February 21, 2020

European Union- Common Agricultural Policy (CAP) Developments

Categories: EU /Farm Bill

Driven by worrying levels of U.S. debt, Congressional authorizing committees, including Agriculture, face a deadline tomorrow for submitting policy proposals to the Joint Select Committee on Deficit Reduction.

Numerous lawmakers, commodity groups and farm organizations have released farm policy ideas in preparation for the looming deadline.

Meanwhile, policy makers and producers are preparing to make changes in agricultural budget allocations and programs in the European Union- a chief U.S. competitor.

Like here in the U.S., price volatility appears to be a concern of some agricultural producers in the EU.

David Jolly reported in Thursday’s New York Times that, “European Union officials on Wednesday proposed major changes to its expensive and contentious system of farm supports, calling for a cap on the amount that individual farms can receive and toughening environmental standards, but leaving the overall budget of the program unchanged.

“‘The effectiveness of our current policy has eroded,’ Dacian Ciolos, the European agriculture commissioner, said in Brussels. ‘Payments are based on a multitude of systems based on historical references that have lost their relevance and weakened by a lack of credibility and transparency with the public. We have to change the paradigm.’

“The proposed changes to the Common Agricultural Policy, whose budget is €56 billion, or $77 billion, set up what will very likely be months of confrontation between nations led by Britain, which argue that the current arrangement leads to unfair subsidization of farmers, and agricultural nations like France, which are relatively happy with things as they are.”

Mr. Jolly explained that, “Negotiations on the proposals, which need the backing of member states and the European Parliament, could be held through 2013.

“Pointing to some of the elements of the existing system that have invited the most withering criticism, Mr. Ciolos emphasized that aid would go only to those actively tilling their fields, saying, ‘I seriously doubt that the airports and golf courses need farm income support.’”

John W. Miller and Caroline Henshaw reported in today’s Wall Street Journal that, “Farm subsidies are paid out of the European Union’s budget but managed by its 27 member states. The subsidies make up two-fifths of the EU annual budget and are hotly debated when the EU writes its budget every seven years. The tenuous state of the region’s economy has heightened those tensions.

“The priorities in the plan are ‘food security, sustainable use of natural resources and growth,’ said Dacian Ciolos, the EU’s agriculture commissioner.

“Mr. Ciolos’s proposal will raise CAP spending by about €15 billion overall in 2014-2020, a move lawmakers say represents a cut of up to 15% in real terms.”

The Journal article added that, “The coming debate in the European Parliament and among the EU’s 27 governments promises to be an intense lobbying battle. Already, farmers are taking aim at the plan, which they say puts too much emphasis on environmental protection and doesn’t recognize that farms are for-profit businesses that must be unburdened by regulation.”

Reuters writer Charlie Dunmore pointed out yesterday that, “Critics of the bloc’s common agricultural policy (CAP) had urged the European Commission to take advantage of high global food prices and cut the huge subsidies it pays to farmers in a reform of the policy from 2014.

“But against a backdrop of increasing market volatility, resource scarcity and climate change, the Commission had already rejected calls for subsidy cuts, and said the reform should refocus spending on the threats facing EU farmers.”

Joshua Chaffin reported yesterday at The Financial Times Online that, “In an interview with the Financial Times, Mr Ciolos pointed to the extreme volatility of world prices as a factor that justified continued high subsidies.

“‘The market orientation decided more than 10 years ago is a very good thing, but now we have to imagine a new instrument in order to deal with price volatility and the increase in world demand,’ he said, warning that those forces could ‘destabilize our agricultural system if we are not able to adapt.’

“Mr Ciolos’ proposals mark the beginning of what will be one of the most contentious debates in Brussels over the next 18 months. While the UK has long called for the dismantling of the CAP, arguing that its maze of subsidies are wasteful and distort competition, France has defended it as a cornerstone of Europe’s post-war prosperity.”

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David Rogers reported last night at Politico that, “Under pressure to cut farm subsidies, Agriculture Committee leaders in Congress are closing in on a 10-year savings target near $23 billion, about a third less than what House Republicans and President Barack Obama had proposed but still a significant change.

“No final announcement has been made, but the bipartisan leadership met Tuesday evening, and three lawmakers told POLITICO that they expected the final savings to be in $23 billion range.”