Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the Council and the European Parliament — accomplishing a sustainable agricultural model for Europe through the reformed cap — sugar sector reform’(COM(2004) 499 final)
Date: 2004-12-15
Institutions: European Economic and Social Committee
Subjects: common agricultural policy, common organisation of markets, reform of the CAP, sugar, sugar industry, sustainable development

C 157/102

EN

Official Journal of the European Union

28.6.2005

Opinion of the European Economic and Social Committee on the ‘Communication from the
Commission to the Council and the European Parliament — accomplishing a sustainable agri-
cultural model for Europe through the reformed cap — sugar sector reform’

(COM(2004) 499 final)

(2005/C 157/19)

On 15 July 2004 the Commission decided to consult the European Economic and Social Committee, under
Article 262 of the Treaty establishing the European Community, on the abovementioned communication.

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 16 November 2004. The rapporteur was Mr
Bastian. The co-rapporteur was Mr Strasser.

At its 413th plenary session of 15 and 16 December 2004 (meeting of 15 December 2004) the European
Economic and Social Committee adopted the following opinion by 137 votes to 21, with 11 abstentions:

1. Introduction

sugar, cutting quotas by 115,000 tonnes and making beet plan-
ters and sugar manufacturers bear the cost of all production
refunds to the chemical industry.

1.1
Twenty-one EU countries produce sugar beet. The
French overseas departments and Spain are minor sugar cane
producers (280,000 tonnes). In general, annual European sugar
production fluctuates between 17 and 20 million tonnes,
whereas European demand for sugar is estimated at 16 million
tonnes a year.

1.5
On 14 July 2004, the Commission submitted a commu-
nication on sugar sector reform [COM(2004) 499 final] as a
further step in the establishment of its sustainable agricultural
model for Europe.

1.2
Beet cultivation on crop rotation extends over 2.2
million hectares of land and involves 350,000 farmers (i.e.
slightly more than 6 hectares per beet
is
processed at 200 sugar factories employing 60,000 workers
directly.

farmer). Beet

1.3
The European Union also produces 500,000 tonnes of
isoglucose and 250,000 tonnes of inuline syrup and has a
refining industry for raw sugar cane (most of which — 1.5 Mt
— is imported from the ACP countries (1)).

In the sugar,

1.4
isoglucose and inuline syrup sector, the
production quota system arising from Regulation 1785/81 has
in
been rolled forward several
2001, covered five marketing years — from 2001/2002 to
2005/2006. The regulation involved here (1260/2001) made a
number of important changes to its predecessor. These include
fixing prices until 30 June 2006, abolishing the storage
scheme, ending the financing of storage costs for carried-over

times. The last roll-forward,

(1) ACP countries: Developing African, Caribbean and Pacific States,

signatories to the Cotonou agreement.

In this document,

1.6
the Commission proposes radical
changes to the sugar regime, prices and quotas from 1 July
2005 and anticipates making further proposals on quotas and
prices in 2008, if need be. The Commission is thus seeking to
bring the sugar regime into line with the CAP reform, make
the European sugar market less attractive for imports, substan-
tially cut quota sugar exports involving refunds, and abolish
production refunds for sugar sold to the chemical industry.

1.7
The Commission proposes merging the A and B quotas
into a single quota and cutting the sugar quota by 1.3 million
tonnes and by a further 500,000 tonnes per year for the
following three years (thereby securing an overall reduction of
2.8 million tonnes or 16 %).

In tandem with this cut in sugar quotas, the Commis-
1.8
sion is proposing increasing the isoglucose quotas by 100,000
tonnes a year for three years (i.e. a rise of 60 %) and main-
taining insulin quotas.

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1.9
In order to bring about what it sees as the necessary
restructuring of the sugar sector, the Commission proposes
making quotas
freely transferable at European level. The
Commission also makes provision for a co-financing scheme
with the Member States, for granting aid — to the tune of
€250 per tonne of quota sugar — to sugar manufacturers who
are unable to sell their quota and wish to withdraw from sugar
production. The purpose of this aid would be to help the sugar
manufacturers concerned meet their social and environmental
commitments.

