Fischlers future
Fischlers future
On the brink of another round of CAP reform, EU farm
commissioner Franz Fischler puts the proposed changes
into perspective exclusively for FW readers
The future has many names. The European Commission has chosen the name Agenda 2000 to describe its view of the future of the union. Behind the name lies a package of proposals which will have fundamental implications for the EUs future.
Agenda 2000 comprises the Commissions views on EU enlargement, the new generation of structural policies and the need for CAP reform within a framework of financial perspectives between 2000 and 2006. Under the agriculture guideline, the budgetary share of the CAP will continue to fall.
Considering both the declining share of agriculture in the economy and the rising budgetary constraints facing members, public support for agriculture will be forthcoming only if it meets fully the requirements of wider European society. What are the requirements and multiple roles which a modern agricultural sector must fulfill?
EU consumers take the continuity of their food supplies for granted. They are now more concerned with product safety and quality. So its a fundamental obligation for the CAP to guarantee food safety and quality to consumers.
European agriculture is also closely linked to the quality and appearance of rural landscapes and the natural environment. The European cultural landscape represents a nature conservation resource of great value which has been shaped by agricultural land management, often stretching over many centuries.
The maintenance and encouragement of sustainable farming systems is essential in order to avoid environmental problems such as erosion, desertification, and the further loss of natural habitats and species. Farmers and rural areas are in a unique position to respond to societys concerns about the natural environment.
Efforts rewarded
But they will not be able to continue to do so if their efforts are not rewarded by the citizens who benefit from their work.
European agriculture needs to adapt to these consumer requirements. And, having grown to be the most important agricultural trade partner, European agriculture needs to become more market-orientated in order to enhance the economic potential of the sector and to provide sustainable employment.
Fortunately, the long-term outlook for the main agricultural markets is favourable for exporting countries, according to leading forecasting institutes.
On world markets, the demand for food is expected to rise. World agricultural production, too, is forecast to increase, but at a lower rate than in the past. So strong prices for agricultural commodities are expected up to 2006 and beyond. The EU is aware of its obligations not to waste its resources and to contribute to world food markets with high quality products at competitive prices.
Despite the rising global demand for food, the outlook for many agricultural commodities is not promising in Europe. If present policies continue, a gap between EU and world prices would remain for many products.
With current commitments under the GATT Uruguay Round agreement, in particular on limiting export subsidies, non-exportable surpluses are likely to emerge after 2000. If current CAP instruments were applied at their present level by central and eastern European countries upon accession, surpluses would rise even further.
The EU could become more isolated among the main agricultural exporters if it continued its high price support policy while others reduced export subsidies and reshaped their agricultural policy.
To help EU agriculture fulfill these requirements and to benefit from developments in the world market, further CAP reform must be carried out. It is needed to improve the quality and competitiveness of our agricultural products both on domestic and on international markets.
The most promising way to do that is to deepen and to extend the 1992 CAP reforms. Market orientation should be increased through a further shift from price support to direct payments and public intervention for agricultural products should return to its originally-intended role of a safety net in cases of severe market disruptions. Lower prices on the internal market will also benefit consumers and leave more room for price differentiation in favour of particular quality standards such as organic products or products of specific origin.
Greater market orientation will make the progressive integration of the agricultural economies of central and eastern European countries into the EU easier. It will also prepare EU agriculture for the next round of multinational trade negotiations.
Reductions in price support
So within Agenda 2000, the Commission proposes reductions in price support for arable crops, beef and dairy products. The cereals intervention price would fall by 20%. By ensuring its safety net function, that should help to avoid the routine use of export subsidies.
To prevent future beef surpluses, an active approach should be favoured, rather than supply management or short term measures. For the beef sector, that would mean a stepwise reduction of 30% in intervention prices.
In the dairy sector, the present system of milk quotas, with its intrinsic rigidities, can not last forever. There are a number of factors to which the system might have to be adapted in the future, in particular the results of the next World Trade Organisation round.
Nevertheless, following an in-depth examination of market developments, the Commission has opted to extend the current quota regime until 2006, to be more flexible and to simplify the present legislation. Milk support prices will also be gradually decreased by an average of 10%.
