Agrimonetary compensation
12. The start of Economic and Monetary Union (EMU)
on 1 January 1999 led to the introduction of a new agrimonetary
system and the consequent abolition of "green" rates
of exchange. Both Common Agricultural Policy support prices and
premium payments are now set in euros and, in the case of the
four Member States outside EMU, are converted into national currencies
either at daily market exchange rates or at specified dates, as
the relevant scheme provides. Appreciation of sterling therefore
reduces the value of Community support payments, and, conversely,
depreciation increases their value.[26]
13. The impact of this factor varies between sectors.
In some sectors, such as pigs, poultrymeat and eggs,[27]
there is no direct impact as agrimonetary compensation is not
payable.
14. According to DANI,[28]
premium payments would have fallen significantly in 1999 as a
consequence of sterling's appreciation but for transitional arrangements,
which have maintained the value of 1999 premium payments at their
previous sterling levels. Further payments, at reducing levels,
may be made over the next two years[29].
Northern Ireland benefited in 1999 from these arrangements to
the tune of about £16 million.[30]
Member States were required to make the payments in full for 1999,
but half the payments in subsequent years are optional. There
are also optional arrangements for Member States to provide compensation,
in three degressive annual steps, for currency induced falls where
these exceed certain limits, half the cost of which may be reclaimed
from the Community budget.
15. Both the unions were critical[31]
of the fact that the Government had not taken full advantage of
the opportunities to compensate, through optional Community agrimonetary
measures, for the impact of the appreciation of sterling. The
Government has, however, paid out a total of £133 million
in optional agri-monetary compensation in 1997 and 1998, £22.4
million of this in Northern Ireland.[32]
DANI also pointed out[33]
that the operation of the Fontainebleau rebate mechanism means
that, as well as bearing the whole of any nationally funded expenditure,
the United Kingdom Exchequer in effect meets 71% of the cost to
the Community budget of any new European Union expenditure in
the United Kingdom. Equally though, we note that such Community
expenditure could be viewed as a mechanism for levering a total
of some £1.40 of public expenditure for each pound of taxpayers'
money used.
16. The Ministry of Agriculture, Fisheries and Food
(MAFF) has submitted evidence describing the transitional compensation
arrangements operating in respect of direct payments as a result
of the introduction of the euro on 1 January 1999.[34]
Payments in 1999 were obligatory and were 100% EU funded. Under
these arrangements, Northern Ireland beef producers will receive
around £13.3 million, sheep producers £2.2 million,
and arable producers £1.1 million. In 2000 and 2001, the
payment of the EU contribution, one half of the maximum permitted
payment, is compulsory, but the other half is a matter for the
Member State concerned. The absolute sums payable in the UK under
the arrangements for subsequent years are dependent on the relative
levels of the pound and the euro. For 2000, only the figures for
livestock premium compensation are yet fixed. This will result
in beef producers in the UK receiving £20.6 million from
the EU-funded element and sheep producers £10.6 million.
Assuming that distribution is pro rata to the 1999 distribution,
beef producers in the Province may expect to benefit to the tune
of about £4.4 million, and sheep producers to the tune of
about £0.7 million. This could be doubled if the provision
for a national contribution is implemented. While our remit does
not extend to taking a view for the UK as a whole, the situation
in the relevant sectors in Northern Ireland in our view fully
justifies the Government paying the optional element in 2000 and
we so recommend.
17. MAFF has also submitted evidence describing the
permanent arrangements designed to compensate producers for currency-induced
falls in prices where these exceed certain limits.[35]
These complex arrangements differ from the transitional arrangements
described above in that they are optional and apply to Member
States outside the euro only. EU funding is subject to a limit
of 50%.
18. Because of the depreciation of sterling against
the euro since 1 January 1999, this compensation will, in principle,
become available for United Kingdom producers. The Commission
will be presenting its calculations at the end of this month.
The Government has yet to decide whether it will take up the option
of paying any of the compensation available under these arrangements.[36]
Until the Commission publishes its calculations, it is not
possible to evaluate either the likely benefits to the farming
industry in Northern Ireland or the potential costs to the Exchequer.
