REPORT on the integration of the new Member States into the CAP
1.3.2007 - (2006/2042(INI))
Committee on Agriculture and Rural Development
Rapporteur: Csaba Sándor Tabajdi
MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION
on the integration of the new Member States into the CAP
The European Parliament,
– having regard to Article 33 of the Treaty establishing the European Community,
– having regard to Council Regulation (EC) No 1268/1999 of 21 June 1999 on Community support for pre-accession measures for agriculture and rural development in the applicant countries of central and eastern Europe in the pre-accession period[1],
– having regard to the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustment to the Treaties on which the European Union is founded[2],
– having regard to Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers[3]
– having regard to the Decision of the Council of 22 March 2004 adapting the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustment to the Treaties on which the European Union is founded, following the reform of the common agricultural policy[4],
– having regard to Council Regulation (EC) No 864/2004 of 29 April 2004 amending Regulation (EC) No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, and adapting it by reason of the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia to the European Union[5],
– having regard to Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy[6],
– having regard to Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD)[7],
– having regard to Council Regulation (EC) No 318/2006 of 20 February 2006 on the common organisation of the markets in the sugar sector[8],
– having regard to the Interinstitutional Agreement of 17 May 2006 between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management[9],
– having regard to the proposal for a Council regulation amending and correcting Regulation (EC) No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers and amending Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD)[10],
– having regard to Rule 45 of its Rules of Procedure,
– having regard to the report of the Committee on Agriculture and Rural Development (A6‑0037/2007),
A. whereas the 2004 enlargement increased substantially the agricultural area (by around 27 %), the number of farms (by around 60 %), and the number of agricultural workers (by around 57 %) in the EU, thereby boosting its production potential and making agriculture more important; whereas higher yields per hectare of food and feed production will release sufficient areas of land for biomass production and this situation has contributed to a further differentiation of the European agricultural and rural fabric; whereas this process has become more marked and has deepened with the accession of Bulgaria and Romania,
B. whereas agriculture in the majority of the new Member States differs significantly from agriculture in the EU-15 in terms of production levels and structures and the number of farms, and is characterised by lower levels of general efficiency, technological development and vertical and horizontal integration than in the old Member States,
C. whereas agriculture plays a greater economic and social role in the majority of the new Member States than in the EU-15, as the sector’s contribution to the GNI and the proportion of employees working in the sector are above the EU average,
D. whereas in certain new Member States subsistence and semi-subsistence agriculture are of great social, cultural and environmental importance,
E. whereas the new Member States have been successfully and smoothly integrated into the internal market, contributing to a significant increase of the European agricultural and food trade; whereas the new Member States duly introduced and enforce veterinary, phytosanitary, food safety, common market organisation and other horizontal rules, so that it was not necessary to apply any specific safeguard measures,
F. whereas the new Member States had to shoulder high social and economic costs in order to adapt to and integrate the common agricultural policy (CAP) rules and to adapt to the competitive environment in the EU; whereas the pre-accession funds only partially covered the costs of the adaptation and integration process before the accession; whereas the accession to the EU revealed the general economic and competitiveness problems of the new Member States; whereas the CAP has failed to contribute to solving these problems entirely,
G. whereas the CAP triggered considerable development and significant changes in the agriculture of the new Member States, and whereas some problems and tensions have arisen mainly due to the fact that the CAP rules do not support sufficiently the development of a balanced, sustainable agricultural sector, especially as animal husbandry, horticulture and up- and downstream integrations are concerned,
H. whereas the Act of Accession introduced a long phasing-in (nine years), with a low starting level (25 %) for the direct payments in the new Member States, though internal market and budgetary contribution rules fully apply to them; whereas cost and income levels in the new Member States do not justify this degree of differentiation, which results in unequal conditions for the new Member States’ farmers in terms of competition,
I. whereas the problems which should be tackled in the new Member States are, primarily, those requiring structural changes to strengthen competitiveness; whereas CAP measures supporting incomes and guaranteeing prices significantly contributed to such strengthening,
J. whereas the Commission and the Council have been late or reluctant in understanding the new Member States’ special problems and offering the necessary help (for example problems on the fruit and vegetables market, especially as regards soft fruits, cherries and apples, the unjustified ban on Polish exports by Russia and Ukraine, the modification and proposed abolition of maize intervention rules, honey imports from third countries),
