EUR 158 million), as a result of higher export refunds deriving from the drop in
world prices; arable crops (+EUR 115 million), after the price for oilseeds proved to
be lower than expected; and, finally, milk and milk products (+EUR 102 million),
owing to higher production of butter and skimmed-milk powder and an increase in
some export refund rates.

For subheading 1(b), foreseeable expenditure was increased by EUR 200 million in
relation to the Preliminary Draft Budget, in anticipation of the speedier submission
by Member States of their new rural development programmes.

The additional requirements arising from recent agricultural legislation amounted to
only EUR 38 million (and affected only subheading 1(a)). This was because there
had been practically no changes to the basic regulations since the presentation of the
Preliminary Draft Budget, which had already absorbed the impact of the Agenda
2000 decisions. Moreover, the financial implications of the Council's decision on the
1999/2000 price package differed little from the Commission's initial proposal.

631.

632.

633.

634.

635.

636.

The requirements thus identified for the EAGGF Guarantee Section in the letter of
amendment amounted to EUR 41 324 million.138 Since the requirements for

138

The requirements identified in the letter of amendment did not cover the requirement of EUR 20.9
million for Chapter B1-50.

130

637.

638.

639.

640.

641.

642.

subheading 1(a) exceeded the ceiling, the appropriations proposed in the letter of
amendment were the subject of a EUR 200 million reduction, applied across the
board to the different budget items concerned, which left a margin of EUR 15 million
below the subceiling concerned.

The Tripartite Dialogue on the 2000 budget was concluded on 16 December 1999,
with the following results for the EAGGF Guarantee Section:

Appropriations for subheading 1(a) stand at EUR 36 889 million, i.e. EUR 463
million below the subceiling fixed in Berlin, following the application of a further
across-the-board reduction to the different headings.

Appropriations for Title B1-4 in subheading 1(b) amount to EUR 4 084 million, i.e.
EUR 297 million above the amount that the Commission requested in its letter of
amendment. Parliament, therefore, increased the appropriations for agri-environment
measures and, in addition, created a new title B1-50 for support for the management
of resources in support of the common fisheries policy, with an allocation of EUR
20.9 million. Appropriations for subheading 1(b) thus amount
to EUR 4 104.9
million, i.e. EUR 281 million below the Berlin subceiling.

Since the Commission can request the non-automatic carryover of appropriations not
committed at the end of the financial year when the appropriations entered in the
relevant budget headings for the following year do not cover requirements, the
budget authority authorised appropriations of EUR 29 million to be carried over to
cover the additional requirement, in the 2000 financial year, arising from the late
payment by Italy of the first annual instalment of agrimonetary aid in 1999. It also
authorised the carryover of approximately EUR 4 million for inspection measures in
the context of humanitarian aid to Russia. Budgetary resources for 2000 thus
amounted to EUR 41 026.9 million.

It should be emphasised that estimating future expenditure on agriculture is
particularly difficult. Up to twenty months can elapse between the forecast and the
execution of certain expenditure, and many unforeseeable factors, both internal and
external - including the value of the euro in relation to the dollar - can have a major
effect on expenditure.

Moreover the Commission's budgetary forecasts are heavily dependent on the
expenditure forecasts and on some production forecasts which Member States must
produce and transmit to it in accordance with the rules applicable. The Commission
has accordingly looked into possible improvements in financial management and has
implemented an action programme in this respect. It has asked Member States to
contribute to this effort by improving the quality and the speed of transmission of the
information concerned, in line with the current rules.

7.2.1.1. The monetary reserve

643.

644.

The operating mechanisms for the monetary reserve are set out on page 139 of the
1995 Report on the Agricultural Situation.

In accordance with the Council Decision on budgetary discipline, the euro/dollar
parity used for drawing up the Preliminary Draft Budget and the amending letter for

131

645.

646.

the 2000 financial year was EUR 1 = USD 1.12 and was equal to the average dollar
parity for January, February and March 1999.

For a large proportion of export refunds for agricultural products, particularly cereals
and sugar, and some internal aid such as that for cotton, however, expenditure
depends on the movement of the dollar rate. The real euro rates recorded were thus
substantially lower than the budgetary parity. The average dollar rate for the period
1 August 1999 to 31 July 2000 (reference period for determining the impact of the
dollar) diverged from this budgetary parity (EUR 1 = USD 0.99) and the amount of
expenditure incurred by Member States is lower as a result of the trend in the dollar
rate. Savings amount to EUR 510 million. The EAGGF Guarantee Section can
benefit only in part from these savings. Savings exceeding the margin of EUR 200
million fixed under the rules of budgetary discipline were transferred to the monetary
reserve at the end of the financial year and cannot be used to finance other measures.

Expenditure was appreciably lower than in previous years as a result of the impact of
the dual rate. Abolition of the green rates eliminated the effect of the dual rate in the
countries participating in the euro and thus resulted in major savings. However, the
cost of the dual rate to the EAGGF Guarantee Section, which had been estimated at
EUR 119 million when the letter of amendment was drawn up, proved to be EUR
106 million higher, at EUR 225 million.

7.2.2.

The EAGGF Guarantee Section in the context of the general budget

647.

In a general budget of the European Union for the 2000 financial year totalling
EUR 87 752.4 million (in payment appropriations entered in the 2000 budget),
EUR 40 993.9 million in payment appropriations (excluding the monetary reserve,
but including the appropriations entered in Chapter B0-40 "provisions"), i.e. 47%,
was allocated to the Guarantee Section.
In 1999 EAGGF Guarantee Section
expenditure accounted for 48% of general budget expenditure.

7.2.3.

The EAGGF and its financial resources

648.

649.

The EAGGF forms an integral part of
Its
appropriations are therefore determined in accordance with budget procedures, in the
same way as other Community expenditure.

the European Union's budget.

The CAP also generates revenue in the form of sums collected under the common
the Union’s own
market organisations. This revenue, which forms part of
resources,139 consists of:

–

levies, which are variable charges on imports from non-member countries of
agricultural products covered by the common market organisations; such
charges are intended to compensate for the difference between prices on the
world market and prices agreed within the Union. Under the Agreement on
Agriculture following the Uruguay Round of multilateral trade negotiations,
levies have been replaced by fixed import duties since 1995;

139

The Union's other own resources are: the levy on VAT, customs duties collected under the Common
Customs Tariff and Member States' contributions.

132

–

levies collected under the common organisation of the market in sugar; these
are divided into production levies on sugar and isoglucose, sugar storage levies
and additional elimination levies which ensure that
farmers and sugar
manufacturers finance the cost of disposing of sugar which is surplus to
Community internal consumption.

133

Revenue

Charges accruing to the Union's own resources under the CAP
(amounts prior to deduction of collection costs)

(EUR million)

Type of charge

1994

1995

1996

1997

1998

1999

Agricultural levies
Sugar levies
Of which:
-
-
-

production141
storage costs
other

922.4
1382.1

844.3
1316.4

810.1
1213.7

1025.2
1114.0

1102.2
1070.1

1187.3
1203.6

849.4
532.1
0.6

773.5
542.0
0.8

722.1
490.8
0.8

765.1
348.9
0.01

790.0
281.1
0.0

827.0
288.5
88.1

2000140

1102.2
1162.7

875.8
286.9
0.0

Total

650.

2304.5

2160.7

2023.8

2139.2

2172.3

2390.9

2264.9

It should be noted that there are other sources of agricultural revenue. Under the
common organisation of the market in milk and milk products, producers pay an
additional levy if milk quotas are exceeded. This revenue does not, however, form
part of the Union’s own resources and is considered to be part of the measures to
stabilise agricultural markets. It covers the additional expenditure brought about by
the production overrun on the quotas and is thus deducted from this same
expenditure.

7.2.4.

EAGGF Guarantee Section expenditure

651.

In essence, the EAGGF Guarantee Section finances expenditure on the common
organisations of agricultural markets, comprising:

–

–

market support (EUR 10 301.4 million in 1999),

direct aid to producers (EUR 29 239.4 million in 1999).

652.

Market support covers export refunds (EUR 5 572.8 million in 1999), storage (EUR
1 568.3 million in 1999), guidance premiums (EUR 154.3 million in 1999),
processing and consumption aid (EUR 2 684.3 million in 1999), withdrawals and the
like (EUR 346.2 million in 1999) and miscellaneous other expenditure (EUR 24.5
million in 1999).

653.

