The Ciolos CAP reform

The CAP2013 reform ended with a whimper yesterday as the Agricultural and Fisheries Council adopted the revised regulations as an A item without discussion following a first reading agreement with the European Parliament. Today the President of the Council ratified the documents in the presence of the ministers from Denmark, Cyprus and Ireland and the vice-minister from Poland. This concludes the legislative process for the 2013 CAP reform. For the first time, we now have a clean version of the four main regulations, as follows.

Direct payment regulation

Rural development regulation

Horizontal regulation

Single CMO regulation

The extended Council press release announcing the Council’s approval has a useful annex summarising the main changes which will be introduced by this reform.

Factors shaping this reform

The 2013 CAP reform will be known as the Ciolos reform although whether it really is a reform or not will be debated for some time. This blog has expressed its disappointment that the reform was not a more ambitious one. It has regretted that the opportunity was not taken to move support for farming further away from generalised direct payment support towards more targeted payments for the delivery of public goods.

The Commissioner has consistently defended the most novel element of his proposals, namely, to pursue greening by allocating a share of Pillar 1 direct payments as a green payment to farmers in return for some simple and shallow commitments to measures intended to benefit the environment and to help mitigate climate change. I have argued on this blog and elsewhere that more could have been achieved in this direction through a combination of raised cross-compliance and more ambitious measures in Pillar 2.

But I also think that even those of us who feel that the Ciolos reform was a missed opportunity will appreciate that the Commissioner had a remarkably difficult brief and that he succeeded to a considerable extent in pushing through his own agenda. I would note the following:

The first explicitly redistributive CAP reform. This reform had to address the unfinished business left over from the last enlargements of the great variation in payments per hectare between the old and the new member states. While there is no ‘right’ way to distribute CAP payments across member states with very different agricultural structures, productivity and general living standards, some redistribution was demanded. Redistribution of CAP budget shares is a zero-sum game in which there are inevitably losers as well as winners. Previous reforms had always been reluctant to propose explicit redistribution between the member states. While the eventual redistribution formula first appeared in the Commission’s proposed MFF in June 2011 and was not explicitly part of the debate on the CAP regulations, this was the first CAP reform in which redistribution has played a major role.

Ciolos also recognised that the historic basis for the allocation of the single farm payment was increasingly untenable and impossible to justify either to farmers or to taxpayers. It was Fischler who, when introducing the single farm payment, insisted on retaining the historic basis because it avoided the additional complications of redistribution within member states. He only agreed to allow the regional option towards the end of the negotiations at the insistence of the German Minister for Agriculture (as reported by Swinnen in his account of the 2003 reform). Ciolos, on the other hand, went to the other extreme in proposing that all payments entitlements should have an equal value within regions by 2019, thus tackling the redistribution issue head on. The final agreement backtracks from this ultimate levelling requirement (and there is plenty of room to debate whether it is a sensible objective or not), but nonetheless movement towards internal convergence is required in all member states.

Another success was the agreement, finally, on a new delimitation of areas with natural constraints ANCs (formerly, the less favoured areas, LFAs) solely on the basis of biophysical criteria. Allowing socio-economic criteria to be used to delimit LFAs had led to absurdities such as that 95% of the UAA in Luxembourg was deemed disadvantaged simply because farm incomes there were low compared to the incomes of bankers and financiers living in the capital city. Yet this proposal from the Commission, made already in 2009, had stalled in the Council because it implied a redistribution of payments within countries that Ministers for Agriculture preferred to avoid. True, member states now have until 2018 to implement the new delimitation, and they can also grant phasing out payments until the end of the programming period to farmers who will no longer be eligible for ANC payments. But, at last, the new ANCs will have a meaningful definition as a result of the Ciolos reform.

Food security concerns changed the context for this reform. The global food price spike in 2007-08 and the subsequent volatility of prices particularly on dairy markets significantly changed the terms of the CAP reform debate. If this CAP reform had been negotiated in the years prior to 2007, the public money for public goods argument advanced by the environmental NGOs would have had a much more favourable hearing. The price spike and subsequent market volatility made food security a much bigger part of the reform agenda. Although the concept was interpreted in widely different ways by different actors (as shown in a valuable analysis by a group of researchers at Wageningen University and summarised here), it pushed the need to maintain and increase EU production to the forefront of the reform debate. Thus, the Commission’s communication opening the debate in 2010 had a rather different emphasis to what it might have had just a couple of years previously.

Preventing backsliding on market orientation. Seen in this light, preventing a reversal of the trend towards greater market orientation was a significant achievement of this reform. True, the Council and Parliament have expanded the scope for coupled payments (but under specific conditions which will have to be approved by the Commission). True, the system of vine planting rights has been replaced by a licencing system (but all wine-producing countries were against the market liberalisation proposed by the Commission). But sugar quotas will go having been part of the CAP for over 50 years. The use of export subsidies has been further curtailed if still there to be used in crisis situations. Proposals to reintroduce supply management in the dairy sector were repelled. Modest steps were taken to strengthen the position of producers in the food supply chain. Other proposals to significantly raise intervention prices were by and large resisted. The Ciolos reform may not have been ambitious, but it did not embrace many proposals which could have been much worse.

