1789: the people of Paris take the Bastille. 1848: republican upheaval all across Europe. 1917: the Communists take power in Russia. 2010: the European Socialists & Democrats declare that the CAP needs to be revolutionized. Admittedly, the S&D do not pretend to lay claim to quite such daring historical parallels – but there is no doubt that they make bold claims: the ‘one step at a time while maintaining the original philosophy’ approach of the 1992, 2000, 2003 and 2008/09 reforms has been ‘overly timid’. Explaining that progressives are those who anticipate and guide ambitious reform processes, whereas conservatives only tackle the issues when forced to do so by the emergence of crises or external constraints, they conclude that, ‘the reform of the CAP over the last 15 years has generally followed this second path.’

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.

The author (pictured, below) is a former Member of the European Parliament and currently a Transatlantic Fellow of the German Marshall Fund of the US. He also has a small farm in Portugal. This is the first in a series of guest posts on capreform.eu.

You will understand that – minor as it might seem – the point that got most of my attention in the paper presented today by the Presidency of the European Council on Agriculture was the one on olive oil. After all, as an olive-oil farmer I have a vested interest on the issue, and therefore I was taken by surprise by reading that the Presidency considers “the authorisation of the private storage of olive oil in 2009, which contributed to a recovery in prices and subsequent market stabilisation” as an example of the success of the existing market control mechanisms.

As I am being paid 50% of the price I received for my olives a couple of years ago – 30 cents a kilo instead of 60 – I have some difficulties getting the point of the Presidency. It is true that when I started harvesting back in November, the local buyer told me he could not guarantee more than 24 cents the kilo, which would probably not cover harvesting costs, and so he presented his 30 cents offer as a generous move.

In the Brussels world of free competition, I could sell my olives to somebody else, but in the real world of Vale do Vargo, the only competitor is a co-operative that is practically bankrupt and pays for your olives in kind (gives you olive-oil in return) which is not a very practical form of payment. In the neighbouring village the local co-operative closed long ago, and several practicalities make it difficult for me to deliver my olives to longer distances.

So, I could think of milling the olives myself, or I could think of asking my south-eastern neighbour to mill them for me. But, well, all the traditional olive mills have been closed, according to the national authority’s explanation, because of Brussels directives. In fact, Brussels directives only told member states that waste water resulting from the milling process of olives should be correctly disposed of, and this did not mean closing down hundreds if not thousands of olive mills across the country, but Portuguese national bureaucracy saw here another golden opportunity to “modernise” by decree this old-fashioned rural country and made a very restrictive interpretation of the directive.

My short farming history started exactly when I was nominated for a report on olive-oil in the Budgets Control Committee of the European Parliament and I got so fascinated with the various dimensions of the issue that I decided to see for myself how to deal with olive groves. I never thought of my olive trees as a business, but as a hobby. Nevertheless, I expected it would be much less expensive than it turned out to be. As I soon understood, many of the olive groves around my own are held as a hobby by people working in nearby towns or villages. They have a small plot of land, something like one or two “sortes” – over there it means from 2,5 to 7 hectares – they take care of them on weekends and they are very happy if the payment for olives will cover their costs, excluding their voluntary work.

Normally this is a population that likes to keep old ties with inherited land or inherited rural habits, and that is emotionally involved with the farming cause, as much as if their livelihood would significantly depend on these plots of land. Then you have those who still make a living out of these traditional olive groves, and they must explore at least some 30 hectares of land. They keep traditional olive trees, but they already use mechanical collection and a lot of chemicals with which they kill all existing vegetation between olive trees and combat major pests. Sometimes they irrigate their olives as well.

The past years have been dramatic for this group. After severe droughts that limited production they now face sharp drops in prices. In the last five to ten years most of the olive grove scenery of Southern Alentejo changed dramatically, with the implantation of huge intensive olive oil groves. Invariably using irrigation, they multiplied by a factor of five to ten the number of olive trees per hectare, although using young and small olive trees that will not be allowed to get old. These new farms use more efficient olive-picking machines and the same chemical approach as the traditional commercial farms.

Most of the new olive groves were planted by Spanish investors, and because of the overall economic crisis, investment dried up in 2008, and several of these olive groves are for sale. Up to 2007/2008 – that is before these new olive groves started producing – the Portuguese olive-oil production was steadily declining, as in the absence of major modernisations, traditional production was just uncompetitive. This situation had, however, a positive aspect: prices remained firm. As the Portuguese consumer gives a premium to Portuguese olive oil and the national production was far below national demand, there was a premium for the national olives.

