Opinion of the Committee of the Regions on the 'Proposal for a Council Regulation (EC) on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF)` (1999/C 93/02)

THE COMMITTEE OF THE REGIONS,

having regard to the Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions entitled Agenda 2000: the legislative proposals: overall view;

having regard to the Proposal for a Council Regulation (EC) on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) [COM(1998) 158 final - 98/0102 (CNS)] ();

having regard to the decision taken by the Commission on 18 March 1998 and the decision taken by the Council on 4 June 1998, under the first paragraph of Article 198c of the Treaty establishing the European Community, to consult the Committee of the Regions on the matter;

having regard to its Bureau's decision of 13 May 1998 to direct Commission 2 for Agriculture, Rural Development and Fisheries to draw up the opinion;

having regard to its opinion on a rural development policy (CdR 389/96 fin) ();

having regard to the draft opinion (CdR 309/98 rev.) adopted by Commission 2 on 10 December 1998 (Rapporteurs: Mr Savy and Mrs Hanniffy);

whereas Article 2 of the Treaty makes it the task of the European Community to 'promote throughout the Community a harmonious, balanced and sustainable development of economic activities, a high level of employment and of social protection ... and economic and social cohesion`; and whereas Article 7d of the Treaty of Amsterdam has added to these objectives that of territorial cohesion, which is of particular importance for the Committee of the Regions;

whereas under the terms of the Treaty, the single market, the single currency and common policies are merely instruments serving these objectives;

whereas under Article 33 of the Treaty, the objectives of the CAP are not only to stabilize markets, assure the availability of supplies and ensure reasonable prices for consumers, but also to ensure '... the optimum utilization of the factors of production, in particular labour` and '... a fair standard of living for the agricultural community`, and to take account of '... the particular nature of agricultural activity, which results from the social structure of agriculture and from structural and natural disparities between the various agricultural regions`;

whereas it agrees with the European Parliament that 'the main objective of the CAP reform in the context of Agenda 2000 is to consolidate the European agriculture model based on, on the one hand, achieving compatibility between the economic dimension of agriculture and its environmental and social roles, as well as its functions for regional planning, and, on the other, the preservation of basic regional products and the production of goods meeting high food safety standards`; whereas the new CAP must focus its efforts on 'global performance and sustainable development`; whereas, within this general framework, 'the concept of competitiveness must not be equated simply with the lowering of raw material costs, ... but should increasingly be equated with the supply of goods and services which satisfy society's changing demands` ();

whereas it agrees with the Luxembourg European Council (December 1997) that it is essential for a versatile agriculture sector to be spread across Europe as a whole, including regions with specific problems;

whereas the proposal for a Regulation on support for rural development from the EAGGF must be assessed in relation to the concerns thus expressed by the Treaty establishing the European Community and by the Parliament and the Council,

adopted the following opinion at its 27th plenary session of 13 and 14 January 1999 (meeting of 14 January).

1. General comments

1.1. The proposal for a regulation on rural development and the concerns voiced in the accompanying explanatory memorandum and recitals, are prompted by the need to improve economic, social and territorial cohesion across the European Union. This represents undoubted progress towards a more integrated rural development policy and, as such, merits endorsement (1.2). On the other hand, an examination of the proposed provisions raises certain reservations about their ability to meet the declared objectives of the new common agricultural policy (1.3). There is thus a case for widening the debate on what an overall rural development policy adapted to European conditions should be (1.4).

1.2. The foundations of an integrated rural development policy

1.2.1. The Committee of the Regions welcomes the objectives and principles outlined in the explanatory memorandum and the recitals of the proposed regulation, and particularly the following:

- the espousal of a comprehensive and coherent rural development policy to supplement market management and to ensure that agricultural expenditure is devoted more than in the past to spatial development and conservation;

- the inclusion of rural development measures in the integrated development programmes for Objective 1 and 2 regions; these complement market policies in other areas;

- the emphasis on subsidiarity in the implementation of this policy;

- the emphasis on meeting agri-environmental requirements and on encouraging the use of farming practices which conserve the environment, natural resources and the landscape;

- the emphasis on the need to base rural development partly on non-agricultural activities and services, in order to help reverse the trend towards depopulation and the economic and social decline of the countryside.

