Opinion of the Economic and Social Committee on 'The agricultural aspects of the Commission's Communication "Agenda 2000"` (98/C 73/21)

On 2 October 1997 the Economic and Social Committee decided, in accordance with Rule 23(3) of its Rules of Procedure, to draw up an opinion on 'The agricultural aspects of the Commission's Communication "Agenda 2000"`.

The Section for Agriculture and Fisheries, which was responsible for preparing the Committee's work on the matter, adopted its opinion on 6 November 1997. The rapporteur was Mr Bastian, the co-rapporteur, Mr Wilms.

The Economic and Social Committee adopted the following opinion at its 350th plenary session of 10 and 11 December 1997 (meeting of 10 December 1997) by 93 votes to 23 with 9 abstentions.

1. Introduction

1.1. The proposed reforms of the common market organizations (COM) in the arable crop, beef/veal and milk sectors come at a time when agriculture is subject to the following influences:

- a predicted rise in the world's population of about 1 billion people over the next ten years, as well as growth in the effective demand for foodstuffs (particularly in Asia);

- the resumption in 2000 of negotiations on the liberalization of international agricultural markets under the auspices of the World Trade Organization (WTO) and in accordance with the Uruguay Round agreements;

- the probable accession to the EU of countries of central and eastern Europe (CEEC), as well as Cyprus;

- the continuation of European partnership with the countries of the southern Mediterranean (inter alia through the establishment of a free-trade area with these countries by the year 2010), a policy of vital importance for the development and stability of this area, as well as for the future of EU Mediterranean products.

1.2. In Agenda 2000 the Commission comes out strongly in favour of the increased competitiveness of Community agriculture in order 'to ensure that Union producers take full advantage of positive world market developments` (). It therefore proposes to deepen and extend the 1992 reform 'through further shifts from price support to direct payments, developing a coherent rural policy to accompany this process` ().

2. General assessment

2.1. The Committee welcomes Agenda 2000 as a basis for a comprehensive debate. The European Union, EU farmers, EU industrialists and their counterparts in the applicant countries, all need a clear vision of what the future is likely to hold for the common agricultural policy (CAP).

2.1.1. The Committee considers that the agricultural aspects of Agenda 2000 provide a sufficiently detailed basis for further discussions of the changing face of CAP and for the adoption of appropriate decisions. Any decisions taken will help to lay down the direction of future agricultural policy and will inevitably have to take account of the future developments outlined in paragraph 1.1 and the effects these might have on European agriculture.

2.2. Whilst generally endorsing the objectives assigned by Agenda 2000 to the future CAP, the Committee is convinced that unanswered questions remain and that the ways in which these objectives are to be realized lend themselves to criticism.

2.2.1. The Commission sets out a number of 'policy` () objectives for the future CAP, viz.: boosting the competitiveness of Community agriculture, externally and internally, particularly in the light of the forthcoming WTO negotiations; giving consumers guarantees about food safety and food quality; ensuring a decent standard of living for the farming community and contributing to the stability of farm incomes; incorporating environmental objectives into the CAP; promoting sustainable agriculture and renewable energy sources; creating alternative sources of income for farmers and their families; simplifying EU legislation (particularly for the purposes of CEEC membership).

2.2.2. Whilst emphasizing that the fundamental CAP objectives laid down in the Treaty of Rome will continue to remain valid in the future, the Committee broadly approves Agenda 2000's objectives although it considers that they should not be artificially ranked since they are all important. The Committee regrets however that the Commission has not dwelt on two aspects of agricultural policy which it considers to be of paramount importance:

- encouraging greater use of the land, bearing in mind specific regional features and taking into account the impact of the CAP on the sectors upstream and downstream of agriculture, which are important for the development of rural areas, and considering in particular the strengthening of the economic organization of producers and the maintenance and development of a real policy for the processing and marketing tools existing in these areas; in practice this means encouraging a more balanced distribution over the countryside of productive farming activities and the chain of ancillary activities, through a fairer spatial and social distribution of opportunities for development and growth, with special reference to rural areas, and taking account of the impact of agricultural policy on each link in the chain and related effects on income distribution;

- keeping a close watch on employment in the agricultural sectors further upstream and downstream as well as in rural areas as a whole, so as not to aggravate the situation, bearing in mind that job-creation is a priority in the EU.

2.2.3. The Committee considers that the EU and Member States must - not least in the interests of safeguarding jobs - do everything to further improve the productivity and competitiveness of agriculture, encourage young farmers to set up in agriculture and promote the creation of skilled jobs in upstream and downstream agricultural sectors and in craft-based industries.

2.2.3.1. The Committee considers that in order to achieve these objectives (improving productivity and competitiveness of agriculture, encouraging young farmers to set up in agriculture and creating jobs), the necessary steps must be taken to encourage the creation of cooperatives and support lines for those already in existence, given the decisive contribution of farm cooperatives to the economy of rural areas, and the value added they give to farm produce through direct placement on the market: this constitutes the best possible guarantee for farm incomes and, consequently, of employment and spatial planning objectives.

