Examination of Witnesses (Questions 260
- 279)
MONDAY 16 OCTOBER 2006
MRS MARIANN
FISCHER BOEL,
MR KLAUS-DIETER
BORCHARDT AND
MR JOHN
BENSTED-SMITH
Q260 Chairman: That could just be
absolutely right.
Mrs Fischer Boel: I try to be
very polite here today. I could give you examples of Member States
that have been using to the full the possibility of the rural
development schemes. Austria is a very good example because they
have had very little direct payment because of their previous
contributions to the output from the agricultural sector and therefore
they had to do something else and they targeted from the very
beginning the rural development policy. Because I think the rural
development policy is so important and because I feel that nobody
disagrees with me, I was so disappointed when I experienced last
December that the heads of state had decided to cut €20 billion
off my budget for rural development policy. Obviously they did
not have any other good ideas for savings than the rural development
policy but I think this was a wrong signal to send. Therefore
we need to continue this transfer into the Second Pillar.
Q261 Mrs Moon: I would like to pick
up the issue of food security. The Vision document is putting
up the argument that we do not necessarily need direct payments
to bring food security standards to European citizens. Where do
you stand on this? Do you think we need direct payments to farmers
to ensure food security and safety for the European Union?
Mrs Fischer Boel: In the present
stalled WTO negotiations we had discussions with some of the members
of the WTO on the specific costs that we have in European agriculture,
the so-called non-trade concerns. The wages are higher, our care
for the environment is considerably higher than some of those
countries with whom we will have to compete, and animal welfare
is a completely unknown factor in some of the countries that can
produce at a very low price. Therefore, I think that one way or
another we might need a certain level of direct payments to finance
these so-called non-trade concerns, and then maybe have building
blocks from the rural development policy to build on top of the
direct payment but at lower levels than we know it today, that
is obvious to everybody, and that is what we need to convey to
the sector, that there will be changes after 2013.
Q262 Mrs Moon: I wonder how much
you feel that the Commission does and should involve itself in
non-food production issues such as logistics and the actual moving
around of food throughout the European Union. Is that something
that the Commission should become further involved in and should
take an interest in?
Mrs Fischer Boel: It is quite
clear that the whole possibility of agriculture to contribute
to the renewable energy production has been highlighted much more
efficiently than we have ever seen before after the situation
last winter where there was suddenly a shortage of energy in Europe.
We have had this discussion previously with the Biomass Action
Plan that was published last year and within DG Agriculture we
have launched a plan for bio-ethanol production where we will
push this production to see whether it is possible to make it
more interesting for farmers to produce renewable energies. We
have a scheme of €45 per hectare available for farmers that
want to go into renewable energy production. On bio-diesel we
are at this stage competitive with oil. We can produce bio-diesel
at about $60 per barrel but when we talk about the first generation
of bio-ethanol produced on cereals we cannot compete with the
present price. The calculations that we have made estimate about
$90 per barrel for bio-ethanol but we are investing heavily in
research in this area as well. I can only support the possibility
of agriculture to be deliverable for renewable energies . We have
some targets for mixing into the transport sector with 2% to be
part of the fuel mix in 2005, last year, and a target of 5.75%
in 2010, and then I think 8% in 2013, but we are not at all there.
The only Member State that has really been pushing this is Germany.
We are now discussing at the end of this year whether we will
make these targets mandatory and if this is the final solution
then we will really boost the production. If we should meet 5.75%
mix in renewable energies from agriculture in the transport sector
we would need 80 million hectares out of 104 million which is
the total amount. I do not think this is possible and therefore
we have to rely to a certain extent on imported bio-ethanol from
some of the big suppliers, very competitive suppliers. I think
it would be a mix of domestic production and imports. Then we
have to make specific efforts in the second generation of bio-ethanol
where you can produce ethanol on waste, on slurry, on manure,
on straw, all these products that are not used specifically nor
of high value today. Yes, there are possibilities and I encourage
the sector to produce, and, of course, on the condition that the
Member States support it, but at this stage you cannot produce
ethanol without a willingness from the finance ministers.
