In addition, the MidTerm Review became tasked with making the CAP financially viable in an enlarged Europe, particularly once it was accepted that the new member states simply could not be excluded from receiving CAP income payments. The MTR then, unlike Agenda 2000, would be undertaken in a context of disruptive politics, permitting both the proposal and consideration of deeper and more fundamental reforms of the CAP than was possible during Agenda 2000. The previous chapter examined the Agenda 2000 Reform, led by Agricultural Commissioner Franz Fischler. Agenda 2000 affirmed bold objectives but ultimately introduced limited change. Decoupling was not extended any further, and the most ambitious initiatives, such as environmental protection and a shifting of money from market support to rural development, were strictly voluntary. Little was expected to change with the 2003 Fischler Reform, sometimes also referred to as the Mid-Term Review , because it was intended only to check and respond to the implementation of Agenda 2000. Instead of being only a review, however,vertical tower for strawberries the 2003 agreement resulted in a major overhaul of the CAP. The most striking reform was the decoupling, in most sectors, of CAP payments from production, continuing and extending the policy first introduced by MacSharry.
Instead of production-based income support, the MTR switched farmers to a direct income subsidy, which is the same whether they grow millions of tons of grain or nothing at all. The new payment system, called the Single Farm Payment , was designed to compensate farmers for income lost from decoupling and to provide a source of income in the years to come. Finally, the voluntary environmental and rural development policies first introduced in Agenda 2000, cross compliance and modulation, were made mandatory. Receipt of the SFP was conditioned on meeting certain environmental standards , and member states were required to direct 5% of direct payments for farmers earning over €5,000 to support the environmental and rural development initiatives of the Second Pillar . The purpose of this chapter is to account for the content of the 2003 MTR, and to explain specifically, why, despite the fact that the MTR was supposed to be only a review of Agenda 2000, major change was achieved. Because the MTR was only intended to check the implementation of the Agenda 2000 agreement, the member states did not expect to see any initiatives of significance. At most, the MTR was expected to produce comments on the status of Agenda 2000 and minor corrections to existing policies.
Indeed, French President Jacques Chirac summoned Fischler to Paris and told him bluntly, “Just so we are clear, the MTR is just a report, not a reform. You can make a proposal in 2007” when Chirac was scheduled to leave office . Fischler, however, had grander ambitions for the MTR. These ambitions would be aided by a series of important challenges that were coming to a head. Fischler had already made ambitious proposals during the Agenda 2000 negotiations, but the CAP was operating under politics as usual, with no significant extraordinary circumstances or crises that could generate disruptive politics. As a result, Fischler’s big ideas were either watered down or shot down entirely. At the time of the MTR, however, bigger changes were afoot. Fischler was able to link his proposals to key challenges, raising the stakes for reform, and compelling the member states to consider changes that were more far reaching and dramatic than they would have entertained during a regular round of CAP reform, let alone a mid-term review. Disruptive politics made it possible for Fischler to propose and reach agreements on more dynamic reforms than would be possible under politics as usual.The impending accession of 10 largely agrarian new member states posed the most direct and disruptive challenge to the CAP. Once these countries joined, the number of farmers who could claim CAP support would more than double, and agricultural land area, which is also supported and maintained through CAP programs, would increase by nearly 50%.
Projections suggested that in order to extend existing support programs to the new member states, the CAP budget would need to double. The CAP was already the EU’s largest program, consuming 40% of the budget. Given that the CAP was routinely targeted for budget cuts, there was simply no way financial commitments to the program could expand to the extent necessary to accommodate the new member states. The CAP needed to be reformed so that it would be financially sustainable in an enlarged Europe. An added incentive to move quickly was that the new member states would render the decision making process even more complex in future, when there would be 25 Ministers of Agriculture attempting to support and defend the unique agricultural preferences of their respective home countries. The CAP was also under pressure from international trade negotiations. In previous rounds of GATT/WTO negotiations, European agriculture had been the stumbling block. A significant problem in the Uruguay Round was that CAP programs were in direct conflict with GATT rules. European manufacturing and services representatives were now signaling to their agricultural counterparts that they would no longer tolerate complications and delays due to agriculture that damaged their ability to defend their sectors’ interests. Officials representing these sectors made it clear that they were willing to sacrifice Europe’s agricultural policy preferences in order to forge the best deal possible for manufacturing and services. Taken together, all of these challenges and time-sensitive circumstances confronting the CAP meant that the reform took place during disruptive politics, making more reform possible under the MTR than had been achieved in Agenda 2000.
