The European Commission has now issued its Communication on the future of the CAP and the NFU has made a critical response. It argues that the Commisson's proposals may entrench inefficiency rather than boosting competitiveness. It thinks that the Commission may have tried to please too many audiences, possibly leading to a rather incoherent document:
'Today’s future of CAP Communication has identified the challenges that European agriculture and the EU Common Agricultural Policy face over the next ten years. However the measures proposed in the EU Commission’s document are unlikely to help farmers rise to these challenges, the NFU has argued today.
The paper, which sets out the direction of the next reform of the CAP due to take place after 2013, describes the context for the next reform and argues that European agriculture must address concerns about food security, the environment, climate change and the economic viability of fragile areas. While these challenges are accurate, the NFU believes that the measures suggested in the paper to considerably reshape direct payments may harm the competitiveness of farming, as well as undermine efforts to simplify the CAP and make it more comprehensible to taxpayers.
NFU President Peter Kendall said that while these ideas come at a very early stage of the reform process it was difficult to take a firm judgment on the document.
“While today’s paper is not without good intentions or ideas, it does not appear to present the best approach to reform for the post 2013 period,” said Mr Kendall. “The proposals outlined in the paper are understandably general and will require considerable clarification.
“The Communication does provide a fair assessment of the economic, environmental and societal challenges facing farming and I am pleased that it recognises the importance of Europe to global food security and of farming to the economy, society and the environment. I am also pleased to see that the Commission supports the maintenance of a common European approach to agricultural policy.
“However when we set out our policy on the CAP in May we argued that any reform must be driven by core principles; commonality, market orientation, competitiveness and simplicity. It is against these principles that the proposals should be measured. When I look at ideas such as a tiered approach to payments, capping of support with labour adjustment and a significant flexibility measure, I tend to see a recipe for complexity, distortion and a risk of undermining efforts to help farmers become less reliant on support.
“This is the key long-term strategic challenge; to get farmers to a place where they can depend on the market for their income.
“We also must recognise the budgetary and political pressure the CAP will be under - and use the resources wisely. My worry is that the Commission’s proposals may actually entrench support and inefficiency in European farming rather than boost competitiveness.
“I believe that the Commission should build on the progressive direction of previous reforms, developing the two-pillar structure for the CAP and ensuring that each instrument has a clear objective – putting competitive agriculture at its heart.
“The Communication rightly dwells on the future of direct payments which, as the largest component of CAP spending, are a focal point for the next reform. However the complicated ideas from today confuse the role of direct support which should be about underpinning the economics of farm production and helping farmers deal with higher costs and volatility rather than delivering environmental goods. This is the role of rural development policies and I’m really surprised to see the Commission omit any reference to agri-environment schemes.
“I fear that the Commission has fallen into the trap of trying to please as many people as possible, in order to justify the money it spends, rather than adopting a clear direction for European agriculture. It is rare that a clear policy pleases all of the people all of the time but I fear that what we have here will end up as a confused proposal that suits no-one.”
This blog will provide further analysis and comment in the coming days, but at first sight the paper does not seem to differ greatly from the draft version leaked last month.
Showing posts with label future of the CAP. Show all posts
Showing posts with label future of the CAP. Show all posts
Thursday, November 18, 2010
Tuesday, October 19, 2010
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.
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.
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?
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?
Friday, August 06, 2010
Ideas from the NFU
After a long delay, I am returning to the NFU paper on 'The CAP after 2013', this time looking at some of their policy ideas. What guides their thinking is something I would agree with, the need 'to facilitate the creation of fairer and better functioning agricultural markets so that ultimately farmers can become less reliant on public support'.
There is no doubt that power has moved down the food chain to retailers to an extent that there is an imbalance in the market. The NFU note that 'most supply contracts are one-sided, conferring significant and undue power to purchasers.' The challenge is how to tackle this monopsony and the NFU suggests a legally enforceable code of conduct that would prevent abusive practices such as slotting fees. This is fine in principle, but the devil is in the detail given the complex distribution of responsibility between the EU and member states.
The NFU also suggests that more work should be undertaken on agricultural futures markets, including the prospects for their extension to a wider range of agricultural sectors. As they point out 'their availability is sparse in many sectors, which inhibits long-term price discovery.'
