Dr. Franz FISCHLER
Member of the European Commission responsible for Agriculture, Rural Development and Fisheries

Post-reform: What next for EU agriculture?
Agra Europe Outlook Conference

Ladies and Gentlemen, David,

Agra Europe's Outlook Conference has become something of a March tradition for me and, as always, it is a pleasure to be able to join you. This year, however, is also something of a landmark occasion, not because, you may be relieved to hear, I am going to present you with ideas for a mid-term review, nor proposals for a reform, but because it will be my last visit as Agriculture Commissioner.

I know that there is a certain degree of speculation over my future, but I can assure you, this organisation whose various factions have reported my movements so reliably over the last ten years, that it is over and out; that for better or for worse, the CAP and I will be parting company, albeit amicably, at the end of this year.

I would like to begin today by thanking Agra Europe for the contribution they have made, and will continue to make I am sure, to agricultural policy. Information, I have always said, is the key to understanding and appreciating the role that the CAP has to play, and without organisations such as your own, our job as politicians would be made much harder. However, today, rather than looking back at the old reports, what I would like to do is look forward, at agriculture post-reform, and at what is still to be done.

Firstly there is the work that remains in terms of implementing last year's package. Implementation is, as you are all well aware, a national responsibility so rather than go into it too deeply myself, I will leave it to some of the later speakers to deal with. Suffice to say that, from my point of view, I am pleased that Member States are now making real headway with defining their national schemes.

I believe that reform has provided the institutional framework necessary to secure sustainability in rural Europe, and provides a sound basis on which to build further efforts. It allows the CAP to cover the length and breadth of rural Europe more effectively, and I hope that all parties will be able to make full use of the doors that it has opened.

But it's not only the doors opened by reform that are going to shape EU agriculture. It's all change at Europe Central this year: a new Commission, a new Parliament, but most importantly, ten new Member States joining in exactly two months from now. Post-enlargement, EU agricultural policy is set to serve almost half a billion consumers, and cover thousands of hectares of diverse rural Europe. New market outlets and a growing number of consumers will provide new opportunities for farmers, but these must be matched by the high standards that society expects, and that the CAP now supports.

One particular challenge vis-à-vis enlargement was, as you know, making enough money available to support the farm sectors of 25 Member States when the budgetary ceiling for agricultural expenditure had been fixed by the Brussels' Council in 2002. Reform had to deal with the reality that future agricultural policy had to seek greater riches with fewer pennies.

Strengthening the second pillar is one aspect of the CAP that has, in particular, been gaining in momentum over the last decade. And, recognising the increasingly important role it plays, and will continue to play, in our rural areas in environmental, social and economic terms, more and more money has been channelled into this side of the policy. Sustainable agriculture is only possible, after all, if it strikes a balance with overall rural sustainability.

Part of the way that we've improved the value of rural development policy is by modulation - moving money from our current account into a long-term savings scheme. Europe's countryside post-reform will be better served by a wider range of measures and a bigger budget, a pattern that I hope will be continued with future reforms.

Evaluation of its efficiency and effectiveness is ongoing, and a review of the rural development Regulation is due later this year to make sure that all the pieces of the rural jigsaw still fit together neatly.

In this respect, reform has also reinforced the importance of localised decision making and subsidiarity. Agricultural policy never was one that could be dictated from a central seat in Brussels and, as we redefine the geography of Europe, so too must we account for it. With clear parameters set out in the new legislation, it's up to national and regional governments to take advantage of, and manage, the possibilities made available. I may think I know what the best direction is for overall policy, but I certainly don't claim to know the ins and outs of every rural region!

We also hope to boost coherency and transparency of rural development policy in the future by bringing the two existing funding systems together under one roof. The financial perspectives recently proposed by the Commission for the 2007-2013 period foresee the introduction of a single rural development fund, which would not only simplify the regional and national administrative requirements, but also allow it to focus more intensely on the three main objectives post-2006, which are:

1. Increasing the competitiveness of the agricultural sector through support for restructuring;

2. Enhancing the environment and countryside through support for land management; and

3. Improving the quality of life in rural areas by promoting diversification of economic activities.

What is more, whilst rural development expenditure in 2006 will only be equivalent to a quarter of the amount that goes on market support, by 2013, this will have increased to a third.

