Agriculture for the 21st Century

Marianne Fischer Boel, EU Commissioner for Agriculture and Rural Development, outlines the agricultural policy challenges facing Europe’s food producers.

A proverb familiar in many languages tells us to ‘look before you leap’. In the years leading up to 2004, many were taking a hard look at the possible agriculture-related difficulties of enlargement and wondering whether we could all really make that leap. They were wondering about the system of direct payments – about fitting into it, about administering it and about its cost. They were wondering about the challenges of meeting European food safety standards. They were wondering about the possible effects of enlargement on the European Union’s internal market, and on national markets. And they were wondering about the implications of differences in farm sector structure.

Yes, there was a lot to wonder about. But we made the political decision that accession was going to happen, we all took the leap – and we made it. In fact, for those who were predicting disaster, the whole business of accession in 2004 was something of an anti-climax.

Certainly, in terms of agriculture, the process of integrating a large number of new entrants into the European Union – and from the other side, the process of joining the Union – has not happened all by itself. A huge amount of political and administrative work has been necessary on all sides, for which credit is due. Restructuring has been moving forwards quickly – and this process has sometimes felt uncomfortable.

And of course, before 2004 and since then, there have been differences of opinion on elements of policy. Good examples include the phasing-in of direct payments, and the size of production quotas.

I believe that it was the right decision to phase in direct payments on the one hand, but on the other hand to make more money available through rural development to restructure the farm sectors in the countries that joined the Union in 2004. This was the most logical way of targeting money from the European budget at restructuring. With regard to quotas, fixing these was always going to be difficult, but the issue should become less and less relevant in the years ahead. I'll come back to this later.

But let’s look at what has actually been achieved since 2004 in the agri-food sector. Fundamentally, the entrants of 2004 are basically ‘in the system’. Payments are being made, standards are being respected, the CAP budget has not exploded and the internal market is working smoothly. These are huge achievements.

At the level of the farmer, there has been very good news. In the EU12, agricultural income has risen by around 40% since 2003 – thanks to direct payments, restructuring, higher prices and access to a larger market. That’s 36 percentage points more than in the EU15. And agricultural income is expected to grow further. We forecast that between 2006 and 2014, real incomes will grow by another 40% in the entrant countries.

Furthermore, agricultural trade has clearly benefited. Between 2004 and 2007, agricultural exports from the EU10 to other member states grew by 81%. Exports to third countries grew by 99%. That proves two things. First, the extra room for expansion provided by membership of a large internal market was well exploited. Second, the adjustment of both farms and the food industry to high European standards did not take a toll on export performance – on the contrary, it opened the doors to new markets.

This is confirmed by the fact that the gross value added of the food industry has been rising in many new member states. And as we all know, diversifying products and emphasising quality and origin are the main ways of moving up the value chain. I therefore also think it’s significant that groups in new member states have shown plenty of interest in geographical indications. There are currently 18 registered Protected Designations of Origin or Protected Geographical Indications in the new member states, and 68 applications pending from these countries. I am pleased to see that the European Union’s quality policy is giving producers in these countries a chance to reassert the distinctive identities of their products.

All of this has been happening over the last four years – or of course, over the last year for Bulgaria and Romania. But now we all have to move forwards together, as the Common Agricultural Policy (CAP) continues to develop to keep pace with the needs of the European Union and the wider world.

Producing more to meet the growing demand for food around the globe is one need – and these days perhaps it’s the one that is uppermost in our minds. Ensuring food security on our continent is another – which in my view is best achieved, not only by producing more, but also by trading more. Finally, agriculture is also at the centre of the debate when it comes to climate change and sustainable development. I firmly believe that European agriculture and our Common Agricultural Policy are part of the solution, not part of the problem.

At this juncture, it is crucial to not lose direction. Many are confused, both about the origins of the food price increases and in particular about the policy response. We have to keep the compass steady and build on the reforms already undertaken. The principles of the 2003 reform, the one-year abolition of set-aside, the steady increase in milk quotas and the lowering to zero of cereal import duties – all these steps are part of the answer.

Therefore, the next stop in facing up to the challenge is the CAP Health Check. I firmly believe that, fundamentally, all member states of the European Union are in the same boat with regard to the Health Check. We need the same things. All our farmers need a system of market tools that does not hold them back from responding energetically to demand, but which gives them a safety net for times of real crisis. All our farmers need a Single Payment Scheme (or, for the time being, a Single Area Payment Scheme), which works as simply as possible. And all our farmers need support to face developing challenges such as the need to fight climate change, manage water better and make the most of bioenergy.

For instance, it must surely be good news to many that we’re mapping out a route to the end of the milk quota system. For many new entrants to the Union, milk quotas have felt like a very heavy burden to carry. And certainly, the milk quota system has no place in the future – a future of greater market-orientation and probably of firm demand. Long gone are the days of desperately trying to control over-supply.

