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France/Europe agriculture: Sarkozy and the future of farm reform
[June 12, 2007]

France/Europe agriculture: Sarkozy and the future of farm reform

(IndustryWire Via Thomson Dialog NewsEdge) FROM EUROPEAN VOICE

The election of French President Nicolas Sarkozy has brought a new impetus to politics in the EU with expectations that his plan for a simplified treaty to replace the shunned constitution will help end the impasse over institutional reform. But, together with his views on Turkey, which he insists should never join the EU, it is his rhetoric on agriculture which has caused the most dismay.

Sarkozys energetic defence of French farming interests has sounded disconcertingly like that of his predecessor Jacques Chirac. A former farm minister, Chirac used his knowledge of the details of policies to run rings around other EU leaders and managed to put off the scrapping of milk quotas until 2015 at the earliest and maintain subsidies to farmers until 2013.

In numerous speeches, Sarkozy has talked about "community preference", a term dating back to the founding of the Common Agricultural Policy (CAP) in the 1950s which referred to favouring domestically produced goods over imports. On his visit to Brussels on 23 May, he promised to defend French farming and ruled out trading cuts in support for farming in return for other countries opening their services markets in the current World Trade Organization (WTO) negotiations.

With National Assembly elections on 10 and 17 June, Sarkozy is clearly still in campaign mode. But if the rhetoric remains the reality after the elections there could be trouble ahead. "There will be a clash if French philosophy were that farming should be supported through price levels and further protection of community preference. That would be going back to the CAP of 20 years ago," a senior Commission official said last week.

Frances vision for agriculture faces pressure on three fronts. Efforts to get a deal in the Doha Development Round of trade liberalisation talks will require the EU to cut its tariffs on farm imports by at least 50% and even more in some cases. But this will only happen if there is a deal. At the moment this is looking unlikely unless the US offers greater cuts on support to its farmers and India and Brazil make better offers on access to their markets for industrial goods. A series of negotiations among the G4 (the EU, US, Brazil and India) in June and at the WTO in July will determine whether Doha is a success. If not, the next chance to obtain a deal might not be until 2010-11 when a new US administration is in place and has staked out its political position.

The real pressure on France will come through the health check of the CAP being planned by the Commission for 2008 and the mid-term review of the EUs budget which will set new spending priorities from 2014. Upcoming reforms such as that planned for the wine sector with grubbing-up measures designed to cut over-production and a ban on a number of winemaking practices will put France on the backfoot.

Farm Commissioner Mariann Fischer Boel wants direct aid to farmers to be fully decoupled from what they produce. Around 10% of payments are still linked to products, particularly in France. The commissioner has also hinted that intervention, the public buying and storage of excess stocks, should only be an emergency option. She also wants to review the system of set-aside, where farmers have to leave a proportion of land out of production, and has said that milk quotas should be abolished when the current system expires in 2015. In addition, Fischer Boel wants to double the proportion of direct aid which is transferred to rural development to 10%. And she has hinted that she might try again to bring in a cap on the total sum an individual farm business can receive, although this has been rejected in the past by countries with large farms such as the UK and Germany.

Fischer Boel wants to keep the farm policy health check separate from the budget review so that the changes can be agreed during the mandate of this Commission, which expires in 2009. The budget review is unlikely to be agreed before 2013. But she has said that she expects there to be less money for farming after 2013.

The Commission will start the budget review process in the autumn with a questionnaire to gather views on the shape of the post-2013 financing. Budget Commissioner Dalia Grybauskaite? is said to favour a radical overhaul of the budget with a major shift in spending away from farm support towards growth and competitiveness-related spending but this is not the Commissions official line yet.

Under changes to the EUs budget, France will become a net contributor to the CAP by 2013. French centre-right MEP Alain Lamassoure, who has been advising Sarkozy on EU affairs, has published proposals which would see greater co-financing of support by national governments. Fischer Boel remains opposed to co-financing of direct support, arguing that if it is voluntary, some countries will pay more than others and there will be an inevitable distortion of competition. She argues that her vision of reform would lead to more co-financing as a greater share of direct aid was transferred into rural development projects for which 50% of funding comes from national governments.

The current trend, which has seen falls in the share of overall EU spending devoted to farming, will continue and may sharply accelerate after 2013. If other EU governments decided on cuts which are too radical for Sarkozy he may prefer to pay subsidies to French farmers from national funds if that is the only way to maintain the level of support.

Commission officials say that Sarkozy should see that guarantees of income support for farmers are the modern version of what the original community preference was meant to achieve, while even an ambitious Doha deal would at worst only halve tariff protection and would touch sensitive products, such as beef, even less.

Whatever the outcome of the Doha talks and the budget review, given the attachment to farming and the power of the agricultural lobby in France, it is clear that French farmers will continue to enjoy protection, if possibly at lower levels than now. The question will be whether the money comes from Bercy or the Berlaymont.

SOURCE: European Voice

Copyright 2007 Economist Intelligence Unit

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