Report from the Commission to the Council and the European Parliament - The agricultural situation in the European Union – 2005 Report {SEC(2007) 365}
Date: 2007-03-23
Institutions: European Commission
Subjects: EU Member State, agricultural situation, agricultural statistics, farm income, farm prices, reform of the CAP, report, rural development

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.3.2007 
COM(2007) 130 final 

REPORT FROM THE COMMISSION  
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT 

The agricultural situation in the European Union – 2005 Report 

{SEC(2007) 365} 

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REPORT FROM THE COMMISSION  
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT 

The agricultural situation in the European Union – 2005 Report 

INTRODUCTION 

1. 

1. 

2. 

3. 

4. 

"The agricultural situation in the European Union — 2005 report", was completed in 
September  2005,  and  is  published  in  conjunction  with  the  General  Report  on  the 
Activities of the European Union. 

ECONOMIC SITUATION AND FARM INCOMES 

Over the European Union as a whole, agricultural income 2005 fell by –6.3% (–6.6% 
in  the  old  Member  States  and  –3.8%  in  the  new  Member  States).  The  actual  range 
varied from –19.3% for Hungary to + 25.9% for Lithuania.  

The growth rate in the EU is projected to have reached + 1.5% in 2005. Besides the 
robust  global  environment,  the  main  factors  behind  this  development  include 
accommodative macroeconomic policies, supportive financial conditions, wider profit 
margins  and  a  weaker  nominal  effective  exchange  rate.  The  EUR  recorded  some 
highs against the dollar at the beginning of the year but fell back to close the year at 
USD 1.17.  

In the first nine months of 2005 the overall value of Community agricultural exports 
increased strongly by 8% with wide divergences across agri-food products. The EU 
remained  a  net  importer  of  agricultural  products  but  its  agricultural  trade  balance 
improved significantly due the higher exports.  

2. 

POLICY DEVELOPMENTS AND LEGISLATIVE INITIATIVES IN 2005 

The CAP reform – sugar 

5. 

6. 

7. 

On 22 June 2005, the Commission adopted a package of proposals for reform of the 
EU  sugar  sector,  re-casting  the  common  organisation  of  the  markets  in  the  sugar 
sector,  amending  Regulation  (EC)  No  1782/2003  and  establishing  a  temporary 
scheme  for  restructuring  of  the  sugar  industry  in  the  European  Community.  A 
political  agreement,  largely  reflecting  the  Commission's  original  proposals,  was 
reached by the Council on 24 November 2005. 

In bringing a system which has remained largely unchanged for almost 40 years into 
line  with  the  CAP  reforms  of  2003/2004,  the  sugar  reform  will  boost  the  sector's 
competitiveness,  improve  its  market  orientation  and  attain  a  sustainable  market 
balance with respect to the EU's international commitments. 

The reform will be achieved by introducing a 36% cut in guaranteed price for white 
sugar,  compensation  for  farmers  in  the  form  of  a  decoupled  payment,  added  to  the 

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single farm payment, and a voluntary restructuring scheme, providing incentives for 
less competitive EU sugar factories to leave the sector. 

Financial Perspectives 2007–2013 

8. 

The European Council decided on 17 December 2005 to fix agricultural spending for 
2007–2013, as approved by the European Parliament, at EUR 293.1 billion for direct 
income  payments  and  market  measures  and  at  EUR  69.75  billion  for  rural 
development (2004 prices). In the political agreement the CAP was identified as a key 
element in a wide ranging review to take place 2008/2009, covering all aspects of EU 
spending and resources. 

Biofuels 

9. 

10. 

In  the  later  half  of  2005,  with  the  call  for  a  renewed  political  signal  on  EU  energy 
policy  in  view  of  rising  oil  prices,  high  energy  dependence  of  our  economy  and 
international  climate  change  commitments,  the  possibility  of  increasing  the 
production of biofuels became a complex, cross-cutting and dynamic issue. 

