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).

On Monday 14 July the European Parliament agriculture committee will discuss its response to the Commission’s legislative proposals for the CAP health check. The committee’s rapporteur is Luis Capoulos Santos, a Portuguese socialist MEP and former Portuguese Minister for Agriculture. His working document, suggests a number of changes to the Commission proposals, notably a hard ceiling of 500,000 euros on CAP payments to individuals, in addition to a ‘progressive modulation’ that would see payments above 100,000 euros top-sliced to provide additional funding for the EU’s farmland conservation and rural policies. [...]

The Commission’s widely leaked proposals for the health check of the CAP are now available, together with various supporting documents and impact assessments. Analysis and reaction will follow on this site over the coming days. Watch the press conference live at 16.30 Brussels time on this AV link. [...]

Launched in September 2007 by Michel Barnier, the Assises de l’Agriculture aim to set up the French position during the CAP health and prepare a “new” policy beyond 2013. It involves all stakeholders from French administration, farm and agribusiness sector, environmental, consumers and land owners organizations. [...]

The European Parliament’s agriculture committee published a working paper on the CAP health check at the end of last year. Tamsin Cooper and Martin Farmer at IEEP have already argued that from an environmental perspective it lacks ambition and is internally inconsistent. I have looked in detail at the working paper’s proposals for ‘progressive modulation’ which is put forward as an alternative to both the Commission’s proposals on payment limits and increased compulsory modulation. [...]

The European Parliament is seeking an outcome to the CAP Health Check that does not compromise the competitiveness of EU farming or diminish the value of farm subsidy receipts. This is the vision presented in a working document drafted by German MEP Lutz Goepel of the Parliament’s Committee on Agriculture and Rural Development. The paper acknowledges the need for some evolution of the CAP, but presents a sometimes inconsistent set of suggestions, a number of which are likely to run counter to arguments in favour of promoting a more environmentally sustainable CAP. The paper is examined in further detail below. [...]

Initial media reaction to the Commission’s Health Check proposals has been predictable, with most papers picking up as the lead story the Commission’s proposal to apply a tapering reduction to direct payments to larger farms. The Financial Times story was headlined “Communists and royalty fight farm subsidy cuts.” Much was made of the fact that the Commission’s illustrative proposals would reduce the payments received by the Queen of England, who apparently received £465,000 (€650,000) in 2005, by over £140,000 (€192,000). British and German officials were quoted as saying they would oppose these reductions as they were unworkable and undesirable. [...]

The recently leaked Commission Green paper sets the scene for the upcoming health check. What emerges at the moment is a very cautious and minimalist approach, in line with what the Commissioner has been promising for a while. Two things seem striking. The first is the choice to ignore the budget review debate. The second is the lack of courage in confronting the CAP’s failings. [...]

Analyses of the contents of the Commission’s Health Check Communication have heightened in recent days with the content of the leaked draft document reported in the agriculture press. Of particular interest from an environmental perspective, is the resurgence of the little applied Article 69. This article is housed within the current CAP legislation, Regulation 1782/2003, and allows a Member State to skim off up to ten per cent of the monies to be directed at one sector and provide an additional payment that is targeted at the ‘protection or enhancement of the environment’, or for ‘improving the quality and marketing of agricultural products’. [...]

The Irish Farmers’ Journal reports that the value of the Single Farm Payment (SFP) is not likely to be greatly eroded by “financial discipline” cuts in order to accommodate the payments to new Member States within the European Union. This is because more buoyant farm prices mean that there will be huge cuts in the cost of traditional market support measures, such as intervention and export subsidies, leaving sufficient money in the CAP budget to fund the SFP. Agra Europe forecasts that the cost of traditional support measures will fall by half by 2013, and that budget-related cuts in the SFP of no more than 2% will be necessary by 2013 to stay within the CAP budget ceiling. Of course, the real value of these payments continually falls with inflation, and may also be reduced by further compulsory modulation. Nonetheless, the pro-cyclical effect of the Single Farm Payment is stark. When farm prices and thus farm incomes are high, farmers can expect even higher SFP payments than when farm prices and incomes are low!

The European Parliament has thrown out a plan agreed at the 2005 summit of EU heads of government to allow the transfer of funds from Pillar 1 expenditure on farm subidies to Pillar 2 rural development to be increased up to a maximum of 20 per cent. Only the UK was planning to use the full amount, given that it receives low levels of rural development funding and wants to find money for its ambitious agri-environmental schemes. The Parliament can only delay the eventual decision, as it is not part of the co-decision procedure. [...]