Memorandum submitted by the Department
for Environment, Food and Rural Affairs
AGRICULTURE AND EU ENLARGEMENT
INTRODUCTION
1. This memorandum provides Defra's written
evidence to the EFRA Committee's inquiry into Agriculture and
EU Enlargement. It is divided into three sections. The first section
sets out briefly the current state of agricultural production
in the accession states. The second covers transitional arrangements
and the likely effect of CAP reform on accession states. The third
looks at the impact of enlargement on the agricultural markets
of the EU as currently constituted.
SECTION 1
STATE OF
AGRICULTURAL PRODUCTION
IN THE
ACCESSION STATES
2. Cyprus, the Czech Republic, Estonia,
Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia
(the AC 10) will join the EU on 1 May 2004. In general agriculture
plays a larger part in their economies than in the EU15.[1]
However there are significant variations between individual states.
For example in Poland, almost 20% of the labour force is employed
in agriculture compared with only 4.9% in the Czech Republic,
a figure close to the EU15 average and significantly below that
of Greece (16%). (See Annex A).
3. In view of these wide variations it is
difficult to make general statements about agricultural sectors
in the AC 10 or about the impact enlargement will have on them
and on the wider EU market. Nevertheless there are a number of
characteristics common to most of the central and eastern European
countries, most notably the:
— structure of land holdings;
— extent of over-employment in agriculture;
and
— low levels of productivity.
4. The structure of land holdings tends
to be bipolar. There are a large number of very small semi-subsistence
holdings, with weak connections to markets and very low labour
productivity. There are also very large holdings which have been
created out of collectives or state farms. They tend to have higher
productivity than the semi-subsistence sector but still lower
than the EU. Their reliance on informal rental agreements where
land restitution has created a fragmented ownership structure
has limited their ability to access capital markets.
5. In a number of these countries there
are very high levels of employment in agriculture. This reflects
the low opportunity cost of labour due to the lack of demand in
other sectors of the economy. Over-employment in agriculture has
however provided an important social function during the period
of transition and has thus facilitated adjustment. Increasing
productivity and the reduction in employment in EU15 agriculture
took place gradually as employment in other sectors expanded.
Similarly growth in other sectors of the economies in the new
member states will be an important determinant of the level of
employment in, and the future structure of, the agricultural sector.
6. Productivity in the agricultural sector
is much lower than in the EU15. This is a consequence, amongst
other things of the low levels of capital investment. Barriers
to increased investment include the very low profitability of
agricultural production and the fact that informal rental agreements
are an important aspect of land tenure which implies low levels
of security for loans.
SECTION 2
EXTENSION OF
THE CAP TO
THE NEW
MEMBER STATES:
TRANSITIONAL ARRANGEMENTS
7. In becoming members of the EU, the new
member states have agreed to take on the full body of EU law,
except where (as in previous accessions) transitional periods
have been agreed. Transition periods for agriculture are set out
in Annexes B-D. The principal transitional measures include:
— the gradual phasing in of direct
payments and enhanced rural development measures;
— CAP scheme and special state aid
provisions; and
— transitional periods for agri-food
establishments and for hen cages.
Direct payments and rural development
8. Direct payments to farmers will be phased
in for new member states starting at 25% of EU15 levels in 2004,
rising to 100% in 2013.
9. New member states have the opportunity
to top up these rates by a further 30% drawn mostly from national
funds. They also have the option to use a simplified system for
making payments, the Single Area Payment Scheme (SAPS), involving
flat rate area payments, decoupled from production, for up to
five years after accession.
10. Between 2004-06 special rural development
provisions are available to new member states.to make the uptake
of normal rural development measures easier and provide additional
support for their farmers to adapt. Country-specific transitional
measures have also been agreed.
CAP scheme and special state aid provisions
11. A number of CAP scheme and special state
aid provisions were negotiated, including a special production
reserve for milk quotas and a one year transition for two states
for individual milk quotas. There are also arrangements for degressive
national aids, most extensively in Malta, Cyprus and Latvia.
Agri-food
12. The new member states have undertaken
to apply all food safety and veterinary rules and to have appropriate
control mechanisms in place. However a number of time-limited
and tightly controlled transitional measures have been agreed
for six states to allow individual agri-food premises more time
to correct specified structural defects.
13. All agri-food establishments in transition
are specified individually along with their shortcomings and must
follow a planned upgrading programme. Crucially, products from
transition establishments must be specially marked and cannot
enter the single market. Provisions for similar arrangements exist
within the current acquis; certain produce can be excluded
from the single market and sold on national markets only.
14. A number of other transitional periods
have been agreed including raw milk quality, the use of non-EU
compliant milk in EU compliant dairies, two animal waste plants,
hen cages, and for a temporary Border Inspection Post at the Hungarian/Romanian
border.
Assessment of the impact of transition periods
15. Transition periods have been a feature
of every EU enlargement. Their principal effect is to permit accession
to take place, whilst allowing new states more time to adapt to
the single market. They are exceptional, and are limited in both
time and scope.
16. For this accession, the generally lower
competitiveness, unfavourable farm structure in most of the AC10
and in particular the large number of small farms and the existence
of semi-subsistence farming combined with the presence of an emerging
commercial farming sector, posed a range of administrative and
economic dilemmas for the extension of the CAP. The phasing in
of direct payments on the one hand, and the enhanced transitional
rural development provisions on the other, are designed to permit
the CAP to be extended to the new member states as smoothly as
possible and in a way that allows time for restructuring.
17. Significant direct payments to farmers
could have led to considerable income disparities and social distortions
in rural societies. The phasing in of direct payments is intended
to avoid this and to avoid reducing the incentive to restructure.
