Opinion of the Committee of the Regions on:the Proposal for a Council Regulation establishing common rules for direct support schemes under the common agricultural policy and support schemes for producers of certain crops,the Proposal for a Council Regulation amending Regulation (EC) No 1257/1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and repealing Regulation (EC) No 2826/2000,the Proposal for a Council Regulation on the common organisation of the market in cereals,the Proposal for a Council Regulation on the common organisation of the market in rice,the Proposal for a Council Regulation on the common organisation of the market in dried fodder for the marketing years 2004/2005 to 2007/2008,the Proposal for a Council Regulation amending Regulation (EC) No 1255/1999 on the common organisation of the market in milk and milk products, andthe Proposal for a Council Regulation establishing a levy in the milk and milk-products sector
Date: 2003-10-24
Institutions: European Committee of the Regions
Subjects: aid system, aid to agriculture, common organisation of markets, production quota, reform of the CAP, rural development

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Official Journal of the European Union

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Opinion of the Committee of the Regions on:

— the ‘Proposal for a Council Regulation establishing common rules for direct support schemes
under the common agricultural policy and support schemes for producers of certain crops’,

— the ‘Proposal for a Council Regulation amending Regulation (EC) No 1257/1999 on support
for rural development from the European Agricultural Guidance and Guarantee Fund
(EAGGF) and repealing Regulation (EC) No 2826/2000’,

— the ‘Proposal for a Council Regulation on the common organisation of the market in cereals’,

— the ‘Proposal for a Council Regulation on the common organisation of the market in rice’,

— the ‘Proposal for a Council Regulation on the common organisation of the market in dried

fodder for the marketing years 2004/2005 to 2007/2008’,

— the ‘Proposal for a Council Regulation amending Regulation (EC) No 1255/1999 on the

common organisation of the market in milk and milk products’, and

— the ‘Proposal for a Council Regulation establishing a levy in the milk and milk-products

sector’

(2003/C 256/03)

THE COMMITTEE OF THE REGIONS,

having regard to the Commission’s package of draft regulations subtitled ‘A long-term policy perspective
for sustainable agriculture’, (COM(2003) 23 final — 2003/0006 (CNS), 2003/0007 (CNS), 2003/0008
(CNS), 2003/0009 (CNS), 2003/0010 (CNS), 2003/0011 (CNS) and 2003/0012 (CNS));

having regard to the decision by the Council on 10 February 2003 to consult it on this subject in
accordance with the first paragraph of Article 265 of the Treaty establishing the European Community;

having regard to the decision by its President on 22 October 2002 instructing the Commission for
Sustainable Development to draw up an opinion on the subject;

having regard to its opinion on the Communication from the Commission to the Council and the
European Parliament on the Mid-Term Review of the Common Agricultural Policy (CdR 188/2002
fin) (1);

having regard to its opinion on the proposals for Council Regulations (EC) concerning the reform of the
common agricultural policy (CdR 273/98 fin) (2);

having regard to the draft opinion (CdR 66/2003 rev. 2) adopted on 12 June 2003 by its Commission
for Sustainable Development (rapporteur: Mr Robert Savy, President of the Limousin Regional Council
(F-PES)),

adopted unanimously the following opinion at its 50th plenary session on 2 and 3 July 2003 (meeting of
2 July).

(1) OJ C 73, 26.3.2003, p. 25.
(2) OJ C 93, 6.4.1999, p. 1.

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VIEWS AND RECOMMENDATIONS OF THE COM-
MITTEE OF THE REGIONS

lation and rural development, on the basis of questions
and criticisms raised in its opinion on the Commission
Communication of July 2002.

1.