K. whereas the clear shortage of producer-owners in the new Member States in the food‑processing industry and abuse of the dominant position of commercial chains seriously limit the competitiveness of the farmers and their cooperation and integration,
L. whereas 8 out of 10 new Member States chose the single area payment scheme (SAPS) for the direct payments,
M. whereas the need for community assistance in rural development in the new Member States was significantly higher than the available budgetary allocations for the 2004-2006 period, and at the same time implementation rules of the rural development programmes limited the dynamic utilisation of Community allocations; whereas these factors have considerably narrowed the impact of the of the CAP second pillar in the new Member States, and may persist also during the new financial framework,
Smooth integration, win-win situation
1. Welcomes the fact that the agricultural and food sector of the new Member States has been integrated thoroughly and smoothly into the common market of the European Union;
2. Stresses that, although the 2004 enlargement caused disturbances on the agricultural and food markets of certain new Member States, it contributed significantly to the development and expansion of the well-established market relations of the 25 Member States as a whole;
3. Points out that the agriculture and food sector in both the new and old Member States benefited at least partially from the enlargement – stakeholders in the new Member States benefited from the higher level of agricultural support and from the increase of trade possibilities, while the food-processing industry and international trade in the old Member States increased, and there was a higher level of investment and a rise in turnover in the retail sector, in particular in the run-up to enlargement;
4. Considers that overall the integration of the new Member States has been successful but that the situation is not always clear cut, as not all farms have seen their incomes rise; points out that the increase in purchase prices and in subsidies were partially offset by the significant rises in production costs (for example rises in the cost of fuel, energy, fertiliser, plant protection products and machinery);
5. Stresses the fact that enlargement has not increased the risk level in food safety, animal and plant health and notes in this respect that the standards and efficiency of the work of the competent authorities in the new Member States are above the EU average in certain aspects;
6. Observes that the 2004 enlargement has not imposed an unbearable burden on the CAP budget and has not demanded significant changes as far as the EU budget is concerned but that decisions on freezing the market and direct payment budget and the 2007-2013 financial framework require a sacrifice based on the principle of solidarity from the EU‑15 from 2007 onwards; also notes that, further to the European Council’s decisions of December 2005, EU-15 producers suffered further cutbacks because of the accession of Bulgaria and Romania, over and above the decisions to implement policies, such as voluntary modulation, to strengthen the second pillar;
7. Laments the fact that higher quotas were not allocated for either the 2004 or 2007 enlargement, if only at the level initially planned;
Application of the Common Agricultural Policy in the new Member States
8. Notes that the considerable differences between the agricultural sectors of the new Member States result in differences in the impact of the CAP application and in the scope and vigour of the challenges the new Member States are facing;
9. Notes that Community rules were not adequately adapted to the new conditions in certain markets (e.g. the markets in soft fruit and in starch) following the enlargement of the EU by 10 countries in 2004;
10. Notes that adaptation to the conditions and rules of the internal market and the application of the CAP – especially concerning veterinary, phytosanitary, food safety, common market organisation and other horizontal rules – have resulted in considerable efforts being required from farmers and administrations in the new Member States;
11. Considers that over a period of several months the Commission failed to attach adequate importance to the ban on the export of Polish agricultural products to Ukraine and Russia or to take effective action to bring it to an end;
12. Notes that, although EU-financed pre-accession programmes contributed to the preparation for the CAP application and twinning programmes proved to be useful, the original goals were only partly achieved and the efficiency of the Community measures was limited;
13. Recalls that the Special Accession Programme for Agriculture and Rural Development (SAPARD) started with a considerable delay and the scope was also limited, mainly owing to the complicated requirements and lack of due-time decisions of the Commission and of authorities of the new Member States;
14. Observes that certain new Member States face considerable difficulties in implementing the Community rural development programmes due to the complexity of their rules and the administrative burden of their management;
15. Reiterates that, as direct payments play a substantial role in the development and adaptation of the agricultural sector of the new Member States, their low level in the first years of the phasing-in period not only hindered the necessary adaptation but created unequal conditions for competition on the internal market as well, which many operators were economically unable to cope with;
16. Stresses the important role of the rural development programmes both in establishing a new, market-oriented approach for farms – e.g. in processing and marketing their own products or in tourism – and in creating alternative sources of income for those which abandon basic agricultural production for economic reasons;
17. Notes that the different levels of the direct payments between the EU-10 and EU-15 have not ensured a level playing field, thus in several new Member States the producers lost ground even on their domestic markets, to which, primarily, competition resulting from an increase in imports and exports from third countries due to the changed customs regime also contributed;
