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WORLD TRADE

ORGANIZATIONG/SCM/N/95/EEC15 December 2003(03-6583)

Committee on Subsidiesand Countervailing Measures

Original: English

SUBSIDIES

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

on Subsidies and Countervailing Measures

EUROPEAN COMMUNITIES

The following communication, dated 6 October 2003, has been received from the Permanent Delegation of the European Commission.

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EUROPEAN COMMUNITY

TABLE OF CONTENTS

Page

I. INTRODUCTION.....................................................................................................................................4

A. STRUCTURE OF NOTIFICATION..........................................................................................................4B. PERIOD COVERED..................................................................................................................................4C. PRESENTATON OF NOTIFICATION.....................................................................................................4D. STATUS OF SUBSIDIES..........................................................................................................................4

II. THE EUROPEAN COMMUNITY’S STRUCTURAL ACTIONS......................................................5

A. EUROPEAN REGAIONAL DEVELOPMENT FUND.............................................................................6B. EUROPEAN SOCIAL FUND....................................................................................................................7C. EUROPEAN AGRICULTURAL GUARANTEE AND GUIDANCE FUND (EAGGF) -

GUIDANCE SECTION..............................................................................................................................8D. EUROPEAN AGRICULTURAL GUARANTEE AND GUIDANCE FUND (EAGGF) -

GUARANTEE SECTION..........................................................................................................................9E. COMMON AGRICULTURE POLICY-ACCOMPANYING MEASURES EUROPEAN

AGRICULTURAL GUARANTEE AND GUIDANCE FUND (EAGGF) - GUARANTEE SECTION 10

III. AGRICULTURE.....................................................................................................................................11

A. GENERAL REMARKS............................................................................................................................11B. MEASURES.............................................................................................................................................12

1. Export Refunds..........................................................................................................................122. Measures on the Internal Market...............................................................................................12

C. ANALYSIS BY SECTOR........................................................................................................................13(i) "ARABLE CROPS" - SECTOR (Cereals, oilseeds, protein crops ,linseed, fibre flax and fibre hemp and

set-aside)........................................................................................................................................................13(ii) "RICE" SECTOR..........................................................................................................................................18(iii) "DAIRY PRODUCT" SECTOR....................................................................................................................19(iv) "OLIVE OIL”................................................................................................................................................20(v) "SUGAR" SECTOR......................................................................................................................................22(vi) "BOVINE MEAT" SECTOR........................................................................................................................23(vii) "PIGMEAT" SECTOR..................................................................................................................................25(viii) "SHEEPMEAT AND GOATMEAT" SECTOR...........................................................................................26(ix) "FRUIT AND VEGETABLE" SECTOR......................................................................................................27(x) "BANANAS" SECTOR................................................................................................................................28(xi) "PROCESSED FRUIT AND VEGETABLES" SECTOR............................................................................28(xii) "WINE" SECTOR........................................................................................................................................30(xiii) "TOBACCO" SECTOR.................................................................................................................................33(xiv) "TEXTILE FIBRES" SECTOR.....................................................................................................................35(xv) "DRIED FODDER" SECTOR.......................................................................................................................36(xvi) "SEEDS" SECTOR.......................................................................................................................................37(xvii) "HOPS" SECTOR.........................................................................................................................................38

IV. INDUSTRY SECTORS..........................................................................................................................38

A. COMMUNITY FRAMEWORK PROGRAMMES IN THE FIELD OF RESEARCH...........................38B. AID TO THE COAL INDUSTRY...........................................................................................................40

V. OTHER PROGRAMMES.....................................................................................................................43

A. SME AND ENTREPRENEURSHIP PROGRAMME.............................................................................43B. JEV PROGRAMME.................................................................................................................................45C. FIFG..........................................................................................................................................................46D. COMMON ORGANISATION OF MARKETS IN FISHERY AND AQUACULTURE PRODUCTS. 47

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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 (PORTUGESE 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 2001 and 2002 and to subsidy programmes which are currently in force, and provides statistical information at least up to the end of 2002.

