Brussels, 22/01/2003 (Agence Europe) - On Tuesday evening, the European Commission adopted its legislative proposals on mid-term review of Common Agricultural Policy (CAP), the main aim of which is to decouple direct aid from production from 2004 through the introduction of a single farm payment encompassing most sectors (arable crops, milk and dairy products, beef and veal, sheepmeat and goatmeat, potato starch, grain legumes, rice, seeds and dried fodder). Compared to the guidelines presented in July, the Commission has had to postpone its strategy for reduction of aid (modulation) from 2004 to 2007 and strongly modify it in order to take into account: - the decisions of the European Council in Brussels in October 2002 (ceiling of market spending until 2013 at the level of 2006 credits); - progressive introduction of direct aid in the future new Member States; - the cost of reforms announced for after 2006 in the wine, milk and sugar sectors. The sector-specific measures proposed remain practically the same (fall in cereals and rice prices, abolition of aid for rye, reduction in aid for durum wheat except for the introduction of a 40 euro/ha premium in traditional areas instead of a quality premium of 15 euro/ha), except in the milk and dairy products sector where the Commission proposes concrete changes instead of different scenarios.
On the subject of decoupling, provisions are the same as those presented in July except for the following adjustments: - decoupling of premiums in the milk sector will be brought forward one year, to 2004 (to take into account reforms proposed in this sector); - 50% of aid to potato starch will be decoupled; - there is the addition of the seeds sector and of regional aid (very remote regions, Aegean Sea, supplement for drying of cereals in Finland and Sweden); - and fruit and vegetables are no longer excluded.
In the place of the "dynamic modulation" system presented in July (reduction of aid by 3% annually as of 2004 until 20%, with a franchise of EUR 5,000 per holding), the Commission suggests implementing a gradual aid reduction system by instalments: - below aid of EUR 5,000, modulation would not apply; - from 5,001 to 50,000 in aid, the reduction in aid would be 1% in 2007, 3% in 2008, 7.5% in 2009, 9% in 2010, 10.5% in 2011, 12% in 2012, 12.5% in 2013; - above EUR 50,000 in aid, the reduction of premiums would be 1% in 2007, 4% in 2008, 12% in 2009, 14% in 2010, 16% in 2011, 18% in 2012, and 19% in 2013.
The Commission has determined these rates of reduction through a complex mechanism of partial reimbursement and payment.
A growing share of modulation (1% in 2006 to 6% in 2012) would be made available to Member States as additional Community payments for rural development measures. From EUR 228 million in 2007, the additional funds to the advantage of rural development will thus continue to grow over the years to reach EUR 1.48 billion in 2013. These funds will be shared out between Member States on the basis of the following criteria: - farm land surface area; - agricultural employment; - and GDP per inhabitant in terms of purchasing power. The balance of the amounts available (0 in 2007, EUR 276 million in 2008, EUR 1.29 billion in 2009, EUR 1.43 billion in 2010, EUR 1.57 billion in 2011, EUR 1.71 billion in 2010 and EUR 1.86 billion in 2013) will be allocated to the additional financial needs linked to the new market reforms (sugar, olive oil, cotton, tobacco and, possibly, fruit and vegetables and the wine sector). It should be noted that, compared to the July guidelines, the Commission has withdrawn its suggestion to have an aid threshold of EUR 300,000 per holding.
Proposals regarding eco-conditionality, the agricultural audit, and rural development have also been specified or fleshed out compared to the July guidelines:
Eco-conditionality: Direct aid would be reduced in the case of infringement: - Requirements set out in nearly 40 Community legislative acts would apply directly to the level of farms; - good farming conditions must be assured; - and there would be an obligation to maintain permanent prairies.
Farm audits: The notion of agricultural advisory system was preferred to that of farm audit. Participation in this system would be compulsory for farmers earning over EUR 15,000 annually from direct payments or whose turnover is above EUR 100,000 annually. The other farmers will have the possibility, if they so wish, to take part. Farm audits will be able to benefit from aid under rural development.
