The declaration states:

The need for ambitious CAP reform: The Common Agricultural Policy (CAP) fails to adequately fulfill important societal objectives: to enhance biodiversity and climate protection, improve water quality, preserve scenic landscapes, increase animal welfare, promote innovative, efficient farming and fair competition in the internal market, and avoid harming farmers abroad. The debate on the future of the CAP beyond 2013 presents the opportunity to significantly improve this policy.

Broad agreement among experts: The shortcomings of the current CAP and recommendations for more effective agricultural policies have been substantiated in numerous scientific publications. A group of leading agricultural economists from across Europe has issued a declaration on ‘A Common Agricultural Policy for European Public Goods’. National advisory bodies, such as the Scientific Advisory Council of the Federal Ministry of Food, Agriculture and Consumer Protection in Germany and the Social and Economic Council in the Netherlands, have also called for far-reaching changes.

Policy-makers’ status quo bias: Unfortunately, decision-makers in agricultural policy appear unwilling to seize the opportunity for substantive reform. Their proposals intend to maintain the status quo to a large extent. A critical lack of reform ambition is manifest in the ‘Franco German position for a strong Common Agricultural Policy beyond 2013’, in the own-initiative ‘Report on the future of the Common Agricultural Policy after 2013’ by the European Parliament, and in the leaked Communication by DG Agriculture on ‘The CAP towards 2020: Meeting the food, natural resources and territorial challenges of the future’, among others.

Guiding principles for a new CAP: We call on policy-makers to pay less attention to special interests. For a future CAP that better serves the public interest, we recommend five guiding principles.

• Targeting on public goods: All subsidies should be closely linked to the provision of public goods. Any subsidy that is not differentiated according to farmers’ provision of public goods, such as the Single Farm Payment, should be progressively phased out. The alleviation of rural poverty should be a function of social and not agricultural policy.
• Environmental focus: Sustainable land use should become the key objective of the CAP. This includes biodiversity protection, climate change mitigation and responsible water management.
• Market orientation: Generally, well-functioning markets rather than state intervention are the best way to attain a demand-oriented, innovative and competitive farm sector. Great care should be taken that subsidies distort production and prices as little as possible. Export subsidies should be abolished.
• Global food security: The EU should promote global food security through an open trading system, support for agricultural productivity in developing countries, climate change mitigation and the preservation of its own sustainable production capacity. To enhance productivity, more public investment in research and development should be undertaken.
• Subsidiarity: The CAP should focus on objectives and policy instruments for which EU-wide coordination creates the greatest value added. It should be carefully examined where burden sharing between the member states and the EU, instead of full EU-financing, can be extended.

Policy-makers must show more reform ambition for the post-2013 CAP if they are serious about the Europe 2020 strategy and the EU’s high-level environmental commitments.

Here you can sign the declaration and see the list of signatories.

They observe – and endorse – an emerging “new rural paradigm” which

is based on the notion of the multifunctionality of rural areas, where various sectors beyond agriculture are acknowledged to play a key role with regard to rural areas’ competitiveness, and where investments across sectors are considered to be a more appropriate tool than farm subsidies alone. This shift can also be viewed as a change from an exogenous model of Rural Development, emphasising policy interventions “from outside”, to a more endogenous approach based on the notion of Rural Development as a process involving multiple levels, dimensions and actors, that is also self-driven.

Despite plenty of tough criticism of the status quo, the RuDI study concludes that rural development should nevertheless remain an element of the CAP. Their argument is

that Rural Development policy has a unique value-added element compared to other policy fields (e.g. Regional Development, Social Cohesion), namely: the presence of a physical dimension (environment, landscape, biodiversity) and its explicit requirement for the integration of this physical domain with the economic and social dimensions. The integration of these three dimensions is inherent in, and crucial for, rural development. As a result, there is an inseparable link between quality of rural life, the competiveness of rural areas, and environmental quality.

