Emphasis on international competition as a justification for income support

I don’t see how our agriculture can, at the same time, be competitive in the international market and have higher level of standards than farmers in other parts of the world.

But if we don’t have this minimum support for income and compensatory payments, the risk is that a lot of farmers who can be competitive without the crosscompliance rules that we have in Europe but not in other parts of the world-who in normal situations can be competitive-will not be competitive.

Active farmers

Ciolos showed strong commitment to the concept of ‘active farmers’. He stated one minimum requirement clearly. When asked whether he would “expect some agricultural goods to be produced for someone to be defined as an active farmer?”, Mr. Ciolos responded ‘Yes. If not, we cannot talk about agriculture or the farmer.’ But otherwise, he provided little substance on how a practical definition could look like, and he admitted:

We can’t expect to have a common definition at European level. This is why now the objective of the Commission is to come with, let’s say, a negative definition-who is not an active farmer-and then the Member States will define who is an active farmer, taking into account the specific situation at national level.

Cap on direct income support

Mr. Ciolos supported the idea of a cap. But when asked whether there is ‘a danger that the larger farm holdings will simpler reorganise themselves into smaller holdings to get around any cap’, he did not offer much clarification:

Especially with big farms, I don’t think their objective is only to have a big amount of payments from public money. I don’t think that we will have a very important phenomenon of the splitting or separation of farms only to have payments. I think a farmer uses other logic when he decides on the structure of production and farms, and is thinking not only about having a level of direct payments.

Small farms

The idea is not to increase direct payments for small farms, but to make them simpler, and then to propose a lot of instruments-like training, investment and organisation of production groups-in order to integrate the small farms more into the market than at present.

We propose to generalise decoupled payments in all Europe and to maintain coupled payments only in some specific regions, for some specific products.

Financial allocation within the first pillar

Q: ‘How do you envisage money being shared between the two main elements of the new direct payments-that is, basic income support and the greening component?’

We are analysing several scenarios, but I think we can go up to maybe one third of the direct payments being linked to the production and delivery of public goods of greening.

Q: ‘Are you considering basing the payment for greening activities in Pillar 1 on objective criteria, such as the additional cost of delivery or the environmental benefit?’

I can see that this part of the greening payments is exactly the level of the production costs for a farm that decides to integrate this measure. The objective, in fact, for us is to use this part of the payments to incentivise a farmer to do more, not only to have a payment in exchange.

Further remarks

The oral evidence shows nicely the broadly practiced art of claiming, at the same time, that the CAP creates no distortions in the international economy (‘I don’t think that we can now say that we influence the level of prices in countries in the south.’) and that similar levels of payment are needed within the EU to avoid distortions (‘Here we can have a distortion in the market if categories of farms have different treatment.’).

Mr. Ciolos denied again that there is any conflict between supporting the delivery of public goods and the standard of living of farmers.

Of course, I don’t think there’s a contradiction between these two objectives, but it will depend on the resources that we have for the Common Agricultural Policy.

I don’t think that there is a tension in the CAP between ensuring good standards of living of farmers and the delivery of public goods if the first Pillar of direct payment is reformed

He furthermore repeated the idea that agriculture is more affected by governmental regulation than other sectors:

It’s the only sector, I think, in Europe that has to play an economic role and plays a part in the market but, at the same time, has to integrate a lot of rules imposed by society. The automotive industry, the textile industry and other industries do not integrate a lot of expectations from people in the way that agriculture does.

I am sure that a list of the costs of regulatory compliance in the automotive industry with all its safety requirements and environmental standards would be quite long. Also, remember the compliance challenge for the chemical industry under REACH. And all the emission standards that affect industrial production in the EU (and which do not apply to imports). And all the legislation on work safety, healthy working conditions, employee rights and job security that affect large companies much more than small farms.

A last point:

I also remind you that the discussion in Doha was not blocked because of the resistance of the European Union, but because of the resistance of the other partners

It’s true: the recent stalemates have not been directly provoked by the CAP. But weak and conservative signals on agriculture from the EU at the beginning of the Doha-Round did quite a bit in bogging negotiations down. With a clear and early commitment from the EU that substantial agricultural liberalization is on the negotiating table, the Doha negotiations might have take a different path.

You can download the transcript here. Please note: The transcript is not yet an approved formal record of these proceedings. Any public use of, or reference to, the contents should make clear that neither members nor witnesses have had the opportunity to correct the record.

Among the losers was French Agriculture Minister Bruno Le Maire (pictured, right), who was rejected by voters of Normandy, where he was standing for election as Regional President. Had he been succesful he would have stepped down as national farms minister. It now means he’s likely to stay on in the post and continue as France’s main man in the negotiations on the reform of the CAP.

Photo credit: Bruno Le Maire / flickr.com / creative commons

Unlike some longstanding members of the Brussels press pack, Roger could never be accused of being a ‘cynical old hack’. As well as being knowledgable about the CAP, he’s excellent company, good humoured and approachable. He’s a true European and genuinely believes in the possibilities of a common agricultural policy that is better aligned to meet the challenges of the 21st century and that operates in an accountable and transparent way. He understands the political pressures that come to bear on CAP decision-makers and I am certain he’ll be a valuable asset to the Commissioner in the years ahead. I wish Roger well in his new job and look forward to continuing our good working relationship, albeit in an altogether new modus operandi.

