Opinion of the European Economic and Social Committee on the ‘proposal for a Council Regulation amending Regulation (EC) No. 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers’ (COM(2003) 698 final - 2003/0278 (CNS))
Date: 2004-02-26
Institutions: European Economic and Social Committee
Subjects: agricultural production policy, aid per hectare, aid to agriculture, common agricultural policy, common organisation of markets, cotton, hops, olive oil, reform of the CAP, tobacco

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Opinion of the European Economic and Social Committee on the ‘proposal for a Council Regu-
lation amending Regulation (EC) No. 1782/2003 establishing common rules for direct support
schemes under the common agricultural policy and establishing certain support schemes for
farmers’

(COM(2003) 698 final - 2003/0278 (CNS))

(2004/C 110/20)

On 1 December 2003, the Council decided to consult the European Economic and Social Committee,
under Article 37(2) of the Treaty establishing the European Community, on the above-mentioned proposal

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing
the Committee's work on the subject, adopted its opinion on 5 February 2004. The rapporteur was Mr
Fernando Moraleda Quilez and the co-rapporteurs Mr Christas Fakas, Mr Adalbert Kienle and Ms Luisa
Santiago.

At its 406th plenary session of 25 and 26 February 2004 (meeting of 26 February 2004) the European
Economic and Social Committee adopted the following opinion by 58 votes to seven with one abstention.

1. Introduction

1.1
In Luxembourg on 26 June 2003 the European agri-
culture ministers adopted a fundamental reform of the CAP,
leaving it up to the Member States to implement it between
2005 and 2007. The agreement also included a joint declara-
tion by the Council and the Commission on certain products
for which the current principles and standards, the long-term
budget perspective (2013) and the financial framework would
be maintained (status quo).

1.2
In the explanatory memorandum to the proposal the
Commission states that since 1992 the common agricultural
policy (CAP) has been immersed in a fundamental reform
process, aimed at moving away from a policy of price and
production support to a more comprehensive policy of farmer
income support. The latest step in this process was the adop-
tion of Regulation (EC) No. 1782/2003 establishing common
rules for direct support schemes under the common agri-
cultural policy and establishing certain support schemes for
farmers.

the single payment

The de-coupling of direct producer support and the
1.3
introduction of
scheme are essential
elements in the process of reforming the common agricultural
policy. As the next step in the reform process, the Commission
proposes to integrate the current support schemes for cotton,
olive oil and table olives, tobacco and hops into the regulation.

proposed reform neither guarantees production of these crops,
takes account of the situation of producers in less favoured
areas, increases competitiveness nor even respects the environ-
ment.

2.2
In the course of the preparatory work for the June
reform the impact of the application of a given model on farms
and geographical areas was in some cases evaluated. Thus, the
European Parliament, during its hearing on the Evolution of
farm incomes in the European Union, held last September,
recommended that,
for future reforms, greater attention be
paid to the analysis and evaluation of their consequences. The
EESC would point out that this has not been done and recom-
mends that this mistake should not be made again in the
future.

including the following:

2.3
In the EESC's view, the de-coupling of aid in the forms
proposed in the sectors in question would give rise to a series
of problems and difficulties,
the
proposed historically based support per producer
takes a
previous period as its point of reference, without eliminating
indeed probably
existing geographical and social
exacerbating them;
to
young farmers starting out in agriculture; it would also have
damaging effects on tenant farms and would jeopardise the
continuation of production in certain areas and regions.

imbalances,
it would be particularly detrimental

2. General comments

2.1
The EESC would point out that the purpose of the
common agricultural policy is to realise the objectives set out
in the Treaty establishing the European Community, in particu-
lar to stabilise markets, to increase productivity, to ensure a fair
standard of living for farmers and to increase their earnings.
The achievement of these objectives would be seriously called
into question if the proposals put forward by the Commission
for the sectors in question were to be implemented, as the

2.4
The forms of agricultural production in question are
supported by a broad social fabric, in terms of both production
and processing. In this sense these are extremely ‘social’ crops
by virtue of the jobs they generate, and particularly in the light
of their labour-intensity and the dominant role they play in
certain areas and regions of the European Union. The EESC
considers that the social repercussions and the loss of jobs
which would result from the proposed reforms would be parti-
cularly severe in areas which already suffer from high levels of
unemployment.

