Why Mercosur deal concerns EU farmers

The EU deal with Merocsur has not gone down well with European farmers and this analysis refers to some of their concerns as well as the drivers of the deal: https://ukandeu.ac.uk/eu-and-mercosur-bloc-breakthrough/?mc_cid=60623adc76&mc_eid=a47fa58ca7

New EU farm supremo sets out his stall

The EU’s new agriculture chief is pushing for more of the bloc’s generous subsidies to be doled out to low-income farmers rather than big agribusinesses. Christophe Hansen told the Financial Times that the seven-year €387bn Common Agricultural Policy (CAP) should no longer reward the biggest landowners and instead focus on small farms, as discussions get under way on the bloc’s finances for the next decade.

[This, then, is a move towards treating the CAP as a welfare payment, but it is not an efficient instrument for delivering such payments.   What about international competitiveness and efficiency?]

 “We all know that the CAP budget will not be higher,” he said. “There is a lot of pressure because we have a lot of political priorities in the European Union so we need to better target the support to those most in need.”

The new EU commissioner, who took office on December 1, said his reform of CAP would not amount to a “revolution” and would not move “entirely” away from hectare-based payments. But changing the allocation would constitute the most significant overhaul in the history of the 62-year-old subsidy programme, which represents a third of the bloc’s annual budget.

The largest farms in the bloc have traditionally received most of the funding, with an analysis by the Institute for European Environmental Policy, a Brussels-based think-tank, estimating about 80 per cent of the direct payments go to roughly 20 per cent of farms.   [My view is that this is a lazy application of the Pareto rule and the actual figure is lower].

 Nearly 6mn farmers and landowners received direct payments in 2022, according to the European Commission. Discussions around the next EU multi-annual budget, which is due to run from 2028, have shifted towards a much greater focus on defence spending in recent months in response to Russia’s invasion of Ukraine and Donald Trump’s return to the White House. The US president-elect has threatened to pull out of Nato if allies refuse to spend more on the military.

Any CAP reduction will be met with fierce resistance from farmers who took to the streets of Brussels and other European capitals last year to protest against stringent environmental regulations, red tape and unfair prices. European Commission president Ursula von der Leyen in September vowed to ensure farmers receive “fair and sufficient income” and preserve farming amid financial and environmental pressures. Hansen, a centre-right Luxembourgish politician, said the commission should encourage farmers to look at “alternative income” streams.   [Historically there has been a suspicion that farm commissioners from Luxembourg are susceptible to French pressure].

While “producing and selling a tomato” was good, “it makes you vulnerable because it’s your only income”, Hansen told the Pinl ‘Un. Farmers could grow crops for biofuels or use their land for solar panels and other renewable energy sources. Planting trees that could be monetised as carbon credits should also be considered, he said.   [Farmers in the UK have been diversifying for decades].

Part of the commission’s response to the protests was to water down environmental standards that farmers were required to meet in order to access CAP support, despite widespread outcry from green groups. Von der Leyen on Tuesday is set to put forward further measures aimed at helping farmers sell their products at a better price.

The proposals, if agreed by EU lawmakers and member states, will make written contracts between farmers and food companies mandatory and allow more co-operation between national authorities to manage cross-border disputes.

Hansen said he also intended to ease competition rules to promote products from young farmers and require greater transparency in retail pricing. “Big retailers use certain products to attract the consumers and they use the weak position of the farmers in the supply chain,” he said. Christel Delberghe, director-general of the retail industry body EuroCommerce, said introducing stricter pricing rules would result in “inflation. What else?”

[Farmers in the UK have certainly been turned into price takers by supermarkets, but changing the balance of power is not easy because consumers demand cheap food]. 

The limits of Dutch lessons for farmer protests

This article by a political scientist looks at the impact of farmer protests in the Netherlands and their implications for the UK: https://ukandeu.ac.uk/farmer-protests-lessons-from-the-netherlands/?mc_cid=6bb3292f21&mc_eid=a47fa58ca7

What it doesn't mention is that the Netherlands has a very pure system of proportional representation which makes it easy for insurgent parties with a narrow support base to win legislative seats.

Doing the Brexit walk

In a thorough and authoritative analysis, Alan Matthews examines the repurposing of the English agricultural budget since Brexit, noting that the only other developed country to attempt such extensive changes is New Zealand: http://capreform.eu/agricultural-policy-reform-in-england-and-the-2024-uk-budget/

There has been a much greater reallocation to agri-environmental funds in England than in the CAP.