On 7 December 2005 the Commission adopted an EU Biomass Action Plan with the 
main objective of more than doubling biomass use in the EU by 2010 and paving the 
way for bigger increases by 2020. This preliminary EU initiative will also serve as a 
basis for a Communication on the EU Strategy for Biofuels, due for adoption in early 
2006. 

Quality policy 

11. 

During 2005, the Commission added 24 names to the list of protected designations of 
origin  and  protected  geographical  indications;  the  list  currently  comprises  705 
products.  Four  modifications  of  the  specifications  of  registered  PFO/PGI  are  also 
listed in the annex.  

Organic farming 

12. 

On  21  December  2005,  the  Commission  adopted  a  proposal  for  a  new  Council 
Regulation on organic production [COM(2005) 671 final]. The proposal is a follow-
up  of  the  Communication  [COM(2004) 415]  on  a  Community  Action  Plan  for 
Organic Food and Farming (EAP).  

Promotional measures 

13. 

14. 

In 2005 the Commission approved for co-financing 25 new programmes of promotion 
operated  outside  the  EU.  The  main  target  countries  of  these  programmes  include 
Japan, Russia, USA and non-EU European countries. The products promoted include 
quality  wines,  olive  oil,  cheeses,  meat  products  and  fruit  and  vegetables.  Most 
programmes  last  for  three  years.  Total  EU  co-financing  for  these  programmes 
amounts to EUR 23.4 million. 

For the EU internal market the commission approved altogether 51 new programmes 
for  a  total  budget  of  EUR 51.6  million  of  Community  co-financing.  Most 
programmes last for three years. The promoted products include fruit and vegetables, 
organic products, products with a PDO or PGI denomination, flowers and plants, milk 

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products, olive oil and to a limited extent beef. In 2005, promotion programmes were 
also  received  by  the  new  Member  States  and  many  proposals  were  accepted  for 
co-financing.  

Simplification of agricultural legislation 

15. 

Simplification  continued  to  be  an  important  objective  in  2005,  as  Better  Regulation 
continues to increase in political importance within the context of the Lisbon Agenda. 
The  Commission  Communication  on  “Simplification  and  Better  Regulation  for  the 
Common  Agricultural  Policy”  (COM(2005)509  final)  was  published  on  19  October 
2005.  It  announces  in  particular  the  development  of  a  simplification  action  plan 
during 2006, the elaboration of a “Single CMO” regulation combining eventually 21 
Common Market Organisations into a single regulatory framework and a conference 
on simplification to be held during the autumn of 2006.  

State aids 

16. 

The Commission received 261 notifications of state aid draft measures to be granted 
in  the  agricultural  and  agro-industrial  sector.  The  Commission  also  started  the 
examination of 25 aid measures, which had not been notified before under art. 88.3 of 
the EC Treaty. 

Assistance to the needy 

17. 

The  European  Union  has  continued  to  implement  its  aid  programme  for  the  needy. 
This  action  consists  of  distributing  agricultural  products  (processed  or  otherwise) 
from intervention stocks in  the Union to  associations  working  with  deprived people 
on the ground in the Member States. 

The Outermost Regions – Reform of the POSEI arrangements  

18. 

19. 

Following  detailed  discussions  over  the  course  of  2005,  Member  States  agreed 
unanimously in a working party on the outermost regions on 2 December 2005 that 
the  Commission’s  proposal  for  a  Council  Regulation  for  a  reform  of  the  POSEI 
arrangements  should  be  put  forward  for  adoption  as  an  I/A-point  by  Coreper  and 
Council.  

The reform will change the approach to providing assistance to the outermost regions 
by encouraging participation in decision making and speeding up the response to their 
specific  needs.  The  Regulation  provides  for  the  submission  of  programmes  by  the 
Member States, which should then be approved by the Commission and implemented 
in the course of 2006. These programmes will include a section on the specific supply 
arrangements  for  those  agricultural  products  which  are  essential  in  the  outermost 
regions for human consumption, as agricultural inputs or for processing, and another 
section on support for local production. 

20. 

The  Regulation  does  not  affect  the  sources  of  financing  or  the  intensity  of 
Community support.. 

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Information measures concerning the CAP 

21. 

