SPICe Briefing 02/83 31 July 2002 CAP MID-TERM REVIEW On the 10th July 2002 the European Commission presented its proposals for a Mid-Term Review of the Common Agricultural Policy (CAP). The need for a review before the policy would be revisited in 2006 was agreed at the last major reform of the CAP in Berlin in 1999. The Commission’s proposals have been judged to be ambitious by most commentators, and some Member States, notably France, have condemned them for being too radical. The most important proposal is to remove the link between production and subsidy by giving farmers a lump sum annual payment based on historical entitlements. This briefing looks at: • the background to the proposals, (with the important concurrent events of EU enlargement, WTO negotiations and a significant shift in US farm policy marked by the Farm Act 2002) • the Commission’s proposals • some initial reactions to the proposals from Member States The briefing also has a glossary of some key terminology. providing research and information services to the Scottish Parliament 1 TABLE OF CONTENTS Background ...........................................................................................................3 EU enlargement...................................................................................................3 WTO negotiations ................................................................................................4 The US Farm Act.................................................................................................5 The Commission’s proposals ..............................................................................5 Decoupling...........................................................................................................7 Cross-compliance ................................................................................................7 Commodity Support.............................................................................................8 Modulation ...........................................................................................................8 New rural development measures.......................................................................9 Reaction to the commission’s proposals ........................................................ 10 Germany........................................................................................................... 11 UK..................................................................................................................... 11 Scotland ........................................................................................................ 11 France............................................................................................................... 12 Glossary .............................................................................................................. 13 Appendix ............................................................................................................. 14 providing research and information services to the Scottish Parliament 2 BACKGROUND Research paper 01/12 Agriculture: a general overview describes the recent evolution of the CAP and its influence over Scottish agriculture. Since its introduction in 1962, the CAP has undergone repeated reforms. Over the next decade, spending under the CAP is expected to be further reviewed in the light of EU enlargement and World Trade Organisation (WTO) negotiations. These developments are expected to result in lower levels of European aid for agriculture. The shift of support from pillar 1 to pillar 2 of the CAP is expected to continue. The last major reform of the CAP was concluded as part of the Agenda 2000 programme in 1999. The Agenda 2000 settlement is described in a previous SPICe Research Note, but essentially the main elements of the deal were to cut price support payments for beef, cereals and milk, and to compensate farmers for the resulting price falls with direct payments. The cuts for milk were delayed until 2006. Rural development measures were brought under one Regulation1, and Member States were given the possibility to introduce cross-compliance criteria, and also to modulate some of the direct. The next major reform will take place post enlargement in 2006, but the Commission was asked by the European Council and Agriculture Council to review the situation in the arable, beef and dairy sectors in 2002/03 as part of the Agenda 2000 agreement. The Commissioner for Agriculture and Rural Development, Franz Fischler, explained why the process was beginning in 2002: Le Figaro: The text you released today is called a Mid-Term Review. Surely, given that the decisions taken at the Berlin Summit in 1999 apply up to 2006 that should begin in 2003. Why the haste? Franz Fischler: Its not that we’re being hasty: the decisions taken at Berlin gave different dates for the review, sector by sector. It wouldn’t make sense for the Commission to conduct the review in a fragmented