Benelux countries increase net contributions to CAP

Alan Matthews takes a look at net contributions to the CAP: http://capreform.eu/how-net-balances-might-influence-member-state-views-on-the-size-of-the-next-cap-budget/

He notes: 'Instead of the smooth transition from the largest net contributors to the largest net recipients as we move from left to right [on the chart], the general picture is now more jagged even if the general pattern is maintained.

The two smallest Member States, Luxembourg and Malta, with relatively limited agricultural area relative to the rest of their economies, now appear as the largest net contributors in relative terms.

More significant in economic terms is that, despite the huge significance of Germany’s absolute net contribution to the CAP, in relative terms the contribution of the Netherlands and Belgium is even greater.'

New farm commissioner in EU

The outgoing EU agriculture commissioner reviews his five years in office which appear to be ones of problem free achievement: https://agriculture.ec.europa.eu/common-agricultural-policy/cap-overview/highlights-2019-24_en?s=09

The new commissioner, Christophe Hansen, is from Luxembourg, often perceived to be amenable to French concerns.  Food has been added to his portfolio, but animal welfare goes to health.   His biography is here: https://commission.europa.eu/document/download/1af2336d-a010-4ac0-b8de-81a23772a5ac_en?filename=CV%20Hansen.pdf

In 100 days he has to produce a vision for agriculture and food, so good luck with that.

Agriculture needs to cut emissions

The EU’s chief climate scientist has warned that the bloc will miss its climate targets if it does not force the agricultural sector to pay for its greenhouse gas emissions. Ottmar Edenhofer, chair of the European Scientific Advisory Board on Climate Change, told the Financial Times that it would be “almost impossible” to achieve the European Commission’s proposed aim of cutting emissions by 90 per cent by 2040 without a levy on agricultural emissions.

 “[Over] the last 15 years, the emissions in the agriculture sector remained quite stable,” Edenhofer said, while other sectors had cut their climate impact. “The price signal is important because without the price signal, it is very unlikely that, basically, we can reduce emissions,” he added.

Farming makes up 12 per cent of the EU’s emissions, of which about two-thirds comes from meat and dairy production. But it is one of the few sectors in the EU to have so far avoided strict climate legislation, including sectoral emissions reduction targets, in part because of farmers’ ability to stage widespread and disruptive protests.

Earlier this year, tractor blockades and demonstrations by farmers in many European capitals catalysed a rethink in the EU about how it was approaching efforts to decarbonise farms. It prompted the commission to retract a proposed law on pesticides and delete recommended targets from a document outlining how the bloc would reach its 2040 goal.

But the issue of making either farmers or other parties in the food chain pay for emissions has risen up the agenda as Brussels starts to outline its priorities for the next five-year mandate starting later this year.

 Denmark has also been lobbying Brussels to introduce an EU-wide system after it announced the world’s first carbon tax on farm emissions in June. EU officials are weighing options including a levy on food processors that would also include incentives for farmers to use their land as a carbon sink.

But a report on the future of farming in the EU that stemmed from consultations between food and farming industry groups as well as environmental NGOs, published this month, said it was “premature” to come to a conclusion about pricing agricultural emissions.

Strategic dialogue report

The final report of the Strategic Dialogue on the Future of EU Agriculture is now available: https://agriculture.ec.europa.eu/common-agricultural-policy/cap-overview/main-initiatives-strategic-dialogue-future-eu-agriculture_en#strategic-dialogue-report

'There is consensus among members of the Strategic Dialogue that economic, environmental and social sustainability in the agri-food sector can reinforce each other, especially when supported by coherent policy measures.'   One can but hope for the latter.

“Business as usual, be it economic, social or environmental, is not an option,” said the report.. “Bold and swift action at all levels is needed” to tackle the “multiple crises” affecting farmers, including increased impacts from extreme weather such as drought, from inflation and from low-cost global competitors.

Among other proposals of the report are schemes to encourage consumers to cut their meat intake, including through tax incentives and labelling, and to help farmers move away from livestock farming, including a controversial suggestion to introduce voluntary buyout schemes for farms in areas with high levels of intensive animal farming.

The most significant recommendation is a major overhaul of the EU’s CAP subsidy scheme, which was first launched in 1962 and consumes a third of the bloc’s multiannual budget. Instead of allocating direct support to farmers according to the amount of land they own and linking that to mandatory environmental standards, the report recommends that subsidies should go to “the active farmers who need it most” based on their “economic viability”.

The report proposes that farmers receive incentives within the CAP to green their practices, as well as from a “Just Transition Fund” that is outside the CAP budget and is dedicated to longer-term changes such as converting farms to “regenerative” or organic methods. There should also be a loan package of up to €3bn from the European Investment Bank that prioritises young farmers.

