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EU Reforms Farm Subsidy Program - 2003-06-26

European Union agriculture ministers have agreed to reform the bloc's controversial $50 billion farm subsidy program in an effort to bolster its bargaining position at upcoming world trade talks in Mexico. The deal was clinched, after 16 hours of non-stop negotiations, when France won key concessions from its EU partners.

The accord, which goes into effect in 2005, cuts incentives to European farmers to produce more food than the continent can consume or sell. EU member states like France, Italy, and Spain that have benefited most from the hugely expensive farm subsidy system can, if they wish, delay implementing the reforms until 2007.

At the heart of the deal is a provision that will sever the link between how much a farmer produces and the subsidy he receives. That link, which has spurred farmers to overproduce in order to get more cash from Brussels, has been blamed for causing what critics of the system call wine lakes and butter mountains.

With so much surplus food around, Europe has in past years dumped its overproduction on world markets, undercutting competitors and squeezing farmers in poor countries, especially those in Africa.

France, which is the biggest recipient of EU farm handouts, won a further concession whereby it and other member states can continue to pay their grain farmers up to 25 percent and its beef farmers up to 40 percent of the production-based subsidies they received under the old EU system.

Brian Groom, a London-based agricultural analyst, says that, after a year-long deadlock in the talks, the only feasible outcome was a compromise, and that EU agriculture commissioner Franz Fischler was forced to back down from his original demands.

"The European commissioner wanted to cut entirely the link between subsidy and production so it [Europe] did not overproduce," he said. "What you have got is a fudge. So, in some areas, it is delayed, or phased in other areas. There is still leeway for governments to continue certain types of payments."

The compromise was struck ahead of the EU expansion next year from 15 to 25 members, which would have made the current subsidy system untenable. It also comes just three months before world trade talks resume in Cancun, Mexico. The European Union is now looking to such countries as the United States and Japan to come to the table with their own reforms, including subsidy cuts.

But Thursday's deal does not mean the overall EU farm budget will shrink. Any savings from a reduction in farm support payments will be used to increase environmental and food safety provisions.

Some farmers' groups, notably in France, have already criticized the EU decision, saying it will spur farmers into abandoning the land. But the European Union says the reforms will lead to farmers' being rewarded for environmentally sound and sustainable agricultural practices, not just for how much they produce.