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Commissioner Fischler's Speech on 'The EU and the WTO - Moving the negotiations forward'

Ladies and Gentlemen,

For ten years I have been giving speeches on the CAP and I am still not sure at what time of day they are best received. Too early and people are still waking up, too late and they are too tired. Too close to mealtimes, they are preoccupied with hunger, and too soon after they risk falling asleep. And if you have the lunchtime slot, away from your home territory, you risk giving people food for thought that might be a little indigestible.

So whilst I thank you for your invitation here today, I feel it only wise to warn you that what I've got on the menu for discussion today is Europe's CAP reform and the state of play in the world trade talks.

I know that I do not need to tell you that the two are closely linked. Reform, though necessary for internal reasons, was the first in a series of decisions that enabled the EU to get the WTO ball rolling because, apart from anything else, it proved that the EU was serious about the Doha round and 100% committed to getting the trade talks moving.

It achieved five key objectives:

• Firstly, and most importantly in the international context, it has simplified and greatly improved our support system, increasing its efficiency and reducing the trade-distorting elements;
  
  
• Secondly, it brought our domestic prices closer to world prices through targeted support price reductions;
  
  
• Thirdly, it increased the emphasis on sustainability and product quality by making support dependent on a series of mandatory requirements under cross-compliance;
  
  
• Fourthly, it reinforced the rural development pillar of the CAP by shifting money across from market support; and
  
  
• Finally, it gave the public more value for less money, and our farmers more scope with less administration.

As far as the support system is concerned, the main change is the introduction of the single farm payment from the 1st January next year to replace the plethora of schemes currently available, which will severe the link between direct payments and production levels through decoupling. Studies have shown that it will be a more efficient way of supporting our farmers, that it is more transparent, simpler to manage, and it continues on the path towards less trade-distorting support that was begun in previous reforms.

Subject to cross-compliance, our new quality guarantee system ensures that despite being simpler to manage, it is also better able to meet the overall requirements of agricultural policy. The question of standards, food safety, animal welfare and the environmental impact of agriculture will no doubt be raised in the context of tomorrow's World Meat Congress discussions, and they are all points that the European public has repeatedly, and explicitly stated should be addressed by farm policy. Because the question of how much we spend on the CAP is not just a bone of contention with our international partners, it is also a question that is frequently raised by our own taxpayers, who not only want to know where their investments are going, but also want clear evidence of the returns.

And just as cross-compliance rules require maintaining the basic standards necessary for a sustainable agriculture system, our newly reinforced rural development policy provides another boost to overall countryside management. Reform provides more money for the CAP's so-called "second pillar" by shifting €1.2 billion a year across from market support, and provides for new and improved schemes that promote diversity, quality, and new economic opportunities in an integrated rural system.

A move to more for less in other words, and this brings me to my next point which is the shift that we have seen in CAP spending as a proportion of total EU public expenditures. Not only was agricultural spending frozen until 2013 by a European Council decision at the end of 2002, it has also been steadily falling as a proportion of EU GDP. Ten years ago, 0.61% of the EU's GDP went to our farm policy, it currently stands at 0.43%, and in another ten years, it's going to be down to around 0.33%. That is three times faster than the rate all other public expenditure has fallen as a proportion of our GDP.

Within this context of a fixed budget, value for money is not the only improvement that reform has dealt. It was also an opportunity to redress the balance in certain market organisations and continue efforts begun in previous reforms to bridge the gap between world and domestic prices. And, over the course of the last ten years, we've done just that, bringing our support prices down, and shifting the emphasis from product to producer at every step of the way.

As a consequence, export subsidies have fallen by over 60% in the last decade, market access has increased, and price support for all EU agricultural commodities has taken a nosedive too: for cereals it's down by 46%, and for rice by 50% to give but two examples. Only ten years ago, CAP spending was made up exclusively of export subsidies and market support. At the last count this was down to just one quarter, and that was before the new reforms are implemented.