1.2.2. The link established in Agenda 2000 between CAP reform and the reform of the Structural Funds is to be endorsed. The fate of specific areas and, thus, the territorial cohesion of the Union, depends both on the results of the CAP and the action taken under Community regional policy. Consequently, rural development measures taken under the CAP and the EAGGF must be closely coordinated with those taken under the new Objective 2 of the Structural Funds.

1.2.3. The draft regulation rightly brings out the link which has to exist between agriculture and rural development. Commissioner Franz Fischler stressed the importance of this link in his statement to the Cork Conference in November 1996: 'The action we take must go far beyond the farming sector. The creation of non-farming jobs, enhanced infrastructure and services and a more intensive drive to improve the environment must logically form part of any rural development policy.` The well-being of specific areas is based on an integrated approach to their development, combining farming, economic diversification, natural resource management, the maintenance of general-interest services and the promotion of culture, tourism and leisure. Accordingly, it is right that rural development measures are to be incorporated into the integrated development programmes in Objective 1 and 2 regions (Article 38).

1.2.4. The Committee also endorses the draft regulation's stated intention - in the very first paragraph of Article 1 - to establish a framework for Community support '... for sustainable rural development.` Many of the paper's provisions rightly press for the promotion of sustainable agriculture which is both of high natural value and environmentally sound.

1.2.5. The Committee fully endorses the objectives set out here. The aim is to foster a living countryside across the EU, i.e. an area completely given over to farming or forestry, its population maintained by both farming and non-farming jobs (industry, crafts, tourism, services), with environmentally sound crop management and quality agricultural production guaranteeing consumers food safety and generating added value on the market. This is the spirit of the Cork Declaration on rural development. That said, however, one must ask whether the specific action proposed measures up to this objective; admittedly, questions and indeed concerns are emerging on that score.

1.3. Inadequate resources to achieve the desired objectives

1.3.1. The draft regulation on rural development must be set within the wider context of Agenda 2000 and CAP reform. The main point of concern is that the draft CAP reform brings a single response - price cuts - to problems arising in very diverse sectors, products and areas. The objective of the CAP is, clearly, above all commercial: the assumption is that, by reducing its prices, the Union as a whole could become globally competitive on its entire product range. This is undoubtedly possible for some products, but the gap in relation to the world prices of many others (inter alia milk and beef), is too great for the proposed price cuts to make them competitive. There is no guarantee that the direct aid flanking the price cuts will be retained in the long term. The rural development support programme which the EAGGF is to fund remains very modest, and, as currently formulated, cannot be a credible counterweight to the CAP's liberal approach. No balance has yet been found between opening up to the world market and maintaining multifunctional agriculture. One has the impression that, for the architects of the reform, there are only two kinds of agriculture: one which opens up to world trade and one which survives by payments from public resources for its services in providing employment and tending the land. In fact, the European agriculture model, to which reference is readily made, also - and perhaps primarily - includes 'top-of-the-range` farming (organic farming, quality labels etc.), rooted in rural areas; thanks to the quality of its products, this sector can secure lucrative segments of the market. The fear is that the new CAP will not give it the chance to do this. In this context, the draft regulation on rural development is inadequate on many fronts.

1.3.2. Rural development policy must be allocated adequate resources in order to be able to offset the risks to which the new CAP will expose some already vulnerable areas. These areas are former Objective 5b beneficiaries and some of them will, of course, also be eligible under the new Objective 2. However, it is still unclear what proportion of Objective 2 resources will go to rural areas, as they have to compete with ailing urban areas, industrial regeneration zones and the fisheries sector. Current information on the resources which the EAGGF might potentially provide for rural development raises fears that these will be wholly inadequate to meet the challenge. The Council of Ministers must accordingly provide for the financing needed for rural policy development.

