CELEX: 51988PC0001
Language: en
Date: 1988-01-13
Title: SET-ASIDE Proposal for a COUNCIL REGULATION (EEC) amending Regulations (EEC) No 797/85 and No 1760/87 as regards the set-aside of agricultural land and the extensification and conversion of production (presented by the Commission)

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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                   !   COM(88 ) 1 final
                                                 !
                                                Brussels , 18 january 1988
                             SET-ASIDE
                          Proposal for a
                     COUNCIL REGULATION ( EEC )
       amending Regulations ( EEC ) No 797 / 85 and No 1760 / 87
      as regards the set-aside of agricultural land and the
          extensification and conversion of production
                  ( presented by the Commission )
 ---pagebreak---                                SET-ASIDE OF FARMLAND
                      COMMISSION COMMUNICATION TO THE COUNCIL
A. Introduction
   1 . European agriculture is facing an unprecedented challenge : while the
       total area farmed is more or less stable , production is rising , mainly
       through increases in productivity : unfortunately , however , the
       prospects as regards demand for agricultural products , both inside and
       outside the Community , are by no means brilliant .  This means that the
       reform of markets and control of production and expenditure on
       agriculture are matters of growing urgency .
   2 . In September 1987 the Commission made proposals to the Council for a
       number of stabilization measures in agriculture , in order to keep crop
       production more in line with market requirements . Most of these
       measures involved changes to the market organizations for the various
       products . The Commission considers that structural measures are also
       desirable , in order to achieve a greater degree of stabilization of the
       supply of agricultural products , by taking land out of farm production .
   3 . The Commission has been asked , both by Parliament in its resolution on
       the farm price proposals for 1987 / 88 and by the Council when it adopted
       those prices , to examine the different ways of not using farmland . The
       attached proposal is the Commission’s response to this request , its
       conclusion being that there is a need for a generalized scheme of
       set-aside for arable land as a whole .   The scheme is based on measures
       already in effect under the common agricultural policy .
                                                                                 L-
 ---pagebreak---                                                  2
   Existing measures
   4 . Since 1985 the Commission has adopted a number of instruments to promote
        not only the withdrawal of land from farm production but also its less
        intensive use .    These measures are :
        - aid for afforestation of farmland ( optional scheme for the Member
           States ) and promotion of afforestation under regional programmes
                                        1.2
           ( Mediterranean countries ) ’ ;
        - compensation to farmers in environmentally sensitive areas who agree
           to farm in a way compatible with the environment : a premium is paid
           to make up for their loss of income ( this is an optional scheme which
                                                              3
           is getting under way in some Member States ) .
        The Commission has also proposed a measure to promote the cessation of
        agricultural activity by farmers over 55 years of age who give up
        farming on all of their land .        The proposal was sent to the Council in
        March 1987 but has not yet been adopted .
    5 . In June 1987 the Council adopted Regulation ^ ( EEC ) No 1760 / 87 on the
        " extensif ication " of agricultural production .       Under this Regulation the
        Member States must , by 29 March 1988 at the latest , introduce
        arrangements for cereals , beef / veal and wine ; they may do so for other
        products in which there is a surplus . As regards cereals , the best way
        of reducing production is set-aside of land properly so called (a
        reduction of at least 20 % in a farm 's cereal acreage ).            In this case
        the land withdrawn from production may be left fallow , with the
        possibility of it being used in a rotation later , or it may be
        afforested , or it may be used for non-agricultural purposes .
1 Council Regulation ( EEC ) No 797 / 85 of 12 March 1985 , Article 20
2 Régulation ( EEC ) No 269 / 79 on Mediterranean forests ; Régulations ( EEC )
  Nos 763 / 85 , 1975 / 82 ( Greece ), 619 / 84 ( Greece ), 1820 / 80 ( Ireland ), 3828 / 85
  ( Portugal - PEDAP ), 2088 / 85 ( IMP )
^ Council Regulation ( EEC ) No 797 / 85 of 12 March 1985 , Articles 19 to 19c
                                                                                             I
 ---pagebreak---                                         3
    Other ways of reducing production may be adopted as long as
    extensif ication (a fall of at least 20 % in the farm 's cereal output ) is
    achieved .