The sudden introduction of high levels of payments would have
been likely to freeze existing farming structures, particularly
in the case of subsistence farming where there would be little
incentive to invest direct payments in production, consolidation
or alternative activities. At the same time, the new member states
have access to more favourable rural development provisions, designed
to aid restructuring with beneficial co-financing terms and measures
to support "meeting standards" and for semi-subsistence
farmers while they restructure. In addition budget allocations
have been calculated on a rational basis, and amount to over half
(
5.1 million) of agricultural commitments for the
AC10 in the 2004-06 period.
18. However, the structure of agriculture
and support arrangements in some AC10 states is closer to the
EU15 than the AC10 average. The provision for national top-ups
to direct payments is designed to prevent any fall in support
on accession. Under the CAP as it stands, it would be possible
for payments to farmers to reach parity with the EU 15 by 2010
(70% phased in direct payments +30% top-ups). Slovenia (which
already supports its farmers at close to EU15 levels) could reach
parity in 2007.
19. Similarly the agri-food and hen cage
provisions are designed to give AC10 farmers and agri-businesses
more time to adapt to the change from pre-accession to EU requirements.
In order to maintain EU15 food safety during transition, agri-food
transition establishments cannot trade on the single market. Without
a transition period such establishments would have to close on
accession, so transition periods enable them to continue to operate
while upgrading to EU standards, whilst maintaining current levels
of protection for animal and human health. However to the extent
that they currently export to non EU15 states some market loss
might occur during the transition period.
20. The new member states have to satisfy
the Commission and others that they can maintain EU standards
and protection and they are meeting the requirements in the
acquis. The Commission has set out progress in its Comprehensive
Monitoring Report and strategy paper published in November. In
this regard the Commission has highlighted a number of areas where
serious efforts are needed, summarised at Annex E, including the
agri-food sector. The Commission plans to review the situation
in February. If conditions are not met safeguard clauses designed
to protect the single market could be introduced. In addition
there is a general economic safeguard clause (as for the last
accession) which could be triggered should serious economic difficulties
arise. In general safeguards could last for up to three years
after accession.
EXTENSION OF
THE CAP TO
NEW MEMBER
STATES: CAP REFORM
21. Since April 2003, the AC10 have been
able to participate in discussions in Brussels—including
the CAP reform negotiations—as active observers. They have
the right to speak and make their views known, but cannot vote
(until May 2004).
22. The implications of the CAP reform (see
Annex F) are relatively modest for the AC10. The most significant
part of the CAP reform was decoupling direct payments from production
through the creation of the Single Payment Scheme (SPS) and the
introduction instead of cross compliance with environment and
animal health and welfare standards. A similar scheme to the SPS
is available in the new member states in the initial period after
accession, the Single Area Payment Scheme[2]
(paragraph 9 above and Annex B refer). At the time of writing
most of the AC10 countries[3]are
expected to introduce the Single Area Payment Scheme.
23. Decoupling in the EU15 is expected to
have a significant impact on production. This is because direct
payments were introduced as compensation for reductions in market
price support and entitlement for the volume of direct payment
(head of stock, acres of crops) was established on the basis of
the inflated volumes of production engendered by that market price
support. The direct payments subsequently inhibited a reduction
in the area of crops (though not yields) and a reduction in the
number of stock in response to the price reduction because planting
a crop or keeping the livestock was necessary to receive the direct
payment. Decoupling these direct payments from production will
finally facilitate the full response to the previous reduction
in market price support.
24. In contrast, in the AC10, the volume
of entitlement for direct payments were, largely, set on the basis
of current production for which support is generally lower than
the EU15 (with the exception of Slovenia). Thus, the difference
between what we would have expected to happen to production when
the IACS system was eventually applied to the AC10 and what will
occur post CAP reform is relatively minor.
25. Decoupling does however mean that these
countries will not be required to carry out the full range of
IACS checks and this will have positive budgetary implications
and will also help the AC10 direct resources to other administrative
requirements.
26. Other reforms are less significant.
However the decision in the CAP reform agreement to abolish rye
intervention and therefore the lower market returns from this
crop could have an impact on the balance of future cropping in
Poland.
27. At the time of writing the Commission
has proposed a number of technical adjustments for extending the
reformed CAP to the AC10, including the requirement that they
must apply the SPS on a regional basis (since they do not have
a record of EU payments during the reference period) and simpler
provisions for national top-ups.[4]
New member states would remain exempt from modulation, and also
remain exempt from the financial discipline mechanism while direct
payments were being phased in. Full cross compliance would apply,
except where an individual member state has a transitional period
for one of the standards concerned.[5]
The Commission also proposes replacing the temporary rural development
measure aiding compliance with community standards with the general
CAP reform "meeting standards" measure available to
all member states, to avoid an overlap. AC10 states applying the
SAPS would have to move directly from that to the new SPS.
28. The Copenhagen accession commitments
for market support and direct payments (heading 1a) for the 2004-06
period totalled
4,682 million at 1999 prices, or
5,316 million at current prices. The Commission estimates
that the CAP reform agreement will reduce expenditure in the new
member states by a total of
47.6 million (current prices) during the same period.
29. The proposals for further reforms, to
the tobacco, olive, cotton and hops sectors, are expected to have
a relatively minor impact on the AC10. The lack of significant
production of cotton in the AC10 countries suggests that they
will be unaffected by the change to the cotton regime. In the
case of tobacco, hops and olive oil the substance of the proposals
constitute a substantial decoupling of production subsidy. The
basic production parameters for the new payments should reflect
the accession agreements. Again, all AC10 states have been able
to participate as active observers and contribute to the discussion
of these proposals in Brussels. Sugar reform is on a slower track.
At the time of writing Commission proposals are not expected until
mid-2004 and decisions are likely to be taken by the EU 25 as
a whole.
SECTION 3
IMPACT OF
ENLARGEMENT ON
THE AGRICULTURAL
PRODUCT MARKETS
OF EUROPE
30. The extension of the CAP to the accession
countries will provide, on average, slightly higher prices for
those producers. The increase in prices will however be smaller
than appears to be the case from the gross differences, as some
of the AC10 products tend to be of lower quality. The price effect
would be expected to stimulate production and to have a negative
impact on consumption. The CAP will also impose higher product
standards and this will force AC10 producers to improve product
specification or face exclusion from the market.
