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14.9.

98 EN Official Journal of the European Communities C 284/55

relatively simple. The split of appropriations for expen- either committee can define its own priorities and may
diture not related to posts could be based on the results show its autonomous responsibility.
of the analytical bookkeeping system that has been
developed as foreseen by article 22 of the financial 3.6. Given its past experience and in particular the
regulations. economies of scale achieved by the joint organisational
structure, the ESC realises and accepts that from an
3.5. The ESC welcomes the Commission’s proposal economic point it is useful to continue co-operation, on
of creating separate budget sections for both consultative a voluntary basis, on the production chain and, should
bodies. This presentation will create an independent the committees be housed near to each other, on
budgetary framework for each committee within which premises-related functions.

Brussels, 1 July 1998.

The President
of the Economic and Social Committee
Tom JENKINS

Opinion of the Economic and Social Committee on:
— the ‘Proposal for a Council Regulation (EC) amending Regulation (EEC) No 1766/92 on
the common organization of the market in cereals and repealing Regulation (EEC)
No 2731/75 fixing standard qualities for common wheat, rye, barley, maize and durum
wheat’, and
— the ‘Proposal for a Council Regulation (EC) establishing a support system for producers
of certain arable crops’ (1)

(98/C 284/11)

On 4 June 1998 the Council decided to consult the Economic and Social Committee, in
accordance with Articles 43 and 198 of the Treaty establishing the European Community, on
the above-mentioned proposals.
The Section for Agriculture and Fisheries, which was responsible for preparing the Committee’s
work on the matter, adopted its opinion on 16 June 1998. The rapporteur was Mr Bastian.
At its 356th plenary session of 1 and 2 July 1998 (meeting of 1 July) the Economic and Social
Committee adopted the following opinion by 98 votes to 33 with 15 abstentions.

1. General comments strategic plan so that it can take advantage of the
opportunities presented by international markets, viz.:
1.1. The Committee would underline the strategic — world population growth,
nature and importance of arable crops (cereals, oilseeds
and protein crops) for the European Union. The figures — an increase in purchasing power (including purchas-
given in Appendix I are a clear illustration of this. ing power in the developing countries),

1.2. The Committee considers that the Union must — an increase in world demand for meat (particularly
press on with efforts to win back its internal market in in south-east Asia), which should trigger a rise in
this sector (particularly for the purposes of animal feed); demand for cereals, oilseeds and protein crops.
it must also build up its food reserves and devise a
1.2.1. The Committee is nevertheless well aware of
the constraints placed upon Europe’s arable crop sector,
(1) OJ C 170, 4.6.1998, p. 1-4. and particularly the Community’s cereal exports, by the
C 284/56 EN Official Journal of the European Communities 14.9.98

agricultural agreement of the Uruguay Round signed in tiations not only in respect of cereals, oilseeds and
Marrakesh in 1994. It is also aware that the forthcoming protein crops but also in respect of other production
multilateral negotiations on agriculture in the World sectors in the Union, and particularly beef/veal and
Trade Organization (WTO) might tighten these con- milk.
straints even further (continuing fall in the level of
customs duties and/or the expansion of tariff quotas;
the reduction of subsidized exports; the decline in 1.5. In the arable crop sector the Committee considers
domestic, production-related support, etc.) These nego- that a resolute determination to defend the European
tiations will take place at a crucial time for Community agricultural model is essentially based on the following
agriculture which is already having to adjust to the principles:
consequences of the Marrakesh agreement and prepare
for eastward enlargement. — the maintenance of active common market régimes
which protect the interests of the farmers concerned,
guarantee balanced markets, stable prices and the
regularity of supplies to the internal market (both
1.3. The Committee therefore generally considers quantitatively and qualitatively) — the latter point
that a further reform of the common organization of being particularly important for agri-food industries
the cereals market, and a change in systems of support downstream of production — and finally ensure the
for producers of certain arable crops, are necessary so presence of the Union on international markets,
that the producers concerned can adapt to their new
economic and international environment. — the maintenance of balance between different types
of crop production, which presupposes appropriate
1.3.1. The Committee nevertheless reiterates the view support for deficit crops,
expressed in its opinion on the agricultural aspects of
Agenda 2000 (1) (point 3.1.3) that the Union must — respect for the environment,
promote its own model of agricultural development
— the preservation of producers’ incomes.
and defend it during forthcoming international trade
negotiations. The Committee accordingly considers that
the forthcoming reform of the CAP must be regarded 1.5.1. With regard to this last point the Committee
by the Union as an opportunity to reaffirm its determi- fears the cumulative effect of the Commission proposals,
nation to adhere to its international commitments whilst viz.: the fall in official prices, partial compensation,
at the same time preserving its own specific types of ceilings, differentiated support from Member States,
agricultural production and its own agricultural policy and the linking of aid to the need for progress on the
instruments. employment and environmental fronts. Under these
circumstances the Committee does not share the Com-
mission’s fear of ‘overcompensation’ in favour of cereal,
1.4. The Committee would underline that the forth- oilseed and protein crop producers and calls for the
coming WTO negotiations will not be the last. It should reduction in official prices to be compensated in full.
not be forgotten that although the creation of the WTO
put an end to ‘rounds’ of negotiations, international 1.5.2. The Committee believes instead that the Union
trade negotiations have now been put on a permanent must carry further the logic of compensatory payments
footing. There is also no doubt that expansion of the established in 1992 and must fully compensate for the
Union to include the CEEC will cause the Union to further fall in prices to be agreed in the arable crop
review its international commitments. sector.