    A premium by hectare is to be paid by the Member States , for which the
    details of implementation are to be determined by the Commission .     The
    EAGGF Guidance Section is to reimburse 25 % .
6 . Thus , if the Community is to extend the possibility of set-aside to all
    arable crops , it should do so along the lines of the existing provisions
    of Regulation 1760 / 87 .
Generalized set-aside
7 . Experience in the United States shows that set-aside may be useful in
    holding down farm output but that its incidence on potential output may
    be cancelled out if it is not accompanied by a prices policy which is
    sufficiently well in line with market requirements .
    The American system cannot be adopted lock , stock and barrel in Europe ,
    for reasons which are both structural ( the specific features of European
    agriculture , including smaller farms and a large agricultural labour
    force ) and administrative ( the American deficiency payments scheme ,
    providing specific incentives for set-aside ).   However , with a view to
    achieving a better degree of stabilization in the supply of agricultural
    products in Europe , a temporary set-aside scheme could have an important
    role to play .
          . < »             . . 4         i
8 . Extension of set-aside to arable land as a whole should be seen as being
    in addition to and not instead of a rigorous prices policy .    If it were
    to take the place of the efforts already under way to adapt European
    farm prices to market realities , then our agriculture might in the
    medium term become even less competitive than its rivals on the world
    market than it is now .
 ---pagebreak---                                            4
    9.   In order not to encroach upon farmers' freedom of choice , any set-aside
         scheme should not be compulsory upon individual farmers : it should be
         optional , with a premium for farmers who agree to take a part of their
         land out of production .  In order to be effective , however , it should
         be compulsory for the Member States , in that each country should have
         to bring in the scheme .
    Supervision
    10 . Any set-aside scheme clearly involves difficulties of supervision , as
         is confirmed by experience in the United States .   First , the farm 's
         arable area before set-aside has to be checked , and then it will take a
         considerable administrative effort to ensure that the land set aside is
         not farmed ; checking the amount produced on the area which is still
         farmed will be even more difficult .  The Commission thus takes the view
         that when a farmer agrees to set aside land he should simply agree not
         to farm the areas concerned .
B . Details of the set-aside scheme
    The farmer’s commitment
    11 . For there to be real progress in stabilizing supply , farmers will have
         to take at least 20 % of their arable land out of production and will
         have to do so for at least 5 years .  For administrative reasons , the
         amount of land set aside must be at least 1 hectare .
 ---pagebreak---                                           5
  Def ini t ion 'of arable land
  12 . The set-aside scheme is being proposed for arable land as a whole ,
       provided that it has actually been cultivated over a reference period
       to be determined . Arable land is used to grow different crops from
       year to year , in crop rotations , and under a set-aside scheme farmers
       will first give up those crops with the lowest net margins per
       hectare . At Community level this means cereals , particularly barley
       and wheat .
  13 . The scheme should not , however , apply to land so far used for growing
       crops not covered by a market organization ( such as potatoes ), as
       grazing land ( green fodder ) or for permanent crops ( olives , grapes ,
       citrus and other fruit ).
  14 . A list of products to which the scheme is not to apply will therefore
       be included among the implementing provisions .
  Protection of the environment and natural resources
  15 . Giving up farm production on arable land , even if only temporarily ,
        should not be allowed to lead to a deterioration of soil quality or the
        natural environment .   It is therefore proposed that the Member State
        should , on land taken out of production , take the steps necessary to
       maintain good husbandry conditions and lay down rules for protecting
        the environment and natural resources .
#
                                                                                6
 ---pagebreak---                                         6
Compensation
16 . The compensation is  for the income lost by the farmer through giving up
     farming on the land  concerned . A premium per hectare set aside is paid
     each year , provided the farmer complies with his commitment . A
     farmer 's premium is not calculated individually but is fixed by the
     Member State on a flat-rate basis , in the light of the situation by
     region or type of land and allowing for the fact that the land set
     aside would have given less than average yields .
