LUXEMBOURG (AP)--The European Union announced radical changes in its $50 billion farm subsidy program June 26, slashing incentives for farmers to produce more than Europe can consume or sell abroad.
EU officials urged the United States to follow suit and reform its own farm subsidies program. The United States and other trading partners have long blamed the EU system for creating food surpluses that are dumped on world markets.
Under the reform plan, hammered out by EU agriculture ministers, EU farmers will no longer receive subsidies based on the amount they produce. Instead they will receive an annual payment based on the size of farms.
Under pressure from France, the EU's biggest agricultural producer, the ministers agreed that EU members can continue to link a percentage of subsidies to output for cereal and beef farmers if there is a risk that farmers might leave the land.
However, the EU's agriculture commissioner, Franz Fischler, estimated that 90% of cereal subsidies and 70% of beef payments would be "decoupled" from output levels under the reforms that will be phased in over four years.
EU officials said this would bolster their position in September's world trade talks in Cancun, Mexico, by neutralizing long-standing criticism of overproduction and dumping of foodstuffs on world markets, which has depressed prices.
"Today is the beginning of a new era," Fischler said, pledging that European "consumers and taxpayers will get more for their money."
He urged the United States to match the EU by reforming its own "highly distorting" agricultural subsidies. "We expect others to respond in kind. Now it's up to others to do their homework and I don't see them studying very hard."
The EU worries about the farm bill President George W. Bush introduced last year which would authorize $180 billion in spending over the next 10 years, a $73.5 billion increase over existing programs.
In Geneva, the head of the World Trade Organization, Supachai Panitchpakdi, hailed the EU move.
Rep. Leonard Boswell, D-IA, a member of the House Agriculture Committee, welcomed the reforms, saying they "ought to make it more competitive for us."
European farmers had long resisted changing the system, which was introduced in the 1950s to make Europe self-sufficient in food after the devastation of World War II.
However, pressure mounted to reform the system before the EU takes in 10 new members next year because the cost of subsidies to farmers in countries such as Poland would strain EU resources.
Jean-Michel Lemetayer, head of the French farmers union FNSEA, accused the EU of "abandoning assurance of farmers' incomes."
The agreement was announced after overnight talks led to a compromise between pro-subsidy France, Spain and Ireland and reformists led by Britain and the Netherlands.
Also under the reform:
--Subsidies can be withheld if farmers violate food safety rules, animal welfare and environment protection.
--More money will go to rural development, improvements to food quality and protecting the environment.
--Limits will be placed on subsidies to the biggest, richest farms, which have previously received most handouts.
--The EU farm budget is fixed around current levels until 2013.
--The EU will reduce the amount it pays farmers to prop up prices of butter, powdered milk and cereals when market prices fall below minimum levels.