2.2.3.2. Moreover, agriculture must continue to act as a locomotive in the development of the rural economy (for instance by strengthening upstream and downstream links and by forging closer ties between jobs in agriculture, craft-based sectors and industry ...). In the view of the Committee, this is how agriculture will contribute to the stabilization of the rural population in EU-15 during the next decade.

2.2.3.3. The Committee also recognizes that the CEEC are in a different situation in that they are faced with serious under-employment in agriculture. The Committee is most concerned about the way 'social issues` are being handled in these countries in the context of agricultural modernization. The Union needs to be particularly vigilant about these matters both before and after their accession.

2.2.4. The Committee also queries whether the Commission's proposed budgetary framework is capable of consolidating existing common policies within an enlarged EU.

2.2.4.1. The extra appropriations proposed by the Commission for Structural Funds and economic and social cohesion may seem inadequate, especially in the light of the enormous financial needs of the applicant countries if they are to restructure and modernize their economies, particularly in the agricultural and agri-food sectors.

2.2.4.2. As far as agricultural policy is concerned, the Committee fears that the Union's aim of 'stabilizing` farm incomes cannot be achieved with the measures proposed by the Commission in Agenda 2000. The Committee regrets that the Commission has not studied the possible effects of its proposals on trends in farm incomes, as well as on the future structural development of agriculture and on consumers, as it has done in the case of market trends.

2.2.5. Finally, the Committee wonders whether the Commission has adequately gauged the impact on the European economy of the transition to the third stage of Economic and Monetary Union (EMU) and the single currency when it stipulates an average annual growth rate in the EU of 2,5 % between 2000 and 2006 as the basis for its assumptions. The Committee would like to know to what extent the EU's financial perspectives, especially for the EAGGF Guarantee Section, would be jeopardized if growth falls below 2,5 % (cf. 5.1). The Committee also attaches considerable importance to the development of the agri-monetary regime during the third stage of EMU and will closely scrutinize the Commission's proposals on this subject.

2.2.6. The Committee urges that all these points be properly taken into account when the future of the CAP is being discussed. The Committee considers that it is vital for the EU to secure the broadest possible consensus on the future direction of the CAP based on a discussion of Agenda 2000. A consensus is needed both for CAP reform and to defend the EU's common agricultural policy objectives and instruments during the forthcoming international trade negotiations.

2.3. In the Committee's opinion, what is at stake is the EU's agricultural identity, which is built on the production of wholesome, high-quality foodstuffs (particular attention should be paid to local specialities, given their importance in spatial planning and employment), protection of the environment and a living countryside.

2.3.1. The Committee considers that the EU must maintain its multi-functional vision of agriculture when it reforms the CAP. In Europe, agriculture's role is not simply to produce wholesome, high-quality food and non-food produce. It also plays a vital role in land-use and spatial planning, and is a sine qua non for the economic and social development of rural areas, and for the conservation of natural resources and the landscape.

2.3.2. In this context the CAP is above all a policy for managing agricultural and food markets. However, it has considerable implications in social, environmental and land-use terms. And it is its attempt to embrace all these fields that singles out EU agricultural policy. As confirmation of its international role, the Committee would like the EU to preserve this approach to the CAP and to highlight all the work done in Europe to satisfy the expectations of consumers and the public at large with regard to agriculture.

2.3.3. Given the complexity and fragility of the balances underpinning the CAP, the Committee would also like the reform to be global. It must take account of all sectors, and not simply those for which the Commission has submitted proposals in Agenda 2000 (cf. 3.5).

2.3.4. All the remarks and suggestions put forward in this opinion spring from the resolve to promote this model of a multi-functional agriculture sector in the Union.

3. Comments on individual sectors of production

The proposals set out in Agenda 2000 must be analyzed in the light of the Commission's forecasts of agricultural market trends for the years 2000 to 2006, as presented to the Council of Agriculture Ministers on 21 and 22 April 1997 in the report entitled CAP 2000 (see Appendix 2) ().

3.1. Cereals

3.1.1. From the year 2000 the Commission is proposing a one-step 20 % reduction in the cereals intervention price to a level of ECU 95,35/t in order to consolidate the single market and pave the way for participation in the expected expansion of the world market.

3.1.1.1. The lower price would be (partly) offset by the establishment of a non-crop specific area payment set at ECU 66/t (). The Commission proposes to lower this payment 'if the market prices are sustained at a higher level than currently foreseen` (). The Committee would nevertheless like to know what the Commission's forecasts are in this area. It would also like to know what the Commission's analysis would be if the trend were reversed, i.e. if market prices were to fall below the level covered by the proposed compensation (ECU 95/t).

3.1.2. The Committee considers that by 2006 the common organization of the cereals market should:

- enable the EU to export worldwide while making only limited use of the export refund mechanism,

- steer clear of the use of set-aside as far as possible,

- protect EU farmers against the volatility of world prices.

