European Commission

Directorate-General for Agriculture

The common

agricultural policy

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Contents

Foreword: Continuity and Change

The CAP - Forty years promoting European agriculture and rural areas

Shaping up for the 21 " century

An agriculture closer to market realities and a new deal for consumers 10

Promoting a living countryside: new opportunities for rural communities 12

Responding to social concerns: a greener CAP 14

Extending the CAP: new horizons, new partnerships 16

Towards a new model of European agriculture

2 < European agriculture

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ι Continuity and change

Ensuring continuity often means bringing about change. This is especially true for the Common Agricultural Policy. Since its foundation in 1962. it has been continuously adapted and reformed in order to maintain a sector that is vital, not only for the farming community, but for society as a whole.

Certainly, the role of the CAP has changed: In the aftermath of the Second World War the Common Agricultural Policy was mainly aimed at achieving self-sufficiency in food products and stabilising the turbulent agricultural markets. By the 1980s, the CAP had met these goals, banishing the spectre of food shortages from our continent and securing a fair standard of living for farmers and their families. In fact, some initial goals were even over achie­ved. As productivity rose sharply, we were left with a system that rewarded large-scale, intensive production with sometimes serious consequences for the environment, animal welfare and food quality. The result: milk lakes and beef mountains which consumers could not consume, but taxpayers had to pay for.

Changing social and economic priorities call for a new approach to European agriculture. In this respect, the reform of 1992 was a big step forward: it brought production into line with consumption whilst encouraging less intensive and more environmentally friendly farming. More needs to be done, however, and if we fail to act today, we will end up paying for it tomorrow. We will simply not be able to deal with the challenges lying ahead, such as changing consumer preferences, eastward enlargement or poor competitiveness of our agricultural pro­duce. The consequences - equally harmful to farmers, consumers and taxpayers - would be new surpluses, decli­ning farm income, inflated budgets and falling public support.

The European Commission s Agenda 2000 reform proposals show how a viable model for European agriculture can be put into practice. Cutting institutional prices and increasing direct payments will benefit European farmers, by stimulating consumption on the presently stagnant EU markets and by boosting the opportunity to compele on pro­mising international markets without export refunds. Rural development policy, which constitutes the new second pillar of the CAP, will help to reward farmers directly for services they provide to society, like the protection of the environment and the preservation of the countryside, which are also an important source of new jobs and regional culture.

The farming community will play a changing and important role in the 21st century. It is only our farmers who can provide consumers with food which lives up to their high expectations regarding quality, food safety, ecolo­gical and animal welfare standards. If we want European farmers to meet these demands, society must be prepa­red to support them through a reformed CAP.

The reform is aimed at reconciling the Common Agricultural Policy with the concerns and ambitions of Euro­pean citizens. This brochure is intended as a contribution to a better understanding of the past, present and future of a policy which, while it is often misunderstood, remains one of the cornerstones of the European Union.

Franz Fischler Commissioner for Agriculture and Rumi Development

European Agriculture > 3

The CAP - Forty years promoting European agriculture and rural areas

Throughout its 40 years' history, the Common Agricul­tural Policy (the CAP) has adapted to changing political and economic circumstances. In its early years, securing the food supply and helping farmers improve producti­vity were key concerns. Today, the CAP extends over many areas of policy, reflecting the important role agri­culture plays in our society. In addition to contributing to the management of agricultural markets in the Euro­pean Union, the CAP also touches on other policy areas, such as environmental issues, regional and rural development and consumer issues.

The CAP was one of the first policies to be decided at Community level. Today, it offers farmers and industry a mature single market for their products, free of inter­

nal barriers to trade, where operators can com­pete on a level playing field. Decisions are taken every day that affect far­mers, consumers, expor­ters and all the other players in the long chain that brings food from stable to table.

The principles of the CAP were decided in the Treaty of Rome that set up the European Community in 1957: • to increase agricultural productivity; • to ensure a fair standard of living for the agricultural

community; • to secure the food supply; • to stabilise markets: • to provide consumers with reliable supplies at reason­

able prices.

It also stated the need to take into account: • lhe particular nature of' agricultural activity, which

results from the social structure of agriculture and from structural and natural disparities between the various agricultural regions;

• the need to effect the appropriate adjustments by degrees;

• the fact that in the Member States agriculture consti­tutes a sector closely linked with the economy as a whole.

