AGRIFISH Council on CAP reform negotiations in mid-March

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The AGRIFISH Council and the AGRI Committee of the European Parliament both held meetings to discuss their respective positions on the Commission’s proposed CAP regulations for the period post 2020 on Monday March 18th last. These meetings provided an opportunity to assess the progress made in each body to agree their initial positions as well as giving some insights into the changes that might be proposed. The AGRIFISH Council meeting was more informative in this respect. The AGRI Committee debate lacked focus because no formal positions were presented at its meeting and we must wait until its April meetings to see the compromise amendments it will decide. This post gives an update on the discussions in the AGRIFISH Council focusing on proposed amendments to the Strategic Plans Regulation.

Positions in the AGRIFISH Council

The debate in the Council was based on a Romanian Presidency progress report which was accompanied by specific drafting amendments to the Commission’s three proposed regulations for the CAP post 2020. Links are here to the Presidency drafting suggestions for the Strategic Plans Regulation, the Horizontal Regulation and the amendments to the CMO Regulation. These set out suggested compromise text amendments, building on an earlier Austrian Presidency paper, on a series of issues that have been discussed on Council Working Group and Special Committee of Agriculture levels. In addition, we should note the drafting suggestions proposed by the Austrian Presidency in December last year to the important Annexes II and III of the CAP Strategic Plans Regulation (on the WTO compatibility of measures in the Regulation and on the standards to be applied in enhanced conditionality).

Consideration of the amendments to the Single CMO Regulation are well advanced in the Council while more work needs to be done on the Horizontal Regulation on financing, management and monitoring of the CAP. In the case of the Strategic Plans Regulation, the Presidency circulated further suggested amendments to a selected number of Articles in the Regulation. At last Monday’s Council, Member States were invited to react to the new compromise texts proposed by the Presidency. Ministers’ interventions revealed a wide spectrum of views in favour or not of the new compromise texts (video here), There are also still many important issues where the Council’s positions have not been revealed. Work is proceeding in parallel at technical level on the remaining Articles. The Presidency plans to circulate a consolidated revised text at a later stage once the inputs from the Member States are collected. The next AGRIFISH Council in April will be devoted to the proposed green architecture of the CAP.

In addition, the Czech Republic on behalf of seven Central and Eastern European countries circulated a non-paper on the future of coupled support at the Council which suggested raising the ceiling on coupled support in direct payments to 25% (23% + 2% for protein crops) as well as removing restrictions on the list of sectors that can be supported in this way. Opinions among the Ministers were predictably divided on this proposal, with the Commissioner and Member States mainly from northern and western Europe arguing that greater flexibility to provide national coupled support would lead to further distortions in competition between farmers in different Member States.

Articles addressed by new Presidency compromise text in draft Strategic Plans Regulation

The new Presidency compromise texts concerned the following Articles:

  • Art. 4(1)(b)(iii) – Permanent pasture
  • Art. 4(1)(e) – Young farmer
  • Art. 4(1ab) – Genuine farmer
  • Art. 13(4)(fa) – Farm advisory services and FAST
  • Art. 15 – Reduction of payments
  • Art. 26 – Complementary redistributive income support for sustainability
  • Art. 66 – Natural or other area-specific constraints
  • Art. 68 – Investments
  • Art. 97(1)(a) – Intervention strategy
  • Art. 100(1) – Target and financial plans Art.
  • 115(2)(b) – Establishment of the performance framework
  • Art. 121 – Annual performance reports
  • Art. 121a – {Annual} performance review

The next paragraphs describe the Presidency proposals for these Articles in the March draft. Many Member States expressed their reservations on various elements of these compromise texts, and it is important to recall that nothing is agreed until everything is agreed. Thus, the text in the Presidency draft could change and evolve further in later iterations.

Definition of permanent pasture. This has been a contentious issue for some time. In the Omnibus (Agricultural Provisions) Regulation, the co-legislatures decided to extend the definition included in the Direct Payments Regulation to allow Member States to include as part of permanent pasture, if they so wished, land which can be grazed where grasses and other herbaceous forage are either not predominant or are absent in grazing areas. In making its proposal in the Strategic Plans Regulation, the Commission reverted to the original definition. Perhaps not surprisingly, the Council has pushed back and wishes to restore the definition included in the Omnibus Regulation.

Definition of young farmers. Here the Commission had proposed a definition that included a requirement that Member States should specify the appropriate skills and training required. While the Austrian Presidency had suggested deleting this in its entirety, the Romanian Presidency proposes that this requirement could be voluntary for Member States. In the current CAP Regulations, Member States have an option to define additional criteria as regards appropriate skills and training criteria for the young farmer top-up in Pillar 1 but must specify the competences required when granting installation aid under Pillar 2. A unified definition is now required for the Strategic Plans Regulation. Commissioner Hogan opposed making the requirement to demonstrate appropriate skills and training optional for Member States, arguing that there should be no back-sliding on requirements already in place.

