One of the main criticisms from member states has been the inflexibility of the proposals which are designed in a ‘one size fits all’ manner (for example, see the recent speech by UK Minister Caroline Spelman on the Commission’s greening proposals). Member states are seeking greater flexibility in the greening practices to be implemented, either in the form of a menu approach or through automatic qualification of farms following approved management practices as in organic farming, the so-called ‘green by definition’ approach. The inconsistency between wanting a flexible greening scheme and retaining the green payment in Pillar 1 of the CAP has yet to sink in for many people.

Luxembourg has tabled a paper at the Agricultural Council which would introduce greater flexibility into Pillar 1 greening but which has been heavily criticised by Birdlife Europe as making CAP greening meaningless. I will review this paper in a later post.

New IEEP report

In the meantime, important insights into this debate can be gained from a new report by the Institute for European Environmental Policy on Delivering environmental benefits through entry-level agri-environment schemes (AES) in the EU. The report investigates the design and implementation of entry-level agri-environment schemes within the EU-27 Rural Development Programmes (RDPs) for 2007-13. The intention is to show how experience of current schemes could help to inform the process of designing the 2014 agri-environment programmes in different ways.

The report comes in two parts. The first part creates a typology of management actions drawn from an analysis of all 88 RDPs in the EU-27 which are, in turn, linked to nine EU-wide environmental objectives. This was an immense task in itself as it involved translating and collating the detailed scheme regulations in all RDPs in all of the EU’s national languages into a single Excel database.

What the analysis underscores is the diversity of the different types of entry-level management actions chosen by member states (and regions) across the EU and the variety of ways in which these are grouped within AES.

The second part uses case studies of selected agri-environment schemes in 10 RDPs from seven member states to investigate in more detail the relationship between the ‘reference level’ (those management actions mandated by legislation or good agricultural and environmental condition (GAEC) standards which a farmer must undertake without compensation), the structure of entry-level schemes, payment rates and uptake. The ways in which the design, revision and improvement of entry-level schemes are undertaken are also documented, as well as the role of farmer support networks and the effect that participation in entry-level AES has on farmers’ attitudes to the environment.

Great diversity in management actions

There is no formal definition or distinction between entry-level and higher-level AES in the EU. Entry-level schemes are described in the report as being fairly simple management achievable by the majority of farmers without major change to their existing farming systems; often relatively close to the environmental reference level which forms the baseline for agri-environment payments under the relevant legislation; and accessible through a non-competitive application and approval process which is largely administrative.

The significance of the focus on entry-level schemes is that the management actions are close to the ‘simple, generalisable’ measures that the Commission has proposed for the Pillar 1 green payment. But there the similarities end. The implementation of entry-level AES across the EU could not be more different from the Commission’s greening proposal than night from day.

Thus the report identifies a total of 63 management actions which it groups into 15 broader categories where the types of action are similar, or share a common focus or aim. For example, limits to application of fertiliser, plant protection products or lime were grouped under the category of input management. All the 63 actions are listed in the box, in descending order of frequency of occurrence of the categories within AES.

There is considerable variation in both the number and type of management actions found with AES in different RDPs. Fewer than five of the possible 63 different types of management actions are included in some regions compared to more than 25 in others, with an average of 15 per RDP.

The management of grass and semi-natural forage is the most commonly occurring category, found in 77 of the 81 RDPs in continental Europe. It is also the category that covers most individual types of actions, 16 in total, including requirements to maintain areas of permanent pasture, upper and lower limits to grazing intensity, restrictions on burning of vegetation, as well as wildlife-friendly cutting regimes and hay making.

The differences in detail in the management actions required across RDPs is striking. Grazing regimes for livestock are the most common type of management actions within the category, closely followed by cutting regimes. The report describes these differences as follows:

Grazing regimes typically specify limits for stocking densities, seasons at which livestock are allowed to graze and, in some cases, define the type of livestock to be used14. Stocking densities may be set as an upper limit, or as a range with a lower limit also defined. Minimum densities vary from 0.1 livestock units per hectare (LU/ha) in Andalucía, Spain to 1LU/ha in Piedmont, Italy with maximum allowed densities ranging from 1LU/ha in Andalucía, Spain up to 2.5LU/ha in Hamburg, Germany (this figure is particularly high, and is just for seasonal grazing between July and November). Two livestock units per hectare is the more commonly specified maximum, present in 12 RDPs. This range is perhaps unsurprising given the different climates, soil types and seasonal variations across the EU, which means that different types of land will have different environmental carrying capacities. For the same reasons cutting regimes can have a range of requirements, including the number and orientation of cuts (such as from the centre to edge of the field), the earliest date at which mowing starts (often in mid June), how much of the parcel can be cut at any one time, the minimum height of sward to be left and the removal of the cut material.

Within agri-environment schemes, grazing regimes are invariably delivered as part of packages that include other actions from this category (such as maintenance of permanent pasture, scrub control, no burning) and also from other categories (for example limits to fertilisers and other inputs, to tillage and other mechanical processes that might affect soil structure). Cutting and grazing regimes may be packaged together or delivered separately, and a single RDP may have more than one package for the management of grassland and semi-natural forage.

Lessons for greening the CAP

What we learn from this analysis is that member states and regions, when tasked with designing agri-environment schemes to deliver environmental benefits, come up with very different solutions in terms of the management actions required of farmers depending on the climatic, physical, structural and agronomic characteristics of their areas. Furthermore, the 10 case studies show that there is a dynamic relationship between the actions that are included as part of GAEC and those actions for which farmers can be compensated as part of entry-level AES. Member states and regions make regular adjustments to the former which then have knock-on effects on the latter (given that the reference level or baseline on which the entry-level AES build is now changed).

The difference with the ‘one size fits all’ approach proposed by the Commission for its Pillar 1 green payment could not be starker.

Of course, making use of flexibility to address local environmental issues in the most appropriate way comes at the cost of a uniform treatment of farmers across the EU. A management action which is part of GAEC standards in one country/region may be eligible for compensation as part of an entry-level AES in another. Farm organisations complain about this diversity of treatment, and member states criticise the absence of a level playing field. But environmental pressures differ from one region to another. Equal treatment does not necessarily mean equitable or cost-effective treatment in this case.

Another objection is that flexibility in some cases may simply mean that some member states have designed schemes which make few environmental demands on farmers in return for payment. This underlines the important role for the Commission in auditing schemes and ensuring a broadly equivalent level of environmental ambition.