Q263 Mr Williams: You quite rightly
identified the extra costs that European farmers suffer as a result
of society's expectations in terms of environmental protection
and animal welfare and the direct payments they receive mitigate
against those extra costs, but European farmers also have extra
costs in comparison with other producers in the southern hemisphere
as a result of climatic and geographic disadvantages. It does
seem that post-2013 if they lose the direct payments and also
lose the protection of tariffs the outlook for European agriculture
is going to be particularly difficult. Beef tariffs at the moment
still run, I think, at £1.70 a kilo plus 10% of the value
of the product. Has any work been done about the outlook if both
those forms of protection are removed in terms of food production?
Mrs Fischer Boel: But that is
exactly what I miss in the UK paper. There are no background explanations
of how you conclude as you do in this paper. That is why these
impact assessments will be from my point of view needed, because
with the estimations that we have on the consequences of a totally
liberalised situation with no direct payments, with zero tariffs,
most European farmers will be kicked out of the market.
Q264 Mr Williams: Most reform of
the Common Agricultural Policy has taken place as a result of
international trade negotiations, internal budgetary pressure
from the EU itself and enlargement. At the moment the Doha Round
has stalled, the budget has been fixed to 2013 and with Romania
and Bulgaria coming in that will be the end of enlargement in
the very near future. What pressure exists, do you think, for
fundamental reform from some of the nation states? Some nation
states would like to see a fundamental reform in the 2007-08 review.
Mrs Fischer Boel: First of all,
on the stalled Doha Round, I hope that we will manage after the
mid-term elections in the United States to bring these negotiations
back on track. I think it will be to the benefit of the European
Union as a whole. We have agriculture but we have services and
we have industrial products as well, so clearly a balanced outcome
is to be preferred. If we do not take this window of opportunity
which might be seen after the new year for a fairly short period,
I think, then we will face a situation where the next possibility
will be when the next administration in the United States takes
office and that is 2009. The world is not standing still. Even
if there is no reform I am quite sure that we will face problems
in Europe and in the United States from meeting panels from Member
States. There will be extreme pressure on our export refunds to
be phased out anyway, and then in 2009 it will be a completely
new reform because I am not sure we will manage to sell the CAP
reform from 2003 again in 2009 and export refunds. If possible,
therefore, we should take advantage of finalising these negotiations
at this stage. On the mid-term review of the financial perspectives,
yes, I am sure there will be pressure on reforming agriculture
again, but I remember clearly 2002 when heads of state agreed
on a budget for agriculture in Brussels. They set a limit on the
expenditures. Actually, it is a decreasing ceiling because the
inflation rate is calculated at 1% and as it is two then it is
a natural decrease and we finance also Romania and Bulgaria underneath
this ceiling. I think that if we cannot stick to an agreement
by heads of state it will be difficult to plan anything for the
future. We need to have a political discussion on that occasion
on the future to send clear signals: yes, there will be cuts in
the direct payments but this is not going to take place until
after 2013, so let us have a fair planning period and let us put
on the table and discuss the consequences of all these ideas:
the intervention system, the quota systems, more rural development
policy, et cetera. I think this will be a huge opportunity, to
take this discussion in due time and not at five minutes to 12.
Q265 Mr Williams: I am sorry to press
you on this, but in Finland you made it very clear that you see
2007-08 as a review rather than a major radical reform, and I
think you said it would be a health review, not an amputation,
which I thought was a very good way of looking at it. Yet when
Commissioner Fischler, your predecessor, introduced the mid-term
review, we did not expect such a radical reform as we received
and there is concern that there will be a radical reform, the
outcome of which is unclear at the moment. Perhaps you would like
to reaffirm your commitment to a lighter touch rather than a more
radical approach.
