Opinion of the European Economic and Social Committee on the Proposal for a Council Regulation on the common organisation of the markets in the sugar sector (COM(2005) 263 final — 2005/0118 CNS)
Date: 2005-10-26
Institutions: European Economic and Social Committee
Subjects: aid to agriculture, common agricultural policy, common organisation of markets, sugar industry

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— ways of travelling (in a group or individually);

— classification according to distances covered;

— means of passenger transport used and levels of accessi-

bility, safety and security, etc.;

recommends that the Commission, together with the
3.6
Member States concerned,
introduce the necessary means to
ensure the best possible mobility for people, in line with the
principle of sustainable development, by taking into account:

— the difficulties or constraints faced by people with disabil-
ities, older persons and young children, though cooperation
with organisations which represent persons with reduced
mobility;

— the funding needed for the research and development of
new methods and technologies adapted to passenger trans-
port; and

— the legislative, regulatory and financial provisions Member
States will require to implement investment projects that
will meet needs;

3.7
stresses in conclusion that a united Europe must ensure
that Member States offer a balanced transport service, both for
freight and passengers.
It wishes to be notified when the
appraisal is launched and to be involved therein, and also to be
consulted on the conclusions.

Brussels, 26 October 2005.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

Opinion of the European Economic and Social Committee on the

— Proposal for a Council Regulation on the common organisation of the markets in the sugar

sector

— Proposal

for a Council Regulation amending Regulation (EC) No 1782/2003 establishing
common rules for direct support schemes under the common agricultural policy and estab-
lishing certain support schemes for farmers

— Proposal for a Council Regulation establishing a temporary scheme for the restructuring of the
sugar industry in the European Community and amending Regulation (EC) No 258/1999 on the
financing of the common agricultural policy

(COM(2005) 263 final — 2005/0118-0119-0120 CNS)

(2006/C 28/10)

On 25 July 2005 the Council decided to consult the European Economic and Social Committee, under
Articles 36 and 37 of the Treaty establishing the European Community, on the abovementioned proposals.

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 7 October 2005. The rapporteur was
Mr Bastian.

At its 421st plenary session held on 26 and 27 October 2005 (meeting of 26 October), the European
Economic and Social Committee adopted the following opinion by 103 votes with 22 votes against and 18
abstentions.

1. Introduction

whereas European demand for sugar is estimated at 16 million
tonnes a year.

Twenty-one EU countries produce sugar beet. The
1.1
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,

Beet cultivation on crop rotation extends over 2.2
1.2
million hectares of land and involves 320 000 farmers (i.e.
slightly less than 7 hectares per beet farmer). Beet is processed
at 236 sugar factories employing some 75 000 permanent and

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seasonal workers directly. The European sugar beet/sugar sector
accounts directly or indirectly for a total of 500 000 jobs.

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 — 1.6
million tonnes — is imported from the ACP countries (1)).

In the sugar, isoglucose and inuline syrup sector, the last

1.4
roll-forward of the quota system took place in 2001.

— market management provisions consisting of carrying
forward out-of-quota sugar, giving the option to withdraw
a percentage of quota sugar that
is surplus to market
for
requirements and the option of providing support
private storage when the market price falls below the refer-
ence price;

— the possibility of the chemical and pharmaceuticals industry
also buying out-of-quota sugar, as is done in the yeast and
alcohol sectors and, in the event that supplies are difficult
to obtain, of securing a specific Tariff Rate Quota;

1.5
On 14 July 2004, the Commission submitted a commu-
nication on sugar sector reform (2), on which the EESC adopted
an opinion on 15 December 2004 (3).

— until 2009/2010, a supply guarantee for full-time refiners,

in line with their traditional needs;

On 22 June 2005, the Commission submitted three

1.6
legislative proposals (4), which are the subject of this opinion.

— the proposal does not impose limits on sugar imports from

LDCs as of 2009/2010;

At the same time, the Commission submitted a proposal for a
Regulation of the European Parliament and of the Council
establishing accompanying measures for Sugar Protocol coun-
tries affected by the reform of the EU sugar regime (5).

