by Jacques Berthelot 

I – The impact of the CAP’s new reform within the EU

We will analyse first the impact of the CAP’s reform on farmers and
then on the other major stakeholders: tax-payers, consumers, advocates
of the environment, food safety and animal welfare, agro-industries.

A – The impact of the reform on farmers

The reform will accelerate the elimination of small farms and the
concentration of large farms, for several reasons:

1°) Because the slump (plotselinge sterke daling, het kelderen van) in agricultural prices will continue, both for
world prices and domestic prices
®       The world prices will continue to drop because:
1)      The new Farm Bill prompts US farmers to produce always more
since they get floor prices higher than world prices for all grains
(cereals, oilseeds, cotton).
2)      The US has eliminated all supply management measures since
1996: set aside, public purchases of grains at the loan rate, subsidies
for farmer-owned reserves.

®       The domestic prices will drop because the reform has decided:
1) a sharp drop in the intervention prices of rice, butter and skimmed
milk powder.
2) an increase of dairy quotas and the halving of the monthly
increments in the cereals’ intervention price.
3) Domestic farm prices will also diminish sharply since the EU has
proposed at the WTO to reduce tariffs on agri-food products by 36% at
the end of the Doha Round  which would probably be a minimum since the
other WTO’s Members have asked 40% to 60% – and since the EU is
negotiating a free-trade agreement with the Mercosur, whose prices are
much below EU prices for cereals, sugar, meats and dairy products .
4) The increased competition from Ukraine, Russia and the new CEEC’s
Member States will diminish EU domestic farm prices, notably of cereals.
5) The foreseeable upholding of a strong euro vis-à-vis the dollar will
slow down exports and foster imports.

®       Against that background, the 10% set aside of arable lands
would be of little help to counteract the slump in prices since it
would be fixed (albeit exceptions would be possible) and will
consequently affect the least productive lands.

2°) The reform will accelerate the elimination of small farms because
the decoupling will increase the volatility of domestic farm prices
from one year to the other,

with cycles of overproduction generating a slump in prices, followed by
shortages generating higher prices. If the large farms enjoying a large
single farm payment will be able to endure the period of lower prices,
this will not be the case of small farmers with a low or no single farm
payment.

3°) Small farms will also suffer from the increased land prices for
several reasons

®       The rush to enlarge the size of farms, since the single farm
payment will be divided by the number of eligible (in aanmerking komende) hectares so as to
permit the transfer of payment rights with the eligible land, will
increase land prices and discourage the setting up of young farmers.

  The rent on leased lands benefiting from payments rights will itself
increase significantly, as it has been acknowledged on farms with dairy
quotas or direct payments more generally, even in Member States like
France where dairy quotas are not freely marketed but where the new
tenant has to give an under-the-counter payment (often to the former
tenant) to get the lease.(chapeau-geld ?)

  The landowners will be more reluctant to lease their lands, as it has
been occurring in the US since the Fair Act of 1996, which will also
increase the rise in farmland prices.

  In shorter terms, the single payment will continue to be capitalized
in farmland prices.

  Worst, article 49 of the Council Regulation’s Proposal made by the
Commission in January 2003 states that "entitlements may be transferred
by sale with or without land", which means that the decoupled single
payments could ultimately become freely tradable securities!

4°) In this context of lower prices, even the largest farms enjoying
the perpetual rent of the average direct payments received from 2000 to
2002 will see their income diminish rapidly

  The more so as the reform has planned a 5% reduction in direct
payments whereas the production costs will continue to rise.

  Besides, additional cuts could be done if necessary (which is almost
certain) to ensure that the CAP expenditure will not go above the
ceiling.

5°) Decoupling will not lead to a more market-oriented CAP

  On the pretext that the single farm payment will be granted to farmers
without an obligation to produce, notably cereals (for Member States
which will adopt a decoupling rate of 100%, surely the largest number
since even the French cereals growers are inclined to adopt it), the
Commission claims that the new CAP will allow farmers to choose better
what to produce according to market signals, i.e. to prices, or even
not to produce anything.

