COMMON ORGANISATION OF THE MARKET IN RICE
(21358)
9439/00
COM(00) 278
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Draft Council Regulation on the common organisation of the market in
rice.
Draft Council Regulation amending Regulation (EC) No. 1251/99
establishing a support system for producers of certain arable crops, in
order to include rice.
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| Legal base:
| Articles 36 and 37 EC; consultation; qualified majority
voting
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| Document originated:
| 7 June 2000 |
| Forwarded to the Council:
| 13 June 2000 |
| Deposited in Parliament:
| 27 June 2000 |
| Department: |
Agriculture, Fisheries and Food
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| Basis of consideration:
| EM of 4 July 2000 |
| Previous Committee Report:
| None |
| To be discussed in Council:
| 24-25 September 2000 |
| Committee's assessment:
| Politically important |
| Committee's decision:
| Not cleared; further information requested
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Background
7.1 The common organisation of the market
in rice contains many of the features associated with the various
régimes under the Common Agricultural Policy (CAP), notably
provision for public intervention, import levies, and export refunds.
In recent years, however, two main changes have been made. First,
by analogy with the reforms made in 1992 in other arable areas,
the intervention system was weakened (by reducing both the support
price, and the period in the year in which intervention is available):
in return, producers became eligible for direct area payments
(though, as with flax and hemp, these have hitherto fallen outside
the main Arable Area Payments Scheme (AAPS)). Secondly, following
the GATT Uruguay Round negotiations, the system previously in
force (under which import levies varied according to the difference
between the Community threshold price and world prices) was replaced
by a series of fixed tariffs. (In common with other agricultural
commodities, these tariffs, and the level of export refunds, were
also reduced by 36% over the period 1995-2000.) Other aspects
of the import régime include a ceiling on the price of
imported rice linked to the level of the Community intervention
price (see paragraph 7.5 below), and preferential access for up
to 160,000 tonnes of husked rice from the ACP/OCT countries.
7.2 Despite these changes, the Commission
says that the market is not in balance, with prices well below
intervention price levels, and stocks in intervention now equivalent
to 20% of annual production. Moreover, the Commission estimates
that, as things stand, these stocks are likely to increase each
year by about an amount equal to 10-15% of production. It has,
therefore, concluded that a "rapid solution" must be
found, and has sought to achieve this by proposing in this document
a number of amendments to the common market régime.
The current proposal
7.3 In setting out the detailed case for
reform, the Commission recalls that there are basically two types
of rice covered by the present arrangements. Japonica, which is
round and medium grain, has traditionally been produced within
the Community and consumed in the Member States concerned (Italy,
Spain, Greece, France and Portugal). Indica rice, on the other
hand, is long grain, imported from the United States, ACP/OCT
countries, Thailand, India and Pakistan, and accounts for the
major part of consumption in Northern Member States. The Commission
points out that the Community has previously attempted to reduce
the surplus of Japonica rice by encouraging the growing of Indica.
As a result, Community production of Indica in 1999-2000 is likely
to be more than twice that five years ago. However, production
of Japonica has remained close to previous levels, and this, together
with increased imports and a ceiling on exports following the
changes made in the Uruguay Round, has led to an accumulation
of intervention stocks since 1996-97. These now total some 400,000
tonnes, with market prices over the last three years having been
well below the intervention price.
7.4 The Commission has accordingly proposed
a number of changes to the rice régime. The most significant
of these so far as the internal support arrangements are concerned
would be:
- the abolition of the intervention system, and
the provision instead of a legal basis for private storage, in
order to overcome any market disturbances;
- the inclusion of rice as an eligible crop under
the AAPS, together with an increase in the area payment from 52.65
euro per tonne (£32.78 per tonne) to 63 euro per tonne (£39.22
per tonne), the rate agreed for cereals under the Agenda 2000
reforms; the other main consequences of the inclusion of rice
in the AAPS would be the application of the base area restrictions
applicable to other eligible arable crops, and of compulsory set-aside.
7.5 The abolition of intervention would
also have major implications for the import arrangements for rice.
