While considerable analysis has been carried out on various aspects of EU Commission proposals the economic impact of the outcome of the mid-term review agreement in food producing countries is not known at present. The mid-term review agreement contains a broad range of changes in the direction of the CAP which will be implemented over the period 2004 to 2007.
The most fundamental aspect of the agreement relates to the options for decoupling or partial decoupling. Each member state will have to decide between the menu of options available. Only when these decisions are made in regard to the particular options will the potential economic impact become clearer. Furthermore, the consequential production decisions taken by individual farmers will also be important factors.
The FAPRI Ireland study published in May of this year and based on the mid term review proposals at that time showed a possible decrease in beef production of 6%, sheep production down 5% and aggregate farm income up 8% by 2012. This study found that a majority of farmers would be better off and the industry as a whole more competitive and efficient, as the motivation to continue market-loss making enterprises would be removed. Further study is, however, required following the agreement on the mid term review reached last week by the Council of Ministers.
I emphasise that the outcome of the negotiations protects the very substantial draw-down in direct payments for Irish agriculture.