The Commission proposes a private storage scheme (1)
1.10
and a mandatory carry-over mechanism for quota sugar to
replace
and the declassification
mechanism. The purpose of this proposal is to guarantee prices
through market balance and to ensure compliance with WTO
commitments.

intervention regime

the

On prices,

1.11
the Commission proposes replacing the
intervention price for sugar by a reference price which will
serve to calculate the minimum price for imports from the
ACP and least developed countries (LDCs) and as a trigger for
private storage measures and the carrying-over of any surplus
volume to the following year. The institutional support prices
would be reduced in two stages. To that end, the Commission
is proposing a reference price of €506 per tonne of white
sugar in 2005/2006 and 2006/2007 and €421 per tonne in
2007/2008. This compares with a current intervention price of
€631.9 per tonne and a weighted A+B market price estimated
by the Commission at €655.

1.11.1
At the same time, the minimum weighted price for
A+B quota sugar beet would drop from €43.6 per tonne at the
moment to €32.8 per tonne in 2005/2006 and 2006/2007 (-
25 %) and to €27.4 per tonne in 2007/2008 (-37 %). The basic
beet price is currently €47.67 per tonne. The Committee
believes that price-cutting will be greater in some Member
States than in others due to the differing proportions of the A
and B quotas.

1.11.2
The Commission considers that up to 60 % of the
income lost as a result of the drop in the weighed price of
quota beet should be offset through direct income support
decoupled from production (in line with the provisions of the
2003 CAP reform).

The Commission proposes

1.12
abolishing production
refunds for the chemical and pharmaceutical industries (2) and
allowing these industries to take supplies of C sugar, as
happens in the alcohol and yeast sector.

1.13 With regard to relations with suppliers of preferential
ACP sugar, the Commission proposes pressing ahead with the
ACP sugar protocol — which involves import quotas — but
with a reduction in the guaranteed price that matches the
reduction in the price of beet. The Commission proposes initi-
ating dialogue with the ACP countries to help them adapt to
the new conditions, on the basis of an action plan to be
submitted before the end of 2004.

1.13.1
The Commission proposes abolishing refining aid for
sugar from the ACP countries and the French overseas depart-
ments and, in time, dispensing with the concept of Maximum
Supply Needs.

For the least developed countries (LDCs), the Commis-
1.14
sion makes no proposals on managing import levels. It asks
that the import prices for LDC sugar be no lower than the ACP
minimum price. With regard to the Balkans, the Commission
plans to negotiate an import quota. Under the EBA (Everything
but Arms) arrangement, sugar from 49 LDCs will be allowed
onto the European market tariff- and quota-free from 2009.

2. General comments

2.1
The European Economic and Social Committee (EESC)
notes that changes and adaptations to the Common Market
Organisation (CMO) in sugar have become necessary because
of:

— the 2001 Everything but Arms initiative aimed at the least
developed countries (LDCs), the impact of which on sugar
was not properly gauged by the Commission at the time;

— the overall trend towards more open European agricultural
markets as a result of World Trade Organisation negotia-
tions;

The Commission estimates the cost to the budget of
1.11.3
decoupled compensation at €895 million in 2005/2006 and
2006/2007 and €1.340 billion a year from 2007/2008.

— threats to European sugar exports arising from the WTO

sugar panel and Doha Round trade negotiations; and

(1) Private stockage makes it possible to withdraw a certain tonnage of
sugar from the market temporarily without reducing quotas. The
mandatory carry-over
from
campaign n to campaign n+I, with a corresponding reduction in
quotas for the n+I campaign.

system and the transfer of sugar

(2) Council Regulation 1265/2001 grants a production refund (support
that aims to narrow the gap between the intervention price and the
world market price) for quota sugar and isoglucose products used in
the chemical and pharmaceutical industries (approximately 400,000
tonnes a year).

