The publication of the Commission’s legislative package for CAP reform is merely the starting gun for the EU’s legislative procedure to debate the regulations before they can take effect. The regulations now enter the co-decision procedure involving the Council of Ministers and the European Parliament (EP).

In an article this week in the Irish farming press, Mairead McGuinness set out the timeline as seen from the Parliament’s perspective. Mairead McGuiness is the EPP Group shadow rapporteur for the direct payments report contained within the legislative package, and thus centrally involved in formulating the EP’s position.

According to McGuinness, the current timeline envisages that draft reports will be prepared for consideration by the Agriculture Committee by April next, with a vote in Committee taking place in September on the changes proposed by MEPs.

However, she warns that given the complexity of the reforms proposed this timetable is by no means certain and that divergent views may delay the work programme.

In parallel with the work in the Parliament, the 27 EU agriculture ministers will also be working towards a common position on each of the dossiers. Technically, the legislative procedure allows the institutions, with the assistance of the Commission, three attempts (first reading, second reading and third reading or conciliation) to get agreement on the proposals. McGuinness states that at this early stage the objective is to get agreement at first reading stage, to ensure that the reforms can come into effect by 1 January 2014.

The hard bargaining between the Council and the Parliament would need to begin in autumn 2012 to meet this deadline. She notes:

Already, there are rumblings that the timetable is too tight and that if agreement is not reached at first reading, then the current regime may need to be rolled over for 2014.

The process involved is known as trilogue (trialogue in French). According to the European Commission’s glossary on co-decision, trilogue are informal tripartite meetings attended by representatives of the Parliament, the Council and the Commission. As a general rule, they involve the rapporteur (accompanied where necessary by shadow rapporteurs from other political groups), the chairperson of COREPER I or the relevant Council working party assisted by the General Secretariat of the Council and representatives of the Commission (usually the expert in charge of the dossier and his or her direct superior assisted by the Commission’s Secretariat-General and Legal Service).

The purpose of these contacts is to get agreement on a package of amendments acceptable to the Council and the Parliament. Any agreement in trilogues is informal and “ad referendum” and will have to be approved by the formal procedures applicable within each of the three institutions.

If agreement between the Parliament and Council is not reached in the first round of negotiations, dossiers go to a second reading (following a vote in the Parliament on the reports). Unlike the first reading, second reading is subject to strict time limits. Within three months (or four if an extension has been agreed) of the announcement of the Council’s common position, the Parliament must approve, reject or amend it at second reading.

Approval of the common position without amendment requires the support of a simple majority of the MEPs voting. However, amendments or rejection of the common position require the support of an absolute majority (i.e., at least 369 votes in favour out of a possible 736).

If the Commission is opposed to any amendment tabled by the Parliament, the Council would have to act unanimously to accept the amendment.

Because of the short time frames involved in the second and third readings, McGuinness’ view is that all efforts will be made to avoid moving to the second stage. The logic is simple. By keeping the ball in the air during the first stage, the time schedule is open-ended and both parties have the freedom of manoeuvre to engage in consultations, consider alternatives and try to seek agreement.

But once the Council’s common position is announced, then the clock starts ticking and agreement must be reached within strict time limits, which would put enormous pressure on the slow-moving institutions. In the absence of agreement, then the Commission proposals to alter the regulations would fall.

The next steps are a special meeting in Strasbourg next week between members of the Ciolos cabinet and the EP’s agriculture committee and then, in November, the 27 farm ministers will attend the Parliament for an exchange of views with the Agriculture Committee.

Amy timeline is of course dependent on the parallel negotiations underway on the EU’s multi-annual financial framework. Any delay in agreeing the EU’s budget over the 2014-2020 period would mean a corresponding delay in agreeing the CAP regulations, as it is hard to envisage agreement on the CAP if countries are not clear on the overall budget envelopes for Pillar 1 and Pillar 2.

As Valentin’s blog post yesterday explains, the CAP is not only a European agriculture policy, it’s a European income redistribution policy. The centrepiece of the CAP is the €42 billion a year in ‘direct aids’ or income support to farmers, funded entirely from the pooled EU budget. Valentin points out that in an era of fiscal austerity, the idea of billions of euros moving from one country’s taxpayers to another country’s farmers is likely to be politically controversial. Particularly when the biggest payouts go to Europe’s wealthiest citizens and most profitable companies.

As national governments decide by how much they are going to pay of nurses and school teachers, how many university places they will cut and which taxes they are going to have to increase, the idea that aids to farmers are ringfenced from cuts will come as a surprise to many. But this is exactly what European leaders agreed to in 2002, in a deal devised by Jacques Chirac and Gerhard Schroeder that fixed the CAP’s direct aids budget at a constant level until the end of 2013.

The result is that the German Chancellor Angela Merkel remains committed to the deal agreed by her predecessor, in which Germany will this year put €2.4 billion more into the CAP direct aids budget than it will get out, while Greece will get €1.2 billion more than it puts in. France will remain a net beneficiary although its gains this year of €868 million are set to halve by 2013 to €409 million.

When the protection of the CAP direct aids budget does finally expire, it seems certain that something will have to be put in its place. As the CAP2020 blog reports, a new study on subsidies and farm viability finds that in the absence of subsidies 83% of farms would continue to have a positive farm income but only 18% have a positive farm income once the costs of their own labour and assets are taken into account. Previous studies have suggested that the major impact of removing direct aids is that farm asset values will fall, especially land values. From the point of view of the general public there is no harm in lower land prices, though a young farmer who has taken out a hefty bank loan to buy land or an older farmer who plans to sell his land to provide for a retirement income would be entitled to think otherwise. It doesn’t take a genius to see that the upheavals – political and economical – of an overnight abolition of the current €42 billion a year that goes into the pockets of Europe’s farmers would be such that this is a very unlikely scenario.

