Fischler continues to sell the mid-term review to member states

Addressing French farmers in Paris on September 25th 2002, Commissioner Fischler argued that the current mid-term review proposals were 'nothing else than a necessary and logical continuation of the reform process that has started in 1992'. Postponing change would only 'lead to more radical change in agricultural support a couple of years down the line'. He rejected suggestions that the Commission wants to cut the farm budget, pointing out that while 'it is true that we propose to cut direct payments in the next seven years… it is not true that this money will be lost for farmers. On the contrary, the money which we take from direct payments will be used to strengthen rural development programmes. This means that our farmers will not receive less but more money for investments in quality, food safety, environment or animal welfare.' Addressing Greek farmers on September 26th Commissioner Fischler stressed that a strong rural development programme would benefit Greek farmers. He pointed out that 'the increased funding flowing into rural development could be used to finance new measures to help Greek farmers to produce better quality and to meet environmental, food safety or animal welfare standards of production demanded of them'. This would include support to certification schemes, organic products and better protection of geographical designations of origin. With its huge potential for quality food this shift in emphasis would 'translate into better prices' for Greek farmers. He pointed out, however, that for this to occur change was essential with a shift away from support for products to support for producers, and away from market measures towards support for rural development. In Luxembourg at the end of September, the Commissioner emphasised that the mid-term review proposals were intended to help farmers produce for the market instead of for intervention stocks. He argued that farmers in Luxembourg would benefit from the reinforcement of the rural development policy, since much of its farmland is located exclusively in less favoured areas, and that further reform would have a positive impact on Luxembourg in terms of farmers' income and in safeguarding farming. Similarly, in Portugal on October 3rd, he reiterated the point that the mid-term review proposals were not proposing cuts in the agricultural budget and that Portuguese farmers would actually benefit from an expanded rural development policy, since 'nearly all the agricultural areas in Portugal are less favoured areas',and in fact 'in future Portugal can count on more money from the Union's agricultural budget'. Addressing Spanish farmers on the mid-term review at the beginning of October Commissioner Fischler pointed out that 'Spain is the second largest beneficiary of the CAP after France and clearly a net recipient'. In consequence Spanish farmers 'have a major stake in the continuance of a strong, coherent and credible common agricultural policy.' However, he stressed that action was now essential if a credible and coherent agricultural policy was to be maintained: 'if we cannot go on the offensive in the WTO negotiations on the basis of a less trade-distorting farm policy, it is obvious that, come the end of the Doha Round in 2004, the EU will be facing the prospect of severe cuts in its controversial direct aid payments without the possibility of farmers being compensated'. He again stressed that the aim was not to cut the farm budget but rather 'to use existing resources in a more rational and efficient manner'. He pointed out the link between 'modulation' of total payments per farm and the expansion of the rural development budget, from which Spain would greatly benefit. In response to Spanish farmers' complaints that their products have to meet much higher standards and are thus undercut by imports, Commissioner Fischler argued that expanded rural development expenditures would directly compensate EU farmers for the increased costs they faced as a result of the requirement for higher quality standards. Speaking in Sweden on October 10th Commissioner Fischler reiterated that the mid-term review continued the shift in 'subsidies from the product to the producer'. He highlighted the intention of establishing 'a new system of production-neutral income support'. However, in exchange farmers will be expected to provide public goods demanded by society, such as safe food, a living countryside and a healthy environment. A strengthened rural development policy will 'give farmers the financial assistance they need to meet the high standards of production expected'. According to the Commissioner 'the new system of production-neutral income support does not distort trade. Unlike the Uruguay Round, the EU would be in a position to actively shape the negotiations on the WTO agricultural chapter under the Doha Development Round'. Finally, speaking in Belgium Commissioner Fischler stressed that if CAP reform were deferred until 2007 then the agricultural budget could feel the pressures of enlargement. Comment: The consequences of postponing change can be seen in the rice sector. In 2000 the European Commission proposed the abolition of the intervention system, increases in direct aid payments and a review of the import regime for rice. This was rejected by EU member states. Since then the market situation in the rice sector has deteriorated further, with rapidly increasing stocks, so that the Commission is now having to propose a 50% cut in the rice intervention price. With EU farmers being largely compensated for the price declines by increased levels of direct aid payments, the shock of dramatic one-step reform is felt most severely by preferential suppliers such as the ACP, who have in the past been able to gain benefits from the high internal EU prices. Despite its high per capita income, all farmland in Luxembourg is classified as in 'less developed areas' and is thus eligible for extensive rural development assistance. The economic circumstances of Luxembourg when contrasted with the situation in agriculture-dependent ACP countries highlights the somehwat disingenuous nature of EU debates on agricultural support to less favoured areas. Clearly Commissioner Fischler is both pushing for reform now to better equip the EU in WTO negotiations and using the prospect of these negotiations to consolidate and extend the current trajectory of CAP reform. It should be noted that while EU farmers will receive assistance in meeting high EU standards, third-country suppliers, including the ACP, will receive no such assistance, and yet will also have to comply with many of these raised EU standards. As Commissioner Fischler implicitly acknowledged this will have adverse implications for the competitiveness of third-country producers relative to those in the EU. The Commission is now more strongly taking the highly questionable line that the new system of production-neutral income support is not trade distorting. . The experience in the cereals sector suggests that support shifts the supply response of farmers, so that at any given price level farmers are willing to produce a far higher volume of product. In the cereals sector this has seen overall EU production and exports increase under the impetus of reform. The trade impact of these nominally non-trade distorting forms of support has even been acknowledged recently by the OECD.Addressing French farmers in Paris on September 25th 2002,..