Reforming the Common Agricultural Policy: History of a Paradigm Change (Palgrave studies in European Union Politics)

Reforming the Common Agricultural Policy History of a Paradigm Change

Isabelle Garzon

Palgrave Studies in European Union Politics Edited by: Michelle Egan, American University USA, Neill Nugent, Manchester Metropolitan University, UK, William Paterson, University of Birmingham, UK Editorial Board: Christopher Hill, Cambridge, UK, Simon Hix, London School of Economics, UK, Mark Pollack, Temple University, USA, Kalypso Nicolaïdis, Oxford UK, Morton Egeberg, University of Oslo, Norway, Amy Verdun, University of Victoria, Canada Palgrave Macmillan is delighted to announce the launch of a new book series on the European Union. Following on the sustained success of the acclaimed European Union Series, which essentially publishes research-based textbooks, Palgrave Studies in European Union Politics will publish researchdriven monographs. The remit of the series is broadly defined, both in terms of subject and academic discipline. All topics of significance concerning the nature and operation of the European Union potentially fall within the scope of the series. The series is multidisciplinary to reflect the growing importance of the EU as a political and social phenomenon. We will welcome submissions from the areas of political studies, international relations, political economy, public and social policy and sociology. Titles include: Derek Beach and Colette Mazzucelli (editors) LEADERSHIP IN THE BIG BANGS OF EUROPEAN INTEGRATION Morten Egeberg (editor) MULTILEVEL UNION ADMINISTRATION The Transformation of Executive Politics in Europe Isabelle Garzon REFORMING THE COMMON AGRICULTURAL POLICY History of a Paradigm Change Heather Grabbe THE EU’S TRANSFORMATIVE POWER Lauren M. McLaren IDENTITY, INTERESTS AND ATTITUDES TO EUROPEAN INTEGRATION Justus Schönlau DRAFTING THE EU CHARTER Rights, Legitimacy and Process Katie Verlin Laatikainen and Karen E. Smith (editors) THE EUROPEAN UNION AND THE UNITED NATIONS

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Reforming the Common Agricultural Policy History of a Paradigm Change Isabelle Garzon Principal Administrator European Commission, Belgium

© Isabelle Garzon 2006 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted her right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2006 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 13: 978–0–230–00184–8 hardback ISBN 10: 0–230–00184–X hardback This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Garzon, Isabelle, 1969– Reforming the common agricultural policy : history of a paradigm change / Isabelle Garzon. p. cm. – (Palgrave studies in European Union politics) Includes bibliographical references and index. ISBN 0–230–00184–X 1. Agricultural and state–European Union countries–History. I. Title. II. Series. HD1918.G375 2006 338.1′84–dc22

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Contents List of Tables and Figures

vi

List of Abbreviations

vii

Acknowledgements 1 2 3 4 5 6 7 8 9 10 11 12 13

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Introduction Analytical Framework The Institutional Context Thirty Years of Immobility Policy Changes since 1992 The MacSharry Reform (1992) Agenda 2000 (1999) The Fischler II Reform (2003) The Increasing Role of Policy Discourse in Agricultural Policy The Determinants of Policy Change Applying Policy Feedback Approach to CAP Reforms Paradigm Change in the Common Agricultural Policy (CAP) Conclusion

1 5 15 21 41 61 77 97 121 141 149 169 177

Appendix 1

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Appendix 2

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Notes

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References

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v

List of Tables and Figures Table 11.1 Table 11.2 Table 11.3 Table 12.1

Feedback effects of the 1992 reform Feedback effects of the Agenda 2000 reform Feedback effects of the 2003 reform The modification of policy objectives

Figure 2.1

Matrix of a multi-level, multi-issue, multi-lateral bargaining approach The bargaining game, 1992 – Market and price policy The bargaining game, 1992 – Horizontal rules and accompanying measures The bargaining game, 1999 – Market and price policy The bargaining game, 1999 – Horizontal rules and accompanying measures The bargaining game, 2003 – Market and price policy The bargaining game, 2003 – Horizontal rules and accompanying measures

Figure 6.1 Figure 6.2 Figure 7.1 Figure 7.2 Figure 8.1 Figure 8.2

Appendix 1 Comparison of successive CAP reforms Appendix 2 Paradigm shift in the CAP

vi

156 159 166 174

9 67 69 83 87 106 106 185 192

List of abbreviations BEUC BSE CAP COPA CPE DBV EAGGF EU FNSEA GATT LTO NFU NGO OECD WTO

Bureau Européen des Unions de Consommateurs Bovine Spongiform Encephalitis Common agricultural policy Comité des Organisations de Producteurs Agricoles Coordination Paysanne Européenne Deutscher Bauern Verband European Agricultural Guarantee and Guidance Fund European Union Fédération nationale des syndicats d’exploitants agricoles General Agreement on Tariffs and Trade Federation of Agricultural Organisations (Netherlands) National Farmers Union Non-governmental organisation Organisation of Economic Cooperation and Development World Trade Organisation

vii

Acknowledgements The views expressed here are personal and do not necessarily reflect the European Commission’s positions. The author would like to thank the Institute for Governmental Studies and the Department of Agriculture and Resources Economics at the University of California, Berkeley, for a stay as a Visiting Scholar in 2004–05 during which this book was written, and anonymous reviewers who helped improve content and presentation of this book. Any remaining errors or inaccuracies are entirely the author’s responsibility.

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1 Introduction

The EU’s common agricultural policy (CAP) has a long history of immobility and change. Since its inception in the early days of the European Common Market, the CAP has been the subject of much debate and criticism and yet has survived for almost 50 years. Intriguingly for the observer, the policy remained almost entirely unchanged during more than 30 years and then was substantially reformed three times in a decade, between 1992 and 2003. This book is about why and how these changes became possible, and how far they went. The purpose is to propose an interpretation of the evolutions of the CAP since 1992, and their impacts on the vision of agricultural policy in Europe, by analysing the role played by actors, various issues and various levels of governance. More specifically, two questions will be addressed. First, despite continuity, change did occur and not always in a situation of crisis. How was it possible and what were the factors at work? The main subject of attention has so far been the 1992 reform. No attempt, to our knowledge, has been made to apply a set of analytical tools to all reforms and compare the weight of different factors. This book will therefore compare the 1992, 1999 and 2003 reforms in applying a set of criteria to compare the factors at work in each case and to identify the determinants of change. The second question is whether incremental change can bring about such a cumulative change in policy design that it eventually can be considered a paradigm change. Until now, paradigm shift has been considered as resulting from a shock or a crisis, not from a constant process of change. Scholars have looked at one isolated 1

2 Reforming the Common Agricultural Policy

event, predominantly the 1992 reform, and not at a succession of changes. However, a longer time frame is necessary. Existing frameworks of analysis of policy change can provide a comprehensive view of policy change in the CAP. We propose to combine multi-level, multi-issue and multi-lateral bargaining frameworks, complemented by policy network analysis. To assess the effects of successive reforms, the cumulative change approach, based on the importance of policy feedbacks and policy networks, will seem the most appropriate to assess evolutions toward paradigm change. This is the subject of Chapter 2. Chapter 3 provides an overview of the institutional set-up of the CAP. Institutions are a key variable in the process of policy change, because they directly affect the ability of different players to influence decision making. In the EU governance system, the EU competence and decision making are decisive factors influencing the multi-level and the bargaining game. Before turning to the comparison of the different sets of reforms, a large historical perspective is necessary to analyse the historical context in which the CAP initially developed. Chapter 4 reviews the original CAP system, its deficiencies and the challenges posed to the system over time. Although critics were numerous, attempts at change in the 1970s and 1980s did not put into question the core objectives, principles and mechanisms of the CAP. By contrast, significant policy changes did take place since 1992. Their contents are presented in Chapter 5 as well as their broad orientations. The latter show strong continuity in the problems addressed and in solutions found. This chapter also presents the method that will be used to compare the three sets of reforms adopted since 1992 and to apply the multi-level, multi-issue and multi-lateral bargaining approach. The method is based on the context, the issues, the actors and the default scenario that are involved. In the three next chapters, the successive reforms of the CAP are compared: the MacSharry reform of 1992 (Chapter 6), the Agenda 2000 reform of 1999 (Chapter 7) and the Fischler II reform of 2003 (Chapter 8). The main purpose is to identify and compare the determinants of each reform. That also includes the role played by ideas and policy discourse. This is the subject of Chapter 9, which analyses the increasing role of policy discourse based on the concept of multifunctionality.

Introduction 3

The results of the four preceding chapters will allow us to assess the determinants of change in Chapter 10. This chapter compares the relative strength of different levels of decision making and certain issues connected to the agricultural debate, the continuity and change in the multi-lateral bargaining game between Member States and the opening of the policy network to new actors. We will then turn to the impact of cumulative change on the policy paradigm. Chapter 11 applies the policy feedback approach to CAP reform in order to assess how each reformative step modified policy mechanisms and stakeholders’ representations in such a way to produce further change thus preparing the ground for the next reform. The issue of paradigm shift is addressed in Chapter 12. It is shown that cumulative change did produce a fundamental change in policy goals, namely a change in paradigm, by transforming the values and tools governing the CAP from a ‘dependent’ into a ‘multifunctional’ paradigm. Finally, Chapter 13 proposes some conclusions about the role played by problems, legacies, preferences, networks and discourse in agricultural policy change. These indicate that EU agricultural policy is shaped by policy problems at different levels of decision making and crossing over different issues, and by policy legacies that provide the grounds for cumulative change through policy feedbacks. Cumulative change is also the result of the transformation of the policy network where new practices, new alliances and new actors have emerged. Accompanied by a new policy discourse, the entire process has resulted in transformed policy preferences and therefore in a paradigm change.

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2 Analytical Framework

The general context in which a subject, the EU1 common agricultural policy, is examined should guide the analytical framework chosen to analyse the developments of this policy. This context is the globalisation of the world economy, the process of European integration, the existence of strong EU competences in the field of agriculture and trade, and specific national situations. The analytical framework must therefore conceptualise the interaction between European integration, domestic developments and external factors as they all operate and influence policy making, often at the same time (Hennis 2005). Like Hennis, we therefore use political economy analysis, including both formal and informal interests, and the coexistence of different levels of decision making to analyse agricultural policy change and its impacts.

The existing frameworks Rare is the comparison of successive CAP reforms by applying a comprehensive framework. The CAP has been approached as an empirical application of theories or models relating to the EU governance system, to policy change or to bargaining processes, but this has usually been tackled in relation to a specific chapter of its history (very often the 1992 reform) and not by applying a long term perspective and a single overall analytical framework. However, policy change in a complex institutional framework like the EU can and should be understood by taking a historical and broad perspective. The ‘historical institutionalist approach’ proposed by 5

6 Reforming the Common Agricultural Policy

Pierson (1993) offers a first framework by underlining that history matters and that policies are the consequence of previous policies and develop consequently. It is argued that a comprehensive view on the history of the CAP is necessary to understand both its changes and its permanencies. To that end, it is possible to borrow from several distinct analytical frameworks which have until now been used separately. The process of policy change in the EU The first main framework is the proposal by Schmidt et al. (2004) to conceptualise the process of policy change in the EU. Schmidt et al. (2004) argue that European policy changes can be explained by five factors: policy problems that establish the need for change; the policy legacies which may or may not be compatible with the proposed solutions; policy preferences that may or may not change in the light of the problems and the proposed solutions; the capacity of actors to respond to problems through new policy initiatives; and discourse that serves to alter perceptions of problems and legacies and therefore to influence preferences. This framework applies particularly well to the CAP and will be applied here with some additions. The first addition is the emphasis placed on policy legacies. The CAP has a long history, as do the attempts at changing its policy instruments. It is not possible to fully comprehend one particular event of reform without examining the legacies of previous decisions, because the latter may have reduced the options of current decision makers or ‘prepared the ground’ for additional changes. The second particular emphasis that needs to be added to the Schmidt et al.’s (2004) framework is related to the political and institutional capacity of actors. In the EU system of governance, many actors and institutions are involved but their actions are constrained by institutional rules (legal arrangements and informal practices), as much as they influence institutional rules themselves. The role played by legal arrangements and informal practices, and their evolutions, needs therefore to be paid attention. In addition, the political capacity of the actors in devising policy options is closely related to the pattern of the policy network. As proposed by Daugbjerg (1999), a policy network is defined here as an organisational arrangement created to facilitate the intermediation between state actors and organised interests. The analysis of

Analytical Framework 7

policy networks usually focuses on the relationship between government and interest groups. The structure of the policy network is therefore an important determinant of policy choices and outcomes (Daugbjerg 1999). A closed policy network consisting of agricultural experts from various administrations and professional organisations will not produce the same policy decisions as a more open network including other interests such as consumer or fiscal considerations. Moreover, the nature of the policy network is important in determining the path of change. Coleman et al. (1996) showed that the distinction between corporatist and pressure pluralist policy networks can frame the trajectory of policy change and determine whether a sweeping paradigm shift or a cumulative change will occur. It is therefore necessary to study the evolution of the CAP policy framework in view of assessing the impact of this evolution on the path of policy change. Lastly, the role of discourse and ideas is essential in influencing policy change. Policy discourse can help change perceptions of problems and trigger acceptance of the solution proposed. It serves to present the problems, values and solutions surrounding the issue concerned, and aims at communicating this ideational dimension to the public (Schmidt et al. 2004). The role of discourse and ideas has increased in the process of policy change in the EU and in particular in the case of agricultural policy. Policy makers were confronted with the increasing need to explain a contested policy, as well as make changes acceptable. The dimension of policy discourse needs therefore to be included in order to assess the evolution of the policy discourse itself as well as its role in accompanying policy change. Multi-level game and multi-issue analysis A second framework of analysis relates to the interaction between different levels of government. Following Putnam (1988) and Patterson (1997), it is widely acknowledged that CAP decision making is a three level game where bargaining and decisions are made at Member State, European and international level. The processes are neither linear nor conducted in isolation. They occur most of the time simultaneously and reverberate with each other. In comparing successive reforms, we will therefore also attempt to evaluate the importance of each level of decision making with particular attention to the international level.

8 Reforming the Common Agricultural Policy

It is not sufficient, however, to see the EU system of governance as composed only of vertical interconnections. There is also a horizontal dimension, which connects issues and decision processes. These issues often can be identified with policy areas and the struggle to coordinate them and ensure their coherence. Collinson (1999) convincingly argued that the EU as a governance system is characterised by a potential for interaction between issue-systems, that is horizontally connected policy debates. These horizontal connections cut across the vertical interaction between different levels of decision making. In the case of agriculture, for example, it is difficult to look at it in isolation from international trade and budgetary considerations. The comparison of successive reforms should therefore identify the role played by these horizontally connected issues in the process of decision making. Multi-lateral bargaining Finally, the third conceptual framework looks at policy making as a bargaining process. A model of multi-lateral negotiations has been proposed by Adams et al. (1996). It applies to non-cooperative bargaining involving different players and incorporates the amount of input each group has in the decision making process, the space of issues over which negotiations take place and the outcome in the event that parties fail to reach an agreement. It looks at disagreement between players, admissible coalitions and essential players, the utility function of players and default scenarios. The CAP decision making process is indeed principally a noncooperative negotiation between essential players, the European Commission and the Member States, who are respectively the sole proposer and the sole decision taker in the process. The bargaining between the Commission and Member States, and among Member States, is influenced both by coalitions and differing assessments of the risk of no agreement. We will give special attention to two particular dimensions identified by a multi-lateral bargaining model: the role played by essential players (notably the European Commission, and the much discussed relationship between France and Germany) and by the default scenario, that is the cost of no agreement. *

Analytical Framework 9

To sum up, in analysing the determinants of change in the CAP, it is possible to apply a multi-level, multi-issue and multi-lateral bargaining approach and follow a matrix which is illustrated in Figure 2.1. Multi-level International

CAP - Multilateral bargaining

Multi-issue

Commission Civil society National governments Economic environment

Trade

European Parliament

Council

Implementation by Member States

Budget

Economic and Social Committee

Reform

National Figure 2.1 approach

Matrix of a multi-level, multi-issue, multi-lateral bargaining

Cumulative change and paradigm shift Next to the determinants of change, our second topic is to assess whether, and if so, how, successive changes, although incremental, produced substantial changes in the paradigm of European agricultural policy. Path dependency Because of the strong continuities between any two successive reforms, the CAP has been described as particularly path dependent. The concept of path dependency was developed by Pierson and followed up by a number of scholars with regard to the CAP. Pierson (2000) proposed a definition of path dependency. In a broad sense, path dependency refers to the causality between different stages of

10 Reforming the Common Agricultural Policy

policy change. It therefore embraces the importance of history in the development of public policy. In a narrow sense, path dependency refers to the probability that further steps along the same path will increase with each step down this path. In other words, there are constraints on future choices and self-reinforcing mechanisms, or positive feedbacks (Kay 2003). This is explained by the fact that the relative benefits of the current activity compared with other possible options increase over time. The idea is captured by the notion of increasing returns used in economics: a long movement down a particular path will increase the costs of switching to some previously forgone alternative. Pierson (1993) identified a series of features that make politics particularly subject to increasing returns, or path dependency: the collective nature of politics; the high density of institutions, which makes policies and institutions extremely durable; the political authority of some actors and the power asymmetries resulting from this authority; the complexity and opacity of politics; the short time horizons of politicians; and the status quo bias of political institutions, which are generally designed to be difficult to overturn. This historical institutionalist approach is particularly helpful in analysing continuity in a particular policy. Daugbjerg (2003) portrayed the CAP as a path dependent policy. He argued that policy makers prefer incremental adjustments to innovatory steps, for which consequences are more unpredictable. But even minor adjustments may weaken the support of some key actors because of the change in perceived distributional effects. Daugbjerg therefore proposed that the strength of the coalition in favour of the status quo is particularly important, because the shift of one major actor may cause the old coalition to split. The process depends also on political acceptability as much as on its ability to create room for new ideas. Cumulative change However, it seems at first sight difficult to apply fully and solely the path dependency approach and accommodate successive CAP reforms, which have sometimes contained major changes. Were the founders of the CAP in 1958 to come back today, they would not recognise this policy, its objectives and its instruments, despite the process of change since 1992 being frequently considered as path dependent.

Analytical Framework 11

Kay (2003) highlighted the limits of the concept of path dependency in the case of the CAP. When successive changes occur, there is a need to take account of their cumulative effects. Indeed, in a dynamic system, unintended movement can occur which slows the system down and affects the direction it takes. As far as the CAP is concerned, there are reinforcement mechanisms which can have unintended effects that produce or increase pressure for change and even generate chocks to the existing policy path. These consequences can affect the balance of interests and the effects of existing instruments. The idea of cumulative change, which may be both path dependent and have destabilising effects on the previous equilibrium, highlights two questions which are critical to understand the CAP reform process. First, it is necessary to understand why a critical juncture, and consequent change, happens, or does not happen. It is largely accepted that this happens when external factors disrupt the conditions of path reproduction. By applying a multi-level and multi-issue analysis, we should be able to identify such critical junctures, or their absence. Second, it is necessary to analyse the dynamics of change, rather than to simply assess the reproduction of the opposition to change as this has often been done. A path dependency approach minimises the positive feedback effects of a decision by emphasising its path reinforcing effects on interest groups and individuals, and on the future possibilities for policy change (Kay 2003). Our aim will be to identify these feedback effects. Like for the determinants of change, the analysis must be done for each level of policy making and for the range of issues concerned. It is also crucial to understand their dynamic, cumulative effects. Can cumulative change lead to paradigm change? Ultimately, the question is whether this accumulation of change brings a fundamental alteration of policy priorities and instruments, in other words whether that leads to a paradigm change. A policy paradigm can be defined as comprising four sets of elements: basic values; a set of norms which form the basis for fundamental policy goals; some ‘algorithms’ – causal relationships which guide policy makers in the selection of policy instruments to solve the identified problems, and images that help to define a vision of the world (Coleman 1998). The issue of paradigm change has until now been

12 Reforming the Common Agricultural Policy

discussed mostly separately from path dependency and cumulative change. This can be explained by the influence of Hall’s (1993) contribution on paradigm shift. Hall proposed three variables – instruments settings, instruments of policy, paradigm – that define three possible levels of change. In a first order change, instruments settings change, while the two other variables remain unchanged. In a second order change, both instruments settings and policy instruments are modified, but the paradigm remains. These two levels of change are qualified as the normal policy making, which preserves the broad continuities, remains incremental, and takes place in a relatively closed policy network. By contrast, in a third order change, all three variables are modified. This corresponds to a radical change in the policy discourse, a more disjunctive process, and a shift of locus of authority (from experts and science onto wider state/society relations and political judgement), and it is often preceded by experimentation and policy failure that gradually undermine the authority of the existing paradigm. In other words, for Hall, a paradigm shift occurs when policies fail to realise their intended objectives or produce undesirable consequences. While Hall’s contribution has been useful to examine a particular occurrence of policy change (in his case, macro-economic policy in the United Kingdom), it is less suited to a succession of changes in which the separation between innovation and continuity is not always clear, and the classification between orders of changes according to the evolution of the variables not easy. This was underlined by Coleman et al. (1996) who showed that a paradigm shift can not only follow a society-wide debate in the partisan or media arena, but also can result from a gradual negotiated process conducted over a number of years. In addition, the accent on a specific event is not adapted to a complex political and institutional environment like the EU. Policy making is done at different levels, concerns different issues at the same time, takes time to develop, and responds to a range of events or new conditions. It is therefore difficult, if not impossible, to identify one specific event as the decisive trigger of paradigm shift. We will therefore draw on Coleman et al.’s (1996) emphasis on the ability of cumulative change to deliver paradigm change to test its applicability to the history of the CAP since 1992. A first attempt

Analytical Framework 13

was made by Kay (2003) even before the last 2003 reform. He highlighted the limitations of the path dependency approach and the unintended consequences that apparently minor changes can have in putting further pressure for change. In doing so, it is possible to use two concepts of the public policy literature, policy feedback and policy network, to identify their specific effects on change in policy mechanisms and in interest groups’ representations.

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3 The Institutional Context

The institutional set-up is a key variable in the process of policy change: it directly affects the ability of different players to influence the decision making process and the extent to which the European level of decision can intervene in agricultural policy. There are indeed two sorts of delegations of powers in the EU system: the transfer of competence from the Member States to the EU and the transfer of power from one institution to the other. Although the legal rules established by the Treaty applying to the CAP have not changed since the inception of the policy, the institutional practice evolved and influenced, sometimes significantly, the outcome of the reforms adopted since 1992.

The EU competence The powers of the different institutions are dependent on the powers of the EU as a whole. The latter are defined by the Treaty, which grants extensive competence to the EU in the field of agriculture. Article 34 establishes the principle of exclusive competence in the organisation of the agricultural common market and provides for the adoption of common competition rules, the compulsory coordination of national market organisations and the establishment of a European market organisation. Since 1958, agricultural market and price policy has been based on these provisions, which in effect remove any national competence in this area. By contrast, Article 35 provides for joint responsibility of the EU and the Member States in the areas of vocational training, research 15

16 Reforming the Common Agricultural Policy

and dissemination of knowledge, calling only for the coordination of efforts. In the same vein, Articles 158 and 159 concerning economic and social cohesion call for a joint effort of the EU and the Member States in the economic and social development of regions lagging behind, including rural areas. The competence of the EU is a supportive action through the Structural Funds, which include the EAGGF Guidance section. This non-exclusive EU competence in the area of structural policy and rural development explains that, while market policy is wholly financed by the EU budget through the EAGGF Guarantee section, rural development and structural measures are cofinanced by the EU and leave wide responsibilities to Member States for preparing and implementing their rural development programmes. Another set of Treaty provisions is relevant to agricultural policy. These govern the common commercial policy where EU powers are also extensive. The existence of the common commercial policy reflects the creation of a common market composed of a customs union. The only means to manage the external relations of a customs union was to establish a single trade policy and express the EU positions with a single voice (Meunier 2005). This explains that Article 133 of the Treaty establishes that EU trade policy is based ‘on uniform principles, particularly in regard to changes in tariff rates, the conclusion of tariff and trade agreements, the achievement of uniformity in measures of liberalisation, export policy and measures to protect trade such as those to be taken in case of dumping or subsidies’. The Treaty provides therefore for the exclusive competence of the EU in trade matters. The extent of EU competence in the fields of agriculture and trade policy, which are among the most integrated and harmonised EU policies, largely explains the visibility and the symbolic importance of the decisions taken by the EU in these areas. Resources and protection of Member States and stakeholders depend mostly on EU decisions. This is why particularly important policy initiatives are often controversial and undergo a complex process of approximation of positions: the EU common interest often confronts particular national interests.

The EU decision making The EU has five institutions: the European Parliament, the Council, the European Commission, the Court of Justice and the Court of

The Institutional Context 17

Auditors. Although not formally recognised as an institution, the European Council, the gathering of Heads of State and Government, plays also a significant role. The CAP decision making is governed by Article 37(2) of the Treaty which gives the Council and the Commission significant powers. The Commission initiates proposals for legislation, and after consulting the European Parliament, the Council adopts legislation by a qualified majority. Without a formal Commission proposal, the Council cannot act. The Council, composed of one representative of each Member State, is the centre of the CAP decision making process. The presidency of the Council rotates every six months according to a specified cycle. The role of the presidency in conducting the discussions is of particular importance, because it can directly influence the outcome by setting the agenda of meetings, by directing the length of the discussions and by forging compromises in direct contact with other national representatives and the Commission. Decisions are normally taken by qualified majority, but to amend or reject a Commission proposal, unanimity is required. This ensures that the Commission’s right of initiative is preserved, and the presidency and the Commission work together in finding solutions that, during complex negotiations, will be acceptable to the Commission as well as Member States. In addition, a decision cannot be taken where a blocking minority of Member States opposes it. This provision ensures that decisions taken by a majority do not conflict with the positions of too many Member States. In summary, the effect of qualified majority is to provide incentives to all players, presidency, other members of the Council and Commission, to adopt decisions that are able to garner maximum support. However, historically, qualified majority voting has not always applied. For decades, since 1966, consensus was required following the ‘Luxembourg compromise’, which gave a power of veto to any Member State. Basically, this was an informal agreement that, if a country would declare that the matter under discussion was of such significance (‘vital national interest’) that it could not afford to be outvoted, the decision would not be taken until the matter was resolved to the satisfaction of that country. This practice had particular adverse effects on the CAP, notably a prolongation of debate and the necessity to grant concessions to the most reluctant

18 Reforming the Common Agricultural Policy

Member States. The next chapters will demonstrate that it took a long time before qualified majority was applied fully to CAP reforms.2 Practice has now changed to comply more and more with the constitutional rule. Application of qualified majority voting has, to some extent, also been made more difficult by the direct intervention of the European Council, the meeting of Heads of State and Government who regularly convene to agree on important new policy initiatives and broad guidelines for the development of the EU. The European Council has no legislative powers under the Treaty and decides by consensus. It has played an important role in the development of the CAP, as decisions have frequently been referred to the European Council when Agriculture Ministers failed to agree or when decisions on the CAP had become enmeshed with decisions on other issues. The first situation reflects the fact that Agriculture Ministers have been prone to defend national agricultural interests as a priority. We will see that the second situation has increasingly been the case as agricultural policy was more and more twinned with other policy issues such as enlargement of the EU or priority to sustainable development. In the decision making process, the European Commission plays a key role since any decision must first be based on a Commission proposal and then needs the Commisssion’s approval to be amended, unless the unanimity of the Member States agrees on an alternative. In preparing its proposals, the Commission receives information and advice from grassroot sources both in Brussels and in the Member States. It traditionally has had close relationships with all types of agricultural organisations, but has progressively enlarged its contacts to the European Parliament, civil society organisations such as environmentalists, and other independent experts. These contacts are essential in the preparatory phase to assess the practical and political feasibility of proposals. A policy initiative prepared by the administrative services of the Commission has first to be approved by the ‘college of Commissioners’, the political body of the Commission composed of one national of each Member State. The proposal is then actively promoted by the Commissioner for Agriculture, whose political responsibility is to ensure the success of the proposal. The Commissioner attends the Council Meetings and his or her task is to present and explain the proposal and if necessary, after consulting fellow

The Institutional Context 19

Commissioners, to amend it in close contact with the presidency of the Council. The Commissioner’s ability to convince, his or her technical knowledge and political judgement play therefore an important role in the success of a new initiative. The Commissioners for Agriculture responsible for the reforms under examination were Mr MacSharry (1989–92), Mr Steichen (1993–94) and Mr Fischler (1995–2004). Correspondingly, the procedure for negotiation of trade agreements grants extensive responsibilities to EU institutions: the Commission initiates the procedure by making a recommendation to the Council, the Council authorises the Commission by qualified majority to open negotiations and adopts directives for the negotiations, the Commission conducts the negotiations in consultation with a committee of Member States representatives who oversee the negotiations and ensure the respect of the directives, and in the end, the Council agrees on the agreement by qualified majority. Like for the CAP, the rules for delegating powers from the Council to the Commission have, in practice, changed over time. Unanimity and consensus have been used in order to ensure agreement of the most conservative Member States. Although unanimity increases the EU’s capacity to resist policy changes requested by trading partners, it also reduces its ability to demand similar policy changes from others. The need to find an international agreement justifies the use of qualified majority voting, which then reflects a more median position (Meunier 2005). The European Parliament plays a marginal part in CAP decision making despite being a directly elected body representing European citizens. Contrary to most of EU legislation for which Parliament has full legislative powers equal to those of the Council, the CAP rules grant only a consultative role to Parliament. Its opinion is prepared by the Agriculture and Rural Affairs Committee, which consults as necessary other committees such as the Budget Committee or the Environment Committee, and then it is adopted by the plenary session. Similarly, the European Parliament does not have any formal power in trade policy making. However, ‘agreements having important budgetary implications’ for the EU (Article 228) must receive the assent of Parliament in respect of its budgetary powers. This last provision was used in 1994 for the conclusion of the Uruguay Round.

20 Reforming the Common Agricultural Policy

The role of the European Parliament evolved as agricultural and trade policies became politicised. Suffice to say here that the European Parliament became less and less preoccupied with producer interests and extended its scrutiny powers to include tax payers and consumer interests. This occurred in relation to the more developed parliamentary powers in the areas of budgetary control and environmental and sanitary legislation. It should be noted that the Constitution signed in 2004 would grant, if ratified, full colegislator status to the European Parliament, thus consolidating the increasing role gained by Parliament in agricultural policy. Conclusion Institutions play a significant role. But institutional practice is also influenced, sometimes significantly, by non-institutional actors and their relationships with institutional actors in policy networks. In the case of the CAP, the action of non-institutional actors has been particularly significant since the origins of the policy as has been their interaction with institutional actors and the evolution of the agricultural policy network. Placing policy change in its formal, legal institutional context is essential to understand how formal rules constrain or are used by actors in their multi-lateral bargaining. But it is only one dimension of this bargaining game, which will be further analysed in the following chapters.

4 Thirty Years of Immobility

The analysis of policy change should take a historical perspective as proposed by the historical institutionalist approach. Analysing changes of a long established policy such as the CAP requires examining the historical context of these developments. This is all the more important as the main interrogation is to understand why and how this policy which was essentially characterised by immobility during its first 30 years could undergo significant changes later on. This chapter presents therefore the initial characteristics and mechanisms of the CAP, their deficiencies and the successive attempts at reforming the CAP up until the late 1980s.

The original CAP Initial iron pacts The origins of the CAP have to be understood in the context of the European integration process. The inception of the CAP was an important step in the unification of Europe through the creation of a Common Market. The integration of six very different national agricultural policies into a common system was part of this endeavour. The Treaty of Rome, the founding document of the European Community, was signed in 1957 by France, Germany, Italy, Belgium, Luxembourg and the Netherlands and came into effect on 1 January 1958. It committed its signatories to forming, within 12 years, a customs union with complete freedom of trade on the internal market and a common external tariff. The Common Market 21

22 Reforming the Common Agricultural Policy

provisions were intended to include agriculture, and the adoption of a common agricultural policy was clearly stipulated. Whereas Article 38 declared that a common agricultural policy would be established, Article 393 specified its objectives in general terms. The wording of Article 39 is open to various interpretations, but it has so far remained unchanged. The objectives are to: • increase agricultural productivity through technical progress, the rational development of agriculture and the optimum utilisation of factors of production, • ensure a fair standard of living to the agricultural population by increasing the individual earnings of persons engaged in agriculture, • stabilise markets, • assure the availability of supplies, • ensure reasonable consumer prices. Article 39 was complemented by Article 40 that stipulated that the CAP should be established after a transitional period and that a ‘common organisation of agricultural markets’ was to be put in place. The details of how these objectives were to be implemented were not spelled out in the Treaty. This was left to the Stresa Conference of Agriculture Ministers, which took place in 1958 and marked the actual birth of the CAP. The meeting agreed on the principles and modalities to put in practice the objectives of Article 39. As part of the wider enterprise of European integration, the inception of the CAP served to reconcile the disparate national agricultural interests and differences in market organisation schemes while a common internal market was progressively established. In fact, it enabled well-organised agricultural sectors such as France and the Netherlands to expand their markets while maintaining mechanisms of support for their farmers and delegating the financial responsibility to the European level. In the case of France, the country had built its reconstruction efforts since the end of World War II on the modernisation of its agriculture and the search for new markets while maintaining protection of its industrial base. It had to deal with an agricultural sector consisting of both a large number of small farms and influential medium-sized and large holdings. France thus stressed the necessity of both the unity of the

Thirty Years of Immobility 23

European market and strong market regulation for as many products as possible. By contrast, Germany, which concentrated on the reconstruction of its industrial capacities largely destroyed by the war, had much less competitive agricultural structures that therefore relied on high domestic prices. While farmers feared increased competition from more competitive European farmers and wanted to retain high incomes, it was considered that the economy as a whole was best served by open trade and a stable food supply. As the CAP was seen as part and parcel of European integration, and the economic advantages for industrial sectors were too great to let agriculture get in the way, Germany withdrew its initial reluctance and agreed to include agriculture in the package deal on the Common Market, which the Netherlands and France would not have accepted without agriculture (Wilson et al. 2001). So, after intensive discussion, it was agreed that the Common Market would include both agriculture and industry. As regards agriculture, the new unified market would rely on remunerative prices based on German high levels and would be sheltered from international competition by a (high) common tariff in order to deliver the new market opportunities that the French were looking for. The Franco-German deal has since been considered as one of the two iron pacts in agricultural policy (Roederer-Rynning 2003b). Following the Stresa Conference, the European Commission put forward a set of proposals for establishing mechanisms to regulate a limited number of product markets. After a marathon session of the Council of Ministers, agreement was reached on 14 January 1962 on the regulation of cereals, pig meat, poultry meat, eggs, fruits and vegetables, and wine. In 1963, the Council agreed on further regulations governing dairy products, beef and rice. All products or groups of products were not supported to the same extent and in the same way. Complete price support applied to grains, sugar, milk and beef. Products such as olive oil, durum wheat, oilseeds and tobacco received only supplementary price support. Products such as poultry, eggs, wine and horticultural products were protected only by a common external tariff. With these measures, the CAP came to be organised mainly around the interests of Germany, France and the Netherlands by concentrating on these countries’ most important products (Hennis 2005).

24 Reforming the Common Agricultural Policy

This organisation reflected what was subsequently described as the three fundamental principles of the CAP: market unity, financial solidarity and ‘Community preference’. Market unity followed logically from the removal of all barriers to intra-EU trade and implied a common level of prices throughout the EU. This was ensured by the establishment of target prices as a basis for intervention, that is the purchase of a commodity into public stocks at a specific price below the target price in order to support the market and farmers’ income. Financial solidarity meant that the full budgetary impact of the CAP’s price support policies was to be reflected in the EU budget. It found its expression in the foundation of the European Agricultural Guidance and Guarantee Fund (EAGGF). The ‘Guarantee section’ of the Fund mainly paid (at 100 per cent) for expenditures of the common organisation of agricultural markets. The ‘Guidance section’ cofinanced measures to improve agricultural production and processing and marketing structures as well as compensatory allowances for farmers in less-favoured areas. Later on, from 1988 onwards, it became part of the so-called Structural Funds and focused on the cofinancing of rural development and structural adjustment programmes. Lastly, the principle of Community preference implied that thirdcountry imports were only necessary if EU producers were unable to meet EU demand. It was translated into a common external tariff and threshold prices higher than internal target prices, thus insulating the EU market from imports. The original sins During the next 30 years, the CAP would essentially concern itself with the development of the agricultural sector through production increases and the application of new technologies. This was illustrated by the market and price policy that dealt with setting price levels and regulating markets rather than with helping agricultural and rural structures adjust to the modernising economy. Although the objectives set by the Treaty pointed to the need to tackle strong structural disparities and to better insert agriculture in the rest of the economy, and therefore to the need for a gradual adjustment of the agricultural sector, the instruments agreed were clearly the reflection of the domination of productivist and agrarian concerns over struc-

Thirty Years of Immobility 25

tural objectives (Roederer-Rynning 2003b). ‘Market’ policy was seen as the main modernisation factor, not ‘structural’ policy. Structural policies had existed in the Member States since the Second World War. They concentrate on the supply side of agricultural markets, while the demand side of the equation comes under the purview of price policy. Structural policy was initially understood as referring to schemes aimed at making the agricultural sector more efficient in its use of land, labour and capital inputs. Later the concept was developed to encompass labour reforms and capital usage measures. Structural measures were given little attention until the early 1970s, when some EU-wide measures were introduced. They were later on complemented by geographically-based programmes. However, they remained essentially productionoriented (Fouilleux 2003). The choice of the original instruments had major economic and institutional consequences. Economically, although market and price support was insulating farmers from the market, it gave the illusion of a market-based policy through the accent placed on prices (Daugbjerg 2003). Indeed, the EU guaranteed to purchase the entire production of a farmer at the generous intervention price. Thus price support reduced the uncertainty of future market conditions. In addition, in an atomistic structure such as farming, the individual farmer is unaware of the relationship between his or her production increase and any downward pressure on price. The CAP, by maintaining high institutional prices, hid this downward pressure on price (Kay 1998), while concentrating all professional and political energies onto the annual decisions on guaranteed prices. Furthermore, even if the system had disguised redistributive effects between Member States, the regulatory system produced inflationary budgetary behaviours and therefore conservative positions: the fixing of institutional prices was the occasion of an annual fight between Member States to take the most out of the bargain and, given the diversity in national productions, compromise could only be found by increasing prices. The financial solidarity principle introduced a moral hazard enabling Member States partially to externalise the costs of higher production (Swinbank et al. 1996, Ingersent et al. 1999). This represented a major endogenous lock-in factor preventing change of the support system of farm support (Fouilleux 2003).

