Annexe
Ten reasons to phase out tobacco subsidies and to reorient support to reward healthy products in the European Union
1 Ambivalent policy (bad for the EU’s reputation)
The huge disparity between the money spent subsidising tobacco and that spent campaigning against smoking suggests ambivalence in the European Union policy towards health goals.
True, but not really complet. The subsidies to tobacco growing amount for 963 million euros and employ almost 500.000 people in less-favoured regions. The only campaign of the EU against tobacco is paid by a percentage (3%) of tobacco premiums (about 30 million euros a year) and has been underused by DG SANCO the last 5 years (a 30% spending of the global amount). The general EU budget is NOT putting money to fight smoking and, what is worse, member states get 70 BILLION euros per year on tobacco taxes…… which part of this money goes to fight smoking ????????
2 Against health
Tobacco kills more than 500,000 EU citizens and around 1 million Europeans in total each year. There is no justification for the huge financial support for a product which is so harmful. Support of the Common Agricultural Policy should be oriented to reward healthy products in the first place.
True, but again please apply to butter (cardiovascular diseases) or wine, and also to structural policies (traffic accidents).
3 Costly
The annual cost of tobacco subsidies is around EUR 1 billion annually. In 2002 the European Union (EU) still subsidised tobacco production to the tune of EUR 963 million.
True, but think about the 500.000 employs and the 1.500 labour hour per hectare (copared with the 147 labour hours per hectare in cereals).
4 No economic rationale
Subsidies are used for supporting a product with limited commercial value. Subsidies remain by far the greatest main part of farmers’ gross incomes and account for more than 75 % of total receipts farmers obtain from this crop. (Page 7 of the 2003 Communication from the Commission document). The origine of the subsidy in 1970 was to pay the labour costs, that aount for this 75%.
In the Commission staff working paper “Tobacco regime. Extended impact assessment”, the lack of economic rationale was shown in a manner which is even more convincing. On the one side farmers receive subsidies and have to pay taxes. The support which the farmers receive from the community is subsidies minus taxes. On the other side they gain income from tobacco growing, but have to pay production costs such as wages, rent and interest. The support from the community represents 98% of the total net income of tobacco growers. In the Commission document this is acknowledged in the following way :
“Finally, another interesting conclusion can be drawn from the ratio between the balance of current subsidies and taxes and the net value added : for year 2000, this indicator, which measures the dependence of the agricultural revenues on the public support, is equal to 98% for tobacco producers of the three considered countries, by far the highest value compared to other agricultural sectors.” (Page16-17)
5 Fails to achieve its main objective
Tobacco subsidies were originally intended to encourage farmers to grow commercially valued varieties of tobacco and thus reduce imports. The policy failed to adapt production to demand or reduce imports, resulting in the EU remaining the world’s highest importer of raw tobacco, 540,000 metric tons in 2001.
Not really true : tobacco production in Europe is limited by quotas (that is why the imports are so high) ; the quality has been improving, because there are European tobaccos in the main international blends and because the exports of European tobaccos are increasing in volume and in value.
6 A necessary part of the CAP reform
The EU farm ministers agreed on a reform of the Union’s Common Agricultural Policy (CAP) on 26 June 2003. Under the agreement, the EU will introduce a single farm payment system which will no longer be linked to the volume of production. These new "single farm payments" will be linked to the respect of environmental, food safety and animal welfare standards. In the framework of a general policy, it would be difficult not to envisage to phase out tobacco subsidies and to develop alternative source of income and activity to tobacco producers.
Ultraperipheral areas (Canary Islands, Aegena islands, French overseas) and CMOs like seeds do not fall into the SFP system ; those exceptions are justifies by the Commission sying that “to avoid the negative effects of decoupling…..”. If in remote areas decopling is negative, in labour-intensive productions (like tobacco, cotton, fruits…) an exception can be thinkable.
On the other hand, PARTIAL decoupling is the real principle of the reform.
7 Unfeasible with enlargement
If enlargement of the EU were to include the 10 accession countries and the three countries hoping to join (Romania, Bulgaria and Turkey), then expenditure on tobacco subsidies could potentially double, which would be economically and politically impossible.
True, but limits have been established for new member states workers for up to 7 years, and if this is acceptable for human beens, solutions can be found for an agricultural product. On the other hand, it is logical to think that 10 new members should mean more expenditure, as it happens with, say, structural funds.
8 Against free trade
Direct producer support mechanisms are trade distorting and should disappear as part of the global World Trade Organisation negotiations. Trade ministers from Africa and other developing countries have warned the EU in July 2003 that there can be no successful conclusion to the new WTO round unless Europe agrees to greater cuts of its farm subsidies.
Tobacco does not make the difference (and also cotton) in the global trade, and there is still room in the amber box to maintain the current direct support (about 32 billion euros). And, why African ministers opinions are more valuable than European or American ones ????
9 Unfair to developing countries
Tobacco farmers in developing countries don’t receive subsidies. Public support makes up 98% of the income of the European producers and remains unfair to developing countries.
Tobacco farmers in developing countries DO recive public support. Please ask in Argentina or Brazil, and also ask for the trade barriers that protect local production and tha in the EU is so low that we can consider that it does not exist.
And please be coherent : if tobacco is HARMFUL, it is in every single place of the world : or do you prefer an increase in the tobacco production of developing countries because their lifes are less valuables ???? Also, European tobacco has to cope with the stricter rules on pesticides, nicotines, etc but third countries sometimes do not have a legal framework for tobacco production.
10 Consistent with the Framework Convention on Tobacco Control
The FCTC calls for diversification away from tobacco farming, towards alternative crops or alternative livelihoods. Countries moving to ratify the Convention should be exploring ways to divest their tobacco farming interests. Tobacco subsidies completely contradict this basic objective.
Not true : the FCTC explicitly excluded the agricultural subsidies to tobacco from the articles in the final text.
Luk Joossens
Consultant to ECL/UICC November 2003
