SPEECH/06/471 Mariann Fischer Boel Member of the European Commission responsible for Agriculture and Rural Development The future of Agriculture in Finland Finnish farmers event organised by Op Bank Group Seinäjoki, Finland, 3 August 2006
Ladies and gentlemen, I would like to express my sincere thanks to the OP Bank Group and to the Seinäjoki Technology Centre for making possible this seminar on globalisation and Finnish agriculture. It's exciting to be making a contribution to the seminar just as the Finnish presidency of the European Union gets fully underway. I have been looking forward to working closely with Minister Korkeaoja and the rest of the presidency team. I have been given a very warm welcome in this magnificent country of yours, where the sun seems so unwilling to go to bed for one half of the year, and so unwilling to leave its bed for the other half. This is one of the many geographical aspects of Finland which draw in curious tourists but which also set demanding challenges for your farmers. Many other forces besides geography have helped shape your farming sector: Finland s history, for example; and more recently, eleven years in the Common Agricultural Policy. That Common Agricultural Policy in which you participate is changing. The international context is also shifting, as communications open up and barriers to trade fall. Now is therefore a good time for asking questions about the future of agriculture within the European Union in general, and within Finland. Today I would like to look first at certain points of current interest to the Union as a whole, then at issues specific to Finland. I am sure that you all know about the suspension of the Doha Round of trade talks within the World Trade Organisation. Let's be clear about this suspension: it is very bad news indeed for the European Union. There were many good reasons why Trade Commissioner Peter Mandelson and I were working so hard to bring success to the talks. Essentially, the multilateral system is by far the most effective tool for creating and spreading the benefits of trade. Bilateral trade agreements can take us forward in small individual steps; but these steps cannot add up to the huge leaps which become possible when all WTO members are at the table, discussing all relevant issues. Bilateral deals will never bring about discipline to the USA's farm support programme, for example. And they usually serve the interests of the strong much more than those of the weak. Now that the Doha Round has stalled, for the time being we have lost the chance to secure profitable access for European businesses to overseas markets for industrial goods and services. We have lost the chance to draw certain developed countries down the route of agricultural policy reform. And we have lost the chance to create wealth gains for the world's poorest countries gains which could far outweigh the value of what we give them in aid. The European Union said clearly in Geneva that it was ready to go the extra mile. For the sake of a successful Round, we were prepared to go beyond the agricultural offer which we put on the table last October an offer which was already ambitious. This extra step would have been within the mandate given by the Council. 2
But I am afraid to say that, for some of our trade partners, "ambition" was strictly a one-way street: they understood ambition only in terms of demanding concessions from others, not offering them. We must now reflect on the right way forwards in the weeks ahead. Our offer of last October stays on the table, and we will remain open to any opportunity of breathing new life into the Doha process. We have already seen messages from Suzan Schwab and Amorin but I want to see flesh on the bones before we decide what steps can be taken. But to be honest, I do not expect to see such an opportunity in the near future. One thing that I can tell you for certain is that the suspension of the Doha talks in no way diminishes the urgency or importance of the many policy-related tasks and questions facing us at home. We have to keep up the good work of implementing the CAP reforms agreed in 2003 and more recently. Some of the national models created to apply these reforms are complex, and we have to make sure that they function smoothly on the ground. As you know, we also intend to press on with further reforms. The Commission's proposals for the wine sector hold little direct interest for Finnish farmers, but they are certainly relevant to Finnish consumers. Spending the European Union budget sensibly, seeing more of the kinds of wine that we want to buy, making the labelling clearer: these are all goals which Finns should welcome. I should add that, alongside changes to the wine regime itself, I would also hope to see publicity campaigns about the health benefits of moderate alcohol consumption. Finnish farmers have a more direct interest in the intended reform of the fruit and vegetables sector, for which the Commission will present proposals later this year, in November. We have to aim high with this reform. The competitiveness of producers in this sector varies enormously from one part of the European Union to another, and we need to inspire those at the bottom to raise their game. I would particularly like to encourage wider participation in producer organisations. The level in Finland is surprisingly low, with just 12% of output marketed through POs in 2004, compared with 38% in the European Union as a whole. Perhaps there is room for improvement here? Another key issue is the extent to which we can introduce the key principles of the 2003 CAP reform - decoupled payments and cross-compliance into the fruit and vegetables regime. As we pursue this work of reform, in 2008 I will also conduct what I call a "CAP health check". I will not be afraid at that point to suggest changes where I think they are necessary. But the health check will not be about further fundamental reform and certainly not about trying to cut budgets. It will be about ensuring that the CAP is working as it should, and simplifying things where this is possible. I look forward to hearing suggestions about how to make things more simple. On the other hand, I certainly cannot rule out further significant change to the CAP beyond 2013. 3
