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WORLD TRADE

ORGANIZATIONG/SCM/N/123/EEC26 August 2005(05-3585)

Committee on Subsidiesand Countervailing Measures

Original: English

SUBSIDIES

New and Full Notification Pursuant to Article XVI:1of the GATT 1994 and Article 25 of the Agreement

on Subsidies and Countervailing Measures

EUROPEAN COMMUNITIES

The following communication, dated 8 July 2005, is being circulated at the request of the Delegation of the European Commission.

_______________

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EUROPEAN COMMUNITY

TABLE OF CONTENTS

PageI. INTRODUCTION.......................................................................................................5

A. STRUCTURE OF NOTIFICATION........................................................................................5

B. PERIOD COVERED...........................................................................................................5

C. PRESENTATION OF NOTIFICATION..................................................................................5

D. STATUS OF SUBSIDIES.....................................................................................................5

II. EUROPEAN COMMUNITY SUBSIDIES................................................................5

III. THE EUROPEAN COMMUNITY’S STRUCTURAL ACTIONS.........................6

INTRODUCTION...........................................................................................................................6

A. EUROPEAN REGIONAL DEVELOPMENT FUND.................................................................7

B. EUROPEAN SOCIAL FUND...............................................................................................8

C. EUROPEAN AGRICULTURAL GUARANTEE AND GUIDANCE FUND (EAGGF) – GUIDANCE SECTION.......................................................................................................9

D. EUROPEAN AGRICULTURAL GUARANTEE AND GUIDANCE FUND (EAGGF) – GUARANTEE SECTION...................................................................................................10

IV. COMMON AGRICULTURE POLICY-ACCOMPANYING MEASURES........11

A. EUROPEAN AGRICULTURAL GUARANTEE AND GUIDANCE FUND (EAGGF) – GUARANTEE SECTION..................................................................................................11

V. AGRICULTURE.......................................................................................................12

A. GENERAL REMARKS.....................................................................................................12

B. MEASURES....................................................................................................................13

1. Export Refunds..........................................................................................................13

2. Measures on the Internal Market.............................................................................14

C. ANALYSIS BY SECTOR...................................................................................................14

(i) ARABLE CROPS" - SECTOR (Cereals, oilseeds, protein crops, linseed, fibre flax and fibre hemp and set-aside).............................................................................................14

(ii) "RICE" SECTOR.........................................................................................................19

(iii) "DAIRY PRODUCT" SECTOR....................................................................................20

(iv) "OLIVE OIL”...............................................................................................................22

(v) "SUGAR" SECTOR......................................................................................................23

(vi) "BOVINE MEAT" SECTOR.........................................................................................25

(vii) "PIGMEAT" SECTOR.................................................................................................27

(viii) "SHEEPMEAT AND GOATMEAT" SECTOR.............................................................27

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(ix) "FRUIT AND VEGETABLE" SECTOR.......................................................................28

(x) "BANANAS" SECTOR................................................................................................29

(xi) "PROCESSED FRUIT AND VEGETABLES" SECTOR..............................................30

(xii) "WINE" SECTOR.........................................................................................................31

(xiii) "TOBACCO" SECTOR................................................................................................34

(xiv) "TEXTILE FIBRES" SECTOR.....................................................................................36

(xv) "DRIED FODDER" SECTOR.....................................................................................38

(xvi) "SEEDS" SECTOR......................................................................................................40

(xvii) "HOPS" SECTOR.......................................................................................................40

VI. INDUSTRY.................................................................................................................41

A. COMMUNITY FRAMEWORK PROGRAMMES IN THE FIELD OF RESEARCH.......................41

B. RESEARCH ON COAL AND STEEL..................................................................................42

C. AID TO THE COAL INDUSTRY........................................................................................44

VII. OTHER PROGRAMMES:.......................................................................................46

A. SME AND ENTREPRENEURSHIP PROGRAMME..............................................................46

B. JEV PROGRAMME........................................................................................................48

C. FIFG.............................................................................................................................49

D. Common Organisation of Markets in Fishery and Aquaculture Products...................50

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Irrevocable EURO Conversion Rates(Council Regulation (EC) No 2866/98 of 31.12.1998

amended by (EC) No 1478/2000 of 19.6.2000)

1 EURO = 40.3399 BEF (BELGIUM FRANCS)

= 1.95583 DEM (GERMAN MARKS)

= 340.750 GRD (GREEK DRACHMAS)

= 166.386 ESP (SPANISH PESETAS)

= 6.55957 FRF (FRENCH FRANCS)

= 0.787564 IEP (IRISH POUNDS)

= 1936.27 ITL (ITALIAN LIRAS)

= 40.3399 LUF (LUXEMBURG FRANCS)

= 2.20371 NLG (DUTCH GUILDAS)

= 13.7603 ATS (AUSTRIAN SHILLINGS)

= 200.482 PTE (PORTUGUESE ESCUDOS)

= 5.94573 FIM (FINNISH MARKS)

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I. INTRODUCTION

A. STRUCTURE OF NOTIFICATION

Subsidies in the European Community are granted both at Community level i.e. out of the Community budget, and by Member States.

In view of this, the notification is divided into two parts. This first part of the notification deals with subsidies granted by the European Community and general information on aid granted within the Community’s territory. The second part of this notification, circulated as addenda to this notification, covers subsidies granted by individual Member States. The Member States’ notifications cover subsidies granted at both national and sub-national level.

B. PERIOD COVERED

As far as possible, this notification relates to subsidies granted during the period 2003 and 2004 and to subsidy programmes which are currently in force, and provides statistical information at least up to the end of 2004.

C. PRESENTATION OF NOTIFICATION

The information provided in this notification includes, as far as possible, all the elements required by Article 25.3 of the Subsidies Agreement and in almost all cases follows the presentation required by the subsidies questionnaire. In a few cases, the presentation is different to that specified in the questionnaire, but all the required elements are still included.

D. STATUS OF SUBSIDIES

In preparing this notification, the Community has attempted to achieve the maximum transparency with regard to aid and support measures granted within its territory. The fact that such aid has been notified does not, in accordance with Article 25.7 of the Subsidies Agreement, prejudge its legal status under GATT 1994 or this Agreement, nor does it prejudge its effects under the Agreement or the nature of the measure itself. In view of the diverse nature of many of the programmes notified, it may be that only part of a programme’s funding involves a subsidy element, which may or may not be specific. Consequently, the appearance of a programme in this notification does not in any way imply that the whole or part of its expenditure amounts to a specific subsidy.

II. EUROPEAN COMMUNITY SUBSIDIES

(a) Subsidies granted out of the European Community budget

In 2003, total expenditure by the European Community amounted to € 102 billion.

In 2004, total expenditure by the European Community amounted to € 111 billion.

The two largest areas of expenditure were agriculture and structural operations, which accounted for 44 per cent and 33 per cent of financial commitments respectively. Another notable area of expenditure is research, which took up 4 per cent of total expenditure. All these are described in more detail in this part of the notification.

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(b) State aid in the Member States

The European Commission is responsible for examining all state aid granted within the Community in order to determine its conformity with Article 92 of the EC Treaty, (and Article 95 of the ECSC Treaty, for coal and steel products), Member States are required to notify all aid schemes to the Commission, which may decide either not to raise any objection or open an investigation procedure. If the aid scheme is ultimately found not to conform to Article 92, the Commission issues a negative decision which prevents the aid being granted. If the Member State has already granted such aid, the Commission can order the aid to be repaid.

Details of Member States’ aid schemes can be found in addenda to this notification.

III. THE EUROPEAN COMMUNITY’S STRUCTURAL ACTIONS

INTRODUCTION

1. The Community’s structural actions (comprising the Structural Funds and the Cohesion Fund) are intended to strengthen the economic and social cohesion of the Community, in particular by reducing disparities between the levels of development of the various regions and the backwardness of the least-favoured regions. Revised Regulations concerning the Structural Funds were adopted on 21 June 1999, and cover the period 2000-2006. The commitments in 2003 amounted to EUR 31,1 Billion, in 2004 to EUR 35,2 Bio. Following the enlargement of the EU on 1 May 2004, the commitment for the ten new EU Member States amounted to EUR 3,8 billion.

2. The three main Structural Funds (European Regional Development Fund (ERDF), European Social Fund (ESF), European Agricultural Guidance and Guarantee Fund, Guidance Section (EAGGF) are described in detail below. In addition, the funds include the Financial Instrument for Fisheries Guidance (FIFG), which assists in the restructuring of the fisheries sector with an annual budget of EUR 578 Mio in 2003 and EUR 629 in 2004.

The other component of EU structural spending is the Cohesion Fund, which is intended to contribute to projects in the fields of environment and transport infrastructure, with an annual budget of around € 2,7 billion (€ 18 billion for the 2000-2006 period). Eligibility is reserved for Member States whose GDP per capita is less than 90 per cent of the EU average (currently Greece, Portugal, Spain, plus the ten new Member States as from their accession on 1 March 2004: Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Hungary, Slovenia, Malta and Cyprus).

3. The Structural Funds (ERDF, ESF, EAGGF and FIFG) are devoted to the following objectives, all of which are cofinanced by Member States:

Objective 1: Development and structural adjustment of the regions whose development is lagging behind (GDP of less than 75 per cent of the EU average).

Objective 2: Economic and social conversion of areas facing structural difficultiesObjective 3: The adaptation and the modernisation of national policies and systems of

education, training and employment. It is entirely financed by the ESF.

In addition, € 1,5 billion per annum is set aside for Community initiatives in the fields of deprived urban areas, interregional co-operation, rural development and equal opportunities.

4. These structural actions are required to conform strictly to the Community’s rules on the provision of state aid (Article 87 of the EU Treaty).

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5. The structural actions are notified in a spirit of transparency. The aid involved is largely devoted to the least-developed areas of the EU, and the great majority of it goes to finance infrastructure or to assist individuals directly, without necessarily benefiting commercial enterprises. Consequently, as stated at the beginning of this document, the notification of a particular fund does not prejudge the status of the aid involved. In addition, only a relatively small part of the Structural Funds are used to assist private investment.

A. EUROPEAN REGIONAL DEVELOPMENT FUND

1. Title of the programme

European Regional Development Fund (ERDF)

2. Period covered by the notification

2003, 2004

3. Policy objective and/or purpose of the programme

The ERDF is intended to help redress the main regional imbalances in the Community through participation in the development and structural adjustment of regions whose development is lagging behind (Objective 1) and in the economic and social conversion of areas facing structural difficulties (Objective 2).

4. Background and authority for the programme

Articles 158 and 160 of the EU Treaty: Council Regulation (EC) Nos. 1260/1999 and 1783/1999.

5. Form of assistance granted – Grants from Community budget for:

ERDF resources are mainly used to cofinance: productive investment leading to the creation or maintenance of jobs; infrastructure; local development initiatives and the business activities of small and medium-sized enterprises.

6. To whom and how the assistance is provided

ERDF aid is cofinanced by the Member States; the ERDF provides a minimum of 25 per cent of the total public expenditure involved, except in Objective 1 regions, where a minimum of 50 per cent applies.

Member States submit multi-annual operation programmes, covering a coherent set of regional development measures, and are responsible for the implementation of the programme and the selection of individual projects.

As regards productive investment, the ERDF participates in financing (national) investment aid with a regional aim. The aid is governed by the principles of coordination adopted by the Commission within the context of its competition policy and which, inter alia, set aid ceilings on investments in firms. This ceiling has been reduced in the current period to 15 per cent of total eligible costs, except in Objective 1 regions where the rate is 35 per cent.

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Aid is normally in the form of grants or loans.

7. Total expenditure under the programme

The ERDF has historically tended to account for more than half of the total for the three Funds, its expenditure amounted in 2003 to EUR 13,4 Billion and in 2004 to EUR 16,8 Billion.

