Fischler signals rethink on farm policy after ineffectual reforms

Date: 25/04/02

David Cronin looks at the background to this weekend's agriculture ministerial and talks to Commissioner Franz Fischler about prospects for reform.

THE Common Agriculture Policy (CAP) is almost as old as the European Community. Its genesis can be traced back to the 1950s: the Treaty of Rome set the objective of ensuring a fair standard of living for farmers, stabilising food markets and enabling shoppers to buy groceries at reasonable prices.

Since then the importance of farming to Western Europe has waned. In the early 1950s, agriculture accounted for 32 of all economic activity in France and 23 in Germany. By 1997, those percentages had been whittled down to 1.9 and 0.8 respectively. Across the EU, agriculture accounted for just 2 of gross domestic product (GDP) in 2000.

Despite the decreasing importance of farming in overall terms, EU agricultural spending gobbles up €40 billion of European taxpayers' money each year - nearly half of the Union's budget.

In recent times, the CAP has come in for stinging criticism from a variety of sources. Consumer groups say it forces Europeans to pay higher supermarket bills than their counterparts in other industrialised countries. Anti-poverty campaigners argue it makes a coterie of Western farmers rich at the expense of producers in the developing world. Germany, the Union's main paymaster, feels it is costing too much. And Britain's Tony Blair has denounced it as a protectionist measure, which hinders the liberalisation of world trade - a view echoed by many countries outside the EU.

Yet arguing that the CAP should go would be tantamount to political suicide for some EU leaders. We can be certain that Jacques Chirac will continue defending its core principles with a zeal worthy of Jean of Arc as he battles with far-right leader Jean-Marie Le Pen in the French presidential election. To do otherwise would be to risk the ire of the country's highly vocal and powerful farm lobby - and a surefire way of losing votes.

AGAINST this backdrop, EU farm ministers will meet in Murcia, Spain this weekend (27-28 April) to discuss how the CAP's focus can be reoriented. They will discuss a paper prepared by the Spanish presidency on rural development. It makes clear that the most recent revisions of the CAP have been largely ineffectual.

Back in 1997, the Luxembourg summit of EU leaders declared: 'European agriculture must, as an economic sector, be versatile, sustainable, competitive and spread throughout European territory, including regions with specific problems.'

That lofty statement helped set the ball rolling for the development of the so-called Agenda 2000 package and the rather limited reforms to the CAP introduced at the 1999 Berlin summit.

This led to a new regulation covering direct payments to farmers. Under it, member states are required to ensure that the rural environment is protected and impose penalties - such as withdrawing subsidies - if farmers are found wanting in that regard. Member states have also been given the go-ahead to cut the amount of direct payments they allocate to farmers by 20 and use the money saved for 'rural development' projects such as early retirement schemes, environmental protection measures and planting trees on farmland. In Euro-jargon, this provision has become known as 'modulation'.

Widely perceived as a sound idea in theory, it has rarely been applied in practice. To date just two of the 15 EU states - France and Portugal - have resorted to modulation.

IN A joint paper last year, Germany and France's agriculture ministers, Renate Künast and Jean Glavany (since succeeded by François Patriat), argued that modulation should be mandatory, rather than voluntary. Radical CAP reform, they said, was necessary to address 'the deep sense of helplessness which consumers feel as a result of recent food scares'.

The election fever gripping both their countries has meant that paper is largely forgotten. But Farm Commissioner Franz Fischler believes it has merits.

'As I see it, it would lead to certain competition problems if one member state would use the 20 room for manoeuvre and others wouldn't do anything. So therefore, principally speaking, I favour the thinking that we should move ahead and introduce modulation in all member states on a compulsory basis. But we must do that in a way that would still allow the member states to decide for which types of projects and for which priorities they would like to use this money.

'The programming of the measures should remain in the member states or, I would prefer, in the regions and not only the member states. It shouldn't be centralised.'

Modulation, he adds, could provide an opportunity to address the perception that the CAP benefits the richest farmers disproportionately: just 17 of the EU's farms receive about 50 of all financial support for agriculture. 'It is true that there is this imbalance - that the biggest farms get most of the money under the present system. But if we do modulation, this is a good way to change the imbalance.'

