In a five-page Declaration they say

We agree that Europe needs an agricultural policy, but it needs one that focuses on areas where European action creates the greatest value. The CAP is not the right policy framework to enhance the efficiency of agriculture, change income distributions in the EU and abroad, promote world food security, or encourage rural development. (my emphasis)

The Declaration endorses the ‘public money for public goods’ logic that has long been promoted by a range of environmental NGOs, most prominently Birdlife International:

The future role of the CAP should be to give farmers appropriate incentives to deliver European public goods demanded by society, particularly in the environmental realm. This includes the fight against climate change, the protection of biodiversity, and water management (avoiding pollution, scarcity and floods).

The Declaration says that the main bulk of the CAP (market measures and direct aid), worth around 40 billion euro a year, should be scrapped:

The first pillar should be progressively abolished. Originally introduced to compensate farmers for lower price support, the main tool of the first pillar – the Single Farm Payment – does not promote societal interests. It should be phased out, and new schemes designed in which aids are granted not on past, but on future behaviour.

There are some well-known names on the list: Alan Swinbank, who along with Stefan Tangermann is the father of the ‘decoupling and bond scheme’ idea of the 1990s, Ewa Rabinowicz, the firey Swede who was one of the co-authors of the influential Buckwell Report, Jerzy Wilkin, Poland’s most authoritative academic working on agriculture policy, and Jo Swinnen, who has done some very good political economy work on the CAP.

The Declaration has been being co-ordinated by Valentin Zahrnt, of ECIPE, a free-market think tank in Brussels, and occasional contributor to this very blog. There will be public event in Brussels next week to launch the Declaration. As well as the Declaration, there is a new website and blog: reformthecap.eu. I’m sure all writers of this blog will welcome the competition.

The reality is that the France’s highly interventionist vision is as far from the centre of gravity on the future of the CAP as the UK’s strongly free market vision was three years ago. There was also a sense among member states that the French were attempting to bounce the Council into adopting a new position on the long-term future of the CAP without any real debate or analysis, a strategy described last week in The Economist’s Charlemagne column.

The French paper reiterates the founding principles of the CAP while pointing out a handful of new challenges. It broadly endorses existing mechanisms and the overall scale of ambition of the CAP. As a sop to new member states, the paper does promise to “[address] the differing level of the direct payments between Member States.” In order to win over support from other member states, France dropped disputed references to “market stabilisation” (government price fixing and intervention buying) and the doctrine of “community preference” (tariffs and other measures to keep out imports).

In the end the UK, Sweden and Latvia refused to sign up to the watered-down paper, and this was enough to ensure that there was no formal vote. You can download the nixed paper here.

In the long term – as described in the present document– there will no longer be any question from the Dutch point of view of generic support for agriculture but solely of targeted payments for promoting competitiveness and sustainability and for socially desirable performance. This approach means that a drastic change will be necessary over the next few years. The disappearance of generic income support and market measures will, after all, mean that the instruments that account for 95% of Dutch CAP receipts (some EUR 1.2 billion a year) will disappear. In their place, there will be a new range of instruments that will reward agriculture-related activities – in a transparent and accountable manner – which represent added value for society but are not rewarded by the market, or are not rewarded sufficiently.

Download the report here. Hat tip: Roger Waite at Agra Facts.

Not surprisingly, the Commission thinks that too many farmers get rewarded under the directive. As part of the 2005 reform of rural development policy, it tried to remove all socio-economic considerations from the delineation of the LFAs and to cut the rates of payment. But this was fiercely resisted by many member states and the issue was ‘parked’.

Now the Commission has come up with fresh proposals for a new LFA system by the end of 2008. A consultation suggests only four options:

Option 1. Maintain the status quo linking LFAs to areas of natural handicap, but excluding socio-economic criteria. This option is effectively dismissed by the Commission as failing to meet Courts of Auditors criticisms, but farming unions are saying it is the only one that is acceptable, but even then consideration must be given to socio-economic criteria.

Option 2. Set certain ‘common criteria’ for LFAs relating to natural handicaps, such as temperature, soil drainage and slope.

Option 3. As Option 2, but with each farm assessed for its environmental contribution.

Option 4. As Option 3, but with payments further limited to High Nature Value farmland.

COPA has expressed the hope that because the issue is so complex it will get bogged down in the decision-making process. However, the time has surely come to take a long, hard look at these arrangements and to see whether they deliver realistic objectives.

