FarmPolicy

November 14, 2018

“Analysis from Brussels”- by Roger Waite- Romanian Cioloş Named as New EU Farm Commissioner-Designate

Romanian Cioloş Named as New EU Farm Commissioner-Designate

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.

Well, we now have a name for the next EU Commissioner for Agriculture & Rural Development. Or at least the Commissioner-designate. It’s the 40-year-old former Romanian Minister for Agriculture, Dacian Cioloş. I thought I’d share a few thoughts on his nomination – and what it might mean for future policy, although it is far too soon for any firm conclusions.

Surprise or not?
Perhaps I should say something first about the process for his nomination. Each of the Member States of the EU was asked to nominate a politician to be their Commissioner for the next 5 years. Commission President José Barroso (a Portuguese) tried to influence governments on whom they named in order to get a good balance of political expertise – but also a good political and gender balance. In the end, however, Barroso got a list of 25 names – and it was up to him to allocate the portfolios as he felt best. [N.B. There are only 25 names because Barroso is the Portuguese Commissioner, and the UK’s Catherine Ashton – currently the Trade Commissioner – was appointed EU High Representative for Foreign Affairs & Commission Vice-President by EU leaders earlier in the month.] It was up to Barroso then to decide who should get what – with some flexibility too for re-jigging the relevant portfolios.

Although Dacian Cioloş is the only trained agronomist among the group, and was named by Bucharest with a view to becoming the next Agriculture Commissioner, there seems to have been near consensus among Member States ever since his name was put forward that a Romanian could not possibly get the agriculture dossier. After all, Romania is a country more dependent on agriculture than any other in the EU – with 29.5% of the workforce employed in the sector, as opposed to the EU average of 5.6%. (The average in the 15 “old” Member States is just 3.5%.) Despite the strong, widespread opinion that any Romanian was apparently not suitable, none of the other interested parties put forward a suitable candidate. Austria, Ireland, the Netherlands and Denmark all considered present or former Agriculture Ministers, but chose to nominate someone else instead. Before the November announcement, the favourites for the agriculture portfolio were the Irish former Minister of Justice (Maire Geoghegan Quinn) and the current EU Energy Commissioner & former Latvian Minister of Finance (Andris Piebalgs) – neither of whom has any agriculture experience, and neither of whom want to start getting agricultural experience, by all accounts. Although a number of commentators have suggested that Cioloş’ nomination for Agriculture is surprising, I tend to feel that Barroso was left with no other option, as no one was willing to put forward a good candidate – and that he was the only suitable candidate from among the nominees. (I should perhaps add that former French Farm Minister Michel Barnier has also been named as the new French Commissioner – but, on this one, even Paris admits that France will not be given the Agriculture Commissioner.)

Before going on, I should mention that the nomination by President Barroso is not the end of the process of appointment. All new Commissioners must now go through a formal Hearing with the relevant Committee in the European Parliament. Although MEPs have no legal powers to reject individual Commissioners – they only have a straight yes-no vote on the whole College of Commissioners – they have managed to obtain de facto power over the individual Commissioners. Five years ago, after a number of Commissioners performed poorly in their EP Hearings and MEPs started to threaten to veto the whole Commission, President Barroso agreed to replace 3 of them. (In fact, he replaced 2 of them, and shifted a third one to a different portfolio.) And so the precedent was set. New hearings were set for the new names a few weeks later – and a happy House of MEPs voted through the new College.

The EP Hearings for the new Commission College have been set for the period January 11-19, with a full Plenary vote scheduled for January 26 – so that the new College could take office from February 1. Knowing the EP enthusiasm for muscle-flexing, I’d be astonished if MEPs didn’t seek to block at least one of the new Commission nominees – but preferably 2 or 3, to get the right party political, gender and old-new member State balance. In short, Cioloş is only half way to becoming the next EU Farm Commissioner.

Who is Dacian Cioloş?
Turning then to the man himself. Born in the city of Zalau in North-West Romania on July 25, 1969, Cioloş studied horticulture & agronomy at the Agricultural University of Cluj. He then continued his agricultural studies in France in Rennes and Montpellier – emerging with a Masters degree – which included a close look at organic farms in Brittany. From there, he started a 2-year internship in the European Commission’s DG AGRI in Brussels – where he met his (French) wife. After that, he became a programme coordinator in Romania for the National Association of Agricultural Development – but also started a part-time PhD at the Ecole Superieure Agronomique in Montpellier. Two years later, he switched to working for the European Commission’s office in Bucharest – providing advice for Agriculture & Rural Development programmes. Then in 2005, he was recruited by the Romanian Ministry of Agriculture to make frequent trips to Brussels and represent the Romanian position in the so-called Special Committee on Agriculture (SCA) – the key Committee for preparing the monthly Council meetings of EU Farm Ministers. This was of course in the build up period before Romania joined the EU in January 2007. Soon after they joined, the Minister then named him “Under-Secretary of State for Agriculture responsible for EU affairs”, i.e. Junior Minister. When, 6 months later, the Minister resigned, Cioloş was then promoted to Minister, charged in particular with sorting out the administration of the various CAP payments. With well over 1 million applications for EU support, the system was struggling, it seems. Anyway, Cioloş remained Minister for 15 months until a new government was formed after the elections at the end of 2008. Since then, he has been doing a number of ad hoc jobs within the Romanian Ministry, notably chairing a Romanian working group on the future of the CAP.

From a purely personal point of view, I’ve come across him a number of times – mainly at Informal Agriculture Council meetings, but I also had a one-to-one meeting with him not so long ago. At Informal meetings, where journalists tend to have access to all Ministers for a couple of hours, he was always a popular target because his French is so good [and there are no interpreters] and because he is good on policy details. In my contacts with him, however, he has given the clear indications of support for competitive, but sustainable farm structures, i.e. not wedded to the small structures so prevalent in Romania. He has pointed out that there is more to Romanian agriculture that just small farms – and that it is also in Romania’s interests to improve its efficiencies (maybe by increasing structures). But maybe that’s what he assumed I wanted to hear, as an Anglo-Saxon.

We spoke in French, but he did assure me (in French) that he also speaks English. It would be a shame if this were to become an issue, as one should recall that both Mariann Fischer Boel and Franz Fischler were not confident enough to speak publicly in English when they first took office. Unfortunately, the fact that Cioloş is seen by some as being “too French” means that speaking English will be an important pre-requisite for allaying such fears.

Unfortunately for him, Cioloş’ claims that he is not “too French” were not helped by the reaction in Paris to his nomination for the Agriculture portfolio. French President Nicolas Sarkozy singled out the appointment as “a second victory for France” (in addition to the fact that the French Commissioner Michel Barnier will be responsible for financial services). Indeed, Barnier has also made comments about how he will ensure that Cioloş is well aware of French agricultural positions.

In preparing for the Hearing in the European Parliament next month, Cioloş has now chosen his chief adviser – or Chef de Cabinet – an Austrian called Georg Haeusler from within DG AGRI, whose main claim to fame was being the personal adviser to DG AGRI Director-general Jean-Luc Demarty from 2006 to 2008. The fact that 41-year-old Haeusler – and Cioloş – is so relatively inexperienced suggests that these changes will considerably increase Jean-Luc Demarty’s influence over the whole CAP reform process. Although Demarty is French, he has been in the Commission for many years and has previously been criticised from Paris for certain positions. In practice, this greater influence of the DG will probably mean a stronger sense of continuation in the direct of policy reform, rather than a strong input from the new Commissioner.

Will he be blocked by the European Parliament?

My immediate response to his nomination was that MEPs will want to block Cioloş, as he is an easy target. But the more I think about it, the more I believe that he will be supported by COMAGRI – on the condition, of course, that he puts in a competent performance in the Hearing. We should perhaps recall that Fischer Boel was not particularly impressive in her EP Hearing, but has turned out to be a particularly skilful Commissioner who would have had unquestioned support from most quarters if she had decided to stay on for another 5 years.

Arguments Against Cioloş
Wrong nationality. Romania is too dependent on agriculture, and besides which Cioloş is too French – having lived & studied there, i.e. a Romanian with a French CV.
lacks political experience. He was only Minister for 15 months, and has spent most of his relatively short career as a civil servant; When he was Minister EU payments to Romania (for pre-accession Rural Development schemes) were frozen because of mal-administration;
lacks political support within the EP. Although he previously insisted that he was “independent”, he has now been embraced by the right of centre European People’s Party, but it remains unclear how strong this support is.

Arguments for COMAGRI supporting Cioloş
Lack of alternative – COMAGRI is pro-farmer, and the fear from blocking him is who might be offered as an alternative Commissioner. Certainly it would be no one as well-qualified & informed as Cioloş. Without any doubt, there is no other Romanian who would be acceptable for the post.
Lack of political experience – With co-decision, it could be a massive advantage for the EP, and for the COMAGRI in particular, to have an inexperienced Commissioner. He is reasonably close to COMAGRI Chairman Paolo De Castro (former Italian Minister) from their time together as Ministers – and so De Castro may have a much stronger influence over him, than over a different Commissioner.

By Roger Waite

“Analysis from Brussels”- by Roger Waite- Fischer Boel Not Staying On As EU Farm Commissioner

Fischer Boel Not Staying On As EU Farm Commissioner

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.

Mariann Fischer Boel confirmed last month that she will be retiring at the end of her mandate and not staying on for a further 5 years as EU Farm Commissioner. While her decision came as no great surprise to me, there had been growing media speculation in recent weeks that she would stay on – because both the Danish government and the Commission President José Barroso had asked her to. In other words, it was up to Fischer Boel herself to decide whether to stay. And, to her credit, the 66-year-old has had the honesty and grace to step down while she’s on top.

