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.

The money is allocated to several instruments (doing away with the traditional two-pillar structure):

* €3 billion for direct income support, available to all farmers in the EU at an equal level, without any historic base. National governments could have the possibility to top up these payments. A flexible component could be introduced to soften fluctuation in prices and regional yields. The eco-conditionality (respect of good agricultural and environmental conditions) shall be tightened.
* €4 billion for environmental services, notably the protection of the climate, biodiversity and water. One part of these payments is available to all preferable farming systems (organic, high nature value, leguminous plants, foraging, low input). Another part is limited to special areas (less advantaged areas, Natura 2000 etc).
* €2 billion to boost the transition towards more sustainable farming. This covers the conversion to preferable farming systems, green investments, innovation and collective responses to local challenges.
* €0.5 billion for food policy. The objective is to promote high-quality, responsible and local consumption through labeling, consumer education, food stamps and investments, for instance in local markets.
* €0.5 billion for security nets and market intervention. Interestingly, the Ministry warns against blanket subsidies for insurances as this can push farmers towards high-risk, high-intensity farming. Only insurances that reward sound environment stewardship should be subsidized.

The Ministry also recalls the polluter pays principle and proposes to consider taxes on the harmful aspects of farming.

There are some elements that raise concern. One is the continuation of fully EU-financed direct payments. However, the proposed drastic cuts to the direct payments combined with stricter eco-conditionality make this tolerable. Another problematic point is the idea to move away from co-financing of agri-environmental measures towards full EU-financing. Furthermore, one phrase about renewed Community preferences (reduced market access for foreign farmers in French parlance) may raise concern (though it may also be discarded as conforming to French political correctness).

The actual proposals are incompatible with French claims to €10 billion: an EU flat-rate income support would bind most CAP money in member states that currently have low CAP entitlements, leaving little for the environmental objectives. And it would be difficult to justify why environmental payments in France – fully EU-financed as they supposedly serve European public goods – grossly exceed payments in other member states.

Despite some minor flaws and tactical compromises, this is a great document. It is amazingly out of line with the position established by the French Ministry of agriculture and espoused in the Franco-German position paper. Let us hope that other ministries of the environment have the same guts! Why not a Franco-German paper for a green CAP? Or even a joint declaration by 27 ministries of the environment?

The position paper can be downloaded in French here.

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.

But as things stand, CAP subsidies are mostly free handouts to member states and their farming communities – they do not create commensurate value for European citizens. This applies in particular to the Single Farm Payment which farmers receive as long as they keep their land in ‘good agricultural and environmental condition’. These minimum conditions largely correspond to the legal baseline – that is, all farmers need to do is to respect the law.

Making those who pay for this waste aware of their unfavorable position actually serves European integration. The CAP absorbs more than 40% of the EU budget, depriving the EU of the renewed momentum it could gain if it became more relevant for attaining the priorities of the future. Citizens are ready to support an EU that creates real value added – by tackling climate change, promoting European infrastructure, or enhancing internal and external security. They are never going to endorse an EU that lavishes money on one politically powerful sector to the detriment of the entire economy.

The distributional issue behind CAP reform will become ever more critical over the next years. Public debts will continue to rise and painful spending cuts will make the population more sensitive to wasteful expenditures. Also, the strain on financial solidarity in the EU provoked by the debt/Euro crisis will spur interest in the transfer mechanisms hidden in the EU budget.

So who is cutting the best deal in the CAP? And who has pulled the short straw? A short paper of mine can be downloaded here. The paper focuses on member states’ receipts of direct income support under the first pillar, which total €42 billion. These are compared with member states’ contributions to financing the direct income support. The national contributions are comprised of the contributions based on value added taxes (VAT) and gross national income (GNI), corrected for the UK rebate and other exceptions.

The most important net contributor to direct income support in 2010 is Germany with €2.44 billion, followed by Italy with a negative net balance of €1.6 billion. Other important net contributors are the Netherlands, Belgium and the United Kingdom.

The biggest beneficiaries, each gaining more than €1 billion, are Greece, Poland and Spain, followed by France, Ireland and Hungary. All these countries defend a large CAP budget and a strong first pillar. Irrespective of their public justification, the money their farmers receive from other member states’ taxpayers certainly plays a role in their love for the old-style CAP.