But it's not just in rural development that the financial perspectives reflect the direction that agricultural policy is taking. The overall objectives for the next framework period also identify sustainable development, citizen interests, and a stronger EU voice as the three main priorities. They tie agriculture, environment and sustainability more closely together by linking them under the same heading: "Preservation and management of national resources", maintain full support for agriculture, and foresee the necessary strengthening of cohesion policy for a European Union of up to 27 within the ceiling set.

Were the proposals to be adopted, they would also continue the pattern that agricultural spending has been taking over the last ten years. CAP expenditure, now represents less than 1% of EU public expenditure, has been in steady decline for the last ten years, and will have dropped further by the time we reach the end of the next budgetary framework period.

Equally telling is the proportion of GDP that agricultural spending occupies. 10 years ago, 0.61% of the EU's GDP went on the CAP. Today it stands at 0.43%, and by the time reform is fully implemented in another 10 years, it will be down to around 0.33%. That's around three times faster than the share of all other public spending has fallen over the same period.

Perhaps more important though, is that successive reforms have strengthened our position in the international field as well. Overall, they've contributed to a cumulative drop of 70% in trade-distorting support, our 'amber' box measures, since the early nineties. They have also significantly reduced the proportion of CAP spending on export subsidies from around a quarter to just 9%. Some argue that this is still not enough, which brings me to the current state of play in the WTO negotiations.

I think we are all acutely aware of the efforts that need to be made in these talks. Last year, the Outlook conference fell, rather fatefully, on the deadline, missed deadline, for the negotiating modalities, and I said at the time that whilst it was unfortunate, it was not the end of the world; that deadlines come and go all the time, but that it did not necessarily spell disaster. And then, just as now, I said that we must focus on progress, focus on reality, and remain focussed on the ultimate goal of trade liberalisation, to the benefit of all parties.

Speaking at the USDA-USAID Export Food Conference last year, JB Penn rightly said that, "trade liberalisation alone won't do the trick". Good governance is needed, sound domestic policies are required, and a differential approach needs to be taken vis-à-vis the developing countries. "From each according to his abilities, to each according to his needs," said Karl Marx, and it's a principle that should be kept at the forefront of the international trade negotiations. Making trade free for all will not make it fair for all.

Hence the EU's long tradition of offering trade advantages to poorer countries, and the pressure it is putting on other developed, and advanced developing countries to follow its example. Our Everything But Arms agreement, allowing the 49 poorest countries unlimited duty and quota free access to our markets from 2009 onwards, is one such model that could be put into practice beyond our borders.

Similarly there is our Generalised System of Preferences, which allows a total of 143 countries and territories to benefit from enhanced access arrangements to the EU market. Both have contributed to our becoming the leading importer of agricultural products from these countries in the world, by a very large margin.

I'm pleased that the Americans have now come a couple of steps closer to us in this respect. Bob Zoellick's recent initiative does show a clear interest in getting things moving again, which is reassuring from this point of view. I'll leave Mr. Ash to go into the U.S. perspective in more detail tomorrow lest I do it injustice!

What I will say however, is that reading between the lines, the latest U.S. communication still suggests that the emphasis is on us. That despite reform, and despite the vast reduction in trade distorting support to levels beyond our Uruguay Round commitments, the implicit assumption is that the pressure is still on the CAP to go further.

To be perfectly honest, it takes quite a lot of gall to stand there and say that our export subsidies should go, but other forms of trade-distorting export support could stay. The Doha mandate was clear in its intentions to discipline all forms of export support, whether it be classified as 'export refund', as in the EU, 'export credit guarantees' or 'food aid for surplus disposal' as in the U.S., 'single desk sellers' in the Cairns group, or 'differential export taxes' as in Argentina.