It’s curious to see and hear the genuine disappointment that the likeable Dane is retiring. When she was first appointed, there was no shortage of doubts as to whether she was up to the job – having been a relatively unspectacular Danish Minister (advocating the rather unrealistic liberal positions that Denmark insists on in Council debates). She only got the job ahead of Dutchman Cees Veerman because she was a woman, critics were only too keen to recall. Indeed, her “Hearing” in the European Parliament – in front of the EP Agriculture Committee – was not entirely convincing. She only spoke in Danish, and gave absolutely no indication of her position on sugar (with reform proposals just a few months away). Nearly 5 years on, she has proved all of the critics wrong. Describing her as “tough, but fair”, most EU Farm Ministers made clear within the margins of the recent Informal Farm Council in the Southern Swedish town of Växjö that they would have preferred MFB to stay. France was perhaps the most “neutral” about the announcement, i.e. not sad to see her go, but one could argue that this is further proof of a job well done. Perhaps the most frequent complimentary comment was about the personal relationship that each of them had developed with Fischer Boel – confirming that the white-haired grandmother’s greatest talent is her inter-personal skills (and the way in which she fulfilled the usual requirement of refusing political demands). Seeing Fischer Boel among farmers, journalists, civil servants, and children is an object lesson in PR, with her particular ability to pat someone on the back, squeeze their arm, shake their hand, laugh at the right moment, etc. But has she been a good Commissioner politically?

Following on from the 2003/2004 “Mid-Term Review” completed by her predecessor Franz Fischler – now often called the “Fischler reforms” – Fischer Boel always had a hard act to follow. Moreover, with the EU having expanded to 25 Member States (later 27), it also meant that the decision-making process was more difficult. With the major reforms having set the nature of EU farm policy until 2013, her main tasks were only ever going to be a “mid-term review” of the Fischler reforms – plus the need to take on the other sectors, which Fischler had not really addressed – wine, fruit & vegetables, and, most difficult of all, sugar.

In what was her first full test, the sugar reform end-game of November 2005 revealed Fischer Boel’s steely side for the first time – as she held on for a 36% cut in the support price over 4 years (as opposed to the 39% cut over 2 years that was originally proposed by the Commission). Although some of the late concessions had to be revisited, the net impact of the reform has been to re-balance the EU market – reducing production by roughly 6 million tonnes, including all sugar beet production in a number of countries, such as Ireland. As a result, the EU has now become a net importer of sugar, rather than a net exporter – as production has tended to concentrate in the most efficient production areas. The high external tariff means that there is still a question mark about true competition on the EU market, as market prices have by no means fallen by as much as the support price. The fruit & vegetables and wine reforms that followed (in June & December 2007 respectively) saw similar ideas for better balancing the market, reducing structural surpluses, improving farm structures (through producer groups) and decoupling support – with a view to facilitating less competitive producers to exit the sector. Again Fischer Boel was able to retain most of what she had proposed – underlining that the change from 15 to 27 Member States has strengthened the Commission’s role in the negotiating process. Basically, there are too many countries for the end deal to vary too much from what the Commission proposes.

WTO – No Win Position For Farm Commissioner

It is difficult to reach a clear verdict on MFB’s performance in the WTO negotiations. For one, there has been no deal yet, but even if there had been one (in July 2008, for example), opinions remain divided over the potential impact that the draft deal would have on EU agriculture. The fundamental problem for whoever is EU Agriculture Commissioner is that the EU is basically willing to provide certain concessions on agricultural market access in order to make gains on services & NAMA – and can therefore probably never make any net gains for European agriculture. (Other than commitments for policy reform in the US & Japan, perhaps.) Whereas Pascal Lamy & Franz Fischler (responsible Commissioners from 1999-2004) were probably the best ever negotiators that the EU have (and will) ever have in knowing precisely how far they could push Member States, the combination of Fischer Boel and Peter Mandelson (as Trade Commissioner) is probably the most liberal that the EU will ever have. Latest positions appear to have provided the maximum possible concessions on agriculture (probably exceeding their negotiating mandate) without having really gained very much at all on NAMA and Services. Rightly or wrongly, the perception in Brussels is very much that it was Mandelson, rather than Fischer Boel, who was perhaps too generous in the agricultural part of the package before he had nailed down gains on NAMA. With Domestic Support now set to be 90% decoupled (by 2012) and Export Refunds unlikely to stay much beyond 2013 (when the current budget period ends) because of domestic political objections, the only real issue left for the EU is the extent to which Europe can maintain some form of tariff protection – and which products the EU will opt to define as “sensitive”. Past experience suggests that Fischer Boel and Mandelson will be blamed for whatever might eventually be agreed.

New Candidates Of The Job

Attention of course now turns to who might succeed Fischer Boel. With the new EU Treaty of Lisbon likely to come into force next year, the next Commission College will basically see 1 Commissioner from each of the 27 Member States. With José Barroso (former Portuguese Prime Minister) now confirmed for a second 5-year term as Commission President, his first task is to ask each Member State to nominate a few able politicians and for him then to work out who should get what dossier – in a way that provides a good blend between big and small Member States, old and new, male & female candidates, and taking into account a fair balance among the main political parties. I call it a 27-dimensional puzzle. However, we commentators have the advantage (at least for the next couple of weeks) that we can speculate without being wrong.

So, with Portugal already excluded (Barroso is their Commissioner), here’s the latest thinking about the other Member States – (as of early October):

Belgium, Estonia, Finland, France, Italy, Lithuania, Luxembourg, Poland, Slovakia, & Slovenia have already nominated a new Commissioner / confirmed that the sitting Commissioner will stay.

Cyprus, Latvia, & Spain are expected to re-nominate their existing Commissioner in the near future. Maybe the UK, too.

An unwritten rule basically excludes the “large” Member States from getting the job, i.e. France, Germany, Italy, Spain & UK. (We still don’t know if Poland and Romania may count as “large” in this context.) France, for example, has named former Farm Minister Michel Barnier as its next Commissioner – but there is simply no suggestion that he will get the “Ag Job”.

So, of the remaining Member States, one can certainly exclude Sweden (not interested in EU agriculture), and Malta & Cyprus (too small, and not agricultural enough).

By my reckoning that only leaves 8 – Austria, Bulgaria, Czech Republic, Denmark, Greece, Hungary, Ireland, Netherlands & Romania. Bulgaria can certainly be excluded because they have had problems of fraud in implementing CAP support (for pre-accession programmes), and it is probably fair to exclude them immediately. The Czech Republic and Hungary can probably also be excluded, too, as the names floating in the media have nothing to do with agriculture – and there remains scepticism from many observers in Brussels whether the Agriculture dossier (and responsibility for the politically hyper-sensitive next CAP reform) can go to a New Member State. This now leaves just 5 possible Member States – – Austria, Denmark, Greece, Ireland, Netherlands & Romania.

In Austria – former Farm Minister (1995-1999) Wilhelm Molterer is widely tipped as the country’s next Commissioner – albeit for one of the financial dossiers (preferably as Budget Commissioner), rather than Agriculture Commissioner. Seen as a safe pair of hands for agriculture, one could nevertheless argue that the pro-farm budget lobby is better off with him as Budget Commissioner (defending the overall size of the farm budget – and the level of Rural Development spending in particular) and someone else succeeding Fischer Boel. I think Barroso would prefer not to have an Austrian Farm Commissioner just 5 years after Franz Fischler stepped down.

In Denmark, there are strong rumours that Farm Minister Eva Kjer Hansen could be nominated as Commissioner – but again with a different portfolio in mind, such as Social Policy, or even Consumer Protection or Health. However, she is not the only name in the media – and she is generally seen as not as good as Fischer Boel.

Greece has only just elected a new (Socialist) government, which virtually guarantees that the Current Environment Commissioner Stavros Dimas will not be re-nominated. It is totally unclear who they might nominate, but the Greeks have never had a particular interest in the CAP, and I would be very surprised if they post went in that direction.

Ireland, by contrast, has a particularly strong interest in agriculture, and would probably be the obvious first choice if a suitable Irish candidate were easily available. Former Farm Minister Mary Coughlan has been mentioned as one option, but the government coalition has such a wafer thin majority in Parliament at the moment – and is so low in the opinion polls – that it cannot risk a by-election. Consequently the next Irish Commissioner is likely to be someone not currently in the Dail – maybe even former Taioseach and current EU Ambassador to the USA, John Bruton.

As far as the Netherlands is concerned, former Farm Minister Cees Veerman is probably the best qualified person for the job – as a farmer, leading academic (Professor at Wageningen University) and politician (Dutch Minister from 2002-2007). Moreover, as the chair of government panel on climate change, he is still close to the heart of government. However, there are rumours that the Prime Minister may want to drop certain Ministers from the Cabinet – and “promoting” them to Brussels is a traditional way of doing this. Current Farm Minister Gerda Verburg is one name mentioned in this context. Having a Dutch Commissioner would also fit in well within the general thrust of the future of the CAP, as seen in DG AGRI – market-oriented and budgetarily aware. Having said that, there are a number of other dossiers up for grabs in the new Commission, and there are strong rumours that Prime Minister Jan-Peter Bakenende himself is looking to become the first “President of the EU Council” – a new job foreseen under the new Treaty of Lisbon. Although this post is not part of the ext Commission College, there is a broad acceptance that whichever country gets that position, it will not then get a high profile Commission dossier like Agriculture.

That brings us to Romania – where the government has openly called for “independent” former Agriculture Minister Dacian Ciolos to be given the job of succeeding Mariann Fischer Boel. The 40-year-old appears to have done a good job in his 2 years as Minister – above all in taking strict measures to ensure that the minimum requirements for introducing CAP support were in place. Although he is young, and has somewhat limited experience as Minister, he is probably as well qualified as most other candidates. Behind the scenes, however, there is a notable opposition to a Romanian Commissioner – especially from the “old” Member States – with officials questioning whether Romania has properly implemented the CAP so far, and concern that a Commissioner from a “new” Member State may concentrate too much on evening out the current level of direct payments (where the new Member States clearly receive a lower amount per hectare on average). I can’t help feeling that there is also considerable opposition to the way in which Bucharest is publicly lobbying for the post – fearing that this might set a precedent for the future if it succeeds. To be fair to the Romanians, their current Commissioner has responsibility for “Multi-lingualism” – probably the most nonsensical portfolio ever created within the European Commission – and they are particularly keen to have something more meaningful in the next Commission.

MFB To Stay Until February?

