Commission reform regulations are presented
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CTA. 2003. Commission reform regulations are presented. Agritrade, April 2003. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/52878
The European Commission's proposed regulations for further reform of the...
The European Commission's proposed regulations for further reform of the cereals, rice, dried fodder, and dairy sectors have been published. The regulations cover: direct aid schemes; support for rural development; the common organisation of the market in cereals; the common organisation of the market in rice; the common organisation of the market in dried fodder; the common organisation of the market in milk and milk products; the levy on milk and milk products. In addition to reiterating the general concept behind the process of CAP reform, the explanatory memorandum sets out the impact of the proposed reforms. The Commission claims that the 'adjustments proposed will complement the EU's international objective of ensuring that developing countries fully benefit from the expansion of world trade, while maintaining food security'. This will be achieved through reducing export availability, 'thereby contributing to stronger world market prices, which is in the interest of the agricultural sector in developing countries'. The reform process will also 'provide a sustainable and predictable policy framework for the European Model of Agriculture'. The Commission also emphasises that the reform process will require additional budgetary expenditures since farmers' incomes will need to be maintained. With regard to individual products the cereals-sector proposal would result in: a 5% reduction in the cereals intervention price to €95.30/tonnee from 2004/05; the abolition of seasonal corrections; and the end of intervention for rye. Area payments will be increased from €63 to €66/tonne with these payments being included in the single farm payment. For protein crops the current support payment will be maintained and converted into a crop specific area payment of €55.57/ha. For rice a one-step reduction in the intervention price by 50% to an effective support price of €150/tonne, in line with world prices, is proposed, with direct aid being increased from €52/tonnee to €177/tonne. €102 of this will be part of the single-farm payment, paid on the basis of historical rights, while €75/tonne multiplied by a specified yield will be paid as crop-specific aid. A private storage scheme will be introduced, to be triggered when the market price falls below the effective support price. In addition special measures will be triggered when market prices fall below €120/tonne. Proposals are also put forward for durum wheat, dairy products, starch, potatoes, dried fodder, seeds and nuts. Against this background a single farm payment will replace most of the premia under different common organisations of the market. This will cover arable crops, beef and veal, milk and dairy, sheep and goats, starch potatoes, grain legumes, rice, seeds, dried fodder. As the Commission explains it 'this single farm payment will be broken down into payment entitlements in order to facilitate their transfer. Each entitlement will be calculated by dividing the reference amount by the number of hectares, which gave rise to this amount in the reference years'. The new payment system will be linked to cross compliance with EU standards in the fields of environment, food safety, animal health and welfare and occupational safety. Accompanying these measures the EU will strengthen the rural-development pillar of the CAP. Comment: The development of the most immediate significance to the ACP concerns the rice sector, where the reduction in the EU price is likely to lead to dramatic income losses for Guyana and Surinam. According to the FAPRI study (see last edition) rice-sector reform will also lead to a 20% expansion in EU rice production, despite an estimated 41% decline in the EU market price of rice. With such an increase in production, EU exports are likely to rise substantially. These predicted developments sit uneasily with the European Commission's assertion that reform will reduce export availability. The sustainability of the European Model of Agriculture will be achieved by reducing the attractiveness of the EU market to below that of the world market, thereby doing away with the need for both tariff protection and export refunds. It should be noted that when the European Commission asserts a reduction in production as a result of reform, this is in comparison with production levels which would have been attained without the introduction of reform and is not with reference to current production levels. With reference to current production levels, The FAPRI study suggests that post reform production levels will be higher in all major products except barley and beef. It should be borne in mind that with the budgetary ceiling fixed, further reform is likely to be more difficult to secure agreement on, since new expenditures will need to be financed from saving elsewhere in the CAP budget. This will require hard negotiations in the EU Council and this could well slow down the pace of reform, particularly if the US$/euro exchange rate makes export refunds more expensive.