Brussels, 18/11/2010 (Agence Europe) - Presenting the communication adopted on Thursday 18 November by the European Commission on the future of common agricultural policy (CAP), Dacian Cioloº, explained that the Commission is proposing an “evolution” and not a “revolution” for the post-2013 period, the date when the current EU financial framework comes to an end. As our publication previously anticipated (EUROPE 10231), this text entitled “The Common Agricultural Policy (CAP) towards 2020 - Meeting the food, natural resources and territorial challenges of the future” advocates making direct aid “more dynamic, competitive, and effective” (particularly with ceilings on this aid for the biggest farms). The communication also contains a compulsory ecological component in direct payments, the maintaining of certain market management measures and the setting up of risk management tools (linked to difficulties relating to income and price volatility).
Addressing journalists, Dacian Cioloº, the European commissioner for agriculture, explained that “the budgetary question will also be discussed when the time is right”. He said that at this stage it is important to “provide orientations for this policy”. Next spring, the Commission will issue proposals on the next financial framework (for the period beginning in 2014), explained the commissioner. He considered that in the recent communication on budgetary re-examination, “there are quite clear elements on the role and a place of the CAP in Community policies for the future”.
Market intervention measures are one of the elements, which ensure a certain stability of income for farmers, admitted Cioloº. In his opinion, these measures are mainly aimed at “avoiding crisis situations that could be catastrophic to certain sectors and which can also be very expensive for the budget.”
The communication on “The CAP towards 2020” pursues three objectives, explained Cioloº: security of supply, with “quality and safe products”; the sustainable use of natural resources, with economic advantages in the long term; and maintaining the territorial balance and diversity of rural areas. These objectives are expected to be included in the two pillars of the common agricultural policy, which the Commission is seeking to maintain. The first contains direct aid and market spending and the second multiannual programmes and rural development.
In exchange for cross compliance criteria, farmers will receive (on condition of respecting certain criteria) the basic payment, with a possible supplement in zones that suffer from specific natural restrictions. Member states will also be able to benefit from additional environment payments, if they agree to respect at least three sustainable agricultural practices (crop rotation, ecological land set-aside etc), explained the commissioner.
Putting an end to a two-speed Europe. Support from the first pillar will also be simplified for small farms and the payment will be “limited for the biggest farms by taking into account, however, the question of jobs”, explained Cioloº. The basic payment will no longer be linked to historical references either. “The surface area of the farm, jobs and production conditions will be taken into account. Simulations are currently being undertaken”, explained the European commissioner, who does not want a two-speed Europe. In his opinion it is important to ensure fair distribution of direct aid between the different countries (the new countries receive less aid than the older ones) “but also between the different regions and the different categories of farms or different sectors”.
On the basis of the potentially eligible agricultural surface area, average direct payment at full rate reaches €271 per hectare in the EU and varies from between around €460 in Belgium and the Netherlands to €95 in Latvia. Its average level is €209 in the new member states and €295 in the old ones: €413 in Italy, €384 in Greece, €318 in Germany, €300 in France, €246 in Spain, €229 in the United Kingdom, €214 in Poland, €179 in Portugal, €145 and Lithuania, and €118 in Estonia. In other words, the average payment varies according to the country from 35% to 170% off the Community average.
Risk management in the second pillar. At the same time, the second pillar will continue to support agro-environmental measures and poorer regions suffering from specific natural restrictions, explained Cioloº. He also explained that it will provide “incentives for innovative investments” and promote the fight against climate change. Finally, it will also offer funding opportunities for tackling price volatility (insurance, mutual funds) and help towards taking measures in favour of local markets and shorter journeys to them.
In the context of market management, the European commissioner explained that “intervention as a safety net should be uniform and activated more rapidly in the event of crisis”. This will be added to other provisions to counter price volatility promoted in the second pillar.
The main elements in the Commission proposals
Direct payments. The communication outlines the importance of, “a redistribution, redesign and better targeting of the support” in order to increase value and the quality of spending. The distribution of direct payments should be reviewed and based on both economic (the purpose of direct payments is to guarantee basic income) and environmental criteria (support for the provision of public goods). The Commission has expressed reservations about the idea put forward by some of the new member states to pay a single flat rate.
Brief reminder: two direct support reference mechanisms currently exist. One for the older member states based on historic criteria, the other for member states that joined the EU as from 2004, which is based on a single per hectare payment. A new system adapted to the whole of the EU, which is fair and transparent, must be introduced, explains Cioloº.