So, it remains open who the next Commission of Agriculture will be. I certainly wouldn’t rule out a new name appearing from nowhere – like Fischer Boel 5 years ago. The only other question is when he/she will take office. Formally speaking the current Commission College’s mandate runs until the end of October – but EU rules permit it to carry on in a caretaker capacity until a new Commission takes office. Barroso and others have made clear that it makes sense for the new College only to take office once the new Lisbon Treaty has entered into force. Prior to the Irish referendum on the Treaty at the start of October, it was assumed that “Lisbon” would be in place by the start of next year. In recent days, however, it has become clear that the Czech President Vaclav Klaus is seeking to exploit his country’s position as the last Member State to ratify the Treaty, by introducing additional demands. This last minute hostage-taking is proving particularly unpopular in Brussels – and there are indications from the Barroso camp at the present time that the new Commission may be delayed until mid-January or mid-February, rather than give way to Klaus on this. In short, a handful of young children in Denmark will have to wait a bit longer until they see more of their grandmother.

By Roger Waite

“Analysis from Brussels”- by Roger Waite- New Protagonists for CAP Reform Taking the Stage

New Protagonists for CAP Reform Taking the Stage

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.

Having previously outlined the timetable for the next, big reform of the EU’s Common Agriculture Policy [see- Towards the Next, Truly Big CAP Reform- The Timetable], a number of the major players are starting to take the stage. Firstly, with the Commission President José Barroso now near-certain to stay for another 5 years, attention is turning to the other Commissioners – and whether or not Mariann Fischer Boel will stay on as EU Agriculture Commissioner. Secondly, with “co-decision” likely to enter into force from next year, the European Parliament will play a much greater role in farm policy decision-making in the future – and the new Parliament has just elected an Italian Social Democrat, former Italian Farm Minister Paulo De Castro to the influential position of Chairman of the EP Agriculture & Rural Development Committee. The third and most important player in farm policy negotiations is the Council, i.e. the Farm Ministers from the 27 different Member States – and there, too, we have seen a number of changes in recent months, including the appointment of new German and French Ministers, who have immediately set up a joint Franco-German working party to consider the future direction of the CAP.

To recap, we will get a “Communication” from the Commission on the post-2013 CAP in July or September 2010. This will be debated for 6-9 months, before the Commission publishes it legislative proposals for reform in July 2011 (with the overall package of proposals for the EU Budget from 2014 until 2019 or 2020 – the so-called “Financial Perspectives”). The decision-making process involves adjusting the Commission proposals until they have a qualified majority of support from the EU’s 27 Member States, under the weighted voting system. Unlike all previous reforms, however, where the European Parliament was merely “consulted”, i.e. the Council could ignore the EP demands, the next reform will almost certainly be decided using “co-decision”, i.e. where the Council has to negotiate with the Parliament in a 1st and 2nd Reading with an obligation to take MEP issues on board.

Fischer Boel – Will She Stay Or Will She Go?

Taking first the Commission, it seems as if Commission President José Barroso will be reappointed for another 5 years. (He has been unanimously backed by EU leaders, but MEPs have now delayed their approval of his reappointment until the autumn.) He has a major say in the appointment of the other 26 Commissioners in the next Commission College – in that he can veto candidates proposed by Member State governments, and the allocation of portfolios is up to him.

Last time around – 5 years ago – it looked as if former Dutch Farm Minister Cees Veerman was about to be appointed EU Farm Commissioner, but, with Barroso keen to appoint as many female Commissioners as possible, he persuaded Denmark to nominate its Farm Minister Mariann Fischer Boel as Commissioner – and also offered the Dutch the high profile “Competition” dossier, if they could find an appropriate female candidate [and they did in the form of Neelie Kroes]. Fischer Boel, it must be said, was a pretty unspectacular Minister of Agriculture. She had held the EU Presidency in 2002, but had done little to impress. And she was following on from Austrian Franz Fischler, arguably the best ever Farm Commissioner.

Five years on, Fischer Boel has surprised all the doubters and been a particularly good Commissioner (one of the best in the current, relatively unspectacular Commission College) – having steered through sectoral reforms for the sugar sector, wine, fruit and vegetables, as well as last November’s Health Check. In short, she is a safe pair of hands. But she recently turned 66, and has previously indicated that her intention was always to retire at the end of the year, once her mandate was over. I remember interviewing her a couple of years ago and asking her whether I should ask the question about staying on for another 5 years. She merely discouraged me from asking the question and, at the end of the meeting, gave me a friendly slap on the shoulder (as she does) and pointed at a poster on the wall in her office with an old woman in a circus outfit with the headline “Do you know when it’s time to stop?”. Despite Barroso and even the Danish government asking her to stay on, I believe it’s more likely that she will go. If you twisted my arm, I’d say about 60%-70% certain that she’s going – with a decision likely to be announced in September or October.

For the time being, there is absolutely no indication of any other names under discussion for the post. Based on past experience, we can assume that Fischer Boel’s successor will have served as Minister of Agriculture (and is maybe still in the post) and will not come from one of the “big Member States” (i.e. France, Germany, UK, Italy, Spain, or Poland). In Brussels, the only name mentioned so far in the corridors is former Dutch Minister (& academic) Cees Veerman – possibly because he came so close to getting the nomination 5 years ago. The Romanian media have debated at length the merits of their former Farm Minister Dacian Ciolos as a candidate – but his name has not be heard in Brussels. Curiously, he has been appointed Director in the Commission’s DG AGRI, and has now managed to delay taking up the post until December. Realistically, with doubts about the proper implementation of CAP funding rules in Romania still remaining – and the newest of Member States having such a massive interest in agriculture [29% of the workforce are employed in the agricultural sector, it seems!], it strikes me as highly improbable that a Romanian will get the job, however well qualified. My instincts tell me that the next Farm Commissioner should be from one of the more liberal countries, i.e. so that he/she naturally favours the ongoing evolution of farm policy – but I’m not going to stick my neck out at this stage. [I guess I’ll have to do that in the autumn.]

European Parliament Ag Committee Headed by Paolo De Castro

While the Commission is still working on its next Commissioner, the European Parliament has this month established its Agriculture Committee for the next 5 years – following June’s elections. The first thing to say is that this EP will be more important than ever before in CAP legislation. Under the Lisbon Treaty, which should come into force from the start of next year (if the Irish population backs it in a second referendum in early October), EU Farm Ministers in the Council will be obliged to negotiate with MEPs during the end-game phase of talks because the legislative process for CAP rules will now involve “co-decision”. Until now, the system of “consultation” has merely meant that the Council must wait for the EP opinion, but can simply ignore all EP recommendations.

While this will of course make life much more difficult for the Council – and the process of legislation-making will be 18-24 months, rather than 9-15 months – it will also make life much more difficult for the Parliament. Until now, under “consultation”, MEPs from farming constituencies have merrily been able to advocate unrealistic, but popular demands in farm policy debates, i.e. without having to worry how they might be financed. From now on, however, that will not be possible. And we wait to see with interest not only how this change of responsibility will affect the level of debate within the Agriculture Committee, but also how such views will fit in with the Budget Committee, for example – recalling of course that all positions have to be agreed in the full EP Plenary.

In that sense, it is worth recalling that the European Parliament is unlike almost any other Parliament in the world in that voting sometimes divides down Party lines (and there are now 6 big Party groups), but it also sometimes divides along national lines. [In my experience, farm policy initiatives tend to be voted along national lines.] Anyway, looking at past battles in the US Congress, we may now face additional divisions based on Committee loyalties, i.e. Ag Committee vs Budget or Environment or Development Aid Committee.

In this context, the EP has formally agreed all members of the new EP Ag Committee – under the Chairmanship of a newly elected MEP – Paolo De Castro. In the 30-year history of the EP, he is also only the second ever Socialist/Social-Democrat to head the Committee, as the farmer vote in most Member States has always tended to be Christian Democrat. However, 51-year-old De Castro is particularly well-qualified to take on the job. [And maybe more experienced than the next Farm Commissioner!] Having become Professor of Agricultural Economics at the respected Bologna University, De Castro served as an economics adviser to Prime Minister Romano Prodi from 1996-1998 before becoming Italian Agriculture Minister (1998-2000). After Prodi was made Commission President (1999-2004), he also served as an external adviser on agricultural issues for most of 2000. After more academic experience, De Castro was elected to the Italian Parliament in 2006 and again served as Minister of Agriculture from May 2006 until October 2008, when Silvio Berlusconi defeated Prodi in the general election.

With many senior MEPs having retired (or not been re-elected) – such as Neil Parish, Lutz Goepel and Friedrich-Wilhelm Graefe zu Baringdorf – the EP Agriculture Committee is relatively inexperienced, but has a number of colourful and potentially politically influential characters. Among them are José Bové – radical French farmer famed for having gone to prison for vandalising a MacDonalds restaurant as part of a protest. He is now a Vice- Chairman of the Committee! Other potential stars include former Portuguese Farm Minister Luis Capoulas Santos, former Irish TV presenter Mairead McGuinness, and former Scottish NFU President George Lyon.

New French Minister Underlines Franco-German Coalition

So while the main protagonists in the post-2013 CAP debate are taking office in the European Parliament and the European Commission and will be there for the next 5 years, the carousel of EU Farm Ministers continues to turn. I will just draw attention to 2 significant changes of late – in the two Member States that have traditionally dominated the CAP – Germany and France.

In Germany, a Bavarian woman Ilse Aigner took over last autumn as farm Minister from a Bavarian man (Horst Seehofer – who became prime minister of the regional government of Bavaria/Bayern). First impressions of the 44-year-old indicate that she is competent, but has a tendency of following her regional boss (Seehofer) more than her real boss (Angela Merkel), for example on GMOs. She is likely to take a more independent position towards the end of the year, if Merkel’s Christian Democrats win the September 27 German elections as current opinion polls indicate. Nevertheless, she will face the very difficult choice on future farm policy priorities as the strong Bavarian farm lobby (with its small farm structures & highly conservative attitudes) tends to contrast with the larger, more competitive attitudes seen elsewhere in the country.