The net balance for all major net payers will further deteriorate in the coming years. In 2013, Germany will make a net contribution of roughly €3 billion, followed by Italy with €1.9 billion, the Netherlands with €900 million and Belgium with €800 million. The strongest deteriorations in the net balance affect Germany, France, the United Kingdom, Italy and Belgium. France sees its net gains shrink from €868 million in 2010 to less than half in 2013.

Is it advisable for the EU-12 to push for a strong first pillar with much direct income support? Clearly, the EU-12 will be much better off by shifting the money from the CAP to the EU’s cohesion funds. EU-12 member states receive a share of every € spent that is three times higher for cohesion funds than for direct income support under the CAP. The ratio for Estonia is 5, for the Czech Republic, Latvia and Romania 4 or higher, and for Poland and Slowenia above 3.

You can download the entire paper here.

However, I stumbled upon an intriguing paragraph by Findlay and O’Rourke (Power and Plenty, p. 374) that dates some continental agrarian protectionism back to Napoleonic wars: ‘in 1811, faced with the growing scarcity of sugar, Napoleon issued a decree promoting beet cultivation through a variety of means, leading to a rapid growth in the number of factories. This new industry, which eventually spread to several other Northern Hemisphere countries, would soon become dependent on government subsidies and protection, since tropical producers retained important underlying cost advantages. Indeed, government production and export subsidies became so prevalent that in 1902 nine European countries … signed the first international primary commodity agreement, the Brussels Convention, which aimed at abolishing sugar subsidies. In this sector, therefore, war time import substitution had not only a long-run effect on subsequent trade policies, but also a large negative impact of tropical sugar producers, particularly from the 1870s onwards … Between 1860 and 1900, European countries increased their share of world trade in sugar from zero to 60%. … By 1902, free-market sugar prices had declined to little more than a third of their 1880 level.’

What an outstanding example of policies’ path dependence! There is a dangerous tendency in man to rationalize the past and call for continuity. Generally it feels better to say: ‘We have done what we had to do. Now times are changing and we need to adapt by building on what we have already achieved’, than to admit ‘We have seriously messed up in the past and now we need to start again with a clean slate.’ It would be preferable to be honest and concede that agricultural protectionism – including but also antedating the CAP – was a big mistake and that we need to move on to an entirely different policy targeting sustainable land use.

Another thought that comes to mind from this historical perspective: both causes of agricultural protectionism, from the early and late 19th century, are classical examples of special interests defending their rents to the detriment of collective welfare. The idea that agricultural subsidies/protectionism originated with the food shortages of the Second World War is clearly a myth. Whilst this experience facilitated the creation of the CAP, the real driving forces of the second half of the 20th century have remained the same as ever: the sectoral interest of agriculture.

According to the scientific advisory board on agriculture, market price, direct income and farm-level investment support should be removed. There is no reason to fear a massive breakdown in EU agriculture: 61% of German agricultural area is rented out, so that large share of direct payments does not benefit farming anyway; bioenergy makes it increasingly attractive to continue farming; structural change will allow significant cost reductions to make farming more competitive; several agricultural sub-sectors are economically viable, and have been so for a long time, without receiving significant subsidies and tariff protection; the extra costs of higher EU standards are low for most farms (less than €50/ha); and targeted payments to maintain agriculture in areas threatened by undesirable land abandonment can compensate adverse effects.

Coping with fluctuating market prices will be a key entrepreneurial challenge for farmers – and not a cause for government intervention. Governments may have some role to play to address production risks that cannot be efficiently insured – especially with regard to droughts. However, adaptation to climate change falls again primarily into farmers’ responsibility, while governments should limit their activity to providing public goods (such as meteorological forecasts, research and innovation).

A sectoral approach tied to agriculture is not a suitable mechanism for regional development. Furthermore, responsibility for regional development should be shifted to lower levels of governance.

Significantly more funds should be dedicated to targeted public-goods programs. In addition to the traditional objectives of climate change and wildlife biodiversity, the importance of maintaining the diversity of the agricultural genetic pool is highlighted. It should be examined which of these public-goods policies are best integrated into the agricultural resort and which should be transferred to other ministries.

