NINTH REPORT
The European Scrutiny Committee has made further
progress in the matter referred to it and has agreed to the following
Report:—
AID SYSTEM FOR FLAX AND
HEMP
(20717)
12992/99
COM(99) 576
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Draft Council Regulation amending Regulation (EC) No. 1251/99 establishing a support system for producers of certain arable crops to include flax and hemp grown for fibre.
Draft Council Regulation on the common organisation of the market in flax and hemp grown for fibre.
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| Legal base: |
Articles 36 and 37 EC; consultation; qualified majority voting
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| Department: |
Agriculture, Fisheries and Food
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| Basis of consideration:
| SEM of 10 February 2000
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| Previous Committee Report:
| HC 23-v (1999-2000), paragraph 2 (19 January 2000)
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| To be discussed in Council:
| Following receipt of European Parliament Opinion
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| Committee's assessment:
| Politically important |
| Committee's decision:
| For debate in European Standing Committee A
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Background
1.1 Under the 1992 reforms of the Common
Agricultural Policy (CAP), producers of the main arable crops
(cereals, oilseeds, linseed and proteins) receive direct payments
under the Arable Area Payments Scheme (AAPS) to compensate them
for reductions in the Community support (intervention) price for
cereals. However, two other important arable crops — flax
and hemp — have remained outside the Scheme. As a result,
they enjoy higher aid rates than other crops, and are not subject
to the eligible land provisions or to the base area restrictions
which apply to those crops. This has led to a significant increase
in the areas grown, particularly in the case of the short fibre
flax in Spain and the UK.
1.2 This has lead the Commission to put
forward from time to time proposals to amend the flax régime,
the most recent being in November 1999. As we noted in our Report
of 20 January, this would involve a number of detailed amendments
to come into effect in July 2000, clearly aimed at reducing the
incentive to produce short fibre flax, without damaging the traditional
long fibre producers in countries such as Belgium, France and
the Netherlands, or those "whose products are economically
viable". These would entail a single per hectare aid for
producers of flax and hemp, which would be reduced progressively
to reach the level of that for competing arable crops by 2002-03.
This would be coupled with the introduction of a straw processing
aid. However, the rate for "traditional" long fibre
flax would be fixed at 60 euro per tonne in 2000-01, rising to
200 euro per tonne from 2005-06 onwards, whereas short fibre flax
and hemp would receive only 40 euro per tonne until the end of
2004-05, and nothing thereafter.
1.3 The Commission has also proposed that,
in addition to aligning aid rates with those for other arable
crops, flax and hemp should more generally be subject to the conditions
set out in the AAPS. In particular, this would involve set-aside
requirements, and their being brought within the eligible land
and base area arrangements. There would also be a system of Maximum
Guaranteed Quantities for the processing aid — one for long
flax fibre, and the other for short flax fibre and hemp —
which would be divided up between Member States, according to
average areas cultivated during the last five marketing years.
The UK quota would be confined to short fibre flax and hemp, and
would be 12,100 tonnes.
1.4 In our conclusion, we noted that the
Government considered that the proposals discriminated against
short fibre flax, and failed to take into account the environmental
benefits of growing renewable raw materials of this kind. However,
it was in favour of aligning aid rates for flax and hemp with
those for other arable crops, and incorporating them into the
AAPS. We in turn made three comments. First, we asked the Government
to comment on the Commission's economic justification for distinguishing
between short and long fibre flax, which we found unconvincing.
Secondly, we asked it to say what effect the processing aid quota
of 12,100 tonnes would have on the industry here. Thirdly, whilst
recognising the arguments for including flax and hemp within the
AAPS, we suggested that this could have unwelcome consequences
in relation to the eligible land conditions and increase the risk
of base area overshoots, thus reducing the aid payable to all
arable producers.
Supplementary Explanatory Memorandum of 10 February
2000
1.5 In her Supplementary Explanatory Memorandum
of 10 February 2000, the Minister of State (Commons) at the Ministry
of Agriculture, Fisheries and Food (The Rt. Hon. Joyce Quin) says
that the Government shares our view that the Commission's economic
justification for different treatment of the different flax sectors
is unconvincing. She adds that the proposals would have the effect
of retaining, albeit through new means, the level of support to
the traditional sector, whilst discouraging the newly emerging
industrial sector by significantly reducing its level of aid,
and the Government opposes this discriminatory approach. As regards
the processing aid quota, she believes this would restrain the
growth of the industry by leaving little headroom for further
expansion, whether or not there was a market for the fibre.
1.6 Turning to the proposed integration
of flax and hemp into the AAPS, she notes that over 90% of UK
flax and hemp is grown on land which is not eligible to receive
payments, and that it is essential to address this point, otherwise
most current producers will find themselves unable to claim aid,
leaving the processing industry without supplies of raw materials.
She says this is a "key point", which the UK will be
emphasising during the forthcoming negotiations. On base areas,
she acknowledges our point that claims on newly eligible land
would increase the risk or severity of base area penalties, and
says that, although the proposals provide for the base areas to
be increased by the average area under flax and hemp in the relevant
reference period (1989-91), this area is negligible in the case
of the UK.
1.7 The Minister also says that flax and
hemp growers and processors have been consulted on the proposals,
and have expressed strong concern over these points, and at the
suggestion that the changes should affect the 2000 crop. She adds
that a Regulatory Impact Assessment is currently being prepared.
Conclusion
1.8 We are grateful to the Minister for
this further information, which confirms that the aid proposal
would be discriminatory against flax production in the UK. It
also makes it clear that the inclusion of flax and hemp within
the AAPS could have potentially awkward implications for both
the eligible land provisions and base area restrictions, and that,
in the latter case, this could lead to aid penalties on other
arable crops. In view of this, we are recommending that the proposal
should be debated in European Standing Committee A, once the Regulatory
Impact Assessment promised by the Government is available.
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