In France, too, there has been a recent change as stalwart Michel Barnier was elected to the European Parliament. (In fact, he is expected to be the next French Commissioner – not for agriculture – and sees 5 months in the EP as a good stepping stone.) Barnier’s replacement as French Farm Minister, appointed in June, is Bruno Le Maire, 40-year-old former Minister for EU Affairs, who rose through the ranks of the French conservative party machinery as an adviser to former Foreign Minister and Prime Minister Dominique de Villepin. Curiously French President Nicolas Sarkozy took the opportunity to rename the job title to Minister for Food, Agriculture & Fisheries – the first time “food” has been acknowledged. (It remains unclear whether or not this might be significant in policy terms.) With predecessor Barnier having acknowledged the pressure for changing the EU’s Common Agriculture Policy after 2013 [see- France Embraces CAP Reform], it is clear that Paris has already woken up to the challenge of justifying CAP subsidies in the future. What is particularly interesting though, is Sarkozy’s decision to appoint as Farm Minister a fluent German speaker, whose main role as Minister for EU Affairs was to bring Paris & Berlin closer together. Sure enough, within a month of taking office, Le Maire has made clear that the French and German government will form a joint working party to look at the future of the CAP. Although the Franco-German alliance on the CAP is not what it used to be (when there were only 6 or even 9 Member States), it is a combination which will still have enormous influence over any future debate. In combination with Belgium, Luxembourg, Ireland, Austria, Finland and maybe Portugal, Spain, Hungary, Slovenia, Slovakia, Greece and Italy, such an alliance will play a key role in the forthcoming negotiations.

By Roger Waite

“Analysis from Brussels”- by Roger Waite- Towards the Next, Truly Big CAP Reform- The Timetable

Towards the Next, Truly Big CAP Reform- The Timetable

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.

Even before last year’s relatively minor reform of the EU’s Common Agriculture Policy (CAP) – called the CAP Health Check – it was clear that there will be a major reform of European farm policy for the period after 2013. Back in 2005, the EU budget was set for the period 2007 to 2013 – the 2007-2013 Financial Perspective – with agriculture accounting for just under 40% of the budget. Since then, it has been clear that politicians are keen to spend greater amounts on issues such as climate change, research and development, creating jobs and growth – and that this seems more justifiable to the taxpayer. With the financial crisis underlining that the next Financial Perspective is not going to see a major increase in the overall level of public spending, the writing is on the wall. The CAP faces a budget-driven reform for the period after 2013.

While this is not new, we have had some clarification in recent weeks of the likely timetable for this reform. A Commission “Communication” on the reform concept will be published in July or September 2010. Equivalent to a White Paper, this report will be used to stimulate a formal public consultation for about 6 months, as well as seeking input from the European Parliament and from Member State Ministers of Agriculture in the Council.

On the basis of the responses to the Communication, the Commission will then come forward with formal legislative proposals for the post-2013 CAP in July 2011 – as part of a bigger package on the post-2013 Financial Perspectives. Experience from 1999 – when the “Agenda 2000” CAP reform was agreed within the package of the 2000-2006 Financial Perspectives – suggests that Farm Ministers will try to agree to a policy reform broadly within the parameters of the proposed Financial Perspectives, but that this will then be adjusted by EU leaders when they finalise the final package.

Another significant change is the fact that the decision-making procedure will involve “co-decision” with the European Parliament – assuming that the Irish vote “yes” to the Lisbon Treaty when it hoes to a second referendum in early October. Under current “consultation” rules, the Council can ignore recommended changes from the European Parliament. Under co-decision, however, the Council is obliged to incorporate EP ideas into the final deal, making the decision-making process much longer and more complex. It also adds considerable unknown factors. While we already know more or less what priorities Member States have, we don’t yet know how the EP will react to its new powers in agriculture policy-making, e.g. whether the voices in favour of shifting EU spending away from agriculture will get the upper hand over the more conservative farm policy attitudes.

Poland holds the Presidency from July-December 2011, for the immediate reaction to the proposals, but we can already assume that the crucial elements of the [1st Reading] negotiations will probably come in the first half of 2012 (under the Danish EU Presidency), with a view to reaching the overall end-game by the end of 2012 (under Cyprus’s first ever EU Presidency). While the Danes have always had excellent, well-run Presidencies – unlike many larger Member States, putting Europe’s priorities ahead of national issues – it remains to be seen how such a small Member State as Cyprus will cope with the responsibility of chairing the end-game sessions. I would guess that this will probably strengthen the Commission’s hand in the negotiations.

One alternative might be to delay the end-game until the first half of 2013 (under the Irish Presidency). This would have the advantage of having a very farm-aware Presidency in the chair, i.e. the policy content would be relevant, rather than just the budget considerations. However, it would also probably mean that the implementation of any changes would have to be delayed until 2015. In other words the 2013 budget would be rolled-over for 2014, but that the overall transition for farm policy might have to be 1 year shorter, e.g. 6 years rather than 7 years.

Strong Signal that CAP Direct Payments Are Not Dead

EU Ministers of Agriculture meet more often than almost any other Ministers in Europe. Well, after all, the CAP is a common policy, and one of the very few areas of policy where the principle political decisions are taken at EU, rather than national or regional level. In addition to their monthly Council meetings in Brussels (In actual fact the April, June and October meetings take place in Luxembourg), Farm Ministers get together once every 6 months in an informal setting, in the Member State holding the Council Presidency. Although policy-making has changed considerably over the years, I still maintain that these Informal Councils are very useful sessions which allow Ministers to build individual relationships with their counterparts in other Member States, with a view to finding allies for subsequent policy negotiations. In the course of the 2½-day meeting, there is a always a “formal” debate of one subject of particular interest to the Council Presidency. Six months ago in Annecy (under the French Presidency), Farm Ministers had their first serious discussion about the future of the Common Agriculture Policy after 2013. At the start of this month, Ministers travelled to the Czech 2nd city of Brno – where 2 days of interesting farm and cultural visits ended with a detailed discussion about the future of the CAP system of Direct Aids – within the context of the post-2013 CAP.

In broad terms, the debate highlighted that virtually all Member States still see direct aids as a significant instrument in the future CAP, but also a general acceptance that the current system of aid amounts based on historic receipts had to be simplified and changed towards a much fairer system of paying farmers for the public goods that they provide. At the end, EU Farm Commissioner Mariann Fischer Boel outlined the likely timetable for the post-2013 reform initiative, highlighting that the first formal Commission Communication on the reform is little more than 12 months away.

To put the discussion in context, figures produced in the build up to the Health Check highlighted that the current rates of CAP direct support (extrapolated to a per hectare basis) show a remarkable variation among Member States. Whereas Latvia gets less than 100 € per hectare, Greece and Malta are close to 550 €/ha. Another notable point is that the average amount received in the “Old” Member States is roughly 300 €/ha, whereas it is just 200 €/ha in the New Member States.

It was therefore perhaps only logical that the Czech Republic opted to pursue this debate under its Presidency. With an average farm payment of 270 €/ha, the Czechs could claim to be an honest broker on the issue.

By Roger Waite

“Analysis from Brussels”- by Roger Waite- France Embraces CAP Reform

France Embraces CAP Reform

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.

While the CAP Health Check from last November will not go down in history as the biggest step in the process of reforming Europe’s Common Agricultural Policy (CAP), it may yet prove to be highly significant in that it has given France the chance to embrace the reform process. Indeed, the noises coming from French government circles in recent weeks have signalled a potentially decisive shift, which, based on past experience, will move the centre of gravity of the political majority within the EU. Paris has seen the writing on the wall (and the pressures to cut the CAP budget after 2013) – with French Farm Minister Michel Barnier and Prime Minister Francois Fallon claiming that France is in danger of being isolated unless it embraces reform now- and concluded that French cereal farmers get too much from the CAP, especially relative to French livestock producers.

Just to recap, back in November, the EU finalised the “Health Check”, which included three main elements in the way that Member States manage their CAP direct aids – i) committing to a further decoupling of EU direct support between now and 2013; ii) allowing Member States flexibility to redistribute up to 10% of their current direct aid “national envelope” (defined under “Article 68”) for various purposes (some of which may be non “Green Box in WTO terms), and iii) shifting a further 5% of funds away from direct aid [through “compulsory modulation”] towards Rural Development measures to address certain “New Challenges” defined as climate change, renewables, water scarcity, biodiversity loss, innovation and dairy restructuring. The Health Check also encouraged Member States to move away from a historical base for allocating payments on the grounds that this was less relevant as time goes on – but there was no obligation linked to this. As with the 2003/2004 “Fischler” reforms, the agreement leaves Member States more or less with the same envelope of funding, but has adjusted the menu of options for how to pay out this amount. It remains up to the Member States to decide how to administer its direct support, thereby highlighting the domestic national political priorities – and tensions. And this is what we are now seeing in France.

To put things more clearly in context, I should perhaps also add that it has become clearer than ever in recent months that the CAP is facing a radical reform for the period after 2013 – because of the need to define the new EU budget for the next 5-7-year period starting in 2014. In short, the implementation of the Health Check will be the last chance for Member States to organise their defence for the biggest ever reform battle ahead – where Farm Ministers might well be joined around the table by Finance Ministers and Heads of Government.

Following the Health Check, Member States have until the Summer to decide how they want to change the administration of their direct support, or Single Farm Payment (SFP) as it is now known – with the first changes applicable next year. For countries such as Germany or England [but not Scotland & Wales], which decided after the 2003 reforms to change their SFP system over a long transition period towards a flat-rate payment per hectare with very little “coupling” maintained, there will be few changes necessary. By contrast, those Member States that took a more conservative approach to implementing the Fischler reforms now have more to do. And to be clear, France was the Member State which maintained as many “coupled” payments as possible. To recap – following the Fischler reform, France still “couples” its payments for suckler cows (100%), calf slaughter premium (100%), sheep & goats (50%), adult cattle slaughter premium (40%), arable/cereals producers (25%) – and bases all remaining payments on a “historical model” (i.e. the amounts received in direct aid from 2000-2002.)

So, what is France going to do?
In a nutshell, Paris intends to address existing national disparities and redistribute €1.4bn of its overall l€8bn envelope of EU aid, i.e. 18% of the total, in what Minister Barnier has described as “a bid to maintain France’s grassland-based livestock production potential”. The first change is that the arable payments, the adult & calf slaughter payments, and the sheep & goat payments will be fully decoupled – and the suckler cow payment will be 25% decoupled, i.e. will stay 75% “coupled”. But rather than pass these previously coupled amounts back to the “usual” recipient as newly decoupled aid on a historical basis, Barnier is invoking a special clause which he himself negotiated into the Health Check political agreement (now defined as Article 63), which allows the Member State to rechannel this previously “coupled” funding. So, some €640m of previously coupled arable payments plus €130m previously coupled livestock aid will now be used to fund a new hectarage payment for grassland farming & forage crops (varying according to stocking density, but with a maximum of 0.8 livestock units per hectare). As you will note, this entails a significant shift from corn to horn.