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— CAP reform.

It is not therefore a question of assessing the need for reform,
but of examining what kind of reform is needed, its scope and
the date it is to become operative.

2.2
The Commission favours a radical revamp of the sugar
regulation. It justifies its proposal by stating that the current
regime is criticised ‘for a lack of competition, distortions in
the market, high prices for the consumers and users, and
its effect on the world market, particularly in relation to
developing countries’. The European Economic and Social
the Commission should base its
Committee regrets
thinking on blanket criticism of this sort without seeking verifi-
cation for it in reliable studies. In that regard, the Committee
would point to its own opinion of 30 November 2000 (1).

that

2.3
The EESC notes that the Commission proposal largely
pre-empts the upcoming international agenda and undermines
the WTO negotiating remit. That is unwise and detrimental to
safeguarding the legitimate interests of the EU sugar industry
and its preferential suppliers. Furthermore, it does not enable
the Commission to deal with issues relating to sugar outside
the quota system.

the impact of

The EESC is concerned about

the incomes of many family farms,

the
2.4
proposed cuts in prices and quotas on levels of EU beet and
sugar production,
the
sustainability of industrial and trading activities in the sugar
sector, sugar industry and rural employment, and multifunc-
tionality, not least in less-favoured or outlying regions and in
the new Member States where major restructuring investments
are needed. The EESC has its doubts as to whether the Commis-
sion's reform proposals are in keeping with the European agri-
cultural model, the multifunctional approach and the sustain-
ability principle as unanimously defined by the Luxembourg
in December 1997 (2). The EESC also
European Council
considers that the reform proposals run counter to the Lisbon
strategy, which expressly cites job creation as one of its goals.

It also fails

its objective. Nor,

in the long run, will

The EESC does not believe that

2.6
the Commission's
reform scenario — securing market balance by cutting prices
— can meet
this
scenario maintain a strong European beet farming and sugar
industry.
to uphold European commitments
towards developing countries supplying preferential sugar. In
fact, these cuts will spell the end for many producers both in
Europe and in the developing countries and will considerably
weaken the position of those producers that do survive. At the
same time, Brazil will be given the opportunity to increase its
world market share and, from 2008/2009, will also be able to
export — indirectly — more and more sugar to Europe
through the swap (3) (triangular trade) arrangement with the
least developed countries, which will not benefit themselves in
terms of social and rural development.

The EESC feels that such a reform of the sugar CMO
2.7
will benefit only a few countries, primarily Brazil.
In that
connection, the Committee would stress that Brazilian sugar
production — which is largely sustained by that country's bio-
ethanol policy and monetary policy — is subject to social,
environmental and land-ownership conditions which are unac-
ceptable but which nonetheless account for the extremely low
Brazilian production costs and thus the low prices on the
world market.

2.8
For that reason, the EESC fails to understand why the
Commission did not adopt the idea of negotiating preferential
import quotas with the LDCs, as those countries themselves are
requesting. That would make it possible to satisfy the interests
of the poorest developing countries in a more targeted way and
to secure a balanced market supply at sustainable prices in
Europe. The EESC would highlight the fundamental contradic-
tion in the stance taken by the Commission which, on the one
hand, cites the Everything but Arms initiative to justify the
radical reform of the sugar CMO, but, on the other, refuses to
act on the LDCs' explicit request
for a preferential quota
system. The EESC considers that import quotas for the Balkans
should be established on an urgent basis.

2.5
The EESC asks the Commission to conduct a detailed
and verifiable study of the regions where beet production and
the sugar industry will be threatened and on how many direct
and indirect jobs in the agricultural and industrial sectors will
be at risk overall. Last year's Commission impact assessment
does not provide the requisite information.

