Opinion of the European Economic and Social Committee on the "Communication from the Commission to the Council and the European Parliament on the Mid-term review of the Common Agricultural Policy"

(COM(2002) 394 final)

(2003/C 85/19)

On 6 December 2002 the Commission decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the above-mentioned communication.

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 14 November. The rapporteur was Mr Kienle.

At its 395th plenary session, held on 11 and 12 December 2002 (meeting of 11 December), the European Economic and Social Committee (EESC) adopted the following opinion by 82 votes to 3 with 10 abstentions.

1. Preliminary observations

1.1. The importance of the debate on the further development of the EU's Common Agricultural Policy (CAP) goes far beyond the economic and social concerns of the agricultural sector. Food safety, security of food supplies and consumer protection also enter into the debate. As by far the main user of land, agriculture has a considerable role to play in terms of both environmental protection and nature conservation and it is important for the development of attractive rural areas offering a good quality of life.

1.2. Agricultural enterprises have to satisfy and strike a balance between economic, environmental and social requirements, with due regard to the principle of sustainability and a European agricultural model that is geared to the promotion of a competitive, multifunctional agricultural sector. If agriculture is not economically successful, many of the social goals which it has been set will be impossible to fulfil.

1.3. There is no doubting the fact that in recent years agriculture and agricultural policy have come under the critical gaze of society on an unprecedented scale. Attention has been focused on food scandals and the conclusions to be drawn from these scandals. The need for better EU food legislation and overall quality assurance schemes has taken on a completely new significance both for farmers and the whole of the food chain. Farmers, the food industry, consumers and politicians have recently started to offer a constructive response to these challenges.

1.4. The EESC has carried out a detailed, up-to-date and proactive examination of the CAP and the operation of Agenda 2000 in a number of documents, in particular its own-initiative opinion on the Future of the CAP (20/21 March 2002) and its own-initiative opinion on a policy to consolidate the European agricultural model (20/21 October 2000). Close cooperation with the European Parliament's Committee on Agriculture and Rural Development has proved to be particularly valuable in this context. In addressing these issues, the EESC was seeking, not least, to exploit the heightened interest in these matters on the part of many individuals and organisations in order to provide the European model for a multifunctional agricultural sector with long-term political guarantees. The opinion set out below on the Communication from the Commission on the mid-term review of the CAP thus represents a continuation of the EESC's earlier approach to this issue.

1.5. The agreement reached at the Brussels Summit on 24 and 25 October 2002, which clears the way for the historic eastward enlargement of the European Union, and already clearly defines the CAP's financial framework for agricultural market regimes and direct payments in the period up to 2013, in no way alters the EESC's determination to examine in detail the observations and proposals put forward by the Commission in its Communications.

2. Key aspects of the Commission's Communication of 10 July 2002

2.1. The Communication refers to the mandate given by the Berlin European Council to the Commission to submit a mid-term review of Agenda 2000. The objectives are essentially the same as those set at the Berlin and Göteborg European Councils, viz.: a competitive agricultural sector; environmentally-friendly production methods and quality products; a fair standard of living and income-stability for farmers; preservation of cultural landscapes; simplification of agricultural policy and a socially-acceptable justification of support for the services provided by farmers. The Commission rejects the notion of abolishing support or renationalising the CAP; it likewise rejects the notion that EU agriculture should limit itself to a passive role.

2.1.1. The Commission's idea is that, following consultation of the EU institutions and interested parties, legislative proposals are to be submitted by the end of 2002/beginning of 2003.

2.2. The proposals provide for a further reduction in price-support for some agricultural market regimes. In particular, cereals and rice will be affected. The Commission takes the view that in such cases intervention is to form only a lower safety net which is rarely triggered. In return, compensatory payments are to be granted or increased. The Commission is also seeking to abolish the monthly increments for the cereal intervention price without any form of compensation. The abolition of intervention for rye is a further proposal. In the case of durum wheat and dried fodder, the current aid linked to production is to be reduced or replaced by income-support measures for farmers. For nuts, the Commission proposes introducing a permanent support system comprising a flat-rate payment which may be topped up by the Member States up to a given ceiling. In the dairy sector the Commission merely presents four different options for the future. Although the Commission makes no direct proposals in respect of oilseeds and beef, the impact which a possible decoupling and modulation would have on these products - and also on milk - is of the utmost importance.