  If that is true for farmers granted a (large) rent of single payment,
on the other hand those who did not get already direct payments in
2000-02 would not be able to produce cereals, oilseeds, pulses, bovine
and ovine meat since their prices have been lowered much below their
production costs since the CAP reform of 1992. E.g. wheat is paid at
around €100 per tonne to EU farmers – very close to its world level 
although its production cost is around €160 per tonne in France (one of
the most competitive Member States for wheat).

  Many among those who grow cereals or raise bovine or ovine cattle who
will cease to do it at prices below production costs, particularly in
deprived areas, if they find more profitable products. Some farmers
granted a significant direct payment are contemplating to choose a    
completely new job, while pocketing their annual single farm payment!

  Hervé Gaymard’s initial demand to maintain a minimal proportion of
coupled payments was therefore fully justified but the final proportion
is much too low – particularly for crops – to avoid a foreseeable
devitalisation of many rural areas.

  Apparently the reform has been welcomed in the UK, even by the NFU’s
President, Sir Ben Gill, who said: "I am encouraged by the fact that
other European farmers have become aware of the benefits of full
de-coupling which their Ministers have failed to appreciate…The
compromises give other countries options to maintain the link, at least
in part, with production. We will ask the Government for full de-
coupling in England" (Financial Times, 28 June 2003).

B – The impact of the reform on the other EU’s stakeholders

1°) The impact on tax-payers

  In the face of the expected slump in farm prices, the EU will find
itself in the same situation as the US which, confronted with the
inability of its fixed direct payments to ensure a fair income to
farmers, has been obliged to quadruple total direct payments from 1996
to 2000, and to legalise for 10 years more increased payments in their
2002 Farm Bill.

  Therefore:
®       Despite the strong commitment made by the European Council to
stabilise agricultural expenses up to 2013 in the EU-25 at the level
fixed for 2006 in the EU-15 (plus an annual 1% increase to allow for
inflation),
®       despite the financial discipline foreseen to ensure that the
farm budget fixed until 2013 is not overshot,
®       knowing that this fixed budget would furthermore have to pay
the new direct payments compensating the reduction in the intervention
prices of rice, butter and skimmed milk powder,

One can be sure that the EU farmers, struggling for their living, will
make the necessary pressures at the State and Community levels to get
additional payments from the EU’s taxpayers.

  This is all the more foreseeable that the stricter standards for the
environment, food safety and animal welfare, would not permit as large
increases in productivity and notably in yields as in the past,
increases which had permitted to balance lower prices to a large extent.

  Therefore this perpetual rent will rapidly become politically
intolerable in case of total decoupling of direct payments for COP
(cereals, oilseeds and pulses) and even in cases of partial decoupling,
and it will be highly justified for the unemployed and receivers of
welfare payments to protest against the fact that some citizens are
getting subsidies tens of time their own allocation even without
producing anything.

  In fact it is the Commission’s unconfessed objective to eliminate
progressively farm subsidies, according to Alan Buckwell’s vow, the
agricultural economist whose Report ordered by the Commission has
inspired the Agenda 2000. For Alan Buckwell, direct payments should be
"a transitory assistance to adjustment… to help farmers to adapt to
reality, by providing them a shock absorber while they are receiving
and assimilating the message that society will pay market prices for
marketable products and reasonable prices for non market services they
are providing, but not more. This message has to be explained and
repeated, stressing very clearly that the assistance to adjustment is
effectively transitory, during the time necessary to prepare themselves
to change their job  and, if necessary, their life".

  Another Report ordered by the Commission to Amsterdam University
(published in February 2000) stands on the same line, specifying that
"since only the farms reaching a minimal level of international
competitiveness will survive in liberalized markets in the long run… a
key objective of the CAP should be to contribute to the international
competitiveness of a core of commercial farms in the most adapted areas
of Europe".

