Select Committee on European Communities Eighteenth Report


17 March 1998

  By the Select Committee appointed to consider Community proposals, whether in draft or otherwise, to obtain all necessary information about them, and to make reports on those which, in the opinion of the Committee, raise important questions of policy or principle, and on other questions to which the Committee considers that the special attention of the House should be drawn.



9984/97 European Commission Communication Agenda 2000
VI/1117/97 European Commission Directorate-General for Agriculture (DG VI) CAP 2000 Working Document Rural Developments


  1.    "In 2008 agricultural production in the European Union of 21 or more members will be very different from today-no longer subsidised-except in specific areas to preserve or enhance the environment and contribute to rural economies and enterprise."[1]-an ideal expressed by the Minister of Agriculture which we support. This Committee has long argued for European agriculture to be market-orientated and for production controls to be phased out[2]. It is a disappointment to us that the Common Agricultural Policy (CAP) aspects of the Commission's Agenda 2000 Communication for a "stronger and wider Union" do not go further than they do to achieve this goal and so make the CAP, in the Prime Minister's words, less of "a manifest absurdity which discredits Europe"[3].

  2.    The CAP elements of the Communication are claimed by the Commission to be a further reform in the direction of market liberalisation and competition in part necessitated by forthcoming enlargement of the Union and the World Trade Organisation (WTO) round. The reform takes further the 1992 "MacSharry"[4] reforms which cut support prices for some products and introduced compensation payments. They also introduced the environmental and social "accompanying measures". Agenda 2000 continues the approach of reducing some commodity prices and providing compensation to farmers for the reduction in revenue. The Commission's initiative is welcome insofar as it sets the CAP on the track towards liberalisation, but the proposals fail to live up to previously encouraging indications of policy made in Madrid and Cork[5]. The reports from these two meetings argued that there was an inescapable need to realign the Community's agriculture for the competitive world expected after the next WTO round. This realignment would limit scope for manoeuvre in relation to price policy and imply that the social and environmental goals of the CAP would now need to be met by other policy instruments.

  3.    The Agenda 2000 CAP package as a whole has recently been examined by the House of Commons' Select Committee on Agriculture[6]. We have decided to focus on the rural development and rural environment aspects of the Communication.


  4.    The Agenda 2000 Communication follows a series of reform proposals and discussion documents. The Commission's Agricultural Strategy Paper, presented to the Madrid European Council in December 1995 outlined the need for an integrated rural policy to accompany reform of the CAP in the direction of internal and international competition and the liberalisation of trade. The First Cohesion Report of November 1996 similarly advocated policy to enhance the economic potential and environmental value of rural areas. Most important was the declaration which came from Commissioner Fischler's conference on rural development, held in November 1996 in Cork, Ireland[7].

  5.    This Committee has examined Agenda 2000 before in relation to the financial consequences of enlargement of the Union[8]. Our opinion on the CAP has been expressed time and again[9]-most recently in our report on the EC tobacco regime[10]. We have also previously examined the subject of rural society[11] as we have the agri-environmental dimension[12]. We return to these subjects in the context of reiterating our previously expressed views that the large part of the CAP-the commodity regimes-must be reformed by opening up to world markets as swiftly as possible.

The proposals in Agenda 2000

  6.    The Agenda 2000 Common Agricultural Policy proposals as we have seen them are set out in volume I "For a stronger and wider Union", section III[13], published in June 1997. Agriculture forms only one part of the proposals. For the agricultural sector, the Commission suggests lower prices for some products, greater decoupling of support from production and more emphasis on rural environmental and rural development measures. These proposals were more fully summarised in the Government's explanatory memorandum:

  7.    "Arable Crops

    -    Reduction of cereals intervention price by 20 per cent (24 ecu (£16.24) / tonne) in one step in 2000.

    -    Non crop specific area payment at 66 ecu (£44.66/tonne) (multiplied by cereals reference yields of the 1992 reforms). This payment would be lowered if market prices were sustained at a higher level than currently foreseen. Represents a 22 per cent increase for cereals (from current 54 ecu (£36.54) / tonne) but a reduction for oilseeds (31 per cent) linseeds (37 per cent) and proteins (8 per cent), despite the supplement of 6.5 ecu (£4.40)/t on the last of these. Silage cereals (mainly maize) would be excluded from the regime. Durum wheat supplementary aids would remain unaffected.

    -    The normal rate for obligatory set-aside would be zero and penalty set-aside abolished. Voluntary set-aside would continue and attract the non crop specific payment rate.

    -    Member States would have flexibility to subject the area aid for crops and set-aside to environmental conditions.


    -    Intervention prices reduced to expected world price levels over 2000-2002 with adaptation of import/export management measures. Increased private intervention.

    -    Significant premium increases: suckler cow from 145 to 215 ecu (£98.11-£145.47)/head; beef special premium--young bulls one payment increased from 125 to 368 ecu (£84.58-£248.99)/head; steers 2 payments increased from 109 to 232 ecu (£83.49-£156.97)/head.

    -    Introduction of a dairy cow premium of 70 ecu (£47.36)/head.


    -    Milk quota regime retained and extended from 2000 to 2006.

    -    10 per cent support price cut (not to world levels) over 6 years.

    -    Dairy cow premium supplemented by a further 145 ecu (£198.11)/head, adjusted according to milk yield.


    -    Possibility of differentiated CAP payments and limits on payment either as a ceiling on direct aid per holding, or as a national maximum envelope of direct aid, allowing Member States to decide on its distribution.

