The agricultural situation in the European Union - 2002 Report - Report in conjunction with the General Report on the Activities of the European Union - 2002 - Brussels and Luxembourg, 2003
Date: 2004-01-08
Institutions: European Commission
Subjects: EU Member State, activity report, agricultural situation

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 8.1.2004
COM(2003) 852 final

The agricultural situation
in the European Union

2002 Report

Report in conjunction with the
General Report on the Activities of the European Union – 2002

BRUSSELS AND LUXEMBOURG, 2003

EN

  EN

TABLE OF CONTENTS

1.

1.1.

1.2.

1.3.

1.4.

1.5.

1.6.

2.

2.1.

2.2.

2.3.

2.4.

2.5.

2.6.

2.7.

2.8.

2.9.

ECONOMIC SITUATION AND FARM INCOMES .................................................................. 4

Overview ...................................................................................................................... 4

Production .................................................................................................................... 8

Producer prices and market prices ............................................................................. 11

Input prices................................................................................................................. 14

Farm income............................................................................................................... 14

Farm accountancy data network (FADN) .................................................................. 22

POLICY DEVELOPMENTS AND LEGISLATIVE INITIATIVES IN 2002................................. 28

Mid-Term Review of the CAP................................................................................... 28

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

Organic farming ......................................................................................................... 31

Promotion of agricultural products ............................................................................ 32

Simplification of agricultural legislation ................................................................... 32

State aid...................................................................................................................... 34

Assistance to the needy .............................................................................................. 43

Outermost regions ...................................................................................................... 43

Information measures concerning the CAP ............................................................... 44

2.10.

Information and communication technology ............................................................. 46

2.11.

Advisory committees and relations with bodies representing the EU socio-
professional sector...................................................................................................... 47

3.

3.1.

3.2.

4.

MARKET DEVELOPMENTS............................................................................................ 49

Crop products ............................................................................................................. 49

Livestock products ..................................................................................................... 76

AGRIMONETARY ARRANGEMENTS ................................................................. 88

4.1.

Developments in 2002................................................................................................ 88

5.

5.1.

5.2.

5.3.

5.4.

RURAL DEVELOPMENT IN 2002 ................................................................................... 89

Belgium ...................................................................................................................... 89

Denmark ..................................................................................................................... 90

Germany..................................................................................................................... 91

Greece ........................................................................................................................ 92

2

 
5.5.

5.6.

5.7.

5.8.

5.9.

Spain........................................................................................................................... 93

France......................................................................................................................... 94

Ireland ........................................................................................................................ 95

Italy............................................................................................................................. 96

Luxembourg ............................................................................................................... 97

5.10.

Netherlands ................................................................................................................ 97

5.11.

Austria ........................................................................................................................ 98

5.12.

Portugal ...................................................................................................................... 99

5.13.

Finland...................................................................................................................... 100

5.14.

Sweden ..................................................................................................................... 101

5.15.

United Kingdom....................................................................................................... 101

6.

6.1.

6.2.

7.

7.1.

7.2.

7.3.

8.

ENVIRONMENT AND FORESTRY ................................................................................. 103

Environmental measures .......................................................................................... 103

Forestry measures..................................................................................................... 104

FINANCING OF THE CAP IN 2002 ................................................................................ 106

EAGGF Guarantee Section ...................................................................................... 106

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

Evaluation ................................................................................................................ 118

ENLARGEMENT.......................................................................................................... 119

8.1.

Main developments .................................................................................................. 119

9.

9.1.

9.2.

INTERNATIONAL RELATIONS ..................................................................................... 123

International organisations and agreements ............................................................. 123

Bilateral and regional trade relations ....................................................................... 129

3

 
1. 

ECONOMIC SITUATION AND FARM INCOMES

1.1. 

Overview

1. 

The 2002 agricultural year was mainly characterised by the following developments:

(a)

(b)

(c)

(d)

level  of  global  economic  recovery,  with 

generally  disappointing 
the
international  situation  suffering  from  an  atmosphere  of  uncertainty  brought
about by  the  combined  effect  of  geopolitical  tensions,  negative  developments
in the equity markets and uncertainty about the true state of the economy and
the corporate sector;

a  sharp  rebound  in  oil  prices  over  the  course  of  2002,  back  to  around  the
relatively high levels of the first half of 2001;

a  deterioration in  investor confidence  which,  combined  with  rising  oil  prices,
eroded purchasing power and led to private consumption in the EU increasing
only marginally in 2002;

a  noticeable  recovery  in  the  cattle  sector  from  the  recent  BSE  and  foot  and
mouth  disease  crises,  with  a  significant  improvement  in  beef  and  veal
consumption,  and  with  prices  in  the  sector  increasing  by  more  than  6%  on
average. The recovery in the beef sector resulted in prices for pig meat during
2002 being well down on the exceptionally high prices of 2001 and those for
poultry  meat  also  being well down on corresponding 2001 prices  for  most  of
the year;

(e)

generally  favourable  weather  conditions  over  the  course  of  the  agricultural
year, except for the severe floods during the summer in some Member States,
leading to the second largest cereals harvest ever apart from that of 2000.

A limited recovery in global trade growth in 2002 helped overall EU exports improve
slightly on 2001 levels. However the situation was less positive for EU agricultural
exports,  which  faced  increased  competition  from  third  countries  especially  in  the
cereals  sector,  where  non-traditional  exporters  in  the  Black  Sea  area  had  a  large
impact on the markets in 2002, although meat sector exports improved considerably
from the previous year’s levels when trade restrictions due to animal disease scares
hit exports. The strengthening of the euro during 2002 also acted to restrain the level
of EU agricultural exports.

According to initial estimates at the end of 2002, farm incomes (measured as real net
value added at factor cost per annual work unit) for the European Union as a whole
fell by 3.0% in real terms in 2002, in contrast to the large increases of 2000 and 2001
(when real incomes  rose 4.4% and  6.1% respectively, according  to  the  most  recent
figures)  and  against  a  background  of  a  significant  further  decline  in  overall
agricultural  labour  (down  2.9%  on  2001).  Despite  this  fall  in  income,  the  average
farm  income  in  2002  still  remains  some  25%  higher  than  that  of  the  early  1990s.
Underlying the drop in income for 2002 was a sharp fall in the prices of many crop
and  animal  products,  which  more  than  offset  the  increase  in  the  volume  of
production.  This  was  especially  true  for  animals  and  animal  products  such  as  pig
meat, poultry and milk, which all exhibited a sharp drop in real average prices, but
was  also  the  case  for  cereals,  oilseeds  and  potatoes.  However,  as  usual,  these  first
estimates should be treated with some degree of caution.

4

2. 

3. 

 
4. 

5. 

6. 

7. 

In terms of weather,  the 2002  agricultural  year  got  off  to  a  good start  with  autumn
2001  field  preparation  and  sowing  of  winter  cereals  and  rapeseed  occurring  under
conditions which were almost optimal and generally much more favourable than for
the  previous  year,  particularly  so  in  France  and  the  UK.  While  the  autumn  period
ended  with  unseasonably  cold  weeks  across  Europe  in  December  and  in  January
2002,  raising  some  concern  for  frost  damage,  the  subsequent  conditions  during  the
winter  season  were  generally  favourable,  with  mainly  higher  than  average
temperatures and a favourable spell for spring crop sowing preparations.

During  spring  2002  the  climatic  conditions  were  as  a  whole  satisfactory  for  crop
growth  and  farming  operations.  The  Iberian  Peninsula,  the  South  of  Italy  (with  the
exception  of  Sicily)  and  Greece  received  good  levels  of  rainfall,  allowing  partial
replenishment  of  water  reserves  and  with  a  resulting  potential  impact  on  durum
wheat  production.  Higher  than  seasonal  temperatures  at  the  end  of  April  and  May
boosted crop development especially in central and northern countries, while in the
Mediterranean  areas  a  wave  of  peak  temperatures  in  June  boosted  summer  crop
growth.

The  situation  generally  worsened  in  July  and  August  with  excessive  rain  in  many
central European Member States, especially in Germany and Austria. This resulted in
saturated  soils  and  flooding,  hampering  straw  cereals  harvesting  operations  or
causing local damage in many areas and leading to loss of harvest and grazing land.
For England, France and Spain, July harvesting operations were on the whole more
favourable  than  in  2001,  and  in  contrast  to  the  situation  in  Germany  and  Austria,
favourable conditions for summer crop development were experienced in many parts
of France, Italy and Spain. Late summer was generally favourable for summer crops,
with drier and warmer conditions in northern areas and cooler, wet conditions in the
Mediterranean  regions,  but  this  was  followed  by  abundant  rain  and  cooler  than
normal temperatures in October which partially affected field operations such as late
potato harvesting and initial sugar beet harvesting in northern countries.

Domestic consumption for cereals is estimated to have risen to close to 192 million
tonnes in 2002/03 (up some 2 million tonnes on 2001/02), driven by an increase in
human consumption (up 1.2 million tonnes) and a rise of around 1 million tonnes in
the  use  of  cereals  for  animal  feed,  mainly  due  to  relatively  low  cereals  prices
compared  to  oilseeds  in  2002.  For  beef  and  veal,  consumption  is  expected  to  have
recovered  strongly  in  2002.  Following  the  strong  falls  recorded  at  the  end  of  2000
and  the  start  of  2001,  beef  consumption  recovered  gradually  over  the  subsequent
period, and current estimates put total consumption for 2002 at 7.5 million tonnes, an
increase  of  11.3%  on  the  2001  level.  Pig  meat  consumption  in  2002  remained  at
more-or-less  the  same  level  as  in  2001  (around  16.5  million  tonnes),  following  on
from the slight increase seen last  year, while poultry meat consumption, which  had
benefited  most  from  the  last  BSE  scare  and  increased  by  over  3%  in  2001,  is
expected  to  have  decreased  slightly  in  2002  (down  1.7%  on  last  year)  due  to  the
recovery in beef consumption. Lastly, while butter consumption remained more-or-
less  unchanged  from  2001,  consumption  of  cheese  continued  its  upward  trend,
growing  by  1.4%  in  2002,  although  this  rise  is  slightly  below  the  trend  of  recent
years.

8. 

the  general  economic  scene,  global 

recovery  was  somewhat
Concerning 
disappointing during 2002. At the beginning of the year vigorous global growth had
been expected, following significant policy stimulus after the events of 11 September

5

 
9. 

10. 

11. 

12. 

2001  and  a  widespread  loosening  of  monetary  policy.  However,  an  atmosphere  of
uncertainty brought about by the combined effect of geopolitical tensions especially
in  the  Middle  East,  which  led  to  higher  oil  prices  over  the  course  of  the  year,  the
negative developments in equity markets and uncertainty about the true state of the
economy  and  the  corporate  sector  undermined  confidence  and  led  to  subsequent
weakness in the recovery, with the  result that  world GDP  growth  is  expected  to be
only  2.6%  for 2002.  Following its contraction in  2001,  the  first in  20  years,  global
trade growth is expected to have recovered to around 2% in 2002.

In  line  with  global  developments,  recovery  in  the  EU  began  in  the  first  quarter  of
2002  but  failed  to  pick  up  over  the  rest  of  the  year.  Consequently,  the  overall
recovery  was  much  slower  than  foreseen, with  the  average  growth  rate  in  the  euro
area  expected  to  have  attained  a  level  of  only  0.8%  in  2002.  At  the  same  time
increases in food and oil prices eroded purchasing power, with a shortage of demand
as a consequence. This, combined with a deterioration in investor confidence and an
increase in the household savings rate, resulted in overall private consumption in the
euro area increasing by only about 0.6% in 2002. Concerning inflation, this declined
only slowly during 2002, with the inflation rate for the year expected to be 2.3% on
average in the euro area (slightly down from last year’s rate of 2.5%).

Compared to the level of recent years oil prices were fairly low at the start of 2002
(around $20/bl for Brent oil), but generally increased over the course of the year back
to around the levels of the first half of 2001. Brent oil prices initially peaked at above
$29/bl  at  the  end  of  September,  reflecting  fears  of  an  oil  supply  disruption  in  the
event  of  war  with  Iraq,  then  fell  to  around  $23/bl  by  mid-November  before  rising
again, driven by a disruption in supplies from Venezuela, to break through the $30/bl
level  by  late  December.  On  the  currency  front,  following  on  from  last  year’s
historically weak levels against the US dollar, the euro strengthened somewhat over
the course of the year and by November had regained parity with the dollar.

Developments  in  international  agricultural  markets  were  somewhat  mixed  in  2002,
with  international  prices  for  most  cereals  recovering  noticeably  during  the  year,
mainly due to low output levels  in some key producer countries and in  light of  the
smallest  expected  global  cereal  crop  since  1995,  while  on  the  whole  international
prices for meat fell. However, international prices for most cereals weakened towards
the  end  of  the  year,  as  several  countries  not  traditionally  known  as  exporters  took
advantage  of  their  recent  good  harvests  and  the  drop  in  exportable  supplies  from
traditional exporting countries to make more of their production surpluses available
for export.

International wheat and coarse grain prices (based on US prices) increased noticeably
from the middle of the year onwards to exceed the price levels of the previous year,
driven by mounting evidence of lower  exportable grain supplies in traditional grain
exporting countries. The steepest price rises were observed for North American and
Australian  cereals,  where  drought  caused noticeable declines in  output  in  2002.  By
September prices for good quality US milling wheat  were up nearly 50% on prices
one  year  earlier,  and  with  price  rises  for  US  soft  wheat  not  far  behind.  However,
although  remaining  noticeably  higher  than  one  year  earlier,  wheat  prices  fell  back
over  the  latter  part  of  the  year  due  to  the  large  surpluses  available  for  export  at
relatively  cheap  prices  in  non-traditional  exporting  countries  such  as  the  Russian
Federation,  Kazakhstan  and  the  Ukraine.  Maize  prices  showed  similar  behaviour
over  the  course  of  2002,  with  prices  rising  initially  mainly  due  to  worsening  crop

6

 
13. 

14. 

15. 

16. 

conditions  in  the  United  States  and  with  September  export  prices  for  US  maize  up
some 28% on those one year earlier. Nevertheless, in the latter part of the year lower
world  import  demand  together  with  large  supplies  of  feed  wheat  and  of  maize  in
several  non-traditional  exporting  countries  acted  to  alleviate  to  a  certain  extent  the
upward pressure on maize prices. In contrast to the cereals markets, large supplies in
the major exporting countries acted to keep prices for rice under downward pressure.

In  the  meat  markets,  overall  international  prices  fell  in  2002.  This  development  in
prices  was  mainly  a  result  of  rising  levels  of  supply,  especially  in  those  countries
previously subject to meat export restrictions in 2001, the reduced effects on markets
of  animal  diseases  and  the  effect  of  exchange  rate  movements  in  2002  on  South
American meat exports. Concerning the specific meat markets, abundant supplies of
poultry and pig meat led to prices for these falling noticeably from 2001 levels, while
beef  prices  and  especially  sheep  meat  prices  increased  somewhat,  the  latter  due  to
strong  demand  and  reduced  output  in  developed  countries,  especially  Australia.
International  prices  for  dairy  products  fell  for  most  of  the  year  but  recovered
somewhat in the latter  part of 2002 as a  result of  a  decline  in supplies in Australia
and  South  America.  By  November  prices  of  all  dairy  products  had  shown  some
recovery,  with  milk  powder  prices  showing  the  greatest  rise  and  with  butter  and
cheese  prices  rising  less  noticeably.  Nevertheless,  prices  of  all  dairy  products
remained well below those twelve months earlier.

The  performance  of  the  European  Union  on  world  agricultural  markets  has  again
been somewhat mixed in 2002. The disappointing level of global recovery in 2002,
the  strengthening  of  the  euro  and  the  continued  strong  competition  from  third
countries  especially  in  the  cereals  sector  all  had  a  restraining  effect  on  EU
agricultural exports. However, a very positive development was the strong recovery
in meat exports from the crisis-hit levels of the year before.

In the first nine months of 2002 the overall value of Community agricultural exports
was marginally down (by around 0.8%) on the same period in 2001. Cereal exports
fell  heavily  in  2002,  by  some  16%  in  volume  and  15%  in  value  (in  euro  terms),
mainly due to the continuing impact of increased competition from exports by third
countries and especially the republics of the Former Soviet Union. (The latter was so
pronounced that while EU cereals exports fell, EU imports of cereals almost doubled
in  value  compared  to  the  same  period  in  2001).  Large  falls  in  the  value  of  exports
were  also  recorded  for  animal  feedstuffs  (down  13%),  sugar  (down  42%)  and
skimmed  milk  powder  (down  37%),  although  for  the  latter  developments  over  the
last  quarter  of  2002  may  result  in  final  figures  for  2002  showing  a  much  smaller
reduction. In contrast, significant rises in the  value of exports occurred for  rice  (up
42%), vegetables (up 18%), potatoes (up 37%) and olive oil (up 21%). Although less
pronounced, increases were also recorded for fruit (up 7%) and wine (up 6%).

Concerning  meat  exports,  the  volume  of  exports  in  the  first  nine  months  of  2002
showed  a  marked  improvement  compared  with  the  same  period  the  previous  year,
when the impact of the BSE and foot and mouth disease crises virtually halted for a
certain period EU exports of  meat  products. Over  the  period mentioned, exports  of
beef and veal rose by around 8% in both volume and value, while those for pig meat
and poultry meat rose markedly in volume (by 23% and 21% respectively) although
much  less  so  in  terms  of  value  (by  4%  and  7%  respectively).  Concerning  dairy
products,  while  skimmed  milk  powder  exports  for  the  first  nine  months  fell  as
mentioned previously, the value of butter and cheese exports rose (up 8% and 1.4%

7

 
17. 

18. 

respectively)  for  the  same  period,  reflecting  the  rise  in  export  volumes  for  these
products (of 20% for butter and 4% for cheese).

On the whole, intervention stocks for most of the main agricultural products covered
by  the  intervention  scheme  increased  in  2002.  For  cereals,  intervention  stocks
increased from around 7.0 million tonnes at the start of  2002 to around  8.0  million
tonnes in early January 2003. Underlying this, however, were quite  wide variations
in changes in the stock levels for individual cereals. While wheat stocks were further
run down during 2002, down to around 0.41 million tonnes by January 2003 from a
level of 0.61 million tonnes in January 2002, over the same period stocks of barley
increased  from  1.8  to  2.3  million  tonnes,  and  stocks  of  rye  continued  the  rise  of
previous  years,  increasing  from  4.6  to  5.3  million  tonnes  and  remain  a  cause  for
concern. However, the situation for rye is expected to improve since production fell
in 2002 and is foreseen to decline further in 2003.

Important  increases  in  stocks  also  occurred  for  dairy  products  during  2002.
Intervention  stocks  of  milk  powder,  which  had  been  completely  run  down  by
October  2000  and  remained  so  during  2001,  started  up  again  in  March  2002  and
increased sharply from then onwards to reach a level of just under 147 000 tonnes by
the  end  of  September.  However,  by  January  2003  stocks  had  been  reduced  back
down to around 109 000 tonnes, thanks to a surge in exports in the latter part of the
year.  Butter  stocks  also  increased  substantially  in  2002,  rising  from  just  under
86 000 tonnes  at  the  start  of  the  year  to  reach  a  level  of  186 000  tonnes  by  early
January  2003.  Further  developments  worthy  of  note  were  the  increase  in  wine
alcohol  stocks  from  2.2 million  hectolitres  in  December  2001  to  3.6  million
hectolitres  twelve  months  later,  and  the  reduction  in  beef  intervention  stocks  by
around 65 000 tonnes during 2002. Finally, in accordance with policy developments
in  the  sector,  public  stocks  of  olive  oil  were  phased  out  to  become  non-existent
during 2002.

1.2. 

Production

1.2.1.  Crop production

19. 

Latest  estimates  indicate  overall  cereal  production  in  2002  at  around  210  million
tonnes, more than 10 million tonnes (or about 5%) higher than last year’s crop, and
the second highest crop ever after that of 2000. The biggest production increases are
expected in France (up some 9 million tonnes), Spain (up 4 million tonnes), and the
UK (up 4 million tonnes), although production in Germany is expected to have fallen
(down 6.5 million tonnes from last  year’s bumper crop level), so that  in  contrast to
2001 France once again became, as usual, the largest EU straw cereal producer. Most
of the overall rise in production is due to an increase in the  common wheat harvest
(up about 10.9 million tonnes, or 13%, compared to last year). Durum wheat and oats
productions are also expected to be up on last  year, rising to 9.8 million tonnes (up
around  21%)  and  7.2  million  tonnes  (up  15%)  respectively.  In  contrast,  barley
production  is  expected  to  remain  more-or-less  at  last  year’s  levels,  while  maize
production  declined  slightly  (down  2.7%  on  2001)  and  rye  production  should
decrease significantly (by 24%) to around 4.7 million tonnes, driven by a 1.5 million
tonne  decrease  in  production  in  Germany.  For  rice,  a  small  decrease  in  production
was more than compensated for by higher milling yields, so that production in milled
equivalent (about 1.6 million tonnes) rose by 5% compared to the previous year.

8

 
20. 

21. 

22. 

23. 

24. 

25. 

26. 

The overall rise in cereals production reflects an increase in both area under cereals
and  in  the  yields  for  2002.  The  total  area  under  cereals  increased  by  2.4%  (almost
1 million ha) compared to the previous year, due for the most part to the rise in area
allocated  to  common  wheat  production  (up  around  8%  to  14.1  million  ha).  Areas
allocated  to  growing  durum  wheat  and  oats  also  rose  slightly  (between  4  and  6%),
while, in contrast, barley, maize and rye areas all fell.

Latest  estimates  show  average  cereal  yields  up  2.9%  compared  to  last  year,  at
5.6 tonnes/ha,  with  average  yields  for  common  wheat  (up  4.3%),  durum  wheat  (up
16.1%) and oats (up around 10%) showing the largest increases. In contrast, average
yields  for  barley  and  maize  were  only  slightly  up  on  2001  (up  around  2%  and  1%
respectively),  while  those  for  rye  fell  markedly  (by  around  15%).  However,  the
pattern of crop yield variation differs greatly from one Member State to another. For
example, while soft wheat yields rose appreciably in Spain (up 32%), and to a lesser
extent in France (up 12%) and the United Kingdom (up 13%), following last year’s
poor results, they fell significantly in Germany (by around 13%) and Ireland (by 5%)
as  a  result  of  less  favourable  weather  there  than  in  2001.  The  return  to  a  more
favourable  climatic  situation  in  Greece,  Spain,  France  and  Italy  compared  to  the
previous year largely accounts for the marked rise in average yields for durum wheat.

Following  an  overall  decrease  in  area  (down  5%  on  2001)  total  oilseed  production
(rape,  sunflower  and  soya)  should  be  slightly  down  on  last  year  (by  around  2%  at
12.9 million tonnes), despite a rise in yields (up 3% to 2.6 t/ha). The overall fall in
production is also despite an increase in rapeseed production (up 3%), itself a result
of a larger cultivated area (up 2% overall, mainly due to a 14% increase in rapeseed
area  in  Germany)  and  marginally  higher  average  yields  (up  1%).  In  contrast,
sunflower  production  fell  by  around  6%,  resulting  from  an  11%  drop  in  total  area
(driven mainly by a 12% decrease in area in both France and Spain) and despite a 6%
improvement in yields compared to last year. Soya production for 2002 was heavily
down on 2001 (by 26%) as a result of a sharp 27% drop in cultivated area.

The dramatic decline in linseed  area observed over  recent  years continued in 2002,
with total EU area  falling a further 43% to around 62 000 ha, driven by significant
falls in area in Germany and the United Kingdom. With yields more-or-less the same
as in 2001, overall production decreased in line with the decline in area, falling from
136 000 tonnes in 2001 to 79 000 tonnes in 2002. While protein crop area remained
unchanged from last year, a significant improvement in the average yield (up 6% on
2001) led to a rise in total output to 4.1 million tonnes (up 5%).

EU sugar production in 2002 is estimated to have increased by around 9% relative to
2001’s exceptionally low level. This was mainly the result of a recovery in average
yields  from  the  poor  levels  of  the  year  before,  driven  by  large  expected  yield
increases in France, Ireland, Italy, and the UK. The good amounts of rain received in
summer, especially in southern areas, and the good climatic conditions in September
boosted 2002 yield levels, although the main producing areas in Germany were later
affected by excessive rain in October which disrupted harvest operations there.

Olive  oil  production  is  expected  to  be  significantly  higher  in  2002,  up  some
0.5 million  tonnes  compared  to  the  previous  year  (an  increase  of  around  25%  on
2001) and continuing the rising trend in production seen over recent years.

Early  estimates  indicate  only  a  very  marginal  increase  in  fruit  production  for  2002
(up  0.6%  on  2001),  while  production  of  fresh  vegetables  remained  essentially

9

 
unchanged from the levels of the previous year. In contrast to last year’s marked fall
in  production,  which  was  mainly  due  to  poor  weather  conditions  in  2001  affecting
yields, potato output is estimated to have recovered slightly in 2002, rising by 1.8%
compared to 2001.

27. 

Preliminary estimates show wine and must production in 2002 having fallen slightly
to around 158–160 million hectolitres, approximately 3% below the previous  year’s
level, and remaining well down on the exceptional harvest of 1999 (of 186.5 million
hectolitres).  2002  production  in  both  France  and  Italy  (down  around  5%  and  12%
respectively  on  2001)  was  affected  by  adverse  weather  conditions,  in  particular
heavy  rains  in  southern  France,  which  destroyed  some  vineyards.  Significant
production  falls  are  also  expected  in  Greece  and  Portugal.  By  contrast,  wine
production is estimated to have risen markedly in Germany (by 19%) and Spain (by
7–10%) in 2002 following the large declines the year before.

1.2.2.  Animal production

28. 

29. 

30. 

31. 

Beef and veal production in 2002 remained strongly influenced by the disturbances
of recent years. The low prices which became a feature of the market from  autumn
2000 onwards and which persisted for most of 2001, together with an atmosphere of
uncertainty linked to weak and  volatile demand, seems to have  led  to a subsequent
reduction in production capacity. On top of this, the special measures decided on in
June 2001 to stabilise the market are expected to have further reduced incentives for
production.  As  a  consequence,  recovery  in  beef  and  veal  production  in  2002  is
expected to have  been  somewhat  limited,  with  net  production  in  2002  estimated  to
reach 7.5 million tonnes, an increase of only 2.9% on last year’s level and still some
3% down on levels in 1999.

Following  the  stabilisation  in  production  in  2001,  current  estimates  indicate  a
marginal increase in pig meat production for 2002 to around 17.7 million tonnes, just
1% higher than that for 2001. The overall  development of EU production has been
strongly influenced by the reduction in capacity which took place over recent  years
in three Member States (due to the build-up of environmental pressures in  Belgium
and the Netherlands, and to the 2001 foot and mouth epidemic in the UK), where the
size of the pig herd is now about 10% lower than in 2000, and which were unable to
respond to the positive price situation observed in 2000 and part of 2001. As a result,
overall  production  for  2002  remained  down  by  about  1.5%  on  the  peak  levels  of
1999.

Following the increase in poultry meat production in 2001 (up 1.9% on 2000), which
mainly resulted from the switch in demand  away  from  beef following  the  last  BSE
scare  and  which  mostly  benefited  the  poultry  sector,  production  of  poultry  meat
decreased slightly in 2002 (down 0.5% compared to 2001). The downturn in growth
was partly due to increased competition in the sector from countries such  as Brazil
and Thailand as well as the recovery in demand for beef.

Production  of  sheep meat  and  goat meat in 2002 is expected to  have  only  partially
recovered  from  the  dramatic  fall  seen  last  year  (when  production  fell  9.4 %
compared to 2000), to reach around 1.03 million tonnes (up just 1% on 2001). This
follows on from the severe disruptions experienced in the sector in  2001,  when the
outbreak  of  foot  and  mouth  disease  in  the  United  Kingdom  and  in  some  other
European countries led to large losses through culling as well as limitations on trade.
The limited extent of the subsequent recovery in production in 2002 was mainly due

10

 
to re-stocking of the sheep herd in the UK, which led to retention of female lambs for
breeding. While the situation in the sector did improve slightly in 2002, overall EU
production levels remain well down on the highs of the early 1990s.

1.2.3.  Milk and dairy production

32. 

33. 

Continuing the downward trend in dairy cow numbers, although at a much lower rate
than the trend of recent years, the Community dairy herd is expected to fall to about
20.1 million  head at the end  of  2002,  a  small  reduction  of  0.4%  from  the  previous
year. Milk yields should increase by around 1.2%, well down on the previous year’s
increase  of  3.3%,  so  that  total  milk  production  for  2002  is  expected  to  be  close  to
121.6  million  tonnes,  more-or-less  unchanged  from  2001  levels  and  continuing  the
stability in production seen over recent years. Overall deliveries to dairies were also
flat compared to 2001, with no major changes within Member States.

In  contrast  to  the  fall  of  the  previous  two  years,  butter  production  is  estimated  to
have  increased  in  2002  by  around  3.5%  compared  to  2001,  driven  by  large
production increases in Belgium, Ireland and especially Spain, and in parallel with a
strong rise in exports. Cheese production continued to rise in 2002 (up by 0.8% on
2001), although at a much lower rate than in 2000 and 2001, helped by a continued
increase  in  consumption  and  a  slight  rise  in  exports.  Production  of  skimmed  milk
powder  is  expected  to  have  recovered  noticeably  in  2002,  rising  by  around  8%
compared to 2001.

1.3. 

Producer prices and market prices

1.3.1.  Producer Prices

34. 

35. 

According to the figures available at the end of December 2002, compared with the
previous  year  the  index  of  farm-gate  prices  is  estimated  to  have  fallen  slightly  in
2002,  by  an  average  of  1.4%  in  the  EU  in  nominal  terms.  This  slight  decrease  is
mainly the result of a 5.6% drop in the price of animals and animal products, and is
despite  a  2.8%  increase  in  overall  crop  prices.  The  steepest  decreases  in  prices  for
animal  products  occurred  for  pig  meat  (down  17.7%,  in  sharp  contrast  to  the  large
price increases of recent years), sheep meat (down 7.9%), and poultry (down 7.7%),
while milk prices also decreased noticeably (down 4.5%). In contrast, beef and veal
prices  rose  significantly  (by  8.5%  and  10.1%  respectively),  marking  a  partial
recovery following the market disturbances of recent years and the very low prices of
2001.  As  regards  crop  prices,  the  steepest  increases  were  recorded  for  vegetables
(fresh vegetables up 8.5%, dried up 9.6%),  olives and olive oil  (up 8.3%)  and fruit
(up 7.0%). Average overall prices for cereals and rice fell 6.7%, driven by significant
decreases in prices of soft wheat and barley of  around 8 to 10%. Potato prices also
fell heavily, down 14% on those of the previous year.

After accounting for inflation, the producer price index for the European Union as a
whole  is  estimated  to  have  fallen  by  around  4%  on  the  previous  year.  The  biggest
decreases  were  in  Austria  (down  5.7%),  Belgium  (down  7.8%),  Denmark  (down
10.4%),  Ireland  (down  8.6%),  Portugal  (down  7.4%),  Spain  (down  5.1%)  and
Sweden (down 5.4%). Farm-gate prices also declined in most other Member States:
in  Finland  (by  3.7%),  Germany  (by  4.3%),  France  (by  4.7%),  Luxembourg  (by
4.9%),  the  Netherlands  (by  3.8%)  and  the  United  Kingdom  (by  4.6%).  Only  two
Member  States  experienced  a  rise  in  the  real  producer  price  index,  namely  Greece
(up 3.0%) and Italy (up 0.8%).

11

 
1.3.2.  Market prices

36. 

37. 

Following the decreases of recent years in application of Agenda 2000, for marketing
year  2002/03  the  intervention  price  for  cereals  stayed  at  the  same  level  as  the
previous  campaign  2001/02  (EUR  101.31  per  tonne).  Similarly,  aids  for  cereals,
which had increased in recent years, remained at EUR 63 per tonne of reference yield
for 2002/03. The level of compulsory set-aside was kept at 10%, although derogation
to this was allowed in September 2002 in those Member States that had been heavily
affected by the August floods. Against this policy background the good prospects for
an  improved  EU  cereals  harvest  for  marketing  year  2002/03  compared  to  2001/02,
together with the impact of highly competitive exports from certain third countries,
especially  the  republics of  the  Former  Soviet  Union,  resulted  in  average  EU  cereal
market  prices  generally  declining  over  the  first  eight  months  of  the  year,  the  main
exception being maize prices. However, prices for many cereals recovered somewhat
over  the  latter  part  of  2002  in  light  of  downward  adjustments  in  initial  EU  harvest
estimates  for  these  crops  and  in  anticipation  of  modifications  to  the  EU  cereals
import regime for 2003.

Given the prospects for a large 2002 wheat harvest in the EU, average market prices
for bread-making wheat declined over the first part of the  year, falling from around
EUR 141 per tonne at the start of the year to close to EUR 120 per tonne by August,
before recovering to around EUR 127 per tonne from the end of September onwards,
some  10% down on prices at  the  start  of  the  year.  Prices  for  durum  wheat  showed
similar behaviour,  with  these peaking in  March  and then  falling  sharply  through  to
the end of June to reach a low of EUR 153 per tonne before stabilising in July and
August. Prices then recovered to around EUR 180 per tonne by December, some 7%
down  on  prices  at  the  start  of  the  year.  In  contrast,  average  maize  prices  remained
fairly stable (at between EUR 131–136 per tonne) over the first half of the year, with
expected  EU  production  for  2002  little  changed  from  that  of  2001,  before  rising
sharply  from  July  to  mid-August,  when  prices  rose  to  around  EUR  154  per  tonne
(some 13% up on prices at the start of the year). However, maize prices fell sharply
over the rest of August back to the EUR 130 per tonne level and remained close to
this level for the rest of the year. Concerning barley prices, average EU market prices
for brewing barley declined from EUR 141 per tonne at the start of 2002 to around
EUR 110 per tonne in August, but recovered strongly over the following months so
that  by  November  prices  had  regained  the  levels  of  the  start  of  the  year.  For  rye,
average  bread  rye  prices  generally  fluctuated  in  a  range  from  EUR  117–125  per
tonne until late July, at which point prices fell sharply to around EUR 106 per tonne
before  gradually recovering  with  the  start  of  the  new  marketing  year  to  around  the
EUR 120 per tonne level by the end of November onwards, in response to the much
reduced rye harvest in Germany.

38. 

Olive oil prices remained fairly stable over 2002,  although  generally  slightly up  on
the prices of the year before. Figures for late November 2002 show prices for Italian
extra  virgin  and  lampante  olive  oil  somewhat  higher  (by  around  9%  and  3%
respectively) than twelve months earlier, and remaining well above the trigger level
for  private  storage.  Those  for  Spanish  olive  oil  show  lampante  prices  up  by  some
3.5% on the  corresponding point in 2001,  but  with  extra  virgin  prices  more-or-less
unchanged and remaining only just above the trigger level for private storage.

12

 
39. 

40. 

41. 

42. 

43. 

In general, wine prices improved over the course of 2002 from the low levels of the
year before, although this was mainly due to a sharp rise in prices in the latter part of
the  year  in  France  and  Italy  in  expectation  of  the  reduced  2002  harvests  in  those
countries.  By  early  December  2002,  market  rates  for  red  wine  relative  to  the  same
period in the previous year were up 24% in France, 14% in Italy and 12% in Spain.
Similarly,  white  wine  prices  showed  improvement  on  those  of  2001,  with  early
December  prices  up  8%  in  France,  27%  in  Italy  and  8%  in  Spain  on  those  twelve
months earlier. However, while prices developed quite smoothly over the course of
2002 in Spain and Italy, prices in France fluctuated widely during the year.

The improved overall situation in the beef sector was reflected in prices for beef and
veal  in  2002.  The  strong  recovery  in  demand  over  2002  led  to  a  substantial
improvement  in  beef  prices,  especially  for  cow  meat,  which  by  September  had
improved  to  around  EUR  190  per  100  kg  compared  to  EUR  160  one  year  earlier.
Although cow meat prices then trailed off over the  latter  part of  the  year, they  still
remained  significantly  above  corresponding  2001  levels.  Prices  for  young  bull
carcasses  also  generally  improved  during  2002,  recovering  to  close  to  1999  levels
and remaining well above corresponding 2001 prices throughout the year. Only steer
carcass  prices  fared  worse  in  2002  compared  to  2001,  with  these  generally  falling
over the course of the year and remaining below corresponding 2001 prices.

Following the strong decline in prices which occurred over the course of 2001 (a fall
of  some  20%  from  the  record  prices  of  February/March  2001  (of  almost  EUR  170
per 100 kg) to those in December 2001), which mainly resulted from the ending of
the  positive  impact  on  the  poultry  sector  of  the  last  BSE  crisis,  prices  for  poultry
meat  developed  in  a  more  traditional  manner  over  the  course  of  2002,  closely
following the pattern set by the average of the last few years. Beginning the year at
around  EUR  134  per  100  kg,  prices  followed  a  rising  trend  through  to  the  start  of
October to peak at around EUR 145 per 100 kg, before dropping over the remaining
months of 2002 back to around the price levels at the start of the year.

During 2002 average EU prices for pig meat kept broadly stable in comparison to the
variability  of  recent  years,  in  general  remaining  in  a  range  between  EUR  127  and
EUR 147 per  100 kg. Prices  remained  throughout  the  year  at  levels  well  below  the
exceptionally  high  prices  of  2001,  reflecting  the  impact  of  the  recovery  in  beef
consumption  also  on  pig  meat  prices.  Starting  the  year  at  around  EUR  136  per
100 kg, prices peaked at the end of March at close to EUR 147 per 100 kg and then
fluctuated  around  a  generally  declining  trend  which  saw  prices  fall  to  around
EUR 127 per 100 kg by the end of November. In light of developments and in order
to  support  the  pig  meat  market,  aid  for  private  storage  was  introduced  from
9 December 2002.

Given the very limited recovery in production in 2002 market prices for sheep meat
and goat meat products generally remained at historically high levels similar to those
of the previous year. Over the first half of 2002 prices generally fell from their start
of year level, of around EUR 450 per 100 kg, to bottom out over the middle part of
the year at around EUR 380 per 100 kg. From July onwards average prices picked up
again  and  were  back  to  around  the  EUR  430  per  100  kg  level  by  the  beginning  of
September,  with  prices  generally  remaining  in  a  range  between  EUR  415  and
EUR 435 per 100 kg for the rest of the  year. While at the start of December prices
were  down  in  most  Member  States  compared  to  twelve  months  earlier,  they  were
significantly higher in Italy, Sweden and the United Kingdom.

13

 
44. 

Following  the  noticeable  drop  in  prices  over  the  second  half  of  2001,  average  EU
butter prices stayed relatively depressed  throughout 2002, remaining at levels close
to  90–92%  of  the  intervention  price  throughout  the  year  and  well  below  the  price
levels of recent years. Average EU prices for skimmed milk powder began the  year
at just above the intervention price. However, the fall in prices experienced at the end
of  2001  continued  into  2002  in  view  of  the  significant  rise  in  production,  with
average  prices  only  bottoming  out  at  the  end  of  May  at  around  2.4%  below  the
intervention  price.  Prices  only  showed  a  sustained  improvement  from  September
onwards, with average prices generally moving above the intervention price over the
latter part of the year as external demand for EU milk powder increased in reaction to
the low, drought-affected production in Australia.

1.4. 

Input prices

45. 

46. 

In  2002,  the  index  of  purchase  prices  in  nominal  terms  for  goods  and  services
currently consumed in agriculture remained more-or-less unchanged (up only by an
average of 0.1%) from the previous year. The biggest rises were for maintenance and
repair of materiel (up 4.4%) and buildings (up 2.1%), seeds and plants (up 2.2%) and
general  costs  (up  2.3%),  but  these  rises  were  heavily  offset  by  decreases  for
fertilisers  and  energy  (down  3.3%  and  3.0%  respectively),  while  feeding-stuffs
remained more-or-less stable compared to the previous year.

When  account  is  taken  of  inflation,  the  real  change  since  2001  in  the  index  of
purchase  prices  for  goods  and  services  currently  consumed  in  agriculture  was  a
decrease  of  just  over  2%  for  the  European  Union  as  a  whole,  mainly  due  to  the
significant  drop  in  prices  for  fertilisers  and  energy  (both  down  over  5%  in  real
terms).  Above-average  decreases  were  recorded  in  Austria  (down  3.0%),  Finland
(down  2.5%),  Ireland  (down  3.3%),  the  Netherlands  (down  2.9%),  Portugal  (down
8.3%)  and  Spain  (down  2.7%).  Real  input  prices  were  also  down  in  Belgium  (by
1.3%),  France  (by  1.9%),  Germany  (by  1.5%),  Greece  (by  1.6%),  Italy  (by  2.2%),
Luxembourg (by 1.6%) and the United Kingdom (by 1.5%), and more-or-less stable
in Denmark and Sweden.

1.5. 

Farm income

47. 

Eurostat's  initial  estimates,  based  on  information  received  from  Member  States  up
until early December 2002, indicate average farm income (measured  as the real net
value  added  at  factor  cost  per  annual  work  unit)  across  the  European  Union  as  a
whole 3.0% down on the previous  year. Declines in income are expected in a clear
majority  of  Member  States,  with  only  five  foreseen  to  record  any  increase.  The
strongest  falls  are  expected  in  Denmark  (down  26.3%),  Germany  (down  18.0%),
Ireland (down 11.4%), Belgium (down 7.7%) and the Netherlands (down 7.5%), with
the sharp drop in pig and milk prices being the main common factor in the decline in
agricultural  income  in  most  of  these  countries.  The  other  Member  States  where
income  declined,  although  to  a  much  lower  extent,  were  Austria  (down  2.8%),
France (down 0.9%),  Italy (down 1.6%), Portugal (down 2.2%) and Sweden (down
1.5%).  In  contrast,  incomes  were  up  in  Greece  (by  5.7%),  Luxembourg  (by  1.0%),
Finland (by 7.3%), Spain (by 1.2%) and the United Kingdom (by 3.9%), with most
of these countries also recording a strong decrease in agricultural labour.

14

 
48. 

Underlying  the  overall  decrease  in  average  farm  income  are  quite  wide  variations
according  to  the  type  of  farming.  According  to  first  estimates  from  the  Farm
Accountancy  Data  Network,  average  income  should  decrease  most  significantly
compared to 2001 levels in those farms specialising in pork and poultry production
(down  38.7%),  while  decreases  are  also  expected  for  mixed  (crops  and  livestock)
production (down 15.9%) and milk production (down 7.3%). While farms specialised
in  wine  production  also  saw  a  decline  in  average  income  (down  7.5%),  those
specialising  in  the  production  of  other  permanent  crops  experienced  a  large  rise  in
income  of  around  18.6%.  Similarly,  farms  specialising  in  grazing  livestock  also
experienced  a  rise  in  average  income  (up  10.5%),  and  those  specialised  in
horticulture  a  rise  of  around  11.7%.  Finally,  incomes  are  once  again  expected  to
remain more-or-less static in farms specialising in the production of field crops.