2°) The impact on consumers

  Consumers will loose since the higher volatility of agricultural
prices will increase retail prices, first because the European Court of
Auditors has shown that the drop in the production prices of cereals
and bovine meat has not been transmitted to consumers, and the
Commission has insisted that one should not expect a decline in the
consumers price of milk as a result of a reduction in the farmers price.

  And the periods of sudden rises in producers prices  linked to a drop
in production following a period of low prices resulting from an
overproduction  will establish new plateaus for consumers prices which
will not scale down or very little when producers prices will decrease.

  Besides, by basing more and more the financing of food on tax-payers
and less and less on consumers  i.e. through remunerative (winstgevend) agricultural
prices without direct payments, except for the smallest farms -, the
reform is socially regressive since the poorest citizens are financing 
     partially, through the VAT, the food of the richest citizens.

  It is distressing to acknowledge that some free-traders NGOs have
entered recently into an alliance with the BEUC (European consumers’
organisation, www.beuc.org), which has always been lobbying for lower
agricultural prices, notably through a lower import protection and
without caring for the multifunctionality of agriculture:

  Thus "BEUC has now joined forces with Oxfam International, the
development agency, and WWF, the Global Conservation Organisation, in a
campaign for a profound and timely reform of the Common Agricultural
Policy (CAP). Environmental sustainability, rural development, food
quality and safety and fair trading relations with developing countries
should be the driving forces behind a reformed CAP, and no longer just
the by-product of meeting WTO criteria… The EU lacks a coherent
strategy for delivering on its commitment made at the WTO ministerial
meeting in Doha last year to reduce "with a view to phasing out, all
forms of export subsidies; and substantial reductions in
trade-distorting domestic support". Failure to develop such a strategy
will undermine prospects for a WTO agreement to stop export dumping,
making a mockery of the EU’s commitment to a ‘development round’ of
multilateral trade talks. This might endanger the whole negotiating
process, and the outcome of the Cancun WTO Ministerial Conference of
September 2003. Consumer interests need to be taken on board. It is
high time for key trade decisions to benefit developing countries and
consumers worldwide" (Memorandum to the Italian Presidency of May 2003).

  If those two free traders NGOs have thought to be able to influence
the BEUC positively to share their concern to get rid of EU’s agri-food
dumping, on the other hand that alliance between Oxfam International
(and WWW, which seems less present in the area of agricultural
policies) and the BEUC is very dangerous and reduces the hopes to bring
it along the same lines as most continental NGOs involved in lobbying
on agricultural policies. Unhappily enough, Christian Aid (Duncan
Green) shares the same stance of prioritising the short term views of
free trade consumers to the detriment of a socially and environmentally
sustainable agriculture for the EU. It is always very risky to have
dealings with Mammon: he cannot be converted but the reverse might
happen !