There are limits to the IEEP study which are recognised in the report. In particular, the study does not attempt to measure or evaluate the environmental impact of the management actions in entry-level AES. But it should cause decision-makers to pause and reflect on how best to really use the CAP budget to deliver environmental benefits.

Image downloaded from http://www.flickr.com/photos/13847552@N03/3906560447/ and used under a Creative Commons licence

First of all, this proposal will generate a ‘golden ticket’ system in Europe where 2011 entitlements will become the most valuable asset a farmer can imagine. This will cause previous agreements between landowners and tenants to be reviewed as well as would cause several difficulties if farmer business changes between May 2011 and the date the new scheme is launched. It also appears that current proposals do not allow the ‘golden ticket’ to revert to the landlord on the termination of his tenancy, thereby creating extreme hardships in changing tenants or getting back entitlements.

As the recent report of the European Court of Auditors puts it: “Non-active landowners would indirectly benefit from EU aid for the entire new programming period. The Court considers that this risk is not entirely excluded, for example if entitlements were transferred back to the landowner in 2011.” Consequently, land transactions currently being negotiated will be influenced by the uncertainty of the reform, which is exactly what happened in the run-up to the 2005 reforms, putting great strain on landlord and tenant relationships in that period. Moreover, it is also possible that the 2011 reference year may be changed to 2012 which farmers must bear in mind when entering into new arrangements this year. The use of a reference year might also create barriers to new entrants.

However, one should clearly see that the BPS does little or nothing to solve the fundamental problem of direct payments: they are ineffective, if not actually counterproductive, in the long run for a number of reasons. The current system is a complicated and misguided confusion of income support, compensation for previous supported price reductions and baseline environmental management payments through cross compliance, resulting in a clearly unequal system derived from historical rights. However, the CAP policy process and mechanisms are dependent on the idea of compensation and the EU seems to find a reason again to justify continued direct payments and thereby complicate the anyway complex system.

This post was written by Attila Jambor.

The ageing of the agricultural population results from a combination of two things: a reduced rate of entry by new young recruits, and a reduced rate of retirement or exit by older farmers. This is taking place in the context of a long term reduction in the agricultural labour force in EU countries.

There is no doubt that the average age of farmers is increasing steadily. Unfortunately, the age of farm holder tabulations from the 2010 Agricultural Census have not yet been released by Eurostat, so the latest data we have are still from 2007. In 2007, 31% of holders of agricultural holdings in the EU-15 were 65 or older (28% in 1997 and 24% in 1990). Note that all the percentages in this post refer to the EU-15 as age distribution figures for the new member states are not available for the longer time period.

The proportion of farm holders over 55 has remained fairly constant over this period (54% in 1990, 55% in 1997 and 55% in 2007). However, while just 8% of holders were younger than 35 in 1990 and 1997, this proportion had dropped to 5% by 2007. Trends over the longer period for the EU-15 are shown in Figure 1.

Note: The figures are not fully comparable over the period. Figures for Belgium are not available for 1990 and for Austria, Finland and Sweden for 1990 and 1993. Germany is only included (including the former Eastern Germany) from 2000 on. Around 5% of holdings were unassigned in 2000 and these have been excluded in calculating the proportions. Source: Eurostat ef_ov_kvage

It is known that younger farmers are more likely to be found on larger farms where the prospects for making a viable living are greater. Figure 2 shows the age distribution of holders on farms over 20 ha in the EU-15 (I have chosen 20 ha as an arbitrary threshold to make a rough distinction between smaller and larger farms). However, while the absolute figures are somewhat better, the trends are the same.

Farm holders over 65 made up 10% of total farm holders on farms over 20 ha in the EU-15 in 1990 and 13% in 2007, although farm holders over 55 on these larger farms have maintained a roughly constant share (37% in 1990, 34% in 1997 and 36% in 2007). Farm holders under 35 made up 14% of the total in 1990, 13% in 1997 and 9% in 2007).

Note: The figures are not fully comparable over the period. Figures for Belgium are not available for 1990 and for Austria, Finland and Sweden for 1990 and 1993. Germany is only included (including the former Eastern Germany) from 2000 on. Around 5% of holdings were unassigned in 2000 and these have been excluded in calculating the proportions. Source: Eurostat ef_ov_kvage

A feature of the age cohorts is that, in each decade, the numbers of farm holders in the 45-54 age group is greater than in the 35-44 age group in the previous decade, indicating that there are significantly more net entrants to farming in the older age group than net exits. These may be relatives assisting on farms who take over the farm management on the death of the previous holder, but they may also be family members who now live and work in urban areas but who decide to hold on to the family holding either as a part-time farm or as a second home after the death of their parents. There may also be small numbers of ‘hobby farmers’ with an urban background with sufficient means to acquire a farm as a rural residence included in these figures particularly in the countries of northern Europe. It is only in the 55-64 age cohort that exits begin to (just about) exceed new entrants.

Another way of looking at the figures is to ask whether the area of land controlled by older farmers is increasing. Evidence from the US for the period 1988 to 1999 suggested that the share of farm assets controlled by the over-65’s increased significantly (from 17% to 34%, see Gale 2003). This does not appear to be the case in the EU-15 where the share of UAA farmed by the over-65’s was 12% in 1990, 14% in 1997 and 14% in 2007 (the corresponding shares for the over-55’s are 39%, 36% and 37% respectively). On the other hand, the share of land farmed by the under-35’s has fallen from 13% in 1990 and 13% in 1997 to 8% in 2007 (see Figure 3).

Note: The figures are not fully comparable over the period. Figures for Belgium are not available for 1990 and for Austria, Finland and Sweden for 1990 and 1993. Germany is only included (including the former Eastern Germany) from 2000 on. Around 5% of holdings were unassigned in 2000 and these have been excluded in calculating the proportions. Source: Eurostat ef_ov_kvage

These trends can be explained by two main fundamental forces. First, the relatively low returns in farming compared to other occupations, combined with the disamenities of living in the more remote rural areas, mean that a career in farming has not been attractive to the younger generation. Second, farmers like everyone else are living longer. And because there are fewer exit opportunities for older farmers for whom their farm is also their home, the fact that they are living longer means that the transfer to the next generation is now taking place later than it did before.

Vision statements, commission reports and scenario studies in various EU countries lament the ageing of EU farm holders and call for policy interventions to counter this trend (see, for example, the 2008 European Parliament resolution on The future for young farmers under the ongoing reform of the CAP). However, the evidence presented above suggests that what we observe is a slow upward shift in the age distribution which can be explained by general social trends (longer schooling periods and longer longevity) rather than any specific worsening of the generational transfer problem in agriculture as such.

