19. It is against this
background that the Commission has produced its very thorough
report, reviewing the whole of the tobacco regime, considering
options for change and recommending a number of modifications.
These have been debated in the Agriculture Council and in due
course the Commission will publish draft implementing legislation.
Options considered by the Commission,
20. The Commission's
report considers a variety of options in respect of the tobacco
regime, which it proceeds to dismiss for one reason or another.
21. One of the options
dismissed is gradual disengagement from support of the tobacco
sector. The Commission rejects this scenario because of the serious
economic and social consequences which would ensue, in the absence
of alternative economic opportunities. Agricultural alternatives
are discounted on the grounds that conversion to market garden
crops would endanger the economic equilibrium of that sector,
and that forestry on such small plots would be economically inefficient
and would in any case not absorb sufficient labour. This leads
the Commission to acknowledge that "any real alternative
to tobacco farming would have to be sought outside agriculture
in the broad sense" (page 30), but that avenue is not further
explored. Another reason given by the Commission for rejecting
the disengagement scenario is that the Community market organisation
might be replaced by national ones.
22. Another option dismissed
is the adoption of area aid payments. The disadvantages which
the Commission identifies with a system of aid per hectare are
the difficulty in checking areas, given the large number of very
small plots; and the requirement for complex monitoring to ensure
that growers did not plant tobacco, for the sake of the premium,
without harvesting it.
23. The Commission also
rejects the payment of direct income support. This was a solution
proposed in a report by the Court of Auditors
and the Commission concentrates on refuting the Court's arguments
in its favour rather than propounding arguments against it. The
Commission disputes the Court's calculation of mean net incomes,
concluding that the policy would cost a similar sum to the existing
regime; and disputes the Court's suggestion that a reduction in
tobacco production in the Community would result in reduced consumption.
The Commission also expresses doubts about the "social and
political acceptability" of an "extraordinary situation
in which farmers would be financed by public funds provided that
they did not farm" (page 32).
The Commission's preferred scenario
24. Having dismissed
these options, however, the Commission does acknowledge that change
in the regime is necessary. The Commission recognises the need
for incentives to grow tobacco with a better quality/price ratio,
in order better to meet the demands of the internal market and
increase the sector's added value. The Commission also seeks
in its proposed changes to provide encouragement for producers
to leave the sector.
25. The main component
of the Commission's preferred scenario is the modulation of premia
for tobacco according to quality. It is proposed that the premia
be divided between a fixed portion and a variable portion, to
fulfil the objectives of providing tobacco farmers with a minimum
income and of encouraging the production of better quality tobacco,
to meet the demands of the market. The variable portion should
be related to the purchase price of the tobacco, and should be
distributed through producers' groups. The Commission proposes
no change in the levels of premia, or in the volume of the quota.
26. Alongside modulated
premia, the Commission proposes aids - both at individual and
at local levels - to assist farmers to leave the sector voluntarily.
The individual aids suggested are either the buying-up of quota
over 7-10 years, or the issuing of saleable bonds on the basis
of which annuities would be paid for 7-10 years. The local aids
should involve strategic local development plans to offer alternative
occupational activities, information, training, and advice and
27. The Commission also
proposes making the quota scheme more flexible. This would allow
transfer of quota from one variety to another, to facilitate moves
to higher quality and greater market sensitivity; and transfer
of quota from one producer to another, to encourage consolidation
of holdings and therefore greater efficiency.
28. Finally, the Commission
proposes to simplify administration of the system; to promote
environmental protection measures; to increase support (by withholding
an increased percentage of premia) for the Tobacco Research and
Information Fund; and to increase supervision of the regime in
order to control expenditure and prevent fraud.
The view of Her Majesty's Government
29. MAFF suggested that
as a limited exercise in improving existing arrangements, the
Commission's preferred scenario had some merit (Q 46). They welcomed
it as "introducing a degree of market sensitivity which does
not exist at the moment" and which must be sensible (Q 47).
30. However, Her Majesty's
Government would prefer to see more radical change. In debate
in the House of Commons European Standing Committee A on 12 February,
Mr. Tony Baldry MP, Minister of State, described current arrangements
as "a crazy regime and a crazy way of spending taxpayers'
money" (HC Deb, col 7). He said "there must be a clear
commitment to the phased ending of the subsidised production of
tobacco" (HC Deb, col 4). The Government's preferred solution
would combine a voluntary buy-out scheme with reductions in both
premia and quota (Q 8).
The views of other Member States
31. To our regret, of
the major producer countries approached, only Spain and Italy
were able to provide us with written evidence within the timescale
permitted by our enquiry. As noted in paragraph 16 above, the
Spanish Embassy in London emphasised the social importance of
tobacco production in Spain, and in particular its importance
to employment. The Commission's specific proposals were not addressed,
but any reduction in quota was resisted (p 16).
32. The Italian Embassy
in London also resisted any radical reform of the sector. They
were content with emphasis on improving the quality of tobacco
produced, and agreed in principle with modulated premia. But
they also said that Italy was against the adoption of measures
aimed at encouraging the abandonment of production, and that entry
of new producers to the tobacco sector should be encouraged (p
33. MAFF told us that
in discussion in the Agriculture Council there had been a broad
majority in favour of the Commission's preferred scenario (Q 2).
Mr. Baldry explained in the Commons that all eight producer Member
States were in favour of the regime continuing. Other than the
United Kingdom, only Sweden was in favour of disengagement from
the sector, while the other Member States without a producer interest
were "apathetic" (HC Deb, col 1). MAFF suggested that
Ireland, although not a producer country, was perhaps influenced
by an interest in the continuance of CAP support in other sectors
on comparable social grounds to those applicable to tobacco (Q
12). MAFF also suggested that producer Member States supported
continuance of the tobacco regime because it was wholly funded
from the guarantee section of the European Farm Guidance and Guarantee
Fund, whereas any structural measures which might provide equivalent
social support would require a degree of national funding (Q 27).
The views of other witnesses
34. The Fédération
Européenne des Transformateurs de Tabac (FETRATAB) disagreed
with the Commission's proposals to encourage voluntary departure
from the tobacco sector. They suggested instead that a national
reserve should be established for the "accumulation of quotas
from farmers who decide to cease producing tobacco. This National
Reserve initially should be allocated to new growers" (p
35. Mr. Terry Wynn,
MEP, said that the Commission's report reflected "a lack
of political will" to accept that tobacco subsidy would have
to be abandoned eventually (p 18). He said that "the complete
dismantling of tobacco subsidies would eliminate the inconsistency
between our health and agricultural policies and free up funds
for job creation, reconversion and health protection" (p
36. The Consumers in
Europe Group also took a robust line against tobacco subsidies.
"The use of EU public money to encourage the uneconomic
growing of produce which is unfit for consumption in the EU cannot
be justified" (p 9). They drew attention to research into
a range of possible alternative crops to tobacco, and to the fact
that these were unattractive only because of the high level of
subsidy for tobacco. "If this were untied, other options
would assume their rightful position" (p 9).
Special Report No. 8/93; OJ C065, 2nd March 1994. Back