15

 
5.1
2.3
7.5
5.9
6.4
4.6
3.5
4.6
5.0
2.1
5.9
6.4
6.5
4.7
5.2
7.7

(%)

Changes in nominal farm-gate prices in 2002 and 2001

Crop
Products

2002/01

Livestock
products

Total

Crop
Products

2001/00

Livestock
Products

(%)

Total

Member State

EU-15

Belgium
Denmark
Germany
Greece
Spain
France
Ireland
Italy
Luxembourg
Netherlands
Austria
Portugal
Finland
Sweden
United Kingdom

Source: Eurostat

2.8
-2.8
-4.3
4.9
10.8
4.3
-2.0
-1.8
7.9
7.2
3.1
2.5
-2.8
1.0
-4.5
-4.7

-5.6
-8.3
-12.0
-6.7
-1.5
-8.7
-3.6
-4.7
-4.6
-5.5
-3.6
-6.7
-5.7
-3.3
-2.8
-3.6

-1.4
-6.2
-8.3
-2.8
7.0
-1.7
-2.8
-4.3
3.4
-3.1
-0.1
-4.0
-4.2
-2.0
-3.4
-3.5

5.1
-0.1
2.3
6.5
5.9
0.3
4.9
11.0
5.7
6.4
7.3
2.9
6.6
-1.9
10.1
10.9

5.2
3.7
9.9
5.6
7.5
10.0
2.0
3.7
3.6
1.1
4.3
8.0
6.3
7.9
2.9
5.7

Changes in nominal purchase prices for agricultural inputs in 2002 and 2001

Intermediate
Consumption

Investment

Total

Member State

2002/01

2001/00

2002/01

2001/00

2002/01

2001/00

EU-15

Belgium
Denmark
Germany
Greece
Spain
France
Ireland
Italy
Luxembourg
Netherlands
Austria
Portugal
Finland
Sweden
United Kingdom

Source: Eurostat

0.1
0.3
1.6
0.0
2.2
0.7
0.0
1.3
0.3
0.3
1.0
-1.2
-5.0
-0.6
1.8
-0.3

4.1
0.9
8.0
3.6
2.1
1.4
3.0
5.2
5.3
3.7
7.8
2.4
8.3
0.6
6.5
5.1

2.5
2.1
2.0
1.5
4.0
3.7
2.0
3.0
2.7
1.8
3.5
1.5
3.1
2.9
3.2
0.9

16

2.2
2.6
2.2
1.2
3.7
5.7
2.1
4.3
1.9
3.5
4.3
1.6
1.3
2.9
3.0
0.3

0.6
0.5
1.7
0.4
2.5
1.8
0.5
1.7
1.2
0.9
1.4
-0.2
-3.9
0.2
2.1
-0.1

3.7
1.1
6.8
3.1
2.4
1.9
2.8
5.0
4.0
3.6
7.2
2.1
7.3
1.1
5.8
4.3

 
Real output price indices for agricultural products

(1995=100)

1995

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

1996

98.9
101.4
101.7
98.3
99.0
98.8
97.7
93.5
100.4
94.3
101.5
99.9
99.1
95.8
94.7
97.4

1997

96.3
101.2
99.8
97.8
96.0
93.9
96.7
86.6
99.0
95.2
105.9
101.2
97.9
93.7
91.3
83.0

1998

1999

2000

2001

2002

91.5
94.2
86.6
92.5
91.1
89.8
96.0
84.1
93.9
94.2
98.7
93.3
96.9
91.6
89.2
73.7

86.4
85.4
81.7
86.3
89.6
85.0
92.3
78.6
88.1
91.2
91.2
87.1
90.4
88.8
87.3
69.7

87.6
91.8
87.7
89.8
90.6
85.9
92.2
79.5
87.9
88.7
96.0
91.4
92.2
89.9
85.1
67.9

89.6
95.4
92.2
93.0
92.9
87.5
93.7
80.0
90.2
88.4
96.6
95.1
94.0
91.7
87.2
73.4

85.8
88.0
82.6
89.0
95.7
83.0
89.3
73.1
90.9
84.1
92.9
89.7
87.0
88.3
82.5
70.0

EU-15

Belgium
Denmark
Germany
Greece
Spain
France
Ireland
Italy
Luxembourg
Netherlands
Austria
Portugal
Finland
Sweden
United Kingdom

Source: Eurostat

17

Indices of real purchase prices for goods and services currently consumed in agriculture

(1995=100)

EU-15

Belgium
Denmark
Germany
Greece
Spain
France
Ireland
Italy
Luxembourg
Netherlands
Austria
Portugal
Finland
Sweden
United Kingdom

Source: Eurostat

1995

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

1996

102.1
102.6
101.2
102.2
99.8
100.9
101.7
101.9
106.1
101.0
104.3
101.1
100.2
100.7
105.2
98.7

1997

101.0
103.2
102.4
102.4
96.8
101.5
101.9
98.7
105.7
100.7
102.6
101.4
96.4
101.4
104.4
92.2

1998

95.3
97.4
98.6
97.9
93.4
98.6
98.3
94.3
94.0
98.4
97.4
96.5
91.0
98.1
100.9
83.9

1999

92.1
95.0
94.0
96.3
93.1
95.0
96.3
93.0
85.6
102.9
94.4
95.1
88.9
95.8
100.1
80.9

2000

95.0
100.1
94.6
101.4
96.1
96.9
99.4
94.0
87.6
105.4
98.6
97.1
89.5
99.4
103.1
82.8

2001

96.3
100.7
99.9
102.7
94.7
96.3
100.9
95.0
90.2
106.8
101.1
97.2
92.9
97.5
106.8
91.7

2002

94.2
99.4
99.2
101.2
93.2
93.7
99.0
91.9
88.2
105.1
98.2
94.3
85.2
95.1
106.5
90.3

18

 
Development of agricultural income in the EU over the 1980-2002
period, in terms of annual change (%) and cumulative growth (1980 = 100)

A n n u a l g ro w th

Cumulative  growth

1 8 %

1 5 %

1 2 %

9 %

6 %

3 %

0 %

-3 %

-6 %

1 0 .9 %

1 1 .8 %

3 .0 %

3 .2 %

1 .2 %

-0 .3 %

-1 .7 %

-0 .8 %

-3 .4 %

-3 .6 %

9 .6 %

6 .4 %

3 .5 %

1 .4 %

0 .5 %

0 .3 %

6 .1 %

4 .4 %

-0 .5 %

-2 .2 %

-3 .0 %

-3 .0 %

1 6 0

1 5 0

1 4 0

1 3 0

1 2 0

1 1 0

1 0 0

9 0

8 0

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

A n n u a l g ro w th

C u m u la tiv e  g ro w th

Source: Eurostat – DG AGRI calculation

19

 
1 0

5

0

-5

-1 0

-1 5

-2 0

-2 5

-3 0

Development of agricultural income in the EU Member States in 2002
(% change versus 2001)

+5.7

+1.2

+1.0

+7.3

+3.9

-0.9

-1.6

-2 .8

-2 .2

-1.5

-3 .0

-7 .7

-7 .5

-11 .4

-18 .0

-26 .3

   B

   D K

   D

   E L

   E  

   F  

 IR L

   I

   L

   N L

   A

   P

 F IN

   S

   U K

E U 1 5

Source: Eurostat – DG AGRI calculation

20

 
Development of agricultural income in the EU Member States over the 1990 - 2002 period

EU-15

Belgium
Denmark
Germany
Greece
Spain
France
Ireland
Italy
Luxembourg
Netherlands
Austria
Portugal
Finland
Sweden
United Kingdom

1990

1991

1992

116.1
86.0

102.1
87.2
76.0
78.1
99.1
115.8
90.4
94.6
100.7
106.5
67.5

116.6
83.8
90.0

100.6
76.8
77.3
83.6
91.9
114.3
91.7
93.8
94.1
89.3
66.5

113.6
73.4
94.4

87.3
83.5
87.4
83.0
92.8
104.8
86.3
70.1
81.7
79.4
72.5

(1995 = 100)

1993

85.8
109.6
72.8
90.5
85.4
90.0
83.0
89.6
85.3
91.0
86.4
81.8
67.9
84.1
83.4
85.5

1994

94.0
111.1
84.0
93.6
95.9
100.4
94.2
93.5
91.1
88.6
97.3
88.1
91.1
88.2
84.0
90.6

1995

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

1996

103.5
109.7
102.3
113.1
95.2
112.3
100.5
102.3
105.7
103.8
95.9
92.1
109.8
80.6
98.1
93.7

Source: Eurostat - Economic Accounts for Agriculture (EAA), Agricultural Income Index

1997

103.8
114.0
97.9
114.4
95.6
113.5
104.0
99.8
108.3
95.4
103.5
83.9
104.6
82.2
104.0
72.5

1998

100.7
107.7
77.3
100.9
95.0
110.9
108.6
97.3
108.2
104.8
93.0
82.0
104.9
72.5
106.5
62.5

1999

100.2
99.7
74.8
94.6
96.5
107.8
106.4
92.5
116.6
94.3
86.4
78.1
125.8
82.3
94.0
61.1

2000

104.7
108.1
91.2
114.0
100.3
120.1
106.2
98.5
112.5
95.1
83.7
84.1
112.1
103.8
105.7
57.9

2001

111.0
116.8
109.9
135.2
105.8
123.6
109.9
104.5
112.6
90.1
87.8
98.0
139.9
99.4
116.5
61.6

2002

107.2
107.8
81.1
110.9
111.8
125.1
108.9
92.6
110.7
91.1
81.2
95.3
136.8
106.6
114.8
64.0

21

 
1.6. 

Farm accountancy data network (FADN)

49. 

50. 

51. 

52. 

53. 

54. 

55. 

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.  The
survey  provides  valuable  information  about  how  farm  incomes  vary  according  to
type of farming and location, which is not apparent from the global averages in the
results for the agricultural sector as a whole. This section presents some information
by type of farming and by country.

At the time of going to press, the results for the Netherlands for 2000 were not  yet
available and for some countries they were still provisional.

The  large  differences  in  average  income  among  Member  States  are  inherent  in  the
structure  of their  agriculture. The Member States  with  the  highest average  incomes
are, generally speaking, those with a large number of large-sized farms specialising
in  arable  crops,  dairy  or  the  less  regulated  sectors  of  production  (pigs,  poultry,
horticulture, …). The southern Member  States, with a large number of small farms
engaged  in  ‘mixed’  farming  (crop  and  livestock  production)  or  ‘other  permanent
crops’ (mixes of different cropping enterprises) have average incomes below the EU
average.

Table  1  shows  the  wide  range  of  economic  results  among  Member  States  for  each
type  of  farming,  as  measured  by  the  Farm  Net  Value  Added  (FNVA).  In  1999
Sweden showed a negative FNVA for the type of farm Drystock.

Table 2 shows the contribution of the balance of subsidies and taxes to FNVA. For
EU-15 in 1999 the proportion of subsidies net of taxes to FNVA was 35% but there
were big differences among Member States and among types of farming. In that year
Finland  and  Sweden  had  an  average  FNVA  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  part  of  subsidies  in  FNVA  was  the
lowest in the Netherlands followed by Italy, Belgium and Spain. Regarding types of
farming  there  are  also  big  differences.  Net  subsidies  in  the  drystock,  arable  and
mixed types of farm were the highest as a proportion to income. The horticulture and
vineyards types of farm were the least subsidised by far. In 2000 only Finland among
the available countries had an average FNVA lower than the balance of subsidies and
taxes. Belgium, Denmark, Spain and Italy had the lowest part of subsidies in FNVA.

FADN data can also be used to analyse the degree of concentration in the agricultural
sector.  This  is  reflected  in  tables  3  and  4  with  data  for  1999.  In  order  to  avoid  the
problems  caused  by  the  presence  of  some  negative  values  for  FNVA,  the  variable
used is total receipts from farming, i.e. receipts from the market and from subsidies.

Table 3 shows the share of the 20% of farms with the highest total receipts per type
of farm, per country and for the EU as a whole. For the EU and for all types of farms
the 20% with the highest receipts account for 67% of the total. Per country, however,
the degree of concentration is lower and only Portugal,  Italy, Denmark and the UK
reach  60%.  Luxembourg,  Austria  and  Finland  are  the  countries  with  the  lowest
degree  of  concentration.  Per  type  of  farm  at  the  EU  level  the  concentration  is  the
highest for  general  field  cropping, horticulture, vineyards and  mixed  cropping.  The
lowest  concentration  is  found  in  cattle  dairying,  rearing  and  fattening  combined,
specialists  dairying,  sheep  and  goats  and  specialists  olives.  Per  country,  specialists

22

 
dairying is the least or one of the least concentrated types of farm in practically all
the  countries.  The  types  of  farm  in  which  the  concentration  is  the  highest  vary
substantially from country to country.

56. 

Table 4 shows the degree of concentration according to the share of the 50% of farms
with the highest total receipts. At the EU level for all the types of farm this share is
91%, while at the country level it is between 71% in Luxembourg and 87% in Italy
and  Portugal. Per type of  farm specialists dairying,  and  cattle  dairying,  rearing  and
fattening  combined  are  the  least  concentrated,  followed  by  specialist  olives.  At  the
other extreme, the highest concentration is found in mixed livestock, mainly grazing.

23

 
TABLE 1 – FARM NET VALUE ADDED

(in EUR)

All farms

Arable

Horticulture

Vineyards

Other permanent
crops

Dairy

Drystock

Pigs/poultry

Mixed

1999

2000

1999

2000

1999

2000

1999

2000

1999

2000

1999

2000

1999

2000

1999

2000

1999

2000

55 577 60 703 50 731 57 351 78 039 77 367

84 715 86 588 49 686 50 598 44 573 44 294 66 835 92 621 54 259 62 122

49 187 65 174 24 497 33 246 251 187 256 147

113 107 109 618 69 404 70 800

8 184

6 593 85 693 162 649 46 530 72 627

47 187 49 728 59 294 57 115 84 441 87 858 44 127 39 906 78 710 73 630 36 249 38 671 29 672 31 821 43 642 70 507 48 516 56 588

10 047 10 686

9 764 10 093 16 292 14 556 11 699 11 798

8 428

9 807 17 443 16 060 14 879 14 639 13 660 13 660 13 061 13 248

21 156 23 698 21 486 26 735 37 198 45 852 27 334 25 505 16 720 16 796 20 248 20 195 20 908 22 540 34 936 51 311 28 157 27 541

47 993 46 712 46 684 45 481 72 830 86 850 105 875 83 983 67 448 65 883 32 406 34 406 28 023 28 490 26 358 51 815 42 559 45 917

Member
State

B

DK

D*

EL*

E

F

IRL

16 228 18 935 38 477 54 826

31 037 34 379

8 975 10 827

34 737 48 025

I

L

NL

A

P

FIN

S

UK*

16 451 15 869 12 271 12 446 34 534 34 260 19 150 20 058 12 768 10 776 45 046 41 768 23 331 23 769 76 271 102 274 24 441 26 776

46 469 54 344

72 938 76 839

47 760 52 949 37 187 47 809

33 518 46 843

61 319

47 159

155 769

49 405

55 064

19 654

27 346

36 779

30 003 30 518 35 631 34 758

30 193 30 062 46 214 40 493 26 424 26 541 27 091 26 104 33 798 38 023 30 309 33 741

5 343

5 567

4 376

5 055

7 872

7 446

9 775

8 151

3 837

3 689 10 232 12 269

6 060

5 672 12 055 16 850

4 620

5 139

25 976 27 815 20 028 21 161 55 832 45 532

27 172 29 423 24 034 27 174 24 481 37 162 28 873 22 517

15 938 23 522 14 456 17 065

7 872

27 416 35 559

-1 431 11 076 14 004 31 730

5 442 17 222

54 875 58 930 78 320 78 417 160 420 185 987

172 580 193 387 58 485 60 708 19 614 21 108 75 230 111 765 56 705 69 441

EU-15

24 674

21 095

57 396

39 605

14 119

35 827

19 403

41 463

30 003

*

provisional for 2000.

24

 
TABLE 2 – BALANCE CURRENT SUBSIDIES AND TAXES AS % OF FARM NET VALUE ADDED

All farms

Arable

Horticulture

Vineyards

Other permanent
crops

Dairy

Drystock

Pigs/poultry

Mixed

1999

2000

1999

2000

1999

2000

1999

2000

1999

2000

1999

2000

1999

2000

1999

2000

1999

2000

15.2

24.7

39.1

39.7

25.2

37.3

52.0

25.1

56.3

50.6

33.6

118.5

93.1

55.2

21.4

30.8

41.3

38.8

28.1

35.0

57.3

21.1

59.4

7.2

52.0

34.9

111.6

114.5

57.9

35.1

20.0

58.9

54.3

57.9

44.7

63.6

62.1

38.0

12.9

60.4

35.2

139.7

124.8

66.4

57.6

19.5

45.4

53.4

59.9

39.9

63.3

47.9

46.5

66.0

36.1

139.7

117.4

64.4

15.7

43.5

4.2

-0.9

6.5

11.6

28.3

9.2

2.8

3.7

4.7

1.0

2.5

-0.7

47.9

0.3

2.9

3.7

3.8

1.3

2.6

0.1

42.9

0.3

2.7

14.6

41.0

4.6

-0.5

6.4

11.9

29.4

6.3

3.6

0.6

1.1

4.9

23.6

26.5

7.0

1.0

1.9

6.1

25.0

23.4

12.8

20.2

22.2

7.0

29.7

28.5

0.5

20.7

27.5

37.1

0.2

16.8

20.8

32.3

12.2

4.5

24.0

18.7

5.4

59.8

6.6

45.4

28.8

93.9

67.7

17.8

24.6

13.6

21.2

31.1

15.9

6.1

28.5

18.3

6.1

59.5

48.6

24.4

38.6

40.4

132.1

166.0

72.5

35.4

38.1

65.5

108.5

17.0

93.9

34.2

50.9

84.8

73.9

33.1

36.6

68.9

95.0

21.3

83.7

56.0

76.0

32.4

21.1

32.9

-15.9

4.5

33.4

2.7

11.7

22.2

3.3

16.1

2.8

2.3

12.7

65.2

-3.1

35.6

-3.9

102.7

144.8

161.6

166.9

123.4

63.7 -1269.8

226.0

20.4

164.3

161.0

68.6

38.3

3.5

80.0

5.3

25.2

27.7

38.6

51.3

33.2

32.8

49.4

47.9

18.6

94.3

10.5

59.5

51.3

127.3

346.4

66.9

45.0

17.4

27.4

45.5

32.2

29.3

49.0

38.8

18.1

75.9

49.8

39.0

186.3

138.4

59.3

Member
State

B

DK

D*

EL*

E

F

IRL

I

L

NL

A

P

FIN

S

UK*

EU-15

*

provisional for 2000.

25

 
TABLE 3 – SHARE OF TOTAL RECEIPTS (OUTPUT + SUBSIDIES) IN 1999
20% OF FARMS WITH THE HIGHEST RECEIPTS

Specialist cereals, oilseed and protein crops

General field cropping

Specialist horticulture

Specialist vineyards

B

38

49

51

DK

62

61

76

Specialist fruit and citrus fruit

46

60

Specialist olives

Various permanent crops combined

Specialist dairying

Specialist cattle-rearing and fattening

Cattle-dairying, rearing and fattening combined

Sheep, goats and other grazing livestock

Specialist granivores

Mixed cropping

Mixed livestock, mainly grazing livestock

Mixed livestock, mainly granivores

Field crops-grazing livestock combined

Various crops and livestock combined

All types of farming

59

37

45

38

43

50

47

37

38

46

48

67

40

65

72

49

64

42

46

64

51

61

D

61

55

44

44

39

63

44

42

49

36

42

67

47

38

69

46

53

EL

48

47

47

38

38

45

41

44

43

44

39

65

42

48

41

44

47

E

53

55

58

45

53

53

47

50

50

41

49

56

53

49

67

47

55

57

F

44

44

55

58

56

52

40

42

41

40

50

47

39

44

42

44

49

IRL

63

55

28

45

48

49

50

74

48

59

I

60

61

54

62

59

55

61

56

66

57

47

54

57

54

75

61

64

64

L

44

42

33

40

34

55

64

51

39

46

31

38

NL

51

55

48

41

53

53

52

48

59

60

55

60

58

54

A

41

42

47

48

41

36

36

35

36

36

39

36

37

37

41

40

P

64

80

62

56

60

65

59

57

55

75

61

65

54

55

71

64

64

65

FIN

48

49

54

0

46

36

42

38

40

43

89

46

52

49

45

S

51

64

48

44

57

47

47

63

62

55

59

53

54

UK EU-15

54

59

76

75

71

47

48

51

49

56

75

74

52

56

48

60

66

71

70

70

65

53

67

49

54

48

52

54

70

65

51

62

63

67

26

 
TABLE 4 – SHARE OF TOTAL RECEIPTS (OUTPUT + SUBSIDIES) IN 1999
50% OF FARMS WITH THE HIGHEST RECEIPTS

Specialist cereals, oilseed and protein crops

General field cropping

Specialist horticulture

Specialist vineyards

B

79

79

84

DK

85

87

95

Specialist fruit and citrus fruit

75

89

Specialist olives

Various permanent crops combined

Specialist dairying

Specialist cattle-rearing and fattening

Cattle-dairying, rearing and fattening combined

Sheep, goats and other grazing livestock

Specialist granivores

Mixed cropping

Mixed livestock, mainly grazing livestock

Mixed livestock, mainly granivores

Field crops-grazing livestock combined

Various crops and livestock combined

All types of farming

85

70

76

69

77

81

75

73

73

83

78

93

72

76

90

80

86

76

90

88

82

89

D

85

82

76

75

74

88

74

73

77

65

73

85

76

70

86

77

80

EL

77

78

78

72

71

77

73

79

92

75

72

68

74

75

73

75

77

E

81

83

83

74

80

76

74

79

77

81

81

84

81

78

89

80

82

82

F

77

78

83

84

85

79

73

73

73

71

81

79

73

76

75

78

79

IRL

87

83

78

79

79

80

74

80

I

84

85

81

84

85

81

84

84

86

84

78

80

82

81

90

85

87

86

87

L

77

74

66

73

66

77

64

83

71

77

58

71

NL

82

84

83

74

87

83

81

83

60

85

88

85

83

A

75

73

82

73

74

69

73

68

72

72

72

71

70

73

76

73

P

85

92

84

84

82

83

85

88

83

87

87

91

81

81

84

84

87

FIN

77

79

83

0

66

68

76

74

83

74

87

79

74

76

S

80

89

78

79

86

66

80

87

89

80

83

83

83

UK EU-15

83

85

93

92

91

78

78

81

79

83

92

87

78

83

84

85

90

91

91

90

86

81

87

79

84

79

82

83

89

92

82

88

91

91

27

 
2. 

POLICY DEVELOPMENTS AND LEGISLATIVE INITIATIVES IN 2002

2.1.  Mid-Term Review of the CAP

57. 

In  its  Communication  dated  10  July  20021,  the  Commission  proposed  a  review  in
accordance with the objectives and general framework (Agenda 2000) established by
the European Councils held in Berlin and Göteborg in 19992 and 2001 respectively.
This  proposal  is  aimed  at  stabilising  markets  and  improving  common  market
organisations (first pillar of the CAP), achieving simpler and more sustainable direct
support,  bringing  about  a  better  balance  of  support  for  sustainable  agriculture  and
rural  development,  and  consolidating  and  strengthening  rural  development  (second
pillar of the CAP). To this end, the Commission proposes severing the link between
production and direct aid; making such aid conditional upon meeting environmental,
food  safety,  animal  welfare  and  occupational  safety  standards;  substantially
increasing aid through modulation of direct payments; implementing a farm auditing
system;  and  introducing  new  rural  development  measures  to  improve  the  quality  of
production,  food  safety  and  animal  welfare  and  to  cover  farm  auditing  costs.  In
addition, where market policy is concerned, in order to improve the competitiveness
of  European  agriculture,  the  Commission  proposes  completing  the  reform  process
initiated in 19923, particularly through cuts in a number of intervention prices.

58. 

The Commission played an active role in the major discussions which followed this
Communication  within  the  Council,  the  European  Parliament,  the  European
Economic  and  Social  Committee,  the  Committee  of  the  Regions  and  the  Common
Agricultural  Policy  Consultative  Committees,  as  well  as  with  civil  society.  These
discussions  were  enriched  by  contacts  in  the  Member  States  with  farming  and
industrial circles, consumers and non-governmental organisations.

2.2. 

Quality policy

2.2.1.  Proposal  for  an  amendment  to  Council  Regulation  (EEC)  No  2081/92  on  the
protection  of  geographical  indications  and  designations  of  origin  for  agricultural
products and foodstuffs

59. 

Since  1994,  geographical  indications  have  been  covered  by  the  World  Trade
Organisation  Agreement  on  TRIPS  (Trade-Related  Aspects  of  Intellectual  Property
Rights).  Council  Regulation  (EEC)  No  2081/92  therefore  requires  amendment  in
order  to  make  it  fully  compatible  with  this  Agreement.  In  March  2002  the
Commission  adopted  a  proposal  for  a  Regulation  amending  Council  Regulation
(EEC)  No  2081/92,  the  main  objective  of  which  is,  first,  to  grant  nationals  of  the
WTO  member  countries  the  right  to  object  and,  second,  to  invite  third  countries  to
participate  in  the  Community  registration  system  by  reciprocity  and  under
equivalence conditions.

60. 

This  Commission  proposal  was  discussed  within  the  European  Parliament,  which
endorsed  it  in  general  terms  in  December  2002,  while  proposing  some  largely  very
constructive amendments. At the same time, a Council working party met on several
occasions to discuss this proposal.

1

2

3

COM(2002) 394, 10.7.2002 and Bulletin 7/8-2002, point 1.3.100.
1999 General Report, points 6 and 495 to 501.
Twenty-sixth General Report, points 506 to 512.

28

 
                                                
2.2.2. 

International context

61. 

62. 

63. 

During  2002,  the  Commission  pursued  its  negotiations  aimed  at  securing  the
establishment of a multilateral register of geographical indications within the context
of  the  TRIPS  Agreement,  as  well  as  the  extension  to  other  products  of  additional
geographical indication protection equivalent to that provided for wines and spirits. In
addition, within the framework of the WTO Agricultural Agreement, the Community
presented  a proposal aimed  at restoring  protection for certain names  covered  by the
exceptions  to  Article  24  of  the  TRIPS  Agreement,  which  suffer  the  effects  of
usurpation in third countries.

Where  bilateral  relations  are  concerned,  a  decision  was  taken  within  the  Joint
Committee set up under the Association Agreement between the European Union and
Switzerland to propose to the Council that a working group be set up to negotiate a
bilateral  agreement  on  the  mutual  protection  of  geographical  indications.  The
possibility  of  protecting  the  name  "Emmental"  as  a  protected  designation  of  origin
(PDO) in Switzerland would be a point of discussion within this working group.

In  addition,  the  Commission  entered  into  preliminary  discussions  with  a  view  to
laying  down  the  foundations  for  future  bilateral  negotiations  with  China  on  the
protection of geographical indications.

2.2.3.  Registration of names under Council Regulations (EEC) Nos 2081/92 and 2082/92

64. 

65. 

Interest continued to be shown in the Community registration and protection schemes
for  names  of  quality  products  in  2002.  Twenty-seven  names  were  registered  under
Council  Regulations  (EEC)  Nos  2081/92  and  2082/92,  including  ten  as  protected
designations  of  origin,  fourteen  as  protected  geographical  indications  and  three  as
traditional  speciality  guaranteed  indications.  These  registrations  bring  the  total
number  of  names  on  the  Community  register  of  protected  geographical  indications
and protected  designations  of  origin up  to  six  hundred  and  four,  and  the  number  of
names on the Community register of certificates of specific character up to thirteen.

Registrations were carried out under the normal procedure laid down in Article 6 of
Regulation (EEC) No 2081/92, save in the case of the name "Feta". This name had in
fact  been  submitted  by  Greece  for  registration  under  the  simplified  procedure  laid
down in Article 17. The registration, which took place in 1996, had been annulled by
the Court of Justice of the European Communities as a result of the appeals lodged by
a  number  of  Member  States.  The  Commission  took  into  account  the  Court's
arguments  that  the  possible  "generic  nature"  of  the  term  had  not  been  examined  in
sufficient depth. As a result, a huge survey was conducted among the Member States.
The  matter  was  eventually  submitted  to  the  Scientific  Committee  for  Protected
Designations  of  Origin,  Geographical  Indications  and  Certificates  of  Specific
Character, which expressed the view that the term is not generic.

66. 

In  the  absence  of  an  opinion  by  the  Regulatory  Committee  on  Geographical
Indications and Designations of Origin, the Commission proposal for registration was
transmitted to the Council, which took no follow-up action. The Commission finally
went ahead with the registration, which was published in October 2002.

29

 
List of PDOs, PGIs and GTSs registered in 2002

Member State

Product

Type of product

Name

Austria

Germany

Spain

Spain

Spain

Spain

Spain

Spain

Spain

Greece

Greece

Greece

Greece

Greece

France

France

France

Italy

Italy

Italy

Italy

Portugal

Portugal

Portugal

Gailtaler Speck

Oberpfälzer Karpfen

Kaki Ribera del Xúquer

Calçot de Valls

Queso de Murcia

Queso de Murcia al vino

(meat-based product)

(fish)

(fruit)

(fruit)

(cheese)

(cheese)

Turrón de Agramunt

(bread, pastry, cake)

Paneletts

Queso de la Palma

(pastry, cake)

(cheese)

Patatas Kato Nevrokopiou

(fruit, vegetables)

Extra virgin olive oil Thrapsano

(oils and fats)

Milo Kastorias

Aktinidio Pierias

Feta

Morbier

Piment d’Espelette

Pruneau d’Agen

(fruit)

(fruit)

(cheese)

(cheese)

(vegetable)

(fruits)

Asparago bianco di Cimadolmo

(vegetables)

Ciliegia di Marostica

Fagiolo di Sorana

(fruits)

(fruit, vegetables)

Carciofo romanesco del Lazio

(fruit, vegetables)

Carne Cachena da Penada

Carne da Charneca

Carne de Bovino Cruzado dos
Lameiros do Barroso

(fresh meat)

(fresh meat)

(fresh meat)

United Kingdom Welsh beef

Finland

Finland

Kalakukko

Sahti

(fresh meat)

(pre-cooked meal)

(beverage)

PGI

PGI

PDO

PGI

PDO

PDO

PGI

GTS

PDO

PGI

PDO

PGI

PGI

PDO

PDO

PDO

PGI

PGI

PGI

PGI

PGI

PDO

PDO

PGI

PGI

GTS

GTS

2.2.4.  Vertical Directives

67. 

In accordance with Article 5 of Council Regulation (EC) No 2991/94 of 5 December
1994  laying  down  standards  for  spreadable  fats,  the  Commission  presented  the
Council  with  a  report,  five  years  after  the  Regulation  came  into  force,  summing  up
the  situation  concerning  the  application  of  the  specifications  relating  to  claims
implying  a reduced-fat  content.  The  general  opinion  is  in  favour  of  maintaining  the
terms, which meet manufacturers', distributors' and consumers' requirements, and no
practical  problems  have  arisen  in  applying  the  Regulation.  This  report  was  given  a
generally favourable reception by the Council.

68. 

The  Commission  presented  to  Member  States  its  position  (interpretative  notes)
concerning two labelling issues in relation to the implementation of Council Directive
2000/36/EC on cocoa and chocolate products. The Commission presented its position

30

 
in  Council  concerning  the  current  negotiations  in  Codex  Alimentarius  for  the
International Standard on fruit juices.

2.3. 

Organic farming

69. 

70. 

71. 

72. 

On 15 March 2002 the Commission adopted Regulation (EC) No 473/20024 updating
technical  Annexes  I,  II  and  VI  to  Regulation  (EEC)  No  2092/915  and  laying  down
detailed  rules  as  regards  the  transmission  of  information  on  the  use  of  copper
compounds.

On 26 June 2002 the Commission adopted Regulation (EC) No 1113/20026 amending
Regulation  (EC)  No  1788/2001  concerning  the  certificate  of  inspection  for  imports
from  third  countries.  The  certificate  has  to  be  presented  with  the  products  to  the
competent  authority  of  the  importing  Member  State  and  will  enter  into  force  on
1 November 2002.

On  25  October  2002  the  Commission  adopted  Regulation  (EC)  No  1918/20027
amending Regulation (EC) No 1788/2001 concerning the certificate of inspection for
imports from third countries. The purpose of the Regulation was to give clarifications
concerning the information to be included in the certificate.

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:

– 

– 

– 

– 

– 

a  regulation  establishing  labelling  and  inspection  requirements  for  animal
feedingstuffs  was  adopted  by  the  Standing  Committee  for  organic  farming  in
December 2002;

additions  to  sections  A  and  B  of  Annex  VI  as  regards  the  non-agricultural
ingredients and processing aids used in processed livestock products; a proposal
will be submitted to the Standing Committee in the first half of 2003;

supplementing feedingstuffs with synthetic vitamins;

evaluation  of  the  need  for  feed  materials  of  conventional  origin  and  feed
supplements;

issues concerning availability of organic livestock.

73. 

The  continuous  process  of  updating  the  annexes  to  Regulation  (EEC)  No  2092/91
included discussion on:

– 

– 

derogation for the use of non-organic seeds;

use of substrates in organic farming.

4

5

6

7

8

OJ L 75, 16.3.2002, p. 21.
OJ L 198, 22.7.1991, p. 1.
OJ L 168, 27.6.2002, p. 31.
OJ L 289, 26.10.2002, p. 15.
OJ L 222, 24.8.1999, p. 1.

31

 
                                                
74. 

75. 

The possibility of developing a European Action Plan for organically produced food
and  organic  farming  was  further  discussed  and  a  Commission  staff  working  paper9
has been drawn up.

The assessment of equivalency under Article 11(1) of Regulation (EC) No 2092/91 is
ongoing  for  several  third  countries.  On  28  June  2002  the  Commission  adopted
Regulation (EC) No 1162/200210 amending Regulation (EEC) No 94/92 laying down
detailed  rules  for  implementing  the  arrangements  for  imports  from  third  countries
provided for in Council Regulation (EEC) No 2092/91 and including New Zealand on
the list of third countries. On 30 December 2002 the Commission adopted Regulation
(EC) No 2382/200211 amending Regulation (EEC) No 94/92 in order to prolong the
duration of inclusion of the third countries listed in the Annex to this Regulation.

76. 

Harmonisation  of  the  conditions  for  issuing  import  authorisations  according  to
Article 11(6) has started in a working group.

2.4. 

Promotion of agricultural products

77. 

78. 

79. 

In August 2002 under the new arrangements for measures to provide information on,
and  to  promote,  agricultural  products  on  the  internal  market  of  the  Community
introduced by Council Regulation (EC) No 2826/2000, the Commission approved 40
of  the  123  programmes  submitted  by  professional  organisations  via  the  national
authorities concerned.

These campaigns chiefly target consumers within the EU. The products concerned are
mainly  cheese  and  milk  products,  fresh  and  processed  fruit  and  vegetables,  flowers
and  green  plants,  and  wine,  as  well  as  information  on  organically  produced  food.
Community part-financing (50%) will amount to EUR 32.1 million over three years,
with EUR 17.5 million in the first campaign year.

The  specific  measures  in  the  beef  sector  were  ongoing  during  2002,  as  were  the
measures for the promotion of agricultural products in third countries, both decided in
2001.  For  the  latter measure,  a  new series of  campaigns  will  be  adopted  in  January
2003.

2.5. 

Simplification of agricultural legislation

2.5.1. 

Introduction

80. 

81. 

Simplification  work  carried  out  by  the  Commission  in  the  field  of  agricultural
legislation has focused  on, first,  making agricultural  legislation  as  clear,  transparent
and  easily  accessible  as  possible  and,  second,  reducing  the  administrative  workload
that  the  common  agricultural  policy  (CAP)  imposes  on  farmers  and  administrative
authorities.

The  simplification  of  agricultural  legislation  was  discussed  by  the  experts  group  on
simplification which was set up by the Commission following the conclusions of the
Agriculture  Council  meeting  of  October  2000.  The  group  met  several  times  and
discussed  and  gave its opinion  on  issues  including  the  implementation  of  the  Small

9

10

11

SEC(2002) 1368 of 12 December 2002.
OJ L 170, 29.6.2002, p. 44.
OJ L 358, 31.12.2002, p. 120.

32

 
                                                
Farmers’ Scheme, simplification of rural development policy, the CAP-ED project (a
project  creating  an  electronic  dictionary  of  codes  used  within  the  CAP,  with  the
intention  of  facilitating  and  simplifying  the  electronic  exchange  of  information
between  the  Commission  and  the  Member  States)  and  simplification  of  Member
States' reporting obligations.

2.5.2.  Transparency and accessibility of agricultural legislation

82. 

83. 

Work  on  the  project  to  consolidate  agricultural  legislation  continued  this  year.  The
project aims to consolidate agricultural legislation in all official languages of the EU
and  make  it  available  on  the  Internet  for  the  general  public.  Modifications  to
agricultural acts are integrated into the basic text so that a single and updated, though
not legally binding, version can be consulted.

Moreover,  the  Commission  has  launched  a  horizontal  project  in  order  to  codify  the
Community acquis before the end of 2005. Agricultural legislation will be included in
this exercise and legally binding codified texts of agricultural acts will be adopted in
the next few months.

2.5.3. 

Simplification measures in different sectors

84. 

85. 

The adjustments in policy measures proposed under the mid-term  review promote  a
substantial  simplification  of  the  CAP.  The  Commission  has  proposed  introducing  a
single decoupled income payment per farm for certain direct aids, which, by cutting
the  link  between  payments  and  production,  will  mean  a  major  simplification  in  the
support for EU farmers.

In the framework of rural development policies and in tandem with the discussions on
the simplification of the Structural Funds, DG AGRI has started to reflect on how to
simplify  Community  rural  development  policy.  A  priori  the  discussion  is  limited  to
the  present  programming  period  2000–2006.  The  exercise  is  aimed,  first,  at
identifying the legal and administrative provisions that are sources of complexities in
Community  rural  development  policy  and  so  hinder  its  implementation  and  the
achievement  of  its  objectives  and,  second,  at  identifying  possible  solutions.  This
debate  should  also  result  in  a  useful  exercise  in  view  of  the  accession  of  candidate
countries before the end of the programming period (2000–2006).

2.5.4. 

Small Farmers’ Scheme

86. 

The implementing rules  for the  Small  Farmers’  Scheme  were  adopted  at  the  end  of
last  year12.  For  the  calendar  year  2002  only  Italy  applied  the  scheme.  After  having
adopted  the  necessary  national  measures  to  implement  it  (database,  internal  rules,
forms etc.), Italy received requests from over 2000 farmers to participate in the SFS.
According  to  the  Italian  authorities  the  administrative  adjustments  needed  to
implement  the  scheme  may  be  the  reason  for  the  relatively  low  number  of
participants. A higher number is expected for the year 2003.

12

Commission  Regulation  (EC)  No  1/2002  of  28  December  2001  laying  down  detailed  rules  for  the
application of Council Regulation (EC) No 1259/1999 as regards the simplified scheme for payments to
farmers under certain support schemes (OJ L 1, 3.1.2002, p.1).

33

 
                                                
2.6. 

State aid

2.6.1.  New guidelines for state aid relating to the cost of disposing of slaughterhouse waste
and fallen stock, as well as for transmissible spongiform encephalopathies (TSE) tests

87. 

88. 

89. 

90. 

91. 

92. 

On 27 November 2002 the Commission adopted new guidelines for state aid relating
to  the  cost  of  disposing  of  slaughterhouse  waste  and  fallen  stock,  as  well  as  for
transmissible spongiform encephalopathies (TSE) tests13. These new rules clarify and
modify state aid policy in these sectors. This was necessary because Member States
had  been  following  different  policies  that  created  a  serious  risk  of  distortion  of
competition.

BSE  legislation  has  significantly  altered  the  economics  of  slaughterhouse  waste.
What was a valuable product in the past is waste now, to be disposed of at a high cost.

In  order  to  allow  the  sector  to  adapt,  the  Commission  authorised  the  payment  of
appreciable amounts of public support. However, this could lead to serious distortions
of competition.  Some  Member States  grant substantial  amounts  of  aid,  while  others
do not. A review of the policy was, therefore,  necessary.  The  new  rules  respect  the
need to protect human health and the environment, which justifies the granting of aid
without creating undue distortions of competition.

These new guidelines do not in any way affect the possibility of granting state aid or
the  legal  obligation  deriving  from  specific  Council  Regulations  to  compensate
farmers for losses where their animals are found to be infected by BSE or comparable
diseases.  They  rather  relate  to  the  permanent  financial  burden  associated  with  the
general obligation to test and separate risk material from healthy animals.

In future, no state aid is to be granted towards the cost of disposing of slaughterhouse
waste of any kind. By way  of exception, Member States may grant 50%  aid for the
disposal of specified risk material and meat- and bonemeal produced in 2003 which
may no longer be used for commercial purposes.

As to TSE tests, Member States will have to respect an upper limit of EUR 40 of total
public support towards the cost of testing a bovine animal (BSE tests) slaughtered for
human consumption from 1 January 2003. No such upper limit exists at present. The
support  comprises  the  total  cost  of  testing,  i.e.  the  test  kit  and  the  taking,
transportation, analysis, storage and destruction of the sample. It should be borne in
mind that EUR 15 of the EUR 40 is currently paid by the Community (EUR 10.5 in
the  year  2003).  This  limit  of  EUR  40  was  found  to  be  sufficient  to  cover  the  price
charged  by  the  most  competitive  test-kit  suppliers  in  the  European  Union.  It  will
prevent  undue  distortions  of  competition  and  give  suppliers  who  charge  more  an
incentive to reduce their prices. For other TSE screening tests (e.g. on fallen cattle or
sheep), the Commission has decided to continue to authorise state aid of up to 100%
with no restrictions on the amount.

93. 

In the case of fallen stock on the farm, and only such stock, Member States may also
grant public support of up to 100% of the removal costs (collection and transport) and
75% of the destruction costs (storage, processing, destruction and ultimate disposal).
100% aid for destruction may be granted in some circumstances, e.g. if it is financed

13

OJ C 324, 24.12.2002, p. 2.

34

 
                                                
through fees or contributions from the meat sector. In order to allow Member States
to adapt existing financing systems, the Commission will authorise aid of up to 100%
up to the end of 2003.

94. 

These  guidelines  will  apply  to  new  state  aid,  including  any  notifications  from
Member States that are pending, with effect  from 1 January 2003. The Commission
proposes  that  Member  States  should  bring  their  existing  aid  schemes  into  line  with
these  guidelines  by  31 December  2003.  The  present  guidelines  will  remain  in  force
until 31 December 2013.

2.6.2.  Overall workload

95. 