  Are Oxfam International, WWF and Christian Aid really aware of the
BEUC’s policy positions, such as the following?
  ®      Have they realised that, if the BEUC is pleading for the
elimination of dumping of agri-food products, it is because it
identifies it  like the Commission does  to the export refunds (terugbetalingen, schadeloosstellingen) alone
and because their elimination make it compulsory to replace them by
direct payments linked to the reduction of farm prices  the BEUC’s
objective -, which the export refunds did not imply. Of course the BEUC
does not admit that the decoupled direct payments have a dumping
effect, no more than the Commission does.
  ®      It is here that stands their most inconsistent behaviour: while
fighting for the elimination of dumping, they pretend to accredit (geloof schenken aan) that
fully decoupled payments have no dumping effect. Otherwise they would
say very clearly that any export of agri-food products by farmers
receiving the single payment should be forbidden.
  ®      They have been tempted by the alleged solidarity of the BEUC
with DCs, when it pleads for an increased openness of the EU to their
agri-food exports : "European consumers want more variety and choice in
the food on offer… We question why EU consumer choice is so restricted
by high import levies and other barriers… It would be very much in the
mutual interest of consumers and developing countries to do away with
many unfair trade-barriers in the developed countries… Future supplies
of food for European consumers will be more secure in the long term if
we diversify our sources of food, than if we try to "put everything in
the one basket" of self-sufficiency " (November 26, 2002).
  ®      What to say then about the solidarity of the BEUC with the
in-coming Member States from the CEECs, when it states: "We feel very
strongly that extending the current system of direct payments to up to
ten new member states is a mistake. Food is
already more expensive in the 15 countries of the European Union than
almost anywhere else in the world" (Memorandum to the Greek Presidency,
November 30, 2002). How can OI ( ? )agree with such a falsehood (onwaarheid, leugen)?
  ®      In a press release on September 19, 2002, the BEUC stresses its
willingness to link direct payments to non trade concerns or to abolish
them otherwise: "We welcome the principle of linking future payments to
environmental, food safety and animal welfare standards… There must be
concrete and verifiable results from the new de-coupled payments. If
direct payments are not clearly seen to be achieving the desired
results, they should be stopped… In the ongoing process of change, the
aim should be to reduce direct payments as much as possible in favour
of spending on rural development and other structural policies. This is
particularly important in the context of enlargement".
  "Food prices are maintained artificially high because of the
combination of market measures,
border protection, price support and reduced efficiency due to the
quota   system. Higher food    prices hurt low-income families
particularly, because poor  families spend a higher proportion of      
their income on food. In that sense the CAP contributes to increase the
social inequality among         non-farmers by acting as a  regressive
tax on consumers" (Reform of the CAP, 26-11-02). I have          shown
above  that it is the present system of low farm prices which make the
poorest EU citizens        finance, through the VAT, the food of the
richest citizens.

3°) The impact on the environment, food safety and animal welfare

  In that context of:
®       decreasing agricultural prices,
       ® a strongly increased intra-EU and global competition after the
Doha Round, with additional competition      distortions inside the EU
stemming from the à la carte decoupling according to Member States,
®       a higher concentration of farms,
       ® a significant renationalisation of the CAP,

it is not credible to think that the EU could impose to its farmers a
high conditionality on direct payments according to their degree of
compliance with higher standards on the impact of their production
systems on the environment, food safety and animal welfare.

  And even though direct payments to bovine and ovine meats will remain
largely coupled (at least in France, not in the UK), the choice of the
Commission (ratified by the European Parliament and the Council) not to
increase the production of oilseeds and pulses will continue to make
more profitable the most intensive systems of animal production, which
have been and remain the main cause of the deterioration of the
environment, the quality of products and animal welfare.

  And the reluctance of the Commission to protect the production of
feedstuffs at the import level is based on three main reasons:
  ® it is much less costly to import than to subsidize the production,
®       the EU does not want nor feel politically able to increase
import protection on feedstuffs, particularly from the US or even
Brazil and Argentina, in the negotiating context of an EU-Mercosur
free-trade agreement,
®       above all that allows to improve the competitiveness of
European animal productions, not only of white meats but also of red
meats and dairy products.

4°) The impact on agri-food industries

They are the only winners of the reform.

  Thus, for Jean Martin, President of the CIAA (Confederation of the
Food and Drink Industries of the EU, www.ciaa.be), "For the CIAA the
agreement reached by EU Agriculture Ministers yesterday represents a
major breakthrough for the agri-food sector. The agreement will improve
the EU’s position in WTO negotiations. Other WTO trade partners will
now have to make a step towards a possible compromise. CIAA considers
that the margin of manoeuvre provided by this reform in the Doha
Development Agenda should be used on the condition that equivalent
agricultural concessions are obtained from WTO partners. "The agreement
reached yesterday is in line with the long term objective of the EU
food and drink industry to promote a competitive, efficient and more
sustainable agriculture in Europe"… The decoupling provisions retained
by the Council represent a decisive step towards opening of the
European agricultural sector to market forces". (Press release of June
27, 2003).

