Reform of the Common Agricultural Policy: New proposals following opposition to Mid-Term Review, January 2003

Despite tough opposition in some Member States, notably France and Ireland, the European Commission remains committed to reforming the Common Agricultural Policy (CAP) - one of the EU's most notorious and costly policies - and, as such, a new package of proposals [COM(2003)23] were adopted on 22 January 2003.

The main objective of the reforms is to provide European farmers with a long-term model of sustainable agriculture that will make the industry more competitive and market orientated whilst offering greater protection to the environment.

Presenting the proposals to the Committee for Agriculture (COMAGRI) in the European Parliament, Franz Fischler, the European Commissioner for Agriculture, Rural Development and Fisheries said:

'This reform has one objective: Making sense of farm subsidies for our farmers, consumers and taxpayers. We need reforms and we need to decide now. Our plans will give farmers a clear perspective to plan ahead'. IP/03/99

Whilst the European Commission is likely to receive backing from the UK and German governments who are keen to push ahead with reforms, France, Ireland and Spain are likely to put up stiff opposition to any changes. There are also mixed views amongst stakeholders and the European Commission will face a tough battle if it is to succeed in the adoption of new reforms.

Background

Despite reforms to the Common Agricultural Policy in 1992 and 1999, new pressures to reform the CAP have manifested themselves since: the BSE crisis, foot and mouth disease, the policy's effect on the annual budget and on third world economies are, when taken individually, widely regarded as valid reasons for undertaking a further reform of the CAP, together they represent an irrefutable case.

In July 2002, the European Commission presented a series of proposals for future European agricultural policy as part of the CAP's Mid-term review [COM(2002)394], which the Berlin European Council had agreed should be carried out in 2002 to evaluate the success of the 1999 reforms. The main elements of the proposals were:

• Decoupling of direct aids
• Reinforcement of environmental, food safety, animal welfare and occupational safety standards
• Introduction of an EU-wide farm auditing system
• Introduction of compulsory long-term environmental set-aside
• Support for energy crops a carbon credit
• Increasing the support for sustainable agricultural and rural development
• New measures to boost environment, animal welfare, food quality and safety

These are explained in more detail in European Sources Online's previous In Focus: 2002 Mid term review of the Common Agricultural Policy, which also provides more background on previous reforms to the CAP.

However, the plans met with tough opposition from some Member States, particularly France and Ireland. Indeed, at the Brussels European Council in October 2002 French President, Jacques Chirac, 'struck a deal' with German Chancellor Gerhard Schröder whereby the two countries agreed that CAP would not be reformed until after 2006, when the financial perspectives, agreed at Berlin in 1999 run out. The leaders also agreed that there would be a ceiling on farm spending until 2013. The deal angered other Member States, particularly the United Kingdom who have been pushing for a thorough reform. Members from the European Commission also expressed their dismay at the compromise.

European Commission tries again

As a result of the agreement in Brussels to freeze the current CAP budget until 2006, the European Commission was forced to adjust its original proposals. The new package of proposed reforms are based on the financial framework for agriculture expenditure that has been agreed up until 2013.

The main elements of the proposals are:

• Decoupling of direct aids and production: The system of linking subsidies to production would be replaced in 2004 with a new farm income payment system whereby each farm would receive a single income payment calculated on the basis of the payments received by the farm between 2000-2002
• Cross-compliance: Farmers will have to meet certain environmental, food safety, animal health and welfare standards in order to be eligible for direct payments
• Modulation: Funds currently used in the CAP budget for direct aids and market support will be moved to rural development, in an effort to 'green' the CAP
• Degression: Direct payments for bigger farms will be reduced
• Intervention prices will be cut for several crops including rye, wheat and other cereals

In comparison to the proposals outlined in July 2002 in the mid term review of the CAP, the latest reforms are still based on the initial ideas but a number of key changes have been introduced:

• The money shifted to rural development during the modulation process will not begin until 2006 and will amount to 1% per year over 6 years rather than the 3% per year that was originally proposed
• Abolition of the €300,000 direct payments to mega farms
• The proposed idea of an EU-wide farm audit system has been modified into a farm advisory system
• The reform of the dairy sector will begin in 2004 (and not 2005) but will be spread over 5 instead of 3 years