As the European Commission has been subsidising private storage of olive oil and – unless there will be bad climatic conditions – everything points to a steady increase of olive production for the next few years, I believe the private storage that the Presidency’s paper presents as the symbol of success in the intervention of markets will certainly play a role in damping future prices. It is awkward that a Presidency that happens to coincide with the largest European olive oil producer member state does not even consider the possibility that what I am presenting here as my personal analysis may become a reality.

If we were to analyse carefully the effect of the use by the EU of massive storage measures – milk products, beef, and grains – when the problem was more structural than short-term, I think we would confirm my point of view. What my accidental farming experience together with my administrative, political and academic experience tell me is that we are facing a structural challenge that has to be considered in several angles: technical modernisation; environmental impact in water, erosion, biodiversity and landscape management; rural policy; budget and budget control issues and food quality.

In our Mediterranean conditions, a traditional olive grove – intermingled with fig and almond trees, cork and green oaks – with centenary olive trees where you can easily find bees-nests, lizards, all sorts of insects and birds, even refuge for rabbits, with a lot of other species of plants in between where you occasionally spot hares, pheasants or wild boars is a wonder of nature. In the past, it allowed the presence of the “gland pigs” – that strive better in oak forests, but that go as well on olive groves – that would eat grass and plants, the figs and the fallen olives – and thus preventing the reproduction of pests like the fruit fly – alternating with lambs that would eat the grass and occasionally would prune the unwanted lower branches of olive trees. The main problem is that you need to give a close eye on what these animals are doing to prevent them misbehaving, and this is time consuming and less competitive than the alternative of spraying chemicals around.

Hand-picking of olives has been out of the question for quite some time and the standard traditional method has been for many decades to hit the trees with a stick, and collect the olives with a net by the ground. This is quite a rude method that destroys the productive capacity of the tree and is still time-consuming. Lately, huge machines that help shaking the tree have been used, but this is much more cumbersome, expensive and time-consuming than to have small aligned olive trees that you can handle like a fruit tree orchard.

As decoupling of aids from production only very recently and still partially arrived at olive production, and decoupled payments are made on the basis of historic production, the Common Agricultural Policy actually became a further disadvantage to the traditional olive grove, as it gets a much smaller subvention than the intensive one.

So objective technical and market conditions – reinforced instead of balanced by the CAP – made impossible to the traditional olive groves to compete with the new intensive ones. The new, intensive olive groves were classified by a DG-Environment European Commission report as the number one cause for soil erosion in Spain, washing annually millions of tones of earth from the fragile Mediterranean soil to the sea. They also represent a drain on scarce water resources, they have a negative effect on biodiversity and, last but not least, they are not beautiful in the landscape as the old ones are.

But if these obvious failures of policy were not important enough, the budget control framework of the European legislation made things considerably worse. Either because the Commission once proposed to replace the payments per olive quantity by a payment per olive tree – proposal flatly refused by the industry – or for some other less transparent reason, the budget control mechanisms of the Commission rely solely on counting the number of olive trees.

As an explanation for this extraordinary practice, the Commission said that counting the number of trees was an indirect way of counting olives, assuming approximate fixed productivities per tree in each particular region. This is sheer nonsense for two reasons: the first is that the main variable on which productivity depends is the intensification degree, not the region where an olive grove is situated; the second is that with extensive methods variability is very high depending on climate variations.

However it goes beyond belief the enormous amounts of effort and public funds put behind this absurd task of counting olive trees. Brussels gossips – completely out of the blue – were that plastic trees were being planted in Italy to deceive the controllers. This would have been double foolishness, as a real olive tree is cheaper than a plastic one and no-one ever got a cent from the European Budget for having an olive tree, but only from producing olives, and plastic trees do not produce them as real olive trees do. The first thing I was told when I bought my olive grove was that I should be very careful in stating a number of trees considerably lower than reality. Otherwise, I would risk seeing the controllers coming, deciding several of my olives were not in good production capacity and condemn me as a fraudster. In the olive oil business fraud comes from making olive-oil without olives, not olives from plastic or almond trees, as it is apparently reasoned by the Commission.

Fraud in olive oil traditionally attains alarming levels, much higher than in milk products or wine, two of the other traditional victims. According to a press report I quoted in a Parliamentary question to the Commission, falsification of olive oil reach 50% levels in some European markets. The Commission was not impressed, and answered this was a detail for member states to be concerned with.

From all of this, I think we can understand what should be done on this sector, quite differently from what as been done lately.