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less

2.5 Most of the sectors affected by the Commission proposal
are located in Mediterranean regions which qualify as less
developed regions,
suffering from
depopulation or upland areas. The EESC therefore considers
that the Commission should take account of the Conclusions of
the European Council of 24 and 25 October 2002, which
stressed the need to protect the interests of producers in the
less favoured regions of the current EU of 15.

favoured regions

The Commission claims to be reinforcing the second
2.6
pillar of the CAP, rural development, by diverting funds from
the sectors in question to the measures set out in Regulation
(EC) No. 1257/1999 on regional development. However, the
EESC considers that the real driver of rural development in the
regions and areas concerned is the maintenance of socio-
economic activity on the basis of existing production. It there-
fore considers that, as a matter of priority, the reforms in ques-
tion should guarantee and promote multifunctionality in the
broadest sense of the term, taking on board the Conclusions of
the European Councils of Luxembourg (1997) and Berlin
(1999).

The new criteria recently adopted for direct support, as
2.7
regards both environmental conditions and the requirement for
good agricultural practice compatible with the conservation of
natural resources, guarantee the sustainable management of
land used for the crops in question.

2.8 Moreover, taking account of the decision of the Euro-
pean Council of Gothenburg to add an environmental dimen-
sion to the Lisbon Strategy (strategy for economic and social
reform), the EESC considers that the EU's sustainable develop-
ment strategy should maintain the balance between economic
growth, prosperity, social justice and protection of the environ-
ment, aspects which should be taken into account
in the
in order to maintain the social and
Commission's proposal
economic fabric and conserve natural resources in the regions
producing the crops in question.

The EESC considers that a probable reduction in the
2.9
land area devoted to the crops in question will have grave
consequences for the other crops which can be grown on the
land in question, as most of these are subject to quotas, which
in turn will produce further distortions of competition and
economic, social and environmental repercussions.

2.10
The EESC considers that a series of specific analyses
should be carried out by sector and region on the possible
effects of various degrees of de-coupling of aid (market, terri-
torial, employment, environmental effects, etc.) before any deci-
sions are taken on changing the existing mechanisms. In par-
ticular, the EESC considers that it is vitally important to eval-
impact of the proposed measures. In the
uate the territorial
EESC's views, the total de-coupling of aid threatens to cut
production of the crops in question in areas which are already
disadvantaged, thus giving rise to undesirable environmental
effects, including acceleration of desertification and erosion in
certain vulnerable agricultural areas.

2.11 When making use of historical statistics on land areas
and output, the Commission should not lose sight of the true

situation in the various sectors, and it needs to take account of
a range of data to gain an accurate statistical picture of produc-
tion in recent years.

schemes under

2.12
Bearing in mind the provisions of Council Regulation
(EC) No. 1782/2003 establishing common rules for direct
support
the common agricultural policy,
leaving it to the Member States to determine the date, between
2005 and 2007, when the new system of aid will enter into
force,
this option should also be
offered to the other sectors to which similar measures apply.

the EESC considers that

The EESC points out that, in the light of the failure of
2.13
the Cancun Ministerial Conference,
the Commission is not
expected to maintain the same principles with which it began
the negotiations without drawing the appropriate conclusions
as to the suitability of the strategy pursued by the European
Union.

2.14
Finally, the EESC considers that the same approach
should be adopted to the June decisions, as to the sectors
currently affected by the reforms, so that the Member States
will have suitable latitude for implementation of the decisions.

COTTON

3. Gist of the proposal

3.1
As we already know, the Commission proposes transfer-
ring the part of EAGGF expenditure for cotton, which was used
for producer support during the reference period (2000–2002),
into funding two income support measures for producers,
namely the single farm payment scheme and a new production
aid granted as an area payment. The total available amount for
both measures
follows:
EUR 504.4 million for Greece, EUR 190.8 million for Spain
and EUR 0.565 million for Portugal.

is EUR 695.8 million divided as

It

3.2
is recommended that 60 % of producer support
expenditure per Member State should be transferred to the
single farm payment scheme in the form of new entitlements
which will be granted to the beneficiary whether they cultivate
cotton or not. The total amount to be transferred to the single
payment is EUR 417.3 million (EUR 302.4 million for Greece,
EUR 114.5 million for Spain and EUR 0.365 million for
Portugal).

that

The Commission proposes

3.3
the Member States
should keep the remaining 40 % of production support expen-
diture (EUR 202 million for Greece, EUR 76.3 million for Spain
and EUR 0.2 million for Portugal,
i.e. a total of EUR 278.5
million) as national budget envelopes, to be used to grant
producers the new area payment (per hectare of cotton) in
areas that are suitable for growing cotton, so that cotton culti-
vation is not abandoned. The new area payment applies to a
maximum area of 425,350 ha, corresponding to 340,000 ha in
Greece (an 11 % reduction in eligible areas compared to the
reference period), 85,000 ha in Spain (a 5 % reduction in
eligible areas compared to the reference period) and 360 ha in
Portugal.

