In the preceding section we have summed up the objectives we consider that the CAP should have and the instruments needed to achieve these objectives in the long term. Legislation and payments for environmental services and services which help to achieve regional development are necessary instruments. We also observed that market price support will not be needed with time. Apart from the fact that market price support is not necessary to achieve the objectives we would like, removal of this type of support would allow greater scope to provide resources for consumer, environmental, animal welfare and regional issues.
As such it would be desirable for the EU’s common market regulating measures, with the exception of border protection, to be removed at some future point. The basic principle should be that all sectors should be reformed at the same time in order to avoid an imbalance of profitability between different agricultural goods. Care should be taken that the reform takes place under socially acceptable forms.
It is reasonable for direct payments to be paid out under a limited period after the reforms in order to facilitate changes and re-structuring of the agricultural sector. Direct payments should give affected producers the maximum possible flexibility in decision-making, so that resources are not tied up in unprofitable production. The size of the need
for such support may be judged based on prevailing conditions in each sector.
It may be reasonable to retain border protection during an interim period. However, special attention must be paid to consumer interests in maintaining a certain import.
However, reform of the CAP is a process which is influenced by many factors. Ultimately it is a matter for negotiation between Member States, in which various interests within the Union must be taken into consideration. The European Union is also a negotiating party in a number of international organizations, whereof the negotiations in the WTO are of major significance to any reform of the CAP. International agreements, mainly from the 1992 UN Conference on Environment and Development in Rio and the 1996 World Food Summit in Rome involve commitments which must be borne in mind in a reform of the CAP. Negotiations concerning an enlargement of the European Union to the East also have a major influence on Common Agricultural Policy. A reform of the CAP would also be affected by other factors such as market developments, economic developments, etc. both inside and outside the Union.
When and how the CAP can be reformed is thus a matter for negotiation both inside the European Union and at international level. On an international level it is likely that the WTO negotiations will have the largest direct effect on Common Agricultural Policy. The latest negotiations influenced the EU’s process of reform, even though there were internal factors, including budget issues, which also helped to initiate the reform. If, instead, the European Union had preceded the negotiations by an earlier reform of the CAP, there would have been greater opportunities for reform in line with EU interests. The same reasoning can be applied to the forthcoming WTO negotiations. As mentioned earlier there will be pressure on the European Union for a further liberalisation of trade and reduction in agricultural subsidies from the USA and the Cairns Group. By being the driving force of the reform process within the framework for the next round of WTO negotiations, the Member States would be able to change the CAP in ways which correspond to the interests of the Union instead of being forced to make reforms along the lines put forward by other countries in the WTO. In this way the European Union would probably achieve a better negotiating position and greater opportunities to press for important issues of consumer and environmental interest within the framework for the WTO work. By assuming a driving role in the WTO
the European Union would also be acting in line with the commitments which Member States signed up to at the 1996 FAO conference in Rome on world food supply and the 1992 UN environment conference in Rio.
An enlargement of the European Union to the East is a high priority issue since it would favour peaceful, democratic and economic development in both Central and Eastern Europe and the European Union. Even if certain problems could be solved with the help of interim measures, an enlargement without any changes to the CAP would cause a series of problems such as economic imbalance, impaired structural development in Central and Eastern Europe and increased budget costs for the European Union. In order to assist the new Member States in their planning prior to EU entry it is important to make some relatively quick decisions on new directions for a common agricultural policy.
The CAP reform carried out by the European Union in 1992 as a result of the GATT negotiations and internal budget pressures mainly affected the cereals sector. Market prices were reduced as levels of export refunds, border protection, intervention prices, etc., were lowered. So as to compensate for these prices reductions, direct payments, payable per hectare, was introduced. This reform was a step in the direction of increased market adaptation, although there were a number of shortcomings in the reform. No time limit was set for the direct payments intended to compensate for the price reduction, with the result that cereal producers today are over-compensated since world cereals prices have been high in recent years. Prices in the European Union have not fallen so much as predicted. For this reason it is important that in any new reform of the CAP, the advantages and disadvantages of earlier reforms should be carefully considered,
The EU’s work towards changing the CAP has been marked by compromises, and as such can be compared to an evolutionary process, in which reforms are carried out successively, rather than a revolutionary one. Market regulating measures have been reduced in scope to the advantage of environmental and regional support. Within market regulation there has been a transition from market price support to direct payments as a direct consequence of the CAP reform. It is likely that in the future the CAP will continue to be changed successively. However, in our opinion it is important that we should strive to reform the CAP in ways which lead to the fulfilment in time of the objectives we have proposed. In order to have the opportunity to apply pressure in the areas we consider important, both inside and
outside the European Union, it would be desirable for the reform process to be started immediately.