2 - Decoupling - A more sustainable system of direct payments European Council Berlin 1999 Agenda 2000 EU Institutions Member States Civil Society European Council Göteborg 2001 Sustainable Development THE MID-TERM REVIEW Rural development - Strengthening the second pillar 4 - Dynamic Modulation - A better balance of support 3 - Cross Compliance - Improving respect of standards 1 - Markets - Stabilizing Markets

THE MID-TERM REVIEW 2002 Remains in the logic of the reform process started in 1992 Stays within the overall ceiling for agricultural expenditure fixed in Berlin Continues to pursue the policy objectives of AGENDA

Markets - Cereals Proposals Outlook Broadly favourable for wheat, but major uncertainties; difficulties for some coarse grains (rye) Completing the reform process Further 5% step of reduction in intervention price, compensated as in Agenda 2000; abolition of monthly increments Review of border protection mechanism Rye Abolition of intervention Durum wheat Reduction of specific supplement to €250 per ha and abolition of specific aid in established areas, quality premium of €15 per t 3

4 No significant deterioration of production potential Markets - Oilseeds

5 Reduction of 50% in basic price to €150 per t in 2004/5 New safety net intervention at €120 per t Compensation paid in form of a coupled (€75 per t) and a decoupled payment (€102 per t) Markets - Rice

Markets - Other crops Dried fodder Envelope for producers of €160m Single support scheme for industry of €33 per t Nuts Maintenance and simplification of support Flat rate payment (€100 per ha) and national top-up (€109 per ha) 6

7 Markets - Beef further decoupling of headage payments together with reinforced cross-compliance conditions, reduce pressures towards intensive production. no other specific beef measure appears necessary at this stage for market or environmental reasons. reinforcement of conditions for exports subsidies for live animals Market recovering No specific market measure necessary at this stage Proposed decoupling of headage payments should reduce pressures towards intensive production Reinforcement of conditions for export subsidies for live animals

Markets - Dairy options Outlook Despite short-term deterioration, favourable market prospects for medium and long term Options –Continuation of Agenda 2000 with no change –Repeating the Agenda 2000 approach –Introducing a two tier quota system –Removal of quotas 8

Why Decouple? Shift of support from production to producer Improved market orientation Farmers can benefit from market opportunities Payments better secured internationally 9

Decoupling Establishment of a farm income payment –Introduction of a single decoupled income payment per farm. –Based on historical payments –Farms will have almost complete farming flexibility –Member states have flexibility to chose method for transferring entitlements following common principles 10

Improving respect of standards Cross-compliance All income payments will be conditional on the respect of statutory standards These will cover food safety, environmental protection, animal health and welfare, as well as occupational safety Farm auditing Community wide system of farm auditing for commercial farms Mandatory as a part of cross-compliance for producers receiving more than EUR 5000 per year in direct payments. 11

Improving environmental incentives Environmental set-aside Long-term non-rotational set-aside (10 years) on arable land eligible for the farm income payment. Based on existing land in compulsory set-aside. Support for energy crops – a carbon credit Replacement of non-food set-aside with a carbon credit, Non-crop specific aid for energy crops Aid would be paid to producers in a contract with a processor. 12

A better balance of support Dynamic modulation All direct payments reduced progressively in steps of 3 % per year. The maximum reduction will be 20 % (maximum in Agenda 2000). Standard franchise of EUR 5000 for 2 annual work units and franchise EUR 3000 for each additionally employed AWU Amounts saved distributed to member states on the basis of agricultural area, agricultural employment and prosperity Capping beyond EUR (and the franchise) with funds transferred to the second pillar in the member state concerned 13

New accompanying measures: – –New food quality chapter in the rural development regulation (quality assurance, certification schemes, related promotion activities). – –“Meeting standards” chapter (temporary, degressive aid for implementing statuary EU standards) – –Support for farm audits. New animal welfare measure (in agri-environment chapter) Increase in cofinancing of agri-environment by 10 percent –– –– Strengthening rural development 14

Budget 15 Expenditure under heading 1a will remain within the corresponding financial perspective ceilings throughout the period 2000–2006. (Current CAP) The mid-term review is estimated to provide a saving of € 200 Mio in 2006

Effects Greater flexibility and opportunities for farmers. Higher quality products and certainty for consumers Better value for money for taxpayers through budgetary stabilisation and more provision of public goods. Farm income payment represents a considerable simplification Enlargement will be facilitated by simplification and decoupling. Proposals should help the EU to pursue a positive agenda in the Doha Development Round 16