8. Duration of the programme

2000-2006

9. Trade effects

Because the Fund is designed to alleviate disparities between regions within the Community, and because the aid is paid out on a horizontal basis, within eligible regions, it is considered that the trade effects are minimal.

B. EUROPEAN SOCIAL FUND


European Social Fund (ESF)


2003, 2004


The European Social Fund was set up by the EEC Treaty in 1957 to improve the employment opportunities for workers and to help raise their living standards. It is based on Articles 146-148, 158-162 of the EEC treaty, according to which its main tasks are to render the employment of workers easier by improving their geographical and occupational mobility and to increase economic and social cohesion within the Community. It is provided on a general basis under objective 3, and within the other two regional objectives.


Above Articles of the EC Treaty: Council Regulations (EC) No. 1260/1999 as well as Parliament and Council Regulations (EC) Nos. 1783/1999 and 1784/1999.5.


- Vocational training,- Employment aids and aids for self-employment,- Development of new sources of employment.


The ESF provides co-financed support in Member States for vocational training, aids for employment and innovative actions. The aid is normally devoted to people, not to enterprises.

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Operational programmes, once approved by the Commission, are managed by the competent authorities in the Member States. Identification of individual projects is the responsibility of the Member State.



EUR 6,5 Billion for 2003 and EUR 7,6 Billion for 2004,


2000-2006

9. Trade effects

Since aid is granted for the benefit of individuals, not enterprises, in order to promote active labour market policies and social cohesion, the ESF is not considered to have any appreciable impact on trade.

C. EUROPEAN AGRICULTURAL GUARANTEE AND GUIDANCE FUND (EAGGF) – GUIDANCE SECTION


European Agriculture and Guidance Fund (EAGGF)-Guidance section.


1 January 2003-31 December 2004


Promoting rural development and structural adjustments in regions whose development is lagging behind, including underdeveloped agricultural regions, (Objective 1). Speeding up the adjustment of agriculture structures in the framework of the reform of the Common Agriculture Policy.


Council Regulations (EEC) Nos. 1260/99 and 1257/99. The Guidance section was established in 1972.


Rural development measures and adjustment of agricultural structures.


Aid is co-financed with the Member States and implemented through multi-annual programmes based on the aims of the EAGGF Guidance section as indicated above. The Member States are responsible for the implementation of the programme and the selection of individual projects.

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EUR 2,76 billion was budgeted for 2003 (EU-15) and EUR 3,23 billion (EU-25) for 2004, excluding the Community Initiatives.


2000-2006

9. Trade effects

Given the aims of the programme it is considered that the trade effects are minimal.

D. EUROPEAN AGRICULTURAL GUARANTEE AND GUIDANCE FUND (EAGGF) – GUARANTEE SECTION


Rural Development plans. European Agriculture and Guidance Fund (EAGGF)-Guarantee section.


1 January 2003-31 December 2004


Promoting rural development and structural adjustments outside Objective 1 regions. Speeding up the adjustment of agriculture structures in the framework of the reform of the Common Agriculture Policy.


Council Regulation (EEC) No 1257/99.


Agricultural development measures and adjustment of agricultural structures outside objective 1 regions.


Aid is co-financed with the Member States and implemented trough multi-annual operation programmes based on the aims of the EAGGF Guarantee section as indicated above. The Member States are responsible for the implementation of the programme and the selection of individual projects.



EUR 1,12 billion was budgeted for 2003 (EU-15) and EUR 0,85 billion for 2004 (EU-15).

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2000-2006

9. Trade effects


IV. COMMON AGRICULTURE POLICY-ACCOMPANYING MEASURES

A. EUROPEAN AGRICULTURAL GUARANTEE AND GUIDANCE FUND (EAGGF) – GUARANTEE SECTION


Accompanying Measures of the Rural Development Programs. European Agriculture and Guidance Fund (EAGGF)-Guarantee section


1 January 2003-31 December 2004.


To support the following measures throughout the whole EU:

(a) Early retirement

(b) Agroenvironmental measures.

(c) Afforestation of agricultural land

(d) Compensatory allowances for less-favoured areas.


Council Regulations (EEC) No1257/99.


(a) Early retirement for abandoning agricultural activity.

(b) Grants to compensate per income foregone and additional costs resulting from agri-environment commitments.

(c) Grants for planting trees on agriculture land.

(d) Area payments to compensate less productivity in agriculture due to climatic or geographic limitations.


Aid is co-financed with the Member States on the basis of multi-annual operation programmes based on the aims of the EAGGF Guarantee section as indicated above. The Member

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States are responsible for the implementation of the programme and the selection of individual projects.



EUR 3,58 billion was budgeted for 2003 (EU-15) and EUR 5,62 billion for 2004 (EU-25).


2000-2006

9. Trade effects


V. AGRICULTURE

A. GENERAL REMARKS

1. The measures notified concern only products that are subject of a Common Agricultural Policy, namely the following sectors:

- Arable crops (cereals, oilseeds, protein crops, linseed, flax and fibre hemp and set-aside)

- Rice

- Dairy products

- Olive oil

- Sugar and isoglucose

- Bovine meat

- Pigmeat

- Sheepmeat

- Goatmeat

- Fruit and vegetables and products processed from fruit and vegetables

- Bananas

- Wine

- Tobacco

- Textiles fibres (cotton, fibre flax and hemp, silkworms)

- Dried fodder

- Seeds

- Hops

- Eggs and poultry

- Fishery products

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- Products of the agri-foodstuff industries (products “not in Annex I”)

2. The measures notified include all price support measures, and direct payments introduced by the common market organisations that can involve participation rather by the Community's financing organisation or by the government of a member State, to the extend that such measure derive from the Community regulations.

3. With respect to the total amount of aid for each sector, it should be noted that the data relate to payments made by the European Agricultural Guidance and Guarantee Fund (EAGGF) in the course of the budgetary year concerned.

B. MEASURES

1. Export Refunds

For certain of the sectors governed by a common market organisation, the Common Agricultural Policy provides for the possibility of granting export refunds.

The purpose of export refunds is to cover the difference between Community prices and international trade prices in order to enable exports to be effected at international trade prices.

The refund is the same for the whole of the Community; a differential may be applied according to destination or time (months of delivery). The amount of the refund is fixed periodically by the Commission. The periodicity of the fixing is different for each sector because of the special characteristics of each sector. In order to facilitate export operations, in the case of the majority of products a system has been introduced whereby refunds can be fixed in advance. The refund is paid to the exporter.

The total amount of export refunds financed by the EAGGF in 2002 and 2003 are as follows:

(EAGGF budgetary period-EUR million)

ProductsRefunds 2002 Refunds 2003

Arable cropsSugar 1 RiceOlive oilFruits and vegetables WineDairy productsBovine meatPigmeat Eggs and poultryNon Annex I Products

Total expenditure

99,31.168,2

41,1 0,1

46,4 23,81.159,6 386,7

27,377,1

413,5

3.443,1

175,91.021,3

37,7 0,1

29,3 19,61.595,4 295,5

17,398,8

433,3

3.724,21 Starting with marketing year 1981/1982, the export refunds on domestic sugar have been entirely

financed out of producer contributions by producers of sugar and isoglucose and sugar beet and sugar cane producers of the Community.

2. Measures on the Internal Market

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1. In order to stabilise markets and assure the agricultural population of an equitable standard of living, the Common Agricultural Policy provides, in the market organisation regulations for the different products, intervention and aid measures that vary according to the nature of the product and the special characteristics of the market.

2. The cost of these intervention and aid measures is, as a general rule, financed by the EAGGF. During the years 2002 and 2003, by product sector, they have amounted to:

(EAGGF budgetary period-EUR million) 1

ProductsIntervention 2002 Intervention 2003

Arable crops Sugar 1

RiceOlive oilFlax and hempCottonSilkwormsFruits and vegetablesWineTobaccoSeedsHopsDairy productsBovine meatSheepmeat and goatmeatPigmeat, eggs and poultryFishery productsOther products 2

Total expenditures

18.490,854,4

150,5 2.329,2

12,2 804,0

0,6 1.505,0

1.324,9 963,2 99,0 12,51.200,4

6.685,2 552,5 2,8 15,41.027,5

35.230,1

16.633,555,5

193,5 2.346,3

17,5 872,6

0,4 1.502,9

1.193,4 960,2 88,3 12,51.200,8

7.795,4 2.082,1 55,4 12,61.075,8

36.098,71Not including storage costs and the part comprising production refunds (chemical industry).2 Dried fodder and dried vegetables; until 1994 expenditures on these was included under expenditure

on high-protein products (for dried fodder) and fruits and vegetables (for dried vegetables).

C. ANALYSIS BY SECTOR

(i) ARABLE CROPS" - SECTOR (Cereals, oilseeds, protein crops, linseed, fibre flax and fibre hemp and set-aside)

This section covers the market organisation for cereals as well as the single payment scheme for producers in the arable crop sector (cereals, oilseeds, protein crops, linseed, fibre flax and fibre hemp and set-aside). The 2003 reform abolished area payments for cereals and introduced a system of decoupled income support for each farm, called “single farm payment “which is conditional upon cross-compliance with environmental, food safety, animal health and welfare, as well as the maintenance of the farm in good agricultural and environmental condition.

Such a system combines the existing direct payments received by a farmer in a single payment, determined on the basis of previous entitlements, within a reference period, adjusted to take into account the full implementation of measures introduced in the framework of Agenda 2000 and of the changes to the amounts of aid made by Council regulation (EC) No 1782/2003 of 29 September

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2003 establishing common rules for direct support schemes under the common agricultural policy (OJ L 270/1 of 21.10.2003).

The common market organisation for cereals

The common market organisation came into force on 1 July 1967. It is now regulated by Council Regulation (EEC) No. 1766/92 until the 2003 agriculture reform which, in the interest of clarity, repealed and replaced it with Council Regulation (EC) No 1784/2003 of 29 September 2003 on the common organisation of the market in cereals (OJ L 270/78 of 21.10.2003). This regulation covers the following products:

- Grain cereals: common wheat, durum wheat, barley, rye, oats, maize, buckwheat, canary seed, millet, others;

- processed products: flours, goats and meal of wheat, malt, starch, glucose, cereal-based preparations, bran, wheat gluten, manioc and potato starch.

The cereal marketing year runs from 1 July to 30 June.

1. Operation of the market

A. Price arrangements

The Council fixes the intervention price for cereals. At this price the intervention agencies must, at certain periods of the year, buy in the cereals they are offered that have the requisite quality characteristics.

One single intervention price is valid for the following cereals: wheat, maize, sorghum, barley and durum wheat; there is no longer an obligation to buy in feed wheat. Rye has been excluded from the intervention system in marketing year 2003/04.

The intervention price is increased from November to June to cover storage costs (technical and financing costs) and thus help to improve the disposal of cereals in line with market requirements.

The intervention price fixed by the Council for all cereals at EUR 101,31/t, for an indefinite period and the monthly increment is EUR 0,46/t.

B. Specific market instruments

(a) Border regime

Where the price of cereals within the Community is higher than the world price, a refund calculated in terms of the difference may be granted on exports. If the world price reaches a level which disrupt or threatens to disrupt the availability of supply on the Commission market, appropriate measures such as export levies may be taken.

Community food aid operations also attract refunds.

(b) Stocks

Two types of intervention measures are involved:

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- Buying-in and subsequent operations involving public stocks: this concerns buying-in by the intervention agencies and the related disposal operations. They give rise to technical and financial costs and to losses or gains on sales of stocks.

- Special measures: these are measures provided for in Article 7 of the basic regulation (No 1784/2003) to avoid situations in which the intervention agencies are forced to buy in excessively large quantities of cereals. The Commission has broad discretionary powers for the application of special measures and may, if necessary, also adopt measures equivalent to carryover payments.

