European NGDOs are particularly concerned about the Common Agricultural Policy (CAP) because of its impact on patterns of international agricultural production, consumption and trade which directly and indirectly affect the food security of resource-poor producers, consumers and other groups in the developing world.

We appreciate the efforts of the European Commission to reform the present CAP regime. We do see some positive elements in the reform proposal, such as the aim of controlling overproduction by reducing intervention prices on cereals, milk and beef; the ceilings on support to farms and farmers; and making support to farmers conditional on respect for environmental objectives. On the other hand we are surprised and concerned by the lack of attention to the impact on developing countries.

We do not understand how the European Commission can present Agenda 2000 and the associated legislative proposals without addressing the issue of coherence with the EU’s development policies. While compensation to European farmers is part of the proposal, no attempt is made to assess the impact of the reform on the developing world, to identify winners and losers or to consider possible ways of compensating those who may lose. Neither ACP partners, nor development NGOs have been consulted in the reform process.

Our central concern is about the focus on export orientation which coincides with the trend towards international agricultural trade liberalization. This will increasingly place small-scale producers in developing countries in direct competition with northern agri-business, placing developing country producers at an unfair competitive disadvantage. For the farmers in Asia, Africa or Latin America it does not make any difference if would market prices are low because European export is subsidized or if European producers are subsidized directly by income transfers. In both cases the result is likely to increase the dependency of poor developing countries on food imports. Poor countries with insufficient foreign exchange reserves or high external debts become extremely vulnerable to price changes on increasingly volatile world food markets.

• EU export subsidies for agricultural products should be rapidly phrased out.
• Direct compensation payments to EU farmers should be phased out over for instance 10 years and be replaced by support measures which do not imply unfair competition with farmers in the developing world and which promote less intensive and more sustainable food production systems as well as conservation of biodiversity and family farming.
• EU market access for agricultural exports form the South should be improved and simplified, by ensuring permanent low tariffs and by abolishing quotas, seasonal restrictions and other non-tariff barriers as well as tariff escalation on processed goods.
• The European Commission should conduct impact assessments of the CAP reform proposals for developing countries and provide assistance to developing countries particularly vulnerable to any adverse effects of CAP reform.
• EU agricultural advisory and policy making mechanisms must be broadened to include official and non-official representation of development, environment, consumer and family/small farmer interests.

• The EU should play an active role in the coming negotiations on agricultural trade in the WTO in order to ensure a rapid phasing out of export subsidies and those types of farm support which result in artificially low world market prices that do not reflect the costs of production for farmers and peasants.
• Compensation should be provided to ACP countries if they experience negative effects as a result of the implementation of the Agenda 2000 CAP reforms.
• The EU should initiate a political dialogue with ACP partners and other southern regions on the negotiations over agricultural trade in the WTO to ensure that the food security concerns of the developing world are taken into account fully in international trade rules.

European non-governmental development organizations (NGDOs) have been concerned about the impact of the Common Agricultural Policy (CAP) on agricultural development and food security in the South, and also in Europe, for many years. The NGDO-EU Liaison Committee last produced a statement on the CAP and the Third World in 1988. Many of the concerns raised in 1988 remain unresolved today and this reflects the failure of European agricultural policy-makers to incorporate a development perspective into their policy planning and formulation processes.

European NGDOs are particularly concerned about the CAP because of its impact on patterns of international agricultural production, consumption and trade which directly and indirectly affect the food security of resource-poor producers, consumers and other groups in the developing world, where a large proportion of the world’s poor are located. The CAP has a significant effect on producers and consumers in the South but European agriculture cannot, and should not, aim to solve the problems of hunger and malnutrition which still affect over 800 million people across the world. The CAP is only one of a range of factors affecting global food security that European NGDOs believe should be reformed. This statement includes a number of proposals for policy change which European NGDOs put forward for consideration by European policy makers within the context of the current CAP reform debate and the next round of multilateral trade talks due to begin in the year 2000.

