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SPEECH/03/515

Dr. Franz FISCHLER

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

CAP Reform and EU Enlargement The Future of European Agriculture

European Bridge

Leuven, 4 November 2003

Ladies and Gentlemen,

I would like to say thank you very much to the Christian Academy for European Dialogue for inviting me to join you here in Leuven. I am pleased to be with you tonight to discuss European agricultural policy.

Organisations such as European Bridge are of enormous importance for the European dialogue. If we are to advance the common cause of Europe, we must build bridges, and if we are to create "an ever closer union among the peoples of Europe", as the Treaty establishing the European Community puts it, we must span the divides with European bridges.

This evening I would like to address four issues:

Firstly: What shape must a modern European agricultural policy take?

Secondly: How will the forthcoming EU enlargement affect our agriculture?

Thirdly: Where do we stand in the international farm negotiations after their failure in Cancun?

And fourthly: the organisers have asked me to briefly touch on the European constitution debate.

    To my first point then, the common agricultural policy:

The EC Treaty of 1957 states that "the objectives of the common agricultural policy shall be (...) to increase agricultural productivity (...) and (...) assure the availability of supplies"(1). Today this call for greater production seems somewhat anachronistic. But at the time the European Community was created this goal was fully justified: at the time European agriculture was not even able to ensure self-sufficiency in cereals(2).

Thanks to the efficiency of our farmers, rapid technical progress and thanks also to the common agricultural policy, the situation changed rapidly and the EC had already become a net exporter by the 1970s.

However, once it had started moving, the European farm production machine was difficult to stop. It took 15 years and two major reforms before the surplus mountains and lakes were eliminated. But even today some opponents still use the milk lakes and meat mountains of the 1980s to argue against the CAP.

But the situation today is quite different. The time of the headlong dash to raise production is over and today's society has completely different expectations of agriculture:

  • How safe is our food?

  • Is it the right quality?

  • Is the farmer protecting the environment - or is he ruining it?

  • What is being done to ensure the quality of my living space and recreation areas?

  • What services do I get in return for the part of my taxes used in agriculture?

These are the burning questions, as again recently confirmed in a European public opinion poll(3):

  • 91% of our citizens want our agricultural policy to provide safe food. After BSE and the dioxin scandal this is understandable.

  • 89% of our citizens want our agricultural policy to ensure that our environment is protected (in Belgium the figure is even 92%).

  • 83% want to see our small and medium-sized agricultural holdings supported.

  • and 79% of European Union citizens want the CAP to provide a stable and fair income for farmers.

These demands are not always easily reconciled, because higher environmental standards, for example, increase production costs, reduce yields and thus lead to lower revenue.

But that is not all. It is not only difficult to reconcile the different demands of society, but - hand on heart - there is also a difference between what people preach and what they practise. How else can the person who advocates greater protection for animals go to the supermarket and buy eggs from battery hens just because they are cheaper?

In any case, the poll again showed that people expect far more from farming than just the production of cereals, milk and meat. Agriculture must be in touch with nature, protect the environment and conserve our farmlands which have been there for thousands of years.

How then can European agriculture and the CAP meet society's requirements?

The answer is sustainability, or more precisely: a return to sustainability, because for centuries it was understood that each generation of farmers would pass on their farms and fields to the next generation so that it could harvest more, not less. It was only advances in technology and chemical engineering that gave farmers the means to live at the expense of future generations and deplete natural resources.

But if we are to return to improved quality, better environmental protection, greater competitiveness and more support for our rural regions and farming families, we also need an agricultural policy that is environmentally, economically and socially sustainable!

  • This means that we must use our resources in an environmentally compatible way.

  • It also means that we must make our farms economically viable, because farms that are unprofitable cannot ensure that our farmlands are maintained.

  • Socially sustainable means that agricultural policy must be acceptable both for farmers and for society as a whole.

Ladies and Gentlemen,

Sustainability, the greater demands made by the population, higher quality and stricter compliance with the rules these are all right and proper, but they must also be reflected in agricultural policy.

That was the reason behind our agricultural reform:

  • To make farming more competitive.

  • To create a more transparent and fairer subsidy system.

  • To promote quality and environmental protection.

  • To provide more funding for the development of our villages and rural areas.

How can we achieve this?

First of all we will sever the link between subsidies and production: Farmers will no longer receive headage payments for each livestock unit that they keep, but a single farm payment. This eliminates the incentive to overproduce. In return farmers will be required to provide society with the public goods which it demands.

  • In principle each farmer will receive the same level of aid as before, but now he can decide for himself what he wants to produce with the money without sacrificing any funding.

  • In future we will police compliance with production standards and the environmental compatibility of the farming methods applied, which is not the case at present. This will increase consumer confidence and is also fairer: black sheep who do not meet the standards will no longer be able to profit from the system at the expense of the others.

  • In addition, the new aid system will provide greater income stability for our farmers because it is independent of market fluctuations and changes in the weather. It is also more efficient: the OECD has shown that in the new, decoupled system twice as much money will end up in the farmer's pocket as in the past.

