Opinion of the European Economic and Social Committee on:

- the "Proposal for a Council Regulation establishing common rules for direct support schemes under the Common Agricultural Policy and support schemes for producers of certain crops" (2003/0006 (CNS)), and

- the "Proposal for a Council Regulation amending Regulation (EC) No 1257/1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and repealing Regulation (EC) No 2826/2000" (2003/0007 (CNS))

(COM(2003) 23 final - 2003/0006 + 0007 (CNS))

(2003/C 208/17)

On 10 February 2003 the Council decided to consult the European Economic and Social Committee, under Article 37 of the Treaty establishing the European Community, on the above-mentioned proposals.

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 25 April 2003. The rapporteur was Mr Strasser; the co-rapporteur was Mr Kienle.

At its 399th plenary session on 14 and 15 May 2003 (meeting of 14 May), the European Economic and Social Committee adopted the following opinion by 82 votes to 27 with 15 abstentions.

1. Introduction

1.1. The agricultural policy decisions taken by the Berlin European Council (March 1999) in the context of Agenda 2000 continued the reform process begun in 1992 and laid down the framework conditions for the CAP in the 2000-2006 period. The decisions envisaged a CAP more oriented towards the markets through a reduction in institutional prices, a shift in financial expenditure towards direct payments, and consideration of environmental requirements. In addition the European Commission was instructed to undertake a mid-term review (MTR)(1) involving various time-limits and mandates, should market developments make this necessary.

1.2. In its Communication of 10 July 2002 on the MTR the Commission stated among other things that much had been achieved since the beginning of the reform process in 1992, the market balance had improved, and a sound basis had been established for enlargement and the then current WTO negotiations.

2. Content of the reform proposals

2.1. On 22 January 2003 the European Commission presented the legislative proposals for a fresh reform of the CAP, taking account of the conclusions of the Brussels European Council of October 2002 and of the lively debate which followed the publication of its Communication on the MTR, e.g. in the Council, the European Parliament and the EESC. The reform is intended "to give farmers a long-term perspective for sustainable agriculture". The Commission groups its reform proposals under the following headings:

- stabilising markets and improving common market organisations;

- decoupling of direct aids - establishment of a "single farm payment", cross-compliance;

- modulation and degression of direct payments;

- consolidating and strengthening rural development.

2.2. The rules on compensatory payments are to be consolidated in a new regulation. A large number of existing regulations would be withdrawn. The new rules should come into force from 1 January 2004. Only the system of modulation is to come into force later, in 2006.

2.3. As regards the planned changes to the common organisation of the markets in cereals, rice, dried fodder and the milk and milk products sector, the Commission has presented specific legislative proposals which will be discussed by the Committee in separate opinions(2).

2.4. Farmers receiving the single farm payment must set aside 10 % of arable areas for 10 years (without the possibility of rotation and without the possibility of growing energy crops as hitherto). Holdings of up to 20 hectares and holdings with ecological crops are to remain exempt from this. To promote the cultivation of energy crops a payment of EUR 45 per hectare (up to a maximum of 1,5 million hectares) is planned.

2.5. The core of the reform proposals presented by the Commission is the decoupling of nearly all direct payments from their current assessment criteria (e.g. by head of livestock or by hectare of cultivated land). The payments for arable crops (with a range of exceptions), for cattle and sheep, and for milk from 2004/2005, are to be consolidated into a single payment largely based on past reference values (average of the years 2000, 2001 and 2002). In contrast to the summer 2002 proposal, the Commission is recommending only a 50 % partial decoupling for starch potatoes.

2.6. For nuts, the Commission proposes to replace the existing system with an annual flat rate payment of EUR 100/ha, which may be topped up by the Member States.

2.7. The decoupled single farm payment is to be broken down into "payment entitlements" in order to facilitate their transfer. Each entitlement will be calculated by dividing the appropriate reference amount by the number of hectares (including forage area) which gave rise to this amount in the reference used. The entitlements (tantamount to surface area premiums) could be transferred to another farmer in the same Member State with or without land, and would therefore be negotiable.