1.3.3. Moreover, it is uncertain whether the measures put forward in the draft regulation are aimed primarily at maintaining a thriving rural way of life across Europe. The concern for competitiveness remains, as the draft regulation makes repeated reference to the 'economic viability` of farm holdings without, however, defining this concept. Article 8 states that setting-up aids will be granted to young farmers in holdings in which '...economic viability can be demonstrated.` Early retirement support for farmers is granted to encourage their '...replacement...by farmers able to improve the economic viability of the remaining agricultural holdings` (Article 10). In Article 5, support for investments is restricted to holdings '...whose economic viability can be demonstrated.` Aid to improve the processing and marketing of agricultural products (Article 24) will only go to enterprises '...for which economic viability can be demonstrated.` Economic viability may be understood in a variety of different ways. Measuring it exclusively against world prices for major products renders rural development policy meaningless and is tantamount to abandoning European territorial cohesion. If, on the other hand, the measure of viability takes account of the benefits which a farm or an enterprise brings for an area's social balance, and of the position which a given product may hold in a specific segment of the market, the European agriculture model has a chance of survival. A choice has to be made between these two approaches, in the awareness that the first is the more likely, and that only the second is consonant with the stated objectives.

1.3.4. In short, it would appear that the various provisions laid down in the draft regulation do not adequately reflect the integrated approach to rural development championed by Commissioner Fischler at the Cork Conference. Affirming that rural life was not limited to farming, he urged the simultaneous development of agriculture, crafts, rural trade, public services, tourism and the like. The paper under review here, however, is limited largely to farming and forestry. Of the nine chapters in title II of the draft regulation, dealing with rural development measures, eight refer exclusively to farming activities: investments in agricultural holdings (Chapter I), setting-up of young farmers (Chapter II), training of farmers (Chapter III), early retirement for farmers (Chapter IV), support for farmers in less-favoured areas (Chapter V), agri-environmental measures (Chapter VI), improving processing and marketing of agricultural products (Chapter VII) and forestry (Chapter VIII). Only in Chapter IX - promoting the adaptation and the development of rural areas (Article 31) - do some of the twelve categories of proposed measures go beyond the strictly farming framework to embrace the renovation and development of villages, improvement of rural infrastructure, encouragement of tourist and craft activities and financial engineering. If the attention given in the draft regulation to the agricultural aspects of rural development really reflects their intended role in the policies to be pursued, then there is grave cause for concern.

1.3.5. The draft regulation remains very vague as to the nature of the partnership with regional and local authorities in the framing and implementation of development programmes. In Objective 1 and Objective 2 regions, the rules of the Structural Funds will undoubtedly apply. Elsewhere, Article 39 confines itself to stipulating that 'rural development plans shall be drawn up at the geographical level deemed to be the most appropriate.` There is a regrettable absence of precision here. It should be clearly stated that the proper level at which to assess a policy's impact on territorial cohesion is the regional level, and that the authorities at the same level are the natural partners of national government and the Commission in framing and pursuing spatial development policy. Close cooperation with other territorial authorities and other participants in the regional partnership is nonetheless a prerequisite.

1.3.6. As currently formulated, the draft regulation does not offer a response to the questions raised by the CAP reform. Against a backdrop of price cuts whose impact on individual areas is difficult to assess, the uncertainties about the real objectives and the legal and financial resources to be made available render it impossible for the proposed rural development policy to provide an adequate counterweight to the risks of opening up to the world market.

The impact of the new CAP will differ widely, depending on the products and areas concerned. Prior to the adoption of the new rules, a study should be conducted - with the involvement of national, regional and local authorities - on their foreseeable effect on each region, since it is at the level of the region that the territorial cohesion of the Union is played out. With more detailed prior knowledge of the territorial impact of the proposed CAP, it would be possible to alleviate potential problems and give rural development policy an agenda more in keeping with the reality of the problems to be addressed. Defending the interests of each region does not mean defending a specific interest against the general interest of the European Union: it is a precondition for territorial cohesion within Europe and deserves, for that reason, to be taken into consideration.

1.4. Towards a broad-based approach to regional development

1.4.1. One of the major issues concerning the future of rural development policy is how it can become more integrated. With the next round of CAP reform, certain rural areas may become more vulnerable than under the 1992 reform. With conventional production possibilities perhaps becoming more restricted, it seems that a growing proportion of the support to landholders will be decoupled from production and directed more to the multi-functional use of rural areas. This should assist in maintaining incomes in the areas in question, but the role of farming as a development activity may suffer as a consequence. The balance between income support and development in enhancing rural viability is an important issue. Measures supporting expansion of output or effecting improvements in productivity would be considered as developmental in character in the sense of providing self-sustaining improvement in economic welfare.

