WG Interview: A European Eye on Agriculture

by Suzi Fraser Dominy
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A native of Absam, in the Austrian Tyrol, Franz Fischler’s agricultural roots go back to his youth; at just 14 he was running his grandparents’ small farm and went on to study agriculture at the University of Agricultural Sciences in Vienna.

Fischler’s career as a representative of the agriculture sector began in 1979 when he joined the Tyrol Chamber of Agriculture, becoming Director of the Chamber in 1984. In 1989 he was appointed Federal Minister of Agriculture and Forestry. Fischler has been the European Commissioner for Agriculture and Rural Development since 1995. Since the appointment of the new Commission in September 1999, his responsibilities have also included Community fisheries policy.

WG: Commissioner Fischler, please explain how decoupling of supports for cereal farmers from production is going to work in the wheat sector? What will the support programs look like for wheat in the 2005 crop and then a few years later, and what are the main differences from the present program?

Fischler: The decoupling of support, through the introduction of what we call the "Single Farm Payment," will work the same way for all agricultural activities. First, the farmer will receive payment entitlements calculated on the basis of the number of hectares and the amount of all direct payment he received during the reference period 2000-2002. Then, every year starting in 2005, the farmer will be able to activate these entitlements and get the corresponding yearly payments provided that he is maintaining in good agricultural and environmental condition a number of hectares at least equal to the number of payment entitlements that he wants to activate.

From 2005 the Single Farm Payment will replace almost all specific coupled support programs that exist now. But for grains, the change will be less dramatic, since already today payments for arable crops are not product-specific. Nevertheless, Member States will have the possibility, if they wish, to put in place a dual system for arable crops, maintaining part of the support (up to 25%) in the form of coupled payments.

The advantage of the new system, compared to the existing system of support for grains, is that it allows quicker and smoother adjustments to market needs. The new support regime will also be a tool to promote agricultural practices that protect the agronomic value of the land and the environment in rural areas. Furthermore, the E.U. decoupled support regime will be less trade distorting and will become much simpler and easier to manage and control.

In summary, the new E.U. direct payment regime will be the tool to promote a sustainable European agriculture, with competitive agricultural activities contributing to the economic and social development of our rural areas and the preservation of the environment.

WG: With intervention and set-aside provisions essentially the same, what do you project to be both the short-term and long-term impact on actual production of wheat, across the entire present 15 Member States, and is it likely that national production levels will be more directly affected?

Fischler: Several impact studies — both within the Commission and externally — have been made, and all these studies suggest that the new decoupled regime will change little in the short or long-term trends for the production of wheat in the E.U.

WG: In trading a single farm support payment for direct crop price support, the expectation in America had been that this would result in more market-oriented agriculture. Support, though, in these broad terms has not had that effect, and any reduction in production and supply has come about as a result of poor weather rather than producer area cutbacks. Are you concerned about the same result, particularly when intervention may continue?

Fischler: Firstly, production patterns in America have not been affected by the direct decoupled crop support they provide, but by the increasing reliance of ex-post, and rather very coupled support that "corrected" negative price developments. It is this insulation of U.S. farmers from price developments that explains why their farm support has not led to more market orientation.

Secondly, market orientation does not mean less production; it means production at a level that prevailing market prices can sustain. This can be achieved only if support is done in such a way as to leave the choice of what to produce to the farmer, irrespective of the level of support he/she receives.

Thirdly, since their introduction in 1992, the E.U. direct payments have been the same for all cereals. And since 2002 they are the same for all cereals and oilseeds. In other words the E.U. grain sector has been supported via partially decoupled payments for a certain time now. Therefore we do not expect that further decoupling will introduce major differences in terms of balance between the different cereals and oilseeds.

Fourthly, intervention will continue, only for certain cereals, and at levels that are below world market prices under normal conditions. Rye, on the other hand, whose support was clearly above world prices and whose limited outlets resulted in a large share of production ending in intervention, will be excluded from intervention in the future. What we expect is that our intervention mechanism will work as a safety net, to be triggered only on rare occasions, and will not have a significant influence on the farmer’s cropping decision.