The impact of these cuts on farmers income will be offset by a significant increase in the arable area payments, the beef and suckler cow premium and the introduction of a new premium on dairy cows.
Detailed legislative proposals to reform the market organisations for olive oil and tobacco will be tabled as soon as the necessary debates have taken place. The Commission plans to draft a new reform proposal for wine once this years market has been analysed.
Our strategy implies that European farmers and their families will have to rely less and less on price support mechanisms. These cannot guarantee farm income in the long term. The future strategy will be to increase direct payments per hectare for arable crops and per animal in the beef sector to help farmers adapt to the new price environment.
Opposition to reform
Many farmers and organisations have already expressed their opposition to the new reform proposals, even before knowing the details. A similar negative reaction met the 1992 CAP reforms. Despite all fears, expectations did not come true. Instead, average EU farm income increased, surpluses were reduced and budgetary constraints were respected. So it makes sense to continue on this route.
But ensuring a fair standard of living for the agricultural community and contributing to stable farm incomes remain key objectives of the CAP. Just the balance of instruments will be changed towards more emphasis on direct payments. During the past few years, we have seen that price cuts do not always need a 100% compensation. We have seen market prices stabilise above intervention prices and, in the longer term, we have seen farmers develop alternative on-farm and off-farm income sources.
The creation of such complementary or alternative income and employment opportunities for farmers and their families continues to be a major aim for the future as employment possibilities in agriculture continue to decrease with structural adjustment. Farmers should be encouraged to exploit all opportunities.
Production of renewable raw material for non-food purposes or the energy sector, rural tourism, marketing of high-quality produce or the preservation of our cultural heritage are some of the many activities which may be developed.
In order to accompany structural adjustments and to strengthen rural development, the commission has suggested reorganising the existing rural policy instruments. However, for the regions most lagging behind in economic development (eligible under Objective 1 of the Structural Funds) the successful approach of integrated development programmes will continue.
Rural development policy cannot be restricted to those regions. In future, it should apply to all rural areas which need to make structural adjustments and the overall coherence should be improved.
The existing accompanying measures (agri-environment, afforestation, and early retirement schemes) will be continued and supplemented by measures to support structural adjustment in rural areas including direct payments for farming in Less Favoured Areas.
All these measures will be implemented in a decentralized way. More money should be earmarked to targeted agri-environmental measures in order to confirm their high environmental profile. Most relevant will be services which call for an extra effort by farmers, such as organic farming, or the maintenance of semi-natural habitats.
Reductions in price support and the expansion of direct payments will continue to shift the burden of agricultural support away from consumers towards the EU budget. Low income households particularly will benefit from lower prices. Nevertheless, agricultural guidelines, which have continuously reduced the share of EUs agriculture expenditure in the EU budget, will always be respected.
In defining its position on the future of its agricultural and rural development policy, the European Commission has carefully assessed the current set of challenges and opportunities facing EU agriculture. The agricultural chapter of Agenda 2000 proposes a coherent framework how all of these demands should be met.
It will help us to prepare our agriculture and our rural areas for the future.
Franz Fischler grew up on a farm in Tyrol, Austria and studied agriculture at Vienna before working in agricultural research. He became EU farm minister in 1995.
FISCHLERS BACKGROUND
Franz Fischler grew up on a farm in Tyrol, Austria. He studied agriculture at the University for Soil Science, Vienna before working in agricultural research. He was appointed Austrian minister of agriculture and forestry in 1989 and EU farm minister in Jan 1995. Aged 51, Franz is married with four children.
Question of reform: How to balance the needs of smaller farmers in countries like Austria (above left) with big-acres growers in countries like the UK?
PROPOSED CAP REFORM
Losses
• Cereal intervention price cut by 20%.
• Phased 30% reduction in beef intervention prices.
• Milk support prices cut by 10%.
Gains
• Significant increases in arable area payments.
• Higher beef and suckler cow premiums.
• New premium on dairy cows.
• Extension of milk quota regime until 2006.