The portion of land affected varied by type of production. Financial support for the rest of the land would come as before, via a system of guaranteed prices. In other words, direct income payments were only partially decoupled from production. The third component of the agreement was a mandatory land set-aside program, to remove land from production with the objectives of reducing output and improving the health of the land. Reducing output would also in the long run reduce CAP expenditures, as costs for storage and dumping would decrease. While long-term savings was an oft-repeated refrain of the reforms, details of exactly when these savings would come and how much they would be were murky at best. Contrary to the stipulations of the initial proposal, in the final agreement, land that was required to be set aside was eligible for compensatory payments for price cuts.These measures sought to improve the environmental health of the land via a series of programs, including agri-environmental initiatives, afforestation, and early retirement. These measures were significantly watered down from the initial proposal circulated by Agricultural Commissioner Ray MacSharry. A fifth major proposal, modulation, which would redirect money from the biggest CAP beneficiaries to the smallest farmers, was defeated and thus did not make it into the final agreement. Table 3.1 below presents the initial and final form of each key measure included in the agreement. Not only were price cuts much smaller than initially proposed, but compensation was extended further. Specifically set-aside land,blueberry plant container which was not supposed to be eligible for a compensation payment, was included in that scheme.
Beyond having smaller than proposed pricecuts and a broader extension of compensation, beef and dairy producers benefited from an additional, hidden form compensation in that price cuts to cereals lowered their input costs related to animal feed. In addition, efforts to redirect additional compensation to small farmers and to reduce the payments of the largest CAP beneficiaries via modulation were completely thwarted. As a Financial Times editorial noted, “the more muscular reform that MacSharry had originally envisioned was sapped by the fierce outcry of the EC’s farm lobbies, echoed and targeted by their agricultural ministers” . The MacSharry Reform fits a broader pattern observable across CAP reforms. Changes to CAP policies and programs rarely if ever take money away from farmers; instead, they change how farmers are paid. In the case of the MacSharry Reform, price cuts did not ultimately take money away from farmers. While EU farmers had previously been supported by the CAP through a system of high prices, that support was transitioning to a direct income support system. In the end, farmers were still being paid the same money; it was merely coming from a new pot. This pattern holds up across other CAP reforms. In CAP reform, there is never direct retrenchment, only recalibration. In other words, spending is not cut, but the operation of the program, including how funds are delivered, is reformed. Of the twin goals of lowering spending and reducing production levels and overall output, most progress was made toward achieving the latter. Mandatory set asides removed land from production, a direct initiative to counteract out of control commodity production. The introduction of partial decoupling through a system of price cuts and compensatory payments also worked to reduce at least the incentives for production. It replaced a system that previously encouraged and rewarded farmers for extracting as much as they could from the land. While the reforms included major strides toward reducing production, the MacSharry Reform failed to decrease overall spending.
Although the reform was undertaken with a major objective of reducing CAP expenditure, and proposals were written with this goal in mind, the end result was a reform that actually increased CAP costs in the short run and, due to the lagged implementation of price cuts, would not actually deliver cheaper prices to consumers until the mid-to-late 1990s . On top of the lack of savings related to smaller price cuts and the broader than anticipated extension of compensation, the accompanying measures targeted for early retirement, rural development, and other agri-environmental concerns added an additional 6 billion ECU to CAP spending. The failure to include modulation in the final agreement, which would have limited the maximum payment earnable by the largest farmers, and thus reduced total payment output levels, added another 6 billion ECU in CAP spending. Savings could be expected only in the long term as production levels fell and the EU would no longer have to finance the purchase, storage, and dumping of vast stocks of excess goods.The CAP reform agreed to in March of 1999 was one part of the EU-wide Agenda 2000 initiative. The scheme, formally called “Agenda 2000: For a Stronger and Wider Europe” was intended to prepare the EU for the new millennium, including the adoption of a common currency, the Euro, enlargement towards Eastern and Central Europe, and challenges related to globalization and the continued spread and development of new technologies. The Commission intended for Agenda 2000 to consider “how to develop the European mode of society in the 21st century and how to best respond to the major concerns of citizens” including unemployment, social exclusion, and the environment . In specific reference to agriculture, the report acknowledged that the 1992 CAP reform had been successful but suggested that “the time has come to deepen the reform and to take further movement towards world market prices coupled to direct income aids” . More broadly, the Commission’s guiding document for the Agenda 2000 reforms suggested that the EU had to modernize and reorganize its structures while also concentrating on the essentials and those areas where Europe could provide real added value.
