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Mariann Fischer Boel

Member of the European Commission responsible for Agriculture and Rural Development

Promoting the Competitiveness of European Agriculture

Congress of European Farmers
Strasbourg, 17 October 2006

Ladies and gentlemen,

It's a great pleasure to be here in Strasbourg again for this second Congress of European Farmers.

Since you've invited me for a second time, I can conclude one of two things: either what I said last year made perfect sense; or else it made no sense at all and you're hoping that I can explain it better this time round!

Whatever the correct conclusion may be, I'm grateful to the conference organisers for asking me to speak before lunch rather than afterwards. This is not just because I want to avoid speaking during the siesta hour. It's also because my topic for today – competitiveness – is a word that can bring on indigestion for some people who come to farming conferences!

But need that be the case? Is "competitiveness" really a dirty word for us? Today I would like to argue that it is not, and should not be.

As my starting-point, let me take a hard fact: we cannot duck the challenge of competitiveness. The pressures on us in this new millennium – from inside the European Union and from outside it – are too strong for us to shut them out.

First, then, the internal pressures. Most European citizens are still prepared to pay public money to farmers – but they want to see it spent well. At a time when other economic sectors are having to make huge restructuring efforts, our taxpayers are not willing to hand over large sums to agriculture simply to hide a lack of competitiveness.

Indeed, much of my work as Agriculture Commissioner has been about telling people that this is not how we spend the CAP budget. Last year's furious debate over the European Union's Financial Perspectives was just one illustration of how strong that belief is in some quarters.

In addition to these internal pressures, of course we face colossal external pressures.

I'm sure no one here thinks that we can dismiss globalisation as a bad dream simply because the WTO Doha Round has been put on hold. If anyone did, they would be wrong.

One reason is that the Doha Round is paused, not cancelled. The European Union is still firmly committed to it. If it hits the buffers, we will lose opportunities for exports and growth. So Trade Commissioner Peter Mandelson and I will do everything in our power to keep it moving.

Nothing will be possible before the US mid-term elections in November. After that we will try to inject fresh dynamism by the early months of next year. Otherwise, short delays may turn into long ones.

But whether or not we manage to revive the Doha Round in the near future, the stresses of global competition are here to stay. Many overseas suppliers are eager to sell more agricultural produce to our markets. So there will be competition. Either we drop out of the game, or we also compete – in one way or another.

Is this such bad news? Certainly, it means that farmers can't count on having an easy life. But no one who is looking for an easy life becomes a farmer!

A more important issue is this: does the need to be competitive threaten the very soul of European agriculture?

If you will allow me a moment of colourful exaggeration, I would describe the supposed dilemma like this: either a farmer lives in honest harmony with nature but also in hardship, like Jean de Florette or some other character from the novels of Marcel Pagnol; or else he climbs aboard his ultra-modern tractor and makes some money from "industrial" farming - but at the price of tearing up hedgerows, driving away the birds and soaking his fields in chemicals.

Let me put in less theatrical terms. Can a farmer be both a competitive producer of farm goods and also a good steward of the countryside, as the public wants? Is there a contradiction?

If there was such a contradiction, we have made good progress in resolving it.

Farm products are private goods – goods for the market. Responsible stewardship of the land and compassionate treatment of farm animals are public goods.

The Single Farm Payment and cross-compliance split private goods from public goods. Whereas private goods will be a matter mainly for the market, public money will be primarily a reward for providing public goods. Some 90 per cent of direct payments will depend on farmers' respect of high standards of environmental care, animal welfare and public health. They will not be linked to production.

Through this approach, the CAP encourages our farmers to look after their land and animals in the way we expect, and removes conflict between these objectives and greater competitiveness. It does this in two ways.

First, it leaves them free to produce whatever they can farm most competitively, without worrying about a possible impact on their cheque from the CAP.

Secondly, it covers the extra costs that arise from standards which they have to meet but which others do not.

All third-country farmers who export to the European Union must comply with our food safety standards. However, they are not bound by a range of other standards which we do apply to our farmers – related to the environment and animal welfare, for example.It is logical that public money should cover the extra costs which these obligatory standards impose on our farmers, because it is the public that benefits from those standards – not, primarily, whoever buys the product.

By covering these costs, the new-style CAP levels the playing field on which our farmers compete with those outside the European Union. The private value of competing goods in the world market is paid for by the purchaser, whereas the public value of the farming systems that produced them is paid for by public funds.

This approach is fair; it falls within the WTO's Green Box of non-trade-distorting domestic support; and I believe it is the basis on which our farmers will accept globalisation.

So if farmers can now more easily be responsible and competitive at the same time, in what ways should they seek to compete?

In some markets, being competitive will always be about holding down prices. And I expect that some European farmers will maintain a presence in bulk markets of this sort. New bulk markets could conceivably emerge – for energy crops, for example

But for many other farmers, being competitive will be less about low prices, more about high quality – more about producing exactly the wines, cheeses, meats and so forth that well-off consumers around the world are looking for.

With these points in mind, the CAP can help farmers to sharpen their competitive edge in a number of ways.

