Background to the debate on CAP reform

The next stage of CAP reform was finally agreed by the EU on June 26th 2003 (see the following item). Earlier discussions in EU Agricultural Council meetings in May and June, however, throw some light on how the agreement was eventually reached. An USDA GAIN Report on the May Agricultural Council meeting sets out the different positions of EU member states on the major issues faced under the Commission's CAP-reform proposals. With regard to decoupling Denmark, the Netherlands and the UK were in favour of full decoupling. France, Austria and Spain were against, while Belgium, Germany, Luxembourg and Italy favoured partial decoupling. Ireland's position was unclear while Finland felt decoupled payments should be linked to hectorage. On dairy sector reform, France, Ireland and Spain rejected the Commission's proposals, while Italy proposed no quota cuts beyond 2008. Austria favoured the maintenance of quotas until 2015. In contrast Belgium favoured reform in 2006, while Denmark favoured reform in 2010. The UK and Germany accepted in full the proposed price cuts, but Finland rejected them. Luxembourg does not want dairy-sector reform while the Netherlands wants full decoupling. In the cereals sector Denmark, Germany and the UK favoured further farm cuts, but Austria, Belgium, Finland, France, Ireland and Luxembourg are against. Italy favours partial decoupling while the Netherlands wants full decoupling. Spain wants to see intervention buying retained. Comment: An article in 'Inside US Trade' has taken a far less optimistic view, revealing sharp divergences amongst EU member states on how decoupling should be implemented. The overall conclusion is that decoupling is likely to be far less extensive than initially envisaged. This would appear to be consistent with the Commissioner's line that there are 'solid arguments' for leaving various sensitive areas out of decoupling. Much of the disagreement revolves around the basis for calculating decoupled farm payments and the extent to which there should be flexibility between member states in how the new system is implemented. According to 'Inside US Trade' there are also disagreements within the EU on the extent to which existing payments should be cut to finance further reform and the extent to which funds should be transferred to the rural-development window. From an ACP country perspective it should be noted that any weakening of decoupling through the maintenance of parallel systems of coupled payments is likely to increase EU levels of production, whilst allowing prices to fall. This is likely to lead to higher levels of EU exports at lower prices, with consequent losses for competing unsubsidised ACP suppliers in areas where cropping patterns overlap with those of the EU.The next stage of CAP reform was finally agreed by the EU on June 26th 2003..