31. AC10 producers will also benefit from
the new income stream represented by the direct payments. As a
result of CAP reform these payments will remain decoupled and
are likely to feed into consumption rather than directly affect
production. However, the relatively poor development of capital
markets in some of these countries suggests that the direct payments
may also have an effect on investment. There may thus be two opposing
effects from the direct payment: they may serve to sustain the
current semi-subsistence sector by improving incomes; at the same
time they may improve the availability of investment finance for
restructuring, although unlike rural development or structural
funding governments cannot control the use to which direct payments
are put. Any investment effect will be dampened as the payments
become capitalised in land prices.
32. AC10 producers will also benefit from
Rural Development funds which should assist in restructuring the
sector.
33. The European Commission has published
estimates of the impact of enlargement on agricultural production
and consumption in different sectors under an Agenda 2000 scenario.
These estimates suggested that the acceding countries would contribute
a marketable surplus (the difference between production and consumption)
in a number of sectors.
34. In the cereals sector the increase in
Rye production in Poland contributed a significant part of the
increase in the marketable surplus. They estimate an increase
in marketable surplus in the beef sector and declines in the market
price though they expect structural surpluses to be avoided. In
the milk sector market surplus for both butter and skim milk powder
would keep prices under pressure.
35. However the prospects on these markets
will have improved significantly as a result of the CAP reform
agreement. In particular decoupling of direct payments, the further
reduction in the price of butter and the abolition of intervention
for Rye will reduce the extent of market surpluses. Quantitative
estimates of the impact of the actual agreement are not yet available
and in addition national decisions on the elements of the agreement
with national discretion have not yet been finalised. However,
the estimates in respect of the January proposals in the Commission's
Impact Assessment give a reasonable indication of the likely effect.
36. The estimates are for a decline in cereals
production in EU25 of around 3% relative to the Agenda 2000 baseline
and a corresponding fall in marketable surplus of around 9%. In
the beef sector production is expected to decline by around 6%
relative to the Agenda 2000 baseline with a marginal effect on
the marketable surplus.
37. Enlargement could also give rise to
an indirect impact, through the need to provide compensation to
third countries under GATT Article 24.6 as a result of higher
EU tariffs. The Commission will need to determine which AC10 tariffs
are likely to increase as a result of joining the EU and will
then have to offer compensation for loss of market share to the
third countries involved. This could result in tariff-reduced
quotas to guarantee the continuation of previous import quantities.
At the time of writing it is not possible to say what, if any,
impact this would have on the EU market.
38. Defra has commissioned research to analyse
the effects of enlargement on EU and UK markets over the period
to full CAP implementation. It examines the impact of accession
on production, consumption and market balances in the acceding
countries and the consequent impact on trade between these countries,
the EU and the UK. It will also consider the trade in processed
goods and the potential for UK food processors which the new member
states' markets could represent.
39. An important theme of the research project
is to examine the potential for productivity improvements in the
accession countries. The extent of any productivity improvement
would have considerable implications for EU markets.
Department for Environment, Food and Rural Affairs
December 2003
Annex A
STRUCTURE OF
AGRICULTURE
1. The ten countries which comprise the
current EU enlargement are of significantly different magnitudes.
The largest, Poland, has a population of around 38 million whilst
the smallest, Malta, has a population of around 400,000. Income
levels vary across the countries and are well below the average
level of the EU15: GDP per capita (at purchasing parity) ranges
from 74% of the EU level in Slovenia to 35% in Latvia. Table 1
illustrates some basic characteristics of the accession countries'
agricultural sectors.
Table 1: Basic Agricultural Data
| Utilised
agricultural
area
(1,000 ha)
| UAA
(as % of
total
land)
| Number of
holdings
'000 (2000)
| UAA per
holding
(2000)
| Employment
in agri-
culture (1)
'000 (2001)
| Ag.
Employ-
ment share
of total
(2002)
(%) (2)
| Share of
agriculture
in GDP
(GVA/
GDP)
(%)
|
| EU-15 | 128,305 | 40
| 6,766 | 18.7 | 6,701
| 4.2 (3) | 1.7 |
| UK | 15,799 | 65
| 233 | 67.7 | 390
| 1.4 (3) | 0.6 |
| CC-10 | 38,327 | 52
| | | 3,871 |
13.2 (3) | 3.1 |
| Czech Republic | 4,280 | 54
| 3,850 | 1.1 | 228
| 4.9 | 1.7 |
| Estonia | 891 | 20
| 551 | 1.6 | 43
| 6.5 | 3.2 |
| Cyprus | 143 | 15
| 219 | 0.7 | 14
| 5.3 | 3.9 |
| Latvia | 2,485 | 38
| 956 | 2.6 | 145
| 15.3 | 3.0 |
| Lithuania | 3,487 | 53
| | | 245 |
18.6 | 3.1 |
| Hungary | 5,853 | 63
| 3,740 | 1.6 | 235
| 6.0 | 3.8 |
| Malta | 12 | 38
| | | 3 | 2.3 (3)
| 2.2 |
| Poland | 18,246 | 58
| 12,264 | 1.5 | 2,736
| 19.6 | 3.1 |
| Slovenia | 486 | 24
| 695 | 0.7 | 90
| 9.7 | 2.0 |
| Slovakia | 2,444 | 50
| 1,577 | 1.5 | 132
| 6.6 | 1.9 |
Sources: European Commission (Eurostat and Directorate-General for Agriculture), FAO and UNSO
(1) Includes forestry, hunting and fishing sector
(2) Share in employed civilian working population
(3) 2001
| | | |
| | | |
2. In terms of their agricultural sectors the group of
entrants are dominated by a relatively few countries. Poland contributed
around half of the total gross value added in agriculture in the
ten countries in 2001, Hungary contributed just under 20% and
the Czech Republic just under 10%. Thus, these three countries
accounted for approximately 80% of agricultural gross value added
for the group. The following paragraphs provide more detailed
information on the agricultural sectors of the three countries
drawing on the Agricultural Situation reports published by the
European Commission.
