More on Pillar 2 allocations by member state

In a previous post I commented that a noteworthy aspect of the Ciolos CAP reform was that, unlike previous reforms, it explicitly proposed to redistribute CAP resources between the member states and between farmers within member states. In writing this I was thinking primarily of Pillar 1 payments. Pillar 2 allocations between member states have been more variable, although still largely influenced by historical amounts (Zahrnt discusses the evolution of Pillar 2 shares in this European Parliament paper).

Also on this occasion, the Commission proposed (in its MFF budget proposals) that the distribution of Pillar 2 rural development support should be based on objective criteria linked to the policy objectives taking into account the current distribution. However, the final allocation was once again largely determined by political bargaining, with some evidence that countries losing heavily from the proposed Pillar 1 redistribution were partially compensated through extra ‘sweeteners’ received in the Pillar 2 budget (see this post for a discussion of the Pillar 2 outcome).

A paper by two researchers at the National Institute of Agricultural Economics in Italy, Alessandro Monteleone and Fabio Pierangeli, (the version on the AgEconSearch website is currently corrupted but a clean version is available here) throws further light on the Pillar 2 distribution in the coming MFF period.

The paper discusses the difficulties in using objective criteria as proposed by the Commission to allocate Pillar 2 payments. As noted by the authors, using objective criteria requires political agreement on a set of issues: the criteria to be adopted to underlie the distribution; the choice of indicators to reflect these criteria; how to combine and weight the different indicators; and how to take into account the historical factor if appropriate.

The authors note two precedents for the use of objective criteria in the distribution of agricultural funds. One is the case of compulsory modulation introduced in the Fischler CAP reform. A share amounting to 20% of the whole amount made available through modulation of direct payments was transferred to Pillar 2 and allocated among member states according to a formula based on agricultural area (65%) and agricultural employment (35%), with GDP per capita in purchasing power parity used as a factor of correction for cohesion purposes.

The second example relates to payments under the Special Accession Programme for Agriculture and Rural Development (Sapard) received by new member states until 2006. The regulation provided for an allocation based on the following objective criteria: farming population, agricultural area, GDP per capita in purchasing power parity and specific territorial situation. In this instance, however, the weights attached to each of these criteria were not specified.

The Commission made an effort in its impact assessment to investigate the potential outcomes using different allocation algorithms for rural development spending in the 2014-2020 period. Its preferred formula was based on the use of nine indicators, and the Italian paper has a useful discussion of the Commission’s proposed approach.

One of the issues raised in the paper is whether countries should be rewarded mainly according to the physical size of the desired attribute (area under organic farming, protected areas, forest area, etc) or whether the formula should borrow from the cohesion fund experience and emphasise more the gap between each region and the reference average, so that the resources allocated would be proportional to the width of the gap.

However, cohesion policy is explicitly about helping regions to catch up, so resources are concentrated on those regions lagging behind. It is not clear that this would be a useful principle to translate into rural development policy. It would mean, for example, that countries with a very low share of organic agriculture or protected areas would receive more in funding than countries with high shares of organic agriculture or protected areas. If the funding is meant to recognise the higher costs of supporting organic agriculture or of maintaining the quality of protected areas, this does not appear to be a sensible targeting.

As the paper recognises, in the final European Council conclusions on the MFF, the Commission’s approach to distributing Pillar 2 funds was dumped. The political deal reached largely neglected the use of objective criteria in the allocation of rural development resources, focusing mainly on historical payments. The vagueness of the criteria supposedly used by the Council has been a source of frustration, not least to the European Parliament.

The paper makes the point that the absence of concrete criteria underlying the distribution between member states means that there is nothing to anchor the sub-national allocation process (especially in those larger member states where rural development programmes are the responsibility of regions rather than the national authorities).

What would be interesting to explore further is whether national administrations have been any more successful in using objective criteria to distribute their Pillar 2 national ceilings than the European Council was at the EU level.

Photo credit: © Copyright P L Chadwick and licensed for reuse under this Creative Commons Licence.

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