The same applies when it comes to domestic support. We decided together with the U.S, and I quote, that we should, "reduce the most trade-distorting support measures," as well as the use of the de minimis the loophole that exempts domestic support from commitment so long as it does not exceed 5% of the total value agricultural production or, if it is product specific, 5% of the total value of production of that product.

But, while we clearly agree to the capping of the blue box, thus guaranteeing the irreversibility of the reform process, we will not accept a further reduction in it. Distinguishing between the most and least trade-distorting support is a fundamental principle on which the WTO Agreement on Agriculture was based and the Doha declaration confirmed.

The usefulness of this distinction is evident from past CAP reforms in order to open the path to farm policy reform; we have always insisted that we need this distinction in the future. But it is also evident that the same will apply for the U.S. when the inevitable choice of reform of the U.S. Farm Bill comes; thus the U.S. request for a tailor-made solution concerning the proposed "capping" of the blue box in the EU-U.S. framework agreement. Precisely so that when the inevitable reform from trade distorting to less trade distorting subsidies is made, the choice between coming back down to earth with a bump, and floating down with a parachute is readily available.

Because achieving the commitments we outlined in the EU-US agreement is not something the U.S. can achieve by maintaining the status quo, not only because their level of domestic support has consistently increased in recent years, but also because they have systematically used the de minimus to exempt substantial parts of this support from reduction.

For example, in 1999, support classified as de minimus, the bulk of which compensated for market price declines and was therefore heavily trade distorting, accounted for a whopping 51% of the total U.S. Aggregate Measure of support.

All this underscores that a strategy of hiding behind the EU is doomed to fail. All players have to address their weak spots. We did not agree that the EU would do all the work whilst others sat back and put their feet up.

So what our partners should remember, is that whilst every foot forward on their part is one step closer to progress, it does not necessarily constitute another step forward on ours. We have proved our commitment time and again, we have moved time and again, but we have to draw the line somewhere.

This Round is about giving as much as it is taking, and where we, the developed countries are concerned, the emphasis is rather on the former. It's time we started to see more flexibility from the other big players.

And putting all the emphasis on one party only, is neither going to solve the problems, nor help us to achieve our objectives. Scrapping the CAP may be the answer to the ideological prayers of some, but it isn't going to mark the way forward in the international field any more than it would help us to achieve our internal priorities: agriculture requires support from governments for the simple reason that it serves multiple functions and provides a range of non-marketable products that go well beyond the production of food.

Ladies and Gentlemen,

It may not have been the end of the world on the 31^st of March last year, but time is now getting on, and still we seem to be stuck in a rut. Two major opportunities, in Cancun last December, and then in Geneva again before Christmas, have come and gone, and still our tree is bearing no fruit. If this spring comes and goes as well without the sign of at least some blossom on its branches, then we are really going to hit some difficult terrain. Every day that is lost leaves a mountain that is larger to climb.

We are going to continue pushing for progress, and we remain on standby for as and when other parties are willing to step down and step forward. Our proposals represent feet that are firmly planted on the ground. Others however still seem to be hovering several feet above.

Similarly, we are committed to pushing on with our internal policy progress. I expect a decision to be taken on our cotton, tobacco and olive oil proposals later this month, and I hope we will be able to present a carefully considered proposal for a reform of our sugar regime before the summer break. I say carefully considered not only because this sector is more complex than some others, but also because of the impact that its reform could have on the developing countries in terms of preference erosion.

So far from being a done deal, I'm afraid I will leave a legacy of unfinished business. But I suppose that's what agricultural policy is about: however much you do, however much progress you've made, it's just one part of an ongoing project. European agriculture post-reform may be more sustainable, but nothing remains set in stone. Demands change, objectives change, and so too must agricultural policy. I believe we're now on course internally, but achieving the same externally will remain a priority for us in the coming months.

Thank you.