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.

EUROPEAN COMMUNITY SUBSIDIES

(a) Subsidies granted out of the European Community budget

In 2001 total commitments by the European Community amounted to EUR 96.99 billion.

In 2002 total commitments by the European Community amounted to EUR 98.63 billion.

The two largest areas of expenditure were agriculture and structural operations, which accounted for 44 per cent per cent and 33 per cent per cent of financial commitments respectively. Another notable area of expenditure is research, which took up 4 per cent 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.

II. 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 2001 amounted to EUR 32.7 Billion, in 2002 to EUR 33.8 Bio.

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 541 Mio in 2001 and EUR 749 in 2002.

The final 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 €2.7 billion. Eligibility is reserved for Member States whose GDP per capita is less than 90 per cent of the EU average (currently Greece, Ireland, Portugal and Spain).

3. The Structural Funds (ERDF, ESF, EAGGF and FIFG) are devoted to the following objectives, all of which are co-financed 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 difficulties

Objective 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).

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

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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

2001, 2002

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 co-finance:

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 co-financed 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.

Aid is normally in the form of grants or loans.

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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 2001 to EUR 20 Billion and in 2002 to EUR 18 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)


2001, 2002


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.

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

- 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 11.7 Billion for 2001 and EUR 9.4 Billion for 2002, excluding Community initiatives


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 2001-31 December 2002

3. Policy objective and/ or purpose of the programme

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.

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

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. Aid is normally in the form of grants or loans.

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EUR 2.62 billion was budgeted for every year (2001 and 2002), 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 2001-31 December 2002

3. Policy objective and/ or purpose of the programme

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 0.84 billion was budgeted for 2001 and EUR 1.02 billion for 2002.

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2000-2006

9. Trade effects


E. COMMON AGRICULTURE POLICY-ACCOMPANYING MEASURES EUROPEAN AGRICULTURAL GUARANTEE AND GUIDANCE FUND (EAGGF) - GUARANTEE SECTION


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


1 January 2001-31 December 2002.

3. Policy objective and purpose of the programme

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 States are responsible for the implementation of the programme and the selection of individual projects. Aid is normally in the form of grants or loans.

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EUR 3.52 billion was budgeted for 2001 and EUR 3.39 billion for 2002.


2000-2006

9. Trade effects


III. 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- 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.

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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 2001 and 2002 are as follows:

(EAGGF budgetary period-EUR million)

ProductsRefunds 2001 Refunds 2002Arable cropsSugar 1) RiceOlive oilFruits and vegetables WineDairy productsBovine meatPigmeat Eggs and poultryNon Annex I Products

Total expenditure

259.81.008.2

38.7 0.2

50.8 22.51,106.5 362.6

55.260.5

438.8

3.403.8

99.31.168.2

41.1 0.1

46.4 23.81,159.6 386.7

27.377.1

413.5

3.443.1

1) 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

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 2001 and 2002, by product sector, they have amounted to:

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(EAGGF budgetary period-EUR million) 1)

ProductsIntervention 2001 Intervention 2002Arable crops Sugar 1)RiceOlive oilFlax and hempCottonSilkwormsFruits and vegetablesWineTobaccoSeedsHopsDairy productsBovine meatSheepmeat and goatmeatPigmeat, eggs and poultryFishery productsOther products 2)

Total expenditures

17,206.373.9

143.6 2.523.6

92.6 733.4

0.5 1.507.1

1.174.2 973.4

102.7 12.5

800.1 5.691.3 1.447.3 14.5 13.41.362.4

33.872.8

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

35.230.11) Not 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 "classical market organisation for cereals as well as the area payment scheme for producers in the arable crop sector (cereals, oilseeds, protein crops, linseed, fibre flax and fibre hemp and set-aside).

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 and 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.

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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, rye and durum wheat; there is no longer an obligation to buy in feed wheat.

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 0.93/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:

- 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 6 of the basic regulation (No 1766/92) 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.