The purpose of the information policy is to explain the issues surrounding the CAP, 
promote  the  European  model  of  agriculture,  keep  farmers  and  other  rural  interests 
informed and raise public awareness of the implications and goals of the CAP. This 
was  done  by  extending  grants  to  a  number  of  public  and  NGO  beneficiaries  for 
seminars, conferences, printed publications and audiovisual media productions. Also, 
the Commission itself organised events covering a range of themes at public hearings, 
press briefings, information visits, speeches, conferences in Brussels, missions inside 
and outside the EU and participation at certain international, agricultural fairs. 

22. 

A  number  of  specific  fact  sheets,  reports,  leaflets,  bookmarks,  posters,  conference 
proceedings and newsletters on international and rural issues were published.  

Access to documents 

23. 

In 2005, the interest manifested by EU citizens in receiving internal documents from 
DG  Agriculture  and  Rural  Development  continued  to  rise,  although  not  as 
significantly as in 2004. Compared to 2004, the number of requests introduced by EU 
citizens  in  application  of  Regulation  (EC)  No 1049/2001  on  access  to  Council, 
European Parliament and Commission documents in the area of agriculture and rural 
development  rose  by  +/– 25%.  This  brought  the  number  of  requests  in  that  area  in 
2005 to +/– 185. 

3. 

AGRICULTURAL MARKETS 

Certain crop products 

24. 

25. 

26. 

World cereal production (excluding rice) in the 2004/05 marketing year rose against 
the  previous  year.  The  2004/05  EU-25  total  cereal  harvest  was  284  million  t, 
54 million  t  or  23%  higher  than  2003/04’s  crop.  In  the  EU,  the  area  increased  by 
1 million ha whereas cereal yield increased by 1 t/ha or 22%. All EU cereals, but oats, 
had a production higher than in 2003/04, ranking from a 11% increase for barley to a 
42% increase for rye. Average cereal yields were record yields for EU-15 (6.02 t/ha) 
as well as for the new Member States (4.09 t/ha). 

According to International Grains Council figures, at the end of November 2005, the 
2004/05 world harvest was 1 632 million tonnes against 1 467 million tonnes for the 
previous marketing year. 

World cereal stocks increased, the 2004/05 estimate being 312 million tonnes (against 
264  million  tonnes  in  2003/04  and  333  million  tonnes  in  2002/03),  comprising 
137 million tonnes of wheat and, due to the huge US harvest, 167 million tonnes of 
feed  grains  (137  last  year).  In  the  EU,  stocks  held  by  the  intervention  agencies  on 
1 November 2004 were 5 million tonnes: 3.0 million tonnes of rye, 0.9 million tonnes 
of barley and 1.0 million tonnes of wheat and 0.2 million tonnes maize. 

27. 

The  total  volume  of  world  trade  in  cereals  in  2004/05  was  211  million  tonnes 
(106 million  tonnes  of  wheat  and  104  million  tonnes  of  coarse  grains)  against  207 
million tonnes the previous year. 

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28. 

29. 

30. 

31. 

32. 

33. 

34. 

35. 

36. 

EU-25 utilisable cereal production would reach 282 million t. In 2005/06 the forecast 
is  that,  with  the  return  to  a  10%  set  aside  rate,  there  will  be  a  decrease  of  EU-25 
cereal area by 2.4% to about 51 million ha.  

This area combined with trend yield estimates would lead to a harvested production 
of 263 million t, 20 million t lower or – 14% compared to 2004/05. Average yield is 
estimated to be 5.15 t/ha, a decrease of 5% compared to last year record. 

Rye  production  fell  from  7.2  to  5  million  tonnes,  following  a  reduction  in  the  area 
sown largely due to Commission decision to abolish the intervention scheme for rye. 