One of the innovations in the Commission’s legislative proposals for the CAP post-2013 is an overhaul of the scheme of installation aid for young farmers and the proposed introduction of a compulsory additional direct payment in Pillar 1 for young farmers receiving the basic payment. However, independent analyses as well as evaluations of previous versions of young farmer schemes suggest that these are hard to justify on a value for money basis. Contrary to conventional wisdom, age is not necessarily related in a negative way to higher productivity.

© Photograph copyright Richard Law and licensed for reuse under a Creative Commons Licence.

Competitiveness and innovation in the agriculture of new Member States before EU accession can be assessed as relatively poor. In a part of the area, the situation even resembled the situation in developing countries. In the parts where a certain level of development was achieved, i.e. closer to the Central Europe part of EU, extreme structural deficits were perceived. There was an obvious need for a development policy that would support restructuring and enable a new development cycle of agriculture.

Strong RD funding for modernisation of farms

Comprehensive European resources from the pre-accession and accession rural development funds were thus of great help. The issue of raising competitiveness became one of the key priorities of the rural development programmes in the region, which account for 35 do 65 % of total funds per country. Comprehensive support programmes were formed, with support to capital investment to agricultural holdings and to the food processing industry as the prevailing measures. Direct support to innovation was not apparent, but some countries used the support for extension services and knowledge transfer.

Thus in the period from 2000 to 2012, the region received a strong financial injection of public funds for development and modernisation of agriculture. No precise calculation was made, but according to estimates, more than EUR 20 billion of EU and national funds were invested for these purposes. This is a huge investment which should contribute significantly to raising competitiveness in the entire agro-food chain.

Impact assessment of the policy is quite demanding: existing national evaluations are rather bureaucratic and do not go beyond simple descriptions of fund distribution and numbers of approved projects. Not many analyses of macroeconomic effects are available at the level of the entire region, only some partial analyses, which, however, expose problems in programming and implementing this policy.

Creating new landlords?

Funds go mostly to individual large projects in agricultural production and food industry, as well as to the purchase of agricultural mechanisation, which reaches a wider circle of beneficiaries. Large modernisation projects are mostly granted to large agricultural holdings (private individuals or companies) which are capable of meeting the demanding criteria for obtaining of funds. They usually involve building and comprehensive planning of stables, ecological facilities, bioenergy plants. Partly, the projects involve the replacement of old facilities, mostly for increasing the capacity, and for sanitary, environmental and animal welfare adaptation. In food industry, the projects mostly involve establishing of new plants to replace the old ones which fail to meet the hygiene and environmental standards.

Only rarely do the projects involve completely new approaches and innovation, but rather the transfer of the most recent technologies which already exist in Western Europe. Thus, the innovation element is not particularly present in agriculture, the technological innovation mostly comes from Western European industry and is usually adapted to the management of larger holdings.

A number of successful projects of this type can be found in new Member States, ranging from half a million to several million EUR worth of investment. If we disregard some cases of corruption and bad investments, these are mostly successful cases of establishing new economic infrastructure. Often, these holdings obtained several projects from EU funds, becoming their special preoccupation.

The fundamental question is how such an approach actually contributes to changing the structure and raising competitiveness. It probably involves around 3000-6000 agricultural holdings (in the whole region) or one per 20,000-30,000 ha of agricultural land and 40,000-60,000 of rural population (all very tentative estimates). These investments are very often unevenly distributed across regions.

Such an approach and extraordinary inflow of funds importantly contributes to raising the competitiveness of a few individual holdings, but not of agriculture at the aggregate level, neither does it significantly contribute to improving the welfare of the rural population. On the contrary, it widens the differences among the rural population: the EU funds creating a type of ‘new landlords’ who then tend to take ownership as well as the political initiative.

Policy makers are of course afraid of making wrong investments, and therefore prefer to give funds to those who are clearly capable of implementing the projects, in terms of the capital and substance. Although a new competitiveness ‘lever’ is established, some important goals of the rural development policy fail to be met.

Support for selling mechanisation and equipment

Otherwise, investment in equipment and mechanisation reaches a wider circle of beneficiaries. These applications are less demanding and public funds in fact contribute to the improvement of capital assets and help solve capital “malnutrition”, for these farms. These funds are much better accepted by producers, as they enable them to acquire modern equipment, in particular machinery (tractors, etc.). But also, the measures have certain weaknesses. They can be granted to everybody, regardless of the development perspective of holdings, although small and subsistence farms are excluded, because they are not able to provide their own funds or they are excluded by the planners. Often, farmers purchase very expensive equipment, which they thus get at very cheap prices, but they speculate that they will be able to sell it after the compulsory period expires. This pushes up the price of mechanisation, on the market.

Considering this, there are substantial deadweight losses in the distribution of public funds. Also these measures often have a concrete impact on individual holdings, but not so much raising their competitiveness, merely helping them stay on the market. Neither could it be claimed that these measures substantially improve the competitiveness of agro-food industry at the level of the state or region. The innovation element is also lacking, as it is mostly about the purchase of mechanisation produced by technology from elsewhere (even if the equipment and mechanisation is produced in new Member States).

No “green revolution”

Finally, the development of innovation and knowledge transfer in NMS seriously lags behind the new investment. It is not the priority of the EU funds, but entirely left to national financing. The whole region lacks a suitable infrastructure for the formation and transfer of knowledge and innovation development. The expected ‘green revolution’ did not happen after accession. Thanks to subsidies, incomes in agriculture improved, but the value-added did not increase, neither was there any significant break-through at the level of groups of producers and regions. The absence of national investment to innovation and knowledge transfer, which has further deteriorated since the beginning of the financial and economic crisis after 2007, is an important reason behind the lack of more integral development. Knowledge formation at the national level is weak, in some cases even weaker than before the transitional period. Although public extension services, which are meant to assist also smaller producers, exist, they are more engaged in assisting them to access public funds than contributing to technological and organisational development. To exaggerate a bit, these countries transposed from the Western Europe the democratic interest-lobbyist manner of organising agricultural interests, but almost completely failed to transpose a comparable European public system of knowledge transfer. There was also no systematic support from the European government or non-governmental organisations for these functions.

