Thursday, November 29, 2012

Trade-distorting subsidies fall

Trade-distorting farm subsidies in the EU fell in the last year for which figures are available (2009-10) to a mere €15.5bn. This puts them well within limits proposed in the Doha Round: Trade

The same source contains a useful summary of the agricultural dimension of the recent EU budget negotiations: Budget

Irish farmers have been worried enough by the threat to farm subsidies to occupy Commission offices in Dublin: Protest

Tuesday, November 27, 2012

Auditors criticise SAPS scheme

A scheme designed to support farmers' income in the accession states is riddled with flaws. Among the unintended beneficiaries have been ski clubs, hunting associations and real estate companies.

The European Court of Auditors has published its first special report (SR16/2012) on income support paid to farmers in the new Member States. It is calling for reform to ensure that income support be directed to the active farmer who conducts concrete and regular agricultural activities. In particular, public entities managing state land and not otherwise involved in farming should be excluded from EU farm support and no payments should be made in relation to unutilized land or land which is mainly devoted to non-agricultural activities.

The Single Area Payment Scheme (SAPS) was designed to enable the new Member States who joined the EU in 2004 and 2007, to support farmers’ income. It is currently applied in 10 EU Member States and the related expenditure amounted to 5 billion euro in 2011. The Court’s report focuses on the beneficiaries of the policy, on eligible land and on the contribution of the scheme to the objective of supporting farmers’ income.

The overall conclusion of the audit is that the implementation of the scheme resulted in a number of questionable features:

  • The definition of the beneficiaries of the scheme is inadequate: it permits payments to be made to beneficiaries not engaged in agricultural activity, or only marginally so. Cases in point include real estate companies, airports, hunting associations, fishing and ski clubs.
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  • In addition, in some of the countries concerned, aid was legally paid to (and supported the income of) public entities managing state land but not otherwise involved in farming. The state is the largest beneficiary of SAPS payments in Hungary (14 million euro in 2010 for 82000 ha of land).
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  • The total agricultural area in relation to which SAPS should be paid was not reliably determined by the Member States but accepted by the Commission. This influenced the amount of aid per hectare paid to each farmer which was sometimes higher or lower as it should have been. Some countries revised the total agricultural areas without proper justification. This allowed them to fully use their respective financial envelope.
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  • In spite of efforts made by the Member States concerned, aid was paid for parcels where no agricultural activity was carried out.
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  • There is an inherent contradiction in the design of SAPS aid: it is, on the one hand, intended to support the individual income of farmers, but on the other hand, the aid is distributed to farms based on the area of parcels of land at their disposal.
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  • SAPS primarily benefits large farms: overall, 0.2% of the beneficiaries receive more than 100000 € representing 24% of the total value of payments.
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  • Finally, even though SAPS was designed as a transitional scheme, most Member States have not prepared for the introduction (foreseen in 2014) of the system (based on payment entitlements) which is already in place in EU-15 Member States. This may result in significant delays in payments in the future.

The Court recommends a better targeted and results oriented policy whereby support to farmers’ income should be directed to the active farmer who conducts concrete and regular agricultural activities and should exclude public entities. The eligibility of land for aid should be clearly defined and limited to parcels on which concrete and regular agricultural activities are required. A more balanced distribution of aid between farmers should be sought either by capping higher individual payments or by taking into consideration the specific circumstances of the farms in the different regions. The Commission should address the structural weaknesses in the farm sector and actively support the Member States and more closely monitor their preparations for the introduction of a future entitlement-based scheme.

Wednesday, November 21, 2012

Could European young farmers become extinct?

The number of young farmers in Europe today is falling fast. We have reached a point where only 6 per cent of farmers across the European Union are under the age of 35. The situation is even worse in members states like Italy, Portugal and the United Kingdom, where the young represent less than 3 per cent of the entire farming community. This state of affairs is reaching breaking point, with five times as many farmers over the age of 65 than there are farmers under the age of 35 – this cannot continue for long.

With so little influx of youth into European agriculture, the sector could soon lose much of its competitiveness on a global market. Young farmers' representatives consider that nothing less than future food security and the vitality of rural areas across Europe is at risk. If nothing is done about the significant lack of generational renewal in the sector, European food production will be hit particularly hard as many elderly farmers retire. This is an aspect of food security that has been very much neglected.

With the Common Agricultural Policy currently being reformed for 2014-2020, there is a window of opportunity to counteract these developments and to prioritise this key age group in EU agricultural policy. If action isn’t taken now, European agriculture will not be able to face present and future challenges such as increased environmental protection, job creation, biodiversity conservation and above all, food security.