(c) Production refunds for potato and other starch

1. A production refund is paid to users of maize starch, wheat starch, barley starch or potato starch for the production of certain non-food products which are not protected upon import by tariffs. The principal beneficiary industry comprises the chemical, paper and paperboard industry and pharmaceutical sector. This refund is variable and is currently calculated so as to align prices of the European Community raw materials to those of the world market.

2. The price and support policy for starch potatoes consists of three measures:

- the minimum potato price: This price is equivalent to the price of cereals, in particular maize; the price is at the level of EUR 178,31 per quantity of raw material needed to produce one ton of potato starch, as from 1 July 2001.

- the payment to farmers: This payment is granted to producers of potatoes intended for starch production. It is applied to the quantities required to produce one ton of starch, and is set at the level of EUR 110,54 from 1 July 2001 until the end of the 2004/05 marketing year. Furthermore, the payment occurs within a quota limit.

- the special starch producer’s premium: This premium set at EUR 22,25 per tonne of starch is paid to potato starch-producing undertakings for the quantity of starch corresponding to the starch producer’s quota provided that the minimum price is paid to the farmer. It was intended to offset certain structural disadvantages in the starch industry.

(d) Other intervention

These headings cover expenditure on various measures, in particular special digressive aid for Portuguese cereal producers.

2. Arable crops scheme and set-aside

Arable crops are currently governed by Regulation (EEC) No 1251/99, as amended by Council Regulation (EC) No 1782/2003 of 29 September 2003, which covers all cereals, oilseeds, protein crops, non-fibre flax seeds (or linseed) fibre flax and fibre hemp and set-aside. For durum wheat a special quality premium is applied. For protein crops a special premium is also applied.

Regionalisation plan

In order to reflect the diversity of agricultural structures in the Community, area payments vary from region to region on the basis of the yields per hectare recorded in the past.(The period covered is 1986/87 to 1990/91, excluding the highest and lowest year).

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The Member States have established a regionalisation plan in accordance with the criteria set out in Article 3 of Regulation (EC) No 1251/99 which aims to define, insofar as is possible, distinct homogeneous areas. The average yields may be modulated in order to take account of possible structural differences between production regions. The regionalisation plan must, however, guarantee that the average historical yield (fixed for a given period) of each Member State concerned is respected.

As a rule, for each area an "all cereals" yield should be applied. On account of the, sometimes substantial, differences in yield, two distinct arrangements are provided for:

- for maize a yield different from that from other cereals may be applied;

- yields for a single region may be broken down into different yields for irrigated and non-irrigated land (mixed areas).

Even where these two exceptions are applied, however, the yield recorded for all cereals in the relevant region during the reference period must not be exceeded.

Expenditure stabilisation mechanism

The area payment is granted only for an area not exceeding a regional base area. This is established as the average number of hectares sown to arable crops (cereals, oilseeds, protein plants, linseed, flax and hemp) or, as the case may be, set aside under a public aid scheme in 1989, 1990 and 1991 in a given region.

As with the regionalisation plan, Member States are required to determine the region, which may cover an entire Member State or several areas within a Member State.

A base area must be established separately for maize or irrigated crops where a yield higher than that for other cereals is applied to these products. In addition, the area payment on irrigated areas is granted only up to a separate base area.

Production and expenditure are controlled by the establishment of these base areas.

If the sum of the areas in respect of which the area payment is applied for (including that on set-aside) the "COP" (cereals, oilseeds, protein plants, linseed, fibre flax and fibre hemp) and areas declared as fodder areas is greater than the regional base, during one and the same marketing year, the eligible area per producer is to be reduced proportionally.

In addition, where a Member State chooses to establish production regions that do not correspond to the regional base areas and where the average yield under the regionalisation plan applied in 1993 is exceeded, all area payments to be paid to that Member State in respect of the following marketing year are to be reduced in proportion to the observed overrun, except where the quantity applied for is less than the product of the base area of the Member State multiplied by the above mentioned average yield.

3. Area payment

Cereals

For the period 1995/1999 the compensation amounted to EUR 54,34/t of historical cereals yield for the region of production concerned. For 2000 and 2001 campaigns the amount is increased to EUR 58,67/t and EUR 63,00/t. taken into account partly the intervention price reduction.

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As regards durum wheat the system of individual rights the system of individual rights has been replaced by a MGA (Maximum Guaranteed Area) system. . The total of all MGA's reaches 3.19 million hectares for traditional regions. The supplementary aid for traditional zones, which was introduced because of the alignment of intervention price for durum wheat to other cereals, was cut to EUR 344,50/ha (not to be regionalised).

For certain non-traditional areas (France, Spain, Italy, Germany and UK) an additional payment of EUR 138,90/ha in respect of an area not exceeding 73,000 hectares. That amount reflects loss of income due solely to the fall in the guaranteed price for durum wheat.

Oilseeds

The products covered are rape sunflower and soya.

The Community market is essentially free. Imports are free of customs duties and exports do not attract refunds.

From the 2002/2003 marketing year onwards, area payments are granted to producers, calculated on a regional basis according to the historical yields defined in the regionalisation plan excluding maize where maize is treated separately. The basis amount is identical to the amount for cereals and set-aside (EUR 63/t). For the 2000/2001 marketing year the basis amount was EUR 81,74/t and for the 2001/2002 marketing year EUR 72,37/t. During this transition period, these amounts can be multiplied with the historical oilseeds yields of the existing regionalisation plans, multiplied with 1.95.

Protein crops, linseed, flax and hemp

The products are covered are:

- peas (excluding chick peas), beans and sweet lupines

- non-fibre flax seed (linseed)

- fibre flax and fibre hemp

The Community market is essentially free. Imports are free of customs duties and exports do not attract refunds.

From the 2002/2003 onwards area payments for linseed, fibre flax and fibre hemp are granted to producers, calculated on a regional basis according to the historical yields defined in the regionalisation plan excluding maize where maize is treated separately. The basis amount is identical to the amount for cereals and set-aside (EUR 63/t). For the 2000/2001 marketing year the basis amount was EUR 88,26/t and for the 2001/2002 marketing year EUR 75,63/t.

For protein crops the area payment amounts to EUR 72,5/t of historical cereals yield for the region of production concerned.

Set-aside

Each producer claiming area payments for more than the equivalent of 92 tons of cereals required to set aside 10 per cent of the area down to arable crops scheme on his holding. The compensation for the set-aside obligation is fixed at EUR 63.-/t multiplied by the regional cereal yields.

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This compensation is also payable on land voluntarily set aside in excess of the obligation, subject however to a ceiling set by the Member State (which may not exceed the area sown to eligible crops covered by payment applications).

Land set aside may be used for producing raw material for the manufacture of products not directly intended for human or animal consumption.

Clause 7 of the Memorandum of Understanding on certain oilseeds between the EC and the US stipulates that by-products of oilseeds produced on set aside land may not exceed one million tonnes per annum, in terms of soya bean meal equivalent, for animal or human consumption produced on set-aside land from rape, colza, sunflower and soya.

Producers applying for area payments for an area not exceeding that needed to produce 92 tonnes of cereals are not obliged to set-aside. The yields to be taken into consideration to calculate this tonnage are those fixed by the regionalisation plan.

(ii) "RICE" SECTOR

(a) Intervention measures

The intervention price for paddy rice has been set at 150 EUR/t since the beginning of the 2004/05 marketing year.

The intervention agencies are obliged to buy in any rice harvested in the Community and offered to them, provided offers are made during the open period (April-July) and comply with certain conditions, in particular in respect of quality and quantity. The quantities that can be bought by the intervention agencies are limited to 75,000 tonnes per year.

The intervention buying-in price is fixed for a given standard quality. If the quality offered differs from the standard quality, the price is adjusted by the application of price increases or reductions. It is applicable in all the Community intervention centres fixed at the beginning of the marketing year.

(b) Direct aids

Following the CAP reform in 2003, compensatory payments for rice are replaced by a two-fold measure:

a) rice will be included in the single payment regime, so rice producers will receive a decoupled aid per hectare as an income payment.

b) an area payment per hectare of cultivated rice is granted in order to maintain rice production. This coupled aid is limited by national base areas, which can be regionalised. If the base areas are overrun, the aid is reduced accordingly.

The national base area for each producer Member State is established:

- Spain: 104,973 ha.- France

- metropolitan territory: 19,050 ha.- French Guyana 4,190 ha.

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- Greece:- traditional zones 20,330 ha.

- Italy: 219 588 ha.- Portugal: 24,667 ha.

(b) Production refund

A production refund is paid to users of rice starch for the production of certain non-food products that are not protected upon imports by a tariff system. The main beneficiary industry comprises the chemical, paper and pharmaceutical sector. The refund is variable and is currently calculated so as to align prices of Community raw materials with the world market level.

(iii) "DAIRY PRODUCT" SECTOR

(a) Intervention measures

Each year an intervention price is fixed for butter and skimmed milk powder and the national intervention agencies buy in, following the rules as indicated below, any such products of the Community origin which comply with certain quality and packaging conditions.

The intervention prices fixed for the last few marketing years (1 July to 30 June) were as follows:

Intervention price valid for 2004/05 2003/2004 2002/2003 2001/20021. Butter 305,23 328,20 328,20 328,202. Skimmed milk powder 195,24 205,52 205,52 205,52

Under the intervention mechanism, as amended in March 1987 and to apply until the end of the additional levy system, intervention buying-in may be limited when certain conditions are met. Since July 1987, intervention butter has been bought in under a tendering procedure. Butter is bought in at a maximum price that is fixed in relation with the bids received by the Commission, but not lower than 90 per cent of the full intervention price. As from 1 March 2004 butter is only bought into public storage at 90 per cent of the intervention price during the period 1 March to 31 August. Where the quantity offered to intervention during this period exceeds 70,000 tonnes1, the obligatory intervention may be suspended and buying-in may be carried out under a tendering procedure. Skimmed milk powder can only be bought between 1 March and 31 August each year. Purchases can be suspended when the annual quantity offered reaches 109,000 tonnes and then be carried out under a tendering procedure.

(b) Aid to private storage

Aid for private storage of milk powder, butter and certain cheeses produced in the Union is or may be granted:

- for top quality skimmed milk powder: only when the market situation justifies the aid;- for butter stored for at least three months and between 15 March and 15 August; the aid can

be paid for a storage period of maximum 210 days;

1 The quantity of 70,000 tonnes for 2004 is reduced by 10,000 tonnes per year until reaching 30,000 tonnes in 2008.

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- for certain cheeses : Grana Padano aged at least nine months old, Parmigiano-Reggiano aged at least 15 months old and Provolone at least three months old.

In years where a serious imbalance can be reduced or eliminated by seasonal storage aid can be granted for private storage of the long-keeping cheeses Emmental type and of certain goat or ewe milk cheeses.

(c) Aid for skimmed milk for animal feed

Aid is granted for skimmed milk powder intended for animal feed.

The milk powder must be either directly denatured or incorporated in some compound feeding stuff intended for livestock.

(d) Aid for skimmed milk processed into casein

Aid is granted for skimmed milk produced in the Community and processed into casein and caseinates, provided both the milk and the casein produced from it comply with certain conditions.

(e) Other measures

- When surpluses of dairy products develop, or threaten to develop, measures other than the above may be taken to facilitate their disposal or to prevent the development of new surpluses. A number of measures are currently in force to facilitate butter disposal on the Community market; inter alia, aid is granted for use in the form of concentrated butter for cooking, incorporation in certain foodstuffs and for direct consumption by certain categories of persons or institutions.

- In order to encourage consumption by young people, aid is granted to Member States which operate an aid programme for milk distributed in schools so that pupils can obtain milk at a reduced rate.

(f) Additional levy payable by producers or purchasers of cows' milk

The additional milk levy scheme, introduced in 1984, is designed to reduce the imbalance between supply and demand for milk and milk products.