We reaffirm that food security is a basic human right and that strategic interventions are required to achieve this goal for the whole of the world’s population. The 1996 World Food Summit produced a plan of action intended to reduce the number of under-nourished people by half by the year 2015. Implementation of this plan, assuming it is fully implemented and successful, will still leave unacceptable levels of hunger and malnutrition in the world in the 21^st Century.

The issues of who produces food, where it is produced, what food is produced, how it is produced, as well as who controls key productive resources such as land, water, technology, and biodiversity are key factors. These factors determine the level of global food (in)security now and in the future since food security depends on access to adequate sage and healthy food by all people at all times. This is affected both by the level of control/sovereignty which countries and communities have over their own food supply systems and by the ability and will of the international community to assist in times of food crisis.

Agriculture has a key role to play in achieving global food security and should be treated differently from other sectors of the economy, particularly in relation to international trade rules. The market will not ensure food security since it is responsive only to those with purchasing power. Governments must assume their responsibilities in managing agricultural markets and food production systems in order to secure food security for their own citizens, particularly the poor and vulnerable groups, and in the world at large.

The CAP was created as a means of promoting food security in Europe. The EU’s own position is that European agriculture must be maintained and that Europe, like other countries, must not become dependent on third country imports on food security grounds. It is the sovereign right of all countries to determine their own food security strategies and to maintain their own agriculture as part of those strategies, if they so desire, but the current CAP undermines the capacity of some developing countries to fulfill this right.

The objectives of the CAP¹ are to:

• Increase agricultural productivity;
• Ensure a fair standard of living for agricultural producers;
• Stabilize agricultural markets;
• Guarantee regular supplies of food to consumers;
• And ensure reasonable prices of food to consumers.

However, CAP policy instruments have not been entirely effective in achieving these objectives and have produced a number of negative outcomes that are inconsistent with other EU policy objectives, such as development and environment. A lack of coherence between EU agricultural policy and EU development policy is one of our key concerns about the CAP, notably because the European Union along with the United States is one (of) the key players influencing the future food systems of the world.

In particular, several aspects of the CAP contradict the EU’s Maastricht Treaty commitment to take account of EU development policy objectives in the other policies it implements, and negatively affect long term food security in many developing countries. The disposal of European agricultural surpluses as subsidized exports is generally harmful to agricultural development in the South, particularly for small-scale agricultural producers and workers. Low income net food-importing countries may benefit in the short term form lower world market prices that result from subsidized overproduction of food in Europe, because of the lower cost of food imports, especially to the benefit of the urban population.

However, long-term agricultural development and, potentially, the food security of vulnerable sections of the population are likely to be threatened by:

• Unfair competition between domestic food production and subsidized food imports;
• Lower world market prices for agricultural exports produced in developing countries as a result of the disposal of EU subsidized exports on world markets;
• Unfair restrictions on access to the EU market for agricultural exports from developing countries, particularly for processed products;
• Over-dependence of net food-importing developing countries on world markets to meet their domestic food requirements in the face of increasing world market price volatility expected to result from the process of international agricultural trade liberalization;
• The promotion by CAP support mechanisms of capital intensive high-input production models which provide unfair competition and threaten both small peasant farmers in poor countries and family farmers in the industrialized world.

In July 1997, the European Commission (EC) published its proposals for the European Union’s financial framework beyond the year 2000. The package of proposals, known as "Agenda 2000", includes the EC’s outline recommendations for further reform of the CAP. The reform proposals build on the MacSharry reforms implemented in 1992 and include:

• A reduction in support prices further towards world market prices: for beef by 30% (between 2000 and 2002); for cereals by 20% (in 2000); and for dairy products by 10% (between 2000 and 2006);
• Compensation for European farmers for price cuts through direct income payments;
• An increase in direct compensation payments for beef and dairy (to be paid on a headage basis) and for cereals (harmonization of direct payments for all cereals);
• A reduction in the compulsory setaside rate to 0% and retention of dairy and livestock quotas;
• An enhanced agri-environment policy;
• The introduction of individual ceilings for direct payments differentiated according to national criteria;
• New rural development measures.

