COMMON ORGANISATION OF THE MARKET IN ETHYL
ALCOHOL OF AGRICULTURAL ORIGIN
(22207)
6586/01
COM(01) 101
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Draft Council Regulation on the common organisation of the market in ethyl alcohol of agricultural origin.
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| Legal base: |
Articles 36 and 37 EC; consultation; qualified majority voting
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| Document originated:
| 21 February 2001 |
| Forwarded to the Council:
| 23 February 2001 |
| Deposited in Parliament:
| 13 March 2001 |
| Department: |
Agriculture, Fisheries and Food
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| Basis of consideration:
| EM of 28 March 2001 |
| Previous Committee Report:
| None |
| To be discussed in Council:
| Following receipt of European Parliament opinion
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| Committee's assessment:
| Politically important |
| Committee's decision:
| Not cleared; further information requested
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Background
6.1 Ethyl alcohol can be produced either
industrially, or from a range of agricultural products (such as
cereals, sugar beet, molasses, potatoes, fruit and wine), for
which it provides an important outlet. According to the Commission,
overall Community production is around 20 million hectolitres,
of which 13 million hectolitres is of agricultural origin, whilst
demand (principally from the spirit drinks, cosmetics and pharmaceutical
sectors) is around 17 million hectolitres and declining.
6.2 The Commission says that the sector
has been confronted with a series of problems during the last
five years, mainly related to increased competition in the internal
market. In particular:
- imports from third countries have increased from
around 400,000 hectolitres in 1995 to just over 1.1 million hectolitres
since the 30% reduction in tariffs following the GATT Uruguay
Round Agreements, with over 80% of this amount being duty free
or subsidised domestically;
- greater quantities are imported as blends of
alcohol with denaturants at far lower tariffs, but, once imported,
the alcohol in the blend may be extracted and used for traditional
purposes; and
- since January 2000, a zero tariff rate has made
it possible to import alcohol diluted with water under the tariff
heading for vodka in bulk, but, once imported, the water may be
extracted and thereby avoid the tariffs applicable to alcohol.
6.3 The Commission adds that further pressures
on the sector are likely to arise as a result of the large quantities
of agricultural alcohol produced by some of the applicant countries,
the likelihood of further reductions in tariffs being agreed in
the next WTO negotiations, and competition from alcohol produced
with the benefit of tax incentives under large scale bio-fuel
programmes.
The current proposal
6.4 Against this background, the Commission
has proposed that a "lightweight" common market organisation
for agricultural alcohol should be established, whose main objectives
would be to increase market information, monitor trade flows,
and establish a forum for discussion and preparing of decisions.
More specifically, the regime would:
- define the different types of alcohol of agricultural
origin;
- require Member States to supply the statistical
information needed for the Commission to establish an annual balance
sheet of production, trade, stocks and end-use;
- provide scope for introducing import and export
licences, intended to increase the reliability of information,
and to permit, where necessary, the application of a safeguard
clause (see below);
- allow preferential tariff quotas to be administered
by the Commission under Management Committee procedure (for which
it is envisaged the Wine Management Committee would be the appropriate
body);
- contain a safeguard clause, permitting urgent
measures to be taken in the event of serious market disturbance;
- enable the prohibition of inward processing arrangements
in the event of market disturbance; and
- ensure that aids granted by Member States are
compatible with the principles of the common market.
The Government's view
6.5 In her Explanatory Memorandum of 28
March 2001, the Minister of State (Commons) at the Ministry of
Agriculture, Fisheries and Food (the Rt. Hon. Joyce Quin) says
the UK is the second largest producer of ethyl alcohol within
the Community, and that producers have been calling for a "light"
regime for a number of years. She adds that, although this proposal
is preferable to one with interventionist aspects (which the Government
certainly could not support), it will need to be convinced that
the current proposal is non-discriminatory, automatically permits
the continuance of trade without any hindrance, does not affect
the competitiveness of importers compared with domestic producers,
and involves a minimum degree of administration and documentation.
In particular, the Government will need to ensure that its World
Trade Organisation and other international commitments are not
compromised.
6.6 The Minister also says that the Government
is discussing this issue with industry, and will submit an analysis
of their comments in due course, though she points out that previous
contacts have shown that ethyl alcohol producers are in favour
of such measures, whilst traders have expressed some scepticism.
The Government will also be supplying a Regulatory Impact Assessment
setting out the "limited" cost implications for those
operators required to submit a security in order to obtain an
import licence.
Conclusion
6.7 Whilst we will await the further
information promised by the Minister before taking a view on this
proposal, we are somewhat concerned that, even if only a "light"
regime were to be agreed, it would be that much easier for the
Commission subsequently to introduce the sort of more interventionist
mechanisms seen in many other commodity regimes under the Common
Agricultural Policy. We would, therefore, welcome the Minister's
comments on this point.
6.8 In any case, it is not clear how
far the sort of information which would be sought under this proposal
would in practice enable the kind of corrective action described
by the Commission to be taken, given the constraints which the
World Trade Organisation (WTO) commitments referred to by the
Minister might impose. Again, we would be glad to know the Government's
views on this.
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