On November 14, 2007, an orientation document, agreeing on rehabilitated objectives for an appropriate farm policy, has been adopted. The challenges that this primarily economic policy have to face are described as demographic, environmental, energetic and territorial. Objectives in this context are to ensure independence and food security of the EU, to contribute to world food equilibrium, to preserve rural territorial harmony and to consider climate change as environmental issues. Any CAP must respect at least the following principles: European preference, markets stabilization, ambitious budget and targeted measures for sustainable agriculture. Having set up these broad (and apparently non-negotiable) concepts, a debate on concrete instruments and methods of funding has been opened in Paris.

From January 30 to February 11, 2008, a broad consultation in each French département has been initiated before establishing the official position of France on the health check and on the CAP beyond 2013 (whose European debate will start with an Informal Council in Annecy later in September 2008). Decentralized (private and public) actors have been requested to give their comments on the French strategy. The ministerial basis document gives an apparent idea of the coming key offensive positions of France: a consolidation of the first pillar.

New risk management programmes may be part of the first pillar and no diffused in the second pillar. They would reflect a modern management of agricultural markets and may partially compensate the adjustments of Common Market Organizations instruments. Revising article 69 would allow the funding of such programmes. It would also finance milk production in mountain areas, sheep and organic production. However the use of such an article is presently unlikely because decoupling schemes are already implemented, because the 10% of national ceiling criteria and the compulsory re-affectation to sectors affected by the retention are excessively restrictive and limit the proficiency of this article. Article 69 has no direct impacts on the overall European budget. Member State maintain the totality of the payment reduction (a difference with the modulation mechanism and an obvious incentive for historical largest recipient of CAP funding) and give flexibility in programmes management and monitoring to Members States.

Last but not least, as France would be marginally impacted by ‘upper limits in direct payments’, the amount saved by this equity tool (and retained by Member State) could also finance these new first pillar features. The basis document considers also the opportunity, by sector and/or geographical area, to increase the decoupling level of direct payments, to harmonize the value of decoupled entitlements, to grant subsidies to all kinds of farmland. The simplification of cross-compliance and higher complementarities between the first and the second pillar are also put forward. Indeed, the emphasis of this document on reinforcing the core of the first pillar jeopardizes the evolution and maturation of the second pillar. The French refusal of a higher rate of modulation is therefore not surprising. This French basis document focuses on a renewed first pillar which would remain the defining spirit of the CAP. As such, it sets down a fundamental distinction with Commissioner Fischer Boel who has always insisted on the need for a stronger second pillar…

Commission leak – Word version

Commission leak – PDF version

Highlights:

- The new text includes a new line about limits on the very largest farm subsidy payments: “Limitations will take into account the need to respect the economic sustainability of large farms and to avoid circumventing such measures by splitting farms.”

- Deletion of bullish language on ‘the biofuels revolution’, and insertion of text about mitigating the negative effects of biofuel crop cultivation on biodiversity. This can be interpreted as a small victory by DG Environment and green NGOs like BirdLife International over the biofuels boosters in DG Agriculture and DG Energy.

- Explicit mention of the EU budget review scheduled for 2008/09 and the fact that the CAP Health Check will not prejudge this fundamental review of the EU budget. “During 2007 and 2008 the Commission in its communication ‘Reforming the budget, changing Europe’ will develop its approach to the budgetary review 2008/9. The Health Check constitutes a preparatory action within this framework, without prejudging the outcome of this review.” This has all the hallmarks of a powerful intervention by EU Budget Commissioner Dalia Grybauskait?, who has been voicing increasingly strident criticisms of the agricultural expenditure component of the EU budget.

More analysis will follow from our team of experts.

Eight Member States currently make use of this option, although there is little information on the exact objectives surrounding implementation. A good example is Scotland, where Article 69 provides around £20m of funding per year for the Scottish Beef Calf Scheme. The option was considered by Defra in England, but dropped when the final decisions were taken on the implementation of the last CAP reform.

The resurgent interest in Article 69 is welcome for the environment, and offers a way to protect the most vulnerable production sectors, many of which play an important role in maintaining high nature value farmed landscapes. This is particularly true in an period of high cereal prices when feed for more marginal livestock producers, often located in the more remote areas of the EU, has become increasingly expensive. The option allows for a redistribution of funding to those sectors that genuinely need it.

So long as it is targeted at specific sectors and production systems, it should not be seen as another way to simply top up farmers’ incomes. Crucially, its implementation needs to be accompanied by some sort of environmental conditionality to ensure that the payment delivers real results for the environment. The cross compliance standards may be too imprecise to push for the required style of management. In this way, Article 69 offers an opportunity to further ‘green’ Pillar I of the CAP, and may free up funding within Pillar II for well designed and targeted agri-environment schemes, which could operate alongside Article 69 implementation.