Direct aid to producers is thus currently by far the largest type of assistance.

654.

Furthermore, as a result of the reorientation and later the reform of the CAP, the
EAGGF Guarantee Section has been used to finance, in whole or in part, various
specific measures for the management of agricultural markets such as the distribution
of agricultural products to the needy in the Community, measures to combat fraud,
the
measures to promote quality and measures designed to compensate for
geographical isolation of the French overseas departments (POSEIDOM), Madeira
and the Azores (POSEIMA), the Canary Islands (POSEICAN) and the Aegean

140

141

Figures entered in the budget.
Including the additional elimination levy.

134

islands. In connection with the CAP reform in 1992 and, more recently, in 1999,
mention should also be made of the accompanying measures to assist farmers with
projects to protect the environment, maintain the landscape, develop the use of forest
resources or transfer their holdings with a view to early retirement, as well as the
other rural development measures, including compensation granted in less-favoured
areas, all of which make up the second pillar of the CAP.

7.2.4.1. Public storage

655.

As shown in Table [3.4.5] (statistical part of this Report), between 1 October 1998
and 30 September 1999, when the public storage accounts were closed, the book
value of the products in storage was significantly up on 1998: from ECU 1 397.8
million to ECU 1 621.9 million, an increase of 16%.

656.

This resulted from:

–

–

–

a marked increase in stocks of cereals and rice (from 13 602 995 tonnes on
30 September 1998 to 14 944 589 tonnes on 30 September 1999),

an increase in milk products (from 208 395 tonnes on 30 September 1998 to
274 845 tonnes on 30 September 1999),

a sharp reduction in beef/veal stocks (from 544 037 tonnes on 30 September
1998 to 160 924 on 30 September 1999).

657.

The following developments took place in 2000:

–

–

a fall in stocks of cereals (8 million tonnes in storage on 30 September 2000),
olive oil (25 000 tonnes in storage on 30 September 2000), alcohol (1.6 million
hectolitres in storage on 30 September 2000), powdered skimmed milk (2 000
tonnes in storage on 30 September 2000), and beef/veal (1 000 tonnes in
storage on 30 September 2000),

a rise in stocks of rice (700 000 tonnes in storage on 30 September 2000) and
butter (72 000 tonnes in storage on 30 September 2000).

7.2.5. Clearance of accounts

658.

In 2000 the Commission adopted six Decisions on the clearance of the accounts
presented by the Member States in respect of EAGGF Guarantee Section
expenditure:

–

–

–

Decision of 1 March 2000 (2000/197/EC) in respect of 1995142,

Decision of 5 July 2000 (2000/448/EC) in respect of 1995143,

Decision of 14 February 2000 (2000/179/EC) in respect of 1999 – clearance of
accounts144,

142

143

144

OJ L 61, 8.3.2000.
OJ L 180, 19.7.2000.
OJ L 57, 2.3.2000.

135

659.

660.

–

–

–

Decision of 28 April 2000 (2000/314/EC) in respect of 1999 – clearance of
accounts145,

Decision of 1 March 2000 (2000/216/EC) pursuant
to Article 5(2)(c) of
Regulation (EEC) No 729/70 - fourth ad hoc Decision, applicable from
1996146,

Decision of 5 July 2000 (2000/449/EC) pursuant
Regulation (EEC) No 729/70 - fifth ad hoc Decision, applicable from 1996147.

to Article 5(2)(c) of

The expenditure recovered from Member States in respect of these six Decisions
comes to EUR 632.6 million.

In the case of the agricultural guarantee sector, where Member States are responsible
for executing virtually all payments and for collecting all levies and recoveries, the
Commission has taken firm steps to encourage Member States to reduce the rates of
irregularity. Firstly, it has worked with the Member States to ensure that, throughout
the Union, the paying agencies see to it that there are very strict controls on all
claims before they are paid, and that the paying agencies' accounts and procedures
are audited each year to internationally accepted standards. Secondly, it has actively
assisted all Member States both in putting into place an integrated control system
which uses the most advanced techniques, viz. checking of fields by aerial and
satellite photography, and in cross-checking claims in computer databases.

661.

The Commission also took part in the following in connection with the clearance of
accounts:

–

–

–

–

–

discussions with the Member States on the findings of the inspection missions
in respect of 1999 and drawing up of a new decision on the clearance of
accounts,

the work of the European Parliament's Budgetary Control Committee in the
context of the discharge of the 1998 budget,

opinion of the Court of Auditors on the clearance of accounts decision for 1995
(conformity clearance), 1996, 1997 and 1998 (clearance of accounts) and on
the 1999 Statement of Assurance,

supervision of and assistance with the setting up paying agencies in the
SAPARD countries,

work of the conciliation body.

7.2.6.

Expenditure on agricultural markets in 2000

662.

The uptake of EAGGF Guarantee Section appropriations for the 2000 financial year
(expenditure by the Member States from 16 October 1999 to 15 October 2000)
amounted to EUR 40 348.6 million, i.e. 98.4% of the appropriations entered under

145

146

147

OJ L 104, 29.4.2000.
OJ L 67, 15.3.2000.
OJ L 180, 19.7.2000.

136

Subsection B1 of the budget. After the transfer of appropriations to the monetary
reserve, the initial appropriations of EUR 40 683.9 million exceeded expenditure by
EUR 335.3 million.

–

–

Total expenditure for subheading 1(a) (traditional EAGGF Guarantee Section
expenditure and veterinary expenditure, covering Titles B1-1 to B1-3) amounts
to EUR 36 172.2 million (provisional figure), i.e. EUR 1 179.8 million below
the below the subceiling fixed in the Interinstitutional Agreement of 6 May
1999.

Total expenditure for subheading 1(b) (rural development and accompanying
measures, covering Titles B1-4 and B1-5) amounts to EUR 4 176.4 million, i.e.
EUR 209.6 million below the subceiling.

663.

The principal sectors where there was underutilisation were:

–

–

–

–

–

sugar (-EUR 86 million), as a result of lower payments for export refunds
deriving from the favourable trend of the dollar exchange rate;

fibre plants and silkworms (-EUR 33 million), the underrun being attributable
to lower expenditure on production aid for fibre flax following tighter controls
by the national authorities;

fruit and vegetables (-EUR 103 million), in particular, in the case of bananas,
modernisation programmes and producer organisations' operational funds;

milk and dairy products (-EUR 189 million), appropriations for public storage
of skimmed milk powder having been greatly underused as a result of the
favourable prices obtained when substantial quantities of this product were sold
from public intervention stocks;

sheepmeat and goatmeat (-EUR 96 million), on account of lower expenditure
on the ewe premium.

664.

On the other hand, expenditure under the following chapters appreciably exceeded
budget appropriations:

–

–

–

–

–

olive oil (+EUR 20 million), as a result of the payment of the balance on
consumption aid;

wine (+EUR 71 million), because of higher expenditure on aid (for distillation,
private storage and use of grape must);

other vegetable sectors (+EUR 38 million),
attributable to an increased requirement for production aid for seeds;

this overrun being partly

beef/veal (+EUR 75 million), due to higher-than-expected expenditure under
exceptional support measures (BSE);

rural development (+EUR 100 million), as a result of the speeding-up both of
Member States' payments on the former accompanying measures and of the
measures implemented under new rural development programmes approved
during the second half of 2000.

137

7.3.

EAGGF Guidance Section

665.

666.

Implementation of the reform of the Structural Funds since 1 January 1989 has
gradually changed the nature of the aid granted by the EAGGF Guidance Section. An
ever-increasing share of Community contributions is taken up by the part-financing
of operational programmes (99.8% of the total in 1998, as compared with 52% in
1993 and 40% in 1991). The second reform of the Structural Funds, which came into
force on 1 January 1994, put
the finishing touches to the system of annual
reimbursement of national expenditure that had not been programmed. Virtually all
financing under the EAGGF Guidance Section is now provided through measures
programmed on a multiannual basis in accordance with the principles of partnership
and subsidiarity between the Commission and the Member States.

The second programming period, which covers 1994 to 1999,
is marked by
consolidation of the principles governing the first programming period following the
reform of the Funds. It also includes some simplification of procedures, for example
under Regulation (EC) No 951/97 on improving the processing and marketing
conditions for agricultural products148. Furthermore, Regulation (EC) No 950/97 on
improving the efficiency of agricultural structures149 has been amended so that
financing is based on multiannual programmes, in a manner similar to that for the
thus harmonising the funding mechanisms. In this way the
other Objectives,
Community schemes implemented by Member States, which account
for a
significant share of financing by the Guidance Section (farm improvement plans,
compensatory allowances, etc.), give rise to reimbursements up to the limits laid
down in the corresponding multiannual programmes.

