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SPEECH/02/404

Dr. Franz FISCHLER

Member of the European Commission responsible for Agriculture, Rural Development and Fisheries

European responses to the new challenges facing agriculture

CEA Congress

Tallinn, 18 September 2002

Ladies and Gentlemen,

The CEA Congress is always a good opportunity for discussing the most up-to-the-minute topics in agricultural policy. But it has seldom been as important as it is this year because we face some major issues to which, together, we have to find responses as soon as possible:

The first issue is how best to run the common agricultural policy in the future.

The second is how to position our understanding of how agriculture should be run on the international stage.

And then there is the issue of how to manage the further integration of Europe so that it is a success.

Europe's farming industry has reached a crossroads at which it must decide how it is to continue from here. Staying as we are can be no option because if you stop in the middle of the road you can easily be run over. If we want to avoid being pushed in a direction we do not want to go, by changing circumstances or by other countries, then we have to make sure we set the course that we want ourselves.

Why do we have to think in terms of change at all? Quite simply because production conditions in agriculture itself as well as the background fundamentals have changed so much over recent decades and continue to do so. A fraction of the previous workforce can now produce several times what was possible only two decades ago. Europe has also become a global player in farm trade, and we are both the biggest importer and one of the biggest exporters of agricultural products. Above all, however, we must constantly remind ourselves that it has become rare for producers to determine prices - the market is biased towards demand. Today's consumers can choose among countless products from different origins, of different qualities and at differing prices. It makes no sense to pretend otherwise.

But apart from producing food, the average European in the street wants farmers to do much else. Farmers are expected to provide such public goods as a well-tended countryside and an intact environment. Up to now these have been a by-product, without farmers being paid for them. In a market-based economy, however, it is only right that farmers should be appropriately rewarded for such services.

And in principle the European public is ready to pay. Just recently, there was yet another survey showing that 77% supported the idea of the CAP ensuring that farmers receive an appropriate level of income. But our taxpayers also want to know what they will be getting in return. As well as putting top priority on healthy food, they want to be sure that farmers will look after the environment.

In fact, agriculture is faced today with both changed underlying fundamentals and a whole series of social expectations, all factors which are difficult to reconcile with each other. There is price versus quality, productivity versus environment, progress versus an intact ecology. We need not accept the accusations that the CAP destroys the environment or that we are in the business of dumping our produce world-wide. But we must show in practice that this is not so and, where our systems are capable of improvement, we must improve them.

As far back as 1992, we started removing the artificial incentive to produce more which was built into our aid schemes, in order to halt overproduction. We need to resolutely pursue this decoupling of aid from production. At the same time, we have cut back export refunds by more than half in the last ten years. But if we want to be taken seriously in the WTO, we have to go further still. As for the environment, we already have tough legislation. The important thing now is to create better incentives for complying with the rules that exist.

One thing is clear: an agriculture policy which concentrates on producing basic commodities has no long-term future in Europe. With such a policy we will manage neither to make European agriculture competitive nor to keep the public on our side. And, internationally, such a policy is simply no longer tenable.

What we need is a Europe-wide response to the many new challenges confronting us. What we need is an agriculture policy which brings producers and consumers together again, which helps to fulfil what society expects. After all, in the end it is society as a whole which is paying for our agricultural policy and this calls for a broad-based public dialogue. We must make it clear that asking for quality and hoping to bargain-hunt are not good bedfellows.

The European Commission's response to the new challenges is what we have been calling the Mid-Term Review. In my opinion it represents the best way forward.

First of all, our proposals are designed to bring consumers and farmers closer together once more. This is because decoupling direct payments is giving farmers back their freedom as businessmen. By removing from direct payments the associated requirement to produce, we are encouraging farmers to turn out what they can sell most readily in the marketplace, and not what attracts the highest subsidy.

Secondly, the Mid-Term Review proposals provide more money for the extra services which farmers contribute to society. Through the "modulation" mechanism, 20% of direct payments can be shifted into rural development schemes. This money can be spent on agri-environment measures and on agriculture in less-favoured areas, as well as on investment in farms or on marketing and diversification. We are also proposing new schemes in areas to which a high priority is attached these days, i.e. premiums for ethically sound animal husbandry and a separate package of measures to support quality products.

By reinforcing rural development, in fact, we are doing exactly what practically all European farm ministers and many of you in the farming organisations have been preaching for years. Nearly all speeches of the last few years have called for the strengthening of the second pillar of the CAP. The interesting thing is, though, that now we are getting down to the serious business, there are some who want nothing to do with it. I wonder where our farm ministers thought the money was going to come from. Did they imagine we could reinforce rural development while leaving everything else the same? One would expect enough realism to know that a bigger agricultural budget is out of the question.

Thirdly, the Mid-Term Review will also decisively improve the international standing of Europe's agriculture. For decades our production subsidies made us one of the main targets of international criticism. Through the reforms of the last ten years, it is true, we have succeeded in fulfilling our international obligations. Yet no-one could say that the EU has managed to secure more negotiating leeway in the WTO. On the contrary: we are asking for so many concessions in return for our direct payments that there is practically no more room for other demands. Complete decoupling of direct payments from production would further improve our international position, and at the same time increase our chances of obtaining what we consider truly important.

WTO

Europe is not an island. The EU is one of the world's largest economic powers and all of us sitting here today benefit from the prosperity that global trade brings. This also gives us an obligation, however, to take into account the legitimate concerns of our trading partners. And notwithstanding this, clear and fair rules for global trade are in any event in the best interests of Europe's farmers.

