European Farmers are being encouraged to become true entrepreneurs, says Mariann Fisher Boel, the new EU Commissioner for Agriculture and Rural Development.

As from January 1, ten EU member states started implementing the fundamental reform of the Common Agricultural Policy agreed in June 2003, offering farmers the freedom to produce what the market wants, he claims.

These ten states are Austria, Belgium, Denmark, Germany, Ireland, Italy, Luxembourg, Portugal, Sweden and the United Kingdom. The five other 'old' member states, that is Finland, France, Greece, the Netherlands and Spain, will apply the single payment scheme in 2006.

Only two of the "new" member states will be introducing the system at an early stage, these being Malta and Solvenia who have opted to go for the reformed CAP in 2007.

Summing up the system, Fisher Boel said: "The CAP at the beginning of 2005 is nothing like its popular caricature. The reform will allow Europe's farmers to become true entrepreneurs. Our rural areas will be offered a sustainable future, a chance to diversify and to contribute to making Europe more competitive. The reform will allow us to play to our strengths, producing world-renowned foods of the highest quality. And it sends out a strong signal to the world, boosting the chances of a successful outcome to world trade talks."

The reform adopted on June 26, 2003 is meant to change the way the EU supports its farm sector. In future, the vast majority of subsidies will be paid independently of the volume of production. The new CAP is said to be geared towards consumers and taxpayers, while giving EU farmers the freedom to satisfy market demands.

To avoid abandonment of production, member states may choose to maintain a limited link between subsidy and production under well defined conditions and within clear limits. New "single farm payments" will be closely linked to the respect of environmental, food safety, animal and plant health, and animal welfare standards, as well as the requirement to maintain all farmland in good agricultural and environmental conditions; a system described by the term 'cross-compliance'.

Henceforth payment will no longer be linked to production, allowing farmers to have their incomes ensured and steer their production towards the needs of the markets and the demands of the consumers. Payments, however, will only be paid in full if these cross-compliance provisions are respected.

At the same time the severance of the link between payments and production - called decoupling - will mean that a major share of support to agriculture is moved from the trade distorting classification under WTO rules towards the minimal or non-trade distorting category.

However, in the case of those areas of support which in the future are still product specific, member states have the option to retain a certain element of relation between payments and production. Such possibilities have in particular been foreseen in the area of animal premia (beef and sheep), where the concern with regard to the effect on production and abolition of linkage has been most pronounced.

Severing the link between subsidies and production will make EU farmers more competitive and market orientated, while providing the necessary income stability. More money will be available to farmers for environmental, quality or animal welfare programmes by reducing direct payments for bigger farms.

To respect the tight budgetary ceiling for the EU-25 until 2013, the reform is to introduce a financial discipline mechanism. It will also strengthen the EU's negotiating hand in the ongoing WTO trade talks. The different elements of the reform, including the single farm payment, will enter into force this year. But if a member state needs a transitional period due to its specific agricultural conditions, it may apply the single farm payment from 2007 at the latest.

From the beginning of this year there will be a strengthened rural development policy with more EU money, new measures to promote the environment, quality and animal welfare and to help farmers meet EU production standards.

Government's reaction

The Department of Information, presumably on behalf of the Ministry for Rural Affairs and the Environment, asked to comment on the impact of the new CAP for Maltese agriculture, replied:

"To put in the right perspective the impact of the CAP reform for any member state one has to synthesise the framework of the new reformed CAP.

This will basically entail a single farm payment or single payment scheme (SPS) for EU farmers, independent or decoupled, from production. This payment will be linked to the compliance of environmental, food safety, animal and plan health and animal welfare standards together with the requirement of keeping all farmland in good agricultural and environmental condition.

There is a strengthened rural development policy with more EU funding and new measures to promote the environment, quality and animal welfare and to help farmers meet EU production standards. The reform also results in a reduction indirect payments for EU big farmers to finance the new rural development policy.

The thrust of the reform therefore rests on the rural development dimension of agriculture. This is at once of positive relevance to Maltese agriculture whose future self-sustainability depends very much on the enhancing of its multifunctionality encompassing rural development, the environment and animal welfare standards.

The reform hinges on direct payments to farmers and this is also of importance to the small-scale setting of Maltese agriculture with limited agricultural product possibilities. In particular, the reform attaches great value to diversification and quality improvements, two central goals for Maltese agriculture in its transformation into a vibrant self-sustainable dynamic sector.

In these respects, therefore, the reform will be deployed by the Ministry for Rural Affairs and the Environment in pursuit of dual symmetric beneficial effects, those deriving from today's Maltese consumer preferences as well as a more equitable income level for the Maltese agricultural producer."

Farmers' reaction

The reaction of Peter Axisa, general secretary of the Assocation of Farmers, was decidedly different:

"The latest reform in the Common Agricultural Policy (CAP) has brought about various comments from various organisations and individual farmers alike. If one had to read through the European Commission's report, one would conclude that all the solutions are readily available for farmers and they will have little problems to worry about with the new reform.

"By putting accent on many new buzz-words such as decoupling, producing for what the market wants, modulation, cross-compliance, etc. the Commission was hoping that these would make farmers think that they have been given a new lease of life. Some may have very well fallen for it, others welcomed it but the majority saw that this reform as nothing but a poor attempt to camouflage the real problems ahead for European farmers.