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3.4
Finally, the Commission proposes transferring a sum of
EUR 102.9 million (EUR 82.68 for Greece, EUR 20.13 million
for Spain and EUR 0.12 million for Portugal) to the second
pillar, to be put towards sectoral restructuring measures in the
context of rural development.

growing areas in recent years in Greece, from 440,000 ha in
1995 to 380,000 ha today. A similar reduction has occurred in
Spain, where cotton-growing areas have shrunk from 135,000
ha some years ago to 90,000 ha today. In the EESC's view, the
proposal to reduce eligible areas by differing percentages (11 %
in Greece and 5 % in Spain) is therefore completely unjustified.

4. Introduction

4.1
The cotton sector is based not on a Common Market
Organisation but on Protocols 4 and 14 which are attached to
the Acts of Accession of Greece and Spain respectively, on the
basis of which a system has been set up to:

— support cotton production in regions where it is important

for the agricultural economy;

— guarantee a fair income for producers; and

— stabilise the market by improving structures for producing

and selling cotton.

4.2 With the decision reached in Luxembourg on 26 June
2003 regarding reform of the CAP, European agriculture set
out on a path towards decoupling payments from production.
The decision also included a Joint Statement by the Council
and the Commission (point 2.5) (1) on the Commission's subse-
quent second wave of proposals for Mediterranean products
(tobacco, cotton, olive oil), concerning:

— same rules and regulations;

— same long-term time frame (2013);

— within the existing budgetary framework (status quo).

4.3
The EESC considers full respect for the decision to be
imperative, and therefore calls on the Commission to be suffi-
ciently flexible when the decision is discussed at the Council
and to correct the major inconsistencies in its proposal as
regards both how the reform is implemented and the imple-
mentation timeframe. The EESC is calling for nothing more
and nothing less for cotton than that which was decided upon
unanimously by agriculture ministers on 26 June 2003 for
other CAP sectors.

5. General comments

The cotton sector has substantial economic and social
5.1
importance for certain regions of
the EU. Approximately
300,000 people are employed in the primary sector, and more
than 100,000 people in the secondary sector. In 2002, cotton
accounted for 9 % of total agricultural production in Greece
and 1.5 % in Spain (4 % in Andalusia).

There are 71,600 farms in Greece and 10,000 in Spain,
5.2
though the average size of farms in Greece is much smaller:
4.9 ha compared to 9 ha in Spain.

The EESC does not share the Commission's view and
5.3
does not agree that there will not be a reduction in cultivated
areas. There has been a continuous reduction in cotton-

(1) CAP Reform – Presidency Compromise (in agreement with the

Commission). Document No.: 10961/03

5.4
As a producer, the EU plays a minor role on the interna-
tional stage, accounting for only about 1.5 % of cotton-
growing areas and about 2.5 % of total world cotton produc-
tion. The main cotton-producing countries are China (22.6 %),
the US (20.1 %), India (13.1 %) and Pakistan (9 %).

It must also be pointed out

5.5 With 708,000 tonnes of imports and 227,000 tonnes of
the EU is the world's major net
exported ginned cotton,
two thirds of
that
importer.
imports come from developing countries and are duty-free. It
should also be pointed out that European cotton is exported
without export
share the
Commission's views and cannot understand how international
trade is distorted when cotton is imported into the EU duty-
free in such large quantities and is exported in very small quan-
tities without export subsidies.

subsidies. The EESC does not

5.6
The EESC points out that during the Cancun Ministerial
Conference the European system of aid to the cotton sector
came under unfair attack, doubtless as a result of the EU's
strategy of aligning itself with the USA. In the EESC's view,
therefore,
it is completely unjustified for the EU to react so
strongly to the initiative of four African countries (Burkina
Faso, Benin, Mali and Chad) to abolish cotton subsidies, which
was launched during the WTO negotiations in Cancun. No
serious trading partner can argue that with 2.5 % of global
production the EU is capable of affecting world prices.

5.7
Cotton is the main natural fibre for weaving and must
consistently be given priority over synthetic fibres. Cotton
produced in the EU is of a high quality, though there is room
if European textile manufacturers are to
for improvement;
compete in the world market they require top-quality cotton.
The EESC therefore backs all of the Commission's proposals in
this area, as they aim to improve quality.

5.8
On 22 May 2001 the Council adopted Regulation
1051/01 revising the regime of production aid for cotton. The
new regime has been working satisfactorily both from the
point of view of farm profitability and from the point of view
of limiting the area under cultivation and reducing the environ-
mental impact. The EESC can see no reason why, two years
later, the Commission should propose a completely different
system without at least looking at the results of implementing
the 2001 revision. The EESC would also point out that the
Commission proposal is not accompanied by an impact study
as was the case for the sectors reviewed in June 2003 and the
tobacco sector.

