Ultimately, Chirac was able to combine his agricultural expertise with a situation ripe for revision: a CAP agreement that was over budget, with no country willing to increase their contribution to the EU in order to close the gap. Chirac’s personal rewrite of the CAP agreement faced little resistance as he stood firm and the other major member states relented due to other considerations which France in turn did not oppose. The main changes imposed by Chirac included a smaller cut for grain prices, increased compensation for beef, and the extension of the milk quota regime by a further two years including an additional delay in price cuts. The UK was concerned with both protecting its rebate and, like Spain and the Southern countries, ensuring access to and increasing their share of cohesion funds. Chirac left Italy’s milk quota increase in the package, thereby ensuring their continued support for CAP reform. The biggest source of opposition should have come from Germany, but it was facing political crises domestically and also in its role in the rotating EU presidency. Schröder’s government was in disarray after finance minister Oskar Lafontaine’s abrupt resignation. At the EU-level, in its role in the rotating presidency, Germany was dealing with the crises in the Balkans, which had now escalated to a NATO bombing campaign and also with the stunning resignation of the entire European Commission, under pressure from the European Parliament . An independent investigation revealed widespread fraud, misconduct,vertical hydroponic farming mismanagement of financial systems, and suggested that “[the Commission] had lost control of the administration” of the EU 25.
A failure of the European Council to act decisively and to successfully conclude Agenda 2000 would be a major embarrassment for Germany and the entire European Union, which it was struggling to lead. With Germany politically weakened, the other major member states distracted by other priorities, and the EU struggling to appear decisive under the shadow of both an international and an institutional crisis, Chirac was able to amend Agenda 2000 to be more in line with his personal preferences after threatening to leave Berlin without concluding the negotiations. In the end, the overall reform was diluted even further largely by reducing the size of price cuts and delaying the timing of reform. This point is essential: the CAP budget was brought under control not by slashing farmer compensation, but by delaying cuts and reforms that would result in further market liberalization. Savings were generated not by reducing compensation packages but by delaying and/or reducing market reform. Price cuts were lowered from 20% to 15% for cereals and the delay of dairy reform was extended a further two years, until 2008. By making cereals cuts smaller than initially proposed and maintaining the dairy quota system the EU reduced and/or delayed the amount of money it would have to pay out as compensation in the form of direct payments. Instead, consumers would continue bear the cost of the price supports. Alternative solutions that would work within the budget, such as reducing the level of compensation or imposing payment ceilings, were rejected . The final agreement formally rejected both alternatives for budget stabilization though it did permit member states to apply modulation, if they so desired . In the end, all the key players left Agenda 2000 with their key interests protected: France avoided co-financing and protected the high levels of transfers it received from the CAP; Germany avoided further increasing its contribution to the CAP budget; the Southern countries protected their current level of structural funds ; and the UK protected the Thatcher rebate.
Overall, the cuts in the final agreement were smaller and took effect at a later date than in the initial proposal. Reducing the size of a proposed cut and/or delaying the time at which it will come into effect are strategies used by welfare state reforms. Reducing the size of a proposed cut is one way to buy off support for a reform while delaying the date of implementation allows the current policymakers to distance themselves from the negative consequences of the reforms they have adopted. The risk, of course, is that these reforms may never actually take place, as the delay affords future actors the opportunity to amend or entirely eliminate the reform before it takes place. Also similar to the process of welfare state retrenchment was the Commission’s use of targeted concessions, like increased milk quotas for some member states. Reform is achieved after support is bought from a key actor, in this case Italy, whose support was crucial to breaking the blocking minority on dairy reform. The Commission’s initial proposal was effectively watered down twice, once in order to reach a compromise in the Agricultural Council and a second time by French president Jacques Chirac at the Berlin Summit several weeks later. Chirac’s watering down of the proposal included reducing the price cut for grain from 20% to 15% and increasing the compensation paid to the beef sector. In addition, dairy reform, by way of finally removing the quotas, was delayed even further. The round of price cuts and compensation continued in the vein of the MacSharry Reform. Yet despite the cuts, EU prices for goods, particularly cereals, still remained well above world prices. As a result, the EU had to continue using export subsidies . The compensation specified in this reform was to be added on top of the compensatory payments already received under the MacSharry Reform.