The NFU also draws attention to the need for more spending on applied science so that the sector can produce more but do so sustainably so that there is les impact on the environment. They suggest that the CAP could play a complementary role in supporting research and development, perhaps through a third pillar. The research infrastucture is an area where government has a legitimate and important role and it has been sadly neglected in recent years.
What is more open to question is the suggestion that Second Pillar programmes should be redefined to focus on agricultural rather than rural development. They are correct in arguing that 'There is a danger in seeing Pillar Two as a dumping ground for policy aspirations in different areas without providing the necessary funding'. However, the future of rural economies should be diversified and not overly dependent on agriculture.
Taken as a whole, the paper is a balanced contribution to the debate which has a number of constructive suggestions to make, although there is too great an emphasis on subsidies and protection for my taste.
There is no doubt that power has moved down the food chain to retailers to an extent that there is an imbalance in the market. The NFU note that 'most supply contracts are one-sided, conferring significant and undue power to purchasers.' The challenge is how to tackle this monopsony and the NFU suggests a legally enforceable code of conduct that would prevent abusive practices such as slotting fees. This is fine in principle, but the devil is in the detail given the complex distribution of responsibility between the EU and member states.
The NFU also suggests that more work should be undertaken on agricultural futures markets, including the prospects for their extension to a wider range of agricultural sectors. As they point out 'their availability is sparse in many sectors, which inhibits long-term price discovery.'
The NFU also draws attention to the need for more spending on applied science so that the sector can produce more but do so sustainably so that there is les impact on the environment. They suggest that the CAP could play a complementary role in supporting research and development, perhaps through a third pillar. The research infrastucture is an area where government has a legitimate and important role and it has been sadly neglected in recent years.
What is more open to question is the suggestion that Second Pillar programmes should be redefined to focus on agricultural rather than rural development. They are correct in arguing that 'There is a danger in seeing Pillar Two as a dumping ground for policy aspirations in different areas without providing the necessary funding'. However, the future of rural economies should be diversified and not overly dependent on agriculture.
Taken as a whole, the paper is a balanced contribution to the debate which has a number of constructive suggestions to make, although there is too great an emphasis on subsidies and protection for my taste.
Tuesday, June 22, 2010
What's wrong with the CAP
A polemical attack on the CAP using data from farmsubsidy.org which nevertheless admits that the chances of real reform are slim: CAP
Thursday, June 17, 2010
CAP consultation draws a big crowd
The consultation on the future of the CAP has been so popular that the deadline has been extended: Deadline
3,700 responses have been received, although that is not so many when one considers the size of the EU. I also wonder how many of them were from ordinary citizens or consumers and how many from special interests that derive benefits from the policy?
I am rather sceptical about such consultations as I think that they rarely change the minds of decision-makers who pick out those responses that suit their thinking. But I wouldn't want to discourage anyone from responding.
3,700 responses have been received, although that is not so many when one considers the size of the EU. I also wonder how many of them were from ordinary citizens or consumers and how many from special interests that derive benefits from the policy?
I am rather sceptical about such consultations as I think that they rarely change the minds of decision-makers who pick out those responses that suit their thinking. But I wouldn't want to discourage anyone from responding.
Thursday, June 10, 2010
How the NFU sees the challenges
After some delay, I am returning to the NFU paper on 'The CAP after 2013.' I would agree with their basic definition of the challenges facing farming: 'Put simply, farmers across the world will be required to produce considerably more food, from finite and precious resources, amid a changing climate and at the same time impacting less on the environment.'
The NFU specifies the benefits of the CAP in the following terms:
1. European consumers expect food that is produced to exacting environmental and welfare standards. These lead to higher regulatory costs which do not always apply to third country imports. The CAP is a form of compensation for these costs.
2. The CAP plays a key role in the EU's long-term food security.
3. There is a territorial cohesion role in terms of allowing farming activity to be spread throughout the EU. It also underpins rural employment [only in some, generally more remote locations in my view].
4. The policy helps to ensure that agricultural production is environmentally sustainable and helps to maintain some of our most important landscapes and environments. [This is essentially an argument for the second pillar].