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6. Specific comments

The Commission proposes

6.1
transferring EUR 102.9
million from the first pillar to the second pillar. In practice, this
will place a double burden on cotton producers as they already
contribute to rural development through the horizontal regu-
lation and tapering payments (reduction of 3 % in 2005, 4 % in
2006 and 5 % from 2007 onwards, when direct aid exceeds
EUR 5,000 per year). These arrangements apply only to the
tobacco and cotton sectors. The EESC believes that this contra-
dicts the Luxembourg decision and calls on the Commission to
re-consider its position.

The EESC considers that, as well as horizontal compul-
6.2
sory measures provided for to protect the environment, the
Member States can implement complementary environmental
programmes to promote efforts to monitor production and
environmental protection. When determining area payments,
account must be taken of the social and economic characteris-
tics of these products in addition to other criteria.

The EESC finds it unacceptable to have a special review
6.3
clause applying only to Mediterranean products. It therefore
calls for Article 155a, which refers to legislative proposals to
be submitted by 31 December 2009, to be scratched, and
instead proposes that Mediterranean products come under the
provisions of Article 64(3) of the Horizontal Regulation (R
1782/2003), which refers to the submission of evaluation
reports.

7. Conclusions

Community cotton cannot be competitive on interna-
7.1
tional markets because production costs are much higher than
those of other competitor countries. It should be noted that
other developed producer countries (particularly the USA)
subsidise their own cotton to a many times greater degree than
the EU, and developing countries have very low production
costs because of social dumping.

The EESC feels that, in a sector such as this, with such
7.2
large fluctuations in world price trends and such a vast differ-
ence between prices within and outside the Community, the
principles of complete trade deregulation and of decoupling aid
from production are not to be recommended.

7.3
If, despite the EESC's assessment, the Commission insists
on placing the cotton sector on the course of deregulation, the
EESC calls for the Luxembourg compromise of 26 June 2003
to be implemented entirely as agreed, with regard to both the
method of implementation and the timeframe for implementa-
tion.

growing areas and 2.5 % of world production, the EU plays a
very minor role on the world stage and does not influence
world prices. The EESC believes that by adopting this kind of
approach we are not helping developing countries, but simply
casting doubt on and undermining the European Agricultural
Model. The EESC therefore feels that,
in WTO negotiations,
cotton cannot be negotiated as an independent sector and
should be included in the general negotiations on agriculture.

OLIVE OIL

8. Introduction

8.1
The first common market organisation for olive oil,
which was set up in 1966 under Regulation 136/66/EEC, lasted
for 31 years and had a very positive impact on the modernisa-
tion of olive groves and the processing and marketing sectors.

8.2
In 1998, the intervention system was replaced by a
private storage mechanism, consumption aids were abolished
and export refunds were set at zero.

8.3
Production support, which is granted to all producers
on the basis of the quantity of olive oil produced and the table
tonne. This sum is
olive equivalent,
corrected whenever the Member States exceed their respective
national guaranteed quantities (NGQs).

is EUR 1322.50 per

the Luxembourg Council. However,

The olive oil sector was not part of the reform package
8.4
approved at
the same
Council asked the Commission to present a proposal on
reforming the CMO in olive oil based on the principles of the
new CAP before the end of 2003.

9. The Commission proposal

9.1

The Commission proposes that:

— support for the sector should not be linked to the amount
of olive oil and table olives actually produced by each olive
grower;

— support should not be granted on the condition that
growers must harvest table olives or produce olive oil or
table olives;

— the payment of support is dependent only on observing the

standards of good farming practice.

However,

9.2
the Commission is concerned that a total
decoupling of aid will lead to the abandonment of certain tradi-
tional olive-growing areas, the degradation of soil cover and
landscape, and negative social impacts. It has therefore estab-
lished two types of aid:

7.4
In the EESC's view, the events that took place during
WTO negotiations in Cancun concerning cotton should not be
allowed to shape the context for cotton negotiations in the
Council of Ministers. With only 1.5 % of the world's cotton-

— direct decoupled aid to growers, to the value of 60 % of the
the three-year period

average of payments made over
2000-2002;

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— per-hectare aid linked to the maintenance of olive groves
with a recognised environmental and social value, to the
value of 40 %, which will be expressed in olive GIS-ha,
leaving it up to each Member State to organise the aid in
up to five categories based on environmental and social
criteria, including aspects related to the landscape and tradi-
tion.