Total  EU-25  oilseed  area  was  quite  stable  in  2005  (+ 3%  compared  to  2004)  with 
rapeseed  up  7%  to  4.7  million  ha,  sunflower  seed  went  up  modestly  by  1%  to 
2.23 million  ha  and  soybeans  increased  2.5%  to  282 000  ha.  Total  oilseed  area  is 
currently  estimated  at  7  million  ha,  including  870 000  ha  under  non-food  set-aside 
scheme  and  350 000  ha  under  energy  crop  scheme.  With  the  excellent  weather 
conditions,  yields  recovered  after  the  low  2003  yields,  giving  a  total  production  of 
about  20  million  tonnes,  at  the  same  level  as  in  2004/05.  A  big  part  of  2.6  million 
tonnes of oilseed oil estimated as non-food was rapeseed oil. The 2005/06 crop would 
be  made  of  15.3  million  tonnes  of  rapeseeds,  3.8  million  tonnes  of  sunflower  seeds 
and 805 000 tonnes of soybeans. 

Total imports of oilseeds went down from 17 million tonnes in 2002/03 to 16 million 
tonnes in 2004/05 and the main part constituted soybeans (95%).  

The  current  characteristic  of  the  European  consumption  is  a  growing  use  of  oilseed 
oils in the non-food sector. Rapeseed oil constitutes the prime example: 43% of the 
total quantity of rape oil available on the European market is used in the food sector 
while 57% go to the non-food sector, especially for the production of biodiesel. The 
boom  in  rape  oil  demand  as  renewable  energy  and  the  resulting  high  prices  will 
probably  contribute  to  decline  slightly  the  rape  oil  consumption  within  the  food 
sector.  

The area put into obligatory set-aside in 2005/06 was about 4 Mio ha, applying a set-
aside rate of 10%. In addition, 3 Mio ha were not used for production although they 
were  eligible  for  decoupled  income  support.  In  particular,  about  870 000  ha  of 
obligatory  set-aside  land  was  used  for  non-food  oilseeds,  mainly  for  biodiesel 
production.  Total  production  of  non-food  crops  cultivated  in  set-aside  surfaces 
amounted to 2.8 Mio tonnes.  

Under the CAP reform, a new aid of EUR 45 per hectare is granted for areas sown to 
energy  crops.  The  support  is  limited  to  a  maximum  guaranteed  area  (MGA)  of 
1.5 Mio ha. This regime was applied in 2004 for the first time and in that year an area 
of 330 000 ha was supported under that scheme. The area reached about 570 000 ha 
in 2005, which represents 38% of the MGA and around 65% of the traditional non-
food  set-aside  oilseeds  surface.  A  further  increase  in  the  area  under  energy  crops  is 
expected in 2006. 

Following  2003/04  global  sugar  production  remained  significantly  below  the  huge 
surplus  production  of  2002/03  in  2004/05  as  well.  The  improving  situation  of  the 
global sugar balance is indicated by the decreasing stock/consumption ratio which has 
reduced to 45.5%, its lowest level since 1997/98 when it reached 40.94%.  

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37. 

38. 

39. 

40. 

Prices  have  improved  significantly  in  2005  reflecting  the  well  balanced  situation 
between production and consumption at global level, as well as expected deficit in the 
2005/06 campaign.  

Total exports of sugar as such have increased by 0.8 Mio t to 4.92 Mio t in 2004/05, 
including 2.44 Mio t of ‘C’ sugar exported without refund.  

In  2005  the  Community  sugar  market  was  characterized  by  an  important  surplus 
situation which had severe effect on the prices and the market balance as well. For the 
first  time  in  nearly  20  years  sugar  was  offered  into  intervention.  The  total  quantity 
offered  into  intervention  by  operators  and  accepted  by  Member  State  authorities 
amounted to 1 324 286 t in 2005.  

As  far  as  the  2005/06  marketing  year  is  concerned  Community  sugar  production  is 
estimated at 19.6 million tonnes, slightly below the 19.93 produced in 2004. Unlike in 
2004/05  it  was  necessary  to  significantly  reduce  Community  quotas  in  order  to 
comply with WTO commitments. 

41. 

The  measure  of  intervention  buying-in,  hardly  ever  used  in  the  sugar  market 
organisation has become a major instrument in the 2004/05 marketing year.  

Certain animal products 

42. 

43. 

44. 

45. 