2.3. The Commission proposes revamping the previous system of compensatory payments in respect of prices by introducing "decoupling". Payments for field crops, livestock premiums and, from 2005, compensatory payments for milk will be affected in particular. It is proposed that compensatory payments be decoupled from the current basis of calculation (e.g. per head of livestock or per hectare of cultivated land) and that they be paid directly to farmers in the form of an income-support payment (general "farm income payment"). Under the Commission's proposal, the size of the farm income payment will be geared to the level of EU compensatory payments made hitherto to a farm (historical basis). In future, however, new criteria are to be applied to all direct payments. These payments will thus be redefined and, to a certain extent, "recoupled" (see point 2.5 below).

2.4. The Commission is seeking to convert as many of the existing compensatory payments as possible into a general farm income payment, to cover field crops, legumes, starch potatoes, beef, milk (from 2005) and sheep. The Commission is proposing extensive changes to the organisation of the markets for rice, durum wheat and dried fodder. Current production quotas and planting rights are to be maintained. The Commission's guiding principle is that farmers should be given greater room for manoeuvre when deciding which crops to grow. In the case of set-aside, however, the rules are to be further tightened; the Commission proposes introducing compulsory long-term set-aside (10 years).

2.4.1. If farmers transfer, sell or lease out land, a proportionate amount of the farm income payment is transferred to the new farmer (equivalent to "per hectare-payments"). The Commission wants to ensure that, as a matter of principle, the decoupling of compensatory payments from production is not used to bring about a redistribution of payments between farms, types of products, regions or Member States; the aim is to ensure that present payments to farmers are, in principle, safeguarded. The Member States are, however, to be given the possibility of basing the calculation of the farm income payment in part on regional or national average values.

2.5. In future all direct payments are to be conditional on compliance with environmental, animal welfare, food safety and land-management standards (cross compliance). The direct payments are therefore linked to the observance of criteria in respect of "good farming practice". The Commission intends to put forward concrete proposals with a view to defining an EU framework for these standards.

2.6. The Commission also proposes that a system of farm auditing, relating to the observance of environmental, animal welfare, food safety and management standards, be introduced on a mandatory basis in the case of farms receiving more than EUR 5000 per year in direct payments (farm audits). It is proposed that a compulsory, 10-year, environmental set-aside scheme be introduced for arable land in place of the existing rotational set-aside scheme. In view of the fact that the production of energy crops on set-aside land is to be stopped, the Commission proposes the introduction of a "carbon credit"; this scheme, designed to promote climate protection, would involve the payment of per hectare aid in respect of land used for the production of energy crops.

2.7. The current system of voluntary modulation is at present only applied in the UK. It has been discontinued in France and abolished in Portugal, but Germany plans to introduce it from 2003. The Commission proposes that a system of "dynamic" modulation be made compulsory in all EU Member States from 2004. With this aim in view, the Commission proposes that direct payments to farmers be reduced progressively by 3 % per year. The maximum rate of 20 % would thus be reached in 2010.

2.7.1. The Commission further proposes the introduction of "franchises" totalling EUR 5000 in respect of the first two full-time employees and EUR 3000 in respect of any subsequent full-time employees; according to the Commission, this would mean that three-quarters of all farms in the EU would be exempt from the reductions in direct payments. The Commission also proposes that the direct payments paid to individual farms be capped at EUR 300000. This, together with the proposed franchise per employee, would have an impact on large farms; it is therefore essential to make a detailed assessment of the effects which these proposals would have on farms, jobs and regions.

2.7.2. According to the Commission, introduction of the system of modulation will not, in principle, result in Member States having to provide extra national funding for co-financing measures up to 2006, particularly since the rate of Community co-financing for agri-environmental measures (and the proposed animal welfare measures) is to be increased by 10 percentage points.

