Wednesday, October 27, 2010

CAP budget may be cut less than expected

Reports are suggesting that the CAP budget may be cut less than expected: Budget

The Commission had at one time been talking of cuts of between 10 and 20 per cent and was seen as a potential ally by reform minded member states. However, these demands appear to have been watered down and a cut of a few billion euros may suffice.

Tuesday, October 19, 2010

Weimar triangle fails to work

Informal groupings of member states have played a key role in the evolution of the CAP at different times. e.g., the 'Aachen five' which tackled agrimonetary questions. Before the publication of the recent Franco-German position paper, it had been suggested that it might take the form of a 'Weimar triangle' of France, Germany and Poland. Indeed, Poland was in talks with France and Germany, but they went ahead and published their joint text before Poland finalised its position.

Now Poland has criticised the Franco-German position paper as an unsuccessful attempt to exert undue pressure on other member states. Polish minister Marek Sawicki described the paper as a 'very conservative one', only signalling slight modifications of the historical criteria for direct payments. It defended the interests of French and German farmers but not of those from other member states.

Frandce and Germany have made it clearer that shifting towards a flat rate payment which would suit accession states is not acceptable to them and a clear red line in the negotiations.

Fischler emphasises need for reform

Former EU farm commissioner Franz Ficshler has emphasised the need for continuing reform of the CAP: Fischler

It was Fischler who carried out the most thorough reform of the CAP. But he points out that a strong farm lobby could halt the forward momentum of reform. He also emphasises the need for investment in research and development.

Friday, October 08, 2010

The devil is in the detail

This post looks at some of the more detailed proposals in the leaked draft Commission communication on the future of the CAP.

The Commission believes that the CAP should be continue to be framed around two pillars. The idea of a third pillar focusing on climate change had been floated, but is evidently not being pursued.

The difference between the two pillars is seen as one of payment structure with Pillar 1 made up mainly of annual payments to farmers and Pillar 2 beuing multi-annual in nature. Is this the right distinction? Or should Pillar 1 be about the economics of agriculture production, while Pillar 2 focuses on 'additionality' with a particular emphasis on improving sustainability?

The rejection by commissioner Ciolos of a single flat payment is upheld, but it is not clear how the question of equity between member states will be addressed. This is likely to be one of the most difficult political issues in the negotiations given that there are wide discrepancies between member states. Those who don't get very much at the moment will want a bigger slice of the cake and those who have a big slice will want to hold on to it. The only concrete option presented is moving towards an arrangement whereby farmers in all member states would receive a minimum share of the EU-average level of direct payments (about €250/hectare).

It is proposed that there would be a cap on payments to large farms. This would have an impact on competitiveness, as large farms tend to be more efficient. It would also particularly hit Britain, Germany and the Czech Republic.

What makes it worse is a suggestion to link payments to employment levels. In other words, a farm that was employing labour inefficiently would receive more support. This would certainly undermine competitiveness, but then the document as a whole tends to give lip service to that concept.

The proposals as a whole also increase complexity when there is supposed to be a move towards simplification. They would increase transaction costs for farmers and the already substantial costs of operating the policy.

Thursday, October 07, 2010

CAP reform paper leaked

A draft of the EU Commission's 'Communication' on the future of the CAP after 2013 has been leaked. It is scheduled for publication on 17 November. This post examines the overall objectives and directions for reform. A subsequent post will look at some of the more detailed proposals.

The paper sets out three challenges and objectives for agriculture, two of which are not very surprising: food security, leading to an objective of viable farm production; and environment and climate change, leading to an objective of sustainable management of natural resources. So far so good, although clearly a question remains about whether these are seen as equivalent objectives or there is some kind of hierarchy (and how one resolves tensions between them).

The puzzle is the third objective, territorial balance. It's a bit difficult to work out what means, but it seems to be moving in the direction of making the CAP a social policy. Many would argue that is what it has been all along, but it has never been spelt out as such, leading to all sorts of inefficiencies.

Under this heading, the Commission talks about economic (boosting the rural economy) and social (local traditions and social identity) objectives. There is reference to supporting rural employment (i.e., motherhood and apple pie), promoting diversification and 'allowing for structural diversity in farming systems' which could be a code phrase for tolerating inefficiency.

