Integrating Results-Based Environmental Payments into the EU Quality Framework
By Pablo Palencia
Pablo Palencia is a veterinarian and consultant with over 25 years of experience in One Health and agrifood strategy. He served as the Regional Minister for Rural Development, Livestock, Fisheries, and Food in Cantabria, Spain. Throughout his career, he has led the development of strategic projects for cooperatives and the establishment of PGI (Protected Geographical Indication) frameworks, focusing on integrating living heritage and ecosystem services into legal structures to ensure the resilience of livestock production systems.info@iberap.com
European Geographical Indications (GIs), including Protected Geographical Indications (PGIs), were originally designed to protect product names, prevent imitation and reinforce rural value creation. Today, however, they sit at the intersection of trade policy, sustainability, public health and territorial resilience.
GIs are no longer only internal EU tools. They are already embedded in international trade diplomacy. They are explicitly negotiated in the EU–Mercosur agreement and EU–India trade discussions. This international recognition makes them not only cultural assets, but strategic economic instruments. Enhancing their environmental and health dimension would therefore be comparatively straightforward: the legal recognition and trade architecture already exist.
The question is not whether the GI framework should be preserved. It is whether it can evolve into a structural instrument of One Health and differentiated territorial economics.
The legal foundation is solid. Regulation (EU) No 1151/2012 established the quality schemes for agricultural products and foodstuffs, defining the link between product characteristics and geographical origin. The 2024 reform of the EU quality policy framework has strengthened protection, improved enforcement mechanisms and enhanced the role of producer groups, particularly in sustainability commitments. However, even with the reform, environmental performance remains largely optional. The regulatory system protects origin, name and production method, but does not systematically integrate measurable soil health, antimicrobial stewardship or biodiversity criteria.
This gap matters. If terroir is the foundation of differentiated quality, then soil biological function should logically form part of the quality definition. Soil health directly affects animal resilience, nutrient density, water retention and carbon sequestration. It influences antimicrobial use, farm profitability and ecosystem stability. Yet soil remains absent from structural GI requirements.
At present, the EU regulatory framework for PDOs and PGIs does not condition eco-scheme payments or other CAP environmental support on the adoption of sustainability practices; in other words, environmental commitments remain voluntary and are not linked to financial incentives. This gap limits the systemic impact of sustainability measures and represents an opportunity to create a performance-based connection between GI compliance and CAP support.
The strategic question for the European Union is how to revitalise PDO and PGI schemes as forward-looking territorial instruments in a context of soil degradation, biodiversity loss and antimicrobial resistance. Although Regulation (EU) 2024/1143 encourages sustainability commitments, their voluntary character has limited systemic impact. Strengthening GIs does not necessarily require reopening the Regulation.
Rather, the Union could progressively integrate a One Health performance dimension within existing structures. One avenue would involve reinforcing environmental expectations through secondary legislation or coordinated guidance at EU level. Another, potentially more immediately actionable, would consist in aligning GI specifications with CAP ecoschemes and results-based payments linked to measurable outcomes, particularly improvements in soil health and microbiome functionality as the first biological layer of food system resilience.
In this model, sustainability would remain a voluntary commitment within the GI framework; however, enhanced public support would be conditional upon demonstrable environmental performance. Such an approach would convert GIs from primarily promotional quality labels into structured territorial governance instruments capable of delivering soil resilience, biodiversity protection and public health co-benefits without adding bureaucratic complexity, and instead simplifying and streamlining existing administrative processes.
Despite this weakness, GIs are uniquely positioned to become operational One Health tools. They already link product, territory and community. They operate through collective governance. They possess traceability systems and inspection mechanisms. They are embedded in a harmonised EU legal framework recognised in international agreements. No new instrument would need to be invented.
My perspective is not only institutional or analytical. Nearly two decades ago, through Fundación Botín’s “Patrimonio y Territorio” programme, I worked directly with livestock farmers in the Picos de Europa (Nansa Valley) to develop the Carne de Cantabria PGI. By promoting cooperative organisation and pasture-based systems, we strengthened rural income, territorial identity, and population retention. This experience showed that Geographical Indications, when rooted in grazing, soil stewardship, and collective governance, already embody the logic of One Health. My proposal therefore draws on both policy vision and practical field experience.
However, structural limitations persist. Market penetration remains modest. Only 14% of European consumers recognize the PGI seal (Eurobarometer 504). This reflects insufficient mainstream communication, uneven promotion strategies and limited consumer awareness of the environmental and territorial value embedded in these labels. Enforcement is also uneven across Member States. Inspection systems focus predominantly on origin and procedural compliance, rather than on ecosystem performance or health outcomes. Environmental sustainability is permitted but not structurally required.
