Explanatory Memorandum to COM(2007)17 - Specific rules as regards the fruit and vegetable sector and amending certain Regulations - Main contents
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| dossier | COM(2007)17 - Specific rules as regards the fruit and vegetable sector and amending certain Regulations. |
|---|---|
| source | COM(2007)17  |
| date | 24-01-2007 |
EU-27 fruit and vegetables production accounts for 3.1% of the Community budget and 17% of the total EU agricultural production.
The current common market organisation (CMO) is set out in Council Regulations (EC) No 2200/96 of 28 October 1996 on the common organisation of the market in fruit and vegetables i, (EC) No 2201/96 of 28 October 1996 on the common organisation of the markets in processed fruit and vegetable products i and (EC) No 2202/96 of 28 October 1996 introducing a Community aid scheme for producers of certain citrus fruits.
In October 2005, drawing its first conclusions from the debate launched in 2004 by the publication of the report on the simplification of the fruit and vegetables common market organisation i, the Commission said that in 2006 it would propose a reform covering both the fresh and processed sectors i.
In May 2005 the European Parliament adopted its own-initiative report on this Communication i.
In keeping its commitments of better legislation, the Commission proposal is accompanied by an analysis of the economic, social and environmental aspects of the problems linked to the CMO and of the impact, the advantages and drawbacks of the different options to these issues, including the results of a public consultation on a set of options for reform.
This reform proposal also answers the European Court of Auditors' recommendations in its Special Report No 8/2006 "Growing success? The effectiveness of the European Union support for fruit and vegetable producers' operational programmes", published in September.
Contents
- 2. REASONS AND OBJECTIVES OF THE REFORM
- 3. PROPOSED MEASURES FOR REFORM OF THE FRUIT AND VEGETABLES CMO
- 1. Producer organisations
- 2. Crisis management
- 3. The introduction of fruit and vegetables areas in the single payment scheme (SPS)
- 4. Environmental concerns
- 5. Promotion
- 6. Trade with third countries
- 7. Simplification
- 8. Marketing standards
- 4. BUDGETARY IMPACT OF THE PROPOSAL
During the last ten years, the fruit and vegetables sector has faced both strong pressure from the highly concentrated retail and discount chains that plays a major role in the setting of the market price and the strong competition of third country products who are offering a combination of improved quality at relatively low prices and are taking rapidly growing market shares.
Since the fruit and vegetables' CMO reform in 1996, producer organisations (POs) and their operational programs (OPs) have been the key elements for the grouping of the supply of fruit and vegetables. The experience has shown that POs are still a valid element to face the highly concentrated retail and discount chains. Nevertheless the level of the concentration of fruit and vegetables production through POs has not succeeded in concentrating supply in all Member States. A high percentage of growers in the main producing Member States choose not to participate. The reform includes measures to improve POs' attractiveness.
On the other hand, the current CMO for processed fruit and vegetables products is based on principles which for other common market organisations have been substantially reformed. The current system, essentially providing support to quantities of products is no more in line with the CAP. The reform proposes the inclusion of fruit and vegetables' area in the single payment scheme and in the single area payment scheme. The shifting from production support to direct aid to producers by introducing a system of decoupled income support for each farm will contribute to promote a more marketed oriented and sustainable agriculture.
The present reform proposal includes measures for crises management, to increase promotion of fruit and vegetables, and to maintain the environment.
The identified objectives of this reform are to:
- improve EU fruit and vegetables' competitiveness and market orientation or, in other words to contribute to achieving sustainable production that is competitive both on internal and external markets,
- reduce fluctuations in fruit and vegetables producers' income resulting from crises,
- increase consumption of fruit and vegetables in the EU,
- continue the efforts made by the sector to maintain and protect the environment,
- simplify and where possible reduce the administrative burden for all concerned.
The aforementioned objectives of the reform have been identified taking into account the need for WTO compatibility; consistency with the reformed CAP, first and second pillar and conformity with the financial perspectives. Finally, it has to be pointed out that this proposal has been drawn up in light of the Commission proposal for a Council Regulation establishing a common organisation of agricultural markets. The fruit and vegetables CMO reform proposal is affected by the latter.
- Some provisions of horizontal nature and existing for a range of other agricultural products such as those on state aids, exchange of information between the Commission and the Member States and the management Committee are left in the existing CMO for fruit and vegetables. Nevertheless they have been updated, simplified and streamlined so as to allow for their easy incorporation into that single CMO proposal.
