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This page has now dated somewhat, but there is enough relevant material here to retain it.

There have been a number of 'reforms' of the Common Agricultural Policy. Some progress has been made. The CAP accounts for a smaller share of the EU budget (down from two-thirds at one time to around 46%). A start has been made on trying to reduce its trade distorting effects. There is at least some discussion of its environmental impact. The fact remains, however, that European farmers are still highly subsidy dependant and a large proportion of the funds goes to better off farmers. 46% of the total aid goes to arable farmers, most of whom are relatively prosperous. If CAP is intended to be a social policy, it fails in that respect. But it also fails in terms of creating an internationally competitive European agriculture. It has also not been reformed sufficiently to take account of the likely consequences of eastern enlargement.

The general consensus among analysts is that change in the CAP only comes about as a result of exogenous rather than endogenous factors. What this means is that the sealed off policy community that makes decisions on the CAP tends to produce only incremental reforms, often associated with side payments to satisfy member states who feel they have lost out. The decision-making process is an intergovernmental one, driven by national ministers of agriculture who generally have a clientilistic relationship with their national farmers' unions. This cosy set up is only disturbed when there is some kind of external shock which brings in a different range of decision makers to the arena, e.g., trade ministers or even heads of government.

The drivers of reform.

Up to the end of the 20th century there have been three main drivers of CAP reform:

During the 1980s the CAP threatened to bankrupt the European Community. The first major reform was the introduction of dairy quotas in 1984. This at least halted the growth of the surplus of dairy produce which was building up in intervention stores or being dumped on world markets with the aid of export subsidies. Dairy products now account for just over six per cent of the cost of the CAP and in that sense the reform was a success. However, Europe still has a structural surplus of dairy produce. Moreover, quotas tend to ossify the sector and reduce its ability to compete on world markets (where there are many lower cost producers, particularly in comparison to small scale dairy farmers in areas like Bavaria and Brittany). In 1988 the Community introduced a system of budgetary stabilisers and associated measures which were intended to slow down the growth of the CAP budget in real terms. Even this not particularly ambitious objective ran into trouble.

In any case, it was overtaken by events. It became apparent that the difficulty of reaching an agreement on agriculture might scupper the Uruguay Round negotiations on liberalising international trade. This would be too high a price to pay for manufacturing exporters such as Germany. There are various accounts of the interrelationship between the breakdown of the talks that were supposed to conclude the Uruguay Round in Brussels. In any event, the opportunity was seized by Commissioner MacSharry to bring forward a set of reform proposals, primarily focussed on the arable sector, but also covering sheep and beef, generally known as the MacSharry reforms. What these achieved was a partial break of the relationship between production and subsdidy, what is known in the jargon as 'decoupling'. Arable farmers were compensated by what turned out to be over generous payments made on a per hectare basis. Even then, final agreement in the Uruguay Round was only possible after a renegotiation of the Blair House agreement with the United States to meet French concerns.

The Agenda 2000 reforms agreed in Berlin in 1999 were supposed to deal with the issue of eastern enlargement. It was thought that the extension of the CAP to new member states in the CEECs would both incur very substantial additional budgetary costs and also encourage production in those countries, leading to new surpluses. It was even suggested that CAP payments such as arable compensation should not be extended to the new member states. This would mean different treatment for farmers a few kilometres apart on the border between Austria and Hungary and was incompatible with the idea of a single market. It was recognised that long transition periods and a number of derogations would be necessary for the new member states.

In any event, the Agenda 2000 reforms turned out to be something of a disappointment. Just when it appeared that there might be some quite radical changes, a lunch between the French and German agriculture ministers appeared to change the tone. In Berlin itself, President Chirac of France had a substantial influence on the final deal. One consequence was that much needed reform of the dairy sector was postponed until 2005. It has been argued that the real agenda at Berlin was to enable the EU to meet its commitments under the Uruguay Round agreements and it is possible that this more modest objective was achieved. In face of the disappointments in Berlin, farm commissioner Franz Fischler pursued a strategy of trying to make something of the 'mid-term reviews' scheduled for 2003 which would enable him to achieve something before he left office.

A new reform agenda?

At the beginning of the new century, an interesting new set of developments took place which provided a new driver for reform. European citizens have become increasingly concerned about food quality and safety issues. This can be traced back to the initial BSE outbreak in Britain. It was reinforced by the dioxin scandal in Belgium and fanned by concerns about the so-called 'frankenstein foods' represented by genetically modified products. The concerns were given new impetus by the discovery of BSE in locally reared cattle in countries hitherto free of the disease, notably Germany. The outbreak of foot and mouth disease in Britain (and subsequently in France) seems to have reinforced these fears.

These events had important political consequences. The Minister of Agriculture in Germany resigned and was replaced by a Green, Frau Kunast, who was given a much wider portfolio including food safety and consumer protection. It was clear that she had a very different agenda from her predecessor, including converting twenty per cent of German farms to organic production. Moreover, she had wider support in the Council of Ministers from women ministers in Sweden and Denmark (the latter an organic fruit farmer) and from a green minister in Italy. (He was replaced following the elections in May 2001, but the new government indicated that agricultural policy would continue to be driven by consumer concerns). This new coalition is, of course, still fragile. For example, the red-green government in Germany may be replaced in the second half of 2002. Moreover, France, Belgium, Spain, Ireland and probably Greece and Portugal are thought to be opponents of radical reform. The position of the Netherlands is ambivalent: it favours some reform because its net budget contribution to the EU is growing annually, but still benefits from the direct and indirect trade effects of the CAP. A necessary but not sufficient condition for reform is a continued commitment to it in Germany.

Given the pivotal nature of the Franco-German alliance in agricultural issues, the key question remained the stance of France. Given that France is still the principal beneficiary of CAP funds, it is not surprising that its initial reaction was negative. Facing re-election next year, President Chirac made it clear that in his view there could be no question of imposing a new set of reforms on farmers. However, farm minister Glavany took a somewhat different line, recognising that there was a new climate and suggesting that the mid-term reviews in 2003 might be used as a vehicle for change - although he also made it clear that France should not be pushed too far. The agenda that seems to be emerging so far is a greater emphasis on the so-called 'second pillar' of a rural development policy. This would be paid for by the revival of degressivity which was dropped in Berlin - annual cuts in the real level of farm support. At least there is a new source of pressure for change, but many of the old sources of resistance are still there and still powerful (as the modification of the 'Everything But Arms' initiative to meet the concerns of agriculture shows).

One word of caution is necessary about the criticisms that have been made of intensive and industrial farming and the associated policy of cheap food. In his latest budget Chancellor Brown introduced a number of measures to help less well off families. These are the very people for whom food makes up a greater than average proportion of their spending, so any increase in food prices would have a distributive effect. In relation to foot and mouth, it needs to be remembered that there were many outbreaks in the 1930s when more traditional farming methods were used, although the nature of the modern food chain does mean that the disease spreads more quickly. In so far as more consumers want organic food, this demand needs to be met, but it is doubtful whether ambitious targets for conversion likely those set out by minister Kunast can be met.

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