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. Last Updated: 07/27/2016

EU Reads Last Rites for Farm Subsidies

BRUSSELS, Belgium -- The European Union's executive office on Wednesday proposed the largest overhaul in years of the EU's 44 billion euro ($43 billion) farm subsidies policy, which would force farmers to do more with less and with greater concern for the environment, public health and food safety.

The EU executive called on the 15-nation bloc to move away from a decades-old system of a bewildering array of subsidies linked to production, mainly to the number of livestock, the land under cultivation or the amount of crops brought to market.

That practice has long been criticized by the United States and other producers as a gross distortion of world trade.

EU Agriculture Commissioner Franz Fischler proposed that in future, European farmers should get a single "direct payment" based on past income and to be cut over time.

That direct payment would be capped at 300,000 euros ($295,000) per year to be supplemented by greatly simplified subsidies for produce such as cereals, dairy products and vegetables.

Fischler called for a "greener" approach to farming, responding to public demands for safer, better quality food products after a string of food safety crises in past years, including mad cow disease, foot and mouth disease and dioxin contamination scares.

"In future, farmers will not be paid for overproduction but for responding to what people want -- safe food, quality production, animal welfare and a healthy environment," he said.

He added the overhaul would still guarantee farmers a "stable income," but would free them from "the straitjacket of having to gear their production toward subsidies."

Fischler said reform of the Common Agricultural Policy was imperative before the EU takes in Cyprus, Malta and eight East European candidates with inefficient farm sectors in 2004.

He said the EU cannot afford to link subsidies to output when poorer farmers from candidate countries like Poland or Hungary join. EU farm subsidies were created in the 1960s. Initially, they helped make Europe self-sufficient in food, but led to massive food surpluses in the 1980s that were then dumped on world markets, depressing prices.

The proposed reform also calls for cuts -- of up to 50 percent in some cases -- in price supports for soybeans and such grains as wheat, corn and rice. Also, the EU executive wants to replace its milk quota system with quotas based on world market prices.

The size of handouts will be linked to how well farmers adopt stricter environmental, health and food safety standards as well as tougher animal welfare rules.

The commission said the reform will save 200 million euros ($199 million) by 2006. The savings, it proposed, should benefit bio-farms and preserve traditional family farms.

But support for reforms is slim, at best, from farmers and EU governments keen to protect a decades-old system of handouts.

Objections to production cuts may well derail expansion talks with 10 candidate nations which are to be wrapped up by the year's end.

France, Ireland and southern EU nations have long resisted subsidy reforms because the handouts to farmers and poor regions have long been solid vote winners for politicians in rural areas.

This year, guaranteeing minimum incomes to the EU's 8 million farmers will cost nearly half of the EU's 98.6 billion euro budget.

Expansion has put the current 15 members in a dilemma: how to extend generous farm subsidies to new members without breaking the budget. The EU has about 8 million farmers. Poland alone has 10 million.

As resistance builds up in the west to unravel gains made by the 40-year-old farm policy, fears rise in the east that EU expansion could be delayed. As a compromise, the EU head office has proposed spending 40 billion euros ($38.8 billion) on farmers and poor regions in the new member countries -- Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Latvia, Lithuania, Estonia, Malta and Cyprus -- from 2004 to 2006.

But Britain, Sweden, Germany and the Netherlands oppose this, saying it will not encourage reform there.