— where exports are concerned, the proposal prohibits the
export of out-of-quota sugar and does not consider the
export of quota sugar without refund;

The Commission's legislative proposal diverges from the

1.7
communication of 14 July 2004 in:

— its duration: the regulation will run until the 2014/2015

marketing year;

— a minimum price for sugar beet that is reduced by 42.6 %
over two marketing years (to EUR 25.05 per tonne), with a
possible further 10 % reduction by way of an agreement
within the trade;

— a reference price for white sugar that will be cut by 39 %
over four years (to EUR 385.5 per tonne), the net reference
price being cut over two marketing years (the difference is
the levy to be paid to the restructuring fund);

— the Commission abandons both the transferability of quotas
at European level and the linear reduction of quotas by
2 800 000 tonnes over four years. A restructuring plan will
be put in place, to be funded by a levy on sugar, isoglucose
and inuline quotas. More than 50 % of the levies on sugar
quotas will be paid for by farmers through cuts in the price
of sugar beet;

— the restructuring fund will grant producers of sugar, isoglu-
cose and inuline who give up their quota, cease production
and dismantle their plants degressive aid, which varies
according to the year in which they stop;

— a production charge of EUR 12 per tonne of quota sugar,

to be borne equally by growers and manufacturers;

— the Commission proposes that the restructuring fund cover
up to 6 160 million quota tonnes, with a total budget of
EUR 4.2 billion;

— A+B quotas merged to form one production quota, with an
additional quota of one million tonnes to be divided
between the Member States producing C sugar, in return
for a payment of EUR 730 per tonne of additional quota;

— a four-year restructuring scheme, with quotas decreasing

progressively thereafter;

— isoglucose quotas that are increased by 100 000 tonnes per

year for three years;

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

signatories to the Cotonou agreement.

(2) COM(2004) 499 final.
(3) OJ C 157, p. 102.
(4) COM(2005) 263 final.
(5) COM(2005) 266 final.

— compensation equal to 60 % of the estimated revenue loss
arising from the price cut in sugar beet will be granted to
sugar beet and chicory growers in the form of decoupled
aid, in line with the per-hectare amounts intended for A+B
production and with a ceiling set for each Member State;

— it will be left to each Member State to decide which refer-

ence period to use for distributing aid;

— the total

financial envelope proposed for direct
income
support for farmers will be EUR 907 million in 2006/2007
and EUR 1 542 million as of 2007/2008.

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2. General comments

liberalisation. Such a move cannot
therefore provide beet
growers, sugar sector workers and European consumers with
the prospect of a sustainable future’.

2.1
The EESC considers that reform of the CMO in sugar
has become necessary. It refers in this regard to its opinion of
15 December 2004 (6), in particular to points 2.1, 2.4, 2.6, 2.7,
2.8, 2.9 and 2.10.

The EESC notes, however, that the proposal for reform
2.2
goes considerably further than what was announced in the
communication of 14 July 2004. The cuts in prices and
production are much more drastic and exports will be rapidly
abolished. The proposal therefore sends the wrong message to
our competitors in WTO negotiations. Furthermore, it does not
safeguard the aim of a European sugar industry that is capable
of guaranteeing market supply, in particular in regions where
restructuring is difficult.

the impact of

The EESC is concerned about

2.3
the
proposed cuts in prices and production on farmers' incomes
and on employment. In this connection, it emphasises the key
role that the sugar industry plays in many regions. The EESC
considers that the proposal is out of step with the European
agricultural model, with the Council's oft-repeated desire to
farm production in the least-favoured
support
regions or Member States, and with multifunctionality, sustain-
ability and the Lisbon Strategy.
the proposals for
reform would result in the loss of 150 000 direct or indirect
jobs.

traditional

Indeed,

The EESC does not believe that

2.4
the Commission's
reform scenario — securing market balance by cutting prices
— can meet its objective, which is to maintain a strong Euro-
pean beet farming and sugar industry and to treat developing
countries supplying preferential sugar with respect. The EESC
considers that everything possible should be done to prevent
new areas of the global market being opened up — in particu-
lar to Brazil — through swaps (triangular trade), which bring
no benefit to the development of LDCs. 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 unacceptable but which
nonetheless account for the extremely low production costs
and the rise in production during recent years, which has led
to increased stocks and thus low prices in the world market. It
considers that access to the EU market should be conditioned
by compliance with social norms as referred to in the Declara-
tion of the International Labour Organisation Conference held
in 1998.

2.5
and quotas are a major

The EESC (7) ‘considers that the proposed cuts in prices
full sugar market
step towards

(6) See footnote 3.
(7) OJ C 157 of 28.6.2005.

The EESC (8) ‘fails to understand why the Commission
2.6
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 (9) does not believe that the significant fall in
2.7
sugar prices would benefit consumers. 70 % of
is
consumed in processed products; this makes it very difficult to
reduce the costs passed on to consumers. Furthermore,
in
countries where sugar markets have been opened up, the prices
paid by consumers have not decreased.

sugar

The EESC fails to understand why the Commission is
2.8
proposing to abolish unprocessed sugar exports so rapidly.
Despite losing the dispute at the WTO panel, the European
Union still has the right to export 1 273 000 tonnes of subsi-
dised unprocessed sugar, whether this be quota sugar with
refund or out-of-quota sugar without refund. Sugar beet yields
also vary somewhat and the market will be subject to the varia-
bility of import levels. It would therefore be useful if exports
could provide some flexibility in managing the fluctuations in
the availability of quota or out-of-quota sugar. This flexibility is
needed to ensure that production is sustainable and that
rational use is made of workers and equipment.