Introduction

2. Decoupling

Since the opinion on the Communication from the
1.1.
Commission to the Council and the European Parliament on
the mid-term review of the Common Agricultural Policy,
submitted by the Committee of the Regions on 20 November
2002, there have been a number of developments which have
defined more precisely the content, context and funding
arrangements of the CAP reform:

— the decisions taken at the Brussels European Council on
24 and 25 October 2002 setting a ceiling for market
aid expenditure in an enlarged EU and recalling the
importance of less-favoured regions and the multifunc-
tional nature of agriculture. These decisions established
the budget framework for market and direct aids expendi-
ture for the period 2007-2013. They guarantee the
continuation of the CAP and provide clear prospects for
the medium term enabling farmers to progressively adapt
their management practices and the Commission to
introduce new arrangements in due course. They open
the way for the enlargement of the EU;

— the submission on 16 December 2002 of the EU’s
proposals in connection with WTO agriculture nego-
tiations. These provide in particular for a 36 % reduction
in import duties, a 45 % reduction in export subsidies
and a 55 % reduction in internal farm support. There are
also specific measures aimed at improving the situation
of developing countries.

1.2.
The adoption by the Commission on 21 January of
proposals for regulations associated with the mid-term review
of the CAP should be seen in this context. Indeed, the WTO
agriculture negotiations and the wider debate on the financial
outlook for 2007-2013 underlie some of the Commission’s
proposals.

There are two major modifications in relation to the proposals
submitted in July: a reform of the common organisation of the
market in milk and milk products and new arrangements
for the operation of progressive modulation. Decoupling
nevertheless remains at the heart of the CAP reform.

The CoR intends to give its opinion on the key elements of the
i.e. decoupling, progressive modu-
Commission proposals,

The CoR gave its endorsement to the principle of decoupling
aid and to the establishment of an income support payment.
This single payment may have the effect of simplifying
implementation of the CAP and reinforcing the role of markets
in determining trends in agricultural production.

the risks inherent in the
However, the CoR pointed out
proposed system of decoupling, which could accentuate
regional disparities, distort competition between producers or
regions and result in the destabilisation of certain types of
production.

The CoR is also concerned that completely decoupled pay-
ments will be vulnerable over time to pressures for their
reduction and abolition.

The CoR called for assessments to examine these risks in detail
prior to any decision.

The Commission has published impact studies assessing the
implications of its proposals. These are largely based on
macroeconomic data. They assess the prospects for production
and prices per product but do not answer the questions raised
by the CoR:

2.1.
There is no assessment of the territorial impact of the
measures. The complete decoupling of aid may lead to a fall-
off in production in disadvantaged and outlying areas and to
more rapid depopulation of vulnerable agricultural areas.
Consideration should be given to some kind of
linkage
between particular areas and vulnerable or low-profit types of
production, and the directions and means of development
should be clearly identified so as to allow balanced develop-
ment across all regions.

The opportunity presented by the review of Community
measures should therefore be used to seek new provisions to
compensate for natural disadvantages facing farms in particular
(incline, altitude, climate), but also measures to encourage the
management of large areas (mowing of slopes, land upkeep)
and, more generally, their economic development.

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2.2.
The principle adopted for determining single farm
payments on the basis of the reference period 2000, 2001,
2002 does not remove the risk of distorted competition
between producers, types of production or regions. The CoR
already highlighted in its opinion on the CAP midterm review
the fact that the Commission’s proposal would maintain the
current situation, where farmers with the highest yield get
it
much more aid per hectare than those producing less;
therefore calls on the Commission to at least extend the
reference period to calendar years 1998, 1999, 2000, 2001
and 2002. Of those years, the two with the lowest overall aid
should be withdrawn from the reference period for each
farmer. The principle proposed by the European Commission
cancels out the advantages enjoyed up to now by regions with
more intensive farming and types of production receiving the
most support. There are considerable risks of production or
market destabilisation in the case of products which do not
qualify for direct aid under the current CAP (pork, poultry,
fruit and vegetables). These products could become attractive
and profitable for producers and regions with historical
references to the detriment of traditional areas of production.