Non-farming measures help to guarantee the incomes of an ever larger number of farmers, thereby contributing to the stabilization of rural areas. Measures which support income, however, whether partially or wholly decoupled from production, may also impede structural change and may be in conflict with other policies to promote farm improvement or diversification. If farming is to become self-reliant, it might imply large-scale and fewer farmers but if it is to become more integrated into the larger rural economy, it implies that it must also engage in non-farming activities. The more farming becomes multi-functional, the more it may contribute to local development in the sense of creating value-added and employment.

Consequently, the development of rural areas and the stabilization of their population requires an extension of policies beyond agriculture towards more diversified forms of rural development. While every opportunity must be availed of to provide on-farm diversification, the potential for creating value-added and employment in rural areas is probably greater in the non-farm than in the farm economy. The ERDF and ESF should continue to contribute to the financing of non-farming measures.

1.4.2. On the wider issue of the nature of and support for rural development, a number of comments are pertinent. The trend towards fewer farms and a declining population in many marginal areas seems inexorable, driven by the level and quality of the resource endowments in such areas, and reinforced by the processes of market evolution, globalization and technological and social change. These processes in nature if not in intensity are also likely to persist for the duration of the next financial perspective. It is clearly impossible to halt this process through a reform of the Structural Funds, making it all the more imperative to support farming during this difficult transition period so as to cushion the social repercussions of structural change, until such time as an integrated rural development policy reduces disparities between regions.

1.4.3. It is therefore clear that for many rural areas and particularly the more marginal, supporting farmers alone in their role as farmers and/or rural entrepreneurs will not ensure the viability of such areas. We should then ask what and who else in rural areas should be the target of our concern and interest. Does the rural sector with respect to this comprise all its residents and, if so, how much do we know about the socio-economic and demographic characteristics of the non-farming population? Do we know the extent of the dependence and linkages of the rural labour force to the agri-food sector and its upstream and downstream elements? What are the factors and their relative weightings which contribute to the changes in the rural population and labour force as a whole? In general terms we know that the patterns of adjustment that are taking place in rural areas are influenced by several factors which can be conveniently grouped into two categories. The first relates to the restructuring of agriculture and food processing while the second includes those factors that are shaping the restructuring of the non-agricultural sectors. In practice many of the fundamental underlying processes are common to both categories of restructuring. However, we know very little about the relative importance of each of these variables to the changes occurring in the rural milieu but the effects are readily visible in the considerable degree of restructuring which is occurring in the rural and regional economies. While rural development has emerged as a policy issue in the EU in the context of coping with the adjustment arising from CAP reform, rural development must be regarded as a wider issue if the objective of cohesion is to be realized. The ERDF and ESF should continue to contribute to EU support for non-farming measures.

1.4.4. In this context, what is needed is a set of specific policies supplementary to mainstream infrastructural programmes which can be targeted to the rural population, supporting rural businesses, services, environmental supports and capacity-building activities. How the Structural Funds will assist the objective of cohesion will depend also on the priority each Member State or region attaches to agriculture and rural development as it prepares its CSF/SPDs for the next round of Structural Funds.

1.4.5. In conclusion, it could be said that the Agenda 2000 proposals for rural development represent some retraction from the ideas circulating in 1995 and 1996, many from Brussels itself and related sources. Broadly, these envisaged a comprehensive multi-sectoral and integrated approach to rural development focused on the particular conditions of different geographical areas. This rural development proposal is clearly narrower in scope. It represents the narrower 'agri-rural` model of development, grounded in the CAP and in the sectoral remit of the European Commission's DG VI. Rural development confined to this framework will provide a part, but not a wholly adequate response to the adjustment problems of farming post-2000. It will not meet the range of development needs in rural areas, especially the need for non-farm jobs, which will also depend on mainstream economic, social and infrastructural policies.

2. Committee of the Regions' proposals

Further to the general remarks outlined above, the Committee of the Regions recommends that the proposed regulation be amended as follows:

2.1. Amendments are required to Articles 1 and 2 of the EAGGF Regulation to ensure the establishment of the broadest rural development policy possible. In particular, rural development measures must be integrated into measures in both Objective 1 and 2 regions and in upland and disadvantaged regions.