(1) OJ C 116 of 20 April 2001, p. 113-115. Committee opinion on the
Proposal for a Council Regulation on the common organisation of
the markets in the sugar sector. ‘The Committee asks to be involved
in the study which the Commission intends to undertake to analyse
inter alia the criticisms directed at the sugar CMO, concentration in
the agri-food industry and the passing-on of price changes from the
producer to the consumer’.

(2) Presidency conclusions: SN 400/97, p.14, 13.12.1997

2.9
The EESC considers that the proposed cuts in prices and
quotas go well beyond the WTO remit and are a major step
towards full sugar market liberalisation. Such a move cannot
provide beet planters, sugar sector workers and European
consumers with the prospect of a sustainable future — despite
the Commission's attempts to convince us otherwise.

(3) In this particular case, the export of Brazilian sugar to a least devel-
oped country and the consumption of said Brazilian sugar in the
least developed country, which replaces local sugar. This least devel-
oped country's sugar, thus replaced,
is exported to the European
Union.

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fall

The EESC cannot agree with the Commission that the
2.10
significant
in sugar prices should benefit consumers in
essence (1). As in earlier reforms, such reductions in the raw
material price will hardly — if ever — be passed on. That is
true in particular of processed goods, such as soft drinks and
sweetened products (75 % of sugar in Europe is consumed in
processed goods). The EESC believes that
the Commission
should carefully monitor the impact of the reform on the
prices of goods containing sugar.

The EESC shares the ACP countries' concern about the
2.11
detrimental
impact of the reform proposals on incomes and
jobs in the economic sectors directly affected and on the social
balance and development prospects in those countries.

2.12
The EESC recognises the threats to European sugar
exports. It fails to understand therefore why the 2005-2009
quota reductions planned by the Commission involve greater
cuts than necessary in exports with refunds — on the assump-
tion that the EU would lose the WTO panel dispute with
Brazil, Australia and Thailand. On the contrary, the EESC feels
that the EU should take appropriate steps to retain all the
export opportunities that it claims and enjoys under interna-
tional agreements, and that it should therefore propose a lower
cut in quotas.

that

The EESC believes

2.13
the Commission should
propose measures to ensure the development of alternative
markets, particularly in the biofuel sector, to compensate for
export and import initiatives that result in fewer outlets for
European producers.

Overall, the EESC feels that the Commission has failed
2.14
to gauge the impact of its proposal, which would result in a
massive transfer of resources from the rural sector (farming and
primary processing) in both Europe and the developing coun-
tries to large international food and marketing companies. It
would also be the unmaking of much of the European and
ACP sugar industry, with the latifundia that dominate Brazilian
sugar production being virtually the sole beneficiaries.
In
several cases, the latter are in breach of fundamental human
rights and labour laws (1998 Declaration of the ILO Interna-
tional Conference (2)) and principles of sustainability (defores-
tation of the Amazon). The EESC considers that access to the
EU market should be conditioned by compliance with social
and environmental norms.

(1) See Communication COM(2004) 499 final, start of point 3.2

Economic impact

(2) ILO Declaration on fundamental principles and rights at work. Inter-

national Labour Conference, 86th Session Geneva, June 1998

3. Specific comments

3.1
The EESC notes that Regulation 1260/2001, adopted
unanimously by the Council, remains in force until 1 July 2006
and provided a basis for accession negotiations with the ten
new Member States. It thus fails to understand the Commis-
sion's proposal to bring the reform forward unnecessarily to 1
farmers have already organised their
July 2005. Moreover,
2005/2006 crop rotations and, in some European countries,
the autumn beet sowing is currently under way. On top of this,
there has been heavy investment by farms and industry since
2001 on the assumption that Regulation 1260/2001 would
remain in force until its due expiry date.

3.2
The Committee therefore asks that the new sugar regu-
lation should not take effect until 1 July 2006 at the earliest.
Any other solution would rightly be seen as a breach of the
principle of trust by the trade bodies concerned and the new
Member States.

