Compromise wins the day in CAP reform war

Minister has achieved much of what he sought in a damage limitation exercise, writes Seán MacConnell.

Minister has achieved much of what he sought in a damage limitation exercise, writes Seán MacConnell.

It was difficult yesterday to interpret who had won the war in the agreement which emerged in the early hours of the morning on reform of the €40 billion Common Agricultural Policy.

The Irish Minister for Agriculture, Mr Walsh, arrived back home tired, but triumphant, claiming to have curbed the excesses promised by the European Commission in its original proposals last year.

The CAP, he said, remained intact. Payments would continue to come from Brussels. These would be protected in the World Trade talks and the policy framework would ensure a more market-orientated and sustainable agriculture.

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On the other hand, the Austrian Agriculture Commissioner, Dr Franz Fischler, was cock-a-hoop at having found his place in European history by conquering the CAP and breaking the link between production and direct payments in the so-called "decoupling" proposal.

He had also succeeded in reducing payments to larger farmers to finance a new rural development policy and introduced cuts which would prevent the resurgence of butter mountains.

Everyone seemed happy with their lot except the large Irish farming organisations who have complained that the cuts in milk market supports will cost them and the Irish dairy industry millions over the next decade.

In fact, all the players told the truth and the most talked about and understood part of the agreement, "decoupling" was achieved by Dr Fischler.

On support payouts, the Union expenditure on arable aid accounts for 75 per cent of the budget. Dr Fischler's agreement has ensured that three-quarters of this payment will be subject to mandatory decoupling from 2005 onwards.

This is a tremendous success for the Commissioner and for the Union, which will now be in a position to protect these payments in the World Trade Agreement talks in September in Mexico.

Over much of Europe the single payment for EU farmers, independent from production, will become a reality and member-states which were opposed to the proposal, now accept decoupling as a principle.

Mr Walsh, who had worked closely with the French in opposing the original reform proposals, has also achieved much of what he sought in what was a damage limitation exercise.

There was a proposal to gradually cut direct payments to farmers who get more than €5,000 annually. This has been reduced by 1 per cent to 5 per cent and Ireland will retain €34 million annually of this so- called "modulation", losing €6 million annually. The retained money will be used for rural development purposes.

The original proposals put forward last year could have resulted in a loss of €464m in direct payments in the period 2006-2010.

Ireland was also opposed to decoupling, fearing that farmers might abandon the land altogether if they were allowed to collect money for doing nothing in the future based on payments made in the past.

Aided by France and Spain, the decoupling of direct payments agreement has ended up as a menu of options for member-states who can implement the levels of decoupling best suited to regional needs.

In Ireland's case this will mean it is unlikely that the suckler cow premium, which supports beef production in the State, will remain as is and Ireland won the right to have a slaughter premium of €80 remain unchanged.

Ireland and other EU countries will be allowed to retain 50 per cent of the ewe premium as it is and the supplementary ewe premium payment for farmers in disadvantaged areas remains coupled.

Full implementation of the decoupling agreement will only take place, said Mr Walsh, following extensive negotiations with the social partners. It was only in the area of milk price support cuts that the Minister came under fire from the farm organisations.

Under Agenda 2000 proposals, the support prices being paid for butter and skim milk powder were being progressively cut by 15 per cent on each product.

The Commission had sought a further overall cut of 10 per cent on both but settled for leaving the skim milk powder reductions at the original 15 per cent and reducing the butter price support by a total of 19 per cent, which included the Agenda 2000 cuts.

The Irish Co-operative Organisation Society has estimated that by 2007 this reduction will have cost the Irish dairy sector €327 million, costing farms a net income reduction of €141 annually even after allowing for compensation of €186 million over the period

However, this compensation in the form of a dairy cow premium, was one of the successes being claimed by Mr Walsh, who said it had pushed the compensation up from 56 per cent to 81 per cent.

This new dairy cow premium will not be subject to decoupling until the reform is totally completed.

The Minister also managed to get additional butter intervention which was not supported by any of the other farm ministers at the talks when he proposed it.

The farmers' figures are correct, but only if they continue to produce low-quality products for intervention and do not take Dr Fischler's advice to produce what consumers want.