CAP reform – EU finally reaches agreement, June 2003

'This decision marks the beginning of a new era. Our farm policy will fundamentally change. Today, Europe has given itself a new and effective farm policy.' Thus spoke EU Agriculture Commissioner Franz Fischler about the agreement reached by EU farm ministers on 26 June 2003.

Although the Common Agricultural Policy (CAP) has long been criticised, it was the publication in 1997 of the Commission's Agenda 2000 report which effectively started the current debate on reforming the CAP. Agenda 2000 highlighted the need to reform the CAP - and particularly to reduce its cost - if the Union was to make a success of enlargement. The latest agreement was reached after weeks of negotiations, following Ministers' failure to clinch a deal at the Agriculture and Fisheries Council on 11-12 June. Discussions - chaired by the Greek Presidency of the Council - were largely based on the Commission's midterm review of the CAP, published in July 2002.

Hard bargaining resulted in what was effectively a compromise agreement, which both proponents and opponents of reform can claim benefits them. Although the Commission said that the CAP will be very different in future, the French ministry of agriculture claimed the agreement 'preserves ... the essential principles' of the CAP (BBC). France, Ireland, Portugal and Spain were reportedly the Member States most reluctant to see the biggest reform pushed through, which would have seen an end to all production subsidies.

In order to avoid farms being abandoned in some areas, Ministers agreed that Member States can retain 'a limited link between subsidy and production under well defined conditions and within clear limits' - essentially meaning that 'single farm payments' can be made where they are associated with the environment, food safety and animal welfare standards.

The compromise text received a mixed response from the outside world, with many groups critical of the deal. The BBC reported that farmers and unions feared 'they would be driven out of business without the subsidies they have been accustomed to', and the Director of the UK's Consumers' Association described the reform as 'a tragic missed opportunity', saying 'once again it is consumers who will pay the price' (a Commission press release claimed the 'new CAP will be geared towards consumers and taxpayers').

Although Commissioner Fischler said 'We are saying goodbye to the old system which significantly distorts international trade and harms developing countries', aid organisations argued the agreement doesn't tackle the problems of over production and the dumping of surplus produce on world markets. Oxfam described it as 'a disaster for the poor, for small farmers, for the environment, for taxpayers, and for the credibility of the EU as a forward looking institution.'

The EU wanted to get agreement on reducing subsidies in advance of the September meeting of the World Trade Organisation in Cancún, Mexico. The EU wants to see global trade opened up, but as long as it subsidises its own agricultural industry it remains vulnerable to the charge of protectionism.

The Financial Times pointed out that the 'decoupled' subsidies agreed by the EU (the 'single payments') are 'deemed non-trade distorting under World Trade Organisation rules', and so might escape the cuts which the Cancún meeting is expected to agree.

The European Commission summarised the key elements of the new regime:

• a single farm payment for EU farmers, independent from production; limited coupled elements may be maintained to avoid abandonment of production
• this payment will be linked to the respect of environmental, food safety, animal and plant health and animal welfare standards, as well as the requirement to keep all farmland in good agricultural and environmental condition ('cross-compliance')
• a strengthened rural development policy with more EU money, new measures to promote the environment, quality and animal welfare and to help farmers to meet EU production standards starting in 2005
• a reduction in direct payments ('modulation') for bigger farms to finance the new rural development policy
• a mechanism for financial discipline to ensure that the farm budget fixed until 2013 is not overshot
• revisions to the market policy of the CAP (asymmetric price cuts in the milk sector, with the intervention price for butter being reduced by 25% over four years, and skimmed milk powder by 15%; a 50% reduction of the monthly increments in the cereals sector, with the current intervention price being maintained; reforms in the rice, durum wheat, nuts, starch potatoes and dried fodder sectors)

Some of the changes agreed will be implemented in 2004, with the single farm payment starting in 2005 (although a two-year transitional period will push the deadline to 2007 for some Member States).

Links:

Greek Presidency of the EU:
	26.06.03:	Agreement on the reform of the CAP, Luxembourg, 26/6/2003
European Commission:
	DG Agriculture
	26.06.03:	EU fundamentally reforms its farm policy to accomplish sustainable farming in Europe [IP/03/898]
	26.06.03:	Franz Fischler: The new, reformed agricultural policy [SPEECH/03/326]
BBC News Online:
	26.06.03:	EU agrees 'radical' farm reform
	21.06.03:	Fudge to CAP it all
	26.06.03:	EU farm reform
European Sources Online: Financial Times:
	26.06.03:	EU reform cuts CAP's subsidy link to output
	26.06.03:	Key points of the EU farm reforms
Oxfam:
	19.06.03:	EU failure to reform CAP endangers WTO talks before they have even started, says Oxfam
European Sources Online: In Focus
	28.01.03:	Reform of the Common Agricultural Policy: New proposals following opposition to Mid-Term Review, January 2003
	12.06.03:	CAP reform: 'decision time' for Member States, June 2003
European Sources Online: Topic Guides
	The Common Agricultural Policy of the European Union

Eric Davies
Researcher
Compiled: Friday, 27 June 2003

Keywords: Reform of CAP