RD as only redistribution policy

The reasons for the current situation are multi-faceted and stem not only from the predominant methods and approaches to programming and implementation of rural development policy, but also from the general perception of agricultural policy measures, as well as competences and capacities of the human resources and institutions necessary for their efficient implementation.

The decision-makers and also the entire agricultural sector view rural development policy too much as a tool for the redistribution of funds in agriculture: only important in order to achieve the greatest possible absorption of the EU funds and satisfy well-organised interest groups. The quality aspect and the actual meeting of the strategic goals of rural development policy – at least by definition – only come second. The policy programmes are not based on real analysis of the situation and identification of problems. Often there are inadequate data and analytical bases to pursue such an approach. What is preferred is simple solutions which often stem from a merely bureaucratic transposition of solutions from other countries, and are not a result of a rational reflection and search for the best possible solution in a real-world environment. They do not take sufficiently into consideration the actual situation in a region and/or sector.

The production-based, partial approach prevails, instead of an integral economic approach. Programming is predominantly by administrative elites, which prioritise the needs of administration and fear of failure to meet the EU criteria over the search for ways to stimulate greater competitiveness. There is a critical lack of vision for a sustainable development of agriculture which would be based on an integrated view of the situation and its development opportunities.

Innovation as an important factor in competitiveness is usually not included in the spectrum of approaches. There are only rare cases of more sophisticated approaches based on the development of human resources and transfer of knowledge, and encompassing a wide range of beneficiaries.

The deficiencies in programming thus further lead to inefficient implementation of measures. Overcome by fear of failure to meet the EU criteria and of fraud; administrators design extremely complicated implementation systems which are not friendly to beneficiaries, but on the contrary, narrow the circle of applicants to those few beneficiaries who have sufficient funds and knowledge to respond to such complex calls for tender. Calls are fragmented by individual sectors and types of capital investment. The selection is usually bureaucratic-based, not based on a comprehensive assessment of the business idea and its realization, but merely on meeting numerous standard and pre-determined criteria.

The failures of impacts evaluation system

There are only a few cases of comprehensive and objective assessment of tenders which engage experts and specialists in various competitiveness issues. There is a lack of skilled human resources in the relevant ministries and paying agencies. There is a general deficit of broad and relevant agricultural-economic knowledge in civil society in these countries, which is necessary for comprehensively addressing development issues.  This is not only a problem in the public administration but also among the interest groups, extension and research institutions.

The entire system of programming and planning rural development policy lacks sophisticated and integral solutions and therefore falls victim of the poor quality of public administration, lack of capable human resources and the burden of absorption of EU funds. The European Commission is not of great help here. It is a part of the rigid administrative system. It is not viewed as an adviser but as the guardian of legitimacy. This is in a way understandable, but it often narrows the programme perspective and the potential measures by expecting RDPs to use already existing solutions and restrictions. It is sceptical about investment in both small and very large farms. It always targets the centre of the structure, the medium family farms which are, however, very rare in Central and Eastern Europe. By its approach, the European Commission no doubt contributes to the inefficiency of rural development policy in the new Member States, in terms of competitiveness. Its main goal is that the programmes are implemented and that the funds are used, in line with the legislation.

Although rural development policy has an extensive system of evaluations in line with the policy cycle theory, these are unfortunately only bureaucratic exercises. They are ordered by the ministries, which, of course, do not want to be criticised. Because of the complexity of the issues involved, these evaluations are very demanding and are beyond the scope of many of the companies dealing with them. As experience shows, there is no real cooperation between evaluation groups and the Commission, which could contribute to a better quality of programmes.

Finally, the perception and the concept of agricultural policy in these countries are, in many ways, quite specific. Apart from the countries with a relatively liberalist attitude to agriculture, such as the Czech Republic and Latvia, the protectionist attitude prevails in most other countries, placing an emphasis on production and national food security. What is usually seen as a societal problem is the poor exploitation of resources and low income situation of farmers. Environmental issues, which importantly affect perceptions of agricultural policy and its formation in Brussels, Berlin, Paris and London, are in this part of the Community largely seen more as an administrative burden than a public obligation. In most of these countries, the decision-makers and the public see the provision of a sufficient quantity of food for the domestic population as the essence of agricultural policy. Thus, competitiveness is not perceived as the key issue of agricultural policy. Although structural indicators of agriculture have been mostly trending upward since  accession, they still reveal the low value-added of agriculture, a lag behind in productivity, unused production potential, and growing negative social trends.

Poor public knowledge transfer system

The investment support system apparently at least works, but with certain problems of efficiency and real impacts. But the situation is more alarming as regards the promotion of innovation and knowledge transfer. Innovation is rarely present in the agricultural policy approach. Public systems of knowledge transfer only exist in outline, and their effects are questionable. This part of the agricultural infrastructure and policy is faced with lack of funds as well as a rather disrespectful attitude of decision makers towards investments in knowledge. Under-development of a public research and extension network significantly affects the efficiency of support aimed at raising competitiveness.

The problem in new Member States is not only the search for basic development solutions and their transfer, but also filling technological and organisational gaps. The institutions in the chain of knowledge lack funds and human resources. Potential young academics prefer to search for other types of employment as these professions are less attractive, not only financially but also in terms of status. Rather than engage in technological development, the developing agricultural science largely prefers to engage in basic research in applied biology and biotechnology, the sciences where national and international projects can be won but which are not directly useable in knowledge formation and transfer for agriculture.

Support for better policy: Commission working like OECD secretariat?

To be able to thoroughly reflect upon the situation and search for proper solutions, the Commission should establish services that would engage in constant monitoring of policies not only at the level of the Community but also at the level of individual Member States. They could have a similar function as, for instance, the OECD secretariat has for its members, which carries out constant and objective monitoring of agricultural policies (PSE calculations, dealing with certain issues). In addition, an institutional framework should be established in the form of committees, which would comprise  independent experts who would give their opinion on the policy and also monitor the situation. This could be a kind of advisory body for sustainable competitiveness (or for other issues of agricultural policy, e.g. environmental and territorial).

Moreover, the rural development programmes, evaluations and individual issues should be subject to proper expert reviews, not just the bureaucratic ones which prevail today. There is a need to educate and licence suitably qualified evaluators, who would then have an independent mandate and would assist the Commission in its assessment of whether to approve a certain programme. Also external experts would need to be included in the process of approving the programmes, who would provide their opinion and in this manner contribute to better quality programmes.

The European institutions should also adopt new guidelines on good practice in the area of raising competitiveness and in particular innovation. Implementation of these practices in member States should also be monitored and special bodies should give recommendations.