26 Reforming the Common Agricultural Policy

The initial CAP made no provisions for dealing with the differences between agricultural systems in Europe. Decisions on prices were harmonised across the EU. The differences in production methods, quantity and productivity of the holdings were not taken into account. This gave a strong incentive to production increases, and it soon led to surpluses. At the same time, disparities of income increased within and among Member States as a result of the concentration of price policy on a limited number of products. Moreover, as price support was proportional to the volume produced, larger and more intensive farmers were the main beneficiaries of the system. Lastly, a policy based on price support could only resort to protectionist and trade distorting measures. Given that European prices were far higher than prices on the world market, the application of Community preference meant that the domestic market was insulated from imports by variable levies and any surplus was exported through the payment of export refunds. Import levies bridged the difference between a minimum import price – called the ‘threshold price’ – which was set below the target price and the lowest price on the world market for the commodity concerned. Similarly, export refunds were paid to EU exporters to compensate the price difference while preserving the benefits of the domestic price support. It should be underlined that this system of trade protection was inseparable from the price policy. To be effective in ensuring a high level of income, an agricultural policy based on price support had to prevent the importation of products coming from third countries at a lower price. It should also be noted that during this period, such policies were not an exception. The GATT (General Agreement on Tariffs and Trade) had established the principles governing international trade: non-discrimination, open markets and fair trade. However, agriculture remained for decades exempt from most of the GATT disciplines. In particular, the use of subsidies was not prohibited and was only subject to notification for those which directly or indirectly reduced imports or increased exports. In addition, quantitative restrictions on exports and imports were allowed and used. The United States was, during the same period, an important user of quantitative restrictions through its 1951 scheme whereby the US Congress could decide to impose quantitative restrictions in cases where imports would impinge upon the effectiveness of a farm

Thirty Years of Immobility 27

program, the bulk of which consisted in price support (Swinbank et al. 1996). Institutionally, the CAP reflected the original compromise. On the one hand, following the opposition of French President De Gaulle to accompany the ‘communautarisation’ of the CAP in 1966 by majority voting, decisions for the CAP remained of an intergovernmental nature: they were de facto taken by unanimity under the regime of the ‘Luxembourg compromise’, despite the fact that the Treaty provided for qualified majority voting. This meant that any Member State could object to, and ultimately prevent, a Council decision on the ground that a national interest, considered vital, was endangered. The effect was not only that very few decisions were put to a vote, but that discussion on a policy proposal continued often until a consensus was reached. The consequence was a prolongation of the debate and the necessity to grant concessions to the most reluctant Member States (Ingersent et al. 1999). In the case of the CAP, the search for consensus also reinforced the endogenous lock-in effects of market and price policy by raising commodity support prices to levels higher than they would otherwise have been, thus exacerbating overproduction and the cost of disposal. On the other hand, the agrarian model was accompanied by corporatist arrangements in the governance of the CAP at national level. This is explained by the combined effects of the unanimity rule, a relatively young European Commission and a weak European-wide farmers lobby, COPA (Comité des Organisations de Producteurs Agricoles) that helped national administrations seize power at European level. Consequently, national organisations remained the main channel of farmers’ lobbying efforts, and their role was even strengthened through the necessary cooperation to implement the CAP at national level. This is the second iron pact of the CAP (Roederer-Rynning 2003b). This is true for founding Member States like the Netherlands (Hennis 2005) and France (Coleman et al. 2002, Roederer-Rynning 2002) as well as for a newcomer like Ireland (Adshead 1996). The agricultural policy network both at national and European level thus developed into a closed policy circle excluding other considerations and interests (Daugbjerg 1999). In short, the progressive establishment of a common regime of agricultural policy was followed by decades of inertia. This can be explained by various lock-in effects. Exogenous institutional locks

28 Reforming the Common Agricultural Policy

such as the intergovernmental game governed by unanimity and institutional opacity facilitated and increased endogenous locks like policy instruments and opacity of the policy. Moreover, the political lock-in effect occurred at both national and European levels (Fouilleux 2003). A challenged model The situation started to be challenged in the 1980s. This has continued apace since. An abundant literature exists on the origins of the 1992 reform. We will only attempt to summarise the main factors. The first factor is economic. As in other parts of the world, notably in the United States, the CAP did not prevent structural adjustment to take place. The institutional price guarantees attracted capital into the farm sector and accelerated its modernisation. The rapid adoption of new technologies during the 1960s and 1970s considerably increased the output through the increase in yields per hectare or in output per animal. This reflects an overall intensification of production processes. As a consequence of these developments, real prices of farm products decreased, benefiting consumers, while the real value of land decreased to the disadvantage of land owners. Farm incomes fell in relation to the other sections of the population. The burden of adjustment was borne by the segment of farmers who were restrained by funds, farm size, managerial ability or age, and production concentrated progressively on larger and highly modernised farms. Smaller farm holdings had to increasingly rely on off-farm income in order to maintain or improve their household income. By 1980, the restructuring process had concentrated income and production in the northern regions of the EU but had still largely to run its course in the south and, overall, farm income was stagnating. The second factor was the increasing budgetary cost of market and price policy. In the 1980s, guaranteed prices to farmers and productivity gains produced such an increase of production that surplus stocks accumulated.4 The instruments put in place during the 1960s were used to the full: surplus production was bought by intervention agencies and stored at the expense of the EU budget in beef mountains or milk lakes; surpluses were sold on world markets at world price levels after compensation of EU exporters with export refunds.5 Between 1973 and 1989, EAGGF Guarantee expenditure,

Thirty Years of Immobility 29

net of expenditure in agri-monetary measures, increased by roughly double the amount of the increase in EU GDP (Ingersent et al. 1999). Governments facing recession and monetary instability were no longer as willing to pay the cost of agricultural policy. A number of times in the early 1980s, due to excessive agricultural expenditure, the EU budget was under threat of not being able to meet its obligations. The problem was further exacerbated by the earlier entry of the United Kingdom into the EU and the debate over the UK contribution to the EU budget. As a large food importer from outside the EU, the UK’s transfers of import levies to the EU budget largely exceeded the CAP subsidies received by the United Kingdom. This net contribution to the budget was a contentious issue at the time of its accession and remained so during the 1970s and 1980s. More generally, there were continuous frictions among Member States regarding the system of financing the EU budget. The financial arrangements of the CAP were such that because import levy revenues were payable to the EU budget whereas export refunds were paid from it, net agricultural importers were bound to bear a higher share of the costs of financing the CAP compared with net exporters. During the 1980s, finding a solution to the British budgetary contribution became enmeshed in negotiations on finding new resources for the EU budget and curbing CAP expenditure. The third factor was the international context and the trade consequences of the policy. During the 1970s and 1980s, the world trading system evolved in a trilateral game comprising the United States, the EU and Japan, but saw lower trade growth and increasing non-tariff barriers.6 The 1980s recession increased trade tensions and protectionist tendencies, thus encouraging some countries to call for trade liberalisation. As far as agricultural trade is concerned, the context changed from a perceived food crisis in the early 1970s to a perceived agricultural trade crisis: this crisis was due to a fall in commodity prices and a major shift in export patterns resulting from the emergence of the EU as a net exporter (Ingersent et al. 1999).7 Facing increasing production and static domestic demand, the EU had to dispose of its surpluses on the world market through the export subsidies mechanism. In a global context of falling demand due to world recession – notably in Communist countries and developing

30 Reforming the Common Agricultural Policy

countries – and static demand in industrialised countries, this contributed to increasing the disarray in which agricultural trade had entered.8 These developments had the political cost of provoking trade and political tensions that exacerbated into GATT disputes and into making agriculture one of the most contentious issues in the new round of GATT negotiations launched in 1986 in Punta del Este (the ‘Uruguay Round’). Indeed, in the first half of the 1980s, preparations for a new round of multi-lateral trade negotiations within the GATT had been underway, with strong support of the United States, Australia and Japan. In parallel, the Organisation for Economic Cooperation and Development (OECD) had been charged with appraising domestic policies and what to do to reduce their trade impact. This work had started to generate debate on the relation between domestic agricultural policies and the problems which world trade in agriculture was facing. Although the EU was determined that the mechanisms of the CAP should not be put into question, Europeans eventually agreed to negotiating objectives that would ultimately force changes to the CAP,9 namely that farm support should for the first time be discussed in a trade context. One specific issue warranted attention early on. This was the oilseeds dispute between the EU and the United States. The origin of the dispute stems from a European concern about the growth of imports of cereal substitutes under very low rates of tariff duties, and the subsequent enactment of a specific oilseeds support regime to rebalance imports by domestic production. As a result of the scheme, EU production of oilseeds rose from 600,000 tons in 1966 to over 12 million tons in 1990 (Kay 1998). This growth of European production created American resentment which perceived it as the result of unfair government support. This resentment took a legal form when the United States lodged a complaint with a GATT panel in 1985 and obtained a ruling in December 1989 which found the EU subsidy regime to be in violation of GATT rules. The processor subsidy scheme favoured domestically produced oilseeds over imported ones and contravened a 1962 commitment by the EU to charge zero duty on imported oilseeds. In order to come into compliance with the ruling, the EU first envisaged settling the issue as part of the agriculture negotiations of the Uruguay Round but had eventually to adopt a new regime in 1991.

Thirty Years of Immobility 31

The new scheme was aimed at being a compensatory payment system with per hectare aids paid directly to producers, thus replacing the processor subsidy of the old regime and removing the guaranteed price level. It did not, however, meet US demands. The United States again referred the oilseeds regime to the GATT. Once more, in April 1992, the EU oilseeds regime was found to be in violation of GATT rules because producers were being directly compensated for any price advantage that imported products might enjoy and therefore continued to contravene the 1962 import concession. Although the oilseeds regime was a specific issue, it highlighted the various interactions and causal links between international trade rules and EU domestic policy, and in many ways was considered as ‘showing the way’ for the cereals sector at a moment when the EU was under direct international pressure to reform the CAP (Kay 1998). Another fourth factor during the 1980s was the globalisation of the world economy which also affected agriculture and challenged the particular structures of agricultural policy. This took place on different levels. In its economic dimension, globalisation in agriculture affected patterns of trade, industry structures and farming practices. Largely as a result of a relatively slow growth of trade in commodities and a much more rapid growth in processed foods, agriculture underwent a twin evolution of specialisation of production and concentration on quality and speciality commodities. This was accompanied by a change in agricultural structures leading to horizontal or vertical integration and high concentration levels, which led to new commercial alliances, mergers and contractual arrangements. In Europe, agricultural production systems have thus been evolving towards a dual structure composed of internationally competitive producers of commodities and protected small scale farmers specialised in quality products, who all enjoyed the same level of protection and support. Global ties were also created through inputs, with the transformation of the banking sector and the development of the seeds and biotechnology industries, as well as through the supply chain (processing, transformation and distribution). As a result, supply chains reached across borders and increasingly relied on traceability and quality control, which in turn required a change in the regulation of agriculture, both toward deregulation of production and reregulation of the methods of production.

32 Reforming the Common Agricultural Policy

Globalisation has also a political and cultural dimension. It contributed to open national policy debates, which until then remained largely closed and were transformed into a largely transnational policy space (Coleman et al. 2004). Many issues contributed to this opening, but multi-lateral trade negotiations that started again in the late 1990s provided the main impulse. New sections of civil society became involved in the debate over trade liberalisation, development or the economic benefits of global market economy. New concerns emerged such as impact on the poorest countries, environment or local and national traditions. These concerns developed sometimes into ‘resistance identities’ and also into a collective consumption model which is replacing the politics of production. Overall, such developments challenged the corporatist model of agricultural policy further by giving space to the expression of new interests like agro-food industries, consumers and nature lovers. On the cultural side, not only have food traditions been globalised but also policy ideas. Competing ideas and policy paradigms have been developed and discussed on the global scene, with the EU model of agricultural policy being one of the main topics of debate. The fifth and final factor explaining the challenge to the CAP follows from the others. This is growing public dissatisfaction with the CAP which over time transformed itself into a legitimacy crisis. The reappraisal of agricultural policy revolves around a set of four issues: the concern for natural resources and the search for public policies aiming at balanced and sustainable development in Europe; the rise of ‘consumerism’ in Europe, starting with concerns about food prices and turning to increasing demands for new regulations ensuring food safety and consumer information; the debate on the globalisation of the world economy and the contestation that world markets and the productive model built on technological inputs favour standardised commodities to the detriment of food products as identity markers; and a new sensitivity to development issues reinforcing the argument that domestic policies should not be trade distorting, not only as regards other competitive exporters but also developing countries’ concerns for food security and poverty alleviation.

The failed attempts at reforming the CAP So, over time during the 1980s and 1990s, several developments combined their effects to bring the CAP into a legitimacy crisis.

Thirty Years of Immobility 33

While the original system was geared towards modernising farm structures, it had benefited only a limited section of farmers and farm income was overall stagnating. The EU rapidly developed from an importing to a major exporting economy in some commodities while the global context rapidly changed, generating falls in prices and rises in stocks. That brought the EU to a position of being accused of destabilising world markets when new trade negotiations started in the GATT. Many criticisms started to emerge, with little impact at this stage on the measures adopted in the course of the 1970s and 1980s. Critics of the CAP Early after its inception, the CAP attracted criticism from independent observers, both in European academic circles and at international level. The main focus was economic and public policy failures to devise appropriate instruments in response. European agricultural economists concentrated their fire on the hidden income transfers of the support system and the impossibility of realising the multiple objectives of Article 39 of the Treaty by means of a single instrument, namely price policy. The main arguments can be summarised as follows. First, the CAP had protectionist and production incentive effects. It therefore was costly in terms of export subsidies and in slowing structural adaptation by shielding farmers away from market signals (price). Second, the CAP induced substantial hidden transfers between economic agents leaving tax payers and consumers to bear the cost. Third, this reverberated into hidden redistributive effects amongst Member States, benefiting exporting countries. Fourth, the system created distortion of competition internationally and had depreciative impacts on world markets. A number of issues were more specifically discussed. They are presented by Ingersent et al. (1999) and will only be summarised here. The first topic was price policy and the need to replace price support with direct income support. As early as 1973, the Wageningen Group, followed by Josling and Tangermann, argued in favour of lower price support to contain surplus accumulation and its combination with a system of direct income support to safeguard farm incomes. An argument in favour of lower price support was also that this would redistribute income in favour of net importing countries and consumers. Most observers acknowledged that price cuts would only be politically feasible if compensated, and they underlined that

34 Reforming the Common Agricultural Policy

direct support would successfully do so provided it was divorced from current or future production levels (the so-called ‘decoupling’). A second subject of discussion was the merits of quotas in order to control production. Most economists opposed the use of production quotas on the grounds that they tend to distort resource allocation by keeping sub-marginal producers in business. Some (Harvey, Beard, the International Agricultural Trade Research Consortium) did examine the feasibility of production quotas as a ‘second best’ option. They found that quotas must be both saleable and released for resale in order to minimise the adverse effects on resource allocation. Another type of supply control was also examined, input quotas or restrictions, and interest focused on land input restrictions, like set-aside which had some positive side effects on productivity, but some also studied the feasibility of applying fertiliser restrictions, whether by tax or by quota, which went in the opposite direction. Later in the debate, environmental and ecological issues appeared as a subject of interest. Most started from the premise that for social and ecological reasons, the CAP should prevent overrapid decline in farm and agricultural population numbers, and that it was unrealistic to strive to develop an internationally competitive agriculture overnight. The ecological way of tackling overproduction and its adverse effects for the environment was a general decrease in the intensity of land use through changing the price ratio between products and yield-increasing inputs. Options put forward included the introduction of direct income support differentiated on a regional basis, and a tax on the usage of fertilisers. As a result of these various analyses and arguments, economists had changed the scientific paradigm by the early 1980s (Fouilleux 2000, 2003). They decided to promote this new paradigm in the agricultural public policy network. Two important positions were taken: first a dissenting article by Mahé and Roudet, significantly published in France in 1980–81, gave the signal that French academia, who until now had remained dominated by the thinking of the 1970s, was starting to open up to new influences and was becoming ready to influence the political debate; secondly, the Memorandum of Sienna in 1984 published by 13 leading European reformist academics explained the main deficiencies of the CAP in 15 points and made proposals for its reform, notably by means of strong reductions in prices and compensatory direct support.

Thirty Years of Immobility 35

While this debate was starting in Europe, a similar renewal of thinking on agricultural policies was taking place at international level. The OECD played a major role in these discussions, through the analysis of policies and the diffusion of new norms. Interestingly, many European agricultural economists took part in these discussions. The work was launched in 1982 with an OECD ministerial mandate to examine agricultural domestic policies and their impact on trade. After some years, this work concluded with a common concept to measure and compare public support for agriculture (the notion of ‘production subsidy equivalent’). The process involved intense interaction with the international scientific community. This had the effect of a major pedagogical exercise also for national policy makers who represented the OECD member countries. The process was based on the hitherto unknown idea that domestic policies had an impact on trade. This laid the ground for a redefinition of the scope and method of public policy intervention. In particular, it modified the relationship between the various schools of thought within national scientific fora or public policy networks (Fouilleux 2000, 2003). The OECD work would not have had a major impact if a new arena of international negotiations had not developed in parallel, that was the Uruguay Round GATT negotiations launched in 1986. The debate in the OECD forum soon crossed over into the GATT arena, giving additional arguments to those in favour of opening negotiations on agricultural policies as well as much further impetus to the debate. However, despite the profound shift in academic opinion which occurred during the early 1980s and despite its early internationalisation, the changes in the CAP undertaken during this period did not take account of the ideas expressed in this forum. Attempts at change Policy makers were aware that the CAP had started to show serious deficiencies. During the 1970s and 1980s, they decided a series of changes that attempted to address the CAP’s structural problems. Paradoxically, however, these malfunctions did not provoke major reforms. The first call for reform was the Mansholt Plan of 1968, a policy paper from the EU Agriculture Commissioner which questioned the

36 Reforming the Common Agricultural Policy

price policy that had just been completed. Commissioner Mansholt argued that market and price policy alone would not be able to deal with the mostly structural problems of the agricultural sector, and that the solution to the farm income problem lay not in enhanced commodity price support but in an accelerated programme of farm structural reform, in other words in a sharper reduction in the number of farmers and a concomitant increase in larger more efficient farms. Mansholt therefore called for a ‘prudent’ price policy that would permit prices to be reduced toward market level and for structural measures helping farmers to create ‘modern agricultural enterprises’ or to leave agriculture. The objective was that between 1970 and 1980 about five million people should be incentivised to leave agriculture through early retirement or retraining. As Mansholt’s intention was to decrease the number of holdings, mainly at the expense of labour-intensive farms, reactions to the proposals were mostly negative. Each Member State found something unacceptable (Kay 1998). France was neutral on the substance of the proposals given its healthy farming structures but feared the control the European Commission would gain over structural policy, a competence thus far kept under the control of national governments. Germany was the most opposed. In view of its very small average farm sizes (11 ha, Wilson et al. 2001), Germany questioned the concept of efficient farm scale, emphasised the socio-economic costs of transition and was unwilling to bear the cost of alteration of farm structures of other Member States. Only the Netherlands was generally supportive. In fact, the predominant factor for opposition may have been that the political struggle of completing the common price policy had just ended and Member States were not receptive to proposals calling for a fundamental change in this policy (Kay 1998), a phenomenon we have seen again since. Not surprisingly, farming organisations also opposed the proposals, both the reduction of farm numbers and the retirement of agricultural land. As a consequence, following a debate of three years and various revised versions of the Mansholt Plan, a much more limited structural programme was adopted. A 1971 EU Council resolution laid down the principles of the new programme: assistance for people leaving agriculture; farm improvement measures for those remaining in agriculture; and information and training services to assist

Thirty Years of Immobility 37

farmers. The costs of the programme were to be shared between the EU and Member States and would be funded by the EAGGF Guidance section. In the following year, three directives based on these principles were adopted: Directive 72/159 on the modernisation of farms, Directive 72/160 on the cessation of farming, and Directive 72/161 on socio-economic guidance of farmers. This limited set of structural measures – complemented soon after by assistance to marketing and processing and to less-favoured areas – would constitute the structural policies available to the EU until the late 1980s. In spite of their growing relative importance, and the additional emphasis on sustaining vulnerable communities in marginal areas, price policy continued to dominate the CAP until the early 1990s. Indeed, successive policy papers of the European Commission and the piecemeal decisions taken in the 1970s and 1980s did not substantially alter market and price policy. Decisions were limited to short term production limiting measures or to budgetary expedients without putting into question the core of the policy, guaranteed prices, which continued to be increased during the 1970s. Two periods can be distinguished (Ingersent et al. 1999). During the first period, the early 1970s, the main impetus came from the European Commission itself. The first instruments of supply control appeared in 1977 with the introduction of a coresponsibility levy in the dairy sector. They were followed by guarantee thresholds in 1981 for the cereals sector, which defined a maximum production quantity for a given year and transferred production in excess of this quantity for one year onto the next. During the second period, the 1980s, the reforms were all initiated by the European Council which requested the Commission to submit reform proposals aimed at bringing agricultural expenditure under more effective control. The common characteristics of these changes were that they were the direct consequence of more general political choices: in 1980, to solve the UK’s budgetary problem; in 1984, to solve the budget crisis which was going to impede further expansion of the EU to Spain and Portugal in 1986; and in 1988, to solve the budgetary crisis as well as to allow the EU to develop new policies (the so-called ‘Delors I Package’). A particularly important and controversial decision was the adoption of milk quotas in 1984. Milk surpluses had existed for 15 years

38 Reforming the Common Agricultural Policy

and the 1977 coresponsibility levy had proved less than efficient in curbing production and thus budgetary costs.10 The decision set limits to the EU production at its 1981 level and shared out the overall quantity into national quotas. The proposal was very controversial amongst farmers, who rejected this intrusion into their freedom of production. It would not have been adopted by the European Council if, at the same time, an agreement had not been reached at leaders’ level on more lasting measures to curb farm expenditure11 and to address the British contribution problem. This was the 1984 Fontainebleau Agreement which increased the ‘own resources’ component of revenue and decided on a freezing of agricultural prices. A new step was taken when a new Commission led by Mr Delors took office in 1985. The Commission published two successive policy papers, first a consultative green paper and then a white paper containing more specific proposals. The Commission insisted on budgetary and international constraints, and justified support for agriculture essentially on social and environmental grounds. It argued very precisely for a change in policy tools as far as agricultural markets were concerned, pleaded for a ‘realistic price policy’ and presented various options with a clear preference for a strong reduction in prices. A particular emphasis was put on international trade and on the need to find a new balance by limiting exports including export subsidies. This orientation was justified as the best way for the EU to continue exporting those products where it had a comparative advantage or could compete on the world market (cereals). Although some action was taken in the following 1986 price review, these proposals were not immediately followed by drastic reforms. Agricultural surpluses and budget problems continued to simmer for a further two years until a 1987 Andriessen report, by the then Agriculture Commissioner, called again for a control of expenditure. This led to the 1988 reform whereby ‘stabilisers’ and a voluntary set-aside scheme were adopted and the agricultural expenditure capped by an ‘agricultural guideline’ as part of a wider agreement on the financial planning for the period 1989–93 (the ‘Delors I’ Package). The latter established an annual limit to the growth of agricultural expenditure at 74 per cent of the EU GDP growth, while the stabilisers instituted maximum guaranteed quantities which, if

Thirty Years of Immobility 39

they overshot, would trigger a reduction in price support for the same year. These measures did not, however, put into question the core mechanism of the CAP, guaranteed prices, although they were accompanied by a strengthening of structural policy. Indeed, the reform of the Structural Funds included the EAGGF Guidance section, doubled the Funds’ financial envelope and introduced new structural measures with some environmental content.

Conclusion By the early 1990s, the EU had only very partially adjusted the CAP in order to deal with the most pressing need, that is curb agricultural spending. The attempts at reform displayed similar characteristics: decisions were taken only when a major budgetary crisis arose, thus giving a sense of ‘fire-fighting’ to the debates (Kay 1998); they were enacted by means of the intervention of the European Council itself because the Agricultural Council was dominated by national farm interests; and decisions were therefore subject to achieving consensus, which ensured that package deals were always complex. Moreover, the core principles of the original CAP were not questioned: market unity, financial solidarity and Community preference remained the organising principles of the CAP system. This reflected a policy paradigm whereby first, agriculture was considered as a protected sector, second, agricultural policy was geared at modernising agricultural structures of production, and third, policy instruments were used for a threefold purpose of securing high prices on the EU domestic market, insulating the European producers from international markets and accelerating structural adaptation through a limited set of structural measures. The impacts of such organisation in terms of budgetary costs, market distortions, international trade and environmental effects were not considered sufficient to justify an overhaul of the system.

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5 Policy Changes since 1992

After the overview of efforts made to address the CAP’s long term problems during three decades, the question that arises is why, by contrast, the next episode, the 1992 reform, could bring much more drastic changes, and why subsequent reforms continued in this vein. Like Kay (1998), we should avoid any historical determinism which would consider that reform was inevitable notably given the financial situation of the CAP. That would lead to the mistaken view that the EU decision making process is a ‘black box’ (Kay 1998) which only responds to objective, material developments, without any intervention of political players, institutions and stakeholders. Before analysing the successive reforms and proposing an interpretation, this chapter examines their content and general orientation and proposes a method of comparison of the three sets of reforms adopted since the early 1990s. Further changes have been adopted in 2004 and 2005 regarding specific commodities and issues (olive oil, tobacco, cotton, sugar, rural development), but they will not be thoroughly examined here.

Content of the three reforms12 The three overall reforms adopted since 1992 followed the institutional rules whereby they were clearly initiated by Commission proposals, provoked lengthy debates in Council, and were adopted after receiving Parliament’s opinion. Their common characteristic is that they all met with strong reluctance from Member States and stakeholders, and each time the Commission actually presented at least 41

42 Reforming the Common Agricultural Policy

two documents: the first set out the rationale for reform and broad orientations with sometimes open options on specific points; the second were detailed regulatory proposals on which the Council had to decide. This two-step approach allowed EU institutions and stakeholders to gain knowledge of the future orientations of the new policy and to react to it. This provided the Commission with a sense of those issues that will be acceptable or controversial, sometimes leading to adjustments to its thinking. Overall, the process usually took more than a year to be completed. The MacSharry reform (1992) In February 1991, the European Commission published a first policy paper which emphasised the fundamental imbalance in the CAP system of farm income support (European Commission 1991). The document attributed this imbalance to guaranteeing market prices rather than farm incomes, and to maintaining prices above market clearing levels, with the result that output had grown at a higher rate than consumption. The Commission also stressed the international impacts of the policy and warned against increasing trade tensions in the context of the GATT negotiations launched in 1986. The growing costs of rising stocks and subsidised exports were considered as unsustainable. In addition, the system encouraged intensive farming, giving rise to environmental concerns, while failing to recognise the dispersion in farm sizes and privileged farm holdings with high volumes of production, without ensuring substantial growth in farm income. It proposed to remove the incentive to ever-higher production by reducing market prices, and compensating farmers with direct income aids to make the price reform politically acceptable. These measures ought to be accompanied with reinforcement measures to protect the environment. The second set of Commission documents were published in July 1991 and contained regulatory proposals with details on the envisaged measures. At the heart of the MacSharry plan were proposals for the arable sector. The basic elements were as follows: the level of price support was to be reduced by 35 per cent over the three years 1994–96, bringing it much closer to world market levels and providing savings in the export subsidy scheme; farmers were to be compensated for their revenue loss through a system of area payments based upon the difference between old and new support levels, a

Policy Changes since 1992 43

historic regional average yield and a historic base area, thus partially decoupling income support from current production; and compensation was conditional to participation in a set-aside scheme, which would withdraw 15 per cent of arable land from production. Compared with its first guidelines, the Commission did not propose to ‘modulate’ compensation according to the size of the farm holding, that is, small farmers to be compensated in full while beyond a certain size, only partial compensation would be paid. This initial proposal had infuriated countries with a predominance of large farms like the Netherlands and the United Kingdom, putting at risk the overall support for the reform. Other commodities were also affected by the reform plans. The milk regime, introduced in 1984, was left virtually unchanged: the Commission proposed only a reduction in the quota level with a view to containing the costs of storing and disposing of excess production. But the reform was to have more impact on the livestock sector. The beef support regime followed a similar trend as arable crops: a price reduction of 15 per cent was proposed for intervention buying, compensated by beef headage payments for two categories of animals, suckler cows and male bovines; and in both cases, the headage payments were subject to restrictions, namely ceilings in total regional payments, adult male cattle and stocking rate. For the sheep regime, similar conditions applied – headage payments limited by the size of flock and a maximum number of ewes – and in addition, intervention buying was removed. Besides market and price policy, the Commission proposed to reinforce structural measures supported by the EAGGF Guidance section, without substantially affecting the structure of the existing schemes. Four structural ‘accompanying measures’ were continued: support to early retirement of farmers, mountain and less-favoured areas, agrienvironmental measures and afforestation of agricultural land. Rural development was included under the umbrella of the Structural Funds in their various objectives, namely adjustment of agricultural structures (objective 5a), development of rural areas (objective 1 and 5b) and innovative actions at local level (Leader initiative). The main innovation was the introduction of agri-environmental measures at EU level. Until then, agri-environmental schemes had existed in some Member States; the reform now required all Member States to develop them throughout their territory and introduced EU cofinancing.

44 Reforming the Common Agricultural Policy

Among all the proposals, the most controversial proved to be the reform of the cereals sector. The extent of the price cut, the amount of compensatory payments and their combination with the requirement of land set-aside were the most discussed issues among Member States. In the end, the Council retained most of the Commission proposals but eased the level of price cut to 29 per cent and set-aside payments were raised by 27 per cent. Although all major temperate sectors, except wine, pigs, poultry and horticultural products, would now be subject to output ceilings, either on the amount of production (milk, sugar) or the crop area (combinable crops) or the number of livestock (sheep, beef), the outcome of the reform did not particularly favour small farmers (withdrawal of modulation) and did not reduce the CAP costs for the EU budget contrary to the initial claims of the Commission. Agenda 2000 (1999) The next round of reform was initiated by the new Commissioner for Agriculture, Mr Fischler, soon after the new Commission presided by Mr Santer took office. The December 1995 ‘Agricultural Strategy Paper’ (European Commission 1995) was prepared for the Madrid European Council of December 1995 which was convened to discuss the eastward enlargement of the EU. The document discussed the long term implications for the future of the CAP of the enlargement and other issues such as still increasing market imbalances, the Uruguay Round commitments and a forthcoming new round of WTO negotiations. The strategy paper examined three options for the future: maintain the post-1992 CAP status quo; radical reform beyond the parameters of 1992; developing further the 1992 approach. The Commission favoured the last option, which would entail further changes in three directions: continued reduction of the reliance on price support; continuation of direct income support to compensate producers for possible loss of revenue; and increased emphasis on linking direct income payments with social needs and the provision of environmental services. The rationale for this proposal was that firstly, new measures were necessary to make European agriculture more competitive on world trade markets, secondly, it was necessary to consolidate the parallel strands of the CAP – market and price policy, environmental measures and structural policy – into an ‘integrated

Policy Changes since 1992 45

rural policy’, and thirdly, the CAP needed to be simplified and to give more latitude to Member States in implementing EU decisions. These broad orientations were not immediately followed by more formal and detailed proposals. Commissioner Fischler preferred to publicise his views through a number of speeches in 1995 and 1996 and to master support from rural grassroots organisations by organising a widely publicised conference on rural development in Cork in November 1996. The delegates adopted a declaration which highlighted the principles on which a future rural policy should be based. The declaration argued strongly that sustainable development should be at the top of the EU agenda and constitute the underpinning principle of rural policy. It also propounded that rural policy must be multi-disciplinary in concept and multi-sectoral in application and apply to all rural areas with differentiation in favour of the regions most in need. In addition, it called for support to focus on community-based initiatives and to be decentralised, thereby encouraging the use of local financial resources. Finally, policies should protect and sustain the quality and diversity of rural landscapes (European Conference on Rural Development 1996). The initiative received a very cool reception from national policy makers. The timing was not propitious to a forward-looking exercise: EU policy makers were at that stage deeply caught up by the first BSE crisis. More probably, the initiative raised suspicions among those who feared that a greater emphasis on rural development would take away EU funds from farmers (Moyer et al. 2002). This inspired the negative reactions of France, Germany and some of the Mediterranean countries, which made sure that the European Council of December 1996 did not comment the Cork Declaration. This reaction did not prevent the Commission from consolidating its views in a more formal policy paper in July 1997. ‘Agenda 2000: For a stronger and wider Europe’ (European Commission 1997a) was not an agriculture-only document. It gave a broad outlook of the development of the EU beyond the turn of the century, the impact of enlargement to Central and Eastern European countries, the financial framework for the EU budget until 2006, and proposals for reform of the main EU policies, including the CAP. Regarding the CAP, the Commission chose to extend and deepen the 1992 reform through further shifts from price support to direct payments and developing a coherent rural strategy to

46 Reforming the Common Agricultural Policy

accompany the process. The Commission proposed to update the CAP objectives as follows: improve the competitiveness of EU agriculture on both internal and external markets; ensure food safety and food quality; ensure a fair standard of living for the agricultural community and contribute to the stability of farm incomes; integrate environmental goals into the CAP and develop the stewardship role of farmers in managing the countryside; assist the creation of alternative job opportunities for farmers and their families; contribute to economic cohesion within the EU; and simplify EU legislation. In more concrete terms, the proposals contained two main aspects. Firstly, in an atmosphere of financial austerity, the Commission recommended to limit the EU budget to the previously established ceiling of 1.27 per cent of the EU GNP for own resources and to limit the growth of CAP spending to 74 per cent of annual EU GNP growth (the ‘agricultural guideline’). Secondly, the Commission proposed to base the CAP on two ‘pillars’. Pillar I would encompass market and price support and would be subject to further reforms in line with those of 1992. For cereals, prices would be reduced by 20 per cent with a partial compensation of 50 per cent, while mandatory set-aside would be set at 0 but a voluntary set-aside provision would be retained at a minimum 10 per cent rate. For beef, the price reduction was 30 per cent, with an increase in direct payments for suckler cows and male bovines. The dairy regime would see an extension of the quota system until 2006 but a gradual decrease in support prices of 10 per cent and the introduction of a new headage payment. Three main innovations were also proposed: ‘cross-compliance’, enabling Member States to make direct payments conditional on respect for environmental provisions; a ceiling on the total amount a farmer could receive in aid as well as a mandatory decrease over time (–3 per cent per year over a total of €5,000 per year); and ‘modulation’ of direct payments according to socio-economic criteria. The creation of the so-called ‘second pillar’ of the CAP, the rural development strand, was proposed as a follow up to previous initiatives. However, to respond to concerns expressed after Cork, a clear separation in the sources of funding of the ‘two pillars’ was proposed. Pillar II aimed at regrouping existing but dispersed measures into a single framework and emphasised the new priority given to

Policy Changes since 1992 47

rural development by increasing its funding. Rural development policy financed by the EAGGF was envisaged as being distinctly farmer-oriented, while action at a regional level continued to be supported by the Structural Funds, including the EAGGF Guidance section, in a reduced number of objectives (from five to three). The measures of Pillar II contained three objectives: reinforcement of the agricultural sector through structural measures; protection of the environment and rural heritage, which was reinforced by becoming mandatory and receiving increased funding; and modernisation and diversification of rural areas in connection with agriculture. The initial reactions to the Commission guidelines predicted difficult discussions in Council, but their thrust was approved by the European Council at its December 1997 meeting.13 This provided the impetus for the Commission to develop detailed regulations, published in March 1998. These measures confirmed previous guidelines, with some changes: direct payments in the beef sector were increased to make the market price reduction more acceptable; and the proposed price cut for milk was increased to 15 per cent, as were the milk quotas by 2 per cent. Overall, the proposals appeared controversial and generated fierce discussions linked to the negotiations on the new budget framework for the period concerned. After a decision by the Council, discussions were reopened and settled by the European Council in March 1999, which allowed the final adoption of the regulations in June 1999. The philosophy of the Commission proposals was preserved, but many measures of market and price policy were altered or postponed. Firstly, the overall budget for market policy was capped at a maximum of €40.5 billion per year, that is, below the agricultural guideline. Secondly, the proposed reductions in market measures were softened: on one hand, price cuts were reduced (15 per cent for cereals, 20 per cent for beef, 15 per cent starting in 2004/2005 for milk instead of a start in 2000/2001), and on the other hand, the 10 per cent set-aside for cereals was maintained. Thirdly, the amounts and modalities of direct payments were substantially altered: the increase in direct payments was reduced correspondingly, capping and degressivity were abandoned, and modulation was made optional. Finally, the Council agreed to review CAP developments in 2002–03 and adopt new measures as necessary.

48 Reforming the Common Agricultural Policy

The Fischler II reform (2003) The most recent overhaul of the CAP dates back to 2003 and was conceived at the initiative of Commissioner Fischler as a response to the call for a mid-term review agreed by the European Council in 1999. The Commission published overall guidelines in July 2002 to cover the period 2006–13 (European Commission 2002a). They put aside the option of a review and offered substantial changes to the regime adopted in 1999. The rationale for a new reform was found in the need to achieve better the objectives set by Agenda 2000 and to integrate in the CAP the guidelines on achieving sustainable development for all EU policies, which were adopted by the European Council in Göteborg in 2001 (European Council 2001). The Commission highlighted five general objectives to be achieved through a new reform of the CAP: ensure the economic viability of European agriculture by reinforcing its market orientation and by increasing food safety and food quality; achieve social balance by means of income support, prevention of farm holdings concentration to the detriment of environmental equilibrium, and fairer distribution of direct aids among farmers; better integrate environmental, health and animal welfare concerns in the CAP support system; reinforce the rural development policy by increasing its funding and focusing on the most fragile regions; and improve implementation of CAP decisions through simplification, decentralisation and budgetary rigour. This general set of guidelines was substantiated by a series of proposals covering both pillars of the CAP. On the market and price policy side, almost all commodities were affected by the proposals. For arable crops, the Commission proposed to modify the Agenda 2000 decisions on cereals and foresaw an additional price cut of 5 per cent, set-aside being maintained. In the dairy sector, a set of options were presented concerning the future of the quota system: the continuation of the Agenda 2000 measures until 2015; the reinforcement of Agenda 2000 through a further price cut and increase in quotas; the introduction of a two-tier quota regime; or the elimination of quotas with a price cut of 25 per cent. While the Commission did not propose any new measures for the beef sector, extension of the general approach to new crops was proposed: this entailed removal of price support through various specific premia and introduction of direct payments for durum wheat, rye, nuts and

Policy Changes since 1992 49

potatoes, as well as for rice, which was also subject to a major price cut of 50 per cent and to a quantitative limit on intervention buying. Alongside the price measures, the proposals contained a number of innovatory horizontal provisions. The most substantial one was full decoupling of direct aids from production through the introduction of a ‘single farm payment’. This payment would not be attached to any type or quantity of commodity but would be based on historical records of aid and acreage and could be transferable and divided into entitlement rights. Decoupling would be applied to all commodities for which direct payments existed or were being introduced. Another innovation, which built on the Agenda 2000 decisions, was the capping as well as the mandatory degressivity of direct payments, the savings of which would be transferred to the second pillar of the CAP. Direct payments would be capped at €300,000 per farm and reduced by 3 per cent per year up to a total reduction of 20 per cent over the period 2007–13, but farms receiving less than €5,000 would be exempted. The savings used to fund rural development policy would be modulated according to a distribution key based on agricultural area, farm employment and prosperity. A third measure, also inspired by Agenda 2000, introduced compulsory cross-compliance, that is conditioning direct payments to compliance with legal standards in the fields of environment, food safety and animal welfare, and good farming practices. The second pillar of the CAP was also covered by the proposals. It was proposed to extend its activities into new areas: food quality, with support to farmers to participate in quality insurance and certification schemes and to producer groups for promotion of quality products; animal welfare measures compensating farmers for commitments going beyond legal norms; and incentives to help farmers meet new statutory EU standards. In addition, an increase in the cofinancing rate of agri-environmental measures was envisaged. The Commission guidelines were immediately followed by strong reactions from all sides. As they were published during the closing stages of the enlargement talks but fell short of proposing any financial framework for the CAP, the absence of any overall budgetary planning for agriculture in an expanded EU after 2006 soon became apparent. This was confirmed by the European Council at the initiative of France and Germany. After a bilateral agreement

50 Reforming the Common Agricultural Policy

between the two countries, the Heads of State and Government agreed, in October 2002, on key variables for CAP financing: on the one hand, the phasing in of direct payments for enlargement to begin in 2004 and to cover a period of 10 years starting at 25 per cent of the full rate in 2004; on the other hand, a ceiling on CAP spending – more precisely its market-related expenditure and direct payments – at €45.3 billion from 2007 onwards and its growth in nominal terms limited, at a maximum, to a rate of inflation (1 per cent per annum up to 2013). With an expected inflation rate of 2 per cent per annum, this implied a decrease in real terms to 2006. This decision provided the Commission with additional parameters for the more detailed regulatory proposals published in January 2003 (European Commission 2003). These largely consolidated the initial guidelines, but were partially altered to reflect either initial reactions or the new budget framework as provided by the European Council. The main difference with the 2002 document was the choice of an option for the future of the dairy regime. The Commission recommended to maintain quotas until 2014/2015 and to advance by one year the Agenda 2000 price reductions, with a differentiated price cut according to the product concerned (–15 per cent for skimmed milk powder, –25 per cent for butter) and an increased compensatory payment combined with a quantitative limit on intervention buying for butter. Another important adjustment reflected the budget framework given by the European Council and modified the degressivity and modulation of direct payments. The annual rate of reduction was proposed to be set at 1 per cent in 2006 and to be gradually increased up to 19 per cent in 2012. The cut would be differentiated: for the first €5,000 no reduction would apply, for receipts between €5,000 and €50,000 an intermediary rate would be applied, and receipts of more than €50,000 would be subject to the full rate of reduction. The savings would only partially be transferred to fund rural development up to a maximum of 6 per cent in 2012, as the ceiling set by the October 2002 agreement was considered insufficient to fund further reforms without withholding part of the product of modulation. As in the past, the proposals triggered intense debate but were able to receive an unusually rapid approval by the Council in June 2003. For such far-reaching proposals, the strong identity of the

Policy Changes since 1992 51

final outcome with the Commission’s proposals is also unusual. The main alteration concerned the extent of the decoupling of direct aids, which was the most controversial issue. The option for Member States to maintain, within predefined limits, a partial link with production was introduced for cereals, beef and sheep. A second modification concerned direct payments. Degressivity of direct payments was set at a total of 12 per cent. Finally, the Council did not agree on a further price cut for cereals.