1.4.1. The forthcoming reform of the CAP must 1.5.3. The Committee also warns the Commission of
therefore be tackled first and foremost with the interests the risk that new differentiated Member State support,
and time schedules of the Union itself in mind for the along with the linking of aid to progress on the
period 2000-2006. The Union is, for example, justified employment and environment fronts, might lead to a
in defending its own line on the decoupling of aid and renationalization of the CAP.
right in rejecting the total dismantlement of export
refunds, as underlined in the Committee’s opinion on
the agricultural aspects of Agenda 2000 (point 3.1.4). 2. Comments on individual sectors

1.4.2. The Union will have to negotiate its inter-
national commitments for the years 2000-2006 on the 2.1. Cereals
basis of the reform to be adopted in the year 2000 so as
not to find itself in a situation where it has to pay a
2.1.1. The Committee shares the Commission’s
second time. In the view of the Committee the Union
eagerness to guarantee the competitiveness of European
should adopt an active strategy at forthcoming nego-
cereals, particularly through prices, including those on
international markets. The Committee also considers
that the Union must seek to supply its own domestic
market whilst remaining a major player on the expanding
(1) OJ C 73, 9.3.1998, p. 71. international cereals market.
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2.1.2. The Committee believes that in a context of limited to cases where world prices climb sharply. The
falling export refunds the gap between official European Committee accordingly proposes that a threshold be
prices (which frequently act as a benchmark for prices fixed for the triggering of export levies. The lower the
on the internal market) and international market prices proposed ‘safety net’ under the reformed COM, the
cannot be allowed to remain too wide for too long. higher the threshold.

2.1.3. The Committee nevertheless considers that the
common market régime (COM) in the cereals sector 2.1.8. The Committee likewise considers that the new
should not exclusively seek to play the role of an ‘export more liberal philosophy underlying the COM should
machine’ for the Union. Apart from its function as a mean that export licences are granted automatically
market regulator, the COM also has other objectives, when no export refunds are involved.
namely protecting producers against fluctuations in
world prices (extremely volatile in the case of cereals),
and guaranteeing stability of incomes. The Committee
would finally point out that a strong and active COM
is yet another way of preserving the existence of what are 2.2. Oilseeds
after all only average-sized European cereal-producing
holdings.

2.1.4. The Committee endorses the view expressed 2.2.1. The Commission proposes that aid for oilseeds
in point 3.1.3 of its opinion on the agricultural aspects be the same as that for cereals, with a compensatory
of Agenda 2000, namely that the Union does not need payment of ECU 66 per tonne (i.e. a 30 % fall compared
to lower the cereals intervention price by 20 % to make with current levels of support). By abolishing specific
cereals more competitive on international markets and aid for oilseeds the Commission hopes first and foremost
to enable it to limit payments of export refunds. The to free the Union from the constraints (in terms of
Union must however also continue to protect producers production and sown area) imposed under the Blair
against the volatility of world prices. House agreement.