Starting on 1 April of each year, and renewed in 2004 for eleven consecutive periods of twelve months, Member States collect a levy from farmers on quantities of cow's milk or other milk products marketed during the relevant twelve-month period in excess of the maximum reference quantities allocated to each Member State.

The levy is administered separately for two types of activity, one for deliveries to an undertaking approved by a Member State and the other for direct sales to the consumer. When the Member States exceed their national reference quantity producers who contributed to the overrun pay the proportional levy. The revenue of individual levies is for 99 per cent transferred to the European Agricultural Guidance and Guarantee Fund (EAGGF). 1 per cent can be withhold to solve difficult cases.

The Council has fixed the corresponding quantities for each Member State. Until the quota year 2003/2004 the rules were fixed by Regulation (EEC) No. 3950/92 (OJ L405 of 31.12.92). As from 1 April 2004 the rules are fixed by Regulation (EC) No. 1788/2003 (OJ L270/123 of 21.10.2003) lastly amended by Regulation (EC) No 2217/2004(OJ L375 of 22.12.2004).

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For the quota years 2002/2003 and 2003/2004 the milk quota quantities were respectively 117.6 and 117.7 million tonnes for deliveries and 1.3 and 1.2 million tonnes for direct sales.

Since 1 May 2004 10 New Member States joined the EU. For the quota year 2004/2005 starting on 1 April 2004 the total quantity of milk quota is 137.34 million tonnes. The total quantity is split-up in 134.87 million tonnes for deliveries and 2.47 million tonnes for direct sales. In case of non-respect of the milk quota for the quota year 2004/2005 the levy for 100 kg of milk is set at EUR 33,7.”

(g) Dairy premium and additional payment

From 2004 to 2007 milk producers are entitled to a dairy premium which as a general rule is calculated on the basis of the individual reference quantity for milk and a rate of 8,15 €/t for the year 2004, 16,31 €/t in 2005 and 24,49 €/t in 2006 and 2007, reflecting the reduced market support through the intervention measures.

Furthermore, equally from 2004 to 2007 Member States shall within a specific financial framework as set out in article 96 of Regulation (EC) No 1782/2003 make additional payments to milk producers in their respective territory by following objective criteria while ensuring equal treatment.

The direct payments referred to above may be dealt with by Member States either through an immediate (as from 2005) decoupled system or through an initial coupled system.

(iv) "OLIVE OIL”

As from 1 November 1998, the market organisation system was substantially modified.

1. The public intervention system based on an intervention price fixed for a given quality and that obliged the intervention agencies to buy in Community olive oil offered, was abolished.

Instead, a private storage system was put in place that allows market operators to store quantities for relatively long periods if the market balance is disturbed. The quantities to withdraw from the market and the aid to be paid are determined by tender.

2. The maximum guaranteed quantity (MGQ) of 1.35 million tonnes was increased in 1998/1999 to 1,777,261 t and distributed among the producing Member States. These National Guaranteed Quantities (NGQs) are distributed as follows:

- Spain: 760,027 t- Greece: 419,529 t- France: 3,297 t- Italy: 543,164 t- Portugal: 51,244 t

Exceeding the NGQ results to a proportionate reduction of the aid to the olive oil producers of the Member States. If the production is lower than the NGQ, 80 per cent of the remaining quantity is carried over to the next marketing year and 20 per cent is distributed among those Member States which have exceeded their NGQ.

3. Aid to the producers of olive oil is granted for olive oil produced in the Community from olives harvested in the Community. However, any olive oil produced from olive trees planted after 1 May 1998 is not eligible to receive the production aid. The aid is designed to contribute to

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establishing a fair income for producers. For Member States who wish, an aid to the producers of table olives can be granted. The quantities benefiting from the aid scheme are being converted to olive oil and included in the NGQs. The increased aid granted for small producers who were also exempted from the co-responsibility scheme is abolished.

4. The Production target market price is the price that is considered desirable with the aim of providing a fair income to producers. This price has remained stable since 1993/1994.

5. The Consumption aid which was equal to the difference between the indicative price less the production aid and the representative market price and which was designed to facilitate the marketing of the Community olive oil, has been abolished as from 1 November 1998. The representative market price as well as the consumption aid scheme, have been abolished.

6. Export refunds are foreseen in the olive oil market organisation scheme. However as of 1998/1999 market-year, the amount of refund has been fixed at zero.

The various elements mentioned above were fixed at the following levels:

(EUR / 100 kg)2000/01 1997/98 1998/99 1999/2000

Target priceIntervention priceProduction aidProduction aid for small producersRepresentative market priceConsumption aid

383,77-

132,25---

383,77175,16142,20151,48229,50 12,07

383,77-

132,25---

383,77-

132,25---

7. Production refund is granted for olive oil used in the manufacture of certain preserved foods (vegetables, fish, crustaceans). The purpose of this refund is to enable beneficiaries to buy on the Community market, at prices close to world market prices, the quality of oil they that they use most frequently for their manufacturing.

The average production refunds are as follows: (EUR /100 kg)

2000/01 1997/98 1998/99 1999/2000Production refunds 44,00* 61,26 44,00 44,00

* Estimate

(v) "SUGAR" SECTOR

1. Prices

(a) Sugar

Each year, an intervention price for white sugar is fixed for the non-deficit areas of the Community; the intervention agencies are required to buy in the sugar concerned at that price throughout the marketing year.

Intervention prices derived from that price are also fixed for each of the deficit areas.

The intervention price is fixed for a standard quality; if the quality of sugar is different, the price is adjusted in accordance with a scale of increases or reductions.

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In addition, an intervention price derived from the intervention price for white sugar is fixed for raw sugar of a standard quality after allowing for a uniform refining margin and national yield. In the marketing years 1996/97 - 1999/2000 and 2000/01 –2005/06 the intervention price for white sugar amounted to 63.19 EUR/100 kg and for raw sugar to 52.37 EUR/100 kg (Reg. 1260/2001 OJ L 178 of 30.6.2001).

(b) Beet

For beet, the basic price for a specific delivery stage and a specified standard quality has been set at 47.67 EUR/tonne for the period 2001/02-2005/06. This price has been fixed taking account of the intervention price for white sugar and of national values representing in particular the processing margin, yield, and undertakings' receipts from sales of molasses. In addition, for the said period a minimum price has been fixed for A beet (2) - at 46.2 EUR/tonne and for B beet (3) at 32.42 EUR/tonne.

These percentages are in direct relation with the production levies charged on A sugar and B sugar. Manufactures are required to pay at least these prices.

In addition, in areas for which a derived intervention price of white sugar has been fixed, these minimum prices are increased by an amount representing the effects of regionalization of prices.

2. Production levies

Levies are calculated as to cover the global loss, which is calculated based on the average export refund multiplied by the exportable surplus (production less consumption). The amount of the levy is set every year by the Commission based on statistical data for the relevant factors. Practical implementation of this principle is ensured through a levy which may be charged at a rate of up to 2 per cent of the intervention price on all production under quotas A and B (whereas hitherto only B sugar was subject to a levy). The levies are collected by the Member States.

If this first levy is not enough to cover the financial losses in question, a second levy, that may not exceed 37.5 per cent, if necessary, of the intervention price, is charged. This levy is only charged on B quota production (i.e. a total of 2 per cent plus 37.5 per cent = 39.5 per cent, that represents a minimum price for beet of 60.5 per cent of the basic price).

(2) A beet is beet intended for processing into A sugar, i.e. into sugar included in production quota A.

(3) B beet is beet intended for processing into B sugar, i.e. into sugar included in production quota B.

3. Intervention measures

(a) Production refunds are granted on sugar used in the chemical industry so that these industries can operate in similar conditions that those being supplied in sugar from the international market. These production refunds are charged to the producers and covered by the levies they pay

(b) Disposal aid (transport, refining) is granted on raw sugar produced in the French overseas departments in order to ensure that it has the same conditions of refinery access as preferential sugar (ACP countries and India).

Either a refining aid or a corresponding tariff adjustment is granted on all raw preferential and special preferential sugar refined in the Community.

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(vi) "BOVINE MEAT" SECTOR

1. In the bovine meat sector an intervention price is fixed each year valid for the reference quality for slaughtered adult male bovine animals.

Market price quotations and public intervention buying-in are based on the Community scale for classification of adult bovine carcasses.

In the marketing year 2000/01 the intervention price has been 342.20 EUR/100 kg carcass weight and in 2001/02 301.30 EUR/100kg. The public intervention regime was abolished on 1 July 2002 and replaced by a system of private storage aid.

Aid to private storage may be granted if the average Community price of adult male carcasses is for two consecutive weeks below 103 per cent of the basic price (222,4 EUR/100kg carcass weight). The amount of such aid is:

- Either established under a tendering procedure;- Or fixed in advance on a lump sum basis.

A safety net public intervention mechanism is provided in case of a very severe decrease in the market prices, i.e. the average market price in a Member State, or a region thereof, has to fall below 156.0 EUR/100 kg during two consecutive weeks.

2. Price support regime

The European Community has introduced measures to link management of the internal market more closely to market price trends (Reg.1254/1999).

During the transitional period up to 1 July 2002:

- For the determination of buying-in prices under the tendering procedures, only offers not exceeding market prices by more than a reasonable margin were eligible;

- the thresholds for the activation of intervention buying-in were fixed as follows (tendering procedure):

Market price as a percentage of the intervention price equal to 347,50

EUR/100 kg. Carcass

Under regular tendering procedures

Under safety net

Community market price

Member State market price

84%

80%

78%

60%

The reorientation measures adopted in the bovine meat sector also include a substantial reduction in the level of price support. This is offset by the grant of direct income support, which is not tied to the level of production, applicable as from 1 January 1993, and subject to:

- At farm level, a density threshold in livestock units (LSU) per hectare of forage area; and

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- At Community level, a ceiling on the number of animals eligible for premium.

3. Premiums

Payment of premiums in the bovine meat sector is subject to a density requirement in LSU/ha of forage area, which has been fixed as follows:

In 2000: 2, LSU/ha.

In 2002: 1,9 LSU/ha.

From 2003: 1,8 LSU/ha.

The density requirement does not apply, however, to holdings with less than 15 LSU.

In addition, a supplementary extensification premium of EUR 36,23 per eligible head may be granted when the stocking density is lower than 1,4 LSU/ha. As from 1997, this supplementary premium amounts to EUR 36,00 and to EUR 54,00 when the stocking density is lower than 1,0 LSU/ha.

(i) Special premium for young male bovine animals

The special premium for young male bovine animals applicable to each of the age groups at 9 months and over 21 months, is set at the following linea:

Bulls: EUR 160 for 2000, EUR 175 for 2001 and EUR 210 for 2002

Steers: EUR 122 for 2000, EUR 136 for 2001 and EUR 150 for 2002

In a country where the percentage of male bovine animals slaughtered during the "off grass" period (IX-XI) exceeds 35 per cent of the total number slaughtered during the year, an additional deseasonalization premium of a decreasing amount of EUR 72.45 to EUR18.11 per head may be granted for bovine male animals slaughtered. In 2000, farmers in Denmark and Germany benefited from this measure at the full rate and in Ireland and Northern Ireland at 60 per cent of the above amounts.

(ii) Premium for the maintenance of suckler cow herds

The suckler cow premium is granted to breeders who do not deliver milk or dairy products or whose milk production is lower than a reference quantity of 120.000 kg.

The premium is set at:

EUR 163,00 for 2000, EUR 182,00 for 2001 and EUR 144,0 in 2002

An additional premium of EUR 50 per cow may be granted at national level particularly in regions where development in the sector is lagging (Greece, Ireland and Northern Ireland, Portugal and certain regions of Southern Italy, Spain and France).

(iii) Slaughter Premium

The slaughter premium for calves (1-7 months) is set at:

EUR 17 in 2000, EUR 33 in 2001 and 50 in 2002.

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The slaughter premium for adult cattle ( 8 months and more) is set at:

EUR 27 in 2000, EUR 53 in 2001 and EUR 80 in 2002.