According to EuroPolitics, Commissioner-designate Ciolos has also named to his cabinet Yves Madre, agriculture adviser at the French Permanent Representation to the EU. Austrian Georg Häusler will be his head of cabinet and Romanian national Sorin Moisa deputy head of cabinet.

I tend to feel that Barroso was left with no other option, as no one was willing to put forward a good candidate – and that he was the only suitable candidate from among the nominees.

40-year-old Ciolos has enjoyed a meteoric political ascent (just ten years ago was employed as an intern at DG Agriculture) but he still has to clear the hurdle of confirmation by the European Parliament. Roger says he’ll be an obvious target for a new Parliament looking to flex its muscles. He considers the arguments against Ciolos and the reasons why the EP Ag Committee (COMAGRI) may choose to support the appointment of a inexperienced Agriculture Commissioner who is far from a household name in European politics.

Arguments Against Ciolos
– Wrong nationality. Romania is too dependent on agriculture, and besides which Ciolos is too French – having lived & studied there, i.e. a Romanian with a French CV.
– lacks political experience. He was only Minister for 15 months, and has spent most of his relatively short career as a civil servant; When he was Minister EU payments to Romania (for pre-accession Rural Development schemes) were frozen because of maladministration;
- lacks political support within the EP. Although he previously insisted that he was “independent”, he has now been embraced by the right of centre European People’s Party, but it remains unclear how strong this support is.

Arguments for COMAGRI supporting Ciolos
– Lack of alternative – COMAGRI is pro-farmer, and the fear from blocking him is who might be offered as an alternative Commissioner. Certainly it would be no one as well-qualified & informed as Ciolos. Without any doubt, there is no other Romanian who would be acceptable for the post.
– Lack of political experience – With co-decision, it could be a massive advantage for the EP, and for the COMAGRI in particular, to have an inexperienced Commissioner. He is reasonably close to COMAGRI Chairman Paolo De Castro (former Italian Minister) from their time together as Ministers – and so De Castro may have a much stronger influence over him, than over a different Commissioner.

Read Roger’s analysis and profile in full.

Readers should be aware that we’re still figuring out how to get the website to correctly display the ’s’ diacritic character in the Commissioner-delegate’s surname.

The minister felt that outgoing farm commissioner Mariann Fischer Boel didn’t envisage that pendulum swinging too far, ruling out headage payments, but new commissioner Dacian Ciolos could bring in a new era.

There are certainly those in Brussels who think that Ciolos will favour more market support and help to smaller farms. However, others take the view that he is on message with the Commission view on reform and has been playing down his linkages with France to reassure pro-reform countries.

However, Christmas has come early for some English farmers, with over 80 per cent of farmers receiving £1.3bn in Single Farm Payments to date. That’s approximately £15,116 per recipient. Not quite a banker’s bonus, but welcome all the same. Organicduck tweeted from Devon, ‘Hurrah and thank you RPA. Maybe off Christmas shopping or maybe pay off some overdraft.’ Payments are also well advanced in Wales and Scotland.

Expert knowledge of the CAP is seen as essential for a succesful Agriculture Commissioner. This is why the job has often gone to ex-Farms Ministers like Fischer Boel and her Austrian predecessor Franz Fischler. It is regarded as important that the Commissioner can out-gun the Council and the Parliament with his or her technical knowledge, particularly necessary to seal the deal in late-night summit negotiations. The battle for the future of the CAP is often fought in a guerilla warfare of jargon-laden detail and complexity.

The Parliament has already appointed Paolo De Castro as chair of its Agriculture Committee. He’s a former Italian Minister for Agriculture and was previously an agricultural economist. But with no member state putting forward a commission nominee with an agricultural background (with the possible exception of the fading French-backed candidacy of Mary Coughlan of the Republic of Ireland), it looks as if it will have to be a ‘fresh face’.

And the face that fits could well be that of the Latvian Andris Piebalgs. First of all, he’s from a small country (this is traditionally a requirement for the agriculture job). Second, he is from a ‘new member state’ – who justifiably consider they get a bad deal from the CAP – and this may be a conciliatory first move in the process of addressing their grievances. Latvia is the country that has the lowest average rates of direct payments per hectare, around 78 euros per hectare. Piebalgs is regarded as having done well in his current portfolio, despite having no background in the energy policy field. He was responsible for conducting Latvia’s EU accession negotiations and so is likely to retain a recollection of the basic outlines of the CAP.

In the absence of a nominee who comes with existing detailed knowledge of the CAP, Commission President José Manuel Barroso would be wise to go for someone who knows Brussels and who has a reputation as a quick study. As things stand, Piebalgs is the candidate that anyone else who wants the plum post of Agriculture Commissioner will have to beat.