3.1.3. The Committee considers that to satisfy these three conditions it will not be necessary to lower the intervention price for cereals by as much as 20 %. But if this happened, the new intervention price would be too far below the average cereals price on international markets (approx. ECU 125/t () for red soft winter for 1991-1996) and existing common market regime instruments would only come into play in the event of a sharp fall in prices (in which case intervention would operate as a 'safety net`). This being so, farmers and all other operators in the sector would have to learn to protect themselves against the volatility of world prices without the benefit of the day-to-day protection afforded by the common market regime.

3.1.4. Although the Commission believes that world cereal prices should normally be above the proposed intervention prices, the Committee considers that it would be dangerous for the EU to agree to the total abolition of cereal export subsidies at the next WTO negotiations. The effectiveness, in terms of international competitiveness, of a reduction in the European intervention price might in fact be weakened by a downward drift in the currency of the EU's principal competitor, the United States. It is therefore very important for the EU to maintain room for manoeuvre in terms of exportable cereal tonnages (with refunds) and to secure the globalization of authorized tonnages for all types of cereals ().

3.1.5. The Commission is also proposing the abolition of aid for silage cereals, and particularly silage maize. The Committee considers that there is a need to properly evaluate the impact of this abolition on the competitiveness of beef and dairy production and on the maize sector as a whole. The Committee therefore calls upon the Commission to undertake a comprehensive study of the implications of its proposal regarding silage maize.

3.1.6. Finally, the Committee welcomes the Commission's set-aside proposal. It hopes that the promising outlook on the international markets will allow the EU to steer clear of this instrument in future whilst emphasizing that set-aside should in principle be retained as an instrument for managing production. In this context, and given the links between the development of certain agri-industrial products and set-aside, the Committee would ask the Commission to make provision for a specific programme for non-food renewables and for making greater use of biomass for energy production and as a raw material for industrial purposes, in order to contribute to the safeguarding of jobs in rural areas and the reduction of CO2 emissions.

3.2. Oilseeds and protein crops

3.2.1. By proposing a non-crop specific area payment of ECU 66/t, the Commission would in reality be reducing significantly current aid for oilseeds and protein crops (although the latter would receive supplementary aid of ECU 6,5/t).

3.2.1.1. The Commission claims that its proposal seeks to a) simplify rules and regulations, b) ensure that aid is neutral in terms of crop rotation selection, and c) give a 'green` tinge to aid in respect of the 'boxes` of the Uruguay Round agricultural agreement.

3.2.1.2. The Committee believes that the proposal would nevertheless deprive the EU of an instrument for steering production: given identical costs but lower yields, it would become less advantageous (with the same premium) () to grow oilseeds and protein crops in the EU than to grow cereals.

3.2.2. If the Commission proposals were applied in their present form, they would most likely precipitate a sharp decline in the European area under oilseed and protein crops, even though the EU is only 50 % self-sufficient in vegetable oils and 20 % self-sufficient in oilseed cake. The Commission's proposals would thus jeopardize the fundamental strategy adopted 25 years ago by the EU at the time of the American soya embargo, namely to encourage the production of oilseeds and protein crops of European origin. The Committee would point out that some major international producers of oilseeds and protein crops (e.g. Brazil and Argentina) impose export duties on their producers, thereby hampering efforts to supply the Community market.

3.2.3. Since the prices of oilseeds and protein crops are already at world levels, there is no urgent or valid reason for the Commission to propose a radical reform in this sector concurrently with the one proposed for cereals (unless the possible budget savings on oilseeds/protein crops are an end in themselves). The expected benefits (simplification and 'de facto` termination of the Blair House Agreement) would seem to totally out of proportion to the other foreseeable effects. The Committee notes the paradox in wanting to shake off the shackles of the Blair House Agreement (which limits any extension of oilseed acreage in the EU) and yet possibly winding up with a shrinking of oilseed acreage.

3.2.4. The Committee considers that oilseed and protein crop production must continue to be the subject of substantial 'positive discrimination` vis-à-vis cereals between 2000 and 2006 so as not to jeopardize the future of an entire sector.

3.2.4.1. To this end the Committee proposes that complementary aid be given to prevent a massive switch from oilseed and protein crops to cereal production and to guarantee equilibrium between these various crops (and hence a satisfactory level of self-sufficiency in oilseed and protein crops). This complementary aid, which might take the form either of crop rotation grants or of a different type of aid for crops where there is a production shortfall (including oilseed and protein crops), should be conceived in such a way that it would enable the Union to remain free of Blair House constraints and so be able to prepare for CEEC accession, CEEC being agronomically well-suited to oilseed production. Since oilseed production in the CEEC is complementary to that of the Union, there is no cause for concern about competition between CEEC and EU products.

3.3. Beef/veal

3.3.1. The Commission is proposing a tapering off of 'effective market support` () of 30 %, bringing it down from the present ECU 2 780/t to ECU 1 950/t over the period 2000 to 2002. As compensation, annual headage aid would be gradually increased (rising to ECU 215 for suckler cows, ECU 368 for bulls, ECU 232 for steers, and introducing a payment of ECU 70 for dairy cows).

