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Farmers around Europe will have to deliver on food quality, environmental protection and animal welfare if they are to continue to receive payments from the European Union under new proposals published by the European Commission on 10 July 2002. The Mid-Term review of the Common Agricultural Policy [COM(2002)394] foresees some of the most radical proposals in the 40 year history of the CAP and promises to stir up much debate around Europe.
Background
The Common Agricultural Policy (CAP) was established in 1957 by the Treaty of Rome making it one of the European Community's oldest 'common' policies. With memories of food shortages during the war years still strong, the policy aimed to increase agricultural production as well as protecting Europe's farmers. It initially proved successful: encouraging both production and productivity, stabilising the markets, securing supplies and protecting farmers from fluctuations in world markets. However by the 1980s CAP was increasingly criticised for the side effects and problems that accompanied these successes: EU farmers were producing more than the market could bear, creating excessive surplus and EU spending in agriculture increased exponentially.
As a result of this over production and increased expense, the Common Agricultural Policy has undergone a number of reforms since its inception. One of the most significant package of reforms were those put forward by Ray MacSharry, the European Commissioner responsible for agriculture in the early 1990s, in two discussion papers in 1991 [COM(1991)415 final, COM(1991)100 final]. These papers formed the basis for a political agreement on the reform of the CAP, adopted by the Council on 21 May 1992 [IP/92/430]. The principal elements of the 1992 Reforms were the cutback of agricultural prices to render them more competitive in the internal and world market, the compensation of farmers for loss of income, as well as other measures relating to market mechanisms and the protection of the environment. The reforms were generally viewed to be successful however developments during the rest of the 1990s highlighted the need for further reform of the CAP.
With the prospect of enlargement of the Union, the increasing budgetary constraints resulting from the preparation of the single, the increasing competitiveness of products from third countries and a new round of World Trade Organisation negotiations, the European Commission proposed a further reform of the CAP in 1998 [COM(1998)158]. The European Commission proposal came within the framework of Agenda 2000, which was a blueprint for the future of European Union policy, in view of the expected enlargement. At the Berlin European Council in March 1999, European leaders agreed on the CAP reform, which comprised measures for:
- the reinforcement of the competitiveness of agricultural commodities in domestic and world markets;
- the promotion of a fair and decent standard of living for the farming community;
- the creation of substitute jobs and other sources of income for farmers;
- the formation of a new policy for rural development, which becomes the second pillar of the CAP;
- the integration of more environmental and structural considerations into the CAP;
- the improvement of food quality and safety;
- the simplification of agricultural legislation and the decentralisation of its application, in order to make rules and regulations clearer, more transparent and easier to access.
The Berlin European Council also agreed that a mid term review of the Common Agricultural Policy should be carried out in 2002 to evaluate the success of the reforms.
Mid Term Review of the Common Agricultural Policy
The European Commission accordingly adopted its mid-term review [COM(2002)394] of the Common Agricultural Policy on 10 July 2002 [IP/02/1026]. The mid-term review sets out to achieve 10 main goals through a number of radical proposals. The objectives are:
To focus the EU's farm support to reward European farmers for their environmental, food safety and quality or animal welfare services
- To provide more money to help farmers to produce in a market and consumer oriented way
- To continue to provide support and stability in agricultural incomes
- To help farmers to get on with their work by cutting red tape and simplifying paperwork
- To ensure that farmers can benefit from growing markets
- To concentrate on the products and services the consumer wants, without artificial incentives to produce what consumers do not need.
- To integrate food quality, food safety and animal welfare fully into the CAP
- To reinforce compliance in the farmed environment, with fewer environmentally damaging incentives, and more environmentally friendly services
- To offer more support for traditional and high-nature value farming systems
- To take the lead in international farm trade talks with a modern farm policy which is positive for international trade and for developing countries
In order to achieve these objectives, the European Commission proposes:
- Decoupling of direct aids.
- The system of linking subsidies to production would be replaced 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 over the last three years.
- The farm income payment will be conditional on compliance with statutory environmental, animal welfare and food safety standards.
- The scheme would initially cover the arable crop, beef and sheep sector, as well as grain legumes and starch potatoes but other sectors could follow later.
The European Commission believes that such a scheme will help to simplify the subsidy system and allow European farmers to fully benefit from market opportunities by supplying products that consumers demand. In addition, there will be improved protection for the environment because production specific incentives which may damage the environment will no longer exist.
