Sunday, April 29, 2012

Amid the wreckage

Alexander Stubb, Finland's EU affairs minister, is quoted in the Financial Times as saying. 'The worry I have in the whole European debate - and we have seen it in the French presidential elections, we see it in the Netherlands, we have also seen it in Finland - is that some fundamentals of European integration are under attack. They include Schengen, the ECB, the euro, the internal market and trade policy. And you know, if we take them away, what's left?

The short and unfortunate answer is the Common Agricultural Policy which still dominates the EU's budget. There is a certain irony in the possibility that among the wreckage of European policies, the CAP would be left standing. Arguably it is the most dysfunctional of the EU's policies.

Stubb, by the way, is a self-confessed EU nerd. Intrigued by his English-sounding name, I found that he went to high school in Daytona Beach, Florida, took his first degree in the States and has a PhD from LSE. Read more here: Stubb

Friday, April 27, 2012

Completing CAP reform on time

In this week’s issue of Agra Europe, editorial director Chris Horseman, who is one of the most experienced and knowledgeable observers of the CAP, suggests that the deadline of January 1, 2014 for the new CAP could be missed unless EU leaders can conclude the Multiannual Financial Framework negotiations by the end of this year.

Horseman argues that the crux of the problem is the fact that MEPs have taken the view that they are not in a position to pass judgement on how CAP spending should be allocated in 2014-2020 if they do not know how much overall spending will be available. Therefore, the need for their Council counterparts to agree a financial framework to provide funds for the Single Farm Payment system becomes an imperative.

However keen the European Commission may be to keep the negotiations on the reform of the CAP and on the future MFF technically separate, the two issues are politically inseparable, Horseman says, before exploring the ramifications and potential scenarios instigated by the deadline for CAP reform being missed.

It has been my view for some time that the deadline would be missed and that January 2015 was a more likely date. It has also been my view that the involvement of the European Parliament would slow down the process and make reform more difficult to achieve. The requirements of a democratic process mean that it should be involved, but the effect on outcomes may be less desirable.

The crux of the issue is that when European domestic governments are practising austerity, and are likely to do for some time to come whatever the calls for a growth strategy, it becomes increasingly difficult to justify the share of the EU budget devoted to the CAP. There is a high 'opportunity cost' in terms of money that could be spent on infrastructure projects that would help employment and research and development that would enhance Europe's flagging competitiveness.

Even within the farm budget there is a strong case for spending more on applied research which would help European agriculture to meet food security challenges in a sustainable way much more than blanket subsidies.

Wednesday, April 18, 2012

CAP reform proposals 'too complex'

The Court of Auditors has published a report arguing that the proposed CAP reforms are too complex and will not achieve the desired aim of simplification. They might not end the controversial practice of 'sofa farming'.

The Court recognises the efforts made by the Commission to simplify the provisions of the CAP and to address a number of observations made by the Parliament, the Council and the Court. However, the Court considers that the legislative framework of this policy remains too complex.

For example, six distinct layers of rules govern rural development expenditure. With respect to cross compliance, the Court considers that, in spite of the proposed reorganisation, the complexity of this policy continues to make it difficult for paying agencies and beneficiaries to administer.

In spite of the claim that it focuses on results, the policy remains fundamentally focussed on spending and controlling expenditure and therefore oriented more towards compliance than performance. In particular, the specific objectives of direct payments to farmers are not set out in the articles of the relevant regulation, nor are the expected results of those provisions or the type of indicators to be used to measure such results.

With respect to rural development, the Court has underlined the importance of setting out specific concrete objectives that the proposed measures are designed to achieve and of ensuring that support is targeted to rural areas where the aid is most needed. Similarly, the objectives and qualitative and quantitative results that are expected of the implementation of cross compliance obligations as well as of the ‘greening’ component of direct payments are not adequately laid down. The disclosure of such objectives would help focus the policy on delivering the desired results.

The Court has noted the Commission’s intention to direct CAP payments to “active farmers” and to achieve a more balanced distribution of direct payments among beneficiaries. However, the Court considers that the risk persists that payments may continue to be made to beneficiaries who do not exercise any agricultural activity. Furthermore, the Court notes that the redistribution effect of the reduction of the amount aid when such aid exceeds certain levels (“capping”) will be limited.

Furthermore, the Court has doubts as to whether some of these proposed measures can be implemented effectively without imposing an excessive administrative burden on national managing agencies and on farmers. As a way out of this difficulty, the Court suggests adopting a general and simple definition of what constitutes an “active farmer” and to entrust the Commission with the task of managing the implementation of the resulting legislation with a view to reaching the high level objectives set out in the Treaty. These objectives are to increase agricultural productivity as well as increasing the individual earnings of persons engaged in agriculture.

The Court notes that the Commission estimates that the proposed reform is likely to result in an increase of 15 per cent in the costs of managing the direct payment schemes which will be borne by Member States. The Court notes that no information is available on the extent to which such additional costs might be offset by increased management or policy efficiency.