More CAP reform on the horizon

by World Grain Staff
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Europe’s Common Agricultural Policy (CAP) has been a victim of its own success. It was founded by politicians who had known a time when much of the continent was starving and were determined to make sure it didn’t happen again. It worked so well that the E.U. became famous for its grain and butter mountains and its wine lake.

In a speech in April, the European Commissioner in charge of agriculture, Dacian Ciolos, described Europe at the time of the CAP’s invention.

"Europe still had a lot of weapons but not enough agricultural machinery," he said. "It dreamed of being self-sufficient in terms of food. The fear of rationing had to be eliminated once and for all."

Since the early 1990s, when the member of the European Commission then responsible for agriculture, Ray MacSharry, forced through the first major round of reform, it has changed dramatically. Driven by the need to cut surpluses and satisfy the requirements of international trade deals, payments under the CAP were decoupled from production. The most recent reform, known as the Health Check, was agreed to in 2008. It simply followed the spirit of reforms agreed to in 2003 and envisioned a more full-scale change post-2013.

For now, Europe is at the talking-about-it stage.

"It is required that there is reform of the CAP post-2013," Maeve Whyte, director of the English National Farmers Union’s office in Brussels, told World Grain. "In particular, in the last nine months to a year, you had a lot of people talking about it. Because any changes to the CAP have to be initiated in a policy document from the Commission, nothing official has been done. The Commission is due to initiate its proposals in November. They’re going for the end of November."

It puts the new European agriculture commissioner, Dacian Ciolos, who took over the job in February, at the center of European agricultural history. He’s why the Commission is holding on for as long as it can.

"Because you have a new commissioner, Dacian Ciolos, he needed time to bed into his job," said Whyte. "He knows the whole of the CAP’s future will be decided on his watch."

Ciolos launched a consultation, starting on April 12, on four basic questions: Why do we need a CAP? What do citizens expect from agriculture? Why reform the CAP? What tools do we need for the CAP of tomorrow?

"All of society benefits from the CAP through food, land-use management, the environment," Ciolos said. "But are Europeans aware of this? The answer is no, or in any case, not enough. The Common Agricultural Policy suffers from a lack of exchange with European society."

By the time the consultation closed, they received 5,474 valid responses, having weeded some out for abusiveness, irrelevance or incoherence. Commissioner Ciolos welcomed what he called the strong public participation. The results were to be publicized in late July, after World Grain had gone to press.

Since the last round of reform, the way Europe is governed has changed dramatically. All of a sudden, under the Lisbon Treaty, which entered into force on Dec. 1, 2009, the European Parliament has some teeth on farming policy. Before the treaty went into effect, the Parliament could talk but had little real power.

Realizing the opportunity, Scottish Liberal Democrat Member George Lyons of the European Parliament got his colleagues to vote on a resolution letting the Commission know what the Parliament wants to see. "It’s an own-initiative response" explained Whyte. "George Lyons decided he wanted Parliament to take a view. It’s not legislative, but it is Parliament’s view."

According to the MEPs, the big challenges facing the farming world include climate change, the need for secure food supplies, food quality and business competitiveness. The European Parliament announced the vote with a reminder that "since the Lisbon Treaty, the overall E.U. reform plans and any E.U. agricultural legislation cannot be approved without Parliament’s agreement."

The MEPs want the funds allocated to the CAP to be at least maintained, and they want to make sure that agricultural policy is not "renationalized" (returned to national control).

"Direct payments to farmers should be fully funded from the E.U. budget to avoid any co-financing by governments that could erode fair competition within the single market," the parliament said in a statement on the resolution.

With a new British government that is looking very hard for ways to save money and a British public which is often less sympathetic to the needs of agriculture than some, the NFU stressed this point in its own paper on the reform.

"The threat of renationalization is very real given the budgetary pressures faced by the European Union," it said. "It must be avoided at all costs, since it would exacerbate to an unacceptable degree any competitive distortions in the single market and herald the end of the CAP. The CAP must remain a centrally funded policy. It must continue to be based on the principle of financial solidarity across the E.U., and further co-financing must be resisted."

Whyte said the NFU wants to make sure it’s a common policy and "that the single farm payment and direct payments are maintained, that it continues to be decided at the E.U. level."

The suggestions from MEPs also included a proposal for an E.U.-funded top-up payment to reward farmers for reducing carbon emissions and increasing soil sequestration on a perunit-of-production basis. They want the level of payments to farmers to be maintained, but they want it to be fairer. They want the high standards of food safety, environment, social legislation and animal welfare that Europe’s farmers must meet to be rewarded. Imports from outside the E.U. should meet the same criteria with due respect for WTO rules, and traceability should be improved to allow consumers to make informed choices.

The MEPs agreed that food quality policy was important to making European agriculture competitive. "Geographical indications of origin need to be strengthened and enforced so as to allow the E.U. to keep its leadership in this area, using protection and promotion instruments," the Parliament said. "Increased competitiveness would also allow farmers to cover costs, respond to market signals and earn stable returns."

The MEPs proposed strengthening the bargaining power of producers in the food supply chain. They want a safety net to deal with price volatility, including public and private storage.

"They also propose new measures, such as creating futures markets or a harvest risk insurance policy to cope with extreme climate conditions," it said.

It said rural development must remain a central aim of the CAP, and the current two-pillar structure, based on production support and rural development, should be maintained.

"Agriculture urgently needs to attract young farmers, and this could be achieved through favorable loans for investment to meet high start-up costs and overcome difficulties in accessing credit," the Parliament said.

"I welcome the report on the future of the CAP by George Lyon, which was voted through the European Parliament Plenary session today," Commissioner Dacian Ciolos said in response. "It will provide a useful input into our deliberations as we draft our Communication on the post-2013 CAP due for publication in November.

"This own initiative report raises important issues about the need to ensure a better balance at the heart of the CAP between food security and the efficient management of natural resources. It also offers interesting ideas on safety net and risk management mechanisms. I note with interest the call to make our policy more understandable to the wider public."

The Europe-wide farmers’ organization, Copa-Cogeca, has also presented its ideas.

"Direct payments to farmers under the CAP must continue after 2013 if farmers are to continue to provide the huge public benefits of safeguarding the countryside and providing food security," Copa-Cogeca Vice-President Gerd Sonnleitner told a European Parliament hearing. "Payments should be directed at active farmers."

He also insisted that the CAP should continue to include market management measures. "Faced with the new challenge of increasing market volatility as well as growing world food demand, the future CAP must ensure that markets function better," he said "The remaining measures to manage the market must be kept. We are also examining new tools to deal with market volatility such as contracts, safety nets and risk insurance. We need to reinforce farmers’ position in the food chain. One way of doing this would be by concentrating supply via the development of producer organizations, especially cooperatives."

Whyte stressed that anything about the CAP could change over the next few months.

"Nobody has had to put their marker in the sand," she said. "The period we are in is one where we are trying to shape the Commission’s position."

Her union is not so convinced about risk management. "One of the big debates is whether risk management tools should be included as a compulsory part of the CAP," she said. "Others say the Single Farm Payment is a risk management tool. We belong in that camp.

"Everything relative to the CAP is up for grabs."

Chris Lyddon is World Grain’s European editor. He may be contacted at: