Select Committee on European Communities Eleventh Report



Letter from Lord Donoughue, Minister for Farming and the Food Industry, to Lord Tordoff, Chairman of the Committee

  I am writing to give the Government's response to the Select Committee's report of 19 March, which I understand is now to be debated in the House of Lords on 9 June.

  The Government welcomes this timely and well-presented report as making a constructive contribution to our thinking on the future of the common organisation of the market in raw tobacco. It agrees with most of the points made by the Committee and shares their concern that the Commission's proposals for reform of the tobacco regime stop well short of what is required. We particularly agree with the comment in paragraph 41, that, if changes of this kind are agreed, further substantial reform will soon be needed.

  The problems of EU tobacco growers are essentially socio-economic. It would be better for them to be addressed by the appropriate structural measures, rather than by continued market subsidies. The Community should start the process of gradual disengagement from the tobacco sector. We will do our utmost to persuade our European partners as to the intrinsic merits of these arguments. However, it must be recognised that the UK is only one player in the process, and that, to date, other Member States with the exception of Sweden and to a lesser extent Denmark have not lent much support to our concerns. This inevitably limits what we can hope to achieve.

  In the meantime, perhaps I could usefully highlight three points arising from the Committee's report, which - though falling short of our own preferred approach - are relevant to that favoured by the Commission. First, the Government considers that decoupling of support from production, and a reduction in support levels, are essential steps which the EU needs to take in preparation for enlargement and to avoid difficulties in the WTO. We shall continue to press for this in discussions in Brussels.

  Secondly, we are in favour of encouraging voluntary departure from the regime, so long as this leads to permanent reductions in quotas. This will be very important in getting the less efficient producers out of tobacco. In principle, we would support a proposal which entailed growers who leave tobacco production receiving payment or bonds. However, we do not think that quota obtained through a voluntary quota buy-up scheme should be redistributed. Nor would we wish to see new entrants encouraged in this sector. We recognise that some schemes to encourage producers to leave tobacco production may require short-term continuation of aid in the form of decoupled expenditure in order to achieve long-term reductions in support.

  Thirdly, the Government supports the Commission's ideas for premia modulated according to quality as far as they go, but we should prefer to see lower premia to expose producers more to market price signals. The modulation of premia to reward quality would serve to increase standards within a producer group, but we think that assessment between groups is necessary to maintain an upward movement in quality.

  Finally I want to emphasise our commitment to reform the EU tobacco regime. Your report has made a valuable contribution.

3 June 1997

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