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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. 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

The reform of arable crops entered into force on 1 July 1993. It is currently governed by Regulation (EEC) No 1251/99, which covers all cereals, oilseeds, protein crops, non-fibre flax seeds (or linseed) fibre flax and fibre hemp and set-aside.

As far as cereals are concerned, the institutional prices have been gradually reduced as from the 1993/94 marketing year to bring them closer to world prices. The resulting loss of income is offset by an area payment, paid per hectare and calculated on a regional basis to producers sowing cereals and submitting applications, subject to certain conditions, in particular that of setting aside land.

For oilseeds, linseed, flax and hemp area payments have been aligned from 2002 onwards to cereal payments. For protein plants a special payment is 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).

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;

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- 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/t. taken into account partly the intervention price reduction.

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.

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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.

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.

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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 shall be reduced by 15 per cent from 351.00 EUR/t. for the 1996/97 marketing year to 298.35 EUR/t. for the 2000/2001 marketing year. Community rice producers may claim compensatory payments fixed per hectare of land under rice sown which shall be differentiated according to the yield (tons/ha).

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 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.

The real intervention price is increased each month during the open period to take some account of warehousing and interest costs for storage of cereals in the Community.

The intervention buying-in prices fixed at the beginning of marketing years have been as follows:

(EUR/t.)Product

Paddy rice

1993/94

291.02

1994/95

291.02

1995/96(1)351.41

1996/97

351.00

1997/98

333.45

1998/99

315.90

From 1999/00 Onwards298.35

(1) As from February 1995, the prices were converted on the basis of the monetary coefficient of 1,207509.

Spanish prices have been aligned with Community prices as from marketing year 1990/91. Portuguese prices have been aligned with Community prices from April 1993.

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

- Spain: 104.973 ha.- France - metropolitan territory: 24,500 ha. - French Guyana 5,500 ha.- Greece: - traditional zones 22,330 ha. - other 2,561 ha.- Italy: 239,259 ha.- Portugal: 34,000 ha.

In case national areas in a given year exceed one of the base areas indicated, progressive penalties will be applied in the form of a reduction of the compensatory payments.

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(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 were as follows:

Intervention price valid for

2002/2003 2001/2002 2000/2001 1999/2000

1. Butter 328.20 328.20 328.20 328.202. Skimmed milk powder 205.52 205.52 205.52 205.52

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. 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.

(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;

- 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 and Gruyère and of certain ewe milk cheeses.

(c) Aid for skimmed milk for animal feed

Aid is granted for skimmed milk and skimmed milk powder manufactured in the Community and intended for animal feed.

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The milk or powder must be either directly denatured or incorporated in some compound feedingstuff 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, provided both the milk and the casein produced from it comply with certain conditions.

(e) Other measures

- Measures may be taken, in years in which they are found necessary, to support the market for long-keeping cheeses and goat’s milk cheeses, if such cheeses comply with certain conditions. These measures are taken, in particular, in the form of private storage aid.

- 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

An additional levy was introduced in 1984 on quantities of milk exceeding those delivered in 1981 plus 1 per cent. The Council has fixed the corresponding quantities for each Member State. The current rules are fixed by Regulation (EEC) No. 3950/92 (OJ L405 of 31.12.92) lastly amended by Regulation (EC) N° 572/2003 (OJ L82 of 29.03.2003, p.20).

In the five last years, the total milk quota quantities for EC 15 were:

(million tonnes)1998/99 1999/00 2000/01 2001/02 2002/03

Deliveries 115.7 116.0 117.0 117.6 117.6Direct sales 1.8 1.5 1.4 1.2 1.3

In case of non-respect of the milk quota, the levy is equal to 115 per cent of the target price for both deliveries and direct sales, i.e. EUR 35.627/100 kg

(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.

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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 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---

383.77175.16142.20151.48229.5012.07

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.

G/SCM/N/95/EEC

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.

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, a basic price is fixed each year valid for a specific delivery stage and a specified standard quality. This price is 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 a minimum price is fixed for A beet (2) equal to 98 per cent of the basic price and a minimum price for B beet (3) equal to 68 per cent or 60.5 per cent of the basic price.