10.5
This clear and real risk is contrary to the primary
objective of any CMO reform, i.e. to maintain production and
the economic and social fabric which it supports, particularly
when olive production is based in some of the least-favoured
regions of the EU and is in relative terms the most labour-
dependent crop (in some regions, it provides 90 % of jobs in
the agricultural sector).

9.3
The Commission is concerned that the new aid system
could alter the fragile balance on the olive oil market and is
therefore limiting access to the single payment scheme to olive-
growing areas that existed prior to 1 May 1998 and to new
plantings provided for under the programmes approved by the
Commission.

The EESC was very pleased that

10.6
the Commission
listened to this concern and proposed a partial decoupling of
aid for some of the sectors included in the proposal approved
by the Luxembourg Council, with the uncoupled percentage of
aid being decided by each Member State.

9.4
The new proposed legislation will enter into force with
the expiry of Regulation 136/66/EEC and after an interim
marketing year of
in 2004 (1.11.2004-
30.6.2005).

eight months

9.5
Current measures for the private storage of olive oil
must be maintained and measures aimed at enhancing quality
reinforced.

10. General comments

10.1
The EESC welcomes the Commission's assessment that
‘the olive sector is a key element of the EU model of agri-
culture’ and its reference to the fact that, although export
refunds have been set at zero since 1998, European Union
olive oil exports have doubled in the last ten years.

The sector's efforts in terms of quality, market organi-
10.2
sation, publicising the product and conquering new markets, as
well as the recognition of olive oil's illness-prevention proper-
ties,
in particular regarding cardiovascular diseases, are key
factors for the gradual increase in world olive oil consumption.

10.3
The EESC points out that the role of olive groves in
creating jobs, combating desertification and protecting biodi-
versity has also already been highlighted in previous Committee
opinions, one of which states that ‘as the southernmost produc-
tive wooded areas in the EU, olive groves play a key social and
environmental role in areas where they could not, or could not
easily, be replaced with other crops, and help rural populations
to continue living in the countryside’ (2).

10.4 Moreover, with regards to the current CAP reform, the
EESC – both in its own-initiative opinion on the future of the
CAP (3) and in its opinions on the mid-term review of the
CAP (4) and the 2003 CAP review (5) - repeatedly warned the
Commission that a total decoupling of aid could lead to
production abandonment in certain regions and for certain
crops, with serious consequences for employment and the
social fabric in surrounding rural areas.

(2) OJ C 221, 7.8.2001
(3) OJ C 125, 27.5.2002
(4) OJ C 85, 8.4.2003
(5) OJ C 208, 3.9.2003

10.7
has not been adopted in the present draft Regulation.

The Committee is surprised to note that this criterion

10.8
There is no doubt that granting an additional 40 % of
totally non production-linked aid to olive groves will inevitably
lead to the technical abandonment of the crop, especially in
areas with the lowest production levels and/or very high
production costs.

10.9
In fact, these areas are characterised by a series of
different factors which lead to significantly higher production
costs, potentially making them candidates for economic aban-
donment.

10.10
At the same time, such moves would lead to the
closure of associated processing plants, owing to the lack of
raw material, and the forced abandonment of farms that still
demonstrated a degree of productive competitiveness.

10.11
The EESC calls on the Commission to fulfil the objec-
tives laid down in the reform of Regulation 136/66, by means
of Regulation 1638/98, which ushered in a transition period,
the purpose of which was to give the Commission time to
gather accurate data on the realities of EU olive production,
thereby enabling it to design a new system based on solid argu-
ments founded on actual conditions in the sector and recent
statistical data.

11. Specific comments

The EESC would draw attention to the fact that Article
11.1
155a of Title IVa – Financial
the
Commission to submit a report to the Council by 31 December
2009 on the implementation of this Regulation, accompanied,
where appropriate, by legislative proposals.

transfers provides for

The EESC considers it unacceptable to have a specific
11.2
revision clause applicable only to Mediterranean products and
calls for this to be removed. Instead, the Committee proposes
that this sector be included within the purview of Article 64(3)
of the horizontal regulation (No. 1782/2003), which provides
for an evaluation report to be submitted.

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11.3 With regard to the 40 % of aid earmarked for environ-
mental and social protection, we fail to understand why, in a
production sector that is so sensitive and only relevant for
Mediterranean countries, Member States are not allowed to use
a system similar to the one provided for in Chapter V, Section
2, Articles 66, 67 and 68 (arable crops, sheep and goats, beef
and veal) of Regulation 1782/2003 of 29 September 2003,
whereby each Member State may decide on the percentage of
coupled aid it wishes to allow.