Let's look at the context. The pressures of global trade are simply too mighty to be ignored, and we have to respond competitively. This has to be one of the central aims of our policies. We must also respect the wishes of our voters and consumers, who quite clearly expect the CAP to score high marks when we assess it against standards of environmental responsibility and general ethics. With this in mind, I think the evolution of the CAP is highly unlikely to make a U-turn. We are much more likely to go further down our current path. I would expect to see further decoupling of public aid from production, an even stronger emphasis on the environment, and further transfers from direct payments to funding for rural development. This is not a foregone conclusion: seven years can be a long time in politics. But in my opinion, we would do well to prepare ourselves mentally for this kind of scenario. I have very good cooperation with young farmers. It is important to listen to how they believe the CAP should develop in the future. Now I come to the second half of my comments for today. The question to be answered is this: How does the future of Finnish agriculture look like - compared to my description of the present and my cautious predictions of the future? The CAP is a flexible policy. If we doubt that, we need only look at the wide range of options taken up by Member States in rural development policy, or in their interpretations of the Single Payment Scheme. Nevertheless, the Common Agricultural Policy is indeed a "common" policy, not a collection of national policies. The impressive efforts of Finnish farmers to integrate into the CAP have been supported by a number of special aids. But 11 years after accession to the European Union, we have to ask ourselves whether all of these aids really fit into a common framework, or whether some stretch its flexibility too far. This question is clearly relevant to Finland's national aid for seed production. This sort of direct subsidy for a single product in a single country looks out of place in the new CAP which focuses so sharply on market-responsiveness. The point of essentially "decoupling" subsidy from production is that farmers should base their production decisions on what the market wants, not on the subsidy on offer The situation with regard to Nordic aid to farmers in Finland's northern regions is of course different. This support is described as a long-term aid in article 142 of the treaty establishing Finland's membership of the European Union, and so abolishing it is certainly not on the agenda. On the other hand, I know that Finnish farmers themselves have been asking questions about how that aid is spent. I welcome these questions, because I think we need to take a fresh look at objectives and mechanisms. The current system clearly addresses one of the stated aims of Nordic aid the maintenance of traditional primary production. But I am not so sure that it has addressed the second aim to the same extent - improving structures for the production, marketing and processing of agricultural products. I think sometimes we haven't been good enough at marketing our products. The fact that Finland actually pays less Nordic aid than the permitted ceiling raises further questions about the objectives being pursued. Also, the mechanisms involved are not as simple and transparent as we would wish. 4
The Commission is examining these points closely as it carries out its evaluation of the Nordic aid scheme. Another kind of aid set out in the accession treaty - transitional aid to southern Finland, as mentioned in article 141 is in a different category. The treaty states explicitly that this support is about helping producers to achieve "full integration into the Common Agricultural Policy". 11 years after accession, the period of transition should nearly be over. I am certainly not arguing that no farmers in southern Finland face natural handicaps. What I am arguing is that we should assist them with the normal tools of the CAP. The right tool for supporting farmers who face natural handicaps is rural development policy. This is doubly true now that this policy has grown from a bolt-on extra into the second pillar of the CAP. It now offers a long, diverse menu of options from which Member States and regions can pick what they need. Finnish farmers are not the only farmers in the European Union who have to overcome difficult challenges set by nature. In other Member States, the assumption is that solutions must be found largely in rural development policy. Finland should likewise be moving towards this approach As regards the substance of the rural development policy, I know that the Finnish government has particular questions about the ways in which it could use agrienvironment schemes and support for Less Favoured Areas (LFAs) in future. The Commission will work with Finland on this to do what can reasonably be done provided that there is no negative impact on the overall framework of our rural policy. The future of farming in Finland is of course not only about what sort of aid there will be, but also about what farmers actually do. If we leave aside the issue of your geography, Finnish farmers face broadly the same challenges as their colleagues in the rest of the European Union. They must compete hard. They must bring the right products to market the highquality products which consumers want. And they must tell consumers clearly why these products are worth a premium. This message is not just about the products themselves but also the high environmental standards of the farming systems which produced them. There may also be scope for Finnish farmers to get more involved in the production of biomass, a sector in which the European Union as a whole intends to be more active. With the price of oil at 75$ a baril, there are possibilities for the production of bioethanol and biodiesel. This could be a very interesting niche even it won't solve all the problems of agriculture. Finally, many farmers and rural communities will have to diversify their economic activities, as in other Member States. Support for this is available especially under axis 3 of the new rural development rules. If we want to maintain family farms it might be necessary to get income from outside the primary sector. That's why access three is so important. Finland has an excellent record in Leader-style projects. I am also encouraged to see the growth of interest in "northern tourism" packages that offer experiences of nature and winter sports. There are some good ideas around! 5
Ladies and gentlemen, I sincerely believe that agriculture in Finland does have a firm future. Inevitably, my comments about your special support measures may draw more attention over the next few days than the other issues on which I have spoken today. But if I argue that some of these special measures should be allowed to run out, it's because I really think you can do without them. The evolution of the CAP and of international agricultural trade presents challenges and openings for everyone. It a coin with two sides: The lowing of tariffs will give us more competition but will also open up markets elsewhere and with high quality products we will have many opportunities especially in emerging economies in the East. I am sure that Finland - with its superb record in harnessing technology, in educating its workforce, and generally in facing up to problems will prosper as much as anyone in this environment. Thank you for your attention. 6