In addition to this, Paris is seeking to use the above-mentioned Article 68 and the funds generated from compulsory modulation – some of which is supplemented by national funding – to further underline this shift of emphasis. Under Article 68, specific coupled payments will be “(re-)introduced for sheep & goats (worth €135m), mountainous milk production (€0.02 per litre –up to a total of €45m), durum wheat in traditional areas (€8m) and suckler calves (€5m), as well as payment for vegetable proteins (30m) and protein crops (€40m). Another new idea, agreed under the Health Check, is the use of €100m to provide start up help for a new risk management crop insurance system, plus €40m for a disease fund.

Then there are also changes to France’s Rural Development programme, financed by an increase the rate of modulation from the current 5% of direct aid payments per farm [excluding the first €5 000] to 10% by 2013. This will see an additional €240m going into the existing agri-environment grassland premium (€64m of which comes from national funds), €42m for less favoured area payments (€19m from national funds), and €32m into the New Challenges (€14m from national funds).

According to French government figures, French cereals farmers’ average income last year was double the average cattle farmer revenue – and four times greater than the average French sheep & goat farmer. Because the original calculation of the direct aids was based on regional reference yields (in the 1980s!), the highest rate of aid per hectare goes to the most productive farmland. By definition this tends to be the richest farmers who least need the support. A study by the French National Institute for Agricultural Research INRA has indicated that the plan will result in a “significant redistribution” of aid, which clearly favours grassland farms at the expense of grain farms. It estimates that direct aid to French cereal farmers will drop by €5 900 on average – equivalent to a 17% cut (based on 2003-2007 figures). By contrast, the change is likely to mean an average €7 800 increase in support for sheep farmers, equivalent to a 43% increase from the 5-year average – or a 29% increase from 2007 levels. Not surprisingly, French cereals farmers have been out on the streets. Curiously, few of them appear to be defending the status quo, merely criticising the speed and amount of the shift.

So, if France is now in effect admitting that grain farmers in the Paris Basin are being over-generously rewarded by the CAP, will the French government embrace a similar re-balancing at EU level? Yes, quite conceivably, but only on the condition that France maintains its overall €8bn envelope! After all, France should now be rewarded for making its payments more justifiable.

All eyes now turn to countries such as Spain and Italy, to see how they will choose to implement the Health Check.

By Roger Waite

“Analysis from Brussels”- by Roger Waite- CAP Health Check Deal Formalised – But Growing Concerns About Market Situation

CAP Health Check Deal Formalised – But Growing Concerns About Market Situation

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 Agriculture Ministers have formally adopted the legislative texts of the CAP Health Check this week – 2 months after the political deal agreed under the French Presidency of the Council. These further steps towards a more market-oriented CAP come as EU markets are facing serious problems – for dairy in particular – and the Commission has even announced the reintroduction of export refunds, and the likely purchase of significant public stocks of butter, milk powder and cereals expected in the months ahead. There is also growing pressure to use the remaining available market instruments to help the pigmeat and sugar sectors. In this context, I can’t help wondering if the Health Check would have been agreed so relatively easily if the end-game was now, rather than last November. Above all, the agreed 1% increase in dairy quotas for 5 years, starting in April 2010, would have had a much bumpier ride – even if no one appears to be questioning the de facto abolition of the quota regime in 2015. It was an irony not lost on observers that this week’s Farm Council discussed these market difficulties at the same time that it looked at a Commission report on high food prices, demanded by EU leaders last July!

Anyway, with the ink now dry on the Health Check, I thought I’d try and draw a few conclusions about what was agreed.

The Health Check was never intended to be a major reform – more a completion of various issues deferred in the 2003/4 reforms, and a number of points aimed at making the CAP more defendable vis-à-vis the European taxpayer, ahead of the next reform – the really big reform – for European farm policy after 2013.

In terms of achieving more market orientation, the Health Check agreement broadly accepted the Commission approach. Compulsory set-aside, potato starch quotas and a dedicated energy crop premium (45 € per hectare) are abolished; dairy quotas are clearly on the way out – and even though the foreseen increase in quotas (5x 1%, with the full 5% in Italy from year 1) will not be fully utilised, the main point is that the quotas will no longer be a production restraint (except maybe in Italy). [Just to clarify this, Italy has always exceeded its quotas. This is because they were established in the early 1980s on the basis of official production figures at the time – but many Italian producers had always significantly under-reported their production. The quotas did very little to stop this “black milk” economy until the issue was finally re-examined and a sort of amnesty agreed in the 1992 Mac Sharry reform. Despite subsequent increases in 1999 and 2003 reforms, Italy still produces 5-6% more than its quota – and pays a heavy superlevy bill every year, as a result. The Health Check agreement for them to front load their 5% quota increase, is therefore aimed more at reducing the superlevy bill than providing any incentive to produce more.]

One Health Check issue agreed with relatively little fuss, which symbolises just how far the CAP has come in recent years, was the agreement to abandon public intervention for barley, sorghum [and rice & pigmeat], and to limit the automatic purchase of common wheat to just 3 million tonnes every year. Greater volumes can be bought in, but only via a tendering system which allows the Commission to controls volumes (& costs). (For the record, intervention for rye was abolished in 2003, and this is the last year that maize intervention will be allowed.) Curiously, Ministers didn’t even realise that they had agreed to abolishing the long-standing monthly increment to the cereals support price – an issue which was blocked by French President Jacques Chirac himself in 1999. Despite all of these changes towards fewer and simpler market instruments, Commission officials are adamant that there are sufficient tools still available to help the market in times of difficulty. It will be interesting to see if they are saying the same thing in 2-3 months time!

On direct payments, there has been a clear move to greater decoupling – albeit over a slightly longer period than proposed – but suckler cow and sheep premium payments will be the only formally coupled payments still remaining in 2013. Member States are encouraged to move their “Single Farm Payment” model towards a flat-rate hectarage payment (per region) and away from a “historically-based model” (on the basis of 2000-2002 production) – but there is no obligation to do so. Despite pressure from the “New Member States” to change the allocation of funding towards a much fairer & more transparent flat-rate payment across the EU, this more fundamental question was well & truly excluded from the Health Check negotiations. This will be one of the biggest elements in the next reform – and the “Old member States” may yet come to regret their insistence on not touching the issue this time around.

Within the debate on how Member States can spend the EU funds for direct payments available to them, the existing “Article 69” concept has been broadened, giving more flexibility to Member States on using up to 10% of their direct payment “national envelopes” for more targeted issues still within the CAP 1st Pillar (i.e. without any need for co-funding them). The new options include potentially coupled compensatory payments for sheep, dairy, beef & rice farming, and public contributions to crop insurance or mutual funds to combat animal & plant diseases. To underline that this should not be “re-coupling by the back door”, the amount of potentially non-Green Box support [as defined within the WTO] is limited to 3.5% of the national envelope.

The other big issue was the move to establish options within Rural Development programmes [i.e. in the 2nd Pillar] to address the “New Challenges” of climate change, biodiversity loss, water scarcity and renewable energies – and the need to shift more funding from the 1st Pillar in order to finance them through the so-called compulsory modulation instrument. The end deal saw agreement that the existing rate of modulation (5%) should be increased by 2% in 2009 [the 2010 budget], rising by 1% a year to +5% in 2012 [the 2013 budget]. All farmers receiving less than €5000 in direct aid (more than three-quarters of EU farms) will continue to be exempted, as are all producers in the 12 New Member States (until 2012/13) because they are having their direct payments phased in to “old Member State “ level over 10 years.

On top of this, the Council agreed to Progressive Modulation, namely that farms receiving more than €300 000 in direct support every year will face an additional 4% shift in funds from 2009 onwards. This is much less than the Commission had proposed, and a long way from the €300 000 cap on direct aid per farm that was discussed in the past – and remains a controversial issue in the USA. However, it is the first time that the EU has agreed to any sort of instrument along these lines, and Commissioner Fischer Boel was very happy in the final deal to have introduced a mechanism that can be tightened next time.

In all, the additional modulation will see nearly €500m shifted to Rural Development this year, rising to €912m in 2011 and €1159m in 2012, some €3.2bn in total – all of which will have to be co-financed by Member States (but at much lower rates than usual – +25% & +10%, rather than the usual +50% & +25%).

The “New Challenges” idea is a good way of enabling the Commission to better defend the CAP budget in future years – as even the most euro-sceptic commentators accept that these are burning issues that are maybe best addressed at EU level. Nevertheless, for complicated domestic political reasons, Germany was insistent that a 5th New Challenge should be added aimed at providing measures to accompany the phasing out of dairy quotas, i.e. a Milk Fund.

In the end-game politicking, there were obviously a number of concessions, with the most obvious lubricants from the Commission being financial. The Commission agreed that the €90m saved by abolishing the energy crop premium should be divided up among the New Member States. And for the Old Member States, it was agreed that they could have more flexibility to use “unclaimed” direct aids from their national envelopes. (For example, under current rules, if farmland is sold off, the entitlements linked to that land is returned to the national envelope, but can never be claimed because the land is no longer in production.) This additional funding can be used for the targeted payments under the new Article 68, it was agreed.

Winners & losers
As I said at the start, this was not a massive reform, and so the magnitude of gains & losses should be viewed accordingly. All Ministers will have gone home with 2-3 of their main demands having been met in order to sell it as a good deal – that is normal. Nevertheless, it’s fair to say that a few Ministers did slightly better than others. For example, German Minister Ilse Aigner (appointed just a few days before the decisive meeting) got more or less what she was after with the Milk Fund, plus various assurances over the front-loading of Italian dairy quotas. Italian Minister Luca Zaia got his front-loaded dairy quota increase, which suggests that Italy might at least once manage not to exceed it quotas (before they are abolished). French Minister Michel Barnier, who chaired the meeting and co-wrote the compromise texts, appears to have emerged with absolutely all items on his wish list – most of which were more of a technical nature. Even though the New Ministers also made gains from the original proposals – the extra €90m and more flexibility on various issues – Latvia, Estonia & Slovakia voted against the final deal, and the Czech Republic abstained. Why? They perceived [perhaps accurately] that the Old Member States did better than the New Member States, and drew the [dubious] conclusion that the Health Check had therefore widened, rather than reduced the discrepancy between “old” and “new”.