Recognition of the issue at the national level  

At the national level it should firstly be that competitiveness becomes the central issue of agricultural policy and that innovation and knowledge transfer gain importance. Furthermore, it should be reconsidered how to approach different groups of producers in terms of market size or capital power. Economic approaches should be pursued to a greater extent than currently. Licensing and special forms of education should be put in place for programming and evaluation projects.

In the area of extension services, rural development policy should support the formation of networks and workshops where producers of various types join together and, using modern communication approaches, search for concrete solutions for individual groups and cases. Support to extension services should constitute an important part of overall support. Even a compulsory share could be considered.

Special attention should be paid to the formation of more efficient research support for raising competitiveness and innovation. Rural development policy funds should be used to support the formation of demonstration centres, projects aimed at filling technological gaps, researching biological, mechanical and organisational progress, adapted initially to the situation in a concrete environment in a Member State. A lot could be achieved by a more efficient transfer of solutions from foreign environments which, however, need to be properly tested and adapted to the new environment. Public support to research and education institutions has multiplier effects. In the given economic situation and considering the social role of agriculture, this could not be achieved without support from the EU funds.

Also the national decision-makers should be convinced about this, as they still view income support as the main tool for raising competitiveness and pay less attention to support to restructuring and knowledge transfer.  An important contribution could also be made by the discussions and strategies adopted in the European Parliament and other European institutions.

Emil Erjavec

It can also submit opinions at the request of one of the other institutions of the Union, and it has just released an opinion on the Commission’s legislative proposals for the CAP post-2013 announced in October 2011.

The opinion focuses on whether and to what extent the Commission’s legislative proposals remedy weaknesses already identified by the Court following its audits. Subsequently it presents some further reflections resulting from the Court’s analysis of the proposals.

The opinion is comprehensive, addressing issues in all four of the main draft regulations in the Commission’s package. One of the guiding principles behind the Court’s observations is whether the proposals facilitate sound financial management by shifting from the current focus on compliance and financial implementation towards a performance-based system, with clear objectives and criteria against which performance can be measured. In this respect, the Court is not impressed:

Despite the claimed focus on results, the policy remains fundamentally input-based (expenditure oriented), and therefore oriented more towards compliance than performance. In particular, the objectives established for direct payments to farmers within the framework of the CAP are not disclosed in the articles of the regulation, nor are their expected results, impacts and indicators. For rural development, a disparate and wide ranging set of objectives are laid down in the regulation which does not include either their expected results and impacts or relevant indicators. Similarly, the objectives and expected results of cross compliance and the ‘greening’ component of direct payments are not adequately defined. The disclosure of these elements would help to focus and target the policy on delivering the desired results.

The Court is also concerned about simplification of CAP regulations, which it relates to the level of administrative and compliance costs which member states and farmers must incur in administering the policy. On this issue, the Court comments as follows:

The limited simplification and additional administrative burdens introduced will have an effect on the costs of the reform which the Commission estimates are likely to represent an increase of 15 % overall. Member States consider that the percentage increase in costs may be even bigger. The Court notes that no information is available to show to what extent these additional costs will be offset by increased management effectiveness or efficiency in delivering the policy.

The opinion also contains observations on other issues that the Court has raised in its audit reports, including confining aid to active farmers, capping and improving the distribution of aid, and improved targeting of investment support to rural areas.

The question is whether the Council, Parliament and Commission will respond to the Court’s criticisms, and how?

Allegations range from payment below the minimum wage, employment of illegal migrants, intimidation and, in the most recent case, murder. The UK’s Guardian newspaper’s special correspondent Felicity Lawrence wrote a startling report into labour abuses in €2 billion a year hothouse industry. She found:

Migrant workers from Africa living in shacks made of old boxes and plastic sheeting, without sanitation or access to drinking water.

Wages that are routinely less than half the legal minimum wage.

Workers without papers being told they will be reported to the police if they complain.

Allegations of segregation enforced by police harassment when African workers stray outside the hothouse areas into tourist areas.

Charities working with illegal workers claim the abuses meet the UN’s official definition of modern-day slavery and that the Spanish economic downturn is making matters worse, as workers are laid off in the construction industry and seek work in agriculture, thus swelling the pool of labour. It’s not just Spain. Again, Felicity Lawrence has reported on abuses of farm workers in the UK:

“Twelve agricultural workers living in a caravan with no water, sanitation, lighting, heating or cooking facilities. Thirty workers living in a two-bedroom house that was structurally dangerous, threatened by men wielding baseball bats if they complained. A worker who lost a leg when the illegal minivan transporting him was involved in an accident. A bonded worker doing 12 hours hard labour six days a week from 3.30am milking cows and breaking rocks on a dairy farm. These are a tiny number of the cases of extreme exploitation found by the Gangmasters Licensing Authority (GLA) during its recent inspections. Last year it uncovered 845 cases of workers being exploited in the food processing and farming business in the UK.”

I have no doubt that the picture is similar in other member states.

The Common Agricultural Policy aims to ensure that recipients of EU farm subsidies observe EU minimum standards on protection of the environment and care of animals. The CAP does not play a large role in supporting the horticulture sector through direct subsidies but it does provide other aid to producer groups and it is not by any means clear that the problem of worker abuse is confined to the less subsidised parts of the agricultural economy.

Should the CAP’s cross compliance rules be extended to cover treatment of agricultural workers? Should farms where labour abuse takes place be disqualified from receiving subsidies?

This post is written by Jack Thurston

Countries resort to export bans in an attempt to keep down the price of food to domestic consumers. When undertaken by countries whose level of trade is big enough to influence the world market price, then an export ban also has ramifications for other countries.

Not only does an export ban, such as the Russian grain export ban in August 2010, by restricting supplies to the world market have an immediate impact on world prices. But by making everyone jittery about the security of future supplies it makes it more likely that importers will begin to panic and start to stockpile thus adding to demand while other exporting countries, in turn, also become more likely to restrict their exports – what Giordani, Rocha and Ruta (2012) call the multiplier effect of export policy. The policy of stabilising prices for domestic consumers makes the world market price more volatile for everyone else.

Not surprisingly, when the G20 asked a panel of international organisations to advise them on potential policies to prevent future price spikes, the group were tempted to propose a ban on export bans. However, recognising that this advice was politically unrealistic, their report recommended instead developing an operational definition of a critical food shortage situation that might justify consideration of an export restricting measure.

