Reforming agriculture

What is being proposed by the Commission to reform EU agriculture? Will the EU stop supporting farmers?

Earlier this month, the European Commission published proposals to reform the EU agricultural policy. The Commission is not proposing to stop supporting farmers. It is proposing to do so in a more sustainable manner.

These proposals should be of direct interest to Maltese farmers as well, taking into account the prospect that these reforms may be in place by the time that enlargement takes place in 2004.

For a long time, the EU has been spending around half of its budget to support agriculture. That works out at around Lm17 billion (17 billion, not million, liri) every year.

The reason why this expenditure is so high is because the EU has been traditionally supporting farmers according to how much they produce. In a post-war scenario when food was scarce, this policy may have been valid. But it stopped making sense a few decades later when farmers found themselves producing just for the sake of subsidies and regardless of what the market wants.

The EU found itself having to pay increasing subsidies for over-production and, worse still, pay more money to buy off over-production, store it, export it at a cheap prices international, and at times, even destroy it.

All this led to a spiralling policy which grew out of proportion, distorted the agricultural market in Europe and the world and drained the largest chunk of the EU budget. And, of course, it also led to more expensive prices for agricultural produce in the EU (this is one of the key negotiating points for Malta in this area).

On the positive side, the EU agricultural policy did help farmers get what they want - the financial support. Which explains why, at every sign of a proposal to reform this system, we see farmers protesting and dumping produce out on the roads. More such protests are likely to follow. Admittedly, they have a vested interest in securing their livelihood.

But this is not to say that the EU agricultural policy should not be reformed. Nor that reform would prejudice the livelihood of farmers.

Fundamentally, the European Commission is proposing to cut once and for all the link between how much a farmer produces and how much subsidies he gets. It means that farmers will be "freed" from having to produce what gets most subsidies and be able to produce instead what the consumer wants.

But cutting the umbilical cord between subsidies and production is a huge step considered as taboo in many countries. So it is expected to be opposed by the large farms and by countries that get most money out of this policy.

This does not mean that all support will be cut. Quite the contrary, the amounts involved will remain pretty much the same. It just means that the support will be linked to other objectives, rather than to how much is produced. It will be linked to environmental protection, food safety, health and safety for farm workers and finally, yes, animal welfare. In other words, farmers will get money not so much on how much they produce but on how they produce it. In other words, the focus will now shift from quantity to quality.

The Commission is also proposing to divert money from production subsidies to subsidies for rural development, thereby substantially increasing funding for projects that promote agri-environment, less favoured areas, training and so on.

Payments for rural development will also target higher environmental, food safety and animal welfare standards. They will also encourage farmers to participate in quality assurance schemes, including geographical indications, designation of origin, organic farming and support to promote these type of products.

This particular proposal on rural development is of direct interest to Malta because we do not grow most of the products that attract EU production subsidies, whereas we do have lots to do when it comes to rural development. This proposal therefore shifts the balance by reducing subsidies on production (which are of little interest to us) and instead increase funds for rural development (which is what we need).

The proposals are also shrewdly formulated in such a way that they do not reduce the amount of money that is already fixed in the EU budget for farming until 2006 (when the current EU budgetary framework expires).

But because they change the basis for how the money is spent, the proposals ensure that the EU budget will be contained and not go bust when new countries with massive farming sectors join in 2004. And it also makes the EU farming policy defensible in the context of the world trade talks, more so in the wake of the recent US farm bill.

In Malta, the proposed reforms are of interest because they address key points in the EU agricultural policy that are considered as having a potentially negative impact on Malta upon membership. These are points on which Malta submitted specific negotiating requests.

Moreover, the new focus on rural development provides new scope for increased EU financial assistance for the Maltese agricultural sector when these reforms take effect.

On the price front, the proposed reforms seek to set the way for EU prices to converge with cheaper world prices, although this process should be gradual and not immediate. Here too, as mentioned, Malta is making negotiating requests to ensure that the price of agricultural produce that we currently import at cheaper international prices do not go up if we join the EU.

So no, the EU will not stop supporting farmers. But it will change the way that it supports them.

Malta-EU Information Centre: Tel: 25909192; Fax: 21227580; E-mail address: euinfo.mic@magnet.mt; Website: www.mic.org.mt

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