The Reform of the CAP: One Year After

Almost exactly a year ago the legislative bodies of the European Union accepted 4 new key Regulations that will determine the next period’s CAP. The Commission presented this reform, utilizing the label ‘Greening’, as a shift of paradigm and an introduction of certain other important changes in both the goals and the instruments of European agricultural policy. The essence of the new reform was to find a new justification for and mechanisms of agricultural policy. The reform, which took place in times of economic crisis, was accepted after the Lisbon treaty; as such it was characterized by a new form of legislation which equalized the roles of the European Parliament and Council as key legislators. A year has passed and it is time to try to assess our achievements from a distance, taking into account the future of the CAP.

CAP reform – The new and the old

It is my assessment that with the latest CAP reform there has been much change at the level of policy objectives, but less in the field of CAP instruments. A few decades have passed and Europe has rediscovered the questions of food production and food security – understood, of course, in a global context and in terms of its contribution to providing food on a global level. It is interesting to note that quite a few new Member States have perceived understood this production orientation as the revival of the communist paradigm of increasing self-sufficiency at the national level. On the other hand, the once-blasphemous grounding of the CAP in public goods has sidled into the basic argumentation of the policy – albeit the texts and results of the reform themselves reveal that this was not meant entirely seriously. Naturally, the entire reform package was neatly wrapped in environmental goals, by which the European Commission as the proposing body wished to respond to social challenges and find new justification for the CAP.

Of the new instruments, the introduction of support for small farms and young farmers should be highlighted, as well as certain new emphases in Rural development policy. Here I especially wish to stress the rediscovered developmental role of innovation and knowledge transfer, as well as risk management measures.

Also notable was the attempt to unify the level of payments within and to a certain extent between countries. To a certain level, this has indeed been achieved, but it is also a fact that a sizable portion of Member States will attempt to mitigate the redistributional effects of this unification through the use of compromise solutions.

Another important change is the abolishment of sugar quotas, which have determined the policy and economic conditions in this field since 1968. This will cause quite a stir in the sugar market.

Direct payments remain the most important measure of agricultural policy. In spite of attempts to give the payments a different connotation, the policy remains one of historical payments, as well as inter- and intra- country payment distribution, despite the fact that substantial changes have been made. The direction of preceding reforms, namely that of deregulation and liberalization of market measures, remains. This is where the policy of reform is moving forward.

Greening featured prominently on a verbal level, especially at the outset of reform, yet was subsequently dropped from discussion; there has been no real turn in policy. The policy of Rural development has retained its basic conceptual and implementation logic, regardless of certain substantial/important changes.

We can conclude that the changes bear the mark of path dependency and are a reflection of political economy compromise; this time around, the reform forces were clearly not powerful enough to achieve serious policy redirection.

CAP reform – A missed opportunity?

The main aim of the policy changes was to keep as much of the budget as possible, while implementing as few changes as possible. Most importantly, the achievement of Greening has been a failure. The use of exceptions, especially those that allow conventional farming of protein-rich crops in ecologically sensitive areas, deals quite a blow to the Commission’s initial logic. Truth be told, the original concept was not well thought-out to begin with, and was set quite unrealistically. The environmental paradigmatic twist has thus definitely failed miserably, especially seeing how the reform is now being implemented in Member States. Evidently in most states agriculture and agricultural policy are still too immature for such a redirection.

The result is a political-game compromise, in which the agricultural ministers in the Council have managed to keep reform at a bare minimum. The European Parliament, which contributed little to the substance of the final result, was mainly busy playing its new role of co-legislator in the field of agricultural policy and drawing attention to itself: “Hello, look at us, we decide as well.” By the end, the European Commission was prepared to accept any kind of reform. The process will mainly be remembered for this new impotency of the Commission, a feature that we were not accustomed to in the times of Commissioners MacSharry, Fischler, and even Boel. The Codecision procedure, as well as loss of competency and real power due to the economic crisis, has weakened the Commission substantially.

