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Europe: Is Reform Of The EU's Farm Policies Possible?

  • Joel Blocker

Prague, 24 June 1997 (RFE/RL) - In Luxembourg this week, European Union agricultural ministers are meeting for three days in an attempt to grapple with reforms in the EU's most controversial and costly area, its Common Agricultural Policy (CAP). Judging by the record of past failures to agree on thorough-going farm-policy reforms, however, the ministers are not likely to succeed -- although they could take some steps that would make basic changes in the CAP more feasible in the future.

Support programs for the EU's eight million over-efficient farmers today account for one-half of its budget of $100 billion. They are also responsible for what Brussels officials estimate as $12.6 billion of excessive pay-outs to subsidized farmers in the past four years. All of the EU's 15 members therefore agree that reform of the CAP is critical to the Union's future budgetary health.

But there is little accord on how to go about it between big beneficiaries like Britain and France -- which alone receives one-quarter of all EU farm aid -- and smaller ones like Portugal and Spain, which receive far less aid and are concerned most with increasing the amount of milk, for example, the EU allows them to produce.

CAP reform is also essential to the EU's planned expansion to Central and Eastern Europe. The Union can hardly afford to extend its already substantial support of member-state farmers to large but still relatively inefficient Central European producers in Poland or Hungary, both of which have large farm sectors. As a result, the EU's Executive Commission has included a review of the CAP -- as well as of so-called structural or regional aid for poorer members, which eats up another quarter of the EU's budget -- in what it calls its "Agenda 2000" project.

Agenda 2000 was charged with estimating the impact of EU enlargement to the East on the Union's future budget. It was also mandated to give the Commission the data to base its judgment on which of the 10 Central and East European candidate countries are now ready to begin membership talks, most likely early next year. What the Commission calls its "opinion" on all these vital matters is due to made public in three weeks. But few EU officials believe that the organization will undertake basic reforms in the CAP before revision negotiations now scheduled to begin in 2000.

Meanwhile, the EU's Commissioner for Agriculture, Franz Fischler of Austria, has set about to try to effect some modest pragmatic changes in the CAP. These are what the current marathon ministerial meetings in Luxembourg are concerned with. Fischler has based his proposals on similar pragmatic changes achieved by the EU five years ago -- after more than a year of negotiations and a classic 50-hour meeting that finally approved a package by qualified majority vote.

In 1992, the EU did succeed in shifting the basis of its agricultural assistance from price supports, particularly for cereals and grains, to direct income supplements paid to large farmers. The big farmers, in return, first allowed 15 percent -- and later, 10 and five percent -- of their land to remain fallow. For years before, objective economists and agricultural analysts had recommended the change as essential to reducing EU farm subsidies. But the Union stopped short of eliminating price supports entirely, instead reducing cereal and oil-seed prices by almost a third over four years.

Commissioner Fischler is now pushing for further cuts, amounting to $1.6 billion, in aid to EU cereal and oil-seed farmers. He says the money diverted from farm subsidies should be used to finance the EU's response to last year's outbreak of so-called mad cow disease, or BSE -- for bovine spongiform encephalitis. At the time, the Union spent millions of dollars propping up beef prices and buying up excess stocks. Even more important, the Commission three months ago called for freezing price supports at current levels, which could add up to huge savings of over $130 billion during the next few years. That proposal is Luxembourg's main agenda item.

Fischler also believes in an eventual thorough revamping of the Union's agricultural sector. In a speech to the EU's Parliament in Brussels last week, he said that without such a reform, the EU will have what he called "ever greater surpluses (which it) will not be able sell on the world market." Market imbalances, Fischler added pointedly, would likely become even more distorted after the EU expands to include 10 Eastern states. So, he concluded, the EU is "going to have to consider market-based solutions that will allow (it) to be more independent of exports." That's exactly what many economic analysts have been saying for years.

But it's not what most EU agricultural ministers are saying this week in Luxembourg. Only Britain and Sweden are said to support the Commission and Fischler's proposals. The other 13 members each have what Brussels officials call a "shopping list" of demands intended to win, in the old EU tradition, a maximum of financial aid for their farmers. A decision on the key issue, the farm-price package, is not expected until late today or tomorrow.

Whatever the 15 ministers decide -- and it's almost sure to be some kind of tortured trade-off compromise -- the Luxembourg meeting is only the start of what are sure to be years of protracted negotiations on changing the CAP. Continued national political resistance to such reform could affect the EU's ability to begin its enlargement to the East.

At its Amsterdam summit last week, the EU lacked the necessary collective political will to agree on the basic institutional reforms needed for large-scale expansion, deferring any such changes for at least five years. If, in the years ahead, the Union is similarly unable to reform its expensive agricultural and regional-aid programs, Eastward expansion could easily be delayed, or even derailed.