This is a world apart from the official German position, dated March 31, 2010, and agreed by the federal and Länder ministries. The ministries favor the status quo plus some more Health-Check style modifications. The two-pillar system with a strong first pillar, centered on direct income support, should be maintained. The CAP should be further simplified and remaining market interventions be reduced to a safety net. Socio-economic objectives should remain central. And the current distribution of subsidies across member states should be upheld.

When will these two worlds clash? So far, the Ministry of Economy (liberal, FDP) and the Finance Ministry (conservative, CDU) have been silent on CAP reform and left the issue largely to the Ministry of Food, Agriculture and Consumer Protection (Bavarian conservatives, CSU). But the strain of the financial and economic crisis on public budgets – together with the growing public discontentment with Germany’s responsibility to pay for the EU and other member states’ deficits – makes a showdown inevitable.

But how independent are the evaluators? How strong is their mandate? How useful are the findings? In a recent article in EuroChoices, Angela Bergschmidt, an evaluator from the Federal Research Institute in charge of agriculture in Germany, offers a bleak account:

[It is] a useless evaluation; costly, often low in scientific quality, unread and unnoticed by policymakers and the wider public.

Evaluation results have apparently not been used to implement changes in the new RDP either at EU level or with respect to adoption by the Commission of the RDPs of Member States.

my experience in Germany is that neither the Federal Ministry for Food, Agriculture and Consumer Protection nor the Ministries of the Federal States are convinced of the evaluation concept. The Administration is accustomed to implementing measures without performance review, adapting them mainly for fiscal or political reasons. As a consequence, the results of an evaluation are used as a line of reasoning if they fit into actual strategies.

the main concern of individual managing authorities is to fulfil formal evaluation requirements

the evaluation unit remains understaffed and is unable to carry out quality control procedures for the large number of RDP evaluations

A seminar on May 19 will take a closer look at ‘Rural Development Policy in the EU – Lessons from the Past and Options for the Future’. The seminar focuses on the evaluation process for rural development programs and how this can inform and improve rural development policy in the EU. One objective of the conference is to discuss how better evidence on the key questions of policy design can be gathered. This is a crucial challenge ahead of the fundamental post-2013 CAP reform. In addition, the researchers have summarized the evidence that is available from existing evaluation reports, drawing lessons for the future direction of policy.

A smarter CAP debate

The seminar is part of a new series of seminars on CAP reform.

The EU needs a smart CAP debate. The CAP is the EU’s most expensive policy, costing € 57 billion annually. The success of the EU 2020 strategy and the next long-term EU budget cycle depends on CAP reform. Furthermore, the CAP is a key lever for promoting biodiversity and fighting climate change. A policy debate of the highest standards is needed to prepare the ground for making the right decisions on CAP reform.

But the debate about the future of the CAP is often poorly informed and distorted. Emotions take centerstage: fears over food insecurity, compassion for small-scale farmers and attachment to the rural way of life can hinder evidence-based analysis. The debate is also driven by special interests, with farmers protesting in the streets and extensive lobbying behind closed doors. Narrowly-conceived national interests in maximizing the receipt of EU subsidies also bias perspectives and arguments.

ECIPE and reformthecap.eu are organizing a series of seminars to help non-experts determine the facts. More and more stakeholders are starting to take an interest in the CAP. They feel that something is wrong with the policy but find it hard to challenge the justifications provided by insiders who defend the status quo. The seminars will provide an overview of what research has to say on critical issues in reforming the CAP. The aim is to inform all stakeholders through easily accessible, high-quality presentations by recognized experts: providing the best science at your fingertips.

The draft report suggests 5 ‘key building blocks’: area-based direct income support, climate change mitigation payments, payments to areas with natural handicaps, payments for biodiversity and environmental protection, and green growth subsidies with a focus on renewable energy. The first two payments are to be fully financed by the EU, and the other three co-financed by the member states.