2.8. The granting of the farm payment related to surface area and other direct payments is to be made dependent on compliance with a set of legal standards for environmental protection and animal welfare as well as for food safety and occupational safety (Annex III) and the maintenance of "good agricultural conditions", to be determined individually by the Member States (Annex IV) (cross-compliance).

2.9. Instead a farm advisory system is to be introduced which would initially be obligatory for those farms which receive more than EUR 15000 per year in the form of direct payments or which have a turnover of more than EUR 100000 per year. This advisory system should help farmers to meet the standards of a modern, quality-oriented agriculture.

2.10. Taking account of the decisions of the Brussels European Council, the Commission proposes an obligatory degression and modulation - changed in relation to the July 2002 version - to apply from 2007 (start of the next financial perspective). However, this should make it possible not only to transfer resources to the second pillar (rural development), but also to cover the further funding needs of new agricultural market reforms. A progressive and differentiated reduction in direct payments (see table below) is now planned. The proposal for capping direct payments at EUR 300000 per farm has been dropped. Under the draft regulation all direct payments are first to be reduced by the general reduction rate, with part of the amount being refunded to smaller farms.

>TABLE>

2.11. In the context of the planned degression, a percentage of the resources saved through the reduction (which will rise from 1 % in 2007 to 6 % in 2011) will be available for measures to develop rural areas; by far the major part, however, would be used for new agricultural market reforms and to provide funds for exceptional situations.

2.12. The Commission proposes to raise the amount of funds for assisting the development of rural areas, and to broaden the scope of this Community policy by introducing new measures for farmers.

2.13. The Commission suggests that funds be made available to promote quality production and in the form of financial support for producer organisations for consumer information and advertising of products which are produced under quality programmes.

2.14. The Commission also proposes to support farmers through a degressive subsidy over a fixed period, to make it easier for them to adapt their farms to the standards laid down in the EU legal provisions on environmental protection, food safety, animal welfare and occupational safety (maximum of EUR 10000 per farm and per year, for a maximum of five years degressively). In addition, there is to be support for the consultation of farm advisory services (maximum EUR 1500) and for improved animal welfare (maximum EUR 500 per head of stock per year, for a maximum of five years).

3. General comments

3.1. This opinion will deal with questions of principle concerning the reform proposals (the horizontal regulation) and with the proposals for new measures to promote the development of rural areas.

3.2. A number of critical comments on the Mid-term review of the CAP can be found in the EESC opinion of 11 December 2002. The Commission proposals clearly go beyond the mandates of the Berlin European Council, and the expected market development for most products do not appear to justify a far-reaching reform of the CAP.

3.3. The Commission is now also basing its proposal for far-reaching reform on the decisions of the Göteborg European Council of 16 June 2001 (EU strategy for sustainable development) and the Brussels European Council of 24 and 25 October 2002 (agreement on the introduction of direct subsidies in the new Member States).

3.4. For the Committee, it is crucial that the multifunctional role of European agriculture be supported in any further reforms. Sustainable farming must be safeguarded in disadvantaged regions too, to avoid a loss of function with far-reaching consequences for the regional economy, employment and population levels.

3.5. The Brussels European Council decision on the one hand offers greater certainty for planning up to and including 2013 by laying down the financial framework for measures under heading 1a (market organisation measures). However, the agricultural budget is strictly limited and this seriously restricts the scope for further steps to reform the CAP; this requires efficient handling of the funds. These restrictions were adopted not for agricultural policy reasons but on purely fiscal grounds. The EESC considers that they neither reflect nor are based on the budget ceiling of 1,27 % of GNP. Rather, they are linked to enlargement, further steps to reform the market organisation system in the framework of the WTO, and the need to strengthen rural development policy and should be considered in that light.

3.6. The EESC acknowledges that improvements have been made to specific points in comparison with the proposals contained in the Communication of 10 July 2002 (for example on modulation or on the farm advisory system).