2.1.5. The Committee is of the view that the reduction
should be limited to what is strictly necessary to bring 2.2.2. In its opinion on the agricultural aspects of
the European intervention price down to world market Agenda 2000 the Committee said that it expected a
levels as observed over the last few years (world market sharp decline in the European area under oilseeds, and
trends illustrated in Appendix II). hence a considerable decline in the Union’s ability to
keep itself supplied in vegetable oils and plant protein
2.1.6. With specific regard to maize, the Committee crops. The Committee feels that such a situation would
cannot accept the Commission’s proposal to no longer be unacceptable given that the Union today is only 25 %
apply the differentiation method (‘maize base’) for self-sufficient in plant protein from protein crops and
working out regional yields as a basis for calculating oilseeds.
compensatory payments (1). The Committee regrets that
the Commission has not taken into consideration the
specific characteristics of maize and calls upon the 2.2.3. The Committee disapproves the Commission
Member States to remain flexible when setting maize proposal which would automatically mean, despite the
yields so as to maintain equilibrium between crops and same premium, that it would be more advantageous to
ensure that processing factories (particularly starch grow wheat than oilseeds. The Committee therefore
factories) continue to receive their raw materials. considers that if priority were given to the production
of plant proteins in the Union, this would force improve-
2.1.7. The Committee notes furthermore that the ments in their competitiveness vis-à-vis other arable
Commission advocates the maintenance of export levies crops.
to ensure that the domestic market is supplied under
more advantageous price conditions for European users
whenever world prices are higher than those on the 2.2.4. The Committee also believes that the praise-
domestic market. The decision on whether or not to worthy desire to break free of the Blair House constraint
impose an export levy would be left to the discretion of would paradoxically result in European oilseed acreage
the Commission. The Committee considers that, if we shrinking to below the area ceilings negotiated with the
are to be consistent with the Commission’s proposed United States in 1993. European producers would have
market liberalization, (aimed notably at encouraging been deceived and the situation would be all the more
producers to seize the opportunities offered by inter- unacceptable since the United States has, with the Fair
national markets), the use of export levies should be Act, maintained price guarantees for oilseeds, besides
introducing, via a ‘flexibility contract’, a specific support
mechanism for this crop where there was none before.
(1) The area payment is calculated by multiplying the planned
compensatory payment (for example, ECU 66 per tonne) In the view of the Committee the Union would be
by the average yield in cereals for the region in question committing a strategic error by dismantling its own
(by region we mean a Member State or a region within system of support for oilseeds when the decoupling
the Member State, at the option of the Member State called for by the United States would in reality result in
concerned). an increase in US subsidization.
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2.2.5. The Committee would point out that the prices tonne (i.e. equivalent to a fall of ECU 6 compared with
of oilseeds are already at world market levels (there is current aid of ECU 78,49 per tonne) seems, in the view
no intervention price) so that this particular product of the Committee, to be inadequate to maintain the
should not be a target for criticism at the forthcoming competitiveness of protein crops vis-à-vis cereals.
international negotiations. According to the Committee
there is no valid nor urgent reason why this sector 2.3.2. The Committee would also ask the Com-
should be reformed before the year 2006. mission to submit proposals on the establishment of a
new ‘protein plan’ in the Union, in order to safeguard
2.2.6. The real challenge for this sector lies in the the survival of a crop which plays a positive role in
enlargement of the Union to the countries of central and environmental protection.
eastern Europe which are potentially major producers
of oilseeds.
2.4. Durum wheat
2.2.7. The Committee therefore recommends that the
Union should only align support for oilseeds on support 2.4.1. The Commission proposes continuation of the
for cereals after a transitional period. During the present system which stems from the reform of the
forthcoming international negotiations it can then COM in ‘durum wheat’ of October 1997: the 20 %
inform the United States of its intention to be exempted reduction in the intervention price would apply to
from the Blair House Agreement and obtain a guarantee durum wheat which, in addition to undifferentiated aid
from the Americans that the US will not challenge the of ECU 66 per tonne, would continue to receive a per
new Community régime should this lead to an increase hectare supplement of ECU 344.5 within maximum
in areas under production. The Committee considers guaranteed areas (or possibly special aid of ECU 138,9
that this approach is legally more certain than the per hectare, depending on the production zone in
Commission’s current approach which seeks to make question).
the Blair House agreement null and void through a
unilateral European decision.
2.4.2. The Committee is opposed to a reduction in
the intervention price for durum wheat.
2.2.8. The Committee realizes that the Union will
have to press on with the task of decoupling its
2.4.3. Such action would weaken border protection (2)
production aid with a view to the forthcoming inter-