Putting policy into practice

In the course of the 1960s, a common market in agri­cultural products was established in the original Com­munity of Six (Belgium, France, the Netherlands, Ger­many, Luxembourg, Italy). This chiefly involved har­monising existing national price support mechanisms, and establishing a common customs barrier for goods coming from third countries. The policy was funded by the European Agricultural Guarantee and Guidance Fund (EAGGF), set up in 1962.

CAP support since then has operated through the esta­blishment of a system of institutional prices for com­modities at Community level. These have included, in most cases, a 'target price' (the price thought by the Community to offer a fair chance for producers to earn a decent living) as well as an 'intervention price'. When internal market prices lall below a certain level, the Community acts as a kind of buyer of last resort, buying in stock and placing it in intervention stores across the European Community, thus helping to stabi­lise markets. The system of institutional prices has ensured that producers always had an outlet for their products.

The increased stability brought about by a strong inter­nal market, as well as technical progress, led to big increases in production. By the 1970s, the European Community was self-sufficient in key sectors. In some sectors, it was more than self-sufficient, and was moving into surplus. These surpluses were held in inter­vention stores, and some released for export. The dif­ferences between the lower prices on the world market and those on the internal market meant that exports nee­ded to be subsidised by means of export refunds (de­signed to bridge the gap between the two price levels).

4 < European agriculture

Past reforms of the CAP

Responding to

changing circumstances

In the 1970s, attention began to focus on specific Com­

munity policy initiatives to speed up the structural

adjustment of the European farm sector. In 1972. legis­

lation was passed to modernise farms, to promote pro­

fessional training, and to renew the agricultural work

force by encouraging older farmers to take early retire­

ment. A few years later, initiatives were taken to pro­

vide assistance to farmers working in difficult condi­

tions, such as hill farmers. These constitute the Less­

Favoured Areas scheme.

By the 1980s, the market system was straining at the

seams in the face of ever­growing production. In effect,

the prices and guarantees provided through interven­

tion and production aids stimulated output at a rate

increasingly beyond the market's absorptive capacity.

Between 1973 and 1988. the volume of agricultural

production in the Community increased by 2% a year

while internal demand grew by 0.5% per year. As a

result, surpluses grew, as did costs connected with

intervention buying and subsidised exports. Growing

volumes of subsidised exports on world markets drew

criticism from trading partners, as these contributed to

depressing world prices.

Thus, the 1980s were characterised by increasing trade

disputes, a growing farm budget, and increasing public

concern about wine lakes and butter mountains, as

well as the damage to natural resources and the envi­

ronment being caused by intensive forms of produc­

tion. The benefits of the CAP were failing to reach

those who needed it: the production­based system was

failing to deliver sufficient support to the vast majority

of small and family­run farms.

1972 · new measures to promote modernisation of

agriculture, professional qualifications for farmers and

start-up assistance for young farmers.

1975 · first assistance programme for mountainous regions

and areas with natural handicaps.

1979 · 'co-responsibility' levy requires farmers to pay a

penalty for serious over-production in the dairy sector.

1984 · milk quota system set up to control the volume of

production.

1988 · budgetary guidelines set a maximum ceiling for the

CAP budget.

■ 'stabilisers' set a maximum limit on quantifies

guaranteed to receive support payments.

• a new approach to Community structural policy favours

a more effective, global strategy for rural and less-

favoured areas and closer co-ordination between the

Guidance Section and other Structural Funds.

1992 · price supports are cut for key products to bring them

closer to world market prices - farmers receive

compensatory direct payments.

• land is 'set-aside' from agricultural production, fo lie

fallow or be used for non-food-production such as bio-

fuels; financial support goes to less intensive farming

methods.

• introduction of three new measures to accompany the

1992 reform: the agri-environment and afforesfafion

schemes and an improved early retirement scheme for

farmers aged over 55.

European Agriculture > 5

Initial measures were taken in the course of the 1980s, notably through the introduction of milk production quotas and budget stabilisers, leading in 1992 to more fundamental reform.

The 1992 reform aimed to bring a better balance bet­ween supply and demand on the internal market. It did so by cutting intervention prices for cereals crops and animal products, thus bringing them closer to those on the world markets, and by compensating loss of income with a series of direct aids to farmers. These aids were paid per hectare in the cereals sector and per head in the livestock sector. Amounts were determined by taking account of yield (or, in the case of livestock, numbers of animals held) over a fixed reference period. Supply management in­struments were also intro­duced. In the case o cereals, these involved set-aside schemes that took land out of production with due compensation paid to the producer.