3.7. The EESC notes that the Commission has presented analyses of the effects of the reform proposals alongside the legislative proposals themselves. These analyses comprise six impact studies, which still focus, however, on the proposals made in connection with the Communication on the MTR. In March 2003 these were supplemented by two further internal studies which considered the changes necessitated by the legislative proposals. However, these studies are based on an unascertainable assumption of market stability, and no region-specific analyses were carried out, for instance on the possible repercussions in disadvantaged areas.

3.8. The Commission deduced from the studies submitted in January that the reform proposals would clearly improve market balance, have a positive effect on farm incomes, make it possible to simplify the settlement of premiums and improve market profits for beef and veal.

3.9. The most recent studies also confirm the frequently expressed fear that the proposed increase in quotas will result in corresponding falls in prices for farmers or that the production of oilseeds may further decline. It is also interesting that the forecast real increase in income up to 2009 per labour unit would be smaller if the reform proposals were implemented than without reform. Here it should be noted that the accepted rises in incomes are mainly due to the fall in employment.

3.10. The Commission also justifies the need for a fresh reform of the CAP by the fact that the existing payment system often dissuades farmers from producing farm produce for which market demand exists, does not provide adequate incentives for quality production and tempts farmers into producing surpluses. However, these arguments contradict the Commission's statement that great progress has been made through the reforms hitherto and that the market balance has improved. Moreover, it should not be forgotten that the overwhelming majority of farmers have made great efforts in recent years to hold their own amid fiercer competition and to meet the high quality and food safety requirements on the part of consumers.

3.11. Simplifying the administration of the CAP, and particularly the management of premiums, is mentioned as an important objective. The EESC does indeed regard this objective as correct, but has serious doubts and foresees considerably more red tape for farms and the agricultural administrations. This applies above all to the new farm payment, the rules on transferability and the requirements of cross-compliance. Farmers would thus face considerable extra work and expenditure, which could lead to a fall in profitability and in specific cases also to smaller farms being given up. The EESC also calls for care to be taken to ensure that the practical application of new measures does not lead to excessive red tape.

3.12. In a number of opinions the Committee has come out in favour of ensuring multi-functionality and of the principle of function-oriented direct payments. This calls for reconsideration of the various CAP instruments from time to time, and if necessary their adaptation to changed requirements. The EESC takes the view, however, that important elements of the reform proposals, such as the proposed farm payment or the additional reduction in milk prices are not helpful for ensuring the multi-functionality of European agriculture.

3.13. The EESC would point out that further falls in agricultural production, or possibly even the abandonment of cultivation in individual regions, would have major long-term consequences for upstream and downstream economic sectors. It would also have a knock-on effect on regional economies and employment as a whole, which could seriously exacerbate the problem of high unemployment in many rural areas. These adverse repercussions would not merely undermine the development potential of many rural regions, but also the important objective of social cohesion; they could also affect the protection of the natural environment and the landscape.

3.14. The EESC must point out that the instruments used to achieve the objectives of the review would not be not suited to the particular situation of agriculture and livestock farming in the outermost regions. There must therefore be a specific study in which appropriate measures are put forward for these areas.

3.15. The Commission expects the implementation of its proposed reforms to have positive effects on the quality and safety of foodstuffs. In a number of opinions the EESC has emphasised the need for society's expectations in foodstuffs production to be met. It has made it clear that there is an undivided responsibility running right through the food production chain.

3.16. The EESC considers that the Commission should take account of the conclusions of the EU Summit of 24 and 25 October 2002 which state that the needs of producers living in the disadvantaged regions of the present EU-15 should be safeguarded and that multifunctional agriculture must be maintained in all areas of Europe in accordance with the conclusions of the 1997 Luxembourg and 1999 Berlin European Councils.

3.17. The EESC perceives the conflict of goals as difficult to resolve, in that on the one hand producer prices are to be increasingly brought into line with the world market price, while on the other production standards are being continuously raised. It has already(3) pointed out that, given the production situation in the EU Member States, it is always more difficult for agriculture to meet its multi-functional remit under world market conditions. Higher standards/requirements for multi-functional agricultural production must also be properly safeguarded against imports that fail to meet these European standards and requirements and thus distort competition. The EESC sees this as a basis for the long-term social justification for a "recoupled" rather than decoupled financial transfer under the CAP to multifunctional European farmers. The EESC further stresses the importance of effective international protection of designations of origin and geographical indications (PDO, PGI) against imitations which harm European agriculture.