The  Commission  received  341  notifications  of  draft  state  aid  measures  in  the
agricultural and agri-industrial sector. The Commission also started the  examination
of 34 aid measures which had not been notified in advance under Article 88(3) of the
EC  Treaty. No review of existing  aid  measures  pursuant  to  Article  88(1)  of  the  EC
Treaty was commenced or concluded. Overall, the Commission raised no objections
to 250 measures, several of which were approved after the Member States concerned
either  amended  them  or  undertook  to  amend  them  in  order  to  bring  them  into  line
with Community state aid rules. The Commission launched the procedure laid down
in  Article  88(2)  of  the  EC  Treaty  in  respect  of  five  cases  where  the  measures
concerned  raised  serious  doubts  about  compatibility  with  the  common  market.  The
Commission closed the procedure provided for  in Article 88(2) of the EC Treaty in
respect of four cases, taking a final negative decision in three. In all the cases where a
negative  decision  was  taken  and  state  aid  had  already  been  granted  by  the  Member
State concerned, the Commission requested recovery of the aid paid.

96. 

The overview of cases which  follows includes a selection of the cases which  raised
the  most  interesting  issues  of  state  aid  policy  in  the  agricultural  and  agri-industrial
sector in 2002. For the sake of clarity, the cases have been classified by topic.

2.6.2.1.  Germany

97. 

98. 

Aid  schemes  aimed  at  compensating  for  the  damage  caused  by  the  recent  floods  in
Germany

The European Commission approved five aid schemes aimed at compensating victims
in the agricultural sector for the damage caused by the recent floods in Germany.

The  schemes  were  examined  rapidly  and  it  was  concluded  that  the  compensation
proposed  by  Germany  could  be  paid  in  its  entirety.  The  measures  were  considered
compatible with Article 87(2)(b) of the Treaty, which states that the Commission can
approve aid to repair the damage caused by natural disasters. The measures approved
provide for:

– 

Financial  compensation  of  up  to  a  total  of  20%  (30%  in  disadvantaged  areas)
will  be  given  to  farmers  for  lost  revenue  due  to  floods  and  land  surface
damage14.

14

Aid N 567/2002.

35

 
                                                
– 

– 

– 

On-the-spot-payments  of  up  to  a  total  of  50%  will  be  handed  out  for  damage
due to floods and, in particular, the loss, destruction and damage  of  economic
goods,  such  as  plant,  machines,  land  and  livestock.  Farmers  will  be
compensated for circulating capital as well as evacuation costs15.

Aid  will  also  be  given  for  the  full  or  partial  compensation  of  property
investment losses in order to keep businesses in operation16.

The special programme under the Joint Scheme (Gemeinschaftsaufgabe) in the
agricultural sector for flood damage specifically covers aid for the restoration of
villages, roads in rural areas and forests, and aqua-culture activities. Particular
emphasis is placed on environmentally friendly restoration17.

99. 

Loans from the Landwirtschaftliche Rentenbank will be supported by a guarantee of
80%  for  loans  for  liquidity  aid  or  for  investments  in  agricultural  and  forestry
holdings18.

Certified beef quality label in Bavaria

100. 

On  13  February  2002  the  Commission  authorised  Germany  (Bavaria)  to  pay  aid
worth a total of EUR 3.5 million in the year 2002 for the introduction of a new quality
label. For the years 2003 and 2004, an annual budget of more than EUR 2 million has
been approved. The quality label is part of an extensive quality assurance and control
programme, which has been introduced in order to restore consumer confidence after
a significant drop in beef sales following the BSE crisis. Access to the quality label is
open  to  all  enterprises  in  the  European  Union  complying  with  the  programme
requirements.

101. 

The aid is to cover the cost of several individual measures, such as:

– 

– 

– 

controls and certification of companies participating in the programme,

information measures designed to  explain the label and its  performance  to the
consumer,

sales promotion and advertising measures.

102. 

103. 

The  aid  will  be  granted  to  groups  of  users  of  the  quality  label,  such  as  marketing
associations or other firms in the food production area. Users of the label must meet
conditions relating to the production, processing and marketing of cattle and beef and
will encounter markedly higher control standards than normal. There are also plans to
extend the label to products other than beef at a later date.

The Commission authorised this aid on  the basis of  new  guidelines for state aid  for
the advertising of agricultural products, which entered into force on 1 January 2002.
These  guidelines  make  it  possible,  for  the  first  time,  to  combine  information  about
product  quality  and  product  origin  in  the  framework  of  such  a  label.  The  label  for
which the Commission has now authorised the granting of state aid allows producers
from all over the Community to indicate the respective origin of their products.

15

16

17

18

Aid N 581/2002.
Aid N 595/2002.
Aid N 647/2002.
Aid N 682/2002.

36

 
                                                
2.6.2.2.  Greece

Aid to compensate for losses caused by natural disasters

104. 

On 26 September 2002 the Commission approved a major state aid scheme aimed at
compensating for the losses caused by natural disasters in Greece19. The method used
to calculate the losses is based not on overall production in the reference years, which
is  the  principal  method  of  calculation  advocated  by  the  Community  guidelines  on
state  aid  in  the  agricultural  sector,  but  on  regional  output  (the  guidelines  state  that
methods  of  calculation  other  than  those  given  may  be  used  provided  that  their
appropriateness is demonstrated). The budget for this scheme is very substantial: over
EUR 171 million for state aid and more than EUR 126 million for the aid still under
consideration  which  the  Greek  authorities  would  like  the  European  Union  to  part-
finance.

2.6.2.3.  Spain

Measures taken by Spain to support agriculture following the fuel price increase

105. 

On  11  December  2002  the  Commission  took  a  final,  partly  negative  decision
concerning  the  support  measures  introduced  by  Spain  following  the  fuel  price
increase,  in  respect  of  which  it  had  initiated  the  formal  investigation  procedure  in
April  200120.  The  Commission  considered  that  a  number  of  measures  directly
associated with this price rise do not fall within the scope of the state aid rules. On the
contrary, it considered that Spain was unable to demonstrate that two measures in the
package  presented  (subsidising  loans  and  guarantees  and  certain  tax  benefits)  were
confined to compensation for the losses incurred as a result of the fuel price increase.
The Commission therefore regarded this aid as operating aid which was incompatible
with the competition rules.

106. 

The Commission decided that the following measures did not constitute aid under the
Treaty:

– 

– 

Amendment of Law 37/1992 on value-added tax;

Tax measures to support agricultural cooperatives;

–  Measures  in  respect  of  natural  persons'  income  tax  and  value-added  tax,

including the following:

– 

– 

– 

For  2000,  the  application  of  a  corrective  index  to  feed  purchased  from
third parties in the case of certain livestock farming activities covered by
the scheme for the objective assessment of personal income tax;

For 2001, a reduction in the net yield under the scheme for the objective
assessment  of  personal  income  tax  for  arable  and  livestock  farming
activities;

Also for 2001, reduction in the percentage for calculating quarterly value-
added  tax  payments  under  the  simplified  arrangements  for  certain
agricultural  activities  and  the  tax  measure  consisting  in  raising  the

19

20

Aid N 143/2002.
Aid C 22/2001.

37

 
                                                
percentage of expenditure which is difficult to substantiate in the context
of personal income tax.

107. 

Conversely, the Commission decided that state aid granted to farmers in the form of
subsidies on loans and guarantees, and the measure extending for 2000 and 2001 the
tax benefits applicable to personal income tax on transfer of certain agricultural land
and  holdings  are  incompatible  with  the  common  market.  For  these  measures,  Spain
did not provide any information demonstrating any link between the rise in the price
of oil and the losses suffered by farmers.

108. 

Since  the  aid  is  illegal,  Spain  must  cancel  it  and  recover  it  from  the  beneficiaries
immediately. Spain must inform the Commission within two months of the measures
which it has taken to cancel and recover the aid.

109. 

110. 

111. 

112. 

113. 

Aid for the extraction, refining and bottling of olive pomace oil

On 14 March the Commission decided to initiate the state aid investigation procedure
with regard to a Spanish aid scheme for the extraction, refining and bottling of olive
pomace oil21.

The aid granted is in the form of loans of a maximum overall amount of ESP 5 000
million  (EUR 30.05  million),  with  a  rate  of  interest  subsidised  by  the  Ministry  of
Agriculture, which will also be able to subsidise the guarantees on these loans.

At  this  stage,  the  Commission  considers  that  this  aid  constitutes  state  aid  which  is
intended  to  improve  the  financial  situation  of  enterprises  but  does  not  in  any  way
contribute  to  the  development  of  the  sector.  Consequently,  it  could  constitute
operating aid incompatible with the common market. In addition, this aid is likely to
be in breach of Community legislation (common market organisations).

Aid to olive oil producer organisations

On  19  July  2002  the  Commission  decided  to  initiate  the  state  aid  investigation
procedure with regard to a regional (Extremadura) aid scheme for olive oil producer
organisations. The aid, in the form of grants calculated on the basis of the number of
production aid applications submitted for olive oil and table olives, is in addition to
the aid provided for in Regulation No 136/66/EEC.

At  this  stage  the  Commission  considers  that  a  grant  to  olive  oil  producer
organisations  calculated  on  the  basis  of  the  number  of  production  aid  applications
submitted for olive oil and table olives is a state aid intended to improve the financial
situation of the groups but does not in any way contribute to the development of the
sector. It is, therefore, to be regarded as operating aid incompatible with the common
market.  In  addition,  it  is  aid  which  is  likely  to  interfere  with  the  mechanisms
governing  the  common  market  organisations  and  to  be  in  breach  of  them  and,
therefore, Community legislation.

21

Aid C 21/2002 (ex NN 14/2002).

38

 
                                                
2.6.2.4.  France

Aid for financing the public rendering service

114. 

115. 

116. 

117. 

On  10  July  2002  the  Commission  decided  to  initiate  the  formal  investigation
procedure  with  regard  to  certain  aspects  of  the  rendering  scheme  in  France22.  The
Commission received several complaints claiming that the rendering levy is liable to
result in distortion.

The  purpose  of  the  rendering  levy  is  to  finance  a  public  service  consisting  in  the
collection and destruction of animal carcasses and material seized at slaughterhouses
recognised as being unfit for human or animal consumption. The levy was introduced
with effect from 1 January 1997, and is applied to the ex-VAT value of all purchases
of meat and other specified products by all retailers of these products.

The major aspect under investigation is the application to meat imported from other
Member  States  of  the  rendering  levy  introduced  to  finance  the  scheme,  despite  the
fact that such meat gains no advantage from the scheme. In addition, since the public
rendering  service  is  free  of  charge,  those  benefiting  from  it,  i.e.  slaughterhouses,
stockfarmers and holders of animal meal, do not have to meet the cost of eliminating
the  waste  produced  by  their  activities.  This  could  constitute  state  aid  to  such
businesses, which might be incompatible with the rules.

The Commission is also looking into the fact that the levy is imposed on businesses
above a certain minimum total turnover rather than on the basis of sales of meat. In
fact,  a  business  that  is  exempt  from  the  levy  may  in  fact  sell  more  meat  than  a
business  that  pays  the  levy  because  of  a  higher  total  turnover  generated  by  other
products.  Such  exemption  could  constitute  incompatible  state  aid  to  the  businesses
that do not pay the levy.

118.  Moreover, the Court of Justice of the European Communities has been asked to give a
preliminary ruling on the interpretation of Article 87(1) of the Treaty23 in connection
with the rendering levy.

2.6.2.5.  Italy

Tax credits for investments in the agricultural sector

119. 

On 26 July 2002 the Commission approved an Italian aid scheme entitled "tax credits
for  agricultural  investments"24.  The  scheme  provides  for  measures  to  support  farm
investments in the production sector and in the processing sector for the agricultural
output of any farm, with the exception of investments for processing products listed
in  Annex  I  to  the  Treaty  that  are  carried  out  in  Italian  regions  eligible  for  the
exemptions provided for in Article 87(3)(a) and the Abruzzi and Molise areas eligible
for  the  exemptions  provided  for  under  Article  87(3)(c)  of  the  Treaty,  which  were
covered by another Decision (Aid N 324/02). The budget for the scheme amounts to
EUR 155 million a year up to 2006.

22

23

24

Aid C 49/2002.
Case C-126/01, Ministry of Economic Affairs, Finance and Industry v GEMO SA.
Aid N 220/2002.

39

 
                                                
120. 

121. 

122. 

Aid scheme in favour of SMEs financed by the Union of the Chambers of Commerce

On  13  May  2002  the  Commission  approved  an  aid  scheme25  in  favour  of
undertakings operating in the agricultural sector financed by the national Union of the
Chambers of Commerce. The scheme, aimed at promoting the development of SMEs
operating  in  the  agricultural  sector,  has  a  yearly  budget  (for  the  first  year)  of  about
EUR 30 900 000.  Aid  is  granted  for  investments  in  the  production,  processing  and
marketing sectors; for the diversification of agricultural activities, for the payment of
insurance  premiums,  for  encouraging  the  production  and  marketing  of  quality
agricultural products, for technical assistance, for the livestock sector, for promotion
and advertising, for the setting-up of risk-capital funds and for guarantees.

Italian aid to advertising

On 1 March 2002 the Commission approved a national aid scheme for promotion and
advertising measures26. This scheme amends the similar schemes already approved by
the  Commission  under  Aid  No  N  558/200027  and  Aid  N 729/A/200028  in  order  to
bring  them  into  line  with  the  Community  guidelines  for  state  aid  for  advertising  of
products listed in Annex I to the EC Treaty and of certain non-Annex I products29.

This is one of the first instances of large-scale application of the guidelines (all types
of association representing agricultural producers being potential beneficiaries of the
scheme). The implementation of the scheme will be checked in the annual reports to
be sent by the Italian authorities.

2.6.2.6.  The Netherlands

123. 

Rationalisation aid scheme for pig slaughterhouses in the Netherlands

On 28 December 2001, the European Commission decided to initiate a formal  state
aid  investigation  procedure  concerning  a  notified  rationalisation  scheme  for  pig
slaughterhouses in the Netherlands30. In the light of the judgment of the Court of First
Instance  in  the  case  Weyl  Beef  Products  BV  and  Others  v  Commission31,  it  was
deemed necessary to examine whether the notified measure, involving an agreement
between undertakings to reduce capacity, complied with Article 81 of the EC Treaty.
The  Commission  doubted  that  the  measure  could  be  exempted  as  a  crisis  cartel
because  there  appeared  to  be  no  structural  over-capacity  in  the  sector  and,
furthermore, it seemed doubtful that the measure would improve production. Finally
the  Commission  also  had  doubts  about  the  compatibility  of  the  proposed  measure
with the provisions of section 9 of the guidelines on state aid in the agriculture sector.
By  letter  of  5  August  2002  the  Dutch  authorities  withdrew  the  notification  of  the
measure. Therefore no final decision will be taken in this case.

25

26

27

28

29

30

31

Aid N 241/2001.
Aid N 30/2002.
See letter SG(2001) D/286564 dated 28.2.2001.
See letter SG(2001) D/286847 dated 13.3.2001.
OJ C 252, 12.9.2001, p. 5.
Aid C 91/2001 (ex N 568/2001), OJ C 37, 9.2.2002, p. 17.
Joined cases T-197/97 and T-198/97, 31.1.2001.

40

 
                                                
2.6.2.7.  Portugal

124. 

125. 

126. 

127. 

Recovery  of  incompatible aid  granted to  the  pig  sector:  Article  88(2)  of  the  Treaty,
Case C-110/02, Commission v Council

On 27 February 2002 the European Commission decided to ask the Court of Justice to
annul  the  Decision  of  the  Council  of  Ministers  of  21  January 200232  authorising
Portugal to grant aid of a maximum of EUR 16.3 million to pig farmers. This is the
same amount of state aid as should have been repaid by 2 116 farmers under two final
negative  decisions  of  the  Commission  dated  25  November  199933  and  4  October
200034.

Considering  that  the  aid  under  these  measures  was  incompatible  with  Treaty
Articles 87 and  88  on  state  aid,  the  Commission  required  Portugal  to  take  action  to
recover the amounts illegally granted. Portugal did not appeal to the Court of Justice
and so the decisions remained unchallenged.

The Portuguese authorities in fact launched proceedings to recover the incompatible
aid but altered their opinion and in a letter dated 23 November 2001 formally asked
the  Council 
totalling
EUR 16.3 million  for  the  2 116  farmers  affected  by  the  Commission's  two  negative
decisions.

to  authorise,  under  Article 88  of 

the  Treaty,  aid 

On 21 January the Council, despite the Commission's opposition, adopted a decision
authorising this aid. The formal basis of that decision is Article 88(2) of the Treaty.
The Commission considers that the Council has misused this provision in the case in
point.  The  Council  took  this  decision  more  than  fifteen  months  after  the
Commission's  second  decision  was  adopted.  It  is  the  first  time  that  the  Council  has
used  this  exceptional  procedure  to  approve  an  aid  the  sole  purpose  of  which  is  to
cancel  the  financial  impact  of  two  final  decisions  of  the  Commission.  The  latter
considers the legal security of European Union decisions to be seriously threatened by
the Council's decision.

128. 

For  the  Commission  the  Council's  use  of  Article  88  to  cancel  out  de  facto  and
regardless of time the financial impact of the two final decisions:

– 

– 

– 

unacceptably violates the legal security of all the interested parties,

involves  an  assumption  by  the  Council  of  a  position  of  higher  authority  that
infringes  both  the  Commission's  decision-making  power  and  the  Court's
jurisdictional power,

raises  questions  of  principle,  on  the  reality  of  the  Commission's  authority  in
state  aid  policy  matters  and  on  the  allocation  of  responsibilities  between  the
Institutions as intended by the Treaty itself.

It has therefore referred this matter to the Court of Justice35.

32

33

34

35

Decision 2002/114/CE of 21 January 2002 (OJ L 43, 14.2.2002, p. 18).
OJ L 66, 14.3.2000, p. 20.
OJ L 29, 31.1.01, p. 49.
Case C-110/02, Commission v Council.

41

 
                                                
2.6.2.8.  Case law

129. 

130. 

131. 

132. 

133. 

134. 

Case T- 152/99 – Hijos de Andrés Molina SA (HAMSA) v Commission

for 

On 11 July 2002, the Court of First Instance of the European Communities ruled on
the  annulment  of  Commission  Decision  1999/484/EC  of
the  action 
3 February 199936 declaring as illegal and incompatible with the common market the
state aid granted by the Spanish Government to the company Hijos de Andrés Molina
SA (HAMSA), which was lodged by the latter and supported by Spain.

The  beneficiary,  HAMSA,  had  been  the  subject  of  a  number  of  financial  support
measures  since  1993,  namely  loans  and  guarantees  from  the  public  body  IFA,
capitalisation  of  part  of  its  debt  to  IFA  and  the  waiver  of  debts  by  several  public
bodies.

Of  the  eight  pleas  submitted  by  the  applicant,  with  the  support  of  the  Spanish
Government,  for  the  annulment  of  the  Commission  Decision,  the  only  one  to  be
upheld by the Court related to the aid granted in the form of an annulment of debt by
public bodies.

In its judgment, the  Court recognised that  the  Commission  had  assessed  the  overall
situation  of  the  public  creditors  in  relation  to  that  of  the  private  creditors,  drawing
decisive  conclusions  from  a  simple  comparison  between  the  total  amount  of  public
claims and private claims, and between the average percentage of the waiver of public
claims  and  private  claims,  and  finding  that  the  public  creditors,  unlike  most  of  the
private  creditors,  had  preferential  claims  or  mortgages.  The  Court  considers  that  it
was for the Commission to assess, with regard to each of the public bodies in question
and taking account of the above-mentioned factors, whether the waiver of debt which
had been granted by it was more generous than that which would have been granted
by a hypothetical private creditor had it been in a situation vis-à-vis the undertaking
comparable to that of the public body and seeking to recover the sums owed to it. It is
therefore the overall simplistic approach followed by the Commission that resulted in
the annulment of this part of the Decision.

On  the  other  hand,  the  Court  rejected  all  of  the  applicant's  other  complaints,
particularly that relating  to non-application of the  principle  of  regional  discipline  to
ad hoc sectoral aid and that relating to the effects on trade, which was based on global
data rather than specific analytical evidence.

Cases C-113/00 and C-114/00, Kingdom of Spain v Commission

Two applications were made to the Court for the annulment of Commission Decisions
2000/237/EC37 and 2000/0240/EC38, both dated 22 December 1999, declaring two aid
schemes implemented by Spain to be incompatible with the Treaty. They concern aid
for,  first,  horticultural  products  intended  for  industrial  processing  and,  second,  the
financing of operating capital.

36

37

38

OJ L 193, 26.7.1999, p. 1.
OJ L 75, 24.3.2000, p. 54.
OJ L 76, 25.3.2000, p. 16.

42

 
                                                
135. 

136. 

In  both  cases  the  Court  confirmed  that  the  relatively  small  amount  of  aid  or  the
relatively small size of the undertaking which receives it does not as such exclude the
possibility  that  intra-Community  trade  may  be  affected  and  that  agricultural  aid  is
exempt from the de minimis rule.

As regards the absence of a statement of reasons regarding the finding that there was
an effect on intra-Community trade, the Court confirmed that the Commission is not
bound to demonstrate the effect of aid. At the same time, it noted that the contested
Decisions included figures on trade between the other Member States and Spain, thus
indicating the overall context in which the aid schemes operate, as well as details of
the  general  effect  of  aid  on  production  costs  and  on  the  existence  of  a  common
organisation of the markets.

137. 

The Court also confirmed in the two judgments that:

– 

– 

the use of the words "abnormally" and "serious" in Article 87(3)(a) shows that
the  exemption  concerns  only  areas  where  the  economic  situation  is  extremely
unfavourable in relation to the Community as a whole, while the exemption in
Article  87(3)(c)  is  wider  in  scope  inasmuch  as  it  permits  the  development  of
certain  areas  in  a  Member  State  which  are  disadvantaged  in  relation  to  the
national  average.  It  adds  that,  in  the  case  of  operating  aid  not  conceived  as
regional aid to investment or for the creation of jobs and not covered by another
practice  such  as  that  involving  subsidised  short-term  loans  in  agriculture
(crédits  de  gestion),  an  analysis  of  the  sectoral  impact  takes  precedence  over
that of the regional impact;

the  aid  schemes  in  question  established  a  financial  incentive  to  sell  and
purchase raw materials from the region and accordingly constitute a restriction
on the free movement of goods; in practice, they amount to  a measure having
equivalent effect to a quantitative restriction, which is prohibited by the Treaty.
In  those  circumstances,  they  could  not  be  declared  to  be  compatible  with  the
common market, the common market organisation concerned being affected.

2.7. 

Assistance to the needy

138. 

During  the  year,  the  European  Union  spent  EUR  200  million  on  a  food  aid
programme  for  the  needy  under  which  agricultural  products  in  intervention  storage
were  made available to charities. Since  Germany, Austria, the  Netherlands,  Sweden
and the United Kingdom decided not to operate the programme in 2002, the amount
allocated to them was spread between the other Member States.

2.8. 

Outermost regions

139. 

On 28 June 2001 the Council adopted a series of Regulations repealing the previous
Regulations based on the programmes of options specific to remoteness and insularity
(POSEIDOM, POSEIMA, POSEICAN). The new Regulations are  Regulations  (EC)
No 1452/2001,  (EC)  No  1453/2001  and  (EC)  No  1454/200139,  applicable  to  the
French  overseas  departments,  the  Azores  and  Madeira,  and  the  Canary  Islands

39

OJ  L  198,  21.7.2001,  pp.  11-57.  They  replace,  respectively  Regulations  (EEC)  No  3763/91
(POSEIDOM)  for  the  French  overseas  departments,  (EEC)  No  1600/92  (POSEIMA)  for  Madeira  and
the Azores and (EEC) No 1601/92 (POSEICAN) for the Canary Islands.

43

 
                                                
140. 

141. 

142. 

respectively.  In  addition,  Regulation  (EC)  No  1455/2001  made  the  necessary
adaptations to the common organisation of the market in beef and veal40.

In 2002 the Commission completed the implementation of the innovations introduced
by  the  2001  Regulations.  That  involved,  in  particular,  the  adoption  of  Commission
Regulation  (EC)  No  43/2003  of  23  December  2002  laying  down  detailed  rules  for
applying  Council  Regulations  (EC)  No  1452/2001,  (EC)  No  1453/2001  and  (EC)
No 1454/2001  as  regards  aid  for  the  local  production  of  crop  products  in  the
outermost  regions  of  the  Union41,  and  Regulation  (EC)  No  98/2003  of  20  January
2003  establishing  the  supply  balances  and  Community  aid  for  the  supply  of  certain
essential products for human consumption, for processing  and  as  agricultural  inputs
and for  the  supply  of live  animals  and eggs  to the outermost  regions  under Council
Regulations (EC) No 1452/2001, (EC) No 1453/2001 and (EC) No 1454/200142.

Through  Regulation  (EC)  No  43/2003,  the  Commission  groups  together  in  a  single
text  all  the  provisions  currently  dispersed  throughout  eleven  different  implementing
Regulations relating to all production of crop products in the outermost regions of the
Union  for  which  support  is  granted  under  Regulations  (EC)  No  1452/2001,  (EC)
No 1453/2001  and  (EC)  No  1454/2001.  As  well  as  consolidating  the  above-
mentioned pre-existing provisions, the new text comprises a new title relating to the
management  and  control  system  for  aid  schemes,  which  will  align  practices  in  the
outermost  regions  on  those  applied  in  the  rest  of  the  territory  of  the  Union  under
Regulation (EC) No 3508/92.

Through Regulation (EC) No 98/2003, the Commission implements the results of the
2001  reform  of  the  POSEI  schemes  by  establishing,  for  products  covered  by  the
specific supply arrangements, aid for supplies to the outermost regions, including the
flat-rate minimum aid designed to take account of the additional transport costs and,
for farm inputs and products intended for processing, the remoteness and insularity to
be  taken  into  account  where  aid  in  proportion  to  the  refunds  granted  for  similar
products exported to third countries does not cover these additional costs.

2.8.1.  Overseas countries and territories (OCT)

143. 

The new Council Decision (2001/822/EC) of 27 November 2001 on the association of
the  overseas  countries  and  territories  with  the  European  Community  ("Overseas
Association Decision") was adopted on 27 November 2001.

144. 

During  2002,  the  Commission  adopted  the  implementing  rules  for  rice  and  sugar
(Regulations (EC) No 174/200243 and (EC) No 192/200244).

2.9. 

Information measures concerning the CAP

145. 

Council Regulation  (EC)  No  814/200045  provides  for  information  measures  relating
to the common agricultural policy, intended for both Member States and the outside

40

41

42

43

44

45

OJ L 198, 21.7.2001,  p.  58. This  common  market  organisation  was  last  governed  by  Regulation  (EC)
No 1254/1999.
OJ L 7, 11.1.2003, p. 25.
OJ L 14, 21.1.2003, p. 32.
OJ L 30, 31.1.2002, p. 33.
OJ L 31, 1.2.2002, p. 55.
OJ L 100, 20.4.2000, p. 7.

44

 
                                                
world.  Commission  Regulation  (EC)  No  2208/200246  (which  replaces  Commission
Regulation  (EC)  No  1390/200047)  lays  down  detailed  rules  for  its  application  and
introduces  significant  improvements  to  the  scheme:  simplification,  transparency,
better  evaluation  of  the  information  actions  proposed,  better  definition  of  the
messages to communicate and means of distribution.

146. 

The purpose of the policy is to explain the issues surrounding the CAP, promote the
European  model  of  agriculture,  keep  farmers  and  other  rural  interests  informed  and
raise public awareness of the implications and goals of the CAP.

147. 

Adoption of the Commission's proposal finances three types of measures:

– 

– 

– 

annual  work  programmes  presented,  in  particular,  by  farmers'  or  rural
development  organisations,  consumers'  associations  and  environmental
protection associations,

specific  measures  to  be  implemented  in  particular  by  the  public  authorities  of
the Member States, the media and universities, and

activities implemented on the Commission's own initiative.

148. 

Actions fall into two main categories:

– 

– 

those  submitted  at  the  initiative  of  third  party  organisations  for  part-financing
by the EAGGF which can be either programmes or specific actions,

those at the initiative of the Commission and financed at a rate of 100% by the
EAGGF.

2.9.1.  Grants

149. 

150. 

151. 

Analysis of applications received from all countries in the Community of  Fifteen in
2000, 2001 and 2002 shows a steady annual increase (from 66 to 145 to 199 of which
27, 54 and 40 were applications for part-financing of programmes and 39, 91 and 159
were applications for specific measures in each of the three years).

The  majority  of  programmes  part-financed  were  from  Belgium,  which  reflects  the
presence in Belgium of a number of European umbrella organisations such as COPA,
CEJA and AEFPR but figures for the specific actions reveal a wider distribution with
significant numbers of actions financed in France, Spain and Italy. Similar trends can
be seen in the amounts of visits to Brussels requested by French, Spanish and Italian
groups and in the volume of letters and e-mail questions submitted to the services of
DG Agriculture.

Individual  organisations  which  were  successful  in  obtaining  part-financing  of  their
information  programmes  include  the  traditional  beneficiaries  of  the  "pre  814/2000
information  policy  grants"  such  as  COPA-COGECA,  AEFPR  and  CEJA  but  also
national  consumer  organisations,  national 
journalists'  organisations,  European
environmental  organisations  and  rural  development  groups.  A  number  of  national
member organisations of the  European  umbrella  organisations  were  also  successful,
as were some provincial/regional organisations and academic bodies.

46

47

OJ L 337, 13.12.2002, p. 21.
OJ L 158, 30.6.2000, p. 17.

45

 
                                                
2.9.2.  Actions at the Commission’s initiative

152. 

153. 

154. 

155. 

156. 

157. 

The  Commission  was  represented  at  various  agricultural  fairs  throughout  the  EU:
Grüne  Woche  in  Berlin,  Salon  de  l’Agriculture  in  Paris,  the  Salon  Alimentaria  in
Barcelona,  AGRIBEX  in  Brussels  as  well  as  the  fairs  held  in  Verona  (Italy)  and
Hameelina (Finland).

An  innovative  aspect  of  the  stands  was  the  voluntary  cooperation  of  national  and
local  farmers’  and  interbranch  organisations  to  present  not  only  our  documentation
but also tangible experiences of quality agricultural production from these countries.
This  type  of  joint  action  demonstrates  clearly  the  complementarity  of  the
Commission’s  general  information  actions  under  Council  Regulation  No  814/2000
and actions provided for in the context of other regulations governing information on
agricultural products.

Another partner was the Rural Carrefour network that accompanied Commission staff
in  providing  information  on  the  stand.  The  presence  of  a  Commission  stand  at
agricultural  fairs  provided  a  base  for  our  participation  in  a  number  of  other
communication activities in the context of the fairs involving press and professional
organisations.

Conferences were organised in Brussels for Agricultural Press and Rural Carrefours
and a conference on Mountain Agriculture was co-financed between  DG  AGRI and
DG REGIO. Two  major information events were organised  for  leading  members  of
the agricultural world  as well as  academics, consumers, the press and other  citizens
from all the candidate countries, including Turkey, in Riga and Prague.

The  regular  publications  programme  was  maintained  with  the  cooperation  of  the
OPOCE  and  a  number  of  specific  product  "Fact  Sheets",  reports  and  leaflets  were
published on common market organisations, international and rural issues.

In the field of other communication actions, updated key messages were produced on
Mid-Term  Review  and  Enlargement  issues.  A  video  was  made  on  the  Mid-Term
Review and updated to reflect the Commission proposals on CAP Reform of autumn
2002. Two "Eurobarometer Surveys" were carried out, one in the Member States and
the other in the candidate countries.

2.10. 

Information and communication technology

158. 

Key issues  for 2002 were the  improvement  of  the  electronic  reception  of  data  from
the  Member  States  and  in  particular  those  related  to  financial  and  market
management.

2.10.1.  Electronic reception of data from the Member States

159. 

In  the  context  of  receiving  data  from  the  Member  State  administrations  several
improvements were made in 2002 (NewIdes). In addition, a new version of the WUSI
(Web  Upload  Secure  Interface)  application,  which  is  a  transfer  mechanism  for  files
coming from the Member State administrations, was implemented in 2002. The DG
Agriculture portal (AWAI-Agriculture Web Applications Interface), which is used as
the point of access for the information system applications that are made available to
our correspondents in the Member States, has been operational since April 2002. For
the  CAP  electronic  dictionary  and  Organic  Farming  projects,  developments  in  2002

46

 
have led us  to a situation where both systems can  go on-line  as planned  in  the  first
half of 2003.

2.10.2.  Improvement of the Financial/CAP management information systems

160. 

161. 

The  planned  developments  of  the  AGREX2  and  eFAUDIT  financial  management
systems have been  completed  and  the  applications  are  running  to  the  satisfaction  of
internal and external users.

The  existing  Agriculture  Markets  Information  Systems  have  been  improved,
particularly the reporting, or adapted in view of the evolution of the regulations. The
publication of market prices on the "Europa" Internet site is also operational, covering
the period from 1985 to the present day.

2.10.3.  Improvement of administrative document management

162. 

In  terms  of  improving  effectiveness,  with  the  help  of  the  electronic  document
management system, the document scanning and archiving ADONIS Image service is
working 
the  document
management  system,  by  means  of  a  more  complete  electronic  archiving  system
(historical archives and classification system), were also taken in 2002.

to  user  satisfaction.  First  steps 

improving 

towards 

2.10.4.  Analysis, reporting and decision support information systems

163. 

The  study  for  the  AGRIVIEW  data  warehouse  concluded  that  a  data  warehouse  is
useful and feasible if resources and sponsorship by the high-level management of the
DG are available. The development of a data set for the AGREX financial data  was
launched as it was foreseen in the 2002 ICT work plan.

2.11.  Advisory  committees  and  relations  with  bodies  representing  the  EU  socio-

professional sector

164. 

165. 

At  some  eighty  meetings  of  the  advisory  committees  and  working  groups  held  in
2002,  the  Commission  consulted  and  informed  the  representatives  of  inter  alia
traders,  consumers,  workers,
agricultural  producers,  cooperatives,  processors, 
interests  of
environmental-protection, 
developments in the common agricultural policy and rural development policies.

rural-development  and  animal-welfare 

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
policy, 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 Communities48.

166. 

Updated versions of the list (to take account of members who resigned, retired, etc.)
were published in Official Journal C 122 of 4 May 1999, C 123 of 3 May 2000, C 233
of 17 August 2001, and C 167 of 12 July 2002.

48

OJ C 370, 30.11.1998, p. 1.

47

 
                                                
2.11.1.  Coordination with the European Parliament

167. 

168. 

169. 

The Committee for Agriculture and Rural Development held about fifteen meetings.
The  Commission  participated  and  kept  the  European  Parliament  informed  and
assisted individual Members of Parliament (MEPs) with various queries. In 2002, the
main topic was the Commission proposal for the CAP reform published in July.

Other  committees  followed  are  the  Committee  on  Budgets,  the  Committee  on
Budgetary  Control  and  the  Committee  on  the  Environment,  Public  Health  and
Consumer Policy. The subject matter in the last-mentioned committee – food safety,
animal  health  and  welfare,  plant  health  and  the  environment  –  is  closely  linked  to
agriculture.

The replies to questions (written and oral) and letters from MEPs, and petitions to the
Parliament  were  co-ordinated.  In  total,  there  were  141  letters  and  194  written
questions  where  DG  Agriculture  was  leader,  and  448  written  questions  where  DG
Agriculture  was  associated.  In  total  98  oral  questions  were  prepared  and  for
9 petitions the procedure was started.

48

 
3. 

MARKET DEVELOPMENTS

3.1. 

Crop products

3.1.1.  Cereals

3.1.1.1.  World market

170.  World  cereal  production  (excluding  rice)  in  the  2001/02  marketing  year  was  higher
than in the previous three years. Central and Eastern Europe enjoyed a record harvest
but  production  fell  in  the  European  Union,  North  America  and  Asia  (notably  in
China). According to International Grains Council figures the 2001/02 world harvest
was 1 480 million tonnes as against 1 452 million tonnes for 2000/01.

171.  World  wheat  production  fell  from  582 million  tonnes  in  2000/01  to  579 million
tonnes in 2001/02. The European Union harvested 96 million tonnes of common and
durum wheat (104.4 million tonnes in 2000/01). Production in China, in the past the
world's largest producer, fell from 102 million tonnes in 2000/01 to 94 million tonnes
in  2001/02.  Production  in  the  New  Independent  States  (NIS)  rose  from  60 million
tonnes in 2000/01 to 90 million tonnes in 2001/02. The 2001 crop in the United States
is  estimated  at  53.3 million  tonnes;  it  was  60.8 million  tonnes  in  2000.  In  Canada
production fell from 26.8 to 20.6 million tonnes owing to lower yields.

172.  World wheat consumption in 2001/02 was 587 million tonnes (583 million tonnes in
2001)  i.e.  8 million  tonnes  more  than  the  harvest.  Feed  grain  consumption  was
915 million tonnes (893 million tonnes in 2000/01), i.e. 14 million tonnes more than
production.

173. 

The International Grains Council's January 2003 estimates for 2001/02 indicate world
coarse grain production of 901 million tonnes (870 million tonnes in 2000/01). In the
United States there was a fall from 273 to 262 million tonnes but in the CIS countries
a  rise  from  54.5  to  68.5 million  tonnes.  Eastern  Europe  saw  a  rise  of  15 million
tonnes.

174.  World cereal stocks declined overall, the 2001/02 estimate being 373 million tonnes
compared  with  393 million  tonnes  in  2000/01  (193 million  tonnes  of  wheat  and
180 million tonnes of feed grains). In the EU intervention stocks on 1 July 2002 were
8.1 million  tonnes  (6.8 million  tonnes  on  1 July  2001):  5.1 million  tonnes  of  rye,
2.5 million tonnes of barley and 500 000 tonnes of wheat.

175. 

The  total  volume  of  world  trade  in  cereals  in  2001/02  was  213 million  tonnes
(107 million tonnes of wheat and 106 million tonnes of coarse grains) compared with
209 million  tonnes  in  2000/01.  The  increase  was  mainly  accounted  for  by  higher
imports into the European Union from Eastern Europe.

176.  World cereal production in 2002 is estimated at 1 437 million tonnes (–2.5%). Wheat
production  fell  from  579  to  563 million  tonnes  and  feed  grains  from  901  to
872 million tonnes. World cereal consumption is constantly rising and is expected to
reach 1 494 million tonnes. At the end of 2002/03 on the other hand world stocks are
sharply down, the estimate being 314 million tonnes (–59 million tonnes). For world
cereal  trade  a  slight  rise  in  volume  can  be  expected  (210 million  tonnes,  of  which
104 million tonnes of wheat).

49

 
3.1.1.2.  Community market

177. 

The  2001/02  marketing  year  is  the  second  under  the  Agenda 2000  arrangements.
Accordingly  the  intervention  price  fell  from  EUR  110.25  to  EUR  101.31  per  tonne
and the aid was adjusted (EUR 63 per tonne of yield compared with EUR 58.67 per
tonne  in  2000/01).  The  compulsory  set-aside  rate  remained  at  10%.  The  Council
decided to reduce the monthly increases from EUR 1.0 to EUR 0.93 per tonne  with
effect from 2001/02.

178. 

Community  cereal  production  in  2001/02  was  199 million  tonnes  for  the  fifteen
Member States, 14 million tonnes less than in 2000/01. This corresponds to a fall in
the area sown from 37.3 million hectares in 2000/01 to 36.5 million in 2001/02.

179. 

Production  of  both  common  wheat  (83.5  million  tonnes)  and  durum  wheat
(8.4 million tonnes) was down, by 12.6% and 12.4% respectively.

180.  Maize production rose from 38.8 to 39.5 million tonnes.

181. 

Rye production rose sharply to 6.3 million tonnes.

182. 

183. 

184. 

185. 

For the 2001 harvest the set-aside requirement was kept at 10%, corresponding to an
area  of  3.9 million  hectares.  Voluntary  set-aside  of  nearly  1.9 million  hectares
brought the actual set-aside rate to 13.5%, with Spanish, Swedish and Finnish farmers
in the forefront of participation in this scheme.

Cereal use was stimulated by the fall in prices under Agenda 2000 and the relatively
high  prices  in  the  oilseed/protein  sector  given  the  dollar's  strength  against  the  euro.
Animal feed use reached 118.5 million tonnes in the Community of 15 in 2001/02.

Community exports in 2001/02 (including processed products) were only 20 million
tonnes  as  against  23.5 million  tonnes  in  2000/01.  Commercial  exports  amounted  to
10 million  tonnes  of  common  wheat  (including  flour),  6.6 million  tonnes  of  barley
(including malt), 1.8 million tonnes of maize and 700 000 tonnes of rye and rye flour.

Durum wheat exports in the form of grain and meal were very low: 300 000 tonnes as
against  600 000 tonnes  in  2000/01.  Owing  to  lower  production  oat  exports  fell
slightly from 700 000 to 600 000 tonnes.

3.1.2.  Oilseeds

186. 

187. 

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

The  European  Union  is  a  net  importer  of  oilseeds,  vegetable  oils  and  cake.  Annual
import volumes are 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 oil and cake from the EU. Total oilseed imports were 20.8 million tonnes in
2001 and 17.3 million tonnes in 2000. Most of this (86%) is soya beans.

188. 

A  total  of  33.6 million  tonnes  of  oilseeds  were  crushed  in  the  Union  (EU-15)  in
2001/02,  as  against  32.6 million  tonnes  in  2000/01.  The  greater  part  this  was  soya
beans (about 59%) followed by rapeseed (about 28%) and sunflower (about 13%).

50

 
189. 

190. 

Under Regulation (EC) No 1251/1999 the area payment for oilseeds is identical with
that for cereals from the 2002/03 marketing  year. Thus there is no longer  a  specific
area payment  for  oilseeds. Market  prices  for them  no  longer have  any  effect  on  the
area payment.

Total  oilseed  production  in  2001/02  was  13.4 million  tonnes  (of  which  1.9 million
tonnes of  non-food production)  as  against  14.1 million  tonnes  (of  which  2.1 million
tonnes of non-food production) in 2000/01.

3.1.3.  Peas, field beans and sweet lupins

191. 

192. 

193. 

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

Under  Regulation  (EC)  No 1251/1999  the  area  aid  has  from  the  2000/01  marketing
year been EUR 72.50 multiplied by the historical cereals yield.

Compensatory  aid  was  paid  on  some  1.2 million  hectares  in  2001/02.  Total
production was 3.8 million tonnes.

3.1.4.  Non-fibre flax

194. 

195. 

196. 

197. 

The  European  Union  grows  both  fibre  flax  (grown  primarily  for  the  fibre  but  also
yielding seed) and non-fibre flax (grown solely for seed). The seed (linseed) is used
without  further  processing  or  crushed  to  give  oil  (for  industrial  use)  and  cake  for
animal feed.

The Union imports large quantities of linseed (about 400 000 tonnes a year). Canada
is its biggest supplier.

In  order  to  control  production  a  better  balance  was  sought  between  the  support
granted  for  linseed  and  that  for  the  other  standard  crops,  and  from  the  1993/94
marketing  year  non-fibre  flax  was  added  to  the  arable  crops  included  in  the  area
payment system under the CAP reform adopted in 1992.

Under  Regulation (EC) No 1251/1999 the  area  payment  for  non-fibre  (oilseed)  flax
was reduced for the 2001/02 marketing year to EUR 75.63/t multiplied by the cereals
yield and from 2002/03 is identical with the cereals payment.

198. 

The area sown to non-fibre flax in 2001/02 was 102 000 hectares.