Another element of the reform package were "accom­panying measures". These included an improved early retirement scheme and two new schemes to encourage less intensive forms of production, more environmen­tally friendly farming, and the development of affores­tation of marginal farm land.

Focusing on rural development

Outside the realm of the CAP, at the end of the 1980s there was a radical shake-up in the way EU assistance to regions suffering from structural handicaps was organised. The 1988 reform of the Structural Funds was the beginning of a more integrated approach to

regional development, a policy move with important consequences for the Union's rural communities. Assistance to priority regions was channelled through national or regional programmes agreed between the Member States and the Commission. Rural development mea­sures were integrated into these pro­grammes. These included start-up assis­tance to young farmers, investment aid for agricultural holdings, encouragement of tourism and craft investment, and financial aid for rural infrastructure pro­jects, such as village renewal schemes. In 1993, the special needs of rural areas received further recognition in the Treaty of Maastricht which stipulated that, "...the Community shall aim at reducing disparities between the levels of develop­ment of the various regions and the back­wardness of the less-favoured regions, including rural areas''

6 < Europi rul lur

COMMON POLICY, COMMON FINANCE: FUNDING THE CAP

Decided at EU level, the CAP is financed by a common fund, the

European Agricultural Guarantee and Guidance Fund (EAGGF).

The CAP is also a source of revenue for the EU budget in the form

of duties on farm trade and levies on sugar production.

The Guarantee Section represents around 88.5% of the EAGGF

budget. It covers expenses arising from Common Market

Organisations (CMOs) in the various product sectors. In 1988, EU

Heads of State imposed maximum limits on the growth of the

Guarantee budget. Known as the "agricultural guideline", this

limits growth in the budget to 74% of the growth in EU GNP. In

1997, the Guarantee budget amounted to ECU 40 805 million,

accounting for approximately half the EU budget or around 0,6%

of Community GDP.

Expenses currently covered by the Guarantee fund can be

categorised in four broad types:

• costs arising from intervention buying;

• export refunds;

• direct payments introduced in 1992;

• agri-environment, afforestation, and early retirement schemes.

Since 1992, support to the agricultural sector has focused less on

price support mechanisms, and more on direct income aid to

farmers.

The diagram on the right shows how funds are allocated under

the Guarantee Section.

The Guidance Section represents around 11.5% of the EAGGF

budget. It is one of the European Union's Structural Funds - the

others being the European Regional Development Fund (ERDF),

the European Social Fund (ESF) and the Financial Instrument for

Fisheries Guidance (FIFG). In 1997, the Guidance Fund

amounted to ECU 4 026 million, or around 5% of the EU budget.

The Guidance Section provides co-financing for rural

development measures and measures to assist the structural

adjustment of agricultural holdings. These include investment

aid, schemes to help young farmers set up for the first time,

compensatory allowances for less-favoured areas, training

activities and rural infrastructure projects, to name but a few.

The measures are included in multiannual programmes drawn up

by the Member States in partnership with the Commission. In

certain disadvantaged areas, these measures are co-ordinated

with the ERDF and the ESF. The three Funds also finance LEADER,

a Community Initiative aimed at promoting bottom-up

approaches to rural development issues. Projects are selected by

a Local Action Group composed of grassroot representatives.

Allocation of resources under the Guarantee section, 1997

40 805 Mio ECU

1. Beef: 7.451

2. Dairy products: 3.625

3. Olive oil: 2.168

7. Sheep and goal meat: 1.447

8. Tobacco: 1.043

9. Wine: 805

4. Accompanying measures: 1.866 10. Other products and measures:

5. Sugar: 1.834 2 - 1 9 0

6. Fruit and vegetables: 1.679 H Arable crops: 16.160

European Agriculture > 7

Shaping up for the 21s t

century

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The European Union faces a considerable set of chal­

lenges over the next few years. In March 1998, acces­

sion talks started with Poland, Hungary, the Czech

Republic, Slovenia, Estonia and Cyprus. A further five

candidate countries are waiting in the wings. In addi­

tion, the Community needs to establish a new financial

framework for the EU budget for the period 2000­

2006. Furthermore, the current generation of Structural

Fund programmes comes to end in 1999, and new

structures are needed for the next programming period.