667.

the
The measures undertaken on the initiative of the Member States under
frameworks are supplemented by those launched by the
Community support
Commission,
i.e. programmes under the Leader, Interreg, Regis II and Peace
Community Initiatives, and measures financed under Article 8 of Regulation (EC)
No 4256/88150 and transitional measures.

7.3.1.

Funding carried out

668.

669.

EAGGF Guidance Section expenditure by Member State during the period 1991 to
1999 is shown in the table below.

It is also worth noting the breakdown of expenditure by Objective. The EAGGF
Guidance Section contributes to the following four Objectives:

–

–

–

–

Objective 1 (regions whose development is lagging behind),

Objective 5(a) (agricultural structures in all regions),

Objective 5(b) (rural development in designated areas),

Objective 6 (Nordic regions), following the accession of the new Member
States.

148

149

150

OJ L 142, 2.6.1997, p.22.
OJ L 142, 2.6.1997, p. 1.
OJ L 374, 31.12.1988, p.25.

138

670.

The following table also shows expenditure from 1994 onwards under
the
Community Initiatives and under Article 8 of Regulation (EEC) No 4256/88 (finance
for technical assistance, general studies, pilot and demonstration projects) and
transitional measures (old measures which cannot be assigned to an Objective under
the new rules).

139

EAGGF Guidance expenditure (commitment appropriations)

(EUR million)

Member State

1991

1992

1993

1994

1995

1996

1997

1998

1999

BELGIQUE/BELGIË

DANMARK

30.5

18.0

28.2

23.5

1.7

20.0

37.6

42.5

40.0

16.7

39.9

29.1

32.5

17.2

40.2

27.4

86.5

47.1

DEUTSCHLAND

200.2

253.7

348.7

700.2

807.9

805.1

718.6

839.4

893.1

ELLÁDA

ESPAÑA

FRANCE

IRELAND

ITALIA

274.2

392.2

402.9

266.3

463.8

328.3

339.1

374.5

321.1

514.2

633.6

412.9

544.7

709.5

695.0

925.2

788.2

991.2

425.3

554.4

633.5

619.7

347.8

526.3

633.1

600.3

857.9

168.5

194.5

165.7

178.3

157.3

261.1

285.2

111.1

121.8

326.5

375.9

625.0

263.2

454.2

428.1

580.1

753.1

1350.7

LUXEMBOURG

6.7

6.3

9.0

9.8

6.0

4.3

1.1

12.2

NEDERLAND

20.5

21.9

19.5

32.1

13.1

27.3

13.6

8.3

11.2

60.8

ÖSTERREICH

PORTUGAL

SUOMI/FINLAND

SVERIGE

UNITED KINGDOM

OTHER
(technical assistance
for Leader)

313.4

289.8

313.9

510.5

282.7

379.5

309.4

444.1

159.7

97.7

122.6

84.5

127.7

187.9

110.2

100.8

99.5

130.5

109.8

102.4

129.3

98.8

174.7

24.7

65.4

74.1

116.0

14.4

45.7

60.9

79.6

75.2

231.8

3.7

4.1

3.4

5.5

5.4

TOTAL

2408.2

2874.8

3093.4

3335.4

3609.1

3934.5

4132.4

4366.9

5580.5

140

Expenditure by objective

(EUR million)

Objective

1991

1992

1993

1994

1995

1996

1997

1998

1999

Community
Frameworks

Support

Obj. 1 (regions
lagging behind)

Obj. 5(a) (agricultural
structures)

1 440.8

1 634.7

1 599.2

1 905.3

2 395.2

2 416.5

2 578.7

2 502.8

2 534.6

631.3

701.3

923.9

1 131.6

655.9

802.4

974.7

1 066.3

1 310.9

Obj. 5(b) (rural areas)

260.2

475.8

508.7

265.8

249.5

508.4

421.5

562.8

1 170.9

47.7

44.7

51.3

51.2

93.9

Obj. 6 (Nordic areas)

Community Initiatives

Leader

Interreg

REGIS

Envireg

PEACE

POSEI

Art. 8 of Reg.4256/88

}
}
}
}
}
}
}
Included under other headings
}
}
}
}
}

0.3

0.0

0.0

---

0.0

---

5.2

235.9

12.8

0.0

---

1.3

---

0.6

83.1

31.3

17.0

---

8.1

---

15.4

7.6

65.4

116.4

303.1

17.6

44.7

100.3

4.6

---

13.0

---

5.3

0.4

6.3

---

7.9

---

1.0

7.5

53.5

---

7.0

---

6.2

0.1

Transitional measures

75.9

63.0

61.6

27.2

10.3

TOTAL

2 408.2

2 874.8

3 093.4

3 335.4

3 609.1

3 934.5

4 132.4

4 366.9

5 580.5

141

671.

672.

673.

674.

Expenditure under Objective 1, which had increased from 1991 onwards, steadied
towards the end of the first programming period, only to rise again from 1994 on.

Expenditure under Objective 5(a) was fairly stable during the period under review,
but peaked strongly in 1994 as a result of the change in the system of financing the
"indirect" measures (former Regulation (EEC) No 2328/91151), which meant that
reimbursements for 1993 and new financing for 1994 were charged to the 1994
financial year. The sharp increase in commitments for 1999 is attributable to the
commitment of amounts outstanding from the 1994-99 programming period.

Expenditure under Objective 5(b) grew substantially from 1991 to 1993, reflecting
the emphasis on rural development policy, but fell sharply in 1994 following delays
in launching the new programming period. The delays were made up from 1996
onwards and, above all, in 1999 (last financial year of the programming period).

Expenditure under Objective 6 remained fairly stable during the years 1995-98,
subsequently registering a sharp increase in 1999 (last year of the programming
period).

675.

Since the transitional measures are being wound up, expenditure on them has fallen
almost every year since 1991.

676. While the amounts under Objectives 1 and 5(b) for 1991 to 1993 include measures
under the Community support frameworks, under the Community Initiatives and
under Article 8 of Regulation (EEC) 4256/88152, from 1994 onwards the amounts
corresponding to the last two are shown separately.

7.3.2.

Budget execution

677.

678.

679.

680.

In terms of the appropriations available in 1999, including those originally entered in
together with transfers and carryovers (EUR 5 717.3 million in
the budget
commitment appropriations and ECU 4 013.2 million in payment appropriations),
execution of the 1999 budget for the whole of the EAGGF Guidance Section was
97.6% for commitment appropriations and 99.9% for payment appropriations.

The financial year 2000 was the first in the new programming period 2000-06, in
which the source of funding for rural development programmes depended on the type
of measure and the geographical area.

The EAGGF Guarantee Section will continue to finance, across the whole of the EU
territory, the three accompanying measures introduced with the 1992 CAP reform, to
which the compensation scheme for farmers in less-favoured areas will be added.

For all other
differentiated according to the geographical context:

rural development measures,

the source of

financing will be

–

in regions eligible under Objective 1 (regions whose development is lagging
the EAGGF Guidance Section will continue to finance rural
behind),

151

152

OJ L 218, 6.8.199,1 p. 1.
OJ L 374, 31.12.1988, p.25.

142

development measures which will be fully integrated as at present
development programmes, in combination with the other Structural Funds;

into

–

outside the Objective 1 regions, the source of finance for rural development
measures will be the EAGGF Guarantee Section.

681.

The appropriations in the 2000 budget for the EAGGF Guidance Section amounted
to EUR 2 909.2 million for commitments and EUR 3 918.2 million for payments.
These figures include the appropriations for the new Objective 1 programmes for the
period 2000-06 and the Community Leader+ initiative, as well as payment
appropriations for the closure of programmes under Objectives 1, 5(a), 5(b) and 6
and integrated Community programmes for the period 1994-99.

7.4.

Evaluation

682.

The evaluation of agricultural measures is divided into two major parts: one dealing
with market-related measures and one concerned with structural and rural
development measures.

7.4.1.

Evaluation of market-related measures

683.