17 . It is thus for the Commission to determine the criteria to be followed
     by the Member State , together with a maximum amount eligible for a
     Community financial contribution ( single amount ) and , in order to
     ensure that the scheme is effectively implemented , minimum amounts also
     ( modulated by Member State or region ) .
18 . A system of premium tendering might have certain administrative
     advantages , and this option is left open to the Member States in their
     implementing rules .
                                                «
19 . The most significant objective criteria for assessing income losses
     would seem to be the net margins per hectare as revealed by the
     Community’s Farm Accountancy Data Network ( FADN ) .
     By way of indication , in the period 1983 to 1985 , net margins per
     hectare on specialized cereal farms in the Community varied between 200
     and 600 ECU ( national averages ).
Relationship between set-aside and the cereal co-responsibility levy
20 . If a farmer takes a part of his cereal-growing land out of production
     and thus reduces his grain output , the amount he will have to pay in
     co-responsibility levy will automatically fall .
 ---pagebreak---                                         7
     The Commission also considers that there should be arrangements whereby
     cereal growers who agree to set aside a substantial proportion of their
     land may be exempted from co-responsibility , subject to certain
     conditions . Thus , those who contribute to eliminating surpluses by
     accepting individual responsibility under set-aside will not be subject
     to collective penalization under the co-responsibility levy .
     Thus it is proposed that each farmer who sets aside at least 30 % of
     his arable land be granted exemption for 20 tonnes from both the basic
     co-responsibility levy and the additional levy provided for in the
     stabilizer system , throughout the period of his set-aside commitment .
     This will create a logical and transparent link between the set-aside
     scheme , the aim of which is to help stabilize supply , and the
     stabilizer system to be applied in the cereals sector .
     In addition , the Commission intends to propose , under the organization
     of the cereal market , an amendment to the rules for implementing the
     co-responsibility levy whereby the levy would be payable by the first
     buyer of the grain . It will also be proposed that all cereal producers
     be granted exemption from the basic and additional levies for their
     first 20 tonnes of grain marketed .   Such an across - the - board threshold
     would be equitable between all producers and would help in protecting
     small producers .
     As the two exemptions could be combined , a large number of cereal
     producers could have their whole output freed from co- responsibility
     levies .
Exemption of certain regions
21 . Regulation 1760 / 87 already allows for Member States not to apply
     extens if ication or conversion schemes in " regions or areas in which
     production should not , because of natural conditions or the danger of
     depopulation , be reduced ". The Commission is to adopt criteria for
     defining such areas ; Portugal is exempt until 1991 .
                                                                                  g
 ---pagebreak---                                        8
     It is proposed that generalized set-aside of land be based on the same
     arrangements .
Financial implications
22 . The main purpose of the farmland set-aside scheme is to help stabilize
     supply of agricultural products , which should lead to a fall in
     expenditure by the EAGGF Guarantee Section . The Commission is thus
     proposing that reimbursement come from the Guarantee Section , instead
     of from the Guidance Section as is at present the case under Regulation
     1760 / 87 .
     In order to take account of the situation of the Community’s less
     prosperous regions , it is proposed that the reimbursement rate be
     modulated .
     In such regions , net margins per hectare tend to be lower , which would
     normally involve premiums being set lower . The Commission is thus
     proposing a degressive reimbursement rate , in steps :
     - 50 % for the firs 200 ECU per hectare
     - 25 % for the tranche from 200 to 400 ECU per hectare
     - 15 % for the tranche from 400 to 600 ECU per hectare .
23 . The cost to the EAGGF Guarantee Section of generalized set-aside of
     arable land is likely to be 140 million ECU per year for every million
     of hectares set-aside .  It is stressed that the estimate is
     approximate , in view of the Community 's lack of experience in this area
     and uncertainty as to the level of premiums ).   The quantities not
     produced on the land thus set aside might at the same time and for
     every million of hectares set-aside lead to a saving for the EAGGF
     Guarantee Section of about 400 million ECU per year .   This , however ,
     may well occur during later years , depending on the real potential for
     disposing of surpluses and the policy adopted as regards depreciation
     of intervention stocks .