Definition of genuine farmer. The Commission has proposed that Member States should define who is a genuine farmer, to ensure that no support is granted to those whose agricultural activity forms only an insignificant part of their overall economic activities, or whose principal business activity is not agricultural, while not excluding pluri-active farmers. It proposed an open-ended list of criteria that could be used as part of this definition. The Austrian Presidency proposed to leave this as a voluntary option. The Romanian Presidency text in addition substitutes ‘objective and non-discriminatory criteria’ for the open-ended list and would allow Member States to consider as ‘genuine farmers’ anyone who received direct payments less than an amount they could specify but not greater than €5,000 per annum.

Farm Sustainability Tool for Nutrients. The obligation to include the use of this tool for CAP payment beneficiaries under GAEC standards is deleted. Instead, the Presidency draft proposes that the farm advisory services would be required to cover the use of this tool or some equivalent tool, but this obligation could be postponed until some specified year in the future (2023 is included in curly brackets). Note that there would no longer be a requirement on farmers to make use of this tool or any other. Any failure to address the continuing nitrogen and phosphorus challenges in EU agriculture would be alarming. I discuss this issue again under the GAEC standards heading below.

Capping. The principle of capping is maintained in the Romanian Presidency draft although all the relevant figures (thresholds, degressivity rates) are left in square brackets. However, there was some support among Member States for an option to make capping voluntary provided that a specified share of the direct payments envelope was used for the redistributive payment. The deduction of labour costs (both for salaried labour and for family labour) is made optional for Member States in the Presidency draft, while Member States that decide to make use of this option will have the flexibility to set out in their Strategic Plans the precise calculation basis they intend to use.  

Recall that capping is one of the areas reserved by the Austrian Presidency for the MFF conclusions to be adopted by the European Council. I am not clear why this should be the case as it has no bearing on the net contributions or receipts that Member States will make or receive from the CAP. In this respect, it is no different to decisions on the limits on coupled payments or the redistributive payment or eco-schemes, where the decisions are left to the co-decision process. In any event, the discussion at the Council revealed that Member States are very divided on how stringent capping should be.

Redistributive payment. The Presidency draft would make this instrument optional for Member States. Most Member States seemed content with this suggestion.

Areas with natural constraints. Designating areas with natural constraints according to biophysical criteria as required under the existing Rural Development Regulation has been a fraught exercise for Member States (see this earlier post). The Presidency draft text has added a provision that in the coming period Member States can redesignate these areas according to the same criteria. Commissioner Hogan, in his intervention at the Council, pointed out that designation according to bio-physical criteria was intended as a once-off exercise, given that these criteria should not change over time, although he allowed that fine-tuning could continue (this is where Member States adapt the areas defined using bio-physical criteria to take account of areas where human intervention has overcome these limitations). Given that the possibility to re-open the mapping at national level will only cause grief for individual Ministers, one wonders why there seems to be such a strong push from a majority of Member States for this option.

Investment support. The Commission proposal had suggested a maximum rate of support for investments of 75%. The Austrian Presidency draft had suggested lowering this to 40% for productive investments, but the original figure is restored in the Romanian Presidency draft. In the Commission proposal, investment aid up to 100% could be provided for afforestation and other non-productive investment related to environmental and climate objectives, basic services in rural areas, and the restoration of agricultural and forestry potential following natural disasters or catastrophic events. The Austrian Presidency added investments supported through LEADER Local Action Groups, and the Romanian Presidency has added investments in agricultural and forestry infrastructure. There was some support to extend this 100% maximum limit further to investments by young farmers and collective actions by groups of farmers.

Performance framework. The performance framework is a key element of the proposed performance-based CAP. The first element of the framework is an annual performance report to be submitted by Member States. This will contain information on expenditure made, the corresponding outputs by intervention, as well as results and distance to corresponding targets set in the Strategic Plan. Where realised expenditure and realised output deviates by 50% from the annual planned expenditure and output, the Member State should submit a justification for this deviation. Where the Commission wants targets (result indicators) broken down into annual milestones, the Presidency draft would leave the frequency of reporting result milestones up to the Member States. Many Member States spoke in favour of having only mid-term and ex post checks.