3.1.5.  Grain legumes (chickpeas, vetches and lentils)

199. 

200. 

Regulation  (EEC)  No  762/89  introduced  a  specific  measure  for  grain  legumes  in
1989.  This  was  prolonged  by  Regulation  (EC)  No  1577/96.  Area  aid  is  granted,
outside the arable crops scheme, for a maximum guaranteed area (MGA). Regulation
(EC) No 811/2000 divided the MGA between chickpeas and lentils (used for human
consumption) and vetches (used in animal feed).

The  aid  is  EUR  181  per  hectare  and  the  MGA  160 000  hectares  for  chickpeas  and
lentils and 240 000 hectares for vetches. If either MGA is not fully taken up the other
MGA is increased by the balance. If an MGA is exceeded the aid for the marketing
year is reduced in proportion.

51

 
201. 

202. 

In 2001/02 the area under chickpeas and lentils was 121 977 hectares and that under
vetches 284 949 hectares. The MGA overrun for vetches resulted in adjustment of the
aid  to  EUR  176.60  per  hectare  while  that  for  chickpeas  and  lentils  remained  at
EUR 181 per hectare.

The  2002/03  marketing  year  areas  are  estimated  at  138 000 hectares  for  chickpeas
and  lentils  and  315 000 hectares  for  vetches.  Given  the  overrun  for  vetches  the
definitive aid was set at EUR 150.52 per hectare.

3.1.6.  Non-food production

203.  With  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  repeated
and replaced Regulation (EEC)  No 1765/92,  new  arrangements  were  introduced  for
set-aside under the Agenda 2000 package:

204. 

205. 

206. 

– 

– 

– 

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

voluntary set-aside is offered to producers up to 10%, but Member States may
set higher rates up to 100% of the agricultural area;

from  2001/02  onwards  the  area  payment  for  set-aside  land  is  EUR  63.00  per
tonne multiplied by the cereal yield, i.e. is the same as for cereal crops.

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

The  old  non-food  production  rules  were  replaced  by  Commission  Regulation  (EC)
No 2461/1999.  New  production  possibilities  have  been  introduced  (crops  for
production  of  biogas,  biofuels  or  electricity  on  the  holding,  biennial  crops  for
exclusively non-food purposes) and procedures simplified.

Regulation  (EC)  No  1251/1999  contains  a  corrective  mechanism  to  ensure
compliance  with  point  7  of  the  Memorandum  of  Understanding  on  certain  oilseeds
concluded  in  1993  between  the  European  Economic  Community  and  the  United
States of America within the framework of GATT. This point states that: "should the
by-products made 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 equivalent, the Community shall take appropriate corrective action
within the framework of the CAP reform".

207. 

The  new  corrective  arrangements  came  into  force  under  Council  Regulation  (EC)
No 2704/1999  amending  Regulation  (EC)  No  1251/1999  establishing  a  support
system  for  producers  of  certain  arable  crops.  For  the  2001/02  marketing  year  the
quantity  of  by-products  expressed  in  soya  bean  meal  equivalent  was  about  800 000
tonnes.

208. 

New  industrial  uses  for  hemp  and  the  use  of  cereals  and  certain  oilseeds  to  heat
agricultural holdings directly without any prior processing have also been allowed as
non-food production.

209.  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

52

 
210. 

211. 

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  for  the  non-food  sector  under  the  special  accession  programme  for
agriculture and rural development (Sapard).

Out  of  918 000  hectares of  set-aside  land  used  for  non-food  production  in  2000/01,
about  880 000  hectares  were  used  for  oilseed  production,  i.e.  about  the  same  as  in
1999/2000.  Some  60%  of  the  output  was  used  to  manufacture  biofuels,  and  the
remaining 40% for lubricants and chemical feedstock.

3.1.7.  Rice

212. 

213. 

214. 

215. 

216. 

217. 

The 2001 world harvest was about 595 million tonnes of paddy rice, 3 million tonnes
down on 2000 (598 million tonnes).

In  the  Community,  despite  a  reduction  of  the  area  sown  for  the  2001/02  marketing
year,  the  amount  of  milled  rice  sold  on  the  market  was  1 500 000  tonnes
(2 564 000 tonnes  of  paddy),  a  rise  of  about  4%  on  2000/01  (1 436 000  tonnes  of
milled rice from 2 391 000 tonnes of paddy).

Production of indica  rice was up by  some  4%  to  540 000 tonnes  (909 000 tonnes  of
paddy).  This  accounted  for  about  60%  of  consumption  (58%  in  2000/01).  Japonica
rice production increased by some 5% to 960 000 tonnes (1 637 000 tonnes of paddy),
about 9% more than consumption (1% in 2000/01).

In the 2001/02 marketing year very large intervention purchases were made in Spain
(76 000 tonnes, mainly indica) and France (28 000 tonnes, mainly japonica). In Italy
purchases were negligible and in the other producing countries, Greece and Portugal,
none were made.

The  2001/02  marketing  year  saw  an  additional  outlet  opened  for  intervention  rice:
99 000 tonnes of paddy rice, mainly japonica, was disposed of for animal feed.

At  the  end  of  the  marketing  year  intervention  stocks  of  indica  (355 000  tonnes  of
paddy) were slightly higher but japonica stocks were lower: the overall reduction was
from 621 000 tonnes of paddy rice to 588 000 tonnes, i.e. about 5%.

218. 

The  2002/03  marketing  year  estimates  are  for  a  reduction  in  total  sown  area  but  a
sharp increase in milled rice production owing to very high milling yields in Italy.

3.1.7.1.  Legislative framework: main developments

219. 

In its communication to the Council and the European Parliament Mid-term review of
the common agricultural policy (doc. COM(2002) 394 final) the Commission, given
the  fact  that  implementation  of  the  Everything  but  Arms  initiative  would  otherwise
lead  to  an  excessive  level  of  stocks  within  a  few  years,  proposed  adjusting  the
common  market  organisation  by  cutting  the  intervention  price  by  50%  from  the
2004/05 marketing year and introducing a private storage scheme triggered off when
the market price falls below EUR 150 per tonne. The lower price would be offset by

53

 
an income aid and a crop-specific aid for rice. The maximum guaranteed areas would
be reduced to the 1999–2001 average or the current level, whichever is lower.

3.1.8. 

Starch

220. 

221. 

222. 

223. 

The  trend  for  the  cereal  starch  market  is  one  of  slow  expansion  of  sales  within  the
Union and of exports.

Production of wheat  starch  is  expanding,  that  of  maize  starch,  accounting  for  about
half  of  total  starch  production,  is  levelling  off,  while  that  of  potato  starch  is  quota-
restricted.

The  production  quota  amounts  for  potato  starch  set  for  the  2001/02  marketing  year
were retained by the Council for 2002/03 to 2004/0549.

The  importance  of  market  management  instruments  such  as  production  and  export
refunds  has  greatly  declined.  Production  refunds  have  almost  disappeared,  the  sole
exception  being  a  period  of  almost  three  weeks  in  April/May.  Export  refunds  on
products based on maize and potatoes have fallen sharply: at the end of the year they
accounted  for  barely  5%  of  product  value.  Refunds  on  wheat-based  products
disappeared some two years ago.

3.1.9. 

Sugar

3.1.9.1.  World market

224. 

After six consecutive years of surplus (when production exceeded consumption) and
a  year  of  virtually  equal  production  and  consumption,  the  world  sugar  balance  is
again in surplus, the excess for 2001/02 being 4.3 million tonnes. End stocks in 2002
stood  at  63.2  million  tonnes,  representing  47.2%  of  total  consumption,  the  second
highest level in recent years.

Marketing year
Sept./Aug.

Production

Consumption

Surplus or
deficit

Stock/consump
tion ratio (%)

1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/2000
2000/01
2001/02

(1)
113.0
111.6
116.1
125.7
124.3
128.5
134.7
134.2
131.2
138.2

Source: F. O. Licht (19.11.2002).

(2)
112.1
112.6
115.0
117.8
120.9
123.2
125.4
128.3
131.4
133.9

(3) = (1) – (2)
+ 0.9
– 1.0
+ 1.1
+ 7.9
+ 3.2
+ 4.9
+ 9.2
+ 6.0
– 0.2
+ 4.3

(4)
35.9
33.5
33.3
39.0
38.8
40.8
45.3
47.8
46.3
47.2

225. 

Early production forecasts had not indicated such a development. A large deficit was
initially forecast by all analysts and revised late during the course of 2001/02 into a
substantial  surplus.  For  example  the  International  Sugar  Organisation  altered  the
0.55 million tonne surplus forecast in May 2002 to 3.45 million tonnes in September.

49

Regulation (EC) No 962/2002 (OJ L 149, 7.6.2002, p. 1).

54

 
                                                
In consequence surplus stocks of over 15.2 million tonnes in August 2001 increased
to  16.6  million  tonnes  in  August  2002  (surplus  stocks  are  defined  as  stocks  above
normal pipeline needs) and so continued to have a generally depressive impact on the
market  and  prices.  The  stock/consumption  ratio  embraces  all  stocks  including  the
accumulated  surplus  stocks.  End  stocks  corresponding  to  47%  of  consumption
indicate a heavily oversupplied world sugar market when compared with the figure of
less than 36% prevalent ten years ago.

The  world  balance  sheet  data  for  2001/02  (September  to  August)  shows  major
production  decreases in the EU (–2.0 million  tonnes),  the  USA,  Poland  and  Turkey
and  increases  of  more  significance  in  Brazil  (+ 4.3  million  tonnes),  China
(+ 2.5 million tonnes), Thailand and Pakistan.

Brazil is again the biggest producer and exporter. It is to be noted that its marketing
year comprises 8 months of crop  year 2001/02 (September 2001 to April 2002)  and
4 months of crop year 2002/03 (May to August 2002), both crop years with very high
figures with 2002/03 forecast  to  be  a  record  year  at  23  million  tonnes.  Other  major
producers in 2001/02 were (in millions of tonnes) India (20.1), the EU (16.1), China
(9.2),  the  USA  (7.8),  Thailand  (6.5),  Mexico  (5.2),  Australia  (5.0)  and  Cuba  (3.8).
These  nine  countries  produced  about  70%  of  the  total.  The  biggest  exporters  were
Brazil, the EU, Thailand, Australia and Cuba, these five accounting for two thirds of
the total exports of 46.3 million tonnes.

Because  of  the  major  reduction  in  beet  sugar  production  in  Europe,  cane  sugar
production,  located  mainly  in  developing  countries,  has  increased  its  already  large
share to 76% of total production. At the beginning of the 90s its share was on average
67%.

Owing to the persistent forecast of a  larger deficit in 2001/02, prices  remained firm
for some months around the level of the previous marketing year. The New York raw
sugar No 11 spot price started at 9.5 cts/lb in July 2001 and came down to 7.1 cts/lb
in June 2002. In  line  with  the  reduced  production  this  slow  slide  in  prices  was  less
pronounced  for  white  sugar.  An  important  factor  in  price  development  was  the
frequently  increased  estimates  for  the  Brazilian  crop  starting  in  May  2001  and  the
good prospects for the following 2002 crop.

Despite these changing fundamentals prices consolidated in a narrow range with few
downward movements after 11 September 2001 and expiry of the May 2002  No 11
contract. Many analysts expected a much stronger downward reaction. This resilience
to the bearish pressure was attributed in large part to the huge buying positions on the
futures markets taken by the funds.

226. 

227. 

228. 

229. 

230. 

231. 

The  price  situation  during  the  2001/02  marketing  year  (July/June)  is  shown  in  the
following table along with the longer-term trend.

EUR / t

1999/2000

2000/01

2001/02

December 2001

White sugar (London)
Raw sugar (New York)

18.70
14.38

28.11
25.24

27.15
19.19

22.21
18.96

It  should  also  be  borne  in  mind  that  during  2001/02  quotations  were  significantly
affected by a weak euro (with the exception of December 2002).

55

 
232. 

233. 

This  relatively  firm  price  behaviour  continued  in  the  first  half  of  the  2002/03
marketing year despite the forecast of a substantial surplus given the record Brazilian
crop, a recovery in EU production and another year of higher production in China.

The growth in consumption of around 2% in 2001/02 (corresponding to the average
for  the  90s)  did  not  match  the  production  increase.  This  relatively  stable  growth  is
determined mainly by price (despite many markets being unaffected by world market
prices),  income  elasticity  (declining  in  developed  countries  with  high  levels  of
consumption) and population growth (slowing down in developed countries). The rate
of growth in 2001/02 was above average in Eastern Europe and the  countries of the
former  Soviet  Union,  Central  and  South  America,  the  Indian  Subcontinent  and
Equatorial  and  Southern  Africa  and  below  average  in  Western  and  Central  Europe,
North America, the Far East and Oceania.

3.1.9.2.  Community market

234. 

235. 

236. 

237. 

238. 

239. 

240. 

In the 2001/02 marketing  year beet areas continued their decline, dipping below the
1.8 million hectare level. The drop on 2000/01 was 1.9%. The below average yield of
8.46  tonnes  of  sugar  per  hectare  was  a  7.6%  fall  on  2000/01.  As  a  result  total  EU
sugar  production  was  only  15.8 million  tonnes  (white  sugar  equivalent)  as  against
17 million for  2000/01.  Of  this  15.5 million  tonnes  came  from  beet,  258 000 tonnes
from cane and 43 000 tonnes from molasses.

Given  this  low production level  non-quota C  sugar  production  was  only  1.7 million
tonnes  in  2001/02.  C  sugar  has  to  be  carried  over  to  the  next  marketing  year  or
exported  without  refund.  The  385 000 tonne  carryover  was  exceptionally  low
compared  with  the  previous  one  of  1.6 million  and  the  average  of  around  1 million
tonnes.

Total  exports  of  sugar  in  its  natural  state  were  4.4 million  tonnes  in  2001/02:
1.8 million  tonnes  of  C  sugar  exported  without  refund  and  2.6 million  tonnes  with
refund. For most of the latter the refund is set under a standing tendering procedure.

Sugar  consumption  within  the  EU  rose  to  12.9 million  tonnes  in  the  2001/02
marketing  year.  Of  this  407 000 tonnes  was  used  by  the  chemical  industry,  an  11%
increase on 2001/02.

The  surplus,  consisting  of  EU  production  under  quota,  preferential  imports  (ACP
Sugar Protocol, India Agreement, Special Preferential Sugar, Balkans, MFN reduced
tariff quotas) and non-preferential imports (mainly in processed products) amounting
to  2.6 million  tonnes  once  EU  consumption  was  deducted,  was  either  exported  or
carried  over  as  blocked  sugar  (non-quota  sugar  becoming  quota  sugar  in  the  next
marketing year).

Exports fell given the lower crop but end of year stocks were 300 000 tonnes higher
than at the end of 2000/01.

Under  the  common  market  organisation  quotas  akin  to  those  for  sugar  apply  to
production of isoglucose and inulin syrup. In 2001/02 as in previous marketing years
isoglucose  production  (300 060 tonnes)  did  not  exceed  the  maximum  amount  under
the A and B quotas. The decline in inulin syrup production accelerated: the 2001/02
figure  of  169 946  tonnes  was  only  a  little  more  than  half  the  quota  amount.
Community consumption of isoglucose and inulin syrup fell to 413 000 tonnes.

56

 
241. 

For the 2002/03 marketing year the increase in beet areas (+ 2%) and more favourable
weather  permitting  a  return  to  high  yields  (9 tonnes  per  hectare)  should  mean  that
sugar  production  will  exceed  17.3 million  tonnes,  3.8 million  tonnes  of  this  being
non-quota C sugar.

3.1.9.3.  Legislative framework: main developments

242. 

243. 

Since the 2001/02 marketing year the common market organisation for sugar has been
governed by the new basic Regulation (EC) No 1260/2001 adopted by the Council on
19 June 2001. The main change was termination of storage cost reimbursement. The
outstanding  balance  from  this  scheme  was  used  to  reduce  the  levies  paid  by  sugar
producers (Commission Regulation (EC) No 1837/2002). In the first half of 2003 the
Commission will submit a report, with whatever proposals may be appropriate, based
on study of the market situation, the price and quota system and the strengthening of
international competition.

For the 2002/03 marketing year the Commission reduced the quotas, as provided for
in Article 10 of the basic Regulation, in order for the Community to comply with its
commitments under the GATT Agriculture Agreement on refund-aided sugar exports.
The reduction of 862 475 tonnes, i.e. 5.7% of the quotas, corresponds to the excess of
sugar exportable with  refunds  (on  the  basis  of production, import, consumption and
stock forecasts for 2002/03) over the maximum permitted under these commitments.

3.1.10.  Potatoes

244. 

245. 

246. 

247. 

248. 

Potatoes  are  one  of  the  few  agricultural  products  for  which  there  is  no  common
market  organisation.  In  1992  the  Commission  presented  a  proposal  for  a  minimal
common market organisation and put it forward again in 1995, but no agreement was
reached and it was not accepted.

Potatoes  are  grown  in  all  Member  States  of  the  Community.  In  2001  the  total  area
grown was 1 251 000 hectares, down from 1 320 000 hectares in 2000. Early potatoes
were grown on 106 000 hectares, 19 000 hectares less than in 2000.

Total production in 2001 was around 44.5 million tonnes, some 4 million tonnes less
than in 2000. Early potatoes in 2001 accounted for about 3.1 million tonnes as against
3.4 million tonnes in 2000.

In  the  period  1995  to  2000  human  consumption  of  potatoes  did  not  move  from  the
28 to 29 million tonnes range.

EU imports of potatoes for human consumption were about 485 000 tonnes in 1999 of
which  some  455 000  tonnes  (94%)  were  early  varieties.  Imports  generally  occur
during  winter  and  spring  when  EU  stocks  are  low.  The  main  suppliers  are  Cyprus,
Egypt, Morocco and Israel.

249. 

Production in 2002 is expected to have been slightly higher (45.6 million tonnes) than
in 2001.

3.1.11.  Dried fodder

250. 

Dried  fodders  are  the  protein-rich  products  (minimum  15%)  obtained  by  artificial
drying (dehydration) or natural (sun) drying  of  lucerne, other  leguminous crops  and
certain grasses.

57

 
251. 

The  following  table  summarises  the  trend  of  production  as  reflected  in  aid
applications.

EU production of dried fodder, based on aid applications

('000 tonnes)
Dried fodder MGQ50 1995/96 1996/97 1997/98 1998/99 1999/2000 2000/01 2001/02
4 421
Dehydrated
Sun-dried
306
4 727
Total

4 412.4
443.5
4 885.9

4 283
156
4 439

3 818
253
4 071

4 070
402
4 472

4 610
151
4 761

4 720
203
4 923

4 599
162
4 761

252. 

253. 

In  2001/02  aid  was  granted  for 4.4 million  tonnes  of  dehydrated  fodder  (100.2%  of
the MGQ) and 0.3 million tonnes of sun-dried fodder (69.0% of the MGQ).

As  subsidised  production  of  dehydrated 
the
co-responsibility  clause  was  applied:  in  order  to  remain  inside  the  budget,  the  aid
(EUR 68.83/t) was reduced by 0.2% (to EUR 68.70/t) in every Member State.51

fodder  exceeded 

the  MGQ, 

254. 

The aid was, however, paid in full for sun-dried fodder, whose subsidised production
was within the MGQ.

3.1.12.  Fibre flax and fibre hemp

255. 

256. 

Fibre flax and fibre hemp  have, since  2001/02, been covered by the support system
for  producers  of  certain  arable  crops  introduced  by  Council  Regulation  (EC)
No 1251/1999.  The  level  of  aid  granted  to  the  producers  concerned  now  compares
with that of competing crops.

In the case of hemp special measures have been adopted to prevent illicit crops from
being  concealed among those qualifying  for area aid and thus  disrupting the market
organisation.  Consequently,  payment  is  made  only  in  respect  of  surface  areas  on
which  the  hemp  varieties  used  offer  certain  guarantees  as  regards  the  psychotropic
substance content.

3.1.12.1. Fibre flax

257. 

258. 

259. 

According  to  the  FAO,  the  total  world  area  sown  to  fibre  flax  in  2001
was 520 000 hectares,  producing  around 588 000 tonnes  of 
fibre,  of  which
220 000 tonnes  was  produced  in  China  and  79 000 tonnes  in  the  European  Union.
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 2001 it exported
84 000 tonnes, mainly to China and Brazil.

The  reform  applicable  from  2001/02  had  appreciable  repercussions  as  regards  the
area  sown  for  harvesting 
totalled 95 500 hectares,  compared
in 2001,  which 
with 211 000 hectares in the case of 1999/2000.

In  2001/02  market  prices  for  fibre  flax  fell  slightly  (by –2.6%)  compared  with  the
record level reached in 2000/01. Despite efforts to diversify  by seeking new outlets,
the market is still heavily dependent on fashions in the clothing industry.

50

51

Maximum guaranteed quantity; Council Regulation (EC) No 603/95 (OJ L 63, 21.3.1995, p. 1).
Regulation (EC) No 1207/2002 (OJ L 176, 5.7.2002, p. 9).

58

 
                                                
3.1.12.2. Fibre hemp

260. 

The  world  area  planted  with  fibre  hemp  has  fallen  sharply  in  recent  years,  from  an
average of 119 000 hectares in 1989–1991 to 54 000 hectares in 2001. China, North
Korea, India and Russia are the main producers. Production in the European Union is
limited.  Although  it  has  traditionally  been  concentrated  in  France  and,  to  a  lesser
extent, in Spain, a few additional Member States (Germany, the United Kingdom and
the  Netherlands)  have  for  some  years  now  been  among  the  producers  of  the  crop.
Trade with third countries is very limited.

261. 

Here too, the reform appears to have had an effect, in so far as sowings for the 2001
harvest  amount  to  approximately  15 000  hectares  (against  32 000  hectares  for
1999/2000).

3.1.12.3. Main legislative and policy developments

262. 

263. 

In  the  context  of  the  sector  reform  adopted  in  July  2000,  the  Council  set  the
processing  aid  for  2001/02  at  EUR  100/t  for  long-fibre  flax  and  EUR  90/t  for
short-fibre flax and for hemp fibre. For long-fibre flax there is a maximum guaranteed
quantity  of  75 250 tonnes  –  shared  out  between  the  Member  States  in  the  form  of
national  guaranteed  quantities  –  above  which  no  aid  is  payable.  The  corresponding
figure for short-fibre flax and hemp fibre is 135 900 tonnes. Moreover, each Member
State  may  transfer  part  of  its  national  long-fibre  flax  quantity  to  its  national
short-fibre flax and hemp fibre quantity and vice-versa.

In  February  2001  the  Commission  adopted  Regulation  (EC)  No 245/2001  laying
down detailed rules for the application of Council Regulation (EC) No 1673/2000 on
the  common  organisation  of  the  market  in  flax  and  hemp  grown  for  fibre.  The
provisions concerned relate in particular to the requirements for granting aid for the
processing of the straw and the control measures applicable.

3.1.13.  Cotton

264. 

The world area under cotton in 2002/03 is estimated at around 31.6 million hectares,
with  production  estimated  at  some  19.3 million  tonnes,  as  against  34.1 million
hectares and 21.4 million tonnes in 2001/02.

265.  While unginned cotton is not traded internationally the European Community, whose
cotton-spinning  capacity  by  far  exceeds  its  fibre  production,  imports  substantial
quantities  of  ginned  cotton:  more  than  one  million  tonnes  from  1990  to  1995  and
785 000 tonnes  in  1997  to  2001.  The  countries  of  central  Asia,  the  United  States,
Syria  and  a  number  of  French-speaking  countries  in  western  and  central  Africa  are
the main suppliers. Intra-Community trade is rising, but remains limited.

266. 

In the European Union, the scale of cotton cultivation is limited, in terms of both the
area planted and the number of producers. It is, however, concentrated in certain areas
of  Greece  and  Spain,  playing  a  major  socio-economic  role  there.  The  Community
area  planted  with  cotton  is  slightly  up:  514 000  hectares  in  2001  (as  against
tonnes  of  unginned  cotton
494 000 hectares 
(1 348 000 tonnes 
in  Spain),  as  against
1 573 000 tonnes in 2000. The European Union is about 48% self-sufficient in cotton
fibres, its consumption from 1997 to 2001 having been around 1.100 million tonnes.

in  2000),  producing  1 685 000 

in  Greece  and  336 000 

tonnes 

267. 

The Community aid scheme provides for a guide price (EUR 106.30/100 kg) and aid
equivalent to the difference between the guide price and the world price is granted to

59

 
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  minimum
price are reduced proportionally. The reduction is less if the world price level allows
expenditure on the aid scheme to be curbed.

268. 

The  guide  price  is  reduced  by  50%  of  the  rate  by  which  the  national  guaranteed
quantity  (249 000  tonnes  for  Spain  and  782 000  tonnes  for  Greece)  is  overshot,
provided that production is less than 362 000 tonnes in Spain and 1 138 000 tonnes in
Greece.  Above 
increased  by  2%  for  each
the  reduction 
additional 4 830 tonnes in Spain and each additional 15 170 tonnes in Greece.

levels, 

these 

is 

3.1.14.  Silkworms

269. 

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

270.  World  production  of  raw  silk  stabilised  in 2001,  totalling,  according  to  the  FAO,
89 600 tonnes,  the  average  from  1995  to  1997  being  87 000 tonnes.  The  industry  is
dominated by Asian producers (88 000 tonnes), with China (62 000 tonnes) and India
(15 000 tonnes) together accounting for 85% of world production.

271. 

There  has  been  an  upturn  in  silkworm-rearing  in  the  Community:  a  total  of  4 928
boxes  were  successfully  produced  in  2001,  compared  with  4 004  boxes  in  2000,
3 500  in  1999  and  2 800  in  1998.  They  yielded  95 800 kg  of  cocoons  in  2001,
compared  with  61 700 kg  in  1998.  As  from  the  2000/01  marketing  year,  aid  is
permanently set at EUR 133.26 per box.

3.1.15.  Olive oil

272.  World  production  of  olive  oil  averages  some  2 700 000  tonnes,  of  which  between
70%  and  80%  (around  2 400 000 tonnes  in  2001/02)  comes  from  the  European
Union. The other main producers are Turkey (65 000 tonnes), Syria (92 000 tonnes),
Tunisia  (35 000 tonnes)  and  Morocco  (60 000  tonnes).  While  production  varies
considerably from one year to another, the world market fluctuates as a direct result
of the Community market situation.

273. 

274. 

275. 

Estimated Community production eligible for aid in 2001/02, including olive-pomace
oils, was around 2 603 700 tonnes, as against 2 062 902 tonnes in 2000/01. According
to information received from the Member States when the olive and olive oil  yields
were  set  for  the  2001/02  marketing  year,  there  are  around  677 million  productive
olive  trees  in  the  European  Union.  Some  two  million  holdings  are  engaged  in
olive-growing.

In  2000/01  Community  consumption  was  almost  1 807 000 tonnes  (83%  of  world
consumption). The most recent forecasts point to a slight increase in consumption in
2001/02.  At  the  beginning  of  the  2001/02  marketing  year,  carryover  stocks  totalled
461 500 tonnes,  but  were  down  to  an  estimated  440 000 tonnes  at  the  end  of  the
marketing year.

Greece  and  Spain  are  normally  the  main  suppliers,  and  Italy,  although  itself  an
exporting  producer,  remains  the  Community's  main  purchaser.  In  2000/01  imports
totalled 40 721 tonnes. Exports for the same marketing year reached 323 660 tonnes,
247 547 tonnes  direct  and  76 113  under  the  inward  processing  arrangements.  No

60

 
276. 

277. 

export refunds were paid during 2000/01. The limit imposed on exports with refunds
for that period under the GATT Agreements was 115 000 tonnes.

In December 2000, in accordance with the transitional reform for 1998/99 to 2000/01,
the  Commission  submitted  a  proposal  to  reform  the  olive  oil  sector,  to  apply  from
2001/02.  On  the  basis  of  that  proposal,  the  Council  adopted  the  new  reform  of  the
olive oil sector on 19 June 2001.

This  reform  extends  the  production  aid  scheme  for  a  further  three  marketing  years
(from 2001/02 to 2003/04). In the meantime, the olive-oil producing Member States
must  set  up  a  geographical  information  system (GIS).  Given  the  importance  of  this
tool  for  determining  the  number  of  olive  trees  and  as  an  additional  means  of
monitoring,  the  Council  decided  that  it  would  be  a  condition  for  the  grant  of
Community  aid  as  from  1 November  2003.  The  Council  also  endorsed  the
Commission's  report,  which  proposes  in  particular  measures  to  improve  both  the
quality  of  olive  oil  supplied  to  consumers  and  the  transparency  of  labelling  rules.
Consequently, a new classification of oil will enter into force on 1 November  2003.
The  Commission  has  implemented  the  various  aspects  of  its  quality  strategy  as
regards the adjustments needed to prepare for changing the classification and names
of  oil.  Further,  the  Council  adopted  the  requirements  for  the  creation  of  operators'
organisations and work programmes which are eligible for Community part-financing
from  1  November  2002.  These  work  programmes,  which  may  be  submitted  by
operators  in  the  sector,  will  cover  four  types  of  activity:  market  follow-up  and
administrative  management,  improving  the  environmental  impact  of  olive-growing,
improving product quality, and traceability,  certification and quality protection.  The
Commission  has  already  implemented  the  detailed  rules  for  the  operation  of  these
new operators' organisations.

3.1.16.  Fresh fruit and vegetables

3.1.16.1. World market52

278.  World production of fresh fruit and vegetables is slightly up. In 2001 it totalled nearly
1 164 million  tonnes,  0.5%  up  on  2000.  Vegetables  (including  melons)  account  for
around  60%  of  this  total,  as  against  47.7%  in  the  Community.  With  production
totalling 112 million tonnes, the Community was the world's second largest producer
in 2001, after China (370 million tonnes) but ahead of the United States (65 million
tonnes).

279. 

In  the  case  of  citrus  fruit,  estimates  for  the  2001/02 marketing  year  point  to  world
production  of  99 million  tonnes,  1.5%  less  than  in  2000/01.  With  production
estimated at around 10 million tonnes, the Community was, in 2001/02, in third place
behind  Brazil  (18.5 million  tonnes)  and  the  United  States  (14.9 million  tonnes),  but
ahead of China (9.6 million tonnes) and Mexico (5.9 million tonnes).

3.1.16.2. International trade

280. 

The  volume  of  international  trade  in  fresh  fruit  and  vegetables  varies  from  one
product to another53. In 2001 Community imports accounted for an average of 8.7%
of world trade in oranges,  6.9% for  apples,  3.1% for table  grapes,  2.7%  for  onions,

52

53

Source: FAO (http://www.fao.org).
Source: FAO (http://www.fao.org).

61

 
                                                
281. 

2.5%  for  pears  and  1.9%  for  tomatoes  and  lemons.  In  2001  Community  exports
accounted  for  10.5%  of  international  trade  in  oranges,  7.9%  for  apples,  4.5%  for
tomatoes and table grapes, 4% for lemons and 3.6% for peaches.

The European Union is a net importer of fresh fruit and vegetables:54 the volume of
exports  was  only  60%  of  that  of  imports  in  1999  and  73%  in  2000.  At  4.2 million
tonnes exports in 2001 represented 69% of total imports (6 million  tonnes).  Exports
of fruit (excluding  citrus fruit) represented only 41% of imports in 2001 (72.5%  for
citrus  fruit).  By  contrast,  while  the  Community  was  a  net  importer  of  vegetables  in
1996, it recorded a surplus from 1997. In 2001 there was an  appreciable increase in
both imports (17% up compared with 2000) and exports (4.3% up on 2000).

3.1.16.3. Community market

282. 

283. 

284. 

285. 

286. 

287. 

288. 

At  about  8.7  million  tonnes  in  2001/02,  apple  production  in  the  Community  was
slightly down (3.9%) on the previous marketing year. The quantities withdrawn from
the market varied from 3.7% of EU production in 1998/99 and 2.4% in 1999/2000 to
3.0% in 2000/01.

In 2001/02 the production of pears totalled around 2.4 million tonnes, 9.8% down on
2000/01. The quantities withdrawn from the market in 2000/01 amounted to 2.8% of
production, compared with 3.6% in 1999/2000.

In 2001 the year-on-year production of peaches fell by 7.4% to a total of 3.3 million
tonnes.  Withdrawals  remained  high  (7.3%  of  production)  but  were  well  below  the
average for 1990/91 to 1994/95 (19.3%).

After a slight drop in 2000, nectarine production was slightly  up (0.9%)  in  2001, at
915 000 tonnes.  This  is  again  the  sector  in  which  withdrawals  are  proportionally
highest:  14%  of  production  in  2000,  although  this  is  down  on  the  20%  recorded  in
1999/2000.

At  2.3  million  tonnes  in  2001,  table  grape  production  has  been  remarkably  stable
since  1996.  Italy  alone  accounted  for  close  on  70%  of  Community  production.
Withdrawals remained negligible at less than 1‰ of production.

Apricot production (470 000 tonnes) was again down in 2001 (–16%) after the sharp
fall recorded in 2000. The quantities withdrawn fell to 2.6% of production in 2000, as
against 4.1% in 1999.

Citrus  fruit  production  was  2.1%  down  in  2001/02,  at  9.7  million  tonnes.  Spain
remained  Europe's  largest  producer,  with  56%  of  the  total  in  2000/01,  followed  by
Italy (30%). Community production of oranges was fairly stable at 5.8 million tonnes
(0.6% up on 2000/01). At 1.7 million tonnes in 2001/02, lemon production was 1.5%
up on the preceding marketing  year.  By contrast, production of mandarins (318 000
tonnes),  clementines  (1.8  million  tonnes)  and  satsumas  (267 000  tonnes)  fell
appreciably, by 10.3%, 4.4% and 7.1% respectively against 2000/01.

289. 

Production  of  cauliflowers  in  2001/02  totalled  2.0 million  tonnes  (5.1%  down  on
2000/01).  Withdrawals  were  down  to  2%  of  production,  compared  with  8.3%  in
1999/2000, 5.2% in 1998/99 and 7.7% in 1997/98.

54

Source: Eurostat.

62

 
                                                
290. 

Tomato production in 2001/02 was down 5.8% on 2000/01. There was an appreciable
fall  (14.9%)  in  production,  to  6.4  million  tonnes,  in  Italy,  the  latter  accounting  for
42.9%  of  the  Community  total.  Withdrawals  remained  negligible,  at  0.9%  of
production of tomatoes for the fresh market.

3.1.17.  Bananas

3.1.17.1. Community production

291. 

292. 

293. 

Banana production in 2001 fell (–2%) to 767 268 tonnes, this shortfall being brought
about by a low harvest in Martinique.

It is estimated that the harvest in 2002 will be approximately 793 000 tonnes.

The  compensatory  aid  for  200155  was  reduced  to  EUR  28.36  per  100 kg,  with
supplementary aid of EUR 8 per 100 kg for bananas produced in Portugal. The cost of
the  compensatory  aid  for  2001  totalled  EUR  219  million,  compared  with  EUR
302 million in 2000.

3.1.17.2. Imports from ACP countries

294. 

In  2001  ACP  banana  imports  fell  by  25 000  tonnes,  to  730 234  tonnes.  A  small
increase is expected in 2002.

3.1.17.3. Main legislative and policy developments

295. 

296. 

297. 

298. 

Following the settlement of the WTO dispute with the USA and Ecuador the second
phase of the agreement began to be implemented on 1 January 2002.

In  the  second  phase  the  "A"  tariff  quota  remains  2.2  million  tonnes,  the  additional
"B" quota  is  increased  by  100 000 tonnes  to  453 000 tonnes  and  the  autonomous
"C" quota is decreased to 750 000 tonnes.

Imports  under  quotas  A  and  B  are  open  to  imports  from  all  countries,  while  the
C quota is open only to imports from ACP countries.

Imports under the A and B quotas and imports of bananas from third countries other
than ACP countries are subject to customs duty of EUR 75 per tonne. ACP bananas
are subject to zero duty, as are imports under the C quota.

3.1.18.  Processed fruit and vegetables

3.1.18.1. World and Community markets

299. 

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.

300.  World production of tomatoes for processing totalled around 30 million tonnes. The
leading producers were the United States (10.2 million tonnes in 2000/01, as against
11.6 million  tonnes  in  1999/2000),  the  EC  (8.4 million  tonnes,  as  against  8 million
tonnes) and Turkey (1.3 million tonnes, as against 1.6 million tonnes).

55

Commission Regulation (EC) No 932/2002 of 31 May 2002 (OJ L 144, 1.6.2002, p. 20).

63

 
                                                
301. 

302. 

303. 

After a sharp increase in 1999 (up 13%), Community output dropped by 8% in 2000.
This  reduction  concerned  concentrate  (–11%)  and  peeled  tomatoes  (–6%).  By
contrast,  production  of  "other  products"  (sauces,  tomatoes  in  pieces,  etc.)  rose  by  a
further 2% between 1999 and 2000. This product group now accounts for almost 21%
of processed tomato production.  Of the  8.4  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.  Production  is  expected  to
remain stable or drop slightly in 2001/02.

Around  471 000  tonnes  of  peaches  were  tinned  in  syrup  and/or  natural  juice  in  the
Community  in  2001/02,  compared  with  around  469 000 tonnes  in  the  previous
marketing year, which is rather low after the previous  year's record level. After two
years of low exports, the Community doubled its exports of peaches in syrup and/or
natural juice in 2001, to 206 000 tonnes.

EC  production  of  Williams  and  Rocha  pears  tinned  in  syrup  and/or  natural  juice
totalled  133 000 tonnes  in  2001/02,  i.e. significantly  below  the  record  figure  of
1998/99. Italy continues to be the main EC producer (54.2% of the total), followed by
Spain (27.6%) and France (12.8%).

304. 

Community aid for processing was set as follows for 2002/03:

Reduction in Community processing aid for 2001/02 in relation to the aid fixed
by the Council (Regulations (EC) No 2201/96 and (EC) No 2202/96)

Product

Member State
Greece
Spain
France
Italy
Netherlands
Austria
Portugal
Other Member
States

Grapefruit
(pomelos)
11.46%
59.10%
26.26%
28.35%
–
–
–

n.a.

*
n.a.:

Peeled tomatoes only
not applicable

Oranges Mandarins

Clementines
in juice
–
–
–
10.62%
–
–
–

–
–
–
10.62%
–
–
–

n.a.

n.a.

Tomatoes

Pears

–
8.8%*
–
1.3%
n.a.
n.a.
–

n.a.

66.4%
–
16.1%
6.3%
2.6%
–
–

n.a.

–
–
–
1.24%
–
–
–

n.a.

305. 

The basic aid per hectare for dried grapes was unchanged at EUR 2 785. This aid is
paid only for specialised areas meeting certain yield criteria.

3.1.19.  Wine

306. 

On 17 May 1999 the Council adopted Regulation (EC) No 1493/1999 establishing a
new common organisation of the market in wine56. Under that Regulation, in 2002 the
Commission adopted:

56

OJ L179, 14.7.1999, p. 1.

64

 
                                                
– 

– 

– 

Commission  Regulation  (EC)  No 753/2002  of  29 April  2002  laying  down
certain rules for applying Council Regulation (EC) No 1493/1999 as regards the
description,  designation,  presentation  and  protection  of  certain  wine  sector
products57. The entry into force of this  Regulation was  postponed  to 1 August
2003 by Regulation (EC) No 2086/2002.58

Commission  Regulation  (EC)  No 1795/2002  of  9 October  2002  amending
Regulation  (EC)  No 1623/2000  laying  down  detailed  rules  for  implementing
Council  Regulation  (EC)  No 1493/1999  on  the  common  organisation  of  the
market in wine with regard to market mechanisms,59 in particular the rules for
distilling potable alcohol.

Commission Decision 2002/666/EC of 19 August 2002 fixing, for the 2002/03
marketing  year  and  in  respect  of  a  certain  number  of  hectares,  an  indicative
allocation  by  Member  State  for  the  restructuring  and  conversion  of  vineyards
under Council Regulation (EC) No 1493/1999.60

During  2001/02  the  Commission  adopted  a  number  of  regulations  opening  crisis
distillation under Article 30 of Council Regulation (EC) No 1493/1999 for a total of
8.1 million hectolitres. Contracts were finally approved for 6.929 million hectolitres
of wine.

In  2001  the  Commission  presented  a  proposal  for  a  Regulation  on  the  common
organisation  of  the  market  in  ethyl  alcohol  of  agricultural  origin.  The  proposed
regulation would define the products to be covered by the new market organisation,
introduce  a  system  for  collecting  data  and  statistical  monitoring  of  the  sector  and
introduce an import and export licensing scheme. The market organisation would be
managed by the Management Committee for Wine. Work on the proposal continued
in the Council and European Parliament in 2002.

307. 

308. 

309.  Wine production in the Community (excluding grape must not processed into wine)

was as follows:

wine year 1998/99:

wine year 1999/2000:
wine year 2000/01 (provisional):

wine year 2001/02 (forecast):
wine year 2002/03 (estimate):

162.562 million hectolitres,

178.892 million hectolitres,
176.006 million hectolitres,

158.147 million hectolitres,
149.500 million hectolitres.

310. 

Forecast  total  Community  production  for  2001/02,  initially  set  at  168.287  million
hectolitres,  was  reduced  to  163.933  million  hectolitres.  The  forecast  for  the  current
wine year, 2002/03, covers total production of 158.465 million hectolitres (estimates
as  at  19 December  2002).  To  permit  comparison  with  quantities  made  into  wine  in
previous wine years it is necessary to deduct about 9 million hectolitres which were
not  made  into  wine.  That  gives  a  forecast  wine  production  for  2002/03  of
149.5 million hectolitres.

311. 

Despite  the  storms  of  8  and  9  September  2002,  forecasts  were  only  slightly  below
total production in the previous marketing  year (–3.3%).  The  expected drop in total

57

58

59

60

OJ L 118, 4.5.2002, p. 1.
OJ L 321, 26.11.2002, p. 8.
OJ L 272, 10.10.2002, p. 15.
OJ L 227, 23.8.2002, p. 49.

65

 
                                                
production is –6.3% in France (51.86 million hectolitres compared to 55.339 million
hectolitres),  –11.4%  in  Italy  (46 million  hectolitres  compared  to  51.912  million
hectolitres) and –19.4% in Portugal (6.2 million hectolitres compared to 7.691 million
hectolitres).  On  a  Community  basis  those  reductions  will  be  partly  offset  by  an
increase in production in Spain (37.7 million hectolitres or + 11.4%) and in Germany
(10.8 million hectolitres or + 20.3%).

Total production
(1 000 hl)
Member State
Spain
Greece
Germany
Portugal
Italy
Luxembourg
France
Austria
UK
Belgium
Netherlands

Total EU-15
wine
quality wine psr
table wine
other

wine year
1998/99

wine year
1999/2000

wine year
2000/01

wine year
2001/02

wine year 2002/03
Forecasts as at
19 December 2002

34 714
3 826
10 727
3 750
57 913
159
54 271
2 703
11
2

168 076
162 562
65 486
90 257
6 458

37 908
3 680
12 244
7 859
58 955
184
62 935
2 803
13
2

186 583
179 117
70 858
100 522
15 203

45 572
3 558
9 950
6 694
54 088
132
59 740
2 337
14
2
1

182 088
176 006
70 114
100 646
11 498

33 850
3 477
8 980
7 691
51 912
135
55 339
2 531
16
2
1

163 933
158 555
66 193
84 132
13 428

37 700
3 098
10 800
6 210
46 000
160
51 860
2 619
16
2
1

158 465
149 500
66 028
75 799
16 238

312. 