- Reinforcement of environmental, food safety, animal welfare and occupational safety standards.
- The full granting of the farm income payment will be conditional on the respect of certain statutory environmental, food safety, animal welfare and occupational safety standards, to be known as cross compliance requirements.
- The focus of these cross-compliance requirements is on supporting the enforcement of good farming practices defined as encompassing mandatory standards. Cross-compliance will be applied as a whole-farm approach attached to both used and unused agricultural land. On unused land, cross-compliance will involve the respect of statutory management requirements and the obligation to maintain land in good agricultural condition. In the case of non-respect of cross-compliance requirements, direct payments should be reduced while maintaining proportionality with respect to the risk or damage concerned. Member States should define and enforce standards, following a common framework providing basic implementation criteria. The European Commission will launch in the next months the works to establish such a framework.
- An EU wide system of farm auditing for professional farms, to be defined by Member States on the basis of economic size will be established in order to meet citizens' expectations and to help farmers meet the standards of modern, high quality agriculture.
- The European Commission proposes that a system of farm auditing will be mandatory as a part of cross-compliance requirements for producers receiving more than €5000 per year in direct payments.
- Compulsory long-term set-aside (10 years) on arable land will be introduced to ensure that the supply control benefits of set-aside are maintained, while reinforcing its environmental benefits under the new decoupled system of support.
- Support for energy crops a carbon credit
- While the cultivation of energy crops has lately proved a successful way of using set-aside land, the new set-aside arrangements would no longer lend themselves to the production of energy crops.
- The European Commission therefore proposes replacing the existing arrangements for non-food crops with carbon credit, a non-crop specific aid for energy crops with the objective of achieving carbon dioxide substitution. Such an aid would complement investment and establishment measures under the second pillar.
- The aid level will be 45 EUR/ha of energy crops with a maximum guaranteed area of 1.5 million hectares and would be paid to producers entering into a contract with a processor. The area allocation between Member States will take into account historical energy crop production on set-aside and CO2 commitment burden sharing arrangements.
- The arrangements will be reviewed five years after its entry into force taking into account the implementation of the EU bio fuel initiative.
- Increasing the support for sustainable agricultural and rural development
- Increase in agri-environment and less favoured area payments, as well as other measures within the second pillar to help promote sustainable agriculture throughout the EU.
- In order to achieve a better balance between policy tools with the objective of further promoting sustainable agriculture, the European Commission also proposes introducing a system of dynamic modulation on a compulsory basis for all member states. Under dynamic modulation all direct payments will be reduced progressively in arithmetic steps of 3%per year to reach 20%, the maximum agreed in Agenda 2000. This covers both coupled and decoupled payments.
- The additional funding for rural development generated by dynamic modulation will amount to around €500-600 million in 2005 according to first estimates, and will increase annually by an equivalent amount with each 3% increase in dynamic modulation.
- New measures to boost environment, animal welfare, food quality and safety
- The European Commission proposes add a new food quality chapter to the rural development regulation to encourage farmers to participate in quality assurance and certification schemes, including geographical indications and designation of origin and organic farming. There will be support for producer groups to promote these agricultural products
- The European Commission also proposes the introduction of a chapter of 'Meeting standards' to help farmers financially to adapt to demanding standards based on EU legislation in the field of the environment, food safety and animal welfare as well as implementing farm audits.
- In addition, the European Commission suggests the possibility of offering animal welfare payments for efforts that go beyond a mandatory reference level in line with agri-environment schemes. In addition, it is proposed to increase the fixed co-financing rate for these measures by a further 10 points, to 85% in areas covered by Objective 1 and 60% in other areas.
In addition to these broad proposals, the Mid Term review also covers individual sectors such as cereal and rye in more detail. More information can be found in the European Commission press release - IP/02/1026 - and memo - MEMO/02/163 which examines each sector according to the benefits they receive now and their prospects under a reformed CAP.