2.9
for a
The EESC supports the Commission proposal
voluntary restructuring scheme, which would make implemen-
tation of the restructuring programme considerably easier. It
would like to see this plan extended, however, to take account
of the interests of sugar beet growers and sugar sector workers.

Overall, the EESC (10) feels that the Commission has
2.10
failed 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 devel-
food and marketing
oping countries to large international
companies. It would also be the unmaking of much of the
European and ACP sugar industry, with the Brazilian sugar
industry being virtually the sole beneficiary (11).

(8) OJ C 157 of 28.6.2005.
(9) OJ C 157 of 28.6.2005.
(10) See also OJ C 157 of 28.6.2005.
(11) See also OJ C 157 of 28.6.2005.

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3. Specific comments

3.1
The EESC welcomes the fact that the Commission is
proposing a regulation for the period from 1 July 2006 to 30
September 2015, as it had requested.

3.2
The EESC considers that the proposed price cuts are
excessive and will furthermore have no effect on sugar imports
through triangular trade operations (the global market, LDCs,
the EU) and which will vary in value according to fluctuations
in world prices and exchange rates. The EESC therefore calls
for price cuts to be restricted to the minimum required — in
line with WTO negotiations — and for these to be spread over
time, just like the tariff reductions, particularly in order to give
the new Member States the time they need to adapt.

The EESC also calls on the Council to pay particular attention
to the problems facing farmers in regions with major problems
or in regions that offer few profitable alternatives to sugar beet
growing.

3.3
The EESC is surprised to note the proposal's provision
for a charge on production to be met by growers and refiners,
since quota levels will clearly be lower than consumption. It is
also surprised that the Commission's approach is based on
promoting competition between European production and
imported sugar. The charge thus discriminates against Com-
munity sugar growers and refiners. The EESC therefore calls for
it to be abolished or, failing that, extended to all
imported
sugar.

3.4
The Committee believes there can be no effective CMO
in sugar unless there is also some power to restrict imports. It
therefore recommends including provisions prohibiting sugar
SWAPs with Least Developed Countries and,
should the
Commission decide to withdraw a certain tonnage of quota
sugar from the market (withdrawal procedure) or to apply a
private storage aid measure (a market price below the reference
price), automatically applying a quantitative safeguard clause
with respect to imports from LDCs.

The EESC considers the proposal to be unreasonably
3.5
restrictive as regards exports. It takes the view that all export
possibilities authorised under the WTO should be authorised
by the regulation,
in particular the export of an additional
volume of out-of-quota sugar when the quantitative and
budgetary limits authorised under the WTO for subsidised
exports are not reached by exports of quota sugar with refund.

The regulation should furthermore allow for the export of
quota sugar without refund.

the market, that private storage and mandatory withdrawal will
not ensure that the market price respects the reference price.
The EESC thus calls for the intervention arrangements to be
maintained.

The EESC takes note of the Commission's proposal to
3.7
provide 60 % compensation for the loss of beet
farming
income as a result of the price cuts. It considers that compensa-
tion must be equitable and that the percentage must be similar
to that of compensation for other crops. It wishes to state that
the real drop in beet prices, taking account of the production
charge and the risk of a further 10 % cut, could reach 50 %.
This being the case, compensation would only amount
to
51 %. The EESC thus recommends a lower price cut and a
higher rate of compensation, whilst respecting the proposed
budget constraints. The EESC stresses that granting compensa-
tion for price cuts does not remove the long-term need for
effective management tools in order to avoid market collapse
and to guarantee farmers' incomes.

The EESC notes that the proposal

3.8
for compensation
envisages decoupled aid, distributed per hectare of beet or
chicory for which an A+B sugar or inuline syrup delivery
contract has been concluded.
It considers that the Member
States, by means of appropriate provisions, must have complete
freedom to grant beet and chicory growers the maximum aid
permitted within the national ceilings set out in the proposal.
The EESC recommends that the Commission assess the long-
term effects of decoupling.

3.9
The Committee finds it illogical that the proposal should
advocate a free-of-charge 300 000 tonne increase in isoglucose
quotas whilst at the same time establishing a tough restruc-
turing programme with the aim of substantially reducing sugar
quotas and that the million tonnes of additional quota sugar
that can be allocated has to be paid for.

3.10
The EESC notes that, at the beginning of the regu-
lation, the Commission accepts its suggestion to implement a
voluntary programme of compensated restructuring, replacing
its mandatory quota-reduction mechanism and the transfer-
ability of quotas at European level.