Despite the urgent need for change, the CAP reform process again shared many features in common with welfare state retrenchment. The most ambitious and far reaching reforms were significantly watered down, and some were defeated outright. Many reforms ended up following a “vice into virtue” logic: rather than introducing entirely new initiatives, existing programs are adjusted to fix inefficiencies and inequalities. Finally, the entire package was filled with side-payments and special agreements in order to defuse opposition. The ultimate reform package in the MTR is consistent with my central claim that it is difficult if not impossible to reduce farmer support.At the time of the MTR, the basic ability of the CAP to continue to function was under threat from WTO negotiations, a looming round enlargement, food safety scares, and public frustration with existing policies. The MTR would, like the MacSharry Reform, be developed and negotiated at a time of disruptive politics. Existing programs were now unstable due to the rapidly approaching accession of new member states from Central and Eastern Europe. Food safety scares, and more importantly,vertical growing continued trade negotiation issues related to agriculture potentially introduced new actors into negotiations that typically concerned agricultural interests only. These challenges created an opportunity for Fischer to propose and advocate major reforms. They also informed the content of the proposed reforms. WTO pressures facilitated the consideration of policies that made the CAP less trade distorting. Enlargement allowed for deliberations over policies that would improve the financial sustainability of the CAP in the expanding Union. Concerns related to food safety and perceived public dissatisfaction allowed policies to be considered that increased environmental and animal welfare standards and that improved the equity of existing programs. Though these pressures were critical, the MTR was not launched in response to them. Rather, a provision requiring an MTR had been included in Agenda 2000 at Fischler’s insistence. Fischler had been frustrated by the tepid Agenda 2000 agreement and wanted another chance to enact meaningful reform. The MTR was a concession to Fischler in return for Chirac’s last minute revisions to Agenda 2000 at the 1999 Berlin Summit27. The purpose of the MTR was to assess the status of the implementation of Agenda 2000 and to offer improvements, if necessary . While Fischler hoped that the MTR would be his avenue for more far-reaching reform, he was careful to only refer to it as a review, and not a reform . Most member states assumed that the MTR would be merely a review and that no substantial changes would result. Still, pressure was building to overhaul the CAP, starting with the recently launched Doha Development Round.
Fischler wanted to avoid a repeat of the Uruguay Round of GATT negotiations when stalemates in the agricultural sector had caused negotiations to drag out four years longer than planned. European manufacturing and services were angry at agriculture for the difficulties they faced in their negotiations because the structure of the CAP was a major obstacle to reaching a final agreement. Specifically, the EU, with its trade-distorting price supports and production-based payments, was at the center of the controversy over how to structure the agricultural component of the GATT. The European Commission and several member states concluded that entering the WTO negotiations with the CAP in violation of WTO rules once again would weaken the chances that EU representatives would be able to both defend the European Union’s vision for agricultural policy and also extract competitive agreements for services and manufacturing. In the run up to the Doha Round, European manufacturing and services sectors made it clear that they would not allow their bargaining position to be weakened or their interests threatened by European agriculture. These sectors signaled their intention to push aggressively for open markets “regardless of the price paid in terms of additional access to the EU agricultural market, which would presumably have to be borne by their fellow farmers” . In order to gain access to new markets, representatives for manufacturing and services stated their willingness to trade away core components of CAP policy. In addition, the European Commissioners for Trade, Competition, and Industry routinely challenged agriculture’s share of the EU budget and sought to diminish the prominence of the agriculture portfolio. Struggles and delays at the Doha Round caused by agriculture would provide additional ammunition to their efforts to siphon money from agriculture and into their own budgets. Given the clear signals sent by European manufacturing and services, Fischler wanted to enter the Doha Round with the ability to pursue and defend European agricultural interests without the sector being a stumbling block for progress towards Europe’s goals in other domains. The most important and fundamental way to position European agriculture for negotiation success was to ensure that CAP subsidies complied with existing WTO regulations. The WTO used a “subsidy stoplight28” system, containing green, amber, and blue boxes, to evaluate and classify member country subsidies. Permitted subsidies, meaning those that do not distort trade and do not include price supports, are in the green box. Examples of green box programs include decoupled subsidies and rural development supports. Examples of amber box subsidies are production based subsidies and price supports. As subsidies in the amber box are considered trade and/or production distorting, they are subject to strict limitations, including an agreement to reduce them over time. In developed countries, only 5% of a country’s subsidies can fall into the amber box. Countries that exceed that limit must reduce their subsidies accordingly. The Uruguay Round agreement included a specific commitment by the 30 WTO members whose subsidies exceeded amber box limits to bring those subsidies in line with the 5% rule. The last category is the blue box, which is also referred to as the “amber box with conditions”. It contains, “any support that would normally be in the amber box [which] also requires farmers to limit production” . It was developed as a way to help states move away from trade and production distorting amber box subsidies without causing too much hardship. Compliance in the agricultural sector was important because it meant that EU could press for market access for goods and services in emerging markets without being told that it first needed to get its agricultural policy in order. Keeping agriculture from hamstringing the pursuit of EU objectives for goods and services was also important for Fischler because it weakened the arguments often used by the EU Commissioners for Trade, Competition, and Industry to call for a reduction in the CAP budget. Speaking about his Doha Round strategy, Fischler noted, “we needed to change the conversation for the WTO. We couldn’t have a Uruguay Round repeat. We needed to be on the offensive.