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Mariann Fischer Boel

Member of the European Commission responsible for Agriculture and Rural Development

Wine market reform: continuing the CAP reform process

Conference "Forum New Economy"
Madrid, 12 July 2007

[Minister, ladies and gentlemen,]

It's a great pleasure to be back in Spain.

I would like to thank the Minister for her kind introduction at this prestigious event.

I suspect that, like me, she could say that her feet have hardly touched the ground over the last few years, because there has been so much work to do on agricultural policy – at European level, and at the national level.

In any case, in my current job I have been very grateful for her willing and constructive co-operation - especially over the recently agreed reform of the fruit and vegetables sector.

So here I am in one of Spain's great cities. And of course Spain has so many great cities. Millions of people from all over the world come to Spain every year to spend warm, pleasant days wandering the streets of Madrid, or Barcelona, or Seville....

And I'm sure these people find what I always find: a bustling, confident Spain which is enjoying the fruits of many years of economic growth in a number of sectors.

But I hope that some of these people also see other images of Spain: the Spain of waving fields of wheat in Castile and Léon; of orange groves in Valencia; of cattle feeding on lush grass in the north.

Spain has deep and strong agricultural roots. And these roots still bring nourishment today – inside Spain and beyond its borders. My local supermarket gives plenty of shelf space to Spanish wines and olives. And those shelves empty quickly!

I could say similar things about the European Union as a whole. Our urban culture is strong. But so is our rural culture. The countryside accounts for more than 90 per cent of our land area, and is home to more than half our population. And our agri-food sector provides 4.6 million jobs.

As the European Union's Commissioner for Agriculture and Rural Development, I'm trying to help our farm sector and our rural economy to prosper. And I want them to fit in as well as possible in Europe's economy and society as a whole.

This is still essential work, no matter how much the European Union's economy may have changed over the past decades.

We still need what the land can give us. We need it to give us food. We also need it to give us other valuable raw materials – especially as our bio-energy sector expands.

Not only agriculture but also the wider rural economy has a vital contribution to make. Farming is still at the centre of some rural communities. But in the age of broadband and high-quality transport links, the countryside is also a base for manufacturing and services – especially tourism.

The European Union's Lisbon agenda for jobs and growth applies to rural areas as well – not only to our towns and cities.

Finally, of course, the countryside is essential from an environmental point of view. Europe's forests, plains and green fields are her lungs. They are one of the battlegrounds on which we fight climate change. And they are places where we go to feel close to the sources of our life.

If we want to do justice to all of these issues in policy-making, we must strike an important balance.

On the one hand, farming has certain differences from many other sectors of the economy, just as the countryside is different from the urban environment.

On the other hand, policy-makers must not exaggerate these differences. Agricultural and rural policy cannot be like the "difficult uncle" in the family, who is allowed to behave and talk however he likes without being challenged. Those who make agricultural and rural policy must be able to justify it to the public, showing that it achieves worthwhile goals.

The European Union's Common Agricultural Policy (CAP) has been responding clearly to that obligation.

One of the biggest innovations in the history of the CAP came in 2003, when we agreed a new basis for making direct income support payments to farmers.

Previously, this income support had been linked to production. In 2003, we agreed to "decouple" most of it from output and link it to various standards – giving it a new name, the Single Farm Payment.

To receive the Single Farm Payment, farmers do not have to farm a given product. The payment is based on past individual, regional or national receipts, and is linked to land. A farmer's Single Farm Payment is reduced – possibly even to zero – if he does not respect tough standards of environmental care, animal welfare and public health.

This brings twin benefits.

First, it sets farmers free to produce what the market wants, as the Single Farm payment does not depend on particular production. This is an enormous boost for competitiveness and avoids trade distortion.

Secondly, it gives farmers an extra incentive to farm in the way that the public wants – providing a pleasant, well-tended countryside, and taking account of animal welfare which is becoming more and more politically sensitive.

Therefore, this reform is good news in terms of both private goods – goods for the market – and the public goods that we want. I believe it makes the value of the CAP much clearer in the eyes of the public. I regret that we have not been good enough at communicating to people outside our sector the value of the 2003 reform.

Since 2003, the work of reform has continued.

We have restructured our rural development policy – extending the range of measures available, and giving clearer guidance over common goals for the whole European Union.

We have also extended the principles of the 2003 agricultural reform to more sectors. We agreed in 2004 to include olive oil, cotton and tobacco. An agreement on sugar followed in 2006. And of course, we recently struck a deal on reform for the fruit and vegetables sector.

Once again, I would like to thank the Minister for her very positive co-operation over fruit and vegetables. And I think this reform will be good for Spain. You have a strong fruit and vegetable sector today. With this reform, it can be even stronger in future.

The reform will extend the ways in which producers can help themselves through Producer Organisations. Bringing decoupling to the sector will give farmers greater freedom and flexibility, while this and various other elements of the reform will also raise environmental standards.

So, as I have said, there has been no shortage of policy work to be done. But there are still plenty of pots boiling in the kitchen.

One of the most immediate challenges is to agree on a reform of the European Union's wine regime – for which I put proposals on the table just over a week ago.

Already, a great cloud of misunderstandings has formed around these reform proposals. I certainly can't address all of them now. But I would like to make a few key points.

