Committee Reports > List of Committees > Joint > 1978 > Committee on the Secondary Legislation of the European Communities > Report No. 13 - Common Organisation of the Market in Sheepmeat

REPORT

Introduction

1. The Joint Committee has examined the proposal made by the Commission in April, 1978 for a Council Regulation on the common organisation of the market in sheepmeat [R/769/78]. The proposed common organisation comprises a price system covering live sheep and goats, mutton, lamb and goat meat. Wool, which is not an agricultural product for the purposes of the EEC Treaty, is not covered in the proposal.

2. When Ireland acceded to the EEC sheepmeat was the only important livestock product not covered by a common organisation of the market. Customs duties had been eliminated in intra-Community trade and a common tariff of 15% for live sheep and 20% for mutton and lamb applied on imports from outside the Community. Following their accession, customs duties on imports from the new Member States were phased out during the transitional period and the common tariff was gradually introduced so that it now applies to imports from third countries into all nine Member States.

3. In the absence of a common market organisation some Member States such as France have been operating national measures to protect the income of their producers. The functioning of the French market organisation has been facilitated by measures taken by the Commission under Article 115 of the EEC Treaty. However, the Commission considers that the judgment of the Court of Justice in Case 48/74 Charmasson v France [1974] ECR 1383 precludes such measures being continued after the end of 1977. In that Case the Court held that a national market organisation may not, after the transitional period, preclude the full application of Article 33 of the EEC Treaty providing for the elimination of quantitative restrictions. In the Commission’s view this decision removes any obligation on the new Member States to accept the French national system after the end of 1977.

4. In 1975 the Commission made a proposal for a Council Regulation to provide for a transitional organisation of the market in mutton and lamb which was to operate until the end of 1977. The previous Joint Committee reported on the proposal in its seventeenth report (Prl. 5136) of 10th December, 1975. In the event the proposal was not accepted by the Council.

Production, Consumption and Trade in the Community

5. The number of sheep in the Community in December, 1976 was 43-5 million of which the United Kingdom accounted for 46%, France 25% Italy 20% and Ireland 5%. Community sheepmeat production amounted to 534,000 tonnes of which the United Kingdom contributed 245,200, France 154,900, Italy 49,700 and Ireland 40,000 tonnes. Apart from Denmark, where sheep farming plays a negligible role, Ireland is the only Member State where the number of sheep and the production of sheep-meat have shown a decline in recent years.

6. The overall consumption of sheepmeat in the Community remains at above 800,000 tonnes a year. However, in contrast to Ireland where consumption is static, consumption between 1962 and 1976 fell in the United Kingdom by 29% but rose in France, Italy and the Federal Republic of Germany by 67, 26 and 178% respectively. There are substantial differences in the average annual consumption per head among the Member States, the figures for 1976 being Ireland 9kg, United Kingdom 8kg, France 4kg, Belgium and Luxembourg 1·3kg, Federal Republic of Germany 1kg, Denmark 0·4kg and Netherlands 0·2kg, giving a Community average of 3kg.

7. The rate of self supply in the Community rose from 59·4 to 63·9% between 1973 and 1976. In 1976 New Zealand, Argentina, Australia and Hungary supplied 80·2, 5·2, 4·6 and 3·1% respectively of Community imports. The United Kingdom is by far the biggest importer accounting in 1976 for 225,000 tonnes or four-fifths of Community imports, including 200,000 tonnes of frozen lamb from New Zealand.

8. Intra-Community trade increased from 60,000 to 82,000 tonnes between 1973 and 1976. Most of this trade has consisted of a flow of 40 to 50,000 tonnes to France mainly from the United Kingdom, Netherlands, Federal Republic of Germany and Ireland (16,000, 15,000, 9,500 and 1,200 tonnes respectively in 1976).

9. Sheepmeat prices in the Community have been determined primarily by the United Kingdom and French markets. Since 1968, the difference between the French and United Kingdom market prices has been some 50% of the French market price. The difference has narrowed somewhat since 1975, the percentage of the French price represented by the United Kingdom market price growing from 46% in 1975 to 49% in 1976, and to 53% in 1977.

National Protective Measures

10. Under the French national market organisation, the import of frozen sheepmeat from non-member countries is subject to a quota of 3,000 tonnes. Imports of live sheep and meat other than frozen are authorised only when prices recorded on the home market are above a certain threshold. In addition, on import a countervailing charge is levied which varies according to the home market price. The import of live sheep not intended for immediate slaughter is prohibited; however, the import of sheep for fattening is allowed, subject to quota, without payment of the countervailing charge. Aid to boost sheep production is granted to producers’ groups.

11. Since the beginning of this year there has been unlimited access to the French Market without payment of the countervailing charge for Irish carcase lamb of a high quality and in a weight range suited to that market.

12. Imports into the Federal Republic of Germany from non-member countries is controlled by law, licences being granted only for the import of certain produce in the sector. While licences may be suspended at any time no suspensions have taken place since 1972. In Denmark imports from non-member countries are subject to quota; the quota of 3,500 tonnes for 1977/78 included 500 tonnes from Ireland.

13. In the United Kingdom when the market price drops below a guaranteed price, farmers receive a deficiency payment equal roughly to the difference. There is also a guaranteed price system for wool which basically functions as a system for stabilising prices. There are no restrictions on imports.

