Luxembourg, 26/06/2003 (Agence Europe) - On Thursday morning in Luxembourg, after more than eleven months of discussions (since the publication in July 2002 of the guidelines on the "mid-term review"), three weeks of negotiations and a night that resembled a marathon, Agriculture Ministers from EU Member States reached a political agreement concerning reform of the common Agricultural Policy (CAP). Reform plans for partial decoupling of direct aid, an increase of up to EUR 1.2 bio annual funds for the rural development fund, the maintenance of the current price for grain and a quite significant reduction in dairy products. The compromise agreed to by the Council will allow for the general ideas behind the Commission's proposals to be retained while providing greater flexibility to Member States by taking into account their specific difficulties. The different elements of reform will enter into force in 2004-2005, even if, as requested by the French, decoupling of aid could begin in 2007 or later. According to the Commission, half of all Member States have indicated their wish to decouple aid for grain by 100%.
The Acting President of the Agriculture Council, Georgios Drys, declared during a press conference that this constituted an, "'historic decisions that would allow for farmers' security to be enhanced , as well as that of the EU's position in negotiations at the WTO, which are expected to be difficult". Commissioner Franz Fischler stressed that, "this decisions marks the beginning of a new era, given that our CAP is going to change radically". He indicated that, "the major part of our direct aid will no longer be linked to production and reform will offer our farmers security of planning up to 2013". The Commissioner explained that this reform would, "also send a clear signal to the rest of the world, given that we are turning our back on the old subsidies system that generated significant distortions in international trade, which do not benefit developing countries". the commissioner concluded on this theme that today's decision would, "strengthen the EU's position in negotiations" with the WTO.
In reply to journalists, Mr Fischler declared that the agreement on CAP reform, "will not be the starting point in WTO negotiations". He exclaimed that the WTO mandate had nothing to do with it and gave assurances that the EU would not being paying our twice. He warned that "We need counterparts to the progress we hope to make", adding that it was on the basis of this progress that the EU would decide its tactics.
Portugal is the only Member State which did not support he Presidency and Commission compromise (presented on Thursday at 5: 30 H in the morning), as it believed that it had not got what it wanted on milk quotas in the Azores. German Minister, Renate Künast, who spoke of great success, believed that with this reform (whose main points are, according to Ms Künast, decoupling, modulation and conditionality of aid) and that the EU had succeeded in "escaping from the old agricultural system". Alluding to how negotiations developed, Ms Künast indicated that "everyone had taken a step closer to each other". She concluded that German farmers would be able to "live very well with this compromise, which showed them a good route to follow". French Minister, Hervé Gaymard, declared to the press that he had approved this agreement as "the priorities for economic and ecological farming come together". He also said that reform would allow for "perspectives for European agriculture to be outlined". The French Minister said that due to this reform and the decisions of the European Council in October 2002 (ceiling on agricultural expenditure till 2013), "the new rules are stable and sustainable". The formulas that remain for decoupling will "allow for continued management of the markets" and the document agreed to will allow the EU, in the perspective of the Cancun meeting, to be "in battle order" for getting its interests across. The British Minister, Margaret Beckett indicated that the agreement "offers us what we were seeking: real change". In her view, the most important elements are: the break with the link between subsidies for agriculture and production and the reduction in bureaucracy; national envelopes would allow priorities to be targeted in areas of sustainable and ecological farming, condititonality of aid; modulation of aid; fall in prices for butter and rice; new financial discipline that would allow for a reduction in aid where Cap spending threatened ceilings. According to the United Kingdom, the key elements in the initial proposals have been preserved. Irish Minister, Joe Walsh, only indicated that reform would enable farmers to have stability and security in the next decade. Italian Minister, Giovanni Alemanno, acknowledged that it for his country it had been a "difficult reform", which nevertheless, "represented a necessary change in CAP.
He added that the reform had to be supplemented by changes to the common organisation of markets in Mediterranean products (olive oil, tobacco and cotton). Alemanno said that although it would lose about EUR 30 million a year from the measures decided for durum wheat, Italy would still end up with a benefit of EUR 13.14 million a year.