Would it not be possible to consider setting an average amount
of aid per hectare for each broad family of products (arable
crops, stockrearing, white meat, fruit and vegetables) calculated
for each area of production to avoid this major risk of
distortion to competition and of market destabilisation? The
for support
draft
schemes (Title III — Chapter V) provides scope for the
implementation and calculation of average aid per hectare at
the regional level. If this provision is applied at all it should be
throughout the EU. However, it still does not eliminate the risk
of distortion to competition between products.

regulation establishing common rules

The risk of destabilising markets and causing economic
2.3.
difficulties for the most vulnerable small, traditional farms
which arises from abandoning production control instruments
has not been addressed. However, such instruments have
proved their worth in successive crises affecting bovine
production or to solve the problem of the low-cost milk
surplus since 1983. There is a degree of inconsistency in the
management of different products. For example, there is still a
control instrument in place for arable crops which is stricter
than before (10 % set aside, excluding industrial crops); an
increase in milk quotas, even though European butter and
powdered milk stocks are mounting (without even mentioning
priority treatment for young farmers or farms in upland areas);
the introduction of maximum guaranteed areas, which limit
the potential for developing protein and energy crops, and the
complete scrapping of control and guidance instruments for
bovine and ovine production.

2.4.
There has been no evaluation of the impact of the
proposed decoupling on land price trends and the land market,
the
even though there is the risk of a race to expand,
disappearance of small farms and the inflation of prices for
prime land. Meanwhile,
lower-quality and less fertile land
could be left abandoned. This will affect the establishment of
young farmers, which should be a priority.

2.5.
Therefore, the CoR continues to question the appropri-
ateness of the methods used to calculate income support in
relation to the objectives of the CAP. The proposals made in
the draft regulations do not seem to meet the objectives of:

— ensuring fairer distribution of aid between farmers,
regions, most environmentally-friendly forms of agri-
culture, farming in vulnerable areas;

— shoring up farmers’

incomes in the face of possible
market destabilisation caused by the complete decoupling
of aid. The adaptability of farming to market oppor-
tunities, which the Commission seeks to instil, is linked
to farmers’
investment decisions. Such decisions will
depend on the stability of produce markets, as farmers
will only invest if they have a clear idea of how things
will evolve in the medium term. The situation differs for
different products: crops require little specific investment
whereas animal products require costly special equip-
ment. Special attention must
therefore be given to
instruments for stabilising these markets:

— safeguarding the European agricultural model and the
quality of animal products. No attention is given to the
production of plant proteins through traditional fodder
crops, thus leaving still more room for imports of soya
and maize from countries which widely grow genetically
modified crops;

— transferring aid from one generation to another.

The CoR is still in favour of the general principle of decoupling
as the present system can no longer be justified:

— production decisions are based on aid rather than mar-

kets,

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— aid is very unfairly distributed between products and

regions.

Nevertheless, the Committee feels that, with the market studies
and knowledge currently available, decoupling cannot be
introduced without being accompanied by production control
and income guarantee mechanisms to be defined.

of WTO agriculture negotiations does nothing to dispel this
concern. It is proposing an overall reduction of 36 % on farm
import duties but does not set criteria for the production
quality or conditions of imported products. This being the
case, constraints imposed on European producers only could
well have a negative impact on the competitiveness of
European agriculture and a limited effect on the quality of
products available to European consumers.

3. Cross-compliance

4. Obligatory set-aside and non-food production

3.1.
The CoR is in favour of aid being conditional upon
compliance with statutory European standards on the environ-
ment, food safety (mentioned in the explanatory memorandum
but not included in Article 4 of the draft regulation), health,
animal welfare and health and safety at work. It shares the
Commission’s conviction that the conditionality of aid is a
necessary complement to decoupling.

It also endorses measures to include in Regulation (EC)
No 1257/1999 (1) transitional and investment aid intended to
help farmers adapt to these standards.