(vii) "PIGMEAT" SECTOR

1. A basic price is fixed for meat of domestic swine, presented in carcasses or half carcasses of a standard quality. The basic price stands at 150,94 EUR/100 kg (Reg. 2759/75).

2. Intervention measures may be taken in form of aid for private storage, which is granted to operators satoring pigmeat on their own expense. This measure may be taken when, on the representative markets in the Community, the average Community price for pig carcasses is less, and is likely to remain less, than 103 per cent of the basic price.

Public intervention is also provided for in the basic Regulation (EEC) No. 2759/75 but has not been used since more than 20 years.

(viii) "SHEEPMEAT AND GOATMEAT" SECTOR

The market organisation for sheepmeat and goatmeat is governed by Regulation (EC) No 2529/2001. However, the arrangements concerning direct payments below have been altered by the 2003 agricultural reform under Regulation (EC) No 1782/2003, particularly in the sheep and goat sector. The premiums are paid under the general conditions laid down in Chapter 11 of Title IV of that Regulation.

A. Direct Payments 2002-2004 (for some Member States until 2005 or 2006 included)

- Non-milking ewe premium - Milking ewe premium - She-goat premium - Supplementary premium - Additional payments

B. Direct Payments under CAP reform (2005, 2006 or 2007 onwards)

Member States can opt of fully decoupled or partially coupled systems.

Under the reform Member States may distribute in the form of premiums coupled with production up to 50 per cent of the aids paid to producers in the sheepmeat and goatmeat sector during the reference years 2000, 2001 and 2002. If that is the case, the premiums are paid under the conditions laid down in Chapter 11 of single farm payment regulation and the unit amount of the premiums is determined in relation to number of eligible females in the reference period and to the premium level of 2002. The conditions are practically the same as those set out in the "direct payments" chapter of the previous regime combined with a financial ceiling.

C. Direct Payments under the SAPS and top-ups regime (most of the new Member States only, period from 2004 to about 2007 or 2008)

Most new Member States have adopted a simplified scheme under the single area payment scheme (SAPS). In addition, supplementary direct support (“top-ups”) may be authorised.

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D. Direct Payments under the POSEI regime (period 2005 onwards)

For 2005 and subsequent years overseas territories or outermost regions have a financial ceiling for establishing their direct support measures.

E. Trade with third countries

The European Community has opened tariff quotas for imports of sheepmeat at a reduced level of duty or at zero duty. These concessions have been established under the Agreement on Agriculture concluded within the framework of the GATT and other agreements.

Tariff quotas are allocated on a first-come, first-served basis or according to a simultaneous examination or traditional/new arrival method. The adoption of this quota management method in 2003 and 2004, however, was made without impact on the real trade pattern that existed under the previous import licensing system.

F. Private storage

The Commission may decide to grant private storage aid when there is a particularly difficult market situation in one ore more quotation areas. Quotation area shall mean: Great Britain, Northern Ireland, every other Member State taken separately. The aid shall be introduced in the framework of a tendering procedure. However, it may be decided to grant aid in the framework of an advance fixing procedure where urgent recourse to private storage proves necessary.

(ix) "FRUIT AND VEGETABLE" SECTOR

(a) Measures to promote the formation of producers' organisations

In order to encourage the formation of producer organisations and facilitate their operation, aid can be granted to such organisations established on the initiative of producers. These organisations are to promote the concentration of supply, its adjustment to demand, the implementation of environmentally sound practices, the regularisation of prices at the producer stage and to make suitable technical means available for presenting and marketing products.

The following may be granted:

1. During preliminary recognition, (a) an aid to encourage the formation of the producer organisation and facilitate its administrative operation; (b) an investment aid, either by special loan or in capital grant, to cover part of the investment costs required to attain recognition.

2. After recognition, a final assistance limited to 50 per cent (60 per cent under certain conditions) of the actual expenditure of the operational funds, capped at (the most) 4.1 per cent of the value of the marketed production of each PO. Those funds are used to finance the operational programme of the producers’ organisation as well as market withdrawals, supplementary to those of the normal scheme.

(b) Intervention measures

For certain fruit and vegetables (Cauliflower, tomatoes, aubergines, melons, watermelons, apricots, peaches and nectarines, table grapes, apples, pears, lemons, oranges, mandarins, clementines and satsumas) producer organisations can decide to withdraw products from the market.

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If such decision is taken, growers receive a Community withdrawal compensation up to a ceiling expressed as a percentage of the marketed quantity. After a transitional period (from 1997 to 2002), the final ceiling for this compensation is, for each marketing year, 10 per cent (5 per cent for citrus and 8.5 per cent for apples and pears) of the marketed quantity.

(c) Special measures for citrus fruit

In order to encourage processing of products not very well adapted to the fresh market, an aid is granted to producer organisations for the quantities delivered to processors, within contacts concluded before the beginning of the season. This regime covers lemons, grapefruit, oranges, mandarins and clementines processed into juice and clementines and satsumas processed into quarters.

(d) Special measures for nuts

In order to encourage the nut sector (almonds, hazelnuts, walnuts, pistachios and carobs) to modernise existing production and marketing conditions, provision has been made, in the beginning of the 90s, for the following for the benefit of organisations of nut producers:

- Special aid for their establishment;

- Aid for the establishment of a working capital fund to allow storage and improve marketing;

- Aid to improve varieties and cultivation and modernise marketing under a ten year plan to be presented by producers' organisations;

- Participation in promotion drives organised in collaboration with the various economic operators in this sector.

This aid is granted to the producers' organisations only to the extent that they furnish a substantial proportion of the funds used to promote these activities. This regime has not been renewed after 1996. Therefore, the last approved plans will end in 2006.

(x) "BANANAS" SECTOR

(a) Measures to promote the formation of producers' organisations

In order to encourage the formation of producers' organisations and facilitate their operation, aid can be granted to such organisations established on the initiative of producers. These organisations are to promote the concentration of supply and the control of prices at the producer stage and to provide members with appropriate technical facilities for packing and marketing bananas.

Start-up assistance may be granted during the first five years following recognition of the organisation, amounting to 5 per cent, 5 per cent, 4 per cent, 3 per cent, and 2 per cent of the value of the production marketed, for each successive year, provided that the actual cost of establishing and administering the organisation are not exceeded.

(b) Compensatory aid to producers

A compensatory aid is payable to all producers who are members of a recognised producers' organisation, and also to individual producers who are unable to join such an organisation. This is limited to an annual maximum of 854.000 tonnes for all EC producers.

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This compensation is calculated as the difference between a "flat-rate reference income" and the "average production income" at ex-packing station stage obtained on the Community market during the relevant years for bananas produced and marketed within the Community. The reference income is currently fixed at EUR 640,30/t ex packing station. In 2003 the aid amounted to EUR 295/tonne for a total of 754.216 tons. In 2004 the aid was fixed at 281 EUR/t for a total of 750.909 tonnes. A supplementary aid is also granted to regions that have experienced significantly severe market circumstances. This supplementary aid is decided on a yearly basis. In 2003 and 2004 a supplementary aid was paid to producers of Martinique and Guadeloupe in the French West Indies, for an average amount of 51,5 EUR/t in 2003 and of 78,9 EUR/t in 2004.

(xi) "PROCESSED FRUIT AND VEGETABLES" SECTOR

Production aid

A Community aid scheme assists producer organisations ("POs") supplying tomatoes, peaches and pears harvested in the Community for the production of some defined processed products. This scheme is based on contracts, to be concluded before the marketing year, between POs and processors. The amount of aid has been fixed at EUR 34,50/tonne for tomatoes, EUR 47,70/tonne for peaches and EUR 161,70/tonne for pears

For each of these products, Community and national processing thresholds have been established as follows (Net weight fresh product, in tonnes):

Tomatoes Peaches Pears

Community threshold 8 251 455 539 006 104 617

National thresholds

Greece 1 211 241 300 000 5 155

Spain 1 238 606 180 794 35 199

France 401 608 15 685 17 703

Italy 4 350 000 42 309 45 708

Netherlands - - 243

Austria - - 9

Portugal 1 050 000 218 600

Whenever a Community processing threshold is overrun, the aid fixed for the product in question shall be reduced, for the following marketing year, in all the Member States in which the corresponding threshold has been overrun. The reduction in aid shall be proportional to the volume of overrun relative to the relevant threshold. . For example, due to such an overrun for the 2002/03 marketing year in the pears sector, the aid fixed for Greece, Italy and France for the 2003/2004 marketing year shall be decreased by 51,1 per cent, 24,4 per cent and 3,4 per cent from the level above mentioned.

(a) A production aid scheme applies to dried figs and to prunes derived from dried 'd'Ente' plums. This aid shall be granted to processors who have paid producers for their raw materials a price not less than the minimum price, under contracts with recognised POs. This production aid may not exceed the difference between the minimum price and the price of the raw material in the main producing and exporting third countries. For the 2002/03 marketing year, these amounts have been fixed as follows:

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(EUR/tonne) Dried figs Prunes

minimum price 878,86 1935,23

production aid 286,0 671,73

(b) An aid is granted for the cultivation of grapes intended for the production of dried grapes of the sultana and Muscatel varieties and currants. The amount of this aid is fixed per hectare of specialised area harvested. A maximum guaranteed Community area has been fixed at 53 000 hectares. If the specialised area used for the production of dried grapes during a marketing year exceeds that maximum guaranteed Community area, the amount of the aid shall be reduced for the following marketing year according to the extent by which that area has been exceeded. For the 2002/03 marketing year, this aid has been fixed at 3 290 EUR/ha for sultanas, 3 080 EUR/ha for currants and 880 EUR/ha for Muscatel.

(c) During the last two months of a marketing year, "Storage agencies" may buy-in sultanas, currants and dried figs produced in the Community. The quantities of sultanas and currants so bought-in may not exceed 27 370 tonnes. A storage aid may be granted to the storage agencies. For the 2001/02 marketing year, these amounts have been fixed at the following levels :

Dried grapes Dried figs

Buying-in price(EUR/tonne) 445,65 542,70

Storage aid(EUR/tonne/day

0,1405 until 28.2.2003, 0,1144 from 1.3.2003 0,1261

(xii) "WINE" SECTOR

On 1 August 2000 the reform of the common organisation on the market in wine entered into force (Council Regulation (CE) N° 1493/99 2).

The main changes, compared to the former market organisation3, concern the abolishment of any guide prices and a reshaping of distillation measures. The general structure of the market support measures, which is aid for private storage of wine and must, distillation of wine and aid for the use of grape must, remained unchanged. The concrete implementing provisions for the market mechanisms are laid down in Commission Regulation (EC) N° 1623/20004, as last modified by Commission Regulation (EC) N° 616/2005.5

Furthermore the structural measures in the wine sector have been reinforced under the reform by introducing a scheme for restructuring and conversion of vineyards. The concrete implementing provisions for the structural measures are laid down in Commission Regulation (EC) N° 1227/2000 6.

2 JO L 179 of 14.7.1999, p.13 Reg (CEE) 822/87, JO L 84 of 27.3.1987, p.14 JO L 272 of 10.10.2002, p.155 JO L 103 of 22.4.2005, p.156 JO L 143 of 16.6.2000, p.1

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1. Aid for private storage of table wines and grape must (Art. 23-39 of Reg.1623/00):

The measure aims to encourage wine producers to use storage in order to stabilise supply during the marketing year. The aid is fixed per hl of product and per day. For the 2000/2001 marketing year it was set at 0,01544 € for table wine, 0,01837 € for grape must and 0,06152 € for concentrated and rectified grape must.

The first day of storage may not be later than 16 February and storage shall expire between 1 August and 30 November for all grape must and between 1 September and 30 November for table wines.