The analysis made by the CIAA of the European Commission’s proposals of
January 2003 and of the WTO’s (Harbinson) proposals of March 2003 to
reform the AoA is also speaking for itself and helps to clarify its
point of view : "Regarding the offensive interests of the European
agri-food industry, the Uruguay Round formula (such as proposed by the
EU) falls short of the necessity of a substantial market opening to get
a drop in high tariffs. Given that, in the framework of the present
project of modalities, some countries, notably emerging ones, could
escape from equivalent or comparable commitments on market access, the
Harbinson’s approach would not provide the expected benefits for the
offensive interests of the agri-food industry.
Regarding the proposals on export competition, the CIAA judges the
contemplated elimination of export refunds as being too ambitious. As
long as there will be differences between the prices paid by industries
on world markets and on the common market, refunds will be necessary to
compensate and allow the EU’s exporters to operate on an equal footing.
Besides, other forms of export support, such as export credits and food
aid, should be subjected to similar reductions and should not escape to
the rules" (Press release of June 19, 2003).

That is echoing the speech made by the President of the CIAA on October
8, 2002, addressing 70 members of the European Parliament : "Our
industry needs to ensure its long-term supply of raw materials. In
order to increase our competitiveness on world markets, the price of
these raw materials should more closely reflect world market prices,
given that a significant part of our production is exported".

In another speech of June 19, 2003, the President of the CIAA declared,
during a seminar it organised on "From Doha to Cancún  Challenges and
opportunities of the WTO negotiations for the agri-food sector", that
"CIAA is committed to continuing the reform process in international
agricultural policies that should lead to a clear set of trade rules
creating a fairer playing field for WTO members following the Doha
Development Agenda". Yes, you have read well: the CIAA claims clearly
that it has a decisive say in the definition of agricultural policies!

In order to confirm that this CIAA’s claim is not pure vanity, let us
hear Pascal Lamy, one of the speakers at the seminar: "The agri-food
industry has the privilege to benefit from the cares of three
Commissioners, a rare privilege at the Commission ! Franz Fischler on
behalf of agriculture since tariffs on transformed products are
agricultural tariffs. Erkki Liikanen on behalf of industry since those
same products are industrial products for our domestic market. And
myself on behalf of my overall responsibility on international trade
issues… And you are aware that your leverage increases on your three
interlocutors when you are united. Owing to those clear positions, we
know where us, as negotiators, have to go or where we cannot go. And
your support, or your positions, are reinforcing ours. Even if it is
obvious that the industry’s position cannot always be reflected at 100%
in the European position…
Our trade in primary agricultural products has a deficit of 19 billion
euros, our trade of transformed agricultural products has a surplus of
almost 7 billion euros…
Regarding market access, I have already said it, the agri-food sector
is one of our standard bearer at the export level. Like you, I think
that the WTO’s negotiations should allow our products to benefit from
the reduction in tariffs. As a matter of fact, I hope to get your
suggestions, when we will come up to identifying the priorities in that
area. Of course the reduction in tariffs will also affect the European
market, and I am sensible to the argument that the result shall be
well-balanced and allow the European industry to go on producing added
value… But there are other means to create value. The second, which I
will mention only in passing, is foreign investment. Some of you are
already well engaged in that way. It is a process which will certainly
gain momentum, owing to bilateral agreements that we can conclude with
one or the other country… The third manner is therefore, you are saying
it regularly to us, to be able to buy raw materials at competititive
prices, possibly close to the world market prices. The solution is to
import raw materials and transform them in high value added products.
You see that once more the question of market access is crucial for the
future of your industry. Not only for exports but for imports as well.
But there is of course a fourth manner, it is quite simply to buy on
the domestic market at competitive prices. This consequently raises the
question of domestic prices and of the necessary reforms to reduce
them. We enter here on the field of domestic support, also discussed at
the WTO. Owing to the successive reforms of the CAP, domestic prices,
particularly of raw materials such as wheat, have become very
competitive. The achievements of the processing industry show it
clearly. We must go on in that direction. We must also keep the same
line in transforming our types of support, in order that they will be
minimally trade distorting. This is the reason of the CAP’s new reform,
and of its importance with regard to the negotiation at the WTO on
domestic support".
No comment!