Reaction to the Mid Term Review
Speaking at the presentation of the mid term review, European Commissioner for agriculture, fisheries and rural development, Franz Fischler said:
"We cannot expect our rural areas to prosper, our environment to be protected, our farm animals to be well looked-after, and our farmers to survive, without paying for it. In future, farmers will not be paid for overproduction, but for responding to what people want: safe food, quality production, animal welfare and a healthy environment. While guaranteeing farmers a stable income, the new system will free them from the straitjacket of having to gear their production toward subsidies. They will be able to produce the crop or the type of meat where they see the best market opportunities and not the highest subsidies. And we will to cut back on red tape and form-filling for farmers and national administrations. Our proposal means better value for money for farmers, consumers and taxpayers alike".
European Commission: Press Release: IP/02/1026
The President of the European Commission, Romano Prodi added:
This is a timely, balanced and fair package that takes account of the needs of farmers, consumers and taxpayers alike".
European Commission: Speech: SPEECH/02/331
However, it is unlikely that the reform package will receive such support from all areas of civil society. The Committee of Agricultural Organisations in the European Union & the General Committee for Agricultural Cooperation in the European Union [COPA/COGECA] immediately criticised the proposals for completely "undermining the commitments made by the European Council in Berlin". According to a press release issued by COPA/COGECA:
"The European Commission proposals would jeopardise the whole enlargement process...In WTO the Commission's negotiation tactics are now beyond belief. The reform of the CAP under Agenda 2000 has already led to the EU making far more concessions to its trading partners than called for by its present WTO commitments. The Commission is now proposing that the EU make yet further concessions to its trading partners on a unilateral basis just as the negotiations are reaching a critical stage. The proposals take no account of the new US Farm Bill, which has completely altered the trading conditions for European and global agriculture. While the US has introduced a new multi-billion dollar Farm Bill for its farmers, the EU Commission is now proposing measures similar to the old 1996 US FAIR Act, which failed so dramatically.
The European Young Farmers' Council (CEJA) adopted a different, albeit critical stance, condemning the European Commission for failing to mention young farmers - the future of EU farming - once in the review. Statistics show that 55% of all EU farm owners were over 55 years old in 1997, and 33% were over 65 years old which led the European Parliament to stress that the number of young farmers (under 35) could reach zero by 2020 and therefore assuming a working life of 35 years, total farm numbers would reach zero by 2055.
Environmental organisations have tended to be more favourable of the proposed reforms since they offer the opportunity to "green the Common Agricultural Policy". Friends of the Earth Europe expressed their support for the reforms but said that the proposals:
"fail to address a central flaw of the CAP, namely the goal of being competitive on the world market. The continued fixation on exports leads to subsidized dumping on developing countries, and puts farmers in poor countries out of work. Also European farmers suffer as they are being asked to perform two mutually exclusive tasks at the same time. First, international competitiveness can only be achieved by increasing efficiency through larger scale, more intensive farming. But at the same time, society demands higher standards of social, environmental and animal welfare. The two objectives simply cannot go together and the EU has to choose for the last option. Export subsidies have to be abolished. The new goals of the CAP should be: quality food, sustainable farming, localization and local diversity.
The group called on the European Parliament and Council of the European Union to further strengthen the proposals.
Consumer organisations have also shown some support for the reforms. The European Consumers' Organisation (BEUC) welcomed the switch away from production linked subsidies but criticised the European Commission for failing to totally abolish subsidies, saying:
"We are disappointed that export subsidies will not be abolished. European consumers are forced to pay for policies that do direct damage to many farmers in developing countries and elsewhere around the world. It is suggested that the proposals would reduce the level of trade-distorting measures but we want them abolished. Consumers should not be forced to pay for bad policies.
Currently, the Common Agricultural policy is believed to cost European consumers around £300 a year.
Despite the positive responses of certain sectors of society, the proposals are still likely to face stiff opposition from the Member States, particularly from France, Spain and Portugal who are amongst the biggest beneficiaries of CAP. France has already stated that it would block any reform of the CAP before 2006 when a new financial framework will be adopted. Germany, the largest contributor the EU's massive farm budget, is also set to fight the move to CAP subsidies to a maximum of 300,000 euros and the end of subsidies on rye. German farms may also suffer because they tend to be large acreage farms which are set to be worse off under the reforms. German agriculture minister, Renate Künast, has warned that the European Commission's plans would badly hit German farms and would cause 40,000 job losses, especially in East Germany.
The first opportunity to gauge the likely success of the proposals with the Member States will come at the Agriculture Council on 15 July 2002 when there will be a public debate between the 15 ministers of agriculture.