2. Distillation

(a) Compulsory Distillation

Within the former package of compulsory distillation measures only two were carried forward under the reform. These are:

- Distillation of by-products of wine-making (Art. 45-51 of Reg.1623/00):

The aim of this distillation scheme under Art. 27 of Council Regulation (EC) 1493/1999 is to avoid overpressing of grapes and thus manufacture of poor quality wines. The price to be paid by the distillers to producers for the marc, wine lees or wine delivered was 0,995 €/°Vol/hl. Articles 48-51 of Reg.1623/00 determine that distillers received a Community aid varying between 0,777 €/°Vol/Hl and 0,8453 €/°Vol/Hl depending on the type of product they distil.

- Distillation of wine from dual-purpose grapes (Art. 52-57 of Reg.1623/00):

This measure under Art. 28 of Council Regulation (EC) 1493/1999, relates to wines from grapes intended at the same time for wine making and for other purposes (case of grapes used for wine spirits produced in the French Charentes region, of grapes intended for drying in Greece or table grapes in Italy). In order not to overburden the market for table wines, all quantities of these wines exceeding the quantities traditionally vinified have to be distilled. The minimum price to be paid to the producers of the wines concerned was set for all wine at an average price of 1,340 €/°Vol/hl. Distillers received a Community aid varying between 0,8453 €/°Vol/Hl and 0,7728 €/°Vol/Hl depending on the type of product they distil.

The price to be paid to distillers for raw alcohol, when delivered to the intervention agency, has been fixed as follows:

Compulsory distillation under Article 27 of Regulation (EC) No 1493/1999:

(i) standard price: 1,654 €/°Vol/hl(ii) marc alcohol: 1,872 €/°Vol/hl(iii) alcohol distilled from wine and wine lees: 1,437 €/°Vol/hl

Compulsory distillation under Article 28 of Regulation (EC) No 1493/1999:

- price 1,799 €/°Vol/hl

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(b) Optional Distillation

Two new measures that have been introduced in the common organisation are intended to allow a more flexible and targeted response to the actual market situation

- Distillation into drinkable alcohol (Art. 63-64 of Reg.1623/00, modified by Reg. 1795/2002):

The first optional measure is a distillation scheme for table wines to facilitate delivery to the traditional drinkable wine alcohol market. (distillation under Art. 29 of Council Regulation (CE) N°1493/1999). The price to be paid to wine producers was fixed at 2,488 €/°Vol/Hl. The Community aid offered to distillers ranged between 1,751 €/°Vol/Hl and 1,884 €/°Vol/Hl, again depending on the type of product obtained by distillation. In addition, distillers can receive a secondary aid for the storage of alcohol, which was set since the wine year 2002/2003 at 0,00042 € per °Vol per hl of product and per day.

This measure shall be opened each year between October 1st and December 15 th. Since the marketing year 2002-2003 its volume was limited to 25 per cent of the highest volume of wine produced by each individual producer in the previous 3 years.

- Crisis distillation:

Crisis distillation as foreseen under Art. 30 of Council Regulation (CE) N°1493/1999, may be opened "if there is an exceptional case of market disturbance caused by serious surpluses and /or problems of quality". The measure can be limited to certain categories of wine or certain areas of production but may also include quality wine. During the marketing year 2002/2003 and 2003/2004 no requests for Crisis Distillation were received.

3. Aid for the use of grape must

(a) Aid to grape must used in the wine-making process

Aid is granted in respect of concentrated grape must and rectified concentrated grape must used to increase the alcoholic strength of wines as foreseen by art.12 of Reg.1623/00. It shall compensate the difference between the cost of enrichment by means of grape must and sucrose, respectively. The aid was fixed, per degree of potential alcoholic strength per hectolitre as follows:

for concentrated grape must prepared from grapes originating in the wine-growing zones C III (a) and C III at 1,699 €/°Vol/Hl, and prepared from grapes originating in other zones at 1,446 €/°Vol/Hl;

for rectified concentrated grape must prepared from grapes originating in the wine-growing zones C III (a) and C III at 2,206 €/°Vol/Hl and prepared from grapes originating in other zones at 1,955 €/°Vol/Hl.

(b) Aid for the manufacture of grape juice

Aid is granted for grapes, grape must and concentrated grape must intended for manufacturing grape juice or, newly introduced under the reform, for manufacturing other comestible products from such grape juice. The amount of the aid for the wine year 2000/2001, as foreseen by art. 4 of Reg.1623/00, has been fixed at 4,952 € per 100 kg of grapes; 6,193 € per hectolitre of grape must and at 21,655 € per hectolitre of concentrated grape must produced.

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(c) Aid for the manufacture of certain products in the United Kingdom and in Ireland

The amount of aid for preparations falling within CN Heading 22.06.00, which are traditionally called "British and Irish wines", have been fixed by art. 18a) of Reg.1623/00, at 0,2379 €/kg of concentrated grape must used. The product must be obtained entirely from grapes produced in wine-growing zones C III (a) and C III (b).

The amount of aid for preparation of certain products enabling the consumer to obtain therefrom a beverage in imitation of wine ("home-made wine"), which are also traditional in the United Kingdom and Ireland, have been fixed by art. 18b) of Reg.1623/00, at 0,3103 €/kg of the product obtained.

Access to all these support measures is reserved to producers who have fulfilled their obligations regarding compulsory distillation

II. Structural measures

1. Abandonment premiums

Premiums for permanent abandonment of vineyards have been maintained. Member States may determine the eligible areas and conditions for the implementation of this measure, including the amount of the premium. EU legislation sets maximum amounts for financing at Community level.

2. Restructuring and conversion

In order to assist further the adaptation of supply to market needs, a scheme for restructuring and conversion of production potential, both in terms of quality and quantity, was introduced under the reform. Member States have to determine the regions, types of production eligible and the amounts of these aids. Wine producers receive up to 50 per cent of the restructuring or conversion costs (75 per cent in regions under Objective 1 of the Structural Funds) plus compensation for the temporary income loss for a maximum of three years.

Decision 2004/688/EC laid down the final allocation for 2003/04 as follows: 7:

Member State Superficies (Ha) Allocations (Euro)Germany 2.198 13.989.772Greece 1.519 7.176.037Spain 22.482 152.001.024France 21.058 111.840.613Italy 17.990 120.341.710Luxembourg 10 81.856Austria 1.837 7.798.847Portugal 4.854 29.967.725

Total 71.948 ha 443.197.584 €

(xiii) "TOBACCO" SECTOR

The reform of the sector, adopted by the Council on 3 June 1992 radically changed the system regulating tobacco, suppressing the intervention and export subsidies and the replacing target price by a system of premium and guarantee thresholds.

7 JO L 201 of 9.8.2000, p.4

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The reformed market organisation regulated by Council Regulation (EEC) No. 2075/92 divides raw tobacco into eight variety groups (Flue cured, Light air cured, Dark air cured, Fire cured, Sun cured, Basmas, Katerini, Kaba Koulak classical).

(a) Premium

- Every year, the Council fixes the premium for each of the eight variety groups.

The amounts of the premium for the 2002, 2003 and 2004 crop were as follows:

(EUR /Kg.)

IFlue cured

IILight air

cured

IIIDark air

cured

IVFire cured

VSun

cured

VI Basmas

VIIKaterini

VIIIKaba

Koulak

2.98062 2.38423 2.38423 2.62199 2.14581 4.12957 3.50395 2.50377

- EU Producers and groups of producers must have concluded a European crop contract in order to be eligible for the premium.

- A supplementary amount to the premium is given to the northern tobacco producing countries (France, Germany, Austria, Belgium) to compensate for the difference in production costs with producers of the southern Member States. The supplementary amount to the 1999 premium has been fixed as follows:

Varieties

Badischer Geudertheimer, Pereg, KorsoBadischer Burley E and its hybrids

Virgin D and its hybrids, Virginia and its hybridsParaguay and its hybrids, Dragon vert and its hybrids

Phillippin, Petit Grammont (Flobecq), Semois, Appelterre

EUR/kg.

0.55090.88220.50390.41120.4112

(b) Guarantee thresholds

In 1992, the Council replaced the global guaranteed maximum quantity system by guarantee thresholds fixed by variety and by Member State.

The quantities produced in excess of the thresholds are not eligible for the premium.

The guarantee thresholds for the 2003 and 2004 crop were fixed as follows:

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I II III IV V Others TotalFlue cured

Light air cured

Dark air cured

Fire cured Sun cured

VI Basmas VII Katerini VIII Kaba

KoulakItaly 48,263 47,689 15,682,

9006,255 8,833 498 127,220

Greece 35,242 11,842 6,938 27,114 24,014 16,696 121,846Spain 29,028 5,545 6,388 30 40,991Portugal

4,906 1,028 5,934

France 10,490 9,262 5,170 24,922Germany

4,728 2,588 3,731 11,047

Belgium

149 1,404 1,553

Austria 29 426 96 551Total 132,686 78,529 32,471 6,285 15,771 27,114 24,512 16,696 334,064

c) Producer groups

In order to concentrate supply and adapt it to the qualitative requirements of the market, a special aid amounting to 2 per cent of the premium is given to producer groups when they conclude cultivation contracts.

(xiv) "TEXTILE FIBRES" SECTOR

1. COTTON

The Council Regulation (EC) No 1051/2001 on production aid for cotton applies till the marketing year 2005/2006. Aid per tonne of unginned cotton is equal to the difference between an objective price per hectare and the world market price calculated by the Commission, provided that the producer received a minimum price per tonne of unginned cotton. Moreover, the aid is paid only if the products are of sound and fair merchantable quality. A NGQ’s of 1,031,000 tonnes distributed between Greece (782,000 tonnes) and Spain (249,000 tonnes) were established. In case the NQG has been overshot, the Commission reduces the guide price. In addition, Member States are required to take the environmental measures and to determine a sanction arrangement and to take the measures necessary to ensure their implementation.

The last modification of the regime of cotton was introduced by Council Regulation (EC) No 1782/2003. As from 2006 the cotton producers would benefit from decoupled aid and from a crop specific payment under certain conditions. Decoupled aid will be incorporated into the mechanism applicable to the single payment and will not be subordinated to the exercise of an agricultural activity, but to maintenance of the equivalent land in a good environmental and agricultural condition.

With regard to coupled aid, or crop specific payment, an amount will be granted per hectare maintained at least until the boll opening under normal growing conditions. If the eligible cotton area exceeds the basic area, aid is reduced proportionally to the overshot.

In addition, approved inter-branch organizations can be made up to ensure the ginner receives supplies of satisfactory quality of cotton. These organizations may decide that a maximum of half of the total amount of the aid to which its member producers are eligible is differentiated according to a

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scale concerning in particular the quality of the unginned cotton to be provided. Member farmers of the organization shall be granted an additional aid of 10 €.

Country Decoupled aid Coupled aidArea (Ha) Aid (€/ha) Area (Ha) Aid (€/ha)

Greece Reference period 966 370,000 - 594 for 300,000 ha - 342.85 for 70,000 ha

Spain Reference period 1,509 70,000 1,039 euroPortugal Reference period 1,202 360 556 euro

2. FIBRE FLAX AND HEMP

After the deep reform of 2000, the support measures in this sector comprise a payment for the producer of the straw of flax and hemp and an aid for the processor of the straw into fibre.

(1) Production aid

Flax and hemp grown for fibre are included into the general support system for producers of certain arable crops since the 2001/2002 marketing year. Therefore, an aid is granted in the form of payment per hectare at the same level and on the same terms than for other arable crops.

Likewise, after the new Single payment scheme come into force, surfaces under flax and hemp grown for fibre will be eligible for this new regime, as well as for the optional arable crops area payment, in those countries where this measure is applied.

(2) Aid for processing the straw of flax and hemp into fibre

An aid for processing the straw into fibre is granted in order to ensure the maintenance of the economical activity in this sector. The aid is granted to authorised primary processors on the basis of the quantity of fibre actually obtained from straw. Nevertheless, in cases where the farmer retains ownership of the straw, which he is having processed under contract, and proves that he has placed the fibres obtained on the market, the aid is granted to the farmer.