3.18. The EESC, referring to the WTO trade talks round, came out inter alia in favour of defending important measures in the "Blue Box"(4). There is a contradiction if the Commission declares that measures in the framework of the "Blue Box" are to be defended, yet advocates decoupling on the grounds of WTO constraints.

3.19. The EESC stresses the importance of defending the essential instruments of the CAP, such as adequate external protection, thus helping to safeguard the multi-functionality of European agriculture.

4. Specific comments

4.1. Decoupling

4.1.1. Decoupling, as the core of the reform proposals, is also at the centre of the political debate. In its opinion of 11 December 2002, the EESC fully explained its scepticism and criticism. In several opinions it has examined in depth the future development of direct payments and has not yet had any satisfactory response to its proposals. It regrets that the Commission has not come up with any genuinely European alternative to the farm payment proposal(5). The Article 58 option would apply only at regional level.

4.1.2. The proposed decoupling can undoubtedly give farmers greater decision-making freedom (not totally geared to the payments), more flexibility and greater simplicity. In the EESC's view, however, there would be considerable disadvantages which must be looked at critically:

- The planned farm payment focuses on a retrospective period which, instead of removing existing disadvantages and imbalances, would in fact exacerbate them.

- The Commission proposal would disadvantage those farms which have to expand - it could be especially harmful to many young farmers just taking over a farm.

- The planned decoupling would have negative effects due to increased speculation in production rights and on the land market, also leading to new property-type rights, which would lead to social tensions within agriculture.

- There would be a threat to maintaining production in certain production branches and/or regions (for example, cattle farming in pasture areas and disadvantaged regions); this would endanger the objective of sustainable farming throughout the EU.

- Within agriculture, distortions of competition could be expected if farmers with high farm payments switch to sectors not hitherto eligible for payments, e.g. from cattle-rearing to pig-rearing or from cereals to vegetables.

- The CMOs, and quantity regulations in particular, would lose their ability to guide the markets since the planned farm payment would, inter alia, no longer relate to reference quantities, with the risk of large fluctuations in production and prices.

- The agrifood industry and in particular SMEs are concerned about the security of supply of raw materials at local level, which could diminish or even disappear altogether as a result of decoupling.

- Social acceptability of the financial transfer to agriculture would not be strengthened as hoped, since people would not be able to identify the services for which the future farm payments are granted, as they would take the form of "money vouchers" without sufficient reference to the farming activity actually carried out on each farm.

4.1.3. Direct payments also have the function of rewarding services which society expects of farmers, but which are not compensated, or only partly so, by market profits. A range of these services are automatically linked with production and are its by-products (such as keeping the landscape accessible through cultivation, high standards in production, etc.); the national solutions set out in Article 5 of the draft regulation and the frameworks set out in Annex IV do not add up to a European solution.

4.1.4. In its opinion on the future of the CAP(6), the EESC demonstrated the causal link between production and multi-functionality, and concluded that this link should be regarded as a decisive argument for further developing direct payments. The EESC agrees with the Commission that direct payments must be duly justified and accepted by society. Accordingly it has repeatedly argued for function-oriented direct payments and for adjustments to be made to the organisation of this important instrument if conditions and requirements change fundamentally.

4.1.5. The proposed farm payment would in practice lead in many cases to a situation where the same services for society were rewarded in very different ways. It should be borne in mind here that farmers who maintain production have to observe all the rules of cross-compliance in order to ensure their claim to a farm payment, which can still be low because of the retrospective reference. On the other hand, a farmer who withdraws from production would have only a few non-specific obligations, which might vary by region, in order to keep his land in a "good agricultural condition", but can still claim a high farm payment under the new system. It is feared that farming as an activity, and hence also production, are being increasingly devalued.

