Background

• In July 1997, the Commission proposed the reform of the CAP within the framework of Agenda 2000, which was a blueprint for the future of European Union policy, in view of the expected enlargement.

• Negotiations on Agenda 2000, and thus the agreement on the CAP reform, were concluded at the Berlin European Council in March 1999.

• Agenda 2000 has been the most radical and comprehensive reform of the Common Agricultural Policy since its inception

Motivation For Agenda 2000 Reform

The major external factors:• Growing world demand for food, further moves

towards a more liberal global trading environment - EU had to prepeare its agricultural sector for the next GATT/WTO commitments

• The challenge of the European Union’s Eastward enlargement

Motivation For Agenda 2000 Reform

On the internal front: Real risk of a return to market imbalances in some

sectors. The Treaty of Amsterdam makes it the responsibility of

community law makers to integrate environmental concerns into all legislation

The CAP needs to rise to the challenge of greater consumer interest in food safety, quality and animal welfare.

The CAP must adapt and respond to the need for more decentralisation, greater transparency and simpler rules.

Motivation For Agenda 2000 Reform

....Growing public and political concern about other issues:

Pollution of the environment by highly intensive agricultural production systems,

Unfavourable agricultural income development, especially in the sector of small scale full-time farming,

Gloomy general economic perspectives for remote rural areas.

Agenda 2000 - Key Priorities: To ensure the competitiveness of the European Union

agricultural sector both on the community market and on growing export markets;

To promote ways of farming that contribute to the maintenance and enhancement of the rural development and landscapes;

To contribute to sustaining the livelihood of farmers while promoting the economic development of the wider rural economy.

Citizens An The CAP

Common agricultural policy

Taxpayers

Environment and animal

Welfare groups

Scientists

Consumers

Farmers

Rural Dwellers, Food industry

Food security

Improving productivity

Market stabilisation

Income support

Ower production

Exploding expenditure

Internationalfriction

Eradicate surpluses

More competition

Incomestabilization

Budgetstabilization

Internationalcompetitiveness

Rural development

Environmental Quality

Process of a continuedadjustment

of CAPinstrument

to new requirements

The early years

The crisisyears

The 1992Reform

Agenda 2000 Future

Productivity

Development Of The CAP

Competitiveness

Sustainability

What Does Europe Want From Its New Agricultural Policy?

Citizens feel strongly about food and countryside. They want:

• Safe, high quality food• Preservation of environment and the countryside• Respect of animal welfare• Good value for public money• A stable, transparent and simple policy framework

Agenda 2000

Aims of CAP Reform

• Strengthen the role of the market• Integrate environmental objectives• Extend rural development, the “second pillar” of the

CAP• Generate additional or replacement sources of income

and employment in rural areas• Increase flexibility for member states• Simplify EU agricultural law

The New Policy Will Seek To Promote

• A competitive agricultural sector A fair standard of living for the agricultural community; Production methods which are safe, capable of

supplying quality products that meet consumer demand; Diversity, reflecting the rich tradition of European food

production; The maintenance of vibrant rural communities capable

of generating employment opportunities for the rural population;

The New Policy Will Seek To Promote

An agricultural sector that is sustainable in environmental terms, contributes to the preservation of natural resources and the natural heritage and maintains the visual amenity of the countryside;

• A simpler, more comprehensible policy which establishes clear dividing lines between the decisions that have to be taken jointly at community level and those which should remain in the hands of the member states;

• An agricultural policy that establishes a clear connection between public support and the range of services which society as a whole receives from the farming community

AGENDA 2000: Macro-objectives

• To create the conditions for sustainable growth and job creation within the community

• Adapt the common agricultural policy (CAP) • Reform structural policy • Enlarge the union: following accession procedures and

putting a pre-accession strategy in place• Establish financial framework for the period 2000-2006

Measures

The key measures continue in the direction set by the MacSharry reforms of 1992

• Lower institutional prices to encourage competitiveness• A fair standard of living for farming community• Strengthening the EUs international trade position• Focus on quality