Consistency and new issues The examination of the content of the successive reforms showed signs of continuity in the problems addressed and consistency in solutions found. This is not surprising as all reforms since 1992 have tried to address the market imbalances created by the original policy instruments based on price support. But reforms also sought increasingly to address ‘new’ issues reflecting society’s concerns.14 Overall, these concerns range from environmental protection and rural development, to food safety and quality, consumer information and international trade. The 1992 reform was an important first step in that it substantially reduced price support for two of the main commodities, cereals and beef, and introduced direct income support. Since then, with subsequent reforms in 1999 and 2003, direct income support has gradually been extended to almost all commodities and lately delinked from production. This was accompanied by a progressive introduction of new instruments attempting at rebalancing support among commodities and regions and at reinvigorating rural policy by extending its scope. Consistency in market and price policy Commodity programmes, the original ‘market organisations’, were the primary focus of the first reformative steps. They followed a particularly consistent path in focusing on the budgetary and economic insufficiencies of the CAP. Regaining control over agricultural budgetary expenditure has been a primary concern of successive reforms. The objective, however, evolved from reestablishing budgetary balance to stabilising expenditure and finally to reducing expenditure in real terms. The first instrument was the agriculture ‘guideline’ setting a ceiling

52 Reforming the Common Agricultural Policy

for agriculture expenditure as a percentage of the EU GDP. Because of the effectiveness of other aspects of the first reform, the guideline appeared later on somewhat too flexible and new concepts or instruments were introduced. It was agreed that the share of agricultural expenditure in the EU budget should stop increasing (1999) and should even decrease as a result of enlargement (2002). To do so, degressivity of direct payments was first proposed in 1999 but the concept was only agreed in 2003. Lastly, a specific ‘financial discipline mechanism’ was decided in 2003 by which direct payments were to be reduced if the annual agricultural budget ceiling was exceeded. Budgetary constraint has therefore been consistently tightened since 1992. Regarding economic concerns, the strategic decision taken in 1992 was to liberalise the agricultural market by opening Europe to imports and by bringing the market’s functioning closer to other economic sectors. Although reforms were not presented as responding to international pressure (Swinbank 1993), they were done in a context of general trade opening. This had fundamental consequences for policy instruments. It led to the transformation of aid modalities so as to minimise their trade impact, and to the transformation of the significance of aid, which progressively changed from an economic to a social support for agriculture (Blanchet et al. 1999). In terms of policy instruments, the shift has occurred in two ways. First, the high guaranteed price policy has been abandoned by reducing institutional prices to bring them closer to international levels and to transform them into safety nets. From the sectors most concerned with international competition (cereals and beef in 1992 and 1999), the change has been extended to almost all commodities (dairy in 1999 and 2003, olive oil, cotton and tobacco in 2004, sugar in 2005). Second, to ensure political acceptability, direct payments have been introduced as compensatory benefits for price cuts. This followed the rhythm of price reductions: from cereals and beef in 1992, direct payments now benefit almost all crops and commodities after the last reforms. Direct payments have gone through some changes too. Their introduction led to overcompensation because all productivity gains could be absorbed by farmers rather than being transmitted to consumers (Roger 1999). In addition, because they initially benefited only two

Policy Changes since 1992 53

categories of farmers (cereal growers and beef producers), this new inequity between different commodities and between Member States15 created political tensions. The extension of price reductions and direct payments to more products and the introduction of partial compensation of price cuts instead of full compensation helped redress these imbalances to some extent. But the most significant development has been the transformation of direct payments into income support decoupled from production. The triggering factor was enlargement of the ten new Member States. Until the years 2000–01, EU institutions maintained the position that direct payments were introduced to compensate farmers for price cuts and implicitly admitted that they could be of a temporary nature (European Commission 1997a). In the accession talks, candidate countries argued that denying their farmers access to direct payments would create an unfair two-tier agricultural policy. Recognising the political impasse, EU institutions proposed the extension of direct payments to all farmers. This move was explained by defining direct payments as an instrument to stabilise farm incomes and by arguing that decoupling them from production would remove the incentive to produce in order to benefit from support and thereby reduce pressures on the environment (European Commission 2002a). This change was intellectually very significant and was intimately linked to the need to find answers to new constraints. The growing importance of ‘new’ issues Since 1992, CAP reforms have been increasingly justified as necessary to reconcile agricultural production with social preferences in response to growing public dissatisfaction with agricultural policy. As a consequence, policy tools evolved into an elaborate set of instruments aiming at several objectives. The first, and the most long-standing one, is environmental protection coupled with rural development. The aim is to preserve and develop agriculture’s ability to provide positive externalities that are expected by society. However, environment and rural development originate from two distinct branches of European policies and have not entirely been reconciled. Agri-environmental measures have been part of the agricultural policy toolbox of the Member States since the 1970s and were

54 Reforming the Common Agricultural Policy

integrated in the CAP in 1992 as part of a set of ‘accompanying measures’ to the reform. They reflect a consistently growing preoccupation with preserving natural resources from agricultural pollution and enhancing the environmental efficiency of farming practices. The measures add a new concept in the way agricultural environmental concerns are addressed. Originally, this was done mainly through a ‘command and control’ approach (regulations). This approach still is applied and sets the baseline to be respected in any case by farmers. Financial incentives financed by the CAP have been added and are meant to remunerate farmers for environmental services that go beyond the baseline requirement and are provided on a voluntary basis (Latacz-Lohman et al. 2003). These incentives have become an important instrument to the point where they are the only compulsory measures that Member States are required to run under their rural development plans. Rural development stems from a distinct policy and set of instruments. It was included in the structural policy of the Union as a means to address economic modernisation of rural areas, in particular in poorer ones in the Southern Member States following the growing heterogeneity of production structures after the enlargements of the 1980s (Perraud 1996). Still disconnected in 1992, rural development merged partly into the agricultural policy toolbox in 1999 and became the ‘second pillar’ of the CAP, also embracing inter alia agri-environmental measures. However, different visions of rural development persist: one vision considers that agriculture is the main activity in rural areas, and led to the creation of the ‘second pillar’ of the CAP; another is the regional or local development approach that tends to deny any specificity to rural areas per se; a third does not give any specific role to agriculture but addresses rural areas and their specific problems in an integrated manner (Berriet-Solliec et al. 2002). The ambiguity remains largely unresolved, as is reflected in the large set of measures available to Member States. Despite their growing financial importance and their integration into one single framework since 1999, the design of both EU agrienvironmental and rural development schemes has been remarkably stable. Their main objectives and targets were already largely established in the 1970s and 1980s, and it is only in 2005 that it was agreed to add new areas such as food quality, adaptation to new

Policy Changes since 1992 55

norms and animal welfare in direct response to calls for improving the quality and the safety of the food production process. This evolution follows the same logic as the one which led to the establishment of cross-compliance as the principal instrument to influence process and production methods, that is ensuring that farmers fulfil regulatory standards by conditioning aid to compliance. Cross-compliance was not an issue in the early 1990s, except in some limited cases (set-aside). Attention was concentrated on helping farmers to cope with the effects of the reform in income terms. The significant increase of direct support that followed, and the persistent pressure to prevent negative environmental externalities, pushed the debate on the legitimacy of income support further. The issues at stake were environmental protection and food safety. Cross-compliance was therefore instituted in two incremental steps: it was first introduced in 1999 as a voluntary environmental measure adopted upon the decision of Member States, and in 2003 it became a full-fledged set of conditions extending to a wide range of regulations in the fields of food safety, animal welfare and safety at work. These new conditions, which involved a sanction in the form of loss of payment, were a logical parallel step to the decision to consider direct payments as income support: since society was increasingly prepared to support farmers’ income no longer on the basis of efforts made to adjust to reform but on the basis of the nature of their activity, it was entitled to ensure that basic requirements (such as reduction of pollution, minimum food safety standards) considered as essential by society were fully respected. Another evolution is the effort to address equity in the distribution of funds. The original CAP system was heavily concentrated on some commodities and the most productive farmers. It was common to say that 80 per cent of the subsidies were going to 20 per cent of the farmers. As soon as direct payments were introduced, the issue of a more balanced distribution of funds between various categories of farmers appeared. The discussion took essentially two forms: modulation of subsidies according to socioeconomic criteria of the farm and capping of individual direct payments to bigger farms. It is notable that the latter idea has been consistently proposed by the European Commission since 1992 and consistently refused by Member States. By contrast, modulation was agreed because it could serve two purposes, namely use the savings

56 Reforming the Common Agricultural Policy

to fund other priorities, in this case rural development and environmental protection, and allocate these funds according to socioeconomic criteria allowing some redistribution across beneficiaries. After a first attempt in 1999 in the form of a voluntary measure, modulation was adopted in 2003 as a measure applicable to all Member States. This involved for the first time the reduction of direct payments to the main beneficiaries of the system.

A reform process: consistency and incrementalism Although the CAP modified in 2003 no longer resembles the system that was in place before 1992, analysts have underlined the continuity and gradualism of the reform process. Continuity has essentially taken three different aspects. Firstly, a strong incrementalism characterises EU policy making. This is particularly true for the CAP, partly due to the EU institutional structure. As the sole agenda setter, the European Commission is only able to receive support for its proposals if they reflect a middle ground and do not hurt priority interests of one or several Member States. In addition, new ideas take time to be institutionalised. But as we will see, almost all of the Commission’s proposals were adopted sooner or later, even if they were first weakened or rejected. Incremental steps do not, therefore, prevent change over time. The second element is the strong consistency in the agricultural policy direction, along the lines of lower guaranteed prices, decoupled income support and incentives for the production of public goods and services by agriculture. This involves a slower rate of innovation of policy instruments in new areas like rural development. This also excludes venturing into new areas that would break up the general scheme, like adopting different financial support systems such as insurance schemes. However progressive evolution did bring new objectives and new tools that try to address no longer only market imbalances but equity concerns and social demand also. The third aspect of continuity is that each new step reverberated into further steps that were meant to address the weaknesses or insufficiencies of the preceding one. This usually followed criticisms made by analysts and academics. In 1992, the reform was soon considered too limited in scope (it concerned essentially cereals and beef), insufficiently ambitious in decoupling support

Policy Changes since 1992 57

from production, too limited in its environmental measures, and still too trade distorting because it continued relying on export subsidies (Swinbank 1993, Mahé et al. 1996). In 1999, the reform attracted criticism for not fulfiling ambitions in certain sectors (milk) or certain issues like equity and consumer concerns, for its inadequacy to prepare for enlargement and forthcoming trade negotiations (lack of additional decoupling and of elimination of export subsidies) and for its limited overhaul of the balance between agricultural support and rural development (Swinbank 1999, Blanchet et al. 1999, Ackrill 2000, Beard et al. 2001, Van Meijl et al. 2000). The 2003 reform has been described as providing a new legitimacy to income support that would make future efforts to dismantle it more difficult (Daugbjerg et al. 2005), insufficient legal compatibility with the WTO ‘green box’ criteria (Swinbank et al. 2005) or only partial improvement as regards the reduction of export subsidies (Guyomard et al. 2004). These three characteristics are those of a process of change rather than those of a one shot, sweeping reform. This calls for answering our first initial questions: how was change possible, what were the factors at work in each case and can one identify the determinants of change? The answer results from a comparison of the three reforms based on a multi-dimensional approach, using the multi-level, multi-issue and multi-lateral bargaining approach.

The method of comparison: multi-level, multi-issue and multi-lateral bargaining After this overview of the content of the successive reforms, we can now turn to the method of comparison of the CAP reforms. Given the complexity of EU governance, such a comprehensive comparison of successive CAP reforms calls for a multi-dimensional analysis. Drawing from the multi-level game approach, complemented by the multi-issue approach, and from multi-lateral bargaining theory, it is possible to look at each event according to a coherent framework that addresses the same set of questions. The context First, what is the context in which the reform happened? We need to address the economic situation and the political context. For the

58 Reforming the Common Agricultural Policy

latter, multi-level analysis comes into play: political developments take place at international, European and national level at the same time, interact with each other and influence the way in which policy makers behave and make their choices. A much debated issue has been how the international dimension influences domestic reforms. We will particularly examine this question and its different patterns over time. The issues Second, what were the issues under discussion? To simplify the analysis, the main questions as they were the subject of the final compromise will be identified. For the purpose of simplification, the classical distinction between issues related to market and price policy (commodity programmes and income support) and issues related to horizontal rules and ‘accompanying measures’ (mainly rural development) will be followed. The latter have become increasingly prominent. As agricultural negotiation should not be looked at in isolation, the multi-issue approach will be applied by identifying which horizontally connected issue is present and how it influences agricultural bargaining. Two dimensions have been chosen for that purpose, international trade and budget. These are recognised as having played a decisive role in changing the patterns of the agricultural debate since the 1980s, not least because new trade agreements and new budget constraints have partly resulted in a change in the political paradigm. Until now they have, however, rarely been compared in their ability to influence the policy outcome. The actors Third, who are the actors ? Looking at CAP reforms as a bargaining process, we need to identify the position and behaviour of the main actors, namely the European Commission, the Member States and stakeholders. In the case of Member States, we will map out positions into intersecting circles linking the core agricultural issues with the connected issue(s) present, and situate Member States according to their priorities. Member States supporting broadly a particular proposal or being favourable to a particular issue will be represented inside the discussion circle. Those which are essentially opposed are repre-

Policy Changes since 1992 59

sented outside the circle. Some others support the thrust of the proposals but have a particular difficulty, identified in parenthesis. The aim is first to identify possible coalition games, in particular the role played by France and Germany, and second to follow a multiissue approach by weighting the role played by non-agricultural issues in discussion and coalition building. Concerning stakeholders, a broad approach must be taken – including agricultural interest groups and civil society organisations – in order to assess whether the policy network described by Daugbjerg (1999) as a closed circle has evolved into a broader network. The main actors are more or less influenced or constrained by the institutional framework. A macro-level analysis of the institutional context is therefore necessary. It should include both legal arrangements and informal practices, as well as identify other actors’ roles. Our attention will focus on the other EU institutions, mainly the various Council formations and the European Parliament. Default scenario Fourth, what was the default scenario? Actors are not only motivated by the pursuit of ‘success’, maximising the benefits of an agreement, but also by the avoidance of ‘failure’, that is, minimising the cost of no agreement. They do so with all levels of policy making in mind. We will therefore examine the cost of no agreement at international, European and national level in order to evaluate their respective weight in the actors’ assessment of the risk of failure.

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6 The MacSharry Reform (1992)

The context The first major reform of the CAP occurred essentially in a context of crisis. This is particularly true for the situation of agricultural markets and its economic and budgetary impact. The post-war objective of self-sufficiency (called ‘availability of supplies’ in the Treaty) was achieved in the late 1970s for a number of core products. Since then, the policy of high prices generated an excess of production (excessive stocks and export subsidisation) which created a series of negative trends: the fall of farm income and soaring budget expenditure, while consumption was increasing at a slower pace than production. After several failed attempts in the 1980s, reform was now seen as inevitable by policy makers (Legras 1993). Chapter 4 showed that previous measures did not put into question the core mechanism of the CAP, guaranteed prices, nor managed to curb agricultural spending. The adaptations of the 1980s were also increasingly criticised by economists and became the subject of institutional criticism by the new Delors Commission which took office in 1985. A sentiment of crisis was also largely predominant on the political side. At European level, the Single Market project had been achieved, and a new stage in European integration had been agreed with the Maastricht Treaty establishing i.a. the economic and monetary union. However, ratification of the treaty was still underway, and difficult ratification campaigns were ongoing in several Member States (France, Denmark). To accompany this new deepening in the 61

62 Reforming the Common Agricultural Policy

European integration process, European leaders were convinced that economic disparities, which had increased following enlargement to Spain and Portugal and the reunification of Germany, would have to be compensated by increased investment in those regions through the EU budget. The share of agricultural expenditure in the European budget was an impediment to developing a new redistributive function for the common budget and was therefore putting at risk further progress in European integration. At national level, two governments were under particular pressure. In Germany, reunification had induced a financial crisis putting the German Chancelor, Mr Kohl, under pressure of trade unions and coalition partners. That led Germany, for the first time, to refuse to envisage any increase in the CAP budget, despite the fact that the new Länder would be amongst the neediest farming regions in Europe (Patterson 1997). But like in the past, Germany remained ambivalent towards agricultural change. With Federal elections due in December 1990, electoral politics required maintaining the support of farmers both in the old and the new Länder although they had diverging interests (Wilson et al. 2001). In France, the referendum for the ratification of the Maastricht Treaty in 1992 and the parliamentary elections in 1993 put President Mitterrand, whose Socialist government had lost political support, into a position where he had both to demonstrate to the farming constituency his commitment to defend the CAP although they were not his natural electorate, and to honour his reputation as statesman and as a strong supporter of European integration. It is probably at international level, in the GATT negotiations of the Uruguay Round, that the sense of crisis was the most evident. Since 1986, the EU had embarked upon agricultural trade negotiations and signed up to very clear objectives of increased market access, regulated and reduced domestic support that had adverse trade impacts, and reduced export subsidisation. The first period of the negotiations until 1990 was characterised by the absence of overlap between the EU and US win-sets. The United States started the negotiation with a ‘zero option’, the elimination of all farm support by 2000, and later made concrete proposals for tariffication and tariff reduction (–75 per cent), classification according to the level of trade distortion and reduction of domestic support (–75 per cent) and reduction of export subsidies (–90 per

The MacSharry Reform (1992) 63

cent). By contrast, the initial EU position was to pursue first stabilisation of world markets and as a second step to reduce support for agriculture. It later evolved into proposing overall cuts in tariffs and domestic support but without proposing specific amounts, until it was bound to present concrete proposals in view of the Ministerial Conference at the Heysel, Brussels, in December 1990. This was only possible after protracted internal discussions and several meetings of the Agriculture and Trade Ministers in October and November 1990. The main issue was the German concern that any losses in farmers’ income resulting from the GATT price cuts should be compensated by income support and supply control. The EU eventually agreed to a 30 per cent cut in support, without making a quantified offer on export subsidies. Four years after the Punta del Este Declaration, one month remained before the Ministerial meeting, but the EU position was still unacceptable to others. Not surprisingly, the Heysel Conference collapsed. The EU was unable to agree to specific quantitative commitments that would have implied changes to the CAP. This would have meant reforming the CAP as a direct result of external pressure, a politically untenable position. By then, however, it became evident that the European position based on the existing CAP would not allow a conclusion of the agricultural negotiations and was an impediment for the conclusion of the whole negotiation (Legras 1993, Patterson 1997, Moyer et al. 2002). In particular, the Europeans were trapped in a situation where they had to placate their world grain competitors and soothe domestic special interests (Mahé et al. 1996). The principal target was indeed export subsidies and domestic support encouraging production. Pressure was actually concentrated on the grain sector, where the Cairns Group of agricultural exporters (i.a. Australia, Canada, Argentina and the United States had most interest in expanding trade. The situation of blockage had two major consequences. On the one hand, political leaders such as Mr Kohl, Mr Mitterrand and Mr Delors realised that farming interests were putting at risk the benefits that far more important sectors of the economy would reap from a new global trade agreement. Mr Kohl in particular put all his weight to change the position of the German agricultural community. On the other hand, decisive developments occurred with strong general policy effects: non-trade distorting social and environmental policies became more attractive as a way to answer

64 Reforming the Common Agricultural Policy

external pressures, and the post-war belief that protectionism was a necessary shield to improve agricultural productivity was put into question. It was therefore necessary to admit that liberalism assumed that agriculture was by now modernised and could be supported through different means (Coleman et al. 2002).

The issues Immediately after the failure of the Heysel Conference, the European Commissioner for Agriculture, Mr MacSharry, unveiled his ideas for reform of the CAP. The principal element of the reform was the reduction in guaranteed prices for the two major European commodities, cereals and beef. This had the double objective of decreasing budgetary costs by reducing surpluses and allowing a reduction in trade protection through tariff duties cuts and reduction of export subsidies. The cuts were accompanied by supply control mechanisms (set-aside for cereals, reduction of milk quotas) to complement their effects on production surpluses. The cereal price reduction was the most passionately discussed issue throughout the discussions. The second building block was the introduction of compensatory direct payments to farmers. Designed essentially to stabilise agricultural incomes and, thereby, facilitate political acceptability for price cuts, they were also intended to make domestic support more acceptable at international level insofar as they were only partially linked to the level of production. In the case of cereals, the link to the actual level of production was even completely abandoned. Finally, several measures addressed the structural impact of the reform as well as new concerns. This was a series of measures funded by the CAP or by regional policy targeting agricultural structures (such as preretirement, installation of young farmers, modernisation of farms), as well as new agri-environmental measures providing incentives to improve farming practices. Some would be implemented immediately and financed by the Guarantee section of the EAGGF; others would be part of a reinforced rural development strand of structural policy in the package to be adopted in 1993 and cofinanced by the Guidance section of the EAGGF. The set of issues under discussion was therefore relatively limited. Despite the reform departing considerably from previous policies,

The MacSharry Reform (1992) 65

the number was manageable. Although part of their content was intrinsically connected to another level and field of discussion, trade, their focus was essentially on agriculture.

The actors The main actors in the decision making process were the European Commission and the Member States. However, other stakeholders, in particular agricultural interest groups, played a significant role. The European Commission In a context where reform was discussed in parallel to the GATT negotiations, the European Commission had a central role as it was responsible for making proposals for agricultural policy, while also being the European negotiator at the GATT negotiations. The Agriculture Commissioner himself, Mr MacSharry, was both responsible for the CAP and for the agricultural part of the trade negotiations. He therefore personalised the intrinsic link between reform and negotiations, even if he repeatedly underlined that the two processes were not linked. Using this double hat, the Delors Commission behaved as an entrepreneurial leader along innovative patterns (Coleman et al. 1999, Fouilleux 2003). The Commission had called for the reform of the CAP several times, as early as 1985. The Commission President, Mr Delors, was himself a strong supporter of CAP reform, and had decided early on that the last attempt at change, the stabilisers regime, would be only a medium term measure. His choice of Mr MacSharry as Commissioner for Agriculture in 1989 signalled that he was determined to bring about reform by means of a strong supporter of the CAP and also a strong, determined personality (Kay 1998). However, the occasion to present new reform proposals in line with the 1985 policy papers did not occur until the GATT negotiations were blocked and the Commission realised that the EU could no longer remain on the defensive. Mr MacSharry appreciated that the situation was untenable. He was convinced that the EU cereals regime was more vulnerable than the US regime. This weakness was partially linked to the condemnation of the oilseeds regime by a GATT panel, which led the Commission to believe that this implied a CAP reform. In addition, Mr MacSharry was worried about the

66 Reforming the Common Agricultural Policy

inequity of the CAP whereby 80 per cent of CAP spending was going to 20 per cent of farmers. Overall, he was convinced that the EU had to reform the CAP before a GATT agreement could be concluded. But he initially had no choice but to negotiate on the basis of the current CAP until the Member States realised that the negotiations would not be concluded without the EU first reforming its agricultural policy in the direction of what the GATT talks had already established. The proposals were prepared as a secret initiative as early as 1989, but the plans were presented only after the failure of the Heysel Conference. Although there are different interpretations of this initiative, including those who think that the Commission tried to increase its autonomy in articulating domestic and international positions (Meunier 1998 and 2005, Roederer-Rynning 2003b), the main point is that the situation in the GATT was a catalyst for the Commission to use its agenda setting power in order to promote a reform that it had so far been unable to present (Kay 1998, Moyer et al. 2002). In this regard, it is worthwhile noting that the Commission also made use of its powers of setting agricultural prices to convince Member States that in the absence of reform, the 1991/1992 price package would entail sharper price reductions without compensation (Kay 1998). In preparing and defending its proposals, the Commission’s main constraints were political acceptability by Member States and the dilemma between economic efficiency and equity: the only way to remove incentives to ever-higher production was to lower market prices; but this had to be compensated by direct aids to make the reform politically and socially acceptable, which pointed to keeping high levels of farm spending. In addition, as the EU trade negotiator, the Commission’s other concern was to calibrate the proposals in such a way that they would be acceptable to trading partners and enable the resumption of the GATT negotiations. The Member States Member States held different, opposite positions on certain issues but the game concentrated on a relatively narrow range of issues and positions. The first set of issues concerns the reform of market and price policy (see Figure 6.1). Two clear dimensions were present: on the one hand, price cuts and their consequences (compensation);

The MacSharry Reform (1992) 67

Figure 6.1

The bargaining game, 1992 – Market and price policy

Proposals: • Wheat price: –35% + set-aside (15%) • Beef price: –15% • Compensation (direct payments) • Reduction of milk quotas Key: B : Belgium D : Germany DK: Denmark EL : Greece F : France

Price cut, compensation D (no price cuts) F (no set-aside)

UK, NL, DK, B E

GATT

I, P, EL (milk quotas, Med. products) Specificities

Results: • Wheat price: –29% + set-aside (15%) • Beef price: –15% • Compensation (direct payments) • No reduction of milk quotas

I : Italy E : Spain UK : United Kingdom NL : Netherlands P : Portugal

on the other hand, the situation in the GATT. Some specific issues were of concern to some Member States but did not put the overall shape of the reform into question. These last issues are isolated because they lead to buying out the Member States concerned in order to arrive at a decision. While the United Kingdom, Belgium, the Netherlands and Denmark were initially opposed to compensating price cuts through direct payments, they realised that this was a necessary condition to ensure the political acceptability of the reform. They soon occupied the centre of the game, supporting the need for price cuts and being acutely aware of the GATT dimension. They were joined by Spain and other Mediterranean countries once these countries could be given some assurances regarding their specific difficulties (Coleman et al. 1999). The main opponents to the reform were France and Germany, which clearly stayed out of the game for most of the discussion. They maintained their traditional alliance as long as external factors allowed. This entente was, however, based on different positions. Germany was against any price cuts and promoted supply control (set-aside) and extensification as a means to decrease cereal surpluses. France opposed set-aside and did not reject outright a cereal price cut (Moyer et al. 2002).

68 Reforming the Common Agricultural Policy

Germany was in a particularly complex position: its opposition to any increase of the CAP budget reduced room for compensation of the reform through direct payments, and also for maintaining the status quo given the EU budgetary crisis. At the same time, the failure of the Heysel Conference had mobilised German industrialists in favour of making concessions in agriculture in order to conclude the Uruguay Round. Germany eventually shifted its position and accepted the principle of price cuts on condition that they would be compensated. Clearly, the price to pay for the reform and the conclusion of the Uruguay Round was, in Germany’s view, a relaxation of its budget objectives. After the collapse of the GATT talks, France came to share German concerns, but kept up its opposition to the commodity reform longer, only choosing to sell its consent to set-aside in return for the highest price, namely high compensatory direct payments. This position is partially explicable by a tense national context. The pressure of farming organisations on the government was so high that the main goal of the French government during most of the discussion was to maintain the national compromise over agriculture (Fouilleux 2003). This bargaining game demonstrated that it is difficult to go against France and Germany’s combined opposition to a measure, unless external pressure induces one of them, or both, to change their position. In this case, Germany’s move made the agreement possible, leaving France with no option but to sell its agreement as hard as possible. In the end, the final decision retained the basic framework proposed by the Commission. Objectives were less ambitious, either for budgetary reasons (wheat) or for lack of external pressure (milk). The results displayed patterns of continuity, despite the fundamental change of some policy instruments. The distributive effects of the CAP remained substantially unchanged, notably through the uniform compensation of price cuts, as opposed to the proportional compensation related to farm size proposed by the Commission. The overall cost of the reform, however, involved an increase in CAP expenditure although the budgetary cost of the CAP was one of the triggers for reform. The paradox is only apparent. Had financial concerns been uppermost, the result would have been different as is demonstrated by the next reform in 1999. It is clear that the prominent connected issue was not the budget but international trade

The MacSharry Reform (1992) 69

and the construction of the negotiating position of the EU. This is illustrated by the different results obtained on the one hand for wheat, which was subject to strong competition from more competitive producers, and on the other hand for beef and milk, which were not so exposed (Mahé et al. 1996). Priority was given, especially by Germany, to getting out of the GATT deadlock. A more expensive CAP was considered an acceptable price to pay. By contrast to the discussion on market and price policy, accompanying measures and horizontal rules were much less contentious (see Figure 6.2). This is explained by their less innovatory character, as they essentially reproduced existing schemes (rural development), or because they established new measures generally deemed necessary to make the CAP more acceptable (structural measures, environmental incentives). The issues under discussion, the areas of intervention and the modalities of application, were clearly part of the agricultural package. No connected, non-agricultural issue can be identified. The only contentious issue, the attempt to modulate direct payments according to the size of the farm, was soon closed due to the opposition from the United Kingdom and the Netherlands and the need to ensure their overall support to the reform.

Figure 6.2 measures

The bargaining game, 1992 – Horizontal rules and accompanying

Proposals: • Modulation of direct payments • Four accompanying measures • Rural development dispersed

Areas

F (accompanying reform)

UK, NL (no modulation)

UK, D (envt) E (rural devt)

Modalities

Key: D : Germany F : France E : Spain UK: United Kingdom NL : Netherlands

Results: • No modulation of direct payments • Four accompanying measures • Rural development dispersed

70 Reforming the Common Agricultural Policy

Civil society Civil society participated in the debate only to a limited extent. The most active stakeholders were farmers’ organisations. It is important, however, to distinguish between the European and the national organisations, although the patterns followed closely the path of the previous decades. Reproducing the classical institutional pattern of ‘corporatism’, positions were essentially taken by national organisations and addressed to their national governments. Most of them defended the status quo and claimed that price reductions would ruin farming in Europe (Daugbjerg 1999). The French national context has been extensively studied. It is illustrative of the situation facing almost all farmers’ organisations during the 1990s. The peak organisation, FNSEA (Fédération Nationale des Syndicats d’Exploitants Agricoles) opposed reform and defended a policy of high prices as a way to preserve its own unity. As the proposals put into question one of the fundamentals of the policy, they were in fact also questioning the identity of farmers’ organisations. The latter were therefore unable to propose alternative solutions, which would have meant going back on their collective identity (Coleman et al. 2002, Roederer-Rynning 2002, Fouilleux 2003). The FNSEA reacted unusually violently, notably through major demonstrations in September 1991 which paralysed the country. For the FNSEA, this was also a way to preserve the exclusivity of the FNSEA’s relationship with public officials which ensured the isolation of agriculture from the broader economic and political context. It used the national agenda (vote of the budget in 1991, parliamentary elections in 1993) to leverage the European agenda. However, with the 1992 reform, the traditionally closed French policy network in the form of the ‘cogestion’ started to weaken. A more competitive relationship had been established between farmers’ organisations and the state (Culpepper 1993). Other departments than the Agriculture Ministry started to be interested and involved in the CAP discussions also (Coleman et al. 1997, Fouilleux 2003). And, within the FNSEA, commodity groups, notably cereal growers, started to develop their own autonomous strategies and contacts with public officials. The latter’s agreement to the price cuts for cereals, which they could eventually accept due to their

The MacSharry Reform (1992) 71

competitive advantage, was instrumental to the change of position of the French government. At the European level, COPA, the European-wide farmers’ organisation, was faced with its long-standing structural problem of forging clear positions among members with differing interests. COPA essentially remained opposed to any change of the CAP until the discussion reached a very advanced stage, and took a late position on the concrete elements of the reform (Daugbjerg 2003). Beyond farmers’ organisations, no other stakeholders actively took part in the discussion. Agri-business and consumer organisations were noticeably absent. Other non-governmental organisations had still not manifested an active interest in the CAP. This first round of reform conformed to the traditional description of CAP policy making as a closed policy network (Daugbjerg 1999).

The institutional framework The institutional set-up and practice played an important role in defining the outcome of the 1992 reform. In many ways, it followed the patterns of traditional CAP policy making. Most importantly, decisions continued to be made under the threat of the veto and therefore had to search for consensus. France and Germany in particular used this threat to extract special concessions from the others as a price for agreeing to the complete ‘package’ both regarding the internal discussions and the GATT negotiations. As shown by Meunier (2005), the practice of deciding by consensus led the EU to adopt in the GATT the most conservative position based on the most recalcitrant Member State’s position. This limited the degree of power delegated to the Commission as the EU representative in the GATT negotiations. Once the CAP reform was adopted, however, the degree of flexibility in the EU position was increased, although the consensus rule was only partially weakened. However, recourse to the veto threat reached its limits when it threatened the wider package, that is, the GATT deal. This triggered the interest of new actors within national administrations (Ministries of Economy and Finance, Heads of State or Government) who were concerned with connected issues (budget in Germany, GATT in Germany and France) and balanced general interests with

72 Reforming the Common Agricultural Policy

special interests. These actors mobilised when the absence of reform, or threats of veto, threatened to derail the entire GATT negotiations. The CAP reform was ultimately agreed by qualified majority voting, with Italy voting against and Germany abstaining. Bargaining continued, however, being a relatively closed game between Agriculture Ministers, and between Council and Commission. By contrast with the 1980s, the European Council was not involved, nor were other Council formations or other institutions, in particular the European Parliament. It is notable that Parliament itself was dominated by its Committee on Agriculture, long protective of producers’ interests, and did not allow any expression of other interests such as the consumers’ (Roederer-Rynning 2003a).

Default scenario The cost of no agreement at the three levels of political decision played a major role in support of a final agreement. At international level, the 1988 stabilisers reform had done nothing to mitigate the impact of the CAP on trade. Moreover, without an agreement on agriculture, the Uruguay Round would collapse, hurting more important sectors of the economy than agriculture, in particular in Germany which was facing an economic slowdown following its reunification, and also in France, including in agriculture where the sector was promoting its ‘vocation exportatrice’. In addition, time was running out in the GATT negotiation itself with US elections due for November 1992 and the expiration in June 1993 of the ‘fast track’, the trade negotiating authority granted by US Congress to the administration. At European level, the absence of an agreement would also have clear negative consequences. If the budget crisis continued, implementation of the Single Market project would seriously be impaired by the impossibility to develop a reinforced cohesion policy accompanying the deepening of economic integration. More immediately, in the absence of a CAP reform, the stabilisers regime would be applicable, thus bringing sharper and immediate price cuts that most Member States had difficulties to accept without compensation (Kay 1998). This particularly explains Germany’s final position: a larger price cut with compensation was easier to accept than a series of smaller cuts without compensation.

The MacSharry Reform (1992) 73

Most national governments ensured that their specific problems were taken into consideration (Italian milk quota was separated off the package; United Kingdom on modulation and some concessions in the sheep sector; Spain, Italy and Portugal on Mediterranean products) or gave priority to the international dimension given their dependence on international trade either in agriculture or in other sectors (Germany, Belgium, Netherlands, Denmark). The Member State opposed for the longest, France, was the one mostly concerned with balancing the cost of failure with the potential benefits of reform for its national agricultural interests. The reform as proposed was actually the lesser of two evils with regard to French competitiveness. It did not resort exclusively to the control of production in the cereal sector, which was the original German position, and compensatory direct payments established without any modulation would benefit the most competitive producers, including the French. Given these considerations, electoral concerns were minimised. Since the French socialist government was almost certain to lose the 1993 parliamentary elections, settling a deal on the CAP would not substantially alter the electoral result, especially once the most concerned producers (influential cereal growers) recognised the benefits they could draw from the reform.

Conclusion The 1992 CAP reform took place in a context of crisis of domestic agricultural markets, the EU budget and the international trade arena. However, not all factors had the same weight. The multilateral and multi-issue analysis shows that one particular dimension prevailed. Although a new budgetary crisis was looming and was presented by the Commission as the major reason to reorganise agricultural expenditure, the reform did not bring about any budgetary savings. Instead, the reform was agreed upon mainly to allow the conclusion of the GATT Uruguay Round. This was possible because trade considerations reverberated through the EU decision making process in two ways. As a third level of decision making, the international trade dimension was fully integrated in national and European decisions under the pressure of a short term constraint, namely concluding the Uruguay Round. Under timing constraint, European leaders became aware that domestic reform was necessary

74 Reforming the Common Agricultural Policy

in order to fully take part in international negotiations. International trade operated also as a horizontally connected issue which guided political choices among a range of possibilities. As the GATT negotiations had reached a very mature stage, they were able to orient the content of the reform through the assessment of what would be acceptable by trading partners. In short, by threatening the collapse of the entire Uruguay Round, stalemate in agricultural negotiations created pressures in the EU to reform the CAP in such a way that a GATT agreement could be reached. Both timing and substance of the reform were directly influenced by the state of the GATT negotiations, because the trade dimension acted both as a third level of decision making and as a horizontally connected issue to CAP reform. This explains the strength of this particular factor and therefore why a reform was implemented in 1992 that went much beyond previous attempts. The domestic policy process did retain its autonomy but now had to act within a set of international constraints. The analysis of the multi-lateral bargaining process does not show the same degree of innovation. There are more continuities than new elements in the game played by the actors, the patterns of the policy framework and the institutional rules. A relatively limited number of issues under discussion would have facilitated the bargaining between Member States. But veto threats continued to be used, making an internal decision more difficult and the EU a difficult trade negotiator. The impact of the search for consensus was however minimised by the concentration of the game on two main actors, France and Germany. Both these Member States were initially opposed to the reform, even if that was for partially contradictory reasons, and their opposition blocked any decision so long as their alliance persisted, thereby demonstrating that no decision can be taken against the opposition of both France and Germany. However, the pivotal role of Germany also appeared clearly: when external pressure reached a certain level, that is, facing the risk of a definitive collapse of the GATT negotiations, Germany changed its position to support the CAP reform. This was the outcome of a gradual evolution in Germany’s position towards the CAP. From being an obstructor to change since the inception of the CAP, Germany now became a partner (Wilson et al. 2001). The alliance between France and Germany broke on the GATT negotia-

The MacSharry Reform (1992) 75

tions, and left France with the choice between vetoing any deal or selling its agreement at the highest price possible. In the bargaining process, the European Commission used its twin role as initiator of the reform and trade negotiator to assert itself as an entrepreneurial leader. On the one hand, it used its agenda setting power to drive the plans for improving the efficiency of European agriculture and increase its autonomy and authority in the GATT negotiations. On the other hand, it remained responsive to political constraints by proposing and then accepting changes that would not radically affect the design of the policy but would ensure a strengthening of the EU bargaining position in the GATT. Lastly, institutional actors were under only one source of pressure from civil society, farmers’ organisations. The latter deployed their traditional method of action, which conformed to a corporatist model. Almost all were opposed to the reform and relied on national peak organisations and their close relationships with national administrations. This contributed to rendering the European level of intermediation inefficient, meaning that the European-wide farmers’ union, COPA, could only adopt a passive position of full opposition to the reform. No counterweight to the representation of producers’ interests existed to influence Agriculture Ministers in any another direction. Other civil society organisations were absent from the debate, as were other European institutions such as the European Parliament. The only evolution to note is the emerging interest of other parts of national government which contributed to slightly opening a still very closed policy network.

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7 Agenda 2000 (1999)

The context The context of the reform adopted in 1999 was noticeably different from 1992, and certainly not one of crisis. The situation of agricultural markets did not provoke the same sense of urgency, although they were still unbalanced. Production of cereals and beef was still excessive, despite the short term cut in beef production due to the bovine spongiform encephalopathy (BSE) crisis that broke in 1996, and the Commission projected huge increases after the turn of the century. Despite 15 years of quotas, the EU was still producing too much milk in relation to demand. Agricultural spending was still rising as an inevitable consequence of replacing support based on consumer prices by tax payer support16 and there was a real risk of breaching the ‘guideline’, the ceiling for agricultural spending, in 1991 and 1992. As a consequence of the continuing excess in production, stocks were mounting and surpluses had to be exported with export subsidies. The exportable surplus of cereals was expected to increase in the following two or three years, nearly doubling the cost of export subsidies from the 1988/89 level. The probability that the amounts and quantities authorised by the Uruguay Round Agreement would be exceeded was very high. Without a new step in the reduction of prices, a new budgetary crisis was anticipated while the EU would be unable to fulfil its international obligations. The European political context was also putting pressure on the CAP, to an extent not felt in 1992. The main constraint was the 77

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perspective of enlargement to the former communist countries of Central and Eastern Europe, whose agriculture lagged behind and would necessitate a considerable increase of funding and a reorientation of CAP priorities if the CAP was to be successfully applied in these countries. One particular problem was the application of compensatory direct payments: following accession, farm prices were expected to rise in the new Member States, but it would be difficult to withhold direct payments whilst they continued to be paid in the old. Partly as a consequence of preparing for enlargement, and partly due to the coincidence of timing (the previous package covered the period 1994–99), a new CAP reform would have to be part of a broader package of financial planning and policy reforms for the period 2000–06. By contrast, decisions of the first episode of 1992 were taken on their own. The new ‘financial perspectives’ were given the over-arching objective to prepare the European financial architecture and policies for the next enlargement. Under these circumstances, agricultural funding would have to compete with other policies and priorities. The European context was therefore favourable to a multi-issue bargaining scenario. This translated into the main topic of discussion being the budget. Although freeing up resources for other priorities of European integration was an important issue in 1992, this was not then the prevailing one. In 1999, the context was one of fiscal rigour geared at meeting the Maastricht criteria for the establishment of the new common currency, the Euro. The strategic decision was made to bring the budget discussion and the preparation of enlargement under the same umbrella of fiscal rigour. Although projections pointed at a possible breach of the agricultural guideline in the upcoming years, the real risk came from the cost of integrating future new Member States into an unreformed CAP, or from the downturn of world prices. In essence, however, the main source of concern for many Member States was the distribution of EU budgetary payments and receipts. At the time the Agenda 2000 proposals were formulated, nine Member States had become net contributors to the EU budget, including the four largest countries (Germany, United Kingdom, Italy and France) and would resist an increase in their financial obligations. Germany in particular had a strong incentive to limit EU spending as it had a net contribution of €10.9 billion (Moyer et al. 2002).