1. Limit market intervention to exceptional circumstances. Do not make a system out of it. If the crisis situation lasts, think of structural measures;

2. Phase out existing subventions and replace them by a system that rewards olive production for (1) biodiversity enhancement; (2) soil conservation and (3) water saving;

3. Promote or subvention research in technologies that will increase human productivity with extensive use of natural elements;

4. Promote or subvention the personal or collective use of machinery that replace burning and pesticides.

5. Couple these measures with rural policy and social policy towards those who will not be able to keep the market competition pressure, as Sicco Mansholt thought necessary from the beginning.

6. Make war on those who make olive-oil without olives, stop harassing farmers for ludicrous reasons;

7. One of the last but very important decisions of former Commissioner Fisher Böel was to send her staff for visits in the countryside. Enlarge the measure to the other European institutions, everyone being invited to reflect all of these issues walking along old olive groves… Be my guest!

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.

The German Council for Sustainable Development has just published a report highlighting the environmental damage caused by intensive agriculture and calling for a reform of the CAP direct payments system. It proposes a three-fold structure of payments: an environmental basic payment, a series of targeted agri-environmental payments for farmers who accept higher obligations, and a series of payments for high nature-value areas where the continuation of agricultural production is desirable but threatened on economic grounds.

For the environmental basic payment, it suggests that eligibility would be conditional on farmers turning over at least 10% of their area to environmentally-friendly husbandry with a view to maintaining a high level of biodiversity in the agricultural landscape throughout the EU.

The Council explicitly argues against the idea that farmers should be remunerated for fulfilling their statutory obligations with respect to the environment, animal welfare and food safety (cross compliance). It also justifies full EU financing of most of the payments “so long as these are directed to fulfilling EU objectives”, thus apparently advocating that some of the existing co-financed agri-environmental payments in Pillar 2 might be moved to Pillar 1 at least as far as financing modalities are concerned.

The report provides an excellent summary of the state of the debate on the environmental implications of agricultural policy (in German only, at least for the moment).

Read it here. Google Translate renders a passable English version of the press release for non-German speakers here.

Nothing tells you that a big political debate is hotting up like the emergence of new alliances of odd bedfellows. Yesterday saw a major joint intervention from two of Europe’s biggest, most authoritative and well-connected players in EU agriculture policy.

Birdlife International is a global partnership of conservation organisations. The Royal Society for the Protection of Birds, its member in the UK, boasts well over a million members. The European Landowners Organization is a federation of farmer and landowner associations. Both Birdlife and ELO have members and affiliates in each of the EU’s 27 member states.

They have come together in support of new ‘joint position’ for the future of the CAP. It is based around seven core principals. At its heart is a recognition that agriculture policy should be reoriented towards supporting the active land management practices that are needed to protect the landscape, the environment, preserve biodiversity and ensure for the long term Europe’s capacity to continue as a major producer of food.

The joint position stresses the need for a common European policy backed by money raised at a European level on the grounds that many aspects of land management require a cross border approach, e.g. water basins that span national boundaries, wildlife species that migrate long distances and seas that lap on the shores of more than one country. Moreover, within a the European common market for food, policies that have a bearing on food production should not operate in a way that distorts free competition. Birdlife and ELO also argue that solidarity among European nations of widely different levels of affluence and a shared concern for the future of the unique European tapestry of landscape and rural heritage is justification for a common European policy financed from a common budget.

The joint position is frank in its admission that despite a measure of evolution since it was founded in the early 1960s and some changing rhetoric, when it comes to how the €55 billion a year of CAP money is actually spent, it is still “a policy tuned to supporting agricultural commodity production”. It goes on to argue that the CAP must leave behind its commodity production past and embrace to a future in which “public expenditure matches, as much as possible, the delivery of public benefits which are vital for achieving both food and environmental security”.

Birdlife has been a pioneer of the “public money for public goods” mantra that looks certain to dominate at least the semantics of the upcoming CAP reform debate, if not the actual policy content. (Public goods have a very clear definition in economic theory but the term is increasingly thrown around without much precision, even by those who should know better, such as three analysts from the IEEP, who in a recent report, define agricultural public goods so widely as to remove any analytical power from the concept.) That a big, mainstream farm union like the ELO should throw its weight behind the public goods argument, and nail its flag to the Birdlife mast, is a significant achievement for the conservation group. It also suggests that the ELO has made a strategic calculation that the public money for public goods will be the defining logic of the next CAP reform, and it is better to get ahead of the argument than be left behind.