fashion, nor would that suit the Member States or other interested parties. We therefore took the date which had 2 been fixed for the cereals sector of 2002 for beginning our review. It’s that simple. EU ENLARGEMENT An important driver for the reform of the CAP is the need to cut spending prior to enlargement. The CAP budget would have to increase significantly if all the existing aids were offered to farmers in the candidate countries. The “agriculture chapter” of negotiations with the candidates is currently taking place. The Commission has proposed a gradual introduction of the direct CAP payments for farmers in the candidate countries. This will start at 25% in 2004, 30% in 2005, 1 Council Regulation (EC) No 1257/1999 of 17 May 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and amending and repealing certain Regulations 2 Le Figaro 10th July 2002 “Franz Fischler s’explique” own translation providing research and information services to the Scottish Parliament 3 and 35% in 2006, rising to 100% by 20133. The extension of 25% of direct payments to the candidate countries in 2004 has been estimated at costing €1.2 billion4. However, several Member States, including Germany and the UK are opposed to giving direct payments to candidate countries at all. Frankfurter Allgemeine Zeitung reported the views of the German Chancellor, Gerhard Schröder: German Chancellor Gerhard Schröder has categorically ruled out extending the current level of European Union agricultural subsidies to farmers in the countries now in the process of becoming EU members. Mr. Schröder pointed out that Britain, the Netherlands and Sweden shared his position. Mr. Schröder said "the fact is that in the Agenda 2000 agreed in Berlin by all 15 Member States, no direct subsidies were earmarked for candidate countries." He said the extension of existing agricultural policy to include 25 member states would cost the EU as a whole € 8 billion a year, with "Germany alone having to bear" a quarter of the total cost. But Mr. Schröder's views were disputed in Brussels, where officials said no decision had been made in Berlin in 1999 to deny new members direct aid. A spokesman for the EU's commissioner for agriculture, Franz Fischler, said it was "wrong to assume that enlargement cannot be financed. The financial admissions in the proposals for negotiations only extend to 2006. For the years until 2013 new members will in any case 5 only receive fractions of the direct subsidies allocated to old members." It was agreed at the European Council in Seville6 that this question would have to be settled in the autumn, after the German elections. WTO NEGOTIATIONS The last WTO negotiations on agriculture, the “Uruguay Round” concluded in 1994. Member countries had until 2000 to implement the agreement. Participants agreed to initiate negotiations for continuing the reform process one year before the end of the implementation period, i.e. by the end of 1999. These talks have now been incorporated into the broader negotiating agenda set at the 2001 Ministerial Conference in Doha, Qatar. Part of the agreement has to be concluded by March 2003, with a view to reaching a final settlement by 1st January 2005. The negotiations will cover domestic support for agriculture, and the permissibility of granting support from the various “boxes” (see glossary), market access rules; the use of import tariffs and export subsidies, and non-trade concerns like support for rural development and animal welfare7. Due to the relatively high levels of support for European farmers, and the protection of the EU market with tariffs, the EU has historically taken quite a defensive stance in the WTO agriculture negotiations. Part of the thinking behind 3 see Fischler's gives CEEC farm ministers "10 good reasons" for Commission proposal more information is available in European Commission – SEC (2002) Final Enlargement and Agriculture: Successfully integrating the new Member States into the CAP 4 Agra Europe – 1st March 2002 EP/3 EU to stand by enlargement plans 5 FAZ English Version – 16th June 2002 EU denies Chancellor's claim that enlargement cannot be financed 6 on the 21st and 22nd June 2002 7 further details on the negotiations are available here: http://www.wto.org/english/tratop_e/agric_e/negoti_e.htm providing research and information services to the Scottish Parliament 4 the Commission’s proposals for the Mid-Term Review of the CAP is to allow the EU negotiators to have something to take to the table to allow the EU to be proactive in pressing for some of the things it wants to get out of the negotiations, like recognition of animal welfare standards, food safety criteria, and country of origin labelling. THE US FARM ACT On 15th May 2002, US President George Bush signed a new Farm Bill into US law. The Farm Security and Rural Investment Act of 2002 sets out various agricultural programmes under 10 titles, notably the commodity (farm subsidy) programmes, conservation and trade. The Act is estimated to increase US spending