Three evaluations launched in 1999 - on sheepmeat, the common organisation of the
market in sugar and the Poseima programme - were completed in 2000. During the
same period, six evaluations were launched on afforestation policy, oilseeds, set-
aside, promotion policy, starch and the common organisation of the market in milk
products. These studies should be available between the beginning of 2001 and the
beginning of 2002. Evaluations are normally published on the Commission website,
along with the steering group's quality judgment.

7.4.2.

Evaluation of structural and rural development measures

684.

685.

In addition to the guidelines for evaluating rural development programmes during the
period 2000-06, a document set out the common evaluation questions, assessment
criteria and indicators to be used. Member States accompanied their programming
plans with information on the ex ante evaluations.

For Leader II and Leader+, the evaluation work has begun in the Member States and
discussions are under way on the task of drawing up a summary and establishing
common methodologies.

686.

For SAPARD, an ex ante evaluation guide made it possible to secure sound
evaluations from a number of applicant countries.

143

8.

PREPARING FOR ENLARGEMENT

8.1.

Main developments

8.1.1.

Accession negotiations

687.

688.

Further to the recommendations of the Helsinki European Council of December
1999, accession negotiations were formally opened with Bulgaria, Romania, Latvia,
Lithuania, Slovakia and Malta in February 2000. Each candidate country will be
judged on its own merits in the negotiations. The process of screening agricultural
legislation with these six countries including veterinary and plant health legislation,
was carried out between October 1999 and February 2000. They have not yet
submitted a negotiation position on agriculture. The agricultural chapter has not been
opened for negotiation with them: it will be opened only when and if they have made
sufficient progress with the implementation of the agricultural part of the Community
acquis.

Negotiations with Poland, Hungary, Estonia, the Czech Republic, Slovenia and
Cyprus were formally opened in March 1998. The screening of the Community
acquis with these six countries was carried out between September 1998 and June
1999. They submitted their negotiation positions on the agricultural chapter in
November and December 1999. These positions specify, in particular, their requests
for transitional arrangements and for technical adaptations of the acquis. In response,
the European Union has submitted to the six candidate countries its own common
negotiation position on agriculture. Although there are a vast number of specific
negotiating requests in relation to the agricultural chapter, some important common
negotiation issues can be identified (with the exception of veterinary and phyto-
sanitary legislation), namely the issue of direct payments, the fixing of quantitative
production thresholds and the possible granting of transitional arrangements. The
agricultural chapter of the Community acquis was formally opened for negotiation
with these six countries at ministerial conferences held in Luxembourg in June 2000.

689. With regard to Turkey, the Helsinki European Council underlined Turkey's status as
a candidate but negotiations have not yet been formally opened. In June 2000 in line
with the invitation of the Helsinki European Council, the Commission started to
prepare the screening of the acquis in the agricultural sector with Turkey, within the
framework of the Ankara Association Agreement.

8.1.2.

Pre-accession strategy

690.

On 6 December 1999, the Council adopted the revised accession partnerships with
regard to the central and east European countries, and on 20 March 2000 the
accession partnerships concerning Cyprus and Malta. The accession partnership sets
out in a single framework the priority areas, both short and medium-term, for further
work identified in the Commission's 1999 Regular Reports on the progress made by
each candidate country towards EU membership, the financial means available to
assist these countries in the implementation of these priorities and the conditions
which will apply to that assistance.

691.

For the agricultural sector, objectives common to all or most of the candidate
countries in these accession partnerships cover:

144

–

–

–

–

for the veterinary and phyto-sanitary sector: alignment and upgrading of
future external borders, and
inspection arrangements,
establishment of a nationwide animal identification system,

in particular at

re-enforcement of common agricultural policy management mechanisms and
administrative
and
implementation of structural and rural development measures, setting up of
bodies and control mechanisms),

agricultural markets

(monitoring

structures

of

restructuring of the agri-food sector and reinforcement of
administration,

food control

the establishment or improvement of a functioning land market, the completion
of land registration and a property register, as well as land reform.

692.

Specific objectives are:

–

–

–

for Poland: further elaboration and implementation of a rural development
plan, to ensure a sustainable future for the Polish rural economy, including
measures dealing with the modernisation of farming and related industries, and
a review of Polish agricultural trade policy with a view to both reducing
dependency on import barriers and increasing competitiveness,

for Hungary, Latvia, Bulgaria, Estonia, Slovenia, the Czech Republic and
Lithuania: modernisation of meat and dairy plants to meet the EU's hygiene
and public health standards,

for Hungary, Bulgaria, Slovakia and Romania: the establishment of a vineyard
register.

Complementary to the accession partnership is each candidate country's national
programme for the adoption of the acquis (NPAA). The objective of the NPAA is to
set out detailed plans on how the candidate country will prepare for accession in each
sector, both from the perspective of the transposition and implementation of
legislation and as regards the development and reinforcement of administrative
structures. The NPAAs also include a timetable for the implementation of the
accession priorities and provide indications of the human and financial resources
required for this purpose.

The appropriate framework within which to discuss bilateral matters with the
countries of central and eastern Europe, Cyprus and Malta, is constituted by the
bodies provided for in the Europe or Association Agreements concluded with these
countries, in particular the Association Council, the Association Committees and
sub-committees for agriculture in the case of agricultural matters. They represent a
forum for discussing agricultural matters, including enlargement-related issues, and
the state of play regarding the implementation of the agricultural acquis.

The EC-Romania Association Committee met on 21 March 2000 in Brussels; the
EC-Slovenia Association Committee on 25 March 2000 in Ljubljana and on
14 June 2000 in Brussels; the EC-Hungary Association Committee on 12 April 2000
in Brussels; the EC-Estonia Association Committee on 9 June 2000 in Brussels; the
EC-Lithuania Association Committee on 15 June 2000 in Brussels; the EC-Latvia
Association Committee on 16 June 2000 in Brussels; the EC-Bulgaria Association

145

693.

694.

695.

696.

697.

698.

Committee on 20 June 2000 in Sofia;
the EC-Czech Republic Association
Committee on 6-7 June 2000; the EC-Poland Association Committee on 27 June
2000 in Brussels; the EU-Poland Sub-Committee on Agriculture met on 16 March
2000; the EU-Bulgaria Sub-Committee on Agriculture on 16 June 2000 and the EU-
Turkey Sub-Committee on Agriculture on 23 June 2000.

In its Regular Reports the Commission monitors the overall progress made by each
candidate country with regard to the three accession criteria established by the
Copenhagen European Council (political criteria, economic criteria and the ability to
assume obligations of EU membership), as well as progress on the development of
those countries' administrative capacities.

Following Agenda 2000, Phare support has been re-focused on two priorities, namely
investment and institution-building. While support for investment will help the
candidate countries bring their economic and social structures into line with
institution-building will help them to reinforce their
Community standards,
institutional and administrative capacities so that they can take on the obligations of
membership. Twinning arrangements are a specific form of institution-building in
addition to technical assistance, training programmes and exchanges of experts.

The main feature of twinning is that it is designed to deliver specific results for the
implementation of priority areas of the Community acquis as set out in the accession
partnerships. In practice, these projects involve the twinning of Member States'
administrations with their counterparts in the candidate countries for institution-
building. Since 1998 many twinnings have been set up in agriculture. They cover
priorities
improvements of veterinary and phyto-sanitary controls,
modernisation of the agricultural statistical system, setting up of the integrated
administration and control system in agriculture,
implementation of the animal
identification and registration system, agricultural policy reform, preparation for the
common agricultural policy, farm registry, approximation of legislation in the wine
sector and modernisation of the rural administrative system.

such as

8.1.3.

SAPARD

699.

700.

The legal framework of SAPARD was completed in 2000. After the adoption,
in 1999, of Council Regulation (EC) No 1268/1999,153 the Commission Regulation
laying down the detailed implementing rules concerned (Regulation (EC)
No 2759/1999)154 and the Commission Decision of 20 July 1999 on the indicative
the annual Community financial contribution (EUR 529 million
allocation of
at 2000 prices) among the 10 recipient countries,
the following stages were
completed:

On 26 January 2000 the Commission adopted a communication laying down the
principles of a new system of financial management of SAPARD. The system
features three components: complete decentralisation of programme management to
an agency set up under the responsibility of each country, a mode of financing based
on dissociated appropriations, and application of the EAGGF (Guarantee) accounts
clearance procedure.

153

154

OJ L 161, 26.6.1999, p. 87.
OJ L 331, 23.12.1999, p. 51.

146

701.

702.

703.

704.

705.

706.

