Select Committee on European Communities Thirteenth Report


  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, but dismissed

  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[7] 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 technical assistance.

  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 14).

  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 11).

  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 17).

  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).

7   Special Report No. 8/93; OJ C065, 2nd March 1994. Back

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