Notwithstanding the fixed levy introduced after the Uruguay Round,
there are in practice ceiling prices for imported husked rice
equal to 188% and 180% of the intervention price in the case of
Japonica and Indica rice respectively. In addition, Basmati rice
(aromatic Indica rice from India and Pakistan) has been granted
a special duty abatement of 250 euro (£158) per tonne, in
recognition of its higher price. The Commission points out that,
with the abolition of the intervention price, the full fixed tariff
should in principle be applied to all rice imports now entering
the Community under the ceiling system, thus increasing duties
from around 200 euro (£126) per tonne to 264 euro (£167)
per tonne. The abatement for Basmati rice would also disappear,
though the preferential arrangements for ACP/OCT countries would
not be affected. The Commission suggests that these changes would
greatly simplify the import duty system, making it more transparent,
and thus likely to lead to a more stable international trading
environment. However, although it believes that the special type
and consumer preference for products such as Basmati rice makes
it unlikely that imported quantities would diminish, it says there
will be an impact on the trade in other varieties. The Commission
therefore says that it is ready to find a negotiated solution
with supplying countries, which takes account of the Community's
obligations.
7.6 The Commission's introduction to this
proposal also refers to the need to respect the environment and
the "multifunctionality" of agriculture by ensuring
the continued growing of rice in areas where careful water management
is important for the maintenance of specific environmental characteristics.
With this in mind, it says that it will be requesting Member States
to submit by 31 December 2003 a special report on the impact of
the measures proposed, as well as any national measures taken.
The Government's view
7.7 In her Explanatory Memorandum of 4 July
2000, the Minister of State at the Ministry of Agriculture, Fisheries
and Food (The Rt. Hon. Joyce Quin) says that the proposals to
abolish intervention and to integrate rice into the AAPS are in
line with the Agenda 2000 approach of moving away from market
price support towards helping farmers via direct payments. She
points out that there is no commercial rice cultivation in the
UK, but that, if abolition of intervention were to lead to the
disappearance of the current duty ceilings and hence to higher
import duties, this would have an adverse impact on the competitiveness
of the UK rice milling sector (where she says there is a significant
economic interest), and on consumer costs and choice. She goes
on to suggest that this would almost certainly be challenged by
supplying countries, and that the Commission will, therefore,
need to pursue negotiations with them as early as possible to
avoid a potential dispute within the World Trade Organisation
(WTO). The Minister also points to the particular difficulties
which would arise in the case of basmati rice, where she says
the ending of the current duty abatement would lead to a substantial
rise in the price of a product largely consumed by ethnic communities
in the UK, which is the main importer of basmati.
7.8 The Minister says that consultations
are being held with interested parties, including consumers, ethnic
groups, and millers and traders, and that a Regulatory Impact
Assessment will be supplied in due course. In the meantime, she
points out that the Commission estimates its proposals would save
16 million euro (£10 million) in 2002, rising to 38 million
euro (£24 million) in 2006, with net savings to the UK in
these two years of £0.5 million and £1.2 million respectively.
According to the Commission, there would also be an increase in
budgetary revenue through own resources (duties) of 36.6 million
euro (£22.8 million) by the year 2002.
Conclusion
7.9 As the Minister points out, the abolition
of intervention in this sector would be a welcome step, both in
principle and (given the prospect that the already high level
of stocks would otherwise increase in the years to come) in practice
as well. Likewise, the incorporation of direct aid payments for
rice producers into the Arable Area Payments Scheme makes sense,
though it seems to us that this could possibly give rise to one
point of potential concern. Since there is no commercial
rice production in the UK, cereal producers in this country would
clearly not be directly affected by this change. On the
other hand, depending on the relationship between production and
base areas in the mainly southern European producer Member
States, the incorporation of rice into the AAPS might, in theory
at least, have a bearing on the aid payable to cereal growers
in those countries, and hence on their relative competitive
position vis-à-vis those in the UK. We would
like to know if the Government considers whether this is likely
to happen in practice.
7.10 Notwithstanding this point, it seems
evident that the main implication of the proposals would arise
from the abolition of the intervention and hence the duty ceilings
as currently calculated. The Minister has also made it clear that
this could adversely affect both the rice milling sector and consumers
in this country, particularly as regards basmati rice. However,
this situation arises only because the present duty ceiling is
defined somewhat arbitrarily in terms of the intervention price
of rice, and, if the Community wished to do so, there seems no
reason why some alternative basis for setting a ceiling could
not be found. In short, it seems to us that the disappearance
of the ceiling need be by no means as foregone a conclusion as
the Commission suggests. Again we would welcome the Government's
comments, and, given the concerns expressed by the Minister about
the effect of the current proposal on millers and consumers, we
would like to know if the UK intends in the negotiations in Brussels
to press for the retention of some kind of ceiling.
7.11 In addition to the Government's
comments on theses two points, we also await with interest
information about the outcome of its consultation exercise
and the Regulatory Impact Assessment which the Minister has promised.
In the meantime, we are not clearing the document.
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