The Brussels Ceiling
11. In 2002, France's president, Jacques Chirac, and
Germany's chancellor, Gerhard Schröder, agreed that spending
on Pillar 1 of the CAP (direct subsidies and market support but
not rural development spending) should not rise by more that 1%
a year in cash terms until the end of the next Financial Perspective
in 2013. This is known as the Brussels Ceiling and the agreement
was endorsed by the European Council in October 2002. This effectively
freezes Pillar 1 expenditure until 2013[6]
and is the basis for the Commission's budgetary proposals for
agriculture.
BOX 1
The Changing Face of the CAP
The CAP of today bears little resemblance to the
CAP of the 1960s. The emphasis of the early CAP was on increasing
food production and protecting the incomes of farmers, following
the shortages of World War II. The CAP sought to maintain guaranteed
prices through market manipulation and frontier protection. To
a great extent this policy succeeded and allowed the Community
to become self-sufficient in food production in a very short time.
However, by the 1980s, the success of this policy
was resulting in an almost permanent over-supply of major food
commodities. These had to be either exported (with subsidies)
or stored or disposed of within the EU. Such measures were increasingly
costly, distorted world markets and proved unpopular with European
taxpayers. Increasing international concern over the trade distorting
effects of the CAP and other developed country farm policies,
and the environmental implications of increasingly intensive agriculture
led to overwhelming pressure to reform the policy in the early
1990s.
Agricultural trade issues dominated the Uruguay Round
of General Agreement on Tariffs and Trade negotiations which culminated
in the Marrakech accord of 1994. The Uruguay Round Agreement on
Agriculture, which was a major feature of that accord, imposed
important limitations on the subsidising of farm exports, and
reduced import barriers. The CAP reforms applied in 1993-6 were
the response to this agreement. The Community was forced to cut
prices for cereals and other major commodities so that the need
to subsidise exports was substantially reduced, and so that domestic
production could remain competitive against imports. An important
element of this new policy was the introduction of "compensation"
to farmers, through direct subsidies, for the reduction of guaranteed
prices.
Nonetheless, through the 1990s, the EU continued
to operate a policy which maintained important elements of the
old CAP: intervention buying, export subsidies and a high import
tariff, in addition to the new direct payments. Production and
the cost of the CAP continued to increase, with the agricultural
budget increasing by over 30 per cent between 1992 and 2000.
The reformed CAP: Pillars 1 and
2
12. The current approach to European agricultural
and rural support was essentially determined by the 1993-96 reforms,
and further refined by the Agenda 2000[7]
adjustments within the Financial Perspective for 2000-2006. Agenda
2000 further reduced internal market prices and compensated farmers
by increased direct payments under what became known as the first
Pillar of the CAP. The various elements of support for rural development[8]
were amalgamated under the so-called second Pillar.
13. Following the mid-term review[9]
in 2003, a number of radical
reforms were agreed[10].
These began a process of change that will fundamentally alter
the way in which European farmers' incomes are supported. The
single farm payment (which decoupled support from production)
was introduced, together with provisions for cross-compliance
(making payment conditional on the recipient meeting certain environmental
and animal welfare conditions) and for reductions to be made from
direct payments ("modulation") in order to provide additional
Community support for rural development.
BOX
2
What is cross-compliance?