18. Notes that the Commission’s reservations towards the new Member States with regard to the alleged surplus of stock on the day of accession to the EU and its threats to impose financial penalties of several million euro were unjustified in most cases and based on erroneous calculations; further notes that no disruption of the balance was observed on any of the agricultural markets that could have been the result of this alleged supply surplus;
19. Emphasises that the new Member States were forced to apply complementary national direct payments (CNDP, top-up), which can be considered as a form of cofinancing and a quasi-renationalisation of Community direct payments and led to serious political and economic difficulties in various new Member States as they imposed a serious burden on the national budgets and limited the availability to apply state aid schemes;
20. Points out that, due to budgetary constraints, contrary to the general objectives and principles of the CAP and contrary to the modulation in the EU-15, the majority of the new Member States were forced to regroup a part of their Community rural development allocations for CNDP purposes as allowed by the Act of Accession;
21. Refers to the opinion of some new Member States that fully decoupled, area-based payments do not contribute entirely to the balanced development and long-term sustainability of their agriculture, and that sector preferences and/or optional coupled payments could be necessary at least temporarily in certain Member States until 2013, and should be considered if requested; refers to the successful practice of the fully or partially coupled CNDP and temporary state aid measures in this respect;
22. Observes that the majority of new Member States would like to continue the application of the single area payment scheme (SAPS) as long as possible, since the switch to the Single Payment Scheme (SPS) means extremely high administrative and technical burdens;
23. Believes that it is necessary to implement cross-compliance rules and requirements concerning sound agricultural practices and environmental conditions both in the new and the old Member States; proposes to introduce the cross-compliance rules gradually, to be fully implemented by the end of the phasing-in period; also proposes that the new Member States be given the option of postponing the application of the cross-compliance rules until the end of the phasing-in of the direct payments; proposes further that the requirements concerning good agricultural and environmental conditions remain in force at least during the SAPS period as the majority of the new Member States may have difficulties in achieving conformity with the complex and costly cross-compliance rules;
24. Proposes to postpone the application of the cross compliance rules in the new Member States until the end of the phasing-in of the direct payments; proposes further that the requirements concerning good agricultural and environmental conditions have to remain in force during the entire SAPS period as the majority of the new Member States have difficulties in achieving conformity with the complex and costly cross-compliance rules;
25. Welcomes the fact that the Council has adopted the proposal of the Commission on the extension of the SAPS until the end of 2010 and on the involvement of new Member States into the energy crop aid scheme;
26. Calls on the Commission, in the context of simplifying and rationalising the implementation of the CAP, the direct payment schemes and the rural development programmes, to take account of the problems faced primarily by the new Member States and to propose appropriate solutions without departing from the implementing rules for the CAP;
27. Stresses that the Commission should take the special problems and concerns of the new Member States more into account in its decisions within the framework of the CAP;
28. Believes that, in the spirit of the 2003 CAP reform, the introduction of single area payments for soft fruit produced for processing should be considered along with the possibility of making them conditional on compulsory membership of producers’ associations or organisations and the requirement to sell products under contract, which may increase competitiveness in the soft fruit sector and improve the situation for growers in Member States such as Poland;
29. Considers that further changes are necessary in the agricultural production and rural fabric of the new Member States and emphasises that CAP rules and Community aid have to assist this procedure; stresses that it is crucial to effect these necessary changes in a cushioned way, as the agriculture-bound rural society and economy of the new Member States could not tolerate too rapid and drastic changes in their production and employment structure;
Future of the CAP in the enlarged EU
30. Points out that the present CAP is unsuitable to manage a substantial part of agricultural and agriculture-related problems in the enlarged EU; considers that the decoupling of the direct payments, forced by the WTO, increases in general the market orientation of European agriculture but decoupled direct payments do not contribute fully to the establishment of a sustainable agricultural sector and rural society, either in the new Member States or in a considerable part of the EU-15; points out that either additional measures or tailor-made application of the direct payments are necessary;
31. Takes the view that, especially in Member States and regions where specialised farms play a decisive role in the agriculture, the present system of direct payments promotes arable cropping too significantly, does not assist properly the establishment of a sustainable animal husbandry and does not promote and facilitate the necessary structural changes;
