5. Rural development issues in relation to the likely WTO Trade Talks outcomes

5.1. CAP and the WTO Trade Talks

The long-term objective for agricultural trade reform negotiations was set out in the Mid-Term Review of the Uruguay Round as: 'to establish a fair and market-orientated agricultural trading system' which would be reinforced both by commitments on support and protection, and 'strengthened and more operationally effective GATT rules and disciplines'. This long-term objective also involved 'substantial progressive reductions in agricultural support and protection sustained over an agreed period of time, resulting in correcting and preventing restrictions and distortions in world agricultural markets'. There were commitments to 'achieving specific binding commitments in .... market access; domestic support; export competition; and to reaching an agreement on sanitary and phytosanitary issues.' Nevertheless, it was noted that commitments should be equitable, 'having regard to non-trade concerns, including food security and the need to protect the environment'.

It should be noted that all subsidies paid to, or revenue foregone from, agricultural producers with respect to production of food and most raw materials (both crop specific and non-crop-specific) are included in the assessment process, including regionalised aids. Exceptions listed are:

1. support not exceeding 5% of the value of production of a basic agricultural commodity or, for non-crop-specific support, 5% of total agricultural production,
2. 10% de minimus for developing countries,
3. certain direct payments in production-limiting programmes where payments are based on fixed areas and yields, and such payments are made on 8% or less of the base area of production, and livestock payments made on a fixed number of head.

It is argued by some that the Agenda 2000 proposals on agriculture, which essentially involve a widening and a deepening of the 1992 CAP reforms, represent an 'opening position' of the Community on the next trade round. Many commentators argue that the proposals do not go far enough to meet the probable demands of our trading partners, and that the EU will be isolated on the protection issue (with the possible exception of support from Japan) at the start of the talks in 1999. To take one example, the FAPRI Policy Working Paper 03-97 which is a 'first look' at the CAP reforms in Agenda 2000 argues that these would adversely affect future US and EU trade relations [section 2.3 of the present document]. At first sight, it seems the reforms do not go as far as the FAIR Act does in the U.S.

It is, on the face of it, a fair working assumption that the trade round starting in 2000 will eventually give rise to the need to reduce EU agricultural subsidies by a significantly larger amount than is proposed in Agenda 2000, which actually increases the level of budgetary payments to farmers in the existing EU-15. It is at this stage that 'non-trade issues' come to the fore, and these will clearly need to be better articulated in future as the basis for agricultural, agri-environmental, rural, and related 'green box' supports, especially those with agricultural producers as the sole policy clients. In this context, we can note that the Commission's 1997 document 'Rural Developments' raises three main sets of arguments for a rural development policy:-

1. 'Rural development is essential to agriculture' (this is exactly the message of our large comparative study of farm household dynamics in 12 EU countries between 1986 and 1992 [Bryden et al. 1994])
2. 'Rural development is essential to the environment and quality of life'
3. 'Rural development is essential to economic development and cohesion' [CEC 1997b: 72-74]

8. The references which follow in square brackets refer to the various Articles in this Decision.