3.3.2. As the Commission itself explains in its report on CAP 2000 (), this proposal would bring the price of European beef (ECU 1 950/t) below the estimated price of American beef in 2000 (ECU 2 125/t). It would however remain above the expected price of beef in Australia (ECU 1 738/t) and, a fortiori, in Argentina.

3.3.3. The Committee considers that, even if the intervention price fell sharply, the EU would be unable to depend a priori on exports to offset the considerable imbalance expected in its beef market until 2006. All it could do would be to maintain its export market share and carve out a number of new high-value markets.

3.3.4. The Committee considers that the proposed strategy of bringing down official European prices to match world market prices does not take sufficient account of the specific role of beef farming in terms of quality, tracability, jobs, land-use, and the economic vitality of certain rural areas in Europe. In the view of the Committee the EU should give priority to stabilizing its internal market in terms of prices and supply (hence ensuring a stable income for its producers), whilst preserving the necessary flexibility to produce enough beef to supply its traditional export markets (North Africa, Near East and Russia for example).

3.3.5. The Committee considers that the EU will therefore have to tread carefully between measures designed to curb the quantities of beef produced and the reduction of official prices.

3.3.6. The Committee believes that a certain reduction of the official price is no doubt necessary to boost beef consumption and to close the price competitiveness gap between red and white meats (pigmeat, poultrymeat) which will have widened with the fall in cereal prices. Such a reduction might vary according to the categories of meat concerned. The Committee feels that there is a need for the Commission to undertake an analysis of the impact of lower cereal prices on beef and veal (as well as on sheepmeat).

3.3.7. The Committee is moreover opposed to the abolition of intervention and its replacement by private storage aid. This proposal is extremely sensitive given the likelihood of imbalances by 2000/2006 on markets (cf. Appendix 2) whose vulnerability has been shown up by the recent BSE crisis.

3.3.8. The Commission proposals must take account of specific regional features

3.3.8.1. The Committee urges that any future reform of the common beef/veal régime should take account of specific regional features and different systems of production in the EU.

3.3.8.2. Some European regions in fact engage in more extensive beef/veal production, particularly in regions specializing in veal-producing suckler herds. But, in the event of price reductions, according to current Commission proposals, the rise in compensatory payments would essentially involve a special payment for male bovines (SPMB), available principally to producers engaged in more intensive stockfarming. Europe's suckler herds and calves reared for breeding and slaughter will then inevitably bear the brunt of the fall in prices and will not receive any specific compensation, thereby leading the veal-producing suckler herd sector down a blind alley.

3.3.8.3. The Committee would point out that some Member States have called for greater consideration to be given to 'area` or other criteria as the basis on which to pay compensation for a further reduction in the official beef price. Hence the question of whether the effect of introducing per hectare folder premiums has been studied by the European Commission in any detail and why the subject of these premiums has not been addressed in Agenda 2000.

3.4. Milk

3.4.1. The Commission proposes that the quota system be extended until 2006. However, so as not to give dairy producers 'the impression that the present system with its intrinsic rigidities can last for ever`, it recommends the introduction of greater 'flexibility` () in the common milk market. The Commission suggests a reduction of 10 % in the official price of milk over the period in question and the introduction of a new yearly payment of ECU 145 per dairy cow to offset the fall in price (on top of the new aid of ECU 70 per dairy cow in the beef sector). The Commission feels that this flexibility will permit the EU to export over the period 2000-2006 while still honouring its commitments under GATT.

3.4.2. The Committee considers that the Commission proposal does not offer a clear road ahead for this sector. This is because it does not:

- provide a clear view of the future of milk quotas (given the difficulties posed by their allocation between Member States),

- release the pressure of the super-levy,

- ensure a real and lasting access to the world market,

- take into account the situation of less favoured regions.

3.4.2.1. It therefore leaves EU producers in a state of uncertainty, does not hold out a real solution to the difficulties facing operators, and does not give the CEEC a clear picture of the common régime to which they will eventually be subject.

3.4.3. The Committee urges the Commission to submit a more ambitious proposal. The new proposal must aim to provide a broader and more lasting basis for strengthening the sector's competitiveness and gaining greater access to international markets, while also stabilizing producers' incomes and securing continued milk production throughout the EU (and especially in disadvantaged and upland areas where milk production is so important).

3.5. Mediterranean products

3.5.1. It is unfortunate that the future of these products (tobacco, olive oil, rice, horticultural products, fruit and vegetables, wine) is not really analyzed in Agenda 2000. The Commission merely refers to past reports and to proposals on future reforms. By doing so, it excludes about 40 % of the Union's final production from its study of the future shape of CAP. The Committee calls upon the Commission to complete Agenda 2000 by making proposals for these sectors. Such action is particularly necessary to achieve the Agenda 2000 objectives of environmental improvement and rural development, given the importance of European agriculture in preserving the environmental and rural communities and in generating jobs.

3.5.2. The Committee would underline the importance of Mediterranean products for the EU in terms of employment, landscape conservation and cultivation and would refer to its different opinions on the subject, inter alia the opinion on the future of Community policy in the fruit and vegetables sector (), the opinion on the reform of the wine sector () and the opinion on the different options for possible reform in the olives and olive-oil sector ().