At the same time, producers face growing regulatory and environmental pressure without always receiving proportional economic support. Transitioning towards enhanced soil monitoring, biosecurity systems, digital traceability or antimicrobial reduction strategies requires investment. Without economic alignment, sustainability obligations risk becoming burdens rather than value multipliers.
Here lies a major policy opportunity. The Common Agricultural Policy (CAP) already provides the architecture for results-based payments through eco-schemes and agri-environment-climate measures. These instruments can reward measurable outcomes such as improved soil organic matter, reduced antimicrobial use, enhanced biodiversity indicators or carbon sequestration. GIs, with their defined territorial scope and collective governance bodies, are ideal vehicles for delivering such results-based payments.
Crucially, this integration would not require a larger CAP budget, but a more performance-oriented allocation. By linking GI compliance to measurable environmental and health outcomes, payments would further evolve from income support toward results-based public goods delivery, strengthening the legitimacy, efficiency and strategic value of EU agricultural expenditure.
While the proposal focuses on GIs as efficient platforms for implementing results-based payments, it is not intended to exclude producers outside these schemes. The approach is scalable: the same principles of measurable environmental and health outcomes could extend to other producers or collective organisations, ensuring fairness, broad participation, and alignment with CAP objectives.
Comparatively, other jurisdictions provide instructive examples. In the United States, geographical labelling systems such as American Viticultural Areas (AVAs) protect origin but remain largely detached from environmental conditionality. In Japan, the GI system has incorporated elements of regional branding linked to cultural identity and premium markets, yet without structural integration of soil health metrics. Some Latin American designations, particularly in coffee and cocoa sectors, increasingly combine origin certification with sustainability standards driven by private schemes. However, these models often rely on voluntary private certification rather than integration within a public agricultural policy framework.
The European Union possesses a comparative advantage: it combines a legally binding GI regime, a powerful agricultural policy and a growing One Health agenda. No other jurisdiction integrates these components at comparable scale. The missing element is policy coherence.
Strengthening GIs as One Health instruments would also reinforce their international trade dimension. Since GIs are explicitly recognised in agreements with Mercosur and are central in negotiations with India, enhancing their sustainability content would increase their strategic value abroad. It would allow the EU to export not only protected names, but verified environmental and health standards. This would strengthen the global positioning of European differentiated agriculture.
Communication is equally crucial. If only a minority of consumers recognise or actively purchase GI products, the sustainability premium remains under-leveraged. A coordinated EU communication strategy should highlight the link between GI products and soil health, antimicrobial reduction, biodiversity and territorial resilience. Consumers increasingly respond to health and environmental narratives. GIs can embody these values, but only if the message is clear, credible and measurable.
A reformed approach would therefore require three aligned actions: integrating measurable soil and health criteria within GI specifications, linking compliance to results-based CAP payments, and reinforcing EU-level communication strategies to expand consumer reach beyond niche segments.
Such an evolution would not dismantle the current system. It would deepen it. It would transform GIs from quality labels into structured territorial governance mechanisms. Farmers would no longer appear merely as recipients of production support, but as custodians of biological capital embedded in a legally recognised framework.
Europe already has the instrument. It is internationally protected, legally consolidated and politically legitimate. By aligning it with One Health principles and CAP result-based incentives, the EU could convert Geographical Indications into operational platforms for rural resilience, differentiated economic growth and environmental performance.
The opportunity is institutional, economic and strategic. What remains is the decision to connect the pieces that are already on the table.
How the new MFF architecture and the NRPP could redefine design, delivery and decisions in EU farm policy
This guest post is writtenby Emil Erjavec, Professor of Agricultural Policy and Economics at the University of Ljubljana, Slovenia. Professor Erjavec is a member of the Tools4CAP Coordination and Support project within the Horizon Europe programme supporting the design and monitoring of the national CAP Strategic Plans 2023-2027 and laying the foundations for a sound preparation of post-2027 Strategic Plans.
The storm sparked in July by the European Commission’s proposal for the next Multiannual Financial Framework (MFF) and its reorganization of the Common Agricultural Policy (CAP) has now subsided, at least publicly. Some calm may reflect efforts by the Commission President to placate the European Parliament – reportedly by setting aside 10% of the National and Regional Partnership Plan (NRPP) envelope outside of the earmarked amounts for the CAP and CFP for rural development in addition to the ring-fencing already promised for CAP income support. Behind the scenes, however, preparations for the MFF negotiations continue apace. Denmark’s presidency MFF negotiating box has set an initial frame, and the caravan moves on.
Many MEPs, national officials and most agricultural NGOs still call for a two-pillar CAP and warn of a likely significant cut in agricultural funding. That claim is only partly right – or, more precisely, hard to assume because of the greater discretion for Member States. A ring-fenced share for the “narrow” (income) part of the CAP, together with additional funding channels for wider rural measures, could still yield a solid overall envelope. The decisive factor will be how each country sets its priorities when drafting its NRPP.
