Monday, October 09, 2006

Health check for CAP

Farm commissioner Mariann Fischer Boel has said that what the CAP will face in 2008 is a health check, consciously avoiding the term 'mid-term review' used by her predecessor Franz Fischler. Her comments follow the recent informal meeting of farm ministers in Oulu, Finland.

One likely subject to arise will be decoupling with the ten pen cent of direct aid payments not paid in decoupled form likely to be targeted. Whether the sigle farm payment should be paid on an historical or flat-rate regional basis will also be examined. At present no EU-15 members are operating the same system and some have variations within their national borders.

The compulsory modulation rate may well rise above 5 per cent. The Commissioner is also keen on capping the amount that any individual farm would receive at €300,000. Such a move would be contentious with Britain and Germany who would claim it penalised efficiency and it is not clear that there is a legally watertight definition of a farm business. However, siphoning off money from large scale farmers and transferring them to the second pillar would create a pot of over €1 billion a year.

The future of intervention payments will also be up for examination with the possibility of it eventually being based by a private storage programme. The Commission is also talking about the abolition of dairy quotas by 2015.

Thus by the middle of the next decade be could have a CAP with very different objectives and policy instruments. It should be less market distorting, and hence WTO compatible, but it would probably leave as much money being spent on agricultural and rural policy. Reformers would thus only get partial satisfaction. They have objected to the objectives and instruments of the old style CAP but also to the opportunity cost represented by the €48 billion a year spent on it.

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