Mrs Fischer Boel: I was very careful
when I chose the name of this health check because I had memories
of being a minister in Denmark at the time when this mid-term
review became a completely new reform, which was good, but nobody
had prepared themselves for such radical reforms. Therefore, yes,
let us have a discussion on the health check but it is not a new
reform. We have to digest the 2003 reform with the possibilities
of simplifying. I think we are all interested in making things
more simple without losing the idea behind cross-compliance, for
example. Yes, it is a health check and you were in Helsinki so
you know why I called it a health check. It is not because you
are sick; it is because we all need sometimes to have a check
of our blood pressure and whatever to be sure that we are completely
fit for the future. That was the reason for choosing that name.
Q266 Chairman: But I suppose if the
check revealed that there was something wrong with the patient
you might be forced to take rather quicker action than to send
the patient on their way with a pat on the back, saying, "Everything
is okay till 2013", so how fundamental is the analysis going
to be when you do the health check into how healthy the CAP is?
Are you going to produce a document that, if you like, is a review
of the state of the health of all or parts of the CAP because
you are already agreed, for example, to reassess the dairy regime,
the implementation of the single farm payments and certain other
specific items, but it would not take much more work to go and
do a complete check on how the whole thing is working? How far
is this check going to go?
Mrs Fischer Boel: We committed
ourselves in the reforms to making these health checks on specific
areas such as the cross-compliance and the decoupling, and we
can add a number of the items that we want to look into as well,
simplification, for example. It is not a one-off discussion; I
think it is an ongoing exercise, how can we make things more simple.
Then I said, "Let us look at the set-aside. Is that interesting
or important or necessary in the situation where you have the
decoupled system?". They are two separate exercises but they
are running in parallel and back-to-back if possible, but that
depends on the discussion on the treaty. Will we have a discussion
on the treaty in 2008 or, if this discussion on a new treaty is
running into the mid-term review of the budget, then I think it
could be difficult to have a serious discussion on specific issues.
I think that if you have good ideas on the health check do not
hesitate. I have invited all the European young farmers to a conference
in Brussels next May to hear their views on what needs to be done
now and what is the view for the future because they are very
entrepreneurial and very ready to face the challenges for the
future.
Chairman: We are glad already that we
have sold at least one copy of the report that will come out of
these discussions.
Q267 Lynne Jones: How is the notion
of a health check compatible with the wide-ranging financial review?
Mrs Fischer Boel: On the health
check it is based on the commitments that we made on the reforms—on
the reform in 2003, the big one, on the Mediterranean products
in 2004, we made a sugar reform in 2005, and we will look into
how does it work, how does it function, where do we need to change.
Q268 Lynne Jones: At the same time
as a wide-ranging review that affects the CAP is there not going
to be pressure for more major reforms than are implied by a health
check?
Mrs Fischer Boel: Of course, from
some Member States and others there will be a huge resistance,
a horror of touching the ceiling of the 2002 agreement and sticking
to the fact that yes, we committed ourselves to a reform on the
condition that we had this planning period up till 2013 on the
budget. We need to send clear political signals in 2009 on what
the future will be like. They are two different exercises and
that is why I say one vision but two steps. They might be going
back-to-back but they are two different steps. If we do not introduce
our ideas for the future, and the future again is 2013, then others
will decide for us. I feel more competent than some others to
have ideas and to send clear political signals. Then these will
be discussed in the Council because I do not decide; I can just
propose ideas to be discussed and then the majority in the Council
decides at the end of the day what is going to happen. It is clear
when you look into the Council meetings that there are huge differences
of opinion on what needs to be done. There are some Member States
that are very reluctant to discuss anything and there are others
that are very open to having a new reform in 2009. Therefore we
have to find the right balance. This is the obligation from the
Commission, to present something that is long-lasting (and long-lasting
is until 2009) with the necessary changes because if we send signals
in 2009 that there will be no prolongation of the quota system
in the dairy sector the value of these quotas will be decreasing
over the period. If farmers know that there will be fewer direct
payments available after 2013 then you can imagine that the value
of the land will be decreasing, not dramatically, I think, but
you adapt to a new situation because you have had the capitalisation
of the direct payment more or less into the value of the land,
so nobody would be taken by surprise but they can adapt their
investments, their considerations for the future, in a decent
way.