  Rural and Agri-environmental policy

    -    Existing agri-environmental and forestry payments to be brought together with structural measures such as Hill Livestock Compensatory Allowances (HLCAs) and farm capital grants as the basis of a single rural policy financed within the Agricultural Guideline. Greater emphasis to be placed on targeted agri-environmental schemes, possibly including higher rates of co-financing"[14]. Consideration may be given to transforming compensatory allowances[15] into "a basic instrument to maintain and promote low-input systems"[16]

  8.    The rural development and agri-environmental paragraphs in Agenda 2000 thus lacked detail. On rural development, this information was however later supplemented by a Commission working document Rural Developments[17] and by appendix 1 to the Government's evidence[18] which added what detail they had learnt from the Commission since the publication of Agenda 2000. The Commission's implementing proposals are expected to be published on 18 or 25 March 1998. The indications we have had from the Government and the Commission as to those proposals may be summarised as follows:

  9.    The Commission's proposals include the simplification of the Structural Funds' Objectives by reducing the current seven Objectives to three.

  10.    Objective 1 (promoting the development and structural adjustment of areas whose development is lagging behind) would remain the same as at present, but the qualifying criteria, particularly the criterion relating to GDP, would be applied very strictly. Support for rural development would form part of the integrated development programmes for these areas, as at present. The Guidance Section of the FEOGA would fund the agriculture measures in these programmes.

  11.    A new, consolidated Objective 2 would contain some similar measures to the old Objective 5b but would include rural, as well as urban and industrial areas in need of structural readjustment. The Commission has said that the coverage of rural areas would be less than under the current Objective 5b. The ERDF, the ESF and the Guarantee Section of the FEOGA (and possibly FIFG) would support the Objective 2 programmes, the interventions by the Funds being carried out in a co-ordinated fashion.

  12.    Objective 5a (promoting rural development by speeding up the adjustment of rural structures within the framework of CAP reform) which applies throughout the Community and Objective 5b (promoting rural development by facilitating the development and structural adjustment of rural areas) which applies in designated areas, would be abolished.

  13.    A new, horizontal measure with the following objectives would be introduced: (i) adaptation of structures to meet the challenges of the WTO, enlargement and future financial perspectives; (ii) more active environmental policy; (iii) economic diversification for job creation. This would be effected by a single legal instrument, combining the types of measures covered by the current accompanying measures (agri-environment, forestry and early retirement regulations) and Objectives 5a and 5b. Some of these existing measures might be adjusted or expanded in the new instrument. The range of measures available might not be solely farm-based. They would be financed from the Guarantee Section of the FEOGA from within the guideline. The accompanying measures are currently funded from the Guarantee Section, whereas the Objectives 5a and 5b structural measures are funded from the Guidance Section. The new measure would be "implemented in a decentralised way at the appropriate level, at the initiative of Member States"[19]. This appears to mean the idea, trailed by the Commission after the Cork conference, that Member States would have available a menu of rural development options. Member States would be able to select those menu options which best suited them and they would finance them from a global allocation, with rates of assistance varying according to the options selected and according to the needs of the areas or groups to which assistance was given. This measure has sometimes been referred to as "Objective 0".

Structure of this report

  14.    In part two of this report we summarise the views of the witnesses who gave evidence to our enquiry. A list of witnesses is printed as Appendix 2. In part three we give our opinion and make some recommendations on the issues raised. These are summarised in part four. The members of Sub-Committee D (Agriculture, Fisheries and Food), which conducted this enquiry, are listed in Appendix 1. A glossary is provided in Appendix 3.

1   The Minister of Agriculture, the Rt Hon Dr John Cunningham, MP, speaking at the 52nd Oxford Farming Conference, 6 January 1998. Back

2   See especially European Communities Committee, 16th Report (1990-91): Development and Future of the Common Agricultural Policy (HL79-I) and 12th Report (1995-96): Enlargement and Common Agricultural Policy Reform (HL 92). Back

3   The Prime Minister, the Rt Hon Anthony Blair, MP, speaking in the Hague, the Netherlands, 20 January 1998, reported in The Daily Telegraph, 21 January 1998, p 1. Back

4   The MacSharry reform round was examined in European Communities Committee, 16th Report (1990-91): Development and Future of the Common Agricultural Policy (HL 79). Mr MacSharry was Commissioner for Agriculture and the reform round over which he presided is commonly known by his surname. Back

5   See para 4 below. Back

6   House of Commons' Select Committee on Agriculture, 2nd Report (1997-98): CAP Reform: Agenda 2000 (HC 311). Back

7   The text of the Cork Declaration is available on the Internet at Back

8   European Communities Committee, 10th Report (1997-98): Financial Consequences of Enlargement (HL 41). Back

9   See especially European Communities Committee, 16th Report (1990-91: Development and Future of the Common Agricultural Policy (HL 79-I) and 12th Report 1995-96): Enlargement and Common Agricultural Policy Reform (HL 92). Back

10   European Communities Committee, 13th Report (1996-97): The EC Tobacco Regime (HL 73). Back

11   European Communities Committee, 24th Report (1989-90): The Future of Rural Society (HL 80-I). Back

12   European Communities Committee, 14th Report (1992-93): Environmental Aspects of the Reform of the Common Agricultural Policy (HL 45). Back

13   The text of Agenda 2000 is available on the Internet at Back

14   Explanatory Memorandum on the CAP aspects of Agenda 2000, submitted by the Minister of Agriculture, the Rt Hon Dr John Cunningham, MP, 9 September 1997. Back

15   Ie the less favoured area payments. Back

16   Agenda 2000, Volume 1, part III, 4, p 33. Back

17   The text and maps of the working document are available on the Internet at NB The text is dated July 1997 but was first published on 7 November 1997 and was not available in an English paper version until January 1998. Back

18   Printed on page 131 of this volume. Back

19   Agenda 2000, Volume 1, Part III, 4, p 33. Back

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