Consultation begins on reforming subsidies for fruit, vegetables
reforming the market for fresh and processed fruit and vegetables,
part of its attempt to wean the sector from about €860m worth of
subsidies.
The proposed changes include a plan for the progressive reduction of support for short-term market intervention, and for the strengthening of structural aid to improve competitiveness.
The plan is part of the Commission's policy to ensure a sustainable agricultural sector within the EU under its Common Agricultural Policy (CAP) and its special regime for the fruit and vegetable sectors, called the common market organization (CMO).
The reforms for both are an attempt to meet the EU's obligations under the World Trade Organisation policy to reduce tariffs and make the global market competitive and open.
The EU's food and drink industry association (CIAA) has long called for a more competitive supply of raw products from within the EU as subsidies for imports are phased out.
The targeted sectors includes raw and processed fruit and vegetables such as tomatoes, peaches and pears, the citrus sector and nuts. Export refunds as well as intervention schemes will also be affected by the simplification plan.
The decoupling of support introduced by the ongoing CAP reform involves both reducing tariffs for imports into the EU and support for farmers. Under the current CMO support measures are granted according to quantities produced, exported or withdrawn from the market.
Under the CMO there are three types of market support. One is production aid and aid to producers where the raw product is destined for processing. The second is refunds to ensure competitiveness on export markets. The third involves payments for ad hoc withdrawals to reduce excess supply on the market.
Withdrawals represent 4.4 per cent of the finance for the fresh produce sector, and 0.7 per cent of the processed sector. Less than a third of the EU's fruit and vegetable exports benefit from refunds under the CMO, whose expenditure represents 1.7 per cent of the commercial value of the produce and 1.6 per cent of the CMO's budget.
Production and processing aids are the principle support mechanisms of the CMO that are linked to production. Such aid amounted to €854m in 2005, making up 97 per cent of the expenditure on producers of fruit and vegetables for processing. These will be subject to reduction commitments on a scale to be decided at the WTO.
The cornerstone of the CMO is the producer organisations, which act to regroup supply and balance the market power of the agri-food industry and the big retail chains, the Commission stated in its consultation document. The producer organisations are the main channel for CAPsupport to fruit and vegetable producers.
The organisations are also designed to help the sector meet quality standards, and to meet the demand for variety and environmental protection.
Part of the problem in reforming the market is the unstable nature of demand and supply for fruit and vegetables. Short-term crises continue to affect the income of fruit and vegetable producers. Such imbalances lead to selling prices falling below the cost price, endangering the economic survival of the producer.
Another factor is the move towards concentration in the agri-food industry, especially in largescale retailing. The number of supermarket chains is falling, with the result that their purchasing power on the market is growing stronger, along with their capacity to influence the supply chain.
"Able to buy huge quantities at very competitive rates, they are now in the position to impose specifications, the cost of which often falls to the producer," the Commission stated.
Meanwhile, the concentration of supply by producer organisations is stagnating at between 30 per cent and 40 per cent, rather than the 60 per cent initially expected, and may even be falling. This leads to an imbalance of producer power.
In a few member states whose agricultural production is made up to a large part of horticulture, and where the producer organisations are finding it difficult to develop, producers continue to be excluded from support by the CMO.
The enlargement of the EU to 25 members from 15 has made the situation worse, the Commission stated.
Another factor in the mix is the Commission's attempt to encourage better nutrition among Europeans, by advocating the consumption of fruit and vegetables.
The consumption of fruit and vegetables in Europe has been declining.Despite promotion efforts, the average consumption of fruit and vegetables remains well below the level recommended by the World Health Organisation (WHO) and nutrition experts, and is even tending to fall further.
The Commission is seeking advice on measures that could help to improve their appeal, availability, accessibility and affordability.
"Linked to changing life styles and eating habits, the decline in the consumption of fruit and vegetables also reflects how important eating out has become," the Commission stated. "It (eating out) now represents more than half of all the meals eaten by Europeans. It also shows the need for a new synergy between the tools of the CMO, agricultural and other policies and private initiatives that aim to bring consumption up to the level that is desirable from the health point of view."
The EU's food and drink association (CIAA) said in its recent annual report that the bloc needs to develop a simpler and more proportionate regulatory framework to ensure sustainable and competitive supplies of raw materials.
"The phasing out of export refunds needs to follow internal reform steps and market access commitments," the CIAA stated. "If industry has no access to competitive raw materials, the situation will become critical for the competitiveness of EU exporters, and it will be imperative to look at alternatives to export refunds."
The current consultation follows a Commission report tabled in August 2004 on the simplification of the CMO for fruit and vegetables.
The deadline for public comment on the EU document is 13 July 2006. It is available here.