32. Notes that, in the case of some new Member States, in some sectors, the allocated quota levels led to the freezing or even decline of agricultural production, and that the fact that decoupled payments were linked to the lower level of quotas constituted a further subsidies disadvantage for the new Member States in addition to the phasing-in; also notes that the problem occurs also in some of the old Member States;
33. Believes that the achievement of the CAP objectives is also hindered in the new Member States by the insufficient level of rural development financing, by the lack of an efficient risk and crisis management system and by excessively strict Community rules on state aid;
34. Stresses that the CAP must be kept on the Community level in the framework of a reformed CAP and any renationalisation of the CAP should be avoided; stresses, however, that specific measures based on the principle of subsidiarity have to be applied; takes the view that it is necessary to revise the scope, objectives, goals, and principles of the CAP, including the European agricultural model, taking into consideration the objectives and needs of the agriculture, rural areas, farmers, consumers and the entire society in the enlarged EU of 27 countries in order to determine the necessary financial resources and ensure their proper, equitable and fully justified allocation;
35. Emphasises that all possible factors (e.g. consequences of earlier financial decisions, CAP reforms, experiences of the new Member States, the diversity and variety of European agriculture) have to be duly taken into consideration in the future reform of the CAP, particularly during the ‘CAP health check’ and the mid-term review of the 2007-2013 financial framework in 2008-2009;
36. Stresses further that it is imperative to avoid decisions forced only by attempts to reduce the level of Community funding or maintain the financial status quo among Member States;
37. Considers that biomass and bioenergy production will play a strategic role in the future of the agricultural sector in the EU; calls in this respect for appropriate EU funding to promote the production of biomass on land no longer required for growing food and feed; recalls in this respect the high capacities of the new Member States, and the increased overall production potential of the enlarged EU;
38. Underlines that fulfilment of the specific needs of the Member States and regions, including problems and difficulties in the new Member States, should be maintained on the basis of subsidiarity with the following, tailor-made instruments:
(a) introduction of a revised system of direct payments, including the introduction of new measures such as voluntary recoupling options, to be used only by those Member States which consider this necessary to meet social, employment and sustainability objectives; extension of the payments to new sectors and new beneficiaries (for example soft fruits destined for processing), within the revised system of national financial envelopes and full Community financing,
(b) introduction of additional, optional, regional or temporary market measures with Community financing,
(c) application of the national envelope system from the EU budget in the sectors to be reformed (wine, fruit and vegetables),
(d) improved support to producer organisations, strong encouragement for them and repeal of national legislation which hampers them,
(e) promoting cross-border cooperation between producer organisations,
(f) introduction of an efficient agricultural crisis and risk management system with Community financial assistance, paid from the national envelopes,
(g) strengthening the internal market with common quality standards, marketing, competition, food safety, environmental and animal welfare rules,
(h) reinforcement of the rural development system and its funding,
(i) increase of the flexibility of the state aid rules (e.g. widening the scope of block exemptions and increase of the ‘de minimis’ level);
39. Considers that WTO compatibility has to be ensured during the Doha Round negotiations as part of the EU offer on reducing trade barriers or in exchange for agreeing with the maintenance of internal support levels of the other WTO members;
40. Stresses that additional customs duties imposed under the special safeguard clause (SSG) could be a useful means of protecting sensitive sectors of the Community market, including those in the new Member States, from surplus imports or from imports at excessively low prices; calls on the Commission to negotiate in the current WTO round the possibility of making appropriate changes to the scope of the SSG for the Community’s list of concessions; points out that some of the new Member States had the opportunity to apply the SSG in sensitive agricultural sectors not on the EU’s current list of concessions;
41. Expects that the future CAP will not only take into consideration the needs of the enlarged EU but that it will also become easier to manage; expects that it will reduce the administrative burden of farmers and national authorities and will support the market-oriented, environmentally sound production of safe products, while ensuring the future of sustainable agriculture;
42. Invites the Commission, the Member States and all stakeholders to conduct a lively discussion and submit forward-looking proposals in order to build a sustainable future of the agriculture in the enlarged EU;
43. Welcomes the Commission’s intention to draw up a long-term vision of the future of the CAP after 2013 that: would respond expansively to the exceptional opportunity presented by the forecast that growth in global agri-food trade will be twice as fast as total expected growth in world trade over the coming three decades; would seek to ensure that agriculture development is uniform throughout the EU; and, through the combined efforts of the EU-15 and the new Member States, would enable agriculture to fulfil its permanent role in terms of production and other activities;
44. Instructs its President to forward this resolution to the Council and Commission, and to the parliaments and governments of the Member States.