3.2.
However, the CoR has concerns about the implemen-
tation of the cross-compliance principle. Article 3 of the draft
regulation establishing common rules for direct support
schemes under the common agricultural policy states that ‘a
farmer receiving direct payments shall respect the statutory
management requirements referred to in Annex III ...’. This
scheme calls for farm audits across the board. It will take time
to implement, which seems incompatible with the immediately
binding nature of the provisions in the draft Regulation. There
is thus a need for transitional provisions to enable farmers to
comply with all the eco-requirements. Initially, the scheme
should be thought of as a development tool for improving
practices rather than as a penalty instrument. The post-
ponement of modulation from 2003 to 2006 also raises the
question of what funding is actually available to implement
this measure from 2004 onwards. Alongside modulation,
farmers must not be required to pay more for any such farm
audits.

3.3.
In its previous opinion, the CoR expressed concern
over the difficulty of reconciling compliance with ever higher
environmental standards in Europe with improving the com-
petitiveness of European agriculture against a background of
trade liberalisation. The Commission proposal in the context

(1) OJ L 160, 26.6.1999, p. 80.

The Commission proposals provide for long-term environ-
mental set-aside on 10 % of a farm’s area, as well as the
introduction of support for energy crops (carbon credit).

These proposals, which form the final component of the
overall direct payment scheme, merit two comments:

— there is real potential for developing new production and
jobs in rural areas in the field of non-food crops. Energy
crops are only one aspect of this;

— at present, most non-food crops are grown on fallow
land. The possibility of doing this has resulted in a rapid
increase in crops intended for biofuel production in
cereal-growing areas. As it stands, the proposed regu-
lation rules out the possibility of growing crops on fallow
land, apparently limiting the prospects of developing a
real European-level biomass energy policy, whereas the
Kyoto protocol, developments in nuclear policy in the
EU and the tense international situation affecting oil
markets would seem to warrant a radical rethink of
European energy policy.

5. Progressive modulation

In its opinion, the CoR welcomed the establishment of
5.1.
a progressive modulation system, accompanied by capping
and franchise arrangements. The advantage of this system was
that it lessened the unfair nature of the CAP, supported
employment in rural areas and strengthened the ‘rural develop-
ment’ pillar. Without questioning the principle of capping, it
nevertheless questioned whether it was appropriate to apply a
uniform ceiling of EUR 300 000.

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Chapter 2 of the Commission’s proposal
for a Council
Regulation establishing common rules for direct support
schemes under the common agricultural policy and support
schemes for producers of certain crops, entitled Degression
and modulation, introduces two major changes in relation to
the guidelines contained in its communication on the mid-
term review of the CAP, of 10 July 2002:

The Committee is aware of the difficulty in reviewing the
structure of rural development programmes for the current
programming period (2000-2006). Nevertheless, it calls on
the Commission to use the opportunity provided by the mid-
term evaluation of these programmes to take stock of their
management methods, so as to determine which systems are
most effective.

— the ceiling is removed;

— farm contributions are determined on the basis of the
farms receiving less than

sum of support
received,
EUR 5 000 not being concerned by this system.

6. Rural development

Only 6 % of the appropriations recovered by applying the
progressive modulation system will be transferred to the
second pillar.

The Committee regrets that the principle of capping has been
abandoned, given in particular its symbolic value. The public
support enjoyed by the common agricultural policy is often
undermined by news of the high level of financial support
benefiting certain farm owners.

On the whole, the Committee nevertheless approves

5.2.
of the system put forward by the Commission, inasmuch as:

— it will vary the degree to which aid is reduced depending

on the direct payments received by farms;

— it maintains the principle of a major reduction in direct
payments, which could reach 19 % for farms in 2013,
thus helping to reduce the distortions to competition
associated with the methods of calculating decoupled aid.

5.3.
However, the Committee regrets that only a portion of
the reductions in aid resulting from the application of the
progressive modulation system (6 %) will benefit rural develop-
ment programming measures. This marks a step back for the
Commission, compared with the provisions it made in its July
2002 communication, which, in the Committee’s view, could
have consolidated and strengthened rural development as the
CAP’s second pillar.

It is worth noting that, possibly owing in part to the lack of
new resources, there are no plans to establish a coherent policy
for young farmers.

Lastly, the distribution of these appropriations is carried out
on the basis of national criteria, agricultural area,
farm
employment and gross domestic product (GDP) per capita in
purchasing power parities. This approach neglects procedures
for distributing and managing this funding at regional level.

