AGRICULTURAL PRICE PROPOSALS 2000-2001
(21056)
6629/00
COM(00) 77
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Commission proposal on the prices for agricultural products
(2000-2001).
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| Legal base: |
Article 37 EC; consultation; qualified majority voting
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| Document originated:
| (Volumes I and II): 23 February 2000
(Volume III): 29 February 2000
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| Forwarded to the Council:
| 29 February 2000 |
| Deposited in Parliament:
| 20 March 2000 |
| Department: |
Agriculture, Fisheries and Food
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| Basis of consideration:
| EM of 21 March 2000 |
| Previous Committee Report:
| None |
| To be discussed in Council:
| Probably June 2000 |
| Committee's assessment:
| Politically important |
| Committee's decision:
| For debate on the Floor of the House
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Background
4.1 The Commission's annual price proposals
are contained in three Volumes. Volume I (the Explanatory Memorandum)
provides the background to this year's proposals, together with
a brief description of the basis for them as they affect individual
commodities. Volume II is concerned with the financial implications,
while Volume III covers the legal instruments containing
proposals for the seven draft regulations which complement the
package.
Volume I: The Explanatory Memorandum
4.2 This section of the proposals is considerably
shorter than usual because it omits detailed information provided
in previous years about the market situation for the various commodities
and trends in income within the Community as between different
sectors and Member States. The Commission also stresses that,
as a result of the various reforms starting in 1992 and including
those agreed last May under Agenda 2000, most support prices under
the Common Agricultural Policy (CAP) are now fixed on a multi-annual
basis. As a result, the prices which need to be determined on
this occasion as part of the annual price-fixing are confined
to monthly increments for cereals and rice; various prices in
the sugar sector; the basic prices for pigmeat and sheepmeat;
and aid for silkworms. These of direct interest to the UK are
dealt with below under Volume III.
Volume II: Financial implications
4.3 The budget for the relevant parts of
the Guarantee Section of the European Agricultural Guidance and
Guarantee Fund (EAGGF) in 2000 is set at 36,889 million euro,
which is 463 million euro below the financial perspectives ceiling
of 37,352 million euro. The Commission's latest estimate —
which is not affected by these proposals — is 37, 471 million
euro, an increase of 582 million euro, as compared with the budget,
and some 119 million euro above the ceiling. However, the Commission
points out that this figure is based on the exchange rate used
for the budget of 1 euro = $1.12, whereas the average real value
for the period from August 1999 to January 2000 was $1.04, and
the rate at the end of January had fallen to $0.98. It goes on
to say that, if a figure of 1 euro = $1.04 were to be taken, this
would provide savings of 200 million euro for the Guarantee Section,
and so bring expenditure back within the financial perspectives
ceiling. In the meantime, the Commission has identified the main
savings as arising on sheepmeat and goatmeat (as a result of an
increase in market prices), and in the milk sector (where an increase
in export refunds is likely to be more than offset by savings
from higher than expected sales of skimmed milk powder from intervention).
On the other hand, it envisages increased expenditure on beef
and veal (due to lower receipts from sales out of public stock),
and on sugar and cotton (reflecting downward revisions to world
market prices).
4.4 As regards 2001, the ceiling for the
Guarantee Section stands at 40,035 million euro. According to
the Commission, this constitutes an "extremely tight"
budgetary situation in which to accommodate the decisions under
Agenda 2000 to strengthen the system of direct compensatory aids
for arable crops and beef, and to reform the wine sector.
4.5 Table 1 summarises the financial effects
of the present proposals on the EAGGF Guarantee Section expenditure
and agriculture own resources.
TABLE 1
| Impact in million euro on:
| 2000
| 2001
| 2002
|
1. EAGGF Guarantee Section expenditure
2. Own resources
| p.m.
p.m.
| -8
-2
| -17
-5
|
Volume III: Legislative proposals
4.6 This volume sets out, by commodity,
proposals for a number of draft regulations.
Cereals
4.7 The relevant Council Regulation provides
for a series of cumulative monthly increases in the intervention
price for cereals during the marketing year, to be set by the
Council each year, and to take account of storage and financing
charges. The main effect of this proposal would be to fix permanently
their amount and timing for the 2000-01 and subsequent marketing
years. This would also involve two equal cuts of 7.5% for the
2000-01 and 2001-02 marketing years to reflect the reductions
in the intervention price made under Agenda 2000.
Rice
4.8 Similar monthly increments to those
for cereals apply in the case of rice. This proposal would simply
keep the increments at the present level of 2 euro per tonne for
the 2000-2001 and subsequent marketing years
Sugar
4.9 The Commission is expected to put forward
shortly proposals for the reform of the sugar régime. In
the meantime, it is proposing that, for the final year of the
present régime, the basic price for beet, the intervention
price for white sugar, and the manufacturing margin should remain
frozen, as should the monthly reimbursement of storage costs
Sheepmeat and pigmeat
4.10 The basic price for sheepmeat is used
to determine the amount of the annual ewe premium payable to sheep
producers, and as a basis for decisions on the granting of storage
aid. It is proposed that this price should in future be fixed
on a permanent basis, rather than annually as at present. Likewise,
the basic price for pigmeat, and the standard quantity to which
it applies, would be set on a permanent basis, rather than annually.
The Government's view
4.11 In general, the Government supports
these proposals, subject to two main reservations. First, it points
out that leaving the price for sugar unchanged pending the forthcoming
review of the régime would increase grower returns, since
sugar levies in 2001 will be cut as a consequence of the limits
on export refunds being imposed under the World Trade Organisation.
This means that prices would need to be cut by 2% to keep unit
returns to growers constant, and the Government says that it would
support a 5% reduction as constituting a real cut, bearing in
mind its view that sugar prices are too high (and have become
increasingly out of line with those for other arable crops). It
also believes that the aid for storage costs should be reduced
to reflect current interest rates.
4.12 Secondly, the Government notes that
sheepmeat is another unreformed area of the CAP, and that its
competitive position relative to other meats could be adversely
affected as a consequence of the wider Agenda 2000 reforms, leading
to a fall in market prices, and hence to increased expenditure
on premium payments. However, it goes on to observe that there
is no prospect of reaching agreement with other Member States
on a significant reduction in the basic price outside the context
of a more general reform of the régime.
Conclusion
4.13 Until recently, the annual price
fixing under the CAP has been a major exercise, in terms of both
the decisions needing to be taken and the background information
provided on the various commodity markets and the economic state
of the industry. For the reasons already explained, the changes
this year are limited, in addition to which the Commission has
also chosen to omit much of the relevant background information
it usually supplies. Consequently, based strictly on its content,
the case for a debate on this document is not particularly compelling.
4.14 On the other hand, the price fixing
has each year provided the House with the opportunity to raise
issues on the CAP, which remains a politically important area
of policy, and one which moreover still accounts for a significant
proportion of overall Community expenditure. Consequently, we
believe that, notwithstanding the different nature of this year's
proposals, there are justifiable grounds, as in previous years,
for their being debated on the Floor of the House. Apart
from any concerns which individual Members might wish to raise,
such a debate might cover the impact so far of the reforms agreed
last year under Agenda 2000; the continuing downward trend in
UK farm incomes; the extent to which that decline can be attributed
to the current strength of sterling against the euro; and the
aid package announced following the meeting on 30 March between
the Prime Minister and industry leaders.
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