POLAND
3. Poland has 18.2 million hectares of Utilised Agricultural
Area (UAA). This represents 58% of the total area of the country
and around 11% of the total UAA in an enlarged EU. Employment
in agriculture, fisheries and forestry is 2.7 million people (or
almost 20% of the working population). This will represent the
largest agricultural labour force of any member state in the EU-25.
4. Agriculture has declined in importance in terms of
contribution to GDP from 8% in 1990 to 3.1% in 2001.
5. Poland has around 2 million agricultural holdings
and a high share of subsistence or semi-subsistence holdings.
At the other end of the scale, about 1800 holdings (0.1%) were
co-operative/public—but represented a 10.5% share of total
UAA (in 1997).
6. Table P1 illustrates the distribution of agricultural
holdings by absolute quantity and size. 80% of farms are under
10 ha but these represent less than 45% of the land.
Table P1: Structure of farming
| Size Band | Number of holdings by size '000
| % |
| 1-2 ha | 448.2 | 23.8
|
| 2-5 ha | 613.6 | 32.6
|
| 5-10 ha | 447.7 | 23.8
|
| 10-15 ha | 185.7 | 9.9
|
| 15+ ha | 185.7 | 9.9
|
| Total | 1,880.9 | 100
|
| Area by farm size '000 ha
| % |
| 1-2 ha | 644 | 4.8
|
| 2-5 ha | 1,987 | 14.7
|
| 5-10 ha | 3,182 | 23.6
|
| 10-15 ha | 2,246 | 16.6
|
| 15+ ha | 5,449 | 40.3
|
| Total | 13,510 | 100
|
Source: European Commission; Agricultural Situation in the Candidate Countries
| | |
7. About 77% of farms represent traditional mixed farms
which keep livestock with a low degree of specialisation in animal
production mainly due to a high degree of subsistence and semi-subsistence
farming.
Key Commodities
8. The most important products (measured as value of
agricultural output) in the years 1998-2000 are cereals (18%),
vegetables (7.4%), potatoes (6.9%), fruits (6.3%). For animal
production milk accounts for 13.6%, pork for 18.7% and eggs and
poultry together for 8.8%. Table P2 represents these products
as shares of Polish production and compared to the EU15.
9. In an enlarged EU the most significant products would
be rye and triticale, a close substitute for rye.
Table P2: Product share of the average value of production
(1998-2000)
| Products | % of total agricultural
production
| % of EU-15 sector
production |
| Cereals | 18 |
12 |
| Wheat | 8 | 9
|
| Barley | 2.3
| 6.6 |
| Maize | 0.4 |
1.4 |
| Oat | 2.8 |
20.7 |
| Rye | 3 |
87 |
| Triticale and other cereals |
1.4 | 89 |
| Rapeseeds | 1.8 | 8.8
|
| Sugar beet | 2.9 | 11.6
|
| Vegetables | 7.4 | 11
|
| Potatoes | 6.9 | 52
|
| Fruits | 6.3 | 11.9
|
| Milk | 13.6 | 10
|
| Beef | 4.3 | 5.7
|
| Pork | 18.7 | 12
|
| Eggs | 3.4 | 7.7
|
| Poultry | 5.4 | 6.3
|
| Sheep meat | 0.1 | 0.4
|
| Source Eurostat | |
|
10. The transition has shifted production towards crop
production. Milk and beef production is restructuring and is losing
importance compared to pork and poultry production. During 1990-2000
the number of dairy cows declined by 35% and beef and veal production
declined by 53%. On the other hand, over the same period, poultry
production increased by 65%.
HUNGARY
11. Hungary will add 5.8 million hectares of UAA to the
EU. This represents 62.9% of Hungary's total land (the highest
of any accession country).
12. Hungary's land privatisation programme has generated
a great diversity in the legal status, size and ownership of agricultural
holdings. The majority are nearly one million private holdings
with an average size of 4 hectares. These farms cultivate around
60% of the agricultural area. The 8,382 corporate farms (0.87%
of total holdings) cultivate a share of 40.5% of the land. Individual
farms are shrinking in number.
Table H1: Structure of Farming 2000
| Size Band | <10
| 10-50 | 50-100
| 100+ | Total |
Number of holdings '000
| 909.9
| 44.6 | 5.4 | 7.2
| 967.1 |
| % | 94.1 | 4.6
| 0.6 | 0.7 | 100
|
| Area cultivated '000 ha | 1,308.3
| 1,371.9 | 507.7 | 3,259.7
| 6,447.6 |
| % | 20.3 | 21.3
| 7.9 | 50.5 | 100
|
| Source: Farm structure in the CEE Candidate Countries—Synthesis report
| | | |
| |
Key commodities
13. Agricultural production has declined over the last
decade by about 25% in value relative to 1990. Since 1995 there
has been a clear shift towards crop production. The agricultural
area devoted to cereals has increased from 46.3% (1992), 48.1%
(2000) to 59% in 2001. Maize is the dominant crop in cereal production
accounting for 44.2% of the total cereal area and a 9.4% share
in the value of production.
14. The most important products measured by their share
of the value of agricultural output in the years 1998-99 are cereals
(17.6%), vegetables (11.2%), fruits (7.5%), oilseeds (4.5%) and
potatoes (3.7%). Milk and beef together accounts for 12.6%, pork
for 15.8% and eggs and poultry together for 13.6% of agricultural
output.
15. During 1990-2000 the number of dairy cows declined
by 18%, milk production by 7%. Over a similar period beef and
veal production has declined by 68% while cattle stocks declined
by 40%. A decline in sheep stocks and sheep meat production was
also observed. In contrast poultry meat production increased by
25%.