The continuing power of the farm lobby

Behind the scenes the agricultural lobby is a sprawling, complex machine with vast financial resources, deep political connections and a sophisticated network of legal and public relations experts, argues the Financial Times in a Big Read analysis. “The farm lobby has been one of the most successful lobbies in Europe in terms of relentlessly getting what they want over a very long time,” says Ariel Brunner, Europe director of non-governmental organisation BirdLife International.  Industry groups spend between €9.35mn and €11.54mn a year lobbying Brussels alone, according to a recent report by the Changing Markets Foundation, another NGO.

Food systems are responsible for between 21 and 37 per cent of greenhouse gas emissions depending on what is included, according to the Intergovernmental Panel on Climate Change. Over half of those emissions come from animal faming alone. Yet agriculture remains one of the last sectors in developed countries still to face binding limits on its carbon emissions. It is one of the few industries not covered in the EU’s emissions trading system, although proposals are under discussion.

The regular meetings between Copa-Cogeca, the umbrella body for farming unions and co-operative bodies across the EU, and the bloc’s officials show that the reach of the agribusiness lobby has been “institutionalised”, says BirdLife’s Brunner. Patrick Pagani, acting secretary-general of Copa-Cogeca, counters that lobbying is normal practice and “transparent” because the body publishes videos of its presidents’ main points.

Farmers in Europe say they are being strangled with red tape at a time when many are struggling with rising input costs following the Covid-19 pandemic and the war in Ukraine, which inflated energy and fertiliser prices. The EU’s Green Deal climate law, drafted in 2019, set out proposals to cut pesticide use and improve food systems, as well as reduce emissions from industrial-scale farms.

In the EU, lobby groups are already staking out positions ahead of the next major revision of the Common Agricultural Policy, which will take effect in 2028. The present iteration has been criticised by farmers for its attempts to tie payments to better environmental performance and cuts to pesticide usage. Following widespread protests, European Commission president Ursula von der Leyen has pledged that the next CAP will be “targeted” and find “the right balance between incentives, investments and regulation”.

Who benefits?

Research suggests that big farms and landowners reap far greater benefits from subsidy packages than small-scale growers, even though the latter are often the public face of lobbying efforts.

That has led to some tensions within the sector.  It has been suggested that the agricultural lobby “hijacked” the spring protests and put the emphasis on deregulation, which served the interest of the biggest industrial farms and agribusinesses, when the main concern of ordinary farmers was insufficient incomes.

FNSEA, France’s largest farming lobby has been accused of having ‘ no interest in securing income for farmers” but “a huge interest” in driving pesticide usage, because FNSEA is headed by Arnaud Rousseau, chair of agro-industrial company Avril.  At the EU level, Marion Picot, secretary-general of CEJA, the bloc’s main body for young farmers, says its members often feel drowned out by more dominant voices in Copa-Cogeca. “We are trying to make sure that young farmers are visible in other farming groups.”

In farm policy, it often seems that benefits go to those already doing well.

Alan Matthews sets out his views on the future of EU agripolicy in the light of the European Parliament elections here: https://www.europenowjournal.org/2024/08/15/thinking-the-future-of-agrifood-policy-in-light-of-the-eu-parliament-elections/

National state aids on the up but hard to track

National aids to agriculture have increased, but they are difficult to track and more transparency is needed: http://capreform.eu/greater-transparency-needed-in-national-aids-to-agriculture/

Alan Matthews estimates that national state aids led to additional transfers of €9 billion to farmers.   He forecasts: 'It is likely that relying on Member States to provide national aids will continue to be a feature of future crises.'

He notes: 'This is an extremely murky area as, despite the obligations on Member States to report State aid and other aid to farmers, there is no central registry which keeps track of these amounts.'

New food security report

The EU has brought out a second report on the state of food security in the EU: https://agriculture.ec.europa.eu/document/download/a91b3841-6021-489e-b877-7f0f5278c88c_en?filename=efscm-assessment-spring-2024_en.pdf

It highlights weather and cost concerns on supply side and high food prices on demand side.

Farmer protests and the EP elections

Alan Matthews writes here about farmer protests and the 2024 European Parliament elections: https://www.intereconomics.eu/contents/year/2024/number/2/article/farmer-protests-and-the-2024-european-parliament-elections.html

He states:'This article looks at the origins of this recent wave of farm protests and asks whether a crisis situation exists in European farming as the Commission has suggested. It examines the measures that have been adopted and proposed in response. These measures, while consistent with the previously existing trend to roll back elements of the Green Deal, are in themselves limited in scope.'