Finally, I think Commissioner Fischer Boel comes out of the deal quite successfully. Yes, the modulation figures were negotiated down – but she still got a further 5% increase [whereas most of us expected a 4% figure]. The progressive modulation concept was significantly diluted – but the mechanism is there. And on all of the other issues, she basically got what she wanted – even if it will take a little bit longer for a few of the issues.

By Roger Waite

“Analysis from Brussels”- by Roger Waite- CAP Health Check Deal – The Overnight Blog From the Press Room

CAP Health Check Deal – The Overnight Blog From the Press Room

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 Agriculture Ministers reached agreement last week on the so-called CAP Health Check. The deal was finalised at 8.30 in the morning after 17 hours of non-stop negotiations. While “non-stop” may sound like hard work, in practice there was a lot of sitting around and large volumes of coffee & beer were consumed by all – officials from Member States, from the Commission, from the Council secretariat, the security guards, those lobbyists, who managed to wangle their way into the building, and the media. For those journalists following the talks – and yes, there were 20-30 of us who kept going all night – most managed to prepare an array of detailed articles, so that we could finish them reasonably promptly once the final paper was released. In order to show that it was not all dull, I thought I’d provide an “off the record” look at some of the lighter issues raised in the course of the negotiations.

Bad Start
I’ve finally got into the Council press area – some 45 minutes later than intended – because of the demonstration by tobacco producers in front of the building. The press release I’ve now received talks of 10 000 protestors, which normally means that numbers are roughly 2 000. That tallies with the numbers that I saw. To be fair, I saw different groups from France, Italy, and Greece – with each group wearing different caps to identify themselves. The mood was good. I saw a couple offering to exchange their caps with the police, who took it all in good heart. My sympathy towards these farmers started to dim when I got close to the Council entrance, however. Their presence had caused the main entrance to be blocked, and so I now faced a fight to get back out of the crowd that I had just fought through! And then a 5 minute walk (and 20 minute security delay) by going round the other side of the building. Alas (for me), just at that moment, the farmers lit a fire of tobacco leaves in order to underline their grievances. By the time I passed it, the smoke was so strong that I nearly suffocated as I walked past – and the stink of tobacco remained with me until long after the final press conference. I can’t understand why they’re here in the first place. The 2004 reform agreed to decouple all payments from 2010 onwards, and Commissioner Fischer Boel had made clear all the way through the Health Check negotiations that there was no chance of any change to that reform. The European taxpayer is simply not willing to subsidise any form of “coupled” tobacco payment any more, she keeps insisting. (For the record, the final deal included a clause which doesn’t actually mention the word tobacco, but which gives Member States a bit more flexibility to pay additional degressive support over 3 years to help tobacco producers restructure.)

Sweepstake
Among the press corps specialising in agriculture policy – the “Ag Hacks” as we sometimes call ourselves – there is a tradition of holding a sweepstake on how long the damn negotiations are going to last. After a quick discussion, we agreed that this time we would revert to true betting – a €5 stake – with agreement that the moment that counted would be the start of the final press conference. (At last December’s wine reform, we just did it for the honour!) We also agreed that we would be able to see the first compromise paper before betting. As Michael Mann, the Commission’s tall & handsome spokesman, won last December’s sweepstake, we were keen that he was one of the first tipsters this time around so that we could all be in the clear about his thoughts. “The deal will finish at 7.30am, but the press conference will not start till 9.02 because French Minister Barnier will want to wait until the French TV news journalists are there”, he predicted confidently, writing 9.02 onto the sheet. There then followed about 10 various tips from the hardened troop, varying from 4am till 10.30am. I was one of the most optimistic with my 5.11am forecast, but I was confident. All the sticky issues can be quite easily resolved, can’t they?

Anyway, I don’t need to tell you what happened, do I? The final deal was agreed at 8.30ish…and the press conference started at 8.50ish.

Decoupled “Hopes”
Oh dear! I have just noticed a typo in what we published on the first compromise text. Some 3 hours after it was sent out to subscribers, I see that AGRA FACTS has formally decoupled all European “hopes” from the start of 2010! Obviously, it was the “hops” payments that have to be decoupled, and it’s just as originally proposed. With Germany about the only Member State that still “couples” the support payment, the whole issue is totally uncontroversial. But now I’ve gone and ruined things! Looks like we’ll have to write a correction now. Fancy calling for hopes to be decoupled!

In the ensuing hours my embarrassment was eased by philosophical debate about what “hopes” should be coupled to. One friend even suggested that if they were coupled to fears, then maybe decoupling was not such a bad thing after all.

A Man Called Hilary
EU Farm ministers meet once a month in Brussels – apart from April, June & October when the meetings take place in…Luxembourg. As a result, the camaraderie & personal contact among the Ministers is more marked than in almost any other Council, and all of them are on first name terms and use the “tu” form of “you” in those languages which make a distinction between “you” and “you”.

In the UK, however, the Ministry of Agriculture has long since been eaten up in to the Department of Environment, Food, & Rural Affairs (DEFRA), run by the so-called Environment Secretary, who tends to concentrate on the politically most important issues in his remit – delegating Farm Council appearances to a Junior Minister. To be fair, this probably does make sense, but the lack of familiarity appears to have backfired slightly in the corridors upstairs. We are hearing that more than one Minister has now referred to UK Agriculture Minister Hilary Benn as “Ben”, assuming that he is called Benjamin because no man (surely) could be called Hilary!

MFB Masterclass
EU Farm Commissioner Mariann Fischer Boel can regularly be relied on to try to improve the English language by translating Danish idioms. There is a wonderful phrase about having a monkey on her shoulder which she will occasionally come up with. We’re told that it means something similar to “carrying the can”. There was also the time when her English was too good, and she said in a press conference that she was “pissed off” with newspaper reports that lots of CAP money goes to golf courses. She’s obviously been told off about that one because every now & again she will answer a provocative question at a press conference by saying “I know what I’d like to say…”, accompanied by her charming grandmother’s smile.

Anyway, a new gem has emerged tonight. In the course of one trilateral meeting, she is reported to have asked the Minister to show extra flexibility otherwise the whole negotiations will be a “dead herring”! Makes changes from “damp squib” or “dead duck”, doesn’t it?

To Vote Or Not To Vote
There has been a lot of talk since the Council finished about the “quasi unanimity” that French Minister Michel Barnier claims to have observed when he chaired the final session. In reality, the Ministers were not formally asked to vote, merely to present their reactions to the final compromise paper. Five Ministers indicated that they could not sign up to the paper, it seems – but this would, under no circumstances have been sufficient to block the necessary qualified majority required for it to be agreed. One officials has told me that the opponents were Latvia, Estonia, Czech Republic, Slovakia and UK – although it remains unclear whether they would vote against or abstain. In reality, the Council services will now tidy up the texts, i.e. incorporate the changes from the final compromise into the proposals that didn’t change. These will probably be done in English, it seems – which is a first from a French Presidency! Once this single text is clarified, it will be translated into the EU’s 23 different languages. And checked by the jurist-linguists for each different language. And will formally be voted through another Council meeting, probably in February or March. It’s then that we’ll see if the dissidents voted against or only abstained.

By Roger Waite

“Analysis from Brussels”- by Roger Waite- CAP Health Check “End Game” is Here

CAP Health Check “End Game” is Here

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 Farm Ministers come to Brussels this week to finalise the CAP Health Check, more than 12 months after the debate first got under way. In the course of this period, we have seen a very interesting discussion, influenced at different stages by various events – the surge in food prices & questions of food security, the Irish “No” to the Lisbon Treaty, the sudden hope & then failure to agree the WTO Doha talks in Geneva at the end of July, and, most recently, the financial crisis. All of these have had an influence on the discussions, but Commission officials can more or less argue that their original proposals already address the underlying problems – in the sense that they are trying gradually to better focus European public spending on a policy which is better understood and justified to the taxpayer, while also providing farmers with some form of safety net – but without the “old” trade-distorting habits. Before going into the details, however, let me just recall that this was never going to be a major reform, it was always intended to complete various elements of the 2003 Fischler reforms (without major changes before 2013 – in order to give farmers stability), with a few changes which address taxpayers concerns about CAP spending. By moving the budget in the direction of projects which are more justifiable to the taxpayer, it will presumably strengthen the defence of CAP funding for the next big reform in 2011/12 which will coincide with the discussion about how the overall EU budget should be allocated after 2013. In this context, a new independent report commissioned by the EU Commissioner for the Budget, the Lithuanian Grybauskaité, suggested last week that, of all the EU policies at the moment, the CAP is the one that adds the least European-scale added value – and could just as easily be financed from national or even regional budgets.

In logistical terms, Ministers will start their deliberations in the Council on Wednesday when the (French) Presidency tables a compromise paper seeking to adjust the original Commission proposals to meet Member State concerns. It seems as if Ministers will then simply stay in the building until there’s a deal! We’re organising a sweepstake among the journalists about when the final press conference will start – and the hot money at present is on about 6am on Thursday morning! My Irish colleague won the sweepstake on the 2003 Fischler reforms, but only because she gave the latest time of those that participated. In practice her tip was still 2½ hours and 1 week earlier than the final agreement. This time, I can’t imagine that things will drag on beyond Thursday because the package is so relatively uncontroversial. However, with 27 Member States, the decision-making process has become so much more difficult – and more & more of the negotiations actually take place in the corridors, as the Presidency & Commission together try to address Member State objections individually, rather than risk a debate where one Minister says he rejects the package – thereby encouraging others to dig in and also block a deal in the hopes of getting a few extra bonbons at the end.

What is interesting is that while these negotiations happen in the corridors, the only people that know what is going on are the Presidency & the Commission. All other delegations are left in the dark, just hanging around until it’s their chance to make their case. I remember in the wine reform last December, I had a number of phone calls from Member State officials asking if we journalists had any idea what was going on! (Don’t tell anyone, but I think in some cases we had had more feedback than some of the Member States.)

