The measures, which cover the period from now to 2013, are aimed at revamping a decades-old system in which farmers automatically earned money for farm products whether there was market demand or not. That system has been attacked at the World Trade Organization for making Europe less likely to import more competitive farm products from outside the bloc.
The measures represent the biggest reform of European farming policy in five years.
Even so, critics said the measures, which were hashed out Thursday morning after all-night talks in Brussels, were only a partial shift in policy rather than a wholesale reform of the €43 billion subsidy system.
«I regret what has been conceded in order to secure a deal which will lead to some new distortions in the short term,» said the British environment secretary, Hilary Benn. «We want to see further changes for the benefit of farmers, consumers and the environment and will continue to press for this.»
The Common Agricultural Policy absorbs more than 40 percent of the annual EU budget of more than $100 billion, or $125 billion, although the bloc’s 13 million farmers represent only about 3 percent of its population.
Britain has led arguments that freer trade is the best way to tackle food crises linked to sharply increased prices over the past year.
France, which receives the biggest slice of EU farm subsidies, worth about €9 billion a year, has opposed a radical restructuring of the system, saying rising food prices underscore the need for a robust program of regional support for farmers.
Such polarized views meant change was bound to be incremental. Even so, EU officials said the measures would free farmers to produce more food based on market demand and redirect money to more relevant uses like preserving the countryside, protecting the environment and revitalizing rural areas.
The reforms are «all about equipping our farmers for the challenges they face in the upcoming years, such as climate change, and freeing them to follow market signals,» said Mariann Fischer Boel, the EU commissioner for agriculture and rural development. «I’m pleased we managed to find a compromise.»
The measures also are positive for European trade relations, although the system still could affect prices and the way farmers produce, said Indhira Santos, a research fellow specializing in European agriculture at the Bruegel research organization.
«On paper these reforms make the European system more compatible with global trade rules,» Santos said. «In practice — although these changes might mean the payments are marginally less distorting — there’s really little difference because most of the money still goes to the same people.»
Food prices in the EU are significantly higher than they would be without the subsidy system, Santos said, while farm supports in the United States had less of an impact on food prices there.
But Jack Thurston, the co-founder of Farmsubsidy.org, which campaigns for budgetary transparency in European farm spending, said the significance of the reforms would be only very slight for trade relations because most of the international friction about farming in Europe concerned tariffs, rather than quotas or spending.
Among the measures agreed to early Thursday morning was to increase annual milk production quotas each year ahead of a planned abolition of the quota system in 2015.
In addition, EU governments agreed formally to abolish the so-called set-aside, which required some farmland to be kept out of production over the past two decades. EU officials say many farmers already are using all of their farmland, after an earlier agreement to lift the rules temporarily. Abolishing the set-aside entirely should foster greater food production and combat price rises, EU officials say.
The measures also reduce direct payments to medium-sized farmers — from an Irish cattle farmer to an Italian olive grower — and to very big landowners like the Queen of England, grain barons in northern France, and the owners of landholdings in formerly communist countries in Eastern Europe. That money is to be shifted into other forms of rural spending, like measures to protect the environment or revitalize the countryside.
But the measures did not go as far as EU officials had hoped.
Fischer Boel, the EU agriculture commissioner, had sought a further 8 percent of all direct payments above €5,000 be shifted to rural projects, but governments limited that increase to 5 percent. Fischer Boel also had sought to reduce direct payments to the biggest subsidy recipients by up to 9 percent. But governments scrapped that plan, agreeing instead to reductions of 4 percent for payments above €300,000 a year.
Thurston, of Farmsubsidy.org, said large landholders had managed to maintain their benefits.
«The changes will not get the Queen, the Duke of Westminster, or Prince Albert of Monaco off of the front pages of newspapers for being the major beneficiaries of these payments,» he said.
With milk prices declining in recent months after sharp rises earlier in the year, some dairy farmers turned up pressure on their governments to go slow on quota reforms, warning that sharper drops in milk prices could hurt their livelihoods. Germany, along with Austria and others, said that moving to jettison quotas too quickly could jeopardize the future of farmers in their mountainous regions.
As a special concession, those farmers will be allowed to use some money earmarked for other sectors. EU officials also will review the plans to scrap the milk quotas in 2010 and 2012 to ensure there would be no serious, long-term damage to the sector.
Italy, by contrast, won a special right to increase production more than other countries in light of its tendency to mismanage production and regularly produce more than the rules had permitted.
Generally, however, the move to end quotas on milk by 2015 would lead farmers to increase the size of their dairy herds in the most productive pastureland in Europe, leading to reduced prices for consumers in the near to medium term, experts said.
Expect «cheaper yogurt, cheaper milk and cheaper cheese,» said Thurston of Farmsubsidy.org.
Other countries also won special exemptions.
France, which holds the rotating EU presidency and led the negotiations, was allowed to continue receiving subsidies that are based on farming sheep and goats. France also lobbied for, and got, a guarantee that the European Commission would have to buy its wheat at a guaranteed price of €101.31 per ton if prices sink beneath that level, up to 3 million tons a year.
«It’s a matter of facing up to an extremely serious crisis in the agricultural sector,» especially cattle farming, said Michel Barnier, the French agriculture minister, who chaired the negotiations. «Farmers know its better to have a real and solid agricultural policy rather than a system of each for himself,» he said on LCI television.
Slovenia won the right to grant special supports to farmers of young cows until 2013. Slovenia also negotiated a special premium on bulls and oxen until 2012.
An even bigger debate on agricultural spending could lie ahead as part of negotiations on the trade bloc’s total budget after 2013.
Those talks have not started yet, although countries like France are expected to argue for the need to preserve strong agricultural supports at a time of volatile food prices. At the same time, pressures could grow to cut the EU farm budget if the financial and economic turmoil deepens and puts even greater strain on EU government budgets.---