Concerned with the development of the South and of Eastern Europe, we appreciate the efforts of the European Commission to reform the present CAP regime which as stated above in many ways is in contradiction with the EU’s objectives for development cooperation. We appreciate the following elements of the reform proposal:

• The proposal to reduce the intervention prices on cereals, milk and beef: because the high prices tended to create overproduction which was sold off via export subsidies, often providing unfair competition to producers in the South.
• The proposal to set ceilings for the support to farms and farmers: because this will tend to reduce the tendency of concentrating land holdings and large scale production and ensuing unfair competition.
• The proposal to make payments to farms and farmers conditional on respect for environmental objectives.
• The proposal to introduce "national envelopes" enabling local administrations to find the best ways of implementing environmental initiatives.

On the other hand we do not understand how the European Commission can present this reform package without including any considerations or making any assessments of the possible implications for food security in the developing world.² Although we recognize a few positive elements in the reform proposal by the Commission, we do not find that the proposals seriously address the problems which development NGOs have voiced for many years regarding the negative impact of the CAP on the developing world. Our major concerns are listed below.

The Agenda 2000 reform proposals place priority on European farmers producing at a level of economic efficiency that enables them to compete on world markets. The reform aims at creating a dominating role for the EU especially in cereals, beef and milk products. This does not reflect the reality that only a very small proportion of global agricultural production is traded on the world market and that world market prices are based on highly industrialized methods of production, promoted particularly in the United States. This type of production would have hugely detrimental implications for the environment, rural employment and rural landscapes if adopted in Europe, as well as in many other parts of the world.

This export-oriented approach, coinciding with the trend towards international agricultural trade liberalization, will increasingly place small-scale producers in developing countries in direct competition with northern agri-business, placing developing country producers at an unfair competitive disadvantage. Agricultural dumping continues also when producer prices are kept low by direct income transfers to European farmers. Artificially low-priced agricultural products of European origin continue to drive farmers from developing countries out of the markets because those countries cannot afford income transfers to protect their own agriculture. For the farmers in Asia, Africa or Latin America it does not make any difference if world market prices are low because European exports are subsidized or if European producers are subsidized directly by income transfers.

Through an export oriented policy the European Union indirectly supports the trend for developing countries to neglect their self-sufficiency in staple foods, and their preference for covering their needs by low-priced imported foodstuffs produced in Europe. Agricultural production in developing countries decreases or gives way to the production of tropical products for export. Often poor countries are encouraged by the World Band and northern governments as part of the typical structural adjustment package to open their markets for cheap agricultural imports, or to sell off food security stocks and rely on the world market. The result is an increasing dependency on food imports, which is especially dangerous for countries with insufficient foreign exchange reserves or high external debts. These countries become extremely vulnerable to price changes on increasingly volatile world food markets.

Transnational Corporations (TNCs), which are largely unaccountable for their actions, play an influential role in promoting an export-oriented approach. Any reduction in producer prices towards the world market level coincides with TNC interests in terms of securing the lowest possible production costs, through the transfer of production away from countries with high social and environmental standards. The problem is that this often implies the leveling down of environmental and labor standards and exacerbates the concentration of production on fewer farms to the disadvantage of the majority of agricultural producers in the North and in the South and to the benefit of agri-businesses. The result has been the increasing indebtedness of small-scale farmers around the world, the undermining of agricultural diversity, as well as an increasing concentration in the land ownership and the marginalization of large numbers of landless poor.

Agenda 2000’s emphasis on adaptation to world market conditions and international competitiveness is likely to promote the continued industrialization of agriculture in Europe with negative implications for the social, employment, food safety and environmental goals of the EU. However, the European Commission has failed to undertake a serious calculation of the social and environmental costs for Europe of implementing the Agenda 2000 reform proposals, let alone the impact on developing countries.

