APPENDIX 10
Memorandum submitted by the United Kingdom
Agricultural Supply Trade Association (UKASTA) (H10)
UKASTA represents over 300 companies involved
in the agricultural supply industry, which together have a combined
annual turnover of approximately £5 billion. Member companies
are involved primarily in the manufacture and distribution of
compound animal feedingstuffs and straight feed ingredients, supply
to farm of agricultural inputs such as seeds, fertilisers, agrochemicals
and forage additives, and the purchase and marketing of combinable
crops.
POLICY DIRECTION
1. The Commission proposals do represent,
in our view, a significant move in terms of the structure of aid
payments, particularly the intention to move to fully decoupled
payments for a number of crop and livestock sectors. We would
give a broad welcome to such an overall commitment, recognising
that the need to contain spending on agricultural support, as
a proportion of the overall community budget. The proposals can
therefore be viewed as a further step towards the restructuring
of EU agricultural support in light of likely future WTO commitments
and in preparation for enlargement.
2. With this in mind UKASTA can understand
and even support those elements of the proposals which might free
the UK industry from production and trade restrictions on its
commercial potential, provided the funds released by shifting
support from production are not simply lost to the domestic industry.
Greater freedom could allow some sectors of our industry to operate
more successfully in an increasingly global market. However, we
are also aware of the vulnerability of some key sectors to increasing
competition, as evidenced by the extraordinarily depressed farm
incomes of the last two years. The Commission proposals to re-deploy
funds only to regions of greatest hardship and disadvantage could
mean the process of moving to freer markets puts our farm economy
with its relatively high average production costs at risk of being
a very significant loser. This would have adverse implications
for the rural environment, employment and investment in the whole
UK food industry, the balance of payments and, of course, the
potential business for UKASTA members.
3. As the trade body representing many businesses
with interests in the marketing and processing of combinable crops
we welcome any opportunity for the EU to adopt a structure which
allows the marketplace to operate more freely, provided the new
mechanisms permit the maintenance of substantial UK farming and
food industries. To this end we would earnestly hope that the
Commission proposals to complete the process of decoupling aid
from production would lead to less interference with the market
by EU Commission officials. The supply industry has long held
the view that market interference has not been to the benefit
of the industry and has hampered trading opportunities both within
and outside the community. In particular, attempts to regulate
internal market prices have led to distortions in comparison to
world market prices; this both militates against the aim of being
a major player in the global agricultural marketplace and raises
costs to EU processors and in particular the feed and livestock
industries.
4. As with many other bodies, UKASTA remains
concerned at the implications for UK agriculture on the planned
enlargement of the EU. In contrast to previous expansions of the
community, the current round of negotiations are with countries
who will bring a very different background and culture to the
community and whose agricultural production operates on a very
different cost base to that which would generally apply to current
EU members. The proposals, if accepted, will certainly allow the
EU to continue negotiations with these countries with more certain
knowledge of the impact of accession on the community budget.
Unless, however there is a co-ordinated move to bring existing
social, environmental and health and safety legislation into line
with EU requirements, there is a very real prospect of EU enlargement
causing significant difficulties in competitiveness for UK agriculture.
UK IMPACT
5. The proposal put forward by the Commission
for dynamic modulation is one which UKASTA could not support and
would wish to argue strongly against. Taking the basic detail
of the proposal as outlined by the Commission, we would find it
extremely difficult to see how any notable proportion of the 20
per cent modulated money could be returned to the UK. Even based
on the results of the UKL exercise in modulation, when funds are
retained at a national level, there would be significant imbalances
and most producers would be denied access to any of the modulated
money. A redistribution of aid in this way could push most, relatively
efficient, UK producers below the level of income they need for
viability, whilst having only a limited impact on the least efficient.
6. We would see, from a UK perspective,
this situation being exacerbated by the proposal to bring in an
overall ceiling at which aid would be capped. The Commission proposal
states that larger units are more capable of achieving economies
of scale and therefore need less aid, but does not explain how
larger units are then to continue investing in their businesses
and so compete successfully in a more open market. Coupled with
the Commission's proposed criteria for dynamic modulation, it
means that there is a very real risk of the most efficient producers
losing around a quarter of their current direct payments, with
no hope of restoring the lost income through, for example, agri-environment
measures, which in the UK would remain grossly underfunded. This
attack on efficiency runs counter to the aim of achieving greater
openness to and competitiveness on the global market and would
have particularly adverse effects on farm structure and producer
incomes in the UK. One of the by-products of these two linked
measures would be deterioration in the UK rural environment and
animal welfare as all producers struggled to maintain their businesses
by cutting all "unnecessary" costs.