on agriculture by 70% over the current position, to an estimated $190 billion (€188 billion) over the next ten years. Crucially, the Bill represents a turnaround in US farm policy, with a return to a system of offering farmers compensatory payments for low prices. This is expected to result in overproduction in the US, and falls in world prices for farm commodities, which would affect farmers in the EU. The EU Commission expects that the US will exceed its limits for spending on price-linked farm payments agreed at the WTO. The EU Commissioner for Agriculture Franz Fischler has spoken out against the changes: “By introducing a new range of price-linked payments (the "counter-cyclical" subsidy programme for crops and dairy products), US policy is flying in the face of a consensus in the developed world that farm support programmes should move away from production- distorting measures. This consensus is reflected in the commitments we all entered into at Doha. It is clearly undermined by the US farm bill, which so significantly increases trade-distorting support. Let me remind your non-specialist readers just what a counter- cyclical payment does: when prices fall, a subsidy cheque makes up the difference. The market is neutralised. Providing a safety net to farmers is one thing; bucking international 8 commodity markets is a different game.” The Commissioner went on to say that the US was in danger of breaking their WTO ceiling of $19.5 billion p.a. for farm support, when five years ago it estimated support would be down to $1.2 billion by 2000. THE COMMISSION’S PROPOSALS On 10th July, the Commission published a Communication on the Mid-Term Review9. This document sets out the broad intentions of the Commission, and will be followed up with legislative proposals in the autumn. The plan is for these to be adopted by the Council in the spring of 2003. Commissioner Fischler explained what he hoped the Mid-Term Review would accomplish in a speech to the European Parliament: 8 "Hitting agriculture worldwide makes US farm bill a flunk bill" Letter to the Financial Times from Commissioner Franz Fischler, May 27, 2002 9 COM (2002) 394 Mid-term review of the Common Agricultural Policy providing research and information services to the Scottish Parliament 5 “We want farmers to resume their role as businessmen, producing for their customers rather than for the intervention stocks. We want to guarantee farmers a fair income. No more, no less: our farmers deserve to be duly rewarded for the quality products they supply, the environmental services they perform and their role in conserving country landscapes. We want to free farmers from the red tape imposed by the CAP. They should be able to spend their day working their farm, not wasting it on paperwork. We want to give farmers the financial assistance they need to meet the high standards of production expected by the public. Quality should be rewarded. We also want to help farmers promote their products more effectively. We want to pay farmers not for overproducing, but for providing what society wants: safe food, a living countryside and a healthy environment. We want to make farming subsidies more justifiable, in line with the principle of "payment for services rendered". EU farmers are responsible for the production of many public goods, from the environment and upkeep of the landscape to animal welfare. Though expected by society, these services are not rewarded by the market - hence the need for the CAP to fill 10 the gap.” The main elements of the Commission’s proposal are the following: • Decoupling of direct payments • Compulsory environmental standards for receiving subsidies • Compulsory farm audits • Further cuts in intervention prices for cereals • Compulsory non-rotational set-aside • Options for reforming the dairy sector • Mandatory modulation of direct support payments • Capping of the maximum a farm can receive • New options for rural development support Some of the Commission’s most important proposals, on decoupling and modulation, were prefigured in a report by the European Parliament Agriculture 10 Speech by Commissioner Fischler: Towards sustainable farming - Presentation of the cap mid-term review European Parliament - Agriculture Committee Brussels, 10 July 2002 providing research and information services to the Scottish Parliament 6 Committee. In its report11, the Committee regretted that Member States had not used the modulation powers introduced by Agenda 2000, and suggested that modulation be made compulsory. The Committee also suggested that in the future, farm payments should be decoupled, and tied to common EU wide standards. DECOUPLING The Commission proposes to fully decouple most of the main schemes of the CAP with a whole farm support payment. Farmers will be given a single payment instead of the separate payments they now receive for cattle, sheep, cereals and most other crops. Payments will be based on historical entitlements. These could be broken down to cover part of a farm in