313. 

314. 

The  most  recent  information  from  the  IWO61  indicates  that  Community  wine
production  (158.555  million  hectolitres)  represents  some  59.3%  of  world  wine
production  (267.6  million  hectolitres)  for  the  2001/02  marketing  year.  France,  Italy
and  Spain  are  the  top  three  world  producers,  followed  by  the  United  States
(19.8 million hectolitres or 8%) and Argentina (15.835 million hectolitres).

The European Union is the top world exporter with 12.2 million hectolitres (2001), up
from  11.518  million  hectolitres  in  2000  and  11.552  million  hectolitres  in  1999.  In
2001  the main traditional buyers of Community  wine62 were the  United  States  with
3.253  million  hectolitres,  Switzerland  (1.620  million  hectolitres),  Canada  with
1.204 million hectolitres and Japan (1.188 million hectolitres).

At the beginning of 2003 the available foreign trade figures63 only cover the first ten
months  of 2002 and must  be  interpreted  with  caution.  Based  on  that  period  exports
and imports increased in volume by between 1.2% and 1.3% over the first ten months
of  2001.  Where  exports  were  concerned,  it  was  notable  that  table  wines  showed  an
increase of 4.5% while quality wines psr were down by –2.1%.

61

62

63

IWO letter No 144, October 2002, p. 3.
Source: EC-COMEXT EEC SPECIAL TRADE SINCE 1988.
Source: EC-COMEXT EEC SPECIAL TRADE SINCE 1988, 7 January 2003.

66

 
                                                
Exports
January – October
2002 vs. 2001

France
Germany
Italy
Greece
Spain
Portugal

EU-15

Table wines

Quality wine psr

All wine

+ 8.8%
+ 13.7%
+ 5.7%
– 26.9%
– 2.0%
+ 27.2%

+ 4.5%

– 1.4%
– 1.3%
– 1.2%
– 2.8%
– 5.6%
+ 0.3%

– 2.1%

+ 2.9%
+ 1.8%
+ 2.5%
– 22.8%
– 3.3%
+ 15.9%

+ 1.3%

315. 

Extra-Community  imports  stabilised  in  the  UK;  there  was  a  large  increase  in
Denmark (+ 113 533 hectolitres).

Imports
January–October
2002 vs. 2001

United Kingdom
Germany
Netherlands
France
Denmark
Sweden
Ireland
Belgium
Finland
Italy
Austria

EU-15

2001
(hl)

3 397 794
1 581 721
726 825
478 996
325 421
230 595
178 210
144 522
104 358
94 534
28 226

7 326 371

2002
(hl)

2002 vs. 2001
(hl)

2002 vs. 2001
(%)

3 406 159
1 516 664
754 424
458 810
438 954
248 289
200 988
152 846
112 696
86 058
23 819

7 413 369

+ 8 365
– 65 056
+ 27 599
– 20 186
+ 113 53
+ 17 695
+ 22 779
+ 8 324
+ 8 338
– 8 476
– 4 406

+ 86 998

+ 0.2%
– 4.1%
+ 3.8%
– 4.2%
+ 34.9%
+ 7.7%
+ 12.8%
+ 5.8%
+ 8.0%
– 9.0%
– 15.6%

+ 1.2%

316. 

317. 

318. 

319. 

320. 

321. 

Per capita wine consumption was 32.11 litres in the 2001/02 marketing year, while in
2000/01  it  was  33.41  litres,  in  1999/2000  35.26  litres,  in  1998/99  34.6  litres,  in
1997/98 34.05 litres and in 1996/97 34.7 litres.

The  consumption  figures  are  calculated  from  the  balances  communicated  by  the
Member  States.  Consumption  is  the  remainder  of  the  balances.  The  2001/02
marketing year is the second one under the new common market organisation.

At the end of 2001/02, 31 July 2002, stocks totalled 156.815 million hectolitres, while
at the end of 2000/01, 31 July 2001, stocks were 161.887 million hectolitres. Stocks
of table wine dropped by 8.673 million hectolitres.

That  figure  includes  some  0.5  million  hectolitres  already  under  contract  for  crisis
distillation but not yet delivered for distillation before the end of the marketing year.

During 2001/02 crisis distillation was opened three times covering a total volume of
6.929  million  hectolitres  of  wine,  2.7  million  hectolitres  of  them  in  France,
3.979 million hectolitres in Italy and 0.250 million hectolitres in Portugal.

Contracts for the distillation of potable alcohol under Article 29 of Regulation (EC)
No 1493/1999,  which  replaces  Article  38  of  the  former  basic  Regulation  (Council
Regulation (EC) No 822/87), were concluded in 2001/02 for 12 million hectolitres of

67

 
wine. During 2000/01 this preventive distillation had been opened for 12.666 million
hectolitres.

322.  With a view to restructuring and converting vineyards under Council Regulation (EC)
No 1493/1999, and taking account of compensation paid to winegrowers for loss of
income  during  the  period  when  the  vineyards  are  not  yet  in  production,  Decision
2002/666/EC64 made the  following  financial allocations to  the Member  States,  for  a
number of hectares for 2001/02.

323. 

Financial  allocations  to Member States for  a number of  hectares  with  a  view  to  the
restructuring  and  conversion  of  vineyards  under  Regulation  (EC)  No 1493/1999  for
2002/03:

Member State

Area (ha)

Financial allocation (in euro)

Germany
Greece
Spain
France
Italy
Luxembourg
Austria
Portugal

Total

2 566
1 050
28 817
13 000
17 516
11
1 532
3 766

68 258

14 682 873
9 285 036
157 285 185
95 000 000
123 935 139
86 842
10 565 980
32 358 945

443 200 000

324. 

By  Decision  2002/655/EC65  the  remaining  balance  from  2001/02  was  allocated  as
follows:

Member State

Area (ha)

Financial allocation (in euro)

Germany
Greece
Spain
France
Italy
Luxembourg
Austria
Portugal

Total

3.1.20.  Tobacco

3.1.20.1. Market developments

–
–
5 993
–
–
–
603
397

6 993

–
–
35 589 831
–
–
–
3 962 937
2 816 997

42 369 765

325.  World production of leaf tobacco was 6 482 million tonnes in 2001, down 6.3% from
2000. The 2002 forecast is 6 748 million tonnes. The People’s Republic of China is
still  the  world’s  leading  producer  of  raw  tobacco  with  production  in  2001  of
2 350 million  tonnes  (36.2%  of  world  production)  and  forecast  2002  production  of
2 329 million tonnes. India is the second largest producer followed by Brazil and the

64

65

OJ L 227, 23.8.2002, p. 49.
OJ L 220, 15.8.2002, p. 64.

68

 
                                                
United  States.  With  production  in  2001  of  327 587  tonnes  (down  2.4%  from  2000)
the EU is the fifth largest producer in the world.

326. 

327. 

328. 

Compared  with  2000  prices,  EU  market  prices  in  2001  were  lower  for  tobaccos  of
groups III (dark air-cured), IV (fire-cured) and V (sun-cured). The biggest reduction
(11%)  was  in  group  V,  the  tobacco  of  which  has  the  lowest  market  price.  For  the
other groups, market prices increased by 7% (group II) to 37% (group VIII).

EU imports of raw tobacco amounted to 540 111 tonnes in 2001, 20 000 tonnes up on
2000. The main suppliers were Brazil, the USA and Zimbabwe. EU exports in 2001
(184 916 tonnes) were similar to those in  2000. The main  destinations were Russia,
the USA and Egypt.

Community  leaf  tobacco  production  is  restricted  by  guarantee  thresholds  set  by  the
Council  in  March  2002  for  the  years  2002  to  2004:  340 738  tonnes  for  2002  and
334 064 tonnes for 2003 and 2004.

3.1.20.2. Main legislative and policy developments

329. 

330. 

In  Regulation  (EC)  No  546/200266  the  Council  set  the  leaf  tobacco  premiums,  the
supplementary amounts and the thresholds for each variety group and Member State
for  the  2002  to  2004  harvests.  The  premiums  did  not  change,  except  for  a  10%
reduction  in  that  for  sun-cured  varieties.  The  thresholds  were  reduced  to  reflect
changes in market, socio-economic and agronomic conditions.

In the same Regulation, the Council amended the rules for the Community Tobacco
Fund,  now  funded  by  a  deduction  of  2%  of  the  2002  harvest  premiums  and  3%  of
those for 2003. The deduction may be increased to 5% depending on the findings of a
report on use of the Fund that the Commission is to submit before 31 December 2003.

331. 

The Fund's purpose is to finance action in two areas:

– 

– 

improvement of public awareness of the harmful effects of all forms of tobacco
consumption,  in  particular  through  information  and  education,  support  for
collection  of  data  in  order  to  establish  tobacco  consumption  patterns  and
investigate  the  epidemiology  of  tobacco  abuse  in  the  Community,  tobacco
abuse prevention study;

specific  measures  to  help  tobacco  growers  switch  to  other  crops  or  other
economic activities that create employment and investigation of the possibilities
available.

332. 

A  programme  for  buying  back  production  quotas  was  introduced  with  the  tobacco
sector  reform  in  1998  and  came  into  force  at  the  1999  harvest.  Unfortunately  only
insignificant quantities were bought back and it proved impossible under the rules in
force  to  achieve  the  production  rationalisation  hoped  for.  With  the  aim  of  boosting
quota  buy-back,  the  compensation  paid  was  increased  by  the  Commission  under
Regulation  (EC)  No  1983/2002.67  Growers  whose  quota  has  been  bought  back  in
2002 or 2003 are  entitled for five  years  to a  percentage  of the premium they would
have received had they continued to grow tobacco. Moreover under the Community

66

67

OJ L 84, 28.3.2002, p. 4.
OJ L 306, 8.11.2002, p. 8.

69

 
                                                
Tobacco Fund rules in force from December 2002 growers who have had their quota
bought back can receive aid to switch to other crops or other economic activities.

333. 

In November 2002 the Commission sent a report to the European Parliament and the
Council on the functioning of the common organisation of the market in raw tobacco
(scheduled  by  Article  26  of  Regulation  (EEC)  No  2075/199268).  Moreover,  an  in-
depth  evaluation  of  the  common  market  organisation  also  under  way  and  due  to  be
finalised at the end of 2002 will give a detailed appraisal of the impact of the market
organisation.

3.1.21.  Seeds

3.1.21.1. Market developments

334. 

335. 

336. 

337. 

338. 

In 2001 the total seed area of 369 951 hectares eligible for Community aid was again
lower  (down  2%  on  2000).  Total  seed  production  excluding  hybrid  maize  was
420 013 tonnes in 2001, some 16% lower than the 498 835 tonnes grown in 2000.

In  2001  Gramineae  accounted  for  186 401  hectares  (up  2.5%  on  2000)  and
Leguminosae for 134 678 hectares (down by 5% on 2000). The volume of Gramineae
seed grown was 212 905 tonnes (up 15% on 2000) and that of Leguminosae seed 202
927 tonnes (down 7% on the 2000 figure of 219 137 tonnes).

The rice seed area fell 7% in 2001 to 17 447 hectares but production was up 1.8% to
70 017 tonnes.

Fibre  flax  seed  was  grown  on  23 820  hectares  in  2001,  a  23.7%  rise  on  the  2000
figure of 19 262 hectares but actual production at 11 455 tonnes was 17% lower than
in 2000. The oilseed seed area was 5 252 hectares, only one third of the land used in
2000 (14 349 hectares). Actual production fell to 1 610 tonnes (5 888 tonnes in 2000).

According to the figures available, imports of seeds covered by the common market
organisation in 2001 are down some 50% on the 2000 figure (62 657 tonnes).  2001
export data for these seeds is not available.

3.1.21.2. Main legislative and policy developments

339. 

340. 

341. 

Under  the  current  Community  legislation  the  Council  sets  aid  rates  for  the  various
seed species in alternate  years. Those  for  the  2002/03  and  2003/04  marketing  years
are given in Regulation (EC) No 154/2002 of 21 January 2002.69

A  constant  increase  in  seed  production  since  the  1994/95  marketing  year  made  it
necessary  to  introduce  a  mechanism  to  stabilise  production  (not  covering  rice  seed,
for which a mechanism was already in place). This was done in the above Regulation.

In  Regulation  (EC)  No  800/200270  the  Commission  set  the  maximum  quantity  for
which aid may be granted at 305 754 tonnes equivalent weight with effect from 1 July
2002.  This  quantity  is  allocated  between  Member  States  according  to  the  quantities
they harvested in the reference years 1996/97 to 2000/01 excluding extremes.

68

69

70

OJ L 215, 30.7.1992, p. 70.
OJ L 25, 29.1.2002, p. 18.
OJ L 131, 16.5.2002, p. 3.

70

 
                                                
3.1.22.  Hops

3.1.22.1. World market

342. 

In 2001 the total world hop area was 58 505 hectares (1% down on 2000), of which
57 934 hectares was in member  countries  of  the  IHGC  (International  Hop  Growers'
Convention)  and  the  European  Community.  The  five  biggest  growers  are  the  EU
(23 019  hectares, 
the  USA
(14 536 hectares),  the  Czech  Republic  (6 075  hectares),  China  (4 813  hectares)  and
Poland (2 250 hectares).

including  Germany  with  19 020  hectares), 

343.  World  production  in  2001  amounted  to  1 982 860  zentner,  2.5%  up  on  2000.  The
8 748  tonnes  of  alpha  acid  (7 388  tonnes  in  2000)  produced  was  equivalent  to  an
alpha  acid  yield  of  8.82%.  Average  yield  per  hectare  was  1.69  tonnes,  2.5%  up  on
2000.

344. 

At 1 425 million hectolitres, estimated world production of beer in 2002  was up on
2001.  With  the  addition  of  5.3  grams  of  alpha  acid  per  hectolitre  of  beer  during
brewing it is predicted that 7 553 tonnes of alpha acid will have been used in 2002.
The amount of alpha acid produced in 2001 was thus 1 195 tonnes more than current
consumption.

345. 

As  a  consequence  of  higher  demand  for  less  bitter  beer  and  improvements  in
technology less alpha acid is used than formerly.

3.1.22.2. Community market

346. 

347. 

348. 

349. 

350. 

Hops are grown in eight Member States (Belgium, Germany, Spain, France, Ireland,
Austria,  Portugal,  United  Kingdom).  Total  area  in  2001  was  23 109  hectares,  of
which more than 80% was in Germany. The 2001 area was up 1% on 2000.

The 2001 harvest of 751 249 zentner was 5% bigger than in 2000. Average yield was
tonnes
tonnes 
also  higher:  1.63 
(30.2 zentner)/hectare in 2000.

zentner)/hectare 

against 

(32.6 

1.51 

The 2001 harvest was of  good quality with an average alpha acid content of 8.55%
for all varieties in the Community. This was equivalent to 3 211 tonnes of alpha acid
– 140 kg/hectare – for beer production in 2002.

The  average  price  for  hops  sold  on  contract  in  2001  was  EUR  185/zentner,  very
from
similar 
EUR 270/zentner in 2000 to EUR 172/zentner in 2001.

the  spot  market  fell  substantially 

to  2000.  Hops  sold  on 

Under  the  common  market  organisation  for  hops  aid  is  given  to  growers  to  enable
them to enjoy a reasonable income. The Council has set it at EUR 480 per hectare (all
varieties)  for  eight  years  running  from  the  1996  harvest  year  (Council  Regulations
(EC)  No  1554/97  of  22  July  1997  and  (EC)  No  1514/2001  of  23  July  2001).  The
same  amount  is  granted  on  areas  temporarily  resting  or  permanently  grubbed  up
(Council Regulations (EC) No 1098/98 of 25 May 1998 and (EC) No 2151/2002). In
2001 such areas amounted to 2 406 hectares (1 748 hectares in Germany).

351. 

The area harvested in 2002 is estimated to have fallen by 4%.

71

 
3.1.22.3. Main legislative and policy developments

352. 

353. 

354. 

By Regulation (EC) No 1514/2001 of 23 July 200171 the Council extended for three
years (to 2003) the current aid of EUR 480/hectare to hop growers.

The  Commission  had  proposed  a  two-year  extension  allowing  decisions  on  aid  to
growers to be taken at the same time as decisions on special measures (temporary set-
aside and permanent grubbing-up).

The Commission had wished to present a report at the end of that period that would
also have covered the special measures and to make proposals geared to the impact on
the  sector  of  accession  to  the  Union  of  a  number  of  countries  that  are  significant
producers of hops.

3.1.23.  Flowers and live plants

355. 

356. 

357. 

358. 

359. 

360. 

361. 

362. 

The common market organisation covers a wide range of products: bulbs and tubers,
live  plants  (both  ornamental  and  nursery  plants),  cut  flowers  and  foliage.  It  also
includes  quality  standards  and  customs  duties  but  no  other  protective  measures
against imports except emergency safeguard action.

The 1997 to 1999 promotion measures for flowers and live plants have  now  ended,
and these products are now covered by the general promotion measures contained in
Council Regulations (EC) No 2702/1999 concerning information and sales promotion
for  agricultural  products  in  third  countries,  and  (EC)  No  2826/2000  concerning
information and sales promotion of agricultural products on the internal market.

Four  programmes  for  flowers  and  live  plants  were  selected  by  the  Commission  for
funding in 2003 under the internal market promotion scheme.

Production of live  plants  and flowers in 2001 was worth EUR 16 315 million: 40%
nursery  plants,  60%  ornamental  plants  and  flowers  including  Christmas  trees.  The
Netherlands is the largest grower with approximately 30% of the total.

In  2001  Community  imports  of  flowers  and  plants  from  third  countries  was
equivalent  to  nearly  8%  of  Community  production.  There  were  357 000  tonnes  of
imports, with a value of EUR 1 237 million, an increase of 2% on 2000.

Cut flowers account for more than 50% of all imports in the sector, most of which are
free  of  import  duty  under  agreements  with  third  countries  (Generalised  System  of
Preferences in the case of South America, Cotonou Convention for the ACP countries
etc.).

Some cut flowers (roses and carnations) are exempt from customs duties under tariff
quotas for five Mediterranean  countries (Cyprus,  West  Bank  and  Gaza  Strip,  Israel,
Jordan, Morocco) provided a minimum import price is respected.

Kenya is the largest supplier of cut flowers to the Community: 43 000 tonnes in 2001,
value EUR 177 million. The second largest exporter to the EU is Israel with 28 000
tonnes  in  2001.  Israeli  exports  were  24%  down  on  2000  but  Kenya's  were  up  7%.
Among other suppliers Costa Rica and the USA are the main exporters of foliage, and
Costa Rica and Poland are increasing their exports of live plants to the Community.

71

OJ L 201, 26.7.2001, p. 8.

72

 
                                                
363. 

364. 

In 2000 cut flower prices were up 8% on 1999 and in 2001 up 5% on 2000.

Exports  from  the  Community  fell  by  1%  in  2001  to  416 000  tonnes  but  their  value
increased to  EUR 1 493  million (+ 5% on 2000).  Biggest exports are  of live  plants,
then  cut  flowers  and  bulbs  and  tubers.  The  value  of  live  plant  exports  increased  by
10%  to  EUR  510  million  for  an  unchanged  volume  of  218 000  tonnes.  Cut  flower
exports  were  also  unchanged  at  77 000 
to
EUR 476 million.

tonnes  but  up  2% 

in  value 

365. 

Exports of bulbs and tubers and of foliage were worth EUR 337 million and EUR 62
million  respectively.  With  the  inclusion  of  these  figures  the  Community  showed  a
positive trade balance for flowers and live plants of EUR 256 million in 2001.

366. 

The  total  value  of  exports  was  EUR  1 493  million  and 
EUR 1 237 million.

that  of 

imports

3.1.24.  Animal feed

367. 

368. 

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 demand72 in 2001/02 remained practically the same in relation to the previous
marketing year, because of an increase in demand in the poultry and pig sectors and a
contraction in the bovine (milk and meat) sector. Half of the total supply comes from
feed that is not generally marketed (pasture, hay and silage) 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).

369. 

Total  animal  consumption of the  key marketable products73 in  2001/02  in the  EC  is
put at 207.8 million tonnes, slightly up (+ 0.6 million tonnes or + 0.3%) on 2000/01,
but with substantial shifts between products. This consumption is made up of:

– 

– 

domestically-produced  products,  estimated  at  148.7  million  tonnes,  down  by
about  five  million  tonnes  on  the  previous  marketing  year,  mainly  cereals  and
meat-and-bone meal following the ban74 on their use in animal feed;

net imports estimated at 59.0 million tonnes, up by about 5.4 million tonnes on
the  previous  marketing  year,  due  mainly  to  imports  of  cereals  from  the
countries of the Black Sea and imports of protein-rich products, while imports
of manioc have fallen.

370. 

In total, animal consumption of cereals is expected to increase by about three million
tonnes to 118.4 million tonnes in 2001/02.

72

73

74

This includes all marketable and non-marketed animal feed, estimate for EUR-15.
Covering most marketable feed used in the Community by the compound feedingstuff industry and on
farms (on-farm consumption and purchases of raw materials) and evaluated in the detailed table below:
Animal consumption of key marketable products (estimate for EUR-15). Source: Directorate-General for
Agriculture.
Council Decision 2000/766/EC of 4 December 2000 (OJ L 306, 7.12.2000, p. 32).

73

 
                                                
371. 

372. 

As regards substitutes subject to import quotas, the quota utilisation rate for manioc
imports fell from 64% in 2000 to 46% in 2001 for manioc from Thailand, while it fell
to 1% for all other origins. The quota utilisation rate for sweet potatoes from China
was again 0% in 2001.

Industrial  production  of  compound  feedingstuffs  in  the  EU75  is  estimated  at
125.2 million tonnes in 2001, up 0.8% on 2000, mainly as the poultry sector picked
up.

EU industrial production of compound feedingstuffs by category of animal

Compound feedingstuffs for

All bovine animals (milk and meat)
Pigs
Poultry
Other

TOTAL compound feedingstuffs

2000

36.0
43.2
37.1
7.9

124.2

(million tonnes)

2001

Difference % change

35.4
43.5
38.3
8.0

125.2

– 0.6
0.3
1.2
0.1

0.9

1.6
0.7
3.2
0.7

0.8

373. 

374. 

375. 

In terms of total production of compound feedingstuffs by Member State in 2001, the
main increases were recorded in Italy, the United Kingdom, Spain and France, while
the largest falls were recorded in Germany and Denmark.

Cereals incorporated into compound feedingstuffs76 in the EC amounted to 52 million
tonnes in 2001, almost 1 million tonnes more than in 2000.

The decisive factors determining the composition of feedingstuffs continue to be the
prices  for  raw  materials  relative  to  one  another  as  well  as  the  percentage  of  total
demand  accounted  for  by  the  different  animal  species  and  the  specific  qualities
sought.  In  2002/03  the  quantity  of  cereals  consumed  in  animal  feed  will  depend  on
livestock demand and the prices of imported products.

75

76

Provisional  figures  for  EUR-15  without  Greece  and  Luxembourg.  Source:  European  Federation  of  the
manufacturers of compound feedingstuffs (FEFAC).
Source: European Federation of the manufacturers of compound feedingstuffs (FEFAC).

74

 
                                                
Animal consumption of key marketable products

(estimate for EUR-15)

(million tonnes)

2000/01

2001/02e

ANIMAL CONSUMPTION ANIMAL CONSUMPTION

UE

IMP EXP TOTAL UE

IMP EXP TOTAL

KEY PRODUCT

GRAIN CEREALS
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 
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

(oilcake–

seeds 

import
duty
rates

T
T
T
T

40,8
29,9
30,4
10,7
113,0

–
–
1,2
1,3
2,5

20,5

11,5

6 % C / T
0 C / T
0 C
T
0 C
0 C
0 C
0 C
0 C

T

4–17 % C

–
–
1,7
10,8
0,2
–
5,4
2,0
0,4

2,0

0,6

1,4

3,0
–
4,5
–
0,1
1,6
0,5
0,8
1,0

3,2

2,6

0,6

0 C
0 C
0 C
0 C

2–5 % C
0–9 % C
0–2 % C
T

22,5

14,7

7,1

37,2

0,9
4,5
1,7
–
11,0
3,3
4,9
2,3
0,4
18,1
153,5

28,5
1,5
2,8
4,4
2,0
1,1
0,1
0,8
–
39,2
56,4

Notes:

e = estimate; T = Tariff since 1.7.1995; C = bound under GATT;
% = import duty as at 1.7.1995; 0 = exempt.

75

–
–
–
–
–

–

–
–
–
–
–
–
–
–
–

–

–

–

–

2,5

2,0
0,3
0,1
0,1
0,5
–
0,2
0,3
–
3,0
3,0

–
–
–
–
–

–

–
–
–
–
–
–
–
–
–

–

–

–

–

1,9

1,5
0,3
–
0,1
0,8
–
0,2
0,6
–
2,7
2,7

40,8
29,9
31,6
13,1

37,3
31,0
30,9
10,9
115,4 110,1

3,9
1,0
1,1
2,2
8,2

31,9

20,0

10,6

3,0
–
6,2
10,8
0,3
1,6
5,9
2,8
1,4

5,2

3,2

2,0

–
–
1,7
10,5
0,2
–
5,2
2,0
0,4

2,0

0,6

1,4

2,2
–
4,3
–
0,2
1,7
0,5
0,8
1,0

3,1

2,5

0,6

37,2

22,0

13,7

42,4

6,9

38,2

29,7
1,5
2,5
4,5
1,9
1,1
0,1
0,7
–
40,1
62,0

27,9
5,7
4,5
4,3
12,2
4,4
4,8
2,5
0,4
54,6

1,0
4,4
1,5
–
9,6
3,4
4,8
1,0
0,4
16,6
207,1 148,7

108,2
108,2

41,2
32,0
32,0
13,2
118,4

30,6

2,2
–
6,0
10,5
0,4
1,7
5,7
2,8
1,4

5,1

3,1

2,0

35,7

42,6

28,7
5,6
3,9
4,4
11,0
4,5
4,7
1,4
0,4
53,7
207,8

108,5
108,5

 
3.2. 

Livestock products

3.2.1.  Milk and milk products

3.2.1.1.  Milk on the world market

376. 

377. 

378. 

379. 

According  to  initial  estimates,  world  production  of  milk  (including  cow's  milk,
buffalo milk, sheep's milk and goat's milk) was set to increase by a little over eight
million tonnes (+1.4%) in  2002 to  a total  of 593 million  tonnes. The production of
cow's milk was expected to account for most of the increase as a result of an increase
in production in Australasia (mainly cow's milk), the United States and India.

Asia:  the  rise  in  production  in  India,  where  more  than  half  the  milk  produced  is
buffalo  milk,  accelerated.  In  2002  India  was  expected  to  produce  more  than
86 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  85  kg  (less  than  a  quarter  of  what  it  is  in  western
countries), with drinking milk accounting for three quarters of that quantity.

Pakistan,  the  other  major producer in  the  region and fifth  largest  in  the  world,  was
expected to produce just over 26.5 million tonnes in 2002, its production having risen
by 1.2% per year since 1996.

In Latin America production looked set to increase in most countries, from just over
60  million  tonnes  in  2001  to  around  61  million  tonnes  in  2002.  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
22.9  million  tonnes  in  2002,  Brazil's  domestic  consumption  was  also  set  to  absorb
large  additional  quantities  of  milk  products,  in  particular  from  Argentina  and
Uruguay.

380.  Milk  production  in  eastern  Europe  in  2002  looked  set  to  increase  very  slightly,  by
barely  two million tonnes to reach  84  million  tonnes,  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 2000, but the trend was reversed in
2001, moving upwards by 1.25%. There is every probability that production will now
begin to pick up again. Similarly, production in 2001 in eastern European countries
(Poland,  Romania,  the  Czech  Republic,  etc.)  was  expected  to  revert  to  the  upward
trend  recorded  between  1997  and  1999.  Supplies  of  feedingstuffs  are  still  limited,
however,  with  consequent  further  reductions  in  herds.  The  shortage  of  foreign
currency  since  the  rouble  crisis  of  1998  has  led  Russia  to  call  sporadically  on  the
world  market  as  a  major  buyer  of  milk  products.  It  imported  products  worth
786million dollars  in 1995, and  in  2000 worth 242 million  dollars.  The  position  of
Russia  as  the  largest  purchaser  of  butter  explains  why  its  market  remained  rather
depressed, with very low prices of around $ 925–1 300 per tonne. Russian domestic
demand for butter faces competition from cheaper substitutes such as vegetable oil.
Consumption of traditional products, therefore, is falling as consumers in the region
switch to products such as long-life milk, soft cheeses, ice cream and desserts.

76

 
381. 

382. 

383. 

384. 

In the United States, after a fall in 2001 of 1.4%77, production was up again + 2.8%,
rising above 77 million tonnes. In Canada the maintenance of processing quotas for
milk left production practically unchanged.

In Australasia, weather conditions were most favourable, benefiting New Zealand in
particular. Favourable world 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
17.5% 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
scheme78 which is to 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.
Milk  producers  have  recently  been  campaigning  for  an  about-turn  in  policy,  but
without success. The scheme in question is expected to shift production to the most
efficient  regions,  notably  Victoria  and  Tasmania.  The  end  of  2002  was  marked  by
drought which seems to have affected production, but the increase in herd numbers
(+ 5%) to some extent made up for this.

In New Zealand, between 2000 and 2002, there has been a spectacular resumption of
milk  production,  which  increased  by  23%  to  13.9  million  tonnes.  Milk  production
has thus returned to the trend during 1995–98, thanks to good weather for pasturing
and favourable world prices. In spite of the fall in the price of milk, (NZD 5.3 to 3.7),
production  was  still  increasing  as  the  herd  grew  by  6.6%  in  2002  and  was  set  to
continue  to  grow.  The  fall  in  world  prices  has  been  offset  (as  in  the  past)  by
devaluations  of  the  New  Zealand  dollar,  a  policy  sometimes  also  followed  by
Australia  with  regard  to  its  own  currency.  At  the  end  of  2002,  weather  conditions
delayed the arrival of New Zealand products on the world market, affording a bit of
breathing space which was reflected in a rise in prices of 20% between August and
December.

385.  World  trade,  not  taking  into  account  fresh  products  nor  casein,  was  expected  to
amount  to  38  million  tonnes  in  milk  equivalent  in  2002,  the  EU  accounting  for
10 million, i.e. 26%, with New Zealand's share amounting to 24% and Australia's to
16%.  This  situation  should  be  compared  with  that  obtaining  in  1996  where  world
trade totalled 32 million tonnes, the EU accounting for 36%, i.e. 12 million tonnes,
New Zealand's share being 21% and Australia's 12%.

3.2.1.2.  Community market

386. 

The dairy herd was expected to be down by 163 000 head to just 19.9 million (a fall
of  0.8%)  by  the  end  of  2002,  while  yields  were  expected  to  be  up  by  1.2%  thus
reaching  6 000  kg/head  per  year.  Production  was  thus  set  to  remain  stable  at
121.6 million (including milk deliveries,  direct sales  and  farm  use).  Member  States
forecast that milk deliveries will remain virtually unchanged at 115 million tonnes.

77

78

Despite the use of bovine somatotrophin, which had initially been expected to bring about a dramatic
increase in production but was to prove disappointing.
AUD 160 million financed by a levy of 11 cents/litre on drinking milk.

77

 
                                                
387. 

388. 

389. 

390. 

391. 

392. 

393. 

394. 

395. 

396. 

The  output  of  drinking  milk  has  remained  fairly  stable  since  1998,  at  around
29 million tonnes. The production of cream intended for consumption, at 2.4 million
tonnes, was up by 0.2%.

Butter production was set to increase – owing to surplus deliveries over the latter part
of 2001 and the beginning of 2002 – by 64 000 tonnes to 1.9 million tonnes.

The Member states, particularly the United Kingdom, expect butter consumption to
increase slightly (0.3%) for the third consecutive year, to reach the 1.8 million tonne
level. Per capita consumption also looked set to rise, following the increase of 0.2%,
to 4.77 kg per year.

Cheese  production  in  2001  increased  by  some  260  000  tonnes  (around  3.5%),  to
amount to 7.2 million tonnes. The increase in 2002 is expected to be much smaller,
90 000 tonnes (up 1.3%).

Per  capita  consumption  of  cheese  looks  set  to  increase  annually  by  1%
(18.18 kg/head),  which  is  much  less  than  the  annual  trend  of  2.4%  recorded  in  the
past. Overall consumption is expected to increase by 1.2% to 6.9 million tonnes.

Production  of  milk  powder  is  expected  to  go  up  by  2.2%  (some  26  000  tonnes)  to
1.9 million  tonnes.  This  forecast  is  based  on  the  upward  trend  in  skimmed-milk
powder  output,  given  that  semi-skimmed  milk  powder  shows  a  high  degree  of
stability  (193 000  tonnes)  and  whole-milk  powder  production  is  falling  by  67 000
tonnes. Thus, production of skimmed-milk powder (1.07 million tonnes) is expected
to  go  up  by  10%  while  that  of  whole-milk  power  is  expected  to  fall  by  10.5%.
Buttermilk powder production also looks set to fall slightly by 0.4%.

Production of casein fell by 6% or 10 000 tonnes, which means a drop of more than
400 000 tonnes of skimmed liquid milk. Manufacture of condensed milk is expected
to  drop  substantially  by  4.5%,  much  greater  than  the  historical  1.4%  downward
trend.

Lastly, other figures worth noting include: the sharp reduction in the number of dairy
farms,  the  annual  decline  in  1995–2002  (EU-15)  being  41.6%  (there  were  thus
553 000 farms in 2002); the average number of cows per holding is expected to rise
to 36, and the average quantity of milk delivered per holding is set to exceed 207 000
kg.  Average  milk  deliveries  per  holding  actually  cover  a  very  wide  range,  from
44 300 tonnes/holding in Austria to 606 000 tonnes/holding in the United Kingdom.

Overall consumption of dairy products in the EU has been increasing since 1997. In
2001, it rose by 1.1% thus amounting to more than 108 million tonnes. This figure is
the total for all uses made of the milk available.

Community stocks were at an all-time low in March 1996, when there was scarcely a
single tonne of either butter or skimmed-milk powder in public storage. Since then,
stocks of skimmed-milk powder have begun 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.  These  favourable
market  conditions  made  it  possible  to  sell  off  all  public  stocks  of  skimmed-milk
powder  in  August  2000.  Unfortunately,  market  conditions  deteriorated  in  2002,
giving  rise  to  152  814  tonnes  being  offered  to  intervention.  The  quantity  of  butter

78

 
397. 

398. 

399. 

entering  intervention  in  2002  amounted  to  156  537  tonnes  against  an  average  of
30 000 tonnes over the ten previous years.

Internal prices for milk products in 2002 showed similar trends, that is to say levels
were very low to start with and then began to recover slightly as from August. The
average  price  for  butter  began  the  year  at  90.6%  of  the  intervention  price,  drifted
down  until  the  end  of  June  (89.5%),  whereupon  it  began  to  climb  again  to  92.2%
until mid-October, after which it remained relatively stable. The price for skimmed-
milk powder started off at 95.8% of the intervention price, fell to 93.9% in July and
rose again (102.3%) over the remaining summer months, remaining stable since then.

There were several sharp reductions in 2001 in the export refunds for milk powder.
Unfortunately,  world  market  prices  for  milk  products  have  fallen  sharply  since  the
last  quarter  of  2001.  This  has  meant  that  refunds  for  milk  powders  and  even  for
butter have had to be raised on several occasions since November 2001. Changes in
the  world  market  situation  (with  the  late  arrival  of  New  Zealand  products)  and  the
GATT  limit  on  public  spending  have  made  it  possible  for  refunds  to  be  reduced
during the last quarter of 2002.

EU dairy exports fell by 19.5% in 2001, i.e. by almost three million tonnes of milk
equivalent.  This  is  consistent  with  the  withdrawal,  up  to  2000,  of  unused  export
licences from previous years under the GATT Uruguay Round agreements. Exports
in  2002  are  expected  to  be  slightly  up  by  6.9%  on  2001,  to  13.3  million  tonnes.
Imports in 2001 remained stable at the same levels (three million tonnes) as in 2000.
Forecasts for 2002 point to a decline in imports, up to 2.5 million tonnes.

November 2002
WORLD MARKET EXPORTS FROM MAIN EXPORTING COUNTRIES (1)
Market shares in milk equivalent and percent (2)

1985

1996

2000

2001 p

2002 e

Country

('000 t)

% ('000 t)

%

('000 t)

%

('000 t) % ('000 t)

%

European Union 12 476.8 43.4% 11 764.2 36.7% 12 802.3 32.0% 9 651.5 25.5% 10 324.1 26.5%
3 948.5 13.7% 6.909.7 21.6% 8 061.4 20.2% 9 609.8 25.4% 9 354.2 24.0%
New Zealand
6.3% 3 820.6 11.9% 6 392.7 16.0% 6 100.0 16.1% 6 347.7 16.3%
1 815.5
Australia
5.5% 1 824.0
5.6%
3 986.8 13.9%
USA
1.9%
694.0
1.3%
4.3%
1 222.6
Canada
8.7%
2 507.3
EFTA
1.7%
665.8
1.7%
7.3% 4 446.1 13.9% 5 005.6 12.5% 4 832.2 12.8% 5 003.6 12.8%
2 082.9
East Eur. + CIS
9.7% 4 312.1 10.8% 4 430.2 11.7% 4 380.3 11.2%
2.4% 3 113.3
677.8
Other countries

2.3% 2 184.7
533.6
1.9%
682.3
2.1%

4.8% 2 172.1
730.8
1.8%
682.4
1.8%

724.6
615.9
660.9

TOTAL

28 718.0 100% 32 055.2 100% 39 974.8

100% 37 807.6 100% 38 995.1 100%

(1)
(2)
p:

Casein and fresh products not included
Calculated using EEC fat and non-fat coefficients
provisional

estimate

e:

3.2.2.  Beef and veal

3.2.2.1.  World market

400. 

According to FAO and EUROSTAT data, world beef production in 2001 amounted
to  59.0  million  tonnes,  i.e.  0.8%  lower  than  its  level  in  2000.  Beef  production
represents  just  over  a  quarter  of  total  meat  production.  For  2002  world  beef
production is forecast to increase to 60.1 million tonnes.

79

 
401. 

The  USA  remains  the  main  beef-producing  country  with  a  share  of  20.3%  of  the
world production. Net beef production in the EU accounted for 12.3% of the  world
production  in  2001.  Beef  production  decreased  in  the  EU  (–1.9%)  as  well  as  in
Argentina  (–1.6%)  and  the  USA  (–2.6%).  This  contrasts  with  the  developments  in
most  other  beef-producing  countries  in  the  world,  where  production  increased,  as
was the case in Australia (+ 2.6%), Brazil (+ 2.0%), China (+ 3.4%) and the Russian
Federation (+ 1.0%).

World beef production

Country

Argentina
Australia
Brazil
China
EU-15
Russian Federation
USA

Source: FAO and Eurostat

2000

2 683
1 988
6 540
4 991
7 404
1 897
12 298

2001

2 640
2 040
6 671
5 162
7 266
1 916
11 980

(million tonnes)

% change 2001/2000

– 1.6%
2.6%
2.0%
3.4%
– 1.9%
1.0%
– 2.6%

402. 

In 2001 world beef exports were 4.7% below their level reached in 2000. This was
particularly  due  to  food  safety  concerns  (bovine  spongiform  encephalopathy  (BSE)
and  foot-and-mouth  disease  (FMD)),  mainly  in  European  and  South  American
countries. Total beef exports in 2001 amounted to 5.5 million tonnes. The re-opening
of  markets  affected  by  BSE  and  FMD  as  well  as  a  general  recovery  in  world  beef
consumption is assumed to lead to a 3% rise in beef exports in 2002.

3.2.2.2.  Community market

403. 

404. 

The Community beef and veal market had been severely disrupted throughout 2001
due to the second major BSE crisis and  foot-and-mouth disease. This led to a clear
loss of  consumer confidence,  a  sharp  reduction in  production,  historically  low  beef
prices and the (temporary) closure of major export markets. However, in the last part
of 2001 a steady recovery of the beef market was seen with a further stabilisation in
2002.

The May/June 2002 survey of the bovine livestock in the EU showed a decrease of
around 2.1% compared with the previous year, with a total livestock herd of just over
81 million  head.  The  livestock  herd  increased  only  in  Spain  (+ 2.3%)  and  Italy
(+ 0.7%),  largely  due  to  a  higher  number  of  bovines  in  the  category  less  than  one
year old. Significant decreases in livestock were seen in Belgium (–4.8%), Denmark
(–4.5%),  Germany  (–3.7%),  France  (–2.6%),  Ireland  (–1.1%),  the  Netherlands
(–6.0%) and the United Kingdom (–1.6%). Comparisons with 2001 are likely  to be
biased due to the BSE and FMD crises.

405. 

Net  beef  production  in  2001  amounted  to  7.3  million  tonnes.  Production  had
particularly fallen at the start of the BSE crisis, with a steady recovery thereafter. For
2002,  Community  beef  production  is  expected  to  increase  by  2.4%  over  2001,
reflecting a return towards a normal trend.

80

 
406. 

407. 

408. 

409. 

410. 

411. 

Beef  consumption  in  2001  amounted  to  6.7  million  tonnes,  almost  12%  below  its
pre-crisis level. The recovery in beef consumption has been steady and it is expected
to approach its pre-crisis level by 2003. Per capita consumption is at around 19.3 kg
per year.

As regards external trade, several third countries (e.g. Egypt, Middle East countries)
closed their markets for EU beef during the BSE and FMD crises. This resulted in a
significant decrease in Community beef exports. Total exports amounted to 548 000
tonnes  in  2001,  i.e.  18%  lower  than  in  2000.  At  present,  EU  beef  exports  remain
affected by the reluctance of some traditional importing countries to acknowledge the
substantial  efforts  made  by  the  Community  towards  increasing  food  safety  and
raising animal health standards. The majority of exports are destined for the Russian
market, and to a smaller extent Lebanon.

Beef imports in 2001 amounted to 378 000 tonnes, i.e. somewhat lower than in the
preceding  years  due  to  FMD  outbreaks  in  some  South  American  countries.  In  the
second  quarter  of  2002  beef  imports  were  particularly  strong.  In  view  of  the
competitive  strength  of  certain  beef  suppliers  from  South  America,  an  increase  in
Community beef imports is anticipated in the coming period.

Several  market  support  measures  were  taken  during  the  BSE  and  FMD  crises  that
have effectively contributed to restoring market balance. Around 880 000 tonnes of
beef were  withdrawn from the market through public intervention, the purchase  for
destruction and special purchase schemes, as well as various BSE and FMD culling
measures.

Producer prices for beef in 2001 were significantly lower than the year before. This
was particularly the case for the carcase prices  for  young bulls  (–18.1%)  and  cows
(–22.5%).  The  decrease  occurred  mainly  in  the  first  part  of  2001,  with  a  steady
recovery  thereafter  except  for  cow  prices.  In  2002  cow  prices  also  improved.  As  a
result,  current  beef  prices  are  largely  satisfactory,  with  prices  generally  at  higher
levels than anticipated in Agenda 2000.