At least, and contrary to the President of the NFU, John Dillon, the
President of the Irish Farmers’ Association, seems quite aware of the
danger and "warned against the risk of agriculture being sold out to
big business and multinational food companies in the (WTO)
negotiations. He said there could be no question of trading agriculture
for industry and services in the negotiations. Agriculture was
essential for the survival of rural Europe but there was a real danger
that the interests of big business would be put first by EU
Governments" (Financial Times, July 16, 2003).

5°) The CAP will become more bureaucratic

The new CAP will be particularly complex and bureaucratic, given:
®       the multiplicity of situations of total or partial decoupling
in the Member States
®       the situation even more complex in the incoming Member States
       ® the system of control and sanctions to ensure that farmers
getting the single farm payment or other direct payments will comply
with the statutory standards in the field of environment, food safety,
animal welfare and occupational safety(beroepsveiligheid, arbeidsveiligheid) of farmers.

II – The impact of the CAP’s new reform on developing countries

A – The swindle (zwendel, oplichterij) of dumping and the farce of the green box’s subsidies

  According to the EU ministers’ statement, "With this reform the (EU)
Council is sending a strong message to European farmers, European
citizens and the world, in particular the developing countries".

  In fact, the new CAP will be a supplementary stab in the back of
Southern farmers. Indeed the main aim of the reform was not a better
adaptation of the CAP to the demands of the EU’s civil society in
relation to the environment, food safety and animal welfare, even if
the Commission has been clever enough in its communication to make the
medias swallow it.

No, the main objective has been to shield agricultural subsidies, once
decoupled, from obligations of reduction at the WTO, by transferring
them to the green box of the AoA. Because the idea that decoupled
subsidies – i.e. not linked to the production or prices of the current
year  do not have trade distorting effects, and notably no effect of
import protection or dumping, is an enormous legal and political farce
to which the political elites of rich countries and international
institutions are still pretending to accredit.

Most negotiators from DCs and all NGOs from North and South have now
demystified it.
         ® All decoupled agricultural subsidies, including those granted
on the specific grounds of protecting the
               environment, are reducing farmers’ production costs,
improving the competitiveness of their products
               and hence have a dumping effect when exported.
®       In fact the decoupling trick rests on an enormous
legal-political swindle: the definition of dumping in
       article 6.1.a of the GATT 1947 itself, repeated in article 9.1.b
of the AoA: it is defined, not as an export
       at a price below its production cost but as an export at a price
below its domestic price.
®       That explains why and how the CAP has been reformed in 1992,
1999 and this last 26 June 2003: in reducing by steps the EU farm
prices to the level of world prices, the EU could export its agri-food
products without explicit export refunds, hence without legal dumping,
even if those subsidies are rightly pointed out as very unfair to
foreign farmers.

Indeed the great bulk of wheat and barley exports of the EU have been
made without refunds from July 2001 to June 2002, since the domestic
price had fallen to the world price level, around €100 or $100 per
tonne (since then the euro appreciation has obliged to resume refunds,
at €15 per tonne of wheat the 15 May 2003).

  To take advantage of that incredible definition of dumping, it was
necessary that the agricultural subsidies compensating the gap between
the production cost and the low price of EU’s agri-food products were
shielded from the obligations of reduction imposed by the WTO.

  And this has been the trick of the AoA, essentially negotiated between
the EU and the US and the imposed to DCs: to state that import
protection is the worst of ignominies (schandelijkheid), followed by explicit export
subsidies (they are indeed disastrous), whereas considering that
domestic decoupled subsidies are not trade distorting at all.