Lastly, a new round of multilateral trade talks starts at

the end of next year under the auspices of the World

Trade Organisation (WTO).

The internal challenges :

• The risks of growing surpluses

Without further reform of the CAP, current forecasts

point to new surpluses on internal markets in a num­

ber of key sectors around the turn of the century. Re­

strictions on the use of subsidised exports, agreed

during the last round of international trade talks,

mean that growing surpluses could lead to increases

in intervention stocks and consequently to pressures

on the CAP budget. Further efforts need to be made

to align supply and demand on the internal market, as

well as to boost the export potential of European agri­

culture. While these efforts include elements of price

competition, other aspects of competitiveness need to

be explored and exploited, such as quality, choice,

health, and safety.

• Revitalising rural economies

While important, the economic role of agriculture in

rural areas is on the decline. All over Europe, people

continue to abandon the countryside to look for work

in the cities. The need for a competitive agricultural

sector and viable alternative economic activities has

become a question of survival for many rural areas. A

global approach to rural development is needed

which takes into account the multifunctional role

played by agriculture.

• Responding to «rowing environmental concerns

The integration of the environment into all areas of

Community policy­making by the Single European

Act of 1986 signalled the start of major efforts to

"green" policy­making at European level. Agricul­

ture, as the major land user in the Community, must

play an important role in this effort. Starting in 1992

8 < Europi tru civri ullur

with the agri­environmental schemes, the Commis­

sion has been exploring ways in which agriculture

can best respond to increasing demands for environ­

mental protection and the preservation of Europe's

countryside.

Decentralising decision-making

There is a clear need to reflect on how certain aspects

of CAP policy management might better be shared

with Member States. This effort comes from the recog­

nition that production systems vary widely across the

Member States, a trend set to continue once the Union

expands. Europe's diversity is a great strength, but can

pose practical difficulties in policy management.

The external challenges :

• Seizing opportunities on the world market

Expert forecasts predict a favourable long­term out­

look for the main agricultural markets for exporting

countries. Demand for food is on the rise ­ due to

both population growth and increasing incomes ­

outstripping supply which is likely to grow at a slower

rate. This suggests that prices will remain relatively

buoyant. European producers need to become more

competitive, however, if they are to benefit fully from

these developments.

What w i l l the future budget be?

• Agenda 2000 recommends that the total budget of the Union

should be kept within an upper limit of 1.27% of the EU GNP.

■ The CAP budget would continue to respect existing budgetary

guidelines. In 2006 the annual budget will amount to around

ECU 50 billion (in 1997 prices).

■ The budget for the Union's structural policies would be

maintained at 0.46% of the Union's GNP. The total allocation

for the 2000 - 2006 period would be ECU 275 billion (in 1997

prices).

In response, the European Commission in July 1997

put forward proposals for the future direction of Com­

munity policies in the years ahead. "Agenda 2000: for a

stronger and wider Union" introduced a new blueprint

for reform of the Common Agricultural Policy and for

policy in favour of rural development. These were fol­

lowed up by concrete proposals for a new regulatory

framework, presented by the Commission in March

1998.

The following sections explain the Commission's main

proposals, which are designed to provide a secure and

sustainable future for Europe's agriculture and rural

communities.

• Getting ready for enlargement

With eleven candidates preparing to join the Union,

bringing with them a potential 100 million new

consumers, enlargement is a new opportunity for

European business. In agriculture, enlargement poses

considerable challenges. Farm sectors in candidate

countries are bigger and undergoing substantial struc­

tural adjustment. Should all current accession candi­

dates join, the agricultural workforce would increase

by 55% and agricultural land by some 25%. Without

corrective action, growing surpluses in the new Mem­

ber States would add to those already predicted in the

existing Member States after the year 2000, espe­

cially in the cereal and meat sectors.

• Preparing for further trade talks

New multilateral trade negotiations under the aus­

pices of the World Trade Organisation (WTO) are due

to start in 1999. There will be strong pressure to

continue the process towards greater liberalisation in

all areas of world trade that was started in the pre­

vious round of talks.

European Agriculture > 9

An agriculture closer to market realities and a new deal for consumers

Current forecasts point to big rises in production in some of the main agricultural sectors, with this trend most striking for beef and cereals. Internal demand. on the other hand, is likely to stay flat, or rise slowly. In the beef sector, for instance, long-term demand is on the decline, influenced by the relative price dif­ference between red meat and white meat, by changing consumer tastes, and by public health scares, not least the BSE crisis.