The  overall  market  stabilisation  is  being  sustained  even  though,  apart  from  export
refunds, none of the support measures were applicable after March 2002. On 1 July
2002 the public intervention regime was replaced by a system of private storage aid.
Since  then  the  average  Community  price  for  carcases  of  male  adult  bovines  has
varied at around 120% of the basic price (EUR 222.4/100 kg). For private storage aid
to be granted, the  average price would  have  to  fall  below  103%  of  the  basic  price,
which is unlikely to happen in the foreseeable future.

412. 

In  view  of  the  overall  satisfactory  market  situation,  the  Commission  sold  around
46 000 tonnes of intervention beef in 2002. It is assumed that the market can absorb
the remaining stocks within a couple of years.

3.2.2.3.  Main legislative and policy developments

413. 

In  line  with  the  Agenda  2000  package,  the  implementation  of  the  reform  of  the
common  organisation  of  the  market  in  beef  and  veal  continued  in  2002
(cf. Regulation  (EC)  No  1254/199979).  In  particular,  the  last  additional  increase  of

79

OJ L 160, 26.6.1999, p. 21.

81

 
                                                
the  beef  premiums  took  effect  in  January  2002.  On  1  July  2002  the  public
intervention regime was replaced by a system of private storage aid.

414. 

In view of the remaining problems on the market for cow meat, the special purchase
scheme  was  prolonged  during  the  first  quarter  of  2002  for  an  additional  maximum
quantity of 40 000 tonnes of cow meat only.

3.2.2.4.  Beef labelling

415. 

416. 

As  from  1  September  2000,  the  Regulation  of  the  European  Parliament  and  the
Council  (EC)  No  1760/2000  established  the  first  phase  of  the  compulsory  beef
labelling system, which introduces a requirement for traceability of beef such that all
labels  must  indicate:  a  traceability  number  ensuring  the  link  between  the  meat  and
the  animal  or  animals;  the  words  "Slaughtered  in"  with  the  name  of  the  Member
State  or  third  country  and  the  approval  number  of  the  slaughterhouse;  the  words
"Cutting  in"  with  the  name  of  the  Member  State  or  third  country  and  the  approval
number of the cutting plant.

As from 1 January 2002, the label also has to contain an  indication  of  the  Member
State  or  third  country  of  birth  and  all  the  Member  States  or  third  countries  where
fattening  of  the  animals  has  taken  place.  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" with the name of Member State or third country
concerned.

3.2.3. 

Sheepmeat and goatmeat

417.  With  production  of  a  little  more  than  1  million  tonnes,  the  European  Union  is  the
second  largest  producer  of  sheep-  and  goatmeat  in  the  world  after  China80  and  is
followed  by  Australia,  India,  New  Zealand,  Turkey,  the  Russian  Federation  and
Saudi Arabia.

418. 

419. 

420. 

New  Zealand  is  the  main  world  exporter  (counting  far  more  than  half  of  world
exports) followed by Australia. Imports are substantial in the EU, Saudi Arabia, the
United States, South Africa and Japan.

In  terms  of  consumption,  the  EU  with  1.3–1.4  million  tonnes  comes  second  in  the
world, after China.

trend  during 

On the European market, production was until recently rather stable although with a
slight  decreasing 
the
foot-and-mouth disease (FMD) crisis in 2001, the gross indigenous production (GIP)
was heavily reduced (over 10%), in particular in the United Kingdom, the main EU
producer. After a modest recovery (2.2%) from the FMD crisis, the estimated figure
for GIP in 2002 is 1 055 000 tonnes of carcase weight equivalent.

last  decade.  However, 

following 

the 

421. 

Among the major EU producers, production in France has decreased year after year
during the last two decades and Irish production has also gone down in recent years.
France  remains  the  most  important  customer  in  internal  Community  trade,  taking

80

The estimate for Chinese production in 2001 is about 2.9 million tonnes (Source FAO).

82

 
                                                
422. 

423. 

424. 

425. 

426. 

products mainly from the United Kingdom (with the exception of the  FMD period)
but also from Ireland.

The European Union imports a quantity  corresponding to about a fifth of its needs.
The  main  supplier  is  New  Zealand,  largely  through  the  United  Kingdom,  although
there is a development towards diversification to several other Member States.

Producer prices were at very  good levels during most  of 1996  and 1997 (EUR  363
and  EUR  376/100  kg  respectively),  in  particular  due  to  the  bovine  spongiform
encephalopathy (BSE) crisis. The next two years (1998 and 1999) had relatively high
levels  of  supply  during  some  short  periods  that  were  associated  with  low  levels  of
prices  (EUR  325  to  EUR  330/100  kg).  The  year  2000  saw  a  major  price  recovery
(EUR  357/100  kg),  the  EU  average  also  being  boosted  by  the  strength  of  sterling
against the euro.

The  FMD  crisis  during  most  of  2001  led  to  a  shortage  of  supply  against  the
background of third countries being unable to significantly increase their exports to
the  EU.  The  shortage  of  supply  was  leading  to  high  prices  and  rather  low
consumption  levels.  That  situation  did  not  change  very  much  during  2002  on  the
supply  side  with  production  recovering  only  slowly  while  demand  for  lamb  was
reported  to  be  firm.  Consequently,  the  market  experienced  the  highest  levels  of
sheepmeat prices ever seen (close to EUR 415/100 kg).

Imports into the Community are carried out mainly under tariff-free or tariff-reduced
WTO  quotas  together  with  additional  quantities  provided  for  in  the  Europe
Agreements. For market management reasons, the quotas are managed on a calendar
year basis. New Zealand is by far the main supplier to the EU, 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  below  19 000  tonnes.  Each  one  of  the  other  exporters,  in
particular EU  candidate  countries  from  Central  Europe  (in  particular  Hungary),  are
all exporting quantities under 11 000 tonnes. A new set of "double profit" agreements
with the candidate countries (already in force in Hungary and the Baltic States) will
be  removing  the  quantitative  restrictions  with  regard  to  that  group  of  countries.
Furthermore,  the  Cotonou  Agreement  with  the  ACP  countries  provides  for  a  small
quota with tariff-free or tariff-reduced rights.

The  EU  ewe  premium  for  the  2001  marketing  year  was  EUR  9.1/ewe,  which  was
calculated  by  computing  the  difference  between  the  basic  price  after  applying  the
stabiliser  (EUR  468.785/100  kg)  and  the  market  price  (EUR  411.677  /100 kg)  and
multiplying  by  a  technical  coefficient  (0.1591).  Under  the  new  sheepmeat  regime,
the  amount  of  premium  is  permanently  fixed  at  EUR  21/ewe  plus  an  additional
payment  of  about  EUR  1/ewe  which  together  represents  a  major  increase  over
previous  years  figures  for  sheep  premia;  producers  in  less-favoured  areas  (LFAs)
receive a supplementary premium of EUR 7/ewe.

3.2.3.1.  Main legislative and policy developments

427. 

The Council adopted a Commission proposal for reform of the sheepmeat regime in
December 2001. The main modifications of the regime concern the ewe premium. In
particular, it was decided  that the deficiency payment  linked  to  variation  in  market
prices should be replaced by a flat-rate payment. Further to bringing the ewe premium
into line with other direct payments under the CAP, the fixed amount will better allow

83

 
forward  planning  and  simplify  farm  management  while,  at  the  same  time,  enabling
producers to respond more readily to market signals.

3.2.4.  Pigmeat

428. 

429. 

430. 

431. 

In  2001  world  pigmeat  production  increased  slightly,  by  1.8%,  reaching  a  total  of
91.1 million tonnes (source: FAO). China remains the top world producer, producing
42.7 million tonnes or 3% more than the previous year. The European Union is still
in second place with an annual production of 17.5 million tonnes, the same level as
the previous year. In 2002 Community production should increase slightly, by 0.8%, to
reach some 17.6 million tonnes. The United States are in third place with a production
of 8.6 million tonnes, 1% up on 2000.

In  2001  pigmeat  market  prices  increased  again,  as  they  had  in  the  previous  year.
During  the  first  half  of  2001  outbreaks  of  swine  fever  declared  in  four  Member
States had a serious impact, provoking a major price increase. As an annual average,
prices maintained their high level (EUR 166 per 100 kg on average) in 2001. Prices
may drop in 2002 to an average of EUR 137 per 100 kg, 17.5% less than in 2001,
which  has  to  be  regarded  as  an  exceptional  year.  Given  the  favourable  market
situation, export refunds for fresh and frozen pigmeat were kept at zero.

Per  capita  pigmeat  consumption  was  stable  in  2001  at  43.6 kg  per  year.  In  2002
consumption  may  drop  a  little  as  a  result  of  the  upswing  in  beef  and  veal
consumption.

In  2001  the  quantity  exported  by  the  European  Union  was  1.08  million  tonnes
carcase  equivalent,  14%  down  on  2000.  That  drop  was  due  to  trade  restrictions
imposed by certain third countries as a result of the declaration of swine fever in four
Member  States  in  2001.  Imports  rose  by  7%  to  52 000  tonnes  in  2001.  The  main
destination of pigmeat exports in  2001  was Russia, receiving  an  annual quantity of
318 700 tonnes (25% of the European Union’s exports). Japan was in second place
with 257 000 tonnes, followed by Hong Kong and China with 107 000 tonnes. It is
estimated that the proportion of exports with refund in 2001 was some 90 000 tonnes.

3.2.5.  Poultry meat

432. 

Since 1991 world poultry meat production has been increasing regularly but at a low
rate:  7%  per  year  from  1991  to  1995  and  4%  per  year  from  1996  to  2002.  Of  the
main producer regions, production is increasing by more  than the  average  in  China
(4.5% per year from 1996 to 2002) and Brazil (10.2% per year from 1996 to 2002).
After  dropping  in  1997,  Russian  production  is  increasing  again.  In  the  European
Union production has been increasing by an average 1.4% since 1996.

84

 
Poultrymeat production

('000 tonnes)

USA

Brazil

China

Japan Russia Hungary

EU

Other

Global

14 522
14 952
15 128
15 990
16 362
17 027
17 572

4 144
4 562
4 627
5 641
6 117
6 732
7 222

9 630
10 400
10 700
11 150
11 960
12 285
12 545

1 249
1 234
1 221
1 189
1 196
1 180
1 195

705
630
640
640
660
700
750

365
372
400
438
366
422
430

8 358
8 636
8 823
8 778
8 806
9 118
9 071

11 456
12 805
12 998
13 813
14 175
14 597
15 000

50 429
53 591
54 537
57 439
59 638
62 061
63 785

3.2% 10.2% 4.5% –0.7% 1.1% 2.7%

1.4%

4.5%

4.0%

1996
1997
1998
1999
2000
2001
2002
Annual rate
of change
2002/1996

2002: estimates
Sources: European Union; USDA.

433. 

434. 

435. 

436. 

437. 

The  world  market  is  stagnating  in  2002,  mainly  because  of  lower  imports  from
Russia and China. The United States is still in first place as exporter in 2002 thanks
in particular to exports of low-value cuts; however, these dropped by 12% because of
animal health problems in trade with Russia. In 2002 Brazilian exports, supported by
the  devaluation  of  the  real,  remain  higher  than  European  Union  exports.  Russia
remains  the  largest  importer  country  but  is  considering  the  introduction  of  import
quotas in order to promote domestic production.

After the great increase in 2001 brought on by the mad cow crisis at the end of 2000
the  European  Union  saw  its  production  drop  in  2002  (–0.5%).  Community  exports
jumped  in  2001  (up  15%),  particularly  to  Russia.  Imports  of  frozen  "salted"  meat
from  Brazil  and  Thailand  greatly  inflated  our  import  volume  in  2001  (+  45%)  and
stayed  at  the  same  level  in  2002,  but  at  lower  prices.  However,  a  Regulation  from
July 2002 corrected the incorrect classification of "salted" meat which from now on
should be classified according to the preservation method as frozen meat.

After the favourable prices in late 2000 and the first half of 2001 (crises in the beef
sector and swine fever  in  the  pig meat sector) prices dropped in the  second  half  of
2001 and at the beginning of 2002 and then returned to their multi-year average level
for the major part of 2002.

Poultry  meat  receives  no  support  on  the  internal  market.  The  measures  governing
trade with third countries were adjusted to comply with WTO rules, in particular the
ceiling  on  exports  with  refund  (286 000  tonnes  per  year  from  2000/01).  That
restriction  resulted  in  a  targeting  of  refunds  both  at  destination  countries  and  at
products. In 2002 therefore only 25% of Community exports benefited from refunds.

Import quotas at reduced customs duties totalling 190 000 tonnes  continue to apply
under association agreements and the "double profit" approach (Poland, Hungary, the
Czech  Republic,  Slovakia,  Romania,  Bulgaria,  the  Baltic  States  and  Slovenia).  In
addition, 15 500 tonnes of boned chicken meat and 2 500 tonnes of turkey meat can
be imported each year without customs duty, to which will be added 11 900 tonnes
for  2002/03  (July/June)  under  minimum  access  quotas  at  reduced  duty  and  2 400
tonnes under other bilateral agreements (Turkey, Israel).

85

 
3.2.6.  Eggs

438.  World production increased by 4.4% (annual rate of change) from 1991 to 1995 and
continued  to  increase  from  1996  to  2002,  by  3.0%.  Although  the  average  increase
was higher in the USA than in the European Union, the latter is still in second place.
China  has  a  high  rate  of  expansion,  7.5%  from  1996  to  2002,  and  is  the  world’s
premier egg-producing country.

Egg production

('000 tonnes)

USA Mexico Brazil

Japan Russia China

EU

Other

Global

4 669
4 738
4 874
5 060
5 150
5 235
5 281

1 589
1 718
1 824
1 978
2 144
2 198
2 253

750
768
832
901
903
920
938

2 610 1 922
2 598 1 946
2 569 2 013
2 560 2 013
2 565 2 068
2 568 2 147
2 556 2 257

15 474
17 223
18 773
22 283
23 262
23 370
23 830

5 182
5 260
5 348
5 396
5 479
5 681
5 658

9 602
7 181
7 117
7 127
7 338
7 411
7 500

41 798
41 433
43 349
47 318
48 908
49 528
50 273

2.1%

6.0%

3.8% –0.3% 2.7% 7.5%

1.4% –4.0%

3.0%

1996
1997
1998
1999
2000
2001
2002
Annual rate
of change
2002/1996

2002: estimates
Sources: European Union; USDA.

439.  World  exports  increased  in  2000  and  maintained  that  level  in  2001.  The  main
exporting  countries  remain  Japan  (egg  products)  and  Hong  Kong  (eggs  in  shell).
Community exports dropped by 0.5% in 2001 and should drop by 3% in 2002.

440. 

On the Community market, the number of laying hens fell slightly by 0.8% in 2002.
Prices remained close to their average in the first half  of 2002 to reach 10% above
average by the end of the summer.

441. 

The common market organisation is similar to that for poultrymeat.

442.  Where  trade  is  concerned,  refunds  were  capped  by  the  WTO  at  98 000  tonnes  of
shell  egg  equivalent  in  2002/03.  Since  summer  1995  export  quantities  have  been
below the limit agreed with the WTO.

443. 

Agreements  concluded  with  the  candidate  countries  laid  down  for  most  of  those
countries  in  2002  a  reduction  of  80%  in  customs  duties  for  certain  egg  products;
"double-profit"  agreements  apply  with  Hungary,  Lithuania  and  Estonia.  Under  the
minimum  access  arrangements,  reduced-duty  import  quotas  were  opened  for  an
annual  volume  of  157 500  tonnes  applicable  from  2000/01,  divided  between  three
product groups of which only the egg products were fully utilised.

3.2.7.  Honey

3.2.7.1.  World situation

444. 

In  2001  world  honey  production  reached  1.26  million  tonnes,  an  increase  of  0.2%
over  the  previous  year  (source:  FAO).  China  remains  the  world’s  largest  producer,
with 256 000 tonnes. The European Union is in second place with 111 000 tonnes.

86

 
3.2.7.2.  European market

445. 

446. 

The degree of self-supply in the European Union was 46% in the 2000/01 marketing
year, a slight drop on the previous  year. The causes were a reduction in production
owing  to  unfavourable  weather  and  increases  in  imports.  Per  capita  consumption
remains stable at 0.7 kg/year.

In application of Council Regulation (EC) No 1221/97 laying down general rules for
the application of measures to improve the production and marketing of honey,81 the
Commission  adopted  decisions  approving  the  national  programmes  for  the  2003
marketing year. The budget line for the honey programmes was increased by 10% in
2002 and the Commission revised the programme decisions accordingly. That budget
increase has been maintained in the preliminary draft budget for next year.

81

OJ L 173, 1.7.1997, p. 1.

87

 
                                                
4. 

AGRIMONETARY ARRANGEMENTS

4.1. 

Developments in 2002

447. 

448. 

449. 

450. 

451. 

The  agrimonetary  measures  adopted  in  2001  were  limited  to  the  application  of
Council Regulation (EC) No 2799/98 establishing agrimonetary arrangements for the
euro82,  namely  the  fixing  or,  where  appropriate,  the  adjustment  of  agrimonetary
compensation for the reduction in national currency of certain amounts in Denmark,
Sweden and the United Kingdom because of the depreciation of their currencies.

According to that Regulation, the fixing of agrimonetary compensation in 2002 could
apply  only  to  revaluations  having  occurred  before  1  January  2002.  In  view  of
developments  in  conversion  rates  in  2001,  there  was  no  reason  to  set  new  rates  of
compensatory aid in 2002.

Following  the  depreciation  of  the  Swedish  krona  and  pound  sterling,  on  the  other
hand, current compensatory aid in Sweden and the United Kingdom was adjusted.

First,  as  regards  the  Swedish  krona,  all  current  tranches  of  compensatory  aid  were
cancelled. Commission Regulation (EC) No 840/200283 cancelled the amounts of the
third  tranches  of  Swedish  compensatory  aid  linked  to  the  beef/veal  and  sheep
meat/goat  meat  sectors  and  structural  measures  resulting  from  the  conversion  rates
applicable  in  January  2000.  Under  the  same  Regulation,  the  third  tranche  of
compensatory  aid  relating  to  the  appreciable  revaluation  of  the  Swedish  krona  in
1999 was also cancelled. In  addition, the  amounts  of  the  third  tranches  of  Swedish
compensatory aid linked to arable crops, and fibre flax and hemp, resulting from the
conversion rates applicable in July and August 2000, were cancelled by Commission
Regulation (EC) No 1971/200284.

Second, as regards sterling, Regulation (EC) No 840/2002 reduced the two tranches
of compensatory aid resulting from the conversion rates applicable in January 2001
in  connection  with  beef/veal  and  structural  measures  (bringing  the  aggregate
maximum amount to EUR 6.63 million instead of EUR 7.24 million) and sheep meat
and goat meat (bringing the aggregate maximum amount to EUR 2.54 million instead
of  EUR  5.38 million).  The  same  Regulation  also  reduced  the  second  tranche  of
compensatory  aid  relating  to  the  appreciable  revaluation  of  sterling  in  2000,  the
aggregate  theoretical  maximum  amount  of  which  was  accordingly  EUR  111.24
million instead of EUR 156.90 million. In addition, Regulation (EC) No 1971/2002
cancelled the amounts of the third  tranches  of  compensatory  aid  resulting  from  the
conversion rates applicable in July and August 2000 in the arable crops and flax and
hemp sectors. This Regulation  also cancelled the  amounts of  the  second  tranche  of
compensatory aid linked to arable crops resulting from the conversion rate applicable
in July 2001.

82

83

84

OJ L 349, 24.12.1998, p. 1.
OJ L 134, 22.5.2002, p. 9.
OJ L 302, 6.11.2002, p. 28.

88

 
                                                
5. 

RURAL DEVELOPMENT IN 2002

452. 

453. 

The rural development programme (RDP) for Basilicata in Italy, which was adopted
on  18  January  2002,  was  the  last  programme  to  be  approved  for  the  2000–2006
period.  Sixty-seven  RDPs,  sixty-nine  Objective 1  region  programmes  with  rural
development  measures  (part-financed  from  the  EAGGF  Guidance  Section)  and
twenty Objective 2 region programmes (EAGGF Guarantee Section) were previously
approved by the Commission in 1999 and 2000.

For  the  first  three  years  (2000,  2001  and  2002)  the  Community  average  budget
execution  of  RDPs  per  Member  State  amounted  to  95%  of  their  respective  annual
allocations.  Six  Member  States  exceeded  the  revised  financial  allocation  (UK,  S,
FIN, A, I and IRL), while another six spent less than the average (P, L, F, EL, DK,
B). The remaining three (NL, E, D) registered rates between the Community average
and 100%.

454. 

Forty-seven amendments to RDPs were approved by the Commission during 2002.

455.  With  the  adoption  of  the  last  seventeen  programmes  in  2002  all  LEADER+

programmes have been approved. Fifty-six were approved in 2001.

456. 

Of an estimated total of 938 LEADER+ local action groups, 692 have already been
selected  by  the  Member  States  (situation  at  26  November  2002).  The  selection
process  started  in  2001  and  is  still  ongoing  in  some  Member  States  (Belgium,
Germany,  Luxembourg  and  Italy).  Eight  out  of  fifteen  national  networks  had  been
established by the end of 2002.

5.1. 

Belgium

5.1.1.  Rural development programmes (EAGGF Guarantee Section)

457. 

Three rural development programmes have been  operating  since  autumn  2000:  one
federal  plan  and  one  regional  plan  each  for  Flanders  and  Wallonia.  For  the  three
programmes combined, total public spending amounted to EUR 921.375 million and
the EAGGF contribution to EUR 360.189 million.

5.1.1.1.  Amendments to the RDPs

458. 

459. 

460. 

The  amendment  submitted  in  respect  of  the  Flemish  programme  in  2001  was
approved  on  27  November  2002.  Amendments  requiring  a  Commission  decision
were presented for the three plans in 2002.

The  amendment  to  the  federal  programme  concerns  the  new  distribution  of
responsibilities  deriving  from  the  special  law  of  13  July  2001  transferring  various
responsibilities, including some in the agricultural sphere, to the Belgian regions and
Communities.

The  amendment  to  the  Flemish  RDP  essentially  concerns  agri-environmental
measures,  measures  associated  with  the  adaptation  and  development  of  rural  areas,
and  evaluation.  The  amendment  to  the  Walloon  RDP  relates  in  particular  to
agri-environmental measures and investment aid.

89

 
5.1.1.2.  Level of payments for the period from 16 October 2001 to 15 October 2002

461. 

The  allocation  to  Belgium  for  2002  amounted  to  EUR  53  million,  of  which  EUR
47.5 million, or 90%, was used. The situation varied  according to plan: 85% of the
budget  was  used  for  the  federal  plan,  94%  for  the  Flemish  plan  and  84%  for  the
Walloon plan.

5.1.2. 

Single programming document (EAGGF Guidance Section)

462. 

Belgium  has  only  one  single  programming  document  (Structural  Funds)  paid  for
from  EAGGF  Guidance  Section  appropriations:  Objective  1  phasing-out  for  the
province  of  Hainaut  in  Wallonia.  The EAGGF  contribution amounts to  EUR  41.57
million,  or  6.4%  of  total  Community  support.  EAGGF  expenditure  for  the  period
from 1 January 2000 to 30 June 2002 was EUR 4.75 million.

5.1.3.  LEADER+ programmes

463. 

Two LEADER+ programmes, one for Flanders and one for Wallonia, were approved
in  December  2001.  The  respective  amounts  of  overall  public  expenditure  and  the
EAGGF  contribution  were:  for  the  Flemish  programme  EUR  8.586  and  EUR
4.293 million and for the Walloon programme EUR 23.214 and EUR 11.607 million.
The local action groups were selected at the end of 2002 and the programmes were
therefore expected to be fully operational in 2003.

5.2. 

Denmark

5.2.1.  Rural development programmes (EAGGF Guarantee Section)

464. 

The total public cost of the Danish rural development programme for 2000–2006 is
EUR  884  million,  including  an  EU  contribution  of  EUR  348.8  million  from  the
EAGGF  Guarantee  Section.  The  programme  includes  support  for  investments  in
less-favoured  areas,  agri-
training, 
holdings,  setting-up  of  young  farmers, 
environment, 
improving  processing  and  marketing  of  agricultural  products,
promoting the adaptation and development of rural areas, and forestry.

5.2.1.1.  Amendments to the RDPs

465. 

The amendments to  the Danish RDP for  the  year 2001  were approved by  Decision
C(2001) 4376  of  19  December  2001.  The  main  changes  concern  investments  in
holdings and, in particular, in  energy saving, ammonia evaporation, animal welfare
and the working environment.

5.2.1.2.  Level of payments for the period from 16 October 2001 to 15 October 2002

466. 

For  the  period  in  question,  the  EU  contribution  for  the  programme  amounted  to
approximately EUR 50.7 million.

5.2.2.  LEADER+ Programmes

467. 

The total public cost of the Danish LEADER+ Programme for 2000–2006 is EUR 34
million, including an EU contribution of EUR 17 million.

90

 
468. 

As a result of an invitation to tender, twelve local action groups were selected. The
groups  cover  11 500  sq.  km,  or  approximately  one  fourth  of  the  territory  with  a
population of 593 000.

5.3. 

Germany

5.3.1.  Rural development programmes (EAGGF Guarantee Section)

469. 

Germany has sixteen different programmes at Länder level.

5.3.1.1.  Amendments to the RDPs

470. 

471. 

In 2002 Germany submitted fifteen requests for amendments to programmes. These
requests  were  aimed  mainly  at  bringing  funding  into  line  with  requirements  and
introducing  new  measures  under  agri-environmental  schemes,  or  at  improving  the
conditions for granting the aid. The amendments were approved before the end of the
financial year (EAGGF Guarantee Section). One amendment was withdrawn.

In  2002  the  flooding  in  some  regions  in  eastern  Germany  caused  an  enormous
amount of damage at a cost of around EUR 9 billion. Three additional amendments
were aimed at increasing part-financing rates and introducing measures to repair the
damage and prevent flooding in future.

5.3.1.2.  Level of payments for the period from 16 October 2001 to 15 October 2002

472. 

The  EU  contribution  to  the  programme  for  this  period  amounted  to  approximately
EUR 730.742 million.

5.3.2.  Objective 1 programmes

473. 

474. 

Six German Länder are classified as Objective 1 regions: Berlin, Brandenburg,
Mecklenburg–Western Pomerania, Saxony, Saxony-Anhalt and Thuringia.

Estimated  total  eligible  expenditure  for  2002  stood  at  EUR  898.281  million,
including  an  EAGGF  Guidance  Section  contribution  of  EUR  486.350  million.  An
amount of EUR 409.495 million was paid during 2002.

5.3.3.  Operational programmes (EAGGF Guidance Section)

475. 

476. 

In  2002  the  Commission  approved  the  amendments  to  the  OP  for  Saxony  and
Thuringia.

Due to the floods the Objective 1 OP for Saxony was amended a second time in 2002
without  the  financial  allocation  being  changed.  For  Saxony-Anhalt  and  Thuringia
financial amendments to the Objective 1 OP are to be proposed in the near future.

5.3.4.  LEADER+ programmes

477. 

In Germany fourteen LEADER+ programmes were approved. For 2002 the total had
been  estimated  at  EUR  20.887  million  but,  due  to  the  late  approval  of  the
programmes, only payments for the national observatory (EUR 0.132 million) could
be executed.

91

 
5.4. 

Greece

5.4.1.  Rural development programmes (EAGGF Guarantee Section)

478. 

The rural development programming document (RDPD) for Greece amounts to EUR
2 686.4  million,  with  a  European  Community  contribution  of  EUR  993.4  million
from the EAGGF Guarantee Section. It comprises the four accompanying measures.
Despite a sound rate of payment, the RDPD is still encountering certain difficulties
in starting up the agri-environmental schemes. In September 2002 an amendment to
the RDPD involving a revision of the codes of good agricultural practice and changes
to agri-environmental projects was submitted to the Commission.

5.4.1.1.  Level of payments for the period from 16 October 2001 to 15 October 2002

479. 

Payments during the period concerned amounted to EUR 160.3.

5.4.2.  Operational  programmes  or  single  programming  documents  (EAGGF  Guidance

Section)

480. 

The  national single-fund (EAGGF  Guidance  Section)  programme  was  approved  by
the  Commission  on  6  April  2001.  The  Community  contribution  towards  this
programme  amounted  to  EUR  1 233.4  million,  out  of  a  total  cost  of  EUR  3 010.2
million. The multifund regional programmes approved in the course of the first half
of  2001  represent  a  total  cost  of  EUR  10 914.4  million,  a  total  Community
contribution of EUR 7 041.7 million and an EAGGF Guidance Section contribution
of EUR 1 026.9 million. All the programme complements were also adopted by the
Monitoring  Committees  during  June  2002.  Certain  activities  which  encountered
implementing difficulties had to be reviewed with the Greek authorities.

5.4.2.1.  Level of payments in 2002

481. 

For 2002 payments totalled EUR 83.2 million.

5.4.3.  LEADER+ programmes

482. 

There  is  only  one  programme  for  the  whole  of  Greece,  which  was  approved  on
19 November 2001. Its total cost is EUR 392.6 million, EUR 182.9 million of which
will be provided by the EAGGF Guidance Section. In 2002 the managing authority
selected the 40 local action groups provided for by the programme. The agreements
between  the  local  action  groups  and  the  managing  authority  were  scheduled  to  be
signed  at  the  beginning  of  2003.  The  managing  authority  also  prepared  the
invitations  to  tender  for  selecting  an  assessor  for  the  mid-term  review  and  the
national network organisation unit. The Monitoring Committee met twice in 2002.

483. 

For 2002, commitments totalled EUR 26.5 million, but no payments were made.

92

 
5.5. 

Spain

5.5.1.  Rural development programmes (EAGGF Guarantee Section)

484. 

In  2000,  the  Commission  had  adopted  two  horizontal  programmes  (accompanying
measures and improvement of production structures) and seven regional programmes
(Aragon,  Catalonia,  the  Basque  Country,  Navarre,  the  Balearic  Islands,  Rioja  and
Madrid).

5.5.1.1.  Amendments to the RDPs

485. 

On  15  May  2002,  the  Commission  approved  an  amendment  to  the  Navarre
programme  concerning  the  introduction  of  priority  criteria  for  agri-environmental
measures, extension of the benefit of aid to the afforestation of agricultural land and
calculation of compensatory allowances in less-favoured areas. On 14 May 2002, the
Commission  approved  an  amendment  to  the  programme  for  Catalonia  relating
mainly to the type of products covered by the processing and marketing measure for
agricultural  products  and  the  drawing  up  of  certain  submeasures  to  encourage  the
adaptation and development of rural areas.

5.5.1.2.  Level of payments for the period from 16 October 2001 to 15 October 2002

486. 

After three years of implementation, the overall financial execution for the EAGGF
Guarantee  Section  stands  at  97%  of  the  amounts  allocated  for  2000–02,  i.e.  EUR
1 388 million out of a total of EUR 1 425.5 million.

5.5.2.  Operational programmes (EAGGF Guidance Section)

487. 

488. 

489. 

In  2000  and  2001,  the  Commission  had  approved  two  horizontal  programmes  (one
single-fund  to  improve  production  structures  in  the  Objective  1  regions  and  one
multifund  for  technical  assistance)  and  ten  multifund  regional  programmes
(Andalusia,  Asturias,  Cantabria,  Castile-La  Mancha,  Castile-Leon,  Extremadura,
Galicia,  Murcia,  the  Canary  Islands  and  Valencia),  as  well  as  their  corresponding
programme complements.

Amendments  to  programme  complements  were  introduced  for  the  following
Autonomous Communities: the Canary Islands (change in the rate of part-financing
of measures) and Castile-Leon (modification of the financial table).

After  three  years  of  implementation,  financial  execution  stands  at  60%  of  the
amounts committed since the beginning of the programming period, i.e. EUR 1 210
million out of a total of EUR 1 984 million committed in 2001 and 2002.

5.5.3.  LEADER+ programmes

490. 

By the end of 2002, the Commission had approved eighteen LEADER+ programmes
(one  horizontal  programme  and  seventeen  regional  programmes,  i.e.  one  per
Autonomous  Community).  Seventeen  programmes  were  covered  by  a  global  grant
and one (the Basque Country) by a programme complement. In all, 150 local action
groups were to be set up.

93

 
491. 

After two years of implementation, financial execution stands at 23% of the amounts
committed since the beginning of the programming period, i.e. EUR 35 million out
of a total of EUR 148 committed in 2001 and 2002.

5.6. 

France

5.6.1.  Rural development programmes (EAGGF Guarantee Section)

492. 

The total cost of the national rural development programme is EUR 12 849.4 million,
with a Community contribution of EUR 4 994.9 million from the EAGGF Guarantee
Section.

5.6.1.1.  Amendments to the RDPs

493. 

On 10 October 2002, the French authorities requested an amendment to the national
rural  development  programme.  This  amendment  is  being  examined  by  the
Commission, which expects to be able to conclude its work during the first quarter of
2003.

5.6.1.2.  Amendments to the SPDs of Objective 2 regions in 2002

494. 

Certain SPD Monitoring Committees approved proposals for amending programmes
with a view to improving the rate of use of the funds available. These amendments
will  be  transmitted  to  the  Commission  in  order  to  allow  the  SPDs  to  be  formally
amended.

5.6.1.3.  Level of payments for the period from 16 October 2001 to 15 October 2002

495. 

The  2002  allocation  for  France  amounted  to  EUR  803  million,  comprising  EUR
701 million  for  the  national  programme  and  EUR  102  million  for  the  Objective  2
rural strand; 84% of this amount has been used. The rate of use of the national plan
stands at 91.60% and that of Objective 2 at 36.42%.

5.6.2.  Operational  programmes  or  single  programming  documents  (EAGGF  Guidance

Section)

496. 

Six  French  regions  are  classified  as  Objective  1  regions:  Guadeloupe,  Martinique,
French  Guiana,  Réunion,  Corsica  and  part  of  the  region  of  Nord/Pas-de-Calais,  of
which  the  districts  of  Douai,  Valenciennes  and  Avesnes-sur-Helpe  are  receiving
transitional support.

5.6.2.1.  Amendments to the OPs of Objective 1 regions

497. 

Following  the  adoption  by  the  Council  on  28  June  2001  of  Regulation  (EC)
No 1447/2001  providing  for  exemptions  for  the  outermost  regions,  such  as  an
increase in the rate of public funding in smaller agricultural holdings and in the agri-
food  industries,  the  different  Monitoring  Committees  approved  the  amendments  to
the  SPD  and  programme  complement  of  each  of  the  programmes  for  the  overseas
departments.

94

 
5.6.3.  National LEADER+ programme

498. 

A global grant was adopted in the context of the Community LEADER+ initiative on
8  August  2001.  The  Centre  national  pour  l'aménagement  des  structures  des
exploitations  agricoles  (CNASEA)  was  chosen  to  manage  the  grant.  Financial
execution  stands  at  1.4%  of  the  amounts  committed  since  the  beginning  of  the
programming  period,  i.e.  EUR  1 093 185  out  of  the  total  of  EUR  80  million
committed in 2001 and 2002.

499. 

Implementation  will  be  carried  out  by  140  local  action  groups  selected  in  2002,
whose first action programmes have been set in place following the signature of the
agreements.

5.7. 

Ireland

5.7.1.  Rural development programmes (EAGGF Guarantee Section)

500. 

The  total  public  cost  of  the  Irish  rural  development  programme  for  2000–2006  is
EUR 3 675.1 million, including an EU contribution of EUR 2 388.9 million from the
EAGGF  Guarantee  Section.  The  programme  includes  support  for  early  retirement,
less-favoured areas, the agri-environment and afforestation.

5.7.1.1.  Amendments to the RDPs

501. 

The rural development programme was amended in order to adjust payment rates for
mountain type grazing under the compensatory allowances scheme. The Commission
Decision  approving  this  amendment  was  notified  to  the  Irish  authorities  on  5  June
2002 (C(2002) 1673).

5.7.1.2.  Level of payments for the period from 16 October 2001 to 15 October 2002

502. 

During  this  period,  EU  expenditure  on  the  programme  amounted  to  EUR  333.03
million, representing 100% of the budget allocation.

5.7.2.  Operational programmes (EAGGF Guidance Section)

503. 

504. 

505. 

The  rural  development  programme  is  complemented  by  other  measures  (farm
investments, forestry) implemented under the two regional (Objective 1) operational
programmes  forming  part  of  the  2000–2006  Community  Support  Framework  for
Ireland.  EU  contributions  for  part-financed  measures  in  2000–2006  (forestry,  farm
investments) under the two regional (Objective 1) operational programmes amount to
EUR 169.4 million.

Foot-and-mouth  disease  in  2001  hampered  the  implementation  of  part-financed
measures (e.g. farm waste, dairy hygiene) under the regional OPs and a low rate of
expenditure  was  therefore  registered  in  that  year.  The  December  2002  request  for
payment did not cover the entire budget for the year 2000.

The PEACE II operational programme (the Community special support programme
for peace and reconciliation in Northern  Ireland and the border counties of Ireland)
was  approved  in  2001.  The  programme  got  off  to  a  very  slow  start  and  no
expenditure was recorded until October 2002.

95

 
5.7.3.  LEADER+ programmes

506. 

The  LEADER+  programme  for  Ireland  was  adopted  on  3  July  2001  (Commission
Decision  C(2001) 1296).  Twenty-two  local  action  groups  were  selected.  The
programme became fully operational in 2002.

5.8. 

Italy

5.8.1.  Rural development programmes (EAGGF Guarantee Section)

5.8.1.1.  Adoption of new RDPs

507. 

During  2002,  the  last  programme  remaining  to  be  approved,  RDP  Basilicata,  was
adopted by the Commission on 18 January 2002.

5.8.1.2.  Amendments to the RDPs

508. 

The  Commission  approved  amendments  to  the  following  RDPs:  Abruzzi,  Bolzano,
Emilia-Romagna,  Friuli,  Lazio,  Lombardy,  Marche,  Piemonte,  Tuscany,  Valle
d’Aosta  and  Veneto.  The  amendments  related  mainly  to  the  reprogramming  of  the
financial  plan  and  the  adjustment  of  several  measures  in  the  programme  to  take
account of actual implementation.

5.8.1.3.  Level of payments for the period from 16 October 2001 to 15 October 2002

509. 

At 15 October 2002,  aggregate  expenditure  during the financial  year under way  on
the twenty-one rural development programming documents financed by the EAGGF
Guarantee Section amounted to EUR 652.9 million in Community contributions and
EUR 1 259.7 million in total public spending.

5.8.2.  Operational  programmes  or  single  programming  documents  (EAGGF  Guidance

Section)

5.8.2.1.  Amendments to the OPs or SPDs

510. 

The  Commission  approved  an  amendment  to  the  OP  for  Campania  concerning  the
adjustment  of  a  forestry  sector  measure  to  include,  in  particular,  the  restoration  of
forestry  production  potential  damaged  by  natural  disasters  and  fire,  and  the
introduction of fire prevention instruments.

5.8.2.2.  Level of payments in 2002

511. 

The  seven  Objective  1  regions  (Sicily,  Sardinia,  Calabria,  Basilicata,  Campania,
Apulia and Molise) benefited from an amount of EUR 419 million in commitments
and  EUR  245  million  in  payments  out  of  a  total  EAGGF  Guidance  Section
contribution of EUR 2 982.6 million.

5.8.3.  LEADER+ programmes

512. 

The  last  eight  programmes  were  adopted  in  2002:  Basilicata,  Calabria,  Campania,
Molise, Apulia, Sardinia, Sicily and the national network.

96

 
513. 

The  approval  of  these  programmes  closed  the  initial  examination  and  negotiation
phase  for  all  Italian  programmes.  Payment  of  the  7%  advance  for  the  eight
programmes  approved  represents  expenditure  of  EUR  11.03  million  in  terms  of
EAGGF  contributions.  For  programmes  already  approved  previously,  expenditure
amounts to EUR 22.68 million for commitments and EUR 7.10 million for payments.

5.9. 

Luxembourg

5.9.1.  Rural development programmes (EAGGF Guarantee Section)

514. 

The year 2002 was the first in which the RDP could be genuinely applied in respect
of all non-Article 33 measures.

5.9.1.1.  Amendments to the RDPs

515. 

The  programme  amendment  submitted  in  2001  and  approved  in  December  2002
mainly  concerned  the  increase  in  the  number  of  hectares  eligible  for  the  prime  aid
rate in the case of compensatory allowances for less-favoured areas.

5.9.1.2.  Level of payments for the period from 16 October 2001 to 15 October 2002

516. 

Use was made of EUR 12.8 million, i.e. 95% of the allocation for 2002.

5.9.2.  LEADER+ programmes

517. 

The  LEADER+  programme  was  approved  in  December  2001.  The  programme
complement  has  still  to  be  submitted.  Consequently,  the  initiative  will  actually  be
implemented in 2003.

5.10.  Netherlands

5.10.1.  Rural development programmes (EAGGF Guarantee Section)

518. 

The  total  public  cost  of  the  rural  development  programme  for  the  Netherlands  is
EUR  1 057.39  million, including an  EU  contribution  of  EUR  417  million  from  the
EAGGF Guarantee Section.

5.10.1.1. Amendments to the RDPs

519. 

The  Netherlands  requested  amendments  to  the  RDP  in  2002.  The  main  changes
concerned the introduction of an investment measure for organic pig farming and the
addition  of  two  new  packages  to  the  subsidy  Regulation  on  nature  conservation
through farming.

5.10.1.2. Level of payments for the period from 16 October 2001 to 15 October 2002

520. 

The  EU  contribution  to  the  programme  for  this  period  amounted  to  approximately
EUR 50.6 million. Accordingly, 87% of the budget was spent.

5.10.2.  Objective 1 programme for Flevoland (EAGGF Guidance Section)

521. 

Flevoland  is  classified  as  a  phasing-out  Objective  1  region.  The  programme  was
approved  in  July  2000.  By  December  2002  the  payment  requests  received  did  not
cover the entire budget for 2000.

97

 
522. 

One  amendment  to  the  Flevoland  Objective  1  programme,  concerning  the
distribution  of  support  among  priorities,  was  approved  by  Commission  Decision
C(2002)4262 of 29 November 2002.

5.10.3.  LEADER+ programmes

523. 

Four LEADER+ programmes have been approved in the Netherlands. An amount of
EUR  12  million  was  earmarked  for  2002.  Since  the  adoption  of  the  LEADER+
programmes,  EU  contributions  totalling  EUR  5.8  million  have  been  paid.  The
selection of twenty-nine local action groups has been completed.

5.11.  Austria

5.11.1.  Rural development programmes (EAGGF Guarantee Section)

524. 

The total public cost of the Austrian rural development programme for 2000–2006 is
EUR 6 570.06 million, including an EU contribution of EUR 3 208.10 million from
the EAGGF Guarantee Section.

5.11.1.1. Amendments to the RDPs

525. 