But perhaps the real point is that 'Fundamentally, the CAP helps to address the failure of agricultural markets to develop fair and profitable returns to farmers.' What constitutes a 'fair' return is a moot point, but in my view farmers have experienced what I would regard as anti-competitive behaviour by supermarkets, especially in the UK. The solutions, however, reside in more effective use of competition policy (more on this in a later post].
Arguments (1) and (2) are really those that underpin the SFP. However, the actual costs imposed on (1) fall far short of present SFP payments. (2) is more difficult to quantify, particular given the uncertainties associated with climate change, but there are grounds for taking an 'insurance' payment against this.
Without the SFP, many farms would cease production. This would probably hit public benefits more than food production given that it is the most marginal farms that would cease production. What this points to (in the absence of an acceptable bond scheme) is a SFP at a reduced rate.
The NFU specifies the benefits of the CAP in the following terms:
1. European consumers expect food that is produced to exacting environmental and welfare standards. These lead to higher regulatory costs which do not always apply to third country imports. The CAP is a form of compensation for these costs.
2. The CAP plays a key role in the EU's long-term food security.
3. There is a territorial cohesion role in terms of allowing farming activity to be spread throughout the EU. It also underpins rural employment [only in some, generally more remote locations in my view].
4. The policy helps to ensure that agricultural production is environmentally sustainable and helps to maintain some of our most important landscapes and environments. [This is essentially an argument for the second pillar].
But perhaps the real point is that 'Fundamentally, the CAP helps to address the failure of agricultural markets to develop fair and profitable returns to farmers.' What constitutes a 'fair' return is a moot point, but in my view farmers have experienced what I would regard as anti-competitive behaviour by supermarkets, especially in the UK. The solutions, however, reside in more effective use of competition policy (more on this in a later post].
Arguments (1) and (2) are really those that underpin the SFP. However, the actual costs imposed on (1) fall far short of present SFP payments. (2) is more difficult to quantify, particular given the uncertainties associated with climate change, but there are grounds for taking an 'insurance' payment against this.
Without the SFP, many farms would cease production. This would probably hit public benefits more than food production given that it is the most marginal farms that would cease production. What this points to (in the absence of an acceptable bond scheme) is a SFP at a reduced rate.
Wednesday, May 05, 2010
NFU sets out ideas on CAP debate
The National Farmers' Union has published a major policy document setting out their ideas on the future of the CAP: NFU
The NFU has been working on this policy statement for some time and as one would expect it is a strategically oriented and sophisticated analysis. Clearly it takes account of the perspectives of farmers, but it is also politically realistic in terms of what can be achieved.
I don't agree with everything that is contained in the document, but it also contains a number of sensible and well thought through suggestions that provide a positive contribution to what is a very important debate.
As time allows over the next few weeks, I will through the document highlighting some of the major elements of the analysis provided and suggesting points of agreement and difference.
The NFU has been working on this policy statement for some time and as one would expect it is a strategically oriented and sophisticated analysis. Clearly it takes account of the perspectives of farmers, but it is also politically realistic in terms of what can be achieved.
I don't agree with everything that is contained in the document, but it also contains a number of sensible and well thought through suggestions that provide a positive contribution to what is a very important debate.
As time allows over the next few weeks, I will through the document highlighting some of the major elements of the analysis provided and suggesting points of agreement and difference.
Tuesday, April 27, 2010
The future of the CAP
Interesting and informative article in The Economist looking at the future of the CAP: CAP
Friday, April 16, 2010
Debate on future on CAP launched
The European Commission has launched a debate on the future of the CAP. Judging by the remarks made by EU farm commissioner Dacian Ciolos to the European Parliament, one of his main concerns is to engender broader public understanding of and support for the CAP. But if you want to take part in the debate, you should go here: Debate
Tuesday, March 09, 2010
Sarko accepts budget cuts
President Sarkozy has accepted the reality of CAP budget cuts, provided they are offset by greater import protection for farmers: Sarko
Farmers do not lack protection as it is with many tariffs in the three figure range. Sarko says that imported products should be produced to the same standard as in the EU which sounds reasonable enough but in fact is a way of excluding developing country exports altogether.