It is for this reason that the European Union has been a constructive participant in the early stages of the new world trade round. This new WTO round has been lent added importance by the growing consensus on the need for a set of rules to govern the process of globalisation. Such rules cannot come from the economic sphere - they must come from the political domain. Trade is not a zero-sum game - under the right conditions, it offers a chance for all nations to prosper. That is why we are in favour of further liberalisation in agricultural trade. But only on the condition that this will create genuine opportunities for all countries, especially in the developing world. The EU has already taken a significant step in this direction by opening its markets last year to the world's 49 least developed countries. I call on our counterparts in the developed world to follow our example.

However, some demands made in the context of the trade negotiations, such as recent calls by the US for radical cuts in all customs tariffs and the abolition of all direct export subsidies, go far too far. This demand is totally one-sided, since it calls on the world, and in particular the developing countries, to go further than the US itself is prepared to go. Not to mention the fact that it is entirely at odds with US policy, under which, just a few months ago, the adoption of the Farm Bill signalled a further expansion in subsidies to domestic farmers. The US position is wholly inconsistent with the need to reach a compromise on these issues.

So what is at stake for European agriculture in these negotiations? The primary task of the EU is to defend our own idea of farming - the European model of agriculture. It is in our view a fundamental right of every democratic society to shape its own agriculture policy, so long as it moves at the same time to restrict any trade-distorting aspects. We are prepared to reduce trade-distorting subsidies. But we will not accept that we can no longer pay our farmers for services they perform that benefit society. Such activity has nothing at all to do with distorting trade, and everything to do with the legitimate interests of the citizen in the street. And it is these interests that we are firmly determined to defend in the WTO.

However, we are not alone on this issue. At the WTO conference in Doha a whole series of countries, including in particular the central and east European accession candidates, shared the EU's position on this matter. Together we managed to ensure that the final declaration from Doha included provision to take account of support for sustainable farming. In WTO jargon, support for important socially useful services comes under the blanket term of "non-trade-related matters". And the Doha Declaration states in black and white that such matters must be taken into account in the new WTO round.

That was just a start, however. We are now in the middle of negotiating the detailed agreements for the new world trade round, and these negotiations are certain to be far from easy.

Many members of the WTO are still pushing for areas such as support for environmental protection and animal welfare and protection for traditional product names to be addressed only in separate agreements, if at all. For us, this is not acceptable - environmental protection and designations of origin are a vital aspect of farming, and cannot be treated as issues separate from agricultural trade. Finished products are precisely one area in which European farming is a world leader. We want global protection for names such as Prosciutto di Parma, Queso Manchego and Tiroler Bergkäse, so that consumers are better informed and producers rewarded fairly for their high-quality products.

As you can see, this position will not be easy to defend in the WTO. One thing is certain, however - in international terms, the Mid-Term Review would give us exactly the room for manoeuvre we need in the negotiations in order to safeguard our real interests.

Enlargement

The final issue I wish to address is enlargement - how can we best shape the process of European integration to ensure it is a genuine success? The answer cannot be simply to graft the CAP in its current form onto the farm sectors in the enlargement candidates. Farming in these countries is just too different from that practised in the EU, and we must be mindful of this. In the eastern European applicants, forty years of planned economy have taken their toll on farmers' competitiveness, and it is no coincidence that supermarket shelves in the CEECs are increasingly full of goods from the EU. What the applicant countries need most is investment to modernise their farms, processing industries and marketing structures.

An even more pressing need for some of these countries, however, is to diversify their rural economies and create alternative sources of employment in the countryside. Cities like Warsaw, Tallinn and Bratislava may today be enjoying boom conditions, but many parts of the rural hinterland in these countries are left trailing far behind. If we do not manage to improve the prospects of people in rural areas, they will simply vote with their feet and leave the land.

All these trends are under way as I speak, regardless of any decision on whether or not to join the EU. EU membership, however, holds the promise of a helping hand in managing the process of structural transition. Such assistance has already been forthcoming in the form of pre-accession assistance packages under which more than €10 billion has been channelled to CEECs since 1990. And it continues today in the form of the Sapard programme, now up and running in all central and east Europe applicants apart from Hungary. But it is as full members of the EU that these countries stand to receive the most generous assistance, in the form both of structural funding and of rural development programmes. The Commission's strategy paper for enlargement allocates the new members even more rural development funding than currently enjoyed by existing members.

The rural development programmes offer the distinct advantage that they can be used to target funding on those areas most urgently in need of assistance in the new members. And they place responsibility for implementing these measures and applying this funding in the hands of local rural people. I would, therefore, like to address a few words to these people in the applicant countries - what your farmers need both now and in future is information and two-way communication.

The EU funding for your countries is ready to be used, and more will be available in future. But whether this money can be fully utilised depends on the advice and support you supply. Such is the pivotal role that is yours to play in the success or failure of sustainable farming and rural development in your countries.

It was a Frenchman [Antoine de Rivarol] who once wrote that people spend their days dissecting the past, complaining about the present and fearing for the future. Given the challenges and issues facing us today, such an attitude could not be worse. As you have seen, today we must grapple not just with challenges and issues, but also with an array of solutions and answers. It behoves us to apply these solutions. As politicians and representatives of Europe's farmers, both you and I have a duty to help them grasp the opportunities to shape their future. Only by acting promptly can we be masters of our own destiny. Mark my words, we find ourselves at a crossroads and must choose the right path. Let us not opt for the path that leads down a dead-end.

Thank you for your attention.


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