PART 5 OPINION OF THE COMMITTEE
(continued)
REFORM OF THE COMMON
AGRICULTURAL POLICY.
87. The CAP has long
been in need of reform. The process has begun and the Uruguay
round and the McSharry reforms introduced by the then Commissioner
have proved their worth. The need now, as the Commission has recognised
in its suggestions in Agenda 2000, is to continue the shift
from payment for volume production to payment for income support
and rural development. It has not been our purpose in this short
enquiry to look at the policies needed for the future of farming
and the rural community although this will be the subject of a
future Report. In the meantime we have limited ourselves to the
financial consequences of enlargement. Our present view is that
a reform of the CAP which reduces its financial costs is pivotal
to the financing of enlargement.
88. Under the Commission's
suggestions agricultural policy costs would be constrained by
the movements of prices towards world market prices and, importantly,
by the proposal that farmers in the CEEC10 should not receive
any of the compensation payments for reduction in guaranteed prices
going to the farmers in the EU15 who have previously had the benefit
of these guarantees. The Commission's case for this policy on
compensation payments is right, but the introduction of it might
well not be acceptable to the applicant countries. We see these
issues as requiring urgent negotiation: they should not be allowed
to become stumbling blocks to progress towards accession.
NET
CONTRIBUTIONS AND REBATES
89. We recognise that
there will be a need to address at some time in the future the
system of national contributions to the Community Budget. The
present system may suit the United Kingdom but is not accepted
as conspicuously fair or transparent. In many British eyes the
CAP in its application across the EU is an unfair subsidy to be
cut back or abolished, but to non-British eyes the United Kingdom's
rebate is also a source of dissension in the EU. German sensitivity
on their net contribution to the Community Budget is understandable:
they have been for long, and are likely to remain, the principal
net contributors. At a time when they have been bearing the immense
costs of the incorporation of former Eastern Germany (their own
very largely domestically financed "enlargement"), when
their budget deficit is under strain and there are crucial domestic
elections looming, it must be expected that Germany will look
for reassurance that the system of budgetary contributions will
in due course be reviewed. The Commission argues in Agenda
2000 that the time for such a review is not until the own
resources ceiling of 1.27 per cent of Community GNP has to be
changed, possibly after 2006. However, we expect there will be
strong political pressure from Germany and some other Member States
for earlier recognition that a new system will have to be devised.
THE
EMU EFFECT
90. We accept that if
EMU works well it would encourage stability and growth directly
in the euro zone and, maybe, indirectly more widely. At this time
we think it is impossible to forecast whether the effects will
be beneficial, as we hope. In our report entitled An EMU of
`Ins' and `Outs'[22]
we said "If EMU goes wrong, the damage will not be limited
to the Euro area".[23]
We see no reason to change this view. The prospect of EMU gives
no justification for making more optimistic assumptions about
growth rates; nor does it give cause for pessimism: until its
effects are proven, it calls for caution when planning the Budget's
inputs and outputs. As for the possibility that the advent of
EMU will lead to calls for an increase in transfers to adversely
affected regions, we have in previous reports consistently taken
the view that EU structural funds are provided for long-term structural
development and not to enhance domestic transfer payments. We
cannot foresee the impact of EMU on less developed or vulnerable
regions and we cannot, therefore, rule out that consideration
may have to be given to remedial measures at national or Union
level.
ENVIRONMENTAL
STANDARDS
91. The costs for the
CEEC10 of reaching the mandatory Community environmental standards
will vary considerably from country to country. Poland has enormous
problems in some areas with the quality of its water supply, its
waste water disposal and its land contamination. Other applicant
countries have lesser problems. It would be unreasonable for the
EU to insist on the full implementation of the environmental acquis
before accession. We think that the way ahead should be for maximum
help to be given to the applicant countries in terms of advice
and access to investment capital and for accession to be followed
by transitional periods, which may need to extend over ten or
more years, determined on the basis of study of the physical and
economic practicalities.
HEALTH
AND SAFETY AND SOCIAL STANDARDS
92. The applicant countries
have a long way to go before their social and health safety standards
will match those in the EU. In these areas we think that the acquis
must be accepted before accession but that there will have to
be transitional periods: as always these should be of minimum
scope and duration consistent with achievability.
93. Freedom of movement
between a newly acceding state and the EU15 may not be in the
interests of either side immediately at the time of accession.
Labour migration has been a fear at the time of earlier enlargements
although it has always proved to be exaggerated. It may be that
some transitional period is desirable for sound economic reasons
as well as on presentational grounds. We see this issue, too,
as one to be resolved in negotiation before accession.
94. The total costs
of meeting the acquis, even after lengthy transitional
periods in the sensitive areas of the environment and health and
safety and social standards, might in the case of Poland reach
some 3-4 per cent a year of national GNP over several years. Costs
of this magnitude would absorb entirely the EU's funding for enlargement.
It is clear that EU funding will need to be substantially augmented
by resources from the international financial institutions and
other private sources.