46. 

47. 

48. 

Initial estimates suggest that world milk production which reached 618 million tonnes 
in 2004 will increase in 2005 by an estimated 3%.  

EU dairy herds are expected to fall by 3.6% to 22.7 million heads. Yield, however, 
should  increase  by  3%  to  6 170 kg  per  animal  per  year.  Milk  production  remains 
stable at 142.6 million tonnes The Member States expect milk deliveries to increase 
to a total volume delivered of 131.2 million tonnes, mainly caused by a 6% increase 
in the 10 NMS. 

Drinking milk production has remains fairly stable at around 33 million tonnes in the 
EU-25.  Production  of  cream  for  consumption  is  also  stable  at  2.6 million  tonnes, 
while yoghurt shows a 5% increase. 

Butter production will increase by 40 000 tonnes to 2.17 million tonnes. 

At the end of 2005 the EU had 1.4 million dairy farmers, 90 000 less than in 2004. 
There is a gradual decline in the number of farmers in all Member States, but Poland 
alone  account  for  a  drop  of  60 000.  The  average  number  of  cows  per  holding  rose 
to 39 (ranging from 4 in Poland to 282 in Latvia). The amount of milk delivered per 
holding is 94 000 kg. However the average for the EU-15 is 240 000 and for the 10 
NMS  this  is  only  19 000.  Again  there  is  a  very  wide  range  in  the  average  quantity 
delivered per farm, ranging from 6 500 tonnes in Lithuania to 1 367 600 tonnes in the 
Czech Republic. 

Total  consumption  of  milk  products,  defined  as  the  total  of  all  uses  made  of  milk 
available in the European Union, has tended to rise since 1996 by 0.3% per year. 

In 2005, only 5 000 tonnes of SMP have been purchased in intervention. At the end of 
the year less than 10 000 tonnes were still in stocks. This is evidence of a balanced 

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49. 

50. 

51. 

52. 

53. 

54. 

55. 

56. 

supply-demand  situation  for  the  milk  protein  market  in  the  EU  in  2005.  For  butter 
36 000  tonnes  were  bought  into  intervention.  Stocks  at  the  end  of  the  year  are  still 
125 000 tonnes. This shows that the EU-25 market for milk fat is less balanced.  

On 1 July institutional prices have been reduced 7% for butter and 5% for skimmed 
milk powder, to 282.44 and 185.00 euro/100 kg respectively.  

Provisional results of the May/June 2005 survey showed a further decrease of 1.0% in 
the bovine livestock in the EU compared with the preceding year. The total cow herd 
in the EU declined by 0.7%. The dairy herd decreased by 1.5%, while the number of 
suckler cows increased slightly (+ 0.8%). 

Beef and veal production in the EU-25 is estimated at 7.84 million tonnes in 2005 or 
2.5% below its 2004 level. The total beef and veal consumption in the EU-25 in 2005 
is  estimated  at  8.14  million  tonnes.  In  2005  total  beef  imports  amounted  to 
528 000 tonnes.  Since  2003  the  Community  became  a  net  importer  of  beef.  During 
the  period  January  to  October  2005,  the  total  imports  exceeded  by  around 
242 000 tonnes  the  exports.  When  considering  beef  meat  trade  only,  the  net  import 
amounted to approximately 302 000 tonnes.  

The  overall  situation  of  the  EU  sheep  and  goat  market  was  relatively  stable 
throughout 2005. Average price of light lamb was at a very high level in the fourth 
quarter of the year (approximately 25% higher than in the year before). 

Community  export  remained  almost  inexistent.  The  European  Union  imports  a 
quantity corresponding to over one fifth of its needs. Imports into the Community are 
carried  out  principally  under  tariff  rate  quotas  with  exempt  or  reduced  rate  import 
duties.  According  to  the  livestock  surveys,  the  sheep  and  goat  population  in  the 
European Union is over 100 million heads.  

