Agricultural lobby fears further reform of the CAP in next EU budget

European Diary: The agricultural lobby is getting restless in Brussels

European Diary: The agricultural lobby is getting restless in Brussels. The twin threats of a World Trade Organisation (WTO) deal on liberalising trade and proposed changes to how the next EU budget is spent are the main causes of concern.

"Totally unacceptable" is how the Irish Farmers' Association (IFA) greeted new ideas floated last week by European Commission president José Manuel Barroso in an effort to break the deadlock over the next EU budget for 2007-13.

"Pandering to the anti-farmer tendency of Tony Blair" was the judgment of the Irish Cattle and Sheep Farmers' Association, who fear reform of the common agricultural policy (CAP).

The proposals unveiled by Mr Barroso would siphon off 1 per cent of CAP payments to farmers from 2009 onwards and provide for a fundamental review of CAP when the next EU budget period ends. But they would also safeguard the current CAP system from further reform until 2013.

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The commission's plan is a clear attempt to find a compromise between the French and British who clashed bitterly over the CAP in June, causing negotiations on the EU budget to fall apart amid much acrimony and name calling.

Tentative budget talks are now expected to resume at the Hampton Court summit this week with hopes of a deal by mid-December.

The stakes are high for European farmers, who benefit from almost €50 billion per year in payments made under the CAP. This outlay makes up a huge chunk of the EU budget - 44 per cent of an €110 billion budget in 2004 - a statistic that is causing consternation in London, where Mr Blair wants reform and a greater focus on using EU cash to modernise Europe rather than propping up the farming sector.

States that benefit from the CAP, such as France and Ireland, which received receipts worth €10 billion and €1.4 billion respectively in 2004, naturally don't follow Mr Blair's logic.

French president Jacques Chirac, whose first big job in French politics was agriculture minister, is a staunch supporter of the CAP and is under pressure from a politically important farm lobby at home.

Mr Chirac has been nicknamed "le bulldozer" by journalists, and observers attribute France's tough stance on farming, at least in part, to his emotional attachment to the sector.

In Ireland's case, Minister for Agriculture Mary Coughlan made her views clear at the Fianna Fáil Ardfheis when she said: "We will stand up for the cause and the future of Irish farming at the farm gate, in Dáil Éireann, in Brussels or at the WTO."

However, both politicians know the EU budget is not the only threat on the horizon.

In parallel with the renewed focus on the 2007-20013 EU budget last week in Brussels, Mr Blair's former Labour Party friend, Peter Mandelson, was attempting to hammer out a global trade deal at the WTO with agriculture dominating the debate.

The trade commissioner is under huge pressure from EU trading partners, such as the US and developing nations like Brazil, to reduce trade tariffs and renegotiate quotas on their produce.

Heavy cuts in tariffs will create more competition for Irish and French beef and ultimately will reduce farm incomes. But without a deal on agriculture, the other trading blocs say they will refuse to open their markets to EU services and industrial products - a scenario that is bad for Ireland, Europe and the global economy.

Under EU rules governing trade Mr Mandelson must represent the interests of the EU at the WTO talks under a mandate granted by member states at council.

Not an easy job when the EU remains hopelessly split over the depth of the cuts in agricultural subsidies and tariffs they will accept to clinch a deal in the WTO negotiations.

This divide, largely between agricultural southern European states and industrial northern states, broke spectacularly into the open at last week's foreign ministers' council meeting in Luxembourg.

The emergency meeting was convened at the behest of Paris, which is deeply suspicious of Mr Mandelson and fears he will sacrifice European farming interests in pursuit of a wider WTO deal.

It accused Mr Mandelson of exceeding his mandate by offering too much too early in negotiations with the US and developing nations.

Twelve other states, including Ireland, followed the French at the council heaping pressure on the commissioner, although falling short of changing his mandate for the talks - a move that would have undermined the commission's role as negotiator for the EU.

Round one to Mr Mandelson and the commission, but expect plenty more fireworks ahead. Yesterday France's foreign minister, Philippe Douste-Blazy, insisted EU member states had introduced unprecedented cuts in farm subsidies in 2003 and could not go further. "We must not sacrifice the CAP," he told journalists.

Some observers believe the French are cleverly adopting a tough position to strengthen Mr Mandelson's negotiating position with the rest of the world. Others believe they are preparing to torpedo a WTO deal. But as EU agriculture ministers gather in Luxembourg for talks today there will be more anxious conversations about how the CAP will be affected by a WTO deal. And come EU budget negotiations in December, leaders can expect a few sleepless nights over the future of the CAP.