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) 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.

2. Production levies

As from 1 July 1981, the principle in force is that producers should bear the full amount of any financial losses resulting from disposal of surplus production of Community sugar in relation to consumption in the Community. 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).

G/SCM/N/95/EEC

If this first levy is not enough to cover the financial losses in question, a second levy, that initially may not exceed 30 per cent and subsequently 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). This possibility has been used since marketing year 1982/83. Any remaining losses not covered by these levies have been absorbed since marketing year 1986/87 by additional levies. These new levies were introduced during the revisions of the quota system from 1986 to 1988. Firstly to absorb the accumulated negative balance not covered during the five marketing years from 1981/82 to 1985/86, and secondly to avoid any further accumulation during the five-year period (from 1986/87 to 1990/91) for which it has been decided to extend the quota system. Thus, for the marketing years 1986/87 and 1987/88 a special absorption levy was introduced, as well as an additional levy for the remaining three marketing years so as to absorb annually the losses not covered by the normal production levies. These levies are calculated by multiplying the total amount owed by the enterprise by a factor representing the relation between the total loss recorded and the receipts from the normal levies, i.e. the basic levy for A and B sugar and the B levy for B sugar. The integral self-financing system on an annual basis has been extended whenever the quota system has been extended.

3. Reimbursement of storage costs

Provisions has been made for reimbursement of storage costs in respect of sugar produced under quotas A and B. The reimbursement is calculated on the basis of the intervention price for white sugar and a standard fixed-rate interest rate for the whole Community. It is aimed at equalising storage costs in the Community. It is a measure designed to ensure regular disposal of sugar in the market throughout the marketing year, to prevent the sale of excessive tonnage during the manufacturing period and in particular to avoid the offering of sugar to intervention agencies solely in order to avoid storage costs. This reimbursement is financed out of a levy on manufacturers, based on the principle of equality, at the Community level, between the total sum reimbursed and the total sum levied.

4. Intervention measures

(a) Production refunds are granted on sugar used in the chemical industry, of which 60,000 tonnes are charged to the budget. That is the quantity eligible for refunds before a new system came into effect on 1 July 1986 under which all quantities over and above that ceiling 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 variable refining aid or a corresponding tariff adjustment is granted on all raw preferential and special preferential sugar refined in the Community in order to maintain a competitive refining margin.

(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.

G/SCM/N/95/EEC

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

- 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: 2.0 LSU/ha.In 2002: 1.9 LSU/ha.From 2003: 1.8 LSU/ha.

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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 2002Steers: 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 144.90 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.

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 prices stands at 150.94 EUR/100 kg (Reg. 2759/75).

2. Intervention measures may be taken when, on the representative markets in the Community, the average price for pig carcasses is less than 103 per cent of the basic price.

Intervention measures are taken in form of private storage aid which is granted to operators storing pigmeat on their own expense for 3 to 6 months..

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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.

The products covered are the following:

- live animals;- meat: fresh, chilled or frozen;- processed products: meat and offal of sheep and goats, salted, dried or smoked,

preserved, other;- offal

The marketing year runs from the first Monday in January to the end of the previous day of the following year.

Direct Payments

Per ewe, the amount of the premium shall be EUR 21. However for producers marketing sheep’s milk or products based on sheep’s milk the premium per ewe shall be EUR 16.8. Per she-goat the amount of the premium shall be EUR 16.8.

A supplementary premium of EUR 7 shall be paid to producers in areas where sheep and goat production constitutes a traditional activity or contributes significantly to the rural economy or practising transhumance.

Trade with third countries

Imports into the Community, or exports therefrom, of any of the products listed in Article 1 Regl. 2529/2001 may subject to presentation of an import or export licence.

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 Uruguay Round.

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.

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(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) a special loan to cover part of the investments 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.

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;

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- 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.

