It would be difficult to go into the details of all the questions that were raised because there would not be enough time. I apologise for that. I will start with the Franco-German accord. What was in the Franco-German accord is less relevant than what was in the conclusion of the summit. That is what counts. As far as financing is concerned, what they did was fix the level of payments for 2006. This is for financing and market measures for the 15 members of the EU, plus the direct payment that was decided in Berlin in 1999. For new members, the Commission proposed, as the financing framework, the phasing in of direct payments and financing the other market measures. What is not part of this ceiling is the financing of rural development. This amount, which in nominal terms for 2006 is around €45 billion, is frozen. In the following years, from 2007 to 2013, there will be a 1% increase per year to compensate for the expected inflation. This is the financing concept and we have to finance with that amount of money the further phasing in steps for the new member states because in 2006 only 30% of the direct payments for the applicant countries will have been introduced. The other 70% must be financed with the increase of 1%.
In addition, it was decided in Berlin in 1999 to introduce milk reform. That was postponed and will now come into force in 2005. Therefore, the last two implementation steps of this reform must also be financed under this new framework. This means we are already above the limits, without any additional change. Financing for the period from 2007 to 2013 is not fully covered and we need a slight reduction in direct payments to the current member states to have solid financing. All necessary reforms in future, such as further steps in the dairy sector or reform of the sugar sector, will have to be financed under this new regime. One must consider how the money required for such reforms can be found.
All market organisation related reforms, such as those in the dairy, cereal and beef sectors, which were foreseen in the mid-term review in Berlin can be decided now and implemented before 2006. We must also adhere to our international obligations, especially the challenges presented by the WTO Doha development round. There are other international obligations, such as the implementation of the "Everything but Arms" initiative and some changes in the sugar sector.
That is the deal. No ceiling was fixed for the rural development sector and one must ask what effect that will have. It is an open question which must be answered within the negotiations about future financial prospects.
The question of modulation and money for rural development was raised. It is true that we proposed in our mid-term review to introduce a modulation or, in other words, to reduce year by year 3% of the direct payments under certain conditions, such as franchise, and to shift this money to the second pillar and use it for rural development. If we want to continue with that, it will be necessary to expand the rural development budget. Legally speaking, this is a change of the financial framework and it would not be possible before 2007. We must rethink the concept when we make our proposals.
What is our current thinking? Our next step should be to present impact studies and clear legal proposals. We can then discuss all the details and clarify some of the concerns that exist. Our intention is to make such legal proposals at the beginning of the coming year and to continue the negotiations then.
Is there enough competition in food pricing and processing? We must examine the food chain and identify the weakest links, the real problems. It is clear that we are acting in a demand-driven market and the nearer one is to the consumer, the better the position. Europe-wide, the greatest concentration is in supermarket chains, more so than in processing. I do not know the figures for Ireland but in Germany the five largest supermarket chains have a turnover of more than 90% of total food delivery. The five people who make the deals and decide which brands and products to buy decide on 90% of produce consumed.
Reflection is needed here, as it is in the processing sector. We are aware of the problem and know the present competition rules, at national and European levels, are not good enough to deal with these problems. A major study is being carried out and we expect the results of the study at the start of next year. This study deals specifically with price transmissibility. In terms of the price the consumer pays, how much goes back to the farmer, where do the reductions take place and to what degree are these reductions justified? Clearly, lack of competition is a big issue. We are carrying out the study into some of the main commodities such as beef, milk, sugar and cereals. I invite the committee to wait two or three months and then we will have a clear basis for further discussions.
I agree that further investment in the agriculture sector is necessary. This explains some concerns related to direct support. We must get rid of the idea that agriculture and the optimisation of farms has to do only with optimising the level of support. Most income in future will come from the market, not from Brussels. This is why investment is so important and why I favour strengthening rural development. The investment programmes are all part of rural development. They put in place targeted measures which allow the farmer to get a better price or to produce more. The farmer will get greater turnover. We must encourage further investment in agriculture.
The most important question is not the ring-fencing of the milk quota trade, but the future of the dairy sector and what will happen to the quota regime after 2008. In discussions with the candidate countries, I do not know of any that would favour the continuation of the quota system.
If we wait until 2008 we will not have the option of discussing which of the four options under consideration is the best because there will be only one option available at that stage. This is what Ireland has to consider and should think about - whether it is better to act now and to think about the possibility of the further promulgation of the quota system. Many people say we now have planning security until 2013. Yes, we have planning security for those who have developed budget planning, but we do not have security for individual farmers. If we want security for them, we must be clear about policy until 2013.
There are many concerns, in Ireland and elsewhere, about decoupling. More and more, the concern will be how to deal with the requests from the World Trade Organisation. We should be aware that the expectations of the other parties to the WTO are at least as big as they were when we dealt with the Uruguay round. We will negotiate and fight very hard but it would be an illusion to believe we will come out of the talks without any changes. This discussion is rather urgent because as soon as March 2003, the modalities will be fixed. It was agreed in Doha that by March 2003, the extent to which duties should be reduced, the degree to which market access should be increased, the degree to which export subsidies should be changed and the degree to which internal support measures, or direct payments, should be reduced should be already decided.
We have a clear mandate and there is no doubt we will act within it. Everybody knows, however, that this mandate is not good enough to reach a positive conclusion. Europe is different from America. The Americans can make practical or strategic proposals. Their proposal for the negotiations is clearly not in line with their present policy. Europe cannot do that because we can act only within the existing Common Agricultural Policy. This is clearly a disadvantage for us in terms of negotiating tactics. Therefore, we have to deal with this problem in the coming year. It is a major risk, at least if one has in mind the interests of farmers, to delay changes in the CAP until we are in the middle of future discussions on the whole financing system, when we will also discuss the structural policy, rural development and the other aspects of our policy.
This discussion will take place in 2004 at the latest. Thus, there are very good reasons to act promptly. A wait-and-see approach would create major problems. If this is true, we have to think about decoupling because this is the only way we can save money for farmers while at the same time being WTO compatible. This is the real challenge, and we have to think not in terms of how we can avoid decoupling but about how we can make decoupling acceptable to farmers and make it clear that our intention in the future will not be to pay farmers for staying in the bar or for what some describe as "doing nothing".
In the future, we will pay farmers only for doing something worthwhile. This is the area on which we can have a lot of discussion, reflect on better ways to address implementation issues and so on. We are open to discussion, but nobody should think we can avoid it. We have no interest in paying only for land ownership. We are prepared to pay only for real farming activities. Therefore, the money must go to those who run a farm, not to those who own land.
Where will I find the money for milk reform? As this question has been answered, I will deal with the question of the developing world. Europe is much better in this regard than some people think. It is necessary to make this more public so that people understand what we are doing, not only in terms of aid - we are by far the biggest donor in the world - but also in terms of trade. The European Union imports more agricultural products from developing countries than the US, Canada, Australia, Japan and New Zealand combined. This represents 40% of total world agricultural trade with developing countries. This will increase further because we are only at the starting point of implementing the "Everything but Arms" initiative. In the coming years we will have more imports, particularly of rice, sugar and bananas from the developing world. These are three interesting products.
In addition, we should also make clear to the outside world that it is not a fair comparison if one does not take into account, when discussing duties, that the EU gives clear privileges to most of the developing countries. Most of them are not exporting to us under the normal duties, they all have reduced duties under the generalised preference system, or agreements like those with the ACB countries or other specific arrangements.