For those who are competing in high-quality markets, it's essential to have access to clear and informative labelling systems. This is why the European Union puts such an emphasis on Geographical Indications and other kinds of quality badge. (By the way, here we see an example of the importance of the Doha Round: gaining international recognition for GIs only through bilateral agreements is a hard, slow battle.)

As you know, rural development policy is also a very important vehicle for supporting competitiveness. In fact, the new Rural Development Regulation, which will apply from January next year until the end of 2013, proclaims this fact loudly by containing an "axis" devoted explicitly to this objective.

As the new Regulation comes into force, the best-known traditional measures to aid competitiveness will still be there on the menu. There will still be support for modernising holdings and improving farm infrastructure, for example. I expect that these measures will remain popular – especially in many of the New Member States.

We will also maintain our support for building knowledge and encouraging high-quality production, and I think there's great potential in the new measure for boosting innovation in food production. There is no reason why agriculture should be left out in the cold as other sectors of the economy gather the fruits of improved expertise, fresh ideas and new technologies.

Finally, we will continue to do everything we can to help organic farmers meet the needs of their customers as fully as possible.

Overall, then, I hope it's clear that the European Union stands shoulder to shoulder with farmers as they work to become more competitive. There are helpful policies in place. But there's also room for improvement in some of those policies, and we will be looking at this over the next few years.

Some of these improvements are small technical simplifications – which, although modest, can often remove significant costs that undermine competitiveness. As I said at our recent (and very well-attended) conference on simplifying the CAP, the devil is often in the detail.

At the conference, I gave an example related to land planted to olive trees after 1998. In general, farmers may not use this land to activate entitlements to decoupled payments. But this restriction is burdensome and not really in the spirit of decoupling. Removing it would give Mediterranean farmers valuable extra flexibility.

Of course, there are also many improvements that we could make in terms of broader policy that would boost competitiveness. Some of these will become clearer as we carry out our analysis of the administrative burdens for farmers which arise from the CAP. But in any case there are areas where change is already clearly necessary.

We are currently discussing possible reforms for three sectors: wine, bananas, and fruit and vegetables. In each of these sectors, there are policies in place which put a brake on competitiveness instead of encouraging it.

In the wine sector, for example, many producers who are making good profits cannot expand output, even though the market would pay handsomely to get more of their wine, because of the system of planting rights.

Greater competitiveness is not our only goal as we reform these sectors; but it's certainly high on our list.

More generally, over the next three years there will be two exercises of reflection on the CAP as a whole.

The first of these is what I call the "health check" of the CAP, to be carried out in 2008. What is the motivation for this? In legal terms, many of the reforms agreed over the last few years contain review clauses. This is true of the Single Payment Scheme, cross-compliance and certain agricultural markets, for example. Our overall aim will not be a fundamental change of direction; rather, we want to make sure that the CAP is working as it should.

Among other things, this will mean checking whether our policy tools are supporting competitiveness as much as they could.

We could reasonably ask this question about decoupling as it is now being applied. Several Member States apply only partial decoupling in some sectors. They are entitled to do this. However, early studies by the Commission suggest that full decoupling in these Member States could bring dividends. We need to analyse this more closely.

We should also take a look at several individual market sectors. For example, does butter intervention in its current form really give sustainable help to the dairy sector? And does cereals intervention as it is currently organised help to keep the cereals sector in good shape, or does it too often become the sale outlet of first choice for some producers?

At roughly the same time as we think about adjusting the CAP through the health check, we will also reflect on what the CAP could look like in the longer term – after 2013. These reflections will feed into the general review of the European Union budget, as agreed by heads of state and government in December 2005.

This budget review could well pave the way for fundamental change after 2013. For example, some have suggested that our farming sector as a whole could become more competitive if we moved towards a single model of decoupling, leaving behind the confusingly diverse range of models used at present.

This is not a clear issue – especially at this early stage of our experience of making decoupling work – but it could well be one of the ideas on the table.

Let me make two final points today.

First, if I have recently begun speaking about what the CAP could look like beyond 2013, this is not because I want to whip up an atmosphere of permanent change. Quite the reverse. As far as possible, I want life to be predictable for farmers, even in an unpredictable world. I understand that, in order to be competitive, they need as much stability as possible, because plans must be drawn up and investments must be made.

But this means that if further change will probably be necessary, we need to think about it now. We need to prepare for it so that it won't spring out at us like a jack-in-the-box in five or six years.

Secondly, I recognise that there are limits to what we can achieve in terms of competitiveness. Farmers in all regions must set their sights as high as possible, but in some regions farmers will always be hindered by geographical handicaps.

Do we turn our backs on these regions, leaving them to sink or swim? No. They will be part of the competitiveness agenda, like everywhere else. But we must also do everything we can to soften the impact of their handicaps through solutions closely tailored to their individual needs. We will draw many such solutions from rural development policy; some could come from outside it.

Ladies and gentlemen, to conclude, I will return to our fictional friend, Jean de Florette. Would he have a place in our modern, competitive European agriculture?

My answer is yes. He could tend his fields with care while also tending his finances. But to achieve this balancing act, he would come and talk to me about quality labels and rural development funding. Then he could use that new tractor with a clear conscience – provided that he ran it on biodiesel, of course...

Thank you for listening, do not get indigestion from what I've said today, and enjoy the rest of the conference.

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