and would encourage imports of quality wheats from
national negotiations. It therefore proposes that when a
third countries which are more competitive in this line
cereal price reduction has been agreed and the non crop
(Canada, United States ...) to the detriment of the
specific payment is known (currently standing at ECU 66
production of quality wheats in Europe. Lowering the
in the Commission proposal), a supplementary payment
intervention price of durum wheat does not mean that
for oilseeds should be made. This supplement should be
the Union will automatically increase its exports to
equal to the difference between current support (ECU
international markets. Under these conditions the Com-
94,24 per tonne) and future non crop specific aid (1).
mittee sees no reason to reduce the intervention price of
durum wheat.
2.2.9. The Committee declares its readiness to study
any alternative solution the Commission might propose
to free the Union from the Blair House constraint from 2.5. Potato starch
the year 2000 whilst guaranteeing the maintenance of
areas under oilseeds (crop-rotation premium within the
framework of agri-environmental programmes, pre- 2.5.1. The potato starch régime is mechanically linked
mium for crops in short supply...) to the COM in the cereals sector. The Commission
proposes to adjust the minimum price for potatoes
intended for the manufacture of potato starch in line
with the reduction of the price for cereals.
2.3. Protein crops
2.5.2. The Committee considers that this proposal
2.3.1. For the sake of consistency between the is technically justified. Nevertheless it would draw
approaches to all European protein crops, the Committee attention to the specific characteristics of the potato
proposes that the protein supplement be calculated starch régime, with production subject to quota restric-
according to the same method it advocates for oilseeds. tions. This means that in the event of a fall in price and
The Commission’s proposed supplement of ECU 6,5 per mere partial compensation, producers cannot stabilize
their incomes by increasing their output. The Committee
therefore considers that full compensation should be
paid in the event of a fall in prices.
(1) This oilseed supplement will have to be eased downwards
to take into account the partial compensation cereal
producers will receive when prices go down (so that the (2) Pursuant to the rule laid down under the agricultural
differential between support for cereals and support for agreement of Marrakesh whereby the maximum customs
oilseeds remains proportionately unchanged from what it tariff chargeable on imported cereals is not allowed to
is at present). exceed 155 % of the intervention price.
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3. Other comments postpone the current dates (15 October - 31 December)
to 1 January - 31 March, on the grounds that paying out
too early does not encourage farmers to market their
3.1. Set-aside harvest at the beginning of the marketing year. The
Committee does not share this analysis and considers
that postponing the payment of direct aid would merely
3.1.1. The Committee approves the Commission undermine the cash-flow position of many producers.
proposal to reduce the obligatory set-aside rate to 0 %
where price reductions make it possible to bring the
cereals intervention price into line with international 3.2.5. Before the 1992 reform, producers were able
market prices. Like the Commission, the Committee to cash in in full when their harvests were sold around
considers that the Union must not deprive itself of the the month of July. The CAP reform of 1992 set in motion
opportunity to engage in obligatory set-aside, which is delays by postponing the payment of compensatory
an effective mechanism for production and market amounts until October. The Committee therefore feels
management (1). that the Union cannot expect producers to make further
financial sacrifices.
3.1.2. As far as voluntary set aside is concerned, the
Committee is in favour of the introduction of a minimum
rate and the possibility of multiannual set-aside for a 3.2.6. Mindful of the Commission’s argument that
period not exceeding five years. The 10 % rate proposed payments in October disrupt cereal deliveries, the
by the Commission appears however to be too high. Committee proposes a neutral cash-flow solution: whilst
The Committee feels that on the basis of the subsidiarity making sure that the procedure does not become
principle, minimum rates should be fixed at a national complicated, this would consist of paying the producer
level, just as the Member States alone fix the maximum a 50 % down payment when his ‘dossier on the declar-
voluntary set-aside rate. ation of area under production’ is validated (in July),
with the balance being paid only from the following Janu-
ary onwards.
3.2. Abolition of monthly increments and the post-
ponement of payment periods
3.3. Crops not intended for food purposes
3.2.1. The Committee considers that the abolition of
monthly increments, combined with a postponement of
the date for making compensatory payments, will lead 3.3.1. In 1995/1996 more than a million hectares of
to a price reduction of the order of 6 to 7 points — more industrial set-aside land were used in the European
than that announced by the Commission. Moreover the Union to produce renewable raw materials for non-food
level of compensatory payments is not linked to inflation. purposes (notably oilseeds and cereals). In 1997/1998
Producers’ incomes are likely to be under particular the acreage given over to such crops came to no more
threat since the Commission has failed to take into than 470 000 hectares, of which approximately 385 000
account the impact of these two proposals in calculating hectares were used to grow colza and sunflowers.
its proposed partial compensation.