If the EU wants the new financing method and scope in force by 2028, the MFF deal needs to be concluded by the end of 2026, or, after the usual drama that unfolds every time in MFF negotiations between net contributors and net recipients, no later than February 2027. That leaves very little time to prepare each NRPP. The proposed Single Fund and the merging of traditional EU policies, primarily cohesion, CAP and home affairs, will demand a fresh strategic formulation of CAP priorities and interventions.
This post asks how extensive the changes will be, what dilemmas they pose for the CAP under the new institutional framework, and how difficult timely NRPP preparation may be. It examines three layers of change: (1) programming and monitoring decision makers of the CAP, (2) the strategic decision-making system, and (3) the quality and novelty of the CAP measures.
The CAP will (partly) be decided by “others”
A core change concerns who decides. The NRPP will be a single document covering all public policies co-financed from EU funds. It therefore requires comprehensive inter-ministerial coordination. Member States will organise this differently, but the “coordinating authority” is likely to sit at cabinet or general secretariat level of the government, in finance, or in the cohesion portfolio. Only in a few countries – particularly in parts of the north – might agriculture ministries lead coordination. In much of the south and east, where cohesion funding has traditionally been substantial, coordination almost certainly won’t sit with agriculture.
As programming and allocation move beyond the agricultural bubble, priorities, the choice of measures and shares of funding allocated to different priorities may shift. This prospect unsettles agricultural decision-makers and farm organisations and fuels their opposition to the NRPP model.
How much change can a different decision structure bring? Those familiar with Brussels and national capitals will recognise a traditional tension between “cohesionists” (often allied with finance ministries) and agricultural policy actors. Cohesion thinking tends to prefer larger, more urban-facing projects, and is less predisposed to agricultural exceptionalism. Behind this lies the usual political-economy dynamic in which influential actors contest project selection and resource distribution.
If cohesion and finance ministries take the lead, they will most likely dilute the primacy agriculture has enjoyed in allocating CAP funds. Historically, this was a largely intra-agricultural process, subject to Commission scrutiny. Under the NRPP, “someone else” will set or at least heavily influence policy priorities and allocate funds. There is precedent: during NextGenerationEU negotiations, which followed a similar top-down approach, the farm sector in several Member States already found itself “in the wings”.
Taking power away from one lobby is not inherently bad; it might mend the current interest-driven inconsistencies in agricultural policy. But simply swapping one interest structure for another does not guarantee better policy. The risks include lower transparency, bureaucratic drift, and weaker technical quality (see below) in decisions. In all cases, it is certain that this institutional shift will shape needs assessments, measures and CAP fund distribution.
Strategic planning under looser rules: risks and realities
The Commission proposes a simpler planning model, replacing the detailed CAP Strategic Plan template used in 2023–2027. Formal SWOT requirements have vanished; the indicator set is proposed to be simplified. The proposal suggests the following requirements: a diagnosis of needs under the CAP priority headings (income stability, generational renewal, resilience and risk management, AKIS, contribution to climate and nature, etc.); an intervention logic linking measures to those needs; the financial envelope for the CAP chapter; and milestones and targets as payment triggers, subject to horizontal conditionalities that apply to the whole CAP chapter. Monitoring would use EU-level indicators, standardising and simplifying procedures.
In short, the EC proposal does not prescribe a fixed complement of plan elements, but offers a looser structure. That flexibility risks inconsistencies and divergent interpretations, potentially undermining policy quality. It also leaves open how the process will work in practice.
Two planning styles are likely to emerge, depending on national rules and coordination: a more cohesion-style, “one objective – one instrument” approach (à la Tinbergen), and a broader CAP approach, listing general priorities and then presenting multiple interventions linked to several objectives. The first implies re-engineering the measures portfolio, which is hard to do within tight deadlines and given path dependency which is very present in the CAP arena. The second adapts the current CAP logic to the NRPP, probably what DG AGRI prefers, while DG BUDG and DG REGIO are more inclined to a simplified, streamlined mapping.
In reality, the dilemma is partly artificial. CAP objectives have never been unambiguous; they are purposely general to allow broad interpretation. And interventions typically serve multiple priorities. The nature of the principal CAP tools, direct payments, investment aid, etc., preserved once again, makes one-to-one mapping unrealistic.
If the choice of approach is left to Member States, planning will be very challenging in some. The simple “priority – instrument” model requires major policy surgery; the looser model largely preserves current practice. Given time pressure, DG AGRI can be expected to codify a moderated version of today’s CAP planning logic through guidance, slightly simplified but recognisable.
Even then, administrations, especially in parts of the east and south, will struggle with writing the plan on time. For a timely 2028 start, quality and participation may suffer. Based on NGEU experience, top-down drafting often produced weaknesses. Without a genuine evidence base and debate, innovative measures are unlikely to appear at speed.