Given the current difficulties faced by the industry, we hope
that the Government will give very careful consideration to the
potential opportunity presented by these compensation arrangements.
Origin labelling
19. A considerable amount of the evidence stressed
the very high quality of Northern Ireland agricultural produce[37]
and it was suggested that this might be capitalised on through
labelling of Northern Ireland products by their source. Lord Dubs
told us[38]
that he had sought to encourage the voluntary labelling of Northern
Ireland products by their source. The UFU told us[39]
that, given the higher welfare standards to which United Kingdom
pork was produced, there would be merit in encouraging labelling.
20. Concern was also expressed[40]
about misleading labelling. For foodstuffs generally, Council
Directive 79/112/EEC, which harmonised Member States' laws on
labelling of foodstuffs, requires Member States to prohibit labelling
which could mislead purchasers to a material degree. This Community
obligation is implemented in the United Kingdom by the Trades
Descriptions Act 1968, the Food Safety Act 1990 and the Food Labelling
Regulations 1996. MAFF told us[41]
that, although some of the key concepts in that legislation are
not defined, and are thus for the courts to interpret, the Act
takes the approach that goods are deemed to have been manufactured
or produced in the country in which they last underwent "a
treatment or process resulting in a substantial change".
This approach is consistent with that adopted by the World Trade
Organisation in the resolution of international trade disputes
and is considered to be a "reasonable working guide"
for the purposes of the 1996 Regulations.
21. On 1 February, MAFF issued informal, non-statutory
guidance to the industry and to enforcement authorities on the
interpretation of country of origin legislation. This seeks, inter
alia, to discourage the labelling as 'British bacon' of bacon
made in the UK from imported meat. We welcome this step, but
doubt whether it goes far enough. As the guidance is non-statutory,
it will be for the courts to decide whether such labelling is
misleading. This may in turn rest on the view the courts take
as to whether the curing of pork constitutes a 'substantial change'.[42]
We would prefer to see appropriate statutory provision made; given
the higher profile given to animal welfare following the incorporation
of a Protocol on Animal Welfare into the Treaties, it is not clear
that a labelling scheme that set out to ensure that a consumer,
anxious to make an informed choice on the basis of the welfare
standards of the animal from which the meat had been produced,
had such a choice, would necessarily be incompatible with Community
law. We recommend that the Government, in consultation with the
Commission, seek to develop such a statutory scheme.
16 Ev.
p. 1. Back
17 Ev.
p. 1. Back
18 Ev.
p. 1-2. Back
19 Ev.
p. 1. Back
20 Q 234. Back
21 Third
Report from the Northern Ireland Affairs Committee, Session 1998-99,
HC 334. Back
22 Official
Report, 1 February 2000, Vol. 343, col. 176 WH. Back
23 Q 127-132.
See also Ev. p. 37. Back
24 Q 12-13. Back
25 Q 114. Back
26 Ev.
p. 6. Back
27 Ev.
p. 4-5. Q 33. Back
28 Ev.
p. 6. Back
29 Ev.
p. 6. Back
30 Q 33.
See also Appendix 11, p. 101. Back
31 Ev.
p. 50 and Q 120-1 and 235-6. Back
32 Ev.
p. 49. See also Q 33 and Ev. p. 20. Back
33 Ev.
p. 6. Q 188. See also Appendix 11, p. 102-3. In the case of
existing Community expenditure transferred to the United Kingdom,
the figure is 66%. Back
34 Appendix
11, p. 101. Back
35 Appendix
13, p. 105. See also Ev. p. 6. Back
36 Appendix
13, p. 105. See also Official Report, 22 February 2000, Vol.
344, Col. 970-1W. Back
37 See,
for example, Q 172 and 200. Back
38 Q 199. Back
39 Q 258. Back
40 Q 148.
See also Appendix 3, p. 80. Back
41 Appendix
12, p. 103. Back
42 The
guidance itself implies that it is likely that the Courts might
take that view. Back