The meeting of G20 Agricultural Ministers in Paris in June 2011 failed to agree on any measures to limit export restrictions on food. Their communique which noted that “the first responsibility of each member state is to ensure the food security of its own population” was even seen as an implicit backing of export restrictions.

The only outcome was an agreement to exclude humanitarian purchases by the World Food Program from such export restrictions. This proposal was subsequently taken to the full World Trade Organisation membership for approval at the Geneva Ministerial Council meeting in December 2011 but even this limited measure failed to achieve consensus.

The EU’s use of varying import levies

Variable import levies have exactly the same destabilising effect on world markets as export restrictions. When world market prices are rising due to a global supply shortfall, a country using a variable import levy lowers the size of the tariff it levies, often down to zero, in order to protect domestic consumers by preventing the pass-through of higher world market prices.

The EU made widespread use of variable import levies prior to the WTO Agreement on Agriculture in 1995. In principle, this required the EU to convert all its variable levies into fixed tariffs. However, there remain some loopholes.

First, many of the EU’s agricultural tariffs contain a specific, or fixed, component which is often the largest element of the tariff. A specific tariff of, say, €20/tonne on wheat is equivalent to a 20% ad valorem (or percentage) tariff when the world wheat market price is €100/tonne but drops to the equivalent of a 10% ad valorem tariff if the world wheat market price increases to €200/tonne. Thus, implicitly, a specific tariff functions as a type of variable import levy and directly contributes to increased volatility on world markets.

The EU makes the situation worse, not least for key food grains, by varying its applied tariffs within its agreed bound rate (maximum) ceilings. The last WTO EU trade policy review described the operation of the CAP import regime for cereals as follows:

In response to fluctuations in world prices, the EU has, within the limits of its bound tariffs, changed its MFN applied tariffs. It reduced tariffs on cereals to zero in January 2008 in response to high world prices, and reintroduced them at the end of October 2008. For wheat, the tariff is based on the difference between world prices and 155% of the intervention price, up to the bound rate of €95 per tonne for high quality wheat and €148 per tonne for high quality durum wheat with similar systems for other cereals. The resulting duty has been set at zero for: durum wheat and high quality soft wheat since 1 July 2010; maize since 17 August 2010; and sorghum and rye since 19 October 2010. In February 2011, the Commission announced that the in-quota tariff for low and medium quality soft wheat and feed barley would be suspended until end-June 2011. Such changes in duties in response to world market prices can reduce predictability and exacerbate fluctuations in world market prices.

While the reduction of duties on imported grains to zero is, in principle, to be welcomed, the EU reserves the right to, and no doubt would, reintroduce duties on grain if the world price were to drop. It is precisely this counter-cyclical behaviour to stabilise the domestic grain price which contributes to the destabilisation of international grain prices.

Looking ahead to the G8 Camp David meeting in May

In the non-agricultural negotiations in the Doha Round, the EU has been a staunch supporter of stronger disciplines on export taxes, seen as a way of getting around the general WTO prohibition on export restrictions (though there is a general exemption for export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party).

Global food security will be on the agenda of the forthcoming G8 Summit to be held at Camp David in the US on May 18-19 2012. The EU could make an important political contribution to this meeting by declaring that it intended to keep its applied tariff on grains at zero per cent regardless of what might happen to the level of world grain prices in the future. Whatever arguments there might be for poor developing countries to use trade policy to stabilise domestic prices do not apply in the case of the EU.

This post is written by Alan Matthews.

Photograph © Copyright Trish Steel and licensed for reuse under a Creative Commons Licence.

However, as expected, individual member states differ significantly regarding the share of their rural population. The largest proportion of the population living in rural areas can be found in Ireland (73%), Slovakia (50%) and Estonia (48%). As another side of the coin, the largest share of the population living in urban areas can be seen in Malta (100%), the United Kingdom (71%) and the Netherlands (71%).

This situation is an outcome of a longer structural change and has several reasons like ageing society, lack of rural job opportunities, economic development patterns, etc. What is for sure is that EU rural development policy could not reverse these trends and was not effective in retaining people in rural areas. The second pillar of the CAP supported farming, agri-environmental programmes, economic diversification and the quality of life in rural areas but all in all, rural residents have gone.

What I find a basic problem here is that no one knows what rural development is really about. Some say it is about farm competitiveness enhancement, some suggest it deals with the environment and again some argue it seeks to increase quality of life. Currently it seems that RDP is confusing many different issues without clear targets. What is more, Eurostat figures suggest that current priorities in rural development show little evidence of recognising the problems experienced in rural areas. In allocating the vast majority of resources to the current first two axes, problems touched upon in the third axis, which are more about the essence of rural development, can not be properly tackled. Although many measures in the first two axes also have a number of second order effects, they are not well-targeted towards improving the standard of living of rural people. It is disappointing, for instance, that one of the most pressing issues in rural areas, namely rural poverty, seems to be side-lined. Are we sure that rural development is doing what is should be doing?

Unfortunately, the future does not appear to change in this regard. Most of the eleven thematic objectives and six rural development priorities proposed by the Commission are again about different issues which will maintain confusion. The debate is again about small details and not about the whole design. With such a broad spectrum of targets, I wonder who will evaluate (and on what basis) in the future whether public money spent on rural development has led to the achievement of the policy’s aims or not. By definition, a good policy should contain four elements: problem identification, design, implementation and feedback. I would be glad to hear which of these is working well in the case of rural development.

This post was written by Attila Jambor.

In that year, the EU used just over 16% of its Total AMS commitment (its bound ceiling) of €72.2 billion. In other words, the EU could have reduced its AMS commitment by over 80% in that year and would still have fulfilled its WTO amber box obligation.

The AMS includes three main categories of support: direct payments that do not fall under the green or blue boxes as non-exempt direct payments; market price support for products for which an administered price exists; and an equivalent measure of support for those products where the domestic market is supported but where no obvious administered price exists. The equivalent measure of support was mainly used for fruits and vegetables, where support is given on a periodic basis.

The figure above shows the trend in EU domestic support by category since notifications began in 1995/96 (click on the figure to enlarge). At the outset, the amber box, consisting mainly of market price support and coupled direct payments, amounted to around €50 billion with another €20 billion consisting of production-limited direct payments sheltered in the blue box. A further €20 billion was accounted for by green box support, consisting of payments deemed not to be or to be only minimally trade-distorting such as general services to agriculture, agri-environment payments, investment aids and decoupled income support.