The Commission is reportedly preparing country-specific guidelines as part of the proposed steering mechanism, a way to defend Union priorities, but no team of officials can fully capture national specifics. The right answer is more evidence-based design, greater transparency and systematic use of science. A few Member States may go in that direction; most likely, most will not.
Have we missed the window for better measures?
With pillars abolished and measure menus simplified, Member States’ scope for manoeuvring increases, but so does complexity in drafting. In substance, most measures remain similar (and more would become mandatory), so the question is how much manoeuvring is feasible.
Two broad classes emerge: ring-fenced CAP measures (the broader income family, which even includes agri-environmental measures), and a smaller set outside the ring-fence (notably LEADER, knowledge and innovation such as support for AKIS/EIP, and school schemes), which must be financed from the funds that are not ring-fenced.
Two dilemmas follow. First, how to reshape the ring-fenced measures. Second, how to win resources from the common pool for wider rural priorities. Time pressure and path dependency suggest continuity of the content and scope of current measures, with country-specific tweaks. Some governments (the Netherlands is often cited) may reduce broad direct payments and favour payments tied to measurable environmental outcomes. Elsewhere, expect a push to “cut red tape”, which often actually means dialling down climate and environmental ambition.
The Commission is likely to use its guidelines to shape Member States’ early drafts where they do not adequately reflect the obligations set out in the proposed CAP regulation to address Union-wide climate and environmental needs. Securing subsequent changes to programme documents at the Commission’s request is likely to prove challenging, particularly in countries that strongly adhere to a production-oriented narrative.
Given limited time, scarce debate on transforming the CAP in the Member states, and few fully tested thoroughly improved or even completely new measures, major leaps are unlikely. Designing good instruments, building consensus and setting workable implementation takes time.
A further challenge arises in countries with strong Cohesion Policy traditions: agricultural stakeholders may struggle to secure rural funding outside any earmarked share, even if a 10% ring-fence for rural development is ultimately enacted. Methodological issues may also emerge regarding how rural expenditure is tracked and attributed. Strong resistance from Cohesion Policy advocates is likely if established delivery models and funding allocations are altered. In principle, an effective rural policy requires cross-ministerial engagement; in practice, the Commission’s laudable vision of an integrated approach will collide with domestic political realities.
Anyone expecting smooth alignment within governments will be disappointed. On climate, livestock, food and public health, and farm incomes, views differ sharply. Regulation vs incentives? Either way, farmer buy-in, credible strategy and delivery capacity matter. The new CAP planning framework changes bargaining terms, is technically and politically demanding, and will consume time, risking delays and thin content.
What outcome should we expect?
Barring major shocks (e.g., turnaround jn French politics or a further rightward shift at EU level), the basic architecture proposed by Commission is more likely than not to survive. Rejecting the MFF would take the EU to the brink. Because of this, we can expect:
The Single Fund and NRPP will likely remain.
The CAP will stay inside this frame, with possibly more planning freedom under a regime with relaxed demands for selecting objectives and instruments.
Rural priorities will face tight resources and will need to draw from the broader pool of funds otherwise earmarked largely for cohesion.
The NRPP institutional framework may be predictable, but national choices on measures and allocations are not, especially under severe time pressure. In several countries, political imperatives will force the adoption of NRPPs and the new CAP at any cost, to secure EU money, leaving little room for innovation. Path dependency will prevail; the “music” will sound familiar even if the director and orchestra change.
We can expect the trend already visible today to intensify, widening disparities between countries, resulting in very divergent emphases within the CAP, not always because of different structural needs, but because of different political priorities. Meanwhile, the big questions, how the CAP contributes to climate and biodiversity, the future of livestock, the prospects for young and small/remote farmers, will remain only half-answered. Dissatisfaction will not vanish. The main difference is that Member States will now carry more responsibility for better policy and progress, while EU institutions bear a little less.
The European Court of Auditors has released an Opinion on the draft CAP and CMO Regulations proposed by the Commission. It is a welcome analysis as it moves the discussion on the CAP in the next programming period 2028-2034 beyond the budget and governance issues that have dominated the debate to date, and provides an analytical examination of the changes proposed by the Commission for the CAP interventions themselves. There are many useful insights in the Opinion.
The one interpretation that I found puzzling was the ECA’s discussion of crisis payments for farmers (Article 38 of the Fund proposal). Box 5 in the Opinion appears to suggest that, in the event of natural disasters, access to exceptional measures funded by the EU Facility would only take effect after crisis payments to farmers had been established. My reading of Article 34(9) suggests that it excludes financing crisis payments to farmers in the event of natural disasters by the EU Facility, although why that should be the case is not explained or justified, but it does not require such payments before Member States can seek additional aid from this Facility. Additional insight on how to interpret this paragraph would be welcome from readers.