The industrialization of European agriculture and intensive cultivation and livestock practices have produced detrimental effects on the environment including the pollution of waterways, soil erosion and the destruction of landscapes. Since the 1992 CAP reforms, farm support payments have become more transparent. But it is no longer acceptable to provide direct payments to farms without demanding that farmers meet basic environmental standards as defined by the European Commission and member governments (cross compliance).

The industrialization of European agriculture has seen a concentration of land ownership and a reduction in the number of farm workers as labor has been substituted by capital. This contradicts the EU’s overarching commitment to address unemployment including in rural areas and has important implications for the maintenance of rural communities. The promotion of less intensive agricultural production methods through agricultural support mechanisms is also less likely to result in unfair competition in the south either through dumping with export subsidies or artificially low prices due to income support.

Hence compensatory direct payments must be phased out over time (for instance over 10 years) and be replaced by support systems which favor rural development and employment, conservation of biodiversity and the environment. As development NGOs we are not against protection of European farmers or rural development, but this must be through a support system which is not linked to aggressive export behavior on the world market and protectionism against producers in the Third World.

Concern about the consistency between the CAP and the development objectives of the EU as stated above is not new. The demand for coherence was introduced with the Maastricht Treaty in article 130v. In June 1997 the Council of Development Ministers invited the Commission to develop coherence impact assessments of new legislative proposals, and the area of food security was singled out as an area of obvious concern.

Against this background it is difficult to understand how the European Commission can present Agenda 2000 without addressing the issue of coherence with EU development policies, and including the world wide questions of food security, hunger, and sustainable development in an assessment of the possible impact of the CAP reform. In addition to the issues presented above, the CAP proposal does not consider how it is possible to manage tight world food markets and the increasing volatility of food prices. It does not even consider how the EU regulation of the agricultural market may add to the volatility of the world market.³ For example when world market prices are higher than EU internal prices, an export tax is added for agricultural exports.

From an international development perspective, the current CAP reform debate is closely linked to other policy processes, particularly the renegotiation of the Lomé Convention and the next round of multilateral agricultural trade talks at the WTO. Certain African, Caribbean and Pacific (ACP) countries benefit from the high internal EU price for their exports of beef to the EU under the Lomé Beef Protocol and for their sugar exports under the Sugar Protocol. The proposed cuts in the EU support price for beef will impact on these countries’ foreign exchange earnings and the EU should compensate these countries accordingly. Likewise, any future reform of the EU sugar regime will impact on ACP beneficiaries from the Sugar Protocol.

The EU’s current GATT/WTO commitments and the next round of multilateral agricultural trade talks at the WTO due to begin in the year 2000 are key driving forces behind the Agenda 2000 CAP reform proposals. It is essential that the EU take account of its international development commitments and responsibilities, particularly in relation to global food security, in its preparations to agree an EU position on agricultural trade of the next round of WTO talks.

The focus on export promotion in the CAP reform proposal is worrying since it is an indication that the EU may only look at its own narrow trade interests in the WTO talks over agriculture and the trade part of the Lomé negotiations. The EU must have a broader perspective and take into consideration the need for improving food security in the developing world. The EU should take seriously the principle of partnership with for instance the ACP countries and the EU should also cooperate with developing country governments to enhance their capacity to engage on a more informed and equal basis in the forthcoming WTO negotiations, particularly in relation to agriculture and food security issues.