  One evidence that decoupling will not change anything for French
cereals growers is the statement given in Le Monde of 28 June 2003 that
"the reform "does not change anything" for cereals growers, it is said
by wheat growers, whose interests have been preserved owing to the
absence of reduction in the price of cereals".

  The self-satisfaction loudly claimed the 26 June 2003 by Frantz
Fischler after the Council’s meeting having adopted the reform, that
"Our new policy is trade friendly. We are saying goodbye to the old
subsidy system which significantly distorts international trade and
harms developing countries" is therefore particularly misplaced.

B – In fact, paradoxically, import protection is the least
protectionist way of supporting farmers in any country

For 8 reasons:
®       1) For economists, any measure increasing the competitiveness
of national products
            vis-à-vis foreign products is a form of protection. That is
why one should banish
            the use of the word "protection" in isolation because, when
used in the area of
            trade, it refers almost exclusively to import protection and
is then connoted
            extremely negatively – a fortiori the word protectionism -,
being associated to such
            terms as overcautious withdrawal into oneself, specter (spook, schrikbeeld), old
demon, stench (stank),
            temptation, hydra, trap, etc. Therefore it is always
necessary to say explicitely
            "import protection" when we want to use it in this
restricted sense.
®       2) Therefore, as Vandana Shiva puts it, "Free-trade is not
anti-protectionism. It is the
            protectionism of the mighty".
®       3) Import protection is the only support available to poor
countries, which do not have
            the budgetary means to subsidize significantly their
farmers, the more so as they
            represent the majority of the employed population.
®       4) All types of subsidies, even on environmental grounds,
reduce production costs and
            have a dumping effect for exported products.
®       5) Only rich countries can use subsidies to protect themselves
from imports without
            having to protect themselves at the import level, by
compensating the reduction of
            domestic prices to their world level so that there is no
longer an economic interest
            to import.
®       6) It is socially regressive that the poorest citizens are
financing (trough the VAT) the
            food of the richest citizens.
®       7) Furthermore an import protection is the only means to
rebuild a market-oriented
            CAP, where the bulk of farmers’ income is based on prices,
not on subsidies, but
            on domestic prices and not on highly volatile and distorted
world prices, which
            have no economic meaning.
®       8) Import protection would simplify the AoA enormously: so long
as the new AoA
            will pose as a basic principle that any country is free to
fix the appropriate import
            protection level on agri-food products, it would be useless
to fix rules on domestic
            supports. Ultimately, even export refunds will not be a
problem since every country
            could avoid their detrimental effect through import
protection. However, since
            many DCs do not have the political ability to increase their
import protection
            because of the pressures made by the IMF and WB, the
suppression of all explicit
            and implicit export subsidies remain a priority.

C – On the other hand, the decoupled domestic agricultural
subsidies are even more distortive than the coupled ones