INSTITUTION
BUILDING
95. We attach great
importance to the development of strong, capable and honest administrations
in all the Member States and the applicant countries. The judiciary
and the civil service are the key institutions whose capabilities
will determine the effectiveness of the implementation and enforcement
of Community law and practice. Without these administrative structures
funds will be wasted or mis-applied or even used corruptly. Building
such institutions and the supporting structures of a flourishing
civil society, including importantly a strong sector of non-governmental
organisations (NGOs), should be given a higher priority than in
the past in the programmes of aid from the EU to the applicant
countries.
96. We are encouraged
that the Commission is adjusting the Phare programme so that it
becomes principally directed to preparing the applicant countries
for accession. Like the Structural Funds, the Phare programme
needs to be made less bureaucratic and more effective in its implementation.
The split of Phare funds 30:70 between institutions and infrastructure
investment grants able to be used as co-financing for loans from
the international financial institutions are welcome developments.
97. We admired the determination
of the Polish authorities to train not just a top élite
but a substantial corps of bureaucrats able to do business with
the Commission and to handle the operation of the acquis.
We think that the Community institutions and the national governments
of the applicant countries should promote, by funding training
and by job exchanges, a strongly rooted understanding of the role
of an open and efficient civil service in a democracy.
NATO
98. We are concerned
at the apparent lack of coordination with regard to costs to the
countries planning to join both NATO and the European Union. We
believe it is vital that those working on the enlargement of the
EU and the parallel enlargement of NATO should ensure that the
total costs of these two processes which could involve heavy burdens
on the accession states are given proper consideration and coordination.
TIMING
ISSUES
99. We do not support
"the regatta approach"[24]
to opening negotiations with the applicants for accession. It
might have some short term diplomatic advantage but once substantive
negotiations began the real differences in readiness for accession
could not be disguised or ignored. Hopes of early progress would
have been raised only to be dashed. We think that negotiations
should begin early in 1998 with those countries which have been
found by the Commission to be in a position to meet the Copenhagen
criteria within the medium term: the 5+1 approach deserves to
be approved by the Luxembourg European Council.
100. A further consideration
which might sway both the existing Member States and the applicant
CEECs in favour of the 5+1 approach is that enlargement up to
20 could be more easily and quickly agreed than enlargement to
a greater number. This arises from the failure of the Treaty of
Amsterdam to deal comprehensively with institutional[25]
change. A Protocol[26]
was agreed to the effect that the Commission would comprise one
national of each of the Member States, but this is conditional
on the modifications of the weighting of votes in the Council.
The Protocol also requires the convening, at least one year before
the membership of the Union exceeds 20, of a conference to carry
out a comprehensive review of the composition and functioning
of the institutions. We think that the changes envisaged by the
Protocol for the membership of the Commission and the weighting
of votes in the Council should be agreed well in advance of any
accession. However, certain Member States, (particularly Belgium,
France and Italy), appear to favour more substantial institutional
reform before any further accessions take place. In our view,
institutional reform must be tackled promptly so that it cannot
be used as a pretext for delaying enlargement.
101. An enlargement
involving not more than five Member States would be likely to
avoid the delay associated with more substantial Treaty revisions.
The prospect of a quicker first enlargement has obvious attractions
for the countries named in Agenda 2000 as the first five.
If all six of the 5+1 were ready to accede together it would become
necessary to undertake, as a matter of urgency, a comprehensive
review of the composition and functioning of the institutions.
102. The applicant countries,
other than the 5+1, need to be convinced of the continuing good
faith of the Union in advancing their accession as soon as they
are ready: a later start in their negotiations need not entail
a later accession date. These countries also need to be made aware
of the precise criteria which they will have to meet before their
negotiations for accession can be started. The suggested European
Conference can be expected to play an important part in giving
the reassurance required but we think that the atmosphere in which
continuing bilateral and multilateral discussions outside the
Conference are held will also be important.
103. We believe that
the economics and the politics of the process of enlarging the
Union are inextricable. The prospect of accession has stimulated
reform and given impetus to the often painful processes of transition
and building democratic institutions and market economies in the
CEECs. To appear to postpone or delay accession beyond what is
strictly necessary for the benefit of both sides will put at risk
the success of the enterprise. Danger could come from outside
the applicant countries from a shrivelling of foreign direct investment
and from inside by disillusion and political instability. The
virtuous circle of political reform strengthening economic reform
and speeding the movement towards accession which has been apparent
in recent years must not be slowed or reversed.
104. The Committee considers
that Agenda 2000 raises important questions to which the
attention of the House should be drawn, and makes this Report
to the House for debate.
22
11th Report, Session 1995-1996, HL Papers 86, 86-I. Back
23
Paragraph 116. Back
24
Paragraph 71 above. Back
25
The only matter conclusively decided was the upper limit (700)
placed on the membership of the European Parliament. Back
26
Protocol on the institutions with the prospect of enlargement
of the European Union. This
Protocol refers to the modification of the weighting of the votes
in the Council "whether by re-weighting of the votes or by
dual majority". Back
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