The Presidency structured the debate around two themes: the effectiveness of exceptional measures in case of market disturbances and crisis; and the proposed measures aiming at a more competitive and well-functioning food supply chain. The debate, which lasted just over two hours, can be followed here on video.

The key battle lines that emerged can be summarised as follows. For simplicity, I refer to those who would like to return to a more managed market as the ‘blues’, and those who would like to push further in a more market-oriented direction as the ‘reds’, while recognising that this crude distinction does not always work. For another summary of Monday’s debate, see this Europolitics article.

Market disturbances (Articles 154-156)

There was general agreement that agriculture is vulnerable to various types of crisis and market disruption, including from animal disease outbreaks, extreme weather events, and loss of consumer confidence due to a food safety breakdown. The Commissioner also highlighted that sectors could face a crisis not only because of low product prices but also where margins are squeezed by high input costs.

The regulation provides for measures to deal with both kinds of crisis and the general market disruption clause is expanded to cover all sectors in the current CMO. The Commissioner has emphasised the need for a speedy response to crisis situations, and supplementary funding to deal with crises is proposed in a crisis reserve outside of the main EU budget.

The ‘blues’ did not have much to complain about in this proposal. Some countries were unhappy with the extent of the dismantling of market instruments in the past – Spain and Poland called for a broadening of intervention and an increase in reference and trigger prices but there seemed little appetite for that. Latvia wanted the risk management toolkit proposed for Pillar 2 to be moved into Pillar 1.

The ‘reds’ raised a range of issues. Some countries were concerned about the need for a clearer definition of market disturbance and for a clear distinction between crises and normal volatility to avoid this measure becoming a form of income support. These countries expressed unease about giving the Commission quite far-reaching powers through delegated acts to introduce safeguard measures. They wanted more guidance on when these measures could be invoked written into the basic law, and more involvement by the member states in making the decision.

Countries differed on whether the crisis reserve should be outside the budget or not. Poland was not happy with the level of co-financing of the animal health and consumer confidence measures and wanted a higher rate of co-financing than the 50% proposed.

Market management

The milk quota system and the vine planting ban are set to expire under existing legislation. Sugar quotas are also set to expire under the existing regulation by 30 September 2015.

Wine-producing countries are unhappy with the disappearance of the vine planting ban and have come together to reverse this decision. Commissioner Ciolos at the Berlin Green Week earlier this month announced the establishment of a high level group to discuss wine reform to report by the end of this year, with no subject taboo. This proposal was not surprisingly welcomed.

‘Blue’ countries also sought to delay the end of sugar quotas, with a number of countries calling for an extension of quotas to 2020. An extension was justified on the grounds that the sector had just come through the 2006 reform, and that a number of processors had invested heavily in acquiring additional quota. One country argued that quotas were necessary to secure adequate sugar supply in the EU.

The fact that the end of quotas in 2015 was clearly signalled as part of this reform and processors should have been aware of this when making their investment decisions seems overlooked in this argument. It was left to the Irish Minister to point out that, in a situation of high sugar prices and short supplies on the EU market, the quicker that quotas were removed, the better.

Improving the functioning of the food supply chain

The ‘blue’ countries are generally happy with the proposal for compulsory recognition of producer organisations and inter-branch organisations, and with the proposal to extend the derogations from competition policy rules which currently apply in the fruit and vegetable sector to all products (while still excluding activities which would fix prices or restrict market access).

The ‘red’ countries objected to the mandatory recognition of producer groups, arguing it should be left up to member states. Other countries were concerned that the proposal to extend PO rules to all producers could lead to the creation of a dominant position in the market place, or the potential for abuse of dominant position. Sweden took the most radical position that strengthening producers’ competitiveness was fundamentally about innovation and not about market regulation.

Phasing out export subsidies

The Commission has not proposed any change to the existing situation with respect to export subsidies. But one of the encouraging aspects of the debate was the number of member states who took the opportunity to explicitly make clear their opposition to the continued use of export subsidies after 2013. There is an opportunity here which can be built on.

This post was written by Alan Matthews

Reform is also expected to bring down the price of cheaper table wines as wine that would, under the old regime, have been distilled is instead bottled for sale (with binge drinkers in Britain being one possible market). However, specialised table wine producers in Sicily and Languedoc-Roussillion in France could see their income fall by up to a third. Enraged wine makers in Languedoc-Roussillion started fires in several French supermarkets to protest against the reform.

However, CEEV, the European wine producers’ federation said that changes in the industry were inevitable in the face of growing globalisation. ‘This may be the last chance we have to update the sector’, warned José-Ramón Fernandez. ‘We welcome the Commission’s efforts as long as they are accompanied by measures to move into alternative agricultural sectors that are socially acceptable to producers.’

A Commission spokesman said that the changes were likely to mean less but better wine on the market in the short term, but in the long-term a more competitive market, together with simplified labelling and classification rules, could see production soar. ‘In the long-term people around the world could be drinking French and Spanish and Italian wine, instead of New World varieties.’

Perhaps. But New World producers know that the market has changed, with a mass market less interested in provenance and more in having drinkable wines available at an affordable price. In the short run, Australian production could be hit by the country’s chronic drought, a topic I hope to cover soon.

In particular the vineyard removal scheme will be much less extensive than originally proposed. The target for grubbing up vines, originally set at 400,000 of the current 3.4 million hectares, looks set to be cut in half. In any case, the scheme would continue to be voluntary for producers with no one forced to tear up vines.

All vine-covered land is planned to become eligible for Single Farm Payment to secure the ‘Green Box’ status of these aids in any future WTO dispute.

The Commission’s plans have encountered opposition from some member states, not least Germany who are upset by a plan to ban the use of sugar. German farm minister Horst Seehofer claimed that Germany would lose part of its competitiveness ‘if we did without sugar unnecessarily.’ A ban on adding sugar would increase the cost of producing wine in Germany by up to 25 per cent. However, Commission officials argue that half of quality German wines are already produced without using sugar.