In a press release detailing the new proposals the European Commission said:

'The proposal will make European agriculture more competitive and market orientated, promote a substantial simplification in the CAP, facilitate the enlargement process and help to better defend the CAP in the WTO. The proposed adjustments allow maximum flexibility in production decisions of farmers while guaranteeing them income stability. The implementation of the Commission reform would remove environmentally negative incentives in the current policy and provide further encouragement for more sustainable farming practices. These adjustments are necessary to ensure that the EU is able to provide a sustainable and predictable policy framework for the European model of agriculture over the coming years'.

To trace the full progress of the latest proposals through the policy-making process you can use these services.

• OEIL (Legislative Observatory) (provides a full history of the proposal with summaries of each major stage in the process)
• Pre-Lex (provides a full and concise calendar of the proposal, bibliographical references and some hyperlinks to full text sources)

Reaction to the proposals

Yet despite having made adjustments to the July 2002 proposals, the European Commission is still expected to face tough opposition from those Member States that have large agricultural sectors. The French Agriculture Minister, Hervé Gaymard, has said that France will oppose the Commission's plans and Spain, Portugal and Ireland are all expected to support France in opposing any reforms.

The European farm lobbying organisation COPA-COGECA has also expressed its opposition to carrying out reforms before 2006. In a press release issued on 22 January 2003 entitled 'Wrong Way and Bad Timing', the Presidents of the organisation, Mr. Sonnleitner and Mr. Borgstrom said, 'Everybody in Europe would be worse off under the Commission's mid-term proposals'. The press statement added:

'A clear decision was made at the Berlin Summit of 1999 that Agenda 2000 would be implemented until 2006. There is no reason to change this timetable.

The Commission has not taken the instructions given by the Council or the Parliament seriously. It has not taken account of the proposals made by the farming sector. It also ignores the fact that the experiment of an MTR-like reform failed completely in the US.

We call upon the Council and the Parliament to change the content and the timing of the reform in such a way that the EU will first negotiate in the WTO on the basis of the present mandate, thus allowing the accession countries to be fully involved in decision making.

The proposals have also been criticised by environmental organisations, although their argument is that the latest reforms are 'too weak'. The European Policy Office of the World Wildlife Fund issued a statement saying:

'WWF believes the European Commission's new proposals for the mid-term review of the Common Agricultural Policy (CAP), due to be presented on Wednesday, show an astonishing back-tracking from the daring package Commissioner Fischler presented last July - which offered significant potential for an environmentally sustainable development of rural areas - making the future look very bleak'.

Birdlife International voiced similar criticisms: Sue Armstrong Brown, the organisation's senior Agriculture Officer, BirdLife International said,

'This deal is bad for everyone, farmers and environmentalists alike. Without real commitment to rural development, we will continue to see massive declines in farmland wildlife. Its only redeeming feature, and this is also under threat, is the decoupling of farm support from productivity.

If the European Commission does not stick to its original vision for a simpler, less bureaucratic CAP, the loss for farmers and consumers as well as for biodiversity and wildlife will be tremendous'.

Reforms before 2006?

Amidst such negative criticism, the European Commission will have a tough time getting through any reforms that meet the objectives of all stakeholders and the European Parliament's agriculture committee has already expressed its disappointment that the most innovative aspects of the July 2002 reforms have been 'watered down'.

Support can be expected from Germany and the United Kingdom, although with the Franco-German relationship strengthening it remains to be seen whether Germany will yet again change its position on CAP reforms. However the UK government remain staunchly committed to pushing ahead with the reforms and the UK National Farmers Union welcomed the proposals, saying:

'Many of the proposed reforms to the Common Agricultural Policy announced today are on the right lines. If introduced in the right way, the proposals will help the EU to meet its international obligations while improving farm profitability'.

