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EU reaches landmark deal on reforming farm policy

By Jeremy Smith and Aine Gallagher in Luxembourg
June 26, 2003 16:18 IST
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EU farm ministers broke a year of deadlock on Thursday to agree a radical reform of the bloc's agriculture policy, seen as vital to revive world trade talks and help farmers in developing countries.

The deal clinched after 16 hours of non-stop negotiations is one of the most comprehensive shake-ups of the massively expensive 45-year-old Common Agricultural Policy and will set the shape of European farming for the next decade.

The main aim of the reform is to trim back the EU's huge subsidies to farmers, widely panned for distorting world trade. But there has been resistance from countries such as France, keen to protect powerful farming lobbies.

The reform's chief architect, European Farm Commissioner Franz Fischler, backtracked on many elements of his original plan but managed to keep the core -- breaking the link between a farmer's production and the subsidy he receives.

This link, effectively an incentive to overproduce merely to win more cash from Brussels, has been blamed for causing the EU's notorious wine lakes and butter mountains of past years.

"The decision that has been taken is the beginning of a new era. On the basis of these rules, the CAP will be very different," Fischler said.

"We're also sending out a message to the world that we have a more trade-friendly policy. We are saying goodbye to a policy that used to distort trade," he told a news conference.

Agreement on EU farm reform is seen as essential to revive the mired Doha round of World Trade Organisation (WTO) talks. Trade ministers will meet next in Cancun, Mexico, in September, for talks that will determine if the round ends on time in 2004.

Fischler had feared that if the EU was seen as incapable of paring back its farm subsidies, the United States and Japan would have little incentive to give ground at the WTO talks.

Portugal was the only EU country to vote against the reform.

The EU's farm budget eats up half of the bloc's entire annual budget of almost 100 billion euros ($115.6 billion).

It was not immediately clear what savings the reform would deliver, but several EU ministers hailed the accord.

"The agreement today delivers what we wanted -- real change," said Britain's Agriculture Minister, Margaret Beckett. "It will give stability and security to farmers in the next decade," said Irish Farm Minister Joe Walsh.

But some French farmers were dissatisfied. "France has badly defended the interests of the CAP and of French farmers," Jerome Despey, head of France's Young Farmers organisation, told radio France Inter.

Main elements maintained

The cornerstone of the reform plan -- severance of subsidies from output -- was largely preserved in the latest round of concessions offered by Fischler in the early hours of Thursday.

The 15 EU member states will start this process from 2005 but may also delay the move until 2007. In the key cereals sector, a minimum rate of 75 per cent 'decoupling' will apply -- not the full break that Fischler first wanted.

In a sop to France, his arch-critic on farm reform and by far the largest beneficiary of farm spending, Fischler abandoned a key sticking point for Paris: cuts in minimum prices for cereals that Brussels guarantees to farmers.

He had originally suggested cutting five per cent off key cereals prices such as wheat, barley and maize.

Under the reform, funds saved from cutting subsidies will be shifted into developing the countryside, as well as filling the coffers for future reforms of European agriculture, where sugar will be the next major target. France had led a camp of mostly southern EU states that dug in their heels against reform ever since the package was first tabled last July.

A round of talks last week was called off after French President Jacques Chirac, a former farm minister, intervened just when it appeared that an agreement could be struck.

For livestock, a sector of prime concern to countries such as Ireland and France, the reform package allows a high degree of flexibility over how member states may apply decoupling rules on specific subsidy payments.
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Jeremy Smith and Aine Gallagher in Luxembourg
Source: REUTERS
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