First, there is one issue on which most people agree: reform is necessary.

Our wine sector is not performing nearly as well as it could and should be. Without reform, we forecast that our annual surplus production in years to come will be around 13 million hectolitres – which would be added to existing stocks.

Also, it's very hard to justify to the public – and to other economic sectors – that we spend half a billion euros every year on distilling wine which has no buyers. This is very difficult to defend.

For these and other reasons, the moment has come for a new policy. We need to spend our wine budget in a much more intelligent way, in a way that boosts competitiveness while doing justice to social and environmental concerns. We will not reduce the budget of 1,3 billion Euros per year.

Secondly, yes, I do want more freedom in the wine sector: freedom for existing producers to expand output if they think they can make money, and freedom for potential newcomers to enter production. The wine sector will be much healthier, and more responsive to consumers, if it works less like a members-only club.

Thirdly, this does not mean a total, irresponsible deregulation. There will still be rules – helpful rules. Scare stories about wines being bottled near the Baltic and labelled as, for example, "Rioja", are just that: scare stories.

Fourthly, yes, I have proposed a "grubbing-up scheme". This would offer money to wine-producers who did not expect to be profitable in future, and who therefore wished to leave production with money to invest in something else.

But after all the misunderstandings I have heard, I almost wish I could paint a sign in the sky saying, "The scheme would be voluntary". No one would be forced to use it. And Member States would be able to limit its use to prevent unwanted social, economic or environmental consequences. It's a measure to offer a helping hand, not impose problems.

Fifthly and finally, I have really made an effort to come up with a big budget for promotion: €120 million of European Union money per year. This is a response to loud calls from the sector. But if that sort of sum is made available, the sector must squeeze the maximum value out of every euro. A big budget can't make up for poor promotional strategy.

I don't have time to mention all the many other aspects of my proposal. But in summary, I would say this: I really do believe it offers the wine sector many tools to do its business better. It would adapt our framework of rules so as to build on our wine tradition, not undermine it.

Now let me look a little further into the future.

This autumn, I will launch an exercise which I call the "CAP Health Check". This will assess whether the reformed CAP is meeting its objectives as effectively, efficiently and simply as possible – in a European Union of 27 Member States, and in the foreseeable international context.

The fact that this exercise is necessary does not mean that we have somehow "got things wrong" in our reforms of the last few years. The CAP covers some very complex things, and recent reforms have been far-reaching. Now that we can see how those reforms are working out in practice, it's a good idea to take stock and see whether adjustments are needed.

This is especially true as the European Union has gained 12 new Member States since 2003. This is not a new reform but an effort to streamline our existing reform.

Among other things, within the Health Check we will look at our system of decoupling direct payments from agricultural production. Not all Member States have applied full decoupling in all sectors. Within the Health Check, we may recommend a further move in this direction.

You can probably also expect us to propose extra transfers of funding from the strictly "agricultural" budget into our rural development policy, to give that policy the financial backing it needs.

So-called "market instruments" – such as public buying of commodities, and production quotas – will also come under the microscope.

In particular, I have given clear signals that we should not renew the milk quota system when it expires in 2015, as it really does not fit in with our reformed CAP. This means that we should think carefully about transitional measures to help give the dairy sector a soft landing.

Aside from the Health Check, we will also have to start thinking about the form that the CAP could take after 2013. This reflection will be part of a review of the European Union budget as a whole – as agreed by heads of state and government in December 2005.

Today is not the moment to talk about the Budget Review in detail. However, I can promise one thing: I will not let the Review be boiled down to simplistic questions about money. If our overriding aim is to make savings, we may well end up with false economies. I will argue firmly to get the CAP that we need, and the funding that we need to fuel it.

I am confident that a post-2013 CAP will still have a strong "agricultural" component of some kind. But we will have to think carefully about what form exactly that component will take.

Alongside the agricultural aspect, we will still need a strong rural development policy – to continue to support care for the environment, competitiveness, economic diversification and a high quality of life in our rural areas.

Finally, I will briefly mention the international context for all this - especially the Doha Round of WTO trade talks.

I really wish there were more positive things to report. The European Union has made a very generous offer on agriculture, holding up the prospect of real gains for our trade partners. We keep moving further in their direction. But they just won't come to meet us.

Now it's up to them to do the walking. We will carry on working for success in the Doha Round. But we need to see balance within the agricultural section of the talks. For example, the US needs to make a much more convincing offer on disciplining its trade-distorting domestic support.

Also, the talks on services and industrial tariffs have a lot of catching-up to do. We can accept offering large agricultural gains to developing countries in return for modest gains in other sectors. But "something for nothing"? A big "something", in fact? Politically, it just won't fly.

Overall, ladies and gentlemen, I hope you can see what I'm talking about when I say my feet have hardly touched the ground recently. These are interesting times.

But in another sense, I have to keep my feet firmly on the ground. In making agricultural and rural policy, we must be hard-headed and practical. We must set goals which the public can support, and get the best value out of every Euro spent.

This is how to ensure that the CAP is never seen as the "difficult uncle" to whom I referred – but always as a responsible and helpful family member.

This is what we are doing.

Thank you for your attention.

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