Table H2: Share of the average value of production
(1998-99)
| Products | % of total
agricultural production
| % of EU15
sector production
|
| Cereals | 17.6 | 6
|
| Wheat | 5.9 | 3.8
|
| Barley | 1.5 |
2.1 |
| Maize | 9.4 | 16.3
|
| Oat | 0.2 | 2.0
|
| Rye | 0.1 | 1.7
|
| Other cereals | 0.5
| 4.8 |
| Rapeseeds | 1.0 | 1.5
|
| Sunflower seeds | 3.5 | 19
|
| Sugar beet | | 2.3
|
| Vegetables | 11.2 | 3
|
| Potatoes | 3.7 | 3
|
| Fruits | 7.5 | 7.1
|
| Milk | 10.3 | 1.7
|
| Beef | 2.3 | 0.8
|
| Pork | 15.8 | 4.1
|
| Eggs | 3.3 | 3.5
|
| Poultry | 10.3 | 4.6
|
| Sheep meat | 0.7 | 1.0
|
| Source: Eurostat | |
|
THE CZECH
REPUBLIC
16. The Czech Republic will add an additional 4.3 million
hectares of agricultural land to the EU.
17. Over the transition period animal production has
decreased in importance in terms of production value in parallel
with an ongoing shift towards crop production.
18. The most important crops measured by their share
of the value of agricultural output in 1998 and 1999 were cereals
(20%), rapeseeds (5%) and potatoes (4%). For animal products milk
and beef together accounts for 28%, pork for 16% and eggs and
poultry together for almost 8%.
CR1: % share in the value of agricultural production
(1998-99)
| Products | % of total agricultural
production
| % of EU15 sector
production |
| Cereals | 20.1 | 3
|
| Wheat | 12.2
| 4.1 |
| Barley | 5.8
| 3.8 |
| Maize | 0.8
| 0.6 |
| Oat | 0.4
| 2.4 |
| Rye | 0.7
| 3 |
| Other cereals | 0.2
| 2 |
| Rapeseeds | 5.0 | 7.3
|
| Sunflower seeds | 0.4 |
|
| Vegetables | 1.9 | 1
|
| Potatoes | 4.0 | 3
|
| Fruits | 1.7 | 2.1
|
| Milk | 20.6 | 1.8
|
| Beef | 7.5 | 2
|
| Pork | 16.1 | 2.7
|
| Eggs | 3.1 | 3.5
|
| Poultry | 4.6 | 2.3
|
| Sheep meat | 0.05 | 0.1
|
| Source: Eurostat | |
|
Annex B
TRANSITIONAL ARRANGEMENTS:
DIRECT PAYMENTS
AND RURAL
DEVELOPMENT
Direct payments
— Direct payments for the new member states will
be phased in at 25% of EU15 levels in 2004, increasing by 5% and
then (from 2007) 10% each year to reach 100% of the level of direct
payments then applicable in the EU15.
— In addition the new member states can make top-up
payments equivalent to a further 30% of the EU15 level. Alternatively
they can top up to maintain the overall level of support farmers
would have been entitled to under domestic (CAP-like) schemes
before accession (2003), increased by 10 percentage points. This
cannot result in a level higher than 100% of EU15 levels of direct
payments.
— Slight variants apply to Cyprus, which can top
up to the 2001 Cypriot support level, and Lithuania (to 2002 levels);
and to the Czech Republic (which can top up to 100% for potato
starch) and Slovenia, which can top up to 2003 levels increased
by 10% in 2004, 15% in 2005, 20% in 2006 and 25% from 2007.
— Most of the top-ups are intended to be nationally
funded, but for the 2004-06 period only, the new member states
may use up to 20% of their rural development allocation to finance
top-ups to 40% of EU15 levels. Alternatively they can use up to
25% in 2004, 20% in 2005 and 15% in 2006, again subject to the
40% ceiling.
Single Area Payment Scheme
— On accession the new member states have the option
of a temporary, decoupled flat rate payment per hectare of agricultural
land (Single Area Payment Scheme (SAPS)) until the end of 2006,
renewable twice by one year (ie up to end 2008). This would be
applicable for all utilised agricultural area, irrespective of
production, provided that the land is kept in good agricultural
condition compatible with the protection of the environment. The
total amount of money (annual financial envelope) available in
each new member state would be equal to the total it would receive
under the EU15 direct payment scheme, calculated according to
EU rules and supply controls set out in the Act of Accession,
and subject to the phase in percentages.
Rural Development
— The new member states have access to special rural
development provisions in the 2004-2006 period designed to make
uptake of normal rural development measures easier. In addition
to the normal provisions it contains:
— differentiated appropriations to allow more time
between commitments and payments on the model of structural funds;
— higher maximum proportions of EU to national money
(80:20) in Objective 1 areas;
— a temporary income support for semi-subsistence
farms while they restructure to ensure their commercial future
(a flat rate of
1,000 per farm (
1,250 per farm in Poland).
— technical assistance to ensure the smooth transition
from pre-accession SAPARD to the rural development acquis;
— some general adaptations eg in respect of eligibility
criteria;
— measures to help farmers to meet costs for compliance
with EU standards (eg environmental, food safety and animal welfare).
— Certain country-specific rural development transitional
measures have been agreed for Estonia (afforestation); Lithuania
(early retirement for dairy farmers) and for Malta (various, designed
to assist Malta to adapt to increased competition within the single
market).
Proposed changes to these provisions
At the time of writing, Commission proposals to adapt the
Act of Accession to take account of CAP reform, and to amend the
CAP reform horizontal regulation 1782/2003, include:
Single Area Payment Scheme
— As from 1 January 2005, the cross compliance requirement
to keep land in good agricultural and environmental condition
would apply. Other Single Payment Scheme cross compliance provisions
would not be mandatory, given the temporary nature of the simplified
Single Area Payment Scheme.
