More problematic was that the compromise reached and approved by the Agricultural Council exceeded the spending limits the Economic and Financial Affairs Council proposed for the CAP by €7 billion. In the final agreement on this compromise within the Agricultural Council, Portugal was outvoted and France issued a reserve d’attente23 on the grounds that the financial problems had yet to be resolved . The lingering financial issue and France’s reserve d’attente facilitated the re-opening and further amending of this agreement by the European Council at the Berlin Summit. The Agricultural Council knew that although their agreement concluded negotiations for the CAP amongst the ministers of agriculture, further revision was still possible by their heads of state or government. They acknowledged as much in their formal press release to outline their compromise stating “the reform of the CAP is part of the Agenda 2000 package and that no part of this [agreement] can be considered definitively agreed until final agreement is reached on Agenda 2000 as a whole” . The European Council, which is comprised of the heads of state or government for all the member states, met at the Berlin Summit 25-26 March 1999 to reach a final agreement on Agenda 2000. As part of these negotiations, the CAP deal reached by the agricultural ministers was re-opened by Jacques Chirac. As a former minister of agriculture who maintained close ties with the farming community, Chirac was considered an expert on the subject, and was arguably more knowledgeable on the agricultural policy and the inner workings of the CAP than any of his colleagues on the European Council,plastic round pots for plants including Gerhard Schröder, Germany’s newly elected Chancellor from the left who chaired the Berlin summit. As it was a period of co-habitation in the French government, Chirac was particularly concerned with appeasing a core right constituency, the agricultural community, specifically those in the beef and cereals sectors .

Fischler was aware that Chirac was willing to go to great lengths to cater to these interests. As one high level Commission official recounted, Chirac made Fischler well-aware of his displeasure with Fischler’s reforms to the beef sector when Chirac visited Fischler in the middle of the night during the negotiations and told him, , “I am the father of beef intervention and you are trying to destroy my scheme” . Ultimately, Chirac wasable 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. 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, 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 previous chapter examined the Agenda 2000 Reform, led by Agricultural Commissioner Franz Fischler. Agenda 2000 affirmed bold objectives but ultimately introduced limited change.

Decoupling was not extended any further, and the most ambitious initiatives, such as environmental protection and a shifting of money from market support to rural development, were strictly voluntary. Little was expected to change with the 2003 Fischler Reform, sometimes also referred to as the Mid-Term Review , because it was intended only to check and respond to the implementation of Agenda 2000. Instead of being only a review, however, the 2003 agreement resulted in a major overhaul of the CAP. The most striking reform was the decoupling, in most sectors, of CAP payments from production, continuing and extending the policy first introduced by MacSharry. Instead of production-based income support, the MTR switched farmers to a direct income subsidy, which is the same whether they grow millions of tons of grain or nothing at all. The new payment system, called the Single Farm Payment , was designed to compensate farmers for income lost from decoupling and to provide a source of income in the years to come. Finally, the voluntary environmental and rural development policies first introduced in Agenda 2000,plastic garden planter cross compliance and modulation, were made mandatory. Receipt of the SFP was conditioned on meeting certain environmental standards , and member states were required to direct 5% of direct payments for farmers earning over €5,000 to support the environmental and rural development initiatives of the Second Pillar . The purpose of this chapter is to account for the content of the 2003 MTR, and to explain specifically, why, despite the fact that the MTR was supposed to be only a review of Agenda 2000, major change was achieved. Because the MTR was only intended to check the implementation of the Agenda 2000 agreement, the member states did not expect to see any initiatives of significance. At most, the MTR was expected to produce comments on the status of Agenda 2000 and minor corrections to existing policies. Indeed, French President Jacques Chirac summoned Fischler to Paris and told him bluntly, “Just so we are clear, the MTR is just a report, not a reform. You can make a proposal in 2007” when Chirac was scheduled to leave office . Fischler, however, had grander ambitions for the MTR. These ambitions would be aided by a series of important challenges that were coming to a head. Fischler had already made ambitious proposals during the Agenda 2000 negotiations, but the CAP was operating under politics as usual, with no significant extraordinary circumstances or crises that could generate disruptive politics. As a result, Fischler’s big ideas were either watered down or shot down entirely. At the time of the MTR, however, bigger changes were afoot. Fischler was able to link his proposals to key challenges, raising the stakes for reform, and compelling the member states to consider changes that were more far reaching and dramatic than they would have entertained during a regular round of CAP reform, let alone a mid-term review. Disruptive politics made it possible for Fischler to propose and reach agreements on more dynamic reforms than would be possible under politics as usual.

The impending accession of 10 largely agrarian new member states posed the most direct and disruptive challenge to the CAP. Once these countries joined, the number of farmers who could claim CAP support would more than double, and agricultural land area, which is also supported and maintained through CAP programs, would increase by nearly 50%. Projections suggested that in order to extend existing support programs to the new member states, the CAP budget would need to double. The CAP was already the EU’s largest program, consuming 40% of the budget. Given that the CAP was routinely targeted for budget cuts, there was simply no way financial commitments to the program could expand to the extent necessary to accommodate the new member states. The CAP needed to be reformed so that it would be financially sustainable in an enlarged Europe. An added incentive to move quickly was that the new member states would render the decision making process even more complex in future, when there would be 25 Ministers of Agriculture attempting to support and defend the unique agricultural preferences of their respective home countries.In previous rounds of GATT/WTO negotiations, European agriculture had been the stumbling block. A significant problem in the Uruguay Round was that CAP programs were in direct conflict with GATT rules. European manufacturing and services representatives were now signaling to their agricultural counterparts that they would no longer tolerate complications and delays due to agriculture that damaged their ability to defend their sectors’ interests. Officials representing these sectors made it clear that they were willing to sacrifice Europe’s agricultural policy preferences in order to forge the best deal possible for manufacturing and services. Taken together, all of these challenges and time-sensitive circumstances confronting the CAP meant that the reform took place during disruptive politics, making more reform possible under the MTR than had been achieved in Agenda 2000. Despite the urgent need for change, the CAP reform process again shared many features in common with welfare state retrenchment. The most ambitious and far reaching reforms were significantly watered down, and some were defeated outright. Many reforms ended up following a “vice into virtue” logic: rather than introducing entirely new initiatives, existing programs are adjusted to fix inefficiencies and inequalities. Finally, the entire package was filled with side-payments and special agreements in order to defuse opposition. The ultimate reform package in the MTR is consistent with my central claim that it is difficult if not impossible to reduce farmer support.At the time of the MTR, the basic ability of the CAP to continue to function was under threat from WTO negotiations, a looming round enlargement, food safety scares, and public frustration with existing policies. The MTR would, like the MacSharry Reform, be developed and negotiated at a time of disruptive politics. Existing programs were now unstable due to the rapidly approaching accession of new member states from Central and Eastern Europe. Food safety scares, and more importantly, continued trade negotiation issues related to agriculture potentially introduced new actors into negotiations that typically concerned agricultural interests only.