There is no shortage of studies pointing failings of the current system of direct aids. Two of the best are the study by Jorge Nuñez Ferrer for the European Parliament and a short paper by the academics David Harvey and Attila Jambor. An excellent new report commissioned by European Parliament looks beyond the problems of current direct aids and considers how they might be replaced by a system that is politically viable but economically rational. A hard task, you might say. The study’s lead authors are Jean-Christophe Bureau, an occasional contributor to this blog, and Heinz-Peter Witzke. I was invited in an informal advisory role along with capreform.eu blogger Alan Matthews and a handful of others.

The report is among the best contributions to the debate on the future of the CAP. It contains a very useful overview of how the various member states line up on key issues and also surveys the various proposals tabled by farm unions and environmental and other civil society organisations. As far as conclusions go, the authors back the ‘public money for public goods’ mantra that was endorsed in a joint statement by Birdlife International and the European Landowners Organisation.

Bureau and Witzke argue there needs to be a gradual transition away from the current distribution of direct aids to one which more accurately reflects the contribution of different farm types towards a variety of public goods. A flat rate per hectare income support payment would remain but should be co-financed, the authors argue, and payment limits should be introduced to very large farms, according to the number of people employed. Member states would be free to shift money from income support into public goods-type schemes. The effect of the proposed system would be considerable redistribution among current winners and losers with the general theme being more support for extensive farming systems, generally to be found in upland regions such as the alpine pasture pictured (above, right).

You can read the 167 page report in full here.

Photo credit: dr3wie // Flickr.com Creative Commons

In the first of a series of video conversations with leading figures in the debate over the future of the CAP, Jack Thurston talks to Paolo De Castro MEP, chair of the parliament’s Committee on Agriculture and Rural Development and a former two-term Italian agriculture minister and professor of agricultural economics.

De Castro explains that he has always regarded himself as a CAP reformer and sets out his vision for a reshaping of the EU’s farm subsidy system. He advocates a shift to a basic flat rate aid payment to farmers, plus additional funds to be allocated at the discretion of member states. He argues for introducing minimum and maximum thresholds for payments (a minimum around 300 euro and a maximum in the range 400,000-500,000 euro). He speaks in favour of co-financing of the CAP, so long as it’s not optional for member states. He explains his vision for the European Parliament’s role under the new Lisbon Treaty rules, including his idea of a permanent seat for the Agriculture Committee on the Agriculture Council and how he’d like COMAGRI to take part in CAP comitology.

CAP Reform Conversations: Paolo De Castro MEP from farmsubsidy.org on Vimeo.

Agriculture Commissioner designate Dacian Ciolos will appear in a confirmation hearing at the European Parliament in Brussels this Friday. Here is a list of 25 questions that MEPs should put the man who – subject to their approval – will set the agenda for European food and farming policy over the next five years.

The hearing will be webcast live, between 9am and noon, Brussels time.

The basics

1. Should maximising food production in Europe be a central objective of the CAP?

2. How would you respond to those who say it is hard to make the case for the CAP as a policy to support farm incomes when there are six and seven figure subsidies being paid every year to the likes of the Queen of England and Prince Albert of Monaco?

3. What is your opinion on the variation in rates of direct payments between new member states and the EU-15? Is any action is required to to address the issue?

4. Do production controls have a role in the future of the CAP?

5. Are you in favour of strengthening or relaxing the cross compliance conditions for those receiving direct payments?

6. Has the CAP gone too far down the road of decoupling subsidies from production – or not far enough?

7. What is your opinion of the US’s programme of counter-cyclical farm subsidies? Could such a system of direct payments that vary according to market prices be appropriate for the EU?

Farm economy

8. In terms of farm structures and farm sizes, where is European farming headed? What farm structures should be encouraged in the New Member States?

9. Do you agree that direct payments increase the market price of land and therefore make it harder for young farmers to start new farm businesses? What should be done?

10. What lessons should be drawn from the crisis in the dairy industry in 2009?

International trade

11. What is needed to reach an agreement on the trade negotiations in the Doha Development Agenda?

12. The EU maintains high tariffs on certain key agricultural commodities and products even though this makes food more expensive for European shoppers. Will you seek to reduce tariff levels?

13. Do you pledge the end of all EU export subsidies by 2013?

Environment and rural development

14. There is currently a lot of talk about public goods. What, in your opinion, are the public good that are most relevant in the context of agricultural policy?

15. Is it your opinion that some types of farming are better for the environment than others that, in some cases, can be very damaging to the environment. How should the CAP take account of these differences?

16. Should agri-environment support be restricted to farmers or should anyone who manages land and can potentially provide environmental services be eligible for aid?

17. Do you consider that the proper place for European rural economic development policy is as part of European regional policy, not as part of the CAP?

18. Do you agree that agriculture should be included in any European plans for reducing greenhouse gas emissions and not given special exemptions?

19. Should the CAP have a new ‘third pillar’ to help Europe mitigate and adapt to climate change? If so, what kind of policy measures would it contain?

Reforming the CAP

20. What will be your main objectives and guiding principles for the CAP post 2013?

21. Are you in favour of retaining the two pillar structure of the CAP and if so, what advantages do you see?

22. Would you favour the further use of modulation to shift funds from Pillar 1 to Pillar 2 of the CAP?

23. Is there a linkage between the CAP and the issue of national budgetary imbalances and various corrections and rebates in the EU budget?

24. How do you regard the connection between decisions on the shape of the CAP post-2013 and decisions on the EU financial perspectives for 2013-2020?

25. In future, should the first pillar of CAP, like the second pillar, and much of the rest of the EU budget, be nationally co-financed?