Groupe de Bruges

Dilemmas of CAP reformcompetitiveness and public goods,

can farmers deliver both? 8th April 2011

The CAP and Public GoodsA view from land managers

Allan BuckwellPolicy Director

Agricultural competitiveness and land-based public goods

• The economic and policy context

– Agricultural commodity market context

– European fiscal austerity

– The size and allocation of the EU budget for the MFF 2014-2020

– Trade liberalisation: Doha and Mercosur

– Undersupply of environmental goods

Implications?

– Less for what the market rewards; more for the market failures• Higher market returns = less

justified income support, & more need and more cost for environmental delivery

– Social equity, between• Member States, • CAP Pillars, • Arable vs livestock• Favoured vs less favoured• Europe’s marginal farmers

The story of 20th Century commodity prices

real non-energy commodity prices, 2000 =100

80

120

160

200

240

280

320

360

4001900

1904

1908

1912

1916

1920

1924

1928

1932

1936

1940

1944

1948

1952

1956

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

2000

2004

2008

2012

2016

2020

Source: World Bank, April 2009

1917

1951 (post war rebuilding)

1974 (first oil crisis)

2008

forecast

… and UK Foresight projections of commodity prices by 2050…

Equity – between Member States?

The CAP towards 2020• The Commission’s three objectives

– Viable food production– Sustainable management of natural

resources and climate action– Balanced territorial development:

avoiding land abandonment, dealing with the 5.5m semi-subsistence farmers

• The two key proposals:• Commission – Ciolos, bolstered by the

three Commissioners 11th March letter • Parliament – Dess

• Council failed to find consensus • The debate is still open

Commission’s Option 1

• Pure financial redistribution

Option 2 Greening Pillar 1• Basic decoupled direct payment: uniform per Ha

in each MS/Region; keeping entitlements and cross compliance, plus ceilings – adjusted for labour

• A mandatory greening component, – Non-contractual annual payments, perm

pasture, green cover, rotation, ecological set-aside, enhanced cross compliance and N2K

• Additional income support to all farmers in areas with specific natural constraints as area-based payments, to complement P2 action in LFAs

• Plus specific small farmer scheme + limited voluntary coupled supports

• Better definition and targeting to Active Farmers

Option 3, European Parliament rapporteur

Albert Dess’s ideas• Pillar 1 remains but smaller (?)

– Greening of P1 via conditionality to P2– Maintaining production capacity, GAEC.

• Pillar 2 expands; resource protection role– Conditionality: obligatory participation in

2 priority programmes in P2 (to get DP)– Co-financing reduced – Pillar 2 resource protection beyond XC.– Mentions: erosion, permanent pasture,

ecological strips, rotation, CO2 sequestration, organic farming, new green technology’ innovation

Comparison of Ciolos and Dess• Similarities:

– Two pillar CAP, more compulsory low-level greening– Reference to WFD, Climate Change and N2K– Restrict support to active farmers– Greening = crop rotation, green cover, EPA and PP

• Differences:• Ciolos Dess

– Greens P1 (thinly) Conditionally greens P1 in P2 + organic, erosion, CO2, Green

technology and innovation – No more P2 resource ? Expands P2 resource– Annual non-contractual Multi-annual, contractual,

M&E– New XC controls Existing controls in P2– LFA top-up in P1 Existing LFA payments in P2 – Payment ceilings No payment ceilings– No mention of Co-fin.Reduce Co-financing in P2

• Political assessment– Legitimises pillar 1? Undermines Pillar 1?– Poor delivery of PGs? Stronger delivery of PGs?

Other contentious issues

• How countries/farmers who are signed-up for existing agri-environment will fit in?

• If Ciolos or Dess proposals go through, existing schemes will have to adapt

• Ceilings on support: scale and adjustment

• Narrower definition of “Active Farmer” ?

• Are we doing more for the Less Favoured Areas?

• What is happening to Co-financing?

• Few new ideas on Rural Development

Other competitiveness issues

• Dealing with volatility– Maintain minimal safety net intervention– Sarkozy: control of speculation; restricting

export bans; more open info on stocks– Commission: Canadian Income

Stabilisation scheme, MS voluntary in P2

• Fairer conditions in the food supply chain– Changes in competition law– Codes of conduct

• Much talk about R&D and skills but no new actions mentioned

• Simplification – especially control & penalties

Where is this leading?

• The task is more complex than 1999 0r 2004:

– 27 MS, co-decision, budget pressure,

– lack of consensus on the key problems; especially the key question of this conference.

• Less strong leadership

• The momentum is with the Commission unless the EP provides a strong clear steer.

• Commission proposals autumn (four new regulations: CMO, DPs, RDR, Finance)

• The timetable looks like slipping.

Likely outcomes

• The CAP has to grasp competitiveness and public goods; with more resource to the latter.

• The CAP will be smaller for the next period, still two pillars, with even less clear functional distinction

• With some redistribution of supports between MS and farmers.

• More low-level greening over most of the territory

• Some simplification of administrative procedures; but not as seen by farmers

• Farmers will be asked to jump through more hoops to get what support remains.

Contact details

Allan BuckwellTel + 44 (0) 20 74 60 79 37allan.buckwell@cla.org.uk

www.cla.org.uk

CLA16 Belgrave SquareLondon SW1X 8PQ