EXPLANATORY STATEMENT
Main consequences of the membership and application of the Common Agricultural Policy (CAP) in the new Member States, including its general impact on the European integration
General Characteristics
In the new Member States agriculture plays an important role in the national economy and in the rural life. Data of 2004 show that 22 % of the total area is dedicated to agriculture in the new Member States, while in EU-15 only 4 %. The share of the agricultural workers in the total working population in the new Member States is 13 %, while in EU-15 1.6 %. The share of the agriculture in the GDP is 2.8 and 1.6 % respectively. In certain rural areas of the new Member States agriculture is the only source of income.
The average agricultural production level in the new Member States is far below the EU 15 average. Farming is characterised by a high proportion of small, semi-subsistent, part-time holdings with low level of production technology and of invested capital. Due to lower efficiency, the production requires notably higher number of work units. Horizontal and vertical integrations are limited. The number of co-operatives and producer organisations is inadequate; farmers do not have ownership in the food processing business. The less intensive production is a disadvantage when competitiveness is concerned; however it poses less danger on the environment and helps in maintaining biodiversity.
The agriculture in the new Member States is characterised also by enhanced diversity in natural and economic conditions. Consequently there are considerable differences in the production structure as well. In Poland the majority of the agriculture is based on small and medium scale family farms with mixed activity of arable cropping and pasture based animal husbandry. In Hungary and Estonia specialised farms play a considerable role. In Slovenia the European type, well developed family farms are dominant. The Czech Republic and Slovakia has a relatively developed, homogenous production structure. The majority of the farms in the Baltic States also conduct mixed activities. The Hungarian agriculture has a double structure, with large agricultural enterprises living together with numerous small, inefficient family farms. The agriculture of Cyprus and Malta is characterised by the Mediterranean production. Horticulture is an important sector in Poland and Hungary.
Some of the disadvantages of the past agricultural policy are still evident as in the communist era agriculture has developed for decades in a totally different direction than that of the CAP. After the change of regime, collapse of the traditional markets, changes in ownership and production structures, severe lack of capital, insufficient integrations, low level and insufficiently structured national subsidies caused further problems.
It is evident that significant further changes are unavoidable in the agriculture and rural economy of the new Member States. Due to the limited possibilities on the internal and third markets, the quantitative increase of the production is a viable solution only in case of products appreciated by the market. Increase of the efficiency will result in farm concentration and decrease in employment. Possibilities for the diversification of the rural economy are limited, as the rural areas of the new Member States do not attract enough capital. Unemployment originating from the agriculture creates a severe problem. Too quick and too drastic changes in the production and employment structure would cause hardly manageable political and economic tensions.
Smooth integration, win-win situation
The accession of ten new Members States increased the number European consumers by nearly 20 %. The utilised agricultural area and the number of agricultural workers grew by 27 % and 57 % respectively.
