The European Union (EU) adopted budget for tobacco premiums in 2006 was €920 million and the provisional adopted budget for 2007 is €316.6 million. The main beneficiaries of the EU subsidy have been Greece and Italy.
European Community produced tobacco is classified so that payments (known as “premia”) are made on eight groups. Premia are paid only when a standard contract has been concluded between the producer and a first processor for tobacco grown in recognised production zones. However, there is a quota system with a Community limit of 350,600 tonnes (divided by member state and variety group). Producers may not conclude contracts for tobacco beyond their quota, so any tobacco grown beyond quota will only fetch market prices and no premium.
Following a successful reform of the EU tobacco regime in 2004, direct support will cease in 2010.
The tobacco regime was introduced in 1970 to support member states who have traditionally grown the crop in geographically disadvantaged areas, maintain farmers’ incomes and reduce surpluses by adapting production to market needs.
The UK does not produce tobacco and has always been critical of the support regime because of the cost and health implications. We believe that subsidies are at odds with the Community-sponsored Europe Against Cancer programme.
The successful reform of the EU tobacco regime in 2004 introduced ‘decoupling’, which means that the direct link between production and support is broken. This will apply progressively until 2010 when direct support for tobacco will cease.