2.8. Under the Commission's proposals, savings brought about as a result of modulation are to be credited to the EU budget and subsequently redistributed to the Member States for use in rural development programmes (second pillar). Redistribution is to be based on criteria such as productive agricultural land, agricultural employment and prosperity. This may result in some shifts in the pattern of distribution between Member States. Savings made above the capped limit of EUR 300000 per farm plus the franchise may, however, be kept by the Member States to fund second pillar measures.

2.8.1. New aid measures, in particular the promotion of food quality, are to be introduced under the second pillar. Farmers participating in voluntary quality assurance and certification schemes are to receive aid. Promotion activities by producer groups and environmental quality programmes are to be supported accordingly.

2.8.2. The Commission would also like to provide assistance to farmers to enable them to observe new standards laid down in the fields of the environment, food safety, animal welfare and farm management in connection with a new EU-wide definition of "good farming practice". Aid is to be payable in the form of a degressive annual compensatory payment for a maximum period of five years. Farmers taking part in the farm audit scheme are also to receive support.

2.8.3. Finally, the Commission proposes to introduce animal welfare payments modelled on the agri-environment measures. In the case of both agri-environment measures and animal welfare measures, it is proposed to increase the rate of Community co-financing from the previous level of 50 % (75 % in Objective 1 areas) to 60 % (85 % in Objective 1 areas).

GENERAL COMMENTS

3. The role of the mid-term review in the context of Agenda 2000

3.1. As pointed out in the introduction, many of the issues now being considered in Commission communications and proposals on the mid-term CAP review have already been addressed by the EESC in its own-initiative Opinion on the Future of the CAP(1). The EESC was clear in its assessment of the scope of the Agenda 2000 decisions and the mandate of the mid-term review, pointing out that "the decisions taken under Agenda 2000 ... cover the period to the end of 2006. The mid-term review in 2002 and 2003 can make only minor adjustments to the existing regulations. A dependable framework is thus in place for the agricultural sector until the end of 2006".

3.2. The EESC continues to take the view that, at the present time, neither the review mandate laid down at the Berlin European Summit nor the expected market trends in respect of most products provide grounds for an extensive reform of the CAP. Also worth recalling are various remarks made in the past by the Commissioner for Agriculture to the effect that the mid-term review was a "review", not a "reform".

3.3. Under the decisions taken at the Berlin European Council in March 1999 on Agenda 2000, there is to be a review of cereals, oilseeds, milk and, if appropriate, beef in 2000-2003. This review will focus on market trends and the trend in EU expenditure on agriculture. Agenda 2000 did not make provision for any changes in EU agricultural funding under the mid-term review. An appraisal of the rural development programmes is to be made in 2003.

3.3.1. The Agriculture Council has also called for reviews to be carried out with regard to sugar, hops, olives, tobacco and the provisions governing small producers.

3.4. The Göteborg European Summit in June 2001 obliged the CAP to pursue the goal of sustainable development. Increased emphasis is to be placed on "encouraging healthy, high-quality products, environmentally sustainable production methods, including organic production, renewable raw materials and the protection of biodiversity". The Göteborg European Council did not, however, issue any specific mandates for the mid-term review of Agenda 2000.

3.5. The EESC thinks that the reactions from political parties, associations and the media to the communication on the mid-term review - irrespective of whether they endorse or reject the document or have mixed feelings - are reflected in the remark from the Schuman Institute that the reforms constitute the biggest change in the CAP's 45-year history. The proposals set out in the mid-term review thus go far beyond Agenda 2000. The EESC interprets this as meaning that the proposals will provide an impetus, in particular, for reforms after 2007.

3.6. In the EESC's view, it is thus necessary for a thorough and open debate to be held, before the legislative proposals are formulated, in order to assess both the priority attached by EU farmers to having a stable and reliable CAP and the extent to which such a far-reaching reform of agricultural policy needs to be introduced - earlier than anticipated - at the present time. The EESC believes that there is an urgent need for the discussions and reform proposals to take account also of the possible impact on the agri-food industry and cooperatives. Such a debate is also necessary because Agenda 2000 not only defines the framework for action for EU farmers, but also provides the basis for the forthcoming enlargement of the Community and the WTO negotiations.