This ‘big bang’ did not cause disturbances on the EU single market, neither in the old nor in the new Member States. In the EU-15 the enlargement did not result in any traceable change as far as agricultural and food prices and well-established market relations, general production and consumption patterns are concerned. Goods from new Member States did not start dumping the EU-15 countries, owing partly to the fact that the major part of the agricultural and food trade was duty- and subsidy-free already prior to the enlargement. Although the relevant investigation of the Commission has not finished yet, market surveys show that in the new Member States operators did not accumulate speculative stocks prior to the accession.
Partly with the help of pre-accession EU assistance new Member States reinforced their national food safety, veterinary, phytosanitary systems. The efforts concentrated on the border control of third country imports, on slaughterhouses and food processing establishments. The careful preparatory work ensured that the enlargement did not increase the level of risk on these fields in the EU. After the accession, no case emerged where the necessity of any safeguard measure was even considered.
The agriculture in the new Member States benefited from the membership and the CAP application. In the cereal, sugar beet, beef and dairy sectors CAP rules stabilised prices and the markets. Agricultural incomes have increased considerably in the new Member States, particularly in those countries and farms, where arable cropping and pasture based animal husbandry are dominant. Only certain agricultural and food prices increased, since before the accession a significant price appropriation procedure took already place. The most significant income increase is registered in Poland, Latvia, Lithuania and Czech Republic.
Old Member States benefited mainly from the elimination of the internal borders. EU-15 exporters increased their market share in the new Member States especially in the case of the processed goods. The membership provided better conditions for the EU-15 investors in the agri-food sector as well. These possibilities compensate generously the limited additional burdens on the old Member States in financing the CAP.
Despite of its historic significance and dimensions the 2004 enlargement did not require significant, burdensome changes in the management and financing of the CAP. From 2000 until the accession new Member States received SAPARD assistance with a yearly budget of 520 million euro, slightly over 1 % of the European Agricultural Guarantee and Guidance Fund (EAGGF). In the 2004-2006 period new Member States received about 5-8 % of the EAGGF allocations. The existing budgetary framework had enough reserve, and interest of the EU-15 Member States was not harmed. Phasing-in of direct payments in the new Member States helps in reducing financial burdens of the Member States. Even by the end of the 2007-2013 financial perspective the share of direct payments and rural development appropriations for the new Member States from the EU-27 budget will climb up to about 19 % only, while nearly 30 % of the utilised agricultural area and 50 % of agricultural workers will be in the 12 new Member States.
Future financing of the CAP, in EU-27 however will take place in a generally negative political and budgetary environment. The decision on the 2007-2013 financial framework confirmed the decision of the 2002 Brussels Summit on freezing the budget of direct payments and market measures on the 2002 level of EU-15, and agreed the sharp reduction of rural development allocations for the old Member States. It is very probable that from 2008 onward the available financial sources will not make possible the allocation of the direct payments on the level laid down in the relevant Community legislation.
Application of the Common Agricultural Policy in the new Member States
In the pre-accession period, candidate countries took considerable efforts in transposing the ‘acquis communautaire’ and establishing the necessary institutional framework for the application of the CAP. EU financed twinning programmes provided useful assistance in this process. However, national agricultural and rural development policies before the membership did not prepare farmers and the rural society efficiently for the new possibilities and challenges, as candidate countries concentrated on the most acute problems and there were no sufficient national financial sources available. The EU provided assistance for the agricultural and rural development of the candidate countries. But due to complicated requirements and lack of due-time decisions the SAPARD programme started with a considerable delay, a huge part of the allocations was used only after the accession.
The most significant and most visible change of the EU membership in the agriculture of the new Member States was the introduction of the direct payments. Although numerous candidate countries applied similar schemes, Community direct payments established a new support system in the new Member States especially as far as their size, distribution rules and scope of beneficiaries are concerned. In order to try to provide a level playing field for the farmers, every new Member States applies complementary national direct payments (CNDP) as allowed by the Act of Accession. But on top of the serious burden it puts on the national budget, it distracts national resources from EC approved state aid schemes, which may be essential in assisting the necessary changes in sectors, where no or limited Community resources are available. The majority of the new Member States had to use the ‘negative modulation’ option (regrouping of rural development sources to pay the CNDP).
