16 October 1998
CAP reform could cut household bills by 2%

REFORM of the European Unions Common Agricultural Policy could cut household bills by 2% without affecting farm incomes, according to a report by the European Commission.

The proposed changes would save the EU £7 billion, lead to a rise in gross domestic product. They would also boost overall employment by between 0.2 and 0.4%.

Franz Fischler, European Union agriculture commissioner, said the report provided proof that CAP reform would benefit the whole community.

Farming groups across the continent are generally against CAP reform because they believe it will lead to big falls in income.

But the report says farm income will increase between 22% and 34% compared with the 1992-1996 average. This assumes an annual decline in labour of between 2.2% and 3.7%.

The Commissions conclusion that everyone will benefit from reform stems from its belief that lower prices will increase demand for food in the EU and ease constraints imposed by the World Trade Organisation on food exports.

By 2005, the report says there would be a 6% increase in the production of cereals compared with what would happen without reform and this would be matched by an increase in internal demand and exports.

Beef production would remain stable but internal EU demand would rise by more than 2%.

Mr Fischler recognised growing criticism that farm price falls were not being passed on to the consumer. He said the Commission would look at the issue.

The study was carried out by EU officials and academics from the universities of Bonn and Amsterdam.

  • EC sticks with cuts in support prices – FWi, 29 September, 1998

  • Financial Times 16/10/98 page 30