In a rare success for the UK presidency, EU farm ministers have agreed to a reformed sugar regime to operate from next July. Sufficient sweeteners had to be offered to the most vociferous opponents to get them to accept a deal, although one had to be reached before too long given the WTO deadline of next May and the fact that the regime itself would expire in the summer.
Ministers agreed to a slight cut in the depth of the price cut, and to an increase in the rate of compensation. The European Commission and ministers compromised on a 36% cut in the price of sugar (a relative marginal reduction in the original figure of 39%), and a 4.2% increase in compensation for farmers. They will thus now receive compensation covering 64.2% of the loss incurred by the price cut. There is a also a more generous compensation scheme for inefficient European sugar producers who will be forced to halt production because of the price drop. Extra compensation will be given to farmers in countries that give up 50 per cent of their production, a move that will principally benefit Italy and Spain.
Finland benefits from a special deal that allows beet farmers in one of the least competitive sugar producer countries in Europe a special aid of €350m so they can continue supplying he one remaining beet producer in the country. Why not import sugar from elsewhere which is what mostly happens anyway.
However, these side payments should not distract attention from a substantial reduction in the guaranteed price. In other words, a deal has been struck that will not bust the budget or fail to curb uneconomic production in the sector.
The new compromise proposal – the second to be tabled at this week's EU farm Council – offers significant sweeteners for various countries, in particular Italy, one of the most vociferous opponents of the reform. Poland, Latvia and Greece still refused to endorse the compromise. The producer price for sugar will be reduced in four stages, with a cumulative reduction over four years of 20%, 25%, 30% and 36%.
The deal has come under criticism from both third world NGOs and industrial suger users. Some development experts suggested that the EU had been forced to offer more compensation to inefficient European farmers at the expense of their more vulnerable sugar cane rivals. 'Developing countries have been sacrificed in order for Europe to reach a deal', said Luis Morago, head of Oxfam International in Brussels.
The UK Industrial Sugar Users Group deplored last-minute concessions that would still leave the EU price about double that in the rest of the world. 'This deal takes the easy way out by simply dumping increased compensation costs on consumers and industrial users.' In fact the EU internal reference price will be €404 per tonne, about 40 per cent above the current spot price. Moreover, the world price could rise if uneconomic EU production is withdrawn and bioethanol actually takes off in a significant way.
For all the criticism, the deal was probably as good as could be obtained given the opposition and will bolster the EU's position in world trade talks.
Thursday, November 24, 2005
Tuesday, November 15, 2005
Changing shape of budget
The CAP budget for agricultural markets and the SFP has been scaled back to a mere €43,280 million in 2006, or €51,051 million when one adds in rural development. However, it is the composition of the budget that is in some ways more interesting. Of course, by far the greater part these days goes on direct aids to farmers (€34,817m).
If one looks at the market support budget, the largest budget line is now for fruit and vegetables at €1,544m, followed by €1,494m for the wine lake and €1376m for sugar. 'Textile plants', effectively cotton subsidies, come fourth at €969m: these are, of course, very controversial in the current WTO talks in terms of their impact on poor West African countries.
Milk products and cereals, once the biggest items, now come 5th and 6th respectively, although it should be remembered that payments now largely take the form of direct aids.
If one looks at the market support budget, the largest budget line is now for fruit and vegetables at €1,544m, followed by €1,494m for the wine lake and €1376m for sugar. 'Textile plants', effectively cotton subsidies, come fourth at €969m: these are, of course, very controversial in the current WTO talks in terms of their impact on poor West African countries.
Milk products and cereals, once the biggest items, now come 5th and 6th respectively, although it should be remembered that payments now largely take the form of direct aids.
DG Agri has a French head again
For a long time, DG-Agri was known as a French fiefdom with a French head of the bureaucracy, many French and Francophone staff and even a canteen that was supposed to serve the best food in the Commission! For some time now DG Agri has had a Spanish head, but on 1 January he will be replaced one of his deputies, French national Jean-Luc Demarty.
