Brussels, 07/10/2010 (Agence Europe) - Maintenance of instruments and direct payments to guarantee food production, introduction of compulsory environmental aid for farmers and of an income stabilising instrument in times of crisis, retention of main market measures and improvement of the food supply chain: these are the main proposals of the communication on the common agricultural policy (CAP) towards 2020, which the European Commission is due to adopt on 17 November.
With regard to CAP funding, the sinews of war, all that is known is that Community spending on agriculture, which has been falling slowly for a number of years, will amount to around 33% of the total EU budget by the end of 2013, when the current financial framework comes to an end. Some sources suggest that the Commission, which is due to adopt its document on the re-evaluation of the mid-term review of the EU budget on 19 October, might be considering reserving some 30% of the EU budget to agricultural spending towards the and of the next financial framework (2014-2020). This would be more than ample to meet the ambitious objectives the EU has for agriculture. But nothing has been decided, with discussion still continuing in the Commission (European commissioners discussed this issue at a seminar on Thursday 7 October) and, ultimately, it will be the EU member states that decide when they agree the package on the next financial perspectives. Commission legislative proposals on the reform of the CAP are expected to be presented in July 2011.
The aim of the Commission communication on the future of the CAP, a draft of which has been obtained by EUROPE, is to get the message across that the European Union must give its farmers the prospect of making a decent living. For this, a strong first pillar of the CAP (direct aid and market spending) is needed in order to guarantee food production, promote sustainable use of natural resources and ensure balanced economic development of the land (to avoid, for example, intensive production and abandonment of land). Furthermore, the agricultural sector has an important role to play in tackling climate change, for instance, by reducing its greenhouse gas emissions, improving its carbon dioxide storage capacity and further developing renewable sources of energy and agro-materials. Farmers, then, have to be encouraged to do more, and they have to be rewarded for what they are already doing for the environment, such as maintaining the countryside and biodiversity, and reducing the impact of climate change.
The communication will set out three options for CAP reform - no change; more balanced, better targeted and more sustainable support; and abolition of market and income support - before finally retaining the second which it judges preferable to the others.
The Commission will propose maintaining the current twin-pillar structure of the CAP, with the first pillar relating to direct aid and market measures, and the second concerned with rural development programmes. The first pillar will contain aid for farmers that is paid annually, and the second will comprise multiannual schemes which support Community objectives while allowing member states sufficient flexibility to meet the needs of their own specific situation. The Commission hopes to bring greater clarity to the two pillars, with some aid passing from one to the other and each pillar complementing the other.
Redistribution and better targeting of direct payments
The Commission will rule out single flat-rate payments, but agrees that there is a need for a fairer distribution of direct payments. This may seem a little complicated, but the Commission is looking at an aid system “that limits the gains and losses of member states by guaranteeing that farmers in all member states receive on average a minimum share of the EU-wide average level of direct payments”. The Commission sets out six points for this aid system, some already proposed by the European Parliament in its opinion on the CAP post-2013 (see EUROPE 10177).
1) Basic income support to maintain production. This would be a decoupled direct payment (that is, not linked to scale of production) providing a uniform level of compulsory support for all farmers in a member state or region who comply with recognised agricultural practices and meet the environmental cross-compliance criteria. There is likely to be a ceiling on direct aid for large farms so that distribution of payments among farmers can be improved, with account being taken of the jobs they provide in rural areas.
2) Compulsory environmental compensatory aid. This, the Commission says, is for the “enhancement of environmental performance of the CAP” through a compulsory “greening” component of direct payments. This environmental aid will be applicable across the whole of the EU and could take various forms: permanent pasture, crop rotation (for example, to bring in pulses), ecological set-aside, grassy strips (a farming/landscaping device used along water courses or planted across slopes, for example).
3) Aid for less favoured areas. This aid would be transferred from the second to the first pillar and would provide additional income support for farmers in such regions in the form of (area-based) annual aid. It would be voluntary and co-financed (part from the Community with the remainder coming from the member states). The current aid for less favoured areas under the second pillar would be ended.
4) Still coupled aid (dependent on amount of production) to take account of specific problems faced in certain regions or certain kinds of farming. This aid would be based on fixed areas, yield or number of heads. The Commission's idea is to use this aid in the dairy and sheep sectors.
5) Aid for small-scale farmers. The threat of job losses in many rural areas could be lessened by offering small farmers a minimum level of direct payment.
6) Simplification of cross-compliance rules (cross-compliance consists of granting aid on condition that certain criteria on product quality, the environment or animal welfare are met). The Commission will suggest giving farmers and administrations a set of simpler, more easily understood rules without, however, watering down the concept of cross-compliance.
Streamlining and simplifying market measures
The public consultation and the conference held in July revealed broad consensus for a market oriented CAP. They also showed, however, that many want to retain market management tools. The 2009 dairy sector crisis “highlighted the important role that existing mechanisms play in supporting the market in times of crisis,” the Commission will point out, seeking to streamline and simplify the instruments currently in place and bring in new elements to improve the operation of the food chain.
Among the potential adaptations to be proposed by the Commission are: extension of the intervention period, the use of “disturbance clauses”, and the extension of private storage to other products, as well as other revisions “to enhance efficiency and improve controls”.
Legislative proposals for the dairy sector will be brought forward by the Commission in December. In the sugar and isoglucose sectors, where quotas are due to expire in 2014-2015, the Commission is considering several options, including a non-disruptive end to quotas at a date to be determined.
The Commission will also say that there has to be an improvement in the functioning of the food supply chain. “Long-term prospects for agriculture will not improve if farmers cannot reverse the steadily decreasing trend in their share of the value added generated by the food supply chain,” the Commission will say. According to the draft communication, the most delicate issues in this context are: the current imbalance in bargaining power along the chain, contractual relations, the need for restructuring and consolidation of the farming sector, transparency and the functioning of the agricultural commodity derivatives market.
Rural Development: payment for services to eco-systems
The big innovation is that the Commission will propose setting up, among second pillar measures, a voluntary income stabilisation tool. This would be a mechanism (insurance schemes and mutual funds) to address the extreme volatility of prices on the markets. The Commission describes the mechanism in this way: “a risk management toolkit to deal more effectively with income uncertainties and market volatility that hamper the agricultural sector's possibility to invest in staying competitive. The toolkit would be made available to member states to address both production and income risks, ranging from a new WTO green box compatible income stabilisation tool, to strengthened support to insurance instruments and mutual funds”.
Still on rural development, the Commission will propose keeping the measures that have proved their effectiveness and putting the focus more on programmes relating to: innovation, competitiveness, modernisation, and climate change. The Commission intends, too, to put in place a raft of measures to meet the needs of specific groups or areas (for example, small farmers or mountain areas).
The Commission is planning to review and strengthen aid mechanisms for young farmers (aid for setting up, access to certain kinds of credit, etc). It also accepts that there is, perhaps, a need to redistribute second pillar funding among member states, on the basis of “objective criteria”.
The Commission is also planning (in a package of proposals to be presented towards the end of December) to strengthen and simplify quality policy (including for organic farming) and promotion policy, to enhance the competitiveness of the sector. (L.C./transl.rt)