Monday, October 30, 2006

Too many errors in CAP payments

In its annual report on the EU's farm accounts in 2005, the Court of Auditors 'found that CAP expenditure [€48.466 billion last year] was still affected by a material level of error which is not detected or prevented bt the supervisory and control systems.' It noted 'weak internal controls for the majority of EU expenditure, both within member states, and at the Commission, and a high incidence of errors in the underlying transactions.'

Greece was singled out as the worst offender. The Court declared that the quality of inspections in Greece was low and that the reporting of results was unreliable. Farmers' unions are responsible in Greece for inputting all data into the computer system, and can make changes whenever they want - without the changes being recorded. Not surprisingly, instances of farmers exaggerating the size of their land are not uncommon.

All of the olive oil subsidies examined in southern countries were found to contain either an overpayment and/or one of more formal errors. This led the Court to ask whether the Geographical Information System, the system of aerial photographs used to verify the existence of olive tree parcels was doing its job.

The Commission got quite humpy about the Court's findings complaining about its 'focus on finding individual errors in small smaples of transactions.' The Commission noted with apparent pride that it had clawed back €2.17 billion in ineligible payments in 2005. So that's all right then.

Gloomy prognosis on Doha Round

Recent conventional wisdom has been that the Doha Round talks will get under way once the US elections are out of the way with a window of opportunity between then and the spring. After then it would be too late to get an agreement through Congress using trade promotion authority (once known as fast track) although a few months' extension might be possible.

However, the chair of the agriculture negotiations, Crawford Falconer, has now said that he thinks the Doha Round will fail. He still thinks that both the US and the EU have room within their negotiating mandates to improve their offers on reducing farm support, but he suggested that the political will was missing on both sides. There was still the possibility of finding 'an outcome that would work and one that would make a difference', but time was running out.

Falconer's intervention could be a ploy to encourage a focus on the issues and to offset overly optimistic pronouncements by politicians. Nevertheless, it is easy to fall into the comforting belief that, as happened in the Uruguay Round, it will be 'all right on the night'. This time it may not be and the consequences for agricultural trade and further policy reform would be serious.

Thursday, October 26, 2006

Green box does distort trade, claims Indian study

A report commissioned by the Indian Department of Commerce and carried out by UNCTAD's Indian team challenges the EU's argument that decoupled aid payments have only a minimal trade distorting effect. According to the researchers' model, EU farm exports would fall by a massive 45 per cent if Green Box subsidies were removed and production would fall by close to 6 per cent.

The EU, US and Canada would all see exports decline by upwards of 40 per cent in the absence of Green Box payments, while Swiss and Japanese exports would fall by over 60 per cent. However, most developing countries would see exports increase by around 20 per cent.

The Green Box issue remains open within the suspended Doha Round negotiations. However, given the EU's attachment to its decoupled Single Farm Payment system, the bulk of which falls into the Green Box, it is unlikely that any Doha Round settlement will lead to changes in the Green Box. However, there could be provision for further discussion of what can legitimately be placed in the box, putting a time bomb under the whole CAP.

Subsidy data to be made public

EU citizens in all member states should soon be able to find out who gets what in terms of farm subsidies, following a decision by Coreper. This may help to create further public pressure for CAP reform.

Ambassadors agreed 'in principle' to open national farm accounts to public scrutiny. However, the decision requires agreement from the European Parliament which hopefully can be obtained by the end of November. It remains unclear whether the Commission or member states will be responsible for publishing the subsidy data, the Commission being reluctant to take responsibility for publishing information it cannot verify.

France is continuing to demand that no subsidy disclosures are made before 2009 when the presidential elections will be safely out of the way. Jack Thuston from the transparency campaign commented, 'It's great news that European governments are endorsing transparency. But it is quite wrong that we should be kept in the dark until 2009, as the French government is reported to be insisting upon. It now falls to elected Members of the European Parliament to stand up for the rights of those they represent. European citizens have a right to know who gets what from the EU and why. Secrecy is bad for European civil society and bad for the reputation of European institutions.'

