October 25, 2001

EU CAP Reforms Affect Blair House Implementation

The following is a detailed explanation of parts of the European Union's Agenda 2000 Reforms to the European Union's  Common Agricultural Policy which will affect implementation of the 1992 Blair House Agreement. The changes starting in 2000/01 are first resulting in a reduction of crop specific payments for oilseeds, and then in 2002/03, oilseed payments will be lowered further and set equal to payments for grains. The EU maintains that this will eliminate crop-specific payments for oilseeds and thus make the Blair House Agreement inapplicable to their crop payment program, while leaving the agreement in effect.

The discussion below is an excerpt taken from the European Union Oilseeds and Products 2001 Annual Report, released by the U.S. Mission to the European Union, Brussels, July, 13, 2001, written by Mary Revelt and Danielle Borremans. The full report can be found under attaché reports at the Foreign Agricultural Service web site.

Marketing Years 2000/01 and 2001/02

One of the main elements in Agenda 2000 reform is the gradual decrease in the level of compensatory payments for oilseeds, reaching 63 euro per ton from marketing year 2002/03 onwards, when compensatory payments for cereals and oilseeds will be aligned. During the transition period, i.e., during 2000/01 and 2001/02, hectare payments under the main scheme will be calculated in the same manner as before: by multiplying a fixed amount (81.74 euro per ton in 2000/01 and 72.37 euro per ton in 2001/02) by the regional historical yields. The option of using either cereals or oilseeds yield remains, whereby the multiplication by a factor of 1.95 in case of oilseeds yield is kept in place. The system of adjusting the compensatory payments to take account of changes in oilseed prices was abolished. Unlike before, producers under the simplified scheme (small producers) also get the oilseeds-specific payment, i.e., the same amount as oilseed producers under the main scheme.

As small producers receive the same payments as the main scheme producers in marketing years 2000/01 and 2001/02, the European Commission, for these years only, includes small producers in the Blair House calculations. Given that Agenda 2000 has provided small producers with a higher oilseeds payment than before, it is not surprising that oilseeds area of small producers in the EU has risen from about 90,000 HA in 1999/2000 to about 558,000 HA in 2000/01.

For the transition period 2000/01-2001/02, the European Commission would set penalties if the total EU oilseeds area for which crop-specific payments have been made exceeds the Blair House limit of 4.933 million hectares (5.482 million hectares minus 10 percent). Table 2 summarizes the Blair House calculations for 2000/01; data were received from the European Commission. In 2000/01, the total EU oilseeds area, including small producers, amounted to 4.415 million hectares, or about 518,000 below the Blair House limit. Given the undershoot, the European Commission did not apply any Blair House penalties in 2000/01. While limits were not exceeded this year, it should be mentioned that Council Regulation 1251/1999, which sets out Agenda 2000 reform in the arable crops sector, limits the penalty rates in case of a Blair House overshoot to 23.07 euros per ton in 2000/01 and 9.37 euros per ton in 2001/02. Limits to the penalties are not foreseen by the Blair House Agreement.

With regard to the other part of the Blair House Agreement, i.e., the ceiling on industrial oilseeds production, it is expected that, during marketing year 2000/01, the EU remained within its limits. The Blair House Agreement of 1992 restricts the production of oilseeds on set-aside land for industrial (non-food and non-feed) purposes. Production of by-products is limited to 1 million tons of soybean meal equivalent annually. To date, the 1 Million Ton Limit has not been breached by the EU. Commission Regulation 827/2000 of April 25, 2000 sets out the rules for an ex ante calculation of total output of by-products from industrial oilseeds in the EU, and makes reference to corrective measures to be taken in case the 1 Million Ton Limit is expected to be exceeded.

As of Marketing Year 2002/03

Compensatory payments for EU oilseeds producers, both under the main scheme and under the simplified scheme, will be based on 63 euros per ton from 2002/03 onwards. Hectare payments will be calculated on the basis of the average cereal yield in each production region. The option of using the oilseeds yield as a basis will no longer exist. According to the European Commission, the equalization of compensatory payments for both cereals and oilseeds will do away with the crop-specificity of oilseeds payments and Blair House. Consequently, the Blair House Agreement will no longer be valid as of 2002/03. The U.S. position remains that, as the Blair House Agreement on oilseeds was incorporated into the EU’s WTO schedule, it is a multilateral commitment, and the EU will continue to be bound by the provisions of the Blair House Agreement.

For more information, contact Paul Provance
 with the Production Estimates and Crop Assessment Division at (202) 720-0881 or e-mail  Provance@fas.usda.gov.

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