I wonder, though, why a space-based, sustainable, integrated, bottom-up approach should be run best by agricultural authorities with an agricultural policy label on it. If the approach of rural development is really valuable and different from the approach taken by other regional policies, rural development should still be merged with the other regional policies and its beneficial characteristics be expanded. Indeed, there should be potential for mutual learning. The reformers of regional policy community speak very much the same language as those who want to improve rural development (see e.g. the Barca report). It’s time to think big about the restructuring of competences – and to rename the CAP.

read the key quotes refering to the excessive concentration of rural development on agriculture and insufficient integration with other regional policies

download the official 8-page summary of the RuDI project

The flagship of OECD research is certainly the country-level analysis of agricultural policies, based on Producer and Consumer Support Estimates and enriched by a brief description of recent policy developments in the report on Agricultural Policies in OECD Countries: Monitoring and Evaluation 2009.

New research on the CAP has been presented at an OECD Workshop on the Disaggregated Impacts of CAP Reform in March 2010.

The OECD also prepares a regular report on the Environmental Performance of Agriculture.

Equally important are the thematic research pieces. A 2009 piece on the ‘Adjustment Options and Strategies in the Context of Agricultural Policy Reform and Trade Liberalisation’ compares the liberalization experience in various OECD countries. It concludes that the agricultural sector frequently adapts better to liberalization than expected (greater efficiency, higher quality, different products), so that the need for adjustment policies is often overestimated. Policies to encourage exit from the agricultural sector are beset with the problem of windfall profits (payments for actors that would have left the sector anyway). Adjustment policies should rely, wherever possible, on generally available adjustment measures, including through the social security and tax system.

Especially interesting is the case of sectoral adjustment policies in Australia. The Farm Family Restart Scheme (FFRS) – now renamed into “AAA Farm Help – Supporting Families Through Change” – assists “low-income farmers who cannot borrow against their assets by giving them access to improved welfare support, as well as adjustment assistance for those who wish to leave the industry. It included income support for a maximum period of one year, grant of up to AUD 45 000 for those wishing to leave farming, access to professional advice on the future viability of the farm business, and other forms of counselling. The FFRS operates as a decision support system for farmers considering exiting the industry by giving them access to professional advice on the future viability of their business and on employment opportunities if they choose to exit the industry.“ Quite different from EU round-about handouts!

Another OECD work published in 2009, ‘Managing Risk in Agriculture: A Holistic Approach’, assesses the sources of risks, discusses private and public risk management tools and offers an overview of the implementation of risk management tools in OECD countries. It reveals the complexity of risk management and calls for prudence in designing governmental schemes (so as not to encourage risk-taking and replace private risk management mechanisms).

‘The Implementation Costs of Agricultural Policies’, published in 2007, finds that the advantages of targeting policies at desired outcomes outweigh the increased transaction costs of implementation for a very broad range of parameters. Furthermore, transaction costs can be much reduced through best practices (especially by the use of information technologies). This undermines the standard argument that the need to avoid excessive transaction costs makes a blunt policy like the Single Farm Payment inevitable.

At first sight, this cooperation has something going for it. It navigates between the extremes – stubborn farmer federations that resist change, on one side, and, on the other, non-farm interests that want to squeeze money out of the CAP budget with little regard to the societal values at stake. It is attractive to the ELO, who is afraid that the political rigidity of farmers, their traditional allies, will backfire and play into the hands of the CAP critics. The ELO has recognized that substantial concessions are necessary to re-legitimize the CAP. Maintaining the size of the CAP budget is more important to them than defending farm income support at the expense of public goods payments. Some of the public goods payments will still end up as profit for land owners, and these payments will improve the quality of rural life about which the ELO cares. Its cooperation with BirdLife will also give it more leverage over farmer federations who now cry foul (e.g. the NFU) but may gradually soften their positions to avoid isolation. This logic is sound.

However, it makes much less sense for BirdLife to team up with the ELO. First, the ELO states the intention to build on the experiences and successes of the CAP. Its ambition is a gradual improvement, not a bold switch to a sustainable land-use policy. Environmentalists who cooperate with the ELO thus lower expectations and soften pressure on the Commission to include ambitious reform options in its proposals. Second, lower expectations will dampen the general interest in CAP reform. The power of environmentalist arguments depends very much on raising the stakes of CAP reform and pushing it to the center of public debate. If CAP reform boils down to a tug-of-war between farmers and finance ministers, the outcome will be a smaller CAP centered on farm income support. Third, the ELO has not been very specific on what policy instruments and subsidy allocations they are aiming for. It is doubtful whether they would endorse a stringent greening of the CAP (especially when political pressures inside the organization grow as the CAP negotiations move forward). My expectation is that environmental objectives will receive more funds under a ‘green and lean’ than under a ‘big and a little better’ CAP.