In order to raise awareness of this issue among the general public and policymakers alike, CEJA – the European Council of Young Farmers – has recently launched a campaign entitled “Future Food Farmers” which I am happy to endorse. With the support of European Commissioners, MEPs and key stakeholders in the sector, CEJA aims to reverse the negative demographic trend that is common to all Member States of the European Union and help young farmers to secure the future of European agriculture.

Everyone can express their support for the cause by taking the campaign’s online pledge, and join public figures like the President of the EESC Staffan Nilsson, Commissioners Dacian Cioloş, Janusz Lewandowski and Janez Potočnik, as well as MEPs Paolo De Castro, Luis Manuel Capoulas Santos and George Lyon in their efforts to keep EU agriculture alive. The online pledge is here: Pledge

The campaign video can be viewed here: Young farmers

Thursday, November 15, 2012

Grey mouse rocks France

EU Council president Herman van Rompuy has proposed an EU budget that is €20bn less than the current EU budget and at least €75bn less than the European Commission's original proosal. It focuses cuts on agricultural spending including a €13.2bn reduction in farm subsidies which drew a furious response from France. It does also plan to cut the UK rebate of €3.5bn.

There is also a row going on about cohesion funds. The Friends of Cohesion constitute a group of 14 member states from central and eastern Europe, with some from Southern Europe. They face a group of member states known as the Friends of Better Spending, but there are only seven of them (Austria, Germany, Finland, France, Italy, Netherlands, Sweden. Another name could be the 'group of net contributors': Better Spending .

Not all of those seven would sign up to a significant reduction in farm spending. Indeed, one could only rely on the Netherlands and Sweden.

Van Rompuy's proposals would mean €13.2bn less for Pillar One (P1) and €8.3bn less for Pillar Two (P2) for the 2014-2020 period than wanted by the European Commission in its initial CAP reform proposals. The cut is three times greater than the €6.8bn the Cypriot Presidency had suggested trimming off earlier this month, proposals which themselves caused a big storm.

The Cypriot plan would have seen €50bn cut from the overall EU budget, but Van Rompuy’s proposal would double that figure to nearly €100bn. Under the Council President’s plan, spending on P1 direct aid payments and market tools over the seven years would go from the €283.05bn tabled by the EU executive down to a maximum of €269.85bn, nearly 4.7% less. The CAP would bear the brunt of further cutbacks as a planned 'Crisis Reserve' to fund emergency measures - for which the EU executive had earmarked €3.5bn - would also be included under P1.

The P2 budget for co-financing national rural development programmes should go from €91.97bn to €83.67bn, around 9% less, Van Rompuy said. The Commission proposal for P2 already involves a 10% cut in real terms from 2013 to 2020, so a further €8.3bn reduction could mean some member states seeing their rural development envelope cut by more than 20% in real terms. Potentially, at least, this form of spending can be more socially useful than Pillar 1.

Somewhat predictably, EU Farm Commissioner Dacian Ciolos responded that the suggestion 'goes against efforts to make the CAP fairer, greener and more efficient'. He also said that this was the 'first step away from a common agricultural policy' and that it could set the CAP budget 'back 30 years'.

With the crunch talks on the multiannual financial framework set for next week (November 22-23), one interpretation is that the Council President has decided that some appeasement of the net contributing states is needed to ensure that the summit is not ‘dead on arrival’ and that progress can be made.

Meanwhile, Agra Europe analyst Brian Gardner has suggested a way to knock around 25% off the EU budget for 2014-20 in his latest comment article – reduce the size of the CAP budget by 75%.

He argues that with the strong likelihood that crop prices will remain at historically high prices in the years to come, largely due to increasing demand, the EU can afford to only provide subsidies to those farmers who really need it.

The EU's most efficient cereal growers in France, Germany and the UK, for example, with average yields of above eight tonnes per hectare, can make adequate profits without receiving EU income subsidies, he argues.

Monday, November 12, 2012

US-EU trade pact could be sunk by farm wars

Following the US elections, EU trade commissioner Karel De Gucht has sought to revitalise talks on a comprehensive bilateral trade deal between Europe and the EU. It reflects a growing recognition that nothing is going to come out of the Doha Round.

However, there is a long history of 'farm wars' between the EU and the US on everything ranging from chickens through pasta to beef hormones. The dispute on GM crops has been particularly troublesome as it is a subject of concern to many EU citizens.

The EU would like to eliminate agricultural tariffs as part of any deal, but Mr De Gucht admitted, 'Access to our agricultural markets will be one of the bones of contention.'

