The European Union's Commissioner for Agriculture, Franz Fischler, is a robust, genial man with an engaging sense of humor. He looks as if he would be at home on a farm but modestly disclaims the description of farmer.
"I was brought up on a farm but I cannot call myself a farmer," Mr. Fischler said recently from his office on the eighth floor of a modern building in downtown Brussels.
Mr. Fischler sat down earlier this year with World Grain contributor and international grain trade consultant Tom Sewell for what has become an annual question-and-answer session on current topics in global agriculture.
WORLD GRAIN: How did you react to the chaos at the World Trade Organization's ministerial last December in Seattle, Washington, U.S.? What effect will that have on the agricultural trade negotiations that are set to begin in 2000? Also, what are the principal issues to be addressed in the new talks and what is your view of how they should be resolved?
FISCHLER: Agricultural trade is of particular importance to the European Union, which is the world's largest importer and second-largest exporter of agricultural products. The E.U. has every intention of ensuring that the development of this trade is based on clear, acceptable and sustainable international trade rules. This was made clear in Seattle. Nevertheless, the Seattle meeting failed to start the Millennium Round.
There are some lessons to be learned from this experience. First, as we enter the 21st century, world trade is no longer just the domain of the industrialized countries. Developing countries, which represent about 80% of the W.T.O. membership, must be involved more closely in W.T.O. decision-making.
Second, the legitimacy of W.T.O. decisions must be more clearly demonstrated and the decision-making process made easier to follow. Transparency must be increased, particularly with the coming negotiations.
Third, the general public continues to be concerned – indeed, worried – by the impact of globalization on the environment, health, social standards and cultural diversity. We should not forget that in democratic societies, citizens' and consumers' concerns are the backbone of markets and political action.
The European model of agriculture, based on multifunctional farming, addresses these relatively new issues, and offers a more future-oriented perspective for agriculture than mechanical calls for a total liberalization of farm trade. That is why, for the European communities, the multilateral trade negotiations will have to cover both trade and non-trade issues.
WORLD GRAIN: There have been conflicting reports on whether Agenda 2000 is the maximum the European community wants to go in changing the Common Agricultural Policy or whether it's simply a starting point in the negotiations. How would you describe the E.U.'s position going into these negotiations regarding: 1) income support for farmers, 2) set-aside requirements and 3) export restitutions? Is each subject to negotiation?
FISCHLER: The European community's agenda for the negotiations is quite clear. The 15 agriculture ministers, in September 1999, said that the E.U.'s policy in the forthcoming negotiations shall be founded on the full Agenda 2000 package decided by the European Council. This position is still valid.
As far as domestic support is concerned, the blue and green boxes have been an essential element in providing assistance to W.T.O. members to make progress in the reform process. We are prepared to discuss further reduction in domestic support but it is our view that the concepts of the blue and green boxes should be maintained. (Editor's note: Blue and green boxes represent W.T.O. support measures, blue being non-trade distorting measures and green being environmental ones.)
On export competition, the E.U. is ready to discuss further reduction in export subsidies provided that all forms of support to export competition are discussed. In spite of the commitment under the Uruguay Round to work toward the development of international disciplines to govern the provision of export credits, no rules and disciplines have been developed so far. That is why we firmly believe that in addition to export credits, other forms of assistance to export, such as state-trading enterprises, should be examined with a view to developing agreed upon disciplines that would ensure a fairer competition on the world market.
With Agenda 2000, the European Union has shown its willingness to reform the Common Agricultural Policy. Multifunctionality is the word we use in Europe to describe the fundamental link between sustainable agriculture, food safety, territorial balance, maintaining the landscape and the environment and — what is particularly important for developing countries — food security.
Understanding multifunctionality as a synonym for protectionism and unfair competition may suit the negotiating tactics of some of our W.T.O. partners. But whether deliberate or not, it is a clear misrepresentation of European agricultural policy and its efforts to deliver what both farming and society expect from it.