Measures

• An integration of environmental goals into the CAP• A new rural development framework: the second pillar

of the CAP• Decentralizing management• Futer simplification

AGENDA 2000: measures

Arable crops

Cereals cut in intervention price to 101 euro/t Increase in direct payments 63 euro/t Oilseeds - same direct payments as for cereals Compulsory land set-aside has been retained, voluntary

set-aside is still allowed

AGENDA 2000: measures

Beef and veal

Cuts in market price support 20% Direct income payments by head of cattle 200 euro/suckler cow 210 euro/male bovine animal

AGENDA 2000: measuresMilk

Intervention price for butter and skimmed milk powder 15% in three steps from 2005/06 marketing year

Direct payments: 17. 24 euro/t milk kvota in 2007 Quotas for milk will be extended and stay in force until

2007/08. Increasing quotas (by 1.5%) in parallel with price reduction starting in 2005.

Rural development

Rural development (including agri-environment support) was given the status of the ‘second pillar’ of the CAP, with many previous measures being grouped into a new Rural Development Regulation 1257/1999 and some new measures added (such as Article 16)

The AGENDA 2000 Ageement...

Continuation of the Mac Sharry reform: further step towards support via direct payments

More emphasis on measures for rural development and environmental ("Second pillar of the CAP")

Helps to meet the challenges of further trade liberalisation

The AGENDA 2000 Ageement...

Contadicory signal for the future of the milk quota system

Some important sectors (like sugar) still not included in the reform

Defines the CAP for the period 2000/06, but announce a mid-term review in 2002/03

The financial framework

• framework must cover the development of the CAP and the effects of enlargement in a coherent fashion and within reasonable budget limits, for a sufficient length of time

• The Berlin European Council considered that this reform could be implemented within a financial framework of an average level of EUR 40.5 billion plus EUR 14 billion over the period for rural development as well as veterinary and plant health measures.

The financial framework

• Each Member State will be able to allocate resources freely, subject to certain Community criteria designed to prevent distortions of competition.

• The applicant countries are facing major difficulties in adapting to a rather complex Community acquis and completing the institutional process of privatisation and transformation of agricultural structures.

The financial framework

-Heading 1

(EUR million - 1999prices)

CAP expenditure(excluding rural

development andaccompanying

measures)

Rural development

and accompanyingmeasures

2000

20012002

200320042005

2006

40 920

42 80043 900

43 77042 76041 930

41 660

36 620

38 48039 570

39 43038 41037 570

37 290

4 300

4 3204 330

4 3404 3504 360

4 370

AGENDA 2000 and the WTO

• Agricultural trade is of particular significance for the EU, as it is the world's biggest importer as well as the world's second biggest exporter of agricultural products.

• In October 1999, the EU Agricultural Ministers agreed on their common position for the forthcoming "Millennium Round" of WTO negotiations. The agricultural negotiations in the WTO framework began in March 2000.

• On the whole, the EU's approach in the agricultural negotiations is based on its Agenda 2000 package.

Agenda 2000 and the WTO

• Objectives already fixed in Uruguay Round Agreement on Agriculture:

“... to achieve substantial progressive reduction in support and production”

Agenda 2000 and WTO

The EU's objectives and interest in these negotiations lie in the following:

that the non-trade aspects of agriculture schould be addressed

the need for special and differentiated treatment for developing countries

the improvement of access to market opportunities

Agenda 2000 and WTO

WTO pressures on CAP:

• EU unique in use of export subsidies, further reduction likely

• EU direct payments classified as “blue box”

• Large reduction of tariffs or increase in tariff rate quotas could put pressure on current support methods

• Reform of CAP important

Agenda 2000 and WTO

WTO pressures on CAP:

• New single payment would be “green boxed”

• Lower production means less need for export subsidies

• Price reductions due to increased access less likely to result in stock build up

• EU can push for bigger reforms

Agenda 2000 and WTO - negotiations

EU proposal: relative to levels currently allowed under Uruguay Round

Average tariff reduction of 36% Export subsidy values cut by average of 45% Aggregate measure of support cut by 55% the total budget for agricultural support must be

reduced by 20 per cent in six years, with the exception of permitted support measures

Agenda 2000 and WTO - negotiations

Less than meets the eye

Offer doesn’t require many changes relative to actual EU subsidy levels today

US, Australia, Brazil, etc. want deeper EU cuts