Ladies and Gentlemen,

This brings me back to the question of trade-distortion and the key concerns of the Doha Development Agenda. Our reform may have been geared to meeting new internal priorities and objectives, but there is no denying that it has served us well in moving towards, even moving in parallel with the objectives established for this round of trade talks. There is also no denying that without our reform, we would not be at a stage in the discussions where I could honestly stand here and say the possibility for an agreement now exists if, and only if, we see increasing flexibility and compromise from the other side.

Market orientation, a 'greener' support policy, and a trade-friendly system are all good and well for our own producers and public - indeed we will continue to reform to ensure this is the case - but it also deserves respect from third countries as well, something I am not sure we have fully achieved yet.

Equally, it deserves the recognition that internal policy reform is needed elsewhere, and on this point, Uncle Sam remains quiet. Ours was not the only policy guilty of trade distortion, and where we have faced up to the problem and addressed it, others now need to tip the trans-Atlantic balance back into equilibrium.

All the more so because while the CAP has consistently moved away from trade-distorting support, the U.S. is clearly going the wrong way down a one way street. Within the context of the present rules, it has managed to stay beneath its amber box ceiling only through systematic reliance on the de minimis rule.

But when market prices are low, and in agricultural markets have this tendency only too often if you ask farmers, the use of the new US counter-cyclical payments would actually lead to an increase in the part of the American amber box coming under discipline. Thus the need for the US to accommodate these payments in a new framework and the demand by others for clear guarantees of and overall reduction in trade distorting support.

Thanks to reform, the EU can deliver this. We are in a position to accept a significant reduction of the amber box, to accept a capping of the blue box, and to support the abolition of the de minimis rule altogether for developed countries.

On export competition, we have also expressed our willingness to move. We have already reduced our export subsidies substantially and you all know, and I believe support, our suggestion to phase-out all the rest. Indeed, this apparently has been the gem that many have been waiting for as they've chipped away at the face of old 'fortress Europe'. The key word here however, is 'all'.

All forms of export subsidisation does not just apply to ours, it applies ecqually to those that dress themselves as export credits, food aid or state trading enterprises, differential export taxes or budget and legal guarantees.

Of course food aid should be used for humanitarian reasons, and of course we understand that export taxes are important to balance the budget of developing countries, but they should not be used as a method of surplus disposal, nor as a method for market distortion. And similarly, if we - the EU and others - are looking for a meaningful result on this issue, single desk export privileges, special financing privileges, and any form of loss guarantee must also be placed on the table.

After all, how could we accept multi-billion budget allocations for agricultural export credits, or the continued benefit of government-supported anti-trust immunity and other such privileges for state-trading enterprises if we really want to create a fair and level playing field for agricultural exports?

So the European offer, though generous, is not open-ended, and nor is it unconditional. We recognise the window of opportunity is open now, that it will soon shut, and that now is the time for meaningful concessions to be made. You wanted reform. You got it. You wanted the abolition of export support. You will get it, provided we see an exchange of goods.

Ladies and Gentlemen,

The third and final pillar up for discussion, market access, is also an area in which reform has enabled us to make both firm progress and a solid proposal. Even with the worst case scenario and a maintenance of the status quo, the EU would still be the largest importer of agricultural commodities from developing countries in the world, by far.

And our Everything But Arms agreement ensures that products from the least developed countries can enter the EU market duty and quota free. This in addition to the series of preferential access arrangements in place with other countries too. What we would like to see now is other developed countries following a similar approach, or a the very least allowing 50% of developing country exports to enter their markets duty free.

But above all we would like to see a formula able to deliver the same extend of detail as we expect in the other two pillars if an agreement of a modalities framework is to be agreed by July.

Priorities and sensitivities are obviously very varied across this pillar, hence the need to come up with a formula that can deliver a meaningful compromise. And what the EU is keen to ensure here is that: Ladies and Gentlemen,

The point I come back to now, in conclusion, is the point I made in relation to both our reform efforts and our offer on export subsidies. Though we are prepared to be flexible, and though we are prepared to be generous, we are not prepared to be taken for granted.

We may have made our mistakes in the past, but since then we have reformed, reformed, reformed, with the net result that we now occupy a legitimate stronghold in the world trade talks, and are keen to make the progress necessary, as soon as possible, to give all parties an equal opportunity in what should be an equal system.

Thank you for your attention.

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