4.1.6. Under Article 58 of the draft regulation the Member States are to be given the option to define a certain balance between individual payment entitlements and regional or national averages. This could lead to a significant simplification in calculating and administrating aid, and could help to mitigate problems arising with the farm payment for the land market. Clearly, however, the Commission saw no chance of getting such a rule through politically at European level, since it would bring about enormous changes in financial flows between Member States and in income ratios between holdings and between regions.

4.1.7. The EESC would point to the danger that, despite the proposed partial decoupling, many farms will stop producing starch potatoes and opt for crops with less risk and capital investment, which could have serious adverse repercussions in some regions. The Committee is opposed to the reduction in the support for durum wheat, as such support is essential for maintaining production in areas where it is traditionally grown and where there are few production alternatives. It is in favour of a new instrument to support the production of nuts, but regards the proposed level of support as not enough to make this produce competitive with imports from non-EU countries.

4.1.8. These problems have been at the root of the EESC's repeated proposal to make a precise assessment of other possibilities for further development of direct payments. The EESC asks yet again why the Commission has not examined a support system combining basic aid with product-related elements. This could on the one hand involve compensation for multi-functional services in a sustainable form, and on the other ensure the economic and productive function of agricultural holdings, which is of particular importance for disadvantaged regions. Many of the problems associated with the Commission proposal could be avoided with such a system.

4.2. Cross-compliance (CC)

4.2.1. The EESC has repeatedly called for uniform and better implemented EU-wide provisions on food safety, occupational safety, environmental protection and animal welfare. This must also apply to the legal provisions on health and safety in the workplace, the protection of young people at work and protection from risks. The CC regulation proposed by the Commission could be a useful instrument in getting closer to this goal.

4.2.2. The EESC reiterates its call for the standards to be clear and unambiguous and to be applied effectively and uniformly throughout the EU. It is also necessary for the CC rules to be practicable, red tape to be kept under control and duplication of checks to be avoided.

4.2.3. The Commission proposes that the granting of direct payments be subject to compliance with 38 EU regulations and to keeping the land in "good agricultural condition". Failure to comply with these conditions would result in a reduction of the direct payments by 10-100 % depending on the seriousness of the infringement.

4.2.4. The EESC would point out that individual provisions would not apply to all farms equally, for example in connection with the habitat or bird protection directives or in the field of health. A question of equal treatment and legal certainty for agriculture thus arises, especially since only some of the regulations can be monitored through checks on farms.

4.2.5. The EESC would point out that proving compliance with the CC standard will place a considerable burden on farmers. At all events, farms' own expenditure, including on documentation, will rise sharply. The EESC therefore considers that a reasonable transitional period to allow farms to adjust to the CC system is both necessary and justified.

4.2.6. One aim of the Commission's proposal is administrative simplification, bringing the current Integrated Administration and Control System into line with the new provisions on direct aid and with checks on cross-compliance and good farming practice. However, the EESC would point out that the administration and control burden could actually increase red tape. To reduce bureaucracy, the legal provisions to be complied with should be restricted to those which are strictly necessary for achieving the aims of the CC standards.

4.2.7. The same applies to the requirements in the field of "good agricultural condition". Here too, those provisions that are necessary to maintain multi-functional agriculture and are also objectively checkable in practice should be defined as requirements. Some of the proposed requirements seem more difficult to implement (e.g. maintaining soil fertility or soil structures).

4.2.8. For the purposes of simplification it is therefore essential to set priorities for controls and to involve farmers' and other professional organisations in developing farm support and advisory services that will work in conjunction with the authorities and encourage voluntary forms of certification.

4.2.9. In this connection the EESC would reiterate that high standards in EU agricultural production must not be undermined by competition-distorting imports, i.e. products from third countries must also consistently fulfil the objectives of cross-compliance, animal welfare and food safety.

4.3. "Farm advisory system" (FAS)

4.3.1. The Commission has further developed its proposal from the MTR Communication for a Farm Audit and is now proposing that an obligatory farm advisory system be introduced.