Farmers do not lack protection as it is with many tariffs in the three figure range. Sarko says that imported products should be produced to the same standard as in the EU which sounds reasonable enough but in fact is a way of excluding developing country exports altogether.
Thursday, February 11, 2010
Ciolos gets positive report
The authoritative Agra Focus has given a positive report on how new commissioner Dacian Ciolos handled his confirmation hearings in front of the European Parliament, although they and others think that the process leaves a lot to be desired.
Given his background it was not surprising that he would handle technical matters competently, but apparently his political atennae were impressive. Let's hope this doesn't mean kowtowing to farm interests. The longest spontaneous applause he received from MEPs in the committee was for stating that he will defend the largest CAP budget possible. He has also received the dubious accolade of being embraced by the farm lobby COPA-COGECA which welcomes his intention to defend a 'robust CAP'.
He did make it clear that direct payments will have to be maintained to provide 'a minimum level of stability in farmers' incomes', but this was not a surprising stance. He cited food security as one reason, but one might question why farmers need financial stability when it is not available to other small businesses that face fluctuating levels of demand.
He did, however, rule out any return to old style policy instruments, making the sensible suggestion of a guarantee or insurance fund that could kick in should there be price volatility. He also wants to reduce the gap between the average payments per hectare in member states by moving away from payments on an historic basis as used in most 'old' member states.
Given his background it was not surprising that he would handle technical matters competently, but apparently his political atennae were impressive. Let's hope this doesn't mean kowtowing to farm interests. The longest spontaneous applause he received from MEPs in the committee was for stating that he will defend the largest CAP budget possible. He has also received the dubious accolade of being embraced by the farm lobby COPA-COGECA which welcomes his intention to defend a 'robust CAP'.
He did make it clear that direct payments will have to be maintained to provide 'a minimum level of stability in farmers' incomes', but this was not a surprising stance. He cited food security as one reason, but one might question why farmers need financial stability when it is not available to other small businesses that face fluctuating levels of demand.
He did, however, rule out any return to old style policy instruments, making the sensible suggestion of a guarantee or insurance fund that could kick in should there be price volatility. He also wants to reduce the gap between the average payments per hectare in member states by moving away from payments on an historic basis as used in most 'old' member states.
Tuesday, February 02, 2010
NFU slams new CLA policy on CAP
Landowners and conservationists have launched proposals for a more environmetally friendly CAP: CAP
When I attended a RASE lecture last year it was evident that there were some differences of emphasis between the approach of the Country Land and Business Association and the NFU. These have now become more marked to judge from the NFU's response which sees the CLA's approach as 'out dated' and 'naive': NFU
When I attended a RASE lecture last year it was evident that there were some differences of emphasis between the approach of the Country Land and Business Association and the NFU. These have now become more marked to judge from the NFU's response which sees the CLA's approach as 'out dated' and 'naive': NFU
Monday, January 11, 2010
The health check is over
The health check is now well and truly over so the CAP Health Check blog has been replaced by a new and more attractively designed site at Subsidies
They also have a film on You Tube about the work of their site: You Tube . This is interesting and well-made.
I suppose my view would be that if you are going to have subsidies, one has to be careful about cutting them off from large farmers who are arguably more efficient and certainly more internationally competitive. Of course, 'efficiency' is a contested concept and does not take account of negative environmental externalities, but what that implies is a proper Pillar 2 in the CAP and a new Pillar 3 to deal with climate change (or at least a substantial climate change dimension to Pillar 2).
They also have a film on You Tube about the work of their site: You Tube . This is interesting and well-made.
I suppose my view would be that if you are going to have subsidies, one has to be careful about cutting them off from large farmers who are arguably more efficient and certainly more internationally competitive. Of course, 'efficiency' is a contested concept and does not take account of negative environmental externalities, but what that implies is a proper Pillar 2 in the CAP and a new Pillar 3 to deal with climate change (or at least a substantial climate change dimension to Pillar 2).