 ---pagebreak--- C. Details of the extensif ication scheme
   Arable land
   24 . The Commission considers that any generalized set-aside scheme ( talcing
         land on the farm out of cultivation ) should not rule out participation
         in an extensif ication scheme ( reducing the farm’s volume of production ).
         Both are provided for in Regulation 1760 / 87 , with the same aim of
         reducing production , but in different ways : extens if ication favours
          less intensive exploitation of land and the introduction of production
         practices ( such as organic farming ) which are environmentally
          favourable .  This is why the Commission is proposing that the
          extensif ication scheme be made applicable to all arable land .    Here too
          the Commission proposes that reimbursement be made by the EAGGF
          Guarantee Section .
   Beef / veal
    25 . The Commission considers that the method of implementation adopted in
          Regulation 1760 / 87 , i.e. decreasing the number of livestock units by at
          least 20 % , presents difficulties of application , for reasons of
          supervision . In addition , since the ways in which cattle are raised
          vary from one Community country to another , the Commission proposes
          that the choice of how the measure is to be applied be left to the
        • Member States , subject to. beef / veal production on the farm being •
          reduced by at least 20 % .
 ---pagebreak---                                             10
   Wine
   26 . For the same reasons , the Commission is proposing that the choice of
        how to achieve extensif ication in the wine sector be left to the Member
        States , always providing that the holding’s production is reduced by at
        least 20 % . In order to achieve better stabilization of the supply of
        wine at Community level , the Commission also intends to propose that
        amendments be made to Council Regulation ( EEC ) No 777 / 85 on permanent
        abandonment of areas under vines , in order to encourage its application
        further .
D. Details of the conversion scheme
   27 . The draft Regulation being put forward takes over the provisions
        adopted by the Council in Regulation ( EEC ) No 1760 / 87 as regards the
        product conversion scheme .     It is proposed that the Council adopt , on a
        proposal from the Commission , the list of products conversion to which
        is to be allowed and the conditions and procedures for grant of the aid .
E. Transitional provisions
   28 . It is assumed that the arrangements currently provided for in Council
        Regulation ( EEC ) No 1760 / 87 as regards the conversion and
        extensif ication of production will continue to apply until the
        Regulation now being proposed comes into force .     The new Regulation is
        to be applied by the Member States within three months of. its entering
        into force .  If need be , provision for a smooth transition to the new
        scheme could be added to the proposal .
 ---pagebreak---                                                         VI / 6676 / 87 Rov . 6
                                                        RW / ep ( VIGSDEMO / 241 )
                                                         ( Rev . 6 of 05.01.1988 )
                      Council Régulation No
                                 of
               amending Regulations ( EEC ) No 797 / 85 and No 1760 / 87
                  as regards the set-aside of agricultural land
              and the extensif ication and conversion of production
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the European Economic Community ,
and in particular Articles 42 and 43 thereof ,
Having regard to the proposal from the Commission ( 1 ),
Having regard to the opinion of the European Parliament ( 2 ),
Having regard to the opinion of the Economic and Social Committee ( 3 ),
Whereas the situation of the agricultural markets has changed , and will
change further , as a result of the new direction imposed on the common
agricultural policy by the need to secure a gradual drop in output in
those sectors where there is a surplus ;
Whereas , in this context , the structural policy must be used to help
farmers adapt to this new situation and to cushion the effects that the
new markets and prices policy is likely to have on agricultural incomes
 in particular ;
Whereas ,    in order that the objectives of the structural policy may be
 achieved , the common measure introduced by Council Regulation ( EEC )
No 797 / 85 of 12 March 1985 on improving the efficiency of agricultural
 structures ( 4 ), as last amended by Regulation ( EEC ) No 1760 / 85 ( 5 ),
 should be adjusted and amplified ;
Whereas arrangements for the set-aside of arable land may assist the