Rural development: The new measures to be introduced are the same as proposed in July but the aid ceilings have been specified: - aid for improved quality has a ceiling of EUR 1500 per farm and per year; - aid for animal welfare would rise to a maximum of EUR 500 per livestock unit; - unlike what had been suggested in July, it would no longer be possible to increase the rates of Community funding for agri-environmental measures.
Regarding sectoral measures, the Commission proposes prolonging until the 2014-2015 marketing year the system of milk quotas, with a few modifications. The Commission considers that the reform decided in Berlin (drop of 5% a year of the price, compensated by direct aid and an increase in quotas) should be brought forward by a year (2004 instead of 2005), with, however, an asymmetric drop in intervention prices, or -3.5% a year for powdered creamed milk, and -7% for butter. Prices would thus fall by 35% for butter and 17.5% for powdered creamed milk, which corresponds to a global reduction of 25% of the objective prices for milk over five years.
As counterpart, quotas would be increased by 1% in 2007 and 2008. As for butter, intervention purchases would be suspended as soon as the limit set of 30,000 tonnes a year had been reached. Over that limit, they propose initiating an adjudication procedure for the purchase of the quantities of butter concerned. In 2007 and 2008, financial compensation will be paid in theform of direct payments.
At a press conference, Commissioner Franz Fischler declared on Wednesday that the reform being proposed would provide farmers with the security they need to plan their activities and manage their farms. Recalling that the decoupling remained at "the heart of the reform", he rejected the most widespread criticism by which production would be dropped and farmers paid to do nothing.
According to him, farmers will not abandon farming, "they will simply convert to certain more profitable crops. They will take their farming decisions on the basis of market developments and will no longer decide in relation to signals relating to specific subsidies to certain products or animals, nor corresponding red tape".
He added that the improvement of farmers' income thanks to a more rational distribution of resources "is consequently not by chance, but the expected result of our proposal".
Initial cautious reactions by MEPs
Fischler presented his proposals to members of the EP's Agriculture Committee.
Speaking on behalf of the EPP-ED Group, CDU member Lutz Goepel MEP noted that, with these proposals, the Commission "somewhat softened" the guidelines presented in July, in the hope of reaching a compromise. He qualified the decoupling of aid as a "good principle", but regretted the lack of reference to employment. For Georges Garot (French, PES), Mr. Fischler had taken a backward step on the more innovative aspects presented in July, which was dynamic modulation and the strengthening of rural development. Mr. Garot regards this proposal as "rather disappointing", as it as valid not only for the period of Agenda 2000 that remains to be covered, but up to the end of 2013.
He regretted the fact that the Commission had not heard the "EP's message" on the need to avoid a "drop in prices for cereals and rice". Mr. Fischler "has made constructive proposals to us", said Karl Erik Olsson (Swedish, ELDR) for whom, they needed to act rapidly in implementing the principle of decoupling.. He did, however, regret two things: - postponement to after 2006 of the application of modulation; - the practically identical pursuit until 2014 of the system of milk quotas, "with all the shortcomings it comprises". Salvador Jose Peres (Spanish, GUE/NGL) strongly criticised the proposal on decoupling, which he said, "will endanger the edifice as a whole". He considered that a "more gradual" decoupling would have been useful to attain the objectives.
Speaking on behalf of the Greens/EFA, Germany's Friedrich-Willhelm Graefe zu Baringdorf thought the proposals went in the right direction, adding that the difficulties were in the details. He cited, notably, the exclusion of grazing in the proposal on decoupling. He noted that the modulation being proposed "is good for the coffers of the Community budget", while deploring the lack of provisions on modulation at national level. Liam Hyland (Irish, UEN) considered that certain aspects of the proposals, especially in the milk and beef and ovine sectors, "represent a violation of the Berlin agreements", referring to the decoupling of aid. Dominique Souchet (French, NA) said he found it hard to understand how "placing a ceiling on direct aid, its digressive nature, the strict limits now imposed for the sake of the respect of the environment over any increase in productivity and the de facto alignment on world prices could increase agricultural revenue" (As Fischler claims)