14. In the other Member States there are no import restrictions or other national measures to support producers’ incomes. However, for veterinary health reasons, Ireland in practice allows imports only from the United Kingdom.

GATT Obligations

15. During the tariff negotiations in 1962, the Community of Six bound the following headings in the sheepmeat sector:

—live pure-bred breeding sheep of domestic species (free)

—sheepmeat, fresh, chilled or frozen (20%)

—sheep offals (12%)

—fats for industrial uses (free)

—other fats (10%)

—preserved sheepmeat (20%).

Certain bound rates of duty were reduced during the 1967 tariff negotiations (offals: 6%; other fats: 7%). In 1973 the Community negotiated, on the basis of Article XXIV-6 of the GATT, extension of all the headings bound by the Six to the nine Member States. In addition, the duty on sheep offals was reduced to 3%. Accordingly, the headings in the sheepmeat sector which have not been bound are the following:

—live sheep other than pure-bred breeding animals (autonomous duty: 15%)

—meat and offals, salted in brine, dried or smoked (autonomous duty: 25%).

Commission’s Proposals

16. The main elements in the proposed Regulation are:—

(i)Basic Price

A basic price for carcases, which could be adjusted seasonally, would be fixed annually for the market year commencing 1 April by reference to the market situation, development prospects, production costs and the situation in the beef and veal sector. For 1978/9 the basic price would be the weighted average of Community prices in 1977.

(ii)Intervention

Intervention measures would be confined to aid for private storage and would operate when the Community market price, calculated by reference to prices in representative markets, is less than 90% of the basic price.

(iii)Third Country Imports

For most products, instead of custom duties a variable levy against third countries equal to the difference between the basic price and the free-at-frontier import price would operate subject to a maximum of 20% in respect of products bound in GATT. Where imports cause “serious disturbance” in the Community “appropriate measures” could be taken.

(iv)Intra-Community Trade

Intra-Community trade would be completely free subject to any health provisions. A Management Committee would be established.

(v)Premia

The variable premium granted by the U.K. under the national price guarantee system would be abolished. The possibility, as a transitional arrangement, of granting compensation for sheepmeat producers disadvantaged by the new system is envisaged. In particular a premium (amount to be determined could vary from time to time and be differentiated by region) may be granted to producers suffering a fall in income.

(vi)Finance

The expenses of implementing the Regulation would be borne by EAGGF. The use of the stabilised commercial rate as opposed to the Green rate used for other sectors is proposed.

Views of the Joint Committee

17. The free movement of goods in the Community unfettered by quantitative restrictions or charges equivalent to customs duties is a fundamental principle of the Treaty of Rome. In the Joint Committee’s view, the freedom of movement of sheepmeat will have to be accepted sooner or later notwithstanding the contrary interests of some Member States. Therefore, it believes that insofar as the Commission’s proposals seek to implement free movement, they should be accepted. However, the Treaty of Rome also requires that any common market organisation must ensure a fair standard of living for agricultural producers and the Joint Committee considers that the Commission’s proposals fall far short of affording to sheep farmers support and protection commensurate with that enjoyed by other agricultural producers. The main defect in the proposed Regulation is the inadequacy of the measures proposed for dealing with imports from third countries but the Committee is also dissatisfied with the provisions proposed relating to the price and intervention system.

Imports from Third Countries

18. In the Joint Committee’s view there cannot be an effective common organisation of the market in sheepmeat without adequate external protection. While cheap imports from New Zealand command so large a share of the Community market, particularly in the United Kingdom, the Joint Committee believes that the Community market price will tend towards the level of the import price. The proposed variable levy will provide no more protection than the present customs duty and presumably recourse to the safeguard clause will be the exception rather than the rule. One consequence may well be the need for payment of large premia to French producers. It seems, therefore, to the Committee that either a quantitative limitation of imports or a minimum import price imposed by the countries of supply is necessary. This, of course, involves successful negotiations with New Zealand in particular and in the Committee’s view, it is imperative that such negotiations be undertaken without delay.

Intervention

19. If one had regard merely to the Community’s overall rate of self-sufficiency it would be difficult to justify a system of price support sustained by permanent intervention. However, without control of imports the Community self-sufficiency ratio means very little. Moreover, if common prices stabilise at a level between French and United Kingdom prices, the overall rate of self-sufficiency may rise if, as seems likely, the expected rise in consumption in France is more than offset by a fall in consumption in the United Kingdom. Furthermore, the seasonal nature of production is unlikely to be counteracted merely by aids for private storage which may not be availed of. Taking all these factors into account, the Joint Committee believes that some element of direct price support should be available at periods of temporary surpluses.

Basic Price

20. The Commission proposes that the initial basic price for 1978/79 would be set at a level to represent the weighted average prices in Member States in 1977. Presumably the basic price would be adjusted annually when the review of prices takes place but it is clear that the price fixed initially would affect the level of producer prices for several years. In 1977 Irish prices were artificially depressed because of the operation of the French national market organisation and United Kingdom prices were affected by the deficiency payments system. In the circumstances, the Joint Committee agrees with the Irish Farmers’ Association that the initial price should be based on the weighted average prices for the original Six Member States which were not adversely affected by the French national measures in 1977.

Acknowledgement

21. The Joint Committee wishes to acknowledge with sincere thanks the considerable assistance which it received from the Irish Farmers’ Association in its consideration of this matter.

(Signed) EOIN RYAN,

Vice-Chairman of the Joint Committee.

28th June, 1978.