3.2.2. The Committee is strongly opposed to these 3.3.2. To ensure competitiveness, such crop pro-
two proposals. duction relies heavily at present on producers being
able to leave land fallow for industrial purposes, in
accordance with Regulation (EC) No 334/93, i.e. to use
3.2.3. Monthly increments comprise additional sums land set aside to cultivate this type of industrial crop.
paid to producers or stockists (cooperatives or private
organizations) prior to the placing of the product on the
market. The Committee considers that the system
facilitates regulation of the internal market by leading to 3.3.3. According to the Committee this balance would
more regular deliveries. Monthly increments constitute a be undoubtedly called in question with an obligatory
useful mechanism for stabilizing prices throughout the land set-aside rate of 0 %. The Committee is surprised
marketing year, and so help to protect producers’ that the Commission makes no proposals on developing
incomes. Because of this the Committee calls for the the non-food uses of agricultural products as part and
maintenance of monthly increments. parcel of the forthcoming reform.

3.2.4. The Committee also considers that it is not 3.3.4. The Committee would emphasize the need to
appropriate to postpone the payment of compensatory guarantee the supply of industrial materials needed to
amounts to producers. The Commission proposes to develop these crops (diesters, chemicals ...) It therefore
calls for the drawing up of a specific plan for crops
intended for non-food uses. This plan could take the
(1) Obligatory set-aside also makes producers eligible for form of specific or direct aid until such time as the
compensatory payments in the event of a fall in institutional Union has put in place the fiscal measures necessary to
prices in the arable culture sector. ensure the future of this sector.
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3.3.5. Without prejudice to the specific plan to be of crops for non-food purposes so as to put a stop to
adopted in the immediate future under Agenda 2000, the worrying shrinkage in the acreage used for such
the Committee recommends the adoption without crops and restore security of supplies for industry.
delay of measures designed to promote the production

Brussels, 1 July 1998.

The President
of the Economic and Social Committee
Tom JENKINS

APPENDIX I

to the opinion of the Economic and Social Committee

Statistical overview of the Community production of cereals, oilseeds and protein crops

Cereals, oilseeds and protein crops account for approximately 30 % of the Union’s utilized agricultural
area. During the 1980s and 1990s, the sharp rise in European crop farming was largely due to an
improvement in productivity per hectare (in the case of cereals this rose on average to 54 quintals in
1996).

Over the last ten years the most striking phenomenon in arable farming has been the doubling of the
Union’s area under oilseeds (compulsorily stabilized at 5,482 million hectares under the Blair House
Agreement) even though the Union today is still far from being self-sufficient in such crops.

With production running at 87,7 million tonnes in 1995, the Union is the world’s top wheat-producing
area ahead of the United States (The Union and the United States account, respectively, for 16 % and
11 % of world production). In 1995 the European Union produced 89.9 million tonnes of secondary
cereals, not including rice, accounting for 11 % of world production. This puts it in second place behind
the United States which, with 209 million tonnes, accounts for 26 % of the world’s production of
secondary cereals.

With a level of self-sufficiency of more than 140 %, the European Union is a major player on the world’s
wheat market, with exports totalling 12,6 million tonnes in 1995/1996, i.e. 14 % of world exports. The
United States accounts for 37 % of the world’s wheat trade, Canada 19 %, Australia 13 % and Argentina
5 %. Where secondary cereals are concerned, the Union is a net importer if we take into account cereal
substitutes. The United States towers over the world market in secondary cereals (70 %) with its major
exports of maize. The Union is largely represented on this market by barley exports, coming third in the
list of world exporters in 1995/1996, and accounting for 5 % of total world exports behind Argentine
(7 %), but level with Canada and beating Australia (4 %).

Source: Eurostat — 1995 and 1997 European Commission reports on the ‘general situation of agriculture in the
European Union’.
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APPENDIX II

to the opinion of the Economic and Social Committee

World wheat prices (SRW fob GULF)