The  amendment  to  the  Austrian  RDP  for  the  year  2001  was  approved  by  Decision
C(2002) 36 of 8 December 2002. The main changes concern investments in holdings,
agri-environmental  measures,  establishment  of  young  farmers,  less-favoured  areas,
processing and marketing, and the financial plan.

5.11.1.2. Level of payments for the period from 16 October 2001 to 15 October 2002

526. 

The  EU  contribution  to  the  plan  for  the  period  in  question  totalled  approximately
EUR 438.20 million.

5.11.2.  Objective 1 programme for Burgenland (EAGGF Guidance Section)

527. 

The total public cost of the Austrian Objective 1 programme for 2000–2006 is EUR
365.1 million, including an EU contribution of EUR 271.0 million from the ERDF,
ESF and EAGGF (EUR 41.3 million).

5.11.2.1. Amendments to the Objective 1 programme

528. 

Two modifications, concerning the distribution of contributions from the Funds and
the national state aid regulations, were approved by Decision of 4 May 2001.

5.11.2.2. Level of payments in 2002

529. 

Since the adoption of the Objective 1 programme for Burgenland an amount of EUR
12.1 million has been paid.

5.11.3.  LEADER+ programmes

530. 

The  LEADER+  programme  for  Austria  was  approved  by  Decision  C(2001) 820  of
26 March 2001 with an EU contribution of EUR 75.50 million for the period 2001–
2006.  Fifty-six  local  action  groups  have  been  selected  under  the  programme.  The
groups cover 46 996 sq. km, or approximately 45% of the territory, and a population

98

 
of 2 175 079. Since the adoption of the Austrian LEADER+ programme an amount
of EUR 6.9 million has been paid.

5.12. 

Portugal

5.12.1.  Rural development programmes (EAGGF Guarantee Section)

531. 

Total  public  expenditure  under  the  rural  development  programme  for  Portugal
amounts  to  EUR  1 829.921  million,  including  a  Community  contribution  of  EUR
1 372.146  million  from  the  EAGGF  Guarantee  Section.  The  programme  applies  to
the whole of Portugal.

5.12.1.1. Amendments to the RDPs

532. 

The three regional programmes for the Azores, Madeira and Mainland Portugal were
amended by the Commission.

5.12.1.2. Level of payments for the period from 16 October 2001 to 15 October 2002

533. 

Payments totalled EUR 170 348 769.48 at the end of this period.

5.12.2.  Operational  programmes  or  single  programming  documents  (EAGGF  Guidance

Section)

5.12.2.1. Amendments to the OPs or SPDs

534. 

535. 

Amendments  were  made  to  the  five  regional  OPs  for  Mainland  Portugal:  North,
Centre, Alentejo,  Lisboa e Vale do  Tejo and  Algarve.  These changes  related to the
"diversification  of  small-scale  farming"  scheme,  bringing  it  into  line  with  the  new
legal basis deriving from Regulation (EC) No 2075/2000.

The  national  "agriculture  and  rural  development  programme  was  also  amended  in
order to provide an exception to Article 37(3) of Regulation (EC) No 12751999 for
investments in the fresh planting of vineyards.

5.12.2.2. Level of payments in 2002

536. 

At  31  December  2002,  commitments  for  the  eight  Objective  1  operational
programmes totalled EUR 329 557 000 and payments EUR 234 852 824.

5.12.3.  LEADER+ programmes

537. 

The national single programme was adopted on 25 July 2001. The total cost is EUR
266.92 million, EUR 161.6 million of which is to be paid from the EAGGF Guidance
Section.

538. 

Commitments since the start of the programming period amount to EUR 48 200 000
and payments to EUR 17 128 113.

99

 
5.13. 

Finland

5.13.1.  Rural development programmes (EAGGF Guarantee Section)

539. 

In  2000  the  Commission  approved  three  rural  development  programmes,  two  for
Mainland Finland and one for the Åland Islands, an autonomous province of Finland.

5.13.1.1. Amendments to the RDPs

540. 

During  2002  the  Commission  approved  an  amendment  to  the  horizontal  rural
development programme aimed at extending it to certain endangered breeds and an
amendment  to  the  regional  rural  development  programme  modifying  the  level  of
public  support  for development projects  and taking  greater account  of  the  financial
distribution  between  different  measures.  The  Commission  also  approved
amendments  to  the  rural  development  programme  for  the  Åland  Islands  aimed  at
including  certain  endangered  breeds  in  the  programme,  making  the  conditions  and
commitments  applicable  to  the  beneficiaries  of  agri-environmental  measures  more
flexible  and  reallocating  EU  funds  between  agri-environmental  support  and  LFA
support.

5.13.1.2. Level of payments for the period from 16 October 2001 to 15 October 2002

541. 

After three  years of implementation, financial execution for  the EAGGF  Guarantee
Section  stood  at  107%  of  forecasts  for  the  period  2000–02.  The  amount  paid  was
EUR 979.3 million, compared with an estimate of EUR 918.9 million.

5.13.2.  Single programming documents (EAGGF Guidance Section)

542. 

In  2000  the  Commission  approved  two  single  programming  documents  (SPDs)  for
Objective 1 programmes implemented in Eastern Finland and Northern Finland.

5.13.2.1. Level of payments

543. 

After  three  years  of  implementation,  financial  execution  stood  at  50%  and  41%  of
the funds committed at the beginning of the programming period for Eastern Finland
and Northern Finland respectively. Of the EUR 69.0 million committed in 2000–02,
an amount of EUR 32.1 million was paid.

5.13.3.  LEADER+ programmes

544. 

In  2001  the  Commission  approved  one  LEADER+  programme  for  Finland,  and
twenty-five  local  action  groups  (LAGs)  were  selected  and  are  supported  by  a
national network.

545. 

After two years of implementation of the programme, EUR 5.8 million (35%) of the
total of EUR 16.5 million committed in 2001–02 was paid.

100

 
5.14. 

Sweden

5.14.1.  Rural development programmes (EAGGF Guarantee Section)

546. 

the  Commission  approved  one 

In  2000 
rural  development  programme
(accompanying measures covering the entire country, other measures covering non-
Objective 1 regions).

5.14.1.1. Amendments to the RDPs

547. 

The amendments relating to measures for start-up aid to young farmers, training, the
agri-environment,  and  processing  and  marketing  of  agricultural  products  was
approved by the Commission on 6 November 2002.

5.14.1.2. Level of payments for the period from 16 October 2001 to 15 October 2002

548. 

After three  years of implementation,  financial execution for  the EAGGF  Guarantee
Section  stood  at  106%  of  estimated  expenditure  for  2000–02,  i.e.  a  total  of  EUR
489.4 million, compared with an estimated amount of EUR 461.3 million.

5.14.2.  Single programming documents (EAGGF Guidance Section)

549. 

550. 

In 2000 the Commission approved the Objective 1 programmes for Norra Norrland
and Södra Skogslän.

After three years of implementation, for both programmes financial execution stood
at 53% of the funds committed at the beginning of the programming period, i.e. EUR
25.3 million out of a total of EUR 47.8 million committed during 2000–02.

5.14.3.  LEADER+ programmes

551. 

552. 

In  2001  the  Commission  approved  one  LEADER+  programme.  A  total  of  twelve
local action groups have been selected.

After  two  years  of  implementation,  the  financial  execution  stood  at  24%  of  the
amount committed at the beginning of the programming period, i.e. EUR 2.8 million
out of a total of EUR 12.1 million committed in 2001 and 2002.

5.15.  United Kingdom

5.15.1.  Rural development programmes (EAGGF Guarantee Section)

553. 

There  are  four  rural  development  programmes  (RDP)  for  the  period  2000–2006:
England, Northern Ireland, Scotland and Wales. The total cost of these programmes
is  EUR  3 276  million,  towards  which  the  EAGGF  Guarantee  Section  contributes
EUR 1 168 million.

5.15.1.1. Amendments to the RDPs

554. 

For  the  England  and  Scotland  programmes,  changes  were  made  with  regard  to
compensatory  allowances  in  less-favoured  areas,  the  agri-environment  and  forestry
schemes.  For  the  Wales  programme,  changes  related  to  the  rate  of  aid  for  tourism
and craft measures.

101

 
5.15.1.2. Level of payments for the period from 16 October 2001 to 15 October 2002

555. 

The  outbreak  of  foot-and-mouth  disease  was  a  major  problem  for  all  rural  areas
during 2001. However, the impact on the financial performance of the RDPs was not
as great as expected and the United Kingdom spent an overall amount equivalent to
104% of its allocation for the period 2000–02.

5.15.2.  Operational  programmes  or  single  programming  documents  (EAGGF  Guidance

Section)

556. 

EAGGF  Guidance  Section  support  is  available  only  in  regions  eligible  for
Objective 1  (or  regions  in  transition):  Cornwall  and  the  Scilly  Isles,  Merseyside,
Northern  Ireland  (in  transition),  South  Yorkshire,  Highlands  and  Islands  (in
transition), and West Wales and the Valleys.

5.15.2.1. Level of payments

557. 

Since the beginning of the present programming period, a total amount of EUR 188
million  has  been  committed  for  these  programmes.  By  the  end  of  2002  the  total
amount  paid  by  the  EAGGF  was  EUR  59  million,  i.e.  31%  of  the  total  amount
committed. An additional amount of EUR 21  million  has  been claimed but  has not
yet been paid.

5.15.3.  LEADER+ programmes

558.  With  the  adoption  in  2002  of  the  programme  for  Scotland,  all  four  LEADER+
programmes have now being adopted. The total public cost of the four programmes
is EUR 253 million, to which the EAGGF contributes EUR 113 million. By the end
of 2002 a total of EUR 33.6 million had been committed for these programmes, with
advance payments amounting to EUR 7.9 million, i.e. 23%. A total of fifty-five local
action groups were selected.

102

 
6. 

ENVIRONMENT AND FORESTRY

6.1. 

Environmental measures

559. 

560. 

561. 

562. 

563. 

In order to monitor the progress achieved in integrating environmental concerns into
agricultural policy, as  requested by the Cardiff European Council in June 1998 and
by  successive  European  Councils  on  a  number  of  occasions,  the  Commission
adopted on 20 March 2001, in the wake of its January 2000 communication entitled
"Indicators  for  the  integration  of  environmental  concerns  into  the  common
agricultural policy",85 a new communication entitled "Statistical information needed
for indicators to monitor the integration of environmental concerns into the common
agricultural  policy".86  In  February  2001,  in  response  to  a  wish  of  the  Council  of
agriculture ministers that the entire area of sustainable development be included, the
Commission presented a working paper entitled "A framework for indicators for the
economic and social dimensions of sustainable agriculture and rural development".87

In  June  2001,  the  European  Council  in  Göteborg  endorsed  the  European  Union
Strategy  for sustainable development,88 calling  upon  the Commission to pursue its
efforts to improve the existing set of indicators and define the statistics required for
these indicators.

In  the  above-mentioned  communications,  the  Commission  presented  an  analytical
framework and identified a set of thirty-five agri-environmental indicators, as well as
the  information  sources  available  for  those  thirty-five  indicators,  and  made
recommendations for future action in this area.

The  recommendations  set  out  in  these  Commission  communications  provide  the
conceptual  input  for  the  IRENA89  project.  Started  in  2002,  this  project  is  aimed  at
developing a set of agri-environmental indicators at least equivalent to the thirty-five
identified  by  COM(2002) 20,  and  the  related  datasets  required  to  compile  these
indicators. A specified final outcome of the project is a report to be presented to the
European Council in December 2004.

On 14  March 2002, the  European Parliament  adopted the  "Biodiversity  action  plan
for  agriculture"90  approved  by  the  Council  in  June  2001.  This  action  plan  analyses
the relationship between agriculture and biodiversity and highlights both the mutual
benefits  which  could  ensue  and  the  adverse  impact  which  certain  kinds  of
agricultural activity could have on the conservation of biodiversity.

564. 

A  number  of  key  ideas,  based  mainly  on  experience  drawn  from  implementing
agri-environmental  measures,  provided  guidance  for  the  preparation  of  the  action
plan, which defines priorities in specific  action areas likely to achieve the goals set

85

86

87

88

89

90

COM(2000) 20 final.
COM(2001) 144 final.
SEC (2001) 266.
COM(2001) 264 final.
IRENA  is  the  acronym  for  "Indicator  reporting  on  the  integration  of  environmental  concerns  into
agriculture policy".
COM(2001) 162 final, volume III.

103

 
                                                
565. 

566. 

by  the  European  Community  biodiversity  strategy.91  The  action  plan  also  sets
specific targets and establishes a timetable for carrying out priority tasks. To ensure
effective  monitoring  of  the  implementation  of  the  proposed  instruments  and
evaluation  of  their  results  with  regard  to  the  conservation  and  sustainable  use  of
genetic  resources  in  agriculture,  the  communication  also  underlines  the  need  to
develop operational indicators in this area.

In  February  2002  the  Commission  set  up  a  Biodiversity  Expert  Group,  in  which
Member  States  participate  and  which  other  stakeholders  are  invited  to  attend  as
observers, in order to promote the implementation of  the  Biodiversity Action Plans
and enhance complementarity with equivalent biodiversity strategies and action plans
adapted and being developed by the Member States.

Agriculture  plays  a  determining  role  in  other  Community  initiatives  aimed  at
safeguarding the environment. One example would be the measures currently being
carried out  to  protect  surface  water  and  groundwater.  Under  the  Nitrates  Directive,
Member States must draw up action plans in designated vulnerable zones in order to
reduce  nitrate  pollution  at  source.  The  1979  Birds  Directive  is  another  relevant
Community  initiative,  which  obliges  Member  States  to  protect  the  habitats  of  their
wild  bird  populations.  Lastly,  an  ecological  network  known  as  "Natura  2000"  has
been  set  up  under  the  1992  Habitats  Directive.  Mention  may  also  be  made  of  the
Commission communication entitled "Towards a thematic strategy on the sustainable
use of pesticides",92 the purpose of which is to launch a broad consultation to assist
in the development of a thematic strategy on the sustainable use of pesticides. This
strategy  is to complement the existing legislative  framework,  which  focuses  on  the
beginning  and  end  of  the  life  cycle  of  pesticides.  It  should  also  be  noted  that  the
Commission  presented  a  communication  entitled  "Towards  a  thematic  strategy  for
soil  protection",93  which  constitutes  a  first  step  towards  drawing  up  a  genuine
Community  protection  strategy  and  is  both  descriptive  and  action-orientated,  thus
providing  a  full  picture  of  this  complex  issue  that  can  serve  as  a  basis  for  future
work.

6.2. 

Forestry measures

567. 

In  the  context  of  the  protection  of  forests  against  atmospheric  pollution  (Council
Regulation  (EC)  No  3528/8694)  the  Commission  approved  the  2002  national
programmes submitted by the Member States with a total EC financial contribution
of EUR 6 584 000. Of this total, an amount of EUR 1 032 000 was allocated to work
on  the  systematic  monitoring  of  forest  condition  carried  out  in  the  Member  States
within the network of 3 600 observation plots (level I). A further EUR 4 721 000 was
allocated  to  the  intensive  surveillance  of  forest  ecosystems  conducted  within  the
network of 514 observation plots (level II), and EUR 828 000 to experiments in the
field and pilot projects contributing towards the enhancement of common monitoring
methods. The results of the programmes are presented in the report "Forest Condition
in  Europe",  published  jointly  by  the  United  Nations  Economic  Commission  for
Europe and the European Commission (reference: ISSN 1020-3729).

91

92

93

94

COM(1998) 42 final.
COM(2002) 349 final.
COM(2002) 179 final.
OJ L 326, 21.11.1986, p. 2.

104

 
                                                
568.  With a view to protecting the Community's forests against fire (Council Regulation
(EC) No 2158/9295), the Commission approved the 2002 national programmes with
an EC financial contribution of EUR 10 448 000. These programmes  are integrated
into  the  Member  States'  forest  fire  protection  plans,  which  are  approved  by  the
Commission. The plans are a necessary  condition for the eligibility of  a  number of
forest  measures  implemented  in  the  rural  development  programmes  under  Council
Regulation  (EC)  No  1257/199996.  The  Commission  issued  a  positive  opinion  on
sixty-two updated plans during 2002.

569. 

Finally,  following  the  Commission  Decision  of  15  December  2001  (Written
Procedure  E/2001/2318)  on 
agreement  between  DG  Agriculture,
DG Environment and DG  Enterprise  concerning the two forest protection measures
and the distribution of responsibilities for the EU Forestry Strategy, the Commission
has  established  an  Inter-Service  Group  on  Forestry.  This  Inter-Service  Group  is
strengthening  co-ordination  on  forest-related  activities 
the
framework of Community policies or initiatives by meeting on a regular basis.

implemented 

the 

in 

95

96

OJ L 217, 31.7.1992, p. 3.
OJ L 160, 26.6.1999, p. 80.

105

 
                                                
7. 

FINANCING OF THE CAP IN 2002

570. 

Agricultural  expenditure  in  2002  took  account  of  the  conclusions  of  the  Berlin
Summit of 24 and 25 March 1999 on the Agenda 2000 proposals: 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) was adhered to, but sub-guideline ceilings
on  expenditure  were  introduced  in  the  shape  of  a  subceiling  for  traditional  market
expenditure  (1(a))  and  another  subceiling  for  expenditure  on  rural  development
(1(b)). These two subceilings have been set as follows:

Expenditure in 2000–2006 (EUR million at 1999 prices)97

Total future CAP
a) markets98

(subceiling 1a)
b) rural development99
(subceiling 1b)

2000
40 920

2001
42 800

2002
43 900

2003
43 770

2004
42 760

2005
41 930

Total

2006
41 660 297 740

36 620

38 480

39 570

39 430

38 410

37 570

37 290 267 370

4 300

4 320

4 330

4 340

4 350

4 360

4 370

30 370

7.1. 

EAGGF Guarantee Section

571. 

The  EAGGF  Guarantee  Section  appropriations  adopted  in  the  general  budget  for
2002  total  EUR  44 255.08  million  (including  EUR  24.9  million  for  the  agricultural
budgetary reserves and provisions – Chapter B0-40).100 The agricultural guideline101
is  EUR  50  867  million  (an  increase  of  EUR  2 079  million  or  4.3%  on  the  2001
financial  year)  and  covers  not  only  expenditure  under  Subsection  B1  but  also
expenditure  under  the  Sapard  pre-accession  instrument  (EUR  555  million  of
commitment  appropriations  entered  in  Chapter  B7-01).  There  is  thus  a  margin  of
EUR 6 611 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 39 660.08 million, i.e. EUR 2 331.92 below the subceiling laid down in
the Interinstitutional Agreement of 6 May 1999;102

97

98

99

100

101

102

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 the EAGGF Guidance Section.
-  These  amounts  correspond,  on  average,  to  the  proposal  put  forward  by  the  Commission  as  part  of
Agenda 2000.
-  All  rural  development  measures  are  part-financed  by  the  European  Commission  and  the  Member
States.
Not including EUR 250 million of appropriations entered in the monetary reserve (B1-6).
A budgetary discipline instrument 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).

106

 
                                                
– 

the  subheading 
rural  development  and  accompanying  measures
(subheading 1(b) covering Titles B1-4 and B1-5) amount to EUR 4 595 million,
i.e. the same as the subceiling fixed in the Interinstitutional Agreement.

for 

7.1.1.  Budgetary procedure

7.1.1.1.  Stages of the budgetary procedure

572. 

573. 

The  2002  Preliminary  Draft  Budget  was  adopted  by  the  Commission  at  its  meeting
held  on  8  May  2001  and  proposed  to  the  Budgetary  Authority  in  the  course  of  the
same month. The appropriations proposed for the EAGGF Guarantee Section totalled
EUR  46 221.8  million, 
for  subheading  1(a)
(EUR 365.2 million  below  the  ceiling  for  subheading  1(a)  at  EUR  41 992  million)
and EUR 4 595 million for subheading 1(b) (i.e. at the same level as the ceiling).

i.e.  EUR  41 626.8  million 

The  Council  adopted  the  2002  draft  budget  at  first  reading  on  20  July  2001.  The
appropriations in subheading 1(a) were reduced by  EUR  1 200  million (abolition of
the special reserve of EUR 1 000 million and reduction of EUR 200 million across all
chapters  apart from those affected by the  BSE  epidemic). Those in  subheading  1(b)
were  maintained  by  the  Council  at  the  level  of  the  financial  perspective.  EAGGF
Guarantee  Section  appropriations  accordingly  totalled  EUR  45 021.8  million,  of
which  EUR  40 426.80  million  for  subheading  1(a)  and  EUR  4 595  million  for
subheading 1(b).

574. 

At the end of October 2001 the Commission adopted letter of amendment No 2/2002
to the Preliminary Draft Budget in order to take account, firstly, of developments on
the agricultural markets (trends on the beef and veal market and measures to eradicate
BSE) and, secondly, of recent agricultural legislation.

575.  While  taking  these  factors  into  consideration,  the  amending  letter  to  the  PDB  set
appropriation  requirements  for  the  2002  financial  year  at  EUR  44 250.8  million,  of
which EUR 39 655.8 million was allocated to market measures (leaving a margin of
EUR 2 336.2 below the ceiling) and EUR 4 595 million to rural development (equal
to the ceiling).

576. 

In  December  2001,  following  the  consultation  procedures  between  the  three
institutions, the final budget for 2002 was established as follows:

– 

– 

for  subheading  1(a),  appropriations  for  2002  were  fixed  at  EUR  39 660.08
million (EUR 2 331.9 million below the Berlin ceiling),

for subheading 1(b), appropriations for 2002 were fixed at EUR 4 595 million.

7.1.1.2.  The monetary reserve

577. 

578. 

The operating mechanisms for the monetary reserve are set out in the 1995 Report on
the Agricultural Situation.

For a large proportion of export refunds for agricultural products, particularly cereals,
rice and sugar, and some internal aid such as that for starch production, use of sugar
by  the  chemicals  industry  and  cotton,  budget  appropriations  are  established  on  the
basis  of  the  discrepancy  between  Community  prices,  expressed  in  euros,  and
foreseeable world prices, generally expressed in US dollars.

107

 
579.  When  the  preliminary  draft  budget  was  drawn  up  in  April  2001,  the  parity  initially
used  for  the  budgetary  estimates  for  2002  was  set  at  EUR  1=USD  0.92  (average
parity  for  January,  February  and  March  2001)  in  accordance  with  Article  8(1)  of
Regulation  (EC)  No  2040/2000.  Subsequently,  when  the  Commission  adopted  an
amending  letter  to  the  preliminary  draft  budget  at  the  end  of  October  2001  on
agricultural expenditure, the rate was reduced to EUR 1=USD 0.89 (average for July,
August and September 2001). The latter rate became the final budgetary parity used
to establish budgetary estimates for 2002.

580. 

581. 

During the first nine months of the reference period for determining the impact of the
dollar  (August  2001  to  April  2002),  the  average  monthly  rates  did  not  register
variations of more than 2.5% against the final parity used for establishing budgetary
estimates for 2002. However, after April, the dollar depreciated considerably and the
rate for July 2002 averaged EUR 1=USD 0.99, thus surpassing the budgetary parity
by some 11%.

The estimated additional costs incurred by the EAGGF Guarantee Section as a result
of the fall in the dollar against the budgetary parity thus amount to EUR 33 million
for  the  2002  financial  year.  Given  that  these  additional  costs  are  below  the  neutral
margin  of  EUR  100  million  referred  to  in  Article  11(2)  of  Regulation  (EC)  No
2040/2000, no transfer could be made from the monetary reserve.  In any case, these
additional costs may still be financed from the budget appropriations in Titles 1 to 3
of the EAGGF Guarantee Section for 2002.

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

582. 

Of  the  overall  commitment  appropriations  of  EUR  97 019.3  million  entered  in  the
2002 general budget, an amount of EUR 44 255.08 million (excluding the monetary
reserve, but including the appropriations entered in Chapter B0-40 "provisions"), i.e.
45,6%, was allocated to the Guarantee Section. In 2001, EAGGF Guarantee Section
commitments accounted for 46% of commitments in the general budget.

7.1.3.  The EAGGF and its financial resources

583. 

584. 

The EAGGF forms an integral part of the European Union budget. Its appropriations
are  therefore  determined in accordance with budget procedures, in the same way  as
other Community expenditure.

Agricultural  policy  also  generates  revenue  in  the  form  of  sums  collected  under  the
common  market  organisations.  This  revenue,  which  forms  part  of  the  Union's  own
resources,103 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;

103

The  Union's  other  own  resources  are:  the  levy  on  VAT,  customs  duties  collected  under  the  common
customs tariff and Member States' contributions.

108

 
                                                
– 

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.

Revenue

Charges accruing to the Union's own resources under the common agricultural policy
(amounts prior to deduction of collection costs)

(EUR million)

Type of charge

1996

1997

1998

1999

2000

2001

Agricultural levies
Sugar levies

810.1
1 213.7

1 025.2
1 114.0

1 102.2
1 070.1

1 187.3
1 203.6

1 198.4
1 196.8

1 132.9
840.0

2002104

1 121.7
770.9

Total

2 023.8

2 139.2

2 172.3

2 390.9

2 395.2

1 972.9

1 892.6

585. 

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.

7.1.4.  EAGGF Guarantee Section expenditure

7.1.4.1.  Expenditure

586. 

EAGGF Guarantee Section expenditure comprises:

– 

– 

– 

– 

– 

– 

export refunds (EUR 3 400.6 million in 2001);

public and private storage (EUR 1 059.9 million in 2001);

withdrawals and similar operations (EUR 2 732.8 million in 2001);
direct payments105 (EUR 27 430.3 million in 2001);

intervention 

other 
to 
(EUR 3 064.2 million in 2001); and

relating 

the 

common  market  organisations

other expenditure, principally rural development (EUR 4 363.8 million in 2001).

587. 

Direct payments to producers are thus currently by far the largest type of aid.

588. 

In  connection  with  the  CAP  reform  in  1992  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  woodland  resources  or  transfer  their
holdings  with  a  view  to  early  retirement,  plus,  under  the  1999  reform,  other  rural
development measures, including compensation granted in less-favoured areas, all of
which make up the second pillar of the CAP.

104

105

Estimates in the 2002 budget.
Direct payments as defined in the Annex to Regulation (EC) No 1259/1999 of 17 May 1999 (OJ L 160,
26.6.1999, p. 113).

109

 
                                                
589. 

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,
measures  to  promote  quality  and  measures  designed  to  compensate  for  the
geographical isolation of the French overseas departments  (Poseidom),  Madeira  and
the Azores (Poseima), the Canary Islands (Poseican) and the Aegean islands.

7.1.4.2.  Public storage

590. 

Between 1 October 2000 and 30 September 2001, when the public storage accounts
were closed, the quantities and book value of public intervention stocks developed as
follows. The book value of products in storage rose from EUR 884.94 million at the
end of the 2000 financial  year to EUR  984.08  at the  end of the 2001 financial  year.
The share of cereals and rice diminished, these two products now representing around
67% of the total value of the products in storage. The remaining 33% comprises olive
oil (1%), milk products (4%) and, above all, beef and veal (25%) and alcohol (3%).

7.1.5.  Clearance of accounts

591. 

The  Commission  adopted  the  following  Decisions  on  the  clearance  of  EAGGF
Guarantee Section accounts:

– 

– 

– 

– 

– 

– 

Decision of 19 February 2002 (2002/144/EC) on the clearance of the accounts
of certain paying agencies in Spain,106

Decision  of  12  June  2002  (2002/461/EC)  in  respect  of  the  2001  financial
year107.

Decision  of  28  June  2002  (2002/523/EC)  pursuant  to  Article  5(2)(c)  of
Regulation (EEC) No 729/70 – ninth Decision,108

Decision  of  26  June  2002  (2002/524/EC)  pursuant  to  Article  5(2)(c)  of
Regulation (EEC) No 729/70 – tenth Decision,109

Decision  of  14  October  2002  (2002/816/EC)  in  respect  of  the  1995  financial
year,110

Decision  of  5  November  2002  (2002/881/EC)  pursuant  to  Article  5(2)(c)  of
Regulation (EEC) No 729/70 – eleventh Decision.111

592. 

593. 

The  expenditure  recovered  from  Member  States  in  respect  of  these  three  Decisions
comes to EUR 295.9 million.

The  agricultural  expenditure  audit  departments  also  performed  the  other  tasks
allocated to them:

– 

168  on-the-spot  inspection  missions  in  the  15  Member  States  and  ten  Sapard
countries, including checking of direct expenditure;

106

107

108

109

110

111

OJ L 48, 20.2.2002, p. 32.
OJ L 160, 18.6.2002, p. 28.
OJ L 170, 29.6.2002, p. 73.
OJ L 170, 29.6.2002, p. 77.
OJ L 280, 18.10.2002, p. 88.
OJ L 306, 8.11.2002, p. 26.

110

 
                                                
– 

– 

– 

– 

– 

– 

– 

discussions  with  the  Member  States  on  the  findings  of  inspection  missions  in
respect of 1999, 2000 and 2001;

the  work  of  the  European  Parliament's  Budgetary  Control  Committee  in  the
context of the discharge of the 2000 budget;

the  replies  to  the  2001  annual  report,  the  special  reports  and  the  Court  of
Auditors' Statement of Assurance for 2001;

the decentralised management of the Sapard programme, divided between five
Sapard paying agencies;

the work of the conciliation body;

assistance for the Commission's Legal Service in connection with cases before
the Court of Justice associated with clearance of accounts decisions;

supply  of  statistical  aggregates  on  agricultural  expenditure  to  the  European
Parliament and DG AGRI.

7.1.6.  Expenditure on agricultural markets in 2002

594. 

The uptake of EAGGF Guarantee Section appropriations for the 2002 financial year
(expenditure  by  the  Member  States  from  16  October  2001  to  15  October  2002)
amounted  to  EUR  43 114.9  million,  i.e.  97.4%  of  the  appropriations  entered  under
Subsection  B1  of  the  budget.  The  initial  appropriations  of  EUR  44 255.08  million
thus exceeded expenditure by EUR 1 140.2 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  38 864.5  million,  i.e.  EUR  3 127.5  million  below  the  subceiling  laid
down in the Interinstitutional Agreement of 6 May 1999.

Total expenditure for subheading 1(b) (rural development, covering Title B1-4)
amounts to EUR 4 250.4 million, i.e. EUR 344.6 million below the subceiling.

595. 

The main sectors in which there was under-utilisation in 2002 are as follows:

– 

– 

– 

– 

fibre  plant  and  silkworm  sector:  –EUR  140  million:  the  Commission  in  fact
established  the  quantity  of  cotton  eligible  for  aid  for  Greece  at  a  level  below
that originally laid down in the 2002 budget;

fruit  and  vegetable  sector:  –EUR  99  million:  this  difference  is  attributable
mainly  to  the  quantities  of  fruit  and  vegetables  withdrawn  from  the  market,
which were lower than those provided for in the 2002 budget, and the quantities
of  and  aid  for  bananas,  which  were  also  established  at  a  level  below  that
provided for in the 2002 budget;

beef and veal sector: –EUR 1 023 million: the under-spending is attributable to
the  improved  conditions  on  the  beef  and  veal  market,  which  occurred  sooner
than  anticipated  at  the  time  of  the  2002  budget  estimates.  Recourse  to
intervention  for  beef  and  veal  therefore  fell  short  of  initial  estimates.  The
quantities of beef and veal exported were also lower than the estimates for the
2002 budget;

sheep meat and goat meat sector: –EUR 120 million: savings were achieved in
this  sector  as  a  result  of  the  favourable  developments  in  sheep  meat  and  goat
meat  prices  in  the  2002  financial  year  and,  consequently,  the  setting  of  sheep
meat/goat meat premiums at a level below that laid down in the budget;

111

 
– 

– 

veterinary  and  plant-health  measures:  –EUR  345  million:  the  payment  claims
for foot-and-mouth disease have not yet been wound up due to the fact that the
clarifications required to settle them are lacking;

other measures: –EUR 102 million: this under-utilisation is mainly attributable
to the United Kingdom's decision not to pay part of the agri-monetary aid.

596. 

By contrast, the following sectors exceeded budget appropriations:

– 

– 

arable  crops  sector:  +  EUR  674.1:  on  account  of  the  bad  weather  during  the
summer, the Commission authorised Germany and Italy to bring forward to the
2002 financial year the payment of the arable crop aid provided for 2003;

milk and milk products: + EUR 446.8 million: this over-utilisation is due to a
deterioration in the milk products market during the 2002 financial year. On the
internal market, recourse to public storage for milk powder and butter exceeded
the  forecasts  in  the  2002  budget.  On  the  external  market,  it  was  necessary  to
raise export refunds;

7.2. 

EAGGF Guidance Section

597. 

598. 

599. 

600. 

Implementation  of  the  reform  of  the  Structural  Funds  since  1  January  1989  has
gradually  changed  the  nature  of  the  assistance  granted  by  the  EAGGF  Guidance
Section.  In the first programming period from 1989 to 1993, a  share of  Community
contributions was still taken up by the annual reimbursement of national expenditure
and the remainder by part-financing of operational programmes. In the second reform
of the Structural Funds  covering the  period from 1994–1999, the entire  Community
contribution was programmed in the form of operational programmes.

In accordance with the  conclusions  of the  Berlin European  Council in 1999, a third
programming  period  for  the  Structural  Funds  was  introduced  to  run  from  2000  to
2006.  EAGGF  Guidance  Section  involvement  in  this  new  period  on  the  basis  of
Council  Regulations  (EC)  No  1260/1999  (the  general  Structural  Fund  Regulation)
and No 1257/1999 (support for rural development) only covers Objective 1 areas, the
Community Initiative Leader+ programme and technical assistance.

For the new period from 2000 to 2006, there is no decrease in Community support for
rural  areas,  although  the  EAGGF  Guidance  Section  allocations  for  the  new  period
might  give  such  an  impression.  In  actual  fact,  measures  targeting  agricultural
structures and the diversification of rural areas (former Objectives 5a and 5b) outside
Objective 1 regions and compensatory allowances, which up to 1999 were funded by
the EAGGF Guidance Section, are now covered by the EAGGF Guarantee Section.

Thus,  Community  support  for  the  four  accompanying  measures,  consisting  in
compensatory allowances for less-favoured areas and areas subject to environmental
constraints (funded  up  to  1999  by  the  EAGGF  Guidance  Section),  early  retirement,
agri-environmental  measures  and  woodland  management,  is  funded  out  of  the
EAGGF Guarantee Section throughout the Community. Community support for other
rural  development  measures  in  areas  outside  Objective 1  is  also  funded  out  of  the
EAGGF Guarantee Section.

112

 
7.2.1.  Funding in the new 2000–2006 programming period

601. 

602. 

603. 

In  the  new  2000–2006  programming  period  the  EAGGF  Guidance  Section
contributes  to  Objective  1  (regions  whose  development  is  lagging  behind),  the
Leader+  Initiative  and  technical  assistance  as  indicated  above.  It  also  continues  to
cover  payment  commitments  under  programmes  from  previous  periods  which  were
wound up by 31 December 2001 and the final balance of which must in principle be
paid by the end of 2003.

However,  by  way  of  exception,  an  amount  of  EUR  148  million  was  committed  in
2000  to  cover  the  outstanding  part  of  the  last  tranche  (1999)  of  the  1994–1999
programming period. This was because, as a result of the lack of budget allocations at
the  end  of  the  1999  financial  year  and  the  late  adoption  of  the  last  programming
adjustment decisions outside the accounting deadline, it was not possible to commit
all  of  the  1994–1999  Structural  Fund  CSF  programmes  and  Community  Initiative
programmes in 1999 (tables 7.2.1a and 7.2.1b).

The  new  programmes  for  the  EAGGF  Guidance  part  of  Objective  1  and  PEACE
comprise  seventy  single  programming  documents  and  operational  programmes,  of
which only thirty-five were adopted by a Commission decision in time to be covered
by  commitments/payments  in  the  2000  financial  year  on  account  of  delays  in  the
approval procedure in 2000. At the beginning of 2001, authorisation  was  granted to
carry  over  commitment  appropriations  for  twenty  other  programmes  from  2000  to
2001 and, for the remaining fifteen programmes, a request was made, in accordance
with  the  1999  Interinstitutional  Agreement,  for  the  appropriations  to  be  transferred
from the year 2000 to the years 2002–2006.

604. 

As regards the Leader+ Initiative, on account of a lengthier procedure following the
adoption of  the guidelines, none  of  the  seventy-three  programmes  provided  for  was
adopted by the end of 2000 and, consequently, it was requested  in 2001  that all the
appropriations  be  transferred  from  the  year  2000  to  the  years  2000–2006.  Seventy
programmes were adopted in 2001 and the remaining three will be adopted in 2002.

113

 
Table 7.2.1a – Expenditure by Objective, 2000–2006 period

(commitments, EUR million)

Objective

2000

2001

2002

2003

2004

2005

2006

Community Support Frameworks

Objective 1: 2000–06 period
(regions lagging behind)

Former Objectives 1 and 6
(1994–1999 period)

Former Objective 5a
(1994–1999 period)

Former Objective 5b
(1994–1999 period)

Community Initiatives

Leader+:
2000–2006 period

Previous CIPs
(1994–1999 period)

Technical assistance

2000–2006 period:
innovative measures and
technical assistance

Previous transitional
measures/technical assis-
tance (1994–1999 period)

1 239.3

3 237.2

76.9

******

******

*****

*****

******

******

29.4

******

******

******

******

******

******

1.0

******

******

******

******

******

******

0.0

271.3

37.0

******

******

******

******

******

******

0.0

0.0

3.7

0.3

******

******

******

******

******

TOTAL

1 387.3

3 508.8

114

 
Table 7.2.1b – Expenditure by Objective, 2000–2006 period

(payments, EUR million)

Objective

2000

2001

2002

2003

2004

2005

2006

Community Support Frameworks

Objective 1: 2000–06 period
(regions lagging behind)

Former Objectives 1 and 6
(1994–1999 period)

Former Objective 5a
(1994–1999 period)

Former Objective 5b
(1994–1999 period)

Community Initiatives

Leader+:
2000–2006 period

Previous CIPs
(1994–1999 period)

Technical assistance

2000–2006 period:
innovative measures and
technical assistance

Previous transitional
measures / technical assis-
tance (1994–1999 period)

587.6

1 276.9

1 353.2

488.3

*****

******

******

803.1

69.4

******

******

******

629.9

142.9

******

******

******

0.0

81.9

178.4

79.8

******

******

******

0.0

0.0

6.5

5.8

******

******

******

TOTAL

3 558.7

2 145.0

115

 
7.2.2.  Execution of 2001 budget

605. 

606. 

607. 

In terms of the appropriations available in 2001, including those originally entered in
the  budget  together  with  transfers  and  carryovers  (EUR  3 567.3  million  in
commitment  appropriations  and  EUR  3 312.6  million  in  payment  appropriations),
execution  of  the  2001  budget  for  the  whole  of  the  EAGGF  Guidance  Section  was
98.4% 
for  commitment  appropriations  and  65%
(EUR 2 145.0 million) for payment appropriations (table 7.2.2).

(EUR  3 508.8  million) 

The year 2001 was the second in the new 2000–2006 programming period, in which
the  source  of  funding  for  rural  development  programmes  depends  on  the  type  of
measure and the geographical area.

The  EAGGF  Guarantee  Section  continued  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 was added from
2000, which up to 1999 was covered by the EAGGF Guidance Section.

608. 

For  all  other  rural  development  measures,  the  source  of  financing  is  differentiated
according to the geographical context:

– 

– 

in  regions  eligible  under  Objective  1  (regions  whose  development  is  lagging
behind),  the  EAGGF  Guidance  Section  will  continue  to  finance  rural
development  measures  which  will  be  fully  integrated  as  at  present  into
development programmes, in combination with the other Structural Funds;

outside  the  Objective  1  regions,  the  source  of  finance  for  rural  development
measures will be the EAGGF Guarantee Section.

For  Objective  1,  execution  in  2001  represents  the  second  instalment  (2001)
committed  in  respect  of  the  thirty-five  programmes  adopted  in  2000,  and  the  2000
and 2001 instalments committed in respect of the twenty programmes adopted late in
2000,  as  well  as  the  payment  of  advances  still  outstanding  on  these  fifty-five
programmes and reimbursements equivalent to 52% of the instalment committed in
2000.

For  the  Leader+  Initiative,  commitments  were  made  for  the  first  instalment  of  the
fifty-one  programmes  adopted  in  2001  (within  the  accounting  deadline)  and
payments  for  part  of  the  advances  under  these  programmes.  For  the  nineteen
programmes  adopted  late  in  2001,  it  was  requested  that  the  commitment
appropriations be carried over from 2001 to 2002.

For  programmes  from  previous  periods,  the  under-utilisation  of  appropriations  is
attributable  to  the  fact  that  the  outstanding  payments  constitute  the  final  balance
payable  under  these  programmes,  for  which  it  is  necessary  to  submit  the  rather
complex final implementing report  giving the results of  the  checks  carried  out,  and
the Member States were therefore late in presenting the final balances.

609. 

610. 

611. 

116

 
Table 7.2.2 – Implementation of EAGGF Guidance budget in 2001

2000–2006 programming period
PEACE
(Objective 1)

Leader+

Innovative measures/
Technical assistance

Former
Objectives 1 and 6

Previous programming periods
Former
Objective 5b

Former
Objective 5a

Former CIPs

Total

Objective 1

A – Commitments
Belgique/België
Danmark
Deutschland
Elláda
España
France
Ireland
Italia
Luxembourg
Nederland
Österreich
Portugal
Suomi/Finland
Sverige
United Kingdom
Other

5.270
2.600
686.386
369.200
1 298.634
159.863
42.910
403.874
0.300
14.200
17.550
366.982
32.756
22.005
86.336
0.000

5.270

662.245
341.200
1 224.166
118.458
30.710
387.213

1.500
5.950
342.182
24.256
15.805
60.871

0.000
2.600
24.141
28.000
74.468
41.100
7.300
16.661
0.300
12.700
11.600
24.800
8.500
6.200
12.965
0.000

4.900

12.500

Total

3 508.866

3 219.826

17.400

271.335

B – Payments
Belgique/België
Danmark
Deutschland
Elláda
España
France
Ireland
Italia
Luxembourg
Nederland
Österreich
Portugal
Suomi/Finland
Sverige
United Kingdom
Other

7.003
18.470
368.653
273.919
619.356
132.669
6.150
523.191
2.466
23.162
7.852
81.803
21.749
8.818
48.599
1.142

0.000

304.406
261.116
603.101
16.417
0.000
16.465

0.000
1.812
55.135
3.922
5.846
5.531

0.882

2.256

Total

2 145.004

1 273.751

3.138

0.000
1.190
2.921
12.803
0.826
18.767
3.353
7.074
0.000
5.803
5.285
11.312
3.878
2.835
5.912
0.000

81.959

0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000

0.000

0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000

0.000

117

0.000
:
23.369
0.000
0.989
45.686
1.022
384.762

0.000
0.000
6.818
13.756
0.000
11.922

2.217
17.280
0.000

0.000
0.000

21.836
2.110
16.393
0.000

0.000
0.000
9.556

3.972
0.000
25.622

0.000
26.775

73.288
0.356
0.840
0.126

0.000
0.000
11.876

488.326

69.392

142.855

0.472
0.000
8.358
0.000
14.061
24.510
0.859
19.707
0.000
0.000
0.587
8.528
0.000
0.000
1.546
1.142

79.770

Former transitional
measures

0.305

0.305

0.342
0.000
3.977
0.000
0.379
0.514
0.034
0.059
0.000
0.126
0.042
0.010
0.193
0.137
0.000
:

5.812

 
7.3. 