Even if the public do become indignant at the size of the handouts given to already prosperous farmers, fundamental reform is likely to encounter continying resistance from the Commission. Commissioner Mariann Fischer Boel has dismissed Defra's reform document as 'incoherent' with 'a complete lack of analysis behind this paper' in an appearance before the House of Commons Environment, Food and Rural Affairs select committee. When I appeared before the committee, I argued that the paper was a strong one, but the problem was the lack of a political strategy to put it into effect.

Fischer Boel insisted, however, that many farmers would be unable to survive without the direct payments scheme and would start to abandon their land with adverse environmental consequences.

Visit at Subsidies

Estonians to pay €35 a head sugar stockpile fine

Estonia will have to pay in full the €46 million fine imposed by the EU for stockpiling sugar in the months before accession in 2004, farm commissioner Mariann Fischer Boel has insisted. The fine amounts to the equivalent of about €35 per person.

Estonia has contested the fine at the European Court of Justice, arguing that a large part of the sugar surplus of 91,464 tonnes have been hoarded by private households in preparation for a national frenzy of jam making. Making jam and syrup at home is a common practice in the Baltic state.

Tuesday, October 24, 2006

Sweden tops new CAP transparency index

On the day when the European Court of Auditors has for the twelfth year running refused sign off the European Union’s annual budget because of concerns about fraud and poor controls, is launching a new Common Agricultural Policy transparency index. The index is based on a comprehensive scorecard that rates all member states according to whether they have released data on who gets what from the EU’s Common Agricultural Policy (CAP). Sweden tops the index with a score of 95%, followed by Denmark (91%) and Slovenia (87%). So far twelve EU member states have released data to

Criticising poor controls in the EU budget, the Court of Auditors said that 'Beneficiaries — farmers, local authorities, project managers — claim more than they have the right to claim'. Most of the problems occur with payments made by member states not by Brussels, because 76% of EU payments are delegated to member states.

Jack Thurston, co-founder of said:

'Transparency is a guard against fraud and maladministration and a way of reconnecting citizens with their governments. Transparency leads to more legimate and effective policy-making. We hope this scorecard will be used to praise the few EU member states who have embraced transparency and shame the many who continue to hide farm subsidies behind a veil of secrecy. All European citizens pay for farm subsidies, they should have a right to know who gets what - and why.'

Read the CAP Transparency Index report:

Monday, October 16, 2006

Are CAP's natural predators awakening?

Farm subsidies campaigner Jack Thurston who runs the excellent website on farm subsidies has responded to the story below on the 'health check' on the CAP: 'As well as payment limits, the health check may also include a minimum farm size to qualify for any payments, i.e. a 'franchise'. The single farm payment has seen a big increase in the number of claimants, often it costs more for the government to administer the payments than the payments are worth. A lower limit on payments was specifically mentioned by Fischer Boel at a public meeting on 17 July 2006 in Brussels. See:


Jack Thurston continues, 'It is currently not clear how the CAP health check will fit in with the review of the EU budget that is scheduled for 2009. What is certain is that we are in an era of fiscal restraint in the EU, so any new money for new projects will have to be found from within existing budgets, highlighting in sharp relief the "opportunity cost" of the CAP. The natural predators for the CAP may finally be awakening.'

Since Jack wrote these notes, Commission Fischer Boel clarified that she will not accept budget cuts to the CAP as part of the general EU budget review in 2009, but admitted that the same guarantees could not be made after 2013.

She also said that 'These are busy days in the kitchen - lots of pots are boiling at the same time. Rather than keeping the door to the kitchen sealed I have decidd at an early stage to give an impression of what is boiling under our lids.' A look at cross compliance was first of the menu, followed by the consequences of partial decoupling and the choice of model for implementing the SPS.

Hardly an inviting or daring menu and some of us would like to see the kitchen closed in its soup kitchen role for farmers.

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.