FarmPolicy

December 5, 2019

"Analysis from Brussels"- by Roger Waite- EU Ministers First Look at Post-2013 CAP

EU Ministers First Look at Post-2013 CAP

By Roger WaiteRoger is editor of AGRA FACTS, the Brussels-based newsletter on EU agriculture policy, and is a Journalism Fellow at the German Marshall Fund of the United States. “Analysis from Brussels” is posted exclusively at FarmPolicy.com.

EU Ministers of Agriculture met in Annecy in France last month for their twice-yearly “Informal” Council meeting, hosted by the country currently holding the Council Presidency. The Presidency also gets to choose the topic for the formal part of the 3-day meeting – and so we were all quite excited when French Minister Michel Barnier announced earlier in the year that his intention was to discuss “the CAP after 2013”, and all in a wonderfully-positioned town at the foot of the Alps overlooking Lake Annecy. While the debate provided no major surprises, it underlined the differences of approach to future farm spending in the different Member States – with perhaps the most significant factor, the strength of feeling in the “New Member States” that the current allocation of CAP funds is unfair and the combined weight that these countries now have within the Council. In PR terms, Barnier was at least able to claim at the end of the meeting that France has now launched the debate on the future direction of European farm policy.

Before going into details, let me just start by recalling why “after 2013” is so important. Under the so-called Financial Perspectives agreed in December 2005, the existing EU budget has been fixed until 2013 with specific annual ceilings for the Common Agricultural Policy. As a result, there is no realistic political way to change the level of CAP spending before 2014. True, the Health Check proposals do seek to increase the transfer from the 1st Pillar of the CAP (market measures) to the 2nd Pillar (Rural Development) through the so-called “Compulsory Modulation” tool, but there is no other major budgetary impact from the proposals – and certainly no commitment for any spending in the period after 2013.

In broad terms, however, the writing is on the wall for such a large CAP budget after 2013 – at least in its current form. For one, the phasing-in of CAP direct payments in the 12 “New Member States” means that the net budgetary position of Member States changes – most notably, France becomes a net contributor to the CAP budget (whereas up until 2012, it looks as if French receipts from CAP funds will still outweigh the amount it puts into the EU budget). For other “Old” Member States – such as the UK, Germany, Sweden, Austria, Netherlands – the already significant net contribution will be even higher. In other words, the political will to channel such a large part of the EU budget (one third) into the CAP is fading fast in the main paymaster capitals. On top of that – following the change in the political agenda in recent years, and in particular in the wake of the Irish referendum rejecting the Lisbon Treaty – there is a broader feeling that the EU needs to redirect its resources and to “connect” more with citizens. Climate Change and Environmental issues are certainly higher up the agenda (indeed agriculture is one of the major contributors to Greenhouse Gas emissions); In a series of interviews we have held with academics in recent months, we have also heard calls for a new European Common Energy Policy, a Common Environmental Policy and a Common Research Policy – all of which would seemingly be more acceptable to “Joe Taxpayer” than a continuation of a Common Agricultural Policy in its current form.

Anyway, coming back to Annecy…
The French Presidency sought to stimulate the debate with a paper referring specifically to the issues of food security, sustainable production, preserving Europe’s rural fabric, and climate change – all seen of course through French eyes, which broadly backs a strong policy for the future. In the course of a 4-hour discussion – which also included contributions from the Chair of the European Parliament Agriculture Committee, the Europe’s young farmers (CEJA) and the overall umbrella organisation of EU farmers (COPA) – there was broad acceptance that diversity is a key element of the European landscape and the importance of maintaining agricultural activities in all regions of the EU.

With European politics underlining the importance of increased production, while at the same stage respecting the environment more and more, there was also broad support for much greater emphasis on innovation and R&D. [While innovation is one of the options open to Member States under Rural Development policy, Research & Development is generally covered by a separate part of the EU budget, or of course from national funds.] Dutch Minister Gerda Verburg was the strongest proponent of this aspect of future policy describing it as the Dutch Government’s top priority.

With the Presidency adamant that the debate at this stage should concentrate on the thrust of future policy – and not the level of funding – Ministers presented a wide range of views on why it was important to maintain farm support. Many Ministers underlined the need for a stronger, clearer justification for CAP direct support, i.e. for “better meeting society’s demands”. But with differences over what society’s demands actually are. For some, the priority is sustainability, for others it is the need to respect environmental, animal welfare and other production requirements which make European agriculture less competitive vis-à-vis the rest of the world, i.e. higher quality standards.

While no Minister seriously argued for the return to the public intervention systems of the last Century in order to buy up surplus production, a good number of Ministers referred to the importance of retaining some form of market safety net for farmers, with the debate going more in the direction of risk management mechanisms [as foreseen in the Health Check proposals for the new Article 68 options]. The concept of buffer stocks was mentioned in some of the presentations, although no Minister appears to have been openly advocating such an idea.

Average CAP direct payment per EU Member State (in € per hectare) – Source: DG AGRI

There were much more fundamental differences, however, when it came to the issue of how to support agriculture in future. It was no major surprise to hear Ministers from France, Italy, Belgium and Spain head the call for a large share of funding to remain in the form of direct payments, i.e. a strong “1st Pillar” in future. Similarly, the UK, Denmark, Austria, Sweden and the Netherlands all underlined the greater priority that should be given to Rural Development in future [the “2nd Pillar”] for better targeting support at societal needs. While these are long-standing views that surprised nobody, the most marked “new” position was the strength of feeling and the coordination with which most “New” Member States [of Central & Eastern Europe] underlined how unfair the current system of direct support is – and how the current allocation of funding has nothing to do with meeting society’s demands or higher quality standards, but merely maintaining the historical level of CAP receipts. The Commission recently presented figures extrapolating the current funding allocations into a payment per hectare [see graph], and concluded that the average payment for the 15 “Old” Member States is nearly 300 €/ha, but less than 200 €/ha for the 12 “New” Member States – with the crassest difference being Greece & Malta which receive more than 500 €/ha, as opposed to Latvia which will get less than 100 €/ha once their direct payments are fully phased in. Portugal also seemed to join the New Member States in this call. One interesting follow-up to this was the confirmation by European Parliament Agriculture Committee Chair Neil Parish – a British Conservative MEP – who argued in favour of a flat-rate payment per hectare across the EU, insisting that payments could no longer be based on cereals yields in the 1980’s.

Probably the key signal on this point, however – and possibly an element which suggests that the whole exercise backfired somewhat from a French political perspective – is the strength of opinion among those calling for a flat-rate hectarage payment. And in terms of the qualified majority voting system in Council, this is a group that cannot be ignored. Added to this, the main losers will be Greece, Malta, Belgium, NL and Denmark – which are not strong enough in combined voting power to block any proposed re-allocation of funds.

In terms of future reform, however, this signal is absolutely vital. For one, it shows that there will have to be a significant reform in the allocation of CAP 1st Pillar funds. Presumably, Rural Development allocations will be used as a way of balancing out the changes in terms of Member States overall net contribution to EU spending. And secondly, given this substantial shift, the changes will presumably have to be made over a suitable transitional period. Just to be clear, this means that the next CAP reform (in 2011 or 2012), will be all about where the subsidy system should be by 2019 or 2020, rather than where it will be from 2014.

By Roger Waite

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