  • And finally, the single farm payment also means less bureaucracy, because in cattle production alone, for example, the number of aid schemes will be reduced from seven to one.

Secondly, there will not only be improvements for individual farmers - we will also do more for our rural areas:

  • In future we will make more money available for rural development: each year a total of approximately €1.2 billion more will be available for our villages and regions.

  • The use to which the funding is put will still be governed by the principle of subsidiarity: the EU lays down the basic conditions for rural development and the respective Member State and/or region can then decide for itself what it uses the funding for.

  • An example: Belgium has three rural development programmes - one for the country as a whole, one for Flanders and one for Wallonia. The EU is providing a total of €420 million(4) for rural development in Belgium for the financial period 2000 to 2006. But it is the Belgian regions themselves that decide whether this money is used to promote the conversion of farms to organic production, build dykes, provide start-up aid for young farmers or promote projects such as the forestry centre of excellence in St Vith.

  • But we will not only make more money available - we have also further expanded the range of available measures: there will be more options for promoting quality, new aid for meeting EU standards and new investment grants for young farmers.

The third key element of our reform was a major overhaul of the milk sector:

  • We have extended the milk quota scheme to 2015.

  • We have reduced the guaranteed prices for butter and milk powder because intervention is intended to be a safety net, not an artificial market. This is also very important in connection with enlargement and our international obligations in the WTO.

Fourthly, we have also kept some of the existing CAP instruments that serve as stabilisers for agriculture. For example: intervention stabilises internal market prices, export refunds help to stabilise the markets, and compulsory set-aside stabilises arable crop production.

The Union actively uses these instruments to regulate the markets. But to do so they must be also flexible.

Take set-aside, for instance: over large parts of Europe this summer we had a devastating drought, leading to smaller harvests and high prices for animal fodder. The Union already decided some time ago to bring forward a number of direct payments to avoid farmers having to face liquidity shortfalls. But we should also try to improve the cereals balance. I will therefore next week be suggesting lowering the set-aside requirement in 2004 from 10% to 5%. This will encourage the production of an additional 7 million tonnes of cereals next year.

The next step in the reform is ensuring that the Member States implement the new policy properly.

At the end of the day everyone benefits from the new agricultural policy:

  • farmers benefit, as they have more freedom of production,

  • consumers and taxpayers benefit, because they get more for their money: more quality, better environmental protection and animal welfare, in a word more value for money,

  • the regions benefit, because they get more money for their rural development,

  • in the international farm talks, too, we are now in a much better negotiating position than before the reform (I will come back to this later),

  • and last but not least, the agriculture reform will allow our agricultural policy to work even in an EU of 25 and more Member States.

    That brings me to my answer to the second question: how will the forthcoming EU enlargement affect our agriculture?

Enlargement to include ten new Member States means 75 million new consumers and four million new farmers in the EU. That means new market opportunities for farmers in all 25 EU Member States, but also increased competition.

Purchasing power in the ten accession countries is currently rising about twice as fast as in the EU-15. Experts are therefore predicting a continued strong rise in demand in the new Member States for quality processed products, such as cheese and meat products.

However, it is mainly the farmers and the food industry in the EU-15 that produce branded products and will be able to make use of these new market opportunities. Conversely, the ten new Member States have the chance of growing low-cost feed grain, rape and renewable raw materials, which will soon be pushing onto our markets. And domestic demand in these countries is continuing to rise too.

At the same time farmers in the accession countries are still being held back by huge shackles: lack of capital, poor animal husbandry, shortcomings in veterinary care and hygiene, not to mention problems with processing and marketing their products, to name just a few.

But there is no getting away from it: we have to ensure that the new Member States comply with our EU standards, and use EU assistance properly.

The EU strives, through targeted programmes, to help farmers to help themselves: over the past four years €1.33 billion(5) has flowed into the farming sectors in the accession countries to enable them to prepare for integration into the CAP.

These resources have been used, for instance, to promote investments in modernising holdings, improvements in processing and marketing products, the setting up of production cooperatives, and improvements in vocational training.

Despite these extremely successful measures, huge efforts will still be required to ensure the common agricultural policy really does work properly in the new Member States: thousands of public employees in the accession countries have to learn how to implement Community law in practice. Programmes will have to be created, agencies developed, tenders organised, controls developed and discussions held.

The course has been set therefore; we are on track but not yet moving at full speed.

    WTO

Increased international competition, new markets and new terms of trade are also on the table in the WTO.

Thanks to our new system of support, with more rural development measures and reductions in price support, we have for the first time moved off the defensive in the WTO and became one of the top international players.

And so it was even more disappointing that negotiations collapsed in Cancun, even before getting on to agriculture. And so it is wrong to claim that farm policy was responsible for the failure of Cancun.

Nor, in retrospect can the blame for the failure be pushed onto those developments which, before Cancun, had been named as conditions for the success of the talks.