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 2001 the aid amounted to EUR 284/tonne for a total of 767.268 tons. There is also the possibility of a supplementary aid for regions that have experienced especially severe market circumstances. This supplementary aid is decided on a yearly basis. In 2001 a supplementary aid was paid to producers in Madeira, in Portugal, and amounted to EUR 80/tonne for a quality of 20.682 tons

(xi) "PROCESSED FRUIT AND VEGETABLES" SECTOR

Production aid

(a) 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 47.0/tonne for peaches and EUR 161.0/tonne for pears

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

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Tomatoes Peaches PearsCommunity threshold 8,251,455 539,006 104,617

National thresholds

Greece 1,211,241 300,000 5,155Spain 1,238,606 180,794 35,199France 401,608 15,685 17,703Italy 4,350,000 42,309 45,708Netherlands - - 243Austria - - 9Portugal 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. Due to such an overrun for the 2002/03 marketing year, the aid fixed for Greece, Italy and France for the 2003 marketing year shall be decreased by 51.1 per cent, 24.4 per cent and 3.4 per cent from the level above mentioned.

(b) 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:

(EUR/tonne) Dried figs PrunesMinimum price 878.86 1,935.23Production aid 286.30 671.73

(c) 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.

(d) 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 1.3.20030.1261

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(xii) "WINE" SECTOR

(! decimal point = comma)

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

The main changes, compared to the former market organisation2, 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° 1623/20003, as last modified by Commission Regulation (EC) N° 625/2003.4

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° 1227/2000.5

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 0.2777 €/°Vol/Hl and 0.6279 €/°Vol/Hl depending on the type of product they distil.

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

1 JO L 179 du 14.7.1999, p.12 Reg (CEE) 822/87, JO L 84 du 27.3.1987, p.13 JO L 194 du 31.7.2000, p.454 JO L 90 du 8.4.2003, p.45 JO L 143 du 16.6.2000, p.1

G/SCM/N/95/EEC

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 0.6401 €/°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

(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):

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 for the wine year 2000/2001 at 0.0336 € per hl of product and per day.

This measure shall be opened each year. For the marketing year 2000-2001 it has been opened on 1 September and its volume was limited to 40 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 2000/2001 the measure was applied several times. Prices to be paid to producers varied between 1.723 €/°Vol/Hl and 2.105 €/°Vol/Hl depending on the kind of product and the inclusion of transport fees. The advanced

G/SCM/N/95/EEC

payments to the distillers concerning the obligatory delivery to intervention boards were fixed between 2.090€/°Vol/Hl and 2.473 €/°Vol/Hl.

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. For the wine year 2000/2001, 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 1.953 €/°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.

(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

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.

G/SCM/N/95/EEC

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.

For the wine year 2000/2001 the following amounts were initially attributed by Decision (EC) N°503/2000.6

Member State Superficies (Ha) Allocations (Euro)

Germany 1.624 12.610.000

Greece 1.162 8.280.000

Spain 18.371 122.110.000

France 14.359 104.140.000

Italy 13.691 100.310.000

Luxembourg 19 150.000

Austria 780 5.470.000

Portugal 3.980 26.660.000

Total 53.986 Ha 379.730.000 €

(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.

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:

6 JO L 201 du 9.8.2000, p.4

G/SCM/N/95/EEC

(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 hybridsVirgin D and its hybrids, Virginia and its hybridsParaguay and its hybrids, Dragon vert and its hybridsPhillippin, Petit Grammont (Flobecq), Semois, Appelterre

EUR/kg.

0.55090.88220.50390.41120.41120.4112

(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:

I II III IV V Others TotalFlue cured Light air Dark air Fire cured Sun cured VI Basmas VII Katerini VIII Kaba

cured cured KoulakItaly 48,263 47,689 15,682,900 6,255 8,833 498 127,220Greece 32,242 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 5,934France 10,490 9,262 5,170 24,922Germany 4,728 2,588 3,711 11,047Belgium 149 1,404 1,553Austria 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.