2.2. Rural development measures described in Article 2 must give a greater emphasis to off-farm activities. In particular, the Committee would proposed the inclusion of the following:

- the processing and marketing of quality products: the current proposed text relates to agricultural products only; this is a narrow proposal given that much of rural development is about diversification into crafts, tourism and cultural heritage which requires marketing and processing support;

- the addition of a reference to support being available for research and development specific to rural areas and concerning rural development as distinct from technical research, as well as support for development of IT as a basis for fostering new educational and employment opportunities;

- addition of a reference to the case for promoting supplementary activities by 'farmers and their employees`.

2.3. In Article 5 a definition of economic viability should be given indicating that viability is not only assessed in terms of lining up to world prices but also in taking account of other elements such as access to market niches, the contribution of a concern or a firm to territorial cohesion, and environmental benefits. This remark also applies to Articles 8, 10, 11 and 24.

2.4. The Committee welcomes the support for vocational training (Article 9) but feels that the scope of the measure should be widened to cover rural enterprise in addition to the skills needed to manage an economically viable farm. Here the development of networking and partnerships between small and medium-sized firms in rural areas also needs to be supported.

2.5. Since compensatory allowances are now proposed on an area rather than on a headage basis (Article 14), and also in the light of the removal of this allowance scheme from the Guidance Fund, the Committee would question the financial implications involved here and the net income drop which will result for some rural dwellers.

2.6. The criteria for defining mountain areas (Article 17) should include not only slope but also ecological vulnerability.

2.7. Chapter VIII on forestry should be reviewed in the light of the European Parliament resolution of 30 January 1997 on the European Union's forestry strategy ().

2.8. Article 31 should be revised and strengthened, specifying that support for the relevant measures must respect sustainable development requirements, without imposing too much red tape on economic operators.

2.9. Article 31 should include the renewable raw materials sector.

2.10. Revisions and additions to the eligible measures to promote a broader range of rural development support would include:

- processing and marketing of quality products;

- improvement of working conditions;

- water resources management and activities;

- promotion and preservation of the environment and support for management of the development of rural areas;

- promotion of renewable commodities for recovery as materials or as energy;

- restoring rural development capacity damaged by natural disasters and introducing appropriate prevention instruments;

- an area-based approach to local development based on a bottom-up philosophy;

- a provision to support research and development in rural areas (see above);

- support for vocational and further training;

- implementation of measures to reduce the risk of desertification;

- support for the development of upland agriculture, inter alia as a means of environmental protection.

In particular, it is essential that local and regional authorities retain the right to select, from amongst the possible aid measures designed to adapt and develop rural areas, those priorities and measures which best match their specific conditions in regard to rural development.

2.11. A single regional programming instrument would be useful, in order to simplify the planning measures mentioned under Article 38 and enable the various EAGGF initiatives to be harmonized within each region.

2.12. In relation to Article 39 of the regulation, the Committee calls upon the Commission to draw up rural development programmes at regional level and to combine in a single programme the rural development support measures to be applied in a given area, indicating the relationship between the various measures provided for, thus guaranteeing compatibility and coherence.

2.13. Article 43 which deals with additional measures and Community initiatives should be extended to (a) promote existing and new networking between rural development programme partners, and (b) promote the exchange of best practice between different rural development programmes. One of the weaknesses of the current rural development programmes established under the current Objectives 1 and 5b is that there is little exchange of experience between the programmes.

2.14. The monitoring committees established to oversee the rural development programmes' implementation (Article 46) must include regional and local authority representation and ensure that the projects adopted fully reflect an area's needs.

2.15. A close relationship should be established between the EAGGF-supported rural development measures and national rural policy to ensure coherence, integration and avoidance of duplication of effort. Rural development policy and agri-policy must continue to focus on ensuring satisfactory living and working conditions and life chances in rural areas.

2.16. In conclusion, the Committee would like to see account taken of producer groups and product promotion and demonstration.

Brussels, 14 January 1999.

The President of the Committee of the Regions

Manfred DAMMEYER

() OJ C 170, 4.6.1998, p. 67.

() OJ C 116, 14.4.1997, p. 46.

() European Parliament, Resolution of 18 June 1998 on the reform of the common agricultural policy (Agenda 2000 - part one, chapter III) (COM(97) 2000 - C4-0522/97), OJ C 210, 6.7.1998, p. 180.

() OJ C 55, 24.2.1997, p. 22.