3.7. The EESC does, however, firmly believe that it will not be possible to hold a full debate until the Commission has presented comprehensive appraisals of the impact of its proposals. There is a problem, in the EESC's view, if the Commission has been pressing ahead with its work on the legislative texts before the opinions of the European Parliament, the European Economic and Social Committee and the Committee of the Regions are ready.

4. The proposals put forward in the mid-term review

4.1. The EESC generally endorses the objectives set out by the Commission. It approves, in particular, the goal of enshrining in the CAP as a whole, the concept of a multifunctionality. It is, however, important, above all, to examine whether, and to what extent, the measures proposed by the Commission will really help to achieve these objectives and will lead towards a multifunctional, competitive agricultural sector. Such an examination is all the more important in view of the fact that the changes to the agricultural policy instruments put forward in the mid-term review would lead to far-reaching changes in agriculture in the EU.

4.1.1. The EESC would point out that when it drew up its own-initiative opinion on the Future of the CAP it engaged in a close dialogue with the Commission and the European Parliament. In this opinion the EESC raised a number of questions which are of considerable importance for the debate on the mid-term review but which regrettably have not been adequately answered so far. For this reason the EESC is all the more convinced of the continuing need for thorough analyses and studies.

4.1.2. The EESC also regrets that the Commission has not taken advantage of the Mid-term Review to analyse the problem of increasing ageing in European farming. In this context attention is drawn to the joint declaration of 6 December 2001 by the EP, EESC and CoR which highlighted the "need to make young farmers a priority in any future planning [and] to take effective and urgent measures to promote and support young farmers in the context of the Mid-term Review ... without delay". The EESC hopes that when legislative proposals are presented they will include concrete measures to this effect.

4.2. The Commission's particular goal in the marketing sector of reducing the role of intervention - particularly in the case of cereals - to the level of a safety net has already been achieved as a result of the price cuts under Agenda 2000. The public storage of cereals has been dramatically reduced in recent years. The EESC therefore doubts whether the trend in world-market prices can be used to justify the proposed further 5 % reduction in the intervention price for cereals, particularly as the Commission itself bases its forecasts on stable world markets. The EESC expresses its concern over the fact that the proposed reduction will weaken and undermine Community preference.

4.2.1. The EESC believes that, rather than simply abolishing intervention for rye, as proposed by the Commission, it is absolutely necessary to lay down transitional and follow-up provisions. For example, new possible applications for rye could be exploited, such as its increased use in animal feed.

4.2.2. As regards durum wheat, the EESC fears that the Commission's proposals will not achieve its goal of improving quality but will rather lead to a major shift in production away from lower-yield regions. The EESC therefore recommends that the current premium paid to producers of durum wheat in traditional areas be tied more closely to stricter quality criteria.

4.2.3. The EESC shares the Commission's view that a new support instrument is needed for nut producers, although it regards the proposed compensatory payment as insufficient to enable them to compete with third country imports.

4.2.4. The EESC also highlights the lack of proposals for boosting the production of protein crops, of which there is a shortfall in the EU, in order to bring it more into line with demand. In an own-initiative opinion which has been well received, the EESC has urged that a new impetus be given to a plan for plant protein crops in the Community(2). As a result of the US Government's recent massive increase in price-support for soya bean production (the "anti-cyclical payment"), there is a risk that EU protein and oilseed production will be placed even more on the defensive.

4.3. The EESC has repeatedly expressed its support for the strengthening of rural development under the second pillar of the CAP. The measures concerned here include, in particular, investment promotion measures for individual farms and groups of farms, agri-environmental measures and compensatory payments for areas suffering from natural disadvantages. In its communication, the Commission points out that rural development currently uses up 16 % of total EAGGF (Guidance and Guarantee Sections) expenditure on agricultural policy - a figure which appears to the Commission to be still too low. For any appraisal, however, to be balanced, however, it is necessary also to include national funding under co-financing schemes and national measures not linked to EU aid. There is no doubting the fact that first pillar measures are of considerable importance to farm incomes, even though, in this area too, there are considerable differences between individual farms and individual regions.