3.3
leaves
The EESC notes that the Commission proposal
open the question of what is to happen to the CMO post-
2008. However, the beet and sugar sectors need predictability
for the requisite restructuring and investment operations. The
Committee therefore asks the Commission to put forward a
regulation covering the period from 1 July 2006 to 30 June
2012, which ties in with the timeframe of the revamped CAP.

3.4
The EESC feels that the Commission has not given any
reasons for the massive cuts in institutional prices (33 % for
sugar and 37 % for beet,
in two stages). However, reliable
calculations indicate that a maximum cut of 20 % would be
enough to comply with the expected new WTO constraints.
The EESC would like to see the Commission adopt that figure.
It would also ask the Commission to bear in mind the LDCs'
desire to negotiate preferential quotas as, in subsequent years,
that would take much of the pressure off the European sugar
market and create a satisfactory export environment for LDCs.

3.5
The EESC condemns the weakness of the market organi-
sation tools that have been put forward to replace the CMO
intervention.
is possible to foresee that private
stockage and the carry-over mechanism will not adequately
ensure that the market price respects the reference price.

Indeed,

it

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3.6
The EESC takes note of the Commission's proposal to
partially offset loss of farming income through compensation
payments. However, it would point out that smaller price cuts
— or restricting those cuts to the first stage only — would
make it possible both to save on the budget and raise the
compensation rate without exceeding the available budget. The
Committee wonders how the national envelopes can be distrib-
uted in a fair and practical way so that the aid does in fact
reach those farmers facing cuts in — or the loss of — beet
income. It would be appropriate for the distribution of aid to
take into account the reference granted to the farmer in the last
two years before the regulation enters into force, as was the
case for the 2003 CAP Reform for milk. The Committee
stresses the need to keep such aid going in the long term and
to maintain the sugar budget.

environment — from the point of view of crop rotation — and
would adversely impact the agricultural markets in replacement
crops. The EESC requests that
the management of quotas
should remain subject to Member State control and that all
restructuring decisions should first be subject
to an inter-
branch agreement.

the EESC feels that

Instead of quota trading,

3.9.1
the
Commission should explore the possibility of setting up a Euro-
pean restructuring fund for the sugar industry which, paying
particular attention to the reconversion needs of farmers and
workers within the sector, would indemnify the quotas that
had become available once the regulation came into force, —
following an inter-branch agreement between the sugar manu-
facturer and the beet planters concerned and reducing all the
more the need to cut quotas.

3.7
The EESC feels that any quota cuts that do prove neces-
sary should be kept to the bare minimum and should apply to
the same extent to sugar and competing products under the
quota system. The proposal set out in the communication to
increase the isoglucose quota is thus unfair as it induces the
Commission to propose bigger cuts in sugar quotas — to the
detriment of beet planters and the sugar industry.

4. Conclusions

3.7.1
The EESC thinks that any decision on the required
scale of potential quota cuts should not be taken until the
Commission has carried out a detailed study covering structural
deficits and possible suspensions of quota sugar production or
until it becomes clear how the WTO agreements pending and
the outcome of the WTO panel will impact on the production
of quota sugar and non-quota sugar and trade flows between
the European Union and non-EU countries.

3.7.2
The EESC feels that the Member States must be given
enough scope to internally manage both the sugar and beet
quota cuts — with due regard to the interests of all the parties
concerned — in accordance with conditions of fairness and
social benefits. Therefore,
it asks the Commission to make
specific provision for this possibility in the reform proposals
and regulations.

The EESC recognises the need to reform the sugar CMO
4.1
but believes that the reform proposals go too far and that their
implementation will have considerable repercussions for the
European sugar sector, particularly in employment. It is unfor-
tunate that the proposals are not adequately substantiated and
that their consequences have not been subjected to appropriate
analysis, as would have been expected.

The EESC recommends that

4.2
the regulation's date of
entry into force be postponed to 1 July 2006 and that farmers
should receive immediate notification of this decision to enable
them to confirm their 2005 crop rotations.

The Committee considers that

4.3
the regulation should
cover a minimum six-year period to provide the sector with an
adequate perspective.