On 7 June 2000, on the basis of these components, the Commission adopted a
Regulation laying down financial rules for the implementation of the SAPARD
programmes and the conditions under which the management of the aid is conferred
to approved implementing agencies in the 10 recipient countries.

Lastly, in the final stage of the process relating to the legal framework, the provisions
to be adopted by the Commission with regard to the recipient countries will have to
form part of bilateral agreements. Negotiations with the countries concerned led to
approval of the text of the agreement. The actual date on which each agreement is
concluded will depend on the constitutional rules of the country concerned.

The rural development plans presented to the Commission by the 10 recipient
countries were scrutinised and negotiated with the Commission. This led to the
adoption by the Commission of 10 SAPARD rural development programmes, for
Hungary, Poland, Lithuania, Bulgaria,
the Czech Republic, Slovenia, Romania,
Estonia, Lithuania and Slovakia respectively.

The aim of the SAPARD programmes is to help implement established EU law and
practice regarding the common agricultural policy and the policies concerned and
the agricultural and
underpinning the effectiveness and competitiveness of
agro-industrial sectors, job creation and sustainable economic development in rural
areas. The principal measures financed under SAPARD programmes are: investment
in agricultural holdings; improvement of the conditions under which agricultural and
fishery products are processed and marketed; development and improvement of rural
infrastructure; development and diversification of the economy with a view to
creating multiple activities and alternative incomes; renovation and development of
villages and protection and conservation of the rural heritage.

Priority is given to measures to improve market efficiency and quality and health
standards and to measures to create fresh employment opportunities in rural areas in
accordance with environmental protection provisions.

implementation of

Before the
the
establishment of the approved SAPARD agencies in each recipient country must be
completed and be approved by the Commission.

the SAPARD programmes

can begin,

8.1.4. CEECs, progressive liberalisation of bilateral agricultural trade

707.

In March 1999 the Council authorised the Commission to open negotiations with
each of the CEECs with a view to further liberalising bilateral trade in agriculture.
Negotiations with each of the countries have been carried out on a reciprocal basis,
with no products a priori excluded from the negotiations. In accordance with the
Council directives, a global balance of the negotiations has been achieved. The
negotiations were equally founded on the principle of neutrality with respect to the
functioning of the CAP.

708.

The negotiating approach covered three different kinds of bilateral concessions
linked to the degree of sensitivity of the products and to the nature of the CAP
mechanism:

147

8.1.4.1. List 1:

709.

For the least-sensitive products (CEEC products currently facing EU import duty of
less than 10 % and products imported from the EU and not cultivated in the CEECs),
an immediate and full liberalisation of trade has been agreed for unlimited quantities.
The list covers more than 400 products and includes, in particular, citrus fruits, olive
oil and horsemeat.

8.1.4.2. List 2:

710.

The so-called ‘double zero’ approach provides for the reciprocal elimination of
export refunds and the elimination of import tariffs within the framework of tariff
quotas. The initial level of the tariff quota has been set, as far as possible, at the level
corresponding to the current trade pattern (based on the average of the past three
years). A substantial yearly increase of the tariff quotas has been agreed bilaterally,
taking into account
trade
development.

the products and the potential

the sensitivity of

8.1.4.3. List 3:

711.

712.

This involves a limited exchange of ad hoc concessions decided on the basis of
specific requests made and agreed on a case-by-case basis. The list also aims at
balancing the overall agreement.

The approach is identical for all the CEECs – both for those in the Luxembourg
group (Hungary, Poland, Czech Republic, Estonia, Slovenia) with whom
negotiations on the agricultural chapter of the acquis were opened on June 14 and in
the Helsinki group (Bulgaria, Romania, Lithuania, Latvia, Slovakia) with whom
negotiations on the agriculture chapter have not yet begun.

8.1.5.

Results of the negotiations

713.

714.

New progressive trade liberalisation agreements have been concluded with the 10
CEECs. Foreseeing immediate liberalisation of most of the non-sensitive products, in
particular a large number of Mediterranean products, the agreements provide equally
for progressive liberalisation in the sectors of poultrymeat, pigmeat, cheese and some
fruits and vegetables, based on the ‘double zero’ approach. The results differ from
one country to another, according to their readiness to liberalise the trade.

Based on current trade figures (1996-1998), CEEC agricultural exports to the EU to
be exempt from duty will increase from, on average, 37 % to, on average, 81 %. (EU
agricultural exports to the nine CEECs to be exempt from duty will increase from, on
average, 18% to 36%).

715. While the results achieved so far are satisfying, negotiations will continue with a
view to progressively expanding agricultural trade liberalisation with each country,
in order to avoid the potential negative impact of an immediate opening of markets
upon accession.

8.2.

Bulgaria

716.

The Bulgarian SAPARD plan was declared admissible on 7 April 2000 and adopted
on 20 October 2000.

148

717.

The annual allocation for SAPARD in Bulgaria is EUR 53 million. The operational
plan is based on four priority areas:

–

–

–

–

improvement of the production, processing and marketing of agricultural
fishery products and the development of
products and processing of
environmentally friendly agricultural practices;

integrated development of rural areas aiming at protecting and strengthening
their economies and communities and helping to reduce the process of rural
depopulation;

investment in human resources;

technical assistance.

718.

A major part of the funds available for the first priority area is dedicated to
investment in agricultural holdings and the processing and marketing of agricultural
and fishery products. The other measures under this priority relate to forestry and the
development of environmentally friendly agricultural practices and activities. The
second priority area includes measures for the development and diversification of
economic activities and alternative income, renovation and development of villages,
protection and conservation of rural heritage and cultural traditions and of rural
infrastructure. The third and fourth priorities include, respectively, improvement in
vocational training and technical assistance.

8.3.

Czech Republic

719.

720.

721.

722.

The Czech SAPARD plan was declared admissible on 28 April 2000 and, after
negotiations, was adopted by a Commission decision.

The annual allocation for SAPARD in the Czech Republic for 2000 is approximately
EUR 22.4 million. The Czech national contribution will be around EUR 7.3 million
in 2000. The Czech rural development plan identifies three priorities:

There is provision for allocating 60 % of the Community contribution (65 % of the
total cost) to investment measures in agricultural and the agri-food sectors, in order
to strengthen competitiveness and,
in particular, to support the adoption of the
various Community standards. A measure for the improvement of the land and
reparcelling is also envisaged.

The second major priority of the plan (one third of the annual Community
contribution) is the development of rural areas, combining infrastructure measures
with a diversification measure. This also includes the agri-environmental pilot
measure. Finally, measures aimed at supporting the implementation of the SAPARD
programme are also envisaged (Priority 3), by means of training or technical
assistance.

8.4.

Estonia

723.

The Estonian SAPARD plan was declared admissible on 12 May 2000 and adopted
on 17 November 2000.

149

724.

The annual allocation for SAPARD in Estonia for 2000 is approximately EUR 12.3
million. On the Estonian side, approximately EUR 4 million has been reserved for
the national contribution in 2000. The operational plan is in the process of being
drawn up. It will include measures covering investment in agricultural holdings,
improvements in the processing of agricultural and fishery products, diversification
and improvement of the rural infrastructure.

8.5.

Hungary

725.

726.

727.

728.

The Hungarian SAPARD plan was declared admissible on 24 March 2000 and was
adopted by a Commission decision after negotiations with Commission services and
modifications of the text. The annual allocation for SAPARD in Hungary for 2000 is
EUR 38.7 million. On the Hungarian side, EUR 12.5 million has been reserved for
the national contribution in 2000. The operational plan is based on two major
priorities:

–

–

competitiveness of agriculture and the processing industry and focus on
environmental protection aspects (five measures: 62 % of the EU funds);

adaptation of rural areas (three measures: 36.5 %).

A major part of the funds available for the first priority area is dedicated to
investments in agricultural holdings (28.3 % of the EU funds). The other measures
under this priority concern the improvement of marketing and processing of
agricultural and fisheries products (20.5 % of the EU funds), the setting-up of
producer groups (7.3 % of the EU funds), the agro-environment measure (4.2 %) and
the improvement of vocational training (1.7 %).

The second priority area includes measures for the development and diversification
of economic activities providing alternative income (15.4 %), the improvement of
rural infrastructure (12 %); and the renovation and development of villages (9 %).

The allocation for technical assistance towards implementation of the programme,
including studies, monitoring, information and publicity campaigns, is about 1 % of
the EU funds.

8.6.

Latvia

729.

730.

