November 19, 2017

EU CAP “Health Check” – Doha (Trade)

Categories: Doha / Trade /EU

EU CAP “Health Check”- Background

Declan O’Brien reported earlier this week at the Independent Online (Ireland) that, “The CAP Health Check negotiations in Brussels this week could turn out to be a marathon affair.

“There is a serious divergence of opinion on several issues between the member states and the commission. So, securing an agreement is not going to be easy.

“Fortunately, France is committed to finalising the Health Check process before its presidency concludes at the end of December. That could prove vital over the next two days.”

The Associated Press reported yesterday that, “As thousands of farmers protested vehemently outside, European Union agriculture ministers mulled changes Wednesday to the EU’s euro53 billion ($67 billion) farm support program.

“The EU spends about 40 percent of its budget supporting 13 million farmers who make up less than 3 percent of its population. Yet the farm ministers in the 27-nation bloc are under strong pressure from lawmakers and farmers who want continued aid and subsidies.

“Ministers were discussing proposals from the EU’s executive office to move the farm program away from direct handouts to farmers by diverting cash to projects promoting rural development, food quality and environmental protection.”

The AP article noted that, “The European Parliament voted Wednesday to back proposals aimed at shielding farmers from the impact of the proposed subsidy cuts. EU lawmakers — meeting in Strasbourg, France — said some subsidies linked to food production should be maintained, including special support for milk and livestock farmers.

“With governments going into the talks divided, officials said they expected a compromise Thursday that would reflect some of the parliament’s concerns.

EU Farm Commissioner Mariann Fischer Boel is pushing for further reforms, while France, which chairs the minister’s meeting, seeking to safeguard the current interests of farmers.”

The article noted that, “The EU has shifted away from subsidies directly linked to production, which was seen as a cause of past surplus production and a distorting factor on world markets.”

To watch a short presentation by Commissioner Fischer Boel (about nine minutes), which was delivered earlier this week the plenary debate on the CAP health check in the European Parliament, see this update, which was posted at the CAP Health Check Blog.

Additional audio clips from Tuesday’s plenary session on the CAP, including comments from French Farm Minister Michel Barnier are also available here.

Xinhua news reported yesterday that, “European Union (EU) farm ministers worked overnight on Wednesday to seek an agreement on a major reform of the EU’s controversial farm subsidies.

“As the closed-door talks were still going on, the farm ministers had to decide on whether to further break the link between farm subsidies and production and thus allow farmers to follow market signals to the greatest possible extent.”

The article noted that, “France, which hold the EU rotating presidency, along with other major agricultural producers including Germany, Poland and Ireland, are reluctant to see a dramatic change of the current system, but EU Farm Commissioner Mariann Fischer Boel is pushing for further reforms.”

An AFP article from yesterday reported that, “EU nations on Wednesday were nearing an agreement on revising the bloc’s controversial farm subsidy scheme, including raising milk quotas and reducing farm handouts, but the talks were expected to continue overnight.

“European agriculture ministers began closed-door talks in the afternoon on a ‘health check’ or mini-reform of the Common Agricultural Policy (CAP), with some tricky subjects expected to keep them at work until dawn.”

The article noted that, “The European Commission wants to free up the system by expanding reforms made in 2003, exposing farmers more to prevailing market forces, [but] France, the current EU president, along with other major agricultural producers including Germany, Poland and Ireland, are seeking a more prudent approach.

“They want to lay the groundwork for an even bigger debate on the CAP’s total budget after 2013, when the current one ends. So far, talks on that issue have not got underway.

“At the start of the year, while the world was facing soaring food prices, France stressed the need to preserve a strong CAP.

“A subsequent drop in prices, in part linked to falling oil prices, has undercut that argument and complicated the task of agricultural policy reform.”

Reuters writer Jeremy Smith reported yesterday that, “Europe’s farm chief yielded some ground on Wednesday in her plans to reform EU agriculture policy, seeking to soften up influential countries France, Germany and Italy in sensitive areas such as wheat and dairy.

“While the broad principles of the proposed ‘health check’ of EU farm policy, authored by EU Agriculture Commissioner Mariann Fischer Boel, remain intact, its scope and speed have now been diluted in an attempt to strike a deal with EU farm ministers.”

Mr. Smith noted that, “Fischer Boel plans to trim handouts to larger farms by siphoning off cash into countryside projects, a process known as modulation, and to curtail most safety-net commodity buying.