In practice, the compromise paper has probably been ready for several days (as it has to be translated into all 23 Community languages) but it is being held back until the European Parliament has voted through its opinion on the proposals (Wed 12 noon). Although the Council can fully ignore whatever MEPs recommend, it is all part of the political game to make MEPs feel happy. Having said that, this is probably the last ever CAP reform which can ignore the EP opinion. Assuming the Lisbon Treaty is finally agreed (in whatever shape or form) in the next couple of years, the next reform (in 2011/12) will have to be finalised under a system of co-decision with the European Parliament, i.e. MEPs will have a mandatory role in the decision-making process.

Anyway, coming back to the content of the final deal – it seems that the preparatory work has more or less cleared up most of the proposals. There is general agreement, for example, that compulsory set-aside and the so-called energy crop premium (45 € per hectare) should be abolished, and that the so-called SAPS scheme should be extended until 2013 for the New Member States. And for decoupling, there seems to be an agreement that all the small sectors (e.g. durum wheat, potato starch, flax & hemp) can have a further 3 year transition before payment finally become fully decoupled. Nevertheless, there remain maybe 5 key elements around which the negotiations will centre, which can be summarised as follows:
[See “What is the CAP Health Check?” for a summary of the original proposals from May.]

Compulsory modulation, i.e. shifting more funds from direct aids (i.e. the Single Farm Payment under the so-called First pillar of the CAP) to co-funded Rural Development schemes (known as the Second Pillar) where the emphasis will be on “New Challenges” of Climate Change, Renewable Energy, maintaining Biodiversity and Water Management. A compulsory shift of 5% already applies (for amounts above €5000), and the question is by how much this will increase. The Commission wants a 2% increase every year from 2010, i.e. to 13% by 2013. The outcome is likely to be lower – maybe to 9% or 10%, but above all rising every year.

Progressive modulation
, i.e. applying a higher rate of modulation to farms that receive more than €100 000 a year in Single Farm Payment. Again the proposed rates of +3%, 6% & 9% for amounts above €100 000, €200 000 & €300 000 will probably be reduced, but the principle will be introduced (so that it can be tightened next time).

Spending modulated funds under Rural Development. With all funding from modulation staying within the original Member State – thereby making it more politically acceptable – the question here is what these “new” funds can be spent on, and what level of co-funding will need to apply. The list of New Challenges seems likely to be extended to include accompanying measures for the milk sector (the main German request), and the Commission will clearly have to dilute its proposed 50% rate of co-funding (or 25% in poorer regions) in the light of the recent financial crisis.

Dairy quotas, i.e. the proposed 5 x 1% quota increase proposed in order to prepare a “soft landing” for the abolition of milk quotas in 2015. With Member States split between those wanting more, those wanting less, and those backing the Commission approach, it seems likely that the original idea will be more or less retained – with some form of rule-bending which will allow a larger or earlier increase in practice for those countries where new market opportunities are apparent (notably Italy, but possible also Poland, Lithuania, Ireland & the Netherlands). For the less liberal Ministers (e.g. Germany, Austria & Portugal), a market review in 2011 will probably give some Ministers a sufficient get-out clause, as well as whatever Milk Fund may be agreed under Rural Development.

Article 68. Another instrument for Member State flexibility on subsidies foreseen – this time within the First Pillar – is the concept defined under Article 68 which allows Member States (or regions) to shave off up to 10% of the Single Farm Payment and use that money on a menu of alternative options – above all to address the potential negative impact of decoupling (though supporting vulnerable zones) or price volatility (though part funding insurance premiums). While all agree on the 10% limit, the main issue of disagreement is the extent to which these funds might be used for potentially trade-distorting measures, i.e. non-Green Box support in WTO terms. Here, the Commission’s proposed 2.5% limit will probably be raised to something just over 3%, but clearly less than 5%.

Market tools. Finally, on the traditional EU toolbox for managing the market, the Commission is looking to remove or dilute various instruments which are considered less necessary in a market-oriented CAP, such as the traditional system of public intervention, where the idea is to limit the system simply to soft wheat, without the automatic purchase of stocks. My feeling is that the automatic purchase of volumes offered will get a stay of execution – and maybe barley intervention, too – with a commitment to re-examine this in the next reform.

Anyway, there are the key issues. Other subjects such as cross compliance and simplification, and the poor allocation of funds to the New Member States also need to be addressed, whereas other wish lists for Italian tobacco growers and Polish soft fruit producers, for example, will be more difficult to include directly in a final agreement.

Past experience suggests that we will probably get more or less unanimity on the package – with each Minister obtaining concessions of some sort which enables him or her to emerge from the talks explaining how the outcome has been a great victory, etc, etc.

By Roger Waite

"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

“Analysis From Brussels” –By Roger Waite – Doha Talks Fail – First Thoughts on the Implications, From a European Perspective

Doha Talks Fail – First Thoughts on the Implications, From a European Perspective

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.

Well the Doha talks have finally collapsed – and negotiations will presumably only restart in 2010, when all the leading players have exited the stage. The current mandates for WTO Director-General Pascal Lamy and EU Commissioners Peter Mandelson (Trade) and Mariann Fischer Boel (Agriculture) expire in 2009, and elections in the USA (2008), India (2009) and Brazil (2010) suggest that respective head negotiators Susan Schwab, Kamal Nath and Celso Amorim will no longer be at the table in 2010. But what does it mean? In the short-term, surely the surge in food prices last year – as the growth in demand far outstripped the growth in supply – will not be reversed this year, and so the need for cheap food will outstrip the political urge for protectionism in the current difficult economic climate. But what will it mean in the more medium term? I thought this was a good moment to air a few thoughts.

Ever since the Hong Kong WTO Ministerial, I have been revising down my estimate of the chances of a Doha deal before President George W. Bush leaves office. I had never actually got to single digits, but before Lamy called the Mini-Ministerial in Geneva, I was down to about a 17% chance of success. My estimates were based on feedback from a range of good professional contacts, ranging from a friend in the Irish Farmers Association who has regularly told me that the figure was down to zero (if not lower), to the greatest optimists who even conceded that the prospects of a deal were lower than 40-60.

In this context, it is all the more remarkable that the talks in Geneva over the past 10 days came so close to reaching agreement – and all the more bitter that they collapsed with the Summit more or less in site. A remarkably sanguine Pascal Lamy told the post-collapse press conference that negotiators had got to point number 23 on the “to do” list of 25 issues. (Curiously, he spoke of 18 out of 20 when giving a similar comment in French!) When the dust settles in the autumn, I would not mind betting that only a handful of these issues will have been definitively “captured” – but there is no doubt that whenever the political input resumes, the prospects of success will be substantially higher than 17%.

So, what does the suspension of talks mean for the EU – particularly within the context of the Health Check? I would argue that it makes very little difference altogether – after all, most Member States were gearing up for a failure anyway. In concrete terms, it may be that the Commission will be willing to accept a longer transition for decoupling various direct payments – but there is no doubt that Mariann Fischer Boel will not accept any transition beyond 2013. The key point to recall is that the main reason for reforming the Common Agriculture Policy is domestic budgetary pressure (all the more so in times of possible recession), and not the WTO. Within this context, export refunds will almost certainly be gone by 2013 – without a Doha deal. The one area where it might make a difference is Market Access, where the postponement of a deal may enable various forms of production to flourish in the New Member States (poultry, fruit & vegetables) as structures and competitiveness are improved before being exposed to more serious competition from outside. The situation only provides a stay of execution for the European beef industry, which will never be as competitive as Brazil and others at the lower end of the market.

So, what does the suspension of talks mean for the US? Again the direct impact is minimal. To my mind, it was highly significant that the US administration was willing this month to accept a limit on Overall Trade Distorting Support of US$ 14.4 billion. It shows that it has done its market forecasts and is sufficiently confident that market prices in the years ahead will be sufficiently higher than 2006 levels to mean that this is not a major concession. However, the threat of a sudden explosion in domestic support remains because of the new Farm Bill. As a result, I wouldn’t be surprised if the new US administration finds a different reason to undertake serious farm policy reform – the same one that we see here in the EU, domestic budgetary pressure. In domestic political terms, it will be more difficult because under a Doha deal the strong US farm lobby could at least have been bought off with the prospect of new market access to non-US markets.

All told, though, the figures that were on the table in Geneva this week make one thing clear – how far the world of farm subsidies has come in the 12 years since the Uruguay Round was fully implemented. The EU has reduced its trade distorting support by 80% and the US potentially by even more, depending on the year. A Doha deal would have locked in these changes. The absence of a deal does not mean that the general trend will be reversed, however. In fact, the new world order of agricultural markets and domestic political pressure on public spending suggests that there is no immediate danger of an increase in trade-distorting support. As for markets, discussions in Geneva highlighted that many countries’ applied tariff rates for many products are well within their “bound” rates from the Uruguay Round – and as long as the growth in agricultural production continues to be slower than the growth in demand, then the prospect of a rise in import duties also remains less likely. But don’t ask me to put a figure on it.

By Roger Waite

“Analysis From Brussels” –By Roger Waite – What is the CAP Health Check?

Editor’s Note: On Tuesday, the European Commission published its proposals for the so-called Health Check of the Common Agricultural Policy (CAP).

Following is an outline of the main issues associated with the Health Check, which was prepared by Roger Waite. Roger 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.

In addition, supplemental news coverage regarding yesterday’s Health Check developments has been posted at this FarmPolicy.com page; and an update from today regarding U.S. farm policy is available here: “Farm Bill: Average Crop Revenue Election (ACRE) Could Be Expensive; Commodity Prices- Hearings on Volatility; Food Prices- Biofuels.”

What is the CAP Health Check?

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.

What is the Health Check?
In the June 2003 and April 2004 CAP reforms, it was agreed that the various policy changes agreed for CAP direct payments would have to be reviewed 2 years after the last [Old] EU Member State had implemented its model of the Single Farm Payment. The EU budget for agriculture has been fixed until 2013, but it was still felt necessary to review the policy for the period until then. Nine Member States introduced their version of the Single Farm Payment in 2005, but the remaining six waited until 2006. Hence the need for the review to happen this year.