Although US trade supremeo Ron Kirk appears to take the idea seriously, and it has the backing of business interests in the States, it is less clear whether it has the high level political backing necessary for success. President Obama is not known for his interest in relations with Europe and did not give a lot of impetus to trade policy in his first term.


Friday, November 09, 2012

Parliament delays CAP reform process

The decision by the European Parliament’s agriculture committee (ComAgri) to delay a vote on laying out its official position on CAP reform until the beginning of next year once again brings into question whether an agreement can be made in time for the new policy to be implemented by the start of 2014. Indeed, for some time I have thought this very unlikely.

Although an official date for the vote was never set, it was generally considered that one would need to take place either this month or next in order for the Farm Council to have enough time to reach a consensus on its own reform package, and then for ‘trilogue’ talks to be held between EU institutions that will finally result in an agreement for the 2014-2020 CAP budget, reports Agra Europe.

MEPs have made it clear that they will not be pushed into approving the next CAP until the EU’s next long term budget is in place and the generally negative feedback from the Cypriot Presidency’s recent proposal to shave €7 billion off the bloc’s multiannual financial framework (MFF) for 2014-2020 is not an encouraging sign that heads of state will come to a firm agreement by the end of the crunch summit on November 22-23.

Those calling for a freeze or cut in real terms to the EU budget will have seized on the recent European Court of Auditors report, which again found that large sums of budget funds in 2011 were misspent, with rural development spending coming in for particular criticism. This is likely to increase the vulnerability of this form of expenditure to cutbacks given the importance of the single farm payments to the revenue streams of most farmers.

With austerity biting across the EU, and distrust in the institutions growing among the electorate, particularly in the UK, it must now be time for the European Commission to push through improved measures of accountability and transparency on how funds are being spent.

Monday, November 05, 2012

Nicosia gets the thumbs down from all sides

It isn't easy being a small state and holding the presidency of the EU, especially when you have to make proposals about the future of the CAP. Cyprus has ended up being attacked from all sides for its suggestions for a way forward on the CAP budget.

The Cypriot EU Presidency’s proposal to cut EU spending by €50 billion as compared with the Commission’s original proposal in the 2014-2020 period, including a €7bn reduction to the CAP budget, has been categorically dismissed by those on both sides of the budget debate – those who want to see an increase, and those pressing for bigger cuts, reports Agra Europe.

Nicosia has suggested reducing spending on CAP direct aid payments and market measures over the seven years from the €283.05bn tabled by the Commission to a maximum of €277.40bn, a cut of just over 2%. The Presidency also suggested reducing the EU average level of direct payments per hectare by at least 0.27% a year between 2015 and 2020, which would trim the proposed overall expenditure on direct payments in 2014-2020 by 1.3%.

The EU's rural development budget - used to co-finance national programmes - would go from €91.97 to €90.82bn, a 1.3% cut, under the Presidency's revised version of the 'negotiating box' for the multiannual financial framework (MFF). My hunch is that, unfortunately, this is where the brunt of the cuts will eventually fall. It only benefits some farmers and there are transaction costs in accessing it.

France has threatened to veto any deal that will result in a cut to the budget for agriculture, with farming groups across the continent calling for nothing less drastic than a CAP budget freeze. The European Parliament, which has also called for a freezing of the CAP budget, slammed the Cyprus Presidency's plan and claimed its voice has not been heard.

The proposal 'sends out a bad signal' and 'will inevitably put in jeopardy the future of certain key policies and programmes,' according to the Parliament's lead negotiators Reimer Boege and Ivailo Kalfin.

France and Germany recently backed the European Commission’s proposals to freeze the 2014-2020 CAP budget at 2013 levels in nominal terms – a reduction in real terms - and have subsequently found support from some of the usual suspects: Spain, Italy and Ireland among others.

On the other side of the debate, the old reformist coalition of the UK, Sweden and the Netherlands are pushing for cutbacks across all areas, including the CAP. This week the UK government, again backed by Sweden, argued that the Presidency proposals for a €50bn cut to EU spending 'don't go far enough' and that the figures are 'still way too high'.

Essentially Europe is split between, on the one hand, those 10 net payers to the EU budget, such as the UK, the Netherlands, Sweden, Denmark and Finland, who put more into the kitty than they get out, and on the other the 17 net recipient member states who mostly want to see an increase of at least five per cent. For all the talk of solidarity, it comes down to what you pay in and what you get out.

The net payers cannot justify an increase as it runs contrary to what they see as the severe economic reality currently gripping Europe. But the net recipients argue that growth and development across the bloc will be severely hampered unless struggling countries get the additional help they need. That may be so, but giving that help to agriculture is not the best way to boost growth and employment.