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Go back to the first part : CAP in context
The economic data suggests that today the CAP is at least slimmer than it used to be. Its share of the EU budget has moved from more than 60 % at the beginning of the nineties to less than 35 % by 2013. At the current stage of reform implementation, more than 80 % of agricultural support is not linked anymore to production. Furthermore, export subsidies have been drastically reduced (from more than 10 billions annually in the nineties to around 350 millions in 2009) and are likely to be phased out completely by 2013. All this sounds fine and takes the wind out of some critics’ battleships. No doubt, it could have been achieved more. However, the health check is not meant to re-open fundamental discussions on Europe’s agricultural policy. The direction is pre-given. Published in May 2008, the health check pushes only a bit further the direction that has already been taken.
A look at the main questions, around which the new proposal is grouped, leaves the impression that policy-makers have learned the lesson : attack is the best defence. The new CAP takes a more pro-active stand. It has become more responsive to the signals that markets and public opinion send. It takes on keeps on evolving on a thin line between contradicting forces that demand more liberalisation or more regional protectionism. Thus, it will have good chances to succeed in avoiding a substantial policy reform.
Three main “health check” questions : How to make direct payments more effective, efficient and simple ?
First, how can direct payments to farmers be made more simple, effective and efficient ? The Commission proposes further simplification in order to raise the system’s efficiency. To do so, Member States will be given the opportunity to change their implementation models by moving towards a flatter rate of aid. Furthermore, the Commission thought about introducing a ceiling for very high and very low payments. Practice has proven that thousands of beneficiaries get subventions which are so low that not even the administrative cost for them is justified. This is mainly due to spare-time farming. The proposal therefore suggests lower payment limitations. More difficult is the issue of a ceiling for large payments. Here, the commission has actually dropped its initial proposal for a ceiling on large payments. Limitations for large payments might have led to the practice to split up big farms into smaller units in order not to loose funding. Big farms will therefore still get big money. However, instead of a ceiling, the Commission proposes now to redistribute funds through a so-called „progressive modulation“. The idea behind this modulation is to shift a progressive percentage of the received direct payments into the CAP’s second pillar for rural development measures. According to this idea, recipients of larger direct payments contribute with a higher percentage of their subventions to rural development measures than recipients of smaller payments. For further simplification and more flexible adaption of the CAP to national circumstances, the Commission also proposes to extend the financing and flexibility of the so-called “Article 69”, that allows member states to retain up to 10 % of national ceilings. This money can be used in specific types of farming important for the protection of the environment or improving quality and marketing of agricultural products.
How to adjust market instruments to new market opportunities ?
Which and to what extent are market intervention instruments still needed in view of new market opportunities and rising food prices ? Generally, the Commission promotes further agricultural liberalisation and strengthened competitiveness. Market intervention – the public buying of surplus production – should revert to its original purpose as a real safety net, particularly in view of high market prices. The Commission therefore proposes the abolishment of rice, pig meat and durum wheat intervention as well as dairy intervention through tendering within fixed ceilings.
- The end of set-aside land ?
Furthermore, the set-aside obligation is considered as obsolete in times of need for more production – a proposal to which the special committee for agriculture has already agreed. Consequently, farmers will not be obliged anymore to set aside land from production in order to be entitled to the amount fixed by the set-aside entitlements. Another suggestion contained in the new Commission proposal concerns the diary sector. As milk quotas will expire in 2015 in order to respond to globally rising demands for diary products, the Commission proposals a gradual increase in quotas between now and 2013 in order to ensure an appropriate transition for producers. This is likely to increase concentration of milk production in which European farmers are more competitive and will put under considerable pressure less competitive production areas, such as for instance small-structured milk farmers in mountain areas. It was not difficult to predict that this part of the proposal would face strong opposition from some Member States.
How to deal with new challenges in agriculture ?
The third main question of the “health check” addresses the question how to deal with new challenges for Europe’s agriculture that were not as clear in 2003 as they are now. These challenges include the increased need for management of production risks, fighting climate change, more efficient management of water, making the most of the opportunities offered by bio energy and the preservation of biodiversity. Adjusting the CAP to meet these challenges will cost money. The Commission is considering using the money coming from the above-mentioned progressive modulation on direct payments within the framework of the CAP’s rural development policy to address these new challenges. Farmers are unsurprisingly not very enthusiastic about this idea. On the other hand, many NGO’s strongly support this suggestion. In practice, this distributive conflict ends up in a discussion whether money should be spent on measures such as the re-structuring of small farms to adapt to a further liberalisation of agricultural markets or to finance measures to fight climate change and improve water management. Together with the above-mentioned discussion on a gradual increase of milk quotas, this issue features most prominently in the discussions on the health-check proposal. According to the foreseen timetable, these discussions should be concluded until November. Then the Council is expected to adopt or reject the legislative proposal. Meanwhile, the different stakeholders and Member States have already taken their positions.
Policy options : More liberalisation or preserved market intervention ?
- Michel Barnier, French minister for Agriculture
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Will the French minister, who currently chairs the Council on Agriculture on Fisheries, be an honest broker ?
Due to the Irish rejection of the Lisbon Treaty, co-decision will not be applied to the proposal, even if it will be adopted only in 2009. The role of the European Parliament will therefore remain minor in the agricultural field and power will remain within the Council. Among Member States several coalitions have already been built to answer the main question of whether further liberalising or protecting Europe’s agricultural sector. An informal group of seven Member States - composed of France, Austria, Germany, Hungary, Finland, Slovenia and Luxembourg – has already been set up with clear positions against further policy liberalisation. In its focus on the “health check”, the group has outlined five common targets : first, the CAP’s first pillar should be maintained in its current form ; second, the proposed progressive modulation for larger direct payments of 13% is considered to be too high ; third, market intervention should also be maintained as a policy for the future, ; fourth, direct payment should remain based on historical payments from the 2000/02 period ; and finally disfavoured areas should have preserved their current status quo. Furthermore, the group asks for supportive measures for the phasing out of the milk quota. Supporters of Commission’s ideas for further liberalisation are the UK, Denmark, Sweden and Estonia. They all want the reform to be as big and ambitious as possible. The position of other Member States lies somewhere in between these two groups of ‘extremists’.
The patient should therefore not be too afraid. The CAP continues to have strong opponents, but also strong supporters. As the first discussions of the health check prove, the policy seems to manage to find a path in between the opposed positions. At the end, this time the patient is only meant to be checked, not operated. The Commission’s current legislative proposal is therefore unlikely to become the momentum for a global policy reform. The health check has not initiated a discussion on policy principles, but will remain what it is intended to be : a fine-tuning of the previous policy reforms. A deeper discussion will only start after the current health-check proposal. For the moment this front is quiet. The patient might appear old, but still stands with both feet on firm ground. Even more, as the proposed orientation towards new challenges proves, the CAP even tries to reach out on new territories in order to demonstrate its relevance for Europe’s policy parquet.
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