G/SCM/N/95/EEC

(xiv) "TEXTILE FIBRES" SECTOR

1. Cotton

The aid system for the production of unginned cotton production has been modified with effect from the 1995/96 marketing year, inter alia with the aim of improving the functioning of the stabilizer system. The Community aid system fixes a guide price (106.30 EUR/100 kg. as from the 1995/95 marketing year) and an aid equal to the difference between this price and the world market price for ginning enterprises that they pay producers a minimum price. If the production of unginned cotton exceeds the guaranteed maximum quantity (GMQ) (1,031,000 tonnes), the guide price and the amount of the aid are proportionally reduced.

In each Member State the reduction of the aid is proportional to the amount by which it exceeds its GMQ, fixed at 782,000 tonnes for Greece and 249,000 tonnes for Spain. This reduction (abatement) is unlimited, but if world prices allow the cost of the aid system to be limited, it is reduced.

On 1 September 2000, when the 2000/2001 marketing year began, the Commission fixed the world market price at 37.255 EUR/100 kg., corresponding to an advance of aid of 43.5 EUR/100kg for Spain and 24.5 EUR/100 kg for Greece (provisional amount). These amounts were calculated on the basis of estimated production of around 320,000 tonnes of unginned cotton for Spain and 1,250,000 tonnes for Greece.

2. Fibre, flax and hemp

Community regulations include the following measures:

(1) Production aid

Aid for fibre flax and hemp produced in the Community has been established in order to give the producers concerned a fair income. The amount of this aid is fixed each year for every hectare sown and harvested. As from the 1997/98 and the 1998/99 marketing year, the contracts with processors are respectively obligatory for flax and hemp.

For hemp, the aid is given to the producer. For fibre flax, one quarter of the aid is given to the producer of the straw flax and three quarters to the person who buys the straw to process into fibre. If the producer processes the straw or has it processed on his behalf, he receives the total amount of the aid. In addition, the Commission introduced in November 1998 criteria on normal cultivate work by fixing a minimum yield.

Aid (EUR/ha.) Area (ha.)Fibre flax: 2000/2001 marketing year 795.46 106,000Hemp: 2000/2001 marketing year 646.31 20,000

(2) Aid for private storage of flax fibre bundle and hemp

The owners of bundle may conclude storage contracts when there is a temporary market imbalance in order to prevent or reduce any significant drop in prices. In 1991, for example, this condition was met and the possibility was utilised.

G/SCM/N/95/EEC

(3) Aid to promote the use of flax fibre bundle

Community measures have been taken since the 1980/81 marketing year to promote the use of flax in the Community. It was decided to include in the basic regulations the possibility of taking measures to promote the use of flax fibre bundle as from the 1987/88 marketing year. These measures are entirely financed by a deduction from production aid.

(4) In November 1999, the Commission proposed a radical reform of the aid scheme regime. The reform is structured around two proposals. The first would include flax and hemp in the general aid scheme for arable crops, aligning the aid per hectare with aid rates for linseed. The second would introduce supplementary assistance in the form of processing aid for straw and distinguishing between high quality long fibre flax and low quality short fibre flax and hemp. The rarely used measures for private storage and promotion should be abolished. The reform is to enter into force on the 1 July 2000.

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.

In 1997/98, aid amounting to 133.26 EUR/box was granted.

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: 4,412,000 tonnes

G/SCM/N/95/EEC

- Sun-dried fodder: 443,500 tonnes

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

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

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 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 and seeds of spelt wheat, maize and sorghum hybrid, linseeds, leguminosae, and graminae.

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 varieties. It is fixed by quintal of produced seeds, taking into account the market situation and the prices on the external market.

G/SCM/N/95/EEC

Aid is fixed for two 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 2002/2003 and2003/2004 is as follows:

(EUR/100 kg.)Products

1. Cereals (rice, spelt)

2. Oilseeds

3. Graminae

4. Leguminosae

2002/2003 and 2003/2004

between 14.37 and 17.27



between 0 and 75.11

In 2002 a stabiliser mechanism including a maximum 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.

(xvii) "HOPS" SECTOR

In order to ensure a fair income for hop producers, the Community regulations provide for a system of aid per hectare. The Council fixed the aid at EUR 480.00/ha for the harvest 1996 to 2003 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 variety conversion; for this latter, up to 20 per cent of the aid can be used.