Eight new Member States chose the single area payment scheme (SAPS), due to the fact that they were not prepared for the operation of the sophisticated system of the direct payments in the EU-15. In general the area based, fully decoupled, flat rate SAPS payments proved to be successful. Both farmers and national authorities are pleased with the simple rules and conditions. The majority of the new Member States would like to continue the SAPS as long as possible despite of some disadvantages of the system. However, some new Member States consider that certain coupled payments are necessary, at least temporarily for the orientation of the changes in the agricultural production. These countries successfully created several CNDP envelopes, with fully or partly coupled payments for sectors, where SAPS payments brought severe disadvantages (e.g. tobacco, milk and beef).
Amendments in the EC legislation, introduced by the sugar reform facilitate the switch from SAPS to SPS. Among others enable new Member States to deviate from the clearly regional model of the SPS. However the Commission have not yet made a proposal on the detailed rules of the change, especially as CNDP rules are concerned. This uncertainty forces new Member States to continue the SAPS application.
The rural development scheme fulfils only partly the expectations of the new Member States. The present system contributes only partly to the realisation of the commonly agreed goals. They do not orient enough to a sustainable development and to the solution of problems outside of the agriculture. Community sources are limited, rules are complicated. Although recently adopted community rules allow the possibility of voluntary modulation of direct payments in the new Member States as well, it is very unlikely that they will make use of this option until the phasing-in of the direct payments lasts.
With the help of direct payments, rural development measures and approved state aid schemes new Member States can create a more suitable system for the development of their agriculture and rural society. The recent changes in the legislation and proposals (e.g. sugar reform, extension of the SAPS application, energy plants) contribute to this goal. But further facilitation of some rules is necessary. It is advisable to postpone application of cross compliance rules in the new Member States until they face phasing-in of direct payments. Management of the rural development programmes could also be made less difficult, without harming the general principles.
The effects of the CAP on the different agricultural sectors in the new Member States vary largely. Cereal farming has become the biggest winner of the CAP application. Intervention and price guarantee system with area based direct aid enable farmers to make use comparative advantages of their plots; further increase of the production is expected. A mixed picture can be observed in the beef and milk sector. Specific arrangements by dairy payments, in form of top-up started at 85 % in 2004, helped to maintain milk production in numerous countries. Chances for beef farming are limited, if the CNDP is distributed on area basis. The pork and poultry sector face extreme challenges. They receive practically no community aid, and the level of national assistance is also limited. Production costs increased due to higher feed prices, while producer prices remained at the same level. The fruit and vegetable sector is important only in certain new Member States. Import of low quality fruit and vegetable products means a real challenge for the farmers. Only the minority of the producers is member in recognised producer organisations, enabling them to receive Community aid.
One of the most important arguments for the phasing-in of the direct payments were those related to the different levels of development, standard of living, and especially cost levels and that farmers in the new Member States require less income compensation. It was further promised that the discrimination in direct payments will be compensated with the increased rural development allocations. The actual figures however fail to underpin the original concept and the expectations for increased second pillar funding also proved to be illusionary. In the 2007-2013 Financial Perspectives there is a serious imbalance in the allocation of resources. The average level of Community support for agriculture and rural development for the new Member States would be only 29-33 % per farmer and 62-64 % per hectare in comparison with the old Member States during the seven years.
Table I shows how the level of the direct payments and rural development allocations on 1 ha utilised agricultural area in the new Member States gradually approaches those of the EU-15. After 2013 there will be no considerable differences. However, if the aid on one agricultural worker is taken into account, the difference remains significant (Table II).
Table I
Table II
Future of the CAP in the enlarged European Union
The 2004 enlargement increased the diversity of the European agriculture, and limited further the possibility of application of common rules. The changing needs and characteristics of an enlarged EU have to be taken into consideration in the future reforms of the CAP. It is imperative to set new objectives and goals in order to ensure long term sustainability, fulfil specific local and regional needs of the agricultural and rural society and the expectation of the consumers, taxpayers, environmentalists etc.