The main points in the political agreement are as follows:
Decoupling aid. Most direct aid will be replaced in 2005 by a single farm payment (SFP) based on the total aid received in the reference period 2000-2002. Member States that so desire can introduce decoupling in 2007 (transition period of 2005-2007). Big farms. The agreement foresees minimum decoupling of 75% of aid with Member States having the option of either retaining the production/aid link for up to 25% of payments for arable farms (this exemption was introduced to cut the risk of farms being abandoned) or keeping a link between production and aid of up to 40% of aid for durum wheat. For beef, the compromise gives Member States the option of keeping up to 100% of the current premium for milking cows and up to 40% of the slaughter premium or keeping a link between production and aid of up to 100% for the slaughter premium or up to 75% of the special premium for male cattle. For goats and sheep, countries will have the option of maintaining a link
Aid for drying cereals, for the production of seeds and direct payments in ultra-peripheral areas and the Aegean Islands will not have to be decoupled. Aid for dairy farming will only be decoupled from 2008 onwards and any Member State so desiring can pay additional aid (of up to 10% of the national budget for direct payments) to farms encouraging high quality production. Fruit and vegetables and potatoes have been excluded from the eligible surface area to avoid creating an uneven playing field with regard to traditional fruit and vegetable growers.
Cereals. No reduction in cereal intervention price and a 50% cut in monthly surcharges. The basic price for arable crops is being kept at the current level of EUR 63/tonne. Specific aid for durum wheat in traditional wheat-growing areas will be EUR 313/ha in 2004, EUR 291/ha in 2005 and EUR 285.25/ha from 2006 onwards. It will be decoupled from 2005 onwards. To compensate for the scrapping of the rye intervention price, structural measures may be taken, using the savings made from “modulation”. Aid for drying cereals (additional payment for cereals, nuts, linseed and hemp) will increase from EUR 19 to EUR 25 a tonne.
Milk. The current quota system will continue to 2014 and no decision has yet been taken about further increasing the size of the quotas in 2007 and 2008. The Commission will publish a report on prospects for the milk market once Agenda 2000 has been fully implemented (2008). Given the deficit of fresh milk, the national reference quantity will be increased for Greece by 120,000 tonnes. The exemption from dairy penalties for the Azores will amount to 73,000 tonnes in 2003/2004 and 61,500 tonnes in 2004/2005. From 2005/2006 onwards, the Azores will have an additional reference quantity of 50,000 tonnes. Decoupling of aid for milk will not occur before the entire Agenda 2000 reform package has been implemented. The general increases in quotas decided in Agenda 2000 will come into effect in 2006. The indicative price for milk has been scrapped.
Dairy products. For butter a 7% cut in the intervention price from 2004 to 2006 and 4% cut in 2007 (making a total cut of 25% in four years). The maximum intervention limit for butter is set at 70,000 tonnes in 2004/05, 60,000 tonnes in 2005/06, 50,000 tonnes in 2006/07, 40,000 tonnes in 2007/08 and 30,000 tonnes from 2008/09 onwards. For skimmed milk powder, there will be a 5% per year cut in the intervention price from 2004 to 2006 (making a total cut of 15% over three years). These price cuts will be compensated for with aid of EUR 11.81/tonne in 2004, 23.65 euros/tonne in 2005 and 35.5 euros/tonne from 2006 onwards.
Rice. The idea to apply super-penalties for overshooting the maximum guaranteed surface area and to set up a private storage system have been scrapped. 50% cut in the intervention price to EUR 150/tonne and public purchasing of up to 75,000 tonnes a year. The Council calls on the Commission to launch negotiations at the WTO to change the consolidated levies on imports of rice.
Potato starch. Minimum price for potato starch to be kept through a partial reduction in the corn intervention price. 40% decoupling of direct aid for potato starch producers. The refund for the production of starch is being kept.