The key task is to wind up the system in an orderly way. On the one hand, we must allow our dairy producers to respond now to the global boom in demand – before others get a headstart. On the other hand, we must not cut the legs from under our healthy market. This means that any increases to quotas before 2015 must be well judged.

With regard to decoupled payments, we must stick to the principle that the Single Area Payment Scheme is a transitional system. It was never designed to be anything else. And according to Commission studies, it channels more of the value of direct payments into land prices than any other system for making decoupled payments. Nevertheless, I’m open to extending further the period during which the Single Area Payment Scheme may be applied.

I also want to give member states using the Single Payment Scheme the opportunity to flatten out the differences between direct payments to individual farmers on their territory. But such a step would be optional, and it certainly would not mean that a flat rate across the European Union would be around the corner.

I know there are concerns over the Commission’s original ideas about reducing very high direct payments. These ideas are a response to very strong signals from the public. Nevertheless, I have no intention of imposing what could be seen as a penalty on large farms – of which there are many in parts of Central and Eastern Europe.

I’m sure that a compromise solution will be in reach within the Health Check. This will probably involve somewhat higher rates of modulation for larger farms, which would in this way contribute a little more than smaller entities to dealing with new challenges. I find that politically justified. By the way, all the money from further modulation should stay in the member state where it was levied.

Some new member states have asked to be allowed to use measures under what we currently call Article 69. This article allows a government to top-slice a direct payment ceiling for a given sector and spend the money on special objectives in that sector. I’m in favour of allowing new member states to do this, and I also want to make Article 69 more flexible in a number of ways.

On the other hand, this should in no way be taken as a signal to turn back the clock on simplification of the CAP. The CAP can bear a certain amount of diversity. But one of its pillars must remain a relatively simple system of decoupled payments – backed up only in specific circumstances and under strict conditions by more targeted instruments.

It is mainly through rural development policy that we can best address those needs of European farmers that are more diverse and specific. The process of planning spending and matching it to those needs is not always easy, but I think the public appreciates the efforts that we make to spend this money in a targeted way.

Overall, I feel very positive about what has happened over the last four years in the agri-food sector for all of the European Union. The leap of enlargement went so well that we have hardly looked back. We should not break our stride. Now is the time to move ahead confidently.

This term ‘new member states’ will continue to be used for analytical reasons for the time being. But we should not be too concerned about analytical labels. Any member state – whether new, old or even future – has a clear stake in the health of the European Union’s agri-food sector and rural areas. Therefore, I know that all member states will continue to make very positive contributions to the ongoing discussions about the CAP for the period until 2013 and beyond.

Who will feed the World?

850 million people in the world are under-nourished, a number that has hardly changed since 1990. To bring this terrifying figure down is the real millennium development goal, argues Mariann Fischer Boel.

As we are witnessing, higher prices can have an immediate and dramatic impact on the world’s poorest populations, putting years of development progress at risk. But in the longer term, rising prices could be an opportunity to help rural communities in developing countries out of poverty.

In my view, the coin therefore has two sides. Both should be at the centre of today’s discussion: how do we address the crisis here and now while avoiding wrong policy choices that could jeopardise development in the longer term. After all, higher prices also provide a window of opportunity to stimulate agricultural production in many developing countries that have great potential, but where structural bottlenecks and low prices have left the potential untapped.

A number of complex causes lie behind the evolution of commodity prices. As the European Commission set out in a recent communication, it is a mix of short-term and long-term factors that have seriously disturbed the balance between supply and demand.

Since the underlying causes are complex, the European Union is responding on several fronts. In the first instance, we need to mitigate the immediate effects of the food price shock. The EU is therefore scaling up its contribution to relieving the impact of high food prices on poor people around the world.

In parallel, we need to boost agricultural supply in developing countries in the short term – and we need to act now to increase the harvests over the next seasons. I have proposed to use some of the money saved on our traditional CAP market instruments to meet this challenge. If European farmers effectively give a helping hand to developing countries’ farmers to get access to seed and fertilizer, this would be a clear sign of international solidarity and would – in the interest of us all – increase production and help to stabilise the markets.

This immediate response should go hand in hand with long-term policies to strengthen agricultural production in developing countries. More research in agriculture and knowledge building will enhance productivity growth. New crop varieties, improved cropping systems, more efficient use of water, and greater resistance to diseases and environmental stress are amongst the ways forward to put global agriculture on a sustainable footing.

Agriculture for tomorrow

Commissioner Fischer Boel’s vision for 21st century agriculture includes:
Productive agriculture: “First, I want to see a system that feeds us, clothes us and gives us energy”
Responsible agriculture: “I also want to see agriculture that plays its part in taking care of the natural world”
Relevant agriculture: “Finally, I want to see an agriculture embedded in living, developing rural economies and societies”