Despite the ambitious agenda, the end result was a CAP reform whose major proposals were either defeated outright, or, at best, made optional for member states to adopt. A key factor explaining the failure to adopt meaningful reform is that there were no major crises that exerted pressure on the CAP. The next round of the WTO had yet to commence. Enlargement was still several years down the road, and the formal terms of CAP accession had not yet been determined. CAP spending was running high, as was normal, but there was no major spending threat, especially since the MacSharry reforms, combined with global price and production yields, seemed to be achieving their intended goal of reducing production. Ultimately,30 plant pot there was no powerful crisis that could credibly be used to justify truly dramatic change or to force an agreement. Unlike his predecessor Ray MacSharry, Agricultural Commissioner Franz Fischler was leading this reform during politics as usual conditions. Fischler thus had little mandate for reform. The purpose of this chapter is to account for the content of the 1999 Agenda 2000 CAP reform and to explain why the reform proposals were largely gutted. The Agenda 2000 CAP agreement contained no landmark reform. Instead previous reforms were preserved and the Commission’s major initiatives in the areas of greening and balancing payments were either made optional or entirely defeated. First, decoupling was preserved and further extended through a series of market reforms to the three most important areas of production: arable goods, beef, and dairy. The cuts were overall somewhat smaller and slower and with greater compensation than reformers had hoped. Beef prices, for example would be cut by 20% as opposed to the 30% proposed and price cuts for milk would be delayed by 6 years, beginning in 2006 instead of 2000 as the Commission hoped. More importantly, these cuts were expected as part of the agreement reached in 1992 to move to decouple the CAP; they do not constitute a new change to CAP policy. Second, the new environmental measure, called cross-compliance, that sought to link direct payments to good environmental practices was made optional instead of mandatory with the member states given virtually complete discretion over if and how to implement the program. If a member state actually chose to participate, it would also be allowed to use its own environmental standards. Modulation, a program to account for payment imbalances across member states by redistributing CAP funds, was likewise made entirely voluntary. Finally, a cap on farmer income payments over 100k ECU was entirely rejected. To the extent that any change was made, CAP reform mirrored the process of welfare state retrenchment, with reformers employing a variety of tactics to slip through any reform possible and hopefully position themselves to achieve more substantial retrenchment in the future. While the environmental programs introduced under Agenda 2000 were voluntary, their inclusion in the CAP agreement positioned policymakers to make more significant reforms in that direction in the future. In this way, the path of these environmental reforms is quite similar to how systemic reforms occur in the process of welfare state retrenchment.
As is typical, the final package included a number of side payments, concessions, and exemptions in order to facilitate the agreement. For example, the measures to cut prices and further decouple payment from production included smaller cuts than initially proposed, with implementation delayed by a number of years and substantial income supports provided to farmers.Agenda 2000 illustrates the importance of disruptive politics for achieving meaningful CAP reform. It demonstrates what reform efforts look like when there are no crises to drive forward major change: major proposals are substantially watered down, made optional, or entirely defeated. The far-reaching reforms that bookended Agenda 2000 were driven by disruptive politics: failing trade negotiations and a CAP system that would be unsustainable in a newly enlarged Europe. In these cases, disruptive politics allowed for fundamental change to CAP programs. The situation surrounding the Agenda 2000 reform was vastly different, with Fischler attempting to lead negotiations during politics as usual. While at first glance it might seem that enlargement, a powerful source of disruptive politics might be at play in the Agenda 2000 reform, a closer look at the circumstances reveals that no such pressure was brought by enlargement. In 2004, ten new member states were scheduled to join the EU. All the new member states, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia, were from Central and Eastern Europe, and were comparatively poorer and less developed than the existing member states. In addition, these countries had agricultural sectors that were much larger and less efficient than the current member states. For this reason, it was projected that it would be difficult and expensive to transition the new Central and Eastern European countries into the CAP. One, albeit narrow, area where enlargement did exert some pressure on reformers was in the domain of price supports. Studies conducted suggested that, without price cuts, the costs of integrating the new member states to the CAP would be “unacceptably high” . Specifically, a 1997 DGVI study estimated that the accession of the ten new Central and East European countries to the CAP would cost between 10-12 billion ECU, with roughly half of that, or 5-6 billion ECU needed to cover direct payments . The study suggested that, if the CAP remained unreformed, these costs could even increase further, as the new member states would exacerbate existing stock build up problems. In addition, if existing EU prices were not brought closer to the lower levels in the new member states, analysts warned that these prices might trigger a new surplus problem, which the MacSharry Reform had worked sohard to combat, and could also result in higher domestic food prices, which would place further financial strain on a population that was already comparatively poorer . Enlargement was ultimately not a significant pressure for reform, however, because member states and the Commission were operating under the assumption that farmers in the new member states would not be eligible for the direct income payments introduced under the MacSharry Reform. Their exclusion was based on the grounds that farmers in these countries had not faced the price cuts for which the direct payment scheme compensated and were actually likely to see prices for their goods increase .