June 28, 2003	Saturday	Rabi-us-Sani 27,1424

BRUSSELS: European Union farm chief Franz Fischler has a new spring in his step. Having fought for over a year to shake-up the bloc’s wasteful farm policies, Fischler finally struck gold on June 26 as the bloc’s 15 farm ministers gave in to demands for a total overhaul of the 45-year old Common Agriculture Policy.

The EU’s hard-won farm policy revamp looks set to have repercussions far beyond the bloc, with officials in Brussels confident the deal will breathe new life into flagging world trade talks and help poor countries’ farmers.

“This decision marks the beginning of a new era,” said a triumphant Fischler. EU governments have also hailed the breakthrough accord as a boon both to farmers at home and in developing countries and say the deal will strengthen the EU’s hand at World Trade Organisation talks on expanding global trade.

Flushed with victory, Fischler and others have warned that they now expect a similar effort by the United States. “Unilateral disarmament is not on,” Fischler warned, adding: “The ball is now in the camp of other countries such as the US whose agricultural policies continue to be highly trade-distorting.”

There is no denying that the shake-up is significant. Clinched after 16 hours of non-stop talks, the revamp breaks a long-standing and much-disputed link between EU subsides and farm production. Instead, of production-related handouts, farmers will get a single, direct payment rewarding them for meeting food safety and environmental standards.

By snapping or “decoupling” the subsidy-production link, the EU will in effect be doing away with millions of euros in financial incentives which over the years have encouraged European farmers to produce the EU’s notorious wine lakes and butter mountains. With less surplus food to dispose of, there are also hopes that the EU will stop dumping its excess products on world markets and in poor countries.

“We are saying goodbye to the old subsidy system which significantly distorts world trade and harms developing countries,” said Fischler. With farm subsidies swallowing up to half of the EU’s annual budget of almost 100 billion euros ($115 billion), the reform also means the bloc will have more money to spend in other sectors. Ministers have agreed that some of the subsidies will be given for rural development, animal welfare and environmental protection.

EU officials are especially hopeful that the package will boost WTO trade talks, give the EU additional clout in the world trade body and polish the bloc’s reputation as a firm believer in free trade.

Brussels’ farm payments have long been a bone of contention at the WTO, with the US, Australia, Brazil and Argentina as well as many poor nations accusing the EU of holding up world farm trade liberalisation by insisting on retaining farm subsidies.

Using the WTO argument to press for change, Fischler had warned EU governments that failure to reform farm policy could end up scuppering the Doha Development Agenda, launched by trade ministers in the Qatari capital in November 2001. Progress in negotiations, which also include services such as telecommunications and industrial goods, will be reviewed by WTO ministers in September at the Mexican resort of Cancun.

Initial reaction from Geneva to the EU deal has been cautiously optimistic with WTO chief Supachai Panitchpakdi predicting the agreement will help move the stalled talks forward.

EU officials are also hoping to win over other critics. Calls for an end to EU farm handouts have also come in recent days from the United Nations which warned in its latest world economic survey that rich countries should begin eliminating agricultural export subsidies and stop the dumping of agricultural products in developing countries. Subsidies and high tariffs in agriculture were “in direct contradiction” to the principles of the new trade round that has placed development issues at its core, said the report.

The picture is far from perfect, however. Fischler had to offer several compromises to win EU states’ backing for the reform. Although a severance of subsidies from output will start from 2005, EU states may also delay the move until 2007. In the key cereals sector, a minimum rate of 75 per cent “decoupling” will apply — not the full break Fischler wanted.

In a sop to France, the main beneficiary of EU farm subsidies, Fischler also abandoned cuts in minimum prices for cereals that Brussels guarantees to farmers.

Deprived of their time-honoured pay-outs, European farming lobbies are not as thrilled as their governments with the accord, saying it would lead to agriculture being abandoned in large swathes of the countryside. French farmers say the reform will have heavy consequences for the future of farming and for the role of farmers in society.

But for the first time in EU history, governments have refused to kowtow to farmers, however powerful. Europe’s new focus is on consumers and the multilateral trading system. And that must be welcomed.