the event of a partial lease or sale. When direct payments are introduced for dairy cattle in 2005-06 they will be included in the single payment. The idea is that farmers will be freer to base their decisions on market demands, and will no longer have to farm in a certain way just so they can claim a subsidy. The Commission proposal does not set a timescale for these changes taking place. This move would also seem to put direct payments to farmers onto a permanent footing. One view is that the payments are temporary compensatory payments given to help farmers adjust to lower commodity prices because of cuts in price support. This change would also have the effect of moving the subsidy from the “blue box” into the “green box” under the WTO categorisation of agricultural subsidies, which would make them safe from being reduced in the ongoing round of WTO agriculture talks (“Green box” subsidies are allowed without limits). At the moment, the blue box is a permanent provision of the agreement. Some countries want it scrapped because the payments are only partly decoupled from production.12 CROSS-COMPLIANCE These whole-farm payments will be backed up by a compulsory set of cross compliance requirements. These will cover environmental, food safety, and animal health and welfare standards. Member States will have some freedom to define the requirements, but there will also be a basic framework of minimum criteria. Research has shown that the environmental value of set-aside land increases the longer it is left uncultivated. The Commission is therefore proposing to do away with the current system of rotational set-aside, and replace it with permanent set- aside as a condition of receiving the whole-farm support (for farms with an arable component). The amount set-aside will remain at 10%. 11 Fiori, Francesco (Rapporteur) – May 2002, Committee on Agriculture and Rural Development Report on the mid- term review of the reform of the common organisations of the market (COMs) in the context of Agenda 2000 Recitals N, AF, AG and AN 12 Further details on the boxes, and on the current negotiations on agriculture are available from the WTO’s website http://www.wto.org providing research and information services to the Scottish Parliament 7 The Commission also proposes to introduce a compulsory system of farm auditing for all farms receiving more than €5,000 per year. Funds will be made available to cover the costs. There is little detail in the proposal about what will be included in the audits, but they would primarily seem to be about making sure farmers are meeting the new cross-compliance requirements. COMMODITY SUPPORT On the price support side of things, the Commission proposes to implement the further 5% cut in cereal intervention prices envisaged by Agenda 2000. There will be a small increase in the area payment to compensate farmers for this. The Commission view is that the price support system for cereals will now act as a safety net in the event of dramatic falls in price, rather than a genuine mechanism for manipulating the internal market. The Commission also proposes to end intervention for rye, and cut the intervention price for rice: neither of these are important for Scotland. No changes are envisaged for beef or milk beyond what has already been agreed at Agenda 2000. The Commission has presented four options for reforming the dairy sector: • Maintaining the status quo agreed at Agenda 2000 until 2015 • Further increasing quotas, and cutting intervention prices • Reducing quota for the internal market, with unlimited quota for milk for export • Abolishing the quota regime from 2008, and cutting intervention prices MODULATION Currently modulation of farm payments is optional, and Member States can choose how much they want to modulate up to a maximum of 20%. They can apply simple modulation across the board, or can link modulation to the number of workers employed on an agricultural holding. Modulated money is kept within the Member State, and if it is spent under the Rural Development Regulation, there are match-funding requirements. At the moment the UK is the only Member State which is modulating payments13, the rate rising from 2.5% in 2001/2 to 4.5% in 2005/614. The Commission proposes to make modulation of farm payments mandatory. The rate of modulation will increase by 3% per year up to the maximum of 20%. The modulated funds will be collected centrally by the Commission, and then reallocated to the Member States through a key based on agricultural area, agricultural employment and “a prosperity criterion, to target rural needs”15. The Commission also proposes that farms receiving €5,000 or less which employ 2 or more people would be exempt from modulation. The amount exempt from 13 following the suspension of the French scheme in May 2002 14 SE2177/2000 4th August 2000 Finnie announces modulation boost for farm investment see also Nick Brown announces a new direction for agriculture - Ministerial Statement in the House of Commons, 7th December 