A sale/purchase contract must be concluded between the farmer and the authorized processor. In cases where they both are one and the same person, the contract is replaced by a processing commitment.

The amount of the aid distinguishes between high quality long flax fibre and low quality fibres:

1. For long flax fibre:

EUR 100 for the 2001/2002 marketing yearEUR 160 for the 2002/2003 to 2005/2006 marketing years EUR 200 from the 2006/2007 marketing year onwards

2. For short flax and hemp fibre:

EUR 90 for the 2001/2002 to 2005/2006 marketing years.

The reason for the increase in long flax fibre payment is the comparable decrease of direct payment for farmers foreseen in the aid scheme for arable crops for those marketing years. The

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continuance of the short flax and hemp fibres payment beyond the 2005/2006 marketing year will be examined at the end of 2005.

The aid is granted within a maximum guaranteed quantity per marketing year of 80 823 tonnes for long flax fibre and 146 296 tonnes for short flax and hemp fibre. These amounts are apportioned among the Member States as national guaranteed quantities

3. SILKWORMS

Community regulations in the silkworm-rearing sector include the following measures:

(a) Production aid

Aid for silkworms, reared in the Community, has been established in order to provide silk producers with a fair income. The amount of this aid is fixed annually for each box of silk utilised. The aid is given to the rearer who successfully rears silkworms.

Since 1999/2000, the aid is fixed at 133.26 EUR/box

In the context of 2000/2001 package prices, the Commission has continued the multi-annual approach followed for Agenda 2000 and previous reforms by fixing an amount for the sector for an undefined period.

(b) Aid to improve quality

Community measures may be taken to improve the quality of silkworms and silkworm eggs. However, no such measure has been taken to date.

(xv) "DRIED FODDER" SECTOR

The common organisation of markets in the dried fodder sector covers the following products: dehydrated fodder, the principal leguminous vegetables, sun-dried and ground, and protein concentrates obtained from alfalfa and grass juice.

From 1 April 1995, beginning of the 1995/1996 marketing year, the Council has modified some basic points of this sector.

Council Regulation (EC) No. 603/95 has established a system based on a flat rate aid for both dehydrated and sun dried fodder within the limits of Maximum Guaranteed Quantities (MGQ) for both types of fodder.

These MGQs are the following:

- Dehydrated fodder: 4,412,400 tonnes- Sun-dried fodder: 443,500 tonnes

The MGQ is the sum of the National Guaranteed Quantities (NGQ).

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The NGQs are the following:

Member States National Guaranteed Quantities (in tonnes)Dehydrated fodder Sun-dried fodder

UEBL 8,000 -Denmark 334,000 -Germany 421,000 -Greece 32,000 5,500Spain 1,224,000 101,000France 1,455,000 150,000Ireland 5,000 -Italy 523,000 162,000Netherlands 285,000 -Austria 4,400 -Portugal 5,000 25,000Finland 3,000 -Sweden 11,000 -United Kingdom 102,000 -Total 4,412,400 443,500

Among the new Member States that have joined the Community on 1 May 2004, the following NGQs have been attributed for dehydrated fodder:

Member States National Guaranteed Quantities (in tonnes)Dehydrated fodder Sun-dried fodder

Czech Republic 27,942 -Lithuania 650 -Hungary 49,593 -Poland 13,538 -Slovakia 13,100 -

As a consequence of the enlargement, as from marketing year 2004/2005 the MGQ for dehydrated fodder will be 4,517,223 tonnes instead of 4,412,400 t.

Within the MGQs, the amounts of the aid are:

- Dehydrated fodder 68,83 EUR/tonne- Sun-dried fodder 38,64 EUR/tonne

If, in any marketing year, the quantities for which the aid is granted exceed the MGQ, the amount of the aid is reduced as follows:

- If the excess is less or equal to 5 per cent of the corresponding MGQ, the amount of the aid is reduced accordingly in all Member States;

- If the excess is more that 5 per cent of the corresponding MGQ, the amount of the aid is reduced by 5 per cent in all Member States; moreover, supplementary reductions are

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applied in those Member States where the eligible production exceeds the NGQ increased by 5 per cent.

(xvi) "SEEDS" SECTOR

Under the Community Regulations in force since 1 May 1972 and applied from 1 July 1972, a production aid is granted for certain types of seed: rice seed and seeds of spelt wheat, oilseeds, and seed of fodder leguminosae and gramineae.

When the market situation does not ensure an adequate income to the producer, an aid can be granted. It consists of EC wide rates for each species or group of species. It is fixed by quintal (100kg) of produced certified seeds, taking into account the market situation and the prices on the external market.

Aid is fixed for two marketing years with the possibility of modification before the start of the second year, if the Community market is likely to be disturbed.

The amount of aid for the marketing years 2003/2004and 2004/2005 is as follows:

(EUR/100 kg.)

Products

1. Cereals (rice, spelt)

2. Oilseeds (flax,hemp)

3. Gramineae

4. Leguminosae

2003/2004 and 2004/2005

between 14.37 and 17.27



between 0 and 75.11

For rice seed a maximum guaranteed quantity is established since 1998. In 2002 a stabiliser mechanism including a maximum guaranteed quantity for which the Community aid is payable for seeds other than rice seeds was introduced. The overall quantity was fixed at 305.754 tons and apportioned among the producer Member States. The distributed amounts are for Belgium 10,077 t, Denmark 93,697 t, Germany 31,654 t, Greece 3,846 t, Spain 23,976 t, France 52,981 t, Ireland 1,016 t, Italy 18,822 t, Luxembourg 865 t, Netherlands 35,856 t, Austria 769 t, Portugal 769 t, Sweden 8,132 t, Finland 5,853 t, United Kingdom 17,910 t. In 2004, upon accession of the 10 new Member States, the total ceiling was increased to 332,841 tonnes.

(xvii) "HOPS" SECTOR

In order to ensure a fair income for hop producers, the Community regulations provide for an aid per hectare. The Council fixed the aid at 480.00 EUR /ha for the harvests 1996 to 2004 included, with no distinction between the various groups of varieties and payment being made at the end of the harvest year. The aid comprises two amounts which existed previously, i.e. aid to producers and aid for varietal conversion.

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VI. INDUSTRY

A. COMMUNITY FRAMEWORK PROGRAMMES IN THE FIELD OF RESEARCH

There are two framework programmes:

- the sixth framework programme of the European Community for research, technological development and demonstration activities (2002-2006), and

- the sixth framework programme of the European Atomic Energy Community (EURATOM) for research and training activities (2002-2006).


Financial participation in Community research and technological development (RTD) activities during the period 2003-2004 is provided through the two above-mentioned framework programmes.

The legal bases of these programmes are, respectively, Article 166 of the EU Treaty and Article 7 of the Treaty establishing the European Atomic Energy Community.

The sixth framework programme of the European Community is aimed at strengthening the scientific and technological bases of Community industry, encouraging the development of its competitiveness and contributing to the implementation of the other Community policies under the Treaty. These objectives and the activities to be undertaken are stated in the Treaty and further implemented through the Decision adopting this framework programme (Decision N° 1513/2002/EC of 27 June 20028).

The framework programme of the European Atomic Energy Community has two main parts: nuclear fission and controlled thermonuclear fusion. The objectives and activities to be undertaken are set out in the Decision adopting this framework programme (2002/668/Euratom of 3 June 20029).

The activities under the two framework programmes relate to fundamental research, industrial research or pre-competitive development. Financing of product development is excluded.

The arrangements for implementing the two framework programmes are essentially the same and are therefore described together in the following paragraph.

2. Form of subsidy:

The framework programmes are implemented through specific programmes, which are the subject of Council decisions.10

Community support to RTD activities is provided in the form of financing ("grants" within the meaning of Article 25.3 of the WTO Agreement on Subsidies and Countervailing Measures) granted to projects following, as a general rule, an invitation for proposals and an evaluation procedure with independent experts and selection procedure.

8 OJ L 232, 29.8.2002, p. 19 OJ L 232, 29.8.2002, p. 3410 All these are published in the OJ L 294 of 29.10.2002.

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Research projects are carried out primarily by participants established within the Community. Legal entities established in a country that has signed an association agreement (associated state) with the Community may participate in a project and receive Community funding from the sixth framework programme on the same grounds as those established in Member States. Legal entities established in countries targeted by the international cooperation activities of the framework programme may participate and receive funding under certain sixth framework programme research projects. Legal entities established in countries that have signed a scientific and technical cooperation agreement with the Community may participate in sixth framework programme research projects. Legal entities established in any other third country may participate in sixth framework programme research projects. Funding for legal entities in the latter two categories may be provided if provision is made for this or if it is essential for carrying out the project.

Research projects must include the participation of at least three independent legal entities established in three different Member States or associated states of which two must be Member States or associated candidate countries. Partnerships usually include universities, research organisations and industry.

The European Commission is responsible for the implementation of the programmes. Contracts concluded with the Commission govern the rights and obligations of each partner (see http://europa.eu.int/comm/research/fp6/model-contract/index_en.html).

3. Amount and duration of subsidy

2003-2004 Total amounts(in millions of Euros)

Sixth framework programme of the European Community for research, technological development and demonstration activities

8267

Sixth framework programme of the European Atomic Energy Community (EURATOM)

636

Total 8903

4. Incidence on trade

The sixth RTD framework programmes have no direct impact on trade. As a general rule, further work is always necessary for the results of a RTD project to lead to a commercially exploitable process or product.

Furthermore, access to the results can be shared among partners and information may be made more widely available under certain conditions, which serves the public interest. One of the main benefits lies in establishing links among research community partners, within Europe but also with non-EU countries.

The economic impact of industrially oriented programmes can be assessed only several years after the completion of the projects because further investment is required after the end of the research projects to develop any competitive applications.

B. RESEARCH ON COAL AND STEEL

The Treaty establishing the European Coal and Steel Community (ECSC) expired on 23 July 2002. The remaining assets at the expiry of the ECSC were transferred to the European Community and a common Research Fund for Coal and Steel (RFCS) was created, dedicated to

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research in the coal and steel sectors. The activities carried out under this Fund are exclusively financed by the yearly returns generated by these assets.

The Research Programme of the Research Fund for Coal and Steel was established by the Council Decisions 2003/76/EC, 2003/77/EC and 2003/78/EC of 1 February 2003, published in the Official Journal of 5 February 2003 (see OJ L 29/22, OJ L 29/25, OJ L 29/28).

The programme is closely co-ordinated with other activities, carried out either in the Member States or existing Community research programmes, such as the Framework Programme of the European Community for research, technological development and demonstration activities. In order to increase the impact of this programme, the European Commission will encourage and promote co-ordination, complementarities and synergy between the different research programmes and support the exchange of information between projects financed under this programme and those financed under the Research Framework Programme.

The programme related documents and the information package are available on CORDIS at: http://www.cordis.lu/coal-steel-rtd/home.html

For coal and steel, the Community contributes financially in the following ways: through research, pilot and demonstration (RTD) projects, accompanying measures and support and preparatory actions.

(1) Research, Pilot and Demonstration:

Research projects are intended to cover investigative or experimental work with the aim of acquiring further knowledge. The financial contribution of the Community is up to 60 per cent of the allowable costs.

Pilot projects address the construction, operation and development of an installation or a significant part of an installation on an appropriate scale. These installations should have a sufficient scale for use. They should allow the investigation of potential for putting theoretical or laboratory results either into practice or to increase the reliability of the technical and economic data needed to progress to the demonstration stage, and in certain cases to the industrial and/or commercial stage. The financial contribution of the Community is up to 40 per cent of the allowable costs.