WG: Are continuation of special and even new premiums for durum wheat an acknowledgement that the market itself will not produce the quality of grain that is required by millers and food manufacturers? Paying farmers in specific areas for growing durum from certified seed of selected varieties is about as direct an involvement of government as to what is produced as there has ever been: this doesn’t sound like genuine reform.

Fischler: I don’t know what is your definition of a "genuine reform." What I can tell you is my own definition: a genuine reform contributes to more sustainability. In the case of durum wheat, many people in the concerned regions told us that decoupling without any production obligation would lead to land abandonment in less favored areas where durum wheat seems to be the only agricultural alternative. Therefore, because one of the aims of the Common Agricultural Policy (CAP) reform is to maintain agricultural activities, specifically in less favored areas, maintaining durum wheat production in those regions is a legitimate objective. And introducing a support to durum wheat linked to the quality rather than to the quantity doesn’t sound to me like a non-genuine choice.

WG: Is it correct to conclude that the CAP changes are designed to reduce E.U. cereal grain prices to world market levels? What do you expect to gain from this? Focus has been on eliminating the need for export restitutions, as well as expanding use of internally grown grain for feed in channels where imports have been sizable in recent years — do these points reflect your goals?

Fischler: Envisaging the CAP reform only from the point of view of cereals price competitiveness on the international markets would be a mistake. I’m sure that you have noticed that there are few changes regarding the regulation of the E.U. cereal markets: the only modifications are the exclusion of rye from intervention and a modest reduction of what we call the "monthly increments," the result being a slight reduction of the intervention price.

Our expectation is that the intervention regime will function as a safety net, which means that in most circumstances our internal prices will be significantly higher than the intervention price and that there will be no permanent need to use export subsidies to achieve a balanced E.U. market.

WG: How do you feel agriculturally related negotiations are proceeding towards the entry of the new member countries of Central and Eastern Europe? Have these new members all accepted the implications of the reformed CAP that won’t offer their farmers the same level of support as previously enjoyed by E.U. producers?

Fischler: The negotiations on agriculture with the new Member States were in principle ended at the meeting of the European Council in Copenhagen in December 2002. The new Member States got a fair and balanced deal in this area. The most urgent problems for agriculture in these countries are structural, and consequently a major emphasis was put on supporting them with various schemes in the field of rural development, including a number of entirely new measures that were tailor-made for them. In fact, the amounts allocated to the new Member States for rural development are significantly higher in relation to the size of the agricultural sector than those received by the 15 existing E.U. Member States (E.U.-15).

As far as direct income payments are concerned, I think that the compromise reached in Copenhagen, which included a gradual phasing-in of direct payments and the possibility for national top-ups, was satisfactory.

We will propose that for the new Member States, until they reach the level of direct payments of E.U.-15, there will be no modulation and no use of any financial mechanism limiting the payments that could come into effect for E.U.-15 from 2007.

What remains to be done at present is to adapt the Act of Accession to the September 2003 CAP reform decisions of the Council as well as adapting these decisions to take account of the new Member States. I am confident the relevant decisions will be taken in due time before accession.


WG: At the time the CAP reform was adopted at the end of June, you spoke enthusiastically about the "strength" this would give in the Doha Round negotiations. Do you still believe that you did your homework sufficiently to gain the support of developing nations that traditionally have been strong critics of the CAP in the course of trade negotiations?

Fischler: As a preliminary remark, the idea that agricultural subsidies in the developed world — and in particular the CAP — were ultimately responsible for the breakdown is a false one. Negotiators didn’t even get a chance to address this issue in the final round of discussions (green room), because the Chair closed the meeting due to the impasse on the so-called Singapore issues (investment, competition, trade facilitation and public procurement).

Then we should always keep in mind the fundamental reason for CAP reform, which was to render E.U. farm policy justifiable to and acceptable by our citizens. That being so, it is clear that the same CAP reform that was before Cancun termed as a condition for success turned into a condition of failure by many of the same partners that were so generous in sending their congratulations. The same applies for the E.U.-U.S. framework agreement, which requested also a precondition for success in Cancun during the Montreal mini-ministerial.