The EESC calls for codecision for growers/refiners on the
restructuring process, and for appropriate compensation for
restructuring to be granted to growers affected by this process.

The EESC condemns the weakness of the market organi-
3.6
sation tools that have been put forward to replace intervention.
Indeed, it is possible to foresee, given the irregular and unpre-
dictable nature of imports, resulting in permanent pressure on

The Committee notes in this connection that the additional
payment of EUR 4.68 per tonne of A+B beet agreed for
2006/2007 for growers affected by restructuring simply repre-
sents the early allocation of aid to these growers to compensate
for the price cuts that will occur in 2007/2008. It does not,
therefore, represent compensation for restructuring.

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3.11
The EESC considers that the Council should attach the
greatest importance to the impact of the Commission proposal
on employment in the various regions affected by restructuring
It calls on Member States and the
in the sugar industry.
Commission to improve access to the European Structural
Funds and to the European Social Fund, especially in the
regions most affected by restructuring and in the new Member
States,
to help to mitigate the reform's adverse effects on
employment by means of social schemes that go considerably
further than the mandatory legal
Job creation,
diversification and reconversion must be promoted.

framework.

3.12
In this regard, the EESC considers it necessary that, as
a matter of urgency, the Commission and the Member States
support — with regulatory and financial measures — a proac-
tive policy on the use of biofuels, in which sugar beet should
play a major role. The EESC considers that there is an urgent
need to further develop the processing of above-quota sugar
production in the non-food sector.

3.13
The EESC wishes to draw the Commission's and the
Council's attention to the highly destabilising effect of sugar
imports from the Balkans on the neighbouring countries. The
Committee recommends that the necessary safeguard measures
be drawn up and implemented (in particular, adherence to the
intervention price or the reference price) and urges that Croa-
tia's quota be set in the very near future.

4. Conclusions

4.1
The EESC recognises the need to reform the sugar CMO
but believes that the reform proposals go too far as regards
cutting production and prices.

Their implementation would have considerable repercussions
for the European sugar sector, and would in particular result in
the loss of at least 150 000 jobs in regions that are often
already struggling and lacking in profitable alternatives to the
cultivation of sugar.

4.2
The EESC calls on the Council to demonstrate greater
ambition than the Commission on the issue of European beet
and sugar production, by restricting import volumes and by
authorising the use of all export options permitted by the
WTO. A production target two to three million tonnes higher
than that being proposed by the Commission is
indeed
possible, in particular by restricting imports. This would help
to save 50 000 to 75 000 jobs and around 50 000 beet farms
in regions throughout the Community.

4.3
The Committee fears that the aims of the Everything But
Arms initiative and of the CMO sugar reforms for development

Brussels, 26 October 2005.

policy will not be met and this is why it supports the LDCs'
request to negotiate import quotas for sugar with the Union.
Swap practices should, under no circumstances, be admitted
and automatic safeguard clauses and a code of conduct which
meets social and environmental sustainability and food sover-
eignty criteria should be established for access to the EU
market.

The EESC recommends that a flow of quota or out-of-
4.4
quota sugar exports in line with the tonnages authorised by the
WTO be maintained,
in order to continue supplying our
nearest traditional customer base.

It reiterates that any changes to prices should be spread
4.5
over
time and should comply strictly with international
commitments and that, if necessary, sugar must be treated as a
sensitive product in the context of the Doha Development
Agenda (DDA) negotiations.

4.6
The EESC thus recommends that the current interven-
tion mechanism be maintained, and that effective market
management tools be implemented on a long-term basis.

It requests that partial compensation to growers for
4.7
income lost as a result of beet price cuts be increased, insofar
as possible, and allocated in full. It stresses the need to ensure
that this aid is sustainable and for the sugar budget to be main-
tained at current levels.

4.8
The Committee welcomes the Commission proposal on
a restructuring programme, but calls for growers to have a
right
to codecision and for aid to be granted to growers
affected by factory closures to help them to restructure their
farms.

4.9
The EESC reiterates its view that the European Structural
Funds and the European Social Fund should be mobilised in
order to give workers affected by the restructuring of the Euro-
pean sugar industry the best opportunities to develop new
career paths, as well as the necessary compensation.

4.10
The EESC considers that the sugar sector must, as a
matter of urgency, be included in the energy debate (a biofuels
policy) as a means of helping to offset the reform's more
harmful consequences.

4.11
sugar imports from the Balkans be corrected without delay.

The Committee insists that the destabilising effects of

4.12
The EESC calls on the Council to monitor the situation
in regions which are facing difficulties or which offer few prof-
itable alternatives within farming.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND