Commissioner Fischler's Speech on the CAP, the WTO and Enlargement

Gentlemen,

In the last month, I've had a fairly comprehensive tour of the English education system, starting it with a trip to the House of Commons and Oxford, and ending up here at Eton. I'm not sure whether that means I've done it back to front, or front to back, but either way, it is a pleasure to be here this evening, and to have the opportunity to visit this historic establishment.

Rarely have I seen such an impressive list of alumni, and it is an honour to stand in a place where so many great men have stood before. Politicians, explorers, royalty, economists - the list is endless - even James Bond, it seems, was educated here. And whilst the Kings, scientists, Prime Ministers and writers that have passed through here have all played their part in shaping, or recording domestic and international history, what I would like to do this evening is look at how Europe is redefining herself; how her old boys and girls are shaping the role we play both in and outside our common borders.

And if we're talking redefining borders, enlargement is the obvious place to start. Fifty years ago, when the likes of Winston Churchill hypothesised about the need for "a kind of United States of Europe", few would have believed that in less than a century we would be realising exactly this dream - the reunification of a continent that had been torn apart at the seams by two world wars.

But it's not only for this reason that this enlargement is referred to as 'an historic one'. Expanding our horizons to bring ten new Member States from southern and eastern Europe on board is also one of the largest and most ambitious projects that the EU has embarked upon so far, changing the geography and economics of the continent, as well as opening up endless new windows of opportunity.

Enlargement brings with it 75 million new consumers to add to the 350 million already resident in the EU, and it adds another 4 million farmers to the 7 million currently producing much of Europe's food. And, with purchasing power in the new Member States rising about twice as fast as it is in the EU-15, experts predict a steady increase in demand for quality processed foods such as meat and cheese, opening up new market possibilities for producers. In return, the additional traditional and speciality products that will come onto the market with accession will add to the variety that European consumers already have to choose from.

Enlargement is not without its challenges though, particularly where agriculture is concerned. Quality in particular is one issue on which the accession countries are lagging behind, and it is the one issue which our consumers have said time and again that they are not prepared to compromise on. For the time being therefore, it is mainly the farmers and food industry in the EU-15 that will be able to capitalise on the market openings, whilst those in the new member states will have the competitive edge in terms of lower-cost feed grain and renewable raw materials.

Farmers in the new member states are also held back by other structural problems. Shedding the legacy of Soviet collectivisation remains a problem in many rural areas of the new Member States, as does a lack of capital and infrastructure, poor animal husbandry techniques, shortcomings in veterinary and phytosanitary standards, plus problems in marketing and processing their products.

But this is something that we were well aware of when we embarked upon this process, and they are all problems that we have worked hard on, together with our colleagues in the new Member States to overcome in recent years.

Through targeted programmes such as the Special Accession Programme for Agriculture and Rural Development, or Sapard scheme, we have channelled €1.33 billion into the farm sectors of the accession countries over the last four years alone, to help their rural areas prepare for integration into the common agricultural policy post-accession.

The underlying principle has been to 'help them to help themselves' - to give farmers and administrators on-hand experience of managing and applying EU support programmes. The Sapard programme in particular, was one such scheme that was specifically introduced for this enlargement, and was designed in such a way that the transition to EU rural development programmes would be a relatively smooth process.

And, as is the case with our own rural development schemes, it was up to the new Member States to identify the investment priorities for their rural areas, ranging from support to modernise farm holdings, to the upgrade of processing and marketing equipment, to improving vocational training schemes to encourage rural diversification.

These programmes have largely been extremely successful, and I can never credit the new member states enough for the phenomenal progress they have made since the membership negotiations began. There is still quite some work to be done, particularly in terms of establishing the necessary controls, and making sure that EU agencies are fully operational from day one, but our support and their efforts are ongoing and will continue well beyond the first of May.

In particular, where agriculture is concerned, a specific accession package was agreed for agriculture and rural development in the new Member States in Copenhagen back in 2002 to boost the integration process. It includes an enhanced rural development package in which more than €5 billion has been made available for the 2004-2006 period to support a range of support instruments, such as a measure to convert semi-subsistence farms into viable holdings.

It also foresees the gradual phasing in of direct support over a ten year period to give their agricultural sectors the chance to provide for restructuring and allow them to adjust gradually to the requirements of the CAP and EU membership.

Producers and consumers in the new Member States will of course also benefit from last year's CAP reform. Planning security, flexibility, market orientation, and a focus on quality are all advantages secured by the latest agreement to improve our agricultural policy for an EU of 25. Reform has created a more stable and sustainable framework for farming and farmers alike, ensures that our agriculture is able to meet the ever increasing standards and cater for the growing range of jobs that society expects our farmers to fulfil. And equally important is that it has made the CAP more trade friendly and more acceptable to our partners beyond our common borders.

And what made this particular reform so unique was that it made the final break in the link between support and production - a process we have called "decoupling". From 2005 onwards it means that the current system - under which a number of subsidy schemes exist for the different market sectors - will be replaced with a single farm payment that is tied to meeting mandatory food safety, environmental and animal welfare standards.

Paying farmers simply to produce may have been appropriate in a post-war Europe that was struggling to get itself back on its feet, but with self-sufficiency levels reached, and exceeded, society is now looking for agriculture to provide a range of public services beyond just keeping food on the table.

We're now in an era where quality is everything - quality in terms of the end product and quality in terms of the by-product, that is to say maintenance of our rural areas and countryside as well. In a recent European opinion poll, 91% of our citizens said that they wanted our agricultural policy to provide safe food, while 89% said they wanted to it to ensure environmental protection as well [1].

And so to ensure that we can provide these other services, reform has also boosted the second pillar of the CAP by shifting some of our money from market support measures across to rural development. The need for increased resources in this respect has been stressed time and again, and as we prepare to embrace new countries and a new rural heritage, so too must we recognise an increasingly diverse rural Europe.

And by making this shift in support, we are able to make an extra 1.2 billion euro a year available for rural development from 2007 onwards, allowing us to bring in new schemes to promote quality, provide new aid to farmers to help them meet standards, and introduce new and improved investment grants for young farmers.

But whilst this might seem a fairly comprehensive overhaul of the CAP, it is only one part of an ongoing process. I hope that a decision will be taken on what we refer to as the 'second wave' products later this month - olive oil, tobacco, hops and cotton, and that we will be in a position to present proposals for a revamp of the sugar sector around mid-year.

The problem with sugar, and this brings me to our relations with third countries and the world trade negotiations, is that it is a very sensitive sector, and any reform we make will have repercussions on the sugar producing developing countries. In particular, we have a number of agreements in place that allow them preferential access rights to the EU market, and what we are looking to do with sugar reform, is strike a balance between securing a fair deal for our own producers and processors, without eroding any of the preferences afforded to the developing world.

On top of the generalised system of preferences that we have in place which, I should add, extends well beyond the sugar sector, we also adopted an agreement in 2001 called 'Everything But Arms'. This commits the EU to allowing the world's 49 least developed countries duty and quota free access to the EU market for all products but arms and ammunition from 2009 onwards, but with progressive tariff reductions starting in 2006. Both these concessions have contributed to the EU becoming the largest importer of agricultural products from the developing countries by far. In fact, not only do we import more from them than our main trading partners put together, we import a staggering 85% of the entire farm exports from Africa, and 45% of those from South America.

Possibly what is more important though, and equally relevant to the developing countries is the constant decline in our net export share for all commodities under WTO commitments. Our net export share, for example, of the world wheat market, has fallen from 22% to just 12% over the last ten years, not by accident, but by policy design. Similarly, our ongoing reforms have also been responsible for the reduction in CAP funds spent on subsidising exports. This has dropped from around a quarter to 9% since 1993. In fact we're now prepared to phase out export support altogether for all products of interest to the developing countries.

Export subsidies bring me to, arguably, the most important aspect of the WTO negotiations, which is dealing with, or more specifically disciplining, trade-distorting domestic support. When the Doha Development Agenda was launched back in 2001, it explicitly stated that disciplining all forms of trade-distorting support was one of the main aims of the negotiations; that this was one of the preconditions for liberalising world trade and making it freer and fairer for all.

And here again, CAP reform served us well. Indeed, it had been given as one of the preconditions for success at the Cancun ministerial. Not only had it helped us to bring down our export subsidy expenditure, it has also contributed to a cumulative drop of 70% in our most trade-distorting support - our amber box measures in WTO terms - over the course of the last decade.

The result was that we were able to be more flexible in the negotiations, and so when we were accused of jeopardising the success of the negotiations by being at loggerheads with the U.S, we worked closely with them to put together a compromise paper that would allow the talks to proceed. The result was a communication that reinforced our position vis-à-vis the developing countries, and one that again stressed the importance of reducing trade-distorting support. In particular, in implied per se, a reform of the U.S. farm policy too, because without it the Americans would not be able to meet the targets we set out.

There are two points however, that we are not prepared to be flexible on. Firstly the need to afford countries at different stages of development different levels of preferences, and secondly the need to defend the legitimate interests of EU citizens - that is to say the importance that they attach to the broader impact of farming in terms of the environment, animal welfare and overall rural development.

To take this first point, I am sure you are well aware of the huge disparities that exist between the least and most advanced developing countries. Few would group together Brazil and Burkina Faso in this respect, and so it would not be logical to put them in the same category for the trade negotiations either. It was Karl Marx who said, "from each according to his abilities, to each according to his needs", and unless we apply a similar principle to trade liberalisation then we risk creating a situation where the rich get richer, and the poor get poorer.