The 55-year-old former agriculture minister does not have a huge amount of direct experience of getting his hands dirty in the fields or cow-shed.

His curriculum vitae refers to 'practical work during university studies' on a mixed holding (horticulture/pig breeding) in his native Austria and a two-month traineeship on a dairy farm in Nyköping, Sweden. Holding the European Commission's agriculture portfolio since 1995, he has nonetheless been a sturdy defender of farmers' interests - at a time when their general repute has been tarnished by BSE and foot-and-mouth disease.

But Fischler makes clear that he will not dance to the tune played by the farm lobby when he has a different melody in his head. In June he will launch a 'mid-term review' of the CAP, but he has stressed that the debate will not lead to a wholesale reform.

This point was welcomed by the Committee of Agricultural Organisations in the European Union (COPA-COGECA), the umbrella group for EU farmers, which fears reform would have adverse consequences for farm incomes. Fischler, on the other hand, believes the review process must yield tangible results.

'A review is more than a pure analysis. And I think we would be seen as a bit outdated if we only presented an analysis, where we identify weaknesses and problems and then don't react.

'So therefore it is clear that the mid-term review will include proposals where we think something should be changed. Where we think there are better ways to reach the objectives, then we have to make the necessary proposals.'

Fischler admits he is likely to disappoint both the campaigners who want the CAP eliminated and the farmers who want it left as it is. 'The problem is that we are confronted with unrealistic wishful thinking. First of all, we have a camp which says we should scrap the CAP altogether.

BUT they don't take into account that if you do that you will favour more industrialised and more intensive production systems than we have now - you favour exactly what is criticised by the consumers. In addition, we must be clear what we want. What you can't have is high quality and lower prices. Quality has its price.

'The other extreme is that we are also confronted with some representatives, mainly from the farming sector, who are living in a kind of policy Nirvana.

'They say agriculture policy is good as it is. Interestingly enough, mainly those who are saying that are those who were in the beginning most critical vis-à-vis Agenda 2000 [and its reform proposals].'

'This is not the sustainable approach either. So what have we to do? I think we have to ask ourselves if our objectives are right.

'And clearly to a certain degree, these are conflicting objectives, they are not all going in the same direction. Then we have to analyse in which respect our policies fulfil these objectives.'

Fischler says he is fully behind the core aims laid down in Agenda 2000. 'We need a competitive agriculture, we need an environmentally-friendly agriculture. We need to look at simplification matters and so on. I don't see why this should be changed.'

He feels the review should be addressing issues such as how the Everything But Arms (EBA) initiative to remove tariff barriers on imports from the world's 48 poorest countries can be implemented and how the export refunds system for the EU dairy sector can be shaken up. He also wants claims by the European Court of Auditors, that durum wheat growers are over-subsidised, to be addressed.

ONE of the hottest potatoes that policymakers have to juggle at the moment is how the CAP will function after the Union's population exceeds 500 million.

Most of the ten countries hoping to join the EU in 2004 have reacted angrily to the Commission's insistence that they will not be able to benefit from the same level of direct payments given to farmers in existing member states for almost a decade after accession.

Hungary's agriculture minister András Vonza has gone so far as to allege that the proposals on financing enlargement breach basic tenets in the Treaty of Rome, which says there shall be no discrimination between the Union's states.

At the other end of the spectrum, some of the present EU states, particularly Germany, feel the package would be too costly. The disquiet over these proposals is unlikely to be lessened by the 'draft common position' on agriculture which the Commission submitted to the Council of Ministers last week.

It recommends that the EU's new entrants should not be allowed give farmers the same amount of direct payments as those in the current 15 countries by using national subsidies to 'top up' those from the EU.

Fischler is not surprised that the plan to only allocate the new EU countries 25 of direct farm subsidies in 2004, gradually rising to the 100 target over the following nine years, has provoked anger. He is unhappy, though, that the candidate countries have largely glossed over what he perceives as the more attractive aspects of the package, including the fact that they will not have to take part in the 'setaside' system (keeping part of farmland free of crops or livestock to deter overproduction) for some time.

