MEMO. Why a European promotion policy for agricultural products?

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1 EUROPEAN COMMISSION MEMO Brussels, 21 November 2013 Questions & Answers: Reform of the policy on information and promotion measures for agricultural products on the internal market and in third countries: the Commission adopts a legislative proposal for a new regulation Why a European promotion policy for agricultural products? European Union farm products are unique in their quality and diversity. Still, European agriculture is faced today with a much more competitive environment, largely resulting from the globalisation of markets. Accounting as it does for 18 % of world exports and 20 % of world imports, the Union can claim to be the world's number one importer and exporter of agricultural products, jockeying for position with the United States. On the internal market, only a minority of European consumers are aware of the efforts undertaken by European farmers to supply high-quality, healthy and safe products. Only 14% of Europeans recognise the logos of products that benefit from protected designation of origin (PDO) or a protected geographical indication (PGI). This situation is without doubt a challenge for European farmers, but it also offers opportunities which should be given effective support, in particular using CAP instruments. The promotion policy for agricultural products aims at increasing the level of awareness among consumers about the merits of European agricultural products both in the internal market and in third countries, and to develop and open up new markets. MEMO/13/1032

2 What are the principles of this policy today? The current principles of the promotion policy are laid down in Regulation (EC) No 3/2008. The European Commission allocates annually financial support for campaigns to promote farm products and inform consumers about how they were produced. The promotion campaigns highlight the quality, the nutritional value and the safety of EU farm products. They also draw attention to other intrinsic features and advantages of EU products, such as specific production methods, labelling, animal welfare and respect for the environment. Promotional activities can include advertising campaigns in the press, on television, on radio or on the Internet, point-of-sale promotions, public relations campaigns, participation in exhibitions and fairs etc. The campaigns can run inside the EU, or beyond its borders with the objective of opening up new markets for EU farmers. Between 2000 and 2012, 552 promotional programmes received EU co-financing. In addition, the Commission conducts its own information and promotion actions such as attending international fairs with an EU stand or organising seminars during high level trade missions. Why a reform of the current system of promotion of agricultural products? The current horizontal promotion scheme has not been changed substantially since its creation in the 2000s. Meanwhile, the CAP has been reformed significantly towards evolved market needs within a more competitive global economy. The contributions received through public consultations and evaluation studies of the current policy have pointed out some weaknesses in the implementation of the promotion scheme, such as the absence of a real European strategy setting priorities, a dispersion of the aids, a too narrow scope of eligible products and beneficiaries, and cumbersome administrative procedures. With the new system, the Commission aims at a more ambitious promotion policy, more focused on the needs of European and third-country markets. The total budget of aid will be increased and the administrative procedure simplified. 2

3 What are the objectives of the reform? The main elements of the reform are: The establishment of a comprehensive European strategy, as suggested by the European Court of Auditors 1 that will allow a better targeting of promotion actions. This strategy should lead to: An increase of programmes targeting third countries and of "multi" programmes (presented jointly by several proposing organisations from several Member States ) through higher co-financing rate: 60% of EU cofinancing instead of 50 % ; Address, on the internal market, the low level of awareness in general among consumers about the merits of European agricultural products and more particularly of products recognised under one of the European quality schemes; Provide a basis for evaluating the results of the policy A significant increase in the financial support for information and promotion actions in order to strengthen the competitiveness of European agriculture. The amount of support should rise gradually from 61 million euros in the 2013 budget to 200 million in 2020; An extension of the eligible beneficiaries by adding producer's organisations; An expansion of the eligible products; The possibility to mention the origin of products and/or commercial brands, under certain conditions, in the context of a generic promotion highlighting the intrinsic characteristics of European agricultural products ; A simplification of administrative procedures to cut red tape: a new one-step selection procedure by the Commission, instead of the two-step procedure in the past (Member State and European Commission); An easier management of programmes which were developed jointly by entities in several Member States, through a single desk at the Commission. Who are the new beneficiaries? Information and promotion programmes were previously submitted by trade or inter-trade organisations. To increase the number and diversity of the proposed actions, the possible beneficiaries now also include producer organisations, whose structure is also encouraged in the framework of the reform of the CAP post Special report n 10/2009 3