While these cuts would allegedly help reduce the problem of surplus production by lowering price guarantees, the CAP still had yet to achieve the full decoupling of payments from production. Modulation was ultimately left up to the member states. If they desired,vertical gardening systems they could modulate payments to farmers for specific reasons such as, “below-average employment density, above-average profit level” or the total level of payments to the farm . The agreement required that any savings collected by the member states through this optional modulation had to be spent on rural development or environmental programs. Cross-compliance was adopted, but only as an optional measure. Member states that choose to impose cross-compliance on their farmers were also allowed to set their own environmental standards so long as they did not distort competition between the member states . While implementing cross-compliance in an optional, non-binding form with no universal environmental standards was a weak outcome, it did position the Commission well for future reform along the same lines. Moreover, it mirrored patterns observed in welfare state retrenchment, where seemingly small changes implemented early can smooth the way for more fundamental change, or systemic reform in the future. Indeed, in the 2003 Mid-Term Review of the CAP, Fischler was able to use the inclusion of cross-compliance in Agenda 2000 as a sign of tacit approval of the program and to successfully push for its adoption as a mandatory CAP program.The process of the Agenda 2000 CAP negotiations, particularly in contrast to the MacSharry and Fischler Reforms which bookended it, illustrates how CAP reform is more limited without the presence of disruptive politics to open space for broader reform. While trade was a driving factor for the MacSharry Reform, it exerted little pressure on shape or content of the Agenda 2000 CAP agreement. The MacSharry Reform negotiations took place not only while the GATT Uruguay Round was underway, but after agriculture had been identified as a major stumbling block in reaching an agreement. For Agenda 2000, there were no concurrent GATT/WTO talks , and the threat of a new round potentially beginning in the near future was not enough to push the CAP towards further liberalization and away from existing trade-distorting programs. Similarly, enlargement towards Eastern and Central Europe was far enough in the future that it had yet to become a critical issue for the CAP. Moreover, the Commission and the member states were operating under the belief that the new member states would simply be excluded from the direct payments system, meaning that it was not necessary to reform the CAP in preparation for enlargement.
The Agenda 2000 agreement serves as a clear example of what happens when negotiations occur during politics as usual. In such cases, reform outcomes are mostly narrow, limited, and/or non-binding. Emboldened by the sense of urgency lent to the CAP reforms by trade negotiations, impending enlargement, and/or other crises, both MacSharry and Fischler were able to make, and more importantly, deliver on bold proposals, resulting in a major reworking of the core operations of the CAP. Without these disruptive politics during the Agenda 2000 negotiations, the Commission was unable achieve the such systemic reforms. The process of reaching an agreement on Agenda 2000 CAP highlights three tactics commonly employed by reformers seeking to retrench the welfare state: 1) implementing small changes, including even non-binding agreements that allow for deeper structural change in the future; 2) using delayed implementation for cuts as a way to reach an agreement; and 3) marshalling support for the reform package via a number of tactics, including offering compensation in exchange for cuts or changes to programs, buying off member states , and offering special policy exemptions and alternatives to those who are opposed to particular aspects of the reform package. The first tactic is best illustrated by the greening policies, which were adopted but left to the member states to decide how they would implement them. In his 2003 reform, Fischler would use the fact that member states had previously agreed to greening standards as grounds for making these standards mandatory. The second tactic, delaying the initiation of cuts and reforms, was seen in the reforms for all three major sectors: cereals, beef, and dairy. While delays were ostensibly undertaken for the purpose of budgetary feasibility, they also helped politicians avoid blame, as they may no longer be in office when the cuts arrive. Finally, the third tactic, attempting to buy countries’ support with side payments is illustrated most clearly in the dairy sector, with the Commission offering Italy an increase in its milk quota in exchange for supporting the reform and thus eliminating the blocking minority that was preventing an agreement. While Agenda 2000 did not have a landmark initiative like MacSharry’s partial decoupling of payments from production and introduction of direct income payments, Agenda 2000 at least protected MacSharry’s legacy by continuing to cut existing intervention price supports. The compensation for price cuts was added to the existing direct payment scheme, as reformers continued to slowly push the CAP away from system based on market intervention to one that was constructed around income supports. Agenda 2000, also continued to develop the CAP’s second pillar which concerns rural development and greening. Overall, and particularly in comparison to the subsequent Fischler reforms of 2003, Agenda 2000 was unremarkable. It lacked any landmark initiative. Environmental measures, while included, were non-binding and left to member state discretion for the standards. Both options to fundamentally reshape how the CAP is funded, degressivity and co-financing, were abandoned. So too were a number of proposed reforms and cuts in the effort to bring the CAP package in line with the new budget. Many of these reforms were eliminated by Jacques Chirac when he re-opened the already watered down reform agreed to within the Agricultural Council at the Berlin Summit. With Agenda 2000 being not just a CAP reform, but a broad package of reforms designed to orient the EU towards, and prepare it for, the challenges of the new millennium, most proximately enlargement, the member states had to pick where to place their influence. While France used its political capital to go all in on reshaping the CAP to align with French preferences as much as possible, other countries defended different interests: Germany sought to prevent an increase in its budgetary contributions, Spain and the southern countries fought to protect cohesion funds, and the UK defended its rebate.The next chapter examines the third major effort to reform the CAP, the 2003 Mid-Term Review also known as the Fischler Reform. Fischler intended to use this reform to push forward and extend the decoupling of the CAP, first begun by MacSharry in 1992.