I will not go into the reports’ food-security and fair-income arguments (though they thoroughly deserve criticism) but will limit myself to commenting on some peculiar lines of reasoning that are considered to prop up the case for a strong CAP.

whereas the share of CAP expenditure in the EU budget has steadily decreased from nearly 75% in 1985 to a projected 39.3% in 2013; whereas this represents less than 0.45% of the EU’s GDP; whereas the decline in budgetary expenditure on market measures is even more significant – from 74% of all CAP expenditure in 1992 to less than 10% at present;

“Measured against the EU budget and GDP, we are wasting less money today than in the past.” This is correct as an empirical assertion about past policy changes. It is not an argument that could justify the expenditure of a single euro on the CAP. Maybe 0.0% is the right spending target. It could theoretically also be optimal to spend 1.0% of GDP on agriculture through the CAP. Whatever the right solution is, reference to past spending levels is not acceptable as an argument in the debate about desirable future policy choices.

whereas the EU continues to experience a widening trade deficit in agricultural products

and

insists that EU agriculture must remain competitive against fierce competition from well-subsidised trade partners; therefore believes that competitiveness should still be a fundamental objective of the CAP post-2013 to ensure that the EU has the raw materials to produce high-value European food products and they continue to win a greater share of the world market

Where is the problem with a trade deficit in agriculture? And why should the EU gain shares in world agricultural markets? The basic assumption of economists is that each country benefits if it specializes according to its comparative advantage. In those developing countries where the most competitive sector happens to be agriculture, governments are often skeptic about excessive specialization and prefer a more complex economic argument based on the dynamic gains of investing in manufacturing and service sectors that allow their country to climb up the value chain in the future. But the EU’s competitive advantage is much more concentrated in high-value-added sectors (high-tech, professional services, luxury goods, research and innovation). In other words: we are lucky. It makes no sense to work against this specialization and export more agricultural products. Since trade accounts roughly balance in the long-term, more agricultural exports would automatically imply fewer exports of these high-value-added products and services in which the EU enjoys a comparative advantage.

recalls, therefore, that unless farming activity is preserved across the EU, no provision of public goods will be possible;

and

insists that the cost of support through a strong CAP is nothing compared to the costs of no action and its negative unintended consequences;

The death of European agriculture is again at the doorstep. The day the CAP is abolished, there is no country to walk in, no food to eat, no water to drink, no air to breathe. These wild beliefs can be divided into two ‘analytical’ steps: first, that agriculture would actually collapse, and second, that this would create overwhelming problems. In reality, agricultural production will most likely continue to grow – with or without policy support (see DG Agri study: Don’t be afraid of liberalization and Crystal ball gazing: Scenar II study on the effects of CAP reform). If agricultural production were to decline dramatically, this would cause some problems – but it would also create great benefits, notably in terms of water quality and climate change (though this depends on second-order effects abroad). But CAP supporters rarely say “We believe that without the CAP, there would be a slight decrease in production, and this would have negative effects on balance.” They almost inevitably turn to the dramatic – “unless farming activity is preserved across the EU, no provision of public goods will be possible” – a situation that would be so horrible that the €55 billion we are paying every year must be deemed nothing short of “nothing”.

I have criticized three points: the reference to past spending as a justification for future spending; the blindly mercatintilist appetite for world market shares; and the all-or-nothing drama when it comes to the survival of European agriculture and the public goods that depend on it. Together, they are examples of a fundamental problem in EU agricultural policy-making: the CAP debate is taking place in a bubble. Agricultural ministries, DG Agri, the EP Committee on Agriculture, farmers, the landowners and rural interests reinforce each other in the CAP-insider community. Radically critical voices are sidelined. The CAP is made within a bubble by people who want to keep the CAP as it stands or to reform it as much as is necessary to preserve it. Lines of arguments such as those I have picked out above can prosper in such an environment. Strikingly unsound statements, which would, in other policy domains, be dismissed with laughter as intellectually deficient, are the respectable mainstream in agriculture.

The starting point of the draft already chills expectations: “The Common Agricultural Policy has been largely successful in fulfilling the objectives it was set out to accomplish so far.”

Three groups of objectives are identified. 1) Supporting economic needs – including an EU agriculture competitive on world markets, EU food security in an unstable world context, and the valuable contribution EU agriculture and the downstream agri-food sector make to EU growth and employment.

2) Responding to social concerns – to enhance farmers’ incomes that are lower than the EU average in most member States and that decreased in 2009; to support the sustainable, dynamic and balanced socio-economic development of European rural communities; to attract younger generations to rural areas and activities; and to tackle rural unemployment.