Abolishing production refunds

3.8
supplying quota
sugar to the chemical and pharmaceutical industry would also
adversely impact sugar quota levels and introduce a risk factor
into future arrangements for the supply of sugar to those
industries. The EESC therefore calls for the retention of the
rules currently in place.

for

that

The Committee requests

4.4
the Union negotiate
import quotas for sugar from the least developed countries, as
these countries have requested. Swap practices should, under
no circumstances, be admitted and social and environmental
sustainability and food sovereignty criteria should be estab-
lished for access to the EU market.

The EESC calls for import quotas for the Balkans to be

4.5
established as soon as possible.

3.9
The EESC feels that quota such transfers — and cross-
borders transfers in particular — could sound the death knell,
in many regions, for profitable beet farming. That would have
grave economic consequences for beet planters' families and
the employment situation. It would also be harmful to the

4.6
It considers that any changes to prices and production
quotas should be strictly in line with international commit-
ments and should apply equally to all sweeteners (sugar and
competing products under quota). Sugar must be treated as a
sensitive product in the context of the Doha Development
Agency (DDA) negotiations.

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It

4.7
that
mechanism be maintained to guarantee the price level.

the current CMO intervention

recommends

4.8
The EESC stresses that the price of the product (beet)
should reflect planters' production costs. It takes note of the
proposals to partially compensate planters for income lost as a
result of beet price cuts. It calls for increases in this compensa-
tion, insofar as this may be possible. It emphasises the need to
ensure sustainable aid and to maintain the sugar budget.

Brussels, 15 December 2004.

It asks that the current provisions for the supply of
industries

4.9
quota sugar to the chemical and pharmaceutical
should remain in force.

4.10
It believes that the Commission must not shirk its
responsibilities but must launch a proper restructuring plan for
the European sugar industry that reflects the interests of sugar
manufacturers, beet planters and the workforce.

The Committee would request

4.11
the Commission to
clarify its intentions regarding sugar production that is not
under quota.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

Opinion of the European Economic and Social Committee on the ‘Communication from the
Commission: Science and technology, the key to Europe's future — Guidelines for future European
Union policy to support research’

(COM(2004) 353 final)

(2005/C 157/20)

On 17 June 2004, the European Commission decided to consult the European Economic and Social
Committee, under Article 262 of the Treaty establishing the European Community, on the abovementioned
communication.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the
Committee's work on the subject, adopted its opinion on 10 November 2004. The rapporteur was Mr
Wolf.

At its 413th plenary session of 15 and 16 December 2004 (meeting of 15 December) the European
Economic and Social Committee adopted the following opinion by 83 votes to three with one abstention:

Japan or Russia, but also with rapidly expanding economies
across the whole of south-east Asia, including China, India and
South Korea. On scientific and technological performance
hinge not just economic competitiveness and the ‘pull’ that that
exerts on investors, scientists and engineers, but also cultural
and political standing and influence. Sufficient R&D investment
can and must help safeguard Europe's position and secure
sustainable development.

1. Introduction

1.1
Europe's economic, social and cultural future. A key
determinant of Europe's future development and position on
the world stage is the inexorable competition that exists on the
global market, with its changing industrial and economic struc-
tures, labour market situation and raw material parameters. It
is becoming increasingly clear
success and
economic strength — and the resultant capacity to provide
social services and secure cultural development — are critically
contingent on available knowledge and on investment
in
research and technological development.

that growth,

The European Research Area (ERA) (1). The European
1.3
Research Area was conceived to meet that challenge. Following
the Lisbon Council decisions of March 2000, the ERA became
the key concept and reference framework for Community

1.2
Global competition. Europe is no longer competing
only with now-traditional industrial nations such as the USA,

(1) ERA: European Research Area. For further details, see in particular
OJ C 110, 30.4.2004 (CES 319/2004) and OJ C 95, 23.4.2003
(CESE 288/2003).