In this post, I want to focus on one of the key messages in the Opinion:
The greater flexibility granted to member states, while allowing for a more tailored approach, should not put at risk the ‘common’ elements of the CAP, as that could lead to an uneven playing field for farmers and negatively affect fair competition and the functioning of the internal market. To mitigate this risk the Commission will need to play its strengthened steering role effectively.
This fear that the Commission proposal removes the ‘C’ from the CAP is one of the most frequent criticisms made of the proposal. The proposal is seen as leading to the renationalisation of the CAP and to risk disrupting the level playing field that is the bedrock on which the single market depends. COPA-COGECA’s petition calling for a dedicated and increased budget for the CAP has as its second point “Preserve the “C” from CAP: Reject the renationalisation of agricultural policy ! The “C” of the Common Agriculture Policy (CAP) must be preserved! Further renationalisation, would fragment the single market, deepen inequalities between Member States, and destabilise rural communities and farmers’ incomes.”
I agree that this is a risk, but it needs to be deconstructed and examined and not simply asserted. We need to keep several issues in mind.
The CAP and a level playing field
The Commission in its Vision for Agriculture and Food, building on the experience of the current CAP Strategic Plans, noted that the current complexity of the CAP called for a more streamlined approach. Its solution was to propose that “The future CAP for post-2027 will rely on basic policy objectives and targeted policy requirements, while giving Member States further responsibility and accountability on how they meet these objectives”.
There is broad agreement that the agricultural challenges that Member States face are not the same, and that flexibility is needed under the CAP to allow these differences to be addressed. For some Member States, the key priority remains modernisation of agricultural structures and raising productivity, for others it is generational renewal, for others it is a desire to support traditional farming structures in vulnerable rural areas, while for yet others it may be addressing the environmental footprint of intensive agricultural systems. For this reason, Member States themselves demand greater flexibility.
Nor has the CAP ever been implemented uniformly across Member States. The level of Pillar 1 direct payments per hectare in Member States partly reflects historic differences in the intensity of market price support, but also the negotiating outcomes of the accession processes in 2004/2007 and later. Despite successive efforts at external convergence over the last two CAP reforms, differences in the level of payments per hectare continue in the current CAP.
The level of Pillar 2 payments per hectare are even more skewed, in part deliberately as rural development funding, seen also as an element of structural funding, plays a cohesion role as well as being part of CAP.
Total CAP pre-allocated receipts in 2027 per hectare of Potentially Eligible Area are shown in Figure 1. Even leaving aside Malta (where each hectare of its 6,644 ha PEA will receive an average of €3,703 in CAP receipts in 2027), there is significant variation, ranging from Greece with receipts of €630/ha PEA to Latvia with receipts of €273/ha PEA. This variation could also be demonstrated by expressing CAP receipts per ha Utilised Agricultural Area. This figure is close to the Potentially Eligible Area for direct payments in many Member States but significantly larger in some Member States such as Spain, France, Italy, Bulgaria and Romania which would lower the figures shown for these countries in this chart. Nor are hectares the only basis for comparison. One could also express the differences per person or per Annual Work Unit of the farm labour force, per holding or as a share of value added or farm income.
Figure 1. Distribution of CAP pre-allocated amounts for Pillar 1 and Pillar 2 in 2027, expressed per hectare of Potentially Eligible Area in 2022. Sources: Commission, Budget pre-allocations web page; Commission, Summary report on the implementation of direct payments (exc. Greening) Claim Year 2022, Table 1.1.
Differences in the way the CAP is perceived by farmers in different Member States are not confined just to the monetary amounts received. Member States have considerable flexibility to define the standards for conditionality that farmers must meet for eligibility for payments. In some Member States, a significant share of direct payments is paid as coupled payments which clearly distort competition in the single market, in other Member States almost none. Some Member States have designed their eco-schemes as almost pure income transfers, in that most farmers were able to qualify without any change in their farm practices. Other Member States set a higher bar, requiring farmers to adopt specific (and costly) measures to be eligible for payment. And so on. The current CAP is far from the ideal level playing field that is sometimes imagined.
How the Commission proposal might exacerbate differences in support
Still, there are reasons why the Commission proposal could exacerbate these differences, as the Court of Auditors and others have pointed out. The minimum ring-fenced CAP amounts for income support are based on the Member State shares in CAP receipts in 2027 and thus will replicate the disparities that are illustrated in Figure 1. However, on top of that, Member States have the option to add to these amounts from the unearmarked portion of their overall allocation under the National and Regional Partnership Fund. It can be expected that Member States will top up their minimum CAP allocations by different proportions, in part because the financial scope to do so is more restricted in some Member States than others (see my calculations here in this blog post), and in part because of differing political priorities in Member States.
