Introduction

Various issues have shaped EU 'Agenda 2000' resolutions on reform of the Common Agricultural Policy: future Community enlargement to the East and the next WTO multilateral negotiations. Other factors, such as globalisation and competition, as well as internal market imbalances and the need to simplify CAP costs and procedures have also had a decisive impact on the reform.

A compromise situation has resulted that offers only partial satisfaction to all concerned. While the underlying principles - price reductions, the decoupling of compensatory payments from production, and the separation of market policy from income support policy - are to be welcomed, the actual measures agreed fall far short of market needs. Price cuts are in many cases insufficient and some critical decisions have been delayed. This risks hampering Europe's food and drink industry both in terms of supplying agricultural materials and the competitiveness of its products.

The CIAA position

Price reductions and export refunds

CIAA finds that the price reductions agreed under 'Agenda 2000' are not enough to ensure competitiveness of EU products on world markets. For the same reason it is unfortunate that a decision on dairy reform has been delayed until well into the new millennium. These reductions, such as they are, will only go some way towards relieving the situation in sectors like cereal products and beef, where budgetary and quantitative restrictions imposed by WTO are increasingly inhibiting the use of export refunds. In fact, the role of the export refund mechanism fully bridging the difference between EU and world price levels will continue to be crucial in many sectors of our industry where significant differences in price levels still apply.

Aid to agriculture and its impact on industry

A shortage of basic agricultural materials has to be avoided in the process of decoupling market policy from income support policy. To be fully effective, all CAP measures need to provide both efficient production and an adequate supply of commodities, while ensuring equal terms of competition across the EU.

The alignment of aid under the CAP reform will disfavour the production of crops like sunflower seed, ignoring trends in market demand. There is a need to encourage specific crop quality and also processing characteristics - an issue that is not addressed in the reform.

CIAA has expressed opposition to any introduction of Community-wide ceilings on direct aid payments to farmers, since these could have adverse effects on supplies to the food and drink industry. Caution should also be applied to the limited re-nationalisation and cross-compliance decisions in 'Agenda 2000'. As an example, 'Agenda 2000' provides a well intentioned opportunity for Member States to apply discretion and flexibility in the use of direct payments (up to 20%) for funding of agri-environmental schemes. Yet this measure risks creating major market distortions, precisely because of its discretionary nature.

Production constraints

In the longer term, CIAA supports the principle of market liberalisation and believes that the EU should examine the progressive phasing out of constraints on agricultural production. To this end set-aside measures, for example, should be eliminated.

Various alternative functions are requested from the agricultural sector: protecting the environment, shaping the landscape, conversing land to recreational oriented activities. However, this process should not be allowed to hamper agricultural productivity and on no account should its cost be borne by the food and drink industry.

Conclusion

The 'Agenda 2000' reform is an important development but inadequate in the light of the future accession of Central and Eastern European countries to the EU. Moreover, these measures leave insufficient room for manoeuvre for EU negotiators in WTO multilateral trade negotiations.

This summary is an extract of the CIAA position PAC/042/98E-Final.