"The EU is very much aware that once barriers are lifted, as soon as agreement with the World Trade Organisation (WTO) is reached, the EU farmer is going to get the biggest blow ever. Hence, the need to camouflage the reality that prices for EU farmers must and will come down to uneconomic levels, forcing most of the farmers out of business. It is true that 'necessity is the mother of invention', and possibly quite a few enterprising farmers will adapt and survive; but the greater majority who are already barely surviving will not be able to stand another big blow.

The best part about it is that such reports are drawn up after consultation with various lobby groups in the EU including the Co-ordination Paysanne Europeenne (CPE), an umbrella organisation for many European farmers' organisations of which we are candidate members.

"The reality is that every member state has its own needs and even with the best possible goodwill (very often lacking), the decision-makers can never please everyone but, somehow, they always manage to please the small farmer less than they do the larger one. Is this a sheer coincidence? I do not think so.

"To the average citizen, the EU has many structures in place to guarantee his/her rights and this could possibly be so in other sectors, but I certainly have not found this when it comes to agriculture. The bureaucracy involved is out of this world and more resources are spent on talking about problems rather than on solving them. Technically, the citizen is right but, in practice, ask the majority of EU farmers to recall some of their bitter experiences. I compare speaking with the Commission and speaking with farmers to watching the same news item on the three main TV stations of Malta... same topic but different reports!

"Allow me to translate a few buzzwords:

"Decoupling is the word they have used to change the aid given to farmers, i.e. whereas aid was previously given on production per hectare in the case of crops and per head in the case of cattle, the production side has now been taken out of the qualifying requirements (decoupled) and farmers are now going to be paid according to area or size of farm.

"Basically, the principle of decoupling started with the 1992 reform, with certain things, due to overproduction. But subsidies on production were not the only cause of overproduction. With competition getting tighter, farmers had to produce more to guarantee they retained the same net income they previously enjoyed with less effort. The reality is that the more they produce, the lower the prices go, and this opens the doors to imported products which will eventually take over the local products.

"Producing for what the market want. I cannot understand the stress on the statement that farmers should start producing what the market wants. As far as I know, this has been happening ever since the beginning of agriculture. How else would the farmers have survived? New items have evolved and others went out of fashion all the time, and this natural process would have continued even if the Commission did not come out with the bright idea!

"Objectives of the CAP. As from January 1 some member states are operating under the following objectives while others will start in 2006 and Malta and Slovenia in 2007:

¤ to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour;

¤ thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture;

¤ to stabilise markets

¤ to assure the availability of supplies;

¤ to ensure that supplies reach consumers at reasonable prices.

"I quote the above to enable me to point out a few things:

"Contradiction - first we decide to "decouple" to decrease production and then our first objective is to increase productivity, which, in turn, is bound to increase production.

"Who decides what is 'fair'? Fair enough, but one should also ensure that the farmers get a 'fair' price for their products because to me this is the biggest flaw in the EU. It would be far more beneficial for all concerned if the EU were to scrap all aid to farmers and ensure that the difference between what the farmers get and what the consumers pay is "fair".

"The abuses here are ridiculous, especially by the supermarkets. How can Britain (an EU member) allow a supermarket to buy a tonne of potatoes from a farmer for £40, pack it and resell it at £724? How can people who allow such atrocities expect the sufferers to have faith in the policies they come up with? Of all the structures that have evolved in the EU, is there nothing to control such scandals?

The Association of Farmers had long insisted that EU membership would mean hardship for Maltese and Gozitan farmers. But we were assured that we were absolutely wrong because a special packet was going to be negotiated for our special needs. We insisted that whatever was negotiated, the final result would have to guarantee that, at the worst, the Maltese and Gozitan farmer would be as well off as prior to Malta joining the EU.

"The Special Market Policy Programme for Maltese Agriculture (SMPPMA) was negotiated and, although this had many positive aspects to it, it still was not enough to guarantee that farmers would be as well off. When we pointed this out at the last MEUSAC meeting, we were suddenly informed that a safeguard clause had been negotiated at the last moment and the workings of this fundamentally important clause were explained to us.

"This is where the association agreed that the packet negotiated was acceptable. Little did we know that what we were told and what went down in the treaty were totally different, and this, together with other unkept promises, has led to farmers losing faith in the authorities and claiming that they have been fooled. So, unless what was promised is implemented, one can only foresee problems in the very near future.

"The association is pushing very hard for farmers to set up a producers' organisation as it believes that this can benefit them. The idea is to promote good agricultural practices, improve marketing by grading and presenting products more attractively, etc.

"Trying to compete (production-wise) with other countries would be asking for trouble, but I do believe that God has blessed the Maltese soil with certain properties that unexplainably contribute to producing very good-tasting products. We should exploit this to the full and sell it.

"Apart from the above, the CAP does not have much to offer Maltese agriculture, but luckily more emphasis is being put onto the second pillar, i.e. rural development and, if handled well, Malta can benefit quite a lot in this regard. In fact it is fair to say that a lot of hard work has gone into acquiring as much as possible under RD; but, even here, the bureaucracy is such that I fear many farmers will prefer staying without aid due to the application process being so complicated and time-consuming.

"Finally, may I appeal to the Maltese and EU authorities to make a genuine effort for the survival of agriculture within the EU and to prevent more farmers leaving the land?

"Losing farmers is easy - bringing them back is not!"