Select Committee on European Scrutiny Fourteenth Report


COMMON ORGANISATION OF THE MARKET IN ETHYL ALCOHOL OF AGRICULTURAL ORIGIN


(22207)

6586/01

COM(01) 101


Draft Council Regulation on the common organisation of the market in ethyl alcohol of agricultural origin.

Legal base:Articles 36 and 37 EC; consultation; qualified majority voting
Department:Environment, Food and Rural Affairs
Basis of consideration:SEM of 10 January 2002
Previous Committee Report:HC 28-xiii (2000-01), paragraph 6 (2 May 2001)
To be discussed in Council:Following receipt of European Parliament opinion
Committee's assessment:Politically important
Committee's decision:Cleared


Background

  7.1  Ethyl alcohol can be produced either industrially, or from a range of agricultural products (such as cereals, sugar beet, molasses, potatoes, fruit and wine), for which it provides an important outlet. According to the Commission, overall Community production is around 20 million hectolitres, of which 13 million hectolitres is of agricultural origin, whilst demand (principally from the spirit drinks, cosmetics and pharmaceutical sectors) is around 17 million hectolitres and declining.

  7.2  The Commission says that the sector has been confronted with a series of problems during the last five years, and that further pressures are likely to arise as a result of the large quantities of agricultural alcohol produced by some of the applicant countries, the likelihood of further reductions in tariffs being agreed in the next WTO negotiations, and competition from alcohol produced with the benefit of tax incentives under large scale bio-fuel programmes. It therefore proposed in February 2001 that a "lightweight" regime should be established, whose main objectives would be to increase market information, monitor trade flows, and establish a forum for discussion and preparing of decisions. More specifically, it would:

  • define the different types of alcohol of agricultural origin;

  • require Member States to supply the statistical information needed to establish an annual balance sheet ;

  • provide scope for introducing import and export licences, intended to provide more reliable information, and permit, where necessary, the application of a safeguard clause enabling urgent measures to be taken in the event of serious market disturbance;

  • allow preferential tariff quotas to be administered by the Commission;

  • enable the prohibition of inward processing arrangements in the event of market disturbance; and

  • ensure that aids granted by Member States are compatible with the principles of the common market.

  7.3  In its Explanatory Memorandum of 28 March 2001, the Government said that the UK is the second largest producer of ethyl alcohol within the Community, and that producers have been calling for a "light" regime for a number of years. However, although this proposal was preferable to one with interventionist aspects (which the Government certainly could not support), it would need to be convinced that it was non-discriminatory, automatically permitted the continuance of trade without any hindrance, did not affect the competitiveness of importers compared with domestic producers, and involved a minimum degree of administration and documentation. The Government would also need to ensure that its World Trade Organisation and other international commitments were not compromised.

  7.4  In their Report of 5 May 2001, our predecessors said that they would await the Regulatory Impact Assessment promised by the Minister before taking a view on the proposal, but that they were somewhat concerned that, even if only a "light" regime were to be agreed, it would be that much easier for the Commission subsequently to introduce the sort of more interventionist mechanisms seen in many other commodity regimes under the Common Agricultural Policy (CAP). It therefore asked the Government to comment on this point, and on the extent to which the sort of information sought under the proposal would in practice enable the kind of corrective action described by the Commission to be taken, given the constraints which World Trade Organisation (WTO) commitments might impose.

Supplementary Explanatory Memorandum of 10 January 2002

  7.5  In his Supplementary Explanatory Memorandum of 10 January 2002, the Parliamentary Under-Secretary of State at the Department for Environment, Food and Rural Affairs (Lord Whitty) says that the Government too was concerned that the proposal might develop into a fully-fledged CAP regime. It had therefore sought assurances on this from the Commission, which had responded by pointing out that any market management measures would require a budget line, which would remain in the gift of the Council. In the meantime, it had said that the Community was fully committed to the provisions of the WTO which only permit interference in free trade in exceptional circumstances, such as when market disturbances have arisen as a result of irregular national aids in other countries.

  7.6  The Minister adds that, whilst this is reassuring, the UK is using official- level meetings in Brussels to encourage consideration of alternative means of achieving greater market transparency falling short of a CAP regime. He also says that the Government can continue to give the proposal "cautious support", whilst continuing to press for it to be confined to those elements needed to provide the Community with accurate statistics for monitoring the market, leaving other aspects on one side until such time as a clear need for them had been demonstrated.

  7.7  The Minister has enclosed with his Supplementary Explanatory Memorandum a Regulatory Impact Assessment. This confirms the Government's initial view that the cost implications of the proposal would be limited, amounting to around £10,000 a year overall.

Conclusion

  7.8  We are grateful to the Minister for this further information, which we have noted. In the light of what he has said, we are now clearing the proposal.


 
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