Making the opposite strategic choice is the UK’s National Farmers Union which is perhaps not surprising since the NFU’s main competition for members comes from the ELO affiliate the Country Land and Business Association (CLA). With Birdlife and the CLA even putting in a cordial joint appearance on the influential BBC Radio 4 Today Programme, the NFU’s Tom Hind reacted angrily to their joint position, dismissing the public goods argument as ‘naive’ and ‘old school’. For the NFU, the recent volatility of food prices means the next CAP reform should see the policy sharpen its focus on boosting commodity production. Some might regard this as a ‘pre-school’ approach.

Today the NFU issued a further reaction in the form of a press release in which its President Peter Kendall denounces the Birdlife/ELO position and reaffirms the NFU commitment to a CAP aimed squarely at commodity production and cheap food. Over the past few years successive NFU leaders have made the case for remuneration for public goods provided by agriculture (even the NFU’s EU-level partner COPA/COGECA has begun talking in these terms). So this more traditional perspective brings the NFU much closer to the positions taken by continental farm unions like the FNSEA in France.

Putting the UK sideshow to one side, the joint position sets out some of the policy implications of the high level argument for a CAP aimed at long term environmental and food security. It argues that High Nature Value farming, for example extensive grazing livestock farms, is badly neglected by the current CAP and should get a much larger share of taxpayer support, at the expense of more modern, resource-intensive and commercially-viable production systems such as feedlot livestock-rearing and monoculture cereal farms. During the question and answer session of the launch of the joint position in the European Parliament, I put it to Allan Buckwell, policy director of the ELO, that the plan would involve a major redistribution of subsidies and this could be politically toxic. Buckwell was admirably frank in agreeing that the plan would involve significant redistribution of support and made it clear the ELO was not in the business of defending the current allocation of CAP funds.

For a statement from a leading European farm union, the ‘joint statement’ is remarkable in that its contains the weakest possible defense of the market mechanisms (support prices, intervention buying and export subsidies) and direct aids of the first pillar of the CAP:

“Pillar 1 has certain strength in its relatively administrative simplicity and in the strong element of certainty and revenue stability it gives farmers.”

The ‘joint position’ contains no reference to measures to ensure price stability nor does it argue for the continuation the current system of direct income support for farmers. However, it is implicit that paying farmers for the provision of public goods does provide them with a valuable new income stream to supplement what they get from the marketplace. Both Allan Buckwell and RSPB’s Gareth Morgan made this point during the question and answer session.

Nevertheless, it is striking that first pillar of the CAP, which still takes up well over three quarters of the current budget, is well and truly hung out to dry. The joint position states that the mechanisms and measures of a reformed CAP “are likely to show more characteristics of the current CAP rural development and agri-environment measures than current support measures”. These characteristics are listed as follows: (1) a contractual basis of payments that lists the public goods the recipient of public funds is expected to produce in return for the public money paid, (2) transparency of both the funding and the contractual commitments, (3) targeting of specific outcomes and results that are quantifiable and measurable, (4) monitoring of performance and adaptation of policies in the light of outcomes, (5) accountability of recipients of EU funds and the national and regional authorities responsible for implementing EU policies and spending EU funds.

It is a sign of changing times that the ELO and Birdlife International are able to see eye-to-eye on the fundamental principals of a new CAP. In my view, they are on the right side of most of the big issues and the ELO has clearly stolen a march on the more traditional farm unions who would prefer to line up in defense of the status quo. My colleague Valentin Zahrnt has argued that BirdLife is makinge a mistake geting into bed with the ELO. I disagree. It’s not possible to achieve radical reform of the CAP without buy-in from the more progressive of Europe’s farmers and land managers.

Either way, there is no doubt that this will be seen a very important intervention as this year’s debate on the next CAP reform gets going. Read the joint position here

When the Lisbon Treaty came into force on 1 December 2009, one of the big winners was the European Parliament which gained equal status with the Council of Ministers in most EU decision-making, including for the first time agricultural policy-making (although with some ambiguity about its role in setting prices and aid levels to which Wyn Grant has drawn attention). There is considerable interest in whether these new powers will be used to promote or block CAP reform. The pessimistic view is that the EP will become the focus of intense sectoral lobbying which will be used to block reform.

Some light may be thrown on the way the EP will exercise its new legislative role by looking at trade policy, another area where the Parliament gained new powers under the Lisbon Treaty. Currently, the EU-South Korean Free Trade Agreement, which was negotiated under the old Nice Treaty rules, is up for ratification under the new Lisbon rules. According to a report in EUObserver, there is a possibility that the EP could reject the agreement, in large part because of lobbying by European small car manufacturers.