Why “Health Check”?
The 2003 “Fischler” reforms were originally billed as the “Mid-Term Review” and intended as a basic review of the 1999 policy reforms. However, with the impending accession of 10-12 New Member States – and an early political agreement by EU leaders on the levels of CAP spending for 2007-2013 – it turned out to be a much more radical reform. The forthcoming exercise is basically the same thing that was originally intended for 2003. However, because of the radical connotation of the phrase “Mid-Term Review”, the Commission decided that there had to be a different name for this exercise and came up with “Health Check” in order to underline that it was a necessary examination, but not a further reform (in order to reassure farmers).

Process & Timing
The decision-making process in the EU requires the European Commission to come forward with legislative proposals for changing existing CAP rules. These are published today. The proposals then pass to the Council and the European Parliament, and the political intention is that everything can be agreed in November, with almost all sides absolutely adamant that the ink will be dry before the end of the year. The changes would then start to apply from 2009/10. Because the EU budget has only been agreed until 2013, the policy cannot make any [budgetary] commitments for what will happen thereafter.

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“Analysis From Brussels” –By Roger Waite – CAP Backgrounder

In conjunction with expanding FarmPolicy.com viewership, FarmPolicy will also be broadening the amount of information available to readers.

In addition to the daily news summaries, starting today, FarmPolicy.com will also be featuring a new farm policy analysis section, entitled, “Analysis from Brussels”- by Roger Waite.

On Saturday, March 1, 2008, The German Marshall Fund of the United States (GMF) announced that, Roger Waite, editor of the AGRA FACTS and AGRA FOCUS newsletters and long-time agriculture policy correspondent in Brussels, has joined GMF as a Journalism Fellow. Roger will provide insight and comment on issues relating to the EU’s Common Agriculture Policy, in particular in relation to the forthcoming “Health Check”.

Roger’s analysis at FarmPolicy.com will be posted on a semi-regular basis and will provide readers with additional information that will assist them in assessing and gauging the political dynamics of the farm policy debate in Brussels – much as Dan Morgan does on US policy issues from Washington.

Roger’s updates will be available exclusively at FarmPolicy.com (homepage, Email and RSS feed)

***

The first installment of Roger’s “Analysis from Brussels” is available below.

CAP Backgrounder

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

The evolution of the C.A.P.
Europe’s Common Agricultural Policy (CAP) has changed considerably in recent years. Goodness knows this was overdue. But successive policy changes in 1992 (“Mac Sharry”), 1999 (“Agenda 2000”), and 2003/4 (“Mid-Term Review” also known as the “Fischler” reforms) have turned the policy around from an expensive, severely trade-distorting , inefficient system based on price support and surpluses dumped on the world market to a much more market-oriented and flexible system, which is considerably less trade-distorting. It remains expensive (in terms of the overall EU budget), but considerably less so than in the past, and a growing share of the funding is being dedicated to policy options which are perceived to be more acceptable to the taxpayer.

Why has it changed so much?
First of all the previous system was unsustainable. Set up in the 1950s and 1960s when Europe was still short of food, the policy worked brilliantly well in encouraging farmers to produce more and more. The only problem was that the politicians of the 1970s and 1980s did not have the foresight or political pressure to adjust the system when the surpluses started to grow. Instead, production control concepts were introduced such as set-aside and dairy quotas – and budgetary stabilisers in order to keep spending in check. Nevertheless, farmers’ production decisions continued to be dominated by what subsidies (direct or indirect) were available, rather than what the market wanted – in the knowledge that the EU would pick up the tab for any surplus production (through public buying up of surpluses and/or using export refunds).

Mac Sharry reform – the first big step

It was only when the GATT Uruguay Round (WTO) talks failed in Brussels in December 1990 that European politicians accepted that they could no longer put off the inevitable reforms. Irishman Ray MacSharry – the then Farm Commissioner – came forward with proposals, based on the US model, to reduce the support price but introduce direct payments for farmers as “compensation” for their potential loss in revenue. While arable payments were based on historical reference yields, the livestock payments were per animal. In terms of reform, this was the most important first step in changing the direction of the policy, and one could argue that the 1999 and 2003/4 reforms were mere extensions of this. The reform also set up “accompanying measures”, notably for agri-environment and early retirement schemes, which were the forerunners to today’s Rural Development policy.

The other major influence on the process of CAP reform was the political changes in Central and Eastern Europe which meant that 10 New Member States including countries such as Poland, Hungary and the Czech Republic joined the EU in May 2004, with Bulgaria and Romania following in 2007. The need to integrate these poorer countries meant that the CAP had to change further as the EU could simply not afford to subsidise these countries’ agriculture in the same way. Indeed, the EU could not afford for farmers in these New Member States to get into the bad habit of western European farmers of allowing subsidies to influence significantly their production decisions.

The Mid-Term Review – also known as the Fischler reforms
With EU Enlargement imminent, the 2003/4 reforms were the last chance to make certain key changes. It was agreed to “decouple” subsidies from production as much as possible – also in order to make EU subsidies more “Green Box” in WTO negotiating terms. But in order to reach agreement among 15 Member States (as it was then), it was agreed to continue some Member States to retain “partial coupling” for some products. For example, France and Spain have kept 25% “coupled” payments for arable crops. The political reason for retaining “coupled” payments is quite simply the fear that if payments are fully decoupled, farmers in marginal areas will reduce production to the absolute minimum. (In order to receive direct aid, a farmer is not obliged to produce, but is required to keep the land in “Good Agricultural & Environmental Condition”.)

One other change in 2003 was the introduction of “cross-compliance”, seen by Fischler as a new way of justifying CAP direct support. After all, was it acceptable to the European taxpayers in 2005 and beyond that farmers were still being “compensated” for cuts in the support price in 1993? The EU has a range of environmental, animal welfare and other rules that farmers were already obliged to meet, such as the Nitrates Directive. The concept of cross-compliance links the payment of direct aid to 18 existing pieces of legislation, giving Member States the right to reduce a farmer’s payment if he is found to be failing to meet these rules.

Single Farm Payment
The 2003 reform also established what is in effect a “national envelope” of farm subsidies for each Member State on the basis of all past direct payment subsidies it received, with Member States being given much more flexibility on how to allocate this predominantly decoupled aid under this new “Single Farm Payment”. National governments could decide whether to implement this Single Farm Payment on the basis of an individual farmers’ historic subsidy receipts or to move towards a simpler, flat-rate payment per hectare in each region, i.e. “historic” or “regional” model. Or a fixed combination of the two, i.e. a “static hybrid” model. Or allow a progressive combination which moves slowly from a historic base towards a hectarage payment, i.e. a “dynamic hybrid”.

By allowing this flexibility, Farm Commissioner Franz Fischler achieved a much greater reform than was expected. But, this flexibility over the amount of “coupled” support and the type of Single Farm Payment model, means that there is virtually no “common” element to the Single Farm Payment received in any 2 Member States. For the record, there are 19 different SFP “models” applied in the 15 “Old” Member States – because Belgium is split into 2 regions (Flanders & Wallonia), and the UK is split into 4 (England, Scotland, Wales and Northern Ireland).

SAPS and phasing in for the New Member States

To confuse matters more, the situation in the New Member States is different. In their terms of EU accession, it was agreed how much direct aid they would have received based on historic production – and respective national envelopes were calculated. Because they lacked a proper historical reference, however, these countries are not allowed to apply a “historic” model Single Farm Payment, i.e. only a regional model per hectare. In fact, in an attempt to reduce the bureaucracy they face – and to set a signal for the “Old” Member States – the Commission agreed that the NMS could apply the Single Area Payments Scheme (SAPS), whereby the NMS merely pays a flat-rate per hectare for all farmland, calculated by dividing the national envelope by the eligible area. Under this system, rules about cross-compliance and compulsory set-aside are not applicable.

The big political and budgetary decision about how to treat the New Member States was resolved by phasing in the system of direct aids starting at 25% of EU-15 levels (i.e. just the full national envelope), rising to 30% in Year 2, then 35%, 40%, 50, 60, 70, 80 90 and reaching 100% after 10 years (i.e. 2013 for most of the NMS and 2016 for Bulgaria & Romania). During this period, the concept of compulsory modulation [see below] does not apply to the New Member States.

Article 69 – targeted payments
One further option open to Member States – defined under Article 69 of the EU Regulation on the Single Farm Payment (1782/03) – is the possibility for national or regional governments to filter off up to 10% of the aid in a particular sector and use it for targeted “environmental or quality production” support in that same sector . For example, the Scottish government decided to siphon off 10% of the amounts previously dedicated to beef production to fund an additional “coupled” payment for beef producers in the Highlands to ensure that the decoupling of payment does not see a massive reduction in cattle numbers. This is done in the form of a “coupled” payment per beef bred calf (with a lower rate payable from the 11th calf onward).

The growing importance of Rural Development
All of this “traditional” direct aid is funded from what is known as the 1st Pillar of the CAP (which also covers export refunds & intervention spending, i.e. “Market” spending). Both “Agenda 2000” and “Fischler” reforms established and expanded a “2nd Pillar” for the CAP of measures relating to Rural Development. In broad terms this are now divided into 3 “Axes” – i) modernisation & improving competitiveness, ii) land management & the environment, and iii) diversification in rural areas. Each Member State is granted an envelope of funding and Member States have come forward with national or regional programmes for the 2007-2013 period on how to spend this money. One key political point is that these measures are co-funded, i.e. 50%-75% comes from the EU budget, with the remainder coming from the national/regional government.

In overall budgetary terms, many Finance Ministers seem to feel that there is greater justification for committing EU funds to RD measures than to direct payments – arguing that this is paying for the “public good” that farmers provide. (Others argue that the cross compliance link give the Single Farm Payment a link to “public good”.) Rather than suddenly cutting the Single Farm Payment to increase RD funding, however, the 2003 Fischler reform introduced the concept of “compulsory modulation” whereby all farmers had their Single Farm Payment amounts above €5000 reduced by 3%, then 4% and now 5% – with the money shifted across to the Rural Development budget envelope. (At least 80% of the funding transferred stays within the original Member State.) For the record, 75% of EU-15 recipients of the Single Farm Payment get less than €5000 a year – and are therefore unaffected by this measure.

By Roger Waite