IV. INDUSTRY SECTORS

A. COMMUNITY FRAMEWORK PROGRAMMES IN THE FIELD OF RESEARCH

There are two such framework programmes:

- The fifth framework programme of the European Community for research, technological development and demonstration activities (1998-2002)

- The fifth framework programme of the European Atomic Energy Community (EURATOM) for research and training activities ( 1998-2002).

1. Policy objective and purpose of the subsidy

Financial participation in Community research and technological development (RTD) activities during the period 1998-2002 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.

G/SCM/N/95/EEC

The fifth framework programme 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 listed in the Treaty and in the decision adopting the framework programme (Decision N° 182/1999/EC of 22 December 1998).

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 1999/64/Euratom of 22 December 1998 of the Council.

The activities under the two framework programmes are either 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

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 an invitation for proposals and an evaluation procedure with independent experts and selection procedure

Research projects are carried out by participants established within the Community. Non Community participants whose country has signed an association agreement with the Community may participate with Community funding to a fifth framework programme research project . Non Community participants whose country has not signed an association agreement with the Community may participate without Community funding to a fifth framework programme research project

Research projects must provide for the participation of at least two partners, independent of each other, and established in different Member States. Partnerships may involve universities, research organisations and firms.

The European Commission is responsible for the implementation of the programmes. Contracts concluded by the Commission (see attached specimen contract) govern the rights and obligations of each partner, in particular arrangements for the dissemination protection and exploitation of research results (Article 167 of the Treaty).

3. Amount and duration of subsidy

1998-2002 framework programme Total amounts(in millions of Euros)

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

13,700

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

1,260

Total both programmes 14,960

G/SCM/N/95/EEC

4. Incidence on trade

The fifth 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, the results are shared among partners and 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 firms have to make further investment to develop competitive applications.

B. AID TO THE COAL INDUSTRY

Aid to the coal industry within the European Union during the period 2001-2002 has been governed by two separate legal frameworks. This is due to the fact that the European Coal and Steel Community Treaty expired after 50 years of existence on 23rd July 2002.

Commission Decision No 3632/93/ECSC covered the period up to 23 July 2002 inclusive. From 24 July 2002, Council Regulation 1407/2002 has governed state aid to the Community coal sector. For the sake of completeness, a brief summary is given below of both legal frameworks.

Commission Decision No 3632/93/ECSC of 28 December 1993 on the Community rules for State aid to the coal industry

Commission Decision No 3632/93/ECSC7 on the Community rules for State aid to the coal industry entered into force on 1 January 1994 and expired on 23 July 2002..

Article 1 of this Decision defined what was considered to be an aid:

(i) All aid to the coal industry, whether specific or general, granted by Member States or through State resources in any form whatsoever may be considered Community aid and hence compatible with the proper functioning of the common market only if it complies with Articles 2 to 9.

(ii) The term "aid" covers any direct or indirect measure or support by public authorities linked to production, marketing and external trade which, even if it is not a burden on public budgets, gives an economic advantage to coal undertakings by reducing the costs which they would normally have to bear.

(iii) The term "aid" also covers the allocation, for the direct or indirect benefit of the coal industry, of the charges rendered compulsory as a result of State intervention, without any distinction being drawn between aid granted by the State and aid granted by public or private bodies appointed by the State to administer such aid.

(iv) The term "aid" also covers aid elements contained in financing measures taken by Member States in respect of coal undertakings which are not regarded as risk capital provided to a company under standard market-economy practice.

7 OJ L 329 of 30 December 1993, p.12.

G/SCM/N/95/EEC

In addition to the specific criteria applicable to each category of aid, the Decision allowed aid to be considered compatible with the proper functioning of the common market if it helped to achieve at least one of the following objectives:

- to make, in the light of coal prices on international markets, further progress towards economic viability with the aim of achieving a degression of aids;

- to solve the social and regional problems created by the total or partial reductions in the activity of production units;

- to help the coal industry adjust to environmental protection standards.