Countries all over the world called on us to reform our common agricultural policy to ensure that the negotiations would succeed: this we did in our June reform, for which we received a huge amount of international support. Yet in Cancun those same parties turned round and said: we are not interested in that, we want to know what else Europe is prepared to do.

It was then said that the talks would fail if we did not settle our differences with the Americans. So we resolved our differences, and were then slated by critics saying it was not acceptable for two major world trading blocks to come to an agreement with each other.

I find it a little strange, to say the least, that what was said beforehand to be a condition for success is afterwards declared to be the reason for failure!

What now?

Cancun has us put us seriously behind schedule in the current negotiations. But the Doha Round must and will continue. Because opening world markets even more is a major prerequisite for economic growth which we urgently need all over the world.

Our negotiating proposal therefore remains on the table:

  • we are prepared to cut trade-distorting subsidies by 60% - double the amount in the Uruguay Round;

  • we are offering to roll back expenditure on export refunds by 45%, and for the first time we are prepared to abolish completely export promotion for products of particular interest to developing countries;

  • we are also offering to reduce agricultural tariffs by 36% on average;

  • at the same time we will not stand idly by and watch while the legitimate wishes of our citizens are swept under the table internationally. Environmental protection, sustainability, animal welfare and quality must be given the place they deserve in the international trade system too.

I will in any case continue to work actively towards a successful end to negotiations. But at the end of the day, success will depend on all members of the WTO converging on a central position. This will require more political will and commitment on the part of all - the industrialised nations and developing countries alike.

A lot more could doubtless still be said here, but perhaps we can come back to this topic again in the discussion to follow.

Now to my final topic:

    The European Constitution

Two years ago the heads of state and government set up a Convention of 105 representatives from the European Parliament, the national parliaments and governments of the EU-25, and gave to it the task of drawing up a Constitution for Europe. The Convention successfully completed this work a few months ago, and now the Intergovernmental Conference is set to decide on the draft.

The greatest thing about the Convention's draft is the fact that it was actually produced at all. After the Laeken summit hardly anyone still believed that the Convention would be able to adopt a draft constitution, let alone such a broad text.

  • The existing EU Treaties have been consolidated and shaped into one compact constitutional treaty, making matters much simpler.

  • The division of responsibilities between the EU and Member States is being reviewed, and the EU may assume new competences only if this means genuine added value.

  • Moreover, a subsidiarity assessment is to be carried out in future for each legislative initiative. A protocol on this has even been attached to the draft Treaty.

  • The Charter of Fundamental Rights has been integrated into the new treaty, meaning that fundamental rights can be contested at the European Court of Justice.

  • The EU has finally also been given its own legal personality, and can, for instance, adhere to the Convention of Human Rights.

  • The EU will get its own Minister for Foreign Affairs. However, the question arises as to the powers of this Minister for Foreign Affairs. For instance, what is his or her real mandate, if intergovernmentalism and unanimity continue to apply in the sphere of common foreign and security policy?

  • This unanimity principle is becoming more and more of a hindrance, as it is unfortunately frequently misused as a right of veto. That could paralyse the Union more and more, the bigger it grows.

But there are also a number of points which give me serious misgivings - particularly the proposal that there be only fifteen voting commissioners. In my view this is the worst possible solution, because it would make the new Commission a two-class society, with top-tier commissioners with voting rights and a portfolio, and the others unable to do anything other than lobby for the interests of their Member States.

From everyday practice I know that we categorically need one voting commissioner per Member State! This is important if only because each Member State needs someone who can speak out in their national language as a visible mediator with Europe. Quite apart from that it is important that all commissioners answer to the European Parliament.

Nor do I view it as an impossible task having a Commission of up to 30 members. This would doubtless create a management problem, but one that could easily be solved.

I would like to address one more weak point in the draft constitution to do with the common agricultural policy: the draft submitted by the Convention has in effect ignored the major paradigm change in European agriculture away from maximising production and towards sustainability, and the goals of the common agricultural policy in the draft still reflect the deprived post-war economy.

On the whole, however, I would like to emphasise once more that the Convention has achieved great things, given its difficult starting position. It put its proposal on the table on time and produced an excellent draft for the Intergovernmental Conference.

We must therefore, under all circumstances, avoid a situation whereby this draft is challenged in its entirety in the Intergovernmental Conference.

I draw now towards my conclusion:

Antoine de Saint-Exupéry once said: "As for the future, your task is not to foresee it, but to enable it."

I hope that the draft Constitution for Europe enables a good future for the Europe of 25 and more, and that our agricultural reform too opens up attractive prospects both for our farmers and for the food sector as a whole, and for our consumers throughout Europe.

Thank you for your attention.

(1)Article 39(1)(a) and (d) of the EC Treaty.

(2)Cereals self-sufficiency rate in 1967: 83.9% (source: Eurostat).

(3)Eurobarometer 59.2, October 2003.

(4)€378.4 million under the Guarantee Section and €41.6 million under the Guidance Section.

(5)€2.2 billion including BG and RO.


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