However, this may not be a sign of a return to old style agricultural politics. An alternative view is that it reflects the decreased significance of DG Agri with the real power over the future of Europe's farmers now in the hands of DG Trade. Indeed, Le Figaro has claimed that Paris lobbied without success to get a French head of trade - the job has gone to Irishman David O'Sullivan.
However, this may not be a sign of a return to old style agricultural politics. An alternative view is that it reflects the decreased significance of DG Agri with the real power over the future of Europe's farmers now in the hands of DG Trade. Indeed, Le Figaro has claimed that Paris lobbied without success to get a French head of trade - the job has gone to Irishman David O'Sullivan.
Sunday, November 06, 2005
Where does the CAP cash go?
In a letter to European Voice CAP campaigner Terry Wynn MEP points out that little information is made available on who gets the large sums of money spent on CAP. Only Denmark, the UK, Estonia, Sweden and Slovenia (now joined by Belgium) make the information available.
When it is made available, it is quite revealing. Wynn points out that UK figures show that Lincolnshire receives three times more in agricultural subsidies than the north-west of England combined and has only a third of the number of farms. He points out that there is no disclosure of where the money goes in France despite the fact that it receives a quarter of CAP expenditure.
The Belgian payment agency, BIRB, has now posted details of the recepients of CAP money. At the top of the list is the sugar refinery in Tienen which received €91.9 million in 2004. At the bottom is the Sacred Heart pyschiatric hospital in Ypres which received €148.70.
There was considerable political resistance to the publication of the information. The agriculture minister in the federal government is Sabine Laruelle, a Walloon Liberal, who happens to be a former president of the Walloon farmers' union. She said she would not release names and amounts and that what was happening 'leads only to a witch hunt', pointing out that 'People focus on examples such as the Queen of England.'
Meanwhile, Yves Leterme, the Christian Democrat head of the Flemish regional government complained about efforts by commissioners Fischer Boel and Slim Kallas (audit and anti-fraud) to get national governments to disclose who gets what from the CAP regime. Leterme said that if the Commissioners were minded to make statements 'which intrude against our constitutional rights to the protection of privacy, then they had better keep their mouths shut.' However, Belgian prime minister Guy Verhofstadt decided in favour of disclosure.
This is public money and EU citizens are entitled to know where it is going. Publication may also serve as a deterrent to fraud which remains a persistent problem in the CAP.
When it is made available, it is quite revealing. Wynn points out that UK figures show that Lincolnshire receives three times more in agricultural subsidies than the north-west of England combined and has only a third of the number of farms. He points out that there is no disclosure of where the money goes in France despite the fact that it receives a quarter of CAP expenditure.
The Belgian payment agency, BIRB, has now posted details of the recepients of CAP money. At the top of the list is the sugar refinery in Tienen which received €91.9 million in 2004. At the bottom is the Sacred Heart pyschiatric hospital in Ypres which received €148.70.
There was considerable political resistance to the publication of the information. The agriculture minister in the federal government is Sabine Laruelle, a Walloon Liberal, who happens to be a former president of the Walloon farmers' union. She said she would not release names and amounts and that what was happening 'leads only to a witch hunt', pointing out that 'People focus on examples such as the Queen of England.'
Meanwhile, Yves Leterme, the Christian Democrat head of the Flemish regional government complained about efforts by commissioners Fischer Boel and Slim Kallas (audit and anti-fraud) to get national governments to disclose who gets what from the CAP regime. Leterme said that if the Commissioners were minded to make statements 'which intrude against our constitutional rights to the protection of privacy, then they had better keep their mouths shut.' However, Belgian prime minister Guy Verhofstadt decided in favour of disclosure.
This is public money and EU citizens are entitled to know where it is going. Publication may also serve as a deterrent to fraud which remains a persistent problem in the CAP.
