1 The Economic, Social and Environmental Impact of the Tobacco Common Market Organisation Reform * Antonio Boggia Andrea Marchini Rossella Pampanini Dipartimento di Scienze Economiche ed Estimative University of Perugia 1. Tobacco in Europe and in Umbria The reform of tobacco Common Market Organisation (CMO), approved by the Agricultural Council of Ministers of the European Union on the 22nd April 2004, will have a strong impact on this productive sector which, although it interests a mere 0,4% of used agricultural land (122.537 hectares), and only 1,3% of farms (79.510 farms), is an important employment source, with 139.000 full time employees (126.000 in the agricultural phase and 13.000 in the industrial phase). The European Union of 15 members is the 5th world producer of unprocessed tobacco (6%), after China (38%), Brazil (9%), India (8%) and the United States (7%). This production takes place in eight EU countries, but in reality principally concerns only three countries: Italy (150.000 t), Greece (123.000 t), Spain (41.000 t). The EU is also the largest importer of tobacco in the world. As can be seen from table 1, EU production of tobacco reached 350.020 t. in 2002. However, the rate of self-supply barely reaches 49%. Community support for the productive area covers 2,4% of the total FEOGA expense, mainly made up of support for production given to farmers for a total of 1 billion euros. This is a very high level of support, both in absolute terms and in comparison with other crops, representing 75% of total revenues. It should however be considered that the European industry has until now taken full advantage of the strong EU support for producers, paying lower purchase prices than those of the world market. In other words the prices of European tobacco, without subsidies, are substantially aligned with world prices, and the Community subsidies appear to have benefited industrialists rather than the producers. At a national level tobacco represents 0,8% of Italian production at base prices of 2002, and in the same year benefited from a total subsidy equal to 330,5 MEURO, that is to say 5,8% of the total FEOGA expense for Italy. * Section 1 and 3: R. Pampanini; section 2: A. Marchini; section 4: A. Boggia. Joint conclusions (sect. 5).