Single Payment Scheme and Cross Compliance
— The Commission notes that all cross compliance
provisions would apply to new member states as soon as they adopted
the Single Payment Scheme, except where an individual state has
a transition period. Such transition periods include:
— A geographical exception for the strict protection
of lynxes under Article 15 of the Habitats Directive 92/43 has
been granted to Estonia, for review by May 2009;
— Malta has a transition period for certain
provisions of Articles 5 and 8 of Directive 79/409 on the conservation
of wild birds, enabling Malta to continue trapping of seven finch
species until end 2008.
Rural Development
— Replacing the "compliance with Community
standards measure with the general "meeting standards"
measure available to all member states to avoid and overlap.
Annex C
CAP AND
STATE AID
TRANSITION ARRANGEMENTS
1. Milk
— Milk quotas—All new member states
except Malta and Cyprus have a special restructuring reserve amount
to not more than 3.5% of 1998-2000 production. To the extent that
there is a switch from on-farm consumption of milk and milk products
to production for the market in the new member state, this reserve
will be released by the Commission (under management committee
procedure) on 1 April 2006.
| Quota 2004 |
| |
| (t) | % reserve of
| Reserve |
| | total production
| (t) |
| | 1998-2000
| |
| CY | 145,200 | 0
| - |
| CZ | 2,682,143 | 2
| 55,787 |
| EE | 624,483 | 3
| 21,885 |
| HU | 1,947,280 | 2
| 42,780 |
| LV | 695,395 | 3.5
| 33,253 |
| LT | 1,646,939 | 3
| 57,900 |
| MT | 48,698 | 0
| - |
| PL | 8,964,017 | 3.5
| 416,126 |
| SK | 1,013,316 | 2.5
| 27,472 |
| SL | 560,424 | 2.5
| 16,214 |
| Total | 18,327,897 |
| 671,417 |
— One year transition period for Poland and
Slovenia for the allocation of milk quota to individual
producers and an associated exemption from the payment of additional
levies in the first quota year.
— Cyprus, Hungary, Latvia, Lithuania, Malta and
Poland have a five-year transition period for the marketing
of drinking milk which does not comply with EU fat content requirements.
Such milk may be marketed only on the domestic market or exported
to a third country.
— Five-year transitional period for Malta for
determining the representative fat content of the milk delivered
for processing.
— For Poland, the distribution of quota between
deliveries and direct sales will be reviewed on the basis of actual
2003 figures.
2. Suckler Cows
— Three-year transition period for Estonia, Latvia,
Lithuania and Poland (additional breeds).
3. Stocking Density
— Five-year transition period for Malta and
Cyprus to reduce stocking levels to the levels allowed
under the EU beef premia rules.
4. Sugar
— (derogation from the acquis) Slovenia
may import 19,585 tonnes of raw sugar per year to supply its
beet sugar factory (notwithstanding the normal rule that raw sugar
imports must be handled at a specialist raw sugar refinery).
5. Wine & Alcohol
— (derogation from the acquis) Czechs,
Hungary, Slovakia and Slovenia may enrich wine with
sugar.
— (derogation from the acquis) Cyprus,
Czechs and Malta have been granted extra planting rights.
— Four-year transition period for Malta for
the enrichment of wine by indigenous varieties.
— Wine-growing areas have been established for Cyprus,
Czechs, Hungary, Malta, Slovakia and Slovenia, with
transition periods for Hungary and Slovenia. (A decision
on Poland has been postponed until after accession).
— Geographical or traditional designations for wine
and alcoholic drinks agreed, for Cyprus (wines, Ouzo, Zivania),
Czech Republic (eg wines, Budvar beer, Slivovice), Hungary
(wines & Palinka), Latvia, Lithuania (spirit drinks);
Poland (various (mainly herbal) vodkas, Polish Cherry),
Slovakia (wines and spirit drinks). Poland may use
the terms "Polish wine" and "Polish fruit wine".
— Five-year transition period for Hungary to
phase out the term Rizlinszilvani.
FRUIT & VEGETABLES
— Five-year transition period for Cyprus for
certain fruit withdrawal quantities.
— Five-year transition period for Malta for
degressive aid to individual tomato producers.
— Five-year transitional period for Poland for
criteria for producer organisations in the fruit and vegetables
sector.
TOBACCO
— Five-year transition period for Poland for
lower thresholds for the recognition for producer groups.
STATE AIDS
In addition to complementary national direct payments (topping
up) Cyprus may grant transitional and degressive national aid
in the cereals (excluding durum wheat), milk and dairy, beef,
sheep and goats, pig, poultry and egg, wine, olive oil, table
grapes, processed tomatoes, bananas, deciduous fruit (including
stone fruit), almonds and carobs sectors until the end of 2010.
Cyprus may also grant special support to "deprived areas"
for a period of up to five-years from the date of accession.
Estonia may maintain its national dairy premium in 2004, on
condition that it is not higher than the pre-accession level.
In addition to complementary national direct payments (topping
up), Latvia may grant transitional and degressive national aid
in the flax, milk and dairy (for 2004 only), pig, sheep and goats
and seeds sectors until end 2008.
— The general economic safeguard clause is applicable
for products covered by these special state aids for up to five
years after accession (compared with the standard three-year period)
— Five-year transition period for aid for the transport
of agricultural goods from Gozo to Malta for up to five years
from accession.
Five-year transition period for degressive state aid for
the production of oil pumpkins.
Three-year transition period for state aid for its Warehouse
Receipt and Goods system (storage aid).
LAND SALES
— In negotiations on accession and the free movement
of capital it was agreed that the eight new Central and Eastern
European member states should have a transition period for the
sale of farmland to EU citizens. They may operate a seven-year
derogation from the general requirement to open up land markets
to foreign buyers. However, as a safeguard, controls may be retained
for a further three-years if there is evidence of serious disturbances
in the land market.