The issue of trade-distortion also has to be taken on board here as well - indeed, it is as much, if not more, of a problem in the developing world as it is in the developed: 70% of customs duties currently paid on goods exported from the developing world are levied by other developing countries. On top of this, the World Bank estimate that up to 80% of the gains from trade liberalisation will come from opening up developing country markets.

Similarly, we strongly believe in defending the interests of EU citizens. These are after all the people that we have gone to the WTO to represent. And so when we have achieved a reform that greatly reduces our trade-distorting support, and that makes subsidies dependent not on production, but on the broader services that agriculture provides, we will not allow ourselves to end up in a situation where its achievements are penalised. The Doha Round is not about doing away with support altogether, and implying that it should, not only distracts from the problem at hand, it also compromises what agricultural policy is able to achieve.

So why, when there seems to be the commitment, and there seems to be the ambition, did Cancun collapse? And why, more importantly, have we been stuck in a rut ever since? Well it has partly to do with the inflexibility shown by other groups, and partly to do with the fact that too many people are still too hung up on shock tactics, rather than dealing with the real figures.

For example, I'm sure many of you will have heard the argument of NGOs and the like that European taxpayers pay the average European cow about $2 a day in subsidies, which is more than many of the world's poorest people receive. Not only is this figure based on inaccurate, measuring cows against men is also irrelevant in terms of the negotiations.

Many people are now asking, "What next?" Can we still plough on regardless? We have too, not just out of the commitment to our citizens, but also out of a commitment to the developing countries who depend so much on the successful outcome of these negotiations. The failure of Cancun was undoubtedly a serious setback, by we will continue to contribute wholeheartedly to the negotiations, and we will continue to work on our internal reforms to improve the CAP's coherency both inwardly and outwardly.

Similarly, in the last few months of this Commission, we also remain fully committed to improving the overall unity of an enlarged European Union. The failure to reach a conclusive decision on the new European Constitution at the Inter-Governmental Conference last year was another disappointment for us, which brings me to my final point this evening.

Gentlemen,

Failure is perhaps too strong a word, because whilst we did not manage to tie-up all the loose ends in the package, we are almost there - 99% of the issues, according to the Wall Street Journal had been agreed by December, so I believe there is an end in sight.

In particular, important progress had been made in terms of the make-up of the Commission. We had always opposed the idea of a two-tier system in which 15 voting Commissioners worked alongside 10 non-voting Commissioners, for fear it would bring into question the coherency, equality, and legitimacy of the Commission throughout the EU. A system of one voting Commissioner per Member State is a much more satisfactory alternative.

There was also the unanimous Council agreement on a European Initiative for Growth, which will be important in stimulating the EU economy, enhancing competitiveness, and encouraging job creation. Not to mention the agreement reached on seven new European agencies for air, rail and maritime safety, food safety, fisheries control, chemicals, and disease prevention and control. These are also significant in boosting overall European coherence and consistency.

The one sticking point that remains, however, is the division of power in the new Europe. And, just as is the case in the WTO, successfully overcoming this problem, depends on being realistic, and on being flexible.

I know that not all Brits feel very European, indeed, in a recent survey conducted by the UK office of the European Parliament, only 9% of respondents said that they considered the EU to be an important issue for the country, and only 24% - 11 million - turned out to vote in the last European Parliament elections. Not only was that the lowest figure in Europe, it was also less than half the number that voted in the third series of 'Big Brother'!

In many ways, those of us in Brussels are taking part in an ongoing reality TV show. We are constantly in view of an EU audience, our every move is scrutinised, and I know many people wait, not necessarily with bated breath, to see what will come in the next episode of European history. As far as the Constitution is concerned however, I believe that it will provide the necessary boost in the European idea that is needed for a modern, new Europe, and that it will improve the overall legitimacy and coherency of an ever expanding Union.

So far from winding down towards the end of its term, the Commission will remain fully engaged in all of the projects I have discussed this evening. Agricultural reform is ongoing, as are the WTO negotiations. Trade liberalisation is a goal that the EU believes very strongly in, and it is cause that we will continue to fight for, regardless of how difficult the terrain becomes. Discussions over the constitution will continue and if no headway is made in the next six months while the Irish hold the Council Presidency, then these negotiations will spill over into the Dutch Presidency during the second half of this year.

Similarly, enlargement is not a done deal yet either. It might be the end of the uphill struggle for membership for the ten countries joining on the first of May, but there are of course others in the pipeline waiting for their door to the EU to open as well. In particular, we will continue to work closely with Bulgaria and Romania to help them achieve their objective of joining in 2007, and one of the last opinions that this Commission will deliver is on whether or not negotiations can be opened with Turkey. Building a stronger and more sustainable Europe is something of a never ending process.

Who knows, maybe we will see some of you picking up some of the projects I have spoken about today in the not too distant future, directing the European show, and securing for a few more years to come.

I wish you every success with the remainder of your studies. Thank you for your attention.



[1] Eurobarometer 59.2, October 2003

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