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Commissioner Fischler's speech on "Europe's agricultural policy in the Global Economy"

Ladies and Gentlemen,

Thank you for giving me the opportunity to speak at the Centre for Strategic and International Studies, this deservedly famous center for European affairs. The activities of the CSIS are a vital element in the process of transatlantic dialogue about events in Europe. It is an honor to be here, and I am delighted to speak with you on the subject of our agricultural policy in the context of globalization.

"Globalization" - what a loaded word that has become! To some, it indicates a type of economic anarchy, where the market determines all, the strong flourish and the weak go under. To others, it indicates an ideal system where goods, and ideas, flow freely across the world to the greater benefit of all. In fact, I would suggest that globalization is the latest stage in market capitalism, the driving force behind the new waves of technological innovation, behind the exploitation of markets for goods and services open to competition and foreign direct investment, behind international money markets operating across the planet, behind great increases in wealth in some areas of the world and the sidelining of others, and behind the serious risks now facing the environment. In other words, globalization has the same features as market capitalism: efficiency, inequity, and pressure, potential or actual, against the objective of sustainable development. We benefit from its efficiency; we must correct its inequity, and we must counteract the threat to sustainable development, and this is what policy must be about.

In particular, the role of trade policy is key in the process of mastering globalization, harnessing its positive features and correcting its weaknesses. And this is indeed what the new Doha Development Agenda is essentially about:

• further liberalization of trade and investment to meet the needs of both poor and rich countries
  
  
• but also, stronger, clearer rules and work to ensure that trade rules are consistent with policies relating to the environment, and sanitary, social, health and consumer protection rules
  
  
• and the integration of the developing world fully into the system by ensuring that the system works to the benefit of developing countries.

As you know, the European Union has been in the forefront in the efforts to ensure that the Doha Development Round achieves these objectives, and that each step forward takes into account and addresses the interests of the developing world.

And where does agriculture fit into this plan? Within agriculture, the benefits of efficiency are clear, bringing the prospects of more food to a world in which many millions still go to bed hungry every night. But agriculture is not just about the production of plenty. It is the key to rural development, not only in developing countries, but even in those parts of the developed world which do not choose to see their small towns and villages disappear. It is at the same time one of the threats to, and one of the possible positive elements in the preservation of bio-diversity and the maintenance of rural landscapes. It can harm the environment - or it can contribute to its care. Agriculture can produce food - but it also must produce safe, clean food.

And agricultural trade can operate in the interests of, or against developing countries. It operates in their interests when developing countries can participate fully in the trading system, both by increasing trade with each other - because you probably know that on average, developing country tariffs for agricultural products are higher than tariffs in the developed world - and by benefiting from access to the markets of the industrialized countries. In this context, of course, we cannot ignore that some developing countries are infinitely more competitive than others - which in our view is a clear argument for granting preferential access to the less competitive, to help them develop - but that is perhaps another question.

In short, agriculture is a microcosm of economic globalization in that it is the efficient motor to feed the world, but it can be a threat to sustainable development, in economic and social terms, and it can contribute to inequity just as it can benefit the developing countries. The challenge to policy makers is to ensure that policy harnesses the benefits and corrects the faults in the way agricultural production and trade operate in the world.

Agricultural policy operates of course on two distinct levels: domestic and international. I would like briefly to explain our view, the European view, that what the free market cannot deliver in terms of benefit to society, policy should deliver. First, let me deal with our domestic policy.

In the European Union, we have carried out widespread enquiries into the needs and wishes of society regarding agriculture. European citizens are clear: they want an agricultural policy which will ensure that farmers can deliver not just food, but cheap, safe, quality food; and they should do this while contributing by their existence and activity to a dynamic rural society; they should contribute positively to a clean environment; they should maintain bio-diversity, and the rural landscapes so dear to European hearts; and of course, they should produce the highest standards of animal welfare. In other words, as well as the production of high quality food, consumers in Europe want farmers at the same time to deliver a number of non-traded goods and services to society. And they must do all this while remaining competitive in a world where the same requirements, and the costs they imply, do not apply equally across the planet, in a world where trade risks to put a premium on efficiency, at the cost of all the other societal requirements.

So this is what European policy is about. The objectives of our policy are clear:

• a competitive agricultural sector, which can face up to world markets without being over-subsidized
  
  
• production methods which are sound and environmentally friendly, able to supply quality products which the public wants
  
  
• diversity in the forms of agriculture, which maintain visual amenities and support rural communities
  
  
• justification of support through the provision of services which the public expects farmers to provide.

And how should policy be constructed to meet these objectives? Our policy has evolved considerably in the course of two reforms, in 1992 and in the year 2000. And, I have just proposed a further policy reform which builds on previous reforms and is intended to meet the objectives I have outlined more effectively. The central element of our new proposal is the complete decoupling of most of our support from production. By moving support from the product to the producer, we free the farmer to produce on the basis of what the market requires, not on the basis of the best subsidy. But this is not money for nothing: the subsidy will be linked to obligations to manage the land in accordance with good practice, to meet our standards, and will recognize the public goods the farm sector provides.

