A race against time

Two important meetings as part of the process of agreeing a CAP reform took place earlier this week – the Agricultural Council on Monday and the Ecofin Council on Tuesday. The Agricultural Council meeting was notable for the success of the Irish Presidency in getting agreement on a compromise mandate on the Common Fisheries Policy reform after 36 hours of negotiations which it is hoped will be the basis for a political agreement with the Parliament before the end of the Irish Presidency in June.

We are not yet at the same point with the CAP reform dossier (see this recent update to the Irish Parliament by Simon Coveney, the Irish Minister representing the Council in the trilogue negotiations and this view from Mairead McGuinness, one of the shadow rapporteurs in the European Parliament). Both the Irish Presidency and the Agriculture Commissioner continue to make bullish pronouncements (as indeed they must) that an overall CAP package also acceptable to the European Parliament negotiators will be agreed at the next Agricultural Council in June. But is this more hope than reality?

The MFF issue

Before turning to the outstanding issues in the CAP negotiations we need to keep in mind that these negotiations are taking place in the context of the unresolved debate on the structure and funding of the EU’s long-term budget for 2014-2020. The Parliament had previously insisted that the two issues were inextricably linked, and that it would refuse to vote on CAP reform until the MFF budget agreement had been concluded.

However, it now seems that the Parliament’s CAP negotiators will be willing to reach a political agreement on CAP reform independent of the MFF outcome. It is now accepted that the consent process with the Parliament on the MFF will not change the CAP budget figures agreed in the European Council’s proposal last February. The Parliament’s negotiators are still trying to secure the release of the individual member state allocations for Pillar 2 rural development funding agreed as part of the European Council package, but even the continued suppression of these figures is not likely to be a stumbling block to a political agreement on the CAP regulations themselves.

However, progress on the MFF regulations may still influence the timing of the Parliament’s formal first reading vote on the reformed CAP if it decides to delay a vote on the new CAP regulations until after an MFF agreement. Here, the Ecofin Council agreement on the 2013 budget on Tuesday is important as it seems to postpone the likelihood of an MFF deal until after the end of October.

The 2013 budget

In a previous post, I discussed the four substantive questions remaining in the MFF negotiations. In addition, the Parliament has insisted as a threshold condition that additional unpaid liabilities from the 2012 and 2013 budgets should not be carried over to become a charge on the available funds in the 2014-2020 period.

I also highlighted that the trilogue negotiations had stalled because the Ecofin Council had refused to commit to approving the Commission’s draft 2013 amending budget which requested an additional €11.2 billion in payment appropriations to avoid this happening. An agreement between the three Presidents (Council, Parliament and Commission) in December 2012 when the 2013 budget was approved made provision for this amending budget.

The Parliament agreed on 6 May to restart the MFF trilogue negotiations following a meeting between the three partners in which the Council Presidency proposed to address the outstanding 2013 liabilities in two stages. It proposed to table a proposal for a first tranche for an amount of €7.3 billion, and to work with member states on a political commitment regarding the second tranche. The parties further agreed that the negotiations on the MFF for the 2014-2020 period would proceed in parallel with the negotiations on the draft amending budget for 2013.

Subsequently, the first MFF trilogue took place on 13 May in which the Council and the Parliament agreed both the scope and the calendar for the negotiations. The parties agreed that the negotiations will focus mainly on future flexibility of the EU budget, a revision clause, the future of the EU budget’s own resources and the unity of the EU budget.

The Ecofin Council last Tuesday reached a political agreement which supported the Irish Presidency compromise in the following terms:

Draft amending budget no. 2 for 2013 is about meeting outstanding payment needs in the 2013 EU budget. The Council agreed to provide EUR 7.3 billion in a first stage and to focus this amount on measures to support economic growth, create jobs and tackle unemployment, especially amount youth people.

The Council also adopted a statement confirming its willingness to take all necessary additional steps to ensure that the EU’s obligations are honoured in a second phase, when the Commission will have more information on implementation, the possibilities for redeployment and on budget revenues.

In a second statement the Council stressed the political nature of the agreement and declared to formally adopt its position on this draft amending budget at a later stage in parallel with the conclusion of the talks on the EU’s multiannual financial framework (MFF) for 2014-2020. Ministers stressed that nothing is agreed until everything is agreed.

The European Parliament’s Budget Committee must now take a view on these conclusions at its meeting tomorrow Thursday 16 May and decide if it is sufficiently water-tight to allow the MFF trilogue to proceed (the next meeting is scheduled for 28 May). Some initial reactions were negative, with Ivailo Kalfin (the Bulgarian MEP who is Vice-Chair of the Budgets Committee and one of the two rapporteurs on the MFF regulation) in this tweet refusing to accept the parallelism between the two processes and arguing that the 2013 additional funds are legally due in any case.