Member States will also have greater flexibility in the allocation of the CAP funds that they receive, due to the elimination of specific minimum ring-fencing requirements (for example, for agri-environment-climate actions or for the amount to be allocated to the redistributive payment) or the increase in maximum ceilings. Particularly the increase in the maximum ceiling for coupled payments should be underlined, as this payment is the most distorting of the level playing field in the single market. The increase in this ceiling comes as a result of sustained pressure from many Member States. Indeed, those Member States critical of the Commission proposal for renationalising the CAP are sometimes those who themselves have contributed most to this renationalisation.
There are other areas where the Commission proposal could lead to a less common CAP. The Court of Auditors highlights that the lack of a clear common framework for definitions such as ‘active farmer’ or ‘small farmer’ could create an uneven playing field for farmers. Member States have even greater flexibility to define the protective practices under farm stewardship as compared to the GAEC standards under conditionality. Member States would also have the possibility but not the obligation to compensate farmers for the cost of implementing these protective practices, and it can be envisaged that some will do so and others not.
These considerations raise several questions. Given that Member States desire flexibility in the implementation of the CAP, and that considerable differences in implementation already exist, how much more damaging would some additional flexibility be in practice? Is flexibility like an elastic band, where you can stretch it so far without creating difficulties, but there comes a point where the elastic just snaps and no longer functions? How close are we to this breaking point at present? Is there an objective way to establish where this breaking point lies? I am not aware of academic research that attempts to throw light on this question.
Another question is whether greater flexibility undermines the ability of the CAP to provide real EU added value. The Court of Auditors in its Opinion notes that EU value added depends on the CAP being used to fund interventions that address EU-wide challenges which could not be addressed as effectively by national funding alone. It provides a list of main challenges as follows:
a system of fair competition and consistent rules for farmers in an open single market;
a common framework for agricultural support that does not distort or fragment the internal market, and a strategic use of financial resources focused on ensuring fair income for farmers;
a strengthened and guaranteed food-security system, even in the event of crises;
a coordinated protection of the environment, climate and biodiversity, and of know-how in the area of food supplies.
The danger lies in too much flexibility that allows Member States to design their agricultural policies solely on national criteria, so that the CAP becomes purely a financial transfer mechanism between net contributors and net recipients without any real EU value added. It is clear that such an outcome would not be sustainable in the longer term.
The solution in the Commission’s proposal to address this second question is the Commission steering mechanism (Article 22(2)(b) of the Fund proposal and Article 2 of the CAP proposal). I do not discuss this mechanism in this post and whether it is likely to be effective. The AGRIFISH Council will devote part of its next meeting on 23 February 2026 to this topic, on the basis of a background note prepared by the Cyprus Presidency. This policy debate will give greater insight into how Member States would like to see this mechanism working.
Variability in the new DABIS payment
Interestingly, there is one area where the Commission claims that it is limiting rather than increasing flexibility although this is not evident at first sight. This concerns the minimum and maximum limits proposed for the new degressive area-based income support (DABIS) payment per hectare. The planned average aid per hectare for DABIS should be not less than €130 and not more than €240 for each Member State (Article 35(3) of the Fund Regulation). This wide range suggests the potential for even more divergence between Member States than observed under the present CAP.
However, the Commission argues that this range is actually narrower than the range in payments in place under the current CAP. Indeed, this seems to be the case (Table 1). In the following, we consider only the average ‘DABIS’ payment in Member States, ignoring the requirement in Article 6(2) of the draft CAP Regulation that Member States are required to differentiate this payment by groups of farmers or geographical areas, on the basis of objective and non-discriminatory criteria.
Table 1. Distribution of ‘DABIS’ payments per hectare in 2027 by CAP Strategic Plan. Notes: ‘DABIS’ payment in 2027 is defined as the sum of BISS, CRISS and CIS-YF payments. For Belgium, where there is little overall difference in PEA and UAA hectares, the PEA hectares for the two regions for which data are not available are assumed to be the UAA hectares for which there are data. I have chosen to use data for FY2027 which refers to claim year 2026 for direct payments as the source shows significant changes in payments in FY 2028 for a few countries as well as an overall increase in payments which I find hard to explain as it lies outside the 2021-2027 MFF programming period. Sources: Data for the BISS, CRISS and CIS-YF payments are obtained from the DG AGRI workbook ‘Planned financial allocations by type of intervention under the 2023-2027 CAP’. PEA data for 2022 from Commission, Summary report on the implementation of direct payments (exc. Greening) Claim Year 2022, Table 1.1. UAA data for 2027 are from the JRC CSP Master file August 2023.