The Decision also contained provisions designed to make existing aid schemes more transparent. Article 9(7) allowed for a transitional period not exceeding three years (which therefore ended on 31 December 1996) after which aid would only be authorized if it was entered in the national, regional or local public budgets of Member States or channelled through strictly equivalent mechanisms (Article 2(2)). In addition, from the beginning of 1994, all aid received by undertakings had to be shown together with their profit-and-loss accounts as a separate item of revenue, distinct from turnover (Article 2(3)).

Member States intending to grant aid to coal undertakings during the period 1994 to 2002 were required to submit to the Commission in advance a modernization, rationalization and restructuring plan to improve the economic viability of the undertakings concerned by reducing production costs (Article 3(2)). For undertakings unable to achieve this, aid would only be considered if they are subject to a closure plan with a deadline occurring before the expiry of decision No. 3632/93/ECSC or, in exceptional social and regional circumstances, if the closure occured after the expiry of the Decision.

Council Regulation 1407/2002 of 23 July 2002 on State aid to the coal industry8

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.

It should be note that, while Council Regulation 1407/2002 has been in application since 24 July 2002, Article 14 of that Regulation stipulates that aid covering costs for the year 2002 may, on the basis of a reasoned request by a Member State, continue to be subject to the rules and principles laid down in Decision No 3632/93/ECSC. In accordance with this provision, the notifications from Germany and the UK concerning the second part of 2002 were assessed on the basis of Decision 3632/93/ECSC.

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

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

G/SCM/N/95/EEC

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.

- 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.

- 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 2001 – 2002 (in millions €)

ECU/EUR million 2001 2002

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

1789.5965.8

1400.9

1711.3693.4

1152.4Spain- operating aid- aid for the reduction of activity- other

274.3385.2

1283.61

279.2329.9469.4

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

0.0350.6642.3

0.0303.4692.4

United Kingdom- operating aid 105.7 23.5

G/SCM/N/95/EEC

ECU/EUR million 2001 2002

- aid for the reduction of activity- other

0.00.0

0.01.3

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

2169.51701.72512.3

2014.01326.72315.5

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

49.57 46.42

Coal production and imports in the Community (EUR-15): 2001-2002(In million tonnes)

2000 2001 2002*Community production 86.1 78.1 72.0Imports into the Community 170.9 192.3 171.7

* Estimates

V. 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 2001 – 31 December 2002


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.

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


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


G/SCM/N/95/EEC

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 smaller businesses.

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

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.

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

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

http://www.eif.org/


G/SCM/N/95/EEC

B. JEV PROGRAMME


The Joint European Venture (JEV) Programme


1 January 2001 – 31 December 2002

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).

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

The Community contribution is intended to cover a part of the expenses incurred in the conception and setting-up of transnational joint ventures. The maximum contribution per project is 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 are made to intermediaries, which may be banks or other appropriate financial institutions. The intermediaries (selected by a call for expressions of interest) are entrusted with the evaluation of the applications and, in the event of a favourable opinion, make recommendations to the Commission.


The amount committed for the programme is EUR 57 million in each year.


1997-2005

G/SCM/N/95/EEC

9. Trade effects

The JEV aid is not contingent on the subsequent joint venture’s export intentions or capabilities. The information on the joint venture partners’ past or future exports is 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 31.12.2002 only 132 Joint Venture projects have received support from the JEV programme, due to which the impact of this programme on trade is negligible.

D. 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 to fishing fleets, aquaculture, processing and marketing circuits, port facilities and socio-economic measures.

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.

G/SCM/N/95/EEC

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 2001 (all regions) : 541 MEUR, 2002 (all regions) : 749 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.

E. 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

Stabilize the market, ensure a regular supply of high-quality products, guarantee reasonable consumer prices and 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.

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

2001 : 16.0 MEUR budgeted, 13.0 MEUR effectively disbursed2002 : 17.0 MEUR budgeted, 5.0 MEUR effectively disbursed

G/SCM/N/95/EEC


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.

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