- With regards to other provisions in the fruit and vegetables sector, the scope of the changes to the regime make it necessary in the interests of clarity to incorporate them in this proposal. Nevertheless, where such provisions are to some extent also of a horizontal nature and so exist for a range of other agricultural products, such as marketing standards and trade with third countries, they have been updated and simplified so as to allow for their easy incorporation into a Council Regulation establishing a common organisation of agricultural markets.
Producer organisations : Taking into account that POs have played a relevant role in the concentration of the supply, provisions have been made for simplification and more flexibility in their operation wherever possible. Such provisions concern the product range of producer organisation, the extent of direct sales permitted and the extension of rules to non-members, more incentives to mergers of POs, associations of producer organisations (APO), to those regions where the level of the concentration of the supply through POs is very low (less than 20% of fruit and vegetables production), to the States who became members of the Union as from 1 May 2004 and to the outermost regions, the delegation of powers or functions of PO to APO and the delegation of functions to subsidiaries under certain conditions. In its report to the European Parliament and to the Council on the situation of the sector of soft fruits and cherries intended for processing, the Commission indicates that it may propose specific additional aid for Member States with a low level of organisation. This is being done with the above mentioned changes.
The Commission has also proposed the inclusion of additional culinary herbs in the common market organisation for fruit and vegetables.
New producer groups : In order to improve the grouping of the supply through POs in new Member States, Producer groups in new Member States wishing to acquire the status of producer organisations in accordance with this Regulation shall be allowed the benefit of a transitional period during which specific national and Community financial support can be given against certain commitments by the group.
National strategy for sustainable operational programs : The Court of Auditors considers that Member States have not ensured that the expenditure on producer organisations' operational programmes has been effective. They also consider that the Commission has not monitored the effectiveness of the operational programmes or evaluated the policy either. In order to achieve more effective operational programmes, the Commission proposes that Member States shall establish a national strategy for sustainable operational programmes in the fruit and vegetable market. Such a strategy should provide for the following elements: an ex-ante analysis, the objectives of operational programmes and instruments, performance indicators, assessments of operational programmes and reporting obligations for producer organisations.
Extension of rules : In order to further boost the impact of producer organisations and associations and ensure the market as much stability as is desirable, the Commission proposes that Member States shall be allowed on certain conditions to extend to non-member producers in their region the rules, particularly on production, marketing and environmental protection, adopted for its members by the organisation or association for the region concerned on the basis of more flexible criteria (producer organisations will be deemed representative for the extension of rules when their members account for at least 50% of the producers in the economic area where they operate and they cover at least 60% of the production of that area. At present, a producer organisation or association of producer organisations is deemed representative where its members account for at least two thirds of the producers in the economic area in which it operates and it covers at least two thirds of the production of that area).
The Commission proposes also that costs arising from this extension of the rules should be chargeable to the producers who are subject to the extension of rules since they will benefit from the extension.
Given the particularities of the organic market, the Commission also proposes that the extension of rules will not apply to organic producers unless they agree and as long as they respect certain conditions.
Interbranch organisations : The reform introduces flexibility on Interbranch organisations. Given the similarity of the objectives pursued, the provisions on extending the rules adopted by producer organisations and their associations and on sharing the costs resulting from such extension are also applied to interbranch organisations.
Fruit and vegetables are perishable products and production is unpredictable. Surplus on the market, even if they are not too high, can strongly disturb the market. For this reason, producer organisations have been receiving 100% of the withdrawal costs for some products (Community Withdrawal Contribution – CWC) and for free distribution. POs have also been allowed to use Operational funds to top up this CWC and to withdraw other products not covered by that scheme.
Experience has shown that the budget devoted to withdrawals has been reduced due to the fact that during the last ten years supply has been better adapted to demand. Nevertheless, the fruit and vegetables sector goes on suffering from market crises. This is why the Commission proposes a wider range of tools for the crisis management to be carried out through POs. Crisis management shall cover in this context: market withdrawal, green harvesting or non-harvesting of fruit and vegetables; promotion and communication; training measures; harvest insurance; and support for the administrative costs of setting up mutual funds.
