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Last Updated: Thursday, 26 June, 2003, 15:06 GMT 16:06 UK
EU agrees 'radical' farm reform
Stockpile of grain
Critics say subsidies lead to mountains of unneeded food
European Union agriculture ministers have agreed reforms to the controversial system of paying subsidies to farmers.

The enormous 43bn euro ($50bn, 30bn) subsidies, widely-criticised for distorting global trade and hurting poor countries, will be substantially reduced.

EU farm commissioner Franz Fischler, who first proposed the reforms, said the accord marked "the start of a new era" and would fundamentally change the 45-year-old Common Agricultural Policy (CAP).

But farmers and unions were already fearful that they would be driven out of business without the subsidies they have been accustomed to.

This reform preserves the essential principles of the CAP
French farm ministry

The CAP will be very different
EU farm Commissioner

Germany's DBV farm union said the deal would cost German farmers between 1.2bn and 2bn euros in lost income, and they would especially struggle with reduced milk prices.

Campaigners on development issues said the deal was a blow to developing countries and would not stop poor farmers going out of business.

The breakthrough deal comes after three weeks of talks, and the original proposals have been watered down.

France, Spain and Ireland insisted on the changes as the price for making an agreement, and only Portugal was left opposing the deal.

The compromise

Under the deal, most of the subsidies that reward farmers according to how much food they grow will be abolished.

In other measures:

  • Farmers will receive a single payment, rather than grading the amount of money in line with the amount of food produced
  • Individual countries will be able to stick to the old system if there is a risk that the new system would lead to the land being abandoned
  • The prices at which the EU intervenes to support farmers are to be cut in key sectors, including milk powder and butter
  • Countries like the UK, which want to press ahead with more radical reform, are allowed to do so
  • Direct payment for bigger farms will be cut to finance the new rural development policy, promoting the environment and animal welfare.

The BBC's environment correspondent Tim Hirsch says the deal effectively means that the method of subsidies will vary greatly from country to country.

And the shift will not save taxpayers any money in the short-term, as the money saved on food subsidies is being redistributed as rewards for taking good care of the environment.

Botched deal?

The EU currently pays 43bn euros in annual subsidies to its farmers, angering poor countries left unable to compete in the global market.

Franz Fischler at the Luxembourg meet
We are bidding farewell to trade distortions
Franz Fischler

The subsidies have been the key sticking point in agreeing the next round of global trade talks.

Other countries, including Australia and much of Africa and the developing world, say it is unfair to ask them to open their markets while the EU is protecting its own agriculture business.

British Agriculture Minister Margaret Beckett said it was "an excellent agreement" and a courageous stride forward in setting a benchmark for September's world trade talks in Mexico.

But critics said the deal was a botched compromise.

Tim Rice, trade analyst for the charity ActionAid, said the latest proposals were unlikely to curb over-production in Europe.

"They allow rich countries to continue dumping agricultural produce, such as sugar and dairy, on developing countries putting poor farmers out of business," he said.

"This fudged deal clearly reveals that development is far from the heart of the current WTO [World Trade Organisation] negotiations."

Oxfam said Europe had "chosen to stick its head in the sand".

'Terrible difficulties'

European farmers were not universally happy either, though for different reasons.

"It's a typical EU compromise which gives and takes a little from everyone and creates terrible difficulties for those who have to implement it," said Gerd Sonnleitner, head of Germany's farmers union.

Britain's National Farmers' Union was more positive, saying it would allow farmers to "re-direct their focus towards the marketplace in a constructive way".

But the French farm ministry suggested the reforms were not as radical as some were claiming.

"This reform preserves - as was France's position all through the negotiations - the essential principals of the Common Agricultural Policy," the ministry said.

The BBC's Stephen Sackur
"The most fundamental shift in farm policy in five decades"

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