Tuesday, November 01, 2005
Group opposed to sugar reform grows
Poland has joined the eleven countries led by Spain who are opposed to the Commission's proposals for reform of the sugar regime. Just four of the opposing countries - Greece, Italy, Poland and Spain - would be enough to block reform under the qualified majority system.
This latest development is causing concern in the Commission and the UK presidency. The WTO has declared the current regime illegal and the current regulation expires next June which would lead to chaos if nothing is put in its place.
The Commission has to think of some way of buying off opposition without rendering the whole reform pointless. The opposing states are calling for smaller price cuts over a longer period with more compensation and it is difficult to see how this can be squared with the WTO judgement or the EU budget.
It might be possible to include the option of partial decoupling for states such as Italy who feel they are worst hit by the price reduction, although it is questionable whether keeping small Italian sugar producers in business is compatible with the spirit of the reform. Certainly national compensation envelopes for sugar producers are still under consideration, but the sweetener would have to be significant.
A further complicating factor is that the opposition countries are suggesting that cuts should be applied initially just to regions with a surplus of production. If one interprets that as countries with B quotas, leading sugar producers would be hit, notably France and Germany where up to 20 per cent of overall production quotas are B quotas.
So this is all about winners and losers rather than a rational reform strategy that would be helpful for the EU as a whole. As June approaches, no doubt some sort of reform, with more side payments, will be devised.
This latest development is causing concern in the Commission and the UK presidency. The WTO has declared the current regime illegal and the current regulation expires next June which would lead to chaos if nothing is put in its place.
The Commission has to think of some way of buying off opposition without rendering the whole reform pointless. The opposing states are calling for smaller price cuts over a longer period with more compensation and it is difficult to see how this can be squared with the WTO judgement or the EU budget.
It might be possible to include the option of partial decoupling for states such as Italy who feel they are worst hit by the price reduction, although it is questionable whether keeping small Italian sugar producers in business is compatible with the spirit of the reform. Certainly national compensation envelopes for sugar producers are still under consideration, but the sweetener would have to be significant.
A further complicating factor is that the opposition countries are suggesting that cuts should be applied initially just to regions with a surplus of production. If one interprets that as countries with B quotas, leading sugar producers would be hit, notably France and Germany where up to 20 per cent of overall production quotas are B quotas.
So this is all about winners and losers rather than a rational reform strategy that would be helpful for the EU as a whole. As June approaches, no doubt some sort of reform, with more side payments, will be devised.
Bulgaria, Romania accession in trouble
Preparations for integration into the CAP remain 'areas of serious concern' for both Bulgaria and Romania just fourteen months away from their planned accession to the EU. To those who say cynically 'we have been here before', noting that outstanding problems when ten member states joined were glossed over, two points need to be borne in mind:
1. The EU is a much less confident and ferbile state following the effective failure of the Constitution
2. The problems with Bulgaria and Romania are more serious than those in the earlier wave of East European entrants.
Food safety is a major area of concern, with the Commission noting deficiencies in both countries in terms of animal disease control and regulations relating to BSE. Romania has made a little more progress in some areas, but both countries have failed to make progress in setting up an Integrated Administration and Control System.
The tone of the Commission report suggests that the warnings issued may be more than the usual routine pleas to get a move on. The situation is to be reviewed in April/May of next year when the postponement of accession by one year may be recommended.
1. The EU is a much less confident and ferbile state following the effective failure of the Constitution
2. The problems with Bulgaria and Romania are more serious than those in the earlier wave of East European entrants.
Food safety is a major area of concern, with the Commission noting deficiencies in both countries in terms of animal disease control and regulations relating to BSE. Romania has made a little more progress in some areas, but both countries have failed to make progress in setting up an Integrated Administration and Control System.
The tone of the Commission report suggests that the warnings issued may be more than the usual routine pleas to get a move on. The situation is to be reviewed in April/May of next year when the postponement of accession by one year may be recommended.
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