They will also not be subject to the onerous requirements of the integrated administration and control system (IACS) from day one. (The computerised scheme was introduced by the Commission in 1993 in a bid to stamp out agricultural fraud).

'The enlargement proposals would be wrong if we would get only compliments from the 15 member states and only criticisms from the candidate countries. Or the other way round. It is clear that we can only table a proposal which is in between. I think the criticism on both sides is rather equal, so therefore I think the proposal is the right balance between the requests of both sides.

'It is important that correct information is given to the public: it is really unfair, for example, what the candidate countries are partly doing. They speak only about the 25 of direct payments starting level without mentioning that we will give 50 more for rural development compared with comparable regions in our member states. That we will allow them not to introduce in the first years, for example, setaside, that we allow them also flexibilities in the production system.

'If you ignore all these arguments, people will say clearly it's an unfair proposal.'

MEANWHILE, there has been some consternation among Brussels officials in recent weeks over a scathing report on EU trade policies by development group Oxfam. It accuses the Union of hypocrisy for preaching market liberalisation, while acting as protectionist in practice. The claim is partly based on how the EU applied a higher tariff peak on some produce from the developing world than duties imposed by the US, Japan and Canada in 1999.

Fischler makes no effort to conceal his frustration with the Oxfam study. 'We, the Europeans, have no reason always to be blamed for not doing enough for the developing world. This criticism was maybe true ten years ago. At that time it was correct. But now a lot has changed.

'For example, we import from the developing countries more agricultural products than the US, Japan, Australia, Canada and New Zealand together. We are more or less net importers in all sectors and no longer net exporters to the developing countries. With the other developed countries, it is just the opposite. They are all net exporters. So why do we always get the blame?'

He regards the Everything But Arms decision as a major advance but concedes that more work needs to be done on how this will apply to imports of products deemed 'sensitive' by European producers. Under EBA, for example, developing countries would be able to export sugar to the EU from 2006-7, paving the way for unrestricted market access in 2009.

EU officials are still mulling over what reforms of the European sugar regime this will necessitate.

The minutiae of the CAP is bound to be further dissected as the new round of global trade talks proceed.

One of the issues that will certainly rouse passions will be the Union's €5 billion per year regime for supporting food exporters.

Although a non-binding commitment was made at the Doha World Trade Organisation (WTO) conference last November to phase out export refunds, the Commission's Director-General for Agriculture, José Manuel Silva Rodriguez, told MEPs in January that they remained a 'fundamental part' of the CAP.

Fischler concurs with his top civil servant. He also emphasises that the passage in the Doha declaration on gradually eliminating the export refunds is preceded by the words 'without prejudging the outcome of the negotiations'.

'We made clear that this is an open point for negotiations. We also made clear that what we wouldn't accept is that at the end of the negotiations or the end of the coming implementing period for the new round, we would have zero export refunds.

'Our problem - in addition to that - is that we have sectors where we wouldn't have a major problem with the phase-out of export refunds. But we have some sectors, where we have a big difficulty. Here I'm coming back to the dairy sector.

'Under the present legal framework in the dairy sector, it is really impossible to phase out export refunds. But we also know the deadline for phasing out the present system is postponed until 2008, so this is clearly a political difficulty.

'I don't see at the moment any qualified majority in the member states for phasing out the quota system in the dairy sector.

'But there is also no qualified majority for its continuation. We will automatically have this discussion in 2008.

'But as long as the member states don't agree to have this discussion earlier we do not have much chance.'

Laying the basis for an overhaul of the dairy sector should be one of the priorities for the mid-term review, Fischler opines.

'What I don't like is the idea to say that in mid-term we focus on analysis, market prospects and things like that and then in 2006 we think about the proposals.

'My aim is where we see clear weaknesses, where change is needed, we should do the necessary changes.

'And we should do it now, not later.'

Major feature on the Common Agricultural Policy (CAP) ahead of the Informal Meeting of Agriculture Ministers at Murcia on 27-30 April 2002.