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EU suggests only minor changes to cotton reform November 12, 2007

Posted by grhomeboy in Business & Economy.
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Europe’s farm chief has chosen to keep the EU’s cotton policy largely intact after a sweeping 2004 reform found fault at the EU’s highest court and was annulled, the European Commission said yesterday.

In September 2006, the European Court of Justice annulled the EU’s 2004 cotton reform after a challenge by Spain, saying a key part of its new subsidy system was flawed and arbitrary. The 2004 reform deal set down that for cotton, 65 percent of EU payments would be decoupled, delinking the amount of Brussels subsidy that a farmer receives from the amount he produces, and 35 percent converted into area-based payments.

Under a new reform proposal authored by EU Agriculture Commissioner Mariann Fischer Boel, that subsidy split will remain with only small changes proposed in other areas. “This proposal maintains the current split between decoupled and coupled payments, which was working well in the cotton sector,” Fischer Boel said in a statement.

The maximum area for subsidized cotton-growing stays at slightly more than 440,000 hectares, with Greece retaining the lion’s share of that at 370,000 hectares. Greek cotton growers will qualify for subsidies of 594 euros per hectare for the first 300,000 hectares and then a lower rate of 342.85 for the remainder.

Spain, the EU’s second-largest producer, receives 70,000 hectares at a subsidy rate of 1,039 per hectare. Bulgaria and Portugal are allocated very small growing areas.

If EU Agriculture Ministers agree, the new cotton regime would enter into force from January 2008. To promote European cotton, the EU would create a “label of origin” and consider granting at least 3 million to subsidize promotion and marketing of its cotton products.

Cotton cultivation is of particular importance to Greece and Spain, the only two producers in the EU which, as a 27-country bloc, turns out around 1.45 million tons of raw cotton a year. Greece is by far the larger of the two and accounts for about 76 percent of EU production, concentrated in three regions, Thessaly, Macedonia-Thrace and Sterea Ellada. In Spain, cotton production is concentrated in the south, in Andalusia.

However, the EU is only a minor player on the world cotton scene, contributing just 2 percent to world output. It is, however, a major importer. Spain filed its complaint over the EU’s final political deal, claiming the revamped cotton regime would encourage farmers to drop cotton growing in favor of competing crops, with negative consequences for cotton-dependent farm regions.

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