Wednesday, January 06, 2010
The NFU perspective on the future of the CAP
Britain's National Farmers' Union is noted for its strategic, long-term view of agricultural issues. Its officials have a sophsiticated, well informed view of developments and it was therefore interesting to read an interview in the latest edition of Farmers Weekly with the NFU's head of economics and international affairs, Tom Hind. He was at one time acting head of the NFU's office in Brussels.
Not surprisingly, he takes the NFU line that farmers need to continue to receive the single farm payment (SFP) to give them a degree of income stability, especially faced with volatile markets. A basic tenet of agricultural economics is that markets for farm commodities are relatively unstable: to put it at its simplest, even with modern agronomy, the weather remains a factor which can disrupt such markets. If one accepts the view that farmers as a category require market stabilisation measures (which is not quite the same thing as income stabilisation), there is still room for a debate about whether the SFP is a particularly efficient or fair policy instrument, but it could be argued that we have to work with what we have.
In any event, he is confident that the long-term legitimacy of direct payments will be strengthened during the upcoming debate about the future of the CAP. He is emphatic that decision-makers in the UK 'must move away from ideologically entrenched positions, especially on phasing-out direct payments.' Not surprisingly, he is heartened by the declaration made by 22 EU governments in Paris in favour of a strong CAP. It's a document short on specifics, but it really represents a political commitment, rather than a set of policy recommendations.
It is interesting that he does fear some further renationalisation of the CAP which many member states pushed during the health check. He notes that in recent weeks several governments have resorted to state aids to give support to their farmers. He is correct to point out that such activities can lead to competitive distortions between member states and hence undermine the single market. What particularly concerns him is the possibility of national co-financing of direct aids. With justification, he fears that UK farmers would lost out as the Treasury would not be keen to top up direct support.
He does oppose direct payment schemes that used farm size or turnover for determining levels of support. He says that such criteria are 'woolly' and they are certainly difficult to interpret and apply in practice given the legal and other issues surrounding what constitutes 'a farm'. However, the real objection is that Britain is one of the countries that would lose out. If one is going to have farm subsidies, and one wants European agriculture to be competitive, should they be denied to the farmers best placed to compete on international markets?
Where I have particular sympathy with him is when he says that what is wanted is a policy focused on the market. This does not mean just decoupling, but also correcting market failures such as excessive retail power. Whether the EU can do much about this is another question. In large part it falls within the competition policy remit of member state governments, but they are often reluctant to rein in retailers who keep down inflation by delivering cheap food to voters, albeit by using contractual and other tactics that are arguably unfair and not in the long-run interests of an efficient and effective food chain.
Clearly someone like Tom Hind is looking at these issues with the needs of his members in mind: that is what he is paid to do. Most of us wouldn't start from where we are and a sudden withdrawal of subsidies could have substantial negative impacts on the agricultural economy.
Nevertheless, modern farmers are much more market oriented and are aware that they have to deliver products that the consumers want: hence the proliferation of farm shops and small-scale processing businesses serving niche markets with value added products. Hopefully, they can eventually be weaned off subsidies, particularly if competition policy is used to remove unfair practices.
Not surprisingly, he takes the NFU line that farmers need to continue to receive the single farm payment (SFP) to give them a degree of income stability, especially faced with volatile markets. A basic tenet of agricultural economics is that markets for farm commodities are relatively unstable: to put it at its simplest, even with modern agronomy, the weather remains a factor which can disrupt such markets. If one accepts the view that farmers as a category require market stabilisation measures (which is not quite the same thing as income stabilisation), there is still room for a debate about whether the SFP is a particularly efficient or fair policy instrument, but it could be argued that we have to work with what we have.
In any event, he is confident that the long-term legitimacy of direct payments will be strengthened during the upcoming debate about the future of the CAP. He is emphatic that decision-makers in the UK 'must move away from ideologically entrenched positions, especially on phasing-out direct payments.' Not surprisingly, he is heartened by the declaration made by 22 EU governments in Paris in favour of a strong CAP. It's a document short on specifics, but it really represents a political commitment, rather than a set of policy recommendations.
It is interesting that he does fear some further renationalisation of the CAP which many member states pushed during the health check. He notes that in recent weeks several governments have resorted to state aids to give support to their farmers. He is correct to point out that such activities can lead to competitive distortions between member states and hence undermine the single market. What particularly concerns him is the possibility of national co-financing of direct aids. With justification, he fears that UK farmers would lost out as the Treasury would not be keen to top up direct support.