Demonstration project: aim at constructing and/or operating an industrial-scale installation or a significant part of an industrial-scale installation. Such projects aim to bring together all the technical and economic data in order to proceed with the industrial and/or commercial exploitation of the technology at minimum risk. The financial contribution of the Community is up to 40 per cent of the allowable costs.

(2) Accompanying measures are designed to complement and/or co-ordinate research activities related to this programme.

(3) Support measures: this includes the dissemination of research results, the promotion of the use of knowledge gained and the support of training and mobility of researchers.

It is worth noting that the results of all RFCS funded research projects are made public and can be acquired against a small fee by any organisation or individual, as provided for under Article 4 of annex III of the model contract. This allows for a wide and non discriminatory dissemination of the research results.

Total EC support provided to coal and steel projects in the years 2003 and 2004 are:

http://www.cordis.lu/coal-steel-rtd/home.html

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Year Coal 2003 Steel 2003 Coal 2004 Steel 2004

Support in Million of €

16,132 43,676 15,266 43,610

C. AID TO THE COAL INDUSTRY

Aid to the coal industry within the European Union during the period 2003-2004 has been governed Council Regulation 1407/2002.

1. Council Regulation 1407/2002 of 23 July 2002 on State aid to the coal industry11

With the expiry of the ECSC Treaty on 23 July 2002, all secondary legislation under the ECSC Treaty also automatically expired. This included Commission Decision 3632/93/ECSC of 28 December 1993. As from 24 July 2002, the sectors previously covered by the ECSC Treaty have been subject to the rules of the EC Treaty as well as the procedural rules and other secondary legislation derived from the EC Treaty.

Having regard to the EC Treaty, in particular Article 87(3)(e) thereof, Council Regulation (EC) No 1407/2002 of 23 July 2002 was established as the new legal framework for state aid to the Community coal industry. In addition, the provisions of Article 88 EC Treaty and Council Regulation (EC) No 659/1999 also apply.

According to Council Regulation 1407/2002, different categories of aid can be considered compatible with the common market:

Aid Conditions

- Aid for the reduction of activity (Article 4) : - closure plan, with a deadline of 31 December 2007;- aid may not exceed the difference between production costs and revenue ;

- Aid for accessing coal reserves (Article 5) : Two categories are foreseen : aid for initial investment : - operating plan to ensure economic viability;

- not more than 30 per cent of the total costs ; current production aid : - part of a plan for accessing coal reserves;

- aid granted to production units which afford the best economic prospects.

- Aid to cover exceptional costs (Article 7) : - costs arising from rationalisation and restructuring.

In addition, the following rules apply for all the categories of aid foreseen:

- The overall amount of aid to the coal industry granted shall follow a downward trend so as to result in a significant reduction.

11 OJ L 205 of 2 August 2002, p. 1

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- aid may not cause lower prices than those for coal from third countries ;

- aid may not cause distortion of competition.

- Member States have, on duly justified grounds, until June 2004 to notify the Commission of the individual identities of production units forming part of a closure plan. For the countries which joined the European Union on 1 May 2004, this deadline was set at August 2004.

- Member States shall notify the Commission of the amount and full information about the calculation of the aid actually paid during a coal year not later than six month after the end of that year.

- The Commission takes a decision in accordance with the rules of procedure laid down in Regulation (EC) No 659/1999 and in the light of the plans submitted.

State aid authorized 2003 – 2004 (in millions €)

ECU/EUR million 2003 2004

Germany- operating aid- aid for the reduction of activity- other

2,570.056,483

770

2 045.3413.9557.4

Spain- operating aid- aid for the reduction of activity- other

not yet approved

not yet approved

France- operating aid- aid for the reduction of activity- other

16984,500

746

086,6

769,3

United Kingdom- operating aid- aid for the reduction of activity- other

00

21,7

00

29,1

Poland- operating aid- aid for the reduction of activity- other

n/a not yet approved

Czech Republic- operating aid- aid for the reduction of activity- other


Hungary- operating aid- aid for the reduction of activity- other


G/SCM/N/123/EEC

Slovak Republic- operating aid- aid for the reduction of activity- other


EU TOTAL- operating aid- aid for the reduction of activity- other

not yet known not yet known

Aid in € per tonne for operating aidand aid for the reduction of activity

n/a not yet known

Coal production and imports in the Community (EUR-15): 2000-2004(In million tonnes)

Year Million tonnes2000 203.22001 196.52002 191.42003 (est.) 184.92004 n/a

VII. OTHER PROGRAMMES:

A. SME AND ENTREPRENEURSHIP PROGRAMME


Multiannual programme for enterprise and entrepreneurship, and in particular for small and medium-sized enterprises (SMEs) (2001-2005)


1 January 2003 – 31 December 2004


The programme holds the following five objectives:

1: enhancing the growth and competitiveness of business in a knowledge-based internationalised economy;

2: promoting entrepreneurship;3: simplifying and improving the administrative and regulatory framework for business

so that research, innovation and business creation in particular can flourish;4: improving the financial environment for business, especially SMEs;5: giving business easier access to Community support services, programmes and

networks and improving the coordination of these facilities.

http://europa.eu.int/comm/enterprise/enterprise_policy/mult_entr_programme/programme_2001_2005.htm


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With these objectives the MAP is also supporting the implementation of the European Charter for Small Enterprises.


Council Decision 2000/819/EC of 20 December 2000

5. Form of assistance granted

The objectives of the programme are pursued via a series of activities that fall under one of three headings:

The Financial Instruments: These are schemes, managed by the European Investment Fund, that are specifically targeted at improving the financial environment for businesses, especially SMEs, by bridging those gaps that financial markets would otherwise normally leave open:

Start-up Scheme of the European Technology Facility (ETF) . It promotes growth and employment throughout the European Union by investing in funds providing risk capital to Smallerbusinesses.

SME Guarantee Facility . It is designed to increase the availability of and facilitate access to debt finance for small companies with job creation potential in Europe.

Seed Capital Action .It is a facility designed to stimulate the supply of capital for the creation of innovative new businesses with growth and job creation potential, through support (long-term recruitment of additional investment managers) for seed funds, incubators or similar organisation in which the EIF participates.

The Euro Info Centres Network: Euro Info Centres represent an interface between European institutions and local actors. Their task is to inform, advise and assist SMEs in all Europe-related areas while taking into account the great variety of enterprises concerned, so that, either directly or indirectly, they can make matters simpler and more efficient for SMEs.

Policy Development: The Commission, in close coordination with Member States, analyses and studies how to ameliorate the overall environment that enterprises have to operate in. This category include activities such as Best projects for the identification and the exchange of best practices; data collection and analysis; grants, networks and other projects; Publication and information dissemination.


Public, private or semi-public bodies, mainly in response to public calls for expression of interest/calls for proposals.


The overall budget foreseen is 450 million EUR over 5 years.


1 January 2001 –31 December 2005

http://www.eif.org/vca/ec_resources/seed/index.htm

http://www.eif.org/pg/ec_prod.htm

http://www.eif.org/


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9. Trade effects

Despite the fact that some actions are aimed at promoting access to new markets, the number of SMEs capable of internationalising their activities is nevertheless small. Consequently, the impact on trade may be considered minimal.

B. JEV PROGRAMME


The Joint European Venture (JEV) Programme


1 January 2003 – 31 December 2004

3. Policy Objective and/or purpose of the programme

To provide financial contributions to small and medium-sized enterprises (SMEs) for the setting-up of new transnational joint ventures within the European Union.


Commission Decision 97/761/EC of 5 November 1997 (OJ L 310/28, 13.11.1997), Council Decision 98/347/EC of 19 May 1998 (OJ L 155/43, 29.5.1998) and Council Decision 2000/819/EC of 20 December 2000 (OJ L 333/84, 29.12.2000).

This programme was closed by Decision 593/2004/EC of the European Parliament and of the Council of 21 July 2004 amending Council Decision 2000/819/EC (OJ L268/3, 16.8.2004), fixing the closure date for applications as 29.12.2004.

5. Form of assistance granted - Grants from Community budget for:

The Community contribution was intended to cover a part of the expenses incurred in the conception and setting-up of transnational joint ventures. The maximum contribution per project was EUR 100,000 covering:

Up to 50 per cent of the eligible expenses, with a maximum of EUR 50,000; Up to 10 per cent of the total amount of investment made in fixed assets.


Direct support to SMEs within the European Union. Applications were made to intermediaries, which were banks or other appropriate financial institutions. The intermediaries (selected by a call for expressions of interest) were entrusted with the evaluation of the applications and, in the event of a favourable opinion, made recommendations to the Commission.


The total amount committed for the programme was EUR 57 million but only about EUR 3 million was disbursed for joint venture projects by end of 2004.


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1997-2004

9. Trade effects

The JEV aid was never contingent on the subsequent joint venture’s export intentions or capabilities. The information on the joint venture partners’ past or future exports was neither requested nor relevant in determining the amount of support for the preparatory works or for the investment. Furthermore, from the start of the programme in1997 until 31.12.2004 only 163 Joint Venture projects have received support from the JEV programme, due to which the impact of this programme on trade has been negligible.

C. FIFG


Financial Instrument of Fisheries Guidance (FIFG) – structural measures in the fisheries and aquaculture sector, .


2000-2006

3. Policy and/or programme objectives

Community structural measures in the fisheries and aquaculture sector and the processing and marketing of its products.

The objectives of the instruments are the following:

- To contribute to achieving a sustainable balance between fishery resources and their exploitation.

- To strengthen the competitiveness of structures and the development of economically viable enterprises in the sector.

- To improve market supply and the value added to fisheries and aquaculture products.

- To contribute to the revitalization of areas that depend on fisheries.

4. Legal authority

Articles 32, 33, 158, 159 and 161 of the EC Treaty, Regulation (EC).1260/99, Regulation (EC) 2792/99, Regulation (EC) 2369/2002.

5. Type of aid

Aid for the restructuring of fishing fleets, aquaculture, processing and marketing circuits, port facilities and socio-economic measures.

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6. To whom and how the subsidy is provided

Co-financing principle and principle of regionally diversified action.

Shipowners, enterprises, producer organizations, public and private bodies, professional organizations, cooperatives, fishermen.

7. Total budget of the programme

Objective 1 Regions: 2000-2006: EUR 2.6 billion (0.403 billion EUR budgeted in 2000) Other Regions: 2000-2006 : EUR 1.1 billion

2003 (all regions) : 578 MEUR, 2004 (all regions) : 629 MEUR


2000-2006

9. Trade effects

The Community has a shortfall in fishery and aquaculture products and is a major importer of these products from non-Community countries. The structural aid has only a very small influence on this situation.

D. COMMON ORGANISATION OF MARKETS IN FISHERY AND AQUACULTURE PRODUCTS

1. Title of the measure

Common Organisation of the Market in Fishery and Aquaculture Products.


2001-2002

3. Policy objectives and/or programme objectives

The objectives of this instrument are the following:

- To stabilize to promote sustainable fishing and optimum use of fish products- To stabilize the market- To ensure a regular supply of high-quality products- To guarantee reasonable consumer prices- To support fishermen's incomes

4. Legal authority

Articles 32, 33 and 34 of the EC Treaty, Regulation (EC) No. 104/2000

5. Intervention mechanisms

Financial compensation, carry-over aid, autonomous withdrawal and carry-over, private storage aid, compensatory payment for tuna supplied to industry.

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6. To whom and how the subsidy is provided

Mechanisms implemented by producers' organizations.

Beneficiaries: fishermen belonging to such organizations.

7. Total budget of the programme

(EU-15) 2003 : 14,5 MEUR budgeted, 12,6 MEUR effectively disbursed(EU-25) 2004 : 33,0 MEUR budgeted, 14.05 MEUR effectively disbursed


Fishing years.

9. Effects on trade

None in so far as the Common Organization of Markets aims at regularizing prices and not at artificially raising their level. The amounts paid under the programme represent less than 0,002 per cent of the value of landed fish in the EC (EU-15).

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