3.6. Production sectors in areas of extreme climates

3.6.1. The Committee is thinking in particular here of production in northern regions, which is characterized by permanent climatic disadvantages such as short growing and grazing periods, hard winters and freezing of the land. Long distances and scattered parcels limit the scope for structural adjustment. These factors push up costs in relation to output. With the reductions proposed by the Commission, market prices would not cover variable costs and would deter production.

3.6.2. The Committee points out the importance of agriculture as the backbone of the rural economy in the northern countries of the EU. The proposed price reductions would jeopardize the long-standing viability of farming in these regions.

3.6.3. The Committee calls for suitable measures to maintain adequate production incentives in northern regions (as well as in southern regions where there are extreme climatic conditions) - for instance by implementing the Committee's proposals whilst taking into account regional identities in different production sectors.

4. Comments on the strategy for preparing WTO negotiations and CEEC enlargement

4.1. Preparations for WTO negotiations

4.1.1. One aim of the Commission proposals is to ease the GATT burden on the EU (cf. Appendix III) and prepare for the forthcoming WTO negotiations.

4.1.2. The Committee notes that it would be in the interests of the European Union to avoid entering the next round of WTO negotiations with a purely defensive posture. In connection with the evaluation of the agricultural proposals set out in Agenda 2000, it is also of crucial importance that the Union can give its farmers a guarantee that the direct payments envisaged between 2000 and 2006 will not be called into question after these negotiations.

4.1.3. The Committee also calls on the EU, which already constitutes one of the most open markets in the world, not to jettison external protection where it is necessary and to make sure that its health and quality standards are properly respected during the forthcoming WTO negotiations. The Committee is well aware how high the stakes will be in future international negotiations on such subjects as the labelling of foodstuffs, genetically modified organisms and hormones. The Committee considers that the EU must encourage recognition of its food and health standards at international level. The Committee also shares the view of the Commission on the need to introduce world-wide environmental and social standards as well as take more account of consumers' interests.

4.2. Preparations for CEEC accession

4.2.1. The present opinion is limited to the agricultural aspects of CEEC accession The overall EU strategy towards applicant members is the subject of the general Committee opinion on Agenda 2000 ().

4.2.2. The enlargement of the EU to include CEEC will have a limited impact on the CAP between 2000 and 2006.

4.2.3. The Commission's analysis in Agenda 2000 bears out comments in the Committee's opinion on the implications for the CAP of CEEC accession (). Since the agricultural revival in these countries has been more sluggish than initially forecast by the Commission in 1995, possible CEEC surplus production will have only a marginal impact on surpluses in the EU-15 during the period covered by Agenda 2000 (see Appendix 4). The Committee considers that transition periods will be necessary before the CAP can be taken wholly on board by the CEEC. This is more to protect CEEC from competition from EU-15 agricultural enterprises and to allow CEEC to restructure their own agricultural industries, than the other way round. The Committee therefore considers that the budgetary implications of the first round of accessions will be minimal (between ECU 1.1 bn. and 1.4 bn. per annum out of the EAGGF Guarantee Section according to the Commission, with the CEEC not receiving any compensatory payments as their farm prices are set to rise after enlargement).

4.2.4. The pre-accession strategy proposed by the Commission is on the right lines.

4.2.5. The Committee considers that if the CEEC are to restructure their production systems and modernize their processing industries and marketing networks, they need help from Structural Funds rather than price support or direct income support for producers. The overhaul of the Phare programme (focused on training), the preparation of a package of pre-accession agricultural aid worth ECU 500 million per year, and the allocation from the Structural Fund budget of a general 'pre-accession` aid package of ECU 1 billion per year () from the year 2000, are appropriate proposals for preparing the CEEC for EU membership.

4.2.6. However, the Committee queries the level of Structural Funds the Commission would like to see allocated to those CEEC which will join the EU between 2000 and 2006 (cf. point 7.6.2). The loans proposed by the Commission seem to be inadequate in comparison with the financial needs of these countries.

4.2.7. Acceptance of the 'acquis communautaire` is a delicate question.

4.2.8. The Committee has deduced from an examination of Agenda 2000 that the Commission still favours the 'big bang` approach (the immediate extension of the single market to the CEEC). This presupposes that price differences between the CEEC and the EU-15 will have been bridged - a goal towards which the Commission proposals are working. However, by the year 2006, price differences will probably still exist, particularly in the sugar and milk sectors (and possibly the beef/veal sector). This potential situation raises a number of questions. Will the new EU members be entitled in this case to use intervention mechanisms? Will the EU be obliged, during a transition period, to introduce derogations from the rules of the single market? The Committee has already given its views on this subject in the aforementioned opinion. The Committee calls upon the Commission to clarify arrangements for the transition periods between accession and the total assimilation of the 'acquis communautaire` by the newly acceding states. The Committee considers in particular that the debate on milk should take place as soon as the Commission presents concrete proposals in this sector.