1999 providing research and information services to the Scottish Parliament 8 modulation would be increased by €3,000 for each additional full-time worker on the farm. The Commission estimate that this would cover around three-quarters of the farms in Europe, but would account for less than a fifth of total direct payments. The Commission proposes to introduce a maximum (after the application of the exemption and modulation) of €300,000 of direct payments which can be made to any farm. Aids removed by this “cap” will be available within the Member State for rural development. The cap will affect six Member States. The most affected will be Germany, because of the large size of former collective farms in East Germany, followed by the UK. The US Farm Bill also introduced a cap on the amount individual farmers can receive of $360,000 (€358,000). Scotland has the largest average farm size in the EU and so would be affected by the Commission’s modulation proposals. Only 9% of farmers in Scotland receive less than €5000 per year, compared to an EU average of 61%. The cap of €300,000 would affect around 30 farmers in Scotland16. NEW RURAL DEVELOPMENT MEASURES One of the criticisms of modulation, particularly from France, where the modulation scheme was abandoned because modulated funds were not being spent, is that the options open for spending the modulated money are too limited. The Commission is proposing to tackle this by introducing new chapters to the Rural Development Regulation, to broaden the range of eligible measures. These would cover: • Food quality – encouraging participation in quality assurance schemes and supporting producer groups e.g. for products of recognised geographic origin • Meeting Standards - helping farmers to implement Community standards for environment, animal welfare, food safety and health and safety • Animal welfare – a new addition to the agri-environment chapter to allow for payments to farmers who go beyond legal requirements. The Commission is also proposing to change the rate of co-financing for measures under the RDR, with the contribution from Community funds moving from 75% to 85% in Objective 1 areas, and from 50 to 60% in other areas. Shifting funds from price support (with no co-financing requirement) to rural development would otherwise mean a global increase in agricultural support. 15 COM (2002) 394 opp.cit p.23 16 figures from a Scottish Executive press briefing, figures exclude part-time farmers providing research and information services to the Scottish Parliament 9 REACTION TO THE COMMISSION’S PROPOSALS Most reactions to the proposals have been fairly general, taking positions either for or against. This section highlights some of the key views. The Financial Times gave an indication of the challenge facing Comm. Fischler in getting his reforms through: For all the apparent benefits of his concept, Mr. Fischler knows it faces a rough ride. As recently as last year, the pro-reform camp among European governments was gaining the upper hand. Now, the situation looks very different. Jaques Chirac has returned to power in France unencumbered by a socialist prime minister who was more sympathetic to change. Meanwhile, other states as diverse as Ireland and Portugal have made unenthusiastic noises about the Fischler plans. Even supposedly staunch advocates of reform, such as the British, seem unlikely to countenance the idea of limiting payments to individual farmers as this could damage UK farmers. Mr Fischler faces a tricky battle today to win his Commission colleagues’ support for his plans. But these difficulties will pale into insignificance when agriculture ministers get their first crack at the proposals next Monday 17 in Brussels. Le Monde summarised the positions of the agriculture ministers following the first discussion of the Commission’s proposals in Council: “Our delegation can assure you of our wish to cooperate in a debate that will be difficult”. That same phrase concluded the speeches of France, Spain, and Italy, the Member States which were strongly critical [of the Commission’s proposals]. Austria, Luxembourg, Greece, Ireland, Portugal and Belgium also joined the camp of the opponents. Finland was hesitant, while Germany, the UK, Denmark, Sweden and the Netherlands supported Mr. Fischler, “daring and visionary” according to the Dutch minister, Laurens-Jan 18 Brinkhorst. Agra Europe published a summary table of the Ministers’ positions on the main elements of the proposals (included in the appendix) and also commented on their attitude towards the proposals in general: Every member state showed willingness to negotiate. Even France and Spain declined to rule out decoupling and modulation explicitly, although belief that reform should be reserved for 2006 could rule out anything but technical sectoral changes this time round. Northern states (Germany, UK, Netherlands and Sweden) have 29 votes between them, which is enough to sink an agreement that does not meet their collective satisfaction. But counter-argument that there is no need for reform right now, is more popular and 19 probably more convincing. The table (see Appendix) shows that there was strong opposition in the Council to the main parts of the Commissions proposals, with opposition even from pro- reformers like the UK and Germany to the proposals on modulation. 