4.3.1. The EESC notes, with concern, that, in addition to the shortage of funding under the second pillar, the extremely uneven distribution of funding between regions is also becoming a problem. This has already led to distortions in competition between farmers in different Member States and regions. If the second pillar of the CAP is further extended (under the modulation scheme), steps must be taken to ensure that the EU Member States provide a minimum level of national co-funding. Failure to ensure that this happens would mean that the claim that the second pillar is part of a common European agricultural policy would no longer hold water.

4.3.2. The EESC fails to understand why in the particularly needy Objective 1 areas of all places only limited flexibility is apparently to continue to be applied to the use of modulation money. Up to now, most rural development measures in these areas were funded under the Guidance Section of the EAGGF. The Commission should indicate ways of considerably simplifying and resolving this funding issue.

4.3.3. The EESC underlines the need for future rural development policy to take account of (a) all economic activities in the agricultural sector and in the service and commercial sectors, which create many jobs and (b) the essential requirements of the environment and spatial development. With these aims in view, it is necessary, on the one hand, to strengthen the second pillar of the CAP and, on the other hand, to develop the European Structural Funds and the European Social Fund more strongly in the direction of establishing an integrated policy for promoting rural areas, embracing the full spectrum of economic and social activities and public and private services.

4.4. The Commission wishes to redistribute to the Member States on the basis of objective criteria (agricultural area, number of farm employees, levels of prosperity) the revenue accruing from dynamic modulation, i.e. the proceeds from the reductions in direct payments, which will ultimately amount to a 20 % reduction. It is not yet clear what concrete form these criteria will take and what the financial impact will be. The same applies to shifts in the pattern of distribution between regions and the current EU Member States.

4.4.1. The EESC would point out that cuts in direct payments and the shifting of funding to second pillar measures will place farm incomes under considerable pressure and make it necessary for farms to adjust. The modulation proposals should be examined in the light of the decisions taken at the Brussels Summit on 24 and 25 October 2002. As there is no meaningful link between, on the one hand, the proposed franchises and ceilings applicable to farms - in their present form - and, on the other hand, effects related to farm size, such as economies of scale and labour productivity, alternative solutions should be worked out.

4.5. It is still difficult to get a clear picture of the economic impact and the impact on agricultural structures of a complete decoupling of compensatory payments from production. Decoupling can undoubtedly provide farmers with greater freedom of decision as regards crop-planning, and this is to be welcomed. However, the proposed restrictions on the use of set-aside would clearly restrict this freedom of decision once again. Furthermore, under the Commission's proposals, a number of premiums are to be retained for specific products (e.g. per-hectare premiums for rice, durum wheat and renewable raw materials). Beef cattle and suckler cows are to be treated in similar fashion.

4.5.1. The EESC fears that decoupling will also have a far-reaching impact on supply-side management policy (e.g. production quotas and ceilings for premiums). The EESC has recently pointed out that quantity provisions may have an important role to play in safeguarding sustainable farming, particularly in disadvantaged areas and grassland areas. It is therefore all the more regrettable that here, too, the Commission has so far failed to submit any projections.

4.5.2. No clear picture has been presented of the impact of the decoupling of payments on crop-production. It might well happen in future that areas where variable costs exceeded income from marketing could be taken out of production. Such a development would undoubtedly conflict with the aim of maintaining a comprehensive system of land-cultivation. In the field of stockbreeding too, it may well be asked whether, following complete decoupling of payments, there would still be an adequate economic incentive to fatten bulls or keep suckling cows. Regrettably, the Commission gives no indication in its proposals of how it wishes to tackle these issues.

4.5.3. The EESC draws attention to the fact that the impact of the decoupling of payments on the sale and leasing of farmland is difficult to foresee. 41 % of farmed land in the EU is leased - although there are considerable differences from region to region. The question arises as to whether, in the case of leased land, there is likely to be increased spin-off benefits for lessors. The splitting of direct payments to farms into payments in respect of parts of the land may produce extremely widely differing payments per hectare, depending on farm structure. This could have undesirable side effects on the determination of individual land purchase prices and rents, even resulting in land being left fallow. It is also likely that decoupling will hinder the transfer of farms to young farmers.