11.4
The fact is that, especially in areas of low productivity,
the total decoupling of production may entail a real risk of
production abandonment with serious implications for local
employment and surrounding industry, as well as the continued
population of the region. The Committee also feels that the
subsidiarity principle
additional
support so that such support is allocated according to criteria
laid down by each Member State, both in terms of amount and
the system used.

should apply as

regards

At all events this support should guarantee:

— the continuation of olive production and its associated
industry, ensuring that the necessary checks are carried out
to underpin the transparency of the market and the quality
and traceability of the product,

— the maintenance of low-yield olive groves, which play a

vital socio-economic and environmental role.

For this reason, the EESC insists that, as in Regulation
11.5
1728/2003 of 29 September 2003,
the Member States be
given the possibility of deciding the percentage of aid coupled
to production and the marketing year in which the single
payment is to be applied.

down in the Commission's Communication of September
2003 (6). A gradual decoupling in three steps is envisaged in
the tobacco sector.

It

also recommends

restructuring
12.2
envelope for the tobacco sector. This envelope will include a
percentage of the current premium, which will now go towards
rural development measures with the primary aim of restruc-
turing tobacco-producing regions.

establishing

a

The proposed Regulation also recommends a review of

12.3
the proposed reform in 2009.

13. Introduction

13.1

The EESC would like to point out the following:

— Tobacco is an annual crop with very important social reper-
cussions throughout Europe. The Commission itself has
carried out studies acknowledging the social and cultural
importance of this crop, which has led to an important
network of
In Europe,
453,887 (7) jobs are directly linked to tobacco production
and 80 % of European tobacco is grown in Objective 1
regions.

in producing regions.

services

— Even the Commission acknowledges the importance of
labour for tobacco cultivation (8), having pointed out that it
is one of the most labour-intensive crops in the Com-
munity. On average, a European farmer must invest 2,200
hours of labour a year to grow one hectare of tobacco,
compared to just 147 hours for general crops. Moreover,
labour represents between 50 % and
for most varieties,
70 % of production costs.

The EESC feels that the Council's provisions, especially
11.6
those concerning the eligibility of areas of new planting
authorised by the Council
in 1998 and the relevant budget
funding for this, should be taken up.

The EESC also wishes to highlight the capacity of this
13.2
sector to create jobs for women during the primary processing
phase. Given that 80 % of tobacco production is found in less-
favoured regions, maintaining these jobs ensures that areas
under tobacco are more dynamic than areas under other crops.

11.7
The EESC feels that funds linked to measures in the
current CMO which are to be abolished, such as export
refunds, support for preserving olives and the financing of
control agencies, should continue to be earmarked for the olive
sector in each Member State.

TOBACCO

12. Summary of the European Commission's proposals

12.1
the
complete decoupling of support in line with the scheme laid

for a Regulation recommends

The Proposal

14. Comments

Its most

The EESC has issued a number of opinions on the
14.1
subject
recent opinion (CES
in recent years.
190/2002) (9) stressed the need for a study on the sector in
which the Commission would assess its decisions, since the
tobacco sector is of major regional importance for less favoured
areas and a source of employment. The CAP has now been
reformed, with aid being decoupled from production and we
expect to see studies making a complete separation between
tobacco growing and smoking.

(6) COM(2003) 554 final
(7) UNITAB White Paper on Tobacco Growing in Europe.
(8) COM(96) 554 - Report from the Commission to the Council on the

common organisation of the market in raw tobacco.

(9) OJ C 94, 18.4.2002, pp. 14-17

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on

sustainable

The Commission's proposals for tobacco follow on
14.2
development
from the Communication
presented to the Gothenburg European Council
in June
2001 (10). The EESC points out that, following legal consulta-
tions by one of the producer Member States, no decision was
reached on the future of tobacco during this Summit. The
Council's legal service expressed the view that, with its fifth
recital, the Commission was attempting to get the Council to
accept a measure (the elimination of tobacco aid) which it had
proposed in its Communication to the European Council, but
which the latter had rejected. (11)

14.3
In the EESC's view, CAP reform - as agreed in Luxem-
bourg on 26 June 2003 – is one of the reasons behind the
Commission's efforts to reform the current CMO for tobacco.
The main objectives of this reform, as laid down in the expla-
natory memorandum to the September 2003 Communication,
have only partially been met.

14.4 Moreover, with regard to tobacco and health, both the
evaluation report and the impact assessment acknowledge that
the CMO has no impact whatsoever on smoking statistics.
There is currently no link between production and consump-
tion, the latter depending more on fashion than on cultivation.
Moreover, only 20 % of tobacco consumed in Europe is actu-
ally produced in the EU, and this is linked to the fact that there
is a support scheme for raw tobacco production.