For the following reasons:
®       1) Because of a tight budget, DCs give priority to coupled
supports which have a more
            direct effect on production and prices than the decoupled
ones. Indeed, DCs need to
            increase their agricultural production whereas the EU and
many other developed
            countries are generally striving to reduce it, the AoA rules
having been designed
            mainly with that aim.
®       2) Coupled supports are often used to maintain domestic prices
above world prices
            (e.g. the EU’s intervention price) and are compatible with
self-sufficiency without
            exports, but blue or green supports allow to lower domestic
prices below
            production costs, with a dumping effect for exported
products.
®       3) Blue and green supports are even more distortive than
explicit export refunds, more
            transparent for importers and which allow anti-dumping
measures when they
            exceed their ceiling, whereas decoupled subsidies can
increase without limits and
            are much more difficult to identify.
®       4) The decoupled nature of a subsidy is quite relative, being
function of the use to
            which the subsidized product is intended. If EU’s direct
payments to COP (cereals,
            oilseeds, pulses) are as such decoupled (blue box), thus non
actionable before 2004,
            subsidies on inputs are coupled according to article 6.2 of
the AoA for developed
            countries and to article 1(ii) of the annex 2. Now, the
largest part of the COP being
            used as feedstuffs (108 Mt of cereals, 12.6 Mt of bran and
18.3 Mt of oilseeds
            cakes and pulses in 1999-00), direct payments for COP should
have been notified
            as coupled subsidies of the amber box, and reduced
accordingly.
®       5) The conversion of those direct payments for COP in a single
farm payment
             decoupled from the production of COP will not change
anything to its remaining an
             input subsidy for the benefiting farmers who will continue
to grow COP.
®       6) Several new in-depth legal analyses (by R.H. Steinberg &
T.E. Josling, James
                  Rude, D. Chambovey) show that even green box’s
subsidies will be much easily
                  actionable (vervolgbaar, strafbaar)at the WTO in 2004 (after the expiry of the
‘peace clause’), which will
                  reinforce the more and more open and well argued
criticisms of the majority of
                  WTO’s Members.
®       7) Therefore the desperate fight of the Commission to shield
the CAP’s direct
             payments in the green box is already lost and the new
reform is already outdated (verouderd)
             before being implemented.
®       8) When Frantz Fishler said that "Today’s decision will give
Europe a strong hand in
            the negotiations on the Doha Development Agenda. The EU has
done its
            homework, now it’s up to others to move to make the WTO
trade talks a success.
            But let there be no mistake. At the Cancún Ministerial
Meeting, the EU will be
            ready to use its increased negotiating capital only if we
get something in exchange.
            unilateral disarmament is not on", he announces clearly that
the EU will go beyond
            its already disastrous proposals for the CAP’s future made
at the WTO (reduction
            of tariffs by 36% and of coupled domestic supports by 55%,
besides the welcome
            proposal for the rest of the world to reduce export refunds
by 45%), if the majority
            of WTO’s Members (i.e. of DCs) agree to enlarge the Doha
Round to the
            "Singapour issues" much called for by the EU (investments,
transparency in public
            procurement, competition, trade facilitation). The CAP
(Common Agricultural
            Policy) is dead, long life to the CAP (Common
Agri-industries Policy)! No wonder
            that the Confederation of the Food and Drink Industries of
the EU is the only
            professional organisation to welcome the reform.

CONCLUSIONS

  The CAP reform is suicidal and proceeds from a very bad calculus,
including from a purely selfish economic point of view for the EU.
Because, without food sovereignty -i.e. an efficient import protection 
there cannot be an overall development in DCs, the more so when farmers
still represent the majority of the population.

Therefore, without food  sovereignty of DCs, developed countries will
not be able to export to them high value added goods, thus prejudicing
(schaden, afbreuk doen aan) their own selfish interests in the long run.

Therefore the EU must reform the CAP by eliminating all types of
dumping so that a large  majority of WTO’s Members would agree to
rebuild the AoA on food sovereignty without dumping, defined as the
export of an agri-food product at a price below its computable
(berekenbaar) production cost, the one that would prevail if all computable
agricultural subsidies were   eliminated, including the collective
subsidies of the green box.

Therefore the CAP should be refocused on its domestic market for its
main basic agri-food products – cereals, sugar, dairy, meat -, for
which it is not competitive (i.e. without import protection and/or
export and domestic subsidies of any colour). Indeed few products meet
these conditions: a high proportion of wines and a handful of cheeses.

  Since those subsidized exports represent only 10% of the EU production
of cereals and dairy products, 8% of its production of meats and 30% of
its production of sugar, it is all the more important to rebuild the
CAP on the protection of its domestic market, on food sovereignty
without dumping.

  Furthermore, such an alternative reform would allow to reduce the
CAP’s budget – an important political consideration for countries such
as Germany – and to release resources to give direct payments to CEECs’
farmers on the same basis as in the EU-15, which will avoid social
unrest in those countries.