WRITTEN QUESTION E-1592/01

by Ilda Figueiredo (GUE/NGL) to the Commission

(1 June 2001)

Subject: Common agricultural policy (CAP) aid differentiation

During the discussions on Agenda 2000, the Commission's original proposal for CAP aid differentiation was ultimately rejected. Instead, a regulation was adopted which enables the Member States to reduce direct aid by up to 20 % and to allocate the money saved to additional rural-development initiatives. So far only three Member States have availed themselves of this facility. Although it did not constitute genuine differentiation, the Commission's original proposal had the merit of enabling aid to be differentiated at Community level, which made it possible to devise solutions to the problem of the imbalance in the distribution of aid between countries, products and producers. When he addressed the German CDU's Agricultural Congress on 7 May, Mr Fischler, Commissioner, agreed that, under the CAP mid-term review, the Commission's original proposal on differentiation might be resubmitted.

Under these circumstances, is the Commission considering the possibility of revising its original proposal?

Does it not regard the introduction of a ceiling on the amount of aid which can be granted to a given farm and a percentage increase in aid for farmers who receive least aid from the CAP (differentiation) to be important from the point of view of fairness and as a means of releasing financial resources? For example, would it agree to a 15-20 % increase for farmers who receive less than 5 000 in aid? What does it think of the idea of extending differentiation to all CAP aid?

Does it not think that the best uses for the savings thus made are compensatory payments and agri-environmental measures?

Does it not think that the thresholds contained in its original proposal are too high to enable the scheme to cover the requisite number of farmers? What does it think of lowering the proposed thresholds?

How many farmers in each Member State receive less than 5 000 in aid, between 5 000 and 25 000, between 25 000 and 50 000, between 50 000 and 75 000, between 75 000 and 100 000, between 100 000 and 150 000 and over 150 000?

Answer given by Mr Fischler on behalf of the Commission

(18 September 2001)

Under Council Regulation (EC) No 1259/1999 of 17 May 1999 establishing common rules for direct support schemes under the common agricultural policy(1) Article 4, Member States may opt to reduce the direct aids paid to their farmers under the common market organisations listed in the annex to this Regulation by up to a maximum of 20 %, and use the Community funds so released to finance additional rural development actions.

The remarks of the Member of the Commission responsible for Agriculture at the CDU's Agricultural Congress, to which the Honourable Member refers, need to be set in context. In the speech in question the Member of the Commission responsible for Agriculture expressed his disappointment that, to date, very few Member States have taken up the possibility introduced under Article 4 of Council Regulation (EC) No 1259/1999 to use modulation as a means to move support away from direct aids under the first pillar of the Common agricultural policy (CAP) and so to increase the financing available for second pillar (rural development) measures. Given this, the Member of the Commission reflected on whether it would be appropriate to make the application of modulation under Article 4 compulsory for all Member States, as the Commission had originally suggested in its Agenda 2000 proposals.

The Member of the Commission responsible for Agriculture did not however state that the Commission was considering resubmitting (or indeed revising) its original detailed proposals on modulation, as the Honourable Member's question implies. Whilst the Commission's original proposal did include

specified common thresholds at Community level beyond which modulation of a farmers direct aids would be applied, this was not a feature retained by the Council. Regulation (EC) No 1259/1999 lists instead three broad categories of objective criteria from which Member States can select from when designing the modulation mechanism most appropriate to their specific farm structures and national policy objectives.

At this stage, the Commission does not consider that the introduction of a single ceiling at Community level on the amount of direct aid would be appropriate or desirable. A single Community-level ceiling would have difficulty to reflect the wide diversity of farming systems and structures within and between the Member States, much of which are based on historical land-use patterns, and would tend to penalise disproportionately certain farming systems and certain Member States. These redistributive effects would be stronger if any such ceiling was fixed at a relatively low level, as the Honourable Member appears to favour.

Equally, the Commission does not consider that it would be legally possible under the existing provisions of Council Regulation (EC) No 1259/1999, nor indeed appropriate or equitable to use aid released from applying such a ceiling to increase direct aid payments to certain other groups of farmers. The Commission would draw the Honourable Member's attention to the origin of the CAP direct aid payments, which are paid as public support to assist Community farmers as they adjust to policy-induced price changes. On this basis the Honourable Member's suggestion that such aids might for particular groups of farmers (who receive below a certain threshold of aid payments) be increased by, say, 15-20 % would be difficult to justify internally or to the Community's external trading partners.

The Commission does not favour the extension of modulation to all CAP aid. The application of modulation to market support mechanisms, such as price support or export refunds, which are channelled via intermediary operators (processors, traders) would, in practice, not be possible as there is no direct link between these payments and individual farmers. As far as rural development measures are concerned, the Commission considers that the application of modulation would be inappropriate given their highly targeted nature, linked to realisation of specific objectives and contracts. It would also risk sending mixed policy signals, given that it is these same rural development measures which the Commission wishes to encourage via the application of modulation.

As regards the most appropriate use of modulation receipts, Article 5 of Council Regulation (EC) No 1259/1999 specifies that modulation receipts can be used as additional Community support for the four so-called accompanying measures under the rural development regulation, Council Regulation (EC) No 1257/1999 of 17 May 2001 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and amending and repealing certain Regulations1: early retirement, less-favoured areas and areas with environmental restrictions, agri-environment and afforestation of agricultural land. The Commission considers that, in line with the principle of subsidiarity, it is in the first instance for Member States to choose which of these four measures they wish to allocate the funds liberated by modulation to. The incorporation of these additional Community funds (and national match-funding) into Member States/regions rural development programmes under Council Regulation (EC) No 1257/1999 is subject to Commission approval, and should be in line with the particular needs of the Member State/region as identified in their programmes, and in conformity with the detailed requirements of Council Regulation (EC) No 1259/1999 and the Commission implementing regulation, Commission Regulation (EC) No 963/2001 of 17 May 2001 on detailed rules for the application of Council Regulation (EC) No 1259/1999 as regards the additional Community support and the transmission of information to the Commission(2), which emphasise in particular the importance of additionality and traceability.

Indications to date are that agri-environment measures will be by far the major recipient of the funding released by modulation in those Members States already applying or at an advanced stage in introduction of modulation. This is in line with the particular importance the Commission attaches to encouraging agricultural production methods which protect the environment and maintain the countryside in the new rural development programmes for the period 2000-2006.

As regards the Honourable Members request for data on the number of farmers receiving CAP direct aid, a table with an estimation of the distribution of direct aid in the Member States will be sent direct to the Honourable Member and to the Parliament's Secretariat.

(1) OJ L 160, 26.6.1999.

(2) OJ L 136, 18.5.2001.