“The trimming is now less ambitious than first proposed but there is still a tiered system of income thresholds where holdings will see percentage payment cuts.”

With respect to specific EU countries, the Reuters article stated that, “Germany has major concerns about how to support its dairy farmers ahead of the scheduled abolition of subsidised EU milk production quotas in 2015 and wanted an EU-financed ‘milk fund’.

“So far, Fischer Boel has stuck to her guns in refusing to offer new cash for this — but gave Germany the option to spend some of its rural development money for specific support to the milk sector.”

The article added that, “In a sop to France, chairing the negotiations, the compromise deal offers more flexibility to support the sheep and goat sectors. Most importantly, it directly addresses a key French concern: bread-making wheat.

“Fischer Boel has now offered to set an annual ceiling of 2 million tonnes for EU producers to sell bread-making wheat into public stores. When that ceiling is reached, a tendering system would apply where producers would bid for wheat to be accepted into storage under the EU’s intervention system.

“Initially, Fischer Boel had proposed a tendering system, with no volumes attached. This upset France, since its farmers would no longer be automatically assured an income for their commodity at a pre-determined price paid by Brussels.”

Yesterday, Jack Thurston provided additional analysis on the European Parliament’s voting on the CAP reforms in the form of two audio podcasts with key policy makers.

In the first audio interview, Mr. Thurston indicated that, “The European Parliament today votes on the CAP health check. I spoke with Neil Parish MEP, who represents the largely rural constituency of South West England and is a farmer himself. He also chairs the Parliament’s agriculture committee, which drafted the report that is being voted on today. Perhaps unusually for a committee chairman, Neil will be voting against his own committee’s report. We discuss the key issues in the health check end-game and the role of the Parliament, the prospects for the CAP reform in the EU budget review and the positive effect of the fall of sterling for UK farmers.”

In the second audio interview, Mr. Thuston noted that, “Paulo Casaca MEP gives his immediate reaction to a series of votes on the CAP health check that saw many MEPs break ranks from agreed party lines, evidence of the passions that are aroused when the Parliament debates food and farming. He argues that the Parliament has lost its way on the CAP and must come up with a new vision for the future of the policy. Mr Casaca is a Portuguese member of the Socialist Group and represents the Azores. He sits on the Budget Committee and chairs the pro-CAP reform Land Use & Food Policy Intergroup.”

Deal Reached

With this general background on mind, the Associated Press reported today that, “European Union agriculture ministers have agreed to a new round of aid reforms in Europe’s shrinking farm sector meant to boost competition in the global markets.

The ministers reached their agreement after all-night talks that ended Thursday morning.

“EU Agriculture Commissioner Mariann Fischer Boel says discussion on how to provide aid to dairy farmers as milk quotas are abolished across the 27-nation bloc in 2015 were the most difficult.

“French Agriculture Minister Michel Barnier says there was ‘virtual unanimity’ backing the reforms which are the largest the EU has undertaken since the last major round of reforms five years ago.”

An AFP article from this morning added that, “European Union nations sealed agreement on Thursday to revamp their farm support policy with increases in milk quotas and cuts in subsidies for production.

“The compromise was thrashed out through the night by the bloc’s 27 farm ministers after some 18 hours of negotiations in Brussels.”

The article explained that, “The changes expand on the major reform of the EU’s controversial Common Agricultural Policy (CAP) in 2003, pushing European farmers further into the world of supply and demand with a smaller safety net of subsidies linked to production levels.

“The ministers notably agreed to progressively lift milk quotas for farmers — in place since 1984 to limit production — before abandoning them entirely by 2015.”

Today’s AFP article also pointed out that, “There was also agreement on the thorny issue of reducing subsidies directly linked to farm production and switching the funding to projects to protect the environment or revitalise rural areas, schemes that will be co-financed by member states and the EU’s joint budget.

“Brussels, which has already cut five percent of its direct aid to farmers, wants to raise this to 13 percent by 2013, but the ministers agreed overnight to set the bar at 10 percent.

The EU’s moves on farm subsidies, which would expose farmers more to prevailing market forces, did not go unnoticed.

“As the ministers gathered Wednesday, almost 10,000 tobacco and farm workers descended on Brussels to protest plans to cut back their aid.”

An item posted today at the BBC Online reported that, “EU farm ministers have agreed to reform agricultural policy by shifting more subsidies away from production and liberalising the dairy market.

“The deal on reforming the Common Agricultural Policy came on Thursday after protracted late-night talks.

