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Last Updated: Wednesday, 11 June, 2003, 11:57 GMT 12:57 UK
Q&A: EU farm reform
Reform of the EU's Common Agricultural Policy is once more under discussion, and the need for agreement is stronger than ever.

Why is the issue so urgent? And is there any chance of agreeing serious reform among 15 divergent countries? BBC News Online investigates.

What is going on this week?

Agriculture ministers from around the EU are meeting in Luxembourg, charged with deciding ways to reform the Common Agricultural Policy (CAP).

This is the latest in a series of ministerial attempts to agree on farm policy: last October, France and Germany unveiled what was then blazoned as a landmark deal, but the momentum seemed to peter out almost immediately.

Now, the European Commission says, the situation is critical.

"It is decision time," Agriculture Commissioner Franz Fischler said on Tuesday.

"There is a lot at stake, and the consequences of failure to reach agreement would be dire."

Why the urgency?

Agriculture reform has been a modest worry for European policy makers for decades.

Farm subsidies cost up to 44bn euros (31bn; $51bn) a year, about half the entire budget of the EU.

When 10 mainly poor, mainly rural countries join the EU next year, claims on that budget would become unsustainable, unless some new formula for distributing cash is agreed on.

This year, the sense of time running out has been heightened by the prospect of a new global trade agreement, due to be discussed in Mexico in September.

Europe's trading partners have repeatedly insisted that the CAP be reformed, pointing out that its web of subsidies puts non-EU producers at a disadvantage.

Less tangibly, too, Brussels needs to be able to prove that it can force through complex and painful reform.

Trust in EU institutions is not high, especially in more free-market-oriented countries such as Britain and the Netherlands.

Persuading Britain to sign up to the euro would be a lot easier if Brussels flexed its muscles.

What exactly is wrong with the CAP?

The real problem with the CAP is not its eye-watering expense.

Instead, it is dangerous because of the way it skews farmers' behaviour, linking subsidies to output, and encouraging them to produce mountains of food that the market does not need.

Although farmers are often said to be reliant on Brussels subsidies, the money does little to eradicate rural poverty.

The flight from country to town continues unabated in big CAP beneficiaries such as Ireland, Portugal and Spain - and two-thirds of total subsidies go to the biggest and richest 20% of farms.

These inefficiencies, meanwhile, combine to produce food that is more expensive than it need be.

According to some calculations, the CAP costs consumers more than twice as much - in terms of higher food prices - as it costs the EU budget.

So what is the alternative, and how will I benefit?

A year ago, Mr Fischler published a set of proposals for CAP reform.

The most radical of his plans to is to shift the basis of subsidy allocation from output to need.

This complicated but sane-sounding idea should, Mr Fischler and the Commission feel, ensure that only needy farmers are subsidised, and only necessary food is produced.

In fact, however, even a rapid agreement on the Fischler proposals will not have much effect in the medium term.

France and Germany, Europe's biggest powers, have agreed to leave the EU farm budget untouched until 2013, and there is no guarantee that overall spending will fall after that.

Food may get cheaper, but it is likely that the financial benefits will be passed on to the farmer, rather than the consumer.

Mr Fischler reckons that farm incomes in the EU will rise by at least 8.5% if his proposals are passed.

But in some places - the Highlands of Scotland, for example, or the olive groves of southern Greece - where farming is barely profitable, there are concerns that farming may die out entirely if subsidies are altered.

So will there be a deal?

Don't hold your breath.

There is a greater consensus in favour of reform now than there was in September, when agriculture ministers from seven EU countries signed an open letter in favour of the CAP.

Now, only France is standing firmly in the way of a deal.

As the biggest overall beneficiary of subsidies - and the third-biggest once its contributions have been netted out - France is aware of the political consequences of allowing subsidies to be diverted to those in real need.

Its government has made polite noises about the need for a new world trade agreement, but has been angered by the US's recent decision to take Europe to court over genetically-modified foods.

The French agriculture minister, Herve Gaymard, has stressed that the French do not have "closed minds" on the CAP.

But he is also wary of drawing up a deal in Luxembourg that is only going to be revised at the World Trade Organisation meeting later this year.

Mr Fischler, the French believe, should now come up with some compromises of his own.

Crucial talks on EU farm reforms
11 Jun 03  |  Europe
Fischler's farmyard revolution?
26 Jun 02  |  Europe
Down on the farm
03 Dec 02  |  Business

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