4.5.4. The EESC also points out that the introduction of the Commission's proposed farm income payment could lead to distortions in competition if farmers use the direct payments to enable them to turn to other products not covered by price-support.

4.5.5. In the EESC's view, the wide range in payments per hectare of farmland arising as a result of the proposed decoupling of direct payments will prompt a critical debate both within farming circles and in society as a whole, with demands being made for these payments to be redistributed or levelled out. In any event, the EESC cannot readily go along with the Commission's expectation that a decoupling of direct payments may ultimately secure or increase public acceptance of these payments. In the EESC's view, a detailed appraisal is needed to determine whether the issues raised will not lead to the system of direct payments being called into question more by the public. Serious consideration should be given to those who voice the fear that the proposals to change the system of support will mark the beginning of the end as regards direct payments and hence CAP funding.

4.5.6. The EESC believes that complete decoupling, and amalgamating the direct payments in a single farm income payment can neither meet the requirements of a multifunctional agricultural sector (European agricultural model) nor satisfy the need for lasting safeguards in respect of direct payments. The EESC therefore proposes that detailed consideration be given to other possibilities for developing direct payments, as already proposed in its own-initiative opinion on the future of the CAP. Such an appraisal should also embrace a system of aid comprising a general basic payment (e.g. an area-related payment) backed up by product-dedicated payments. This would take special account of the requirements of a competitive and environmentally-friendly agricultural sector.

4.5.7. The EESC notes that the Commission's proposal to introduce compulsory ten-year set-aside, in place of rotational set-aside, will in practice run into major difficulties and be met by a lack of understanding. The proposal should therefore undergo detailed reexamination.

4.6. The EESC has already pointed out (see point 2.3 above) that the Commission's decoupling proposals do in fact amount to a new definition or a form of "recoupling" as direct payments will in future be conditional on compliance with particular land management, environmental, animal welfare and food safety criteria (cross-compliance). The EESC will be unable to make a real appraisal of the situation until such time as the Commission has presented its views in greater detail on the scope of the cross-compliance provisions and the attendant monitoring procedures.

4.6.1. Whilst the EESC does, on the one hand, recognise the need for proper proof of employment of EAGGF funding, it does, on the other hand, believe that it is absolutely essential to avoid imposing a further major extension of bureaucratic monitoring procedures on farmers and the authorities in the Member States.

4.6.2. The EESC draws attention to the fact that up to now, farmers have been eligible for environmental aid (agri-environmental programmes) only if the standards of good farming practice are met. The Commission's proposals for the establishment of cross-compliance conditions will exacerbate the existing problems of definition with regard to the remuneration of farmers for measures to help the environment. The EESC calls for clear and unambiguous environmental criteria which are applied uniformly throughout the EU. The EESC draws attention, in particular, to the need to find solutions in respect of EU standards which go beyond international standards (once markets are opened up). This will be an ongoing requirement as long as there is a discrepancy between the environmental standards applied in the EU and the standards to be met in the case of imported food products. The EESC takes the view that restricting the period of payment (e.g. in the case of animal welfare measures) to five years is inadequate on competition grounds.

4.7. Whilst the proposed EU-wide farm audit is a very far-reaching proposal, far too little specific detail has been provided so far for a serious appraisal. The EESC would, however, urge even now that such auditing systems are made available on a voluntary basis and are based on or use existing documentation as far as possible, thereby enabling them to be of benefit to farmers in farm management. In the light of the experience gained with agri-environmental programmes, in particular, the EESC strongly advocates the development of a comprehensive system of incentives, rather than the introduction of monitoring and auditing systems.

