The European Union's Approach to Agricultural Policy

By

Mariann Fischer Boel
EU Agriculture & Rural Development Commissioner

at the

European Institute
Washington, DC
September 15, 2005

Ladies and gentlemen,

I’m very pleased to be with you today to talk about the European Union’s approach to agricultural policy.

Actually, I say “approach,” but it’s significant that the title you gave me for my address says “approaches,” in the plural. Why is this important? Because it highlights that we are trying to achieve a number of different things through farm policy.

This is one of the messages that I’ve been trying to get across here in Washington during two days of meetings and presentations.

And may I say, I’ve been very pleased by the response I’ve had. Not only have I been very warmly welcomed; I’ve also seen a real willingness to listen and an eagerness to understand.

The EU and the US don’t always take the same line on issues such as farming and global trade. But when we have to debate particular points, these are debates between friends.

And it’s healthy that such debates should arise. They remind us that, on both sides of the Atlantic, there are vigorous traditions not only of farming and trading but also of free thought. It’s been hugely refreshing and stimulating to hear points of view from experts in the US during my visit here.

The new policy background: a reformed CAP

I’ve been given a number of topics to talk about today. But before I come to them one by one, I need to fill you in on some background that will tie them together for you.

All discussions about agriculture taking place in the European Union have to be seen in the light of ground-breaking reforms agreed in 2003 and 2004.

I spend so much time talking about these back in Brussels that I could almost believe the whole world should know that our Common Agricultural Policy, or “CAP,” has been reformed.

Unfortunately, the realist in me says otherwise. Even in Europe, many politicians don’t know it; many media commentators don’t know it; many citizens don’t know it. So it’s quite possible that the message hasn’t got through just yet to the right parts of Washington, let alone the Mid-West!

Nevertheless, the policy shift in question really is fundamental.

The central element is a new-style subsidy to farmers called a “single farm payment.” The single farm payment is based on historical subsidy receipts and land area, rather than on current production.

To receive their single farm payments, farmers don’t have to produce anything. But they do have to meet demanding standards of environmentally friendly land management, and public and animal health. This new link between subsidy and farming practice is called “cross-compliance.”

So the shift we’re talking about here is a switch from support for production to support for farmers. It gives the profession a new freedom to look for the best returns available on the market. Public money is no longer one of the main variables steering production choices. Instead, it pays for the public goods and services we want: an attractive, healthy environment and a high standard of food safety.

The reforms agreed are also giving a shot in the arm to our wider rural policy. Direct payments to farmers – with the exception of the smallest – are being top-sliced, and the money is being siphoned into funds for rural development. I’ll come back to rural policy a little later.

Adding value

The policy decisions which I’ve just described have huge implications for one of the topics of today’s presentation – added-value agriculture.

I need hardly say that, in agriculture as in most sectors, the battle to add value is a battle that we need to win.

For the foreseeable future, there will be a large international trade in bulk farm commodities, and it will usually make money – for some. People around the world will always need to eat staple foods. And the oceans will continue to be criss-crossed by ships carrying grain from the Americas or butter from Oceania.

But as trade agreements put pressure on import tariffs, not everyone can be a winner in the bulk market. At the same time, other sorts of market are opening out, as wealthier populations demand high-quality foods with characteristics worth a premium – taste, production method and so forth.

With its enormous range of specialised products, the European Union has a tradition of catering for such markets and wants to build on that tradition. Indeed, many of its smaller farms probably must do so if they want to stay in profit.

Our recent CAP reform is designed partly to help us keep a sharp competitive edge in the high-quality market.

With single farm payments giving them basic income security, farmers should no longer be chasing subsidy. Instead of having one eye on support programmes, they should have both eyes on the market. This should liberate them to come up with more of the innovative products that consumers crave.

Describing this process in a paragraph in a speech makes it sound easy. Of course it’s not easy. But I do believe that our reforms are putting farmers and the agrifood business on a firmer footing to compete at their best.

However, while we’re encouraging our farm sector to fight hard in the added-value markets, I feel that some of our trade partners are trying to disarm us of one of our most suitable weapons.

I’m thinking here of geographical indications (“GIs” for short) – those food and drink terms like “Parma ham” or “Rioja” that carry the name of a place and evoke particular traditions and qualities.

GIs are one of the thornier issues in the agricultural section of the Doha Round talks. We like them; some countries don’t. I certainly won’t try to resolve that debate today.

What I would like to do is get across to you that, if we in the European Union make a fuss about GIs, we’re not simply trying to be difficult. Many of our farmers and food and drink producers really do see their well-known traditions and associated product names as one of their best hopes for competing internationally on the basis of quality rather than subsidy. But only if those names cannot be unfairly copied.

There is a certain logic to saying that “Champagne” should come from the Champagne region!

The issue of GIs is going to be tricky in the Doha Round – and it’s not a sideshow for the EU.

Rural development policy

The push for competitiveness and added value also forms part of our wider rural policy.