Rising supply in the face of stagnant, or slowly rising, internal demand has consequences in terms of rising production surpluses. The Commission estimates that intervention stocks in the cereals sector could rise to between 50 and 60 million tonnes by 2006, while those in the beef sector could reach 1.5 million tonnes by the same date.

On the other hand, demand on the world market is expected to be strong, but opportunities for subsi­dised exports arc limited by the Uruguay Round agreement. Maintaining current internal prices at their present levels would almost inevitably mean big rises in non-exportable surpluses: the other option would be to tighten production control and introduce punitive supply management techniques. At a time when national budgets are under pressure, neither of these options is attractive.

The Commission in its reform proposals has therefore opted for a more offensive approach, aiming at giving the EU farm sector the means to open-up to new opportunities on internal and external markets.

This is why cuts in intervention prices are proposed in the cereals, beef and dairy sectors. These would bring internal prices closer to those on world markets and increase export opportunities.

In addition, changes arc proposed in the role of inter­vention buying. For beef, it will be replaced by a pri­vate storage regime similar to the one that already exists in the pigmcat sector. For other sectors, inter­vention buying should return to its original role of providing a price safety net.

Direct income support would be increased, in line with the process started in 1992. This would help to stabilise farmers' incomes as well as being more transparent. In line with efforts being made to find new ways of sharing responsibility for the manage­ment of the CAP with Member States, part of the direct aid would be managed nationally. This would allow Member States increased flexibility to adapt direct income support to national, regional, or local circumstances. The proposals make clear that such steps must be taken in full respect of the principles of a common policy.

In the same spirit, the Commission will give the Member States the opportunity necessary to target aid at those most in need. Ceilings will also be set on the total amount of direct income support producers may receive, which will ensure a more equitable dis­tribution of EU assistance.

The 1998 reform proposals cover most product sec­tors. A proposal for the tobacco sector was tabled in January 1998. This was followed in March by a

10 < European agriculturi

Belgium and France

NATURES PROGRES

France m AGRICULTURE B I O L O G I Q U E

77ie Netherlands Germany

review of the olive oil sector, pending a more funda­mental reform. Finally, the Commission will put for­ward proposals for a reform of the wine sector, once it has completed an in-depth analysis of the market. In 1996, the Council adopted a major reform of the fruit and vegetables sector, and the Commission is continuing to monitor the implementation of these changes.

Meanwhile, the commitment to food safety and qua­lity has been strengthened. Initiatives in 1997 inclu­ded new rules on the identification and labelling of beef and moves to consolidate the body of food hygiene legislation. On quality, the Commission continues to work on the protection of traditional and high-quality products.

Continued efforts to promote safety and quality, com­bined with the proposed reduction in prices, mean that the Commission's reform package would provide a new deal for Europe's consumers in the years ahead.

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European Agriculture > 1 1

Promoting α living countryside: new opportunities for rural communities

The role played by agriculture in rural economies in the European Community has evolved over the years. While farming once dominated the rural world, today it accounts for only a minor share of employment in most parts of the Union. Moreover, the trend remains one of decline and this, in turn, has far-reaching effects on rural communities, leading to depopulation and the loss of local infrastructure, such as schools and shops.

This is the pattern in many rural communities but not all. In other areas, different trends can be identified. Changing patterns of work, greater labour flexibility, and early retirement mean more people moving into rural areas, bringing with them different needs and different priorities. The challenges and opportunities facing women in rural areas also need to be addres­sed. Clearly such diverse situations call for local solu­tions to match local needs.

Financing rural development

Depending on the type of measure selected, and the areas the

programmes are located in, there are two sources of finance

available lo Member Stales.

The Guarantee section of the EAGGF will provide co-financing for

early retirement schemes, agri-environmental schemes,

initiatives to promote the afforestation of farm land, and aid for

farmers in Less-Favoured Areas across the whole of the

Community. The Guarantee fund also provides co-financing for

all other rural development measures outside of Objective 1

areas.

The Guidance section of the EAGGF will provide co-financing for

rural development measures in Objective 1 regions, as well as

co-financing for the Community Initiative in favour of rural

development across the whole of the Community.