Two recent changes since 2004/05 in the distribution of support between the boxes are worth highlighting. The first is the conversion of blue box support into green box support as a result of the decoupling of direct payments after 2005. The second, equally striking, is the drop in amber box support in 2007/08 (discussed in a previous post).

Changes in measuring support to the fruit and vegetables sector

This is due to the fact that the EU no longer includes an ‘equivalent measure of support’ for fruits and vegetables. In the past, support to fruits and vegetables was calculated as the support provided through the entry price system, which sets the minimum import price for imported fruits and vegetables. Now, the EU has started to calculate it based on the budgetary cost of market withdrawals. Most of this falls under the de minimis heading and so is no longer recorded.

The EU has justified this change in the WTO Committee on Agriculture as follows (see also the discussion in the earlier post):

The primary measure providing support for fruit and vegetables prior to the 2007 reform was not the entry price system (EPS). The EPS is a form of border protection in the realm of the market access pillar. It was not the existence of the EPS as such that implied the calculation of a price gap for the fruit and vegetables sector. Rather, this price gap calculation resulted from the existence of an, albeit rudimentary, price support instrument in which the entry prices only served as a proxy for the applied administered price, as per paragraph 2 of Annex 4 of the Agreement on Agriculture. This price support instrument was abandoned in the 2007 reform.

The suggestion that the 2007 reform resulted in the abandonment of a price support instrument that previously operated in the sector is not wholly convincing. The only price support instrument (apart from the entry price system) that operated in the fruits and vegetables sector prior to the 2007 reform was the market withdrawal system.

Buying-in prices for fruits and vegetables were abandoned in the previous reform in 1996. Instead, the EU made payments to producer organisations for ad hoc withdrawals, in order to reduce excess supply on the market. To avoid excessive withdrawals, limits were set in the 1996 reform on the volume of products eligible for support (there was no limit before), in terms of the volume of marketed production of a producer organisation. The withdrawal compensation was also reduced and producers themselves were required to bear much of the costs. As a result, use of the withdrawal mechanism decreased dramatically following the 1996 reforms.

In the 2007 reform, there was no substantive change to these arrangements. Market withdrawals and green harvesting/non-harvesting of crops continue as the market intervention mechanisms to support fruit and vegetable producer prices. Implementation of these instruments remains the responsibility of producer organizations, with 50% co-financing by the Community and a budget limited to 0.5% of the value of the marketed production by each producer organization.

The Commissions’s argument is that the support that still existed prior to the 2007 reform was a Community compensation for withdrawals that constituted, because of the way in which it was implemented, a survival of the previous public withdrawal system. It argues that this type of support was abolished as a result of the reform, and so it is now justified to measure support in the fruits and vegetables sector using budgetary outlays rather than a price gap approach.

Changing composition of AMS support

Although the AMS totals for 2007/08 and 2008/09 are similar, there are changes in the composition of this support. There has been a sharp fall in the AMS in the sugar sector as a result of the implementation of the 2006 sugar regime reform which substantially reduced the applied administrative price used for this calculation.

This decrease in the sugar AMS has been offset by increases in the cereals AMS (due to the excellent cereal harvest in that year which increased the amount of production nominally eligible for support) and in the AMS for wine where support in 2008/09 did not qualify as de minimis.

The EU has also submitted a notification describing the changes in its wine regime which entered into force on 1 August 2008. Use of distillation measures will gradually be phased out by 2012 and this should reduce notified amber box support in this sector in the years to come.

A further fall in the measured AMS can also be foreseen for the 2010/11 marketing year when the intervention price for sugar is abolished.

Prospects for the EU’s AMS after 2013

In its post-2013 CAP legislative proposals (the single CMO regulation), the Commission is at pains to distinguish between reference prices and intervention prices, clarifying that only intervention prices for public intervention correspond to the applied administered prices for the purposes of AMS calculations in the WTO Agreement on Agriculture (i.e. price gap support).

The products eligible for public intervention include common wheat, barley, maize, paddy rice, beef and veal, and butter and skimmed milk powder. Public intervention at a fixed price for common wheat, butter and skimmed milk powder is limited to specific quantities, after which it will operate by way of a tendering procedure to determine the maximum buying-in price. These are the arrangements currently in place so no further changes (other than dropping sugar and the changes taking place in wine) are envisaged for the market support element of the AMS calculation.

The other elements of the AMS consist of coupled direct payments and budgetary outlays for market crisis intervention which are not excluded under the de minimis rule. Further reductions in expenditure on coupled payments are expected as a result of CAP Health Check decisions already taken, and market crisis expenditures are also not expected to increase after 2013.

Thus, the downward trend in the EU’s measured AMS can be expected to continue assuming there is no challenge to the Commission’s proposed basic income payment and, more particularly, the proposed new green payment. Alan Swinbank in his recent presentation on direct payments for the European Parliament’s COMAGRI laid out some cogent reasons why the green payment, in particular, might be challenged as not meeting the criteria for decoupled income support. I will return to these arguments in a later post.

This post was written by Alan Matthews.

Economists evaluating the Commission’s legislative proposals for the CAP post 2013 face a dilemma.

Economists work within a paradigm in which agriculture is an industry no different from any other, where markets by and large do a good job in allocating resources, and where the only justification for government intervention requires both the existence of market failures and demonstrating that governments have access to relevant information or resources which would allow them to address those market failures effectively.

This is an extremely powerful toolkit because it allows economists to distinguish between welfare-enhancing policy interventions and those which are largely about shifting resources and rents from one group to another (the distinction between PERTs and PESTs using Gordon Rausser’s terminology in his well-known 1982 AJAE paper).

Applied to the CAP, this paradigm produces unambiguous policy recommendations: eliminate support to farm incomes, confine public budgets to the purchase of environmental public goods through targeted programmes, and maintain a minimum crisis management capacity to deal with catastrophic risk. Of course, an agricultural policy of this kind assumes that appropriate accompanying competition, environment, education, research, food safety and social safety net policies are also in place. Whether these policies should be pursued at EU or national or local levels will depend on the nature of the market failure and whether the impacts are mainly local or EU-wide in scope, though sometimes EU action is welcomed because of corruption or the ineffectiveness of local administrations to take account of local interests.

