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Wednesday, 10 July, 2002, 11:39 GMT 12:39 UK
Q&A: EU farm reform
The European Commission has proposed major reform of the Common Agricultural Policy.

BBC News Online looks at the issues at stake for consumers and producers.

What is wrong with the CAP?

The Common Agricultural Policy is a vast system of subsidies for European farmers.

It is designed to ensure food security by paying high prices to farmers for their crops.

But it has led to over-production and food mountains as surpluses have grown.

And it has hurt developing countries whose own farmers cannot compete with subsidised products from Europe.

It has made food more expensive, and might have caused environmental damage by encouraging over-farming.

What does Europe want to do about it?

The European Commission is proposing that agricultural subsidies - based on the amount of crops a farmer grows - should be replaced by a different system of aid for agriculture.

Small farmers would get more - because payments would be capped for big farms - and farmers would be encouraged to make environmental improvements in return for aid.

And eventually the huge amount of money spent on agriculture would be cut by 20%, with savings going to fund rural development.

How would consumers benefit?

European consumers currently spend an estimated 300 a year each on subsidies to agriculture, as well as paying prices above world levels.

If there were lower subsidies, those costs could come down - although the EU might well find other ways to use the spare cash.

If EU markets were opened up to more foreign competition, that should mean more choice and lower prices.

But that is a long-term prospect, which depends on marketing improvements by developing countries.

Which EU farmers will win or lose?

The plans could hit UK farmers particularly hard, as they are generally among the largest in the EU.

In contrast, some of the smaller farms in Italy, France and Portugal will still receive the same amount of subsidy, and some types of production will still receive direct subsidies for some time to come.

This reflects the political reality that the UK is committed to agricultural reform, while there is strong resistance to reform in Mediterranean countries with a bigger rural population.

What about Eastern European farmers?

The EU is facing a big expansion to the East, with 10 countries, including Poland, Hungary and the Czech Republic, expected to join in 2004.

Agriculture is particularly important in these countries - especially Poland - because a much higher percentage of the population lives in rural areas and Eastern European farmers would like to export more to the EU.

One of the most contentious issues is whether - and how - the Common Agricultural Policy will be extended to these countries when they join the EU.

The EU has said it will impose a ten-year transition period, and start by offering the new countries subsidies of only 25% of existing levels.

Reform of the CAP is vital if the EU is to avoid eventually incurring huge new costs in subsidies to farmers in Eastern Europe.

What about farmers in developing countries?

Developing country farmers could be big winners in any CAP reform.

At the Doha trade talks, developing countries persuaded the EU agreed to negotiations "aimed at eliminating" production subsidies.

Overall, agricultural subsidies are worth 300bn ($465.6bn), six times the amount of foreign aid to poor countries.

The US, however, has recently increased its farm subsidies, which could undermine progress in the trade negotiations.

But if agreement can be reached on across-the-board reductions in rich country subsidies then developing country exports could increase dramatically.

What chance do the reforms have of success?

Like all previous reforms of CAP, these radical proposals still have to be approved by the member states, based on a complicated voting system that takes into account the different size of each EU member state.

While Germany, Britain and the Netherlands want reform, France is likely to be joined by Italy, Ireland, Portugal and Austria in resisting major changes.

With talks likely to be delayed until the German elections in September, there is very little time to reach agreement before the enlargement negotiations that are planned to conclude at the end of the year.

But it is likely that member states will be forced to agree some reforms so that the enlargement of the European Union can go ahead.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Jonathan Charles
"Many EU governments, including Britain, believe the subsidy bill is too high"
The BBC's Tom Heap
"A total of 27bn is what Brussels hands out to farmers every year"
UK Rural Affairs Secretary Margaret Beckett
"We have to try to avoid creating a system just as daft as what we have now"
See also:

10 Jul 02 | Europe
05 Jul 02 | Business
26 Jun 02 | Europe
10 Jun 02 | Europe
30 Jan 02 | Europe
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