4.2.9. The Committee stresses the importance of giving aid to the CEEC, both under the Phare programme and via pre-accession funds, to prepare them for conditions in the EU, particularly in the fields of animal and plant health and to help them take on board food harmonization directives. The Committee calls upon the Commission to exercise special care when using Community loans to help CEEC in these areas so as not to skew conditions of competition in the European agro-food sector.

4.2.10. Enlargement will not create any difficulties for the EU in the fisheries sector.

4.2.11. The Committee notes the Commission's view that EU enlargement to include CEEC should not pose any 'serious problems` for the common fisheries policy (CFP). It approves the Commission's desire for the EU to pay particular attention to modernizing the fishing fleets of coastal applicant countries, as well as to establishing administrative structures necessary for accommodating the CFP. The CEEC will have to be given technical aid in these various fields, first during the pre-accession period and then as part of structural aid.

4.2.12. The Committee considers that the cost of integrating the agricultures of eastern Europe countries should be clearly identified in the Community budget.

5. Comments on the Commission's budgetary estimates for the CAP

5.1. The Commission proposes that the present method of calculating the agricultural guideline be maintained. In so doing it assumes that Community GNP will grow by 2,5 % per annum and inflation by 2 % per annum.

5.2. The Committee believes that it is essential for the EAGGF Guarantee Section to have the capacity to finance the proposed reform in an enlarged EU.

5.3. Reforming the common market regimes for EU-15 would, the Commission believes, cost around ECU 4,3 billion in 2006. The maximum cost of the first CEEC accessions would be ECU 4,5 billion. The Commission also puts the additional cost to the EAGGF Guarantee Section of introducing 'new accompanying rural development measures` and horizontal measures in the fisheries sector at around ECU 2 billion per year. Thus, an additional ECU 10,8 billion would have to be financed under the agricultural guideline in 2006.

5.4. The Commission considers, on the basis of its projections, that the present agricultural guideline trend will allow this additional cost to be covered easily. It even forecasts a margin of safety between agricultural expenditure and the agricultural guideline over the whole period (ECU 4 billion in 2006) so that it can 'cover market uncertainties and enable the reform of the common agricultural policy to continue before the end of the period covered by the financial perspective`. Provided the Commission figures () are watertight, they encourage 'budgetary optimism`. The Committee would nevertheless like to know whether pessimistic hypotheses would jeopardize the EU's capacity to keep within the agricultural guideline. The Committee would ask the Commission to undertake a full financial study of this question.

6. Comments concerning the ceilings, differentiation and conditions applicable to aid

6.1. On the ceilings, differentiation and conditions applicable to aid, the Committee feels that practical proposals from the Commission are needed for an appraisal to be possible.

6.2. The Committee will therefore await such proposals before taking a stand.

7. Comments on structural policy, rural development and environmental services

7.1. Structural policy

7.1.1. The Committee endorses the Commission proposals set out in the Agenda 2000 programme insofar as they cut red tape and promote the efficiency of the EU's structural policy. The development of rural areas must remain a central objective of Structural Fund intervention.

7.1.2. The Committee regrets that in its proposals the Commission has limited itself to describing the broad objectives of structural policy without specifying the measures which it is thinking of proposing. It seems clear that the Commission's basic objective is to improve the competitiveness of Community agriculture; for this, the Committee considers it absolutely necessary to have instruments for improving production structures, improving product quality and marketing, and reconciling efficient production with respect for the environment and animal welfare. Agricultural cooperatives, whose members are farmers, are often one of the few enterprises to maintain their presence in many farming regions. The Committee feels that this fact makes cooperatives the ideal instrument through which to channel its structural policies aimed at ensuring the viability of farms and the development of economic potential, with the objective of seizing any opportunities which are created and facing the challenges of the next few years with some guarantee of success.

7.1.3. The Committee finds that the proposals are a necessary but inadequate step towards reducing regional differences, supporting regions in the throes of economic reform, and further developing human resources throughout the Union, as Commission President Santer made clear in his speech presenting Agenda 2000 to the European Parliament on 16 July 1997.

7.1.4. The Committee is particularly pleased that the proposed reduction of objectives from seven to three will in future help to make European structural aid more effective. The Committee also assumes that previous aid for rural areas (under Objectives 1, 5a, 5b and Leader) will in future be continued under the new aid schemes for Objectives 1, 2 and Leader.

7.1.5. In this connection the Committee would point to the fact that agricultural workers are not adequately covered by pre-retirement schemes. Pre-retirement arrangements should be worked out in greater detail within the framework of the planned 'concentration` designed to cushion the impact of the general problems caused by on-going structural changes in agriculture.

7.2. Funding of structural aid

7.2.1. The planned funding of structural aid for the Fifteen during the period 2000-2006 (ECU 230 billion) will be modulated by geographical area in order to bolster structural support for disadvantaged regions, including the northern peripheral regions.