Fourth, BirdLife had to subscribe to the idea of threatened EU food security as a justification of the CAP. Of course, food security as meant by BirdLife is nothing else but ‘environmental security’: we need to farm sustainably to protect our natural farming resources in the long run. But the ELO use of the term comes closer to what farmers mean by it. Environmentalists should be most careful not to strengthen a term that is the most powerful and misleading argument of old-style CAP defenders (I have summarized the case against the food security argument here).

While warning of the dangers of closer cooperation between environmentalists and land owners (or other stakeholders who benefit most from CAP subsidies that are not effectively targeted at public goods), I do not overrate this joint position paper. It is rather vague and contradictory, and it says very little on the most contentious issues, such as farm income support, the definition of European public goods, the choice of targeted policy instruments, and co-financing.

Let me repeat my general appreciation for BirdLife’s CAP reform advocacy. They have published excellent studies, such as ‘Could do better! Why EU Rural Development Policy is failing to reach its biodiversity potential’ and ‘Through the green smokescreen’. And they have recently developed a much more precise vision of the future CAP together with four other farming and environmental NGOs.

It has some explanation of EU agriculture policy under the watch of Mrs Fischer Boel, along with some pictures including a delightful bicycle composed entirely out of vegetables. This is a great example of carbon-neutral transport and Europe’s horticulturalists are no doubt relishing the commercial opportunties presented by supplying components to the bicycle manufacturing industry. I expect it is a concept dreamed up by the same folk who brought us the EU’s biofuels targets. Good to see the fonctionnaires keeping busy over the summer break!

The final page features a road sign proclaiming “The Future” (see below). I can already picture in my mind’s eye Mrs Fischer Boel pedaling off into the distance on her vegetable-bicycle and I am certain that readers of this blog will join me in wishing her a long and happy retirement.

You can download the English version of the leaflet here (it’s also available in all 21 community languages), or, like me, you could start scouring Ebay. I feel certain that one day a signed copy will be a valuable collectors item.

“Analysis from Brussels”- by Roger Waite- Towards the Next, Truly Big CAP Reform- The Timetable

From a European perspective, this measure has ambiguous effects and may even be welcomed for its short-run effects. In the short run, the Commodity Credit Corporation will enter the market as an additional buyer, raising the floor price of milk. While only US milk products are eligible for support, as a major dairy exporter this action is going to help to strengthen world market prices, to the benefit also of EU producers.

In the long run, of course, the measure will keep more US dairy farms in production than would otherwise be the case. When dairy markets recover, the disposal of US stocks will dampen the upswing in dairy product prices, and there will be more US competition than would otherwise be the case.

Nonetheless, as a way of mitigating short-run price volatility on world markets, encouraging countries to engage in counter-cyclical stock-holding seems a sensible thing to do, provided of course that the stabilised price is not set above the long-run market equilibrium. The limited duration of the US measure is a positive sign in that regard. The difficulty is that this measure would be caught in the WTO Aggregate Measure of Support as an amber box subsidy, and the ability of countries to pursue amber box subsidies will be severely curtailed under proposed Doha Round disciplines.

Is this a case where ideology has triumphed over sense? Would it make sense to exempt intervention buying from WTO disciplines under appropriate circumstances? The EU experience with intervention gave stock purchases to support market prices a bad name, but this was in the context where markets were also highly protected by tariff barriers and the use of export subsidies. In the absence of trade barriers, intervention buying has positive spillover effects for producers in other countries. Could WTO rules be designed to encourage such good neighbour policies?

Let us leave aside for the moment the fact that the bulk of existing farm subsidies go to larger farmers rather than smaller ones, so that even if the thesis above is valid, current agricultural policy does not support it. My interest is in the evidence for the thesis itself. Is it the case that small farms are better for the environment?

