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4.1.2. Reform of the CAP
The mechanisms of the common agriculture policy (CAP), set up in 1962, underwent a large-scale reform in 1992 and further reforms in 1999 as part of Agenda 2000 concerning the Commission's proposed strategy for strengthening and enlarging the EU.
The reform is based on:
The chapter on agriculture of the Berlin Agreement, in particular, resulted in a package of Council regulations aimed at adjusting sectors and intervention and support instruments.
These are in addition to the reforms adopted before the Berlin European Council, with regard to the following markets:
Following the changes adopted in 1984 and 1988, the CAP was reformed in 1992 and further reforms were introduced in 1999 as part of Agenda 2000.
1. The first CAP adjustments in 1984
The need for changes in the CAP first became apparent in the early 1980s, as a result of the decline in the agricultural sector and the high budgetary cost of the EAGGF and the imbalance between supply and demand in European and international markets. Measures to limit expenditure were adopted in 1984 (introduction of milk quotas and provisions to manage the cereals and wine markets). At the same time the Commission submitted the Green Paper (COM(85)333) in which it underlined the need to adapt the CAP to economic constraints and to seek a better market balance, whilst highlighting the economic and social role played by agriculture.
2. The 1998 decisions
As the action taken had not brought about an improvement in the situation of European agriculture, the Commission submitted new proposals leading to the Council's decisions in February 1988:
3. The 1992 CAP reform
These measures proved insufficient. In response to budgetary, environmental and international pressures (in connection respectively with surpluses, more intensive farming and the GATT agreements), the Commission was forced to propose a genuine reform of the CAP. It presented two discussion papers, COM(91)0100 and COM(91)0258  on the development and future of the CAP, and it was ratified by the Council political agreement of 21 May 1992. This reform brought about radical changes in the farm support system in force at the time. To reduce supply, it replaced the system of income support through guaranteed prices with a direct income support scheme. It began to take effect with the 1993-94 marketing year in the herbaceous crops, beef, sheep and goat meat, dairy products and tobacco sectors. Shortly afterwards it was applied to the dried fodder, cotton and sugar sectors and in June 1996 to fruit and vegetables. The wine and olive oil sectors, which had been adjusted in June 1995 to comply with the GATT multilateral trade agreements, remained in abeyance until the next reform, with Agenda 2000. The 'reform of 1992' produced positive effects in the cereals sector, since production was realigned, consumption boosted and public stocks substantially reduced, from 32 million tonnes in 1992/93 to 12.9 million in 1998. The most spectacular consequence of the fall in cereal prices following the 1992 decision was the strong come-back of wheat and maize in animal feed: whilst it steadily diminished during the 1980s, the volume of cereals used as compound feedingstuffs rose from 83 million tonnes in 1992 to 107 million in 1998, i.e. an increase of 29%. However, the Commission had to 'temporarily' suspend cereal exports eligible for refunds to avoid an excessive rise in internal prices and protect domestic consumption. In the oilseed sector results were better and the Commission considers that low prices were fully offset by direct aids per hectare; this was not the case in the protein crops sector where aids were not sufficient to offset the fall in prices.
With regard to beef, excellent results were obtained, with intervention stocks of 1 million tonnes before the reform falling to 20 000 tonnes in late 1995. Subsequently, the BSE crisis of June 1996 (*4.1.3) somewhat overshadowed the positive effects of the reform, and stocks increased again, reaching 314 500 tonnes in July 1999.
Changes in the premium system produced good results in the sheep- and goatmeat sectors, whilst in the case of pigmeat and poultry the fall in cereal prices did not reduce stock feeding costs as much as expected, and these sectors were unable to improve their competitive position on world markets, a problem aggravated by the reduction of export refunds, swine fever and the dioxin crisis.
In the dairy sector EU exports fell steadily until the spring of 1999, though they still account for 40% of world trade.
4. The 1999 CAP reform (Agenda 2000)
In the new scenario opening up at the end of the millennium, with the forthcoming accession of the Central and Eastern European countries, revision of the GATT agreements etc., there is a need for further realignment of the CAP, in accordance with the strategy adopted in 1992. This means consolidating the European agricultural model, in the framework of a policy increasingly geared to the market, in order to fulfil agriculture's three basic functions simultaneously:
Agenda 2000, presented in 1997/98, was a first step in that direction. It was followed by proposals for regulations largely supported by the Berlin Council in March 1999. The proposed measures included:
These proposals coincided with renewed reforms for various sectors characteristic of southern Europe (olive oil, tobacco, wine and bananas - for the latter, following the decision by the WTO dispute settlement body). During the first year of implementation of the Agenda 2000 CAP, this reform process continued (reforms were completed for linen and hemp and are under way for sugar, rice, cotton, fruit and vegetables). Other changes are expected, depending mainly on the progress and substance of negotiations on agriculture which began in March 2000 in the WTO and on the Community's future enlargement.
ROLE OF THE EUROPEAN PARLIAMENT
1. The 1992 reform
On 11 December 1991 Parliament adopted a resolution  on the development and future of the CAP, approving the aims of the 1992 reform, i.e.
The resolution deals with the regional, environmental, budgetary, trade, social and development aspects of the 1992 reform and regrets that the reform does not tackle Mediterranean produce and other sectors such as sugar.
In February 1996 Parliament adopted another resolution on the prospects for the CAP, stressing the need to complete the reform without delay in all sectors (wine, fruit and vegetables and olive oil) in accordance with the principles of the reform and the Jumbo Council agreements of September 1993. It also urges the Commission to submit an overall review of the 1992 reform and a detailed assessment of the impact of commitments arising from the GATT agreements and from agreements with third countries. In the same resolution Parliament asks the Commission to take account of the impact which commercial or free trade agreements, negotiated or under negotiation with third countries, may have on the agricultural sector as a whole and farmers' incomes and their future.
This is the background for the Agenda 2000 proposals for CAP reform mentioned above.
2. The Agenda 2000 CAP reform
Parliament's general position on the Agenda 2000 reform proposals is set out in several reports:
These reports were followed up by a series of sectoral resolutions drawn up by the relevant committees:
On 18 November 1999 the European Parliament adopted a resolution on the communication from the Commission on the EU approach to the WTO Millennium Round (COM (1999) 331). In it Parliament notes that 'the decisions of the Berlin European Council on reform of the common agricultural policy constitute the basis for negotiation with the objective of making it possible for the EU to secure the European agricultural model, based on family farms and characterised by multifunctionality, sustainable production of agricultural goods and management of the environment and preservation of the countryside'.