European Farm Policy Reform Slashes Subsidies

BRUSSELS, Belgium, June 30, 2003 (ENS) - Farm ministers from across the European Union have adopted a fundamental reform of the Common Agricultural Policy. The ministers underlined that the agreed reform "responds to the demands for healthy food, more quality, environment and animal friendly production methods, the maintenance of natural living conditions and the care of the countryside."

The reform will change the way the European Union supports its farm sector, and it is intended to strengthen the EU's negotiating hand in the ongoing World Trade Organization (WTO) trade talks. The EU has been accused of distorting world trade in farm products by subsidizing overproduction and dumping surpluses on world markets, depressing prices.

EU Farm Commissioner Franz Fischler said, "This decision marks the beginning of a new era."

European Agriculture Commissioner Franz Fischler (Photo courtesy European Commission)

The new policy, agreed on Thursday, decouples subsidies to farmers from the volume of production. Fischler estimated that under the reform deal, 90 percent of cereal subsidies and 70 percent of beef subsidies would be decoupled from production levels over four years.

Severing the link between subsidies and production is intended to make EU farmers more competitive and market orientated, while providing the necessary income stability.

But many European farmers,' business, consumer and environmental organizations expressed disappointment with the farm policy reform.

Farms like this one in Tuscany, Italy will be affected by the new Common Agricultural Policy. (Photo courtesy FreeFoto)

COPA-COGECA warned that the reform could increase production costs above market value and force farmers to stop production. It urged the EU to "make it clear in the WTO negotiations in Cancun in September later this year that this is a final offer."

Head of the World Trade Organization, Supachai Panitchpakdi, welcomed the EU's decision to reform the Common Agricultural Policy. He expressed his expectation that the EU's agreement would revive stalled WTO talks on agriculture.

Head of the French farmers union FNSEA, Jean-Michel Lemetayer, accused the EU of "abandoning assurance of farmers' incomes."

The European Farmers Coordination called the deal a "scandal" and a "swindle," arguing that the decoupling would accelerate the disappearance of family farmers.

"The small and middle farms will not resist the price falls and decoupling will have perverse effects of agricultural abandonment in the disadvantaged areas, where there will be no economical interest anymore to produce for farm prices below the production costs. Then decoupling is clearly an anti-rural development measure," said the farmers organization European Farmers Coordination in a statement.

To avoid abandonment of production, EU member states may choose to maintain a limited link between subsidy and production under well defined conditions and within clear limits, Commissioner Fischler explained. These new "single farm payments" will be linked to the respect of environmental, food safety and animal welfare standards.

Ploughing a farm in England (Photo courtesy FreeFoto)

The different elements of the reform will enter into force in 2004 and 2005. The single farm payment will enter into force in 2005. If a Member State needs a transitional period due to its specific agricultural conditions, it may apply the single farm payment from 2007 at the latest.

The Council also decided to revise the milk, rice, cereals, durum wheat, dried fodder and nut sectors. In autumn 2003 the Commission will submit a communication on the reform of olive oil, tobacco and cotton, which will be followed by legal proposals.

In order to respect the tight budgetary ceiling agreed for the expanded European Union which will include 25 member states as of next May, ministers agreed to introduce a financial discipline mechanism. This reform will also strengthen the EU's negotiating hand in the ongoing WTO trade talks, they said.

"Our new policy is trade friendly," the ministers said. "We are saying goodbye to the old subsidy system which significantly distorts international trade and harms developing countries."

At the WTO Cancún Ministerial Meeting in September, the ministers said, "the EU will be ready to use its increased negotiating capital only if we get something in exchange. Unilateral disarmament is not on. The ball is now in the camp of other countries, such as the U.S., whose agricultural policies continue to be highly trade distorting and have even become increasingly so."

EU officials have called on the United States to follow the European example and cut its own farm subsidies policy. The U.S. will increase farm subsidies by $73.5 billion over the next 10 years under the farm bill, introduced by President George W. Bush in 2002.

U.S. Trade Representative Robert Zoellick (Photo courtesy USTR)

They urged Brussels to submit its negotiating proposals for the three core areas of WTO agriculture negotiations - reducing domestic support, eliminating export subsidies, and cutting tariffs.

Consumers International, which represents 250 consumers organisations in 115 counties worldwide, expressed its "deep disappointment at the so-called reform" of the farm policy.

Consumers International Director General Julian Edwards said, "This deal is another magician's trick, a real sleight of hand, by EU agricultural negotiators." Saying the reform offers nothing of substance, he proclaimed, "This deal is anti-development, anti-trade and anti-consumer."

The European Environmental Bureau (EEB), representing 134 member organizations in 25 countries, expressed disappointment over the weakening of the Commission's original proposals for farm policy reform, deploring the lost opportunity for structural change towards sustainable agriculture.

"The first proposal in July 2002 gave us hope that a real move was taking place towards sustainable agriculture," said John Hontelez, secretary general of the EEB. "The legislative proposal in January this year was already disappointing, having lost the teeth of the first proposal. Now, the result of the negotiations of the council is even more disappointing. What is left are bits and pieces of a reform package, making it more complicated and hardly effective."

International conservation organization WWF called the reform deal "half-hearted" and accused the EU of "lack of commitment for an environmentally sustainable European agricultural policy."