When I read the recent speeches of my friend, Dan Glickman, the U.S. Secretary of Agriculture, I am struck by the extent to which thinking on either side of the Atlantic is converging. I am not saying that we have reached the point where we could happily read each others' speeches; but on the other hand, I would suggest that this recognition of agriculture's wider role and responsibility — whatever we choose to call it — is a rare example of politicians claiming paternity rather than denying it.
WORLD GRAIN: Many have come to view the payments made to farmers, both in the United States and the European Union, as undermining the influence of market prices as affecting farmers' decisions regarding crops and acreage. Do you agree that such payments reduce the effectiveness of world prices as signaling farmers in the U.S. and E.U.? What limits, restrictions or changes would you like to see in how these payments are computed?
FISCHLER: It is evident that any form of safety net or income support affects the full effect of market prices. But, in the European community at least, we have been moving consistently in the direction of less market-distorting policies. The U.S. Fair Act also was a step in that direction, but it has been supplemented by "emergency packages" that, as they have become a regular feature of U.S. policy, look like a step back toward deficiency payments without the production limiting rules that were a feature of its original deficiency payment regime. The U.S. will have to decide on a policy that fits into one of the W.T.O. boxes and conforms to the appropriate rules.
WORLD GRAIN: Do you think you are making headway in convincing other grain exporters that support programs need to recognize the role of farming in the social fabric and in the environment as well as the bare economics of grain supply and demand? With these factors in mind, is there a limit on how much the E.U. is willing to spend to maintain a status quo in agricultural production?
FISCHLER: There is an increasing convergence of views between the U.S. and the E.U. that farming has a role to play in society which goes beyond its role as a producer of food. But, certainly in the E.U., there is a limit to the budgetary resources that can be devoted to this purpose, nor has the E.U. ever argued that the object of agricultural policy is to maintain a status quo.
WORLD GRAIN: Central and East European countries (CEECs) that are applicants for membership in the E.U. have pressed to have their farmers be made eligible to receive the same income supports offered to the present member countries. Is the resolution of this: 1) dismissing the entreaties of the new member countries, 2) modifying your level of income payments in order to make it possible to spread the payments to farmers throughout the expanded European community, or 3) some other approach?
FISCHLER: Up to now, most heat has been generated in discussing the subject of direct payments, serving to offset losses of income as a result of the reductions in price support. To simply transplant the system of direct payments to the CEECs would be to ignore their special circumstances. Simply grafting our system could provoke macroeconomic distortions and could lead to social tensions in the applicant countries if farmers were given an advantage over other sectors of society through direct income support.
At the very least, this could induce a reluctance to change, hindering the development of sound agricultural structures. It might be better to use direct payments for a transitional period and support restructuring and additional rural development programs. This is a discussion that we have not yet had. From our side, we have consistently argued that available resources would be used most effectively for rural development and restructuring.
However, the problems to be solved must not hinder the process of preparing for enlargement. Much remains to be done in the applicant countries. Agricultural structures and the modernization of all stages of production and processing are still lagging behind.
(Editor's note: As a footnote to the interview, Mr. Sewell added, "There is some ambiguity regarding the European Commission's position over direct payments to the applicant countries. Not long after this interview, Commissioner Fischler said in a public speech that without direct payments it would be impossible to implement supply control mechanisms, such as set-aside. This was widely taken as a hint that these payments would be a requisite for a balanced market. No doubt, all this has to be argued out in the negotiations.")
WORLD GRAIN: Eastern Europe currently presents market opportunities to the West, but the situation is rapidly changing as the former Soviet satellites adapt to a modern market economy with the help of western technical and financial assistance. If the countries applying to join an enlarged E.U. are successful, do you share the view of many E.U. farmers that low-cost produce, including the main grains, from Eastern Europe will threaten their livelihoods?
FISCHLER: Enlargement offers considerable opportunities to the candidate countries in helping them make efficient use of their agricultural production potential. Of course, taking into account the many structural handicaps that most central and eastern European countries still have to overcome, this potential will not immediately be used to the full extent. However, our most recent status quo projections highlight substantial expected developments on CEEC agricultural markets.