Concerning withdrawals, as explained above, the CWC (Community Withdrawals Compensation) has been removed. The Commission proposes that:
- withdrawals can be carried out by POs on the principle of 50/50% co-financing;
- withdrawals for free distribution in the EU will be 100% paid by the Community up to at a limit of 5% of the volume of the marketed production of each producer organisation.
The proposal sets out the integration of the fruit and vegetables into the single payment scheme. Such integration implies:
- making the land covered by fruit and vegetables (including orchards and potatoes for human consumption) eligible for the activation of payment entitlements;
- decoupling the existing support for processed fruit and vegetable products and increasing the SPS national budgetary ceilings;
- allowing Member States to establish reference amounts under the scheme on the basis of a representative period appropriate to the market of each fruit and vegetable product and of appropriate objective and non-discriminatory criteria.
The production and marketing of fruit and vegetables should take full account of environmental concerns, including cultivation practices, the management of waste materials and the disposal of products withdrawn from the market, in particular as regards the protection of water quality, the maintenance of biodiversity and the upkeep of the countryside.
In order to achieve this, the Commission proposes:
- the introduction of fruit and vegetables areas in the Single Payment Scheme means that the cross compliance rules will be compulsory for all fruit and vegetables producers receiving direct payments;
- an enhanced approach to operational programs: Currently there are no limits in the operational programs for environmental measures expenditures: The reform proposal introduces a minimum of 20% of expenditure in each operational program;
- an enhanced approach to organic production: During the last years, an increasing demand for organic vegetables, largely being met by innovative, medium scale producers has occurred. The proposal introduces a Community co-financing rate of 60% for organic production in each operational program.
The goal intake of fruit and vegetables in a healthy diet is set at a minimum of 400 g per day by the WHO/FAO. Taking into account that in the EU only Greece and Italy reach this level, the Commission proposes the following ways to improve promotion of fruit and vegetables:
- POs will continue to be able to include promotion in their operational programs; in particular they will carry out generic promotion under certain conditions to be decided in the implementing regulations and promotion of POs' brands; furthermore they will have to include in their operational programmes action targeted at promoting consumption of fruit and vegetables by young consumers;
- Council Regulation (EC) No 2826/2000 will be amended in order to increase the EU co-financing rate would to 60% in the case where the promotion of fruit and vegetables would be targeted towards school-age children and adolescents;
- under the new heading of crisis management, promotion and communication are eligible measures for funding by POs operational programmes;
- market withdrawals, which are 100% EU co-financed, can be distributed in the EU for free not only to charitable organisations and foundations but also to schools and public education institutions and children's holiday camps.
Taking into account that the WTO negotiation talks are still ongoing and that their outcome remains unknown, the reform proposal does not touch on the current legal framework relating to external trade (entry price system, tariff quotas, trigger volumes…).
For fruit and vegetables, the impact and the role of export refunds have been analysed. Their economic impact has considerably decreased. Indeed, exports with refunds represent less than one third of total exports. The value of export refunds is situated between 0.8 and 8.9% of the price of the products in question. It has therefore been considered that better use can be made of the funds allocated to this instrument and it is proposed to abolish export refunds.
The administrative simplification resulting from the abolition of the processing aids in favour of the existing single payment scheme or of the single area payment scheme is a great advantage of the proposed reform.
In its effort to improve the attractiveness of Producer Organisations the reform proposes several simplifications and increased flexibility.
Abolition of export refunds also implies a resulting simplification as all the procedures relating to the granting of these refunds will no longer exist for exporters.
The particular issue of the simplification of marketing standards has been dealt with by replacing the legal provisions on these standards with the more concise text that will be in the single CMO. In particular this ensures that the Commission has sufficient flexibility and powers to simplify where appropriate and possible.
The impact of the proposed reform does not increase costs with respect to the status quo scenario. It is expected that the changes and innovations in the regime will lead to the budget being used more efficiently.
The increase to the Single Payment Scheme budgetary ceilings will be equal to the historical level of expenditure for the States who were members of the Union before 1 May 2004 and to the amounts resulting from the enlargement treaties for the other Member States.
The operational programmes of the Producer Organisations will be reinforced, especially for the Member States where the grouping of the supply through the Producer Organisations is very low. It is expected that the value of production passing through the targeted organisations in these countries will grow faster than for the other Producer Organisations. Reinforced financial support will also be given to improve the recognition of producer groups in order to become Producer Organisations. The overall budget effect will be largely neutral due to the proposed abolition of export refunds and market withdrawals.