4 What are the new eligible products? Changes regarding the products take place at two levels: 1) A new approach in defining eligible agricultural products: there is no restrictive list of eligible products anymore (as it is currently the case in the annexes of the implementing Regulation (EC) No 501/2008), but a broader range of eligible products, to be completed each year by setting priorities. This will allow a more dynamic and reactive approach if needed for a specific sector. This broader eligibility covers all agricultural products except tobacco and fishery products. 2) Extension to certain food products: the EU exports mainly processed agricultural products (outside the Annex I of the Treaty on the Functioning of the European Union (TFEU)). The previous system was limited to agricultural products covered by Annex I of the TFEU, which excluded de facto the processed products (chocolate, confectionery, beer, etc). It was therefore necessary to open the promotion scheme also to certain food products based on agricultural products. In accordance with other systems within the CAP, the promotion scheme is now open to all agricultural products not listed in Annex I and eligible to the European quality schemes. However, national quality schemes in the meat sector will no longer be eligible under the new promotion system that will focus on information and promotion of European quality systems. However, these national systems will continue to receive support for information and promotion in the frame of the rural development. What are the changes in procedures for the submission and management of programmes? The Union is aiming to simplify the regulatory framework of the CAP. It is therefore appropriate to apply this approach also to the Regulation on information and promotion measures for agricultural products. Under the old system, twice a year, the national authorities of the Member States preselected the campaigns which could benefit from EU support. These were then transmitted to the European Commission, who in turn evaluated them and then selected the projects to be accepted. This system proved not to be satisfactory. The selection was long since operated in two steps, and this double selection has not provided guarantees for the quality of programmes, while generating redundancy. This proposal aims to simplify the process with a one-step selection of programmes by the Commission, only once a year. The management of "simple" programmes (by an entity from one Member State) will continue to be under shared management with the Member States, after a selection by the Commission. The "multi" programmes (jointly presented by entities from several Member States) will be managed directly by the Commission. 4

5 What will be the strategic priorities of the Commission for the selection of promotion programmes? Information and promotion actions co-financed by the European Union must convey a specific European dimension. To this end, and in order to avoid dispersion of resources and increase the visibility of Europe through the information and promotion measures for agricultural products, it is necessary to establish a European strategy defining the priorities of the regime, in terms of products and / or themes, markets and / or targeted populations. Over the period , barely 30 % of the budget earmarked for information provision and promotion measures was spent on measures targeting third-country markets. The proposal of the new regulation aims at encouraging a larger number of information and promotion measures dedicated to third countries. The Commission will adopt a work program setting out the EU priorities in terms of markets, products or messages to highlight, taking into account the FTA negotiations trade, the most promising markets, thus avoiding the scattering and dispersion of resources. What is the "technical support" offered by the Commission? The Commission plans to develop new technical support services to stakeholders. This support aims at promoting the exchange of information on the promotion, for example by providing a platform of discussion for operators looking for partners to set up a multi program, best practices for effective campaigns, and guiding them in their export activities, for example by compiling business data on foreign markets. Can wine be promoted under the present proposal? Information and promotion of wine is one of the leading measures of the support for wine within the Single Common Market Organisation of the CAP. To ensure complementary, it was necessary to limit the eligibility of wine only to proposal where it is associated with another agricultural or food product. The wine may therefore be the subject of information and promotion actions in the EU and in third countries, provided that other products are also covered by the program: wine and cheese for example. Also, on the internal market, wine programmes will be limited to informing consumers of the European quality schemes relating to geographical indications, in line with the EU strategy to support Member States in reducing alcohol related harm (COM(2006)625). Why delegate to an executive agency the selection of programmes and management of multi programmes? Multi programmes will be managed directly by the Commission, which will significantly reduce the administrative burden for applicants (for example, they will no longer have to submit their project in each relevant Member State and in each national language). The budget being significantly increased, the Commission will need more staff to manage the promotion policy. In an effort to streamline, the management is foreseen to be delegated to executive agency. 5

