Union warms to EU CAPreform stance

18 July 1997

Union warms to EU CAPreform stance

By Shelley Wright

NFU leaders have welcomed the broad thrust of the EU Commissions plans for CAP reform officially released on Weds.

They believe the direction for reform chosen by the commission, through commodity price cuts with direct compensation, will secure the long-term competitiveness of EU agriculture.

But the details, including inadequate compensation levels and plans to put a ceiling on the total support payments individual farms can receive, have raised grave concern.

As forecast the proposals include a one-off cut of 20% in cereal intervention prices in 2000, a 30% reduction in beef prices between 2000 and 2005, and a 10% fall in milk support prices by 2006 (News, July 11).

Direct payments will be used to compensate farmers for the cuts, but cereal farmers will only be compensated for 50% of the price drop. Beef headage payments will rise and dairy cow headage premia will be introduced, with the existing milk quota system retained until at least 2006.

NFU policy director Ian Gardiner described the proposals as the commissions opening shots in what would be a long process before final agreement was reached. But many would instantly try to assess the impact on farm businesses as they stood today.

The unions economists had calculated the worst-case scenario would result in an overall loss in the UKs combinable crop sector of £330m. The dairy industry stood to lose about £19m, equivalent to a 0.14p/litre cut in milk prices, while the net effect on the beef industry would be a loss of £89m.

"Of course thats relevant, but it ignores the fact that the current CAP is unstable and is built on sand. I dont think anyone believes we could take the current CAP into the next WTO (World Trade Organisation) round and survive," Mr Gardiner said.

"The commission has opted for price cuts with direct compensation with the aim of allowing Europe to export without subsidies and become competitive on the world markets."

High support prices?

The only alternative would have been to sustain high support prices in the EU. But that would have meant producers could only supply the internal European market, which was already under attack from increased imports because of the GATT deal. So there would have to be increasing production constraints, which could see set-aside as high as 20% by 2000, as well as devastating cuts in suckler cow numbers to reduce beef supplies.

"Thats the real choice and, at the end of the day, we prefer the commissions solution," Mr Gardiner said.

But the proposal for a ceiling on the total level of support an individual farm could receive was not acceptable, although no firm conclusions could be drawn until the commission released a figure.

The NFU was also concerned over plans to transfer less favoured area payments gradually into an environmental policy to maintain and promote low input farming systems.

And alarm bells were ringing over the proposal to give individual member states the right to decide, within agreed EU rules, how some of the CAP money could be spent and the right to introduce national supplements.

That could severely disadvantage UK farmers because of Treasury constraints, and could lead to serious distortions in EU trade.

EU farm union group COPA flatly rejected the plans saying they will have a catastrophic effect on EU farm incomes.

Risto Volanene, secretary general of the EU farm group COPA, whose membership includes the NFU, said the proposals were unacceptable. Calling on the commission to table new proposals he said there could be no question of introducing reforms which would lead to a loss of income for millions of EU farmers.

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