EU CAP IN INTERNATIONAL PERSPECTIVE OECD MONITORING … · • 52 OECD and emerging economies spent...

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EU CAP IN INTERNATIONAL

PERSPECTIVE

OECD MONITORING AND EVALUATION

SALV, Brussels 16 November 2017

Most of the USD ½ trillion spent to support farmers

distorts markets, is inefficient for public objectives

• 52 OECD and emerging economies spent USD 519 billion to support farmers (avg 2014-16).

• On average, 16% of gross farm receipts stem from public policies.

– OECD average: 18% - Emerging economies average: 14%

• Most of that (three-fifths) is transferred through price support.

– Among the most distorting forms of support, not efficient to achieve stated public objectives

• Only USD 90 billion are spent on general services.

• Those can help agriculture and food to be more productive, sustainable and resilient to external shocks, e.g.

– Investments in people: education, skills training and others

– Investments in physical infrastructure (including digital technologies)

– Investments in a well-functioning innovation, knowledge and information system

– Biosecurity inspections and controls adapted to the sector‘s needs

• Countries should improve coherence across policies, reduce distortive support and redistribute towards investments that help the sector to achieve its societal objectives.

OECD Trade and Agriculture Directorate 227/11/2017

• Information on policy developments in countries

• Includes comparable measurement of support to

agriculture (PSE methodology)

• Consistent over time and across countries

• Covers OECD and many emerging economies

• 52 countries – two-thirds of global agricultural value

30th Annual Report on

OECD Monitoring and Evaluation of Agricultural policies

27/11/2017 OECD Trade and Agriculture Directorate

Levels of support to producers in OECD and

emerging economies are converging

Support to farms as percentage of gross farm receipts

Source: OECD (2017), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database),

http://dx.doi.org/10.1787/agr-pcse-data-en

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Grand Total OECD 11 emerging economies

But producer support varies widely across individual

OECD countries and emerging economies

Support to farms as percentage of gross farm receipts (1995-97 and 2014-16))

Source: OECD (2017), "Producer and Consumer Support Estimates", OECD Agriculture statistics (database),

2014-16 1995-97

1) 1995-97 replaced by 2000-02

2) EU (15) for 1995-97, EU (28) for 2014-16

3) 2014-16 replaced by 2013-15

4) Not including non-OECD EU Member States

Trade distortions have been reduced more than

support – thanks to changes in the support structure…

OECD Trade and Agriculture Directorate 6

Relative change in the trade impact of countries policy packages and in the Producer Support Estimate,

selected countries, 1995-97 to 2014-16 (as measured in percent of gross farm receipts, respectively)

1) 2014-16 replaced by 2013-15

2) 1995-97 replaced by 2000-02

3) EU (15) for 1995-97, EU (28) for 2014-16

-100% -80% -60% -40% -20% 0% 20% 40%

European Union 3

South Africa

United States

Russia

Canada

Switzerland

Israel

Norway

Turkey

Philippines 2

Indonesia 1

Trade impact change (relative) %PSE change (relative)

27/11/2017

A significant part of support remains commodity-

specific, distorting signals faced by producers

Single Commodity Transfers, all countries, 2000-02 and 2014-16

(Percentage of gross receipts for each commodity)

Barley Wool Eggs Oats Soy-bean

Sun-flower

Sorghum Poultry Pigmeat

Palmoil

Sheepmeat

Beefand veal

Milk Wheat Maize Rape-seed

Sugar Cotton Rice Allcomm.

%2000-022014-16

Source: OECD (2017), "Producer and Consumer Support Estimates", OECD Agriculture statistics (database),

27/11/2017

Countries generally agree on what is needed

• Numerous objectives shared across countries:

– ensuring food security

– enabling producers to improve their living standards by operating in an open and

transparent trading system

– sustainable productivity growth

– building resilience

– ecosystem services

– inclusive growth and development.

• Countries also agree that more coherence is needed with other

policies

• OECD Agriculture ministerial 2016

To achieve these objectives, countries should shift the

focus of their agricultural and food policies

• More emphasis is needed to:

– Ensure an integrated approach to agricultural and food policies

– Prioritize investments in people’s education and skills and agricultural innovation

systems;

– Prioritize investments in strategic physical infrastructure;

– Clarify and streamline risk management policies;

– Target funds to specific objectives and intended beneficiaries.

– Phase out market price support.

– Phase out output and input subsidies.

