EU POLICIES: THE CAP, NATURAL RESOURCES AND ILLEGAL LOGGING

Following intensive negotiations and discussion on the reform of the Common Agricultural Policy (CAP) the EU Agriculture Council, on 29 September, moved towards implementing the first steps of the CAP compromise package and debated support reductions for various agricultural sectors. During the meeting agriculture Ministers also started off discussions on the future of the EU tobacco, cotton, olive oil and sugar sector. Furthermore, as part of its 6th Environment Action Plan the EU has published its first strategy on the sustainable use of natural resources -- aimed at raising a policy debate amongst a broad range of stakeholders -- and has moved towards developing legislation on the import of illegally logged timber.

First phase of CAP reform implemented

The EU Agriculture Council approved first regulatory measures targeted at implementing the EU-internal compromise deal on reforming its Common Agricultural Policy (CAP), which had been agreed on 26 July 2003 in Luxembourg. The reform package will affect the milk, rice, cereals, durum wheat, nut and dried fodder sector. Part of the reform aims to reduce direct payments for bigger farms and redirect payments into the rural development pillar of the CAP. In addition, large parts of the production-linked payments will be merged into a single farm payment scheme, while payments will be largely decoupled from production and made contingent on cross-compliance with environmental, food safety and animal welfare standards (see BRIDGES BioRes, 30 June 2003). However, part of community farm support remains coupled to production, in particular in the cereals sector, oilseeds and protein crops (25% coupled), potato starch (60%), and in the durum wheat (40% of supplementary aid per hectare) sector. This is meant to give EU member states flexibility, security and a smooth transition to producers amidst what has been described as the most radical change since the foundation of the CAP in 1958. Furthermore, partial compensation and support for income losses resulting from a reduction of intervention prices and community support, as well as incentives to produce quality products will be provided in the, inter alia¸ durum wheat sector, the rice sector and the nuts sector.

By diminishing trade-distorting support in the agricultural sector, the CAP reform is expected to strengthen the EU's position at the WTO negotiations on agriculture, which, however, are currently stalled due to the collapse of the WTO Cancun Ministerial meeting in September (see BRIDGES Weekly, 25 September 2003).

Discussion on reform of tobacco, cotton, olive oil and sugar sectors

Further reform initiatives with respect to tobacco, cotton, olive oil and sugar, sectors that previously were not covered under the Luxembourg reform package, were also discussed. For tobacco the proposal suggests phasing out the production-related subsidies over three years, including decoupling existing premiums, abolishing the Community Tobacco Fund and restructuring tobacco-producing areas. With regards to cotton and olive oil the proposal suggests that 60 per cent of the subsidies would no longer be linked to production, but be converted into new entitlements to the single farm payment scheme. In addition, the Commission suggests three ways to reform the sugar sector. One suggestion, which is likely to be controversial among EU member states, would be to open the EU sugar market to foreign competition, in particular from developing countries. Another option would be to progressively eliminate production quotas, and harmonise prices for imported sugar with internal EU prices. The last option would be to slowly reduce quotas, tariffs and prices without abolishing the current support system (see BRIDGES Weekly, 25 September 2003).

Although the reform is aimed at bringing better market orientation, environmental benefits, enhanced competitiveness and more stable income for farmers, proposals are likely to be met with strong resistance from environmental organisations, EU producers and agriculture ministers, alike. Opposition is in particular expected from France and Germany, the major sugar producers in the EU, as well as from the Mediterranean countries, the major producers of olive oil, cotton and tobacco. Oxfam, on the other hand, believes that the proposals submitted would not be sufficient to end surplus dumping. Oxfam argues that sugar farmers in the EU would be compensated for lower prices through direct payments. In 2001 EU subsidies amounted to EUR 1.4 billion for sugar, EUR 973 million for raw tobacco, EUR 2.524 million for olive oil and to EUR 773 for cotton.

Consultation on the sustainable use of natural resources

On 1 October the EC Commission outlined its Thematic Strategy on the sustainable use of natural resources, which aims to promote economic growth without causing environmental degradation. The main activities of the strategy include gathering and updating information on the environmental impacts of resource use, assessing policies affecting the use of natural resources, as well as identifying appropriate measures to ensure that policies are supportive of the sustainable use of natural resources. The gathered information will be used to develop a knowledge base providing, amongst others, data on the specific environmental impacts of the use of natural resources, as well as related technological and socio-economic changes. Based on this information, the Commission hopes to be able to develop appropriate policy assessments for example on how trade policy affects the import of tropical timbers. Finally, through policy integration it is hoped that resource-related environmental issues will also feature in other policy areas. The overall aim of the multi-stakeholder process is to reach the objectives of the Lisbon strategy by decoupling economic growth from environmental degradation.

The resource strategy is linked to two other initiatives introduced this year; the Integrated Product Policy assessing environmental impacts of products through life-cycle assessments, and a waste strategy promoting the recycling of waste and limiting the amount of waste produced. The resource strategy, which is being developed in cooperation with European institutions as well as public and private stakeholders, is expected to be operational in 2005. The second stakeholder meeting to continue discussions will be held on 14 November 2003.

New EC policy to halt illegal logging

Related to the discussions on the sustainable use of natural resources EU agricultural ministers on 13 October instructed the Commission to draft legislation to allow only certified legal timber imports to enter the region. This is an initiative to clean up the estimated EUR 1.2 billion in illegally sourced timber imports that cross EU borders. The EU has a substantial market for harvested timber, with Africa being the largest supplier of plywood and sawn wood, followed by Asia. The proposed legislation foresees that the timber exporting countries or regions sign up to the "Forest Law Enforcement, Governance and Trade" agreement, which obliges them to certify the timber exported to the EC as legal. WWF supports the proactive steps of the EU towards environmental sustainability, but remarks that there are still many things to improve, such as integrating Public Procurement Directives in its forest policies. The legislation on the import of illegally logged timber is expected to be finalised by mid-2004.

ICTSD reporting; "EU Aims to Stem Illegal Rainforest Timber Trade," REUTERS, 14 October 2003; "EU Plan on Illegal Logging: now it's time to legislate!," WWF.DK, 14 October 2003; "Sweet nothing in EU sugar reforms," OXFAM, 23 September 2003; "Commission starts consultation on sustainable use of natural resources," EURACTIV, 3 October 2003; "Commission outlines strategy for sustainable use of resources," EUROPEAN COMMISSION, 1 October 2003; "Brussels offers three ways to start CAP reform," GUARDIAN, 24 September 2003; "Agricultural reform continued: Commission proposes sustainable agricultural model for Europe's tobacco, olive oil and cotton sectors," EUROPEAN COMMISSION, 23 September 2003.