4.3.2. The EESC understands that the Member States will be allowed some leeway in organising the introduction of the proposed. The EESC has argued that such systems should be offered on a voluntary basis and an incentive system should be created to that end. Advice should cover not only compliance with the statutory standards, but also continuous improvement of the economic, environmental and social situation of farms.

4.3.3. The EESC would point out that participation in such a farm advisory system would entail additional costs for farmers. It is therefore important to offer farmers the possibility of support, as envisaged in the Commission's proposal for rural development. In the context of farm advisory services, the Committee calls for special attention to be paid to training and certification instruments for self-employed and employed work. The EESC would stress the vital role of agricultural organisations and trade unions in helping farmers and farm workers to undertake training and refresher courses, and in advising them.

4.4. Degression and modulation

4.4.1. Some marked changes have been made compared with the July 2002 proposals. Besides the shift of funds to the second pillar of agricultural policy (modulation), a shift within the first pillar (degression) is now also planned. The EESC regrets the Council's failure to make a decision on the financial statement for the second pillar of the CAP; under these conditions there is no point in discussing a specific percentage figure for an agricultural budget transfer to the second pillar. The reduction in direct payments is more differentiated depending on the amount of the payment. On the other hand, the original proposal lacks an upper limit, and this is an advantage for larger farms. This means, as the EESC proposed, that effects related to farm size, e.g. cost degression, would at least begin to be taken into account. However, no account was taken of the farm employment criterion.

4.4.2. Modulation and degression is not to apply to the new Member States until 2012. The EESC assumes, therefore, that the resources generated by modulation for the second pillar will be spent only in the existing 15 Member States.

4.4.3. According to Article 10, the Management Committee for Direct Payments would be entitled, under the procedure referred to in Article 82(2), to modify the degression percentages. Since each change would have far-reaching consequences, the EESC has reservations about such authorisation.

4.4.4. The EESC would point out that the proposals on degression should be seen in direct relation to the planned price reductions. Both measures taken together would lead in many cases to serious income losses for individual farms. Particularly affected would be farmers whose income is derived exclusively from farming.

4.5. Set-aside and carbon credit

4.5.1. The existing system of set-aside, with the element of rotation and the possibility of using set-aside land for renewable raw materials, has markedly eased the "traditional" agricultural markets. The Commission's reform proposal means a long-term set-aside for ten years, without the possibility of rotation or use for renewable raw materials.

4.5.2. The EESC is in favour of retaining the possibility of rotational set-aside. As hitherto the alternative should be allowed of growing energy crops instead of set-aside. If land needs to lie fallow for many years for nature conservation reasons, appropriate offers should be made through the agri-environmental measures.

4.5.3. In the EESC's view, the planned subsidy for energy crop cultivation amounting to EUR 45 per hectare is a first positive sign. However, in view of the still excessively low subsidy and without the use of set-aside land, it is doubtful whether the stated objective of 1,5 million hectares can be achieved.

4.5.4. The EESC endorses the idea that farms with up to 20 hectares of arable land and farms engaged in organic production should be exempted from the set-aside obligation as hitherto.

4.6. New measures for rural development

4.6.1. The EESC has repeatedly called for measures in favour of rural development to be strengthened. It regards it as essential for the possibilities of all the Structural Funds also to be used for this. It is also important because a comprehensive approach to rural policy is needed to achieve positive development overall.

4.6.2. The Committee is in favour of a substantial follow-up regulation to Regulation (EC) No 2826/2000 on information and promotion actions for agricultural products on the internal market. The marketing promotion planned in the context of rural development would be too restrictive and would essentially confine promotion to microprojects.

4.6.3. The Brussels European Council (October 2002) laid down the financial framework for agricultural expenditure up to 2013. Whereas a ceiling was agreed for heading 1a (market organisation expenditure), no such ceiling exists for headings 1b and 2 (rural development).