Clearly the above developments were anything but satisfactory. One should look very closely to the reasons for this, and should explore any ways possible to make developing countries better understand the real stakes for negotiations. We all need to do our homework, and we certainly can, and should, improve our efforts to explain our policies and their impact on others. Yet, looking into what was on offer for developing countries, it is hard to find arguments supporting the simplistic notion that this was a bad deal for developing countries, and therefore that no deal was sort of a success.

The E.U. had in fact arrived in Cancun having already shown its commitment to developing countries and the development agenda. Our existing concessions to developing countries have helped the E.U. to become the main importer of farm goods from the developing countries, importing more agricultural products from this group than our major trading partners combined. We had the "Everything But Arms" agreement behind us, which opened up, unilaterally, the E.U. market to the 49 poorest countries in the world without demanding political or economic concessions. We proposed that this concession should be extended by our developed country partners and advanced developing countries. We also proposed that developed countries should use all appropriate means to ensure that zero-duty access for developing countries’ exports of agricultural products represents no less than 50% of their total imports from developing countries.

In addition, a number of other provisions were on offer for developing countries: tariff escalation would have been addressed, and special and differential treatment provisions, such as a special safeguard mechanism, and arrangements for special products, would have been provided for developing countries.

But the reason these offers were not considered enough is linked to two factors. Firstly, there was a lack of real commitment for negotiations by many, which resulted in more divergence of positions at the same time that a move by all towards convergence was needed. Secondly, there was the continuing misperception that WTO is about doing away with all policies. WTO is about reducing trade-distorting policies. These do not only exist in the developed world, and they are not limited to domestic support.

In summary, while we agree that the developed world has definitely to do more than the developing world, and we consider that most commitments must come from the developed world, we also firmly believe that an agreement requires all to move.

WG: Europe is generally viewed as opposed to genetically modified food from the viewpoint of both producers and consumers. Do you see a time when farmers will be eager to embrace GMOs, even participating in persuading consumers of their safety?

Fischler: Contrary to statements that are sometimes made in the media, several GM crops have been authorized for cultivation in the E.U. GM maize, for instance, has been cultivated in Spain for a number of years. GM crops are required to meet strict conditions for the protection of the environment and human health before they get clearance for cultivation. The E.U. regulatory framework ensures that each GMO is submitted to a rigorous risk assessment, and it provides for strict labeling rules, which are a prerequisite to gain consumer confidence and allow consumer choice.

But farmers also should have the choice of whether to adopt GM crops or not. This means that the conditions for ensuring that GM crops can co-exist with conventional and organic crops have to be established. In July, the Commission issued a Recommendation on guidelines for co-existence, which provides general principles and an indicative list of management measures that Member States may implement to ensure co-existence.

I am in favor of having freedom of choice for farmers and consumers among products that are healthy and safe for the environment. The new E.U. regulatory framework for the cultivation of GM crops is now well advanced, and new GM varieties are currently in the process of authorization. European farmers will be able to decide to grow GM crops on a larger scale if they see a market for their produce.

WG: Agricultural marketing systems that will separate various sorts of crops — organic, non-GMO, etc. — will be very expensive to create and to operate. Have you considered the need for such systems and whether the E.U. should be directly involved?

Fischler: Recent surveys among European consumers showed that there is a demand for clear labeling rules and a separation of GM and non-GM crops. Two new E.U. regulations on GM food and feed and on traceability and labeling of GM products will ensure freedom of choice for consumers. The new regulations request operators to label GM products and establish the conditions for the traceability of GM food and feed throughout the food chain. However, a product will not have to be labeled and traced in the case of adventitious or technically unavoidable presence of GMOs below a certain threshold.

Product separation and labeling is not new to E.U. agriculture and the food industry. For example, for meat products, traceability is required, and also for a number of products of specified origin, which have to be produced according to high quality and purity standards. Labeling of GM food products has been required under the Novel Food regulation since 1997. The industry has built up experience in this area, which will no doubt be useful in meeting the requirements of the new regulatory framework.

WG: Thank you.