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.

We can eliminate three sets of member states. By convention the post cannot go to a large member state, ruling out the UK, France, Germany, Italy and Spain (and presumably Poland).

Former Romanian farm minister Dacian Ciolos is the name formally mentioned, but indications are that a candidate from a member state with such a large agricultural population, and possible problems with the use of its EU funding, would not be acceptable. Indeed, one can rule out the new member states altogether as the only two other possible candidates – former Slovenian farm minister Iztok Jarc and his Cezch counterpart Petr Gandalovic – have now left office and are unlikely to get support from their governments.

We can also rule out member states who have appointed non-agricultural commissioners: Belgium, Finland, Luxembourg and Portugal. While it would be interesting to have someone without an agricultural background in the post, it is unlikely to happen in practice. Sweden is also thought not to want the dossier.

Given the recent election in Greece, the unstable political situation in Ireland, and no agricultural expert being discussed from those countries, they are unlikely to provide a viable nomination – although Ireland could spring someone out of the hat at the last minute: remember that Fischer Boel was a late and unexpected appointment. An Irish nominee would certainly be welcome in Paris.

We are really left with Denmark, the Netherlands and Austria. A second Danish appointment seems unlikely. If climate minister Connie Hedegaard is the Danish nominee, she could occupy a similar portfolio at the European level. Farm minister Eva Kjer Hansen is also in the frame but could get a food safety/SANCO dossier if she comes to Brussels.

The Netherlands has perhaps the best qualified candidates in the form of current agricultural minister Gerda Verburg or former minister Cees Veerman.

But the smart money is on another Austrian, former farm minister Wilhelm Molterer, even though Vienna would prefer him to have the budget portfolio. It’s certainly not a done deal and there could be a last minute surprise.

There is a short section on agriculture policy:

“Europe has a long and proud history as an agricultural producer. Thanks to the efforts of her farmers, a common policy and the investments made in technology, education, research and market development the EU is not only able to feed itself but has become an important agricultural exporter. Agriculture will continue to have an important place in Europe’s future development, not only in ensuring food security, preserving the environment and cherishing the countryside, but also in facing new challenges such as
climate change while providing a fair standard of living for farmers. But it needs to adapt. Just as the common agricultural policy has proved able to transform itself in recent years, there is a need to decide on the future needs and role of agriculture and rural development in the EU 2020 vision and to gear public investment and innovation efforts to deliver a thriving rural economy.”

If, as some have said, there’s a major reform of the CAP brewing in the Commission, to be launched in the second half of 2010, you’d never know it from that passage, would you?

However, read on in the prospectus a few pages to the section on the future EU budget and things get a bit more crunchy:

“We will have to re-shape the EU budget to respond to the new priorities. This will require a root and branch reform of the EU budget. The defining moment for this will be the preparation of the 2014+ Multiannual Financial Framework. I want to use the upcoming budget review as a stepping stone for this exercise.”

This suggests that reports of the death of the budget review are greatly exaggerated. Is “root and branch reform” Brussels code for taking an axe to the 45 per cent of the budget spent on farm subsidies? By Barroso’s own admission, agreeing changes to how the EU budget is raised and spent is very difficult:

“While everyone agrees in the abstract on the need for reform, as soon as the debate moves to concrete measures, there seems to be a strong bias in favour of the status quo.”

He’s not wrong. In his first term as Commission President Barroso, every bit the compromise candidate and keen to secure a second term of office, was careful not to rock the boat. Will we see a new Barroso in a second and presumably final term?

Many of the leading lights from the old committee have gone. Former chair UK Conservative Neil Parish is standing for the UK Parliament and may have a role in Dave Cameron’s government at a junior level. I am grateful to Parish for getting me a glass of champange after German Green landowner Freidrich-Wilhelm Graefe zu Baringdorf had attacked me when I appeared before the committee as ‘not a real scientist.’ (It then all kicked off with a German CDU member heckiling the Green Junker).

The new committee chair is Paulo De Castro, the second Italian to chair the committee and just the second Social Democrat. The fact that he is chair owes much to the priority which the European People’s Party gave to chairing other committees under the D’Hondt points system for allocating committee chairs.

De Castro is well qualified for the job, having been a Professor of Agricultural Economics at the University of Bolonga and Italy’s farm minister from October 1998 to April 2000. He also served as a special adviser on agricultural issues to Commission President Romano Prodi from June to December 2000.

Agra Focus commented that De Castro ‘is arguably as well-qualified as anyone in Europe to head one of the EU Institutions going into the debate on the post-2013 Common Agricultural Policy.’ It remains to be seen whether the 1st reading vote on the reform proposals occurs while he is chair, or after the halfway point in the mandate (early 2012) by which time there could be a different chair.

De Castro used encouraging terminology in a short interview with Agra Focus. There have been concerns that co-decision (if the Irish get the vote right at the second time of asking) could slow down and dilute reform because of farm interests on the EP Committee. However, De Castro emphasised the importance of goals of concern to all EU citizens such as public goods, food safety and animal welfare.