Experts look at the past and the future

Commission officials and leading experts on the CAP met under the auspices of the European Network of Agriciultural and Rural Policy Research Institutes (ENARPRI), The Centre for European Policy Studies (CEPS) and the University of Leuven (KUL) in Brussels on Thursday to discuss the past and the future of the CAP. The interesting discussion was conducted on Chatham House terms, but some flavour of it can be given here.

Biofuels

There was concern about an unthinking rush to replace foods crops by biofuels. One view expressed was that they were a disaster with an incredible increase in the surface area covered in the United States. The missing US exports were equivalent to those of Australia and Canada combined. They used a lot of water which was a more precious resource than oil.

Another speaker drew attention to the number of bills before the US Congress on the ethanol issue. It was seen as nothing to do with farm output but with energy independence, although a cynic might also see a link with the early primary in Iowa.
The mandates (obligations) were a recipe for rent seeking and represented bad policy.

The future balance of the CAP

There was some interest in the development of a policy that emphasised food and environmental security policy. Whilst this was not endorsed by all participants, there was a recognition that a spatially diffuse, multi-dimensional environmental challenge was being managed by fragmented private managers. The key market failure was environmental: climate change.

There was concern about the delay to rural policy implied by the effective halt in transfers from Pillar 1 to Pillar 2. Less was now being spent on Pillar 2 than before the budget discussions. The view was expressed that Eastern Europe had little interest in rural policy because it didn't have co-funding money. More generally, member states wanted to re-nationalise the CAP.

The health check was taking shape. It was a tidying up, a simplification. There was a long check list involving a move away from partial decoupling and getting rid of set aside, but none of it was fundamental. The budget review was much more important, coupled with the renewed discussion on the constitution. Quite a few people wanted to cut the CAP budget.

The easiest way of saving money in agriculture would be to cap big farmers which would also make it easier to defend the CAP. It was somewhat alarming to hear one respected presenter claim that the CAP had been steered towards acceptability and respectability by reform.

The Commission view

Invariably on these occasions I lock horns when the Commission and this happened when I suggested that there were limits to the radicalism of the reform which left 46 per cent of the EU budget spent on the CAP. The response was that this was a strange way of addressing this, given that the EU had a tiny budget. CAP spending accounted for one per cent of public expenditure in the whole of Europe. Farmers made up five per cent of employment, ten per cent of the population lived in rural areas and 47 per cent of the European land surface was farmed.

On that logic if, say, small shopkeepers are three per cent of the EU population, they should get three per cent of the budget in handouts. Farming is meant to be a commercial activity. If it is producing positive externalities, it should be rewarded for that, but the delivery of those outputs needs to be clear and demonstrable.

The producer perspective

The producer perspective on this is interesting. They fear paying twice for the Doha Round (although no one would forecast whether there would be a successful conclusion or not). They also see the single payment as 'nominal' and eroded by inflation (which is a strange way of looking at some of the sums paid out). It is also seen by farmers as a transitional payment which will eventually disappear. However, most of those in the meeting thought that market payments would persist after 2013 and even after 2020. The CAP is a resilient beast.