3) Delivering benefits in terms of public goods – with a focus on the positive externalities of agriculture, justifying ‘a strong and well-supported CAP’.

From these objectives, the draft moves to an outline of future CAP measures and structures. The basic tenet is: keep things roughly as they are. Maintain some market measures as a safety net, continue with the Single Farm and the Less-Favored Area Payments, and uphold flexible spending entitlements that are fully community-financed (roughly corresponding to Art. 68). The current budget should also be kept, and co-financing limited to the sort of measures that currently fall under co-financing.

At some point, the report asks for the “maximisation of the delivery of environmental goods”. But this is misleading rhetoric. You can spend any Euro only once. If you want to serve many objectives and finance many measures that have nothing to be with environmental goods, you are leaving little for the environment.

For this draft, any argument is good enough if it results in payments to farmers. In the category “Supporting economic needs”, one objective is “corrections to market failures such as exposure to natural disasters, high risk and price volatility, lack of demand elasticity, farmers’ position as ‘price takers’ in the food chain, etc.” Since when are natural disasters a market failure? Or high risks, or a lack of demand elasticity? These are market conditions that determine how profitable a given sector is and who should be in this sector (according to how successful individual economic actors are in coping with these conditions). They can, in particular circumstances, give rise to market failures, and these market failures can, again in particular circumstances, justify efficient state action (which is unlikely to take the form of round-about income support or market intervention to support prices). But considering all these phenomena enumerated above as ‘market failures’ that somehow warrant the Single Farm Payment or price intervention is untenable.

What is most upsetting is that this draft comes from George Lyon, who happens to be a Liberal Democrat from the UK. These are the best reform credentials one could wish for. Once MEPs from other party groups and member states have introduced their amendments, the outcome will likely be worse.

But why would a Liberal Democrat from the UK write such a draft? Have a look at his homepage. Mr. Lyon was brought up in a seventh-generation tenant-farming family, occupied different positions within the National Farmers’ Union (NFU) starting in 1989, and had a stint as President of NFU Scotland in 1998-1999. He is hardly a special case. ComAgri MEPs frequently have close farming ties, which helps to explain why they overwhelmingly support a CAP that serves farmers first. If the EP wants to be worthy of its new powers in agriculture, it must intervene early and forcefully in the work of ComAgri.

The S&D give two reasons a ‘New Start’ (yes, in capital letters, just like the ‘New Deal’ they are calling for) is imperative. The first is the common environmental public goods rationality (climate change, water management, renewable energy, biodiversity, soil erosion). The second is a combination of social concerns: reducing regional disparities, redirecting subsidies from the most competitive to more needy farm holdings, and creating employment (‘the granting of aid must absolutely be linked to job creation in rural areas in order to maintain, bring to life and develop the agricultural area in all regions of Europe’).

Concerns about employment and vitality in rural regions seem to point towards the strengthening of the non-agricultural component in rural development (Axes 3 of Pillar 2). But the document takes a most interesting turn in the opposite direction: the ‘hotchpotch’ of Pillar 2 should be cleared up, all CAP subsidies should be merged into one pillar, and all current CAP instruments that no longer fit should be transferred to the regional and cohesion policy.

I have a number of problems with the document. I am concerned about the objective of stimulating agricultural employment through the CAP and do not see the need to have a generalized payment link to natural handicaps. Furthermore, I very much like the extension of national co-financing of CAP subsidies, which the document rejects without further explanation.

Nevertheless, my overall assessment is strongly positive. The level of change envisioned is outstanding, and the general tone is rational/progressive (‘instruments must be better focused on objectives; priority must be given to expenditure that is more socially useful, such as financing of public goods made available to society; and handouts (direct subsidies) must be replaced with measures encouraging those involved to take account of the new requirements (new contractual approaches). Public subsidies should be given to farmers in return for their provision of environmental services and landscape management.’)

Comparing this statement to the stubborn defense of vested interests that is endemic in the EP Committee on Agriculture, it is a great step forward. And this is all the more important since Paolo De Castro, the chairman of the EP Committee on Agriculture, is a Socialist.