 various sectors , and in particular those with surplus production , to
 adjust to market requirements ;
 Whereas the set-aside arrangements should be extended to cover all arable
 land since from one year to another the use made of such land varies with
 the rotation of crops ; whereas , however , the possibility should be pro ¬
 vided for of excluding from the scheme land so far used for crops whose
 situation     is not  such as    to make desirable Community          incentives  for
 reducing the area devoted to them ; whereas , to achieve tangible results
 in terms of the stabilization of supply , it should be stipulated that at
 least 207. of the arable land must be set aside for a period of at least
 five years ;
 ( 1 ) OJ No L 93 , 30.03.1985 , p. 1
 ( 2 ) OJ No L 167 , 26.06.1987 , p. 1
 ---pagebreak---                                           2
Whereas , given the greater need to protect the environment and to
maintain the countryside . Member States should take the necessary
measures to keep set-aside land in good agricultural condition and lay
down the necessary provisions to protect the environment and natural
resources ;
Whereas it should be left to the Member States to set the amount of the
aid per hectare of land set aside , in the light of the income losses
actually incurred and in accordance with criteria to be laid down within
the framework of the detailed rules for applying these arrangements ;
whereas , on the one hand , the level of aid must be fixed so that it is
sufficiently high to provide farmers with a real incentive to set aside
some of their land ; whereas , on the other-hand , the aid should not exceed
the level necessary to offset the loss of income resulting from the set-
aside of the land ; whereas , to this end , the minimum and maximum amounts
eligible for the aid should be specified ;
Whereas , to provide an additional incentive to those farmers who set
aside large areas , that is , at least 30% of their arable land , such
farmers should be exempted , in respect of a quantity of 20 tonnes , from
the co-responsibility levy provided for in Article 4 of Regulation ( EEC )
No 2727 / 75 and the additional co-responsibility levy provided for in
Article 7a(3 ) of Council Regulation ( EEC ) No 2727 / 75 of 29 October 1975
on the common organization of the market in cereals ( 6 ), as last amended
by Regulation ( EEC ) No      / 88 ( 7 );
Whereas , to take account of the different situations obtaining in the
various regions of the Community , provision should be made for the modu¬
lation by tranches of the rate of reimbursement from the European Agri¬
cultural Guidance and Guarantee Fund ;
Whereas the introduction of aid arrangements for the set-aside of land
necessitates certain changes in the aid arrangements for conversion and
extensif ication as introduced by Regulation ( EEC ) No 1760 / 87 ; whereas ,
for the sake of clarity , adjustments should be made to the provisions
currently in force without altering in any essential respect the existing
aid arrangements for conversion and extensif ication ,
Whereas , although schemes for land set-aside and extensif ication of pro¬
duction fall within the common measure for improving the efficiency of
agricultural structures provided for in Regulation ( EEC ) No 797 / 85 , their
main aim is nonetheless to help in re-establishing the balance between
output and the market’s capacity to absorb it ;
 ( 6 ) 0J No L 281 , 01.11.1975 , p. 1
 (7)
 ---pagebreak--- whereas , therefore , by way of derogation from Article 1(3 ) and
Article 6(1 ) of Council Regulation ( EEC ) No 729 / 70 on the financing of
the common agricultural policy ( 8 ), as last amended by Regulation ( EEC )
No 3183 / 79 ( 9 ), it should be laid down that schemes for land set-aside
and extensif ication of production are to be considered as intervention
within the meaning of Article 3 of Regulation ( EEC ) No 729 / 70 and there ¬
fore financed by the Guarantee Section of the European Agricultural
Guidance and Guarantee Fund ;
HAS ADOPTED THIS REGULATION :
                                          Article 1
Regulation ( EEC ) No 797 / 85 is hereby amended as follows :
1 . In Article 1 :
     ( a ) the following subparagraph is added to paragraph 1 :
           "The common measure shall include such measures as are considered
             to be intervention within the meaning of Article 3 of Regulation
             ( EEC ) No 729 / 70 ";
     ( b ) in paragraph 2(a ) the words " and extensif ication " are deleted ;
     ( c ) the following subparagraph is added to paragraph 2 :
           " In accordance with Title VIII , the Guidance Section of the Fund
             shall make a contribution to the measure referred to in
             paragraph 1 concerning :
           ( a ) the scheme for encouraging set-aside of land ;
           ( b ) the scheme for encouraging extensif ication of production ."