— The exception is Poland, which has a 12-year transition
period on sales of farmland. This involves a 12-year transition
period before sales are definitively freed up, while farmers already
farming leased land will be able to buy it after three years in
eastern Poland and after seven years in western Poland (part of
pre-war Germany).
Annex D
AGRI-FOOD
ESTABLISHMENTS AND
OTHER TRANSITIONAL
ARRANGEMENTS IN
THE VETERINARY/PHYTOSANITARY
SECTOR
Agri-food measures have been agreed for the following
states to allow more time for agri-food establishments to correct
specified structural defects:
— Czech Republic: 44 meat establishments,
one egg establishment, seven fish establishments (until December
2006);
— Hungary: 44 red meat establishments (until
December 2006);
— Latvia: 29 fish processing establishments
(until January 2005), 77 meat establishments (January 2006), 11
milk processing establishments (January 2005);
— Lithuania: 14 meat establishments, five
fish establishments and one milk establishment (until January
2007);
— Poland: 332 meat establishments (until
December 2007), 113 milk establishments (until December 2006),
40 fish establishments (three years);
— Slovakia: one meat and one fish establishments
(December 2006).
All agri-food establishments in transition are specified
individually along with their shortcomings and must follow a planned
upgrading programme. Crucially, products from transition establishments
must be specially marked and cannot enter the single market.
In addition Malta's sole dairy (until 2009) and a maximum
of 56 EU-compliant dairies in Poland (until 2006) may accept deliveries
of non-EU-compliant raw milk under the condition that it will
be processed separately, be specially marked and unable to enter
the Single Market.
Other veterinary/phytosanitary arrangements
— Transitional arrangements until December 2009
relating to the height and slope of hen cages have been agreed
for a limited number of existing cages in a specified number of
establishments in the Czech Republic, Hungary, Malta, Poland
and Slovenia. Slovenia also has until 1 December
2004 to meet EU requirements on floor area of cages.
— Provision has been made for a temporary Border
Inspection Post on the Hungary/Romania border.
— Latvia has transitional arrangements until
December 2004 for two animal waste establishments.
— Transitional arrangements for the quality of raw
milk have been agreed for Poland, Latvia, Lithuania and
Malta.
— Cyprus, Latvia, Malta and Slovenia have
a five-year transitional arrangement for the quality requirements
of seeds.
— Poland and Lithuania have special
measures for potato wart disease/ring rot.
— Lithuania has a transitional arrangement
until end 2010 in relation to the payment of remuneration for
plant variety rights.
— The Czech Republic has a transitional arrangement
for a maximum of two-years after accession for animal nutrition
(ie the marketing in its territory of feedingstuffs based on the
yeast species Candida utilis).
— Poland has a transitional arrangement for
the marketing of certain plant protection products until 31 December
2006[6]and for forest reproductive
material accumulated before 1 January 2004.
Annex E
SUMMARY OF
COMPREHENSIVE MONITORING
REPORTS NOVEMBER
2003
Red (serious concerns) = serious problems and strong possibility
of non-implementation by accession.
Amber (enhanced effort) = significant delays.
| Country | Summary
|
| Cyprus | |
| Red | Paying Agency—eg staffing, procedures and IT.
|
| Trade mechanisms—yet to establish admin structures and procedures.
|
| Amber | FADN, veterinary control systems, TSEs and animal by-products, upgrading of agri-food establishments, common measures, animal nutrition and some phytosanitary legislation.
|
Czech Republic |
|
| Red | Upgrading of agri-food establishments—highly likely that many non-transition establishments will be non-compliant on accession.
|
| Amber | Paying Agency, IACS, trade mechanisms, CMOs for wine, sugar, alcohol and beef. Nearly all veterinary and phytosanitary issues.
|
Estonia |
|
| Red | None |
| Amber | Paying Agency, IACS, trade mechanisms, CMO for milk, TSEs and animal by-products. Veterinary control system, trade in live animals and animal products, upgrading of agri-food establishments, common measures, animal nutrition and phytosanitary issues.
|
| Hungary | |
| Red | Paying Agency—IT, staff, procedures
|
| IACS—technical & organisational delays (serious doubt ready on accession).
|
| Upgrading of agri-food establishments—highly likely that many non-transition establishments will be non-compliant on accession.
|
| Implementation of rural development measures—Delays eg not yet sent draft RDP for EAGGF funds.
|
| Amber | Trade mechanisms, CMOs for sugar and wine. TSEs and animal by-products, veterinary control system, common measures and certain phytosanitary issues.
|
Latvia |
|
| Red | TSEs and animal by-products—legislation not fully transposed, not fully compliant.
|
| Amber | Paying Agency, IACS, trade mechanisms and CMOs for milk, sugar and beef. Veterinary control system, upgrading of agri-food establishments, trade in live animals and animal products, animal disease control, common measures including residues and animal welfare. Phytosanitary issues.
|
Lithuania |
|
| Red | None |
| Amber | Paying Agency, IACS, trade mechanisms and CMOs for milk and beef. TSEs, animal by-products, veterinary control system, upgrading of agri-food establishments, common measures and animal welfare. Phytosanitary issues.
|
Malta |
|
| Red | Paying Agency—legislation (including accreditation criteria) & admin procedures not in place.
|
| IACS—made little progress (serious doubt ready on accession.)
|
| External trade mechanisms—admin structures and procedures not established.
|
| TSEs and animal waste treatment—collection and treatment not compliant, concerns re-incineration plants.
|
| Amber | Organic farming, FADN, CMOs for wine, alcohol, beef, fruit and vegetables and olive oil, and rural development. Veterinary control systems, upgrading of agri-food establishments, common measures, animal nutrition and phytosanitary issues.
|
| Poland | |
| Red | Paying Agencies (2)— financial management & accounting IT, staffing.
|
| IACS—staffing, IT, land parcel data out of date.
|
| Upgrading of agri-food establishments—highly likely that many non-transition establishments will be non-compliant on accession.
