Foot-and-mouth disease and BSE have reawakened concerns about Europe's Common Agricultural Policy (CAP). Consumers see a gap between what food producers supply and what they want. A policy that encourages surpluses that then have to be disposed of at considerable cost is no longer accepted.

Europe's food producers have to face new realities. There is a growing emphasis on safety. Environmental concerns are increasingly important. Production methods, including animal welfare, are under closer scrutiny.

The European Union's Agenda 2000 reform package, agreed in 1999, responds to these concerns. The policy objectives include a competitive agricultural sector without excessive subsidy, sound and environmentally-friendly production methods, and a fair standard of living and income stability for the agricultural community.

However, pursuing competitiveness may lead to an agriculture in which only quantity matters. But greater emphasis on quality implies higher production costs. How can these objectives be reconciled? The answer lies in the concept of economic, social and environmental sustainability. To achieve sustainability in all these respects, Europe needs a common agricultural policy. Yet there are those who want to scrap the CAP. Such a move would be disastrous. The gap between the EU's domestic and world prices would put significant pressure on EU farm prices, farm income and farm structures. The result could be the creation of a two-tier industry polarised between expensive production to meet the demands of the better-off and mainly intensive farming, producing food at lower costs to match world market prices.

The core of Europe's farming system, a family-based agriculture, would be squeezed. Agriculture in less-favoured regions would be abandoned altogether, resulting in less diversity in agriculture and rural communities. Clearly, the issue is not whether to support agriculture but how to support it. The Commission's farm reforms in the past decade have produced concrete successes: meat, cereals and milk surpluses have fallen; the use of domestically-produced feed grain has risen steeply; and budget expenditure has been stabilised. The CAP also stands up to scrutiny when compared with US farm policy. While the EU has frozen its budget, in the US direct support to agriculture has increased by about 700 per cent since 1996. According to the Organisation for Economic Cooperation and Development, last year the US supported its two million farmers with $103.5 billion (#117 billion), while the EU spent $92.3 billion on its seven million farmers.

Of course, the pace and extent of EU reforms can always be debated but the Commission's proposals have been more ambitious than most member-states have been willing to accept.

However, there are three areas in which the Commission must make progress. First, critics point out that the EU still spends too much on production, while doing too little to preserve the environment and the farming landscape. Only 10 per cent of the CAP budget goes towards rural development, for example. This is perhaps the biggest gap between society's expectations and reality.

Second, member-states are allowed to penalise failure to comply with environmental requirements by reducing direct payments to farmers. Yet only a few countries have done so. Europe can and should go further.

Third, to take account of the differences in cost structures between large and small farms, member-states are entitled to reduce farm support for big farms by up to 20 per cent and to use this money for additional measures to promote the environment or organic farming. Disappointingly, only France, Britain and Portugal have made use of this option. It is worth asking whether it should become compulsory for all EU countries to follow their lead. I believe it should.)

Franz Fischler is European commissioner for agriculture