7. We believe the Commission should explore
alternative policy shifts which permit the move away from direct
production aids whilst rewarding efficient farmers by other means
such as improved agri-environment schemes and other measures promoting
sustainability. By markedly worsening the prospects for commercial
farmers in the UK, modulation would reduce agricultural production
here and threaten the survival of many companies within the supply
industry. At the same time we would question what overall benefit
there would be to the environment or to the general contribution
agriculture would be able to make to environmental maintenance
and enhancement. The UK government must seek to persuade the Commission
that a successful transfer of support to Pillar II can only be
achieved if it is done on the basis of subsidiarity, allowing
member states to tailor social, environmental and rural development
support to their own particular circumstances.
ENVIRONMENTAL IMPROVEMENT
8. We cautiously welcome the principle that
access to fully decoupled payments should be conditional on meeting
certain environmental and welfare targets. We believe however
that the means of achieving higher standards require very careful
thought if there is to be an overall beneficial impact on the
environment which raises overall environmental standards rather
than producing a series of "hot-spots" of strong environmental
benefit, but whose impact may be diluted or even lost across a
wider area.
9. The Commission does not make clear whether
payments being conditional on meeting certain statutory standards
(environmental, food safety, animal welfare and occupational safety)
will be set at a uniform level or take account of local conditions,
which may govern the ability of producers to achieve them. Nor
is it clear whether the associated proposal for farm audits is
the sole means by which compliance will be checked. Nevertheless
the proposal does seem to provide a basis for what the report
of the Policy Commission on Food and Farming (the Curry report)
described as "broad and shallow" measures to be adopted,
provided of course that the package as a whole permitted adequate
funding and equal access for producers in all regions of the EU.
The raising of minimum standards across all producers would surely
command much greater UK public support than the myriad current
schemes, which are costly in terms of outcomes, complex, bureaucratic
and poorly appreciated by the public.
10. A major benefit of adopting the "broad
and shallow" approach in the UK is that compliance could
be checked through existing externally audited assurance schemes,
at considerably less cost to the Exchequer or EU funds than might
hitherto have been the case. From a consumer point of view there
is a widely held assumption that farm assurance schemes are already
addressing such issues fully, and pressure to ensure they do will
only grow in the near future. By utilising this existing structure
and having it replicated in those member states where it does
not currently exist, the Commission would have the benefit of
using market driven schemes through which to promote sustainable
systems.
RE-ALLOCATION
OF FUNDS
11. Whilst we believe there is general support
for the principle of moving funds from Pillar I to Pillar II,
this should not be at the expense of UK agriculture, otherwise
the reforms will have been self-defeating. Furthermore we would
question whether the Commission should not take a much wider perspective
in determining the issue of rural development and consider whether
its aims in this area might not be better achieved by directing
resources through other areas. From a UK perspective there has
to be concern that the reforms will simply ensure that money is
diverted from supporting the most efficient areas of agriculture
into supporting an ineffective and unviable rural idyll.
12. The Commission should, we believe, focus
more clearly on policies which are intended to provide assisted
development to rural areas and bring about policy changes which
allow rural areas to make a more telling contribution to the economy
as a whole. One such example of this, which could be easily transferable
across the Community, is that of non-food crops. There are a growing
number of areas where the technological possibility now exists
for products to be made using renewable, as opposed to non-renewable
resources. Whilst much effort has been concentrated on bio-fuels,
there are developments in areas such as biodegradable plastics.
We would urge the Commission, and Member States, to look at development
in these areas in a more holistic manner, taking into account
the environmental costs as well as development and production
costs of the various technologies.
13. We would suggest therefore that this
is an area in which the Commission should adopt a more positive
approach, especially greater flexibility and subsidiarity to ensure
that these new opportunities are not stifled before they can thrive.
Many offer the potential for long-term overall savings to the
EU and national purse when the full costs of some non-renewable
energy sources are taken into account. They could also offer an
alternative source of income to UK producers at a time when income
from traditional sources is at a historically low level. There
are opportunities for the various sectors within the industry
to work together in entrepreneurial partnerships, all of which
would strengthen the argument that a devolvement of power to national
and regional authorities, within an overall Community framework,
would ensure that the agricultural industry is able to make a
full contribution to the attainment of sustainable development.
27 September 2002
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