5. Further political efforts to reform the CAP

5.1. Whenever consideration is given to reforming the CAP, there is, in the EESC's view, an urgent need to pay careful attention to the scope for adapting farms to meet changes in agricultural policy and the limits imposed on this process. In many regions of the EU the continuing exodus of young people from farming is being noted with considerable concern. The question of the viability of farms in disadvantaged locations - and particularly grassland farms, too - is furthermore of cardinal importance in the context of agriculture's multifunctionality. It is impossible to ignore the fact that farm incomes in these areas are significantly lower, despite the granting of compensatory allowances in disadvantaged areas. Instruments for assisting these areas should therefore be further developed, and the regions' own interest in safeguarding jobs in farming and creating alternative employment should be given a stimulus. The EESC believes that these views are echoed in the declaration issued on the occasion of the European Council of 24 and 25 October 2002, particularly with reference to the conclusions of the 1997 Luxembourg Summit, which highlighted the need to maintain a multifunctional agricultural sector throughout the EU.

5.2. Agenda 2000 limited the funding available under the EU agriculture budget. In recent years expenditure has fallen well short of the agricultural guideline and the ceiling laid down in the financial decisions taken at the Berlin European Council. Considerable unused funds have been paid back to national budgets from the EU agriculture budget, on a regular basis. It is a known fact that the Member States carefully monitor any steps which are taken to reform the CAP to see how their positions as net contributors or beneficiaries could be affected. The EESC underlines its conviction that the maintenance of the European agricultural model (multifunctional agriculture) and its extension to the new Member States can only be achieved if adequate, reliable funding is available. All reform measures must therefore be scrutinised to determine whether they can be funded under the new financial framework.

5.3. There are a number of external factors which have an influence on the further reform of the CAP; one factor which has a special influence is the ongoing WTO negotiations. The EESC recommends that the Commission maintains its stance of linking the standard trade issues (reduction of export support and internal support and improved market access) with "non-trade issues", such as preventive action to protect consumers and international environmental and animal-welfare standards, and that the Commission continues to press for the development of the requisite international bodies. The EESC is concerned that the mid-term review proposals could give the impression that the EU has already given up the concept of the "blue box". The Commission should certainly not make any rash concessions.

5.3.1. There is no indication in its communications on the mid-term review that the Commission has acted on its announcement that it would examine the new US Farm Bill and its impact on world agricultural markets. This is all the more regrettable given the fact that US agricultural policy regarded the 1996-2002 Farm Bill, which focused on extensive decoupling and liberalisation, as the wrong approach and the new Farm Bill once again focused more on market and price support.

5.4. The Commission's report on the mid-term review contains only minor proposals for improving the international competitive position of EU agriculture. Above all, the decoupling of direct payments, described by the Commission as being green box compatible, will not improve the competitiveness of EU agricultural products on international markets. In the EESC's view, it is therefore essential to carry out a more thorough analysis and projection of the Commission's proposals with a view to safeguarding the position of EU agriculture on the world market.

5.5. In public circles it is often said that a far-reaching reform of the agricultural sector is unavoidable because of the eastward enlargement of the EU (and, in particular, because of the additional funding which would be required for direct payments). The Commission has hitherto opposed this line of thinking and argued that EU enlargement and internal reform of the CAP have to be addressed separately. If the Commission changes tack on this matter, it is, in the EESC's view, absolutely vital to involve the candidate states in the consultations on the mid-term review. An interim reform which excluded the states which will be joining the EU in just two years time would be bound to call into question their acceptance of such a reform and to exacerbate the accession process.

5.6. The implementation by the Member States of at least some of the measures proposed by the Commission, and in particular the decoupling of direct payments, will, in the view of the EESC, be very costly and time-consuming. The Commission's communications do not indicate specific timetables for implementing the various measures. This would, however, appear to be of particular importance for the further discussion of the mid-term review proposals. The EESC believes that it will not be possible to amend the system of direct payments without taking account of the market organisations for beef and milk. Follow-up measures to Agenda 2000 (i.e. an "Agenda 2007") should be extremely carefully prepared and discussed in view of their great complexity and far-reaching consequences.

Brussels, 11 December 2002.

The President

of the European Economic and Social Committee

Roger Briesch

(1) OJ C 125, 27.5.2002, pp. 87-99.

(2) OJ C 80, 3.4.2002, pp. 26-34.