But the European Commission will need to persuade many more sectors of that line of thinking before the Common Agricultural policy is reformed once again. Agriculture ministers will discuss the latest proposal for the first time on 27 January 2003. The Greek Presidency had hoped to push the reform through by June before the Italians take over the Presidency and ahead of the September meeting of the World Trade Organisation in Cancun, Mexico but whether that can be achieved remains seriously in doubt.

Further information within European Sources Online:

European Sources Online: Topic Guides:
	The Common Agricultural Policy of the European Union

European Sources Online: In Focus:
	2002 Mid term review of the Common Agricultural Policy
European Sources Online: Financial Times:
	04.01.02:	Beckett urges farmers to back CAP reforms
	30.01.02:	Seeds of change
	08.02.02:	EU Commissioner warns against redirection of farm subsidies
	20.06.02:	Farm subsidies to be set by environmental criteria
	26.06.02:	CAP reform plan boosts move to 'green' farming
	09.07.02:	The seeds of reform
	09.07.02:	Straw to urge reform of CAP
	09.07.02:	Commission set to approve wide reform of farm budget
	10.07.02:	Fischler faces battle to convince colleagues of farms plan
	10.07.02:	Distortions remain in policy's support regimes
	10.07.02:	Indebted breeder scorns 'injustice' of reforms
	10.07.02:	Mid-term test
	11.07.02:	Fischler's reform plan faces tough opposition
	16.07.02:	Ministers divided over CAP reforms
	11.09.02:	France and Spain seek coalition to block CAP reforms
	23.09.02:	CAP is something we can be proud of
	24.09.02:	EU farm folly
	24.09.02:	Fischler defends farm reforms
	04.10.02:	Farming fudge
	23.10.02:	Chirac links concessions on EU farm policy to UK rebate
	25.10.02:	Schröder and Chirac in farm deal
	26.10.02:	Chirac scores win on points in fight over farm reform
	26.10.02:	EU farm accord angers Blair
	28.10.02:	A shoddy farm deal
	31.10.02:	Deal on EU agricultural reform shortchanges world's poor farmers
	06.11.02:	Britain warns on EU farm costs
European Sources Online: European Voice:
	04.07.02:	Campaigners pressure Fischler over CAP reforms
	11.07.02:	Fischler's crop of reforms set to harvest war of words
	11.07.02:	French farmers at odds over CAP reforms
	18.07.02:	EU can't be a cash cow for ever

Further information can be seen in these external links:
(long-term access cannot be guaranteed)

EU Institutions

European Commission:
	DG Press and Communication:
		Press Releases:
			25.06.02:	'EU citizens want safe food and healthy environment from farm policy', says Commission poll [IP/02/922]
			10.07.02:	'Towards sustainable farming': Commission presents EU farm policy mid-term review [IP/02/1026]
			12.07.02:	'Winning back the trust of consumers', Fischler says on the mid-term review [IP/02/1047]
			28.08.02:	European Union is fully committed to reducing trade-distorting farm subsidies [IP/02/1247]
			25.09.02:	'Postponing farm policy changes would turn against farmers', says Franz Fischler in Paris [IP/02/1371]
			28.10.02:	'Seize opportunity to build strong CAP before it is too late', Franz Fischler urges after Brussels Summit [IP/02/1565]
			13.12.02:	Enlargement and agriculture: Summit adopts fair and tailor-made package which benefits farmers in accession countries [IP/02/1882]
			15.01.03:	Farm reform: 'Commission proposals would have positive effect on farm incomes,' studies say [IP/03/46]
			16.01.03:	Commissioner Fischler on agricultural reform: '2003 is a year of decisions' [IP/03/65]
			22.01.03:	Commission tables farm reform to give farmers a long-term perspective for sustainable agriculture [IP/03/99]
		Speeches:
			28.10.02:	Europe needs a Strong and Sustainable Agricultural Policy [SPEECH/02/524]
			06.11.02:	Statement in response to oral question on the CAP [SPEECH/02/542]
			16.01.03:	The Community's agricultural policy 2003 - The year of decisions [SPEECH/03/8]
			22.01.03:	CAP Reform: A long term perspective for sustainable agriculture [SPEECH/03/20]
		Memos:
			22.01.03:	CAP reform - a long term perspective for sustainable agriculture: Questions and Answers [MEMO/03/10]