The Latvian SAPARD plan was declared admissible on 5 April 2000 and, after
negotiations with Commission services and modifications of the text, was adopted by
a Commission decision.

The annual allocation for SAPARD in Latvia for 2000 is EUR 22 million. On the
Latvian side, EUR 7 million has been reserved for the national contribution in 2000.
The operational plan is based on three objective areas:

–

–

–

development of sustainable agriculture (four measures: 54% of the EU funds);

integrated rural development (two measures: 36 % of the EU funds);

improvement of the environment (three measures: 4 % of the EU funds);

150

731.

A major part of the funds available for the first objective area is dedicated to the
improvement of marketing and processing of agricultural and fisheries products
(26 % of the EU funds). The other measures under this objective area concern the
modernisation of agricultural machinery (23 %), afforestation of agricultural land
(3 %) and land reparcelling (2 %). The second objective area includes measures for
development and diversification of economic activities providing alternative income
(24 %) and the improvement of general rural infrastructure (12 %). The third
objective area covers measures for organic farming, preservation of biodiversity and
rural landscape and reduction of agricultural run-off that will be developed at pilot
level. Vocational training (4 %) and technical assistance (2 %) constitute two
separate supporting measures.

8.7.

Lithuania

732.

733.

The Lithuanian SAPARD plan was declared admissible on 25 April 2000 and
adopted on 27 November 2000.

The annual allocation for SAPARD in Lithuania for 2000 is EUR 30 million. On the
Lithuanian side, EUR 9 million has been reserved for the national contribution in
2000. The SAPARD plan provides funding for the following seven operational
measures:

–

–

–

–

–

–

–

investments in agricultural holdings (47 % of the EU funds);

improving the processing and marketing of agricultural and fisheries products
(21 %);

development and diversification of economic activities, providing for multiple
activities and alternative income (8 %);

improvement of rural infrastructures, renovation of villages and maintenance of
rural heritage (15 %);

forestry,
marketing of forestry products (5 %);

including afforestation of agricultural

land and processing and

vocational training (2 %);

technical assistance (2 %).

8.8.

Poland

734.

The Polish SAPARD plan was declared admissible on 6 April 2000 and, after
negotiations with Commission services and modifications of the text, was adopted by
a Commission decision.

735.

The annual allocation for SAPARD in Poland for 2000 is EUR 171 million. The
operational plan is based on two priority areas:

–

–

improvement of the market efficiency of the agri-food sector;

improvement of the conditions for economic activities and job creation.

151

736.

A major part of the funds available for the first priority area is dedicated to the
improvement of marketing and processing of agricultural products. The other
measures under this priority concern investment in agricultural holdings. The second
priority area includes measures for the development of rural infrastructure and
diversification of economic activities in rural areas. Supplementing these priorities
the plan includes measures for vocational training and technical assistance. Pilot
projects on agri-environment and afforestation will also be implemented through the
plan.

8.9.

Romania

737.

738.

739.

The Romanian SAPARD plan was declared admissible on 27 April 2000 and
adopted on 12 December 2000.

The annual allocation for SAPARD in Romania is EUR 153 million. The operational
plan is based on four priority areas:

–

–

–

–

improvement of the competitiveness of processed agricultural and fisheries
products;

improvement of infrastructure for rural development and agriculture;

development of the rural economy;

development of human resources.

At this stage, a major part of the funds available for the first priority area is dedicated
to the improvement of processing and marketing of agricultural products. Other
measures under this priority concern the improvement of structures for quality,
veterinary and plant-health controls, foodstuffs and consumer protection. The second
priority area includes measures for the development of rural infrastructure and the
management of water resources. The third area includes investment in agricultural
holdings, setting up producer groups, forestry, diversification of economic activities
and agri-environmental pilot projects. The fourth area includes vocational training
and technical assistance.

8.10.

Slovakia

740.

741.

742.

The Slovakian SAPARD plan was declared admissible on 6 June 2000. The
Commission, however, drew attention to the poor quality of the prior appraisal. As
the latter is a formal requirement under Regulation 1268/99, the Slovakian plan must
be improved significantly with regard to this point. In order to achieve this and to
finalise the plan, partnership is being provided by the Austrian Federal Ministry of
Agriculture. The revised plan was adopted on 17 November 2000.

The annual allocation for SAPARD for Slovakia for 2000 is approximately
EUR 18.6 million. The Slovakian national contribution will be approximately
EUR 5.9 million in 2000. The Slovakian SAPARD plan identifies three priorities.

Improvement of the agricultural production sector including the food industry: this
will account for 61 % of the Community contribution for acquis-related investment
in farm holdings and for investments aimed at contributing to the upgrading of agri-

152

food enterprises to EU standards, as well as increasing their competitiveness. In
addition, a small amount is aimed at helping to set up producer groups.

743.

The second major priority of the plan (one third of the annual Community
contribution) is the development of rural areas that will embrace measures on
diversification of economic activities, forestry, agri-environment pilot schemes and
land consolidation. Finally, measures aimed at supporting the implementation of the
SAPARD programme are also envisaged (Priority 3), by means of training or
technical assistance.

8.11.

Slovenia

744.

745.

746.

747.

748.

The Slovenian SAPARD plan was declared admissible on 20 April 2000 and, after
negotiations with Commission services and modifications of
the text, was
subsequently adopted by a Commission decision.

The annual allocation for SAPARD in Slovenia for 2000 is EUR 6.4 million. On the
Slovenian side, EUR 3.4 million has been reserved for the national contribution in
2000. The operational plan is based on two major priorities: the improvement of
production and marketing structures in agriculture and food-processing, and
economic diversification and improvement of rural infrastructure.

A major part of the funds is dedicated to investment in agricultural holdings and to
the improvement of processing and marketing of agricultural and fishery products
(75 % of the EU funds).

The two measures on diversification of economic activities and improvement of rural
infrastructure will receive 24 % of EU funds.

The allocation for technical assistance towards implementation of the programme,
including studies, monitoring,
information and publicity campaigns, amounts to
approximately 1 % of the EU funds.

153

9.

INTERNATIONAL RELATIONS

9.1.

International organisations and agreements

9.1.1. World Trade Organisation (WTO)

9.1.1.1. WTO consultations and dispute settlement

749.

A panel was established on 23 July 1998 at the request of the EU to examine Korea’s
definitive safeguard measure on imports of certain dairy products (i.e. an import
quota on skimmed-milk powder preparations). The Appellate Body confirmed the
that Korea had acted inconsistently with the provisions of the
Panel Report
Agreement on Safeguards. On 20 May 2000 Korea revoked the safeguard measures.

9.1.2. Organisation for Economic Cooperation and Development (OECD)

750.

751.

752.

753.

EU Member States account for half of the OECD members and are the major
contributors to the OECD budget. The Commission participates actively in the work
of this organisation, in particular, as far as agriculture is concerned, in the Committee
on Agriculture (COAG).

Core to COAG activities is the annual preparation of a mid-term market prospect for
the main OECD agricultural commodities (the ‘Agricultural Outlook’ report) and the
yearly review of the main developments in agricultural policies of member countries
(‘Agricultural Policies, Markets and Trade in OECD Countries’). A similar review
focuses on the main developments of major non-OECD members, whether transition
economies or emerging countries. These reviews include in particular a calculation
of aggregated estimates of support to farmers and to the agricultural sector, the
so-called PSE database.

Other regular COAG activities address agriculture and trade, agri-environment, rural
development, agricultural structures and statistics,
the Agricultural Knowledge
System (extension, education and research) and international standards (in particular,
certification of seeds and forestry reproductive material). Stocktaking of the past five
years of OECD work on Agri-Environmental Indicators was done in 2000.

As mandated by OECD Ministers of Agriculture in March 1998, the COAG is now
engaged in a substantial and broad-ranging work programme relating to the WTO
negotiations on agriculture. At the end of 2000, a first series of analytical background
material was published. This work covers traditional trade issues such as market
access, domestic support, export competition, although in a more comprehensive
manner than before, thanks to new analyses such as on the use of officially supported
export credits, the trade impact of state trading enterprises, decoupling, impact of
support measures through a matrix evaluation of policies (the Policy Evaluation
such as
Matrix), etc.
multifunctionality, food security, the relationship between trade and environment, the
impact of biotechnology, food quality and appellations of origin, etc.

It also covers concerns going beyond trade issues,

754.