2 . Title 01 is replaced by the following Titles 01 , 02 and 03 :
                                          " Title 01
                               Set-aside of agricultural land
                                         Article la
     1 . Member States shall introduce an aid scheme designed to encourage
          the set-aside of agricultural land .
     2 . Aid for set-aside may be granted for all arable land , irrespective
          of the crops grown , provided that the land has in fact been culti¬
          vated for a reference period to be determined . Land growing crops
          whose situation is not such as to make desirable any set-aside of
          land devoted to them may be excluded from the scheme .
( 8 ) OJ No L 94 , 28.04.1970 , p. 1
( 9 ) OJ No L 304 , 27.10.1987 , p. 1
 ---pagebreak---                                         4
   3 . The agricultural land withdrawn from production must represent at
       least 207. of the arable land on the farm concerned . tor a period
       of at least five years such land must be withdrawn f rom
       cultivation , that is :
       - left fallow ,
       - afforested or
       - used for non-agricultural purposes .
       Member States shall take the necessary measures to keep the land in
       good agricultural condition . They shall lay down the necessary
       provisions for managing the land so that the environment and
       natural resources are protected .
   4 . Member States shall determine :
       a ) the amount of the aid to be paid per hectare of land set aside
           on the basis of the loss of income resulting from the land being
           set aside , whilst ensuring that the amount of the aid is suffi ¬
           cient to make it effective , on the one hand , and that it does
           not provide excessive compensation , on the other , together with
           the way in which that aid is to be paid .
           This aid shall be eligible for reimbursement from the Fund only
           up to a maximum amount per hectare to be determined . The aid
           may not be less than certain minimum amounts to be determined ;
       b ) the reference period referred to in paragraph 2 ;
       c ) the undertaking to be given by the beneficiary for the purposes
           of verifying that the area farmed has in fact been reduced .
   5 . Producers who , for the land set aside , receive aid within the
       meaning of this Title may not receive aid within the meaning of
       Titles 02 or 03 for such land .
   6 . Producers who set aside at least 30% of their arable land shall be
       exempted , in respect of a quantity of 20 tonnes , from the
       co-responsibility levy referred to in Article 4 of Regulation ( EEC )
       No 2727 / 75 and from the additional co-responsibility levy (*)
       provided for in Article 7a(3 ) of Regulation ( EEC ) No 2727 / 75 .
   7 . The Commission , acting in accordance with the procedure laid down
       in Article 25 , shall adopt detailed rules for applying this Title ,
       specifying in particular :
           the land to be excluded from the scheme under the second sentence of
           paragraph 2 ;
           the criteria to be applied by the Member States when fixing the aid ;
           the criteria for determining the reference period referred to in
           paragraph 2 ;
           the maximum annual amount per hectare eligible for assistance from the
           Fund ;
       -   the regionally-adjusted minimum amounts , taking account of soil types
           and the net margins recorded .
(*) Date of the Regulation 's entry into force
                                                                                  4T
 ---pagebreak---                                     Title 02
                         Extensif ication of production
                                   Article lb
1 . Member States sball introduce an aid scheme to promote extensi -
    fication of the production of surplus products . Surplus products
    shall be defined as products for which there are consistently , at
    Community level , no normal unsubsidized outlets .
    Until 31 December 1989 Member States may restrict the scheme to
    crop products , beef and veal , and wine .
2 . Extensif ication shall be defined as a reduction of at least 207., for a
    period of at least five years , in the output of the product concerned
    without any increase in other surplus production capacity . However , such
    an increase shall be permitted in proportion to a any increase in the
    utilized agricultural area of the farm .
3 . Member States shall determine :
    ( a ) the conditions for reducing output of the various products . In
          the case of beef and veal , it may be stipulated that , in order
          to achieve the reduction in output referred to in paragraph 2 ,
          the number of livestock units must be reduced by at least 207.;
          in the case of wine , it may be stipulated that the yield per
          hectare must be reduced by at least 20% ;
    ( b ) the amount of the aid , on the basis of the undertaking given by
          the beneficiary and the loss of income incurred , and the way in
          which it is to be paid ;
    ( c ) the reference period for the product concerned , for the
          purposes of calculating the reduction ;
    ( d ) the undertaking to be given by the beneficiary for the purposes
          of verifying that production has in fact been reduced .