4.6.4. The EESC regrets that, in the planned redistribution from the first to the second pillar, even in the 6th year after the start of modulation only EUR 1,5 billion more will be available for rural development measures. Assuming that the political will is there, additional funds for rural development could be mobilised by using the generally available financial framework (never fully exhausted in earlier years), thereby achieving a better balance.

4.6.5. The new rural development measures proposed by the Commission are mainly intended to support farmers in their efforts to meet standards and aim increasingly at quality production. This is an important function. However, the Committee points out that no adequate budgetary commitment has been made for the measures concerned.

4.6.6. The EESC welcomes in principle the proposal for new accompanying measures to promote food quality, to provide support for fulfilment of production conditions and to promote animal welfare measures in accordance with the tried-and-tested agri-environmental measures.

4.6.7. Should farmers have recourse to the new accompanying measures in accordance with their objectives, the additional funds of maximum EUR 1,5 billion will scarcely be enough. This means that the Commission's declared aim of improved rural development will not be achieved.

4.6.8. The EESC supports the idea of allowing as of now compensatory payments under Article 16 of Regulation (EC) No 1257/1999 in connection with the application of Natura 2000 measures. However, it would argue for similar handling of equivalent matters in the future, such as the application of the framework directive on water resources.

4.6.9. The introduction of a new support for farmers opting for quality systems must not be incompatible with receipt of other existing types of support within programmes under accompanying measures.

5. Summary

5.1. The EESC accepts the need to adjust the CAP to changed requirements. In its own-initiative opinions it addressed in detail the further development of direct payments to farms. It rejects an abrupt system change through the transfer of the previous area- and animal-related premiums to the "single farm payment" proposed by the Commission. A reduction in the link between market regulation and production entails the risk of more instability for farming, especially in disadvantaged regions. The EESC regrets that the Commission has not followed up its suggestion for a basic aid payment plus product-related subsidies instead of a farm payment.

5.2. The EESC considers that the present proposals for the farm payment and cross-compliance will unfortunately not provide a satisfactory solution to the question of how the considerable demands made on agriculture by society (through high European standards) can be met at a time when the agricultural markets are being liberalised (objective of the WTO negotiations). There also remains the concern that young people will continue to drift away from agriculture in many European regions. It is also sceptical as to whether the present proposals will meet with lasting public approval.

5.3. In the EESC's view, the newly proposed cross-compliance instrument can help to ensure that regulations on food safety, occupational safety, environmental protection and animal welfare are put into practice uniformly across the EU. The cross-compliance rules must, however, be practicable and not require excessive administrative outlay.

5.4. The EESC considers that the reform proposals should place more emphasis on voluntary measures and/or incentives. Thus use of any farm advisory system should therefore be voluntary. Nor should the reform target an obligatory 10-year set-aside, but should retain the principle of rotational set-aside on a voluntary basis, especially as this has gained general acceptance by both farmers and society as a whole.

5.5. The EESC firmly supports an expansion of the second pillar of the CAP, namely the development of rural areas. Measured against the Communication of July 2002 on the mid-term review, the legislative proposals for reforming the CAP are clearly a backwards step in this respect. Moreover, supplementing the second pillar by modulation alone would weaken the complementarity between the two pillars of the CAP. With regard to improving product quality, food safety and environmental protection the proposals are a step in the right direction. Although adequate resources are not provided for this, the Committee believes that these could be increased in the next reform of the Structural Funds.

Brussels, 14 May 2003.

The President

of the European Economic and Social Committee

Roger Briesch

(1) See the EESC opinion on the Mid-term review of the Common Agricultural Policy, OJ C 85, 8.4.2003.

(2) OJ C 85, 8.4.2003.

(3) EESC own-initiative opinion on "A policy to consolidate the European agricultural model", OJ C 368, 20.12.1999, pp. 76-86.

(4) See the EESC opinion on the Mid-term review of the Common Agricultural Policy, OJ C 85, 8.4.2003.

(5) The term used by the Commission - "single farm payment" - is misleading, since the amount paid per farm would not be uniform, but would vary considerably on the basis of the reference to earlier years.

(6) OJ C 125, 27.5.2002.