1. EU export subsidies for agricultural product should be rapidly phased out.
2. Direct compensation payments to EU farmers should be phased out over for instance 10 years and be replaced by support measures which do not imply unfair competition with farmers in the developing world and which promote less intensive and more sustainable food systems as well as conservation of biodiversity and family farming. The new systems should be designed to reverse the tendency of concentration of land ownership and promote family farming.
3. EU market access for agricultural exports from the South should be improved and simplified, by ensuring permanent low tariffs and by abolishing quotas, seasonal restrictions and other non-tariff barriers. For all developing countries tariffs on processed goods should not be higher than on raw materials. The least developed countries should have free access to the European market, also regarding agricultural products, form the year 2000, and after that the whole of Africa should have the same market access as soon as possible.
4. In the process of EU enlargement, support should be provided to encourage agricultural development in Central and Eastern Europe on the basis of sustainable farming principles, in order to ensure that those countries avoid the environmental degradation experienced in the EU as a result of chemical pesticides, fertilizers and intensive farming.
5. The European Commission should conduct impact assessments of the CAP reform proposals for developing countries and provide assistance to developing countries particularly vulnerable to any adverse effects of CAP reform.
6. EU initiatives to improve policy coordination and consistency in relation to agriculture should be strengthened. Concrete consultation mechanisms—systematic, compulsory and formalized—should be established between DG VI and VIII to ensure a more consistent approach to policy making.
7. EU agricultural advisory and policy making mechanisms must be broadened to include official and non-official representation of development, environment, consumer and family/small farmer interests.

1. Reform in Other Policies

8. In order to improve the world agriculture market situation the EU should complete the implementation of our proposals 1, 2 and 3 above by playing an active role in the coming negotiations on agricultural trade in the WTO. The EU must ensure that other countries will also be obliged to end export subsidies and reduce those types of farm support which result in artificially low world market prices. WTO rules should allow safeguards against export at prices that do not reflect the costs of production or are artificially low priced because of unsustainable farming practices.
9. Net food importing countries should be compensated for potential increases of food prices on the world market as per the commitment in the WTO Marrakech Ministerial Decision.
10. Compensation should be provided ACP countries it they experience negative effects as a result of the implementation of Agenda 2000 CAP reforms and other European regulations having an important direct impact on agricultural production systems in the South.
11. Support should be provided to improve the capacity of developing country governments to engage in the next round of WTO agricultural trade negotiations on an informed and equal basis, in order to ensure that their food security concerns are fully taken into account in international trade rules.
12. The EU should engage in a political dialogue with ACP partners and other southern regions regarding an approach or common strategy to the negotiations over agricultural trade in the WTO and Lomé which take into account the need to develop food security on a sustainable basis. The dialogue must include the option of adopting a food security clause in the WTO agreement on agriculture in order to promote national food security for staple food products and to protect the vulnerable groups in the population.

In their current form, the Agenda 2000 CAP reform proposals lack an international development perspective, despite the EU’s Maastricht Treaty commitment to take account of its development policy objectives in its other policies. Moreover, Agenda 2000 presents a real threat of job losses, further increases in farm size and industrialization of food production with all that implies about food safety and quality and environmental degradation in Europe.

Because of the EU’s dominant role in world food markets, the proposed CAP reform with its emphasis on direct compensation payments and export agriculture will continue to drive farmers from developing countries out of the markets and push southern countries to engage in the same kind of policies although they cannot afford income transfers to their own farmers. This is especially true for countries having established trade agreements, such as the Lomé Convention, and free trade areas with the EU. This will endanger the future of peasant agriculture, which is essential to provide food security in vulnerable countries, especially in Africa and Asia. The losers both in Europe and the developing world will be small and medium sized farmers and food security. The winners will be intensified large-scale farming and international agri-business.

The real issue facing European agricultural policy makers is therefor not as simple as deciding whether or not to liberalize European agriculture, but to define a new model of international agricultural production and trade that will produce a fair distribution of costs and benefits between large producers, small producers and consumers—North and South—and that simultaneously meets a range of social, developmental and environmental objectives.

1 The objectives were first included in the Stresa Agreements 1963, and recently restated in the Amsterdam Treaty.

2 The European Commission has apparently disregarded altogether the Declaration by the Council of Development Ministers of June 5^th 1997 which invites the Commission to prepare Coherence Impact Assessments on any new proposals, and which especially focuses on the need to be aware of problems of coherence in relation to food security in the developing world and Europe’s agricultural exports.

3 For example when world market prices are higher than EU internal prices, an export tax is added for agricultural exports.