4 . Where the scheme is applied in the milk sector , the reduction in
    output shall be calculated      on the basis of the reference quantity
    allocated under Regulation       ( EEC ) No 804 / 68 ( 1 ), as last amended by
    Regulation ( EEC ) No 773 / 87   ( 2 ). The reference quantities suspended
    pursuant to this paragraph      may not be reused or reallocated for the
    duration of the suspension .
    The eligible amount of the premium paid under Council Regulation
    ( EEC ) No 775 / 87 of 16 March 1987 temporarily withdrawing a
    proportion of the reference quantities mentioned in Article 5c(l )
    of Regulation ( EEC ) No 804 / 68 on the common organization of the
    market in milk and milk products shall be deducted from the eli ¬
    gible amount of the aid .
5 . Producers who receive aid within the meaning of this Title may not
    receive aid within the meaning of Titles 01 or 03 for the land
    affected by extensif ication .
6 . The Commission , acting in accordance with the procedure laid down
    in Article 25 , shall lay down detailed rules for applying this
    Title , specifying in particular the maximum annual amounts eligible
    for assistance from the Fund .
                                                                                   Ai
 ---pagebreak---                                             6
                                        Title 03
                                Conversion of production
                                       Article le
    1 . Member States shall introduce an aid scheme designed to encourage
         the conversion of production towards non-surplus products .
    2 . The Council , acting on a proposal from the Commission in accordance
         with the voting laid down in Article 43(2 ) of the EEC Treaty , shall
         adopt a list of products towards which production may be converted
         and shall lay down the conditions and procedures for the granting
         of the aid .
    3 . Producers who receive aid within the meaning of this Title may not
         receive aid within the meaning of Titles 01 or 02 for the land in
         question .
    4 . The Commission , acting in accordance with the procedure laid down
         in Article 25 , shall adopt detailed rules for applying this Title ."
2 . In Article 26 ,
    ( a ) paragraph 1 is replaced by the following :
         " 1 . The expenditure incurred by Member States in connection with
               the measures provided for in Articles lc , 3 to 7 , 9 to 17 and
               19 to 21 shall be eligible for aid from the Guidance Section of
               the Fund . The expenditure incurred by Member States in connec ¬
               tion with the measures provided for in Articles la and lb shall
               be eligible for aid from the Guarantee Section of the Fund ."
    ( b ) the following subparagraph is added to paragraph 2 :
           " The Fund shall reimburse to Member States 507. of the eligible
             expenditure on the measures provided for in’ Article la .
             The rate shall be reduced to :
             257<> for that portion of the aid which exceeds 200 ECU per hectare ;
             157. for that portion of the aid which exceeds 400 ECU per
             hectare . "
3 . In Article 32(1 ) the following subparagraph is inserted after the
    first subparagraph :
    " Where Titles 01 , 02 and 03 are concerned , Member States shall bring
    into force the measures necessary to comply with this Regulation
    before . 1988 (*)."
(*) Three months as from the entry into force of the proposed Regulation .
 ---pagebreak--- A. The following Article 32a is inserted :
   " 1 . On receipt of a reasoned application , the Commission , acting in
         accordance with the procedure laid down in Article 5 , may autho ¬
         rize a Member State not to apply the aid schemes provided for in
         Titles 01 , 02 and 03 in those regions or areas where , because of
         natural conditions or the threat of depopulation , production
         should not be reduced .
         The Commission , acting in accordance with the procedure laid down
         in Article 25 , shall adopt the criteria for defining the regions
         or areas referred to in the first subparagraph .
     2 . Portugal is hereby authorized not to apply the schemes referred to
         in paragraph 1 during the first stage of accession ."
                                    Article 2
Articles 5 and 6 of Regulation ( EEC ) No 1760 / 87 are hereby repealed .