	DG Agriculture:
		22.01.03:	CAP reform
		22.01.03:	CAP reform: Impact analyses of the mid-term review proposals
		22.01.03:	Proposals for reform of the Common Agricultural Policy [COM(2003) 23 final]

National Organisations
United Kingdom: Department for Environment, Food and Rural Affairs
	Homepage
	CAP Reform
		Press Releases:
			10.07.02:	Euro farming reform plans on the right lines - Beckett
			09.12.02:	Government gets wide backing for CAP reform

Committee of Agricultural Organisations in the European Union / General Committee for Agricultural Cooperation in the European Union [COPA-COGECA]
	Homepage
		Position papers:
			Sustainable and stable development for European agriculture - COPA and COGECA's contribution to the discussion on a mid-term review of the CAP [September 2001]
			Preliminary reflections on the proposals made by the Commission for the mid-term review of the Common Agricultural Policy [November 2002]

European Farmers Coordination
		Position papers:
			04.12.00:	Biarritz - after the 1962 CAP, after the 1992/2000 CAP, Europe needs another Common Agricultural Policy which does not deceive the expectations of the Europeans anymore
			03.02.01:	After the words, actions! CPE calls for a thorough reform of the CAP
			16.03.01:	Let's change Common Agricultural Policy: CPE launches a European campaign
			05.10.01:	To change the Common Agricultural Policy
			27.06.02:	CAP proposals at mid-term review: The plan of the European Commission does not give any hope for sustainable family farming
			01.07.02:	Open letter to Commissioner Fischler on the Mid-Term Review of the Common Agricultural Policy
			11.07.02:	European Commission CAP reform proposals
			22.01.03:	CAP reform proposal: Lower agricultural prices to benefit agro-industry, supermarkets, international trade companies, + lower direct payments

Environmental Organisations
World Wildlife Fund: European Policy Office
	Homepage
	The Common Agricultural Policy - threat and opportunity for nature
	The Mid Term Review of the Common Agricultural Policy
		Position papers:
			04.12.00:	Mid-Term Review Proposals for CAP Reform: WWF's Reactions and Environmental Implications [July 2002]
		Press Releases:
			21.01.03:	Complete setback for sustainable Common Agricultural Policy

Birdlife International
	Homepage
		Press Releases:
			10.12.02:	EU enlargement: Yes - but followed by CAP reform!
			17.12.02:	Copenhagen deal threatens sustainable rural development in EU accession countries
			17.01.03:	European Commission in full reverse over CAP?

Miscellaneous Organisations
European Integration Online Papers
	Towards a Theory of the Reform of the Common Agricultural Policy [2000]
Centre for European Policy Studies
	Homepage
	Towards a Sustainable European Agricultural Policy for the 21st Century: Executive Summary [September 2002]
	Budgetary Implications of Enlargement: Agriculture [May 2002]
	A Fischler Reform of the Common Agricultural Policy? [September 2001]
CESifo
	Homepage
	CAP reform [CESifo Forum Special issue, 2002]

News Organisations
BBC News Online:
	A-Z of Europe: Common Agricultural Policy
	10.07.02:	EU unveils farm policy shake up
	10.07.02:	Farm reform gets UK backing
	10.07.02:	Q&A: EU farm reform
	15.07.02:	EU farm reforms debated
	19.07.02:	Farm reforms set to serve EU taxpayers
	17.09.02:	EU threat to farm subsidies
	25.10.02:	Farm deal brings EU expansion closer
	25.10.02:	Pacific hits back at EU farm deal
	03.12.02:	Down on the farm
	16.12.02:	EU offers WTO farm subsidy cuts
	23.01.02:	EU farm shake-up plan saddens Greens

Helen Bower

Compiled: Tuesday, 28 January 2003

The European Commission adopted a new package of proposals on 22 January 2003 aimed at reforming the EU's notorious Common Agricultural Policy.