In this very moment, before the reform has even begun to take place, the CAP is already in need of new reform. Nobody is satisfied with this new CAP – not the farmers, nor the policy makers, administration, environmental organizations, or academia. We are faced with a Colossus of decisions, regulation and distribution of financial means, nothing more. The whole thing has been driven to the point of absurdity. The only important thing remaining is the distribution of funds, which allows for political control of the sector and a semblance of social peace.

It is vital to underscore that policy goals are unclear, while their connection with our challenges is make-believe and imprecise. This policy, which may indeed be successful in persuading the naïve of its good intentions, has brought about neither more environment nor more development, elements which European agriculture is in dire need of. The only possible exception might be found in the Rural development policy, yet even here, when the way it is being implemented nationally and regionally is scrutinized, many deficiencies are to be found.

Speaking in terms of implementation of the new CAP, a full picture cannot be drawn, given that decision-making about implementation within Member states is still underway. Available information shows that most MS are using the most conservative of solutions in order to implement as few changes as possible, thus inflicting minimum income damage to national agriculture, especially existing beneficiaries of payments. Some are even transferring funds from Rural development to direct payment funds. It seems that the central measure in this field will be that of internal convergence of direct payments. Each day takes us further away from the Greening that the Commission wished -at least declaratively- to achieve with its proposal.

The discussion about the future CAP is already open

So what Europe needs is a new, lucid consideration of what it wants its CAP to achieve. Given the current constellation of political power and interests, this seems unlikely, however; it is not unreasonable to be skeptical about any possibility of change after 2020. The only certainty is another round of prolonged, strenuous negotiations, of which the fundamental question will be: Why the hell do we have the CAP anyway?

The main necessity would be to transfer the logic of the policy cycle, which is to have policy address real questions and challenges and to implement policy changes according to its successfulness. In addition, different MS face very different problems, generally unconnected to the distribution of First Pillar funds. The two-pillar logic must be abolished and an integrated concept set up, maybe even towards renationalization in a form of more targeted policy – at least for the wealthier Member States.

I believe that at least temporarily a form of low basic payment could be instated, founded on cross-compliance externalities, while all other measures must be significantly more targeted and tailored to public goods which are to be understood in a broader, also social sense, taking the smaller farmer into consideration. For most states, development is the main challenge in need of considerably more attention. The next challenge is risk management, which might take shape either as targeted payments that would cover part of actual losses incurred, or as other forms.

Modern politics must free itself of the fetters of interest politics and assume the responsibility of creating a better, more efficient policy, not only setting high-flying goals. All this sounds very utopian and naïve, of course; yet the absurdity which the CAP has reached today calls for impossible demands and the opening of a new debate regarding a new CAP reform.

This post was written by Emil Erjavec

Photo Credit for Council Press

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One Response to “The Reform of the CAP: One Year After”

  1. Guy Beaufoy
    December 17, 2014 at 13:08 #

    Thanks for all the useful articles, including this one summarising the recent “reform”. A major issue that seems to get little attention is the definiton of minimum activity especially in the case of extensive pastures (a quarter of all EU farmland?). Unless there is a mechanism to ensure that livestock are both present and grazing on these pastures then Pillar 1 payments become completely meaningless in terms of maintaining farming activity and of conserving biodiversity and landscapes. Member States have tried to design solid requirements for claimants to prove they have livestock and that there is a minimum grazing pressure, but the Commission refuses to allow such mechanisms for fear of WTO objections (supposed production incentive). The Commission has become more insistent on this under the reforms, thus making another step backwards in this new “greener, fairer, simpler” policy. It would be VERY useful to have some analysis of the issue in a WTO context: are third countries likely to object to things like minimum grazing pressure as a criterion for minimum activity, as AGRI argues? Could the EU defend such criteria as environmentally justified? I would really welcome some expert independent opinion on these issues. Thanks