The Commission is advocating a fair distribution of support, together with, however, a transition period aimed at avoiding any brutal rupture with the old system. The Commission explains that one of the possible solutions could consist of setting up “a 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 is planning to introduce six elements to underpin this aid system. Some of them were proposed by the European Parliament last July (EUROPE 10177):
1) Basic income aid to help maintain production. This involves a basic decoupled direct payment (without any link to product volume), which provides a uniform level of obligatory support to farmers in a member state (or region). The Commission retains the option of introducing an upper ceiling for direct payments received by large individual farms to improve the distribution of payments between farmers, but taking into account factors such as employment in rural zones.
2) Compulsory environmental compensation aid. In the future there will be “a mandatory greening component” in direct payments taking the form of environmental measures applicable throughout EU territory. Priority should be given to action addressing climate change and environment targets: - permanent pastures (which are considerable reservoirs of biodiversity); - green covers (sowing certain vegetables immediately after harvest helps improve the capacity for water retention and fights against soil erosion. This also helps produce what is called “intercrops”; - crop rotation (traditional method that respects the capacity of soil to regenerate itself). It provides the advantage of reducing the use of chemical products such as pesticides, herbicides and fertilisers); - ecological set-asides (environmental set-asides enrich the agricultural ecosystems by providing refuge for fauna and flora. In order for them to use their full potential, set-asides must be created with great care in order to protect the development of small bushes).
According to the Commission, it would also be appropriate to examine the possibility of including the requirements currently stipulated in the Natura 2000 areas and improving certain elements of good agricultural and environmental conditions (GAEC).
3) Aid to least favoured regions. This aid would not be transferred from the second pillar (rural development) to the first pillar (direct aid and market spending). However a supplementary payment could be brought within the first pillar. This would be another way of supporting farmers' income in these zones, in the form of annual aid (based on the surface area farmed). It would be voluntary and co-funded (partly financed by the Community and partly by EU member states). Existing support for least favoured regions granted in the second pillar would not therefore be abolished.
4) Aid still subject to cross compliance (depending on the quantities produced) to take into account specific problems encountered in certain regions where specific kinds of farming exist. This support would be based on surface area, yield and the number of heads of cattle. The Commission's idea is to use this aid in the milk and ovine sectors.
5) Aid to small farmers. The risks of job losses in many rural areas could be reduced by offering small farmers a minimum level of direct payment.
6) Simplification of cross compliance rules. The Commission wants “simplification of cross compliance rules by providing farmers and administrations with a simpler and more comprehensive set of rules without watering down the concept of cross compliance itself”. The introduction of the water framework directive into the scope of cross compliance will be “considered” once the directive has been implemented and the operational obligations for farmers have been defined.
These changes in the way direct payments are made are expected to be accompanied by an improved definition and better targeting of support to “active farmers” in an effort to respond to the criticism made by the European Court of Auditors.
Market measures. Although market measures represented 92% of the CAP spending in 1991, just 7% of the CAP budget was spent of them in 2009. The Commission is seeking to rationalise and simplify the tools currently in place and introduce new elements to ensure that the food chain works more effectively. Some of the possible adaptations include: the extension of the intervention period, the application of the so-called market disturbance clause and the extension of private storage for other products, “as well as other revisions intended to enhance and improve controls”. The Commission explains that these measures, particularly the intervention instruments, “should only be used as a safety net to be deployed in the event of price crises or market disturbance”.
Milk quotas will be withdrawn in 2015. Legislative proposals are expected to be presented soon, on the basis of recommendations from the high level group of experts on milk, “in view of facilitating long-term planning and subsequently ensuring the stability of the milk sector”. Several options for the future include, “phasing out quotas at a date yet to be defined” in which should be examined with a view to increasing efficiency and sector competitiveness.
The Commission considers that it is necessary, “to improve the way in which the food supply chain functions”. Some of the fundamental questions include: the current imbalance in the food chain, the level of competitiveness at each stage of the chain, contractual relations, the necessity of restructuring and consolidating the agricultural sector, transparency and the way in which the basic agricultural product derivatives market functions.
Rural development. It is more appropriate than ever for themes involving the environment, climate change and innovation to guide post-2013 policy. Investments should provide an example of stimulating economic and ecological performance. Attention focuses on the importance of direct sales and local markets, as well as the specific needs of young farmers and newcomers to farming. In order to obtain greater efficiency, it has been proposed that an approach would be more focused on results and targets that are possible to quantify.
All of the risk management tools should also be included in an effort to better manage the hazards affecting income and market volatility. Some of the instruments making up the tools available to member states include a new stabilisation tool for income, which is compatible with the WTO Green Box and provides greater support for insurance and mutual funds instruments, in an effort to help manage risk related to production and income.
Next stages. The Commission communication will be debated at the Council and the European Parliament. Taking into account the ongoing detailed impact studies that each of the options contain in the communication, the Commission will present legislative proposals around summer 2011. These will follow the co-decision procedure applied for the first time to CAP reform. The reformed CAP is due to enter into force in 2014. (L.C./transl.fl)