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The CAP became soon the main target. All Member States took positions pointing in the same direction: the United Kingdom and the Netherlands advocated rigour against the CAP; France agreed if applied to the overall budget; Germany strengthened its opposition to continuing to be the main contributor to the CAP; and the Southern Member States gave priority to protecting structural policy from budgetary constraints. As a consequence, one of the main issues became the overall level of spending for which agriculture had to contribute with a ‘real stabilisation of expenditure’. National political contexts did not help ease the pressure. The election campaign in Germany took place in 1998 with the main contender against Chancelor Kohl, Mr Schröder, making an electoral issue of the German contribution to the European budget. Going one step further than Mr Kohl in 1992, he announced that he would refuse any compromise which would increase agricultural expenditure. After winning the election in September 1998, this position became Germany’s bargaining position. The political situation was also tense in France, where a conservative President, Mr Chirac, shared his powers with the socialist-led government of Mr Jospin. The situation affected to some degree the negotiating position of France, insofar as the President and the government had somewhat diverging positions on CAP reform (Delorme 2004b). In a more structural way, national public opinion had started to shift. On the one hand, there was an increasing opposition to the way farmers were supported. Basing itself on a study commissioned in 1997, the European Commission warned that ‘the public has difficulty in understanding why aids are given for not cultivating the land without requiring good cultivation practices’ (cited by Moyer et al. 2002). On the other hand, demands for higher environmental standards, more food safety and more equity in the distribution of aids increased considerably under the cumulative effects of the accession of the Nordic countries and Austria in 1995, the BSE crisis in 1996, and government initiated public debates on agriculture in France and the United Kingdom which were focused on rural development and multifunctionality (see Chapter 9), and in the Netherlands on environmental regulation (Hennis 2005). Compared with the constraints at European and national levels, the international level did not play a significant role. The direct

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pressure of previous WTO commitments has been mentioned. It is of a static nature and directly connected with the evolution of the European markets and their ability to respect these constraints. This is qualitatively different from the necessity to adjust a bargaining position in the context of ongoing negotiations. This dynamic pressure was, however, not totally absent in 1999. The EU was among the active proponents of the launch of a new round of WTO negotiations, scheduled in Seattle for the end of 1999. This would be a source of pressure which the Europeans had an interest in anticipating through a new CAP reform. This pressure was expected to target export subsidies again, a new reduction of the most trade distorting domestic subsidies, an incentive to further decouple direct support from production and to reorient it towards environmental subsidies, which were better recognised by the WTO.

The issues The European Commission presented its proposals for a reform of the CAP as part of the ‘Agenda 2000’ package. Despite the complexity of the package, the duration of the discussion was not much longer than the discussion on the first CAP reform. However, the number of issues was significantly larger, and the issues were more intrinsically connected to a non-agricultural issue, the budget. The first issue under discussion was the prolongation of the 1992 reform, namely further price cuts for cereals and beef as well as their extension to the dairy sector, which had escaped a reduction of quotas in 1992. A solid path had been established, by which a reduction of prices had the twin benefits of improving market balance and allowing a reduction in external protection in anticipation of future WTO negotiations. A second issue, or group of issues, was brought by the Member States which wanted to further reduce the CAP budget and proposed new ways to save money, by contrast with the European Commission which had proposed to maintain the existing agricultural guideline. Various techniques were successively or alternatively discussed: cofinancing of agricultural policy by Member States, degressivity of direct payments, capping individual receipts and partial compensation for price decreases.

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A third issue was the rebalancing of benefits of the CAP among different sectors, regions or Member States. The introduction of direct payments in 1992 for traditionally supported crops had highlighted further the differences in financial support available for agriculture in Member States. Although the general balance was not substantially altered by the Agenda 2000 proposals, some proposals made for budgetary reasons (capping of individual receipts, partial but differentiated compensation for price decreases according to commodities) had also the intended objective to provide more equity in the distribution of aids. Others were more specifically targeted at this objective, such as modulation of direct payments according to socio-economic criteria. A fourth issue was the CAP’s contribution to rural development and the overhaul of the schemes relating to structural and rural policy into a single framework. This was the creation of the ‘second pillar’ of the CAP designed to answer to calls for fostering agricultural multifunctionality. The last issue was the continued reinforcement of environmental protection in agricultural policy. It translated into the introduction of conditions on direct payments linked to environmental protection, and into the reinforcement of agri-environmental measures within the rural development strand. In a nutshell, the set of issues to be addressed was not only very large, but it also mixed two dimensions which would make the bargaining process particularly difficult: the multi-level dimension within the agriculture topic, and the multi-issue dimension connecting horizontally agriculture to the overall EU budget. This contrasted sharply with 1992.

The actors Compared with 1992, the game was essentially played by the same actors, although new stakeholders in civil society started to mobilise. The European Commission Having presented an overall package of financial planning and policy reforms, the European Commission’s main role and objective was to ensure consistency of policies, but its room for manoeuvre was more constrained than in 1992. It had to give coherence to

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somewhat contradictory strategic objectives (enlarging the Union without increasing the budget) as well as reconciling continuity between past and new reforms. Its main concern was to find appropriate solutions to facilitate the integration of Central and Eastern European states into the EU, and its second priority was to minimise pressure on the CAP in the forthcoming round of multi-lateral trade negotiations in the WTO. The Commissioner for Agriculture, Mr Fischler, employed some innovatory practices in order to promote and defend its proposals. Being an Austrian, he had a particular sensitivity to the difficulties of marginal rural areas and was strongly committed to rural development. As a former Minister for Agriculture, he understood very well the economic constraints on European agriculture. His personal influence was decisive in shaping the Agenda 2000 proposals, notably the proposal for a ‘second pillar’ on rural development. Early on, Mr Fischler decided to promote a prolongation of the 1992 CAP reform through the publication of the 1995 ‘Strategy Paper’. In addition, he decided to look for support outside the agricultural community by organising the 1996 Cork Conference on rural development and later on by starting to use public discourse in a vigorous defence of the Agenda 2000 proposals. This constituted a move to open agricultural policy to public debate. This also was innovative in engaging new actors into the policy debate. However, the Commission had to face a particularly intense conflict between reforms and their political acceptability. The Fischler initiative to promote rural development as a new component of the CAP had shown the resistance to change: the reaction of Agriculture Ministers was one of fear of losing powers and money against non-agricultural rural actors. Constraints were of two kinds. On the one hand, as the Agenda 2000 orientations formed a package covering various policy areas, the balance within each sector and between the different sectors was very fine. On the other hand, as in the previous CAP reform, the proposal for reducing reliance on price support had to find a quid pro quo, which was the continuation of the system of compensatory payments that however was the main concern in the preparations for enlargement. Overall, these constraints required the right appreciation of the Member States’ priorities. The Commission proposed a substantive reform of the CAP compensated by a constant budgetary cost. It did

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not anticipate that Member States would give precedence to a reduction of the real cost of the CAP, more than to a significant change of its modus operandi. The Member States Member States defended positions in a much more complicated game than in 1992. Some had developed new visions for agriculture, but the debate and reflections had not achieved the same stage everywhere. It was particularly advanced in the United Kingdom and in France, which directly influenced the shaping of the Agenda 2000 proposals by promoting the new priority for rural development (Lowe et al. 2002). Like in 1992, a first set of discussions focused on market and price policy and contained two connected issues (see Figure 7.1). This time, besides the issue of price cuts and their implications, the prevailing non-agricultural issue was the budget and the concern for reducing or stabilising agricultural spending. As previously, specific demands guided also national positions. But contrary to 1992, no Member States stood clearly outside the game, that is, refusing the

Figure 7.1

The bargaining game, 1999 – Market and price policy

Proposals:

Results:

• Wheat price: –20% + end set-aside • Beef price: –30% + premium to extensification • Milk price: –15% • Partial compensation • Capping of direct payments • Mandatory Budget decrease of direct payments

Price cuts FIN, B, D, E, P (full compensation) SE, UK, DK, I (end milk quotas) UK, DK, SE (end set-aside) SE, A, DK, NL D (cofinancing) UK, F (degressivity) A, EL, B, FIN, IRL E, I, P (capping) (rebalancing) D, UK, F, E (no capping)

D, I, NL (no beef premium)

Specificities

Key: A : Austria B : Belgium D : Germany DK : Denmark EL : Greece

F : France FIN : Finland I : Italy E : Spain SE : Sweden

UK : United Kingdom IRL : Ireland NL : Netherlands P : Portugal

• Wheat price: –15% + set-aside (10%) • Beef price: –20% + premium to extensification • Milk price: –15%, starts 2005 • Milk quota increase for 5 Member States • Partial compensation • No capping of direct payments • Voluntary decrease of direct payment

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thrust of the proposals, although Germany was initially opposed to any change (Wilson et al. 2001). The other difference is that positions were much more dispersed than in 1992, not only on specific products of national interest (rebalancing of aid for Mediterranean products, beef premium), but also on various aspects accompanying the price cuts (the extent of compensation by direct payments, supply control instruments such as milk quotas and set-aside). Wilson et al. (2001) described the bargaining game as a triangle where the ‘protectionists’, headed by Germany, argued for the status quo, the ‘evolutionists’, led by the Commission and France, favoured a continuation and adaptation of the 1992 reform, and the ‘free marketeers’, headed by the United Kingdom, argued for radical liberalisation. The bargaining game was in fact even more complicated. A few Member States – the United Kingdom, Sweden, Denmark, the Netherlands – backed the general orientation of the proposals but said that they did not go far enough, notably by maintaining milk quotas until 2006. A general opposition was initially led by Germany’s conservative government, which feared the loss of income for farmers and challenged the Commission’s assessment, notably regarding the impact of the next WTO round. Price cuts for milk were particularly criticised by Germany, Belgium, Luxembourg, Austria and Ireland. France expressed reservations too, but emphasised the need of a fairer distribution of aids between sectors and between farmers. The Southern Member States criticised the proposals for not giving enough attention to Mediterranean products. Despite the dispersion of negotiating positions, a new situation occurred. The centre of the game was now occupied by three major Member States, Germany after the change of government in autumn 1998, France and the United Kingdom, which all shared a desire for reform as well as the objective of budget rigour, but crucially disagreed on the modalities. This was exemplified by the debate on cofinancing versus degressivity as a means to make savings in the agricultural budget: Germany strongly opposed the Commission proposal for degressivity and promoted cofinancing as an alternative, while France and the United Kingdom supported degressivity. However, although clusters of Member States had been formed and had become more active than in the past (Katranidis et al.

Agenda 2000 (1999) 85

2002), Franco-German agreement was still necessary. In the absence of an agreement between France and Germany on either of the two systems of financial savings, neither of them could be adopted. The Franco-German alliance in agriculture, one of the two original iron pacts, broke down with enlargement (Roederer-Rynning 2003b). Other means to limit the agricultural budget had therefore to be found. An agreement of the simplest form was found, a top-down general limit of spending (€40 billion per year) agreed by Heads of State and Government in February 1999. For the first time, this agreement involved a difficult interaction between the Ministerial and the European Council levels, Agriculture Ministers agreeing on a reform package outside the limit set out by the Heads of State and Government and leading the latter to reopen the deal at the final stage of the discussion. This top-down financial approach explains the main patterns of the Agenda 2000 outcome. Firstly, given that price decreases were compensated by direct payments, price cuts were either reduced (wheat, beef) or delayed (milk) in order to stick to the agreed overall ceiling since alternative solutions (smaller compensation, degressivity) encountered too much opposition. Secondly, the dispersal of positions was prone to encourage some Member States with special difficulties to push up the bidding. The need to buy some players out increased (for example, Italy on milk quotas, Austria, Ireland and France on beef premium, Germany on unmodulated compensation and strengthening of set-aside). Thirdly, the predominance of the budgetary issue diverted energies away from searching innovatory solutions. This is particularly true for the proposal to establish a coping of individual receipts and the mandatory decrease of direct payments. Societal pressure in favour of a fairer distribution of funds was insufficient to change the balance, as well as the prospect of increased external pressure through new trade negotiations. In fine, although supported by a block of five countries (Austria, Greece, Belgium, Finland, Ireland), proposals went against the financial interests of both the main beneficiaries (France and Spain) and the main contributors to the CAP (Germany, United Kingdom). They were therefore dropped from the final compromise. In short, the outcome of the Agenda 2000 negotiation on market and price policy was clearly due to a combination of two factors. On the one hand, players were unable to handle more than a limited set

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of issues. On the other hand, this problem was accentuated by the fact that sources of division were multiple: a Franco-German disagreement, too many Member States opposed to a particular proposal, and differing degrees of readiness to embrace innovation. As a result, the non-agricultural issue, the budget, prevailed in the final compromise. This allowed least reform-minded countries to hide agricultural conservatism behind budgetary rigour: during the Berlin European Council, France, followed by Germany, was at the origin of the proposal for delaying and reducing the efforts in the name of budgetary rigour. This affected directly the extent of the reform. It is obvious that what had been the decisive connected issue in 1992 and one important reason for reform, the international trade dimension, did not play a significant role, despite the declarations of European authorities.17 The final outcome did not go beyond ensuring respect for existing commitments and making a cursive reference to future WTO negotiations.18 The reasoning developed by Mahé et al. (1996) with respect to the 1992 reform applies here mutatis mutandis: in the absence of an immediate pressure on the sector least exposed to international competition, the dairy sector, budgetary concerns prevailed over preparation of new market opening. If the wheat sector was reformed, the price cut aimed only at fulfiling existing obligations and was soon recognised as insufficient to negotiate future reductions of trade protection. Similarly, despite some concerns over the future of the WTO ‘blue box’19 in which direct payments are classified, no decision to reduce them or to further decouple them from production was made in 1999. Had there been real external pressure over the ‘blue box’, the main objective of the CAP reform would not have been to stabilise overall expenditure but to guarantee the future of direct payments by their decoupling and/or reduction. Therefore, insofar as the international trade factor played a role, it was in a static rather than a dynamic way, and certainly not to the same degree as the budgetary issue. The discussion over horizontal rules and accompanying measures offer, by contrast, much more continuity with 1992. The issues discussed remained in the agricultural field, concentrating on the modalities rather than on the priorities of intervention. They were not influenced directly by any direct connected issue (see Figure 7.2).

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Figure 7.2 measures

The bargaining game, 1999 – Horizontal rules and accompanying

Proposals: • Environmental conditions on direct payments • Compulsory modulation according to environmental & social criteria • Single framework for rural development • Compulsory agrienvironmental measures

Results: Areas

F (food quality)

D, DK, SE, UK, A (envt) UK, F, E, FIN (rural devt)

F, UK (modulation) Modalities

D, E (no modulation)

• Voluntary environmental conditions on direct payments • Voluntary modulation according to environmental & social criteria • Single framework for rural development • Compulsory agrienvironmental measures

Key: A : Austria D : Germany DK : Denmark F : France

FIN : Finland E : Spain SE : Sweden UK : United Kingdom

The Member States’ positions on priority areas for the new rural development ‘pillar’ show a strong convergence. This can be explained essentially by the relative continuity of the measures proposed by the Commission, a general evolution favourable to stronger environmental regulations, and also partly by the strong support demonstrated by the new Franco-British alliance in favour of rural development policy. Hence the relatively easy agreement on the new scheme, in particular on the enhanced status of agrienvironmental measures and the creation of the ‘second pillar’ for rural development. More debated was the proposal by the Commission to modulate the decrease of aids exceeding €100,000 and increase the funding of rural development through the savings obtained from modulation. The idea was actively supported by France, which had substantially reviewed its agricultural policy tools and needed additional funds to finance the new priority to rural development, and the United Kingdom, which saw this as a way to rebalance the CAP to its advantage. But the measure went against the interests of Germany and Spain, whose production structures were characterised by sharp

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diversity and needed support of the larger holdings for agricultural reform to be implemented. By directly affecting the largest producers, modulation therefore endangered the reform’s acceptability in Germany and Spain. Consequently, it became a voluntary option, later used only by France and the United Kingdom. Civil society Civil society was much more active in 1998–99 than it had been previously. It had started to undergo structural evolution that had begun to reverberate into positions taken by governments and EU institutions. The most significant evolution affected agricultural organisations, both at national and European level. At national level, the first signs of the end of the ‘corporatist’ relationship between farmers’ organisations and governments started to appear. Similar evolutions within Member States affected directly national preferences and positions taken by governments at EU level. This pattern can be found in each of the major Member States. In France, where the resistance to the 1992 reform had been strongest, the end of the 1990s saw the development of a growing sense of uncertainty among farmers. This was due to two factors. The first was the evolution of the CAP, which favoured the emergence of new actors, within the main organisation, FNSEA, and outside. These new actors were commodity groups organised according to their particular interests rather than the solidarity principle among all farmers on which the identity of the FNSEA was originally based. Notably the commodity groups increasingly organised direct contacts with national and European administrations. Other emerging actors were minority organisations which contested the idea of professional unity and looked for alternative positions. These organisations established their own links with other organisations like consumers and environmental NGOs to differentiate themselves and find support for agriculture in other parts of society. The second factor was the weakening of the relationship between the peak farmers’ organisation and the State. The recognition by the Socialist government of minority organisations in their access to the comanagement of the CAP was decisive (Delorme 2004b). The underground contacts of commodity groups with the State also contributed to weaken the former pattern.

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These changes largely underlay the demand of French farmers’ organisations for a new ‘social contract’ between farmers and society at national and European level, and their new emphasis on rural development (Lowe et al. 2002). This new position also gave support to the open dialogue launched by the Socialist government in 1998 in preparation of a new loi d’orientation agricole. The divisions among the French farming community consolidated during the discussion on the Agenda 2000 reform. The farming community was by now divided between efficient producers like cereal growers, who could compete internationally (almost) without public support, and the more marginal farmers who saw liberalisation as a threat (Moyer et al. 2002). Expressing this division, the leading minority organisation, Confédération paysanne, which represents the more marginal farmers, welcomed the idea of modulation because it would contribute to a redistribution of aid. Meanwhile, the FNSEA supported the principle only for tactical reasons as a way to avoid cofinancing, but sharply criticised the modalities as they would apply in France (Lowe et al. 2002). The evolution of the agricultural intermediation system in other Member States was profound too. In the United Kingdom, the main farmers’ organisation, the National Farmers Union (NFU), had been weakened by the distance taken by the Blair government from agriculture and by the emergence of new civil society actors, notably the rural development movement (Hennis 2001, Delorme 2004c). Recognising that direct payments had very low public support in the United Kingdom, the NFU chose to take part in the discussion, with the support of the Land Owners Association, in order to influence it, notably by opposing the capping of individual receipts (Lowe et al. 2002). In Germany, despite the strong diversity of agricultural structures which further increased following reunification to the East, the Deutscher Bauern Verband (DBV) managed, during the 1990s, to maintain its position as the key farm lobby. Hence the political dominance of small farmers in the south of Germany, a powerful Conservative electorate, prevailed and preserved in turn support for successive Kohl governments until 1998. Given their weak competitiveness, they felt threatened by greater openness and strongly opposed the Agenda 2000 reform, in particular the dairy producers who succeeded in delaying the dairy reform. However, the change of

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government in September 1998 put an end to the traditional alliance between the Federal government and the DBV as farmers were not the natural agricultural constituency for the social-democrats, who were more inclined to be responsive to the pressure from industrial lobbies and the growing influence of the new Länder (Perraud 2004b). In the Netherlands, as early as 1994, the agrarian community recognised the limitations of the corporatist intermediation system based on a vertical statutory organisation, the Landbouwschap, which institutionalised the relationship between the State and organised agriculture, and vertically organised statutory organisations representing the different segments of the production chain. As elsewhere, the restructuring process had led to an increased differentiation between large scale, modern farms, highly integrated with industry, and small farmers left out of the system. In addition, the intervention of the State for marketing products was seen as having become less necessary (Hennis 2005). As a consequence, the Dutch corporatist model collapsed when a new Federation of Agricultural Organisations (LTO) was constituted and the Landbouwschap was abolished. This new organisation focused on the individual agricultural entrepreneur and the integration of all parts of the production chain, while its sectoral organisations took over the Landbouwschap functions. These changes in the Dutch intermediation system were accompanied by a change in national agricultural policy in 1995. Its objectives became the competitiveness of the entire food industry through national champions, more attention to some segments such as the food processing industry and retailers, and an emphasis on environmental regulation. These changes accelerated following the BSE crisis and other food safety scares. Since the 1992 reform, other parts of civil society had started to show interest and to mobilise around agricultural issues, predominantly at European level. They started to take part in the agricultural policy debate through one channel, the European Parliament and, on the occasion of one particular event, the preparation of the WTO Ministerial Conference in Seattle that took place in November 1999. The most active were the environmentalists, whose influence had been strengthened by the provisions of the Maastricht Treaty on the

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integration of environmental concerns into all EU policies. Using this argument, they mobilised further at European level and gained recognition and acceptance by other EU institutions, notably the European Commission, through developing new lobbying activities related to agricultural policy. They supported the reform of the CAP and particularly the reinforcement of agri-environment measures and the emphasis on sustainable rural development. The intrusion of civil society in agricultural debate was also actively supported by rural organisations and local authorities. With the expansion of the EU regional policy since the early 1990s, these local actors supported the reorientation of the CAP towards a rural development policy based on a territorial and integrated approach. Notably, they mobilised at the instigation of the European Commission at the Cork Conference in 1996 where they argued in favour of a new EU rural policy. Other organisations such as consumer organisations remained much less influential. Despite the outbreak of the BSE crisis in 1996, which led consumer organisations to support a reform of the CAP, their voice was still weak. While non-agricultural organisations developed their activities essentially at European level, it is worth mentioning that at national level, they were particularly active in the United Kingdom. Conservation NGOs and critics from the rural lobby put strong pressure on the government to change the way funding was allocated. Their prime objective was to gain access to agricultural funding for environmental protection and the development of rural areas (Egdell et al. 1999, Lowe et al. 2002).

The institutional framework Similarly to the evolution which occurred in the participation of stakeholders, the institutional framework witnessed change marking the beginning of a new environment for agricultural policy debate. The main change was the new scrutiny of agricultural policy by bodies other than the traditional agricultural policy network. Inside the Council, other ministerial actors became involved in the preparation of national governments’ positions, the main ones being Economy and Finance Ministers, following the trend initiated by the 1992 reform. However, their main concern was no longer the

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international dimension, but the budgetary cost of the CAP. In their capacity of coordinating authority for the adoption of the EU multiannual financial framework, they put pressure individually on national colleagues and collectively on the Agriculture Council to adopt the cheapest possible CAP reform. Other ministerial actors were less influential, although the Environment Council started to influence the agenda by putting to the fore its preoccupation for sustainable development. However, due to the technical character of agricultural policy, Agriculture Ministers could keep a relative autonomy for the overall Agenda 2000 discussion. This is illustrated by their ability to conclude a deal in February 1999 that contradicted the financial orientations given by no less than the Heads of State and Government a few days earlier, and that necessitated a different decision by the European Council in March 1999. Outside the Council, other bodies increased their scrutiny too. This is particularly true of the European Parliament, where a deep change could be witnessed since the 1992 reform. The European Parliament, despite its consultative role on agricultural issues, took advantage of its powers in deciding the budget and legislation linked to agriculture. Following the BSE crisis, Parliament’s Environment Committee and growing consumers interests took over control of the agricultural debate. It did so in using its regulatory powers in the food safety and environmental areas, as well as its ‘talking shop’ function by organising debates on agricultural policy (Roederer-Rynning 2003a). Rules and practices inside the Council were not substantially altered. An evolution towards majority voting, in conformity with the letter of the Treaty, could have taken place: Agriculture Ministers concluded a first deal by qualified majority in February 1999. But because the CAP reform was part of the overall financial framework, which is decided by unanimity, and the ministerial deal did not follow the financial guidance by Heads of State and Government, there was an incentive to reopen the agricultural compromise at the Berlin European Council, where France, notably, again made use of its veto power until unanimity was reached. For its part, Germany could use another institutional tool, the EU Presidency in the first semester of 1999, to play an active role in the debate. It was a particularly active Presidency despite its difficult

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position. In agriculture, Germany had been so far one of the least reform-minded Member States. On the budget, it was defending the most demanding position for the reduction of spending and the reallocation of national contributions to the budget. Like any other Presidency, Germany had to moderate its positions for the sake of winning agreement, for which the forthcoming enlargement was both primary reason and Germany’s top priority. It gave up the cofinancing of the CAP and a deep change in the resources of the European budget, in favour of a promise of future reforms in both cases, and satisfied itself with an overall stabilisation of expenditure and the perspective of EU enlargement to the east. However Germany also used its privileged position to secure its most vital agricultural interests, namely a more limited CAP reform disguised under the general commitment to financial discipline (Tallberg 2004). Hence the agreement of the German government to carry out a less substantive cereal reform, to postpone the dairy reform and to keep mandatory set-aside for cereals as a low cost means to prevent excess of production.

Default scenario The cost of failure was high in the minds of policy makers but in a very different way than in 1992. The predominant concern was at European level. Without an agreement on agriculture, or for that matter on the budget, the EU would be deprived of the basis on which to discuss the future enlargement. Other important policies paving the way to enlargement – notably cohesion policy – were dependent on a decision on agriculture. In addition, there were agricultural reasons driving the decision too. No reform would not put a halt to the rise in spending and would weaken, or erase, the effects of the previous reform. National considerations played also an important role. France and the United Kingdom were setting new directions in their own agricultural policy. Here, national debates reverberated back to the European debate: without additional means (modulation) coming from the European level, these countries’ plans to reorient their policies towards rural development could be curtailed (Lowe et al. 2002, Delorme 2004b and 2004c). In turn, the new German government needed an agreement both to demonstrate its credentials of

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European leadership and to distance itself from its predecessor. As shown above, it used its Presidency to meet these objectives. The third level of decision making, the international level, was much less of a concern. No agreement would put Europe’s ability to respect its legal obligations in jeopardy, but there was no immediate cost to a limited overhaul. Even if the new round of WTO negotiations was launched at the end of the same year,20 the EU would still have a negotiating position to start with; but there was no immediate or targeted international pressure on specific points. Some presented the expiration of the ‘peace clause’, which protected agricultural policies from being challenged through the WTO dispute settlement system until the end of 2003, as a motivation to change the system before any challenge was brought. But this was a sufficiently theoretical argument (Delcros 2001, Chambovey 2002) not to represent a real cost of a limited reform. In other words, even if a failure would have involved high costs for European integration, the addition of costs at different levels was less significant than in 1992. This explains the poor performance of the Commission’s proposals in meeting the test of the Council. The short term pressures lay at national level but were largely neutralised by each other by discarding the most ambitious parts of the reform. They were not compensated by international pressure. At European level, the medium term pressure of enlargement was not sufficient to motivate substantial reform, as it was implemented as mere quantitative budgetary considerations.

Conclusion The Agenda 2000 reform aimed at anticipating future challenges more than at responding to immediate pressing needs. This contrasts with the 1992 reform and helps explain why the determinants of change were noticeably different from the previous episode. The multi-level and multi-issue analysis revealed that the international dimension, the third level of decision making, was almost absent from the 1999 decisions. It operated only as a static, passive legal constraint – respecting existing commitments – and not as a locus where an active position had to be taken for the sake of advancing international negotiations. In the absence of such a short term constraint, anticipating future challenges was not a strong

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enough incentive to enact an ambitious reform. In addition, although the existing WTO commitments had an influence in that they ruled out consideration of policy options that would have increased border protection or domestic price support, new WTO talks had not been entered into yet. It was therefore not clear whether and which reforms undertaken for domestic reasons would get full ‘credit’ at the international bargaining table. A remote prospect of new international rules created too much uncertainty for policy makers. As the international level was pushed into the background, the space was occupied by a non-agriculturally connected issue, the budget. The context was favourable to multi-issue bargaining as the CAP reform was part of a wider package of decisions, all geared at preparing the future enlargement of the EU to Eastern and Central European countries and all included in a single financial framework. Because of the complexities of the package, a single issue prevailed. This was budgetary rigour. Contrary to what is sometimes considered, the analysis showed that a too strong budgetary constraint was not an incentive for a major CAP reform: the decisions were less costly but also less ambitious than the initial Commission proposals, even if they showed strong consistency with the previous 1992 agreement. The multi-lateral bargaining analysis showed contrasts and evolutions in comparison with the 1992 game. In the first place, the set of issues under discussion and the number of Member States, following the 1995 enlargement, were larger than previously and made bargaining more difficult. This was further complicated by the integration of agricultural discussions into a general package where unanimity was required to take a decision. Second, a new configuration appeared in the bargaining game between Member States. In the context of decision by unanimity, the greater dispersion of national positions increased the need for buy outs. Moreover, a new convergence of views between the United Kingdom and France did not compensate the divergence on some issues between France and Germany which made any agreement impossible, thereby confirming Germany’s pivotal role. Indeed, French and British support for degressivity and modulation could not overcome German opposition; no mandatory solution was adopted for either of these two issues.

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Third, the European Commission remained in its traditional role of agenda setter and aimed at ensuring consistency of policies in the search for appropriate solutions to facilitate the future enlargement of the EU. It did not behave as a political leader to the same extent as in 1992 although it developed new practices of political leadership such as using public discourse. These practices were precursors for further change in the agricultural policy debate. Institutional and political constraints were higher for the Commission than in 1992: the international agenda did not provide it with the platform of international trade negotiator; and agriculture was inserted into a wider package in which the balance within each sector and between the different sectors was very delicate. That complicated the Commission’s assessment of Member States’ priorities when calibrating its proposals. Lastly, evolution in the policy network started to take place. The main change was the weakening of the corporatist model of relationships between national governments and farmers’ organisations. The emergence of new agricultural and non-agricultural actors in some Member States (France, United Kingdom, Netherlands) started to put in question the exclusive role played by national peak organisations, as did the latter’s inability in other Member States (Germany) to cope efficiently with the increasing diversity of agricultural structures and farmers’ interests. At European level too, the new involvement of civil society organisations – mainly limited to environmentalists – and the increasing role of the European Parliament contributed to open the policy network. This explains the general support for the new priority given to rural development and the ease with which the measures were adopted by the Member States, in contrast with the measures related to market and price policy.

8 The Fischler II Reform (2003)

The context The Fischler II reform was initially planned as a ‘mid-term review’ of the 2000–06 programme to tackle the leftovers of Agenda 2000. More than a market or budget motivated reform, it was therefore first considered as the second act of a previous episode. It turned out to be, however, a substantial reform. How can this be explained? The market outlook gives only a partial explanation. For most commodities, the balance was going to be reached in the medium term,21 with successive reductions of institutional prices22 starting to reach their objective of transforming them into a safety net, and some sectors (wheat) having begun to export without export subsidies. Imbalances remained, however, for minor crops (rye, rice) which were witnessing very worrying levels of intervention stocks, while the dairy sector had to face substantial decisions on whether to maintain production quotas, and many commodities were still dependent on export subsidies. But the most important issue was no longer the imbalances of the European agricultural markets. It had been replaced by more systemic and political questions. On the one hand, even if successive price cuts had reinforced the market orientation of European agriculture, the take-over by direct payments had generated a high dependence on income support and weakened the effect of price cuts by maintaining incentives to produce or to use certain production factors. On the other hand, the social distribution of income support had remained concentrated on some sectors and regions, 97

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mostly the most competitive ones, without tackling effectively the pressures on traditional and mixed production systems. A report published by the European Commission in October 2002 revealed that the CAP reforms of 1992 and 1999 had done little to improve the distribution of payments, and that the bulk was paid to a minority of large farmers. Consequently payments to the regions and groupings of farmers, for which the income problem was most acute, formed a relatively small proportion of the total pay-out.23 There was therefore a problem of better targeting support and allocating it more equitably. In short, the main issue had become one of income support, its economic efficiency and its social equity. Looking at the political context, the European agenda was still putting pressure on the CAP. Like in 1999, the main constraint was enlargement but in a more concrete way. 2002 was going to be the final year of accession talks without agriculture having been clarified yet. Agenda 2000 had not foreseen the application of direct payments in the new Member States, which had created negative reactions on their part. To finalise the accession negotiations, the EU had to accept to extend direct payments in the new Member States (in a phased-in manner over ten years) and decided on specific modalities, namely a decoupling to avoid any artificial increase of production and a strong emphasis on rural development and food safety to accompany the transition of agricultural systems. These decisions raised a question of compatibility with the CAP when applied in the rest of the EU. Just as importantly, this compromise came close to being rejected by some Member States (the United Kingdom, Sweden, the Netherlands and Germany) in June 2002. They were reluctant to sign up to this concept due to their concerns about the offer of direct payments to new Member States, which would in their minds perpetuate the costly ‘compensatory’ aid scheme which they tried to reduce (AE 26/06/02 and 18/10/02). As a result, they linked their agreement to the EU negotiating position in the enlargement talks with the prospect of an early reform of the CAP. The timing and the circumstances of the mid-term review were therefore propitious for a thorough review of the consequences of enlargement. In contrast with Agenda 2000, the issue of the budget available for agriculture was largely off the table. The financial planning was set until end 2006 and most importantly, once the first orientations of

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the Commission were known in July 2002 and the deadline for concluding the enlargement negotiations was approaching, France and Germany took the initiative in September 2002 to agree on the long term financing of agricultural markets (2007–13), not only for its enlargement component but also for the entire EU. The agreement contained two elements. First, they agreed on the phasing-in of direct payments for enlargement to begin in 2004, an idea that Germany had not contemplated thus far. The phasing-in would cover a period of 10 years starting at 25 per cent of the full rate in 2004. Second, from 2007, CAP spending – more precisely marketrelated expenditure and direct payments – would be capped at €45.3 billion and would not increase beyond the rate of inflation (1 per cent per annum up to 2013). France shared with Germany the concern to limit the overall cost of EU expansion and accepted to pay the price of a ceiling in order to secure the overall agricultural budget. This bilateral agreement was a surprising tactical move by France, whose authorities had until then refused an anticipation of the reform before the end of the 2000–06 period. This revealed a marked priority to securing the funding of the ‘first pillar’ of the CAP. Meanwhile, Germany achieved its paramount objective of limiting agricultural expenditure after enlargement without compromising on the substance of the reform. The agreement between France and Germany was later accepted by the European Council in October 2002. Heads of State and Government did not dare to reopen an agreement that paved the way to enlargement and to new CAP reforms, but the most reform-minded Member States insisted on inserting in the final communiqué the signal that the decision was ‘without prejudice of the mid-term review proposals and the WTO round’ (European Council 2002b). Contrary to initial concerns that the financial agreement may have slowed down reform, its merit was to withdraw the potential for acrimony that the connection between agricultural reform and budgetary planning had caused in 1999. In effect, Commissioner Fischler immediately considered that the reform plan had been bolstered by receiving a clear mandate and a clear financial framework from the European Council (AE 1/11/02). Beside these political events at European level, a new evolution within European public opinion had taken place, building on the

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debate started in the mid-1990s. Civil society had embarked upon a thorough debate over agricultural policy. Domestically, food safety crises experienced since the late 1990s24 and internationally, the new sensitivity to the impact of the CAP on trading partners, in particular developing countries, generated calls for reform with more emphasis on less intensive production, respect of environmental and health standards and support for rural development. The questioning of the legitimacy of the policy was a strong factor that pushed in the direction of reform rather than review.25 A particular evolution at national level also went in this direction. Following the changes that occurred in France and the United Kingdom at the end of the 1990s, Germany decided on a fundamental reorientation of its agricultural priorities after it had been hit by the BSE crisis in 2000. Germans discovered the reality of industrial agriculture and became hostile to agriculture in general after having nurtured a romantic view of the family farm model. Led by a Green Minister in charge of both agriculture and consumer policy, Mrs Künast, the main preoccupation became food safety and quality to be ensured by reinforced regulation, and less intensive ways of producing commodities, which should be supported through decoupling income support and supporting alternative methods of production such as organic products (Perraud 2004b). Politics at national level would have some influence too. Presidential elections followed by parliamentary ones were taking place in France in April and June 2002. They were followed by the German parliamentary elections in September 2002. This introduced some uncertainty on the positions that two of the main actors would take in the CAP debate. All these pressures at European and national level would not, however, have been sufficient to push for a deep overhaul of the CAP system if the international dimension had not been supporting it again. After the failure of the Seattle Meeting in November 1999, a new round of WTO negotiations had eventually been launched in Doha in November 2001. The Doha Agreement set the general objectives of the negotiation (substantial reduction of tariff duties, domestic support and export support).26 Like the previous Uruguay Round, agriculture was considered as the key to progress, and ultimately to the success of the negotiations.

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Unlike the Uruguay Round, however, the task was more clear-cut because of the transparency introduced by the Uruguay Round in the measurement of border protection and domestic support. The stakes were also different: it was no longer so much about agreeing ways to bring agriculture under the constraints of GATT rules, but to secure prospects for further reforms of agricultural policies, in particular in the United States and in Europe. Moreover, actors had diversified and the negotiating landscape had changed. The Cairns group of agricultural exporters (i.a. Australia, Canada, Argentina), supported by the United States, gave priority to the ‘core’ agenda (market access, domestic support, export subsidies). The EU, together with other European countries, Japan and some developing countries wanted to enlarge the discussions to non-trade concerns and the multifunctionality of agriculture. More assertive developing countries wanted to ensure that developed countries would take more stringent commitments than developing countries and that other issues such as special and differential treatment for developing countries, food security and trade preferences were also part of the agenda. The agreement in Doha energised the process and the next phase was to agree on more precise modalities to reach the Doha objectives by an agreed deadline of March 2003. As other delegations, the EU made an offer in January 2003 which included significant reductions in tariffs, domestic support and export subsidies (European Community 2003), but was greeted with less than enthusiasm by WTO partners. Despite its active involvement in the negotiations and its desire not to be seen as holding up progress, the EU had again been put under strong pressure to abandon export subsidies and to reduce substantially its domestic support, including the less trade distorting direct payments classified as ‘blue box’. By 2003, it became clear that the EU could not take part in a WTO agreement on the basis of the Agenda 2000 package, in particular the capping or reduction of ‘blue box’ subsidies. This would indeed not be possible without reforming the CAP. The experience of the Uruguay Round had taught Europeans to avoid being blamed for the failure of the next Ministerial Conference scheduled in Cancun in September 2003, like in the Heysel in 1990. The issue of income support, which joined export subsidies as the target of the WTO negotiations, had therefore to be addressed. The

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mid-term review offered the opportunity of a tactical, proactive move to improve the negotiating position of the EU, while the WTO negotiations would serve as the main connected concern to stimulate and guide the content of the reform (Daugbjerg 2004). In effect, the CAP reform took place under pressure of the prospect of the Cancun Meeting which was to act as a pivot and aimed at deciding on an interim agreement for the Doha Round.

The issues General orientations for the reform were published by the European Commission in July 2002 (European Commission 2002a) and detailed proposals in January 2003 (European Commission 2003). The final compromise was adopted in June 2003, two months before the WTO Conference in Cancun. One year of discussion on a large range of issues was the shortest duration for any CAP reform. The first issue under discussion was the reforms of commodity programmes according to the original plans for the mid-term review (cereals, dairy) or their extension to new sectors which had until then not been substantially reformed (rice, other cereals such as rye, durum wheat, and so on).27 The proposals were to further reduce institutional prices and/or quotas, and the debate focused on the necessity of cuts in relation to the market situation, which included forecasts of increased imports following any new trade agreement, as well as the change of philosophy transforming the system of institutional prices and intervention buying into a safety net protecting against market instability. The following series of issues addressed what had been identified as the new economic and social priority, income support. The notion of direct compensatory payments gave way to the idea of income support ensuring a fair standard of living to farmers and sheltering their income from market instability. By fulfiling a social function, efficiency and equity of direct payments came to the forefront. Hence the second issue under discussion was the decoupling of direct payments. The stated objective was to further develop the market orientation of producers’ choices, as well as reducing the intensity of the use in production factors, thus favouring a less intensive, more resource protective agriculture. As the objective was

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also to improve the international position of the EU by rendering the protection of the ‘blue box’ less necessary,28 the opportunity to change the WTO negotiating position by anticipation, before being constrained to it, was also part of the discussion. Addressing the objective of a more equitable distribution of CAP support by modulating it according to socio-economic criteria and putting a ceiling to individual receipts was a third issue. The funds freed up on larger farms would be used to finance rural development. The debate revolved around the extent to which funds would be redistributed within and across Member States. A fourth issue was the integration of the consequences of the new 2007–13 financial framework which extended direct payments to new Member States without any significant increase in the overall budget. Within such predefined overall constraint, that meant introducing degressivity of aid, the issue becoming which farmers should contribute the most. A last question under discussion aimed at reconnecting the CAP with citizens and rebuilding their trust in the safety of food. The main modalities were the introduction of cross-compliance, that is, conditioning the payment of income support to the fulfilment of environmental and health standards, and the incentives to sustainable production methods through the increase in the number of areas covered by the rural development scheme. The range of issues to be addressed was therefore complex, touching market efficiency, social equity and society’s concerns, and comprising many innovatory solutions. The debate, however, was relatively focused, as opposed to 1999.