6 This will increase the expertise of the Commission in the field of promotion and the visibility of promotion actions, while addressing the needs of the management of multi programmes through a single desk with a high level of technical and financial expertise. What are the financial provisions of the new system? Under the old system, the funding granted by the European Union could cover half the cost of a campaign. The proposing organisation had to contribute to at least 20 % of costs. National authorities could supplement the financing. The contribution of the European Union could rise to 60 % for measures to promote fruit and vegetables intended specifically for European schoolchildren, as well as those relating to information on responsible beverage consumption and on the harms of irresponsible alcohol consumption. In the new system, the programmes will be financed by the proposing organisation and the European Union. The financial contribution of the Union to the programmes can cover 50% of the eligible expenditure for the benefit of the aid. The percentage is increased to 60% for a program if it meets at least one of the following conditions: a) The program is a "multi" program; b) The program is targeting one or more third countries. The percentage is also increased to 60 % for actions of information and promotion of fruits and vegetables intended specifically for children in schools of the EU. Why encourage and favour multi programmes? Cooperation between economic operators from different Member States contributes substantially to the increase of a European added value. It promotes the development of information and promotion campaigns targeted on the European dimension common to all entities, and offers greater visibility of the diversity of European agricultural products. Despite the priority given to programmes developed jointly by proposing organisations from different Member States, they only represented 16% of the total amount of aids over the period Based on this observation, it was therefore appropriate to establish new provisions, particularly with regard to budgetary management to overcome the current obstacles of implementation. For these programmes, the EU co-financing rate will be 60 % instead of 50%, and management will be simplified through a single desk to the Commission. Why is there no more co-financing foreseen by the Member States? In the new system, the possibility of co-financing by Member States disappears as a result of the simplification of the selection, directly made by the Commission. 6

7 Can Member States still continue to promote their agricultural products? Member States may of course continue to finance their own programmes to promote their agricultural products, in compliance with the State aid rules. What is the budget of support dedicated to the promotion policy? In recent years, the European Commission has annually granted approximately 60 million of financial support for information and promotion of agricultural products. This amount will be significantly increased and should gradually reach 200 million per year in In the current economic context, why rise support for promotion of agricultural products? The current promotion budget, of approximately 60 million, must be adapted to answer the needs of 500 million of consumers in Europe and support our exports which amounted to 114 billion in Our major commercial partners (USA, Canada, Brazil ) very widely use promotional tools. It is therefore appropriate to strengthen the competitiveness of our farmers with modern and proactive marketing tools, in the context of a reformed and to the market needs adapted CAP. The new budget for the promotion policy is estimated on the basis of the opportunities to be seized in third countries, as a result of increasing demand, such as in Asia where, by 2050, for ASEAN member countries alone, agricultural imports are expected to increase by over $ 17 billion. In addition, our access to different markets are expected to improve as a result of the expected conclusion of many trade negotiations. The free-trade agreements currently being negotiated represent markets with a present value of around 35 billion per year for the European agri-food sector. The acceleration in demand and liberalisation of substantially all trade through these negotiations will probably make it possible for this figure to be very significantly increased. For example, by 2027 an ambitious free-trade agreement with the United States could increase the EU's agricultural exports by around 15 % (over 1.7 billion per year) and its exports of processed agricultural products by 45 % (over 13.4 billion per year). An ambitious free-trade agreement with Japan could increase agri-food exports by 137 % in the long term (over 5.9 billion per year). This is therefore a strategic and pivotal opportunity for the European agri-food sector that should, given the importance of European SMEs in this sector, be seized through an ambitious and innovative policy. 7

8 Will the increase in support for promotion lead to a cut in direct aids to farmers? This proposal is made in accordance with the budget sub-ceiling for expenditure on the first pillar of the CAP. The proposal will not lead to a reduction in envelopes for direct aids to farmers. How does the promotion policy relate to the rules of the internal market and competition? Campaigns co-financed by the Union shall not be oriented to commercial brands or to specific origin. However, the indication of brands or origin might have a leverage effect in the context of promotion measures, especially in third countries. It is therefore appropriate to give greater visibility to brands and to origin while maintaining a balance with the prominence of generic messages targeting the intrinsic characteristics of agricultural and food products from the EU. In compliance with the rules on competition and internal market, the Commission will set strict rules concerning the mention of commercial brands-for example, several brands in the form of banner at the bottom of a poster, and indication of origin - for example, to a secondary level relative to the main generic message. Regarding the control of State aids, for the promotion of agricultural products listed in Annex I of the TFEU, rules on State aids do not apply to payments made by Member States, nor to financial contributions from Member States' parafiscal charges or mandatory contributions. 8