Evaluation

612. 

The  Directorate-General  for  Agriculture  carries  out  regular  evaluations  of  common
market  organisations  and  measures  applicable  to  agriculture.  The  purpose  of  these
evaluation  studies  is  to  contribute  to  policy  preparation  and  decision-making  by
providing  information  on  the  effectiveness,  efficiency  and  impacts  of  measures
financed by the CAP. Evaluations examine in particular impacts of CAP measures on
market  equilibrium,  on  producers’  incomes  and  on  production  structures,  on  the
environment and on rural development. Evaluation reports are publicly available on
the Europa website.

7.3.1.  Evaluation of market-related measures

613. 

Evaluations concerning the market measures for the milk sector, for raw tobacco, for
the olive oil sector and the promotion policy for agricultural products were finalised
in 2002. The studies on the impact of the Community measures on set-aside and on
Community policy for starch and starch products, finalised in the latter part of 2001,
were published. Preparations for the evaluations of the common market organisations
for wine, for pork and poultry and for cereals were started. Work is also under way
for a series of studies covering the market measures in the fruit and vegetables sector.

7.3.2.  Evaluation of structural and rural development measures

614.  Most  of  the  national  level  ex  post  evaluations  for  the  1994–1999  programming
period  were completed  in  2002,  and  Community-wide  synthesis  evaluations  of  this
period could be started. Study contracts were signed for carrying out evaluations of
rural  development  measures  financed  under  Objective  5a,  Objective  5b  and  the
Leader II Community Initiative. Reports for these studies will be available during the
second half of 2003.

615. 

To  support  the  cycle  of  evaluations  during  the  programming  period  2000–2006,
guidelines  were  prepared,  discussed  in  the  STAR  committee  and  published  on  the
internet.  Three  guidance  documents  were  finalised:  Guidelines  for  the  mid-term
evaluation of rural development programmes supported by Sapard, Guidelines for the
mid-term  evaluation  of  rural  development  programmes  2000–2006  and  Guidelines
for the evaluation of Leader+ programmes.

118

 
8. 

ENLARGEMENT

8.1.  Main developments

8.1.1.  Agricultural accession negotiations

616. 

617. 

618. 

619. 

620. 

Negotiations on a chapter  of  the  acquis  communautaire  are  opened  when  the  EU’s
Common Position on the chapter is transmitted to the candidate country concerned,
on the occasion of a meeting of the Accession Conference. The situation as at the end
of 2001 was that negotiations on the agriculture chapter were open for 10 candidate
countries as follows: Cyprus, Czech Republic, Estonia, Hungary,  Latvia,  Lithuania,
Malta, Poland, Slovakia and Slovenia (known collectively as the Laeken 10). During
the  year  2002,  negotiations  on  the  agriculture  chapter  were  opened  for  Bulgaria
(June) and Romania (December).

Concerning Turkey, at its meeting in December 2002 in Copenhagen, the European
Council  concluded  that  if,  in  December  2004  and  on  the  basis  of  a  report  and  a
recommendation  for 
the
Copenhagen  political  criteria,  then  the  European  Union  will  open  accession
negotiations with Turkey without delay.

that  Turkey  fulfilled 

the  Commission, 

it  decided 

On  30  January  2002,  the  Commission  published  an  issues  paper  entitled:
"Enlargement and Agriculture: Successfully integrating the new Member States into
the  CAP"  (SEC(2002) 95  final,  30.1.2002).  This  paper  made  proposals  for
consideration by the  Member  States  regarding a  number  of issues in the context of
the  negotiations,  such  as  direct  payments  to  farmers,  state  aids,  stocks,  rural
development, etc.

During  the  course  of  2002,  DGs  Agriculture  and  Enlargement  held  technical
meetings  with  the  individual  countries  of  the  Laeken  10  to  clarify  technical  points
and to exchange further information. As the negotiations proceeded, so first revisions
of the EU Common Positions  were  transmitted to the  Laeken 10 in June/July 2002
and second revisions in October/November 2002.

On 9 October 2002, the Commission published for each of the 13 candidate countries
its Regular Report. These are annual publications which review the progress of each
candidate country in the light of the  accession criteria. They  assess progress on the
basis of legislation that has been adopted by the candidates (i.e. not on the basis of
draft legislation) and measures which have been implemented. As in previous years,
one  chapter  in  each  Regular  Report  was  devoted  to  agriculture.  To  assist  in  the
preparation of the Regular Reports, DG Agriculture in liaison with the Commission’s
Technical Assistance and Information Exchange Office, organised a number of Peer
Reviews.  The  objective  of  such  reviews  was  to  ascertain  the  extent  to  which
candidate countries had prepared themselves regarding the practical implementation
of  specific  parts  of  the  agriculture  acquis  and  to  identify  areas  where  further
technical assistance was needed.

119

 
621. 

The 2002 Regular Reports are as follows:

Bulgaria

SEC(2002) 1400

– 
– 
– 
– 
– 
– 
– 
–  Malta
– 
Poland
– 
Romania
– 
Slovakia
– 
Slovenia
– 
Turkey

Cyprus
SEC(2002) 1401,
Czech Republic SEC(2002) 1402,
SEC(2002) 1403,
Estonia
SEC(2002) 1404,
Hungary
SEC(2002) 1405,
Latvia
SEC(2002) 1406,
Lithuania
SEC(2002) 1407,
SEC(2002) 1408,
SEC(2002) 1409,
SEC(2002) 1410,
SEC(2002) 1411,
SEC(2002) 1412.

622. 

In November 2002, Bulgaria submitted its reply to the EU Common Position.

623. 

Accession negotiations for the Laeken 10, including those on the agricultural chapter,
were  concluded  at  the  meeting  of  the  European  Council  in  Copenhagen  on  12  and
13 December  2002.  Agreement  was  reached  on  a  number  of  agricultural  issues
including  transitional  arrangements  and  the  phasing-in  of  direct  payments  applying
to the new Member States, complementary direct payments, reference quantities for
milk,  sugar  and  a  number  of  other  products,  base  areas  and  reference  yields  for
cereals,  premia  ceilings  in  the  livestock  sector  and  additional  rural  development
measures  for  the  new  Member  States.  Further  details  are  given  in  Accession
Conference document 21000/02 of 13 December 2002.

624. 

The meeting stated that the comprehensive and balanced outcome of the negotiations
provides  a  solid  basis  for  the  smooth  integration  of  ten  new  Member  States,  while
safeguarding the effective functioning of the enlarged Union.

8.1.2. 

Sapard (Special Accession Programme for Agriculture and Rural Development)

625. 

During the year all countries finalised their efforts to prepare the structures  and the
legislative  and  administrative  framework  to  implement  the  Sapard  programmes.
Before  the  end  of  2001,  the  Commission  adopted  decisions  conferring  the
management of aid to Slovenia, Lithuania (November) and Latvia (December). This
was done after an examination of the national accreditation work by the Commission
services, including on-the-spot  audit. Similar  decisions were  adopted  for  the  Czech
Republic  and  Slovakia  in  April  2002,  for  Poland  and  Romania  in  July  and  for
Hungary in November. In all cases the conferral decisions concerned certain but not
all  measures  envisaged  in  the  programmes.  Although  further  decisions  would  be
necessary to allow implementation of the remaining measures all countries are now
able to operate the instrument.

120

 
626. 

By  decision  of  2  October  the  Commission  cleared  the  accounts  of  the  Sapard
agencies  of  the  five  countries  which  had  secured  conferral  decisions  in  2001
(Bulgaria,  Estonia,  Latvia,  Lithuania  and  Slovenia)  concerning  expenditure  in  that
year and no problems were detected.

627.  Modifications  of  the  Sapard  programmes  for  certain  candidate  countries  were  also
approved  by  Commission  decisions  during  the  year.  The  main  purposes  of  the
modifications were the adjustment of the programmes according to the finalisation of
the  implementing  systems,  the  update  of  the  financial  tables,  the  revision  of  the
measure on Technical Assistance following a guidance paper from the Commission,
the  revision  of  certain  aspects  of  the  accredited  measures  in  the  light  of  the
experience  in  implementation  and  the  revision/finalisation  of  the  non-accredited
measures (for example the agri-environment measure). Certain modifications of the
Sapard programme were also requested by the Czech Republic in order to address the
impact of the serious flooding which the country experienced in August 2002.

628. 

629. 

630. 

During the year, the annual financing agreements for 2001 were signed with all ten
Candidate Countries with the objectives first of all to make available the Community
contribution  for  2001;  furthermore  to  adjust  certain  provisions  of  the  Multi-annual
Financing Agreements in the light of the experience acquired; and finally to amend
the  Annual  Financing  Agreements  2000,  mainly  to  extend  the  deadline  by  which
Community  funds  committed  in  2000  can  be  used  for  payments  until  the  end  of
2003. A total of EUR 554.5 million in commitment appropriations was assigned to
the instrument for 2002.

In  November  2001  a  seminar  was  organised  on  the  agri-environment  pilot  actions
within the Sapard programmes. Following this seminar a guidance paper was issued
to  the  Candidate  Countries  giving  orientations  for  the  elaboration  and  the
implementation  of  agri-environmental  pilot  actions  within  Sapard.  A  seminar  was
organised  in  June  2002  with  the  participation  of  the  10  eligible  countries  on  key
aspects  of  programme  management,  implementation  and  delivery  (monitoring  and
evaluation financial management and controls, conferral of management issues).

Following the August flooding in central  Europe, which  affected several Candidate
Countries,  the  Commission  submitted  on  18  September  a  proposal  to  the  other  EU
institutions  for  a  modification  of  Regulation  (EC)  n°1268/1999  of  21  June  1999  in
order to increase the ceiling on public aid to 75% and the Community contributions
to 85% for relevant projects in areas affected by exceptional natural disasters.

631. 

The monitoring committees in all countries continued their work during the year with
the participation of Commission representatives acting in an advisory capacity.

8.1.3.  Bilateral trade

632. 

CEECs: As a follow-up to the "double zero" negotiations in 2000, the Commission
launched new ("double profit") liberalisation talks at the beginning of 2002 aimed at
continuing the gradual opening of markets in order to avoid a "big bang" on CEEC
accession and preparing operators for conditions in the enlarged single market. New
concessions  were  agreed  with  all  ten  CEECs  in  the  course  of  the  year:  those  with
Estonia, Hungary, Latvia and Lithuania came into force on 1 July and the remaining
agreements are to be implemented in early 2003.

121

 
633.  Whilst the same proposals were put to all ten CEECs, the results of the negotiations
varied according to the degree to which each partner was able to accept further trade
liberalisation.  However,  in  all  cases,  70%  to  90%  of  agricultural  trade  has  been
liberalised.  It  is  too  soon  to  gauge  the  actual  trade  impact  of  the  most  recent
concessions. However, in the first two years of implementation of the "double zero"
agreements (in most cases, July  2000  to  June  2002),  agricultural  trade  between  the
Community  and  each  of  the  CEECs  increased  on  both  sides  –  in  some  cases  quite
considerably.

634. 

635. 

Cyprus and Malta: On 12 February 2002, the Commission received a mandate from
the Council to negotiate similar agreements with Cyprus and Malta. Proposals were
subsequently made to these countries on the lines of the  "double zero"  and "double
profit" agreements with the CEECs. However, the parties’ positions were such that it
was not possible to make progress in the negotiations in the course of 2002.

Turkey: Agricultural trade relations with Turkey are governed by arrangements that
came into force in 1998 under Decision 1/98 of the EC-Turkey Association Council.
These  arrangements  involve  reciprocal  concessions  in  agricultural  trade  between
Turkey  and  the  Community.  In  July  2002,  Member  States  gave  the  Commission  a
mandate  to  negotiate  improvements  to  these  preferential  arrangements.  Formal
negotiations are to start in early 2003.

122

 
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

636. 

637. 

638. 

639. 

On 12 September 2002, Argentina requested WTO consultations on EC regulations
and  other  mandatory  provisions  on  oenological  practices  and  on  trade  in  wines,  in
particular  as  regards  the  process  of  acidification  of  wines  with  malic  acid
(WT/DS263). Argentina claims that they are in violation of Articles 2 and 12 of the
TBT Agreement, Articles I.1 and III.4 of the GATT 1994  and Article XVI.4 of the
WTO Agreement. Consultations were held on 30 September 2002.

On  27  September  2002,  Brazil  and  Australia  requested  WTO  consultations  on  the
EC's common market organisation for sugar and its application and implementation
(WT/DS166). Brazil and Australia claim the EC provides export subsidies in excess
of its WTO commitments in relation to "C sugar" and to the exclusion of 1.6 million
tonnes  of  ACP  and  Indian  sugar  from  export  reduction  commitments.  Brazil  and
Australia also claim violation of the national treatment obligation in the intervention
price for sugar. According to the complainants, the EC sugar regime is inconsistent
with Articles 3.3, 8, 9.1, 10.1 of the Agreement on Agriculture, Articles 3.1 and 3.2
of  the  SCM  Agreement,  and  Articles  III:4  and  XVI  of  GATT  1994.  Australia  also
claims  that  the  EC  may  be  paying  a  higher  per-unit  subsidy  on  sugar  as  an
incorporated  product  than  on  the  primary  product,  in  violation  of  Article  11  of  the
Agreement on Agriculture.

Consultations  were  held  in  Geneva  on  21  and  22  November  2002.  Fourteen  ACP
countries  participated  in  the  consultations  as  third  parties  (Mauritius,  Fiji,  Guyana,
Malawi,  Belize,  Jamaica,  Barbados,  St  Kitts  and  Nevis,  Swaziland,  Kenya,  Côte
d’Ivoire,  Madagascar,  Congo  and  Zimbabwe),  as  well  as  India,  Canada  and
Colombia.

On  11  October  2002,  Brazil  requested  WTO  consultations  with  the  EC  on  the
customs classification of frozen boneless chicken cuts (WT/DS269) and in particular
on  Commission  Regulation  (EC)  No  1223/2002  of  8  July  2002  concerning  the
classification of certain  goods (boneless chicken cuts, frozen and impregnated  with
salt  in  all  parts)  in  the  Combined  Nomenclature.  Brazil  claims  that  through  this
Regulation  its  commerce  has  been  accorded  treatment  less  favourable  than  that
provided  in  the  EC  Schedules  in  violation  of  Articles  II  and  XXVIII  of  the  GATT
1994.  Brazil  claims  also  violation  of  Article  XXIII:1  of  the  GATT  1994.
Consultations were held in Geneva on 5 December 2002.

640. 

The EC has intervened as third party in a number of WTO dispute settlement cases
concerning agricultural products, in particular:

– 

Panel  and  Appellate  Body  proceedings  in  "Chile  –  Price  band  system  and
safeguard  measures  relating  to  certain  agricultural  products"  (WT/DS207),
requested  by  Argentina.  The  panel  report,  circulated  on  3  May  2002,  found,
inter alia, that Chile’s price band system was similar to variable import levies
and minimum  import  prices and was thus inconsistent with Article 4.2 of the

123

 
– 

– 

– 

– 

Agreement  on  Agriculture.  The  Appellate  Body  report  circulated  on
23 September 2002 reversed certain aspects of the panel’s findings, but upheld
the panel’s conclusion that the price band system in question was similar to a
variable import levy or minimum import price.

Second  compliance  panel  and  Appellate  Body  proceedings  in  "Canada  –
Measures  affecting  the  importation  of  milk  and  the  exportation  of  dairy
products"  (WT/DS103/RW2),  requested  by  the  United  States  and  New
Zealand,  which  concern  mainly  the  interpretation  of  export  subsidies  under
Article 9.1(c) of the Agreement on Agriculture. The panel report, circulated on
26 July 2002, found that Canada’s commercial export milk scheme constituted
a  subsidy  within  the  meaning  of  Article  9.1(c)  of  the  Agreement  on
Agriculture. The Appellate Body report was circulated on 20 December 2002.

Panel on "Japan – Measures affecting the importation of apples", requested by
the United States on 7 May 2002 (WT/DS245) concerning measures restricting
the  importation  of  apples  in  connection  with  fire  blight  disease.  Panel
proceedings are ongoing.

On  7  November  2002,  the  United  States  requested  consultations  with
Venezuela  concerning  import  licensing  measures  on  certain  agricultural
products (WT/DS275/1). Consultations were held in Geneva on 26 November
2002.

On  18  October  2002,  the  Philippines  requested  consultations  with  Australia
with  respect  to  certain  measures  affecting  the  importation  of  fresh  fruit  and
vegetables  (WT/DS270)  and  certain  measures  affecting  the  importation  of
fresh  pineapple  (WT/DS271).  Consultations  in  connection  with  Australian
sanitary  and  phytosanitary  measures  were  held  in  Geneva  on  15  November
2002.

641. 

Consultations  between  the  EC  and  US  regarding  the  protection  of  trademarks  and
geographical  indications  for  agricultural  products  and  foodstuffs  in  the  European
Communities and in particular Regulation (EC) No 2081/92, requested by the US on
1 June 1999, continued throughout 2002.

9.1.2.  Organisation for Economic Cooperation and Development (OECD)

642. 

643. 

to 

the  OECD  budget, 

EU  Member  States  account  for  half  of  OECD  membership  and  are  the  major
contributors 
including  voluntary  contributions.  The
Commission participates actively in the work of this organisation, in particular, as far
as agriculture is  concerned,  in the  Committee for  Agriculture  (COAG),  its  working
parties  and  at  the  interface  with  the  Committees  on  Trade  and  Environment  (joint
working parties).

At  the  core  of  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",
generally known as the "Monitoring report"). 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,  the  so-called  Producer  Support  Estimate  (PSE)
expressed  as  the  percentage  share  of  public  financing  (budgetary  payments  and

124

 
644. 

645. 

646. 

economic transfers from consumers and taxpayers caused by policy measures) in the
overall  income of the farming sector, and to the  whole  agriculture and food sector,
the Total Support Estimate (TSE) which indicates the degree of support in the OECD
economies expressed as a percentage share of GDP.

Other  regular  COAG  activities  address  agriculture  and  trade,  the  agri-environment,
rural development, agricultural structures and statistics, the Agricultural Knowledge
System  (extension services,  education  and  research)  and  international  standards  (in
tractors).
particular,  certification  of  seed,  forest  reproductive  material  and 
Stocktaking of the past five years of OECD work on Agri-Environmental Indicators
was done in 2000, while another interim report is scheduled for 2004.

As  mandated  by  OECD  Ministers  for  Agriculture  in  March  1998,  the  COAG  is
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 and export competition, although in a more comprehensive
manner than before, thanks to new analyses of subjects such as 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  Matrix),  etc.  It  also  covers  concerns  going  beyond  trade  issues,  such  as
multifunctionality, food security, the relationship between trade and the environment,
the impact of biotechnology, food quality and designations of origin, etc.

In 2002, during the second part of the two-year work programme of the Committee
for  Agriculture,  the  OECD  examined  trade  liberalisation  issues  in  greater  depth  by
modelling  market-access  improvement  scenarios  simulating  changes  in  the  tariff
quota  system,  the  impact  of  trade  liberalisation  on  developing  countries'  food
security, non-tariff  barriers,  and sanitary  and  phytosanitary  measures,  as  well  as  an
analytical  framework  for  the  role  of  state-trading  enterprises  in  liberalising  world
trade.  A  horizontal  programme  on  economic  and  administrative  aspects  of  food
safety  was  also  carried  out.  The  impact  of  support  measures  was  analysed  from
different  aspects  such  as  income-transfer  efficiency,  the  effects  of  direct  payments
and all policy measures related to support in the crop sector, as well as the impact of
crop-insurance  subsidies.  A  more  horizontal  study  called  "the  positive  reform
agenda"  set  out  to  address  the  cohesion  between  commodity  production  and  the
provision  of  public  goods  and  other  non-commodity  outputs,  relating  it  to  trade
policy  in  the  agricultural  sector.  Policy  was  analysed  in  the  light  of  aspects  of
decoupling,  transaction  costs  and  farm  household  income,  and  methodology  was
further developed on the basis of the US "Farm Security and Rural Investment Act"
as  well  as  the  "EU  CAP  reform  –  a  long  term  perspective  for  sustainable
development".

647. 

The  interface  between  agriculture  and  the  environment  initiated  a  second,  more
practical phase with a new working programme on indicators and impacts. A series
of  workshops  were  held  to  devise  methodology  for  state-of-the-art  indicators  and
target  further  developments  in  the  fields  of  biodiversity,  soil  carbon  fixation  and
landscape.  Sectoral  studies  on  pig  meat  production  revealed  the  environmental
impact  of  intensive  production  and,  therefore,  the  need  for  alternative  production
systems and revised sectoral policy measures.

125

 
648. 

649. 

650. 

The Committee for Agriculture agreed on a new working programme along the lines
of the previous two  years, focussing more on societal concerns and on a horizontal
programme  for  methodology  development,  with  a  view  to  gaining  a  better
understanding of price-transmission phenomena in developing countries.

A  first  horizontal  workshop  on  developments  in  the  organic-production  and  trade
sectors, including the regulatory framework, provided an interesting insight into the
situation in all OECD countries.

Horizontal issues of relevance to agriculture, such as regulatory reform, governance,
e-commerce,  a  code  for  multinational  companies,  sustainable  development  and
territorial development, are being addressed through other OECD bodies.

651. 

All  these  activities  have  produced  valuable  material  for  the  EU,  particularly  with
regard to the reform of the agricultural sector and ongoing multilateral negotiations.

9.1.3.  World Summit on Sustainable Development, Johannesburg, 4 to 6 September 2002

652. 

653. 

654. 

655. 

The World Summit on Sustainable Development was held in Johannesburg from 4 to
6 September 2002. Agriculture was among the key topics at the Summit. The  aims
were to appraise the situation ten years after the 1992 Earth Summit in Rio de Janeiro
and  to  find  ways  of  achieving  more  practical  progress  in  implementing  sustainable
development. The European Union acts as a driving force in this worldwide process.

The Summit is one of a series of recent significant international events, including the
Millennium Assembly of the United Nations held in December 2000, which defined
a set of "millennium development goals" to eradicate world poverty, the Ministerial
Conference held in Doha in November 2001, which launched the new round of trade
negotiations at the WTO, the United Nations International Conference on Financing
for Development held in Monterrey in March 2002, which made it possible to adjust
international development-aid commitments, and the FAO Summit held in Rome in
June  2002,  which  reconfirmed  the  agricultural-development  and  food-security
objectives adopted at the World Food Summit held in Rome in November 1996.

At Community level, the EU has since Rio adopted a whole series of guidelines and
decisions enabling sustainable development to be integrated into European policies.
The  internal  dimension  of  sustainable  development  was  spelled  out  at  the
EU summits  in  Cardiff  in  June  1998,  Lisbon  in  March  2000  and  Göteborg  in  June
2001.  The  EU  position  for  the  Johannesburg  Summit  was  prepared  at  the  Seville
European  Council,  where  the  external  dimension  of  sustainable  development  was
defined. Implementation of the EU commitments entered into in Johannesburg is to
be assessed by the European Council scheduled for spring 2003.

The  United  Nations  has  identified  agriculture  as  one  of  the  five  priorities  for
sustainable  development,  along  with  water,  energy,  health  and  biodiversity.  While
the  Rio  Summit  highlighted  the  need  to  take  account  of  the  environment,
Johannesburg  emphasised  more  the  need  for  balanced  development  in  all  countries
throughout  the  world  in  order  to  pave  the  way  for  sustainable  development,
particularly  by  taking  the  developing  countries'  requirements  into  account.  The
action plan adopted by the Summit comprises a detailed list of recommendations and
commitments. It is based on the following global objectives and themes: eradication
of  poverty,  change  in  unsustainable  methods  of  production  and  consumption,
protection and sustainable management of natural resources, health, globalisation and

126

 
656. 

governance, as well as measures to be carried out at regional level, particularly in the
case  of  Africa.  The  action  plan  includes  a  whole  series  of  agricultural  and  rural
development  initiatives,  thus  demonstrating  the  relevance  of  these  sectors  in
achieving sustainable development goals.

Farm  subsidies  and  access  to  the  developed  countries'  markets  for  agricultural
products  from  the  developing  countries  were  among  the  key  issues  in  the  public
debate  and  negotiations.  The  Johannesburg  Summit  reconfirmed  the  importance  of
the trade round launched in Doha and the commitments entered into by the members
of  the  WTO,  particularly  those  concerning  the  developing  countries.  The  Summit
also  provided  an  opportunity  to  launch  a  series  of  voluntary  initiatives  and
partnerships involving a wide variety of players and targeting practical achievements
in sustainable development at  local,  regional  and  global  level.  The  priorities  set  by
the  European  Union  comprise  in  particular  water  development  and  management
initiatives aimed mainly at providing the poorest populations with access to drinking
water,  a  renewable  energy  development  project  and  the  launch  of  a  programme  on
sustainable methods of production and consumption.

9.1.4.  Generalised System of Preferences (GSP)

657. 

658. 

659. 

660. 

661. 

The aim of the GSP is to foster the integration of developing countries into the world
economy and the multilateral  trading  system. The  GSP  focuses on the needs of the
poorest beneficiary countries through the so-called "Everything but Arms" initiative
which is incorporated into the GSP.

In  2001  the  EU  adopted  a  new  Generalised  System  of  Preferences,  Council
Regulation  (EC)  No  2501/2001,  which  came  into  force  on  1  January  2002.  It
modifies  significantly  the  previous  schemes  by  improving  non-reciprocal  trade
preferences  and  providing  strong  incentives  for  compliance  with  core  labour
standards.  Several  countries  have  applied  to  benefit  from  the  special  incentive
arrangements for both environmental protection and the protection of labour rights.

The main objective is to encourage beneficiary countries to make more and better use
of  the  opportunities  offered  by  the  scheme,  and  thus  to  increase  imports  for  which
preferential treatment  is available. This is to be achieved by improving preferential
margins and by making the scheme more easily accessible.

The  new  GSP  regime  is  based  on  only  two  product  categories  –  sensitive  (S)  and
non-sensitive  (NS)  –  as  opposed  to  four  previously.  While  non-sensitive  products
continue to enjoy duty-free access to the Community market, all other products will
benefit  from  a  uniform  flat-rate  reduction  of  3.5  percentage  points  for  ad  valorem
duties  and  30%  for  specific  duties.  However,  the  new  regulation  also  contains  a
"standstill"  clause  guaranteeing  that  the  preferential  treatment  provided  under  the
previous regulation will continue to apply where it is more favourable.

As far as graduation is concerned, the rules have been clarified and complemented.
In  order  to  make  the  regime  more  neutral  and  objective,  conditions  for  graduation
will  be  examined  on  a  yearly  basis.  Graduation  will  be  decided  only  where  the
criteria are met during three consecutive years. Similarly, sectors that do not meet the
criteria during three consecutive years will be readmitted.

127

 
662. 

Preferences  provided  under  the  special  arrangements  for  least-developed  countries
(the so-called Everything but Arms initiative, which was adopted in February 2001),
as well as under the special arrangements to combat drug production and trafficking,
will continue to apply without any change.

9.1.5.  United Nations Food and Agriculture Organisation (FAO)

663. 

As a member of FAO, 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,  the  Committee  on  Commodity  Problems  and
the  Committee  on  Forestry,  presenting  its  agricultural  policy  and  setting  out  its
approach to food security.

664. 

The Commission also participated and played an active role 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 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;

the  preparation  and  work  of  the  World  Food  Summit  –  five  years  later
(WFS-fyl)  held  in  June  2002.  The  first  World  Food  Summit  took  place  in
Rome  in  1996,  with  the  objective  of  reducing  the  number  of  undernourished
people to half their present level no later than 2015;

the FAO Council in November 2002, where important decisions were taken, in
particular:

– 

– 

– 

the  establishment  of  an  Intergovernmental  Working  Group  (IGWG)  for
the preparation of voluntary guidelines on the Right to Food. The IGWG
will meet in April for the first time,

the adoption of a new Code on Pesticides,

the  agreement  on  the  accession  of  the  EU  to  the  Codex  Alimentarius
Commission.

9.1.6. 

International agreements

665. 

666. 

The  International  Agreement  on  Olive  Oil  and  Table  Olives  was  extended  until  30
June 2003. Certain irregularities in the management of the secretariat, detected as the
result of an audit of the organisation, are in the process of being resolved. Once this
has been accomplished, a normal two-year extension will be considered.

The Food Aid Convention was also extended until 30 June 2003. A decision on the
extension of this Convention and the Grains Convention, which expires on the same
date, is to be taken by the Council during the first half of 2003.

667. 

The  International  Sugar  Organisation  lost  Japan  as  a  member  at  the  end  of  2002.
However, Russia's joining partly compensated for this loss.

128

 
9.2. 

Bilateral and regional trade relations

9.2.1.  ACP countries

668. 

EU-South  Africa  wines  and  spirits  agreements  entered  into  force  provisionally  on
1 January 2002. They should reciprocally  facilitate and promote trade in wines  and
spirits between the two parties. The main points of the agreements are:

– 

– 

– 

protection of geographical indications: South Africa will refrain from using the
terms  "port"  and  "sherry"  on  its  export  markets  after  five  years  and  on  its
domestic  market  after  12  years.  Provision  is  made  for  the  elimination  of
trademarks. For spirits, terms such as "grappa" and "ouzo" will be phased out
over a five-year period;

oenological practices;

quotas:  increase  in  the volume of the  duty-free tariff  quota  for  South  African
wines imported in bottles (42 million litres).

9.2.2.  EFTA countries

669. 

The  bilateral  "Agreement  between  the  European  Community  and  the  Swiss
Confederation on trade in agricultural products" entered into force on 1 June 2002112,
following  the  finalisation  of  the  package  ratifying  the  seven  agreements  with  the
Swiss  Confederation  that  were  initiated  in  June  1999.  This  agreement  notably
provides  for  the  full  liberalisation  of  trade  in  cheese  between  the  parties,  to  be
achieved  progressively  over  a  five-year  period.  It  also  provides  for  the  removal  of
technical barriers to trade in a series of domains, as laid down in the Annexes to the
Agreement:  plant  and  animal  health,  animal  feed,  seeds,  wine-sector  products  and
spirit  drinks,  conformity  checks  for  fruit  and  vegetables,  organically  produced
agricultural  products  and  foodstuffs.  The  first  meeting  of  the  Joint  Committee  on
Agriculture, which  is  created  by  the  Agreement,  took place  on  12  December  2002,
with a view to the establishment of its rules of procedure and of the working groups
that are needed to administer the Annexes to the Agreement.

670.  Within  the  framework  of  Article  19  of  the  Agreement  on  the  European  Economic
Area,  bilateral  negotiations  took  place  between  the  Kingdom  of  Norway  and  the
European Community with a view to extending existing preferential concessions for
agricultural  products.  Negotiators  finalised  the  agreed  minutes  on  18  December
2002. This allows for an overall improvement in bilateral trade, thanks to preferential
tariff  quotas  and  an  increase  in  duty-free  access.  These  new  concessions  are
scheduled  to  be  implemented  in  2003  once  the  formal  procedures  have  been
completed within the Council.

112

Decision  of  the  Council,  and  of  the  Commission  as  regards  the  Agreement  on  scientific  and
technological  cooperation,  of  4  April  2002  on  the  conclusion  of  seven  agreements  with  the  Swiss
Confederation, 2002/309/EC, Euratom (OJ L 114, 30.4.2002).

129

 
                                                
9.2.3.  Asia

9.2.3.1.  Bilateral trade relations with China in 2002

671. 

Relations  with  the  People’s  Republic  of  China  centred  on  ongoing  intensive
discussions  on  questions  relating  to  market  access.  In  particular,  a  joint  committee
was established to tackle existing public- and animal-health issues affecting trade in
products of animal origin.

9.2.3.2.  Bilateral trade relations with Korea and Japan in 2002

672. 

Relations  with  Japan  and  South  Korea  centred  mainly  on  market  access  and
deregulation,  particularly  in  relation  to  phytosanitary  and  sanitary  issues.  Progress
was made in a number of areas, whereas in others discussions were ongoing.

9.2.4.  Middle East and Mediterranean Region

673.  Within the framework of the Barcelona process, new Association Agreements  have
now  been  concluded  with  all  Middle  Eastern  and  Mediterranean  countries,  except
Syria. The new Agreements, which replace the Cooperation Agreements dating back
to  the  1970s,  aim  to  further  liberalise  and  thus  increase  agricultural  trade.  They
provide for reciprocal trade concessions on agricultural products and regular reviews
of the agricultural chapters of the Agreements.

674.  Middle East: An Interim Agreement has been in force with the Palestinian Authority
since  1997.  The  Agreement  with  Israel  entered  into  force  in  2000,  though  the
reciprocal agricultural concessions were applied earlier. The Agreement with Jordan
entered into force in 2002 and that with Egypt (signed in 2001) is in the process of
being ratified. 2002 saw the conclusion of an Association Agreement with Lebanon;
an Interim Agreement is due to enter into force in 2003. Negotiations with Syria are
still ongoing. Negotiations for revised  agricultural concessions are being  conducted
with Israel and are due to start with Jordan in 2003.

675.  Mediterranean: Revisions of the agricultural concessions under the 1998 Agreement
with Tunisia were agreed in 2000 and have been in force since 2001. The Agreement
with  Morocco  entered  into  force  in  2000,  although  some  provisions  were
implemented earlier. The revision of this Agreement is still ongoing. The Agreement
concluded with Algeria in 2001 was signed in April  2002  and  will  enter  into  force
after ratification by all EU Member States.

9.2.5.  Western Balkans

676. 

Under  Regulation  (EC)  No 2007/2000,  as  amended,  the  Community  continued  to
extend unilateral and autonomous trade liberalisation to the Western Balkans in the
framework  of  the  Stabilisation  and  Association  Process  (SAP)  and  in  line  with  the
conclusion  of  the  March  2000  Lisbon  Council.  Agricultural  imports  from  Albania,
Bosnia  and  Herzegovina,  Croatia,  the  Former  Yugoslav  Republic  of  Macedonia
(FYROM)  and  the  Federal  Republic  of  Yugoslavia,  including  Kosovo,  have  been
fully  liberalised  since  1 November  2000.  Exceptions  from  these  arrangements  are
beef  –  individual  tariff  quotas  for  baby-beef  are  granted  to  all  the  above  countries
except  Albania  –  and  wine,  for  which  there  is  a  shared  duty-free  quota  of
545 000 hectolitres.

130

 
677. 

Trade with FYROM and Croatia in agricultural products (except wine) is subject to
reciprocal  concessions  under  the  2001  Stabilisation  and  Association  Agreements.
Pending  ratification,  the  trade  preferences  have  been  applied  from  June  2001  and
March  2002  under  Interim  Agreements  with  FYROM  and  Croatia  respectively.
Additional  protocols  to  the  Agreements  to  cover  trade  in  wine,  including  the
reciprocal  recognition,  protection  and  control  of  wine  names  and  designation  of
spirits and aromatized drinks, have been in force since 1 January 2002.  In line with
Article  16  of  the  EU-FYROM  Interim  Agreement,  negotiations  to  improve
concessions granted to the EU have been started and should be concluded in 2003.

678. 

At  the  end  of  2002,  the  Council  adopted  directives  for  the  negotiation  of  a
Stabilisation  and  Association  Agreement  with  Albania.  Negotiations  are  to  start  in
early 2003.

9.2.6.  Latin America

679.  Mexico: A free-trade agreement between the EU and Mexico has been in force since
1 July  2000  under  Decision  2/2000  of  the  EU-Mexico  Joint  Council.  The  trade
liberalisation complies with GATT Article XXIV in that it involves substantially all
trade:  for  agricultural  products,  80%  of  EU  imports  and  42%  of  Mexico's  imports
will  be  liberalised  by  2010  after  the  respective  transition  periods.  Mexico  has  also
undertaken to negotiate a wine agreement with the EU.

680. 

The EU benefits in particular from Mexican liberalisation for wines, spirits, and olive
oils.  The  EU  granted  Mexico  limited  concessions  within  quotas  for  certain  cut
flowers, eggs and albumin, honey, fruit, vegetables, orange juice and pineapple juice
and  a  transitional  quota  for  avocados.  Both  parties  have  a  waiting  list  (subject  to
future review) of sensitive products not to be liberalised at this stage – the EU’s list
includes  bananas,  sugar,  beef,  dairy  products,  rice,  maize,  sweet  corn,  starches  and
many  fruits  and  vegetables.  Other  features  of  the  agreement  are  review  clauses  for
further  liberalisation,  the  maintenance  of  CAP  measures  such  as  the  entry  price
system  and  export  refunds,  and  an  origin  protocol  setting  out  requirements  for
products to obtain originating status.

681.  Mercosur: Negotiations are in progress  with a view to  concluding an EU-Mercosur
Association  Agreement  which  should  include  provisions  on  agricultural  trade  and
incorporate agreements on wines and spirits and sanitary and phytosanitary matters.
At the second EU-Mercosur Summit in Madrid on 17 May 2002, it was agreed that a
ministerial meeting would be held in order to give a new impetus to the negotiations.
At this meeting (Rio de Janeiro, July 2002), agreement was reached on an ambitious
timetable for the final stage of negotiations and on starting talks on the SPS and wine
agreements.

682. 

Chile:  Negotiations  for  an  EU-Chile  Association  Agreement,  which  had  started  in
April  2000,  were  concluded  after  a  tenth  round  on  26  April  2002.  The  Agreement
was signed in Brussels on 18 November 2002. As regards agriculture, it provides for
the  gradual  creation  of  a  free-trade  area  (including  a  review  clause  for  possible
improved concessions  in the future)  and  incorporates  specific  agreements  on  wines
and spirits and on sanitary and phytosanitary matters.

683. 

EU  tariffs  will  be  progressively  eliminated  for  97%  of  agricultural  and  processed
agricultural imports from Chile: 33% at entry into force, 55% from 2007, 12% from
2010 and 0.2% from 2012. With other products covered by tariff quotas, only 0.9%

131

 
of  EU  agricultural  imports  from  Chile  will  not  benefit  from  any  form  of
liberalisation. Chile will eliminate  duties for 81.9%  of its agricultural imports from
the EU: 61.5% at entry into force, 16.6% from 2008 and 3.8% from 2012. Chile has
also granted the EU tariff quotas for products such as olive oil and cheese.

684. 

The specific agreements on wines and on spirits and aromatised drinks are designed
to facilitate and promote trade in this important sector. Geographical indications (e.g.
Bourgogne),  traditional  expressions  (e.g.  reserva)  and  other  protected  names
(e.g. grappa)  benefit  from  reciprocal  and  exclusive  protection.  The  wine  agreement
contains  a  list  of  reciprocally  accepted  oenological  practices  and  a  mechanism  to
allow the use of new oenological practices.

9.2.7.  NIS

685. 

Agricultural production in former Soviet Union countries, in particular in Russia and
in Ukraine, and Kazakhstan to a certain extent, showed some dramatic improvements
in the recent period, notably in the grain sector. Bumper crops of wheat in the Black
Sea  area  offered  new  opportunities  for  traders,  whilst  domestic  feed  demand  still
lagged behind. It coincided with unusual production and trade patterns in the rest of
the world, characterised by high reference prices on the US market. This situation led
to substantial imports of grain from the Black Sea area into the EU. The recovery of
the agri-food sector  in  these  countries  is,  nevertheless,  far  from  over  after  a  severe
transition shock. Russia remains a major outlet for EU agri-food exports. However,
Russia has recently initiated a series of actions aimed at limiting food imports, with a
view to promoting the development of its own agri-food sector. More developments
are  expected  in  the  years  to  come,  notably  in  the  animal  production  sector.
Significant  changes  are  taking  place  with  the  liberalisation  of  the  land  market,
privatisation and regulatory reform, increased investments and the emergence of new
production structures.

686. 

Bilateral  relations  in  agriculture  intensified,  notably  with  Russia  and  Ukraine,
whether within the framework of the Partnership and Cooperation Agreements or as
part of the preparatory process for accession to the WTO. As for the other NIS, there
are  similar  prospects  for  increasing  bilateral  relationships  in  agriculture.  However,
the  situation  still  remains  critical  in  some  places,  in  particular  in  the  Caucasian
countries, in which EU assistance (TACIS programmes) helps alleviate food security
problems. The forthcoming enlargement of the EU to the east will reinforce ties and
relationships with the NIS.

9.2.8.  North America

9.2.8.1.  United States

687. 

688. 

Negotiations on a comprehensive EU/US wine agreement were pursued with the aim
of facilitating trade in wines, while improving protection for European and American
names  used  in  winemaking  and  observance  of  oenological  standards  used  by
winemakers.  Moderate  progress  was  made  in  the  talks  by  the  end  of  2002  and  the
parties agreed to continue discussions at least for the first quarter of 2003.

The  US  continued  to  apply  100%  ad  valorem  tariffs  on  USD 116.8  million  of  EU
exports  pursuant  to  the  WTO  arbitrator's  ruling  of  the  level  of  impairment  in  the
Hormones  case.  No  progress  was  recorded  in  talks  aimed  at  agreeing  on  an
equivalent level of compensation to replace the tariffs.

132

 
689. 

690. 

691. 

The  Commission  followed  closely  the  adoption  of  the  Farm  Security  and  Rural
Investment Act in May 2002. While the US Administration had signalled in 2001 its
intention to move away from production and trade-distorting support for farmers, the
new  policy  marked  an  increase  of  about  80%  in  commodity  support  and
implementation of  new production-distorting subsidy mechanisms. The direction of
US  policy  was  widely  condemned  by  WTO  members  and  stood  in  contrast  to  the
direction  of  policy  reform 
the  EC,  which  was  moving  away  from
production-related  measures.  The  Commission  continued  to  press  the  US  to  reduce
its dependency on bogus food aid as a tool for the disposal of surpluses.

in 

The  Commission  began  exploratory  talks  with  the  US  on  recognition  of  organic
production  standards  and  controls.  US  rules  on  organic  production  were  finally
implemented  in  October  2002  and  the  Commission  made  representations  to  ensure
that bilateral trade was not disrupted as a result of the change in the rules.

The  Commission  made  representations  to  the  US  following  the  adoption  of  the
Bioterrorism  Act,  which  will  require  the  registration  in  the  US  of  all  foreign  food
facilities  and  detailed  prior  notice  of  shipments.  Publication  of  the  proposed
implementing rules was planned for early 2003.

692. 

The Corn Gluten Feed Monitoring Group continued to meet regularly.

9.2.8.2.  Canada

693. 

694. 

Negotiations on an agreement on trade in wine and spirits were intensively pursued.
The talks focussed on protection of the use of European names, quality standards for
wines  and  spirits  on  the  internal  market,  and  the  operation  of  Canadian  Provincial
alcohol monopolies.

Canada  continued  to  apply  100%  ad-valorem  tariffs  on  CAD  11.3  million  of
EU exports pursuant to the WTO arbitrator's ruling on the level of impairment in the
Hormones case.

133