The European Commission has backed a revised plan to radically reform the EU's Common Agricultural Policy (CAP) in a move that Ireland and France are likely to oppose when member state ministers meet next week.
European Agriculture and Fisheries Commissioner, Mr Franz Fischler, formally outlined the plan today which proposes graduated annual cuts in farm subsidies (modulation), breaking the link between subsidy and output (de-coupling), and reducing minimum guaranteed prices for cereals.
The €40-billion-a-year budget will remain in place but the plan will see more money directed to poorer farmers - 70 per cent of CAP funds currently go to only 20 per cent of EU farms.
Mr Fischler today insisted the reform was urgent given the EU's commitments to the World Trade Organisation (WTO) to reduce subsidies.
Agriculture ministers will discuss the matter next Monday, just one day ahead of the WTO meeting in Geneva that form part of the current Doha round of WTO talks.
"There is no doubt that the Commission proposal would strengthen our negotiating hand considerably in the Doha round," Mr Fischler said.
The package, known as the mid-term review, retains the main principles outlined in an original blueprint issued in July.
Ministers remain evenly divided between those staunchly against the scale of reform, a camp led by France and Ireland, and those keen to agree on sweeping changes before 10 new member states join next year.
One of the key sticking points for Ireland is de-coupling - the breaking of the link between production and direct payments.
A report compiled by the Food and Agriculture Policy Research Institute (FAPRI) confirmed Commission projections that the plan would lead to an overall drop in production, especially in the beef sector, triggering a rise in price for producers.
It is also estimated sheep production and processing would significantly affected. leading to a drop of 25 per cent in the value of exports.
The Minister for Agriculture, Mr Joe Walsh, yesterday expressed reservations about the proposals: "decoupling would have a much greater impact in Ireland than is the case for the EU as a whole."
But Mr Fischler today defended the idea saying that although output could fall in sectors like beef, rises in farm incomes and better quality produce would more than offset lost revenues.
"The most common criticism is that farmers would be paid for doing nothing. This criticism is completely unfounded - farming would be dictated by market conditions," he said.
"Incomes would rise as a result of these market reallocations ... and this is not accidental," he added.
The other particularly contentious element of the plan is known as modulation, the process by which farm aid is gradually reduced and over time with the surplus shift into rural development projects. Some cash would also be set aside for future reforms of the sugar and dairy sectors.
Next week's WTO talks in Geneva are part of the Doha trade round, launched in 2001. Developing countries want both the EU and US to slash farming subsidies which lead to produce from poorer states being priced out of lucrative Western markets.
While the developed world wants to reduce market-distorting policies and give developing countries greater self-sufficiency, the Commission is also keen to cut the CAP's €40 billion annual budget.
The United States and EU both heavily subsidise their agricultural industries with nearly half the EU budget spent on the CAP. EU farm output is currently subsidised at a rate of 35 per cent compared with 20 per cent in the US.
The Commission has proposed cuts in EU import tariffs by 36 per cent, a reduction in export subsidies by 45 percent and a slashing of domestic farm support by 55 per cent.
In Washington, US Trade Representative Mr Robert Zoellick expressed both frustration with the delay and his strong support for Mr Fischler's efforts to push foward a new round of reforms.
"The agriculture ball is in Europe's court and world trade liberalisation and development depend on member states facing up to their larger responsibilities," Mr Zoellick said.