We should be clear that new member states must have the same opportunity to develop their long-term production potential as existing members. However, to reap the full benefits of membership, there are economic, social, political and administrative challenges to be met. The current negotiations on accession are about ensuring that candidate countries take the necessary steps to meet these challenges before joining the E.U.
Regarding the costs of enlargement for current E.U. farmers, we are not yet in a position to give a precise answer. To identify the cost of enlargement in agriculture would be necessary to know the timetable according to which accession will take place, how many countries will join the E.U. and in which order, and under which conditions they would do so. Since all three parameters are a matter of substantial negotiation, with the applicant countries only hypothetical and thus highly speculative and uncertain, only estimates could be made.
Having said this, I would like to underline the financial perspectives as approved by the Berlin European Council and implemented by the Inter-institutional Agreement in May 1999. The indicative financial framework that forms part of the Inter-institutional Agreement was established on the assumption of a European Community enlarged by six new member states from 2002.
However, this is not the right moment to speculate on the financial impact of possible results of the negotiations. This also applies in the context of the direct payments issue. Moreover, there is not only enlargement that might have an impact on C.A.P. but also the general development on the agricultural markets. We also have to closely follow what will happen in the framework of the W.T.O. and, if need be, draw the necessary conclusions. How these conclusions might look is an open question.
WORLD GRAIN: How do you think the agricultural sector will be affected by the European Commission's plans for creation of an independent food safety authority, and what role do you expect agriculture to have in the implementation of new regulations? Were you in favor of the approach adopted and why did the E.C. not endorse the idea of following the U.S. model of something like the Food and Drug Administration? Do you think what's been done will be an effective answer to U.S. complaints about politics having too great an influence on food regulations in the European community?
FISCHLER: In January 2000, the E.C. adopted its "White Paper on Food Safety," including the idea of the creation of a European Food Authority. The E.F.A. should have a legal existence and personality separate from current E.U. institutions in order to carry out independently its role in terms of risk assessment and risk communication. Furthermore, the E.F.A. must be guided by the best science, be independent of industrial and political interests, be open to rigorous public scrutiny, be scientifically authoritative and work closely with national scientific bodies.
Scientific opinions will continue to be made available to the European Commission and the Parliament by the E.F.A. as soon as they are available and will be published on the Internet so that all interested parties are kept fully informed.
Legislation and control are the two components of risk management that must be left to an institutional framework with full political accountability. The drafting and making of legislation will remain the responsibility of the European Commission, the Parliament and the Council.
The existing treaty provisions impose constraints on the activities that can be attributed to the E.F.A., but this should not be taken to mean that a possible future extension of its competencies should be discounted. Such an extension should only be considered in light of the experience with the functioning of the E.F.A. and the confidence gained in its operation, including the possible need to change the treaty establishing the European Community.
The annex to the White Paper on Food Safety includes an "action plan" comprising 84 areas in which the E.C. will come forward with proposals. As the E.C. acts as a college (20 commissioners including its president), all services involved have the possibility to get actively involved in the elaboration of the draft texts. This safeguards that the voice of agriculture will be heard, as well as that of industry and all other stakeholders.
WORLD GRAIN: As the European Commission member responsible for the welfare of farmers, many wonder why you've not been more vigorous in espousing acceptance of genetically modified grains for production in Europe. Farmers in America have seen GMOs as a major step forward in efficient production, which raises the question of why the E.U. hasn't been a vigorous proponent of such grains being planted in Europe?
FISCHLER: Keeping in mind the welfare of farmers, the European perspective must be to produce for the market. If farmers perceive that genetically modified grains are widely rejected by the consumer, there is no reason to persuade them of the contrary, even if GMOs provide certain progress in efficiency.
European consumers are not only concerned about food prices, but also about food safety and quality and the environmental effects of agricultural production. European farmers address all these consumer concerns instead of limiting themselves to just increasing efficiency.
Furthermore, European farmers are carefully observing the concentration process in seed and crop protection industries and the American discussion about adverse effects on competition.
WORLD GRAIN: How do you see the dispute with the U.S. over GMOs being resolved? Do you think farmers should be in the forefront of efforts to reassure consumers about the safety of GMOs and modified grains?