Dried fodder. Aid for transformation is being kept, as is the single simplified system for the sun-dried fodder industry in the form of EUR 33 per tonne aid from 2004/05 onwards.
Nuts: The current system will be replaced by an annual standard aid of EUR 120.75/hectare within the limit of a maximum guaranteed area of 800,000 ha for almonds, hazelnuts, walnuts, pistachio and carob. The Member States will be able to pay an identical additional maximum annual aid (EUR120.75/ha).
Aid modulation: Modulation (reduction of aid to strengthen the rural development policy) will begin in 2005 (as opposed to 2007 in the initial proposal, which will mean adjustment of financial perspectives for 2000-2006) at a rate of 3%, then 4% in 2006 and 5% from 2007. A franchise of EUR 5,000 in aid received for each farm will be applied. One percent of the credit saved will go back to the Member States where the saving was made while the rest would be distributed within the Community depending on the socio-economic criteria. Nonetheless, each Member State should receive at least 80% of the savings thus made on its territory. EUR 1.2 billion in direct aid annually will thus be intended to strengthen the second pillar of the CAP from 2007 (rate of 5%).
Financial discipline: In conformity with the agreement of the European Council in Brussels in October 2002 (on the ceiling of agricultural market spending until 2013), payments could be "adjusted" if forecasts show there is a risk that the margin of security of EUR 300 million under the heading 1a of the budget (market spending) could be exceeded.
Aid conditionality: The establishment in 2005 of a compulsory sanctions system (partial or total aid reduction) for farmers that do not comply with certain regulatory norms for environment, food safety, health and animal welfare, employment security on farms, even if the list of such criteria to be respected has been considerably reduced compared to the initial proposal. Those receiving aid should also keep their land in good farming condition, even if the land is targeted by the risk of land abandonment.
Rural development: Aid in favour of young farmers could be increased. Aid of EUR 3,000 per year will be paid under the programmes for improving product quality. The rate of cofunding for agri-environmental measures has increased to 85% in areas under Objective 1 and to 60% in the other areas. Aid for State forests is possible.
Agricultural advisory system: This system (which comes within the framework of the principle of conditionality of aid) will be optional for the Member States until 2006. Not until 2010 will it be possibly decided that this system should be compulsory for farmers.
Set aside: member States may maintain rotating set aside and non-food production on the areas concerned. Exemption for organic producers will be maintained.
Mediterranean production: Before making legislative proposals, the Commission will present a Communication in the autumn on reform of common market organisations for olive oil, tobacco and cotton.
Market crisis management: Before the end of next year, the Commission will present a report with proposals on specific measures for facing up to risks, crises and natural disasters at national level.
President Prodi is pleased - contrasting judgement of MEPs
President Prodi welcomed the "historic agreement" reached in Luxembourg, that he describes as a "turning point for this vital sector for Europe". Reform is good for farmers, consumers, taxpayers and also for the environment and for developing countries, he states in a press release. In his view, the Member Sates were able to take the "long term view" by embracing a new agricultural policy that will deliver high quality food and respect of the environment. Furthermore, the agreement places Europe in a strong negotiating position for the WTO trade talks.
Speaking at the European Parliament, British Liberal Elspeth Attwooll welcomed the decisions on decoupling with the element of flexibility that this introduces, although she does fear that "the different rates at which reform may develop in the various Member States could bring in some short term distortion on our internal market". In her view, "we can now look the developing world in the eye and show them evidence that we do not want to continue to dump cheap, subsidised food on world markets". German Green member Friedrich-Wilhelm Graefe zu Baringdorf is also pleased and considers this to be a success for Minister Künast (who is also a Green). It is a good thing, he says, that the Commission did not give way too much on the specific wishes of the Member States. On the other hand, his compatriots at the EPP, Lutz Goepel and Elisabeth Jeggle, are very displeased, especially for decisions on the dairy sector. The same reaction came from Salvador Jové (GUE), who feels that the reform is "unacceptable and will especially penalise disadvantaged areas and small farms" in Spain.