The Cap After The Fischler Reform

THE CAP AFTER THE FISCHLER REFORM: SINGLE PAYMENT SCHEME

This paper describes the main component of the June 2003 Common Agricultural Policy reform: the introduction of Single Payment Scheme (SPS)payments independent of production. This reform of the CAP brought about a separation between financial support and the level of production. The original CAP was based upon high support prices.According to this, the more the farmer produced the greater benefit he received from the policy. The result was over-production and huge surpluses that could only be sold abroad by means of large exportsubsidies. EU hopes of reaching agreement in World Trade Organization (WTO) negotiations led to pressure to end that system.

The 2003 CAP reform extended the principle of a partial separation ofsubsidy from production. In the future, direct payments to farmers would be made mainly through an annual SPS that will replace the majority of existing direct aids. As we mentioned earlier, theintroduction of the SPS eliminates the links between production and subsidies. Its main objectives are to give farmers the freedom to adapt their production to market demand, promote environmentally andeconomically sustainable farming, to simplify CAP application and strengthen the EU position in WTO negotiations on agricultural trade.

According to the reform, farmers are not obliged to produce toreceive SPS or other direct payments. In fact, the justification for paying SFP is no longer to maximise food production. Much of the political justification nowadays is based upon farmers preserving theenvironment. All farmers need to comply with certain basic environmental requirements in order to receive SFP, whether or not they are producing anything. That is known as cross-compliance. Crosscompliance is divided into three sets of requirements, all of which you must meet in order to receive your single payment and other direct payments in full. Basically, farmers must maintain good...