The actors Following the path established in 1999, a relatively large set of actors took part in the debate. The European Commission As in 1992, the reform proposals were made in the context of ongoing trade negotiations. The European Commission had therefore a central role as it was both responsible for making proposals for agricultural policy while also being the European negotiator at the WTO negotiations. The Agriculture Commissioner, Mr Fischler

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himself was both responsible for the CAP and for the agricultural part of the trade negotiations. As in 1992, the Commission used its right of initiative to the full by extending the notion of a policy review into a full-fledged reform. It behaved as a political actor insofar as it first downplayed the importance of the reform during the first semester of 2002 in view of the forthcoming French presidential and parliamentary elections in spring 2002, and then undertook innovatory ways to promote the reform. The decision to propose an expanded reform caused controversy, first in relation to the interpretation of what the European Council of March 1999 had meant when referring to a review in 2002–03, and second in relation to the impact of reform on the enlargement talks, namely the risk of delay (AE 26/07/02). In order to ensure the adoption of its ambitious reform plans, the Commission followed an innovatory path in comparison with the previous rounds. This resulted in an expansion of its margin of manoeuvre in two ways. First, policy learning played a major role. The difficulties encountered in 1991–92 in introducing substantial changes to the CAP were remembered as being largely due to the fact that reform had been made unavoidable as a result of external constraint, more precisely the isolation of the EU in the trade negotiations. The two Commissioners responsible for the WTO negotiations, Mr Fischler and Mr Lamy, the Trade Commissioner, decided at the beginning of their mandate to avoid being put in the same situation. On the one hand, they conducted an active policy of promotion of the new trade round with a strong emphasis on development issues (Van den Hoven 2004). On the other hand, they actively promoted early CAP reform, namely one resulting from an internal decision rather than being forced into it under direct, immediate international pressure. Second, given the ambitions of the reform and its substantial link to WTO negotiations, policy discourse became a major tool for the Commission in explaining the rationale for change, particularly its ultimate objective to support multifunctionality and sustainability (see Chapter 9) and the articulation between domestic reform and trade negotiations (Fouilleux 2004). In a first phase, Mr Fischler emphasised the need to respond to growing public concern and was anxious to underline that the reform did not mean the end of support for agriculture but a better protection of public goods and a

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simplification of the policy for farmers (AE 12/07/02, AE 19/07/02). In a second phase, when controversy over the details of the proposals became more focused, the rhetoric was centred on the merits of decoupling. It was argued that it would simplify the CAP, make production more market-orientated and enhance the compatibility of the CAP with the WTO (AE 04/04/03). In doing so, the Commission aimed at convincing stakeholders to make use, in a renewed fashion, of the domestic debate to address international problems, and later on to use the CAP reform to improve the European negotiating position in the WTO. Indeed, soon after the reform was adopted, Commissioner Lamy argued that with a less trade distorting support system, the EU was in a position to take renewed commitments in the Doha Round (Lamy 2004). The Member States The Member States’ positioning was a complex game but did not present the same degree of heterogeneity as in 1999, although complexity was particularly present in one side of the debate, namely horizontal rules and rural development. Importantly, a core group of countries could agree with the thrust of the Commission proposals, and the divisive issue of budget planning was not the most prominent issue connected to the agricultural debate. Regarding market and price policy, national positions took a familiar pattern: the main issue was the extension of the principles agreed in previous reforms (price cuts and compensatory direct payments) to almost all commodities, which inevitably triggered some specific reactions. The prevailing connected issue was international trade (see Figure 8.1). It did not have the same intensity as in 1992 because the pressure of market opening, and therefore of domestic price decrease, was not so strong, although this played a major role in the discussion of the rice reform. However, the issue of competitiveness through price decrease was still in the background. There was a general recognition for the need for further price cuts and the extension of direct payments to all commodities, both to improve the situation of the market and to facilitate trade negotiations. Hence a strong core group of countries could support the proposals. Two issues were in particular discussed. The first was the price cut for wheat, which was strongly opposed by France, supported by

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Figure 8.1

The bargaining game, 2003 – Market and price policy

Proposals:

Results:

• Wheat price: –5% + set-aside • Milk price: –25% (butter) from 2004 • Partial compensation • Rice price: –50% + quantitative limit • Extension of direct payments to all other crops

Price cuts, Extension D.P. UK, NL, SE (end milk quotas) UK, D (no capping) D, UK, NL, SE, DK B, L, A

WTO

F (no cereal price cut)

• Wheat price: no reduction + set-aside enlarged • Milk price: –25% (butter) from 2004 • Partial compensation • Rice price: –50% + quantitative limit • Extension of direct payments to all other crops

Specificities

Key: A : Austria B : Belgium D : Germany DK : Denmark F : France

Figure 8.2 measures

L SE UK NL

: Luxembourg : Sweden : United Kingdom : Netherlands

The bargaining game, 2003 – Horizontal rules and accompanying

Areas Proposals: • Mandatory & extensive conditionality of direct payments • Full decoupling • Mandatory degressivity & modulation • Extension of rural development to production methods

Results:

F, UK, D (production methods, modulation, degressivity, conditionality)

F, E (no decoupling)

WTO

NL, DK, SE, UK (decoupling) D, B, L, A (partial decoupling) E, P (redistribution) UK, D, F, DK (no redistribution) IRL (no degressivity)

Modalities

Key: A : Austria B : Belgium D : Germany DK : Denmark

F L E SE

: France : Luxembourg : Spain : Sweden

UK : United Kingdom IRL : Ireland NL : Netherlands P : Portugal

• Mandatory & extensive conditionality of direct payments • Partial decoupling • Mandatory degressivity & modulation • Extension of rural development to production methods

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many other Member States, notably the Netherlands which broke ranks from the reform-minded countries on this issue. They argued that the need to reduce prices was not compelling with regard to maintaining market balance and not necessary to accept further WTO commitments. Eventually, because another issue – decoupling – was considered more important, the reduction of cereal prices was abandoned in order to buy out support for decoupling. The second issue was dairy reform, and more specifically the prolongation of the milk quotas until 2015. The concept of quotas had long been opposed by some countries, notably the United Kingdom, the Netherlands and Sweden. Others (Ireland, Belgium, Denmark) were reluctant to decide at this stage the future of the policy after 2007. Demands to abolish the quota system could not, however, go against a strong alliance between the Commission, which proposed to maintain quotas, and a majority of Member States, notably France and Germany, which wanted to settle the future of the regime and favoured the continuation of the quota system. However, the subject that triggered most controversy was horizontal rules and their link with rural development policy (see Figure 8.2). Many new rules – decoupling, modulation, crosscompliance – had been proposed to address concerns expressed by stakeholders: efficiency and equity of income support, environmental protection, and increased attention to the development of rural areas. Both their innovatory character and their important distributional effects triggered a debate less on principle than on modalities. An additional reason for the increased complexity of the debate was the introduction, for the first time, of a new connected issue, the international trade dimension. As it became evident that the ongoing WTO negotiations would involve new reductions in trade distorting support, the proposals for decoupling and increased financing of rural development through degressivity and modulation were assessed according to their ability to improve the EU’s negotiating position in the trade talks and to safeguard within the WTO the legitimacy of the CAP. The actual bargaining game revolved around a limited number of issues. A majority of Member States was aware that the choice of modalities governing direct payments had to be made with due regard to their impact on international trade. They had gone

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through the policy learning process and wanted to avoid a repetition of the painful 1992 experience. In addition, a new entente between France, Germany and the United Kingdom facilitated agreement on priority areas: improvement of production methods through conditionality and increased financial incentives, and increased funding of rural development by a shift of money from income support, through degressivity and modulation. The relative consensus on the objective explains the ease with which agreement was found on the extension of priority areas for rural development to include food safety and quality, adaptation to regulatory norms and animal welfare, as well as on the new cross-compliance regime. By contrast, the other innovations met with stronger opposition because of their distributional effects. As regards decoupling, the lead opponents were France and Spain, which clearly stood outside the game by contesting the need to consider the international dimension. Their tactical argument, relaying a concern of farmers’ organisations, was that the EU should not make concessions in the WTO negotiations before other trading partners – essentially the United States – would make some as well. Their principal worry was the impact that decoupling income support would have on production systems in fragile and intermediary areas, which were dependent on specific funding to preserve their ecological balance and could face land abandonment. This risk concerned principally the livestock sector. France and Spain led a coalition of Member States pleading for a more gradual approach to reform (AE 13/09/02), which became with time a defence of partial decoupling. The argument of land abandonment was strong enough to convince a majority of Member States and the European Commission to agree on maintaining the option for Member States to keep part of income support coupled with production, an idea initially promoted by Germany in an effort to find a compromise solution (AE 11/04/03). It did not, however, go against the general conviction that decoupling, as a general rule, was necessary for economic, environmental and international reasons. Another dimension of the discussion was whether and how to modify the distribution of subsidies between farmers and Member States. This was the mandatory decrease of direct payments and the allocation of part of the savings to rural development, accompanied by their redistribution according to the ‘modulation’ principle. It

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had been actively promoted by the United Kingdom and France since the last Agenda 2000 reform. In a noticeable shift of position compared with previous governments, the Green German Farm Minister, Mrs Künast, was an active supporter of redistributing subsidies to support extensive farming, create jobs and give incentives to crops that have an environmental value (AE 30/05/03). But the solution advocated by Germany was regionalisation of decoupled direct payments, rather than modulation. Despite the new agreement in principle between France, Germany and the United Kingdom, the extent of the redistribution proposed by the Commission was considerably altered after it had raised opposition from larger farmers and some Member States. Indeed the burden of modulation was unevenly shared.29 In financial terms, the reallocation of money would mean losses for France, Greece and Spain, and wins for Germany, the Netherlands and Austria. These effects of the first Commission proposals explain why a lesser decrease of direct payments was eventually decided and the Member States obtained the guarantee to retain 80 per cent of their national envelope. This reform was nevertheless substantial: it concerned 25 per cent of the farms and 80 per cent of direct payments. The concession made to Germany was to agree on the option of regionalisation of decoupled direct payments. A related question was how much of the decrease in direct support would be transferred to rural development. Following the overall capping of agricultural expenditure decided by the European Council in October 2002, the Commission argued that part of the savings drawn from degressivity should be used to fund reforms scheduled for later (such as sugar and cotton), otherwise these reforms would have to be financed by a reduction in direct payments. Some Member States (France, Portugal) argued in favour of giving priority to rural development but did not succeed. By contrast, and not surprisingly, the proposed capping of individual farmer’s receipts was once more defeated. It affected essentially the United Kingdom and Germany, in particular most of the East German farms (AE 23/08/02). Overall, this round of reforms showed elements of both continuity and change with previous rounds. The difference resides in a much more cohesive bargaining game than in the past. On the one hand, the heterogeneity of positions was much reduced in comparison to

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1999. On the other hand, the positions of France and Germany were more propitious to an agreement since they both largely shared the thrust of the proposals, contrary to 1992, and their divergences concerned a limited set of issues (decoupling) contrary to 1999. But as in 1992, the change of Germany’s position on decoupling (from full to partial decoupling) was crucial in reaching an agreement. The link with international trade and the ongoing WTO negotiations bears strong similarity with 1992. This was clearly the horizontally connected issue that helped drive change. Some support can be found in applying, here again, the argument of Mahé et al. (1996): the sectors most concerned by change were those for which international pressure was strongest. Indeed, the WTO negotiations had made clear that one of the main targets for competitors in developed countries, and now also for developing countries, was domestic support, notably the reduction, or elimination, of the ‘blue box’ for which direct payments qualified. The conservative position of the EU had become a potential impediment to reaching an agreement. Decoupling would allow the Union to be more relaxed on the issue and most importantly, safeguard the future of the CAP within the WTO. Similarly, the reduction, and possibly the elimination, of export subsidies was being advocated by a majority of the WTO membership. Here, contrary to the 1990s, the main commodity concerned was no longer cereals but dairy products. While dairy reform had been postponed in 1999 when international pressure was weaker, now dairy prices were to be reduced more substantially and at an earlier date. Another sector directly concerned was rice, whose excess of production due to high domestic prices would make further market opening extremely difficult without substantial reform. This reform, long postponed, was indeed adopted.30 The role played by the WTO dimension was confirmed by the Council itself. In its final conclusions (Council of the European Union 2003), half of the political declaration introducing the final compromise was devoted to explaining the relationship between the newly adopted reform and the ongoing WTO negotiations.31 Using the reform to its advantage, the Council offered a declaration of principle on the right of countries to support agriculture, explained the impact of the reform on trading partners (less trade distortion) and considered the new decisions as its new negotiating position

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provided that they would be matched by other countries. The contrast with the concerns prevailing in 1999, where only a cursory reference was made to the WTO,32 or with the defensive position adopted in 1992, was remarkable. Civil society Civil society’s participation in the debate marked also a strong contrast with previous experiences. Never before had the competition between farmers’ organisations and other stakeholders been so intense. As regards agricultural organisations, their opposition to the reform appeared milder than in previous years and their unity weaker. They tried to take part in the debate at an early stage, although they strongly rejected the anticipation of the reform before the end of the 2000–06 period (COPA-COGECA 2001 and 2003b). Regarding the main innovations, the political support of the major Member States and their public opinion to a more equitable distribution of direct aids and to a better implementation of environmental and food safety standards made strong and visible opposition to modulation and cross-compliance politically delicate. The main target of farmers was therefore the decoupling of direct support (COGECA 2002, COPA-COGECA 2003b and 2003c). The official concern was that decoupling may increase income instability and lead to further reductions of direct payments, and that the resulting change in production volumes might cause painful adjustments between sectors if farmers who qualified for decoupled payment moved into sectors which had historically not qualified for CAP direct aids. But the actual explanation probably resides in the distribution of direct payments. While 50 per cent of total direct payments went to 5 per cent of recipients, and half of the beneficiary farmers received less than €1,250 per year, 63 per cent of payments went to farmers who received between €5,000 and €50,000 per year (European Commission 2002b). The latter account for 1.4 million farm holdings representing almost a third of the total 4.5 million farms. They formed a middle band of beneficiaries that provided solid political support to direct payments. Although they were moderately rewarded by the existing arrangements, they defended in fact a system that benefited a small minority the most.

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The opposition, however, was not as radical as in 1992 or 1999. A new dimension, the remuneration of services provided by agriculture to society, had become a new source of legitimacy for agricultural support. Farmers’ organisations understood that this may protect direct payments in the future (Daugbjerg et al. 2005). With strongly entrenched governmental positions in favour of decoupling, farmers probably realised that the issue of decoupling would not fade away and that the farm sector had an interest in securing the future of the CAP in the WTO. In addition, the representation of farmers’ interests in Europe was more divided than in the past. COPA had now come up against serious competition from the small farmers’ organisation, the European Farmers Coordination (CPE) which was in favour of the redistribution of support and emphasis on rural development. It took more radical positions on the effect of decoupling on small farmers and on the need to maintain strong public intervention on the agricultural markets (CPE 2003). Eventually, COPA chose, as a consequence, to criticise the reform more for its consequences33 than for its economic or political rationale. National organisations held, as in the past, different and sometimes contradictory positions. The British NFU had since long anticipated the move towards decoupling and was mostly concerned with degressivity of direct payments and their possible individual capping (which was eventually refused), as well as with the possible diversion of rural development funding to beneficiaries other than farmers. The German DBV had just experienced a breakdown of its traditionally close relationship with the federal government. It was also weakened both by internal conflicts and through conflicts with other corporatist actors, and by increased regional differentiation due to the different pace of restructuring in the East and in the West (Hennis 2005). Having difficulty to express general positions for German agriculture in its entirety, DBV mostly relied on the French FNSEA to carry forward its position. Its main concern remained linked to the relative lack of competitiveness of German agriculture and focused on the augmentation of production costs and administrative controls entailed in the reform proposals (cross-compliance). The French FNSEA and the Spanish farmers’ organisation led the opposition to decoupling. Basing their argument on their support for a more sustainable and multifunctional agriculture, they argued

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against the social and environmental effects of decoupling on certain areas. In addition, together they were the most resistant to any change in position in the WTO negotiations. However, the opposition of farmers’ organisations to the reform was destabilised by other stakeholders who broke into the policy debate more forcefully than before. Like in the bargaining game between Member States, a new horizontally connected issue, international trade, mobilised new actors. Protests against globalisation and the WTO in the previous years, including mobilisation around agriculture, had brought organisations with different concerns to cooperate. For the first time, alliances between environmental, consumer and development organisations were formed. Some34 put the emphasis on rural development, the need for less intensive practices and the CAP’s impact on trade accusing Europe of ‘dumping’ food through export subsidies. Others35 argued in terms of taxpayers’ interests, asking for safe food, safe environment and a vibrant countryside. All were conscious that their previous positions had been contradictory at times and tried to reconcile environment, consumer and development concerns. Consumer organisations were more active at European level than in the past, with their umbrella organisation BEUC, the Bureau Européen des Unions de Consommateurs, arguing for a ‘radical reform’ based on food safety concerns, environmental protection and a new interest in the trade aspects of agricultural policy (BEUC 2003a and 2003b). It was supported by active national campaigns fuelled by the recent food scares, in particular in the United Kingdom and in Germany (Hennis 2001). Environmental activists, who had a longer tradition of taking part in agricultural policy debate, developed a comprehensive approach toward CAP reform. Like in the past, they argued in favour of increased funding for rural development. They innovated in being strong supporters of increased regulation of production, notably cross-compliance (for example EEB 2002 and 2003a) and increased controls by Member States. They were more ambiguous on decoupling, which they favoured in principle but were concerned about with regard to its impacts on small farmers and land abandonment (WWF 2003a and b, EEB 2003a). The newcomers were development organisations, drawn into the debate from their participation in the debate on agricultural trade

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negotiations. Their main targets were an increased market access to the EU for goods from developing countries and the elimination of any subsidies that impacted on trade, including income support (Oxfam International 2002). The difficulty of maintaining such a position on domestic support led them to focus on export subsidies, to adopt a sceptical position on decoupling and to focus on certain commodities (milk and sugar).

The institutional framework The institutional framework in which the bargaining took place played a decisive role. Most importantly, the CAP reform was clearly decided by qualified majority. This was facilitated by the fact that, unlike in 1992 and 1999, the CAP reform was a stand alone decision, not taken in connection with a wider decision requiring consensus or unanimity such as a trade agreement and the EU budget framework. Agreement and compromises had therefore to be found within the topic discussed, without balancing them against other non-substantially-related issues. The logic of qualified majority voting is to force delegations to compromise first for fear of being isolated in the ‘no’ camp and, secondly, by making a decision impossible as long as a blocking minority stands on its position. This is what happened when France and Spain attempted to lead a coalition (Ireland, Portugal, Greece, Belgium) with the objective of forming a ‘blocking minority’ against decoupling. The alliance broke down, however. ‘Middle-ground’ countries (Portugal, Italy) became prepared to give precedence to a long term strategy for European agriculture (AE 13/09/02). Ireland acknowledged that its beef production system would adjust better to full decoupling than partial decoupling and announced a softer position in the final stage of the negotiation (AE 16/05/03). Finally, Spain eventually changed its position once it realised the link with future additional reforms of Mediterranean commodities (olive oil, cotton, tobacco), as the decoupling of direct payments from temperate productions would facilitate the extension of the single farm payment to these commodities (AE 13/05/03). In addition, the coalition of opponents to decoupling had to face another group of Member States (United Kingdom, Germany,

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Netherlands, Sweden, Denmark) which strongly supported full decoupling of direct support. The latter also formed a blocking minority that opposed any substantial change to the Commission’s original proposals for full decoupling. France was left in a position of isolation without being able to use its veto. They chose to negotiate some buy outs, like the renunciation of price cuts for cereals, in order to ultimately join the compromise over partial decoupling. Only Portugal voted against the final deal for a last minute minor problem of dairy quotas in the Açores. Although the decision making process took place on its own, it was very much embedded in the wider policy agenda and institutional set-up and substantively influenced by it. This also contrasted with the 1992 episode, when decisions on agriculture were almost completely taken in isolation from non-agricultural developments. Indeed, on the one hand, three successive European Councils had constrained the possible outcome by agreeing on precise guidelines. In 2001, the Gothenburg summit on sustainable development prescribed a review of the CAP along the lines of increased environmental protection, less intensive production methods and more attention to food safety and health (European Council 2001). In 2002, the European Council decided on the financial framework for agriculture until 2013 (European Council 2002a), and then agreed on the modalities to be applied to acceding countries (European Council 2002b). On the other hand, the scrutiny by the European Parliament continued to increase. This was demonstrated by various parliamentary committees organising hearings which further gave non-agricultural interests prominence over agricultural interests. However, the Agriculture Committee continued to play an important role by helping devise a political compromise on decoupling. The European Parliament’s role went far beyond its institutional role (consultation). It anticipated, as it did in the past in other areas, the new powers (codecision) given by the draft constitutional treaty which was being discussed at the same time.

Default scenario Attitudes towards a default scenario had a familiar pattern. The international dimension came back to the top of the agenda. The WTO

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negotiations were not in a comparable situation of crisis to that of 1990: they were actively ongoing and heading towards a Ministerial Meeting in Cancun in September 2003 aimed at agreeing intermediate targets for all sectors of the agenda, including agriculture. However, partly for lack of a new EU position, the date for agreeing on agricultural modalities in March 2003 had already been missed and a resulting sense of urgency and looming crisis was prevailing. Commissioner Fischler deployed a strong argumentation in favour of a reform anticipating plans agreed in 1999. He claimed that the opportunity for radical reform had to be seized now rather than later. In clear references to the Uruguay Round experience he argued that ‘the cost of agreement would only rise’ (AE 12/07/02) and that the EU should decide its policy before direct external constraints became too strong: ‘The evolving situation in the WTO must be taken into account. We must avoid repeating the errors of the Uruguay Round’ (AE 12/07/02). Indeed, no agreement on the CAP reform would have two consequences. First, the EU would be locked in defending a position which would not respond to the targeted pressure against export subsidies and domestic support and therefore make an agreement in Cancun impossible. Second, activists against trade liberalisation targeted agriculture as a symbol of the imbalances caused by globalisation. The more discussions on agriculture continued, the less support public opinion would lend to trade opening. As a result, not only would the EU be in a similar position to 1992 of being held responsible for blocking the WTO negotiations, but this would have an impact on public opinion towards the EU as a global actor. The absence of an agreement would have more unquantifiable consequences at European level. Not responding to a situation of market crisis, nor being part of a wider political package, there was no immediate cost for not reforming the CAP. The problem which would result from a failure was the inequality between the EU 15 Member States and the new acceding countries following the agreement on enlargement. Tensions would certainly result from such a two-speed system, but they were largely unpredictable. Even more elusive was the loss of citizen’s support. There was a clear sense that the CAP had to respond to criticisms against its most inequitable aspects and its negative impacts on environment and health. Indirectly, the legitimacy crisis of the CAP was reverberating into a legitimacy problem for the European institutions. In

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particular, Germany’s reversal of position was of concern. Until now, German political support for the CAP had never really been at stake, despite its increasing concerns over the EU budget. After the strong reaction of public opinion during the BSE crisis, and without action at the European level, the already fragile German political support for the CAP could be lethally wounded. Conversely, looking at the national level, the German authorities were in need of demonstrating to their citizens, as in France and the United Kingdom in 1999, that the CAP could change and meet their concerns and needs. All in all, the addition of the costs of failure at all levels seems less important than in previous rounds. How can the change be explained? It seems that the relative value of the international dimension on the one hand, combined with the existence of an immediate, short term deadline (Cancun) on the other hand, were decisive. In other words, in comparison with 1999, the horizontally connected issue played a positive, rather than negative role, and this was reinforced by its short term horizon. The pattern was, in this respect, similar to 1992.

Conclusion The 2003 reform took place in response not to a crisis or a budgetary need but to a political need to address the internal inconsistencies of the CAP system which were less and less acceptable to public opinion. The reform was decided as a stand-alone issue, like in 1992 and contrary to 1999. It was therefore not connected with non agricultural European issues, as the budgetary framework for agriculture and the enlargement arrangements had been decided by the end of 2002. The multi-level and multi-issue analysis showed that the extent of the reform could not be entirely explained without the existence of external pressures, more precisely of international trade considerations, which acted as a third level of decision making and as a horizontally connected issue like in 1992. The particularity of the 2003 situation is that the interaction with the WTO negotiations was less dramatic and controversial. The policy learning effect affected all actors, who all shared the concern of avoiding a repetition of the EU isolation of the early

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1990s. Indeed the reform aimed at improving the chances of success of an intermediate deal in the WTO and not to conclude, like in 1992, the entire round of negotiations. As the timing of the reform was essentially the result of earlier decisions on the CAP – a mid-term review – one can say that the interaction between the European and international levels of decision making was a more conscious, proactive choice made by EU policy makers and less of a constraint imposed by international events. The other characteristics of the interaction between the international and European levels are the substantial link between some components of the reform and the constraints resulting from the WTO negotiations. These constraints had extended, from the issue of domestic prices whose reduction allowed additional market opening and reduction of export subsidies, to domestic support, for which decoupling was decided to allow further commitments in the reduction of the WTO constrained categories of public support. The risk taken by policy makers in reforming the CAP for domestic reasons but also in order to get some ‘credit’ in the international bargaining existed but appeared less important than in 1999. In effect, the prospect of a WTO decision – the intermediate agreement on modalities – was real, and the readability of other players’ positions clearer than in 1999, so that policy makers could more easily anticipate what would be acceptable by trading partners. The multi-lateral bargaining analysis also revealed important evolutions in comparison with previous experiences. Although controversy over a particular issue, decoupling, was particularly fierce, the first difference with the past is a notably more cohesive bargaining game between Member States, with less dispersed positions and closer cohesion between the views of the United Kingdom, France and Germany. In particular, the change of position of Germany on issues it had opposed in the past facilitated agreement. It appears to be the conclusion of a trend engaged in 1992 and analysed by Hennis (2005) whereby Germany has transformed itself from an obstructor into a partner of agricultural policy change. The second difference is that a clear application of Treaty rules took place, with qualified majority voting applied and triggering powerful effects. There was no real opportunity to apply the consensus rule through linkages with wider packages, and therefore no threat of veto. In a first stage, the effect was to generate new

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attempts at coalition building, which generated opposed blocking minorities. In a second stage, Member States were forced to concentrate on improving their bargaining position by negotiating concrete solutions. A more familiar element is, by contrast, the role played by the European Commission. Like in 1992, the European Commission used its twin role as initiator of reform and trade negotiator. It did so in a traditional way by using its agenda setting power to drive change beyond a mid-term review and proposed a substantial reform for improving the efficiency and legitimacy of European agricultural policy. It remained responsive to political constraints by accepting changes that would not radically affect the design of the policy but would ensure its social acceptability. But the Commission also asserted itself as an entrepreneurial leader in new ways: first by pleading for leadership in the WTO trade negotiations, thus making a reform of the CAP which would have positive trade impacts, a strong argument for reform, and second by developing a new rhetoric whereby it emphasised a new political vision of agriculture based on multifunctionality and sustainability. Lastly, the bargaining between Member States took place in a context where many actors took part in the debate. Actors who had traditionally been absent from the agricultural policy debate participated for the first time. This involved on the one hand, civil society organisations, which mobilised in connection with WTO considerations, and on the other hand, the European Parliament, which acted as a forum for the expression of diverse views and as a locus for developing compromise ideas. In parallel, farmers’ organisations appeared more disconnected from their traditional interlocutors, the national administrations, and faced increased divisions both at European and national levels.

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9 The Increasing Role of Policy Discourse in Agricultural Policy36

Since the early 1990s, the successive reforms of the CAP became more and more politicised. The previous chapters have shown that these reforms took place increasingly as an open policy debate, involving a rising number of stakeholders and an enlarged set of issues which not only concerned agricultural production but also societal concerns. This was accompanied by an evolution of the way the policy debate took place. Because policy makers were confronted with the growing need to explain a policy contested both by international trading partners and by the public, as well as to make changes acceptable to the farming constituency, they more and more used policy discourse and ideas to explain and promote reforms. The role of discourse and ideas is indeed essential in influencing policy change. Policy discourse used in the transformation phase can help change perceptions of the problems and trigger acceptance of the solution proposed. In the case of the CAP, the key concept was multifunctionality, an idea that emerged in the late 1980s and evolved to become the backbone of European discourse on agriculture. This chapter will analyse the origins of the notion of multifunctionality and explain its role in relation to the successive reforms. The analysis will be conducted at the three levels of decision making like for the rest of our research, because the national, European and international levels are fully interrelated. We will first examine the reasons for the emergence of the multifunctionality concept in Europe, namely the debate over agricultural policy 121

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which consistently intensified over the last two decades. We will then examine the chronology of the emergence of multifunctionality within the three levels of decision making, in order to identify the timing sequence and to clarify how each level of the policy debate interacted with each other. Lastly, we will identify more precisely the functions of this discourse and find out how it tried to address different objectives simultaneously.

The legitimacy crisis of agricultural policy Any public policy debate has deep roots. Indeed, multifunctionality in Europe is part of the wider public policy exchange, whose origin is a deep legitimacy crisis of the CAP. Previous chapters have shown that agricultural policy problems have succeeded one another since the late 1980s. The need to solve a major budgetary crisis and the risk of failure of a critical international negotiation (GATT) presided over the 1992 reform. The looming budgetary crisis and the necessity to prepare for an historical enlargement of the EU helped consolidate and deepen the reform in 1999. Finally, the deep consumer confidence crisis following various food scares, the unfinished business of preparing for enlargement and new WTO negotiations motivated the last reformative step in 2003. Indeed, since the late 1980s, the CAP legitimacy is at stake, both domestically and internationally. The direct motives may have evolved over time but they revolve around one single issue: citizens, consumers or third countries question the need, both in terms of efficiency and equity, of a European policy whose original purpose was to serve the well being of a minority portion of the economic agents by increasing their production capacities and income, and must now justify the impacts on other agents (consumers, environment, third countries) of a highly visible and transparent budget. More precisely, multifunctionality came at a time when the political environment had undergone four main evolutions. The first is the intrinsic link with the use of natural resources and land. These are increasingly scarce resources that European societies value more and more for ecological, land management and territorial development reasons. The debate on multifunctionality, actively supported by environmental NGOs as well as local

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and regional authorities, is intimately linked to the search for public policies aiming at a balanced and sustainable development in Europe. The second evolution is the relation to food. Here, following dramatic food scares in the mid-1990s and early 2000s, consumer organisations have questioned the inability of public policies to ensure the safety of food brought on the market by producers. In their view, policies should include new regulatory functions ensuring food safety and consumer information. This attitude is accompanied by scepticism about traditional farmers’ support through high prices or income support. Thirdly, the debate on the globalisation of the world economy penetrated the agricultural public policy exchange by contrasting local production of food with global markets of basic commodities. Groups from the anti-globalisation side of the debate, joined by some farmers’ organisations, emphasised that the market tends to favour standardised commodities to the detriment of food products as identity markers and fails to remunerate such externalities as traditional food processes. Finally, a new sensitivity to development issues in relation to food security and poverty in the world, largely due to the active engagement of development-oriented NGOs, reinforced the argument that domestic policies should not be trade distorting, not only with regard to competitive exporters but also to developing countries’ food security and poverty alleviation concerns. This was a strong motivation for a search of convergence between European and developing countries’ agricultural concerns and influenced more generally the reorientation of European trade policy toward a more development-friendly attitude. Following the above changes, justifying the CAP has increasingly been difficult as the controversies were no longer restricted to professional circles. Consequently, the public’s feeling of frustration augmented in parallel to the less-than-perfect compromises that Heads of State or Ministers eventually made to reach an agreement. The reality of policy problems and legacies of each previous policy change were, in short, the cause of a deep legitimacy crisis of the CAP. Policy changes did occur because policy preferences of various actors changed over time. However, the main characteristics of the

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two decades of agricultural reforms are the coherence of the reform doctrine: a European-wide agreement in favour of the liberalisation of agricultural markets both at domestic and at international levels; a similar consciousness, albeit varying according to Member countries, that public policies are necessary to support farmers’ income given the natural market’s instability; and an increasing awareness that a second reason for supporting agriculture is its non-sectoral outputs, which are highly valued by society. This sophisticated reasoning alone would not have been sufficient for sustaining a society-wide political debate. The multi-dimensional character of the debate took time to find its discourse. The multilevel use of the concept – addressed both to a European audience as well as to trading partners – complicated the process. This reinforced the need for a policy discourse that would address at least four objectives: to explain the ‘world vision’ of policy makers when applied to a decreasingly important sector of the economy; to regain the citizens’ agreement that public funding should continue to be allocated to the sector while providing benefits to society as a whole; to maintain farmers’ acceptance of sometimes drastic changes by balancing their private economic interests with public goods; to accept the responsibilities of a world economic power by making policy and its evolutions acceptable to third countries.

How did the multifunctionality discourse appear… and disappear? Multifunctionality has been essentially promoted by the EU in the context of trade negotiations. The idea has been debated at international level for more than two decades and yet it is not a generally accepted concept. It has often been considered a device to justify the continuation of subsidised agriculture and protect it from international competition. However, since the debate on multifunctionality emerged in the late 1980s, Europe has undertaken deep changes of its agriculture policy. The EU felt the need to embody these reforms into a single concept. This concept of multifunctionality has evolved to become a social – if not economic or political – reality. We can trace the development of the multifunctionality concept at all three levels of policy making in Europe – national, European and international. The question is

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therefore how the different levels of debate and decision were articulated and thus interacted with each other. Diversity of views across Europe Member States are concerned in very different ways and to varying degrees with the CAP. Their influence on the European political debates depends largely on their share of total agricultural output and European agricultural programmes. This is why the examination of the national debates will be limited here to four key Member States.37 Agricultural policy in the United Kingdom has benefited from a long-standing consensus dating back to the 1980s (Delorme 2004c). This consensus gives priority to the free functioning of the market, which plays in favour of the comparative advantages of British agriculture, while it recognises market failure at valourising externalities. These externalities were initially understood as environmental externalities but have now been given a broad interpretation encompassing rural development as a whole (the ‘countryside’). The dominant British vision is a policy where large competitive, commercial farming should not receive public support while multi-produce small farms should receive targeted support as part of the wider support to rural areas. This approach to agricultural policy does not envision agriculture as fulfiling various functions of which some are valuable to society. It was therefore initially at odds with the ‘continental’ vision of multifunctionality. To be acceptable to British policy makers, multifunctionality ought to be focused on environmental outputs and used as a discourse to explain a transition process. In Germany, by contrast, the situation has never been consensual. This is the direct result of the division of agricultural production structures. Their heterogeneity increased following reunification with the East and is reflected in the differences in regional agricultural policies38 (Wilson et al. 2001, Perraud 2004b). This dispersion of structures and policies has had direct consequences on the views regarding the role and objectives of agriculture. The collapse of the German Democratic Republic had removed an important ideological reason for supporting family farms as a priority. It had exposed agriculture to more scrutiny by politicians and had opened the way to a subtle change of political rhetoric: less emphasis

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on landownership, more on environmental management and public responsibility. Until 2000, the political trend at national level was to slowly disengage from the traditional protective attitude in favour of southern small farming and to accept the need to increase competitiveness. This triggered strong suspicions in the south, where multifunctionality was introduced in defence of the need to compensate income differences where farming is not economically viable. The German debate was complicated by the BSE crisis in 2000. The reaction to the food scare was violent. The public abandoned its idyllic vision of agriculture to turn it into a massive rejection, and policy makers put into question all previous policies. The process of food production in its entirety became the priority of agricultural policy, with the imposition of new environmental, health and animal welfare standards. This vision of agriculture’s role in society, driven by a regulatory approach, does not aim at devising policies according to agriculture’s different functions. This development had a strong impact on the development of the multifunctionality concept at European level. In order to be acceptable to the new German majority view, the concept had to include a strong regulatory component in the food safety and environmental fields. Spain is yet another case. The diversity of production systems is even wider than in Germany, but the consensus on agricultural policy has been relatively stable since Spain’s accession to the EU (Rueda Catry 2004). The CAP is considered as providing the financial and regulatory means to modernise production structures and liberalise agriculture. It is implicitly accepted that agriculture had to be reoriented towards commodities where Spain had comparative advantages. But the dropping number of farmers in rural areas with economic and social backward development is also a general concern. This explains why economic and social cohesion in rural areas is seen as the other priority. The approach is a territorial and global approach including not only agriculture but all factors of rural development. These two priorities did not leave much space for reflection over the functions of agriculture. The paradigm was rather economic and social cohesion and the debate was over distribution of European and national funding. When the European debate on multifunctionality entered the Spanish policy exchange, the main actors essentially brought it into their preestablished framework. It is generally understood that poli-

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cies implementing the multifunctionality concept should give priority to the traded goods (such as quality products) and serve mainly to maintain farmers’ income. This generally distanced position on multifunctionality meant that in order to be understandable to Spanish ears, the concept had to contain a strong territorial dimension and have direct consequences on the way in which European programmes would be distributed among Member States and regions. By contrast, France was the country where the soul searching about agriculture’s functions was the most wide-ranging. A public debate about the functions of agriculture led to the common understanding that agriculture was an important economic sector that warranted public policies whose role was, however, questioned by society (see for example Bouët 2001, Hervieu 2002). Like in Germany, following food scares, there was a call for a strong reorientation of agricultural policy toward less production and more attention to environment, food safety and animal welfare. This led the Socialist government to propose in 1998 the new ‘loi d’orientation agricole’ whose cornerstone was multifunctionality (Delorme 2004b). The law assigned three functions to agriculture: an economic, a social and a territorial/environmental function. In addition, the inequity in the distribution of direct aids within France itself was weakening general support to agricultural policy, including within farmers’ organisations. Multifunctionality was clearly used as a transformative concept to adjust agricultural policy to new societal demands and therefore to restore its legitimacy. It justified the introduction of conditions on direct payments according to economic, social and environmental criteria. However, for the national policy to be effective, European rules had to be changed. The timing of the CAP reform – the Agenda 2000 reform – coincided with the French agenda and was used by the French government to introduce a ‘modulation’ mechanism in the name of the social and environmental dimensions of multifunctionality. With the ambition to use multifunctionality as a new paradigm for agricultural policy, the French debate brought theoretical and political justifications to policy change at European level. The European birth of the multifunctionality concept is deeply rooted in national debates on agriculture and agricultural policy which reflect the diversity of national political contexts and

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production structures. In a period of policy change, the diversity of views in Europe and the uncertainty it generated created the need for a policy discourse providing policy makers with common narratives. Diversity also explains to a large extent the hesitations of the European concept. Over the years, it became clear that a common emphasis was put on environmental protection, territorial/rural development and production methods. This was going to be directly expressed in European positions. However, the concern for social equity or the unspoken objective to maintain subsidy levels through multifunctionality are ideas which are much less shared across Member States. Hence the ambiguities in the European discourse and the difficulty encountered to change policies in these areas. Similarly, although the policy exchange on agriculture ‘adopted’ the discussion on multifunctionality in all countries, its function remains ambiguous (Perraud 2004a). Some use the concept to accompany the transition to a reduced role of agriculture. Others use it as a new paradigm to maintain the place of agriculture in a new economic and political environment. None of these options seems to have decisively been adopted at European level. Flashback on CAP reforms The diversity of national positions only partly explains the need for a concept expressing a consensus on the role of agriculture and the future of the CAP. The emergence of the multifunctionality concept had also its own dynamics at European level. One has to go back to the 1992 reform and its preparatory documents to find the first traces of the concept of multifunctionality at European level. When presenting its motivations for a deep CAP reform, the European Commission was essentially motivated by budgetary and economic efficiency concerns. But among the objectives, a link between agricultural production and land occupation was made for the first time and the multiplicity of functions of agriculture was underscored.39 If the germ of multifunctionality was clearly present, its components were however not yet defined. Although the Commission considered that ‘farmers undertake, for the society as a whole, a wide range of tasks which would be difficult to perform without the intervention by the Community authorities, given the special nature of agriculture’ (European Commission 1992), the

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concept was relatively narrow. The number of functions clearly identified was as low as two: economic production and protection of the environment. The 1992 CAP reform was accompanied by policy changes in other areas, notably a new emphasis on rural development linked to the increasingly important regional and cohesion policy. This was going to have profound consequences in the way rural local actors would perceive agriculture. A first step was taken with the first European Conference on Rural Development in 1996 in Cork. The event was decisive in forging a consensus on what should be the new objectives for the CAP. Emphasising the need to ensure public acceptance of agricultural policy, the Cork Declaration identified as the main objective sustainable development in all its social, economic and ecological dimensions. It asked for an increase of resources for rural development and environmental objectives and called for an integrated, multi-disciplinary and multi-sectoral approach ‘encompassing agricultural adjustment and development, economic diversification, management of natural resources, enhancement of environmental functions, promotion of culture, tourism and recreation’ (European Conference on Rural Development 1996). The European Commission followed closely the Cork Declaration’s recommendations. In its guidelines for the Agenda 2000 reforms (European Commission 1997a), the call for the continuation of the reform process was not based on a sense of economic urgency as it had been the case in 1991–92. Rather, the Commission put the emphasis on long term issues, amongst which were new consumer concerns and growing public understanding for environment protection. This was a hint at what would become one of the main arguments in favour of multifunctionality: agricultural policy was also about supporting the provision of public goods going beyond the sole production of food. The proposed driving force was the search for sustainable development in its three dimensions: competitiveness of European agriculture providing food safety and quality; income stability for farmers, which helped to continue justifying direct support as a compensation for price decrease; and environmental protection. While the main concept was sustainable development, the idea of multifunctionality appeared indirectly and in a very particular