A greater decentralisation of responsibilities will characterise the

approach fo programming but this would not imply less control

of Community funds. New arrangements are accompanied by a

clearer definition of responsibilities, so that the Member States

take on the major role in the areas of monitoring, evaluation

and financial control. .,

With Agenda 2000, the Commission has put forward an

integrated vision of rural development. It is this policy that is

vital to accompany and complement the reform of the market

sectors of the CAP. It also offers Europe's rural communities a

chance to exploit and develop their vast potential and contribute

to the economic and social cohesion of the Union.

The key to the Commission's Agenda 2000 proposals for rural development is the creation of conditions for regional actors to find new solutions to local problems. The proposals focus on the contribution that the far­ming community can make to the regeneration of rural areas, and to the protection and maintenance of the natural landscape. Assistance would be delivered through integrated rural development programmes that draw on a wide range of measures suited and adapted to different needs.

Among the measures supported are the following: • investment aid to improve farm holdings and to pro­

mote diversification into other rural activities; • help for young farmers setting up for the first time; • training, for instance, to promote sustainable manage­

ment techniques; • initiatives to promote the processing and marketing

of farm products; • assistance for rural infrastructure projects, such as the

renovation of villages, and the construction of links to the Internet;

• support for farmers faced with severe natural or envi­ronmental handicaps, for instance, where the nature of the terrain makes farming difficult;

• schemes to encourage older farmers to take early retirement;

• promotion of afforestation on agricultural land; • payment for the costs involved in promoting agricul­

tural practices that benefit the environment. • Initiatives to promote equal opportunities in rural

areas.

Member States would have the flexibility to address their particular needs, but the programmes must incor­porate one obligatory component: they must include measures that promote farming practices compatible with respect for the environment.

12 < European agriculture

► ► ► LEADERship for rural communities: building on the success of Community Initiatives

A Community Initiative in favour of rural development will build on the experience of the present LEADER initiative and will provide added impetus to EU rural policy and help prepare for future enlargement.

LEADER is based on a bottom-up, participatory and multi-sectoral approach, which encourages rural areas to help themselves. Support is granted to innovative, small-scale rural development initiatives, which can serve as examples of good practice in fields as varied as eco-tourism, cottage industries, the preservation of the natural heritage, and tele-working.

Responding to social concerns: a greener CAP

In Europe, centuries of farming have shaped the land­scape. The diversity and variety of llora and faunae are inextricably linked to agricultural systems. In areas where farming has disappeared, the rural environment has suffered and natural biodiversity has decreased. Of course, not all farming systems produce positive bene­fits for the rural environment and some intensive prac­tices have resulted in a deterioration in the ecological balance and cultural value of the landscape. The increa­sing economic pressures on farmers, to improve com­petitiveness and to intensify or change management practices or abandon land, mean that society can no longer expect farmers to deliver environmental ser­vices for free.

Agriculture and forestry, the main land users in the Community, have a key role to play in the upkeep and management of Europe's countryside. Taken together, these activities occupy up to 80% of the European Union's land area.

While farmers are therefore in a unique position to play an active role in countryside management, such activi­ties can be labour intensive. The knowledge, experience and effort farmers can bring to the protection of the environment can only be mobilised by reforming incen­tive systems.

Since the mid 1980s, the Community has been looking at ways in which to better integrate environmental considerations into all aspects of policy-making. Gro­wing public concern at the damage being caused to the environment by all manner of economic activity, led to the decision in 1986 to place greater emphasis on the environmental implications of policy decided at Com­munity level. In effect, the EC Treaty now calls for environmental protection requirements to be integrated into the definition and implementation of Community policies.

In 1992, the Community introduced obligatory schemes to promote forms of farming that benefit the environment, as well as initiatives to encourage the afforestation of farmland. Since 1992, some 1.35 million agreements have been signed between farmers, national and regional authorities, with the Community providing financial support. These agreements cover the diversity of situations including the promotion of more sustainable use of resources, the preservation of particular areas of environmental interest such as wet­lands, and the encouragement of organic farming

practices and integrated production techniques. In forestry, the scheme has also been well supported: agreements to afforest 500,000 hectares of farmland have been signed since 1992. These initiatives provide new opportunities for rural areas in terms of demands for new services and the creation of new job opportu­nities.

The Commission's Agenda 2000 proposals aim to build on achievements made since 1992, to continue to tackle the root causes of environmental damage, and to find new ways of developing economic benefits from the natural landscape.

