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EU: Dispute Over Farm Subsidies Shelved Until Autumn

  • Ahto Lobjakas

European Union foreign ministers, meeting in Luxembourg yesterday, agreed on a compromise allowing them to open accession talks on agriculture. Although EU officials say negotiations can now proceed on 95 percent of the issues, the compromise leaves open the crucial question of whether the new members are to be allowed access to the bloc's lucrative farm subsidies. Yet, it is precisely that issue -- only to be addressed after Germany's autumn elections -- which is quickly becoming key to the entire enlargement process.

Brussels, 18 June 2002 (RFE/RL) -- European Union officials were bending over backward last night trying to explain why delaying a decision on postenlargement farm subsidies -- known as "direct payments" -- is a good thing.

The ministers did agree on a common position in agriculture talks, but decided to postpone until autumn discussions on whether the new members will be entitled to billions of euros in farm subsidies.

The EU's Enlargement Commissioner Guenter Verheugen said the agreement on the rest of the agriculture chapter in accession talks is, politically, "a very strong signal" for the candidates. Verheugen said that, without the decision, the credibility of the EU's commitment to enlargement would have suffered.

Verheugen made light of the missing agreement on direct payments, saying yesterday's negotiating position allows the EU and candidate nations to address "95 percent of the agriculture chapter."

Yet, direct payments are quickly becoming a "make-or-break" issue for enlargement. On 16 June, German Chancellor Gerhard Schroeder wrote in "Sueddeutsche Sonntagszeitung" that his country is at a financial breaking point and cannot afford to pay much more for enlargement. He explicitly ruled out direct payments for new members, saying it would cost Germany an extra 2 billion euros a year.

On the other hand, all 10 first-wave candidates last month signed a declaration in Warsaw condemning the European Commission's (EC) offer of 25 percent of EU subsidies on accession as not enough.

Jean-Christophe Filori, the EC's enlargement spokesman, said yesterday in Brussels that the commission would stand by its initial proposal of limited subsidies with a gradual transition to full EU levels in the not-too-distant future.

"I can only repeat the well-known position of the commission -- that direct payments are part of the acquis communautaire (EU law), that they were never formally excluded at [the] Berlin [summit of 1999, which fixed the EU's budget until 2006], even if it's true that they were not included in the calculations, in the financial perspective [for the period 2000-06], but they were never formally excluded. We seek in the long-term the achievement of a common agricultural market with a level playing field for all."

The intensifying debate on the affordability of enlargement has seen a number of previously enlargement-friendly member states side with Germany. Like Germany, these countries -- the Netherlands, Sweden, and Britain -- are all net contributors to the EU's 100 billion-euro annual budget. Agricultural expenditure accounts for roughly half of that.

On 16 June, Chancellor Schroeder said all EU member states should share the burden of enlargement more equitably. A key part of Germany's demands is that the current recipients of EU agricultural funds give up at least some of their subsidies.

Berlin and its net-payer allies question the longer-term status of direct payments, saying they were introduced in 1992 to compensate for price decreases suffered by the EU's farmers after market-oriented reforms. Germany says that having fulfilled their objective, direct payments should go.

The EC together with Germany and other EU countries -- many of them net recipients of EU farm support -- argue that the nature of direct payments has changed over time and that they have now become an integral part of the EU's farming policy.

This point was made yesterday by the EC's agriculture spokesman, Gregor Kreutzhuber: "You have to take into account the history [of] how direct payments were introduced. They were introduced in 1992, as compensation for price cuts for farm products, which back then they called compensatory payments and not direct payments. But, at least with the 'Agenda 2000' [budget] reform [introduced at the Berlin summit in 1999], this compensation element has been completely cut. So now we're talking about direct payments which are part of the Common Agricultural Policy. They're part of stabilizing the income of farmers."

If direct payments are part of EU law, then it follows that they should be extended to the new members after "reasonable" transitional arrangements, Kreutzhuber said. Kreutzhuber also said the EC knew when it introduced its offer of limited subsidies to the candidates in January that it was facing a difficult issue.

Events in recent weeks suggest that the EC may have been reckless in pushing the issue of the costs of enlargement onto center stage in this fashion without prior consultations with Germany.

As a "Frankfurter Allgemeine Zeitung" columnist noted yesterday, threatening to delay enlargement is the only real leverage Germany has at its disposal if it really wants to cut costs and force through radical reform of the EU's agricultural policies.

Once enlargement takes place, most new members will join forces with France, and agricultural reform in its presently envisaged form will become virtually impossible.

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