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Published February 15, 2011, 11:33 AM

EU ag commissioner talks budget, trade

WASHINGTON - In a statement with implications for the 2012 U.S. farm bill debate, European Union Agriculture Commissioner Dacian Ciolos said Feb. 9 he hopes to keep the EU farm budget at the current level after the rewrite of the Common Agricultural Policy that is scheduled to go into effect in 2014.

By: Jerry Hagstrom, Special to Agweek

WASHINGTON - In a statement with implications for the 2012 U.S. farm bill debate, European Union Agriculture Commissioner Dacian Ciolos said Feb. 9 he hopes to keep the EU farm budget at the current level after the rewrite of the Common Agricultural Policy that is scheduled to go into effect in 2014.

Ciolos also briefed reporters on his discussions with Obama administration officials and Congress.

Ciolos said he discussed with Agriculture Secretary Tom Vilsack the need for U.S.-EU “mutual recognition” of organic products, and he urged Vilsack to finalize a U.S. rule to allow the importation of European beef, since EU member countries are following international guidelines for the control of mad cow disease. He said they also discussed the possibility of increasing European imports of U.S. “Hilton” steaks that are served in luxury hotels.

He also said Vilsack and U.S. Trade Representative Ron Kirk gave him the impression the Obama administration wants to finish the Doha Round of multilateral trade talks, indicating to him that “it is not easy to do this, but it is not impossible.”

Ciolos, a Romanian, also told reporters genetic modification is a “preoccupation of American authorities.” Ciolos said he understands American officials base their decisions “on science,” but added that European consumers have said they want “a more sure quality of production, and GMOs don’t enter into this quality.”

He also noted the European Union is the second-largest food exporter in the world.

“We export quality food. This is the culture and tradition of the consumer in the EU,” he said. Food, he added, is not like automobiles or high-tech products because “it goes into the stomach.”

Overseas influence

The development of the next version of the Common Agricultural Policy, or CAP, could influence the next U.S. farm bill because U.S. farm leaders and legislators traditionally have compared U.S. and EU farm subsidies when making arguments to maintain farm programs at current or higher levels of spending.

Senate Budget Committee Chairman Kent Conrad, D-N.D., strongly has argued EU spending levels give its farmers a competitive advantage over American farmers and must be taken into account in determining the U.S. program.

Unlike some of his predecessors, Ciolos said he doesn’t have concerns about the current U.S. farm program, but noted. “We all face concerns regarding the budget.”

He also said in his meetings on Capitol Hill and with Vilsack he had received the impression “there are strong interests still supporting agriculture” in the United States.

Ciolos said he hopes to keep the budget for the EU CAP at the current level of $80.9 billion (euro $59 billion) after 2014, but acknowledged there are pressures to trim it.

Of that amount, the EU spends $58.9 billion (euro $43 billion) on direct payments that farmers get whether prices are high or low.

That amount is much higher than the U.S. direct payment program of $5 billion, but the figures are not directly comparable because the United States also makes marketing loan and countercyclical payments when prices are low and subsidizes crop insurance. In addition, 12 to 13 million European farmers get the payments, compared with more than 1 million farmers in the United States.

The other $22 billion (euro $16 billion) of the EU farm budget is spent on rural development, which in the European Union includes efforts to modernize agricultural production and processing.

Updated CAP

A new version of the CAP is scheduled to go into effect in 2014, and the process of rewriting it already has started. Under the EU system, the European Commission, which is the equivalent of the U.S. executive branch, proposes changes to the CAP. That proposal is then considered by the European Parliament and the Council of Ministers, which is composed of the agriculture ministers of all 27 member states. If consensus is not achieved or the proposal is controversial, the final proposal is bumped up to the European Council, which is composed of the heads of government of the member states. In past rewrites, French presidents sometimes have insisted on last-minute changes.

Ciolos said the commission staff already has begun preparing a proposal that should be released in the second half of 2011, with a legislative proposal in 2012 and preparation for implementation in 2013, so it can go into effect on Jan. 1, 2014.

Ciolos said his objective is to maintain the two main EU farm programs: direct payments and rural development. But he and his staff want to shift from a system of direct payments based on an average of what farmers were getting in the 2000 to 2002 period to one using “objective criteria” so the direct payments will provide farmers with a basic income, improve the technology of production, encourage good management of natural resources and maintain agriculture in all regions.

But devising the new criteria is difficult. The origins of the CAP go back to the 1950s when the EU — then the European Community — was a small collection of European countries, each with its own farm program designed to increase production so the post-World War II food shortages never again would occur.

The original CAP combined those programs to try to discourage competition among the European countries, and it was so wildly successful in encouraging production, by the 1990s, there was both taxpayer and international pressure to change the program to avoid the surpluses.

Payment differences

Because farmers had gotten more money when they produced more, the farmers who had produced more also got bigger direct payments when their previous subsidies were converted into that program. The situation has become further complicated by the addition of more countries to the European Union, which now numbers 27 member states. The EU could not afford to make the same payments to farmers in the new member states, so a per-hectare scheme was developed for them.

On a per-hectare basis, the payments to countries vary dramatically. Polish farmers get 200 euros per hectare while German farmers get 300 euros, and in France, there is so much variance by sector it is impossible to come up with a per-hectare figure, a Ciolos aide said.

The current scheme is unfair in other ways. Crop farmers get more money than livestock producers. Farms owned by British aristocrats get some of the biggest payments, but so do the former collective farms in eastern Germany and other former Communist countries. Those former collective farms employ many people, and there is a danger that a reduction in payments could lead to layoffs if the scheme is not devised properly.

Ciolos is proposing a cap on the CAP of a maximum of 300,000 euros per farm, though all previous attempts to put a limit on the size of subsidies have failed. An aide said more than 1,000 farmers in Europe get more than 1 million euros per year.

“I don’t personally have a problem with big farms. They are important for innovation,” Ciolos said. But, he noted, taxpayers object to large payments going to those farms.

Rural development now is managed by the member states, which get funds when they make proposals and put some of their own money into the projects. The commission wants to make rural development more universal within Europe to address climate change issues, an aide said.

Ciolos and his staff face a political minefield in developing the CAP proposal, but will keep in mind “the political realities” as they write it, an aide said.