Opinion of the Economic and Social Committee on the 'Proposal for a Council Regulation on the financing of the Common Agricultural Policy` () (98/C 407/37)

On 4 June 1998 the Council decided to consult the Economic and Social Committee, under Articles 43 and 198 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Agriculture and Fisheries, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 9 July 1998. The rapporteur was Mr Bastian.

At its 357th plenary session (meeting of 9 September 1998), the Economic and Social Committee adopted the following opinion by 105 votes to three, with eight abstentions.

1. Introduction

1.1. Agenda 2000 sets out proposals for reforming the common market organizations for cereals, oilseeds and protein crops, beef and veal, and milk and milk products, together with cross-sectoral measures and the establishment of a rural development policy. The reform is to be accompanied by a revision of EAGGF Guarantee and Guidance funding of the CAP.

1.2. To implement the reforms, the Commission puts forward new budgetary estimates reflecting the cost of the market reforms and making the EAGGF Guarantee Section responsible for the new accompanying measures for rural development, horizontal measures for the fisheries sector, and pre-accession aid for the candidate countries.

1.3. The Commission thus proposes to transfer structural measures from the EAGGF Guidance Section to the Guarantee Section, to create new budget headings in the Guarantee Section, and to increase the market expenditure traditionally financed by the Guarantee Section.

1.4. The overall additional cost for the EAGGF Guarantee Section would be around ECU 4 000 million in the year 2006, including an extra ECU 3 150 million (at constant prices) for the reformed CAP, ECU 2 200 million for the new accompanying measures, and ECU 500 million for pre-accession aid, plus ECU 3 900 million for integrating the candidate countries in the CAP. The overall cost of the reform would be met from the agricultural guideline, and the method of calculating the guideline would remain unchanged.

2. General comments

2.1. The Committee notes the Commission's proposal for reforming the CAP as part of Agenda 2000, but would reiterate certain criticisms on the practical details, as expressed in its opinion on the agricultural aspects of the Commission communication 'Agenda 2000`.

2.2. In general terms, the Committee observes that the Commission puts forward the principle of reforming the financing of the CAP as an adjunct to the introduction of a rural development policy. However, the Committee is concerned at the complexity of the new financing system, and is worried about the balance between the wide range of measures to be financed by the EAGGF-Guarantee Section.

2.3. The Committee points out that the purpose of the EAGGF is to finance measures linked to agricultural production, and that the financing of market policy must remain entirely in Community hands.

3. Agricultural guideline

3.1. The Commission proposes that the method of calculating the guideline should remain unchanged, so that it will continue to increase in line with the economic growth rate, which the Commission estimates at 2,5 % per year. The Commission envisages that after inclusion of CAP reform expenditure, there will remain a financial margin of around ECU 4 000 million between its budget estimates and the guideline.

3.2. The Committee notes that the guideline is being retained. The guideline is vital for ensuring the long-term financing of the CAP and for guaranteeing the survival of farms throughout the EU. The Committee considers that the budgetary margin within the guideline must be preserved, given the importance of the reforms which the CAP is undergoing.

4. Financing of the common market organization reforms

4.1. The Commission proposes to reform the market organizations with a view to making EU farm prices more competitive. The drop in prices will be offset by an increase in direct aid. The cost of the market reform will reach ECU 4 300 million in 2006, and will be financed from the agricultural guideline.

4.2. The Committee thinks that use of the guideline to finance the increase in market expenditure is feasible, insofar as the growth rate of the guideline remains unchanged.

4.3. The Committee stresses the vital need for any market reform to be fully funded by the EAGGF-Guarantee Section. However, as stated in its opinion on the agricultural aspects of Agenda 2000, it deplores the fact that the Commission only proposes partial compensation for the price reduction envisaged for the various production sectors, and that no measures are proposed for Mediterranean products. The Committee points out that it called for full compensation for the price reduction, and thinks that this increase in expenditure should be reflected in the market policy strand of the financial perspectives for the CAP reform.

5. Inclusion of the new accompanying measures for rural development

5.1. The proposed reform also transfers structural expenditure from the EAGGF Guidance Section to the Guarantee Section, apart from measures for Objective 1 regions. This means that structural measures which have traditionally been financed by the Structural Funds will come under the agricultural budget.

5.2. The Commission thinks that this can be achieved thanks to the budgetary margin within the agricultural guideline.

5.3. The Committee notes the proposal to group market support and structural measures within the same budget.

5.4. Here the Committee stresses that all measures financed by the EAGGF-Guarantee Section - be they market measures or structural measures - must be directly linked to agricultural production.

5.5. At all events, the Committee warns against the risk of confusing two types of measures whose rationale and objectives, although complementary, are radically different.

5.6. The Committee stresses that the budget must make a clear distinction between these two types of policy, and must continue to differentiate between compulsory and non-compulsory expenditure.

5.7. The Committee adds that the grouping together of these two policies must in no circumstances strengthen one at the expense of the other. The Committee will be careful to see that this situation does not provide a smokescreen for reducing the portion of the agricultural budget allocated to market policy; this policy is the only means of ensuring price stability, and is the main instrument for protecting farm incomes.

5.8. The Committee stresses that rural development policy must complement market policy, and that the rationale underpinning market policy remains unchanged.

6. Financing of pre-accession measures

6.1. The Committee supports the accession of new Member States. It realizes that accession must be ushered in gradually by the use of pre-accession measures and - if necessary - transitional periods.

6.2. Given the importance of agriculture for the economies of the candidate countries, the Committee thinks that consideration should already be given to how these countries will participate in the CAP. The Committee feels that the establishment of pre-accession CAP measures is a necessary first step.

6.3. However, the Committee is worried that the pre- and post-accession measures are to be financed from the agricultural guideline for the 15 existing Member States.

6.4. The Commission believes that the budgetary impact of the pre-accession measures will be limited, and will stabilize at around ECU 500 million per year between the years 2000 and 2006.

6.5. The Commission also proposes to include expenditure on the participation of new Member States in the CAP from the year 2002 ('post-accession` measures). The budget for the new Member States would total ECU 3 900 million in 2006 (ECU 1 400 million for market policy and ECU 2 500 million for rural development measures).

6.6. The Committee is nonetheless concerned at the low level of expenditure envisaged for rural development measures, as these are important for the adjustment of the new Member States' farm structures. The Committee thinks that the sums which the Commission proposes for these structural measures are insufficient.

6.7. Irrespective of the level of funding for pre-accession aid and for participation of the new Member States in the CAP, the Committee stresses the importance of making a clear distinction between CAP expenditure for the EU-15 and for the new Member States. This distinction must be retained throughout the transitional period.

6.8. To this end, the Committee proposes the setting-up of a pre-accession fund. This would be a separate fund financed from the Community budget as a whole.

6.9. Turning to post-accession expenditure, the Committee adds that under no circumstances must the Commission take advantage of the inclusion of expenditure on the new Member States in the agricultural guideline in order to reduce CAP spending on the EU-15 and use it for measures to help the new Member States. Any additional expenditure for the latter must be obtained by increasing the agricultural guideline. The Committee stresses that the guideline intended for 15 Member States is not designed to provide CAP funding for 20 member states or more, and that it must be increased in the light of the GDP of the new members.

Brussels, 9 September 1998.

The President of the Economic and Social Committee

Tom JENKINS

() OJ C 170, 4.6.1998, p. 85.