7.3. Objective 1 and 2 regions

7.3.1. The Committee particularly welcomes the Commission's plans not only to apply existing criteria, but also to develop a criterion that covers regions with very high unemployment. The Committee calls upon the Commission to propose as soon as possible a more precise definition of regions which will in future be eligible for aid under Objectives 1 and 2. The Committee likewise calls for statements on the future of the 'special arrangements` intended for the most northerly, sparsely populated regions.

7.3.1.1. The Committee welcomes the Commission's plans to make transitional arrangements for areas which will not qualify for structural aid in the future. Such arrangements will take into account the specific characteristics of such regions and will underpin the benefits reaped from previous structural aid.

7.3.1.2. At the present time however the Committee fails to see in practice how these transitional arrangements could be consolidated and urges the Commission to take practical steps to identify the regions in question and to draft appropriate proposals so that interested parties can be consulted on the actual provisions. This is true for peripheral EU areas as well as for very low population-density regions, as is made clear in Agenda 2000.

7.3.2. The Committee welcomes the Commission's suggestion that the Community 'Leader` initiative should continue, but would emphasize that it must be provided with sufficient resources and be applicable in all rural areas.

7.4. Objective 3 regions

7.4.1. The Committee welcomes the Commission's plans to encourage the development of human resources in regions outside Objectives 1 and 2 areas, so that the Member States in question can be helped to adapt and modernize their systems of education, training and employment.

7.4.2. The Committee would offer the Commission its active support and cooperation in framing adequate criteria and measures to help modernize labour markets in accordance with the planned employment programmes and the new employment chapter of the Amsterdam Treaty. The Committee would in particular draw attention to its expertise, past record and representativeness in rural areas, in the belief that it can help draw up effective, forward-looking guidelines for Europe's employment strategy in four areas: accompanying economic and social changes; lifelong education and training systems; active labour-market policies to fight unemployment; combating social exclusion. As pointed out above, the ESC expects the Commission to adopt prompt, concrete measures so that these goals can eventually be achieved.

7.5. The Cohesion Fund

7.5.1. The Committee is pleased that the Cohesion Fund, with due regard for Articles 130d and 104c of the Treaty, will be available in the future to help those Member States which are particularly weak in terms of structures and economic development.

7.6. Structural help for enlargement

7.6.1. The Committee supports the Commission view that those states which have opened accession negotiations should receive structural aid. The Funds should be sufficiently well-resourced to enable these important obligations of solidarity to be met.

7.6.2. The Committee is fully aware of the basic level of appropriations earmarked for the various instruments and therefore asks whether the planned funding (ECU 38 billion from the Structural and Cohesion Funds for 2000-2006 and ECU 7 billion for pre-accession aid) will be sufficient to cope with the structural problems of future Member States.

7.6.3. The Committee would ask the Commission how these sums have been calculated and what concrete problems are to be given priority.

7.6.4. The Committee is particularly interested in ascertaining how much is to be spent on the necessary adjustments to agricultural structures and agricultural social policies in 2000-2006 and what projects would be involved.

7.7. Simplification and enhanced effectiveness

7.7.1. The Committee welcomes all Commission efforts to simplify structural aid measures and make them more effective.

7.7.2. The Committee asks the Commission, however, how a one programme per region approach can actually promote simplification and achieve greater efficiencies. This question arises in particular because a number of different measures - partly co-financed through programmes under the EAGGF Guarantee Section - will no doubt continue to be implemented simultaneously in certain regions.

7.7.3. The Committee welcomes the Commission's intention to give back-up committees greater scope for action and sees this as an important step in making structural aid more effective.

7.7.4. The Committee doubts whether the necessary funds are available to carry through the Commission proposal seeking to involve the EAGGF Guarantee Section in co-financing programmes to promote the development of rural areas as part of structural policy (Objective 1 and Objective 2 regions).

7.7.5. On the other hand, the Committee supports the Commission's intention to focus the budget lines (particularly the ERDF, ESF, FIFG and EAGGF), on providing structural aid and promoting new targeted measures.

7.8. Development of rural areas

7.8.1. The Committee agrees with the Commission that further changes in 'market evolution, market policy and trade rules` will present new challenges, particularly for rural economies. These new relations will merely aggravate the acute economic development problems already existing today and require the most careful attention from European institutions and organizations.

7.8.2. The Committee does not however feel that concentrating the Commission's rural development policy on specific environmental measures, as described in Agenda 2000, is enough to provide lasting solutions to the wide-ranging problems of rural areas. This view is not at odds with the Commission's statements but seeks to encourage it to devise a new and effective policy to secure the sustainable development of rural areas based on economic projects with a real structural impact.

7.8.3. The Committee feels that the possibility should be considered of making rural development a separate priority in the structural policy charter, within which all the Structural Funds could be applied.

7.8.4. The Committee would point out the need for rural development to specifically include support for the agro-industrial and agri-food processing sector, and not only measures to improve technology but also, and especially, the promotion of research and development (R& D), quality, specialist training, marketing, etc.

7.8.5. The Committee would emphasize that agricultural and rural organizations within the European Union have a wide-ranging experience in rural development and already cooperate closely with European authorities in implementing European programmes (Leader, Adapt).