The Council could decide on this issue by qualified majority voting although it is quite likely that the reform could be referred to the European Council where every leader can veto the proposal. Meanwhile, the European Parliament will debate the mid term review in November 2002.
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)
Certainly the debate over the latest CAP reforms is likely to be the most controversial and difficult of the policy's 40 year history. While many hope that negotiations will be concluded before enlargement, the issue could continue into 2004 by which time potential beneficiaries such as Poland might also seek to block the latest CAP reform.
Further information within European Sources Online:
| European Sources Online: Topic Guides |
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The Common Agricultural Policy of the European Union |
| European Sources Online: European Voice |
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29.11.01: |
The seeds of reform |
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29.11.01: |
Künast ploughs on against intensive farming practices |
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29.11.01: |
France backs "profound" reform of CAP |
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13.12.01: |
Call for end to CAP and farm directorate |
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27.06.02: |
Farmers rail against aid cuts |
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11.07.02: |
Fischler's crop of reforms set to harvest war of words |
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11.07.02: |
French farmers at odds over CAP reforms |
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| European Sources Online: Financial Times |
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25.04.01: |
Move to reform EU farm policy suffers setback |
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26.04.01: |
Fitting a new CAP on Europe's farming |
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08.05.01: |
A three pronged reform |
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23.05.01: |
Portugal adds pressure for farm reform |
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16.07.01: |
EU farmers "should get payment for reform" |
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18.07.01: |
UK, Germany to push green farming |
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24.10.01: |
Agriculture: In the vanguard of reform |
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04.01.02: |
Beckett urges farmers to back CAP reforms |
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30.01.02: |
Seeds of change |
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08.02.02: |
EU Commissioner warns against redirection of farm subsidies |
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01.05.02: |
EU backs proposed reforms to farmers' subsidies |
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27.05.02: |
EU shrugs of US farm policy example |
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05.06.02: |
US calls for farm export subsidies to be axed |
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12.06.02: |
Farm follies |
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20.06.02: |
Farm subsidies to be set by environmental criteria |
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25.06.02: |
Fischler's agricultural blueprint takes the bull by the horns |
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26.06.02: |
CAP reform plan boosts move to 'green' farming |
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26.06.02: |
Brussels ignores Schröder's concerns over 40bn budget |
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27.06.02: |
France to voice protest against reforms |
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28.06.02: |
Britain wary of Brussels plan to limit level of farm subsidies |
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09.07.02: |
Commission set to approve wide reform of farm budget |
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09.07.02: |
History of the Common Agricultural Policy [FT.com] |
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09.07.02: |
CAP reform [FT.com] |
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10.07.02: |
Brussels approves farming reform blueprint [FT.com] |
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10.07.02: |
Fischler faces battle to convince colleagues of farms plan [FT.com] |
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11.07.02: |
Fischler's reform plan faces tough opposition [FT.com] |
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15.07.02: |
Berlin disputes new proposals for farms |
Further information can be seen in these external links:
(long-term access cannot be guaranteed)
EU Institutions
| Agricultural Organisations |
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| Committee of Agricultural Organisations in the European Union & General Committee for Agricultural Cooperation in the European Union [COPA/COGECA] |
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Homepage |
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Press Releases: |
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 The European Commission must respect the Agenda 2000 decisions reached at the Berlin Summit: No mid-term reform of the Common Agricultural Policy |
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The US Government defends American farmers - We expect the EU Commission to defend European farmers! |
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The Berlin Summit decisions on Agenda 2000 must be respected. We call for wide and open debate on the future of CAP |
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Position Papers: |
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The European model of agriculture: The way ahead [November 1999] |
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Our vision for the future: A sustainable agriculture for all Europeans [March 2002] |
| Consumer Organisations |
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| European Consumers' Organisation |
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Homepage |
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Press Release: the Mid-Term Review of the Common Agricultural Policy |
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11.07.02: CAP review - preliminary comments |
Further and subsequent information on the subject of this In Focus can be found by an 'Advanced Search' in European Sources Online by inserting 'CAP reform' or 'Reform of the Common Agricultural Policy' in the keyword field.
Helen Bower
Compiled: 12 July 2002
On 10 July 2002 the European Commission published its Mid-Term review of the Common Agricultural Policy [COM(2002)394] detailing of the most radical proposals in the 40 year history of the CAP.
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