What has changed in the published Commission communication?

The formal Commission communication on the future of the CAP published today, and which Jack Thurston has summarised below in his own inimical way, had become available some weeks ago in a leaked version when it went into inter-service consultation. It is an interesting exercise to deduce, from a comparison of the two versions, what changes were made as a result of this process and what implications they might have.

At the outset, we can state that the two documents are substantially the same, with only very minor adjustments. Thus, all of the criticisms made of the earlier document remain valid. The Commission stresses that this is still a consultation document. It does provide some shape to the discourse around the future CAP, sometimes in a positive direction (placing more emphasis on targeted payments for public goods and highlighting the importance of innovation) but sometimes in a negative direction (raising misleading concerns about relative farm –nonfarm income levels and food security).

However, it also remains at a very high level of generality. Key parameters which will determine the impact of the package, such as the balance between basic income support and green payments in Pillar 1, and the distribution keys or even potential criteria which might determine the distribution of both Pillar 1 and Pillar 2 payments between Member States, are not enumerated or discussed.

The changes made to the leaked draft before its final publication today are of two kinds: (i) editorial points, and (ii) more substantive issues. The latter of course are more interesting, and there are three that are worth highlighting.

LFA payments to remain in Pillar 2

The first substantive change is the Commission’s backtracking on moving Less Favoured Area payments from Pillar 2 to Pillar 1. Traditionally, the distinction between the two pillars was that Pillar 1 was concerned with the economics of agricultural production – market and income support – while Pillar 2 focused on improving structural and environmental performance and supporting local development.

The Commission’s leaked draft proposed an alternative distinction between the two Pillars, namely

The future design of the CAP should be based on a two pillar structure….The first pillar should contain the support paid to all farmers on a yearly basis, whereas the 2nd pillar is the support tool for community objectives giving the member states sufficient flexibility to respond their specificities [sic]

While this is about as clear as mud, it was followed up by the specific proposal

that direct payments in Pillar 1 should be used to promote the sustainable development of agriculture in areas with natural handicap by providing an additional income support to farmers in such areas in the form of an area-based payment with optional top-ups on a voluntary basis. The existing support for LFAs granted in the 2nd pillar would come to an end. [my italics]

This has now been replaced by the following paragraph.

Promotion of the sustainable development of agriculture in areas with specific natural constraints by providing an additional income support to all farmers in such areas in the form of an area-based payment as a complement to the support given under the 2nd pillar.

This seems to mean that there will now be payments to LFA areas as well as other areas with specific natural constraints both in Pillar 1 and Pillar 2. At the same time, the possibility of national top-ups has been removed. This would mirror the proposal that farmers will receive agri-environment payments both in Pillar 1 and in Pillar 2.

Despite this, the proposed principles for the overall architecture of the CAP is retained in the document, albeit slightly elaborated.

The instruments of the future CAP should continue to be structured around two pillars…The first pillar would contain the support paid to all farmers on a yearly basis, whereas the 2nd pillar would remain the support tool for community objectives giving the Member States sufficient flexibility to respond to their specificities on a multi-annual, programming and contractual basis. In any case, the separation between the two pillars should bring about clarity, each pillar being complementary to the other without overlapping and focussing on efficiency.

How these proposals would ensure that each pillar is complementary to the other without overlapping is a mystery to me. What seems to have been behind the original idea was a version of ‘modulation’. Instead of attempting to shift more of the overall CAP budget from Pillar 1 to Pillar 2, the Commission was proposing to shift some of the payment objectives of Pillar 2 into Pillar 1 which would have the same effect of enlarging the budget for traditional ‘rural development’ objectives. Significant lobbying by Ireland among others seems to have stymied this plan for the moment, at least as far as the LFA payments are concerned.

A new small farm scheme

A second small but potentially significant clarification concerns the small farm scheme. The last enlargements brought millions of subsistence and semi-subsistence farms into the Union. The leaked document proposed a minimum level of payment to these small farmers, which would have reversed the trend of introducing a minimum size of payment in an attempt to end the situation where the transactions costs of making the payment often exceeded the value of the payment itself. In the published document, this is now revised to a potentially more sensible proposal, though again specific details are lacking.

A simple and specific support scheme for small farmers should replace the current regime in order to enhance the competitiveness and the contribution to the vitality of rural areas and to cut the red tape.

The radical Option 3 presented more neutrally

The final change to highlight concerns the reformulation of the three broad options which the Impact Assessment will be asked to consider. The first option was labeled as the continuation of the status quo apart from a correction to the distribution of direct payments across member states. The second option which is widely seen as the Commission’s preferred option contains the proposals for some greater targeting of the Pillar 1 payments plus an extension of the menu of Pillar 2 measures to include, for example, climate change mitigation and risk management instruments.

The third option was presented in the leaked document in a very negative way.

Those requesting a more radical reform of the CAP advocate moving away from income support and most market measures, and focusing entirely on environmental and climate change objectives. This alternative could have the advantage that it would allow a clear focus of the policy. However, this would lead to a significant reduction in production levels, farm income and number of farmers for the most vulnerable sectors and areas, as well as cause land abandonment in some areas and intensification of production in other areas, with serious potential environmental and social consequences. This option would thus imply a loss of synergies between the economic, environmental and social dimensions of the CAP.

One can almost sense the Commission holding its nose as it proposed this third option, it is clearly not something that it really wanted to contemplate.

In the published document, this option is now presented on an equal standing with the other two. The text reads

Another option would be a more far reaching reform of the CAP with a strong focus on environmental and climate change objectives, while moving away gradually from income support and most market measures. Providing a clear financial focus on environmental and climate change issues through the Rural Development policy framework would encourage the creation of regional strategies in order to assure the implementation of EU objectives.

The negative impact assessment has been eliminated, and it will now indeed be interested to see if the proper Impact Assessment to follow will provide a methodologically well-founded analysis of this option free of the prejudices which clearly characterized the earlier draft version.

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2 Responses to “What has changed in the published Commission communication?”

  1. Jack Thurston →
    November 19, 2010 at 12:01 #

    Excellent, and thorough analysis, Alan. The LFA issue shows that distinction between pillar 1 and pillar 2 looks increasingly blurred and confused.

    The Commission communication is notably silent on the question of whether it is proposing that pillar 1 should continue to be wholly EU-financed, in contrast to pillar 2 which is nationally co-financed.

  2. Alan Matthews →
    November 19, 2010 at 12:38 #

    Absolutely, Jack. Another change which might be highlighted, in the section outlining food security challenges, is the addition of the qualification that “it is essential that EU agriculture maintains its production capacity and improves it while respecting EU commitments in international trade and Policy Coherence for Development“. The bit in italics represents the addition. In terms of the forthcoming Impact Assessment, this is an important orientation which represents an improvement on the earlier draft.