'While signalling a willingness to respond to farmers’ concerns, they are unlikely to significantly change their situation. More radical changes have been put on the table, and these elements will play a role in the European Parliament elections in June 2024.'

Look out for an article from him to appear soon online from Political Quarterly.

Ministers retreat in face of farmer protests

Ministers have urged the EU to increase funding for the €60bn-a-year Common Agricultural Policy subsidy scheme in a bid to quell protests as Belgian farmers blockaded roads and set fire to tyres in central Brussels.

The CAP, which consumes about a third of the EU’s joint budget and is the oldest of the bloc’s policies still in operation, is designed to provide a steady stream of income to farmers in order to ensure food production. But as farmers staged their latest protests on Monday over rising costs and environmental regulations, ministers gathering in Brussels to discuss emergency measures to placate farmers said more money was crucial.

Charlie McConalogue, Ireland’s agriculture minister, told the Financial Times that the CAP had “eroded” in real terms over the past years and “must be strengthened in terms of its funding”. “Food security and supporting food production [should be] put very much back at the centre of . . . European budgetary considerations,” he said, a call echoed by ministers from France, Poland and other eastern European countries, according to diplomats present at the talks.

The CAP accounts for €386.6bn of the bloc’s €1.21tn common budget, which runs from 2021 to 2027.  Is this really a good use of available funds? Some 80 per cent of the scheme’s money goes to just 20 per cent of farmers, it is claimed, although I think this is a lazy application of the Pareto rule.

The debate over its increase comes amid heated discussions over priorities for the EU’s joint budget, with governments reluctant to contribute more due to stretched national finances and a need to spend more on defence after Russia launched its full-scale invasion of Ukraine two years ago.

Renationalisation?

Piet Adema, the Dutch agricultural minister, told the Financial Times that instead of boosting the CAP, member states should be allowed more flexibility in how the funds could be used, i.e., renationalise the policy but said consumers should also accept the need to pay more for their food.   But consumers are struggling with a cost of living crisis.

Adema said: “There should be more transparency in the whole food supply chain: where are the earnings made, where are the losses made and how can we influence that?   Indeed, but there are powerful forces that would oppose that, both input multinationals and large scale food processors.“The amount of money you pay for your food compared to 20 or 30 years ago relatively has gone down so when we as a society want our farmers to produce honest sustainable goods, we have to pay for them.”

Farmers have not only called for more funds but also a relaxation in environmental regulations and a reconsideration of trade deals that they say are allowing cheap food imports to undercut prices for EU producers.

Brussels mayhem

In Brussels on Monday, hundreds of tractors blockaded streets close to where ministers were meeting. Some drove at riot police and destroyed barbed wire barricades set up around the main buildings. Several protesters threw manure and brandished placards with slogans such as “leave a future for our children, don’t kill our parents”.

Police used water cannon to douse burning tyres. The demonstrations follow weeks of protests across EU countries including France, Germany, Italy, Poland, Romania and Spain. Farmers blocked a major motorway in Poland on Monday and threatened to continue their blockades for more than 20 days unless their demands were met. French President Emmanuel Macron missed a G7 meeting at the weekend as he spent 13 hours meeting farmers at the country’s annual Salon de l’Agriculture trade show. He called for “calm” after facing protests at the event. “We’re not going to be able to fix the farming crisis in a few hours,” he said.

Ministers in retreat

Ministers agreed that proposals put forward by the European Commission last week aimed at cutting red tape for farmers trying to access CAP funds were “a step in the right direction”, said David Clarinval, Belgium’s deputy prime minister told the Pink ‘Un, but “more ambitious measures” were needed.

The commission has already withdrawn a flagship proposal to cut pesticide use and deleted emissions reductions targets for agriculture from a document outlining options for future EU climate policy. Agriculture will be on the agenda of the EU leaders’ summit in March, one EU diplomat said. In a letter to the commission on Friday, Copa Cogeca, the main farming lobby group, said the bloc’s environmental agenda had resulted in “a regulatory tsunami, with too many rushed consultations, top-down targets lacking assessment, and proposals pushed through without feasibility studies”.

But Via Campesina, one of the groups behind Monday’s protest, which represents small food producers and agricultural workers, said: “Putting a stop to various measures aimed at protecting the environment is an easy solution that meets the needs of agribusiness players. Administrative simplification measures are necessary, but obviously insufficient to guarantee an income for our farms.”

Why farmers are protesting

Some excellent in depth analysis of why farmers are protesting across Europe and how they relate to climate change: https://www.carbonbrief.org/analysis-how-do-the-eu-farmer-protests-relate-to-climate-change/

Look out for some further analysis that will appear soon in Political Quarterly.