7.8.6. It would therefore be logical to make better use of these programmes and look at whether they are targeted effectively and properly.

7.9. The low level of funding earmarked for 'rural development` raises a number of question-marks

7.9.1. The Commission estimates that the cost of 'new rural development accompanying measures` and horizontal measures in the fisheries sector (FIFG) will come to ECU 2 billion in 2006. However, the 1998 preliminary draft budget earmarks more than ECU 3 billion for specific action taken under these accompanying and horizontal measures (Objectives 5a and 5b, FIFG, rural development actions taken under Objective 1). The Committee therefore concludes that the Commission is projecting a lower level of EU support for rural development directly linked to the activities of farmers (and fishing) in the year 2006. Does this not go against the general thrust of the proposed reform? The Committee calls upon the Commission to explain this point in greater detail?

7.10. Environmental action

7.10.1. The Committee endorses the Commission conclusions that 'a prominent role will be given to agri-environmental instruments to support a sustainable development of rural areas and respond to society's increasing demand for environmental services` ().

7.10.2. The Committee welcomes the proposal that 'targeted agri-environmental measures should be reinforced and encouraged through increased budgetary resources and, where necessary, higher co-financing rates` ().

7.10.3. The Committee welcomes the Commission's decision to emphasize in particular 'services which call for an extra effort by farmers, such as organic farming, maintenance of semi-natural habitats and cattle raising in upland areas` ().

7.10.4. Environmental measures should be integrated more effectively into common market organizations.

Brussels, 10 December 1997.

The President of the Economic and Social Committee

Tom JENKINS

() Agenda 2000, Rapid Text File IP/97/660 p. 6.

() Agenda 2000, Vol. I, p. 27.

() SEC(97) 819 final.

() The theoretical 'shortfall` of ECU 12/t for farmers would be easily made up for by gains in productivity and the current trend towards bigger farms.

() Agenda 2000, Vol. I, p. 29.

() Figure taken from information published by the International Cereals Council.

() The Union currently requires a higher level of export refunds for secondary cereals such as barley than for wheat.

() The introduction of specific aid of ECU 66/t will in fact result in an income shortfall of ECU 28/t for producers of oilseeds compared with the present situation (i.e. 2,3 times the cereal sector's loss of income as a result of partial compensation).

() Agenda 2000, Vol. I, p. 30.

() SEC(97) 819 final.

() Agenda 2000, Vol. I, p. 31.

() CES 94/95.

() OJ C 110, 2.5.1995.

() OJ C 287, 22.9.1997.

() OJ C 19, 21.1.1998.

() OJ C 75, 10.3.1997, p. 4.

() The Commission proposes that Structural Fund aid totalling ECU 45 billion be earmarked for the CEEC during the period in question.

() For the 2000-2006 period the Commission presents figures for all budget lines at constant 1997 prices, with the exception of the agricultural guideline which is expressed in current prices.

() Agenda 2000, Vol. I, p. 33.

() Agenda 2000, Vol. I, p. 33 and 34.

APPENDIX I to the opinion of the Economic and Social Committee

The following amendments were defeated during the debate:

Insert, after point 3.4.3, a new point 3.4 bis as follows:

'3.4bis Sugar

The sugar regime has not been reformed since 1968. The Commission now states that by 2005 the increasing EU-15 surplus will be 3,5 million tonnes plus a further 750 000 tonnes from the CEFTA countries.

Having stated that, it does not propose any action though the price paid for sugar is already well out of line with that for competing crops. The discrepancy will increase as a result of the proposals for these other crops.

In this sector too therefore reform is needed, as noted in 2.3.3. The Committee calls upon the Commission to complete Agenda 2000 by making proposals for this sector, particularly since the cost is very largely paid for by higher consumer prices.`

Reason

The sugar regime is becoming increasingly expensive as prices for beet become increasingly out of line with those for the reformed crops. The Commission has repeatedly put off reform, probably because the sugar regime is only a small charge on the Community budget (mainly as a subsidy to the ACP countries and the French Overseas Departments). The bulk is paid by a charge on consumer prices.

The Committee often prides itself in looking after consumer interests. We could be failing in our duty if we did not press for this reform.

Result of the vote

For: 35, against: 71, abstentions: 6.

Points 6.1 and 6.2

Replace by the following:

'The Committee calls on the Commission to put forward proposals, as soon as possible, on specific ceilings for direct payments and other provisions affecting farmers' incomes, along with criteria for differentiation aiming to apportion farm aid fairly among the different producers and regions.`

Reason

Reduced resources make it necessary to concentrate farm aid first and foremost on those in greatest need as opposed to unfairly increasing the wealth of a select few.

Result of the vote

For: 30, against: 65, abstentions: 17.

APPENDIX II

Agricultural market prospects until 2005 for the EU-15 and the ten CEEC, according to the European Commission (CAP 2000 report)

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APPENDIX III

Timetable by product of the export commitments of the European Union-15 (1)

(Commitments in volume terms)

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(1) Excluding food aid.

APPENDIX IV

Financial prospects for 2000-2006

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