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context. The Commission felt the need to define the ‘European model of agriculture’ as the main conceptual background for the new orientations. Most interestingly, the characteristics of the European model were presented in contrasting Europe with the rest of the world.40 Commissioner Fischler made extensive use of the concept. In a September 1997 article in the Frankfurter Allgemeine Zeitung, he argued that the revised CAP would establish a level playing field for EU farmers, rewarding them for services they provide which overseas competitors are not expected to deliver to the same extent (Moyer et al. 2002). Only then does the identity between the ‘European model of agriculture’ and multifunctionality appear clearly. While the objective of policy change was identified – sustainable development – the rationale for the solutions proposed had to be found in opposing European identity to the rest of the world in direct connection with the prospects of new trade negotiations. The political and discursive nature of the notion of multifunctionality was confirmed by the conclusions of the Berlin European Council in March 1999 who declared that multifunctionality together with sustainability was the objective of the Agenda 2000 reforms.41 1999 contrasts with the discourse during the 2001–03 round of policy changes. The contrast goes in three directions. The first was the decision taken by the European Council of Gothenburg in June 2001 to submit all EU policies to a ‘sustainability test’. The CAP was singled out among the new priority to ‘manage natural resources more responsibly’.42 Following these orientations, the Commission recommended to ‘reorient support from the CAP to reward healthy, high-quality products and practices rather than quantity’ and ‘in the midterm review of the CAP, (to) improve the agri-environmental measures so that they provide a transparent system of direct payments for environmental services’ (European Commission 2001). In doing so, a crosscompliance scheme (eco-conditionality) was also proposed, in direct response to German concerns and approach. The second contrast between the two last rounds of reform resided in the attitude towards direct support to farmers. The European Commission considered that direct payments were no longer justified as compensation for price cuts that took place years ago and had to answer criticisms of their impact on the environment or their unfair distribution. In an unspoken shift of philosophy, the

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Commission characterised them as income support justified by the nature of agricultural markets (price instability). That was instrumental to the idea that such payments should be totally delinked from production, more fairly distributed amongst farmers and supportive of public goods objectives like the environment. Addressing French and Spanish concerns, the European Commission proposed mandatory mechanisms to reallocate direct aids between farmers and to poorer and more agricultural regions under the rural development scheme (the so-called ‘modulation’). The paradigm of sustainable development was therefore directly used to bring to the fore social equity issues and new means to increase environmental outputs of agriculture. The last contrast flows from the previous considerations. Multifunctionality had disappeared from the language used to explain the reform. In a similar manner, external factors were less prominently mentioned than in previous occasions and considered only as one of the constraints that the Commission had considered in devising its proposals.43 Subsequently, in early 2003 when WTO negotiations had become more active, reference to trade was made but in a less defensive manner than in the past. A few months later, it was even used as an offensive tactical argument.44 The argument was, however, about specific issues within the WTO negotiations and no longer about the position of principle on multifunctionality. The change in tone and in referential was confirmed by the Agriculture Council who approved the reform in June 2003.45 Previous chapters showed how the timing and the content of the 2003 reform had been influenced by the WTO agenda. The discourse, too, was influenced by the WTO negotiations. Indeed, why was the notion of a European model of agriculture still present but no longer identified with multifunctionality, but rather aligned on sustainability? Why was multifunctionality only implicitly referred to in 2003 while it had become the main discursive concept in previous years? The real issue: WTO negotiations? These interrogations bring us to the third level of analysis, the international game within the GATT and the WTO negotiations on agriculture. The reason is not only linked to the analytical method. It is also a necessary step due to the nature of the subject. Multifunctionality had indeed been an idea launched and promoted by the EU

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within the world trading system. It provoked intense controversies on its nature and objectives, to the point that it has mainly been understood as a pretext used to continue subsidising agriculture without accepting new constraints on domestic policies and market opening (Swinbank 2001). While the concept of multifunctionality can be traced back to 1991 in the domestic European debate on agriculture, the first official document on this subject submitted by Europeans to the WTO was only published in 1998. This is the only comprehensive attempt made by European policy makers to define multifunctionality. This was done in an international context. It is also significant that the submission was made before the launch of any real WTO negotiations. The prospect of such negotiations was however sufficiently certain – either as part of a European effort to launch a new global round of negotiations or as a follow-up to the mandate given by the Uruguay Round Agreement – to already raise concerns in Europe, particularly regarding domestic subsidies. The submission emphasised the specific character of agriculture and European preferences, and took some distance with the classic analysis of externalities.46 This position followed a rather classical line of argument in the European context. However in an international forum, it was weakened by two factors. The first was the absence of a convincing reality check since the second reform of the CAP had not yet been adopted. The emphasis on environmental and rural development measures was therefore at odds with the CAP as it had developed since 1993. The second weakness was in the argumentation. It could be understood that multifunctionality served to defend all kinds of subsidies without taking account of their impact on trade.47 The ambiguity persisted in the position taken in preparation of the new round of negotiations, particularly before the Seattle Ministerial Conference in 1999. Following orientations first given by the European Council in March 1999 which made a link between the newly adopted Agenda 2000 reform and the WTO,48 the Agriculture Council made an explicit link between multifunctionality as a feature of the European agricultural model and the objectives of the EU for the forthcoming negotiations. The approach was defensive (‘safeguarding the future’), multifunctionality being clearly used as a shield against what was perceived as

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a threat to the recently reformed CAP. In addition, the position contained again two important ambiguities. The first was a reiteration of a – defensive – descriptive approach of agriculture’s functions mixed with Europe’s expectations from agriculture.49 The second ambiguity was in the relationship between multifunctionality and the various chapters of the negotiations.50 By associating multifunctionality to the trade distorting ‘blue box’ subsidies as much as to the less contentious non-trade distorting ‘green box’ subsidies or non-trade concerns, the clarity of the argument was weakened. It should not come as a surprise that institutions could only promote and defend what existed at that time. Given that the CAP was still strongly based on direct payments classified as ‘blue box’, policy makers had to defend the ‘blue box’. But this position triggered a strong reaction by trading partners, who interpreted the concept of multifunctionality as a smokescreen protecting the status quo. The controversy reverberated into the subsequent position taken by the EU in 2000. Faced with strong opposition within the WTO but also outside in the form of anti-globalisation protests, language evolved in three ways. Multifunctionality was presented less as a characteristic of the agricultural production process than as a condition to secure public support for trade liberalisation.51 Faced with the accusation that the concept was so broad and vague that it may justify any public subsidy or protectionist trade measure, the position was made more precise. Moreover, concerned with the rejection of developing countries, the EU signalled that the concept encompassed also developing countries concerns.52 The position could not, however, overcome previous ambiguities. The reason was still the need to defend existing policies in the absence of a clear framework for the WTO negotiations.53 The evolution of the position was further confirmed by European proposals for modalities in the agricultural negotiations in early 2003. The timing of these proposals is decisive. The WTO new round of negotiations had now been officially launched after the agreement on a work programme in Doha in late 2001. This agreement had secured the main strategic European objectives in respect of domestic policies: it included the continuation of the ‘blue box’, it recognised the need to review the ‘green box’ and acknowledged the necessity to take account of non-trade concerns. Therefore, the

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discourse no longer required the same emphasis on multifunctionality as before. In addition, in mid-2002, the European Commission had made its proposals for a new reform of the CAP. Although the domestic debate was ongoing, these proposals had already enhanced the credibility of European efforts in reforming domestic policies. As they had the intended effect to give more negotiating room for manoeuvre by decoupling direct support from production, thereby allowing its classification under the ‘green box’, the reform proposals allowed some relaxation of the multifunctionality discourse in the WTO, in particular in relation to the link with the ‘blue box’. This context explains why the 2003 contribution no longer referred to multifunctionality, emphasised the right of countries to pursue their own course without giving precedence to the European model and listed the components of multifunctionality with a targeted vocabulary.54 Moreover, as the perspective of decoupling decreased the need of ‘blue box’-type payments, the language referred to the very original utilitarian function of the ‘blue box’, namely serving as a temporary measure accompanying reform. As soon as the CAP reform was adopted in June 2003, the language even became offensive.55 The defensive role played by the multifunctionality concept in the negotiating discourse at international level could not be more explicit when it disappeared, as soon as strategic objectives had been secured and domestic reform proactively accomplished. In short, the European, national and international levels of policy discourse closely reverberate on each other. These policy exchanges are stimulated by timing coincidences. The period 1998–99 was particularly conducive to strong policy debates and therefore the need for a policy discourse. Indeed, three processes were unfolding at the same time: at national level, two influential Member States were engaged in a public questioning over the role of agricultural policy; at European level, the Agenda 2000 CAP reform was being discussed and innovated with a new emphasis on rural development; and at international level, Europeans had to prepare for difficult new trade negotiations. This period represents a peak in the use of the concept of multifunctionality. Since then, while the understanding of its components seems stabilised and helped devise new reforms, the label is no longer so prominently used. In fact, Europe seems to be hesitating between multifunctionality – with its emphasis on the

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functions of agriculture – and sustainable development – and its emphasis on policy goals. It is clear that national and international levels are decisive in explaining the formation of the concept of multifunctionality at European level. On the one hand, the concept itself stems from the concern of one particular Member State (France) and has served to convince another Member State (United Kingdom) in their efforts to adjust agricultural policies to society’s concerns. On the other hand, the discourse has been used as a bargaining argument in the WTO before any real negotiation took place. Once the negotiations were launched to the satisfaction of European objectives, it was no longer tactically wise to insist on the concept any longer. Finally, multifunctionality helped explain why the two last rounds were not so much based on an economic analysis as the 1992 reform was. While the first reform was essentially based on economic efficiency concerns and used public goods as a side argument, the following two reforms were primarily politically motivated and took place in a more society-wide debate. Hence the need for a political concept.

The many functions of the European discourse on multifunctionality The European discourse on multifunctionality is the product of a political questioning on the role of agriculture in today’s society. It has clearly a normative role, and as such, fulfils three intertwined functions: it justifies the existence of agricultural policy, the need for change and the necessity to address environmental and rural development concerns. Justifying public intervention Multifunctionality is first a political concept constructed to continue justifying support to agriculture by public policies. Fouilleux (2003) argues that a crisis occurs when the compromise governing a policy can no longer be renewed. Various factors can be at the origin of this crisis. In the case of agricultural policy and multifunctionality, the entry of new actors was a powerful drive for change. This was particularly the case in France and in Germany where both countries significantly renewed policy discourse

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following public debate. In addition, because the European political system is still a fragile one, another factor identified by Fouilleux was at work: the crisis can endanger, or can be perceived as endangering, the legitimacy of those responsible for perpetuating the compromise. At European level, the first body concerned was the European Commission. From all its positions, it is apparent that the Commission’s efforts to justify the CAP are ultimately explicable by the concern to perpetuate the political compromise over European institutions. In doing so, addressing the diversity of views within Europe was a difficult task. National attitudes towards agriculture depend on cultural and political contexts as much as on agricultural production structures. This variety called for one single easy-to-understand political discourse. The concept of multifunctionality was the best synthesis found by European policy makers to give a renewed legitimacy to agricultural policy. But why was there ultimately a need to legitimise a public policy that had existed for the last three decades? Slangen et al. (2004) offer a valuable ultimate explanation: the public had been used to considering the amenities provided by agriculture as ordinary externalities of agricultural production because they were provided for free in the past. They were ‘normal deliverables’ in the implicit social contract between society and agriculture. The discovery that these deliverables may be destructive for the environment or public health, or that society may have to pay to enjoy the private delivery of public amenities provoked a discussion over a new social contract. Political justification was also necessary at international level. Multifunctionality was used to defend the right of countries to conduct domestic policies aiming at non-trade objectives. New actors – developing countries, NGOs – renewed the debate and obliged European policy makers to argue their case differently. In addition, the debate on development was so intense that it put into question the consistency of European development, trade and agricultural policies and ultimately, the social compromise over European external economic policies. In addition, the multifunctionality concept could not dissimulate its ambiguities as it initially was used as a shield against external pressures for reform. That was the original sin of the concept.

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Driving change Multifunctionality is not only a static concept used in a defensive way. It is also a dynamic orientating principle used in the process of policy change to explain and justify the proposed changes. This activity-based concept56 was more and more closely connected to the resource-oriented concept of sustainable development. As the European policy for sustainable development became more precise and sophisticated, so was the multifunctionality discourse. Three dimensions have clearly emerged, echoing the three dimensions of sustainability. The economic side of the argument maintains that agricultural policy should increase the economic efficiency of the sector. In this respect, multifunctionality fits the liberalisation agenda pursued since the early 1990s. The environmental aspect entails the many functions that were initially underscored as the non-traded outputs of agriculture. Today, the approach encompasses both a concern for reducing negative externalities and for increasing positive externalities. By comparison, the social aspect is the newest. It is based on the assumption that agricultural employment remains a strong factor of social cohesion in many rural areas, even if maintained in economically non-viable farms. It also involves the assumption that agricultural support should be distributed fairly across farmers and regions. The social argument led therefore to question the equity of agricultural policy. These three aspects developed over time and were not all present to the same extent in the policy debate. It seems paradoxical that when the concept seems stabilised and the reforms are the most wide-ranging the word ‘multifunctionality’ no longer prominently figures in the policy discourse. We saw that without the international dimension, this would not be explainable. Explaining new priorities One constant feature is the accent on new priorities, environment and rural development. This is the third function of the concept of multifunctionality. The explanation certainly lies in the origins of the first reform in the early 1990s. Nowadays, environmental and rural development considerations are most strongly related to the legitimacy crisis of European agricultural policy. They are the main arguments used to explain to different audiences both the need to maintain and the need to change farmers’ income support. As in

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the case of the equity issue, the progressive transformation of the main policy instruments, which was based on economic efficiency grounds, now emphasises the environmental and societal benefits of change. This legitimising discourse is addressed to consumers, citizens and farmers. For consumers, the multifunctionality discourse continues to highlight the search for low prices through the increase of competition brought by liberalisation, but it also underscores the ‘quality insurance’ of new regulations. To citizens, multifunctionality serves to explain the continuation of a high level of budgetary expenditure, but distributed in a more equitable way and most importantly, in a manner which allows redistribution in favour of public goods. Finally, multifunctionality and its policy implications are also addressed to the most concerned stakeholders, farmers. Although they are asked to adjust to liberalised markets, they are also remunerated for the private provision of public goods.

Conclusion We examined the concept of multifunctionality in the context of policy change in Europe. In doing so, we took the view that policy discourse exerts a causal influence on policy change. As analysed by Schmidt et al. (2004), policy discourse can help modify actors’ perceptions of the policy problems and policy legacies, and subsequently their preferences, thereby creating an opening to change. The discourse on multifunctionality appeared after the first policy changes had altered public perceptions, when more profound policy changes became inevitable for efficiency, equity and legitimacy reasons, and when institutional capacity to make these changes acceptable and understandable, both at European and national levels, had to be increased. Indeed, the timing dimension is particularly important. The concept further developed at a moment – 1998–99 – when the three levels of European policy making were involved in debates over agricultural policy and when the policy network started to open to new interests. Multifunctionality contains the two dimensions of Schmidt et al.’s (2004) definition: it served to present the problems, values and solutions surrounding European agriculture, and it aimed at communi-

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cating this conceptual dimension to the public. The notion was a discursive response to a legitimacy crisis affecting agricultural policy and was part of the solutions found by European policy makers to renew the social contract over agriculture. In particular, it is closely connected to European efforts to make sustainability an overarching principle of public policies and promotes the idea that a natural resource-based activity can contribute to the global objective of sustainable development. For any policy change, context is important. According to the arena, discourse can be used in broadly two different ways: to bargain or to argue (Schmidt et al. 2004). In the case of multifunctionality, discourse was essentially used as a bargaining tool in the international context and as an arguing tool in the European context. The word itself was primarily created to be used in the international policy forum as a defensive argumentation line as long as the conditions under which domestic policies could be developed were uncertain. By focusing deliberations on interests, this bargaining attitude inevitably raised suspicions. Here is illustrated the power of discourse. According to Schmidt et al. (2004), discourse succeeds in driving change if it contains both cognitive arguments that explain relevance and coherence of policy change, and normative arguments that coincide with longstanding or newly emerging values and complement the cognitive arguments. In a WTO context, defending multifunctionality before domestic reforms had taken place was too big a disconnect between the discourse and the policy programme to be acceptable to other negotiators. By contrast, in its domestic argumentative function, multifunctionality was quite effective in connecting policy responses to long-standing, as well as to new, societal expectations.

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10 The Determinants of Policy Change

The comparison of successive reforms brings some preliminary conclusions on the determinants of policy change. Drawing from the multi-level game approach, complemented by the multi-issue approach, and from the multi-lateral bargaining theory, we looked at each event according to a coherent framework that addressed the same set of questions: the context in which reform happened, the issues under discussion, the actors involved, the default scenario they faced in case of no agreement, and the policy discourse accompanying reforms.

Multi-level and multi-issue analysis: where WTO is stronger than the budget Multi-level and multi-issue analysis revealed how the different levels of decision making interact and how they are affected by horizontally connected issues. A much debated question in agricultural policy analysis has been how the international level affected CAP reform, and whether other exogenous issues had the same power to put pressure for change. The comparison between the three reformative episodes provides some answers. In 1992, although a new budgetary crisis was looming and was presented as the major reason to reorganise agricultural expenditure, the reform did not bring about any budgetary savings. In effect, the reform was decided as a way to allow the conclusion of the GATT Uruguay Round negotiations. Trade considerations reverberated through the EU decision making process both as a third level of 141

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decision making and as a horizontally connected issue. The international trade dimension was fully integrated in the domestic and European agenda of decision making under pressure of a short term constraint, taking positions in international negotiations in order to conclude them. It also guided political choices among a range of possibilities through the assessment of what would be acceptable in the GATT. Both timing and substance of the reform were therefore directly influenced by the state of the GATT negotiations. This explains why the reform went further beyond what had been attempted in previous years. In 2003, the reform took place in response not to a crisis or a budgetary need but to a political need to address the internal inconsistencies of the CAP system. But the extent of the reform could not be entirely explained without the existence of international trade considerations. Like in 1992, trade acted as a third level of decision making and as a horizontally connected issue but its influence was less dramatic. All actors wished to avoid a repetition of the Uruguay Round experience while the timing of the reform was essentially the result of earlier decisions on the CAP. The interaction between European and international levels of decision making was therefore a more conscious, proactive choice made by EU policy makers and less a constraint imposed by international events. But like in 1992, the international dimension served to guide decision makers in choosing policy options which would increase the chances of acceptability of the CAP in the WTO. The double nature of the international dimension as a third level of decision making and as a horizontally connected issue gives it more impact than a domestic connected issue like the budget. Its presence in 1992 and 2003 largely explains the breadth of the reform, as its relative absence in 1999 can explain the more modest outcome. In 1999, WTO concerns operated only as a static, passive legal constraint – respecting existing commitments – and not as a locus where an active position had to be taken in ongoing negotiations. In the absence of such a short term constraint, that is the necessity to take decisions at a third level, anticipating future negotiations was not a strong enough incentive to enact an ambitious reform. By contrast, European connected issues do not seem to help the reform process. The inclusion of the CAP reform in 1999 within a

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wider agenda of reform that made agreement on agriculture part and condition of a wider package deal fostered vetoing positions and made a deal more difficult. Because of the complexities of the package, a single issue prevailed, budgetary rigour. Contrary to what is sometimes considered, the analysis showed that an overly strong, top-down budgetary constraint was not an incentive for a major CAP reform: the decisions were less costly but less ambitious than the initial Commission proposals. However, the strength of one particular dimension, either international trade or budget, is dependent on one particular factor, the time horizon available to decision makers. This would tend to confirm the existence of path dependency in the CAP. As Pierson (2000) underlined, one characteristic of path dependency is that change is constrained by the generally short time horizons of politicians. In 1992 and 2003, politicians had to face the immediate pressure of international trade negotiations and find a solution to their blockage. In 1999, the immediate pressure was the necessity to find an agreement on the budget.

Multi-lateral bargaining: continuity and change In the EU system, bargaining essentially takes place between Member States. The analysis of this multi-lateral bargaining did not reveal any strong coalitions of Member States, but strong patterns in the negotiating game, the crucial role played by certain Member States and the influence of the institutional setting. There was a clear evolution in the bargaining game, which went from a high dispersion of fundamental positions to a more cohesive play. The 1992 reform proposals had to go against the fundamental opposition of France and Germany; this was no longer the case for the subsequent reforms. A further evolution occurred in 1999 and 2003 with an unprecedented convergence of views, except on a limited number of issues, between the United Kingdom, Germany and France. This does not mean that positions have become aligned. A high number of contentious issues is propitious to the dispersion of positions, like in 1999 and, to a lesser extent, in 2003. The consequence is that in order to avoid a veto, or to obtain a majority, the bargaining process needs to buy out some Member States. This happened for all three rounds of reform.

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For clarity purposes, we made a distinction between the discussions on market and price policy and other horizontal and accompanying measures, including rural development. This helped highlight the existence of different bargaining games. Negotiations have been more difficult as regards market and price policy than concerning horizontal rules. This can be explained by the fact that the effects of change in the commodity programmes are more concentrated and give way to group politics, thus favouring stronger influence of corporatist behaviours on policy makers. This difference seems, however, to be starting to narrow with the 2003 discussions, where the game around horizontal rules and rural development became more complicated. The most striking examples are degressivity and modulation of direct payments. This reflects an evolution whereby change in these rules is beginning to have appreciable redistributive effects for an increasing number of stakeholders. In addition, horizontally connected issues (trade) have entered the debate, thus complicating the game. This may be a sign of a ‘normalisation’ of the debate on horizontal issues and rural development. Change is produced in an incremental way. We saw new policy tools reflecting new ideas being institutionalised slowly, after one or even two failures. This illustrates another factor of path dependency underlined by Pierson: the status quo bias of political institutions. The complexity of the European governance system reinforces this feature, notably in the patterns of negotiations between Member States. This leads us to the particular role of some Member States. Two remarks can be made. First, about the much discussed case of France and Germany. It is often said that no proposal can be accepted if it is opposed by both countries, or if the two countries disagree with each other. This was indeed clearly illustrated in the case of the 1999 reform, where both countries opposed reform of the commodity programmes and diluted them, while disagreeing on some financial aspects and thereby preventing their adoption. However, the adage is no longer correct if an external factor disrupts the pattern. Both in 1992 and 2003, Germany was more sensitive to the GATT/WTO dimension of the reform than France. In 1992, after maintaining its alliance with France against the proposals, Germany gave precedence to the GATT aspects and joined the majority. In 2003, Germany and France held different positions on decoupling, but Germany maintained its support to it by recognising the link with the WTO. In both cases, the position of Germany was decisive to move the reform

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forward. As a result, the opposition of one of the two countries does not prevent an agreement – France had to join the consensus both in 1992 and 2003 – but increases the need for buy out: in 1992, set-aside for Germany and high compensatory payments for France and Germany; in 2003, partial decoupling for France. Second, if the relation between France and Germany can be a liability for the reform process, the triangle of United Kingdom, France and Germany can be a powerful asset. Prepared by the 1999 process, the 2003 reform demonstrated an unprecedented degree of understanding between the three countries. This provided important innovations in policy instruments (degressivity, cross-compliance, modulation) that had previously been resisted because of differences of views between the three countries. The actors’ game does not take place in an institutional vacuum. It is made more or less difficult by EU institutional rules. We highlighted the importance of practice in this regard. Two important evolutions took place. On the one hand, decision practice has evolved from veto threat or unanimity to qualified majority, in keeping with the letter of the Treaty. From the Luxembourg compromise in 1992, the practice moved to an attempt of majority voting in 1999 which was limited by the inclusion in the financial perspective package, and then to clearer application of qualified majority in 2003. In addition to removing the veto threat and its chilling effects on the decision process, qualified majority had the expected effect to force countries to build and join a compromise for fear of being isolated, rather than resorting simply to buy out. On the other hand, the institutional environment progressively extended from negotiations inside the Agriculture Council into the scrutiny of other institutions, notably the European Parliament. The result was the penetration of non-agricultural interests into the policy debate, and therefore its politicisation.

Policy network analysis: from a closed to an open policy network Policy network analysis showed a deep evolution from 1992 until 2003. This is the constant opening up of the policy network. The distinction made by Coleman et al. (1996) between corporatist and pressure pluralist policy network applies here. In a corporatist

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model, interest domains are controlled by representational monopolies, while there is competition in a pluralist networks. In addition, corporatist networks are characterised by a high level of integration into peak organisations, which do not exist in a pluralist network where associations tend to cooperate on an ad hoc basis. Finally, associations in corporatist networks have a public status, namely recognition by public authorities, which pressure pluralism does not have and therefore relies on policy advocacy. Coleman et al. used these distinctions to show that the nature of the policy network affects the trajectory of policy change. In a pressure pluralist network, policy change can be initiated from outside the network and tends to provoke a broad, political debate, while a corporatist network will keep control of the formulation and implementation of change, negotiate it and manage it. In the case of the CAP, one should draw both a temporal distinction and a distinction according to the level of decision making. Until 1999, a clear corporatist policy network prevailed at national level, although it started to unravel somewhat in certain countries as early as the 1980s when policy networks underwent an important change (Coleman et al. 2004). On the one hand, international trade discussions evolved to include ‘behind the border’ domestic support. This attracted Trade and Finance Ministries into the agricultural policy communities. On the other hand, in certain countries, the views of Agriculture Ministries became less focused on producers’ interests only, and had to be more responsive to the interests of food industries, environmental concerns (notably in the United Kingdom and in the Netherlands) and consumer affairs (particularly in Germany). However, these evolutions had not produced noticeable effects. By contrast, the policy network at European level never followed entirely the corporatist model, not least because there was no exclusivity of representation from the peak farmer organisation, COPA. The policy network constantly evolved towards the pressure pluralist model, with the increasing involvement of other interest groups or institutions. The door started to open in 1992 to strong political pressure which helped instigate policy change, with the focus on international trade. It further opened in 1999, with the focus on environment and rural development. Since 2000, the difference in nature between the national and European policy networks has been significantly reduced. This is

The Determinants of Policy Change 147

due to the contestation of the corporatist model at national level with the appearance of minority farmer organisations and powerful commodity groups within the farming community, as well as the active implication of non-agricultural stakeholders. As a consequence, a political debate could take place also at national level, leaving room for a state-managed policy change. At European level, a pressure pluralist policy network further established itself, as the dispersion of the representation of farmers’ interests increased. In parallel, non-agricultural interest groups organised and developed their policy advocacy activities and received recognition from all EU institutions. The result was an unprecedented open policy debate in 2003, triggered from outside the agricultural policy network. A manifestation of the evolution of the policy network towards a pressure pluralist network is the need for policy makers to build a new policy discourse in response to a broader policy exchange. We examined the increasing role played by policy discourse in agricultural policy and the particular role of the notion of multifunctionality. The latter was a discursive response to a legitimacy crisis involving long-standing and new values. It helped synthesise the diversity of national views as part of the policy change process at European level, although it was primarily used in an international context at a moment when various processes of policy change were colliding. The construction of the discourse, including its hesitations between multifunctionality and sustainability, reflected broadly the path and rhythm of the opening of the policy network. In addition, as political discourse can be used for presentational or communicative purposes, the discourse on multifunctionality was a coordinative effort of European institutions to propose a consensual view on agricultural policy, as well as a communicative effort addressed to citizens and the rest of the world to explain this policy and its changes. Discourse is also sensitive to context and has been used both to argue for reform domestically and to bargain for minimal changes internationally. The recourse to political pronouncements based on values was not necessary in a corporatist policy network, where policy debate is limited to experts of administrations and professional circles. It became inescapable when the policy debate expanded to a broader set of interests which relied on policy advocacy.

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11 Applying Policy Feedback Approach to CAP Reforms

After comparing the successive CAP reforms, we turn now to their effects. Chapter 5 evoked the elements of continuity and permanency of the CAP. Subsequent chapters have analysed the determinants of change, and also highlighted strong elements of incrementalism in the way by which policy change is introduced. Such incremental change points in the direction of path dependency, namely the fact that initial moves only initiate moves in the same direction, which would tend to bring – and has led some analysts – to the conclusion that fundamental change is excluded from such developments. However, one should also consider the effects of cumulative change as was highlighted in Chapter 2. In this chapter, we analyse the dynamic effects of change, drawing on contributions from Coleman (1998) and Kay (2003) which showed the limitations of the path dependency approach and underlined the unintended consequences that an apparently minor change may have by creating reinforcing mechanisms which will produce further pressure for change. This is what public policy analysis calls policy feedback. Like Coleman et al. (1996) in the case of Canada, Australia and the United States, Coleman and Kay convincingly argued that in the case of the CAP, significant policy changes can result from policy feedback loops. They did so in relation to the 1992 episode. We would like to extend the analysis to the entire CAP reform process since 1992. In analysing the process and the effects of cumulative change, we use the contribution by Coleman et al. (1996) on the components of 149

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cumulative change: policy feedbacks and policy networks. Having looked at the evolutions of the agricultural policy network in previous chapters, we will focus here on policy feedbacks. This second part of the analysis aims at answering one of our lead questions: incremental as they seem, did the successive CAP reforms bring a fundamental change of goals to the European agricultural policy? In doing so, our approach will be the following: First, cumulative changes can be identified by following a similar framework of analysis as in our previous comparison of successive reforms. Policy effects take place at all levels of policy making, and we will assess how the policy change affected decisions and dynamics at national, European and international levels. Second, we will follow Pierson’s (1993) framework of analysis of policy feedbacks. Policy decisions produce resources and incentives for three types of actors: governments, interest groups and the general public. They also produce information and meaning (interpretative effects), more precisely learning effects and visibility or traceability of the policy. We will therefore attempt to identify how each reform affected resources and representations of governments, farmers and their representatives, as well as the general public.

Policy feedbacks of the 1992 CAP reform The international level The level of decision making most directly and most visibly affected by the agreement on the 1992 CAP reform was the international level. The agreement of May 1992 directly contributed to unblock the process of the GATT negotiations. The main provisions of the CAP reform came closer to the possible area of compromise that had emerged from the last two years of negotiations, notably by decreasing domestic prices and therefore allowing for some decrease in the custom tariffs protection, and by shifting support to compensatory payments related to a period preceding the reform, thereby enabling the EU to claim that they were decoupled and hence exempt from the GATT disciplines. Consequently, the EU could take a position on the draft agreement prepared by GATT Director General Dunkel in December 1991 and claim that it did not take sufficient account of the principles of the CAP reform. Indeed, with the CAP reform, EU negotiating objec-

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tives could be adjusted. From preserving an unchanged CAP, the objective was to secure the legal situation of the reformed CAP in the GATT (Cloos et al. 1994). This paved the way for a bilateral agreement between the US authorities and the European Commission, known as the Blair House Agreement, in November 1992. The accord settled the longstanding oilseeds dispute and provided a common understanding on how the draft final GATT agreement should be amended. This agreement triggered an intense internal debate on its compatibility with the CAP reform, launched by France. The French authorities made use of the threat of veto to obtain some clarifications and modifications to the agreement and to the CAP reform. But France ultimately agreed to the deal, which allowed for the successful conclusion of the Uruguay Round in 1994. The GATT agreement was concluded on the basis of the reformed CAP. Once an internal decision was taken, especially by consensus, it became clear to all other countries what the new European limits would be, notably in relation to cereal prices. This experience would have a lasting learning effect on policy makers in the EU. The first lesson was that too much time was spent in defending an indefensible CAP (Moyer et al. 2002). Had the EU been able to change its policy in anticipation, before being constrained to it by a crisis in the negotiation, the price to pay would perhaps be less. This would be remembered by the successors of Mr MacSharry. Trade Commissioner Sir Leon Brittan would present the Agenda 2000 reform as a step towards preparing the EU negotiating position in the future new round. Agriculture Commissioner Fischler emphasised the need not to reproduce the Uruguay Round scenario in 2002 by anticipating reform before external pressure became too strong, and the Council itself confirmed that the 2003 reform served to get credits in the WTO negotiations, notably to obtain similar commitments from other trading partners. The second lesson was that part of the problem was due to internal divisions and excessive time and energy spent to agree between Member States rather than negotiating with trading partners. For example, it took seven meetings of the Council in Autumn 1990 to agree on the negotiating mandate of the Commission for the Heysel Ministerial Conference. Similarly, following the Blair House Agreement, several months were spent,

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at France’s initiative, to discuss, besides the agreement’s compatibility with the CAP reform, the EU competence and the Commission’s negotiating authority in trade policy. The price to pay was the reintroduction of the unanimity rule in trade policy after it had partially been relaxed through the adoption of the CAP reform (Meunier 2005). The idea that the EU had been weakened by its own internal divisions was therefore going to remain high in the memories of the Uruguay Round. After the internal debate on the EU competence and the Commission’s autonomy that had been engaged by France, the issue of EU competence, notably, would be pushed into the background in order to protect the need to speak with one voice (Meunier 2005). The GATT agreement had also structural effects on European agriculture. On the one hand, it introduced limitations on future policy developments. Transfers to producers through domestic support programmes were limited and had to be reduced by 20 per cent and a set of criteria for minimally trade distorting subsidies had to be respected. Therefore, the agreement forbade any new policy increasing the link between price support and production, which means trade distortion. With a cap on export subsidies and their mandatory reduction, the agreement also introduced a potential limitation to the life expectancy of export subsidies and immediate constraints for the period 1995–2000 that would dictate further domestic reform even before the end of the period of implementation of the Uruguay Round Agreement. In a certain way, the GATT agreement opened a new path dependency, one not based on continuity but one based on reforms. On the other hand, the debate on the reform was directly connected to the constraint to find an agreement in the GATT. This led to the general recognition of the importance of bringing commodity prices closer to world market levels, which contributed to the elaboration of new values forging a more market-oriented paradigm. From then on, the policy community – policy makers and interest groups – would be influenced by WTO considerations when discussing agricultural policy reform. The European level At European level too, reform had profound consequences, although not immediately visible. The seeds of change were sown,

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hence the 1992 reform could be qualified an ‘enabling reform’ (Coleman et al. 1997). The introduction of direct compensatory payments, which moved the policy from opacity closer to transparency of farmers’ support, had multiple consequences on the perceptions of farmers, civil society and public opinion. First, the principle of compensatory payments was established without solving the budget problem. But as time went on and adjustment processes took place, the economic rationale of compensation would be put more and more into question. Was it conceivable to continue paying compensations to farmers for a price cut that took place years ago? Already temporary market price increases for cereals due to worldwide changes in the mid-1990s generated a first debate on ‘overcompensation’. Second, by removing the emphasis on price support, direct payments started to break the market illusion and the vicious circle attached to price policy (Daugbjerg 2003, Fouilleux 2003), although to a limited extent since the 1992 reform essentially concerned arable crops and, to a lesser extent, beef. The new method of support had also institutional consequences. Prices were set for a longer period of time than the previous annual Council’s decisions. This diminished the influence of the Council and increased the Commission’s weight since a change to the level of prices could only be initiated with a proposal by the Commission (Swinbank et al. 1996). This would contribute to reintroduce a longer term perspective in the Ministers’ minds and reduce their traditional inflationary behaviour. All this generated an identity crisis among farmers when they became aware of income transfers from the rest of society, which were at odds with their perception of themselves as self-employed people (Daugbjerg et al. 2005). This would prepare the ground for granting direct payments in return for services valued by society because this would seem more acceptable. Third, the new transparency of agricultural support highlighted strong differences in the benefits received by commodity groups, regions and Member States, while the distributive effects of the CAP were substantially unchanged by the 1992 reform, notably due to the uniform compensation of price cuts. Differences between various categories of recipients were until then hidden by the consumer-paid price support. Fiscal transparency would change the per-

154 Reforming the Common Agricultural Policy

ceived distributional effects of the CAP among farmers and Member States, bringing equity issues and benefits from the EU budget to the fore. Following the 1992 reform, the equity issue remained for further discussions. Fourth, direct payments introduced a sense of direct State intervention in farmers’ business life, once again at odds with their perception as being self-employed. This would generate criticism of a bureaucratisation of the CAP, paving the way for calls for further simplification of the system through decoupling (Daugbjerg 2003, European Commission 2002a and 2003). Another seed of change was the recognition of the need to make the CAP ‘greener’. These claims were initially confined to academic circles and some environmental organisations. For the first time, they were given official recognition in the CAP through the introduction of agri-environmental schemes. This raised expectations among environmental organisations by making the issue more visible and by giving incentives to assess the new policy tools against their environmental performance, thus raising demand levels both from environmental interest groups and the general public. A much noted report of the EU Court of Auditors concerning the ‘Greening of the CAP’ in 2000 was illustrative of these new checks and balances. Similarly, the consequences of market liberalisation on the structural adjustment of EU agriculture were highlighted and received renewed attention. The new measures of structural policy and rural development would soon be considered as insufficient by local authorities and rural actors, and calls for an integrated rural policy dealing both with change in agricultural structures and preservation of the viability of rural areas would appear. These calls could build on the new discourse on multifunctionality and a non-agriculturalist view of rural development that had developed in several countries and was looking for State and European subsidies.57 Finally, the agricultural budget debate entered into a new dimension. It became part of the wider European agenda, and it no longer was supported by the initial iron pact between France and Germany. As from 1992, German leaders would be bound by the promise to no longer underwrite increases in agricultural expenditure.

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The national level The impact of the CAP reform on the national level of policy making is less easy to assess given the diversity of situations. One clearly affected area was the nature of the relationships between state actors and farmers’ organisations. Many authors point to the end of the traditional corporatist model, particularly in the case of the Netherlands and France where competition among farming interests increased. In both countries, during the CAP reform debate, commodity groups with special interests in the reform, like cereal growers, started to organise to defend their own interests either with government officials, or, when preferable, within national peak organisations. In the Netherlands, this eventually led to a modification of the intermediation structures. Minority organisations also started to organise themselves better. They used another strategy, such as reaching out to other constituencies in view of extending their support base. This is the case of Confédération paysanne in France. Another effect of the reform at national level was its significant redistributional effects on some Member States. By reducing the share and levels of intervention buy-in and export subsidies, reform penalised major exporters. They lost out to Member States like Germany and the United Kingdom that were large producers – and could therefore receive large amounts of direct payments – but also net importers. This evolution particularly affected the Netherlands, one of the major agricultural producers in Europe. The benefits received by the Netherlands from the CAP had declined by 18 per cent in 1997 (Hennis 2005). This impacted on the Dutch attitude toward the agricultural budget. Having been a strong supporter of the original CAP and an ally of the other large exporter, France, Dutch policy started to come closer to those countries – United Kingdom, Denmark, Sweden – whose specialised, highly competitive sectors could compete without high support from the CAP and which were net contributors to the EU budget. The change of the Dutch attitude would durably affect the balance of agricultural and budgetary interests between Member States, as was highlighted by the discussions on Agenda 2000. A summary of the feedback effects of the 1992 reform using Pierson’s framework is provided in Table 11.1.

