Franco-German position on future of the CAP

This week the governments of France and Germany have published a short document setting out their common position on the future of the common agricultural policy. It makes for fairly light reading though the following points are worth remarking on:

- The common position endorses further moves towards greater market orientation in the CAP but suggests countervailing measures are needed “to buffer devastating effects of growing price volatility and market crises”.

- There is nothing concrete on the future budget of the CAP and it is stressed that “a final decision on all questions relating to finances will be made when decisions are made on all policies and the entire EU financial framework”. In other words, there is not going to be another stitch-up like the Chirac-Schroeder deal of 2002 which effectively fixed the CAP budget for the next 11 years, short-circuiting the normal EU budget-setting processes.

- The two pillar structure of the CAP should be maintained, and no national co-financing should be required of pillar one expenditure (i.e. direct payments and market measures). This is something of a surprise, coming as it does from Germany, the major net contributor to the CAP and France, that is soon to become a net contributor. Co-financing is one way for net contributor countries to improve their budget balances.

- Once the budgets of the two pillars have been decided, there should be no need for modulation of funds between the pillars.

- While new measures may be needed to meet new challenges and objectives, these must “take very carefully into account the financial implications for each Member State.”

- It is argued that “EU standards must be met by all imported products” though it is not clear whether this relates to methods of production or EU sanitary and phytosanitary standards, which imports must meet already.

- The common position states that “In some sectors we need more transparency and more market power for the producer” and suggests some methods by which this could be achieved.

- “Decoupled payments have to remain central in any future system.” The common position argues that “direct payments provide remuneration for public goods that are not rewarded by the market, cover production cost caused by higher production standards desired by society and they contribute to the income of farmers and are an essential part of the risk reducing safety net for European agriculture”. France and Germany reject “EU-wide flat rate” for direct payments and argue that direct payment rates are to be set with regard to net budget positions of member states. Effectively, this is France and Germany saying they don’t want to pay any more for direct payments to Polish and Romanian farmers.

- Member states should investigate, on a voluntary basis, insurance and mutual funds, as a method for stabilising farm incomes over time.

- The countries support greater national flexibility in rural development policies and in “distribution of direct payments within a Member State”.

What should we make of the common position? It reads rather as though France’s main priority is to secure its own position on the CAP, which is to preserve the status quo with the addition of measures of the kind that were introduced as emergency measures during last year’s milk price crash. Germany, which also has concerns about price volatility, is additionally looking to constrain the CAP budget (and the EU budget more widely) and protect its national budgetary position.

The 5-page document can be downloaded from here (PDF).

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One Response to “Franco-German position on future of the CAP”

  1. Alan Matthews →
    September 16, 2010 at 19:09 #

    Jack, this is an excellent summary of the document, and you rightly highlight it in your post because it is an important statement of values by two important players in the CAP reform and EU budget debate. However, I think it is important to highlight that this is the common position of the agricultural ministries in both countries, and at least possibly in Germany this position could be overruled by the Finance ministry. As you rightly question, why would net payers oppose co-financing? But it is perfectly clear that agricultural ministries as cheerleaders for farm lobbies would oppose co-financing because they know very well they would be told where to go if they go to their finance ministries looking for income transfers to farmers at a time when the outlook for food markets is very buoyant.

    Even with this caveat, it was remarkable how little new the document contributed to the debate. It was very much a question of old wine in new bottles. There is no guidance here on the key questions. For example, while the document is clear in opposing a common flat rate of SFP payment across Europe, it does not put forward criteria which might justify differentiated payments. It wants to retain the two-pillar structure, and rightly points out that once the funds are allocated to the two pillars there will be no need for modulation, but it does not say whether it wants to shift more resources into pillar 2 compared to pillar 1. It does not seek a new legitimacy for direct payments.

    As a common position it lays down markers but does little to advance the debate.