The EU’s approach to rural development is both deeply important to the Union’s well-being, and wide-ranging.

Important - because rural areas cover about 90% of our territory and are home to about 50% of our population. We cannot push them to the margins of policy.

And wide-ranging - because we face very different challenges from country to country and from region to region.

These challenges are reflected in a new blueprint for rural policy from 2007 to 2013, recently agreed within the EU. The document sets out three “axes” for action, which are:

• the competitiveness of farming and forestry;
• land management; and
• diversification of the rural economy and the quality of life in rural areas.

In many of the central and eastern European states that joined the EU in 2004, we have to put a high priority on upgrading the structure of farms and the farm sector.

Some of these farms will prosper in the EU by their own unaided efforts. Many will not survive, whatever we do. But there is a middle category, which can do well if public money gives them a helping hand for a time, to make up for a lack of investment over the last few decades.

The alternative is to allow rural unemployment to climb, driving people to over-crowded cities.

In other EU states, an issue of more concern is to relieve pressure on the environment – making sure that the “countryside” remains worthy of the name.

The environment has been moving up the EU’s agenda in recent years. In terms of agricultural and rural policy, we address its needs in several ways.

I’ve already mentioned the concept of “cross-compliance” – the dependence of farm subsidy payments on the respect of conditions related to environmentally friendly land management and public and animal health. This should set a baseline for environmental practice in farming, food security and animal welfare.

But we believe that for farmers, foresters and land managers who go beyond the baseline, making special efforts to look after our landscape and keep it beautiful, there should be extra public money available. After all, we’re talking here about public goods and services – things which most people wish to have access to but which the market cannot easily provide.

So within our rural development rules, Member States can set up several sorts of schemes to reward the keepers of our countryside for their efforts.

A third task is to help businesses and homes get the infrastructure and services they need. Many people and firms are dissuaded from moving to rural areas because there will be no broadband connection waiting for them or no bank.

Public funding can help bring together the critical mass of basic services needed for life in the countryside to become viable.

In the European Union, we like to run rural policy at the lowest administrative level possible. Even my excellent staff can’t be expected to predict from Brussels every detail of the problems which face farmers in northern Finland or aspiring new companies in rural Portugal.

On the other hand, this hands-off approach has thrown up a few problems in the past. There has sometimes been an imbalance across the EU as a whole – with some countries focusing very sharply on the environment, while others have prioritised restructuring but neglected other tasks.

Of course we’re certainly not looking for total symmetry across the EU. But in order to get a general consistency, we’re putting together a high-level plan that will set out overall goals and link these to rural programmes in individual member states.

Renewable energy and biofuels

I’ve mentioned the environment several times today so far – mainly with regard to land use and management. But we’re all aware of wider environmental concerns, which nevertheless also have links with farming.

The debate which surrounds global warming and the Kyoto Protocol is too large for me to address in detail today: I don’t think it’s up to me to bring the EU and US positions together in the space of a few minutes!

But let’s agree at the very least that we’re all giving some thought to alternatives to fossil fuels – whether these will run out in 50 years or 500 years.

With this in mind, pushing back the boundaries of what we can do with bioenergy and biofuels isn’t a fashionable distraction: it’s sensible policy.

The EU has set itself some demanding targets. By 2010, we want renewable energy to make up 12% of our overall consumption. By the same year, 5.75% of our transport fuel should be biofuel.

I’m encouraged by what I’ve already seen happening in the EU bioethanol sector. New plants, operating on the cutting edge of technology, have opened in several Member States. The market is modest for the time being, but demand is growing and the know-how is there.

Agriculture has a contribution to make. I hope that growing energy crops will become more attractive over the next few years as technologies and markets develop.

Already, the reforms which I’ve outlined today give farmers the freedom to seize market opportunities when these appear. But for the time being there’s a sweetener: a special aid of €45 for every hectare devoted to energy crops, subject to certain conditions.

We believe this is the right kind of incentive to help the sector through its early growth stage.

However, theory must submit to practice. So the [European] Commission will report on the success of the energy crop subsidy by the end of next year.

In the mean time, external experts are taking a look at everything that can be done at present within the CAP to promote bioenergy.

And my department in the Commission is heading up an investigation into the prospects of biofuels. They will report back early next year.

When they do, I fully expect them to set out a huge potential for the future. Agriculture must play its part in this future: supplying raw materials, helping to widen our range of alternatives to unpredictable fossil fuel supplies and showing the public that farming can still give us the things we need.

******
Ladies and gentlemen, I think I’ve come towards the end of my allotted time for today.

I hope that I’ve been able to make clearer the logic which lies behind the European Union’s approaches to agricultural policy – just as I’ve learned so much about US policy thinking during this visit.

In any international negotiation or other discussion, we must always remember that there usually is a logic to the other side’s position – and it’s our duty to work hard to grasp it.

So I’ve been extremely grateful for the chance to do so much explaining and listening on this visit to Washington.

And now I’m ready for your questions if you have any.