The second element of the framework is the performance review by the Commission. Whereas the Commission proposal is for an annual review, the Presidency draft leaves this open. Where the Commission proposed that, where there was a deviation greater than 25% from the respective result indicator milestones for the reporting year concerned, it could ask the Member State to submit an action plan describing the intended remedial actions and the expected timeframe, the Presidency draft would give more leeway to Member States. In the early years, deviations greater than 45% and 40% would not attract attention, while the deviation would have to exceed 35% or more in the financial years 2024 and after before an action plan would be sought. Nonetheless, an annual review would be held each year between the Commission and each Member State to examine the performance of each plan, including progress made towards achieving established targets, any issues affecting performance and past or future actions to be taken to address them (Article 122).

The third element in the framework is the annual performance clearance which is described in Article 52 of the Horizontal Regulation. This would check the relationship between expenditure and outputs as described in the performance report. Where there is a discrepancy between expenditure incurred and the outputs achieved in comparison with the schedule set down in the Strategic Plan, and after giving the Member State an opportunity to explain the discrepancy, the Commission can make a corresponding reduction in the financing from the Union budget. No changes are suggested to this procedure.

GAEC standards. Although not on the agenda of the AGRIFISH Council last Monday, the amendments proposed by the Austrian Presidency last December to Annex III of the Strategic Plans Regulation are very relevant and are summarised here.

  • For GAEC 1 (maintenance of the ratio of permanent grassland in agricultural area), the proposal clarifies that the level of this ratio would be set at the discretion of Member States.
  • GAEC 5 on the use of the Farm Sustainability Tool for Nutrients would be eliminated, consistent with what has been proposed in Article 13(4) above. The elimination of this GAEC does not only eliminate the requirement to make use of this tool: it also eliminates the associated objective “Sustainable management of nutrients”. This is important because Article 12 of the SP Regulation provides that “In respect of the main objectives laid down in Annex III Member States may prescribe standards additional to those laid down in that Annex against those main objectives. However, Member States shall not define minimum standards for main objectives other than the main objectives laid down in Annex III.” Thus, by eliminating the main objective to ensure sustainable management of nutrients, the Council would effectively prohibit any Member State from voluntarily opting to introduce this requirement for its farmers.
  • In GAEC 6, tillage management to reduce the risk of soil degradation and erosion would only be required where there is a significant risk of this happening.
  • GAEC 8 on the requirement for crop rotation is amended to permit other practices with an equivalent effect.
  • GAEC 9, which includes the requirement for arable farmers to maintain a minimum share of land with non-productive features in the Commission’s proposal, is amended to also allow areas with nitrogen-fixing crops cultivated without plant protection products to be eligible to fulfil this requirement, thus confirming the current rules for greening.
  • GAEC 10 under the Commission’ proposal would implement a ban on converting or ploughing permanent grassland in Natura 2000 sites. The Presidency amendment would limit this to areas designated as environmentally-sensitive grasslands in Natura 2000 sites.  

As an over-arching condition, the Commission had proposed that all farms would be required to follow the GAEC standards, thus removing the exemption enjoyed by small farms in the current programming period. The Romanian Presidency draft (Article 12)  leaves this in curly brackets indicating further discussion is required.

It would be useful to know from relevant experts whether these amendments to the proposed GAEC standards fall into the category of tidying up the Commission proposals or seriously hollow them out.

Assessment

Characteristic for many of the Presidency amendments discussed last week is that they would make many measures that were obligatory in the Commission proposal voluntary for Member States. So in drawing up their Strategic Plans, adopting a definition of genuine farmer would be voluntary, requiring young farmers who benefit from EU assistance to have appropriate skills and training would be voluntary, whether to introduce stricter capping and to include deduction of labour costs would be voluntary, and whether to have a redistributive payment in favour of smaller farms would be voluntary.

Bear in mind that these texts have not yet been agreed by the Council. But if they were, they would drive the CAP in an even more a la carte direction. In the AGRI Committee, one of the main concerns with the Commission proposal has been that the additional flexibility given to Member States under the new delivery model and performance framework will undermine the common nature of the CAP. If the Committee sticks to this line when it determines its final position, the stage will be set for some interesting confrontations with the Council.

Another common theme behind the Presidency amendments is to pull back on the reporting requirements under the proposed performance framework. Annual result-based milestones would become less frequent, and the requirement to submit an action plan where there was evidence that these milestones were not being met would become less onerous. This may reflect genuine worries over the administrative effort required to produce these indicators, but it may also reflect a fear among Ministers that these obligations could lead to interruptions in the flow of funds to their farmers. Commissioner Hogan in his intervention reminded Ministers that simplification could not be at the expense of accountability and explained that his services have written to Member States to convince them that the additional reporting requirements would not be onerous. Future iterations of the Presidency amendments to the Commission draft Regulation will show whether Member States are convinced by these explanations or not.

This post was written by Alan Matthews

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