HISTORICAL CONTEXT OF AGRICULTURAL DEVELOPMENT - Science for Agriculture and Rural Development in Low-income Countries - page 14

maintain a limited link between subsidy and production under well defined
conditions and within clear limits. These new 'single farm payments' that will come
into effect in 2008, are linked to the respect of environmental, food safety and
animal welfare standards. Severing the link between subsidies and production has
made EU farmers more competitive and market-orientated, while providing the
necessary income stability. More money is available to farmers for environmental,
quality and animal welfare programmes as a result of reducing direct payments for
bigger farms. Within the reform, a number of the commodity (milk, rice, cereals,
durum wheat, dried fodder and nut) sectors have also been revised. This reform will
also strengthen the EU's negotiating hand in the ongoing WTO trade talks.

Key elements of the reformed CAP

A single farm payment for EU farmers, independent from production; a limited
number of coupled elements may be maintained to avoid abandonment of
production;

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This payment will be linked to the respect of environmental, food safety, animal
and plant health and animal welfare standards, as well as to the requirement to
keep all farmland in good agricultural and environmental condition ('cross-
compliance');

•

A strengthened rural development policy with more EU money, new measures to
promote the environment, quality and animal welfare and to help farmers to meet
EU production standards, started in 2005;

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A reduction in direct payments ('modulation') for bigger farms to finance the
new rural development policy;

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Revisions to the market policy of the CAP:
- Asymmetric price cuts in the milk sector: the intervention price for butter will
be reduced by 25% over four years, which is an additional price cut of 10%
compared to Agenda 2000, for skimmed milk powder, a 15% reduction over
three years, as agreed in Agenda 2000, is retained;
- Reduction in the monthly increments in the cereals sector by half, the current
intervention price will be maintained;
- Reforms in the rice, durum wheat, nuts, starch potatoes and dried fodder sectors.

•

WTO

Within the framework of WTO the most recent round of ministerial negotiations was
held in December 2005 in Hong Kong. The role of WTO may be expected to
become more important, now that China also has become a member. In preparation
for the Hong Kong-meeting, the General Council concluded in mid-2005 that the
Doha Round talks have reached a sticking point within both agriculture and NAMA
(Non-Agriculture Market Access). It was stressed that progress must be made on all
the three pillars of the agriculture negotiations in parallel (i) export competition is
the most advanced area of the talks, (ii) domestic support , where agreement should