17 Financial Times 10th July 2002 p.6 Fischler faces battle to convince colleagues of farms plan 18 Le Monde – 17th July 2002 Le réforme de la PAC sous le feu des ministres de l’Union 19 Agra Europe - 19th July 2002 Mixed reactions from EU farm ministers providing research and information services to the Scottish Parliament 10 GERMANY One of the main changes of view has been in the German position. There, Christian Democrat (Conservative) politicians have traditionally been anti-reform, because of the support of German farmers for keeping the status quo. The current Agriculture Minister, Renate Künast, of the Green Party is much more in favour of reform. Germany is keen to cut its contribution to the CAP budget20, and Renate Künast welcomed the main features of the Commission’s proposals, but was concerned about the €300,000 cap on farm payments. Germany would be the Member State most affected by this, because of the size of the former collective farms in the old East Germany. However, the German position may change following the elections this autumn. The Conservative leader, Edmund Stoiber has said, with a view to improving Franco-German relations, that reform should wait until 2006. 21 UK The UK, which has long pushed for reform of the CAP, has welcomed the Commission’s proposals, but wants them to go even further. Margaret Beckett, Secretary of State for the Environment, Food and Rural affairs said of the proposals: They are on the right lines, and I welcome the proposal to shift the emphasis of support from production-linked aid to measures that promote wider rural development. However, the proposals do not go far enough. In particular, they do nothing to control the burgeoning growth in the budget because they simply recycle money in the agriculture 22 budget. We need year on year savings in the cost of the CAP. Scotland The Scottish Minister for the Environment and Rural Development, Ross Finnie welcomed the idea of linking support to quality production, saying that Scottish farmers were already well placed in this regard, but said that some of the proposals would need “careful watching”, particularly those on decoupling and modulation.23 The National Farmers Union of Scotland expressed particular concern about the proposals for modulation: Whilst we accept the need for the CAP to change, we have consistently and vigorously opposed modulation. It taxes direct support to farmers in order to pay for environmental and rural development schemes which most farmers are unable to gain access to. This latest proposal would appear to change the requirement for Member States to match fund the money raised from modulation, further weakening the whole concept. The modulated cash will go into a central EU pot and be re-distributed to members states 20 See fig 1 in appendix which gives all net contributors/beneficiaries from CAP budget 21 Le Monde 17th July 2002 p.2 Edmund Stoiber veut revitaliser les relations franco-allemandes 22 DEFRA 10th July 2002 Euro farming reform plans along right lines - Beckett 23 SE089/2002 - 10th July 2002 Common Agricultural Policy review providing research and information services to the Scottish Parliament 11 from there so there is a real danger that we could see Scottish farmers being taxed and 24 farmers in other countries potentially getting the benefit. FRANCE By contrast, France has maintained its anti-reform stance. Speaking at the Council of Ministers on Monday 15th July, the French Agriculture Minister, Hervé Gaymard said: “Today we are beginning the first stage of a reflection on the future of the CAP, in which France intends to participate in a spirit of openness as long as the timetable agreed at Berlin is respected. But the Commission, with this communication, has proposed a profound reform of the CAP which it intends to enact now. In making this choice, it has gone far beyond the mandate defined by the Heads of State and of Government at Berlin, which did not intend for the Mid-term Review any more than a certain number of technical changes, where necessary, based on experience to date. I cannot subscribe to this approach : you cannot define in a matter of weeks the future of the CAP, any more 25 than you can change it every three years.” This view is shared by COPA, the committee of EU agriculture unions: When the Council adopted the Agenda 2000 decisions in Berlin, it only invited the Commission to put forward mid-term proposals if the budgetary or market situation required such action. This is clearly not the case: agriculture has been well under budget since 2000 and the Commission’s own market assessment is extremely favourable. The Commission proposals would jeopardise the whole enlargement