Other OECD bodies are deliberating issues that are of importance to agriculture.
These tend to bear a horizontal character:
regulatory reform, governance,
e-commerce, code for multinational companies, sustainable development and

154

territorial development. In particular, in 2000, at the request of the G8, the OECD
provided a major contribution to the fields of food safety and biotechnology.

755.

All these activities have produced valuable material for the EU, particularly with
regard to the reform process of the agricultural sector and related international
developments. However,
the OECD
negotiation of an Understanding disciplining the use of export credits to agriculture
has so far proved unsuccessful, notwithstanding the commitment made under the
Uruguay Round WTO Agreement on Agriculture.

the Commission was disappointed that

9.1.3. Generalised System of Preferences (GSP)

756.

The provisions of the Council Regulation applying the new multiannual generalised
system of preferences (GSP) for agricultural products entered into force on 1 January
1997. The aim of GSP is to foster the integration of developing countries into the
world economy and the multilateral
trading system. The new scheme grants
preferential access to Community markets to a wide range of agricultural products
from the developing countries, except where those products are the subject of a
market organisation. Products are classified in one of
four categories - each
corresponding to a separate preferential margin - according to their sensitivity.
Inclusion in a category is based on the evaluations which had led to the tariff offer
presented by the European Union in the context of the Uruguay Round.

757.

The four categories are:

–

–

–

–

highly sensitive products, which have a preferential margin of 15%;

sensitive products, which have a preferential margin of 30%;

semi-sensitive products, which have a preferential margin of 65%;

non-sensitive products, which have a preferential margin of 100% and are
entirely free of customs duty.

758.

759.

GSP focuses on the needs of the poorest beneficiary countries by transferring
preferences gradually from the developed to the developing countries.

There is also provision for special arrangements for countries undertaking to abide
by social and environmental standards. GSP coverage of agricultural products was
substantially widened by Council Regulation (EC) No 1256/96 of 20 June 1996155,
with the addition of 527 products and the removal of 64 others. The basic principle is
that GSP should cover all products except those which are the subject of a market
organisation. Additional preferences are also granted to Latin American countries
which commit themselves to combating the production of drugs.

9.1.4. United Nations Food and Agriculture Organisation (FAO)

760.

As a member of the United Nations Food and Agriculture Organisation, the EU took
part in the work of the various bodies belonging to the Organisation, in particular the
meetings of the Committee on Agriculture, the Committee on World Food Security,

155

OJ L 160, 29.6.1996, p. 1.

155

the Committee on Commodity Problems and the Committee on Forestry, presenting
It also
its agricultural policy and setting out
participated in the technical consultations on the revision of the International Plant
Protection Convention (IPPC), which is aimed, inter alia, at bringing the Convention
into line with the Agreement on the Application of Sanitary and Phytosanitary
Measures of the Final Act of the Uruguay Round. The Community also played an
active part in the meetings on food security and, in particular, the implementation of
the code of conduct for the granting of food aid.

its approach to food security.

761.

762.

The Commission took part in the drawing up of FAO's new strategic framework,
which will lay down the policy guidelines for 2000 onwards. The Commission also
played an active role in the FAO's technical contribution to developing countries in
preparation for the talks in the context of the new negotiations within the WTO.

The Commission also contributed to the FAO's discussions on trade-related but
non-commercial issues, such as the multifunctional aspects of agriculture and its
links in less advanced countries.

9.1.5.

International Grains Agreement (IGA)

763.

The Agreement, which was renewed in 1995, consists of two separate legal
instruments: the 1995 Grains Trade Convention and the 1995 Food Aid Convention.
Both were due to expire on 30 June 1998, but their period of validity was initially
extended by one year (until June 1999) to enable the Food Aid Convention to be
renegotiated.

9.1.5.1. Grains convention

764.

The period of validity of the Grains Trade Convention was again extended,
from 1 July 1999 to 30 June 2001.

9.1.5.2. Food Aid Convention

765.

766.

767.

The European Union and its Member states are signatories to the Food Aid
Convention, whose aim is to contribute to world food security and improve the
international community's ability to respond to food emergencies and other food
needs of developing countries.

Renegotiation of the 1995 Food Aid Convention began in 1998 in the context of the
Marrakesh and Singapore Ministerial Decisions.

The text of the Food Aid Convention was approved on 24 March 1999, at a meeting
of the Convention Council working group concerned.

768.

The Convention was applied on a provisional basis from 1 July 1999.

769.

After being adopted by the Council (Decision of 13 June 2000) and Parliament it was
notified to the United Nations and applied outright.

9.1.6.

International Sugar Organisation

770.

The EU has continued to play a full role in the affairs of the International Sugar
Organisation, which is the body responsible for administering the 1992 International

156

Sugar Agreement (ISA). The two major issues dealt with have been the response to
the very low world market prices for sugar and the possible relocation of the ISO
offices.

9.2.

Bilateral and regional trade relations

9.2.1. United States

771.

Negotiations continued on a comprehensive EU/US wine agreement at a meeting in
April 2000. Pursuant to Article 1 of Council Regulation (EC) No 2839/98156 of 17
December 1998, the Commission reported orally to the Agriculture Council in June
2000 on progress in the negotiations with the US. The Council then examined
various aspects of wine trade policy, concluding on a number of issues at the October
Council. The Council reaffirmed its policy designed to the protect consumers by
underpinning the quality of wines placed on the EU market in relation to acceptance
of winemaking practices and the use of geographical names and traditional terms
describing wine. The Council also expressed the general principle that, in the event
of disagreements with trading partners, trade should continue while the dispute was
being resolved. The Commission welcomed these conclusions, while specifying that
the EU's ability to take action for the
nothing in any agreement should limit
protection of health. Following these deliberations with Member States, negotiations
with the US were resumed in December 2000 and at least one more meeting was
scheduled for early 2001.

772. With regard to EU support measures for canned fruit (peaches and pears), annual
bilateral discussions under the existing bilateral arrangement with the US took place
on the level of support for the 2000 marketing year. In December, the Agriculture
Council adopted the new support regime in the sector. This reform abolishes
payments to processors in favour of direct payments to producers. As the mechanism
described in the arrangement with the US applies with respect to payments to
processors, consultations were held with the US in December 2000 to examine the
implications of the reform on the bilateral arrangement.

773.

In the beef hormones and banana trade disputes, the US continued to impose 100 %
ad valorem tariffs on EU exports. The retaliation lists covered a wide range of
products, but focused on pigmeat, fruit
juice, cheese, and fruit and vegetables.
Unsuccessful attempts were made throughout 2000 to agree on an equivalent level of
compensation in the beef dispute in the form of increased access to the EU market
for hormone-free beef and on new banana import measures aimed at stopping
retaliation. The US increased the level of commercial damage applied to the above-
mentioned EU exports that permitted under WTO rules in these disputes by warning
of their readiness to alter the lists of products subject to 100 % tariffs.

774.

In the Foreign Sales Corporation tax dispute, the WTO Appellate Body ruled in
February 2000 in favour of the EU that the US scheme provided tax reductions
including under the
dependent on export which were contrary to WTO rules,
Agriculture Agreement. While seeking to negotiate a solution compatible with WTO
obligations, the EU reserved its right to impose retaliatory measures, if necessary, on

156

OJ L 354, 30.12.1998, p. 12.

157

775.

776.

industrial and agricultural products up to a value of USD 4 043 million and notified
the WTO thereof in November 2000.

The Commission followed closely the continued expansion of trade-distorting US
farm subsidies and surplus disposal mechanisms. With the package approved by the
US in June 2000, farm payments had increased sevenfold in four years, exceeding by
a factor of 300 % the amounts paid per farm in the EU. These developments have
informed the Commission's position in the WTO negotiations under the Agriculture
Agreement.

In July 2000 a WTO panel ruled that a US safeguard action in the form of a
quantitative limit on imports of wheat gluten, particularly from the EU, was
incompatible with WTO rules. The US appealed against the ruling: the decision of
the Appellate Body was expected by January 2001 at the latest. With regard to US
measures to manage the quota in a restrictive and discriminatory manner,
the
Commission registered its dissatisfaction with the US actions in various bilateral
forums, under the New Transatlantic Agenda (NTA), the Transatlantic Economic
Partnership (TEP) and at the EU/US Lisbon Summit in May. In December 2000 the
Cereals Management Committee delivered a positive opinion on a Commission
proposal to adopt the necessary implementing regulation, as required under Council
Regulation (EC) 1804/98157 of 14 August 1998, should the US fail to lift the quota in
compliance with WTO obligations and procedures. The regulation will enable
trading concessions withdrawn by the US in respect of wheat gluten to be rebalanced
through the application of an EUR 5 per ton tariff on the import of corn gluten feed
from the US, up to a quantity of 2 730 000 tons.

