Farm policy reform: the European experience

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Farm policy reform the European experience Dan
Rotenberg, Counselor - Agriculture Delegation of
the European Commission to the U.S. Domestic and
trade impacts of US farm policy November 15, 2007
Holiday Inn Capitol

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Outline

• CAP has been radically reformed since 1992
• Main stages 1992 (Mac Sharry reform), 1999
  (Agenda 2000) and 2003 (Fischler reform)
• On-going process sugar, F and V, wine, health
  check
• Reforms driven by both internal and external
  factors
• Internal budget considerations, EU enlargement,
  environmental concerns.
• External trade impact and WTO implications

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The CAP from Past to Present
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CAP reform at a glance

• From product price to direct producer support
• gradual elimination or reduction of support
  prices into safety-nets
• partial compensation of product support drop by
  shift to producer support
• to decoupling of direct aids
• single farm payment based on historical
  references
• requiring compliance with set of existing
  statutory standards
• and to a better balance of support
• enhancement of Rural Development policy
  instruments to meet new standards
• shift of funds from market support to rural
  development
• financing new market reforms with
  redistribution of direct aids

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2003 CAP reform key objectives

• European model of agriculture
• a competitive EU agricultural sector
• environmentally friendly production methods
• quality products
• contribution to rural landscapes
• dynamic sustainable rural economy
• a minimized impact on world stage

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2003 CAP reform and DDA negotiations a
pre-emptive action

• Decoupling of payments means shifting direct
  payments
• to the green box (non-trade distorting payments)

• Prices reduction means reduced need for export
  refunds

• The EU has done its homework with its CAP
  reform
• -move on domestic support
• -move on export subsidies

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The sugar case reacting to international pressure

• EU25 key sugar player (production 20 million
  MT 14 of world production net exporter 4.7
  million MT of exports and 1.9 million MT of
  imports more than 300.000 producers in 21 MS)
• Key elements of support intervention price,
  quota system, border protection, preferential
  access, export subsidies.
• But not sustainable EBA (DFQF from 2009) and WTO
  challenge (sugar panel April 2005).

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Sugar reform and its impact

• Internal prices cut by 36 and abolition of
  public intervention
• Farmers partially compensated of income loss
  through direct payments (merged into the Single
  payment scheme)
• Restructuring fund to encourage uncompetitive
  producers to renounce to their quotas
• Impact production to fall (6 millions MT),
  exports to disappear, imports to increase.

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The effects of the CAP reform

• Internally
• Externally

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The path of CAP expenditure
EU-25
EU-10
EU-12
EU-15
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The decline share of CAP budget
Agricultural Budget from 0.63 in 1990/92 to
0.45 in 2005/06 and 0.35 in 2013
Share of the EU agricultural expenditure in the
Gross National Income of the European Union
(1991-2013) - (constant 2004 price)
0.70
0.65
0.60
Share of CAP budget in the EU GNI
0.55
- 46
0.50
in
0.45
0.40
0.35
0.30
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
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Reduction of export subsidies since 1992
-80
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Evolution of EU role in world agricultural trade

• EU agricultural trade structure balanced
• move from quantity to quality
• EU agricultural exports mainly (70) in high
  value added products
• price-dependent bulk commodities represent just
  7 of EU exports
• Net export position of the EU decreased in key
  sectors
• most of this decline is driven by CAP reform
• most gains go to Southern Hemisphere (Brazil)
• EU largest market for developing countries
• EU first importer and first exporter of
  agricultural products

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EU net export share (reform impact)
A declining share of EU net exports on world
markets
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EU net export share (pre-reform)
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The EU domestic support impact on beef
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and the evolution of EU beef trade!
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Imports from developing countries (2005)
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Conclusions on EU farm policy reform

• Key factors
• - consumers concerns
• - budget pressure
• - WTO commitments
• - EU enlargement
• Key elements
• - decoupling (ends subsidy hunting)
• - conditionality on payments
• Key lesson Farm policy reform is a marathon,
  not a sprint

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Thank you for your attention !
dan.rotenberg_at_ec.europa.eu www.eurunion.org