Brussels, 03/10/2007 (Agence Europe) - Over the past 15 years, the Common Agricultural Policy (CAP) has changed considerably but can still be improved to make it more justifiable and to respond better to pressures from the challenges of a changing world (climate change, water management and growth in biofuels market). One must make the most of the “review clauses” foreseen in the 2003 reform to allow the “possibility of further adjustments in line with market and other developments”. This is set out in the provisional version (currently in interservice consultation) of the communication that the European Commission is to adopt on 20 November on the CAP “health check”. In the light of the reactions of European communication ministers, the Commission will present legislative proposals for CAP adjustment towards May 2008 with a view to political agreement of the Agriculture Council under French EU presidency (July - December 2008).
The services under Mariann Fischer Boel, Agriculture Commissioner, say the aim is to address three main questions: How to make the Single Payment Scheme more effective, efficient and simple; how to render market support instruments, originally conceived for a Community of six member states, still relevant in an increasingly globalised world and an EU of 27 members; and how to master new challenges, from climate change to growth in biofuels and water management, by adapting to the new risks and opportunities.
Themes of discussion and the main Commission suggestions for this CAP health check are:
Simplifying the Single Payment Scheme
Breaking with the past. The Commission recalls that the new member states can use the Single Area Payment Scheme (SAPS) until 2010, whereas the EU15 member states had to implement the Single Payment Scheme (SPS decoupled payment) by 2007. They could apply a historic SPS model, a regional model or a mix of the two approaches. According to the Commission, the SPS (whether in its historic approach or regional approach) remains dependent upon past production levels and, as time goes by “it will become more difficult to justify differences in this support, especially in the historic model”. It therefore seems appropriate to allow member states to adjust their chosen model towards a flatter rate during the period from 2009-2013.
Move towards full decoupling. During the 2003 reform, member states opted for the SPS and gained the right to some aid coupled to production. According to Ms Fischer Boel, aid partially “coupled” to production is less and less relevant and proves to be complex and costly at the administrative level. The Commission suggests doing away with the possibility of coupling 25% of payments for arable crops, but acknowledges that some aid (linked to volumes produced) may be relevant in “certain regions where the level of production is small overall, but important economically or environmentally”. Such is the case, for example, for the suckler cow premium in regions where beef production is extensive, the Commission explains. The suckler cow premium (fully coupled with production) is intended to orient the production of beef and promote the production of quality meat. The Commission therefore suggests that, during the health check, there should be a “case-by-case analysis to identify the potential risks from a move into full decoupling and the possible alternatives at regional level”.
Upper and lower limits in support levels. The Commission wants to sound out member states on the question of setting up an upper and lower limit for support to farmers. For the upper limit, the solution could be to gradually reduce payments to the most prosperous farmers. For example, farmers who make over €100,000 annually would have their subsidies reduced by 10%. Aid would be reduced by 25% when revenue exceeds €200,000 and by 45% for over €300,000 in annual payments. Savings thus generated would remain in the member states where they were made and could be used for financing aid to meet the new challenges.
For small aid volumes, a minimum payment level could be introduced or the minimum surface area required to be eligible for aid could be reviewed slightly upward.
Outlying the scope of cross-compliance. The Commission has already started the simplification process with regard to rules on cross-compliance (granting of subsidies on condition that a whole series of requirements are met on the environment, product quality and animal welfare). The Commission is willing to go further, mainly on the subject of regulatory requirements with regard to management and good agricultural and environmental conditions.
Grasping new opportunities and improving market orientation
“Old CAP” instruments. The Commission hopes to begin reflection on the future of the remaining “old CAP” instruments, such as quotas, public intervention, price support and export refunds. The medium-term outlook for markets is favourable, especially in cereals and the dairy sector. The Commission therefore plans to analyse the existing supply management tools, to examine whether they serve any valid purpose or whether they simply slow down the ability of EU agriculture to respond to market signals. Furthermore, the Commission intends to monitor closely the present market situation (high prices and shortage of raw materials). It is a question of analysing whether this is a reflection of a short-term response to poor 2006-07 cereal harvests or “indicative of longer-term trends which could put pressure on agricultural markets and the supply situation”.
Single cereal intervention. The Commission recalls the EU decision to gradually phase out maize intervention and considers that “extending the model of maize intervention reform to other feed grains seems the best solution in the present context”. According to the draft communication, “the maintenance of intervention for a single cereal (wheat) could therefore provide an appropriate safety-net support, whilst allowing other cereals to find their natural price level”.
Abolishing compulsory set aside. The role of set aside has “become much less pertinent as a result of market developments and the introduction of the SPS”, the Commission notes. The foreseeable demand and supply situation for cereals, including the demand linked to fulfilment of the biofuel target set by the EU (10% transport fuel by 2020) “argues for mobilising land which is presently kept out of production through the compulsory set aside scheme”, the draft communication reads. The Commission nonetheless admits that there is a need to safeguard the environmental advantages of the set aside scheme. Abolition of set aside could therefore be accompanied by strengthened rural development measures in favour of land, water and ecosystem management. The Commission cites several possible measures such as the maintenance of permanent pastures, the protection of riparian strips and measures linked to climate change mitigation like carbon sequestration or biodiversity corridors.
Preparing a “soft landing” for dairy quota expiry. At the end of the year, the Commission will present a report on developments of the dairy markets and products. It takes the view, however that “the reasons for which the EU dairy quotas were introduced are no longer valid”. As a result, the health check should, according to the Commission draft, propose a “gradual quota increase” that could “best prepare the ground for a 'soft landing' of the sector by the time quotas expire” on 31 March 2015. The Commission acknowledges that the end of quotas could be very painful for some regions, especially mountainous regions. Specific support measures for farmers in such regions could therefore be set in place.
Responding to new challenges
More funding for rural development. Given that the CAP budget is fixed until 2013, the strengthening of rural development funding can only be achieved by stepping up the effort for compulsory aid modulation. Modulation consists of reducing direct and market aid and transferring these amounts to the rural development funding programme. The Commission suggests that the modulation rate should be increased by 2% annually from 2010 to 2013, which would rise from 5% today to 13% in 2013.
Risk and crisis management. According to the Commission, the health check must be used to bring up the subject of risk and crisis management in the agricultural sector. The first Community measures of this kind were adopted during reform of the fruit and vegetable sector. The Commission does not however feel a Community is appropriate and prefers that member states finance these measures by using funding available to them in rural development programmes. Member states are invited to reflect upon the following options: - extend the use of part of modulation (direct aid) savings to allow risk management measures in the framework of RD policy, provided that they meet “green box” criteria (aid which does not distort competition on the global market); - and examine on a case-by-case (sector by sector) basis the need for additional measures in the context of future adjustments in market mechanisms and carry out, at a later stage, a more general examination of risk management for the period after 2013.
Energy and climate. The health check should, according to the draft communication, explore the following ideas: using rural development measures as an incentive to combat climate change, better manage water reserves and provide environmental service in the field of bioenergy; - cross-compliance of aid could contribute to reaching objectives on climate change and water management; - rural development measures could encourage farmers to develop second general biofuels; - and the current support scheme for energy crops must be reviewed in the light of new incentives for biomass production (binding targets and high prices). (lc)