IP/08/993

Brussels, 23 June 2008

CAP Reform: Commission welcomes adoption of reformed cotton support scheme

Mariann Fischer Boel, Commissioner for Agriculture and Rural Development, welcomed today's adoption by the Council of the reformed EU cotton support scheme. The reform maintains 65 % of aid "decoupled" (i.e. no longer linked to production) and 35 % linked to cotton production in the form of area payments. National restructuring programmes are created to facilitate restructuring in the cotton ginning industry and to enhance quality and marketing of the cotton produced. The new scheme will replace the current support arrangement, which was annulled by the European Court of Justice on 7 September 2006.

"I am happy that the long discussions and court cases regarding the reform of the cotton sector have now been brought to a positive conclusion," said Commissioner Fischer Boel. "The reform maintains the 65-35 division between decoupled and coupled payments, respects our international commitments, and is budget neutral."

The Commissioner stressed that the reform is in line with the aims of the CAP reforms, to provide producers with more stable incomes, while allowing them to react to future market developments. The reform respects the undertaking in the Greek, Spanish and Portuguese Accession Treaties that the EU should support cotton production in regions where it is important for the agricultural economy.

To help the EU cotton sector to adapt to changed circumstances, the Council has decided to support a restructuring process. National envelopes with an annual budget of EUR 4.0 million for Greece and EUR 6.134 million for Spain may be used to finance among other things dismantling and investment in the ginning industry, quality and promotion. The 2004 reform has already allocated an additional EUR 22 million per year (from 2007 to 2013) to assist regions affected by the reform.

The EU's international commitments are respected in the sense that the decoupled part of the support will be categorized in the "Green Box" containing non-trade distorting support. The remaining 35% coupled support has the characteristics of production limiting "Blue Box" support and is based on fixed areas and yields. This reform confirms the elimination of trade distorting "Amber Box" support.

Background

Cotton is an arable crop used for its seeds and mainly for its fibre. The cotton sector has strong regional importance in the two main producing Member States. Around 76 % of the EU's total output (about 1.45 million tons of raw cotton in 2005) is grown in Greece. In 2005, 9.1 % of Greece's total agricultural output was cotton while in Spain, the other main EU producer, cotton contributed 1.3 %. A small quantity of cotton is also grown in Bulgaria; Portugal no longer grows cotton.

In the EU, most farms growing cotton are characterised by their small size (Greece 4.5 ha and Spain 11.0 ha) and large number (79 700 farms in Greece and 9 500 in Spain). In Greece, cotton holdings have a higher degree of specialisation.

Internationally, the EU is a minor player, contributing only about 1.4 % to the world's total production of cotton (2007). This implies that the impact of EU production on the evolution of world market prices has been negligible. This is further strengthened by the fact that the EU does not use export subsidies for this sector and offers duty free access.

In the new Regulation, national base areas that could benefit from the coupled aid under the Single Payment Scheme are established as follows (figures for 2004 reform in brackets):

Bulgaria: 3 342 ha (10 237 ha)

Greece: 270 000 ha (370 000 ha)

Spain: 48 000 ha (70 000 ha)

Portugal: 360 ha (360 ha).

The coupled aid is established by multiplying a fixed yield with reference amounts. The reference amounts per tonne of unginned cotton are as follows:
Bulgaria: EUR 671.33

Greece: EUR 251.75

Spain: EUR 400.00

Portugal: EUR 252.73.