Funding for agri-environmental schemes would increase, with Member States obliged to include such schemes within integrated rural development pro­grammes and to look at ways of co-ordinating such activities with other rural development measures, such as investment aid. In order to assess the impact of agri-environmental schemes, the Commission believes that there should be more emphasis on evaluation and the development of agri-environmental indicators.

A similar integrated approach is proposed for afforesta­tion measures to promote greater coherence between these and other measures coming under the framework of rural development legislation.

Schemes to compensate for natural handicaps in Less-Favoured Areas (LFAs) are to be improved and streng­thened. Set up in 1975, the LFA schemes provide "compensatory allowances" to farmers in mountainous areas or in other areas where the physical landscape results in higher costs. In the future, LFA schemes would also cover areas subject to specific environmen­tal constraints, ensure greater coherence with environ­mental needs, and contribute to enhancing biodiversity.

14 < European agriculture

On the markets, the Commission proposes linking direct income aid available under the Common Market Organisations (CMO) to respect for environmental conditions. More specifically, in the beef CMO, incen­tives introduced in 1992 to encourage more extensive beef production systems are due to be increased, provi­ding further impetus towards more sustainable farming methods in what is a key sector of EU agriculture. A similar link between market mechanisms and environ­mental considerations was made in the 1996 reform of the fruit and vegetables sector.

Other matters relating to environmental protection and landscape management include measures to regulate the level of nitrates from agricultural sources getting into the water supply, and rules on the use of fertilisers and pesticides.

The links between farming and the environment are complex and delicate. In its reform proposals, the Commission has sought to strike an appropriate balance between the needs and aspirations of society as a whole, while providing incentives to farmers moving into new areas of activity.

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European Agriculture > 15

Extending the CAP: new horizons, new partnerships

In December 1997, EU Heads of Government took the historic decision to initiate a further enlargement of the Union. The talks, begun at the London Conference held in March 1998, will increase membership of the Union to between 21 and 26 members over the coming years, with the accession of countries from Central and Eas­tern Europe and Cyprus. The move will help to under­pin European stability, while 100 million additional consumers will be added to the largest internal market in the world. Enlargement, however, poses new chal­lenges, not least for the agricultural sector.

The economics of the accession candidates arc charac­terised by a greater dependence on agriculture than in the present Union. Where farming accounts for some 2.4% of EU GNP and employs some 5.3% of the Union's active population, in Central and Eastern Euro­pean Countries, the equivalent figures are 9% and 22.5%.

There has been substantial structural adjustment since 1989 in the countries concerned, but much remains to be done. Infrastructure is a main area where conside­rable modernisation needs to be undertaken. Restructu­ring is also necessary in the agricultural sector. This applies as much to farms themselves as to upstream and downstream industries, like the agro-food sector, as well as in related activities such as the animal feed industry.

Yet, enlargement provides great opportunities. Many EU firms arc already on the ground developing new markets ahead of accession.

Since 1989, a number of special arrangements have been put in place between the EU and the countries of Central and Eastern Europe (CEECs). "Europe Agree­ments" laid the foundation for the talks that started in March 1998. Exchanges of officials, multinational conferences, and other initiatives have all helped to establish strong links that will be needed over the coming years.

The Community has also targeted programmes such as PHARE on helping the CEECs prepare for Union membership. In the agricultural sector these support programmes have covered fields as varied as improving land registries, encouraging new management tech­niques, and promoting the modernisation of the agro-industrial sector.

Agenda 2000 proposes specific pre-accession aid for structural improvements in the farm sector, with funds of ECU 500 million per year from the EAGGF -Guarantee. Priority will be given to measures to improve the efficiency of farm structures and the agri-food industry, initiatives to improve land management, water resources management, the encouragement of economic diversification in rural areas, and programmes to promote a more sustainable approach to agriculture.

A great deal of work will meanwhile be needed to har­monise standards, notably in the fields of veterinary and phytosanitary controls in readiness for the expan­ded Single Market.

The pre-accession aid for agriculture comes in addition to assistance from the Structural Funds for major infra­structure projects. Funding here will amount to ECU 7 billion over the period 2000-2006.

