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.
ORDERED
TO REPORT
CAP REFORM IN AGENDA 2000
THE
TRANSITION TO COMPETITION:
MEASURES FOR RURAL DEVELOPMENT
AND THE RURAL ENVIRONMENT
| 9984/97 |
European Commission Communication Agenda 2000
|
| VI/1117/97
| European Commission Directorate-General for Agriculture (DG VI) CAP 2000 Working Document Rural Developments
|
PART 1 INTRODUCTION
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.
Background
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.
Beef
- 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.
Dairy
- 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.
Modulation
- 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 http://europa.eu.int/en/comm/dg06/new/cork.htm. 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
http://europa.eu.int/comm/agenda2000/index.htm. 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 http://europa.eu.int/en/comm/dg06/new/cap2000/rd/index.htm.
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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