Farmers face a market free-for-all

Europe's agriculture policy faces its biggest shake-up for 35 years - but the wealthy need not worry, writes Katherine Butler in Brussels

THE European Union yesterday embarked on a path of historic reform, aimed at returning much of its agriculture to the forces of the free market.

Announcing details of the widest ranging shake-up in the 35-year history of its common farm policy, the European Commission launched a move to phase out price supports, the bedrock of the Common Agricultural Policy since its creation in 1962. The goal is to allow Europe's most efficient European farmers, who have been shielded from world trends for more than three decades by artificially high prices, to compete globally for food sales.

Much of the pounds 30bn a year spent on rigging food prices, buying up food that cannot be sold on the market and on subsidies to exporters, will go instead to fund big increases in direct welfare-type payments to farmers.

One of the keystones of the farm policy, a ban on member states subsidising their own farmers from national coffers, would fall away for the first time. Some believe this marks the first stage of the dismemberment of the original CAP.

Reform is being driven by fears that extension of the CAP in its present form to 10 million farmers in Eastern Europe early in the next century could bankrupt the Union. It comes in the context of Agenda 2000, a six- year plan to reform the way the EU spends 80 per cent of its budget, ahead of the EU's eastward expansion. Jack Cunningham, the Minister of Agriculture, welcomed the proposals saying they would save consumers pounds 1bn a year on the price of food. "The rural environment will also benefit from the reforms," he said.

Artificially inflated prices for key foods - cereals, milk and beef - would be slashed by up to 30 per cent from 2000 under the plan, though this could prove too much for EU governments and the powerful farm lobbies behind them. Britain, which has always led a cheap food policy, will be pushing for even steeper cuts when the negotiations begin later this month while others will fight to defend their national interests.

The Commission's plan aims to end the policy of stockpiling surplus food, particularly grain, to shore up the price. Without the guarantee of a market, prices would fall to world levels, allowing farmers to export without the help of subsidies. The controversial setaside policy, paying farmers to grow nothing, would be scrapped. Franz Fischler, the EU farm commissioner, predicted that after the reform, "in cereals we will have a free market".

In spite of Mr Cunningham's hopes, there are few reasons to believe the new policy will lead necessarily to much cheaper food. Some direct payments will be linked to the environment for the first time and more money will be available to promote rural development and the "fabric of the countryside". But intense political pressure from the national governments and farmers lobbies has recently forced the Commission to drop some of its more radical ideas. And some measures run counter to the Commission's earlier vision of a move away from factory farming to high quality food production, which safeguards rural areas. By putting Europe in a race for world food markets, critics believe the reform could encourage larger farms and even more intensive production than we have previously seen.