The GAn

The Uruguay Round of multilateral trade talks held under the

auspices of the General Agreement on Tariffs and Trade (the

GATT, known since 1995 as the World Trade Organisation) ran

from 1986 to 1994. In agriculture, important agreements were

reached in the following areas:

• commitments to reduce border protection measures;

• commitments to reduce the use of export subsidies for all

products.

• commitments to reduce the level of domestic support to the

farm sector;

• a "peace clause" up to 2003 to prevent nations taking action

in the WTO against domestic support policies.

• recognition of the equivalence of sanitary and phytosanitary measures (the SPS accord).

16 < European agriculture

Preparing the ground for international trade talks

At the end of 1999, a new round of multinational trade talks begin under the auspices of the World Trade Organisation. The trend is towards greater liberalisa­tion of the farm sector internationally. The agenda for the talks was defined by the conclusions of the previous Uruguay Round. As part of a more open global market, European farmers will witness many important changes early in the next century : increased market access for third country products, less use of subsidised exports and a "decoupling" of public support for pro­ducers from the levels of production they achieve.

The reform proposals set out in Agenda 2000 provide a solid basis for negotiations in the next round of WTO trade talks: .

• cuts in support prices will bring them closer to world market levels and will reduce or eliminate the need to subsidise exports. This will also provide incentives for EU farmers to pursue opportunities in the many growing world markets.

• The increasing emphasis on direct support, which characterises the Commission's proposals for all the main sectors, will lead to a decoupling of direct sup­port from production decisions.

The rules governing trade in agricultural products have to take into account a range of factors. A meeting of farm ministers from the leading trading powers, held in March 1998 in Paris, agreed that moves towards libera­lising trade in the sector need to be set in the context of wider traditions and values, where the social, environ­mental, and consumer dimensions of agriculture are fully recognised.

A level playing field that respects the needs and priori­ties of the international community will be one of the main themes of debate in the next round of talks. For the EU, the correct balance must be struck between reform and the need to maintain the specificity of the European agricultural model.

European Agriculture > 1 7

Towards a new model of European agriculture

The CAP has come a long way in the four decades since its introduction. While its basic principles remain as valid now as they were then, over the years it has adapted to evolving political and economic priorities. The CAP of today places greater emphasis on develo­ping rural economies, on encouraging sustainable forms of agriculture, and on facing up to the challenges at world level.

These form the basis of a new model of European agri­culture for the next century, that will have the following priorities:

• a competitive agricultural sector in a global market place;

• an agricultural sector that places greater emphasis on quality rather than quantity;

• an agricultural sector that protects the environment, preserves rural landscapes, and is concerned with ani­mal welfare;

• an agriculture sector at the heart of vibrant rural eco­nomies;

• an agricultural policy closer to its citizens, with sim­pler rules that can be understood by all;

• an agricultural policy that is more decentralised, in recognition of the richness and diversity of European farming;

• an agricultural policy that establishes a new contract between the European taxpayer and the farming com­munity and which recognises the full range of services farmers provide.

A significantly reformed Common Agricultural Policy and a new policy framework for rural development arc the means for bringing this new agricultural model into being.

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18 < European agricultar

For further information

The Agricultural Situation in the European Union- 1997 Report

Agenda 2000 - for a stronger and wider Union

CAP 2000 Working Documents:

Situation and Outlook - Beef Sector, SEC(97) 819, April 1997 Situation and Outlook - Dairy Sector, SEC(97) 1013, April 1997 Situation and Outlook-Cereals, Oilseeds, Protein Crops, July 1997 Situation and Outlook- Rural development, July 1997 Long Term Prospects - Grains, Milk and Meat Markets, April 1997

Agenda 2000 - legislative proposals in the market sectors and in rural development (COM-1998-158 final)

Agricultural situation and prospects in Central And Eastern European Countries, 1998 edition

Guides-1996-97 editions

Annuals:

Arable Crops (Cereals, Oilseeds, Protein Crops, Non-Fibre Flax) Sugar Olive Oil and Table Olives Wine Tobacco Milk and Milk Products Meat Fruit and Vegetables

Special issues:

G A TT and European Agriculture. 1995 The Agrimonetary System in the Single Market, 1996 Agriculture and Environment, 1997

If you would like more information on European agricultural and rural development policies, please visit Europa, the Commission's web site: http://europa.eu.int/en/comm/dg06

European Commission, Directorate-General VI -Agriculture, Brussels, March 1998. Photo credits: Eureka Slide. Campagne Campagne.

European Agriculture > 19

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