LONDON, Sept 21: In what ought to be regarded as a welcome news in most of agriculture-producing developing countries the OECD’s first Economic Survey of the European Union released earlier this week has called for farm support to be cut and made less market-distorting.

The report recognised that the reform of Common Agricultural Policy in 2003 was a major step forward but said that to be even more effective the link between subsidies and farm production needs to be broken completely.Farm support could be better targeted so that, for example, it could be of more benefit to lower-income farm households and to the poorer farming regions.

The survey also called for the EU to act together with the world’s other big traders (presumably the US) to reduce farm subsidies and open up its markets to the rest of the world.

The survey identified the services sector as the main weak spot in the EU’s internal market.

Differences in national laws make it hard for a service provider in one country to do business across Europe. The report is cautiously optimistic that the EU Services Directive, to be implemented by the end of 2009, will help create Europe-wide markets but said that member governments need to stop protecting providers from outside competition.

Competition is weak also in network industries such as electricity, gas, telecoms, transport, ports and postal services.

To create more competition in energy markets, the report recommended improved linking of national markets to create regional or pan-European markets. The networks also need to be fully separated from the generation and supply activities. The legislative proposals announced on Thursday by the Commission on this issue are said to be a welcome development.

The report highlighted good progress in financial markets but called for changes to Europe’s fragmented banking industry. Establishing an effective single euro payments area (SEPA) to make it easier to transfer money from one country to other it said needed to be accelerated.

It also recommended getting better value for money from spending on the regions of Europe, continuing to modernise and strengthen competition law and removing restrictions on immigration from the EU’s new member states.

The Economic Survey of the European Union focused solely on EU-wide policies. National policies of EU countries which are also members of the OECD are reviewed in the OECD’s regular economic surveys of individual countries and of the euro area.Launching the OECD’s first Economic Survey of the European Union the OECD’s Secretary-General, Angel Gurría, said: “A vibrant single market is central to Europe’s long-term prosperity.”

He added: “The European Commission is making tremendous efforts to get rid of barriers to trade, and we fully support them”. But member states need to provide a fresh impetus to clear the rules and red tape which are stifling competition and blocking cross-border trade and investment.