Commission backs down on greening agriculture

The European Commission has thrown in the towel on plans to cut climate change emissions in agriculture: https://www.euractiv.com/section/agriculture-food/news/eu-commission-backtracks-on-agricultural-emissions-cuts/

The recent farmer protests across Europe have undoubtedly been a factor, but there has also been concern about far right gains in the upcoming European Parliament elections which could undermine the European project as a whole.  The desire of Urusla von Ley en to secure a second term as Commission president is also part of the context: https://neighbourhood-enlargement.ec.europa.eu/news/speech-president-von-der-leyen-european-parliament-plenary-conclusions-european-council-meetings-2024-02-06_en.

Reducing climate change emissions in agriculture are not an optional extra.   In France, for example, they account for 12 per cent of emissions, far exceeding the contribution of agriculture to GDP or employment. Unfortunately, governments in general have a tendency to back away from effective measures of climate change once they threaten current lifestyles or working patterns.   This is in spite of increasing evidence of  a climate emergency.

Apparently the intention is to have a policy that covers the food sector as a whole which is not without merit but undermined if other measures are dropped.   The Greens are calling for a windfall tax on the profits of agri-food companies.

The plan to halve pesticide use by 2030 is to be dropped.   This is, of course, not directly related to climate change.  It would have an impact on production.   Biological alternatives to synthetics are being developed and are increasing market share, but there are not enough of them and they are not suitable for all crops. This policy might also have been onerous for farmers in terms of form filling.'  According to von Leyen, the pesticides measure has become a symbol of polarization.   Shares in Bayer, the EU's biggest pesticides producer, rose by 2 per cent.

Animal welfare rules are set to be watered down and unpopular (and largely ineffective) set aside requirements abandoned.

Why farmers are in revolt

It's been no surprise to see French farmers blocking motorways.   Such demonstrations are part of the political culture of France and farmers are particularly likely to resort to them.

However, all over Europe farmers are in revolt.   In the Netherlands they have given support to an insurgent party while Polish farmers are threatening to block the border with Ukraine to halt grain shipments.

All this is happening when farmers receive quite generous subsidies with the CAP still accounting for around a third of the EU budget.    Admittedly, input prices went up sharply in recent inflation.

The grievances cited by the farmers are many but among them are imports which under cut them and are produced used pesticides no longer permitted in the EU.   The EU's whole green agenda is seen as a threat, not least because of the form filling burden it imposes.

Four per cent set aside is unpopular as the land still has to be maintained and it does little to boost biodiversity.

Farmers have attracted some support from the public, not least in France where gastronomy is so central to the national identity.

So what is the answer?   There isn't a simple one.  Blocking imports would harm developing countries and put up prices for consumers.  Up to now the CAP has not been modified to take account of climate change and the green agenda was intended to address this and other environmental issues such as biodiversity.   It cannot be abandoned.

Over ten years ago I wrote an article emphasizing the importance of policy instruments in the CAP and the need for them to be better designed - more closely related to policy objectives while imposing fewer transaction costs on farmers.

However, simplification has long been a call in the CAP and not much progress has been made.  Indeed, complexity is almost what defines the policy, deterring policy outsiders from probing too closely.

Alan Matthews has an interesting perspective.   He argues that the evidence shows that farmers have made steady gains in their income from agriculture over the last two decades (since 2005) and agricultural income levels have been at their highest in the past three years, despite higher input costs: http://capreform.eu/what-is-actually-happening-with-agricultural-incomes/

EU green thrust irks farmers

No surprise perhaps to seem them on the streets, but French farmers have begun blocking motorways and targeting government buildings to express anger over rising costs and what they call suffocating red tape at both a national and EU level.

 “To attain our objectives, violence is not the answer, but some farmers have simply had enough,” said Arnaud Rousseau, head of the country’s biggest farmers’ union, FNSEA, on France Inter radio on Monday. He promised further demonstrations until farmers’ concerns were addressed. 

The government has said for months it would introduce legislation to help farmers but on Sunday pushed back the proposal for a few weeks, saying it wanted to improve it.  The movement in France, the biggest agricultural producer in the EU and a main recipient of the bloc’s Common Agricultural Policy subsidies, comes as similar protests have occurred in recent weeks in Germany, the Netherlands, Poland and Romania.  In the Netherlands, farmer discontent over fertiliser curbs helped boost an insurgent party..

Although farmers’ rage has sometimes been touched off by national measures such as a fuel tax subsidy cut in Germany, there is also a broad consensus against the EU’s “farm to fork” strategy that aims to reduce pesticide use and impose new rules to take climate change into account in farming practices.