Based  on  Council  Regulation  (EC)  No  21/2004  establishing  a  system  for  the 
individual 
identification  and  registration  of  ovine  and  caprine  animals 
identification of animals became obligatory as from 9 July 2005.  

the 

In 2005, the EU pigmeat production is expected to remain stable at around 21 million 
tonnes. The average price will remain at around EUR 139/100 kg. The consumption 
per capita of pigmeat is expected to decrease slightly to 42.9 kg/capita. 

Since  1999,  the  world  production  of  poultry  meat  has  increased  regularly  and  in  a 
substantial way (+ 20%). The European Union’s production has strongly decreased in 
2003 (– 6.6%) due to the avian influenza in the Netherlands and in Belgium, and the 
reduction  of  production  in  several  Member  States  (France,  Italy,  Sweden).  The 
production of the EU-25 started to recover in 2004 (+ 1.4% compared to 1999). The 
present  market  situation  is  very  fragile  since  consumption  of  poultry  meat  dropped 
during the last four months of 2005 due to the media coverage of the Avian Influenza 
situation despite the absence of an outbreak within the EU commercial poultry flock. 

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4. 

57. 

5. 

58. 

59. 

60. 

61. 

62. 

IMPLEMENTATION OF THE 2003 REFORM 

From 1 January 2005 all EU farmers receiving direct payments shall comply with the 
cross-compliance  conditions.  Ten  Member  States  started  implementing  the  Single 
Payment  Scheme  in  2005.  Five  Member  States  out  of  ten  and  two  regions  in  the 
United  Kingdom  have  chosen  the  historical  model  which  distributes  the  reference 
amounts only according to the individual farming in the reference period, whereas the 
regional  model  at  least  allocates  part  of  the  reference  amount  according  to  the 
farming activity in 2005.  

RURAL DEVELOPMENT  

For  the  period  2000–2006  the  rural  development  programming  consists  of  the 
following:  68  Rural  Development  Programmes  – RDPs –  (co-financed  by  EAGGF 
Guarantee), 69 Objective 1 region programmes – operational programmes and single 
programming  documents –  with  rural  development  measures  (EAGGF  Guidance 
co-financed)  and  20  for  Objective 2  region  with  rural  development  measures 
(EAGGF Guarantee co-financed). 

With  the  enlargement  of  the  European  Union  on  the  1st  May  2004,  a  special  rural 
development  regime  was  introduced  for  the  new  Member  States  ‘Temporary  Rural 
Development Instrument (TRDI)’. Across the EU-10 territory there are two types of 
programming:  10  RDPs  co-financed  by  the  TRDI  and  9  Objective 1  region 
programmes,  covering  most  of  the  territory  of  the  new  Member  States  (co-financed 
by EAGGF Guidance).  

In  2005,  Community 
EUR 8 501.8 million (Guarantee and Guidance combined).  

expenditure  on 

rural  development 

amounted 

to 

73  LEADER+  programmes  have  been  approved  for  the  period  2000–2006.  The 
payments in 2005 for these programmes amounted to EUR 332 million from EAGGF 
Guidance.  

2005 was also marked by an important change of the rural development policy for the 
next  programming  period  2007–2013:  On  the  basis  of  the  Commission  proposal 
[COM(2004) 490 final] the Council reached a political agreement on the new Rural 
Development Regulation in June 2005 which, after certain technical adaptations, was 
formally  adopted  in  September  and  published  as  Council  Regulation  (EC) 
No 1698/2005. The Council also adopted the new Regulation for financing the CAP 
by which the new single Fund (European Agricultural Fund for Rural Development – 
EAFRD)  was  created  (Council  Regulation  (EC)  No 1290/2005).  These  two 
instruments  put  in  place  the  basic  rules  and  mechanisms  for  programming  and 
financial  management  for  rural  development  policy  in  the  period  2007–2013.  More 
particularly, the new policy will take a more strategic approach (through Community 
strategic  Guidelines  and  strategic  planning  in  the  Member  States)  focusing  on  a 
limited number of EU priorities  (axes for agricultural/forestry competitiveness, land 
management/environment,  diversification/quality  of  life  in  the  rural  areas,  Leader 
approach),  taking  largely  on  board  the  Lisbon  and  Göteborg  agendas,  while 
simplifying considerably programming, funding, financial management and control of 
the new programmes.  