The whole notion is not easy to grasp and may be honed in the final version of the paper now that this kite has been flown. What seems to be going on here is a (probably mistaken) attempt to mould economic and social objectives into one. It also implies a policy that is more locally-led and flexible in its approach.

What could this lead to is all sorts of special pleading for subsidies of various kinds which satisfied local client groups. It also does not seem to fit to well with declarations about preventing the renationalisation of policy. Indeed, the paper reiterates the case for an EU-led policy rather than a national one.

The paper sets out three broad policy options:

1. Enhanced status quo: adjusting the current instruments and delivering a more equitable distribution direct payments. This is viewed within the Commission as a missed opportunity to make the CAP more legitimate.
2. More 'balanced targeted and sustinable support': a fairly significant adjustment of direct payments, especially 'greening' the first pillar. This would seem to be the Commission's preferred route.
3. Abolish all market and income support and focus delivery on public goods/climate change: essentially the British approach and dismissed pretty much out of hand.

One important dog fails to bark in the nighttime. The paper remains largely silent on the scale of the budget. It is decisions on the budget that will shape the next phase of the CAP.

The paper talks of the need to improve competitiveness, but there are no measures set out to achieve it, indeed some proposals (discussed in a later post) could have a damaging effect. One critic has remarked that, taken as a whole, the document is neither very common nor very agricultural. But nor does it particularly emphasise sustainability.

In other words, it's a bit of a mish mash. Why I am not surprised?

Monday, October 04, 2010

Comprehensive and authoritative review of CAP

Review of Arie Oskam, Gerrit Meester and Huib Silvis (eds),EU policy for agriculture, food and rural areas. Published by Wageningen Academic Publishers, ISBN: 978-90-8686-118-7, €40, $60.

This book offers a comprehensive, authoritative and up-to-date review of EU agriculture, food and rural policy. One of the things I liked about it was that it covered areas that are often neglected such as animal health and welfare policy and plant diseases policy that are likely to assume a growing importance in the coming years.

The book is divided into six sections. It starts with an overview and then turns to the context of EU policies, with particular emphasis on the differences in decision-making before and after the Lisbon Treaty. The third section looks at the policies in more detail including alternative options such as the bond scheme and the fourth is concerned with food policy including developments related to food quality and safety. The fifth part provides a well informed analysis of a wide range of aspects of rural policy. The book culminates with a section which looks at the role of the CAP in European integration more generally and possible future scenarios.

The book does not set out to provide a theoretical treatment of the CAP and in that sense it is accessible to the general reader. Although there is material in the book which would be of value to the specialist researcher, particularly in the area of rural policy, this is a book which could be used with students approaching the subject for the first time. Indeed, it has been developed in relation to courses taught at Wageningen Business School, although the price militates against it being used as a text.

Given that there is a foreword by Mariann Fischer Boel, one would not expect this to be a highly critical treatment, although she points out that she does not share all the views expressed by the authors. The chapter authors are certainly prepared to be critical of current policy.

In a concluding chapter, Cees Veerman states that we should be cautious with the agricultural production capacity in the EU in both a quantitative and qualitative sense. He points out, 'EU surpluses are not the ultimate answer to food shortages elsewhere in the world, as they have never been. The battle against hunger can only be won by strengthening rural development in poor countries and supporting the spending capacity of their populations, and by creating fair and open markets'.

This book is a very useful contribution to the literature on the CAP.

Lib Dems lack say in farm policy-making

Defra is just one of three government departments that does not include a Lib Dem minister. Moreover, all the ministers in the department have strong farming links, inclining them towards a productionist agenda.

Lib Dem farm spokesman Andrew George, the MP for West Cornwall and the Isles of Scilly, has criticised the Conservative stranglehold on posts. Differences have emerged on the proposed badger cull and the decision to abolish the Agricultural Wages Board.

Mr George has been trying to work with the Secretary of State, Caroline Spelman, to have some say about how budget cuts are made. However, he has admitted that he was 'not yet in the inner circle of Defra ministers'.

Most disagreements are likely to be over matters of domestic policy such as the two that arisen already, rather than attitudes towards the CAP where both parties share a relatively liberal, market oriented stance. However, the Lib Dems are particularly attuned to the concerns of smaller farmers from whom they receive electoral support.