Q269 Lynne Jones: I understand all
those arguments but if at the end of the day there is a fundamental
review of the budget, unless it is going to agriculture, agriculture
being the biggest area of expenditure, it is inevitably going
to have a knock-on effect. You are determined to resist such pressure,
I gather, and you would hope that the outcome of the review would
not bring in any major changes to your budget.
Mrs Fischer Boel: But would you
expect me to lie down on the ground and say, "Yes, I am willing
to give 50% of my budget to reduce the British rebate"? That
is what we are talking about.
Q270 Lynne Jones: How do you see
the balance moving though in the next couple of years? Where does
the power lie within the Commission?
Mrs Fischer Boel: It is two years
since I took office and I feel a much more open mind to discuss
changes in the agricultural sector than I did two years ago, and
I think this is a huge positive approach, that you do not say,
"No, we do not want to discuss it". Yes, Member States
want to discuss it in a much more open and transparent way than
previously because I want to give this predictability to the sector
and not decide or keep my cards so close to my body that nobody
knows what I intend to do. You could feel in Helsinki and during
the informal meeting that there was not the automatic pilot resistance
to discussing changes, and that I think is very positive.
Q271 Mr Drew: But there are those
who have to undergo much more radical surgery and they are the
new entrants and the potential new entrants. In what way are we
looking at quite a difficult process in as much as you cannot
pretend that the existing Community can do things by apparently
trying to rationalise what it has done in the past and change
because there are those new countries that are going to find that
very difficult to encompass?
Mrs Fischer Boel: We have now
introduced a new rural development policy for the next period
up till 2013 and there is a variety of different possibilities
compared to what you saw previously. You have this different axis
of rural development policy where we are much more diversified
than ever before. We have now introduced innovation into the rural
development policy to give clear signals that this is very important
for the future. Let us continue to make things more simple. We
have a SAP system in the new Member States, a simplified system,
which I think they should keep because it is the simplest way
for paying money that you link the same payment to all the hectares,
the same level. This is crucial.
Q272 Mr Rogerson: Commissioner, you
have said that you put simplifying the policy at the top of your
agenda. Do you think that the universal adoption of a flat rate
system and a moving away from a historic based payments system
is part of that simplification process?
Mrs Fischer Boel: Trying to imagine
a situation in 2017 where you are going to explain why there are
entitlements of different value because the former owner of this
farm occasionally had a dairy production in 2001 I think will
be difficult. Therefore, one of the discussions that we should
have on the mid-term review of the budget is, should we be targeting
a much more flat rate system with our payments, and I presume
it would be very well accepted everywhere to try and make things
more simple. There will, of course, be a resistance to this discussion
because simplification sometimes means that all the privileges
that you have been putting into some areas once upon a time, historical
based from 2000 to 2002, will disappear and they are not very
fond of getting rid of their specific profitable rules linked
to a previous production but I think we need to have this discussion,
so yes, I am in favour of having a discussion on whether it is
possible to go towards a more flat rate system and that is the
reason why I have been very willing to prolong the possibilities
for the new Member States to keep their SAPS system, their simplified
direct payment system.
Q273 Mr Rogerson: Do you think that
a logical extension of that would be to move towards a common
hectare payment across the Union ultimately?
Mrs Fischer Boel: Across all the
European Union? But then you would make it even more difficult.
If you could make a flat rate system, a single farm payment system,
within the Member States linked to the original calculations on
the output then I think it would be a huge step forward. It is
too early to imagine that you could have the same flat rate all
over Europe. If we can just make it a flat rate country by country
it would be a huge contribution to the simplification.
Q274 Chairman: But how are you going
to answer those Danish farmers that we met who said, "Please
do not forget it is more difficult to farm here. The costs are
higher than in the easier areas of other parts of the Community"
with a flat rate scheme?
Mrs Fischer Boel: You must know
that now I am the Commissioner for the European Union and not
the Danish Minister.