FISCHLER: In October 1999, Presidents Prodi and Clinton (of the European Commission and United States, respectively) launched the Transatlantic Initiative for enhancing E.U./U.S. dialogue on biotech issues. In this context, a consultative forum is being established, involving participants representing various stakeholders, including farmer representatives. I am confident this will improve mutual understanding.
Moreover, a multinational protocol on biosafety was agreed upon early this year in Montreal. This agreement creates a framework for international movements of living modified organisms derived from modern biotechnology and will help to avoid further disputes. I hope that the U.S. will soon be in a position to ratify this protocol.
Farmers are, of course, in a key position to judge on constraints and benefits of biotechnology concerning agronomic traits. However, while farmers are involved in risk management because they have to adapt their farming practice, risk assessment is a matter for scientists and regulators.
The safety of GMOs must be examined on a scientific and transparent base. The E.U. is currently revising its rules for the deliberate release of GMOs with the objective to establish approval procedures that are widely accepted and will help increase consumer confidence. Only if consumers are convinced that biotechnology is safe and beneficial will they buy GM products.
The problem might be that the benefits of biotechnology, up to now, are hardly visible for consumers, since genetic modifications have mainly addressed agronomic traits. GM crops with quality traits are expected to be available in the near future and might be able to alter consumer perception of biotechnology.
WORLD GRAIN: Recent reports indicate that export flour sales by mills in the European community have dropped in the current crop year, mainly as the result of new mills being built in former importing countries in North Africa. This reverses the long-time upward trend in European flour exports. What is your view on the prospects for export flour business and the ability of the European Commission to continue to help its mills maintain a dominant share of this trade?
FISCHLER: There has been a drop in both European and global flour exports over the past few years, mainly because the largest importers have steadily increased their flour production capacity. This has affected all exporters.
The E.C. has lost a part of its export volume to traditional destinations like Egypt, Yemen or Algeria. Another factor to be taken into account is that new, so-called "marginal exporters" like Morocco, Tunisia and Turkey have come onto the world market even if these countries normally have to buy their grain on the world market because they are not self-sufficient in wheat.
I consider this decline in world trade in flour to be permanent, especially if you take into account that over-capacity is no longer only a problem of industrialized countries. In this context, there is a need to restructure the milling industry. This is why, in 1999 alone, European community mills have closed 1 million tonnes of wheat milling capacity.
Export refunds applied on wheat flour are strictly calculated on the basis of wheat grain exported in the form of flour. This means that if the export refund applied on wheat grain is 1, the export refund applied on flour exports equals 1.37 because you need 1.37 tonnes of wheat to make 1 tonne of flour. By no means are these export refunds devoted to support the European milling industry or its export capacity.
WORLD GRAIN: Global trade in grain continues to be stagnant, and it is difficult to make a case that a significant upward trend is near. China, often described as needing rising imports, has turned out to be just the opposite in recent years – actually exporting more and importing less. Are you still optimistic about trends in global grain trade, perhaps looking to the economic rebound in Asia? Are there steps that can be taken in agricultural trade negotiations that would significantly increase export volume?
FISCHLER: Global trade of grains should, in the context of W.T.O. multilateral agreements on agriculture, become more liberal and less dependent on any kind of export subsidization. On the other hand, according to most forecasts made by world grain experts, world demand of grain should steadily rise during the next five years.
I do not wish to comment on the quality or validity of those forecasts. But I would say that while I feel optimistic, at the same time one has to remain prudent.
The E.C. has just implemented Agenda 2000. One of its targets is to make E.C. grain exports possible without any subsidy. According to all the studies on global trade for grains, the E.C. will be in a position to export mostly without the help of export subsidization, notably for wheat and wheat products. Furthermore, as in the past five years, the E.C. will create more solid grounds on the supply side (i.e. reducing supply). This is why Agenda 2000 reform includes annual set-aside of 10% of E.C. land devoted to grain production. This is equivalent to saying that the E.C. will take out of the world market at least 20 million tonnes of grain each year.
In this context, the E.C. has done everything to make it possible to achieve the most favorable scenarios and ensuing results described in these studies.