14.5
The Framework Convention on Tobacco Control,
unanimously approved on 21 May 2003 by the 192 members
of the WHO, specifically avoided expressing a view on tobacco
subsidies and left out any reference to these in the final
wording of its Article 17.

acknowledges

The EESC nonetheless

that public
14.6
opinion associates production with consumption. In the light
of the urgent need to step up anti-smoking campaigns, particu-
larly those aimed at young people and those at high risk of
dependency, the EESC would not wish to remain silent on the
issue.

14.7
The EESC notes the low level of take-up of Community
Tobacco Fund resources. In line with its views on the subject, it
urges that
tax revenues arising be used to
finance more ambitious anti-smoking programmes.

the significant

14.8
The EESC acknowledges that if Community tobacco
production were to disappear, so could the tobacco with the
lowest level of phytosanitary waste in the world and the most
sustainable form of production (from the environmental point
of view).

14.9 Without special external protection or special produc-
tion quality it will be difficult to compete with third-country

(10) COM(2001) 264 final
(11) Report of the Council's legal service (2002) on the Commission
Communication on sustainable development and the Conclusions
of the Göteborg European Council as against the fifth and sixth
recitals of the draft Tobacco Regulation.

producers owing to the fact that these countries largely practise
social dumping, i.e. they exploit female and child labour. One
WHO study (12) reveals that in India today 325,000 children,
50 % of whom are under seven years old, work in the sector;
in Brazil, the number of children working in the sector rises to
520,000, 32 % of whom are under 14 years old. There is also
evidence to suggest that a similar situation exists in other coun-
tries such as China, Indonesia, Zimbabwe, Argentina, etc. all of
which are key tobacco producing countries.

14.10
In the EESC's view, the survival of the processing
sector in Europe is directly linked to the continuation of
primary tobacco production in the EU. Given the extremely
high cost of transporting raw tobacco, a primary processor
cannot live on processing imported tobacco. If tobacco produc-
tion disappears, the EU will start to import processed tobacco,
with the obvious consequences for the industry and employ-
ment in it.

14.11 Moreover, there is no economically viable agricultural
alternative to tobacco that at the moment could by itself create
the same number of jobs and therefore keep people in rural
areas as tobacco currently does. At the moment there are no
alternatives to tobacco growing, as other crops are subject to
production quotas (with penalties in the event that they are
exceeded). Moreover, reform is being proposed before an in-
depth assessment of the sector has been carried out. This is a
clear indication that the EU is keen to cut the agricultural
budget. The Member States, however, will continue to levy a
tax on tobacco even if it is imported from third countries.

In the EESC's view, while this proposal is in line with
14.12
sustainable development and health policies,
it hides a large
dose of confusion as tobacco consumption (which is a major
source of tax revenue for the Member States – to the tune of
EUR 63,000 million) cannot and must not be tackled in the
short term by plunging European producers into crisis, most of
whom live in less-favoured rural areas and receive only
EUR 955 million of the Community budget.

14.13
Before any decision on total decoupling is adopted,
the Commission should propose measures to cushion the
impact of this on the sector. The EESC regrets that there is at
present no plan for switching production.

14.14
In this connection, the EESC would like to highlight
the environmental benefits of European tobacco cultivation
methods. Even the Commission recognises the risk of tobacco
production being abandoned in mountainous areas, which
tobacco growing regions. Likewise,
account
according to information provided by experts in the sector (13),
European tobacco is four times less polluting than other crops.

for 30 % of

(12) WHO-ILO
(13) Tobacco regime. Extended impact assessment SEC(2003) 1023

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According to the impact assessment (14), 81 % of
14.15
world tobacco production is based in developing countries,
which in turn consume 71 % of cigarettes. It also points out
that the CMO in tobacco has no impact on world prices, inter-
vention mechanisms and export refunds disappeared a decade
ago and border protection levels are very low.

15.8
impor-
Due to the special environmental and social
tance of tobacco cultivation in the regions, a definition should
be provided specifying the requirements for maintaining the
soil
in a good agricultural and environmental condition.
Minimum criteria should likewise be introduced for securing
employment and enabling this aid to be taken up.

The EESC believes that the CMO in tobacco makes a
14.16
very important contribution to sustainable development
in
tobacco producing regions, combining economic development
with respect for the environment and dignified working condi-
tions. The large majority of these regions are less-favoured
areas and Objective 1 regions.

14.17
The EESC would like to highlight European society's
growing concern for product quality, which includes produc-
tion methods and working conditions.

15. Conclusions

15.1
The EESC believes that the Commission's proposal is
inconsistent and will have serious repercussions on tobacco
growing regions and tobacco producers' incomes.