6.1.
The Commission’s proposal for a Council Regulation
amending Regulation (EC) No 1257/1999 on support for rural
development from the European Agricultural Guidance and
Guarantee Fund (EAGGF) and repealing Regulation (EC)
No 2826/2000 takes up the main provisions contained in the
Commission’s communication of July 2002.

On the whole, the Committee approves of increasing the scope
of the accompanying measures provided for under Regulation
(EC) Νο 1257/1999 with respect to standards, farm advisory
systems, farmers who undertake to adopt standards of animal
husbandry that go beyond the statutory minima, participation
and the promotion of national and Community quality
schemes.

6.2.

It nevertheless would draw attention to:

— the binding nature of certain standards, in particular in
the field of animal welfare, which may threaten high-
quality traditional types of production. Support aimed at
enforcing standards cannot be the only response. The
impact of Community legislation on this type of pro-
duction, which does not have a significant impact on
intra-Community trade, should be measured more care-
fully, in order to provide for implementation methods
that are commensurate with the desired ends;

— the excessively restrictive definition of rural development,
seen by the Commission as an extension of agricultural
activity. The Committee notes that the accompanying
measures proposed cover the 2000-2006 programming
period, without prejudice to any future debate on the
reshaping of rural development policy. In this light, the
Committee would hope in particular that the issue of the
link between regional policy and rural development
policy will be addressed as of now with a view to the
publication of the third cohesion report at the end of
2003.

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7.

Implementation of
reform

common agricultural policy

The implementation of common agricultural policy reform is
intrinsically linked with progress in the discussions on agri-
culture at the WTO and the preparation of the financial
perspectives of the European Union budget for the 2007-2013
period.

7.1. CAP reform and the World Trade Organisation

The Committee has questions to ask regarding the link between
the proposals for CAP reform presented by the Commission
and its negotiating positions on agriculture within the World
Trade Organisation.

It would draw attention to the risk that the outcome of the
negotiations taking place within the WTO could upset the
overall balance of CAP reform, concerning the following
points in particular:

— the protection of geographical

indications and more
generally Community and national schemes designed to
improve food quality and safety, including provisions
aimed at informing consumers;

— the application of legally binding standards for environ-
mental protection, animal welfare, food safety and health,
including on products imported onto the Community
market.

Furthermore, the CoR is of the view that no major decisions
on CAP reform should be taken in advance of the outcome on
the WTO negotiations.

7.2. The financial perspectives (2007-2013)

The Committee is concerned about the direction being taken
in discussions on the European Union’s financial perspectives

Brussels, 2 July 2003.

for the 2007-2013 period. It fears that when it comes to
decision time, rural development and non-Objective 1 regional
policy will be treated as balancing items. The Member States
are already agreed on maintaining the level of financing under
the first pillar at the ceiling reached for 2006 in real terms.
There is also a consensus emerging that the lion’s share of
regional policy financing should go to regions eligible for
Objective 1 after 2006. With these two sums being fixed from
the outset, any adjustments would have to be made to
rural development and/or non-Objective 1 regional policy
appropriations, depending on the overall ceiling for expendi-
ture chosen by the Member States.

The Committee will be on its guard to ensure that the financial
conditions for consolidating and strengthening development
are conducive to running a credible policy.

7.3. The timetable for implementation

Common agricultural policy reform will be implemented in
stages. Over time, it will have to incorporate not only the
decisions taken in the context of the WTO, but also the initial
results of measures introduced at the time of the mid-term
review on markets, farmers’ income and rural areas.

The Committee hopes that the implementation timetable will
be flexible enough to respond not only to external events but
also to implementation difficulties and to indications from the
ongoing monitoring and evaluation of the impact of reform,
especially at regional level. Given the risks posed by certain
provisions in this reform, as pointed out by the Committee,
the implementation of a monitoring system of this kind
appears all the more crucial.

The President

of the Committee of the Regions

Albert BORE