process. After years of negotiations on the basis of the existing acquis communautaire, the Commission is now hurriedly proposing radical changes to the CAP that would create a completely different situation in agriculture in the enlarged Europe. This means that either the Commission is willing to risk delaying the whole enlargement process, or that it expects the candidate countries and their farmers to accept a new fait accompli without any real renegotiations. In WTO the Commission’s negotiation tactics are now beyond belief. The reform of the CAP under Agenda 2000 has already led to the EU making far more concessions to its trading partners than called for by its present WTO commitments. The Commission is now proposing that the EU make yet further concessions to its trading partners on a 26 unilateral basis just as the negotiations are reaching a critical stage. Mr Gaymard also made some interesting points about the Commission’s proposals for decoupling: “On the subject of decommissioning, I think its much too early to make a firm judgement. Too many questions remain unanswered. • What will be the consequence of removing the obligation to produce in those sectors where profitability depends on direct support, in particular beef? What will happen if we remove set-aside, quotas and all the other instruments controlling production? • How practical is it, to go about decoupling in this way, which will give an artificial value to each hectare of ground? 24 News release 110 – 10th July 2002 NFUS concern at CAP reform proposals 25 translated from Hervé Gaymard’s speech at the Council of Agriculture Ministers on the 15th July 2002. 26 COPA –COGECA 10th July 2002 The Berlin summit decisions on Agenda 2000 must be respected providing research and information services to the Scottish Parliament 12 • What are the risks of abandoning less productive areas, in the mountains for example? • More fundamentally, what will the public think of us giving subsidies without the obligation to produce anything? The main criticism you can make of the Commission, is precisely that they have left these important questions in the shade. It has shown in its approach exactly the opposite of what would be demanded by common sense. It has, in effect, proposed to us a system which we sense, and which it does not contest, will have enormous consequences, as much for the future administration as for distribution of production and so, for the future of farmers and the land. Besides, it has not accompanied what anyone what call a revolution, with any study of the social or economic impact. The best approach would have been to adopt the same approach as for milk. It should have presented several options, showing for each the 27 advantages and disadvantages, and a full evaluation of their impact.” Research Briefings are compiled for the benefit of Members of Parliament and their personal staff. Authors are available to discuss the contents of these papers with Members and their staff but cannot advise members of the general public. GLOSSARY Boxes: In WTO terminology, agricultural subsidies are categorised into the following three ‘boxes’: • the green box - for subsidies that do not distort trade and that are therefore permitted e.g. Rural Development Regulation measures • the blue box - covers subsidies that are partially decoupled from production e.g. area or headage payments • the amber box - for subsidies considered to distort production and trade and that are therefore committed to being reduced e.g. price support Cross-compliance: making receipt of support payments conditional on fulfilling certain criteria Decoupling: removing the link between production and support, e.g. by paying on an area rather than a headage or tonnage basis Degressivity: reduction in the value of subsidies over time Intervention buying or price support: helping to prop-up prices of agricultural products by buying a commodity, such as wheat, or butter, when the market price falls below a certain level, storing it, and then selling it when the price rises back again. 27 Mr Gaymard’s speech opp cit providing research and information services to the Scottish Parliament 13 Modulation: removing some of the payments given direct to the farmer, and transferring them into rural development support, such as agri-environment schemes “Pillars” of the CAP: the CAP is commonly seen as having 2 pillars. Pillar 1 includes price support payments, and subsidies paid direct to farmers, which accounts for around 90% of CAP spending. Pillar 2 is rural development spending, which currently accounts for around 10% of CAP spending. Quotas: specify the amount of a particular thing a farmer is entitled to produce, e.g. milk. For sheep and cattle, farmers only receive subsidies for animals for which they have quota. Set-aside: is land used for growing cereals and other crops (not grass) which has been taken out of production APPENDIX Fig 1 Net contributors to / beneficiaries from the CAP budget 2000 (€m) GER UK NED BEL SWE LUX IT AUT