19 November 2010

8 minute read

The paper published today (Friday) outlines three options for further reform. Following discussion of these ideas, the Commission will present formal legislative proposals in mid-2011.

Outlining the Communication today, EU Agriculture and Rural Development Commissioner Dacian Ciolos underlined the importance of making the CAP “greener, fairer, more efficient and more effective”.

He continued: “The CAP is not just for farmers, it is for all EU citizens – as consumers and taxpayers. It is therefore important that we design our policy in a way which is more understandable to the general public and which makes clear the public benefits that farmers provide to society as a whole. European agriculture needs to be not only economically competitive, but also environmentally competitive.”

Earlier in the year, the Commission held a public debate and a major conference on the future of the CAP. The vast majority of contributions identified three principal objectives from the CAP:

• Viable food production (the provision of safe and sufficient food supplies, in the context of growing global demand, economic crisis and much greater market volatility to contribute to food security);
• Sustainable management of natural resources and climate action (farmers often have to put environmental considerations ahead of economic considerations – but such costs are not rewarded by the market);
• maintaining the territorial balance and diversity of rural areas (agriculture remains a major economic and social driving force in rural areas, and an important factor in maintaining a living countryside)

The EC Communication looks at the future instruments that might be suitable for best achieving these objectives. For direct payments, the Communication outlines the importance of a redistribution, redesign and better targeting of the support, based on objective and equitable criteria, easy to understand by the taxpayer.

These criteria should be both economic (noting the “income support” element of direct payments) and environmental (reflecting the public goods provided by farmers), with support better targeted towards active farmers. A more equitable distribution of funds should be organised in an economically and politically feasible way with a transition to avoid major disruption.

One approach could be to provide a basic income support payment (which might be uniform per region – but not flat-rate across the EU, based on new criteria, and capped at a certain level); plus a compulsory environmental payment for additional actions (annually) which go beyond the basic cross-compliance rules (such as green cover, crop rotation, permanent pasture, or ecological set-aside); plus a payment for specific natural constraints (defined at EU level) and complementing amounts paid via Rural Development measures); plus a limited “coupled” payment option for particularly sensitive types of farming (similar to the current option introduced [under Article 68] in the CAP Health Check). A simple, specific support scheme should enhance the competitiveness of small farms, cut the red tape and contribute to the vitality of rural areas.

On market measures, such as public intervention and private storage aid, there may be some scope for streamlining and simplifying measures, and possibly introducing new elements with regard to improving the functioning of the food chain. Although these mechanisms were the traditional tools of the CAP, subsequent reforms have enhanced the market orientation of EU agriculture and reduced these to safety net measures - to the extent that public stocks have virtually been eliminated. Whereas market measures accounted for 92% of CAP spending as recently as 1991, just 7% of the CAP budget was spent on them in 2009.

Rural Development policy has allowed enhancing the economic, environmental and social sustainability of the farming sector and rural areas, but there are strong calls to fully integrate environmental, climate change and innovation considerations into all programmes in a horizontal way. Attention is drawn to the importance of direct sales and local markets, and the specific needs of young farmers and new entrants.

The LEADER approach will be further integrated. In order to be more effective, a move towards a more outcome-based approach is floated, perhaps with quantified targets. One new element in future rural development policy should be a risk management toolkit to help deal better with market uncertainties and income volatility.

Options should be open to member states to address production and income risks, ranging from a new WTO-compatible income stabilisation tool, to strengthened support to insurance instruments and mutual funds. As with direct payments, there should be a new allocation of the funds based on objective criteria, while limiting significant disruption from the current system.

The Communication outlines three options for the future direction of the CAP, in order to address these major challenges:

• adjusting most pressing shortcomings in the CAP through gradual changes;
• making the CAP greener, fairer, more efficient, and more effective; and
• moving away from income support and market measures and focusing on environmental and climate change objectives.

In all three options, the Commission foresees the maintenance of the current system of 2 Pillars – a 1st Pillar (covering direct payments and market measures, where rules are clearly defined at EU level) and a 2nd Pillar (comprising multi-annual rural development measures, where the framework of options is set at EU level, but the final choice of schemes is left to member states or regions under joint management).

Another common element to all three options is the idea that the future system of direct payments cannot be based on historical reference periods, but should be linked to objective criteria.

“The current system provides different rules for the EU-15 and the EU-12, which cannot be continued after 2013”, Commissioner Ciolos insisted today. More objective criteria are also need for Rural Development allocations.

However, the Eurogroup for Animals said the communication goes against the concerns of Europe’s citizens who expect their food to be produced without animal suffering.

The group said the Communication mentions that farmers must respect EU animal welfare rules but does little to concretely support the move to high welfare and more sustainable animal production systems.

“The Commission has focused on competitiveness, public goods and sustainable use of resources as some of its key objectives and improving animal welfare in agriculture has the potential to deliver on all three,” said Véronique Schmit, Executive Officer Policy of Eurogroup for Animals.

“The future CAP must improve animal welfare by incorporating it in both pillars of the policy, through direct payments to farmers and through rural development measures. It is also essential that compliance with EU legislation is ensured through stricter controls,” she concluded.

Eurogroup for Animals said it will work with the European Parliament and the Council to ensure animal welfare is incorporated more robustly in the CAP.

"We hope that policy makers will recognise animal welfare as a public good and support the demands of Europe’s citizens."

UK National Farmers' Union President Peter Kendall said that while these ideas come at a very early stage of the reform process it was difficult to take a firm judgment on the document.

“While today’s paper is not without good intentions or ideas, it does not appear to present the best approach to reform for the post 2013 period,” said Mr Kendall.

“The proposals outlined in the paper are understandably general and will require considerable clarification.

“The Communication does provide a fair assessment of the economic, environmental and societal challenges facing farming and I am pleased that it recognises the importance of Europe to global food security and of farming to the economy, society and the environment. I am also pleased to see that the Commission supports the maintenance of a common European approach to agricultural policy.

“However when we set out our policy on the CAP in May we argued that any reform must be driven by core principles; commonality, market orientation, competitiveness and simplicity. It is against these principles that the proposals should be measured. When I look at ideas such as a tiered approach to payments, capping of support with labour adjustment and a significant flexibility measure, I tend to see a recipe for complexity, distortion and a risk of undermining efforts to help farmers become less reliant on support.

“This is the key long-term strategic challenge; to get farmers to a place where they can depend on the market for their income.

“We also must recognise the budgetary and political pressure the CAP will be under - and use the resources wisely. My worry is that the Commission’s proposals may actually entrench support and inefficiency in European farming rather than boost competitiveness.

“I believe that the Commission should build on the progressive direction of previous reforms, developing the two-pillar structure for the CAP and ensuring that each instrument has a clear objective – putting competitive agriculture at its heart.

“The Communication rightly dwells on the future of direct payments which, as the largest component of CAP spending, are a focal point for the next reform. However the complicated ideas from today confuse the role of direct support which should be about underpinning the economics of farm production and helping farmers deal with higher costs and volatility rather than delivering environmental goods. This is the role of rural development policies and I’m really surprised to see the Commission omit any reference to agri-environment schemes.

“I fear that the Commission has fallen into the trap of trying to please as many people as possible, in order to justify the money it spends, rather than adopting a clear direction for European agriculture. It is rare that a clear policy pleases all of the people all of the time but I fear that what we have here will end up as a confused proposal that suits no-one.”

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