AGRIFISH Council meeting underlines pressures to reverse CAP reform

Agricultural Ministers had a round table discussion on the future of the CAP at yesterday’s AGRIFISH Council meeting in Brussels. This was based on an orientation paper prepared by the Maltese Presidency.

The orientation paper identified six CAP priorities. These included the three previously identified by the Commissioner – building resilience, responding to environmental challenges, and generational renewal – and three others – investing in rural viability and vitality, maintaining a market orientation and strengthening farmers’ position in the food chain. Ministers were invited to answer the following questions:

    In your view, what would be most effective way to address the CAP priorities?
    Without prejudice to the overall financing of the CAP, do you think that a rebalancing exercise should take place between the first and the second pillar of the CAP in order to deliver on these priorities?

The round table was held in closed session, and little information was provided at the subsequent press conference on the range of views expressed by individual Ministers. The official conclusions of the meeting state:

Common Agricultural Policy post-2020

The Council had an exchange of views on the future of the Common Agricultural Policy (CAP).

In particular ministers shared ideas on how the priorities of the future CAP can be achieved, and on whether or not there should be a rebalancing of direct support and rural development.

Most delegations asked for adequate funding for the future CAP, which will have to face a variety of challenges including market volatility, climate change and pressure on resources.

Simplification was generally highlighted as an overall priority for future policies in order to release the full economic potential of EU farming and rural areas. Other issues indicated as priorities were: building resilience, responding to environmental challenges, investing in rural viability and vitality, ensuring generational renewal, maintaining a market orientation and strengthening farmers’ position in the food chain. The issue of risk management was touched upon by several delegations that expressed the need for a more robust response to market crises, including in the form of countercyclical measures. Innovation was also indicated as both a priority and a tool to face future challenges.

As for the pillar structure of the CAP, most delegations confirmed its validity. Some delegations were in favour of putting more emphasis on rural development in the future in order to invest in rural viability and vitality, whilst others warned against a reduction of direct support to farmers.

Concerning direct payments some delegations asked for their progressive harmonisation in all EU member states, in order to achieve real level playing field in the EU. Several also called on the Commission to maintain if not strengthen voluntary coupled support.

Though several delegations found it was too early to consider a rebalancing of the financial resources allocated to pillar I and pillar II, many asked for real flexibility between pillars at member state level.

The Council conclusions underline the prominence of views that seek a return to greater use of market management and the product support of the old CAP. It is also worth underlining the conclusion that most delegations confirmed the validity of the pillar structure of the CAP, even if many delegations also wanted greater flexibility to move resources between the pillars!!

Voluntary coupled support

Supporting the view that the Council is increasingly favouring a return to more interventionist CAP measures, at the meeting 12 Member States introduced a non-paper on voluntary coupled support (VCS). In it, they criticise the Commission for being too robust in policing the measures proposed by Member States (recall that, under the Direct Payments Regulation, coupled support may only be granted to those sectors or to those regions of a Member State where specific types of farming or specific agricultural sectors that are particularly important for economic, social or environmental reasons undergo certain difficulties, and may only be granted to the extent necessary to create an incentive to maintain current levels of production in the sectors or regions concerned).

These rules are in place because coupled support has the potential to cause distortions in competition within the single market. Farmers in one country who receive a coupled payment linked to production may expand production and drive down prices for farmers everywhere else. We see this at work in the EU dairy sector, where every second cow in the EU receives coupled support at a time when EU milk prices were at a low level, jeopardising the incomes of those dairy farmers who did not receive support. To minimise these distortions, ensuring that coupled payments at least do not increase production should be a sine qua non of this support.

Apparently, the Commission is doing its job and strictly monitoring and cross-examining Member states, and this has annoyed the 12 Member States.

Bulgaria, Croatia, Cyprus, Czech Republic, Finland, France, Greece, Italy, Latvia, Poland, Romania, Slovenia are deeply concerned with all the additional information and justification required by the Commission for the above mentioned points, placing at risk the VCS effective implementation. In addition, a visible risk of financial corrections arises, affecting the direct payments and the farmers’ income. Needless to mention the excess burden and cost resulting for the national administrations.

The Member States have a point that the Commission only engages in ex-post checks, apart from the specific procedure by which the Commission approves or rejects Member States notifications when the latter represent more than 13% (or 15%) of their national envelope.

According to the Commission’s information note on the implementation of direct payments 2015-2020:

In line with the relevant regulatory framework, the Commission does not approve/reject the notifications and Member States remain the only ones responsible for the decisions they have taken in implementing the reformed CAP. Consequently, it was made clear to Member States that the exchanges with the Commission do not prejudge any findings on their final notifications and in no way rules out other investigations concerning the same subject or financial corrections in the future in the framework of clearance of accounts.

The Member States’ arguments that

“a more flexible VCS scheme, allowing Member States to target sectors in need according to their national strategy, would serve effectively the objectives of the VCS and also the CAP. Taking into consideration that European farmers are exposed to global competition and markets’ volatility, a more adapted VCS scheme would undoubtedly support the viability of holdings in sensitive sectors, the production of safe and high quality products, the creation of jobs and the maintenance of rural population.”

would lead to a highly dangerous renationalisation of production-distorting agricultural support. The proposal would mean that the sole limit on the VCS that Member States could provide would be the quantitative ceiling percentage for each Member State’s Pillar 1 direct payments ceiling. This could potentially allow countries to direct all this support to one or a few sectors solely on the basis that it was in line with “their national strategy”, without regard to the consequences for farmers in other Member States.

Better to move to a system of pre-clearance and approval rather than throw out the rather minimal safeguards to prevent such production-distorting support in the future. However, the significant support the proposal received from 12 Member States indicates that even holding the line in preventing a return to aspects of the old CAP may be increasingly problematic in the months ahead.

This post was written by Alan Matthews

Photo credit: European Union Audio-Visual Services

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