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Table 11.1

Feedback effects of the 1992 reform Government

Resources & Incentives

Interest groups

General public

Administrative Farmers: Lock-in : capacity: – Overcompensation – Raised – WTO constrained – Bureaucratisation expectations over policy NGOs: environment – Market orientation – Raised expectations protection – National benefits over environment from, and protection contribution to, – Raised expectations EU budget over rural – Stronger development Commission weight – Division between France and Germany on budget – Increased interest of new government actors

Interpretative Policy learning: effects – Use CAP reform to improve WTO position – Unity in trade negotiations – Anticipation of crisis

Visibility – traceability: Farmers: – Identity crisis – Inequity issue Policy learning: – Increased competition between farmers organisations

Visibility – traceability: – Inequity issue – Recognition of non-agricultural functions of agriculture

Policy feedbacks of the Agenda 2000 reform The international level In comparison with the 1992 reform, the policy feedbacks of the Agenda 2000 reform on the international level were less immediate and more difficult to manage. The now accepted connection of domestic policies with the WTO and world markets would have required a reform going further for the EU to be in a strong position ahead of the new round of trade negotiations. In concrete terms, the less-than-complete overhaul of the domestic support would have uneasy consequences for the EU negotiating position in future WTO talks: the price decrease would be insufficient to envisage a substan-

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tial reduction, and therefore the elimination, of export subsidies; the stabilisation of direct support expenditure, rather than its decrease, would make further reduction commitments of the overall domestic support difficult; and the absence of decoupling while the future of the ‘blue box’ was put into question was a matter of preoccupation (Blanchet et al. 1999). As shown in Chapter 9, this would lead the EU to engage in the defence of the multifunctionality of agriculture, a discourse partly aimed at hiding some of these weaknesses but only succeeding in raising suspicions in the WTO. On the other hand, the increased international exposure of agriculture was discussed extensively during the Agenda 2000 debates, as they would later be in the year during the WTO Seattle meeting. This would fuel the debate on the role of agricultural policies in a global economy. From their impact on developing countries to the protection of the environment, new issues penetrated the policy debate and highlighted the necessity to rebuild a consensus, a new paradigm, for agricultural policy (Hervieu et al. 2001). This debate was no longer held in closed policy networks. It interested a series of civil society groups and increasingly the general public. The European level But the main policy feedbacks took place at European level. They concern in the first place the importance taken by budgetary considerations. First was the lesson drawn by political leaders. They had to acknowledge that insistence on fiscal rigour was made at the expense of substantive reform. Mr Chirac and Mr Schröder in particular would remember their deep and lasting disagreement and their late night involvement in negotiating a deal during the Berlin European Council in March 1999. Both men would aim at avoiding a repetition of such events by trying to improve the Franco-German coordination on agriculture policy in the early 2000s and ultimately, agree on the budget in September 2002 in order to withdraw the issue from the discussion on the reform. Second, budgetary limitations would also have consequences on the EU enlargement process. The decision not to apply, for budgetary reasons, direct payments to future new Member States was going to be hard to maintain and justify. It fuelled the debate on the applicability of the CAP in the accession countries, thus increasing uncertainties

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both on the accession process – negotiating positions were adopted only in late 2002 – and on the future evolutions of the CAP itself (Blanchet et al. 1999). The third issue is partly linked to the previous one. Insofar as there was an agreement to disagree on certain questions, the most contentious ones were left for further review a few years later. This prospect of a ‘mid-term review’ was agreed by most reformist Member States on the understanding that new pressures like enlargement and WTO talks would certainly push for further reform. Indeed, almost all commodities were included for review. There was therefore an in-built dynamic for change. Attempts to introduce innovations responding to society’s concerns did not succeed in the 1999 reform and the solutions would prove unsatisfactory. Leaving modulation and cross-compliance as an option for Member States would demonstrate that without pressure from EU institutions, decisions having important redistributive effects were difficult to take by Member States alone.58 This illustrates the persistence at national level of a corporatist policy network, which is more resistant to change. However, the signal sent to farmers was clear: redistribution had become a general policy issue and would take place in some way sooner or later. Agenda 2000 left untouched the system of direct payments. This element of continuity would be hard to resist for much longer. Direct payments considered as compensation for price cuts were going to become more difficult to justify when not all commodities received direct payments and some commodity groups had been privileged. In addition to the persistence of this inequity, the lack of resources for the remuneration of public goods would point to consider direct payments as a source of funding. The absence of change in this area at that stage paved the way for the next reform of the general application of direct payments through decoupling and to the introduction of conditions to ensure the provision of public environmental and health goods expected by society. The national level In most Member States, the creation of a ‘second pillar’ of the CAP called ‘rural development’ mobilised new civil society actors eager to access new sources of EU funding. Following the Cork Conference on rural development in 1996, a vision of an integrated rural deve-

Applying Policy Feedback Approach to CAP Reforms 159

lopment, where agriculture is a sector among others, was competing with a more agriculture-centred vision. The competition for funding therefore increased with the introduction of the ‘second pillar’ of the CAP and modulation. But the limited increase of resources and the limited innovations in their financing did not help close the debate over the role of agriculture and rural development. On the contrary, the issue of multifunctionality and sustainability continued gaining ground, emphasising the need for remuneration of externalities and for the sanctioning of pollution or non-respect of legal standards. The place of agriculture in rural economy was also discussed, in particular in relation to the conversion of the economies of future accession countries. This debate contributed to open the policy network at national level. Feedback effects of the Agenda 2000 reform are summarised in Table 11.2.

Table 11.2

Feedback effects of the Agenda 2000 reform Government

Interest groups

General public

Resources & Incentives

Administrative capacity: – Inappropriate for enlargement – In-built dynamic of change

Farmers: – Resistance to innovation at national level NGOs: – New competition for funding of rural development – Increased interest of civil society actors

Lock-in: – Calls for new functions from agriculture – Questioning of income support

Interpretative effects

Policy learning: – Multifunctionality discourse – Budget impedes reform – Franco-German disagreement impedes reform

Visibility – traceability: – Limited rebalancing between commodity groups – Feeling of uncertainty (MTR) Policy learning: – Redistribution unavoidable

Visibility – traceability: – International debate on agriculture – Traceability of impact on environment – Inequity issue – Raised expectations over rural development

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Policy feedbacks of the 2003 CAP reform Assessing the consequences of the 2003 CAP reform is essentially a matter of prospective analysis. In one particular area, though, immediate policy feedbacks took place. The international level At international level, the agreement on the CAP in June 2003 was immediately used by the EU as a new, more offensive negotiating position in the WTO Doha Development Agenda. Following the missed deadline for agreeing on a set of modalities in March 2003,59 the negotiations had effectively slowed down before the agreement on the CAP reform, as other countries were waiting for the results of the European internal debates.60 As in 1992, Europeans made it immediately clear that the new CAP would be the basis of a WTO agreement and expressed new objectives, like ‘buying two reforms for the price of one’, namely forcing a change of the American agricultural policy by requesting equivalent concessions in the area of domestic support and export subsidisation. This more offensive positioning was demonstrated by a bilateral agreement concluded between the European Commission and US authorities in August 2003 (AE 15/08/03), just as it had been done in 1992. However, this was not sufficient to avoid the failure of the Cancun Ministerial Meeting in September 2003. Many reasons can be found to explain the failure of Cancun, notably the fact that countries could not agree on the inclusion of ‘new’ issues (investment, competition, public procurement and trade facilitation) in the WTO rules book. Those reasons related to agriculture are, first, the late approval of the reform and the bilateral agreement between EU and United States, and second, more importantly, the new configuration of assertive developing countries which had become reluctant to sign up to deals prepared by developed countries. In particular, the EU and US proposal to treat less favourably advanced exporting countries than food importing and least developed countries had infuriated middle income countries (such as Brazil, Argentina, China, India) which formed a new alliance, the so-called G20, to assert vigorously their interests (AE 22/08/03). Eventually, the new CAP did lay the ground, after the recovery from the Cancun failure, for the introduction of two intermediate

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agreements in the WTO. Indeed, in July 2004 in Geneva, the EU could sign up to a ‘framework’ deal that contained the objective of a substantial reduction of domestic support including the ‘blue box’ category, and for the first time, the elimination of export subsidies. This last move was a significant development in the CAP history and a direct result of the 2003 reform. After having opened the door to the elimination of export subsidies on products benefiting developing countries, the EU had to go further in order to bring the necessary impetus to efforts to reach a deal in July 2004 (AE 14/05/04). This threw the onus back on the EU’s trade partners to decide what price to pay in return for the abolition of export subsidies. As a consequence, the EU obtained the reciprocity of efforts by the United States, which met an EU stated objective (AE 6/08/04). Later in December 2005 at the Hong Kong Ministerial Meeting, further commitments could be taken by the EU: within three bands of reduction in domestic support, the EU was able to commit to the highest reduction; a date for the elimination of export subsidies (2013) could be agreed, with parallel elimination of other forms of export subsidisation; and thanks to cotton reform in 2004, the EU could easily accept special efforts for this commodity, an issue of particular concern of some African countries and the United States. Although these agreements did not bring as concrete results for custom tariffs as they did for domestic and export support, nor yet allow for the conclusion of the Doha Round, they would not have been possible without the 2003 CAP reform. Similarly, without these agreements in agriculture, agreement in other areas of the Doha Agenda would not have been found. Longer term assessments on the interrelation between the reformed CAP and the WTO rules and negotiations are more difficult. Some analysts have already pointed to some of the pressures that will come from the new WTO environment. On the one hand, some consider that it is not certain that the EU will be able to implement its commitment to eliminate export subsidies without further reform (price decrease) before the end of the current CAP period 2005–13, notably for the main commodities receiving export support, dairy and sugar (Butault et al. 2004). On the other hand, the compatibility of the new decoupled single farm payment with recent WTO jurisprudence has raised some concerns (Swinbank et al. 2005). More fundamentally, when export subsidies are outlawed, no safety

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valve will allow high-priced EU surpluses to be exported, thus depriving also farm incomes from a safety net. As markets further liberalise, farm incomes will face increased instability which may trigger calls for new forms of income stabilisation. Such concerns have already been expressed and have led public authorities, both national and European, to consider the merits of farm insurance as a method of market fluctuations and crisis management (see for example European Commission 2005c). Whatever the evolutions in these particular areas will be, experience of the internationalisation of agricultural policies and globalisation of agricultural trade tell us that pressures will continue to come from international markets and will continue to affect domestic policies like the CAP. The place taken by the WTO dimension in many aspects of the 2003 reform discussions also shows the extent of the policy learning since 1992. This seems to indicate that policy makers have integrated this dimension into the shaping of agricultural domestic policies. The experience of the reform of specific commodity programmes in 2004 and 2005, some of which – cotton and sugar – had a strong international dimension, seems to confirm this trend. The European level At European level, the policy feedbacks of the 2003 reforms are somewhat uncertain to assess. A paradoxical situation resulted from the budgetary decisions taken in 2002. By framing budgetary perspectives until 2013, the European Council helped steer the budget debate away from the substantive discussion on the CAP. A lesson drawn from 1999, this was decisive for agreeing on important new measures. However, the debate on the agricultural budget was only partially evacuated. First, the 2002 budget agreement on the CAP concerned the current Member States and arrangements for the ten Central and Eastern candidate countries. It left open the inclusion of new accession countries over the period 2007–13, principally Bulgaria and Romania. Consequently, another decision by the Brussels European Council in December 2005 had to foresee specific amounts for these two countries which are expected to join the EU during this period. This may have significant impacts as it was decided, at the same time, to maintain agricultural spending at the levels agreed in 2002

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(European Council 2005). Unless policy instruments are modified, the foreseeable result will be that the ‘financial discipline mechanism’ will have to apply earlier than possibly expected, meaning that direct payments will have to be reduced when there is a risk to breach the ceiling on the agricultural budget. Second, no decision was taken in 2002 on the funding and the measures of rural development policy. This had two consequences. The first consequence was that rural development policy did not escape the competition for scarce fiscal resources that took place in the debate on the new ‘financial perspectives’. As in the past, the debate focused on the stabilisation, and even reduction, of overall EU expenditure. The ultimate decision taken by the Brussels European Council in 2005, which allocated a specific amount for rural development, may have different impacts. On the one hand, the decision reduced the Commission’s proposal by €20 billion (around –35 per cent), which means that following the application of the new compulsory modulation, receipts for rural development will be strongly reduced for some if not all Member States. If resources allocated to rural development are considered insufficient, even if the possibility of a voluntary additional modulation is introduced, one could not exclude calls for further shifting resources from the ‘first pillar’ of the CAP. In this case, the level of degressivity of direct payments and their transfer to rural development as agreed in 2003 would appear insufficient, notably to the main stakeholders of rural policy. The issue of capping individual receipts may therefore also resurface. On the other hand, one should not exclude a certain radicalisation of positions concerning the relationship between the ‘two pillars’ of the CAP. The domination of producers’ interests in the 2002 budget agreement is obvious as only expenditure for market and price policy was secured. The same applied to new Member States which concentrated their efforts in the accession negotiations to secure maximum direct aids. Further rent-seeking behaviours are therefore possible. A strong pressure in favour of increasing funding for rural development may trigger either a defensive reaction from farming interests against further shifting funds from agricultural production to rural development, or a strategy to capture increasing parts of the rural development funds. A sign of this strategy is the weight of agri-environmental measures

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in the total of rural development policy until now and in the future (agri-environmental measures will have to represent at least 25 per cent of national rural development plans) and the permanency of structural and investment measures in the direction of farmers rather than non-agricultural actors. The second consequence is that, by being integrated into the wider 2005 budget discussion, rural development policy was also integrated into the general debate on the Union priorities in terms of economic and social development. This was not so much the case in the past. The new setting for rural development1 had to demonstrate how it contributed to the achievement of the so-called Lisbon strategy for sustainable development (European Commission 2004a and 2005b). More significantly, ultimate agreement on the 2007–13 budget was reached only after it was agreed to undertake a review of all EU policies by 2008/09. This notably includes all components of the CAP. The need to demonstrate how rural and agricultural policies contribute to growth and employment in Europe will therefore certainly not fade away. A first sign of this evolution can be found in the publicity of the debates on the CAP reform, which may have durable policy learning effects. All actors and stakeholders found a new consensus on the potential for agriculture to produce public goods. Using the argument of sustainability and multifunctionality eased the process, with notably less opposition from farmers than in the past. Indeed, policy makers realised that they could use public opinion and other stakeholders’ support to make substantial policy changes. Farmers’ organisations realised that this support for the new paradigm would make opposition to specific issues like modulation and cross-compliance a costly action for their image in public opinion, but they also learned how to make use of the new paradigm to oppose other issues like decoupling. Changes in the income support system may also have further systemic effects, although there are elements of continuity. Indeed, despite decoupling and extension of direct income support to almost all commodities, the historical base of direct payments has been maintained.62 This means that with a weaker modulation than proposed by the Commission, the distributive effects of the CAP and the equity issue remains for discussion. In particular, as modalities for implementing the new ‘single farm payment’ depend largely

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on decisions by Member States, the way in which they choose to apply the new subsidy scheme may decide whether it is, or not, definitely considered as a new way to support the social and environmental functions of agriculture. One potential positive feedback concerns decoupling. The protracted discussion that led to a voluntary partial decoupling have been criticised, notably by farming organisations, as introducing new complexities, opacities and potential distortions of competition between farmers (COPA-COGECA 2003c). Calls for full decoupling to counter these negative effects may convince the most reluctant to adopt a unified decoupled system, thus completing the shift from production support to income support. In this case, arguments in favour of ‘double decoupling’, namely the decoupling of payments from land and not only from production, would be made more strongly. They have already been expressed (for example Beard et al. 2001, Daugbjerg et al. 2004) and point to transforming direct payments into a bond scheme or insurance scheme. Another potential effect of decoupling leads in a different direction. The transformation of support from compensation for price cuts into a more permanent income support as a way to alleviate market instability had the immediate consequence to reinforce the need for political justification, given the low acceptance of this type of support by the general public. Public authorities had to link these payments to specific public interests in other fields. In particular, the issue of food safety came to the fore, and will certainly remain a strong component of the general public’s expectations.63 One answer was the introduction of cross-compliance to ensure that payments are no longer made to farmers who do not fulfil EU standards. This had the merit of restoring the legitimacy of direct support. But there are two alternative scenarios: either this may make future efforts to reduce, or even dismantle, direct support much more difficult (Daugbjerg et al. 2005), or calls from farmers for costs compensation may increase as demands from society grow (COPA-COGECA 2003c). The national level At national level, the main question concerns the evolution of policy networks. Overall, they have opened up to non-agricultural stakeholders. Will this result in the end of the corporatist relations

166 Reforming the Common Agricultural Policy

at national level, that so much impacted the way decisions were made at European level? The 2003 experience may have opened a new chapter in the history of the agricultural policy network at national level by ending its exclusive character. A summary of the policy feedbacks of the 2003 reform is provided in Table 11.3. Table 11.3

Feedback effects of the 2003 reform Government

Interest groups

General public

Resources & Incentives

Administrative capacity: – Integration in wider economic debate – Calls for simplification and further decoupling

Farmers: – Rent-seeking against rural development – Costs compensation – Protection against income instability – New justification of income support NGOs: – Increase rural development

Lock-in: – Cross-compliance – Raised expectations on food safety – End of policy network exclusivity

Interpretative effects

Policy learning: Visibility – traceability: Visibility – traceability: – Pro-active use of – Opposition of – Better legitimacy reform in WTO sustainability of the CAP – Decision paradigm – Persistence of facilitated by no difficult inequity issue budget discussion – Persistence of – Use discourse to inequity issue help reform Policy learning: – Focused opposition based on sustainability paradigm

Conclusion All in all, it is clear that the first significant reform in 1992 started to alter the set of available instruments, and that reforms are linked through time. Each CAP reform altered the policy legacy of the CAP and therefore the instruments available to future policy makers (Kay

Applying Policy Feedback Approach to CAP Reforms 167

2003). To conclude, we respond to the invitation by Coleman et al. (1996) to use the two concepts of policy feedback and policy network to explain cumulative policy change and its effects. The strength of policy feedbacks The cumulative effect of policy feedbacks over the period 1992–2003 can be summarised as follows: A strategic decision was taken in 1992 in favour of progressive trade opening and policy reform. In order to maintain and improve the competitiveness of European products, this triggered the constant necessity to bring domestic prices closer to international levels and to bring policy instruments closer to the international paradigm of agricultural policy. The introduction of direct, partially decoupled payments brought progressively transparency in the thus far consumer-paid support to farmers. Budgetary transparency generated the necessity to address equity problems by extending direct payments to all categories of farmers, and combined with international pressure, to fully break the link with production through decoupling. Once social values were inserted among the norms of agricultural policy, they gave rise to increasing expectations based on the idea that agriculture ought to provide public goods. Combined with budgetary transparency, this highlighted the need for a policy concept and discourse, multifunctionality and sustainability. In return, this justified increased conditions and controls on the way financial support was allocated and used (cross-compliance). Finally, the impact of increasing fiscal constraint was to reinforce the need for redistribution of the funding available to agriculture among farmers, between farmers and non-farmers in the case of rural development, and among policy priorities. This generated new rent-seeking behaviours which extended into the discussions over rural development after having previously concentrated on market and price policy. The opening of the policy network The other part of the explanation of cumulative change is to be found in what we explored in Chapters 5 to 10. That is the evolution of the agricultural policy network. From a closed, largely corporatist network, it became a more open pressure pluralist network,

168 Reforming the Common Agricultural Policy

involving competing interests inside and outside agriculture both at European and national level. The contribution of budgetary transparency to this process should not be under-estimated. Increasing the visibility and the traceability of the policy for the general public and non-agricultural groups, budgetary transparency transformed the group politics process and brought it closer to a State/Europe-directed process where competing agendas of different social groups, motivated by resources and incentives drawn from the policy, have to be arbitrated through a political process. Political, social and public involvement was helped by this new transparency. Drawing on Coleman et al. (1996), we could show that the evolution of the nature of the policy network influenced the trajectory of the policy change. Until 1999, corporatist networks prevailed at national level, kept control of the policy debate and process, and negotiated cumulative change largely outside the broader partisan agenda. Hence a progressive, cumulative path of change unfolded, despite the fact that at European level, an increasingly pluralist network favoured more debate and a more radical change of path. However, since the early 2000s, a change of trajectory in the policy change seems to have appeared alongside the change in the policy network that occurred at national level. With a pressure pluralist model now almost in place both at national and European levels, the policy debate could be initiated from outside the policy network, and there is some evidence that this provoked, or accelerated, a change in paradigm involving all institutions and all stakeholders. This evolution did not happen following one particular event. The evolution in the policy network was progressive and took place at different paces according to the level of decision making (national, European, international). If confirmed, it would indicate that the evolution in the nature of the policy network could affect the trajectory of change from a cumulative, negotiated path as described by Coleman et al. (1966), into a sweeping third order change as described by Hall (1993).

12 Paradigm Change in the Common Agricultural Policy

After the analysis of the policy feedbacks and the evolutions of the policy network that help understand the cumulative changes that occurred between 1992 and 2003, we can now answer one of our lead questions: did cumulative change produce a paradigm change in European agricultural policy? Coleman (1998) proposed a definition of paradigm as including four sets of elements: basic values; a set of norms which form the basis for fundamental policy goals; some ‘algorithms’ – causal relationships which guide policy makers in the selection of policy instruments to solve the identified problems; and images that help to define a vision of the world. This definition emphasises the components of fundamental policy goals as much as their instrumentation or the conditions of change. As explained in Chapter 2, such definition is well suited to a succession of changes in which a clear separation between innovation and continuity is not always possible and the accent on a specific causal event not adapted to a complex political and institutional environment like the EU. Indeed, ideas – values and norms – change progressively and take time to be institutionalised in adjustments of policy tools,64 without necessarily needing a radical change as argued by Hall (1993). Concerning the CAP, our main question is not whether each episode led to a paradigm shift, as this has often been analysed after the 1992 and 1999 reforms. It is whether the overall process since 1992 produced a change in paradigm. We will therefore compare the original values, objectives and main instruments with those of today’s CAP. 169

170 Reforming the Common Agricultural Policy

The different agricultural policy paradigms Different types of agricultural paradigms have been identified by Coleman et al. (2004). Each paradigm originates from specific agricultural problems, addresses specific policy objectives, has a particular vision of world markets and resorts to particular policy instruments. Despite its simplifying character, it is useful to briefly present an overview of this classification in order to situate the CAP paradigm in a range of possibilities. Coleman et al. proposed four agricultural policy paradigms: the dependent model (also called ‘protected development’ or ‘state assisted’ paradigm in some papers), the competitive model, the multifunctional model and the globalised production model. In terms of agricultural problems implied by each paradigm, the dependent model faces a chronic low level of income in agriculture and a lack of competitiveness without assistance and protection, while the competitive model is characterised by average or above average income levels in agriculture, and the sector’s competitiveness conditioned by keeping costs under control and ensuring the reform of domestic policies in competing countries. The third paradigm, the multifunctional one, faces inadequate incomes to support rural areas and considers that the production of public goods is under-rewarded. By contrast, in a globalised production model, the sector is consumer driven, which implies a focus on market opportunities and product differentiation, and incomes depend on the producers’ bargaining powers within the food production chain. Resulting from the problems to address, each paradigm develops different policy objectives. For the dependent paradigm, government intervention is needed to find markets, while ensuring supply control to prevent production surpluses. In a competitive paradigm, policy should on the contrary move towards free market, relax any supply control and only provide producers with safety nets. The multifunctional paradigm aims at preserving the recreational value of the countryside and keep family businesses viable to support rural areas, while in a globalised production system, the objective is to establish quality and safety standards for food products and provide fairness in contractual relationships within the food industry.

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The different policy objectives of each paradigm are reflected in their different visions of world markets. For the dependent paradigm, world markets are unstable, prices are depressed and this offers no basis for domestic policy, while the competitive model considers that world markets can be made more stable and more reliable if domestic policies are reformed and guided by international considerations. The multifunctional paradigm considers that world markets reflect a mono-functional type of agriculture and provide inadequate prices to ensure the supply of public goods. By contrast, the globalised production model is concerned with a development of contractual arrangements unhindered by territorial borders and with the destabilising character of government intervention. As a consequence of different problems and objectives, the main policy instruments employed by each paradigm also differ substantially. The dependent model uses border protection, surplus buying, and mechanisms of state trading and export assistance to reach its objectives. In the competitive paradigm, preference is given to decoupled income support as a transition to a liberalised system, risk management tools and low safety nets. The multifunctional model develops environmental subsidies, cross-compliance to enforce environmental regulations and policies to prevent evolutions toward a mono-functional agriculture. Finally, the globalised production paradigm focuses on the harmonisation of regulations and standards, enforcement of competition rules and the protection of intellectual property rights. Coleman et al. (2004) argued that the globalisation of agriculture led to the globalisation of ideas, that is a convergence of agricultural policy models towards less trade distorting models. This produced true paradigm shifts out of the dependent paradigm which dominated the post-Second World War period, notably in smaller exporting countries, like New Zealand and Australia, and in reforming developing countries such as Mexico. In other countries, including the United States and Canada, the change is less dramatic, more hesitant and contains important vestiges of the dependent paradigm, while some countries such as Japan and Korea continue to defend the dependent paradigm. Regarding the EU, Coleman et al. see the dependent paradigm giving way to the multifunctional model. We would like to explore this proposition in more detail.

172 Reforming the Common Agricultural Policy

A fundamental change in the CAP policy goals Drawing on Coleman (1998), Coleman et al. (2004), it is possible to highlight a clear change in the fundamentals of the European agricultural policy away from the ‘state assisted’ or ‘protected development’ or ‘dependent’ model of policy, and towards an alternative to the ‘competitive’ or ‘globalised’ model, which can be brought under the same umbrella of ‘market liberalism’. From the ‘dependent’ to the ‘multifunctional’ paradigm Under the original paradigm – the ‘dependent’ model – the image of agriculture was one of a sector lagging behind the modernisation path in which the general economy had embarked. This was true both in terms of economic and social performance and justified a special status among other public policies. The basic values governing the agricultural ideal were modern and efficient family farms, in which the economic actor, the farmer, fulfiled a national objective, producing food for the whole nation. Consequently, the normative dimension of the policy was to increase production in order to foster equality between farmers’ revenues and the rest of the society. The toolbox rested on two elements: on the one hand, the regulation of market and prices and the protection against international competition; on the other hand, a modification of agricultural structures through an anticipatory approach of the reduction of the farming population. The latter targeted larger farmers for the increase of productivity while helping the less competitive ones to withdraw from production. In contrast, under the paradigm of market liberalism, the assumption is that agriculture has been modernised. It is seen as one sector among others. This evolution from specificity to homogeneity gives precedence to market allocation over state intervention. As a consequence, the predominant value governing agricultural production is entrepreneurship rather than its sole food production function. The policy goals derived from these values are to organise the sector in a dual manner. Having been modernised, commercial agriculture is expected to compete in the global economy. But given the diversity of the EU, notably following its successive enlargements, it is recognised that less competitive farmers should continue

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to produce. The target is regional and local markets, the strategy being to build on traditional know how of quality foods. The policy instruments corresponding to these objectives are twofold: on the one hand, a deregulation process transforming previous forms of support into safety nets and opening the domestic markets to international trade; on the other hand, the development of a new form of structural policy at European level to help the adjustment of weaker regions in modernising their agriculture. Although it is clear that the CAP withdrew from the model of ‘dependent development’, Europe has not fully embraced this type of market liberalism. Public intervention remains high, in particular in supporting farmers’ income. The logic of alleviating market instability for social objectives, namely providing farmers with a fair standard of living, is still present. This has even been considered as an indication that the paradigm had not changed (Daugbjerg 2003). But a paradigm is not made of one single component. Importantly, support is no longer justified by a sectoral specificity due to economic backwardness, but by the provision of income stability and public goods. The image of the farmer did not entirely become one of an entrepreneur. It evolved towards stewardship of the environment, as a reaction against the negative environmental impact of both the ‘state assisted’ and ‘market liberal’ paradigms. As the structural transformation planned under the first paradigm achieved its objectives, the reduction of the farming population also gave rise to concerns of land abandonment. The idea that agriculture is an essential part of the social and environmental balance of rural areas was coupled with the objective to protect and garden rural landscapes. Revenue transfers from society found therefore a justification in the provision of public goods. This is indeed the ‘multifunctionality’ paradigm. What changed? Skogstad (1998) argued that the institutional setting of the CAP, notably its constitutional framework, was one explanation for the durability of the dominant agricultural paradigm. We would argue, on the contrary, that the most interesting feature is that without any modification of the objectives of the CAP as assigned by the Treaty (Article 33), public authorities could reformulate very different policy

174 Reforming the Common Agricultural Policy

Table 12.1

The modification of policy objectives

Article 33 Treaty European Union

European Commission 2002

• Increase production and productivity • Fair standard of living, notably increase of individual incomes • Stabilise markets • Guarantee provision of goods • Ensure reasonable prices for consumers

• • • • • •

Competitiveness Ensure quality of food Stabilise income Open markets & minimise shocks Protect environment Maintain widespread presence of agriculture on the territory

goals, notably in 2002 (see European Commission 2002a), as shown in Table 12.1. A more detailed description of each step based on the three variables proposed by Hall (1993) – instruments settings, instruments of policy and paradigm – would also confirm a clear change in paradigm since the first reform of 1992 (see Appendix 2). How can one summarise the change that progressively took place along the three reforms? Four elements can be identified. First, the overall financial solidarity that presided over the institution of the common agricultural market progressively gave way to a socio-economic solidarity aimed at compensating structural handicaps in certain regions. Indeed, the recognition that structural problems had to be addressed at the right geographic level displaced the centre of gravity from market unity and underwriting of its costs solely by the EU budget. This notably justified cofinancing adjustment policies designed by Member States and their local authorities. Second, insulation from world markets – the so-called Community preference – was replaced by the acceptance of inserting agriculture in the liberalisation of world trade. That meant accepting some assumptions of the market liberal paradigm, that is that world markets can be stabilised by putting international constraints on domestic policies and establishing rules governing the food chain to the extent they provide more fairness in trading relationships. Third, from a production intensive model, the model turned into a more quality intensive one, with high content of technology, and environment and health protection. This represents a strategy of withdrawing from the production of basic commodities, unless they are competitive globally, and reorienting European production to

Paradigm Change in the Common Agricultural Policy (CAP) 175

high valued added products that can compete in world markets. This borrows from the globalised production paradigm insofar as the comparative advantage of EU food products lies in their differentiation and therefore the establishment of global rules on quality and safety standards. Fourth, although the principle of income stabilisation remains, it is now conditioned to the provision of public goods. This is the core of the multifunctional paradigm. The combination of the objectives of income support, environment protection and widespread presence of agriculture on the EU territory highlights the policy objective to continue supporting farm businesses as an essential component of the vitality of rural areas and the provision of public goods. The most recent evolution lies in society’s expectation that government support should do more than provide incentives and rewards to the production of public goods but also sanction failure to provide them. Some uncertainties remain, however. One component of the market liberal paradigm is acceptance of territorial specialisation, which leads to dual structure of farms which are internationally competitive and those which are not. The actual trend of farm structures evolutions points in this direction, and yet, policy discourse and objectives claim the need to maintain a widespread and diversified presence of agriculture on the entire European territory. How far will specialisation go or how strongly will it be resisted? How long can the discrepancy between discourse and reality last? Another uncertain future concerns policy instruments. The current instrument setting is a combination of new policy tools reflecting directly the new multifunctional paradigm (decoupled support, cross-compliance, modulation) and instruments inherited from the previous dependent model (quotas, set-aside, intervention). Will this coexistence be replaced by yet totally new instruments as advocated by the supporters of bond schemes (Daugbjerg et al. 2004) or income insurance (Blanchet et al. 1999)?

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13 Conclusion

Agricultural policy change in the EU is a complex process. The EU governance system is very sophisticated and it has to accommodate very diverse interests. It develops policies in the context of globalisation of the economy. Globalisation led to a restructuring of the European agricultural sector which has strengthened the differentiation among farmers and changed the role of the State and public policies toward market deregulation. As a consequence, the basis for farmers’ collective action has been destabilised by increased differentiation and they now find it increasingly difficult to legitimise the general representation of farmers’ interests. At the same time, criticism by consumers and environmental groups of the model of intensive agriculture has increased, together with the State willingness to adopt new environmental and health regulations. This shows that some counterforce to the traditional model of interest representation exists and may provide the basis for a new pattern of coalitions and collective actions (Hennis 2005). We tried to illustrate the general evolution of the CAP, not from a theoretical point of view but through an empirical analysis. We started from the position that policy change should be viewed through the lenses of history: decisions taken in previous times reduce future politicians’ ability to choose by making the cost of reversal higher. We also considered that although agricultural policy is a very specific domain, it cannot be disconnected from other areas of the European political agenda. The last point was that the CAP seemed to have gone through very substantial changes since its inception, and particularly in the last 15 years, and that this was 177

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connected with the evolution in the policy debate, and notably its participants. To test these propositions, our main framework was the factors identified by Schmidt et al. (2004) that explain European policy changes: policy problems that establish the need for change; policy legacies which may or may not be compatible with proposed solutions; policy preferences that may or may not change in the light of problems and proposed solutions; the capacity of actors to respond to problems through new policy initiatives; and discourse that serves to alter perceptions and therefore to influence preferences. Policy problems at different levels and across issues shape agricultural policy The analysis and comparison of the policy problems showed the usefulness of a multi-level and multi-issue approach: in the EU system of governance, problems facing policy makers and their decisions are vertically connected across three different levels of policy making (national, European, international), and horizontally connected with other policy areas. In two occurrences, in 1992 and 2003, the international trade dimension exerted a strong positive pressure for change on the CAP. This pressure shapes the content of reform through the interpretation by policy makers of what policies might successfully be enshrined in a GATT or a WTO agreement. This happened in all three episodes, but the objective is best achieved when the pressure is high and the public debate active, namely when the political horizon is shortest, like in 1992 and 2003, because policy makers have to take decisions simultaneously at European and international level. In contrast, in 1999 the predominant pressure came from EU budgetary considerations. This inhibited more substantive change by giving priority to quantitative budgetary objectives instead of a substantial overhaul of the CAP modus operandi. The a contrario demonstration is the removal of the budget issue in 2003 from the negotiating table and the relative smoothness with which reform was agreed, as well as its substantive breadth. In comparing each default scenario, it is clear that the higher the cost of no agreement, the more likely substantive reforms are to happen. Through its double nature as both a third level and a

Conclusion 179

horizontally connected issue, the international dimension has a particular strength because it increases the cost of no agreement. It was not strong enough in 1999 against the prevailing connected issue, namely the budget agreement. In this regard, it is probable that the cost of no agreement was higher in 1992 than in 2003, as the entire Uruguay Round had already failed once because of agriculture. This does not mean that the Fischler II reform was not a substantive one. There were simply other factors at work adding to the external pressure. Policy legacies provide the grounds for cumulative change through policy feedbacks Policy legacies play a crucial role in policy change. Each decision and policy mechanism influences future decisions. The apparently strong incrementalism in the successive CAP changes may lead to the conclusion that it is a path dependent policy that may not fundamentally change either in its objectives or in its policy instruments. This had to be questioned as it would mean that no paradigm change could happen in European agricultural policy. On the contrary, policy feedback analysis demonstrates the strength of apparently minor changes to put pressure on policy mechanisms and produce further change. The analysis of the three reformative episodes confirms this proposition. Cumulative change did modify the overall policy objectives through feedback loops. In particular, strategic decisions such as opening the EU market to international competition and aiming at an effective reduction of the agricultural budget had fundamental consequences on policy instruments, stakeholders’ interests and representations. The 2003 CAP overhaul confirmed once more the dynamic effects of feedback loops in that it was further consolidated in subsequent sectoral reforms of specific commodity programmes in 2004 (cotton, olive oil, tobacco) and 2005 (sugar). One should add that in the EU governance system, agreement is always a quid pro quo stemming from diverging national positions. This provokes a natural instability in the consensus as national positions evolve. This therefore creates favourable conditions for further changes and can be illustrated by the fact that a proposal that failed once becomes sooner or later acceptable to all.

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Policy preferences moved from a ‘dependent’ into a ‘multifunctional’ paradigm The combined effects of policy problems, with their multi-level and multi-issue character, and policy feedbacks had powerful implications for policy preferences. The much debated question about paradigm change in agricultural policy has been answered. Despite its progressive and cumulative character, a paradigm change did take place, certainly if one compares the original CAP and the current CAP setting following the last rounds of reforms. From a protected, state assisted model characterised by high regulation of the market, insulation from world trade and orientation toward modernisation of farm structures, the policy model oriented itself in the direction of a market liberal paradigm. This implied a deregulation of the domestic market, trade opening and a differentiation between two types of agriculture, one competing (almost) without public support, the other supported to preserve the local rural economy. The market liberal paradigm was, however, not entirely adopted. It was adjusted to particular EU values and needs like environmental protection and food safety, as well as to the preoccupation with the socio-economic viability of rural areas. This is the multifunctional paradigm, which tries to reconcile through public regulations and incentives the needs of an open market economy – a demand-driven agriculture – with society’s demand for a high quality environment. This new paradigm is clearly different from the ‘dependent’ one. The difference is not only supported by the difference in policy norms and values, but also in the policy instruments. Three main characteristics emerged from the analysis. The first is the introduction of much stronger market orientation. The system of high guaranteed prices, supported by public interventions on the market to cope with the excess of production (including trade with third countries), has moved into a system where institutional prices are set at a level closer to world levels and serve only to limited public intervention. Revenues of farmers now come from market prices rather than public buy-in of excess production. The second is the transformation of income support. The initial objective being to increase farmers’ income, the price-based support also served to increase incomes through their incentive effect on production. After an interim period where direct support was intro-

Conclusion 181

duced as a compensation for price cuts, the objective is now to stabilise income. The system aims at providing an income safety net, delinked from production, in order to alleviate the increased instability of revenues resulting from market priced incomes. The third characteristic is the penetration in the agricultural agenda of non-agricultural issues reflecting public goods valued by society (environment, health, rural development). From being initially inexistent in the public policy debate, they have become almost predominant and changed the nature of public intervention. They guided the shift of public support away from commodity programmes and they have reintroduced a high level of market regulation, this time geared at conditioning income support and controlling production methods. New practices, new alliances, new actors: a transformed policy network The change in policy preferences that led to paradigm change is the result of evolutions that occurred in the institutional capacity of actors to take part and influence policy debate. Profound evolutions took place and helped them respond to the problems through policy initiatives. Two factors reinforced each other. The first factor is the institutional norms and practices in which the main actors operate, in other words, within which the multilateral bargaining takes place. Although they were not legally modified during the period under examination, actors used them differently to the benefit of change. The main evolutions occurred among Member States. The alchemy that produces agreement is a complex one. Changes must contradict neither too many Member States (like the cap on individual direct payments that never succeeded) nor trade interests of major non-EU countries (as cereals in 1992 and income support in 2003). In addition, the concentration of benefits and the dispersion of costs must not be too high, as this was the case in 1999, and Member States must not have a proclivity to hold positions. These are preconditions for change to take place within the bargaining game. The extent of change depends on other factors as well. On the one hand, the increasing readiness to apply qualified majority voting in the decision making practice had the positive effect to make opponents more ready to compromise and join the

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consensus for fear of being isolated. This is an indication of a possible normalisation of the CAP within the EU decision making process as it was one of the rare policies still making use of the Luxembourg compromise, that is the systematic search for consensus. On the other hand, the decisive role of some Member States continues to be verified, albeit in an evolving manner. There is no clear indication of stable coalitions of Member States throughout the reform process. In contrast, the importance of the positions of Germany and France is obvious. They have a high nuisance value when both oppose a proposal (like in 1992) or disagree (like in 1999). But the effect of the Franco-German disagreement on the final outcome is more pronounced when Germany opposes a proposal than when it supports it. However, this negotiating duo has evolved into a triplet. Fundamental agreement on the CAP goals has clearly increased due to narrowing differences with the United Kingdom. This new convergence was demonstrated with powerful effects in the 2003 reform as it produced a range of innovations that had been impossible due to disagreements between the three countries in the past. A question is whether this trilateral partnership will remain so or be destabilised by new events such as enlargement. Aside from the evolutions concerning Member States behaviours, two other actors used institutional practices to their benefits and in favour of change. One is the European Commission, which deploys different roles according to the bargaining context. Its influence in shaping the agenda and the outcome is at its maximum when the Commission can use simultaneously its function of agenda setter on the European scene and its role of trade negotiator in the international arena. This was witnessed in two instances, both in 1992 and 2003, and allowed the Commission to increase its autonomy and credibility. In 1999, its role as a coherence manager did not give the Commission the same influence. The other actor who played a crucial role was the European Parliament. Although it does not have direct legal decision making powers, the Parliament’s role slowly increased by using its indirect powers over agricultural policy, namely its budgetary scrutiny and its legislative powers in the area of environment and food safety, and by playing the role of a debate platform allowing for the expression of both producer and consumer interests. This provided a

Conclusion 183

forum for the policy debate and an opportunity for new actors to enter into the policy exchange. Indeed, the second factor that modified the capacity of the actors was the opening of the policy network. At European level, the agricultural policy network did not initially have much weight and left the space open for national policy networks to organise and set the European agenda. They built a closed, corporatist model that could keep control of the reform agenda. This is another explanation of the cumulative change in the CAP. But this came to an end around the year 2000, when competing organisations transformed the policy networks in a more open, pluralist network also at national level. Organisations in a pluralist network tend to focus on general policy advocacy rather than the defence of specific group interests. That opened a space for other parts of society to join the policy debate and exert pressure in favour of change, outside the traditional policy debate. This happened both at national and European level, with the result of provoking a political, society-wide debate on the future of agricultural policy. The last round of reform seems to indicate that this may have engendered a change of pattern from group politics to State-directed politics affecting a wider range of stakeholders. The cognitive and normative function of policy discourse The opening of the agricultural policy network was accompanied by the elaboration of a new policy discourse on agricultural policy. The role of discourse and ideas is indeed essential in influencing policy change. It helps change perceptions of the problems and trigger acceptance of the solutions proposed by presenting the problems, values and solutions, and communicating them to the public. The key concept developed to embrace the entire spectrum of cognitive and normative arguments was the concept of multifunctionality. The sophisticated system of the CAP had to be embodied in an easyto-read political concept, and criticisms and the legitimacy crisis had to be responded by a coherent policy discourse. Multifunctionality as policy narrative – and not as paradigm – was instrumental in explaining and driving change, especially after the first policy changes had altered public perceptions, when more profound policy changes became inevitable for efficiency, equity and legitimacy reasons, and when institutional capacity to make these changes acceptable and

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understandable, both at European and national levels, had to be increased. Multifunctionality is closely connected to the efforts to make sustainability an overarching principle of European public policies, and is now largely identified with it. As its content evolved, the discourse fulfiled different functions depending on the arena. It was essentially used as a bargaining tool in the international context and as an arguing tool in the European context. While this was controversial in international trade negotiations, the discourse on multifunctionality was quite effective in Europe in connecting policy responses to long-standing, as well as to new societal expectations. In this respect, this new policy narrative fulfiled the functions identified by Radaelli (2000): cognitive systems are a resource used by actors in the dynamics of power, in this case, the construction of a policy narrative aimed at changing a policy and at defending it internationally. But they also provide a normative structure within which public policy is circumscribed. In the case of the CAP, the multifunctional discourse developed into a new paradigm. * Two major dynamics, policy feedbacks and the opening of the policy network, produced a paradigm change. Literature has shown that opened, pluralist policy networks facilitate a trajectory of sweeping paradigm shift. Will further paradigm shift happen to the CAP? Agricultural restructuring and modernisation was the primary objective of the CAP. This led to overproduction and environmental damage as well as trade conflicts. Pressure from taxpayers, certain Member States and rival trade blocs contributed to policy change and the discontinuance of traditional agricultural support systems. The climate has become favourable for further paradigm shift because of the change of dominance among policy actors which altered the nature of the pressure on farmers. The uncertainty about further developments lies in the fact that even if new actors and their concerns seem now well integrated into the policy debate, the farmers who would benefit from further changes are not yet well entrenched in the CAP system and the support for the evolution toward a reinforced rural, ‘second pillar’-type policy is not yet fully consolidated.

