ECONOMY

Bracing for CAP reform

BRUSSELS – Europe’s farm chief is keen to make changes to the EU’s mammoth agriculture policy that might pave the way for more drastic reforms to kick in from 2014, officials and diplomats said yesterday. EU Agriculture Commissioner Mariann Fischer Boel says the idea is to hold a health check to see how well the Common Agricultural Policy (CAP) is working after a 2003 reform ushered in a sea-change in how subsidies are paid. Still at the planning stage, the health check should emerge in draft form late next year or perhaps in early 2008. Fischer Boel has already dropped several hints about its contents. Although she has often denied that a major reform is being planned, the talk of health checks echoes the language used by her predecessor, Franz Fischler, when he unveiled his ideas for a so-called mid-term review in July 2002. That turned into a push for a full-scale reform. Fischer Boel is now considering how she sees the shape of farm policy once the current EU budget period expires in 2013. «The mid-term review turned into a completely different way of subsidizing farmers. This is intrinsically different but there could potentially be some big changes,» one European Commission official told Reuters. Fischler’s 2003 reform achieved what many thought was impossible and broke the CAP’s historic link between farm subsidy and farm output, a concept known in EU jargon as decoupling. Seen as highly trade-distorting, coupled payments survive to a limited extent in certain sectors. But Fischler’s overhaul consigned the idea of a 100 percent link to history. Speaking to Finnish farmers in August about the health check, Fischer Boel said she expected to see more decoupling, a stronger emphasis on the environment and more direct subsidies being shifted into funding rural development. «We would do well to prepare ourselves mentally for this kind of scenario… (but) I certainly cannot rule out further significant change to the CAP beyond 2013,» she said. Insiders say the chances are that EU farm ministers could decide on the health check during the first half of 2008. That would coincide neatly with the timetable of six-month EU presidencies, which often influence ministerial debates with agendas and behind-scenes bargaining among national delegations. «They (the Commission) won’t be ready any earlier than that. And if they go later, we get into the French presidency and I don’t suppose they’ll want to do it then,» one EU diplomat said. France has been the chief beneficiary of the farm budget. Diplomats said the Commission would be keen to get any changes to farm policy agreed to by ministers well before the EU’s budget review, which member states will debate in 2009. Possible content Rural development is likely to feature prominently since Fischer Boel favors raising the rate of compulsory modulation, a concept introduced in the 2003 reform for shifting direct farm payments into funding countryside projects. The idea, Commission insiders say, is to propose a higher rate of compulsory cash-channeling to discourage too much voluntary modulation, which risks generating big competitiveness differences between farmers in different EU countries. At present, the standard modulation rate is 4 percent and rises to its ceiling of 5 percent next year. Fischer Boel is thought to want to see all 25 countries move toward 15 percent. The long-standing EU intervention system, a public purchase mechanism used as a safety net to guarantee farmers an income when internal prices are low, may also come under fire. Intervention, especially in cereals, has proved tricky to phase out. In 2003 Fischler tried to cut cereals intervention prices but faced such strong opposition from France, the EU’s grain powerhouse, that he was forced to back down. Commission insiders say corn may be also a target for reform given this year’s problems with massive intervention stockpiles in new EU members such as Hungary. «We have to do something on maize, that’s no secret. Maize is the big problem,» the Commission official said. There have also been informal comments about dairy policy, with Fischer Boel seemingly keen to scrap intervention and export subsidies and private storage aid after 2013. National production quotas are already due to be phased out in 2014-15 as part of the 2003 reform. Fischer Boel recently described the EU dairy regime as a relic from the 1970s. Another likely proposal will be for upper and lower limits on subsidies paid to individual farmers. In 2003 Fischler suggested curbing the largest handouts to farmers with an annual cap of 300,000 euros – but that was rejected by ministers.