777.

The Corn Gluten Feed Monitoring Group continued to meet regularly.

778.

Regular exchanges of views between the US and the Commission were held on the
implications of concerns about the use of genetically modified products for trade in
agricultural products.

9.2.2. Canada

779.

780.

Discussions concerning trade in wine and spirits with a view to consideration of an
EU/Canada agreement were held, specifically at
the Joint Cooperation Council
meeting in November and at the EU-Canada Summit in December. The talks focused
on protection of the use of names, on the use of oenological practices, on
certification requirements, particularly for certain quality wines with a high alcohol
content, and on the trading conditions applied by Canadian alcohol monopolies.

In the beef hormones dispute, Canada continued to impose 100 % ad valorem tariffs
on CAD 11.3 million of EU exports, including pigmeat and fruit and vegetables.
Attempts to agree an equivalent
level of compensation to bring an end to the
retaliation were unsuccessful.

157

OJ L 233, 20.8.1998, p. 1.

158

9.2.3. Mexico

781.

782.

A Free Trade Agreement between the EU and Mexico entered into force on 1 July
2000. Mexico has also given a commitment to negotiate a wine agreement with the
EU.

A series of lists outlines the different ways in which various agricultural products
will be administered, from immediate elimination of duties, to elimination of duties
between three and ten years after entry into force. The EU will benefit in particular
from Mexican liberalisation for wines, spirits, and olive oils. The EU will grant
limited partial liberalisation quotas to Mexico for certain cut flowers, eggs and
albumin, honey, fruit, vegetables, orange juice and pineapple juice and a transitional
immediate or early liberalisation to EU
quota for avocados. Mexico will grant
exports for most of these products. Both parties have a waiting list of sensitive
products that they cannot liberalise at this stage, subject to future review. (Bananas,
sugar, beef, dairy products, rice, maize, sweet corn, starches and many fruits and
vegetables are among the products on the EU reserve list). Essential elements of the
CAP, including the EU entry price system and export refunds have been maintained.
The agreement also includes a protocol on rules of origin, which sets out the
requirements for eligibility for originating status for the various products.

9.2.4. Mercosur and Chile

783.

the
In July 1998 the Commission adopted draft proposals for directives for
negotiation of an association agreement between the European Union and Chile. The
draft was approved by the Council on 13 September 1999. The directives state that:

–

–

–

–

the parties are to give confirmation of their common objective of gradual
mutual liberalisation of trade in goods and services as a whole with a view to
the introduction of free trade and taking into account the sensitiveness of
certain products and sectors in accordance with WTO rules;

in the second half of 1999 the parties are to begin concertation on the round of
multilateral negotiations in the context of the WTO and on the preparation of
the forthcoming negotiations. The concertation could well cover a number of
issues and include regular talks on agriculture, trade and services;

the parties are to begin negotiations immediately on non-tariff matters;

the process of negotiation on tariff reductions and on services is to begin
on 1 July 2001, the said negotiations being conducted and concluded in the
light of the results of the WTO round and the anticipated timetable for the Free
Trade Area of the Americas. They are expected to be concluded after the WTO
round.

784.

In 2000 the Commission took part in two sets of meetings with Mercosur and Chile
respectively (6-7 April
in Santiago and 13-16
in Buenos Aires, 10-11 April
and 20-23 June in Brussels). A third set of meetings was held in Brasilia and
Santiago in November 2000.

785.

In the case of agriculture this gave rise to exchanges of technical information in
preparation for tariff negotiations in 2001.

159

9.2.5.

South Africa

786.

787.

The Agreement on Trade, Development and Co-operation (TDCA) between the EU
and South Africa (SA) entered into force on a provisional basis on 1 January 2000.
Details on parallel wine and spirits agreements still remain to be settled.

The agriculture part of the TDCA involves various degrees of trade liberalisation,
ranging from immediate liberalisation to liberalisation over longer periods of up to
10 years by the EU (up to 12 years by SA). Both parties also have a ‘reserve list’ of
sensitive products that they exclude from liberalisation for the moment. Bananas,
sugar, beef, rice, maize, sweet corn, starches and many fruits and vegetables are
among the products on the EU reserve list. SA excluded products such as fresh
meats, dairy products, some cereals and sugar products. The reserve lists will be
subject to future review. For certain products which are to be liberalised, but not
immediately, some preferential transitional quotas will be introduced with immediate
effect (the EU will benefit from such quotas on certain wines, SA will benefit on
certain cheeses, cut flowers and wines).
the EU allowed partial
liberalisation for some of the Community's other sensitive products, such as some
citrus fruits, canned fruit, juices, cut flowers and wines, some of which featured on
the original Council Mandate exclusion list. This was in the form of tariff quotas,
generally limited to levels of recent imports from SA. In return, SA offered the EU
some reciprocal tariff quotas in the cheese sector. Tariff quotas have in-built growth
factors. Essential elements of the CAP, including the EU entry price system and
export refunds, have been maintained. The agreement also includes a protocol on
rules of origin, which sets out the requirements for eligibility for originating status
for the various products.

In addition,

9.2.6.

Japan and South Korea

788.

Relations with Japan and South Korea continued to be centred on market access and
deregulation issues, particularly in relation to continued removal of trade barriers in
the areas of plant and animal health. Progress was evident in a number of areas,
particularly stabilisation of the pigmeat trade, following an exchange of letters
between Commissioner Fischler and the Japanese Minister for Agriculture.

9.2.7. New Zealand

compliance with the

789. With regard to dairy imports under reduced tariff arrangements, further clarification
of the technical parameters and control mechanisms (in particular for New Zealand
butter exports requested by New Zealand) will soon allow a stricter verification of
full
corresponding
implementing legislation was adopted and implemented on 1 July 2000. At the
request of the European Union, the New Zealand MAF, Food Assurance Authority,
took over responsibility for the issuing of compliance certificates (JMA1) from the
New Zealand Dairy Board with a view to ensuring that conflicts of interest are
avoided.

respective quota

conditions. The

9.2.8. Mediterranean countries

790.

New association agreements are being negotiated under the Euro-Mediterranean
Partnership concluded with the EU's Mediterranean partners at
the Barcelona
conference in 1995. The agreements replace the cooperation agreements dating back

160

to the 1970s. The new agreements, which are aimed at stepping up trade, provide for
reciprocal trade concessions on agricultural products. The negotiations with Israel,
Morocco and Tunisia were concluded in 1995, those with Jordan and the Palestinian
Authority in 1997. The negotiations with Egypt were concluded in 1999, but the
agreement has not yet been initialled by Egypt. The negotiations with Algeria, the
Lebanon and Syria are proceeding.

The agreement with Tunisia entered into force in 1998, those with Morocco and
Israel in 2000, although the reciprocal agricultural concessions agreed with Israel and
some provisions of the new agreement with Morocco entered into force early. The
reciprocal agricultural concessions agreed with the Palestinian Authority entered into
force provisionally in 1997.

The agricultural chapter of the agreements with Morocco, Tunisia and Israel is, under
the terms of those agreements, subject to a review aimed at achieving greater
liberalisation of trade. The negotiations concerned were concluded at the end of 2000
in the case of Tunisia, are proceeding in the case of Israel and have yet to begin in
the case of Morocco.

For Turkey new arrangements have been applicable to agricultural products
since 1998. Under those arrangements the preferential regime is extended to Turkish
goods imported into the EU and there are concessions for Community agricultural
products exported to Turkey.

Malta and Cyprus are in a pre-accession phase, in which their agricultural policy is
being adapted in the light of the body of EU law.

In the case of Malta there has been no substantial progress on the legal set-up,
administrative structures or the rules governing market organisations. While there is
monitoring of the veterinary aspects the provisions governing slaughterhouses are
not yet in line with established EU law and practice.

There has been substantial progress in adapting Cyprus' agricultural policy,
in
particular with regard to the abolition of state monopolies and neighbouring reforms.
improvements are also required in the operation of market
A number of
organisations. Transposal of the established body of EU law and practice remains
patchy, in particular with regard to inspection at frontiers.

791.

792.

793.

794.

795.

796.

161