He does oppose direct payment schemes that used farm size or turnover for determining levels of support. He says that such criteria are 'woolly' and they are certainly difficult to interpret and apply in practice given the legal and other issues surrounding what constitutes 'a farm'. However, the real objection is that Britain is one of the countries that would lose out. If one is going to have farm subsidies, and one wants European agriculture to be competitive, should they be denied to the farmers best placed to compete on international markets?
Where I have particular sympathy with him is when he says that what is wanted is a policy focused on the market. This does not mean just decoupling, but also correcting market failures such as excessive retail power. Whether the EU can do much about this is another question. In large part it falls within the competition policy remit of member state governments, but they are often reluctant to rein in retailers who keep down inflation by delivering cheap food to voters, albeit by using contractual and other tactics that are arguably unfair and not in the long-run interests of an efficient and effective food chain.
Clearly someone like Tom Hind is looking at these issues with the needs of his members in mind: that is what he is paid to do. Most of us wouldn't start from where we are and a sudden withdrawal of subsidies could have substantial negative impacts on the agricultural economy.
Nevertheless, modern farmers are much more market oriented and are aware that they have to deliver products that the consumers want: hence the proliferation of farm shops and small-scale processing businesses serving niche markets with value added products. Hopefully, they can eventually be weaned off subsidies, particularly if competition policy is used to remove unfair practices.
Friday, January 01, 2010
New Year Greetings
I had an interesting visit to Australia in February and March and met many people connected with agricultural policy. This llama on a property in Queensland did not seem too pleased to see me, probably having been told that there was about to be a CAP regime for camelids.
May I wish all readers a happy, prosperous and healthy new year. I would like to be also able to forecast that the momentum of CAP reform will be maintained, and that agricultural policy will increasingly be adapted to the needs of climate change mitigation and adaptation, but I am not optimistic on either point.
Monday, July 27, 2009
Franco German alliance revived
France and Germany are seeking to revive the Franco-German alliance on CAP reform, seeking to agree a mutual deal which they can then impose on others. This may, however, not be so easy in a 27 member state EU. France and Germany may, however, be able to exploit the existence of a lame duck administration in Britain, the main champion of liberal solutions, combined with a likely change of government next year.
Paris and Berlin haveannounced the creation of a Franco-German working group to frame reform of the EU's Common Agricultural Policy (CAP) after 2013. The working group was established on 2 July, a day before newly-appointed French Farm Minister Bruno Le Maire met with European Commission President José Manuel Barroso to explain France's stance on the future reform.
Le Maire said Barroso had shared his views on the 'strategic importance' of agriculture to the EU and on guaranteeing European food security.' It is absolutely necessary to regulate production,' Le Maire told the press after the meeting, insisting that the agricultural sector is far too strategic to be left to market forces alone.
'More regulation' will be France's guiding line in negotiations on farm reform, he added. But regulation does not necessarily mean quotas, he added, a reference to ongoing protests over milk prices.
'Our main political objective must be to guarantee stable and decent revenue for farmers,' he went on, noting that French farmers had lost 20 pet cent of their income since 2008. Such price volatility and decreases are 'not economically viable' and 'farmers cannot live with such instability,' he stressed. In other words, they must be funded by European taxpayers.
Franco-German cooperation on CAP reform will be very tight, Le Maire said, indicating that he would add a German official to his cabinet to prepare the work. Similarly, a French official will be sent to Berlin, he said.
The working group is open for others to join, he added, announcing a charm offensive tour of EU capitals that will start in London before going to Madrid, Rome, Bucharest and Warsaw. Paris and Berlin expect to table their first guiding principles for CAP reform 'in the coming months,' he added.
The appointment of Marie, formerly junior minister for European affairs, as farm minister in the 23 June reshuffle was itself significant. An ENArque, he has no clear agricultural experience or background. He is, however, a fluent German speaker and made numerous visits to Berlin in the first half of the year.