                                    Article 3
This Regulation shall enter into force on the third day following its
publication in the Official Journal of the European Communities .
This Regulation shall be binding in its entirety and directly applicable
in all Member States .
                                                                            4
 ---pagebreak---            FINANCIAL              STATEMENT                   concerning :
           proposal for a Council Regulation amending Regulations ( EEC 1 No 797 / 85 and
           No 1760 / 87 as regards the set-aside of agricultural land and the extensi -
           fication and conversion of production
       1 . Budget heading : IIIB       Item :   1030   Title :    EAG6F Guarantee : set-aside of
                                                                                             agricultural land
                                                                  EAGGF Guarantee : co-responsibi l i ty levy
       2 . Legal basis :    Article A3 of the Treaty
       3 . Classification :           . Compulsory expend ! turo/Won -compul oory oxpondi tuno
    U
      k. Purpose/description of the measure :        set-aside of agricultural land in order to help
    {
    i                                                stabilize the supply of agricultural products
    i
   i
   i
  | 5.       Method of calculation
  I 5.1 Form of expenditure : reimbursement of a part of national expenditure
  |                                  exemption from the co-responsibility levy
  j 5.2 Community contribution : between 15 and 50 % of expenditure qualifying for EAGGF
                                           contribution
  j! 5.3 Calculation : see        annex for the cost per million hectares withdrawn from produc-
                              tion .
   •                          It: is envisaged that the system will start to be applied in the
   j                          autumn of 1988, so that the first EAGGF expenditure will be in
                              1989 .
  ! 6.      Financial implication as regards operating appropriations
  i 5.1 Schedule of commitment appropriations and payment appropriations (m ECU )
                                                     EAGGF
                         Year                 Guidance Premiums
                         19 89                       p.m .
                         19 90                       p.m .
                         19 91                       p.m .
                         19 92                       p.m .
                         19 93                       p.m .
      6.2 Financing during current year :
 j 7 . Observations :
i
                                                                                                               Ai
 ---pagebreak---   ANNFX TO THE FINANCIAL STATEMENT
  Subject : Set-aside of arable land .
  In order to estimate expenditure an average premium of 400 ECU per hectare
  has been retained as a hypothesis .       This amount is based on the net income
  loss for the producer resulting from non-production , as well as the cost
  to maintain the land in fallow .
* For 1 million hectares withdrawn from production :
  Total cost of the premium = 1,000,000 x 400 ECU / ha = 400 MECU of which the
I EAGGF participation is set , according to the level of the premium at :
     50 % up to 200 ECU / ha              )
     25 % between 200 and 400 ECU / ha )     average rate estimated at 35 %
                                             or 140 MECU
     15 % between 400 and 600 ECU / ha )
  Exemption from co-responsibility levy on 20 tonnes of cereals marketed by
  farmers setting aside at least 30 % of their arable land .        It is estimated
  that this exemption will affect 600,000 tonnes of cereals .        With a 3 % levy
  (= 5.38 ECU / tonne ) : 600,000 x 5.38 = 3 MECU ( 1 ).
  The fall in production will concern cereals mainly , because of their profita ¬
  bility per hectare . The average yield is 4.6 tonnes per hectare but , given
  slippage of 50 % , the expected fall is only : 1,000,000 hectares x 4.6 tonnes
  per hectare x 50 % = 2.2 million tonnes .
  Reduced expenditure for the EAGGF Guarantee Section , based on an export cost ,
  after one year of intervention storage , of about 175 ECU per tonne , will
  be : 2.3 million tonnes x 175 ECU per tonne = 400 million ECU .
  Consequently for 1 million hectares withdrawn from production and affecting
  cereals :
                                                                   MECU
  - Total cost of the premium                                      400
  - Cost for EAGGF                                                 140
  - Lower receipts due to the exemption on the
     co-responsibility levy                                          3
  - Lower EAGGF expenditure on disposal                            400
  C1 ) Exemption from the levy will be of greater importance if the co-responsi -
       b-iJ. it i levy is set at -a higher level than at present .     • • •