|
| Veterinary and phytosanitary control—legislation, not yet joined ANIMO, bovine database, BIPs.
|
| TSEs—testing & cadaver collection, upgrading of waste plants.
|
| Animal by-products—legislation.
|
| Movement controls of animals—legislation, administrative structures for on-spot checks during transport and at destination.
|
| Control of potato ring rot and wart disease—legislation, phyto guarantees.
|
| Amber | Trade mechanisms, CMOs for milk, beef, eggs and poultry and rural development. Trade in live animals and animal products, common measures, animal welfare and animal nutrition.
|
Slovakia |
|
| Red | Paying Agency—much work to do, legal framework not yet adopted.
|
| IACS—serious technical & organisational delays, most areas still at planning stage (serious doubt ready on accession.)
|
| Upgrading of agri-food establishments—highly likely that many non-transition establishments will be non-compliant on accession.
|
| Amber | Trade mechanisms, CMOs for wine, sugar and beef. Veterinary control system, TSEs, animal by-products and common measures. Controls on maximum residue limits for pesticides.
|
| Slovenia | |
| Red | None |
| Amber | CMOs for sugar and milk. Veterinary control systems, trade in live animals and animal by-products, upgrading of agri-food establishments and common measures re residues.
|
| |
Annex F
SUMMARY OF
THE CAP REFORM
AGREEMENT
1. The central element of the reform proposals is the
new Single Payment Scheme. This new "decoupled"
subsidy will replace a number of existing subsidy regimes from
either 1 January 2005, 2006 or 2007. The amount of single payment
which a farmer receives will be based either on the average amount
of subsidy received during the "reference period" (2000-02),
termed the "historic" approach or on the area farmed,
termed the "flat rate" approach. Alternatively a hybrid
of both options could be used. Crucially, it will not be based
on what or how much is produced, enabling farmers to become more
market oriented. Member states have various options for partial
recoupling of payments up to about 25% of total subsidy.
2. Farmers will be able to sell or transfer their subsidy
entitlement, though purchasers will be able to use it to claim
subsidy only if they are farming an equivalent area of land to
that which gave rise to the entitlement and are doing so in accordance
with the various compliance obligations (see below).
3. A National Reserve must be established to fund those
who acquired land during the period immediately before the new
system was agreed and those whose subsidies were reduced during
the reference period due to force majeure. The Reserve
will be funded by a levy of up to 3% of the new subsidy and by
using any subsidy entitlement which remains unclaimed.
4. Under the "historic" approach, the new subsidy
will not be payable for growing fruit and vegetables, potatoes,
permanent crops except energy crops, or for woodland (permanent
crops and woodland will also be exempt under the "flat rate"
approach). Farmers must maintain set-aside land as before, though
rotation is allowed and field strips as narrow as five metres
will count, helping to protect field margin habitats.
Cross-compliance
5. In order to qualify for the new subsidy, farmers will
have to comply with 18 existing EU directives and regulations
on the environment, public health and animal health and welfare
and maintain their land in good agricultural and environmental
condition (to be defined by member states). Member states will
have to establish an enforcement regime.
National Envelope
6. Member states can take up to 10% of subsidy on a sector
by sector basis, to improve the quality and marketing of agricultural
products, or to support specific types of farming which are important
for the protection or enhancement of the environment, such as
extensive livestock grazing which might otherwise become unprofitable.
Modulation
7. Member states will be required to levy 3% of subsidy
from 2005 to fund rural development and agri-environment schemes,
rising to 4% in 2006 and 5% from 2007 onwards. The UK will be
able to modulate at a higher level in line with its plans under
the current voluntary system, to fund the Government's sustainable
food and farming proposals.
Farm Advisory System
8. By January 2007, member states must set up a farm
advisory system to help farmers who wish to use it to meet the
cross-compliance obligations.
Devolved implementation
9. The new regime can be implemented differently in different
regions (enabling the devolved administrations to do things differently).
Rural Development Regulation
10. Minor amendments have been made to the Rural Development
Regulation to allow funds to be used for quality food production,
aid for farmers facing new legislative requirement, support for
farmers whose production methods are above standard practice and
aid for integrated rural development strategies.
Commodity regime changes
11. Finally, certain changes have been made to some of
the commodity regimes. In particular, the support price for butter
has been cut by 25% and by 15% for skimmed milk powder.
Previously agreed milk quota increases have been postponed
to 2006 and further increases dropped pending review. Aid for
energy crops will be introduced. Previous provisions for
improvement plans for nuts are to be replaced by an area payment.
There are also some changes to the cereals regime,
including changes to the rules for set-aside, the abolition
of intervention for rye, a new premium for durum wheat,
and changes to the regimes for protein crops and rice.
Department for Environment, Food and Rural Affairs
December 2003
1
On average agricultural production in the AC 10 accounts for around
13% of employment and over 3% GDP, compared with 4.2% of employment
and 1.7% of GDP in the EU 15. Back
2
The SAPS remains simpler than the Single Payment Scheme. It can
cover all utilised agricultural area, irrespective of crops grown
(there are no negative lists); no coupled payments are maintained
for specific sectors, and there is no set aside. Land must be
kept in good agricultural condition compatible with the protection
of the environment. At the time of writing it is proposed to apply
the SPS requirement to keep land in good environmental condition
as from 1 January 2005, but other cross compliance requirements
would not be obligatory. Back
3
Malta and Slovenia are unlikely to make use of the SAPS option. Back
4
See Annex B and Explanatory Memoranda EM 14164/03 (CAP Reform:
amendments to Regulations following enlargement) and EM 14165/03
(CAP reform: amendments to Act of Accession). Back
5
Eg Estonia has been granted a geographical exception for the strict
protection of lynxes under Article 15 of the Habitats Directive
92/43 (to be reviewed by May 2009). Back
6
The transition period relates to Article 13 (1) of Directive 91/414:
Poland may postpone, until the end of 2006, certain dealings for
the provision of information. Back
|