Appendix Appendix 1 – Comparison of successive CAP reforms 1992

1999

2003

Market and price policy Wheat

• Substantial price reduction: –29% (EC proposed –35%) • Compensation with acreage payment • Compensation linked to set-aside: 15%

• New price reduction: –15% • No new price reduction (EC proposed –5% with 50% (EC proposed –20%) – compensation) cumulative: –40, 5% (EC proposed –44%); further • Set-aside maintained at 10% with non-food use allowed reduction to be decided in 2002/03 • Partial (50%) compensation with increase of acreage payment • Reduction of set-aside: 10% (EC proposed 0%)

Beef

• Price reduction: –15% • Compensation with headage payment (ceiling on livestock number and low herding rate conditions)

• Important price reduction: –20% (EC proposed –30%) • Partial (80%) compensation with headage payments (ceilings and rates modified to encourage extensification) • Introduction of new premia

1992

1999

2003

Milk

• No reduction in quota level (proposed by EC)

• Price reduction: –15% (starts 2005/06 – EC proposed start 2000/01 and 10% reduction) • Partial (65%) compensation with new aid proportional to quota size • Small increase of quota level: +1.5% (starts 2005/06 except for 5 Member States – E, EL, IRL, North-IRL, I – starts immediately)

• Anticipation of price decrease to 2004/05 • Increase of price cut for butter: –25% (milk powder unchanged: –15%) • Increase of compensation for butter • Quantitative limit on intervention for butter (30,000t) • Introduction of decoupled direct payments

Rice

n/a

n/a

• Major price reduction: –50% • Introduction of decoupled direct payments • Quantitative limit on intervention (75,000 tons)

Others

n/a

n/a

• Extension of direct payments to durum wheat, rye, nuts, potatoes • 2004: extension of direct payments to olive oil, cotton, tobacco • 2005: proposed extension of direct payments to sugar

186

Appendix 1 – Comparison of successive CAP reforms – continued

Appendix 1 – Comparison of successive CAP reforms – continued 1992

1999

2003

• Mandatory conditionality in relation to good farming and environmental practices, and to regulatory rules relating to environment, food safety, animal welfare and safety at work (18 EU directives2)

Horizontal rules n/a

• Environmental conditions1 on part of direct payments upon decision of Member States according to their national specificities

Decoupling

n/a

• Unification of arable crops • Decoupling of all direct support in one single scheme payments, transformed into a • Mountain and less-favoured single farm payment based on areas; aid based on grazing historical records of aid and acreage and no longer on acreage headage; minimal • Partial voluntary coupling for environmental conditions cereals (up to 25% of acreage can be imposed payment) and beef (varies according to premia). EC proposed full decoupling.

Limits to direct payments at farmer’s level

• Cereals: modulation of • Ceiling on total direct compensation proposed by EC, payments proposed by EC, rejected by large farmers (UK) rejected • Mandatory decrease of direct payments proposed by EC (–3%/year beyond €5,000/year), rejected • Voluntary modulation: Member States can reduce

• Ceiling on total direct payments proposed by EC, rejected • Mandatory modulation: mandatory reduction of direct payments (–12% – EC proposed –20%) beyond €5,000/year, reallocated to rural development • Within Member States, voluntary regionalisation of

187

Conditionality, cross-compliance

Appendix 1 – Comparison of successive CAP reforms – continued 1992

1999

Budgetary discipline

• General agricultural guideline

direct payments (partially or totally) or voluntary redistribution

• Agricultural guideline • Agricultural guideline maintained maintained • Reduction of aids if market • New financial mechanism: prices superior to reduction of payments in case intervention prices proposed annual ceilings are exceeded by EC, rejected

Accompanying measures, rural development Framework

• Dispersed schemes: 3 schemes of ‘accompanying measures’; 1 regulation on forestry; 1 regulation for structural funds (objectives 1, 5a, 5b and 6) • 2 Funds: Guarantee and Guidance sections of the EAGGF

• 1 regulation for rural development, 1 regulation on Leader • 2 Funds: Guarantee and Guidance sections of the EAGGF • Menu of 22 measures according to 3 objectives • Financed in part through modulation (affected to agri-environmental measures, less-favoured areas, preretirement, afforestation according to contractual arrangements)

• Single regulation maintained and extended4 • Creation of one single fund (European Agricultural Fund for Rural Development) • Menu of 38 measures according to 4 axis • Financed in part through modulation: funds distributed across Member States according to socio-economic criteria (but one country gets at least 80% of modulation)

188

direct payments according to socio-economic conditions of the farm3 (EC proposed mandatory modulation for aids exceeding €100,000). Limited to 20% of payments.

2003

Appendix 1 – Comparison of successive CAP reforms – continued 1992 Rural development

2003

Reinforcement of agriculture and forestry sectors: • Vocational training • Setting up of young farmers • Early retirement • Investment and modernisation aid • Product processing and marketing aid Protection of the environment and the rural heritage • Mountain and less-favoured areas; aid based on grazing acreage and no longer on headage; minimal environmental conditions can be imposed • Agri-environmental measures (MAE); become the only mandatory provisions; MAE can be used to target farms with individual contracts and in favour of extensification of animal breeding (grazing premia) and crop production + organic agriculture + ecological set-aside +

Competitiveness of the agriculture and forestry sectors (mini. 10% of Member States plans): – Human potential: • Vocational training • Setting up of young farmers (increase of EU cofinancing) • Early retirement • Advisory services – Physical potential: • Modernisation aid • Forestry • Improvement of value added (new) • Agricultural infrastructure – Food quality and safety (new): • Adaptation to regulatory norms (new EU norms not yet enforced by Member States; temporary and decreasing, ceiling: €10,000/farm/year) • Farmer participation in qualitative schemes (ceiling: €3,000/farm over 5 years) • Support to farmers’ organisations for product information and marketing – Transitory measures for new

189

4 accompanying measures: • Early retirement • Mountain and less-favoured areas • Agri-environmental measures • Afforestation of agricultural land Forestry • Afforestation in rural and less-developed regions • Protection of forest against air pollution and fire Structural Funds – adaptation of agricultural structures and modernisation of rural areas – Objective 5a – adjustment of agricultural structures in the framework of CAP reform • Setting up of young farmers • Investment aid, including diversification of farm production • Marketing and processing of agricultural products • Support to collective organisation • Income support in mountain areas

1999

Appendix 1 – Comparison of successive CAP reforms – continued 1992

landscape preservation • Areas with environmental restrictions (Natura 2000 from 2003) (new) • Forestry: afforestation + sustainable forestry – Objective 1, 5b and 6 – Adaptation and development of development of rural areas rural areas – in all regions: • Conversion and diversification • Diversification of farm of production activities • Investment and marketing of • Marketing of quality quality products products • Improvement of rural • Agro-tourism and craft infrastructures industries • Renovation of villages and • Land improvement protection of rural heritage • Reparcelling • Land improvement • Setting up of farm relief • Reparcelling and farm management • Irrigation services • Agro-tourism and craft • Agricultural infrastructure industries • Water management (new) • Environment protection • Protection of the • Restoring agricultural agricultural environment production after natural • Restoring agricultural disasters production after natural • Forestry development and disasters afforestation • Basic services for the rural • Advisory services and economy and population improvement of agricultural (new)

2003 Member States (new): • Support to collective/ cooperative farmers organisations • Subsistence farming Sustainable land management (mini. 25% of Member States plans): – Sustainable use of farm land: • Mountain and less-favoured areas: reduction of eligible areas • Agri-environmental measures: increase of EU cofinancing; extension to animal welfare (practices beyond national rules; ceiling: €500/head/year) • Natura 2000: compensation for farming in protected sites (new for forestry sites) – Sustainable forestry: • Afforestation • Mixed agri-forestry systems Diversification of rural economy and improvement of quality of life (mini. 10% of Member States plans) – Rural economy: • Diversification of farm

190

• Environment protection (production methods)

1999

Appendix 1 – Comparison of successive CAP reforms – continued 1992 training facilities • Financial engineering • Agricultural and forestry R&D – Leader II – stimulation of innovative rural development at local level

1999

2003

• Renovation of villages, protection of rural heritage Leader + – stimulation of innovative development at local level

production and activities Business creation Agro-tourism Quality of life: Provision of basic services Village and heritage renovation – Training: • Vocational training • Competence acquisition Leader (mini. 5% of Member States plans) Local strategies for rural development • • – • •

191

Notes 1 Set-aside, anti-erosion practices, limit on animal headage. 2 From 1 January 1st 2005: • 5 environmental directives: wild bird protection; water pollution caused by dangerous substances; soil protection against sewage; water protection against agricultural nitrate use; natural habitats protection • 3 directives on public health and animal health: identification and registering of animals; beef registering; beef identification and labelling From 1 January 2006, 7 directives on public health, animal health and vegetal health: marketing of phytosanitary products; hormone ban; general food safety law; prevention and control of transmissible spongiform encephalopathy; foot and mouth disease prevention; prevention of certain animal diseases; prevention and eradication of sheep catarrhal fever From 1 January 2007, 3 directives on animal welfare: rules on veal protection; rules on pig protection; protection in breeding sites 3 Workforce/ha below a level to be determined, or gross standard margin below a level to be determined or total amount of aids superior to a limit to be determined. 4 Proposed in 2004, the new regulation was adopted on 16 September 2005. n/a = non applicable

192

Appendix 2 – Paradigm shift in the COMMON AGRICULTURAL POLICY 1958 (Stresa)

1992

1999

2003

• • • • • •

Market unity Increase farmers’ income Community preference Self-sufficiency Financial solidarity Structural improvement

• • • • • •

Reduction of production Preserve farmers’ income Regulated trade opening Financial responsibility Environmental responsibility Structural improvement

• • • • •

Competitiveness Preserve farmers’ income Regulated trade opening Financial constraint Multifunctionality

• • • • • • •

Competitiveness Stability of farmers’ income Food safety and quality Trade opening Financial rigour Cohesion Sustainability

Policy • Free circulation of goods instruments • Common high price guarantees • High border protection • Export subsidies • Common budget • Targeted regional programmes

• • • • • •

Intervention price decrease Compensatory payments Regulated border protection Limits on export subsidies Agricultural guideline Agri-environmental measures • Increase in regional programmes

• • • • • •

Intervention price decrease Compensatory payments Regulated border protection Limits on export subsidies Budget cap Rural development

• • • • • • • • •

Price decrease Income payment Cross-compliance Decreased border protection End of export subsidies Budget cap Degressivity of direct support Modulation Rural development

Instrument setting

• Extension of price decrease • Targeted price decrease • Rebalancing of • Overcompensation compensations in favour of • Limited reduction of tariffs, introduction of import animal productions quotas • Maintenance of supply • Strengthened supply control control (set-aside)

Paradigm

• Annual price setting • Limited supply controls (milk and sugar quotas)

• General price decrease • Decoupling and general allocation of direct payments • Reduction of supply control (partial end of intervention) • Allocation of modulation through socio-economic criteria • Extension rural development

Notes 1

2

3

4 5

6 7

8

9

We use the term EU – European Union – throughout the book for simplification purposes even though the EU was only established in the 1990s and deals with wider issues than the original Common Market and today’s European Community, which still exists and covers economic and social policies, including the CAP. We are concerned here only with major policy initiatives such as overall reforms of the CAP. In the case of less politically sensitive decisions, decisions by qualified majority voting have been frequent. Today, the relevant articles for agricultural policy are Article 32 to Article 38 of the Treaty on the European Community. The corresponding article to Article 39 of the Treaty of Rome is Article 33. Cereals stocks doubled between 1980–81 and 1986–87, beef stocks rose to 30 per cent of world trade in beef (Swinbank et al. 1996). On average, export refunds accounted for 40 per cent of annual EAGGF Guarantee section expenditure between 1975 and 1987. Of the remaining 60 per cent which were broadly classified as intervention, two-fifths were for storage (Ingersent et al. 1999). It has been estimated that from 40 per cent, the share of world trade subject to export controls rose to 48 per cent (Ingersent et al. 1999). In 1973–74, European self-sufficiency ratios for cereals, sugar and beef and veal were 91, 91 and 96 respectively. In 1990, they were 120, 128 and 108 respectively (McCalla 1993). For example, by 1986, wheat prices in real terms were only one-third of their 1974 value and sugar real price in 1985 was 7 per cent of its 1974 peak and 11 per cent of its next peak of 1980. World wheat stocks rose 70 per cent between 1980–81 and 1986–87, rice stocks rose 250 per cent and coarse grains stocks rose 140 per cent (Swinbank et al. 1996). With regard to agriculture, the Punta del Este declaration said that ‘the Contracting Parties agree that there is an urgent need to bring more discipline and predictability to world agricultural trade by correcting and preventing restrictions and distortions (…). Negotiations shall aim to achieve greater liberalisation of trade in agriculture and bring all measures affecting import access and export competition (…), by: (i) improving market access through, inter alia, the reduction of import barriers; (ii) improving the competitive environment by increasing discipline on the use of all direct and indirect subsidies and other measures affecting directly or indirectly agricultural trade (…); (iii) minimising the adverse effects that sanitary and phytosanitary regulations and barriers can have on trade in agriculture (…)’. 193

194 Notes

10

11 12 13

14 15

16

17

18

19

20 21

22 23

The early 1980s saw the budget of the milk sector grow from 3.3 billion ECU in 1982 to 4.4 billion ECU in 1983, and it was predicted to rise to 5.8 billion ECU in 1984 (Kay 1998). EAGGF expenditure jumped by 20 per cent in 1983 and by another 10 per cent in 1984 (Tangermann 1998). See details at Appendix 1. ‘The approach involving mainly a combination of reduced pricesupport measures and compensation through direct aids as well as flanking measures remains generally valid’ (European Council 1997). See a summary of the successive reforms at Appendix 1. In 1995, Germany and France received 45 per cent of direct payments with 20 per cent of the EU farm holdings. Austria, Finland and Sweden received 12 per cent of direct aids with 5 per cent of EU holdings and the United Kingdom received 11 per cent with 3.6 per cent of the EU farm holdings (Chatellier et al. 2004). EAGGF Guarantee spending increased from ECU 10.4 billion in 1992 to ECU 17.5 billion in 1997 (Ackrill 2000). In 1998, approximately half of the EU budget in 1998 went to the CAP, of which 88 per cent went to the EAGGF Guarantee section (Hennis 2005). The Trade Commissioner, Sir Leon Brittan, emphasised the need to conclude the reform of the CAP before the start of the new WTO Round (Moyer et al. 2002). ‘24. The European Council acknowledges the scale of the efforts being made to curb the budget and exercise rigour in implementing the CAP decided within the framework of Agenda 2000. The efforts made, notably in terms of reducing support prices, represent an essential contribution by the European Community in stabilising the world’s agricultural markets. The European Council considers that the decisions adopted regarding the reform of the CAP within the framework of Agenda 2000 will constitute essential elements in defining the Commission’s negotiating mandate for the future multilateral trade negotiations at the WTO.’ (European Council 1999). WTO rules distinguish between trade distorting support and non-trade distorting support, exempting the latter from reduction commitments through the so-called ‘green box’. It also exempts support which is basically trade distorting but which is linked to production-limiting mechanisms; these measures are known as ‘blue box’ subsidies. The Seattle Conference in November 1999 failed to agree on the launch of the negotiations. Self-sufficiency ratios had become more balanced: 109 per cent for coarse grains, 107 per cent for meat, 101 per cent for butter and 105 per cent for skimmed milk powder in 1999 (European Commission 2002b). Real output prices (excluding direct payments) decreased from an 100 index in 1990 to a level of 75.4 in 2001 (European Commission 2002b). Out of 4.5 million farmers receiving direct payments, approximately half (2.4 million) received less than €1,250 per year, around 1.8 million received between €1,250 and €20,000 per year, and fewer than 2,000

Notes 195

24

25

26

27 28 29

30

31

garnered €300,000 or more each year. Seventy per cent of direct payments beneficiaries were producers of arable crops and livestock (European Commission 2002b). In a Eurobarometer survey of June 2002, the main priorities of the CAP were considered to be production of safe food and protection of the environment but only a minority of citizens considered that the CAP fulfiled this objective. See for example Mr Fischler’s emphasis on food safety and precaution, environment and methods of production as priority concerns to be addressed in order to redress the prevailing negative image of agriculture (presentations at two Commission seminars in April 2001 and April 2002; http:// europa.eu.int/comm./agriculture/capreform/archive/ index en.htm). The part of the Doha Declaration related to agriculture states: ‘We recall the long-term objective referred to in the Agreement to establish a fair and market-oriented trading system through a programme of fundamental reform encompassing strengthened rules and specific commitments on support and protection in order to correct and prevent restrictions and distortions in world agricultural markets. We reconfirm our commitment to this programme. Building on the work carried out to date and without prejudging the outcome of the negotiations we commit ourselves to comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade distorting domestic support. (…) We take note of the non-trade concerns reflected in the negotiating proposals submitted by Members and confirm that non-trade concerns will be taken into account in the negotiations as provided for in the Agreement on Agriculture’. We do not include here other sectors reformed in 2004 (olive oil, cotton, tobacco) and 2005 (sugar) that follow the same logic. Decoupled payments are classified in the ‘green box’ and exempt of reduction commitments. In a few Member States – the Netherlands (52 per cent), Portugal (44 per cent), Greece (37 per cent) and Italy (35 per cent) – a high proportion of their agricultural holdings would be affected, while in the United Kingdom and Germany only 1 per cent and 7 per cent of their holdings respectively would be unaffected (study by the German Federal Research Institute on Agriculture – FAL – cited in AE 23/08/02). The same reasoning could further apply to commodities reformed in 2004, notably cotton, and in 2005, sugar. These commodities had long been insulated from international competition. The new role of developing countries in trade negotiations, and mobilisation of civil society, brought them into the light of trade controversies, and then agricultural reforms. ‘The Council stresses that the reform allows to reduce the remaining trade distortions of CAP measures, and that overall CAP expenditure will stay within the agreed ceilings, despite an increase in the number

196 Notes

32 33

34 35 36 37

38 39

40

of farmers of 50 per cent following the EU enlargement. The CAP reform is Europe’s important contribution to the Doha Development Agenda (DDA), and constitutes the limits for the Commission’s negotiating brief in the WTO Round. Its substance and timing are aimed at avoiding that reform will be designed and imposed in Cancun and/or Geneva – which could happen if we went there empty handed. The Council stresses that the margin of manoeuvre provided by this reform in the DDA can only be used on condition of equivalent agricultural concession from our WTO partners. While the EU has been moving throughout the 1990s towards less trade distorting support and has taken the initiative to very substantially move further and early in the DDA, it does not intend to, and will not pay twice in order to conclude the round. Europe has done its part. It is now up to others to do theirs. […] Every country or Union has the right to an agricultural policy of its own, provided it is sustainable and avoids or limits trade distortion. The support that the EU (just like others) offers to its farmers is a policy choice, based on an objective of ensuring a sustainable agriculture, in its social, economic and environmental aspects. The reform confirms and acts on that choice, and aims at securing the future of farmers in a changing world in the light of societal demands and international requirements.’ See note 18. ‘Uncertainty and distortion of competition between farmers, between sectors and within sectors, between regions and Member States’, increase in costs of production (COPA-COGECA 2003c). Oxfam International, BEUC and WWF (2003). Birdlife International, Europe Public Health Alliance and EEB (2003). This chapter is based on a paper written in 2005 (see Garzon 2005). The emergence of a new form of discourse on agriculture and rural development can be traced in all Member States. See for example Svendsen G.L.H. (2004) in the case of Denmark. Agriculture is a highly decentralised competence in Germany. ‘Sufficient numbers of farmers must be kept on the land. There is no other way to preserve the natural environment, traditional landscapes and the model of agriculture based on the family farm as favoured by society generally. (…) It implies a recognition that the farmer fulfils, or at least could and should fulfil, two functions, namely those of producing and of protecting the environment in the context of rural development (…) Concern for the environment means that we should support the farmer also as an environment manager through use of lessintensive techniques and the implementation of environmentally friendly measures’ (European Commission 1991). ‘This model is not the one of our main competitors’; ‘agriculture has fulfiled for many centuries multiple economic, environmental, social and territorial functions and missions. This is why it is essential that multifunctional agriculture be spread over the whole European territory, including regions with specific problems’ (European Commission 1997a).

Notes 197

41

42

43

44

45

46

47

48 49

‘20. The European Council welcomes the agreement reached by the Agriculture Council at its March session on an equitable and worthwhile reform of the CAP. The content of this reform will ensure that agriculture is multifunctional, sustainable, competitive and spread throughout Europe, including regions with specific problems, that it is capable of maintaining the countryside, conserving nature and making a key contribution to the vitality of rural life, and that it responds to consumer concerns and demands as regards food quality and safety, environmental protection and the safeguarding of animal welfare’ (European Council 1999). ‘19. Sustainable development (…) requires dealing with economic, social and environmental policies in a mutually reinforcing way’; ‘the CAP should, among its objectives, contribute to achieve sustainable development’ in a precise number of areas of action (production methods, renewable raw materials, biodiversity) (European Council 2001). ‘Although the Commission’s objectives are to fulfil domestic needs and expectations, these modifications will also allow the EU to adjust to external challenges’, such as enlargement, sustainable development and developing countries concerns, and reduction of trade distortions (European Commission, 2002). In a direct allusion to US policies, the reduction of trade distorting practices would be effective only if other trading partners would also reform their domestic policies. ‘The Council recalls that farming in the EU is not only about producing food and fibre. A sustainable agricultural model requires a policy spread throughout the European territory, economically and socially sustainable and environmentally friendly, market-oriented and simpler’ (Council of the European Union 2003). ‘The role of agriculture is not only to produce agricultural goods at the lowest possible cost’; ‘Agriculture provides services which are linked to the land and are mainly of a public good character.’ The functions are ‘preservation, management and enhancement of the rural landscape, protection of the environment, a contribution to the viability of rural areas’; ‘These functions are not simply externalities of the agricultural production function (…).’ ‘It is a fact that the European society does care about the multiple functions of agriculture and therefore policies to ensure their support have been established’; ‘In order to be sure that the functions of agriculture will be undertaken, public intervention is necessary’ (European Community 1998). ‘Given the interdependence between the various functions of agriculture, supporting the other functions of agriculture cannot be seen as completely separate from its production function … (This) requires policies encompassing agriculture as a whole’ (European Community 1998). See note 18. ‘Safeguarding the future of the European model of agriculture as an economic sector and as a basis for sustainable development is of

198 Notes

50

51

52

53

54

55 56

57

fundamental importance because of the multifunctional nature of Europe’s agriculture.’ ‘European agriculture as an economic sector must be versatile, sustainable, competitive and spread throughout Europe’ (Council of the European Union 1999). ‘Direct aids can contribute to some of the missions of multifunctional agriculture particularly in the field of rural development.’ ‘An appropriate balance has to be struck in the outcome of the negotiations between trade and non-trade concerns, most of which result from the multifunctional role of agriculture or are intended to answer legitimate concerns of the rural world and of consumers. This applies in particular to the multifunctional role of agriculture including environmental protection, safety and quality of food and animal welfare’ (Council of the European Union 1999). ‘The EC believe that in order to achieve [the negotiations] goals, it is vital to muster strong public support, which can only be achieved if other concerns are met, in particular the multifunctional role of agriculture, which covers the protection of the environment and the sustained viability of rural communities, food safety and other consumer concerns including animal welfare’ (European Community 2000). ‘The specific role of agriculture as a provider of public goods should be recognised. This is all the more important in order to muster public support to the process of further liberalisation of trade in agriculture. In this context, the multifunctional role of agriculture, which, in both developed and developing countries, includes its contribution to sustainable development, the protection of the environment, the sustained viability of rural areas and poverty alleviation should be recognised’ (European Community 2000). ‘Direct aids can contribute to some of the missions of multifunctional agriculture, namely protecting the environment and contributing to the sustained viability of rural areas and poverty alleviation’ (European Community 2000). The EU objectives were ‘further substantial liberalisation on a fair and equitable basis and the right to maintain a model of agriculture which addresses the need to ensure environmental protection, rural development, food safety and other consumer concerns’. The ‘blue box’ ‘has been an essential element for reducing the most trade distorting support’ (European Community 2003). See note 31. In an attempt to define multifunctionality (OECD 2001), the OECD opposes sustainability to multifunctionality. Sustainability is defined as a resource-oriented, long term, goal-oriented global concept. Multifunctionality is proposed as being an activity-oriented concept describing the characteristics of a particular sector. Sustainability and multifunctionality, albeit distinct, need not be incompatible. The OECD report recognises that the opposition is somewhat artificial. See for example Svendsen G.L.H. (2004).

Notes 199

58

59

60

61

62

63

64

Only the United Kingdom and France used the option of modulation. The French experiment of ‘contrats territoriaux d’exploitations’ would concern only 2 per cent of the farms and be contentious to develop (Blanchet et al. 1999, Roger 2000c). The UK experience would be somewhat easier (Lowe et al. 2002). Commissioner Lamy notably denounced proposals by the chair of the WTO Agriculture Committee, Mr Harbinson, as ‘unbalanced’ (AE 28/ 02/03) because they were calling for the complete elimination of export subsidies, a reduction in tariffs of 40–60 per cent and a reduction in trade distorting domestic support of 60 per cent. The US agricultural trade negotiator, Allan Johnson, recognised that ‘Europe clearly has an issue here which relates to their own internal process’ (AE 28/02/03). Proposed by the European Commission in July 2004 (European Commission 2004a), an agreement was reached by the Council in June 2005 and a regulation establishing a new rural development fund was adopted on 20 September 2005 (Regulation 1698/2005). Some variation away from this principle has been made possible, as Member States may choose to regionalise direct payments, and hence redistribute across territories, and therefore types of production. Recent polls showed that around 90 per cent of the citizens consider that the first role of the CAP should be to ensure that agricultural products are healthy and safe, but less than 50 per cent think that the CAP fulfils these objectives (European Commission 2004b). We refer to Fouilleux’s contributions (2000, 2003) on the production and institutionalisation of ideas, in particular as regards the 1992 CAP reform.

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Index Accompanying measures 43, 54, 69, 86 Agenda 2000 44, 47, 77–96, 127, 129–30, 156–9 Agricultural guideline 38, 46, 47, 80 (Agri-)environmental measures, schemes 43, 49, 53–4, 64, 81, 130, 154, 163 Andriessen 38 Animal welfare 48, 49, 55, 108, 126, 127 Article 33 of the Treaty, see Treaty Article 39 of the Treaty, see Treaty Beef

23, 43, 46, 47, 48, 51, 64, 69, 77, 80, 85 BEUC 113 Blair 89 Blair House (Agreement) 151 Blue box 86, 101, 103, 110, 133–4, 157, 161 Brittan 151 BSE 77, 79, 91, 92, 100, 126 Budget 9, 16, 24–5, 28–9, 36–8, 45–7, 49–50, 51, 58, 61–2, 68, 77–9, 80, 83, 85, 86, 93, 98–9, 141–3, 153–4, 155, 157–8, 162–4, 168, 178 Cairns Group 63, 101 Cancun (Meeting) 101–2, 116, 160 Capping (of direct payments) 46, 47, 49, 55, 80–1, 103, 109, 163 Ceiling (on expenditure) 46, 50, 51–2, 99, 163 Cereals 37, 44, 46, 47, 48, 51, 56, 64, 70, 77, 89, 102, 107, 115, 153 Chirac 79, 157 Civil society 32, 70–1, 88–91, 111–14, 157, 158–9

CPE 112 Co-financing (of CAP, expenditure) 80, 84, 93 Co-responsibility levy 37 Commercial policy, see Trade policy Commissioner for Agriculture 18–19, 44, 48, 64, 65, 82, 103, 116 Common Market 21–2, 23 Community preference 24, 26, 174 Compensatory payments, see Direct payments Conference on Rural Development 45, 82, 129 Confédération paysanne 89, 155 COPA 27, 71, 75, 111, 112, 165 Corporatism, corporatist model 7, 27, 32, 70, 75, 88, 90, 96, 146–7, 155, 167–8, 183 Cork Conference, see Conference on Rural Development Cost of no agreement 8, 59, 72–3, 93–4, 116, 178–9 Cotton 41, 52, 162, 179 Council (of Ministers) 16–19, 23, 39, 41–2, 44, 47, 72, 91–2, 145, 151–2, 153 Cross-compliance 46, 49, 55, 103, 108, 111, 113, 145, 158, 164, 165, 167 Cumulative change 1–2, 7, 9–13, 149–50, 167–8, 179, 183 Dairy, see Milk DBV 89–90, 112 De Gaulle 27 Decision making 6, 7–8, 15, 16–20, 41, 71–2, 91–3, 114–15, 141–8, 181–3

211

212 Index

Decoupling 43, 49, 51, 53, 56–7, 86, 98, 100, 102–3, 105, 107–8, 110, 111–12, 114–15, 134, 144–5, 154, 157, 165 Default scenario 8, 59, 72–3, 93–4, 115–17, 178–9 Degressivity 47, 49, 50, 51, 52, 80, 84, 103, 107, 108, 109, 112, 144, 145, 163 Delors 38, 61, 63, 65 Delors package 37, 38 Dependent paradigm 170–1 Developing countries 32, 100, 101, 114, 123, 136, 157, 160 Direct payments, support 31, 33–4, 35, 42, 44, 45, 46, 47, 48, 49–51, 52–3, 55, 64, 66, 67, 68, 78, 82, 84, 86, 97, 98, 102–3, 105, 108–9, 111–12, 127, 130–1, 133–4, 150, 153–4, 157, 158, 163, 164–5, 167, 180–1 Discourse 6, 7, 82, 104, 121–39 Distributive effects 25, 33, 68, 144, 153, 158, 164 Doha (Agenda, Agreement, Meeting, Round) 100–1, 105, 133, 160–1 Domestic support 100–1, 110, 114, 116, 118, 133, 146, 152, 156–7, 161–2 Dunkel 150 EAGGF 16, 24, 28–9, 37, 39, 43, 47, 64 Enlargement 44, 49–50, 53, 78, 85, 93–4, 95, 98–9, 116, 157 Environment protection 32, 34, 38, 42, 43, 44, 46, 47, 48, 49, 53–6, 69, 79, 81, 100, 103, 107, 115, 122, 125, 127, 129, 137–8, 154, 173, 174, 175, 180, 181 EU competence, see Treaty European Commission 8, 16–20, 36–7, 38, 41, 42–51, 65–6, 75, 81–3, 96, 103–5, 119, 128–31, 136, 153, 174, 182

European Council 17, 18, 37, 39, 45, 47, 48, 49–50, 72, 85, 86, 92, 99, 115, 130, 162, 163 European Parliament 16–20, 41, 72, 92, 115, 145, 182–3 Export refunds, see Export subsidies Export subsidies 26, 29, 33, 57, 62–3, 64, 77, 80, 97, 101, 110, 113–14, 116, 118, 152, 155, 157, 161 External pressure, see International pressure Farmers’ organisations 27, 70–1, 88–91, 111–13, 155, 164 Fischler 44, 45–51, 82, 102–5, 116, 130, 151 Financial discipline mechanism 52, 163 Financial framework 45–6, 49–50, 78, 92, 103, 163 Financial perspectives, see Financial framework Financial solidarity 24, 25 FNSEA 70, 88–9, 112–13 Fontainebleau Agreement 38 Food quality 46, 48, 49, 54 Food safety 32, 46, 48, 49, 55, 79, 100, 108, 113, 115, 123, 126, 127, 129, 165 France 22, 23, 36, 45, 49, 62, 67–8, 71, 73, 79, 84, 87, 88, 93, 99, 100, 106, 108, 114, 115, 127, 151, 152, 155 Franco-German relationship 67–8, 74, 85, 95, 99, 110, 143, 144–5, 154, 182 G20 160 GATT 26–7, 30–1, 42, 62–3, 65–9, 71–2, 73–4, 101, 141–2, 150–2, 178 GATT Agreement, see Uruguay Round Agreement Germany 23, 36, 45, 49, 62, 67–8, 71–2, 78–9, 84, 87–8, 89, 92–3,

Index 213

99, 100, 108, 109, 118, 125–6, 144–5 Globalisation 31–2, 113, 123, 162, 171, 177 Governance system 7–8, 15–20, 144–5, 177, 179 Green box 133, 134 Guarantee threshold 37 Guaranteed price, see Price policy Heysel Conference 63, 64, 66, 101, 151–2 Historical institutionalism 5–6, 9–10, 21 Hong Kong (Meeting) 161 Income support, see Direct payments Incrementalism 56–7, 144, 149–50, 179 Institutional practice 15–20, 71–2, 91–3, 114–15, 145, 181–3 Institutional price, see Price policy Institutional set-up, framework, rules, see Decision making Institutions, see Decision making Interest groups, see Farmers organisations and Non governmental organisations, and also: 146–7, 150, 156, 166 International constraint, dimension, see International pressure International pressure 63, 68, 73–4, 85, 86, 94–5, 100–2, 116–17, 136, 138, 141–3, 151, 174, 178–9 Intervention buy in 25, 28, 43, 49, 50, 97, 102, 155, 180 Italy 72, 85, 114 Jospin

79

Kohl 62, 63, 79, 89 Künast 100, 109 Lamy 104–5 Land Owners Association

89

Landbouwschap 90 Legacies 6, 123, 138, 178, 179 Legitimacy crisis 32, 116–17, 122–4, 147, 183–4 Lisbon strategy 164 Lock-in effect 25, 27–8, 156, 159, 166 LTO 90 Luxembourg compromise 17, 27, 145, 182 Maastricht Treaty 61, 62, 78, 90–1 MacSharry 19, 64–6 MacSharry reform 42–4, 61–75 Mansholt Plan 35–7 Market policy, see Price policy Market unity 24 Member States 41, 58–9, 66–9, 78–9, 83–8, 95, 105–11, 118–19, 125–8, 134, 143–5, 151–2, 181–2 Mid-term review 48, 97, 158 Milk 37–8, 43, 46, 47, 48, 50, 64, 69, 73, 77, 80, 84, 85, 86, 89, 93, 97, 107, 110 Mitterrand 62, 63 Modulation 44, 46, 47, 50, 55–6, 73, 81, 87–8, 89, 93, 95, 107–9, 111, 127, 131, 145, 158, 163, 164, 175 Multi-issue analysis 7–8, 9, 57–9, 73–4, 94–5, 117–18, 141–3, 178–9 Multifunctional paradigm 170–5, 180–1 Multifunctionality 78, 81, 101, 104, 119, 121–39, 147, 154, 159, 164, 167, 172–3, 183–4 Multi-lateral bargaining 8, 9, 57–9, 74–5, 95–6, 118–19, 143–5 Multi-level game 7, 9, 57–9, 94–5, 117–18, 141–3, 178–9 Netherlands 23, 36, 43, 67, 69, 73, 79, 84, 90, 98, 107, 109, 114–15, 155

214 Index

New Länder 62, 90 NFU 89, 112 Non governmental organisations (NGOs) 71, 88–91, 111–14, 122–3, 136, 156, 159, 166 Non trade concerns 101, 133 Non trade distorting policy 63–4, 133 OECD 30, 35 Oilseeds 30–1, 65–6, 151 Olive oil 41, 52, 114, 179 Origins of the CAP 21–8 Oxfam International 113–14 Paradigm (of agricultural policy) 32, 34, 39, 126, 127, 128, 152, 157 Paradigm (change, shift) 2–3, 7, 9–13, 167, 168, 169–75, 180–4 Path dependency 7, 9–13, 143, 144, 149–50, 167–8, 179 Pillar(s) 46–7, 49, 54, 81, 87, 99, 158–9, 163, 184 Pressure pluralism, pressure pluralist model 7, 145–7, 167–8 Price policy, support 16, 23, 25, 26–7, 28, 31, 33, 37, 39, 42, 44–8, 51, 52, 56, 64, 95, 102, 152, 153, 180 Protectionism 26, 29, 33, 64, 84, 133 Policy debate 8, 30–5, 55, 58, 82, 90–2, 96, 99–100, 105, 113–14, 119, 121–4, 135–9, 144, 145, 146–7, 168, 181–4 Policy feedback 11, 13, 149–67, 179 Policy network 6–7, 13, 13, 20, 27, 34, 35, 70, 75, 96, 138, 145–7, 157, 158, 159, 165–6, 167–8, 181–3 Qualified majority 17–18, 19, 27, 72, 92, 114, 118, 145, 181–2 Quotas 34, 37–8, 43, 46, 48, 50, 64, 73, 77, 80, 84, 85, 97, 107, 115, 175

Re-balancing (of expenditure, benefits), see Distributive effects Re-distribution, see Distributive effects Re-unification (Germany) 62, 72, 125–6 Rent seeking 163–4, 167 Rice 49, 97, 102, 105, 1110 Rural development 24, 41, 43, 45, 46–7, 53–6, 64, 69, 81, 82, 87, 89, 91, 96, 103, 107–9, 126–8, 129, 132, 137–8, 144, 154, 158–9, 163–4, 181 Santer 44 Schröder 79, 157 Seattle (Meeting) 80, 90, 100, 132, 157 Second pillar, see Pillar(s) Set-aside 34, 38, 43, 44, 46, 47, 48, 64, 67, 84, 85, 93, 145, 175 Sheep 43, 51, 73 Single farm payment 49, 161 Single Market 61, 72 Spain 67, 73, 85, 87–8, 108–9, 114, 126 Stabilisers 38, 65, 72 Stresa Conference 22–3 Structural Funds 16, 24, 39, 43, 47 Structural policy, measures 24–5, 36–7, 43, 44, 47, 54, 69, 79, 154, 173 Sugar 41, 52, 161, 162, 179 Surplus 26, 28 Sustainable development, sustainability 45, 48, 92, 115, 122–3, 129, 130, 131, 134–5, 137, 139, 159, 164, 167, 184 Trade distorting measures, support, policy 26, 32, 63–4, 80, 101, 105, 107, 123, 133, 152, 171 Trade liberalisation 29, 32, 116, 133 Trade policy 16, 19, 123, 152 Treaty 22, 15–16, 152, 173–4 Treaty of Rome 21–2

Index 215

Unanimity 17, 18, 19, 27–8, 92, 95, 114, 145, 152 United Kingdom 29, 43, 67, 69, 73, 78, 83, 84, 85, 87–8, 89, 93, 95–6, 98, 107, 108, 109, 114–15, 118, 125, 135, 143, 145, 146, 155 United States 26, 30–1, 62–3, 101, 108, 160–1 Uruguay Round 30, 44, 62–3, 68, 72, 73–4, 101–2, 116, 141–2, 179

Uruguay Round Agreement 132, 151–2

77,

Veto 17, 71–2, 74, 92, 115, 118–19, 143, 145, 151 Wheat, see Cereals WTO 44, 79–80, 82, 84, 86, 90, 94–5, 100–2, 103–5, 107, 108, 110–11, 113, 115–16, 117–18, 119, 131–5, 139, 141–3, 144, 151, 152, 156–7, 160–2, 178