Experiences of the new Member States prove that further reform of the CAP is necessary. Statistical data show a considerable general development in the agricultural income in the new Member States. But mainly the production of cereals and pasture based animal husbandry benefit form the direct payments. The well-known phenomenon of ‘production for the subsidies’ is also observed in the new Member States. Although they are decoupled, SAPS payments speed up farm concentration, strengthen arable cropping.
Experiences of the new Member States do not confirm entirely the total decoupling concept of direct payments, promoted by the Commission, as Member States are not in favour of the simple, flat rate system of payment. Most of them intend to prefer some sectors with the use the options, provided for in the recent legislation.
During the ‘health check’ further options ought to be explored and possibly allowed, including direct payments for sectors and beneficiaries currently excluded. The SPS envelopes can be considered as Community financial assistance for income compensation in the agriculture of the member states. Taking into consideration of the specific situation, difficulties and requirements of their agriculture, every Member State could create the most convenient income compensation system, using the ‘menu of options, ‘laid down in the Community legislation. New options could mean among others extended aid to producer organisations, contribution to an efficient agricultural risk and crisis management system. The Commission has to supervise the application in order to avoid any distortion. This concept will not renationalise the CAP. Instead of compromised general conditions, which work nowhere perfectly, a more flexible system is needed. It has to be noted that this concept is not entirely new. The Commission proposal on the reform of the banana common market organisation is based on the same principles, and a partly similar system is proposed in the case of the wine reform.
Management of the rural development programmes has to be facilitated also. In order to fulfil expectations of the consumers and the taxpayers, community standards and rules on quality, food safety, environment and animal welfare have to be strengthened continuously.
A further important step has to be the increase of flexibility in the case of the state aid rules. A clearly defined, sufficiently wide range of block exemptions and a considerable increase of the ‘de minimis’ level would provide for the necessary flexibility of new Member States without harming the competition rules.
The Commission argues that decoupled direct payment rules are necessary for the fulfilments of EU WTO commitments on internal support. WTO negotiating partners, especially the USA is interested in the maintenance of their internal support level and in further reduction of market protection. EU might agree with these endeavours if negotiating partners also agree that only a certain part of the EU direct payments will be decoupled and consequently part of the ‘green box’.
It is important that future CAP reforms have to be motivated by the aim of fulfilling needs of the member states’ agriculture and rural population and of ensuring the sustainability; by the endeavour of simplification and reduction of administrative burdens; by the imperative of creating a production system fully in conformity with the expectation of the consumers within the given budgetary framework.
Final comments from the Rapporteur
The Rapporteur would like to express his gratitude for the input and help in preparing this report to the fellow Members of the European Parliament, to the Hungarian Agricultural Economics Research Institute, to the agricultural ministries and parliamentary committees on agriculture of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic.
PROCEDURE
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Title |
The integration of the new Member States into the CAP |
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Procedure number |
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Committee responsible |
AGRI |
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Rapporteur(s) |
Csaba Sándor Tabajdi |
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Discussed in committee |
12.7.2006 |
3.10.2006 |
19.12.2006 |
27.2.2007 |
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Date adopted |
27.2.2007 |
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Result of final vote |
+: –: 0: |
31 1 3 |
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Members present for the final vote |
Vincenzo Aita, Peter Baco, Sergio Berlato, Thijs Berman, Niels Busk, Luis Manuel Capoulas Santos, Giuseppe Castiglione, Dumitru Gheorghe Mircea Coşea, Gintaras Didžiokas, Michl Ebner, Carmen Fraga Estévez, Ioannis Gklavakis, Lutz Goepel, Esther Herranz García, Elisabeth Jeggle, Tchetin Kazak, Atilla Béla Ladislau Kelemen, Heinz Kindermann, Diamanto Manolakou, Véronique Mathieu, Mairead McGuinness, María Isabel Salinas García, Willem Schuth, Czesław Adam Siekierski, Csaba Sándor Tabajdi, Marc Tarabella, Witold Tomczak, Donato Tommaso Veraldi, Bernard Piotr Wojciechowski |
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Substitute(s) present for the final vote |
Bernadette Bourzai, Béla Glattfelder, Gábor Harangozó, Wiesław Stefan Kuc, Astrid Lulling, Albert Jan Maat |
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Date tabled |
1.3.2007 |
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Comments |
... |
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