Q275 Chairman: I should have said
Finnish farmers. You heard them at the meeting. I apologise; it
should have been Finland.
Mrs Fischer Boel: I am also very
cautious when you mention Danish farmers.
Q276 Chairman: You carry on being
cautious, but let us move a bit north; I got it wrong. Finland—they
made that point very clearly, that they believed that they had
special circumstances which merited additional support, so a flat
rate scheme would not be easy as soon as you have a long queue
with exceptions.
Mrs Fischer Boel: With a flat
rate system you would need a rural development policy to facilitate
the specific difficulties that you might face, for example, in
the very northern part of Finland where it is quite clear that
the summer is very much shorter than you see in other parts of
the European Union, but, of course, there are differences in production.
If you ask a Portuguese farmer he will say, "Of course you
have difficulties up in the northern part of Finland but I have
difficulties here. I have no rain, I have droughts, and therefore
my production facilities are very difficult and very different
from the major part of Europe". You need one way or another
to embrace these very diversified possibilities for production
within the European Union. A rural development policy targeted
to the specificities of different Member States could solve these
problems, I am quite sure.
Q277 Sir Peter Soulsby: Commissioner,
can I return to the issue that you touched on earlier amidst concerns
about land abandonment and related environmental issues? There
was something that we heard very strongly from Commission officials
in January when we visited and heard subsequently when we visited
both France and Germany, and no doubt you have heard it elsewhere
as well. Am I right in understanding that this is a very specific
concern that you have about the UK Government's vision for the
future, that there are issues there that perhaps have not been
adequately thought through?
Mrs Fischer Boel: If you try to
make an impact assessment on the consequences of the UK paper
with no direct payment, with zero tariffs, free access, then I
am quite sure we would see a situation where first of all the
least developed countries would face huge difficulties. Sometimes
you think that you solve their problems by reducing tariffs within
the European Union, but the fact is that the least developed countries
in the world, the 50 poorest countries in the world, today have
free access to the European market, zero tariffs and no limits
on quotas, so they can sell today. The more you lower the tariffs
the more they will say, "We face erosion of preferences".
I am so sure that Benin will never be able to compete with Brazil
in a situation where you lower the tariffs. Therefore you have
to be a bit careful when you say, "Lower tariffs. It is always
better for the developing countries". Yes, for the most developed
developing countries it is, but for the poor countries they can
today produce whatever they want and sell it into the European
Union. By the way, Europe is today by far the biggest importer
of agricultural commodities from the least developed countries.
We are bigger than Canada, the United States, Japan, Australia
and New Zealand all together. We have shown that trade is a possibility
to increase the standards of living for these poor countries.
If we look internally at what will be the consequences for European
Union agriculture with the calculations that our economists have
made, it will not be possible in some areas of the European Union
such as mountain farming to compete at zero support, at zero tariffs
in the future, and that is the reason why if we do not want abandonment
of land we need a level of, as you say, direct payment. I have
said that we will have a discussion on how low can we go, but
if you have no cross-compliance you cannot ask the farmers to
keep their land to good environmental standards. I think we should
try to find a decent balance and then give time for the farming
society to respond to the new situation.
Q278 Sir Peter Soulsby: To what extent
do you think that properly targeted agri-environment schemes under
Pillar 2 will have the potential to prevent land abandonment and
mitigate environmental consequences?
Mrs Fischer Boel: If we try to
imagine that there is no direct payment then the million dollar
question is how much do we need in rural development funding to
compensate or to secure that farmers will not leave the most vulnerable
areas in Europe? This calculation has never been made but I think
you have to face the fact that considerable funding would be necessary
in the rural development policy. Therefore, let us have these
calculations that I hope have been the basis for these fairly
far-reaching proposals. I am clearly in favour of changes. Do
not look upon me as a person that does not want to change anything.
Q279 Lynne Jones: A conservative!
Mrs Fischer Boel: I am trying
to be careful and not offend anyone. You need to be aware that
you will be facing changes, so let us decide in due time.
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