The European Union has decided to dramatically revise its farm support policy, maintaining high subsidy levels but tying them to farm existence rather than production.
The move away from production-related subsidies was hailed as a reform that could breathe new life into stalled World Trade Organization agriculture negotiations.
“This decision marks the beginning of a new era,” EU farm commissioner Franz Fischler said in a statement announcing the June 26 agreement.
“Our farm policy will fundamentally change. Today, Europe has given itself a new and effective farm policy. The bulk of our direct payments will no longer be linked to production.”
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Fischler said it would help the EU carry its weight at WTO talks.
Trade talks have been stalled in part because Europe was unable to promise reductions in production- and trade-distorting subsidies as it tries to clear the way for new entrants and deal with farmer opposition to subsidy cuts.
Reuters News Agency reported that European Union trade commissioner Pascal Lamy told a U.S. business group the hard-fought deal would give the EU new flexibility in WTO talks, but only if the United States and other trading partners were willing to put their own farm programs on the negotiating table.
“The farm bill cannot go untouched,” Lamy said, referring to legislation signed last year that boosted U.S. crop and dairy subsidy payments by $57.1 billion US from the previous farm bill.
Lamy said he also would use the “negotiating credit” provided by the new EU farm package to go after state trading enterprises in Cairns Group countries that have a monopoly control over agricultural exports or imports.
The EU’s farm deal allows member countries to “maintain a limited link” to subsidize production.
It does not necessarily reduce subsidy spending but makes money available to farmers in block sums if they maintain their land, operate in an environmentally friendly manner and respect animal welfare rules.
WTO director general Supachai Panitchpakdi called it a “substantial achievement” that could help break the WTO deadlock.
“I definitely welcome this,” he said. “At least it could lead to opening up of discussions on moving the agenda in agriculture forward.”
Ted Menzies, president of the Canadian Agri-Food Trade Alliance, said from his Alberta farm that it sounds like a breakthrough even if it is not as radical a reform as Canadian free traders would have wanted.
“Some of the reforms are headed in the right direction, separating production levels in some crops from production,” he said.
“I think this means we will go into WTO talks in Cancun, (Mexico, in September) with a much more optimistic attitude. Maybe we’re reaching the point where we can come out of this with something positive.”
Australia, a leading WTO proponent of trade liberalization, was typically unimpressed.
“As long as payments are linked to production, farmers are shielded from market realities that might otherwise be telling them to produce less,” Australian agriculture minister Warren Truss said in Canberra. “After weeks of debate and with a mountain of evidence that the CAP (Common Agriculture Policy) needs to change, EU ministers have adopted what can best be called a marginal and mediocre change. Unfortunately, self-interest has again ruled the day and the addiction to subsidies prevails.”
A spokesperson for Canadian Trade Minister Pierre Pettigrew said, “Canada believes that this is encouraging, and could lead to progress in Doha round negotiations.”
Pettigrew is to host a meeting of U.S., European, Latin American and Asian trade ministers and WTO chief Supachai Panitchpakdi in Montreal next month.