The EUObserver report notes that a debate in the Parliament next week will throw light on the stance of the European legislature, with observers predicting support or opposition is likely to fall along national rather than political lines. One MEP, Christofer Fjellner, a member of the parliament’s trade committee and a supporter of the agreement is quoted: “It would be very disturbing if the first thing the European Parliament does with its new powers is to take special interests to heart and increasingly act in a protectionist way.”

A signpost of things to come in agricultural policy ?

Five leading European farming and environmental NGOs, who between them boast several million members, have jointly published a blueprint for a new Common Agricultural Policy. In an unusual and very modern step, they have published a draft proposal and opened it for consultation. They will produce a final version in 2010. The proposal, which runs to 28 pages, is for a radical reorientation of the CAP away from a productivist and income support model towards a ‘public money for public goods’ ethos. [...]

You can read here the agreed communiqué from the 22 countries which were invited by France to discuss the future of the CAP in Paris yesterday. The meeting itself was surrounded by some controversy given that 5 member states (UK, Sweden, Denmark, Netherlands and Malta) were not originally invited, although the UK did send along a civil servant as an observer. The French Agriculture Minister Bruno Le Maire talked at length about the objectives of the meeting in an extensive interview with Le Monde.

The countries attending were those which had supported the call by France and Germany for stronger measures to support dairy farmers in October this year. The meeting took place in the shadow of the start of the debate on the next financial perspective, and was in part a reaction to the leaked Commission reflections in October on the parameters for the next financial perspective, which foresaw a substantial reduction in the CAP budget.

However, the Declaration itself is merely a restatement of well-known views on the role played by European agriculture in Europe’s economy and society and adds nothing to the debate. As Ministers departed, it was clear that they were unable to draw up any list of concrete conclusions and demands. As Minister Le Maire ruefully noted: “It’s not easy to reach an accord within 22 states that defend their different options”

The Spanish Presidency which begins on 1 January has announced that it will hold two councils devoted to reflections on the future of the CAP which may give more opportunity for all member states to set out their views.

At various times in the history of the CAP, member states have formed informal groupings to address particular issues, e.g., ‘the Aachen Five’ and the agri-monetary system. The G-21, in effect led by France, is a much larger grouping which constitutes a qualified majority in the Council. It become the G-21 rather than the G-20 at a meeting in Vienna when Greece joined. This left only the four leading reform countries (UK, Denmark, Netherlands, Sweden) outside the grouping, plus Cyprus and Malta – countries that have small farm sectors and may not have thought it worth the time and effort. [...]

I’ve always found the notion of ‘agricultural economists’ a curious one. As if the normal rules of economics don’t apply to agriculture and there’s need for a special discipline of agricultural economics. In universities agricultural economists are often housed in their own special departments, separate from the regular Economics department. I wonder if this alternate universe of agricultural economics might explain the state of agriculture policy, whether in the EU, the US or elsewhere. Anyway, today a group of agricultural economists from 22 EU countries has come out in favour of radical reform of the Common Agricultural Policy. [...]

Until recently, I have walked through Brussels with this grey-blue bag that all participants of the 2008 budget review conference received. In the meantime, it has fallen apart, and I don’t have anything to replace it. This is somewhat similar to the CAP & EU budget debate: the 2008 conference presenting the results of the consultation process briefly attracted broad attention, but subsequently, the debate fizzled out and was overwhelmed by the financial and economic crisis. [...]

The final paragraph of Commissioner Fischer Boel’s valedictory leaflet is revealing and foreshadows the debate that has yet to surface about the future of the CAP after 2013, the end of the current financial perspective. Mrs Fischer Boel makes the case for maintaining a common European agriculture policy among the EU’s 27 member states, presumably funded from the EU budget, as it is now. [...]

Euractiv reports on the creation of a new Franco-German working group to frame reform of the EU’s Common Agricultural Policy (CAP) after 2013. France has a new Agriculture Minister in Bruno Le Maire, who wasted no time in setting out his stall in meetings with Commission President Jose Manuel Barroso. [...]

The debate on the future of the CAP after 2013 has now started following the informal Farm Council in the Czech Republic earlier this month. Those who want to influence the debate have about twelve months before the Commission publishes a Communication (effectively a White Paper) on future policy in the summer/early autumn of next year. Formal legislative proposals will then be published in the middle of 2011 together with the proposals for the financial perspectives from 2014 to 2019 or 2020. [...]

France is Europe’s agricultural powerhouse and when it comes to the CAP, it is probably the single most influential member state. So what France thinks is of central importance to the future of EU farm policy. It is therefore good to see the publication of the latest of the national reform profile series at the CAP2020 website, run by the respected Institute for European Environment Policy. [...]