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6. 

63. 

64. 

65. 

ENVIRONMENT AND FORESTS 

A  two-year  (2005-2006)  study,  entitled  “Study  on  environmental  Cross-compliance 
Indicators in the context of the Farm Advisory System” (CIFAS study), was launched 
at the beginning of 2005.  

The implementation of the “Biodiversity action plan for agriculture”, adopted by the 
Council in  June  2001  and  by the European Parliament in March 2002, continued in 
2005.  

The  6th  Environment  Action  Programme  (6th  EAP)  remains  the  main  driver  of  EU 
environment  policy  until  2012.  In  addition  to  providing  the  basis  for  environmental 
policy  initiatives,  this  Action  Programme  reiterates  the  obligation  laid  down  in  the 
Treaty  to  integrate  environmental  protection  requirements  into  the  definition  and 
implementation of other Community policies and activities.  

Other forestry measures 

66. 

7. 

67. 

8. 

68. 

9. 

69. 

70. 

The  Commission  Communication  to  the  Council  and  the  European  Parliament 
reporting  on  the  implementation  of  the  EU  Forestry  Strategy,  COM(2005) 84  final, 
was adopted on 10 March 2005. Council Conclusions on the proposals put forward by 
the Commission in the Communication were adopted by the Agriculture and Fisheries 
Council  on  30  May  2005.  Co-operation  and  co-ordination  with  the  Member  States 
continued through the Standing Forestry Committee.  

FINANCING OF THE CAP IN 2005 

CAP  expenditure  is  funded  under  the  Financials  Perspectives  decided  at  the  Berlin 
Summit in 1999 and adjusted at the Copenhagen Summit at the end of 2002 to take 
account of the financial effects of the enlargement of the Union to include the ten new 
countries. Thus, new ceilings apply for the EU-25 as of the budget year 2005.  

ENLARGEMENT 

The  Accession  Treaty  with  Bulgaria  and  Romania  was  signed  on  25  April  2005. 
Under its terms Bulgaria and Romania will join the EU on 1 January 2007.  

INTERNATIONAL RELATIONS 

The WTO Ministerial Conference took place in Hong Kong in December 2005. Full 
modalities were not achieved but the meeting locked in the progress made since the 
2004 Framework Agreement. It was agreed that full modalities in agriculture should 
be  reached  by  the  end  of  April  2006  and  for  the  other  issues  under  negotiation 
(NAMA, Services, trade facilitation and rules, including GIs) by the end of July 2006. 

On  export  competition,  the  EC  agreed  at  the  Hong  Kong  Ministerial  Meeting  to 
eliminate  export  subsidies  by  the  end  of  2013  provided  that  other  WTO  Members 
ensure the parallel elimination of all other forms of export subsidies flowing through 
other  export  competition  instruments  such  as  State  Trading  Enterprises,  officially 
supported export credits and non-genuine food aid practices. 

EN 

10 

   EN 

 
71. 

72. 

73. 

Bilateral and regional trade discussions have taken place under six regions' Economic 
Partnership  Agreements,  South  Africa,  the  EEA  and  bilaterally  with  Japan,  South 
Korea and Thailand.  

On  14  November  2005,  the  Council  adopted  a  mandate  to  initiate  bilateral 
negotiations  with  the  Mediterranean  partners  for  an  ambitious  trade  liberalisation. 
This  mandate  was  based  on  a  recommendation  adopted  by  the  Euro-Mediterranean 
Ministers  of  Foreign  Affairs  at  their  meeting  in  Luxembourg  in  May  2005. 
Negotiations will start in early 2006. 

After  about  20  years  of  negotiations,  a  first  phase  agreement  on  trade  in  wine  was 
reached between the EC and the US. This agreement provides for the continuation of 
the  existing  Community  special  authorizations  granted  to  the  US  on  wine-making 
practices,  labelling  and  certification  and  for  the  exemption  of  all  Community  wine 
from the US certification requirements. 

EN 

11 

   EN