Greening part of the Pillar 1 payment. The principle that at least a share of a farmer’s direct payment should be justified by environmentally-friendly management practices is now established even if the impact on the ground of the new green payment in the coming period will be extremely limited. Looking back at the history of innovation in the CAP, there is a pattern whereby a Commission proposal is often initially accepted in a very watered-down version only to be strengthened in later reforms. Perhaps greening will follow this path in the future. But it could also be a fruitless path if there are real limitations to what can be achieved through greening direct payments in Pillar 1. The environmental movement will need to think carefully before putting all its eggs into that basket.

Reform through co-decision. This was the first CAP reform under the co-decision procedure in which the Parliament has a formally equal role with the Council. The initial verdict must be that the process was long, it was messy… but it worked. I suspect this will always be the case and that the idea that politically-charged topics such as agricultural policy will ever be resolved differently is just a mirage. The notion that the Parliament would bring new ideas to the debate and help to widen the range of interests that could influence agricultural policy also proved to be hopelessly naïve. There is no doubt that the inter-institutional bargaining required to achieve a first reading agreement has reduced the influence of the Commission which now takes on more of the role of an intermediary, while enhancing the role of the Council Presidency whose job it is not only to broker a common position within the Council but then to negotiate a political agreement with the Parliament. The Irish Presidency played an outstanding role in this regard, while Paolo de Castro as the COMAGRI Chair also retained the confidence of his committee when pushing through the necessary compromises. The Parliament certainly put its stamp on the final agreement, for good or ill, but it was noticeable how all of the rapporteurs following the conclusion of the political agreement in June commented on the lack of technical expertise available to them when negotiating with the Council. The Parliament will take time to reflect on the lessons to be learned.

Flexibility as the legacy of the Ciolos reform

The Council press release highlights the contributions of this reform as greening, fairness and targeting. But possibly its major legacy will be the much greater flexibility given to member states in how to implement the reform. As we can see in the sometimes intense debates now taking place in member states over the options to be adopted, agricultural policy has to some extent been renationalised. This characterisation should not be pushed too far. The single market remains in place, with state aids requiring approval by the Commission. Member states have always had considerable flexibility in putting together their rural development programmes. The new flexibilities concern the ways in which direct payments are administered within member states. These are politically difficult decisions because they involve the distribution of resources, but they don’t fundamentally undermine the common framework of the policy.

The Ciolos reform is a work in progress. It leaves unanswered the justification for the bulk of Pillar 1 payments. The green payment does not appear to hold out much potential for additional environmental benefits, but its impact, or lack of it, will only become evident with time. The robustness of the new market management architecture will only be tested in the context of a crisis. The new rural development regulation contains some useful new instruments, but it remains to be seen how member states will make use of them.

These are all questions to be answered on another day. For three years Commissioner Ciolos has fought for his agenda and his reform, and this day belongs to him.

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2 Responses to “The Ciolos CAP reform”

  1. Simon Ward
    December 18, 2013 at 11:13 #

    To be positive the reform has introduced mechanisms that could be used to greater advantage in the future. However, it tragically raises cost for producers and reduces food production through crop diversification and EFA. The environmental delivery is minimal and if the two points are taken together the cost of the environmental gain is exceptionally poor value for money in most areas of the EU. For example, restoration of pollen and nectar plants would be cheaper, have a smaller impact on production and a more positive environmental delivery. The gains in England through our environmental schemes, while unlikely to be lost entirely, will not be enhanced by the reform.

    Mansholt produced clear objectives for the CAP. We need new objectives that are designed not simply to maintain the status quo with new excuses, as this reform has done. Let’s look forward to the next reform and start planning for it.

    Thus we may accept that we do not want to drive the rural populations in an uncontrolled way into cities and other EU countries when we are struggling economically. But as the economies pick up a reduction in a farming reliant rural populations should be encouraged. There is little more tragic than trapping people in poverty unnecessarily as the CAP does too often. Re training and investment in infrastructure (e.g. broadband) is a civilised means of creating new opportunities for people and support for this this in exchange for a phased reduction of farming payments seems a reasonable direction.

    We need to use Australia and New Zealand much more wisely as an economic model for farming where without subsidy their, respective, innovation in dairy and arable sectors is outstanding. A payment for being, as the Basic Payment is, is not conducive to modernisation.

    Greenhouse gas reduction should have a specific cost allocated to it so that the cost of creating grassland or woodland – or destroying it – is recognised. It should not be an unequally valued burden but delivered by those who can achieve it most cheaply -as other carbon schemes aim to do.

    And so on. The debate for 2020 needs to start …

  2. Deborah Mallender
    January 23, 2014 at 11:03 #

    Yes the Common Agricultural Policy does need to change. Currently 12% modulation is taken away from food production and given to pillar 2 activities instead, in the name of rural development. We are then to learn that drama groups are to receive money for lighting and laptops out of this pot of money. A bizarre stretch of the concept of Common Agricultural Policy. Presumably the recent food riots in London passed the average advisor by as theoretically they say there is enough food for all. Stop thinking globally and start thinking locally, defacto there is only a local society.

    Any EU law does not affect these local societies uniformly whether is substantial non observance of EU law, derogation, state preferences, additional burden of national law or even a discord with national law this means there is no uniformity of effect of EU Law. When there is no uniformity this was not the intention of the original EU mandate to provide for a level trading playing field within Europe. The Common Agricultural Policy is not fit for purpose and needs to consider how it is going to feed local populations in local areas taking into account local farming/food producing conditions.