POR FIN DEN IRL GRE FR SP -5000 -4000 -3000 -2000 -1000 0 1000 2000 3000 th Source Le Monde 17 July Table 1 Summary of positions on main proposals taken in Council of Ministers on 15th July 200228 (next page) 28 Source Agra-Europe 19th July 2002, adaptation of the table to show only views on decoupling, modulation and general points. The hard copy version also summarises Ministers views on cross compliance, cereals, and other points. providing research and information services to the Scottish Parliament 14 Member France (10) Germany (10) UK (10) Italy (10) Spain (8) Belgium (5) Greece (5) Netherlands state (5) (Council votes) Decoupling No. “Too early to Yes. Minister Yes. “Bold and No. Full No. Historical No. Full No. Decoupling Yes. comment” but claimed it was imaginative.” decoupling “a reference decoupling not a threat to rural “Courageous erring on the her idea in the step on the period would acceptable, employment. and visionary,” negative. Has first place! road to the total “create partial already said “no breakdown of tensions decoupling change to form or the CAP.” between preferred. level of payments.” Partial farmers with decoupling different more palatable. historical baggage” Modulation No. See above. No. No. No. No money No. 20% cut No. Raise No. First pillar Yes. To be Second pillar Degressivity Degressivity to be diverted “excessively money for RD of CAP serves limited, reinforcement instead. And no instead. And no from 1st pillar. large.” through export social function, however, by acceptable by other ceiling on ceiling on Modulation subsidy should not be overall budget means. payments. payments. But must not apply savings diminished in savings. in favour of shift to wine, olive oil instead. favour of rural to RD. development. General Played down CAP reformist Near identical In the anti- Reform “neither “No financial Traditionalist Seeking budget comments image of France as par excellence, position to reform camp; pressing nor reasons” for defender of savings to pay stick-in-the-mud but unwilling to Germany (see unwilling to see essential.” But reform, re status quo and for reactionary. “Ready penalise large left). Agenda 2000 Strident anti- Berlin Mediterranean enlargement, to enter Eastern Compromise altered before reform rhetoric, agreement, but product and could negotiations,” but German farms. based on expiry in 2006. but never pressures subsidies. support hard to see what Position Commission Calling for actually ruling nonetheless to Fischler going he is ready to against plans could be “further study” out either do something further. Mixed negotiate over. modulation agreeable. on impact of decoupling or now. messages on Less aggressive likely just Stance on milk US Farm Bill. modulation. farming for than his negotiating quotas Could be market: farmers predecessor. tactics. unrealistic swayed? should be entrepreneurs, but not all can be. Portugal (5) Austria (4) Sweden (4) Denmark (3) Finland (3) Ireland (3) Luxembourg Comments (2) Decoupling No. Not enough No. “Very Yes. In Yes. Needs No. In its No. Will reduce No. Would 55 votes redistribution. critical.” principle further study proposed form economic reduce farmers' against and 32 “Breaks the does not rectify activity, incomes. in favour. essential link” inequities of damaging rural with production. current system. economy. Dynamic No. See above. No. No. “Uncertain Yes. Would Yes. No. Reductions No. Direct Massive 76 Modulation `Differentiated Unworkable as effect” Transfer pay for `Cohesion' in aids to support cannot votes against application' might proposed, but to RD based on measures like effect smaller be reduced and only 11 in work. (excluding preferable to real need, quality particularly holdings not without “proper favour. D and Mediterranean degressivity rather than standards and welcome. tolerable. compensation” UK backing products) which “sends scale of cuts. animal welfare. Raise €5 000 to farmers. degressivity the wrong Degressivity threshold to instead, but signal.” also sought. exempt more could perhaps smaller-scale accept farms. modulation. General While not in favour Anti-reform Hawkish pro- Environmentall New member Ambiguous Minnow in anti- comments of the proposals in state prepared reformer, y-conscious state still trying anti-reformer reform camp. their current form, to back rural surprisingly Nordic pro- to get a bigger playing cards Could accept seemed open to development lukewarm on reformer. slice of CAP close to chest. cap on direct the big ideas. A changes where Fischler's `Big Danish position pie. Small, Against major aids to surprise possible these benefit Ideas.' Likely to not yet disadvantaged change before individual reform ally in the the come round to elaborated in farm sector so 2006. Could farms, Mediterranean environment, a compromise, full. far the recipient support new simplified group? but not few absolute of little subsidy. objectives of payment wholesale objections, if rural scheme to decoupling or any. development farmers. modulation. aid.