Impact of enlargement on CAP reform

Summary

Enlargement is expected to create great imbalances in the EU's agricultural market and pose a heavy burden for the EU budget under the current rules. The EU believes that the CAP as it is would not be suitable for the enlarged Union, and that support for rural development should play a much greater role than market measures in the future.

The agricultural sector in most of the Central and Eastern European countries is more fragmented, inefficient and traditional than in the current Member States. However, smaller family farms that practice more organic farming, for example in Poland, have experienced less problems in the area of food safety and health than the EU's industrial-scale farming that has led to such epidemics as BSE and foot-and-mouth disease.

The candidate countries reject the EU's position that their farmers should not be immediately entitled to direct income support. They object to any radical CAP reform before enlargement, which would exclude them from the process of decision-making on future agricultural policy. The EU will partially revise its CAP in 2002, as decided at the Berlin European Council in March 1999. Agenda 2000, adopted at the Berlin Summit, does not foresee a fundamental reform before 2006. However, it also excludes the possibility that future Member States would receive full CAP payments prior to that date.

Nevertheless, the ten Central and Eastern European candidates will receive 520 million euro per year in the seven year period from 2000 to 2006 to prepare for full participation in the CAP through the new Special Accession Programme for Agriculture and Rural Development (SAPARD).

Main Policy Options

The main policy decisions facing the EU in the area of agricultural negotiations are:

• Whether to gradually phase in direct farm payments to the new Member States while they adapt their agricultural and rural development policies to the EU or whether to apply the CAP to the new members immediately.
• Whether to reform the Common Agricultural Policy before extending it to the candidate countries or not.

Issues

The EU has opened negotiations on agriculture with Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. Negotiations on agriculture with Bulgaria, Malta and Romania have not yet started.

The Belgian Presidency of the EU will organise negotiations on the veterinary and phitosanitary issues in agriculture in the second half of 2001. Negotiations on other agricultural issues, including the controversial direct payments to farmers, will start in the first half of 2002, under the Spanish Presidency.

Positions

The EU is expected to adopt its common positions on agricultural issues, in particular veterinary issues, phytosanitary issues and transition measures, by the second half of 2001. Common positions on those agricultural issues that have not been solved and in particular issues of major importance such as direct payments and quotas, should be adopted in the first half of 2002. The 2002 elections in France, the largest beneficiary of the CAP funds, will be decisive for the final EU position on agricultural negotiations.

The EU does not want the candidate countries to receive direct payments immediately after they join the Union. However, all the candidate countries demand equal treatment with the current Member States. A report by Poland's government says that Polish farmers would suffer from unfair competition in liberalised agricultural trade if they are not eligible for EU farm payments.

The Danish Agricultural Council called for the delay of the enlargement until 2006 to avoid cuts in farm support to existing Member States. In a position of April 2001, the Danish farmers' association said that a two-year delay of enlargement would give the EU time to finish the CAP reform, making enlargement affordable.

The ten Central and Eastern European candidates demand full incorporation into the CAP in their negotiation positions on agriculture.

Poland's government requests incorporation "into the full range of CAP as well as structural instruments, including the participation of Polish farmers in benefits provided by price, income and structural mechanisms". It insists on the right to direct payments to Polish farmers after the accession. Poland, the candidate country with the largest farm sector, requests production quotas "at the level of natural potential for environment-friendly agricultural production on the one hand, and ensuring maintenance of stable income sources for agricultural population on the other".

The Polish government has published a study claiming that Polish agriculture will not be too big a burden for the CAP budget. According to officials, Poland expects to receive 3 billion euro per year in direct payments for its farmers. The report says that Poland's farms will not cost the EU much because direct payments are linked to the size of farms, yields and number of animals, and not to the number of farmers. Poland has one of the highest numbers of farmers in Europe, but Polish farms are very small on average.

The European Landowners' Organisation (ELO) wants to "steer the CAP towards a more integrated rural policy which acknowledges and supports the food, forestry, energy, recreational, s ocial, environmental and cultural landscape roles of land management in a more balanced way". It says that this can be characterised as "a switch in emphasis from producers to land managers".  

The Deutsche Bank Research says that the enlargement requires a reform of the CAP. Its report, "EU agricultural policy: a plea for real reform", says the prospects for a reform are "better than ever before because, in actual fact and in the eyes of the politicians, the public purse is empty and, like it or not, taxpayers cannot be squeezed for any more taxes or social-security contributions". It adds that "the time is ripe for agricultural reform, since the economic and ecological indeed the moral damage of former policies is very much in evidence". The study expresses hope that "the developing and agricultural economies as well as the EU accession candidates will pressure the Union to denounce the old-EU lobby for current subsidy policy so as to erode its political clout".

Euronatur , a joint platform of German environmental, agricultural, animal welfare and consumer associations, has called for a "rigorous reorientation" of the European Union's agricultural policy. Euronatur says that the primary objective is no longer a continuous increase in productivity. It lists new priorities, such as:

• production of quality food,
• protection of consumers' health,
• protection of nature and environment,
• farm animals welfare,
• demonstrating economic prospects for farmers and the rural areas.

Timeline

The Swedish Presidency intends to open negotiation on agriculture with Latvia, Lithuania and Slovakia by the end of June 2001. The opening of agricultural negotiations with Bulgaria, Malta and Romania has not been foreseen yet.

The EU has not yet defined its negotiating position on agriculture. However, it made clear in the Agenda 2000, adopted by the Berlin European Council in March 1999, that potential new Member States would not be eligible for direct payments to their farmers until 2006.

The financial framework of the CAP for the period 2000-2006, reached in Agenda 2000, foresees a revision in 2002. No major reform has been foreseen before 2006.