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
added
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
-5
0
5
10
15
20
25
30
35
40
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
%
Grand Total OECD 11 emerging economies
27/11/2017 OECD Trade and Agriculture Directorate
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),
http://dx.doi.org/10.1787/agr-pcse-data-en
-20
-10
0
10
20
30
40
50
60
70%
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
27/11/2017 OECD Trade and Agriculture Directorate
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%
Chile
European Union 3
South Africa
United States
Russia
Canada
Switzerland
Japan
Israel
Norway
Turkey
Philippines 2
China
Indonesia 1
OECD
Trade impact change (relative) %PSE change (relative)
27/11/2017
A significant part of support remains commodity-
specific, distorting signals faced by producers
OECD Trade and Agriculture Directorate 7
Single Commodity Transfers, all countries, 2000-02 and 2014-16
(Percentage of gross receipts for each commodity)
-20
-10
0
10
20
30
40
50
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),
http://dx.doi.org/10.1787/agr-pcse-data-en
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
OECD Trade and Agriculture Directorate 827/11/2017
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.
OECD Trade and Agriculture Directorate 927/11/2017
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
OECD Trade and Agriculture Directorate 10
Consecutive reforms have shaped
today’s CAP
New instruments have replaced most
distorting forms of support
OECD Trade and Agriculture Directorate 1127/11/2017
0%
5%
10%
15%
20%
25%
30%
35%
40%
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?
OECD Trade and Agriculture Directorate 1227/11/2017
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.
OECD Trade and Agriculture Directorate 1327/11/2017
The lion’s share of coupled support
goes to livestock sectors
OECD Trade and Agriculture Directorate 14
Beef and veal; 41%
Milk and milk products; 20%
Sheep meat and goat meat;
12%
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
OECD Trade and Agriculture Directorate 15
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
OECD Trade and Agriculture Directorate 1627/11/2017
Illustration: RM strategies and policies
in Spain
OECD Trade and Agriculture Directorate 1727/11/2017
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).
OECD Trade and Agriculture Directorate 18
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
OECD Trade and Agriculture Directorate 19
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
OECD Trade and Agriculture Directorate 20
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
OECD Trade and Agriculture Directorate 21
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.
OECD Trade and Agriculture Directorate 2227/11/2017
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
OECD Trade and Agriculture Directorate 2327/11/2017
Further reading
OECD Trade and Agriculture Directorate 24
http://dx.doi.org/10.1787/9789264278783-en
27/11/2017
Much more information available in electronic form
• The whole Monitoring report including the country chaptersand the Statistical Annex is available on http://dx.doi.org/10.1787/agr_pol-2017-en.
• Data for the calculations of support are available at http://dx.doi.org/10.1787/agr-pcse-dat-en.
• An interactive database with the indicators of support is alsoavaliable on www.oecd.org/agriculture/PSE
• A compare your country (CyC) is also available at www.compareyourcountry.org/support-for-agriculture.
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• Visit TAD website: www.oecd.org/tad/agricultural-
policies/
• Contact us: [email protected]
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OECD Trade and Agriculture Directorate 26