In the EESC's view,

in the light of studies in the
15.2
tobacco sector, the Commission proposal presents no solutions
for the potential effects of total decoupling on the sector. The
EESC therefore considers that the Commission should present
all the possible alternatives in order to safeguard the future of
farmers in the regions affected.

15.3
The EESC considers that our understanding of the lack
of causal connection between tobacco growing in Europe and
tobacco smoking has progressed. However, it acknowledges the
fact that public opinion still tends to make this link.

The EESC recommends to the Commission that, in the
15.4
reform of the tobacco CMO, a system of decoupling be consid-
ered which takes account of the social importance of the crop
and allows Member States a high degree of flexibility in asses-
sing different production situations.

The EESC considers that it would be beneficial

15.5
for
reform of the tobacco CMO for the structure of the sector to
remain as it is at present, managed by groups of producers
which have in the past enabled the sector to function.

15.6
The EESC welcomes the provision for mobility of
growers in order to boost the future viability and competitive-
ness of farms. It hopes that the quota buy-back option will be
retained.

15.7
The EESC calls for the subheading 1a) budget to be
retained in full, leaving the Member States the option of using
a proportion of it for rural development.

HOPS

16. Introduction

16.1
Hops are an essential raw material in beer production.
The hop plant (humulus lupulus) is a perennial climbing shrub
which is grown on cost-intensive trellis structures. Hops give
beer its aroma, bitterness and long shelf life.

16.2
submitted a report on the evolution of
(COM(2003) 571 final).

On 30 September 2003 the European Commission
the hop sector

16.2.1
This comprehensive report provides a good overview
of the entire hop sector and the market organisation rules in
force.

16.3
the market organisation in hops.

The Commission report gives a positive assessment of

16.3.1
The common market organisation in hops has
successfully dealt with the major market adjustments of recent
years. EU hop producers have been able to consolidate their
position as world market leaders. Special measures have been
used successfully to match supply and demand more effectively.
In the eight EU Member States which produce hops,
the
market is structured around specialized family farms with an
average of 7.8 hectares which face a considerable degree of
concentration among breweries on the demand side.

16.3.2
The existing CMO in hops also provides the basis for
implementing universal hop certification, including a full certi-
ficate of origin for every batch and a comprehensive system of
quality control and contracts.

16.4
The implementation of this system is the responsibility
of producer groups, which are described by the Commission
itself as the ‘heart and soul’ of the CMO in hops. The producer
groups do indeed have a key role to play in a comprehensive
system of quality control and contracts which includes
universal hop certification and a full certificate of origin for
every batch. The same goes for the initiation and implementa-
tion of projects concerned with quality, growing, research, pest
control, marketing and production technology.

(14) See footnote 12.

16.5
years at around EUR 13 million.

Expenditure on the hop sector has remained stable for

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17. Gist of the Commission proposal

Until now, permanent crops such as hops and olive
17.1
trees were not covered by Regulation 1782/2003. The
proposed amendment of Regulation 1782/2003 is intended to
integrate the direct payments for hops under the specific CMO
regulation on direct
in hops 1696/71 into the general
payments.

17.2
The Commission proposes fully integrating support
payments for hops into the single payment scheme. Support is
to be pitched at EUR 480 per hectare across the board.

However,

17.3
that Member
States should have the option of coupling up to 25 % of the
component of the national ceiling to hop production.

the Commission proposes

18. Comments

for

18.1
The EESC feels it is consistent and makes sense, in the
wake of the ‘Luxembourg decisions’ on CAP reform of 26 June
the Commission henceforth to integrate direct
2003,
regulation on direct
payments for hops into the general
payments and to wish to maintain the current level of support.
In any event, efforts should be made to ensure that hop
production in the EU, including the new Member States, should
continue to be at the forefront of world hop production.

Brussels, 26 February 2004.

18.2
The EESC accepts the conclusions of the Luxembourg
Council and the arguments put forward by the Commission to
facilitate the introduction of a partial decoupling in those
sectors at particular risk of abandonment of production or
imbalance. The Committee would therefore be in favour of
coupling a certain proportion of the direct payments to hop
production in all hop-producing Member States.

18.2.1
In the EESC's view, the percentage of coupled aid in
the hops sector should be increased from 25 %, as initially
proposed by the Commission, to 40 %, in order to ensure that
the essential work of producer groups is appropriately taken
into account. Areas formerly used for hop-growing which are
cleared under the special programme should be included in the
calculation of the reference amount.

As regards the Member States being able to choose
18.2.2
(Articles 51-57) and the
between the farm payment model
regional model (Article 58 ff.), the EESC points out that if a
Member State opts for the regional model, current support for
hops would be considerably ‘watered down’ and redistributed
for other types of land use.

The President

of the European Economic and Social
Committee

Roger BRIESCH