Evaluation of the CAP 2014-20

• Evaluation of the main new features

• Special focus:

– Coupled support

– Risk management

– Environmental measures

• ex-ante assessment using the OECD indicators

of support and the CAPRI model

Published in July 2017

Consecutive reforms have shaped

today’s CAP

New instruments have replaced most

distorting forms of support

45% % of gross farm receipts Support based on: Commodity output

Input use

Current A/An/R/I, production required 1

Non-current A/An/R/I, production required

Non-current A/An/R/I, production not required

Non-commodity criteria

Miscellaneous

Stable overall budget: how is it spent?

Notes: Total public expenditure includes national co-financing and national top-ups. An annual average expenditure on national Rural

Development Programmes (RDP) is calculated by the OECD using the seven year national RDPs as published.

Source: EU budget data 2017 and OECD calculations based on published national RDPs.

CAP 2014-20: Less commonality

Choice measures:

• Higher payments to first hectares [9 MS]

• Simpler conditions for small farms [15 MS]

• Reduced BPS above150K [22 MS]

• Coupled support [0% to >50% of MS DP]

– more relaxed conditions

– more (18) commodities

– more budget: 10% of DP budget

To fund choice measures => BPS down.

The lion’s share of coupled support

goes to livestock sectors

Beef and veal; 41%

Milk and milk products; 20%

Sheep meat and goat meat;

Protein crops; 11%

Fruit and vegetables; 5%

Sugar beet; 4%

other; 5%

27/11/2017

Coupled support should be ended

• VCs distort markets and resources

between sectors

• Short-term income problems should be

addressed with risk management tools

• P2 instruments can support farm efforts to

achieve long-term competitiveness and

productivity gains

Risk management

• Less market intervention => more exposure to risks

• OECD analysis of RM in agriculture: – 3 layers: normal, marketable and catastrophic risks.

– Need to look at all policies holistically

• Little take up of CAP RM:– Direct payments limit downside income risks

• one-fifth of farm receipts results from policies.

– Schemes and services may exist at MS level.

• Crowding out of farm-level actions and markets?

• RM measures may work counter to enhancing resilience

Illustration: RM strategies and policies

in Spain

Need to revisit Risk Management tools

• Integrated approach for normal, marketable and catastrophic risk:– Look at all risk exposure and incentives

– Clarify 3 layers

– Clarify public and private roles

– RM for income fluctuations or income levels?

– What is a disaster, and how to act?

– Resilience!

• Farmers must be co-responsible

• RM targeted at farm income requires detailed info on farm household income (Canada model).

Environmental measures

• Environmental components include:

– Cross-compliance: compulsory

– New Greening: compulsory,

• 3 conditions

• Agri-environment & climate measures

(P2): voluntary

– Continuation of former agri-environmental

payments

Greening assessment

• Marginal overall impact on EU aggregate production,

prices and trade.

• Local effects could be more notable and farming

practices would change in few areas:

– Ecological Focus Area increases land set-aside.

– In turn, this may increase intensive practices (within permitted

limits) on remaining productive land.

• Voluntary measures (P2) are more targeted and more

relevant to local objectives and conditions of member

states

Simplify and target environmental

components

Improve policy coherence:

• review all measures affecting environmental performance,

• assess local environmental conditions,

• Provide support where it is needed to achieve objectives.

Target measures to environmental outcomes at the farm level.

Enhance effects of environmental measures through:

• Improving farmer access to information and guidance.

• Monitoring correct implementation on farm.

• Adapting choices to local environmental conditions.

• Enforce environmental baseline; supplement with voluntary schemes

Overall impacts from CAPRI model

• small aggregate effects on production, prices, trade,

welfare and the environment.

• BPS & coupled support & convergence =>

redistribution between sectors and between MS.

• Greening only impacts some specific land allocations.

• Greening >< VCS = inconsistent signals.

Future directions

Better target support to

• the provision of public goods, such as environmental stewardship and climate change mitigation.

• Foster (climate) resilient farming practices.

• Stimulate innovation – widely defined; incl. education

This will require

• Policy coherence between incentives to produce, environment and risk management – and with non-agriculture policies

• Clarification of risk management needs

• Clarification of tax provisions in MS

• Re-design of income support to address income problems.

• Explore voluntary/contractual approaches to support farm businesses and enhance environmental outcomes instead of blanket support

EU CAP IN INTERNATIONAL PERSPECTIVE OECD MONITORING … · • 52 OECD and emerging economies spent...

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