It is important for economists to continue to remind policy-makers of these basic principles. But this comes with the risk that economists are then side-lined in the debate on the nitty-gritty of specific proposals for CAP reform. Attila Jambor in his recent post on the definition of active farmers illustrates the point well. He concludes that the need for this definition would not arise if basic income payments were eliminated. We know this will not happen in this CAP reform, so does this mean that economists should say nothing on ways to define an active farmer, given that policy-makers wish to restrict the receipt of direct payments to ‘undeserving’ recipients?

Thus, the dilemma for economists debating the CAP reform proposals is whether only to challenge the policy-makers’ preferences in the name of the social interest or also to work within the constraint of policy-makers’ preferences in seeking the most efficient instruments to meet those preferences, well aware this is may lead to second-best policy choices from a social interest perspective. At a minimum, economists should be clear about this tension and seek to make it explicit.

Notre Europe report

These thoughts were prompted by reading the latest contribution to the CAP post 2013 debate, Do the proposals for the CAP after 2013 herald a ‘major’ reform? published by Notre Europe. The report is written by Louis-Pascal Mahé who is Professor Emeritus at Agrocampus (Ecole d’Agronomie) Rennes. Louis Mahé along with Jean-Christophe Bureau was the author of a previous influential study on the future of the CAP also published by Notre Europe in 2008. In this study, he reviews the Commission’s legislative proposals and makes proposals to amend them.

Louis-Pascal Mahé is well aware of the first-best reforms of the CAP but also of the political economy behind the Commission proposals. He favours the gradual elimination of the basic payment given that over time it is absorbed into land prices. For greening, he prefers a system of voluntary agri-environmental contracts in return for aid linked to foregone income.

However, much of the report necessarily addresses the specifics of the Commission proposals. But it is not always clear if the measures favoured in the report are preferred as first-best solutions or proposed as the best likely to be implemented given the political constraints on which measures are likely to be feasible.

Ecological Focus Areas

The study favours the introduction of ecological focus areas (EFAs) because of their potential to bring about positive environmental benefits particularly for the one-third of highly intensive arable farms. The objection to the proposal, as for the Commission’s own proposal, is that while the costs of EFAs can be fairly readily identified, the environmental benefits are not well specified.

We know under the Water Framework Directive, for example, that some areas are much more vulnerable to nutrient run-off and that it is here that interventions should be targeted. Requiring the same effort on all agricultural land to promote biodiversity, reduce nutrient run-off and lower GHG emissions will clearly raise the cost of achieving these environmental targets very considerably.

To partly address this criticism, the report recommends that EFAs should be introduced on a grid rather than an individual farm basis (that is, the obligation would be to maintain a minimum EFA area at a higher spatial scale of between 100 to 1,000 ha).

The argument is that the grid structure would allow the exchange of entitlements and obligations within the grids so minimising somewhat the production opportunity cost of this measure. Maintaining reasonably small grids would ensure that minimum pockets of biodiversity and landscape elements would still be required in intensive farming areas. Effectively, EFA ‘quotas’ would become tradable but only within each grid.

The report asserts that the operation of tradable quotas within each grid would not require high transactions costs although it is hard to see that introducing greater flexibility would not also increase administrative costs. This is not necessarily an argument against this option, only to make the point that it should not be over-sold.

However, the report does not address the workability of this, nor the Commission’s, proposal. Under the old set-aside system, the report notes that cereal growers in the Paris basin purchased or leased land in Vendée to formally comply with set-aside obligations defined per holding. The grid system would not prevent this happening also with EFAs.

As the EFA quota must initially be assigned to each farm, the proposal would not prevent an individual farmer deciding to rent his required EFA quota in a totally different area rather than within his grid. I find it hard to see how agricultural policy alone can compel farmers to operate on a zonal rather than a holding basis. This is more a matter of environmental regulation to be implemented through national legislation, although it could be incorporated via GAEC standards into cross-compliance.

Other issues

The report also comments on a range of other controversial issues in the Commission’s proposals. It concludes that Pillar 1 is the correct home for the new green payment because it concerns the provision of European public goods (climate, biodiversity, water quality) which need to be funded annually and which justify full EU financing. But it criticises the size of the green payment as over-compensation and thus likely to end up capitalised in land values.

However, it might be argued that it is precisely because environmental management requires a sustained effort over a period of years that it is better suited to the multi-annual programming in Pillar 2. Also, Pillar 1 greening measures by definition must be shallow, prescriptive, one-size-fits-all measures applied across the EU as a whole. Member states are looking for more flexibility in the green measures, for example, through a menu approach, but this only underlines the place of these schemes in Pillar 2.

The author would go further than the Commission’s proposal to maintain the permanent pasture area at farm level by also calling for the inclusion of an incentive scheme to restore former grasslands that were converted to cultivation in the past. Such schemes can be already part of Member State rural development programmes.

The study criticises the lack of targeting of the proposed aid for young farmers in Pillar 1. It points out that farm succession is rarely a problem in favourable farming areas, and aid to young farmers in these areas will only be capitalised into higher land rents. It argues that targeting and increasing aid to young farmers in remote rural areas where conditions are difficult and where abandonment is looming is much more justified and consistent with the principles of rural development and cohesion.

The study welcomes the creation of the crisis reserve and extension of the coverage of the Globalisation Adjustment Fund to farmers outside of the MFF. It envisages these as the nucleus of a Pillar III of the CAP which could eventually be associated with the market support payments in Pillar 1 and the risk management instruments in Pillar II.

The study also supports the Commission proposals to reverse the shift of bargaining power in the food chain against primary producers by permitting greater collective action through producer organisations and inter-branch organisations. Indeed, it proposes the extension to all producer organisations of the power to negotiate contracts and prices, even though it is aware that encouraging the formation of two oligopolies in the food chain could be to the detriment of consumers.

Can the Commission’s proposals be built on in later reforms?

The Notre Europe study will be a much-cited contribution to the debate on the CAP post-2013, not least because of its relatively favourable assessment of the Commission’s proposals. Although throughout the study, the tension between the first-best options for reform and the politically-constrained discussion of the Commission’s proposals (“This reform remains a positive development, undoubtedly the only window that is politically open in the economic context..” (p. 57)) bubbles under the surface.

The report’s support for the Commission’s proposals is based on the argument that they are a significant first step in redirecting the CAP towards European public goods and away from the inheritance of the past (historic payments) and that they can be built on in further reforms.

The critique of this argument is that it remains important to challenge the political constraints which prevent consideration of first-best solutions and that, even in a second-best world, it remains important not to introduce elements which create further distortions and introduce additional avoidable costs into agricultural policy.

This post is written by Alan Matthews