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. Last Updated: 07/27/2016

EU Ushers in a 'New Era' in Farming

LUXEMBOURG -- European Union agriculture ministers reached a final agreement Thursday to overhaul the EU's 43 billion euro ($50 billion) farm subsidy program aiming to strengthen Europe's bargaining position in world trade talks.

The 15 farm ministers agreed on a compromise text after 16-hours of talks to break deadlock between those wanting to preserve farm handouts and those wanting reform.

"It took many hours ... but we have a broad majority in favor," said Greek Agriculture Minister Georgios Drys after the meeting. "This is a historic decision for the future of European agriculture."

Only Portugal was left opposing the agreement early Thursday after France, Italy, Spain and Ireland said they could live with the compromise.

The reforms only needed majority backing.

The deal will break a decades-old link between output and subsidies blamed for creating food surpluses that undercut competitors and squeeze producers in poor countries.

Saying it marked a "new era," EU Farm Commissioner Franz Fischler said the reform marked the largest overhaul of EU farm policy that would end the practice of automatic farm handouts for producing more food.

"On the basis of a new set of rules, the Common Agricultural Policy will be very different," Fischler said. "We are bidding farewell to trade distortions."

Fischler said the deal would help bolster the EU's negotiating position in upcoming trade talks to open world farm markets.

"It sends a clear message to the world that have a more trade friendly policy," he said.

The current system of EU farm handouts has been criticized by the United States, Australia and Canada, which say it violates World Trade Organization rules.

EU nations have struggled for many years to overhaul their Common Agricultural Policy, which was set up in the post World War II years to rebuild Europe's farming sector.

Pressure to reform has increased due to a crucial WTO meeting in September in Cancun, Mexico.

"We can go with our heads held high to Cancun," Fischler said.

The compromise deal, worked out during early Thursday morning will cut subsidies in various product areas, including butter, milk, beef and grain production.

The compromise allows countries to keep aid tied to output levels for up to 25 percent of subsidies for cereals and up to 40 percent of beef subsidies. It also locks in a "fixed farm budget" until 2013.

Other subsidies would be paid at a flat rate depending on the size of farms rather than how much they produce.

In the final offer, a "flexible solution" was drawn up which would see a two-year phase in of the reforms -- something France had been pushing for.

Fischler on Wednesday proposed not to cut price supports of cereal grain crops like wheat in exchange for phased in cuts in other areas, something France and Italy welcomed.

Several nations initially objected to cuts in support prices for butter, milk powder and to beef production, while Italy, Spain and Portugal demanded higher milk quotas in exchange for cutting aid. But most accepted the reforms should begin in 2005.

The Netherlands, Sweden and Britain had pushed for more radical reform but accepted the compromise deal in an effort to get France and others on board.