In principle, there are three reasons why this might be the case, even controlling for differences in farming system and underlying natural conditions. The first has to do with the scale differences between small and large farms. Small farms mean more varied field structures, more hedgerows and more patches of uncultivated land. Large farms are more likely to have larger field sizes, and thus fewer hedgerows and fewer niches of unproductive land.

The second argument has to do with production intensity. If larger farms are more intensively managed and use more fertiliser, for example, then they will have less biodiversity and are more likely to cause water pollution.

The third argument has to do with farmers’ attitudes. Small farmers, it is argued, have a more empathetic relationship with their land and nature, whereas larger farmers (who may well be absentee owners) have a more utilitarian, rationalistic attitude. The outcome again will be more environmentally-friendly farming on smaller farms.

There is certainly some empirical evidence in support of this proposition. Belfrage and colleagues at the Swedish University of Agricultural Sciences compared the diversity and abundance of birds as well as butterflies, bumblebees and herbaceous plants between six small farms and six large farms in southeastern Sweden. Two of the large and four of the small farms were organic. More than twice as many bird species and territories, butterflies, and herbaceous plant species, and five times more bumblebees were found on the small compared to the large farms. Differences were also noted between small and large organic farms: 56% more bird species were found on small organic than on large organic farms, although none of these farms used any pesticides.

Levin in a Danish study noted that there exists a strong positive relationship between large farms and mean field size and a strong negative relationship between large farms and densities of uncultivated grass.

Marini and colleagues examined plant, orthopteran (crickets and grasshoppers) and butterfly diversity in 132 hay meadows in a region of the Italian Alps, distinguishing between three farm size groups. They found a negative influence of farm size on species richness of the three taxonomic groups. Large farms were strongly associated with higher production of organic fertilizers and higher soil fertility than small traditional farms, controlling for meadow slope, thus reducing the observed biodiversity.

There are many ways to elicit farmer attitudes to environmental conservation, including their willingness to enrol in agri-environment schemes. Vanslembrouck and colleagues from the Department of Agricultural Economics at Ghent University examined farmers’ willingness to participate in an agri-environment measure in Belgium, namely, to adopt buffer strips or unsprayed field margins. In their analysis, larger farms were more willing to adopt the measure, controlling for other variables.

This evidence is thus not unambiguous but does give credence to the belief that small farms may be more environmentally-friendly. In the Italian study, this led to the policy conclusion that “regional stakeholders should consider measures to prevent or at least to reduce the ongoing structural transformation of farms”.

However, there is a further argument that trying to maintain biodiversity and landscape amenities by subsidising larger numbers of relatively unproductive farms to remain in existence is an expensive way for society to buy these environmental benefits. At least in principle, a targeted scheme where we would pay farmers for desired environmental benefits directly could work out cheaper in the long run.

Directly contracting for environmental benefits would also allow some geographic targeting if (as is likely) it is not possible to prioritise the production of environmental goods over food production in all areas (I assume here, of course, that all farmers are required to observe minimum standards of environmental regulation).

On the other hand, the transactions costs of targeted environmental contracting can be very high, which is why environmental organisations continue to support a low flat-rate payment to all farmers in return for compliance with specific environmental conditions.

It would be interesting to hear of other experiences relevant to this debate.

A difference this time is that the Czechs are pushing the issue of redistributing subsidies across member states. Various criteria for future subsidy allocation have been floated. Some look rather dangerous: if CAP money is distributed according to agricultural employment or the number of farms, it will again be ‘farmers’ money’ and not public money to be spent on farming (and land use more generally) so as to enhance society’s well-being.

ECIPE has just published a study that examines which criteria could reasonably guide future allocation. The study also develops scenarios for the future distribution of CAP subsidies (conservative, area-based, multifunctional). The results reveal surprising differences between the negotiating positions that countries traditionally adopt and the payments they can expect from reform. Some countries that defend the status quo would gain substantially from reform. This is especially striking in the case of Spain and Finland. By contrast, most Eastern European states can expect to gain only moderately – or they even risk losing. They would therefore be served best by minimizing CAP expenditures in order to free up money for the EU’s structural funds.