More subsidies will be transferred to conservation, reducing the traditional EU incentives for farmers to produce.”

The BBC article indicated that, “The aim is to shift more funding into rural development and conservation measures and to make agriculture more responsive to market forces.

“[A]ll farms qualifying for a minimum of 5,000 euros (£4,208; $6,312) in annual EU subsidies will shift 5% of their EU money into rural development projects by 2012, on top of the 5% that is currently obligatory.

So direct aid for rural development will rise to 10% of the EU farm subsidies – not the 13% that the European Commission wanted.”

The article also stated that, “The BBC’s Dominic Hughes in Brussels says those who wanted the measures to go further, led by the UK, will argue this is a missed opportunity.

“But further reform is planned for 2013 – and there is no doubt the direction of travel is towards the free market, and away from subsidy, he says.”

Jack Thurston provided a more detailed summary of what the EU farm ministers agreed to in an update posted today at the CAP Health Check Blog.

While outlining several principle points of the deal, Mr. Thurston indicated that, “The rate of modulation (shifting funds from direct aids to rural development aids) will be raised from 5% at present to 10% by 2012. The increase will be made gradually: 7% in 2009, 8% in 2010, and 9% in 2011. The progressive modulation concept has been watered down; only recipients of more than €300,000 will face a higher modulation rate: 4 percentage points higher than the standard rate. The resulting money will be allocated for ‘new challenges’ – climate change, energy, biodiversity and water management but will it will also have to fund ‘accompanying measures’ for the dairy sector.

This looks like a setback for the Commission, which had hoped to ‘walk the talk’ on increasing the emphasis on targeted policies like farmland conservation and rural economic development over traditional farm handouts.”

Doha (Trade)

A news release issued yesterday by the European Commission stated that, “EU Trade Commissioner Catherine Ashton has met with representatives of German industry at the Bund Deutscher Industrie (BDI), the umbrella organisation for German industry. The managing director of the BDI Werner Schnappauf confirmed the importance that German industry places on an open trading environment, particularly in the context of the current financial and economic crisis. Mr. Schnappauf also confirmed the commitment of BDI to a successful conclusion of the Doha Round of world trade talks, in line with the G20 conclusions following the Washington Summit.

“Speaking after the meeting in Berlin, Commissioner Ashton said: ‘I welcome the strong support of German industry for a Doha deal, and I intend to do everything possible to achieve agreement by the end of the year. Boosting trade is the best way to create growth and jobs, including for our small- and medium-sized enterprises.’”

An AFP article from yesterday reported that, “Foreign ministers preparing a weekend APEC summit here [Lima, Peru] agreed a global trade deal should be sealed as soon as possible and preferably by year’s end in response to the world economic crisis, officials said Wednesday.

The Doha round of trade talks, which hit a dead end in July, should be revived in line with the recommendations of the G20 summit held in Washington last Saturday, foreign and trade ministers from the 21-nation Asia-Pacific Economic Cooperation forum agreed.

“‘The time has come for the Doha round to be brought to a conclusion, and that I think is the main topic of conversation for APEC this week,’ Australian Foreign Minister Stephen Smith told reporters after a meeting with his APEC counterparts.”

And the Associated Press reported yesterday that, “The White House officials said there would be a major push at APEC to build momentum for reaching agreement by the end of the year on a broad framework for the current round of global trade talks, known as the Doha round. However, analysts believe accomplishing that goal is unlikely given that most nations would prefer to wait to strike any deals with the incoming administration of President-elect Barack Obama.”

Joe Guinan, writing yesterday at the German Marshall Fund blog, provided an analytical look at what the recommendations on trade generated from last weekend’s G20 summit mean for global trade.

The concise update, “Business as Usual? The G20 Communiqué and Global Trade,” can be read in its entirety by clicking here.


Lauren Vernon, writing yesterday at The Hill Online, reported that, “Republicans could gain another House seat in the 111th Congress — thanks to the newly elected Democratic president.

“Barack Obama’s choice for secretary of Agriculture could take one Democrat from the 20-seat pickup the party gained by way of the recent elections. (Three House races have yet to be called and two seats in Louisiana will be filled on Dec. 6.)

According to reports, Obama is considering Reps. Collin Peterson (D-Minn.) and Stephanie Herseth Sandlin (D-S.D.) for the USDA post. His transition team declined to comment on Cabinet speculation.”

Keith Good

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