Paris and Berlin haveannounced the creation of a Franco-German working group to frame reform of the EU's Common Agricultural Policy (CAP) after 2013. The working group was established on 2 July, a day before newly-appointed French Farm Minister Bruno Le Maire met with European Commission President José Manuel Barroso to explain France's stance on the future reform.
Le Maire said Barroso had shared his views on the 'strategic importance' of agriculture to the EU and on guaranteeing European food security.' It is absolutely necessary to regulate production,' Le Maire told the press after the meeting, insisting that the agricultural sector is far too strategic to be left to market forces alone.
'More regulation' will be France's guiding line in negotiations on farm reform, he added. But regulation does not necessarily mean quotas, he added, a reference to ongoing protests over milk prices.
'Our main political objective must be to guarantee stable and decent revenue for farmers,' he went on, noting that French farmers had lost 20 pet cent of their income since 2008. Such price volatility and decreases are 'not economically viable' and 'farmers cannot live with such instability,' he stressed. In other words, they must be funded by European taxpayers.
Franco-German cooperation on CAP reform will be very tight, Le Maire said, indicating that he would add a German official to his cabinet to prepare the work. Similarly, a French official will be sent to Berlin, he said.
The working group is open for others to join, he added, announcing a charm offensive tour of EU capitals that will start in London before going to Madrid, Rome, Bucharest and Warsaw. Paris and Berlin expect to table their first guiding principles for CAP reform 'in the coming months,' he added.
The appointment of Marie, formerly junior minister for European affairs, as farm minister in the 23 June reshuffle was itself significant. An ENArque, he has no clear agricultural experience or background. He is, however, a fluent German speaker and made numerous visits to Berlin in the first half of the year.
Tuesday, March 10, 2009
The future of the CAP
An excellent new site on the future of the CAP is now available organised around the theme of '2020: debating the future of the CAP': CAP 2020 . It has a particular emphasis on environmental issues, but has a broader focus than that.
Backed by the knowledge and expertise of the Institute for European Environmental Policy, this is going to be a key resource for analysts of the CAP. Indeed, it is going to eclipse anything that can be offerd on this blog or even what Jack Thurston has been able to achieve on CAP HealthCheck. He has been reorienting his interests in any case: Health Check
This blog will be kept going as from time to time I may be able to draw on my experience and contribute something to the debate. However, the debate is clearly moving on.
A document I saw recently suggested that the UK Government now has the ambition of phasing out the CAP as a protectionist and subsidy providing policy package by the year 2020. Even before the recession, I would have been sceptical about that ambition, given the strength of the political constellation that defends the CAP.
However, we now face a long and deep recession that it is going to have profound implications for the future role of government. Although the 'regulatory state' will probably be strengthened as a result, whatever government is in power in a particular country, it is going to have to cut public expenditure and raise taxes to pay off debt.
This might seem a golden opportunity to reduce the large sums that are spent on subsidising agriculture. However, even though the debate on the CAP has become more transparent, and significant changes have been achieved in the way in which it is delivered, the politics of bringing about change in the CAP remain challenging and complex. The policy will probably outlive me.
Backed by the knowledge and expertise of the Institute for European Environmental Policy, this is going to be a key resource for analysts of the CAP. Indeed, it is going to eclipse anything that can be offerd on this blog or even what Jack Thurston has been able to achieve on CAP HealthCheck. He has been reorienting his interests in any case: Health Check
This blog will be kept going as from time to time I may be able to draw on my experience and contribute something to the debate. However, the debate is clearly moving on.
A document I saw recently suggested that the UK Government now has the ambition of phasing out the CAP as a protectionist and subsidy providing policy package by the year 2020. Even before the recession, I would have been sceptical about that ambition, given the strength of the political constellation that defends the CAP.
However, we now face a long and deep recession that it is going to have profound implications for the future role of government. Although the 'regulatory state' will probably be strengthened as a result, whatever government is in power in a particular country, it is going to have to cut public expenditure and raise taxes to pay off debt.
This might seem a golden opportunity to reduce the large sums that are spent on subsidising agriculture. However, even though the debate on the CAP has become more transparent, and significant changes have been achieved in the way in which it is delivered, the politics of bringing about change in the CAP remain challenging and complex. The policy will probably outlive me.
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