The other key aspect of our policy is rural development: already in "Agenda 2000", which is the name given to the reform we undertook three years ago, we had devoted an increasing amount of attention, and resources, to rural development. The future of the agricultural sector is closely linked to the balanced development of rural areas, and in recognition of this the Agenda 2000 reform strengthened the policy framework for targeted policies focusing on investment in competitiveness, but also rural viability, quality of life and sustainable agriculture, as well as creating new employment and income opportunities for farmers and their families. The new reform proposals further this trend, and if accepted will also increase the amount of resources available for rural development policies.

And how does our policy impact on our trade? You are doubtless aware that the EU is the largest importer and the second largest exporter in the world of agricultural products. It is therefore clear that we have an interest in increasing market access in the world, and in ensuring that rules regarding market protection are limited, justified and respected. And yet you still hear that tired old criticism that we are some sort of agricultural fortress, blocking imports from the developing world. It is sometimes useful to look at the facts behind the criticisms: with some €60 bio of agricultural imports annually, we take more than half - €35 billion, from the developing countries: this is more than the US, Canada, Australia and Japan combined. And part of the reason is that we offer preferential access to various groups of developing countries, which means that a wide spread of competitive and less competitive countries have access to our market.

As to exports, the other tired old argument is that we dump our surpluses on world markets, and depress world market prices. Well, that may have had some justification in the 70s and 80s. But since that time our policy has moved steadily away from trade distorting export support, so that our net export market share in every product grouping receiving support has fallen over the past ten years. And our much reviled export refunds have fallen from 25% of the value of exports at the end of the 80s to under 5% today. This is no accident - this is a result of our past reform efforts.

And the reforms I have now proposed, if accepted, will continue and strengthen this trend.

Before turning briefly to the WTO negotiations, and how our approach to those negotiations fits in with the trend I have outlined, allow me to say a few words about the forthcoming enlargement of the European Union, and the role of agricultural policy in that enlargement.

You are all aware that the cruel division of Europe is finally being healed, geographically, politically and economically, and the European Union will welcome ten new Members on l May 2004. In that enlargement, the integration of the agricultural sectors of those countries into the Union is not an abstract concept but a reality which will require hard work. Our agricultural area will increase by some 30% - fine, but that area consists of farms which are on average only 17 acres - compared to about 50 acres in the EU (and 500 acres in the US). Approximately half the farms are either subsistence, producing only for on-farm consumption, or semi-subsistence, marketing some of the output. Our number of farmers will rise from just under 7 million in the existing EU to nearly 11 million in the enlarged Union.

Farming in the future Member States has in general not had the possibility to develop as it did on the other side of the iron curtain. A major effort will now be required to reorientate all farming types towards EU quality, food safety and environmental standards. Many future members will need to reduce the high levels of hidden unemployment in their rural areas. The commercial farming sector, and that part which is potentially commercial needs a favorable and stable investment environment, for up- and down-stream modernization.

Our challenge is to ensure the future of the agricultural sector, and of rural areas in the new Member States, to promote a prosperous and competitive agriculture, in the framework of a vibrant rural economy - the same objectives which I described for the existing Member States, but starting from a very different base. And incidentally, since the financial framework for all our market measures for agriculture has been fixed at essentially a static level until 2013, that challenge will have to be met from our existing resources.

So enlargement gives us an additional reason to ensure that the measures we use to achieve our objectives are the most effective possible.

Now let me turn to the Doha Development Agenda, and our approach to it. Internationally, we are consistent with our domestic approach in the negotiations on agriculture in the WTO. Here we are fully in favor of a more liberalized trading system for agricultural products. But freer trade must not be at the cost of the developing countries, and must not prevent policies related to non-trade concerns. What does this mean in practical terms?

It means that the European Union is ready and willing to improve market access, reduce trade distorting internal support and further reduce our export subsidies, provided all forms of export subsidization are similarly disciplined. But we have two other major strands to our proposals:

First, for the developing world:

• we believe that the developing countries should benefit from increased access to developed country markets, and we propose that at least 50% of each developed country's imports from developing countries should be at zero duty and that the least developed countries should have completely free access to all developed country markets for all products (except arms), as they have to our market;
  
  
• We also propose that special flexibility should be allowed to developing countries in implementing the new commitments, and that their policies regarding food security should benefit from special measures.

Second, for non-trade concerns:

• We must ensure that freer trade does not prevent policies designed to protect the environment, promote animal welfare, pursue safer food production methods or maintain a dynamic rural society
  
  
• But we must also ensure that the pursuit of such objectives should not be to the detriment of others: in other words, the policy instruments to pursue such non-trade concerns should be carefully measured to diminish any trade distorting elements.

We believe that the success of the negotiations depends on all participants being ready to make efforts, on clearly positive results for developing countries, and on an agreement which permits all participants to pursue domestic policies which reflect their values, without imposing the cost of those policies on others.

Ladies and gentlemen, Einstein said that "the significant problems we face cannot be solved at the same level of thinking we were at when we created them". The process of globalization has thrown up great advantages but also many new problems. We are fortunate to live in a period when we can participate in the benefits of globalization and the development of policies to master the process.

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