Even if the MFF trilogue gets the go-ahead tomorrow and a political agreement is reached by end-June, the Council’s decision to wait until the Commission comes forward with revised figures in October before committing to approve the remainder of the draft amending budget seems to suggest (if parallelism means what it says) that the MFF regulations will not be formally tabled for approval by Parliament until after that point in time.

This, in turn, may mean that the MFF sectoral legislation (including the revised CAP regulations) must also wait for first reading approval until after that point in time. The Commission has already accepted that the new rules for direct payments cannot come into force until 1 January 2015 and it has also proposed transitional rules for rural development programmes. However, a further delay in formal approval of the new CAP regulations is likely to further complicate the process of drawing up and approving member state rural development programmes.

CAP reform

While the political agreement on the fisheries reform was an undoubted political triumph for the Irish Presidency at last Monday’s Agricultural Council, the CAP reform debate was a curious affair. The Presidency made clear that it was not yet seeking a new mandate from the Council, but instead it sought feedback on three of the politically contentious items in the trilogue negotiations with the Commission and Parliament.

The issues it chose to focus on were the young farmers scheme, the small farmers scheme and the definition of an active farmer. According to Minister Coveney in the chair, the aim of the session was to narrow down the number of issues on which there needs to be a ‘political’ negotiation and compromise in order to get a whole package agreed in June.

While important, the differences on these three issues are not at the heart of this CAP reform. The decision to focus on these issues for the Council debate suggests that the Presidency did not want an open discussion on the more complex and central issues remaining – greening, internal convergence, flexibility between Pillars, sugar quotas, and the role of delegated and implementing acts – which might only have hardened positions and made an ultimate compromise more difficult rather than easier.

According to the Council conclusions (see also this statement released by Minister Coveney):

On the active farmer requirements, several delegations showed openness to a compromise solution consisting of a short mandatory ‘negative list’ to avoid farm payments being allocated to natural/legal persons with marginal agricultural activities (e.g. airports, sports facilities), with the possibility for member states to complete this list according to national needs. However some member states repeated their preference for a voluntary negative list. On the nature of both the young farmers’ scheme and the small farmers’ scheme, while member states generally reiterated their commitment to the position set out in the Council’s general approach, they showed openness to exploring compromise solutions, including on certain operational aspects of these schemes (in particular the maximum number of hectares eligible for the young farmers top-up and the maximum amount for farmers participating in the small farmers’ scheme).

The outlines of the Presidency compromises on these issues point to the possible solutions on other issues. The central theme of the Ciolos CAP reform is turning out not to be greening or a more level distribution of payments, but rather enhanced member state flexibility in policy design or what one observer has described as the ‘pick and mix’ approach.

We saw this already in the drafting of the Council’s mandate where a range of possible models was included from which member states could choose (for example, with respect to establishing eligible hectares for direct payments, on internal convergence, and on greening mechanisms). Additional flexibility is now proposed to address the divisions between Council and Parliament on the definition of active farmers.

Flexibility (or subsidiarity by another name) can be broadly positive, particularly where it allows policies to be better designed at national or regional levels to achieve better outcomes. The danger with flexibility is if it leads to distortions of competition between farmers in different countries, and thus puts at risk the great achievement of the single market in agricultural products.

Allowing member states to voluntarily recouple direct payments to production is an example of the more dangerous form of flexibility in the current proposals. Allowing member states to make up their own minds if throwing money at young farmers in a totally untargeted way and without conditions is the best way to achieve generational renewal in agriculture is surely a wise example of the use of flexibility.

Next steps

Following Monday’s Council meeting, discussions within the Council continue at official level in the Special Committee on Agriculture, and between the Council, Parliament and Commission in the trilogues. The Presidency has scheduled an informal Council for three days at the end of this month (26-28 May), to which the COMAGRI chair is also invited.

The Presidency will be hoping that most of the hard bargaining on where the Council is prepared to compromise with the Parliament on the outstanding political issues will be decided at this meeting, away from the direct glare of video lights and public sessions. Provided the Parliament feels that sufficient concessions to its positions have been made, this would then allow the Presidency to present new texts of the four CAP regulations at the final Agricultural Council under the Irish Presidency on 24-25 June. Ultimately, it only requires a qualified majority of member states to support the compromise position. These texts would then have to be approved by the Parliament, possibly at its July meeting, but if a linkage is made with the MFF agreement then approval could be delayed until the late autumn.

This is the most favourable scenario for the timing of an agreement on CAP reform. Its very tight, there are a lot of ‘ifs’, but it could be done. But even this favourable scenario would still be just the first step in the approval process which could last until the late autumn (note: these two concluding paragraphs slightly revised 16 May).

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