To construct Table 1, we first assume that the DABIS payment will replace three payments in the current CAP – the BISS, CRISS, and CIS-YF. I have summed the amounts that each Member State allocates to these three payments in 2027. In column (1), I have expressed these amounts per hectare of Potentially Eligible Area. I have used 2022 data for PEA as in Figure 1 because I have not found reported data for the new CAP programming period 2023-2027. There could be minor changes in the PEA areas with the introduction of the new CAP, so the figures in column (1) should be seen as best approximations of the 2027 outcome.
The choice of the PEA as the denominator could be contentious as this is left unspecified in the draft Fund Regulation. Article 35(3) simply specifies a minimum and maximum DABIS amount “per hectare”. How to define this hectare is not specified. In the definitions Article in the draft Fund Regulation, there is guidance for how Member States should define an “eligible hectare” (Article 4(22)c). If it were intended that the DABIS payment limits should be interpreted as per eligible hectare, then this should be stated for legal clarity.
As it is, there is uncertainty how the Commission intends these limits to be defined. In column (1), I have assumed that the Commission has intended “eligible hectare” as the denominator. I redo the calculation in column (2) using UAA hectares as the denominator. The UAA figures are taken from the JRC CAP Strategic Plans Master file prepared in August 2023 and refer to the year 2027. There are differences in the ranking of Member States between the two columns where there are significant differences between PEA and UAA areas in these countries.
Based on PEA areas in column (1), the range for the ‘DABIS payment’ (that is, the sum of BISS, CRISS and CIS-YF) in 2027 will lie between €115 for Latvia to €261 for Cyprus (for this purpose I leave Malta aside because it is very much an outlier, as indicated in Figure 1). On this rather crude comparison, we can say that the Commission proposal to limit the range to €130 to €240 per hectare represents a narrowing.
If we assume that the proposed range for the DABIS payment were based on UAA areas, then the case for narrowing is even stronger. Here, the projected range in 2027 will be from €86 in Romania to €274 in Cyprus (again leaving Malta to one side) (column (2)).
Looking only at the proposed ranges overlooks a potentially significant outcome of the Commission proposal. The possibility for Member States to choose an average DABIS payment anywhere between €130 and €240 per hectare opens the possibility for those Member States that currently (or, more accurately, are projected to receive in 2027) have low ‘DABIS’ payments to significantly increase these payments. Poland, for example, which currently has a ‘DABIS’ payment of €156/PEA hectare (€148/UAA hectare) could increase this to €240 per hectare. Similarly, Spain with a 2027 ‘DABIS’ payment of €144/PEA hectare (€125 per UAA hectare) could do likewise. On the other hand, farmers in Denmark who currently receive a ‘DABIS’ payment of €224/PEA hectare (€220/UAA hectare) could in principle see these payments reduced to €130 per hectare under the Commission proposal. This speculation is not intended to suggest that these countries will make these changes, but it does indicate the scope for a very different landscape of direct income support for farmers under the draft Regulations.
Conclusions
There is a widespread concern that the increased flexibility for Member States in the Commission’s proposal for the CAP 2028-2034 will lead to greater differences in support to farmers and further undermine the idea of a level playing field for farmers within the single market. This concern should be taken seriously.
However, in this post I suggest that the debate needs to be more nuanced. I point out that there is widespread recognition that the CAP cannot have a ‘one size fits all’ architecture and there is considerable pressure from Member States for greater flexibility. The debate should also consider the considerable lack of uniformity that currently exists in the way the CAP is implemented in different countries. Further, I point out that, with respect to the level of the DABIS payment which is where most of the concern is focused, there is evidence that the Commission proposal reduces the extent of differentiation compared to the current CAP, something that has not been highlighted previously in the debate. There is much less concern and angst among farmers about differences in the budgets available for agri-environment-climate action between Member States (at least under present rules where payments are limited in principle to costs incurred and income foregone – this could change if these payments shift to become more of an income top-up).
Various measures have been proposed to limit the extent of flexibility with the objective of minimising potential distortions to the level playing field. The most popular call is to reintroduce minimum ring-fencing requirements (for young farmers, for agri-environment-climate actions). The limitation with this approach is that quantitative budgetary allocations say little about the level of ambition of these payments, as we see currently with eco-schemes.
But it is clear that drastically reducing the maximum ceiling for coupled supports (I would make an exception for protein crops) should be an obvious priority, as these are the most distorting payments (by contrast, differences in decoupled DABIS payments largely impact the structure of agriculture by slowing the exit of smaller farms rather than increasing the average income of those farmers who remain in farming in the longer term). But those who criticise the Commission proposal most loudly for risking the renationalisation of the CAP are also those who call for the maintenance and even increase in coupled payments (see the European Parliament resolution of 10 September 2025 on the future of agriculture and the post-2027 common agricultural policy (2025/2052(INI)), paragraph 19).
The bigger question, I suggest, is how to ensure, in spite of giving Member States needed flexibility in the implementation of the CAP, that the CAP can continue to deliver European value added. In the absence of demonstrable European value added, the CAP becomes just a financial redistribution mechanism without long-term prospects. There is a huge weight of expectation on the Commission steering mechanism to fulfil this role, which I fear it will be unable to bear. This is an area where academic research could play a really important and significant role.
Update 26 Feb 2026. The paragraph referring to the ECA Opinion’s discussion of crisis payments to farmers has been amended, and a typo referring to Article 34(9) was corrected.
A new structural framework for rural resilience and global competitiveness in the face of the Mercosur challenge
By Pablo Palencia Garrido-Lestache
Pablo Palencia Garrido-Lestache is a veterinarian and consultant with over 25 years of experience in One Health and agrifood strategy. He served as the Regional Minister for Rural Development, Livestock, Fisheries, and Food in Cantabria, Spain. Throughout his career, he has led the development of strategic projects for cooperatives and the establishment of PGI (Protected Geographical Indication) frameworks, focusing on integrating living heritage and ecosystem services into legal structures to ensure the resilience of livestock production systems. info@iberap.com
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Europe faces a silent but structural crisis in agriculture: generational renewal is failing. Across many EU regions, more than half of farm holders are over 55, while only a small fraction of young people enters the sector. In many rural areas, when a farmer retires, the farm simply disappears.
For decades, the Common Agricultural Policy (CAP) has been the backbone of European agriculture. It has provided income stability, supported food production and contributed to territorial cohesion. However, the CAP was designed to sustain production, not to guarantee generational continuity or to fully recognise the strategic, cultural and territorial value of farming. The CAP keeps farms operating; it does not ensure their long-term succession.
The Mediterranean Paradox: Protecting the Recipe, Ignoring the Farmer
A clear example of the current legal inconsistency is the Mediterranean Diet, recognized by UNESCO as Intangible Cultural Heritage since 2010. While the UNESCO protection shields the ‘recipe’ and the cultural ritual, the primary producers who provide the essential ingredients—such as traditional olive groves, dehesas, and transhumant livestock—remain unprotected. We must move from protecting the ‘outcome’ to protecting the ‘source’. Ensuring a legal and fiscal shield for these living production systems is the only way to safeguard the Mediterranean Diet as a functional reality rather than a historical memory.
This calls for a change of perspective. The objective is not to replace the CAP, but to complement it with a long-term structural vision. European legal frameworks already allow for the protection of living practices, not only buildings or monuments. Recognizing extensive grazing systems, traditional dairy farming, or territory-based agriculture as Living Heritage means acknowledging them as public goods essential for territorial balance and food systems.
One Health and Results-Based Policy
This approach aligns closely with the One Health framework, which recognizes that human health depends on functional ecosystems and economically viable food systems. In this context, territory-based agriculture should be understood as a policy lever with direct implications for public health and climate adaptation.
One of the most relevant shifts implied by this approach is the move from compliance-based policies towards results-based frameworks. Rather than focusing exclusively on prescribed practices, policy should value outcomes: soil conservation, biodiversity enhancement, wildfire risk reduction, and population retention. This paradigm shift allows the CAP, heritage policies and climate strategies to be aligned around measurable and durable results.
The Mercosur Challenge: Sovereignty through Differentiation
The ratification of the EU-Mercosur agreement imposes an unprecedented competitive pressure that threatens the definitive ‘commoditization’ of the European primary sector. In this scenario, recognizing territorial agriculture and livestock as Living Heritage is not a protectionist measure, but an indispensable strategy for sovereign differentiation.
By shifting the regulatory framework from production-based subsidies toward results-based remuneration for public goods, this proposal legally shields economic support within the WTO ‘Green Box’. It grants producers the status of stewards of a state asset, securing the viability of generational renewal through structural fiscal incentives and offering a unique value proposition rooted in cultural excellence and climate resilience—factors that industrial-scale imports from third countries simply cannot replicate.
This leads us to a fundamental question: Is it time for a new European Living Heritage Label? While existing PDO and PGI marks protect the ‘product,’ a Heritage Label would protect the ‘system’—the stewards who maintain the landscape and biodiversity that third-country imports cannot replicate. If we already shield our architectural landmarks and industrial intellectual property, should we not ask ourselves if the true vanguard of the CAP lies in branding our rural soul as a strategic asset? Is Europe prepared to transform its farmers from subsidy recipients into certified custodians of a collective legacy, or are we willing to let our rural heartlands become empty postcards?
Conclusion: A Future for the Next Generation
From a fiscal perspective, this approach opens the door to tools that remain underused: targeted tax incentives, facilitation of family succession and the mobilisation of private investment. When agricultural activity is recognized as a form of heritage, young farmers cease to be perceived merely as subsidy recipients and instead become custodians of a collective asset.
Generational renewal is not only an agricultural challenge. It is a strategic issue for Europe’s territorial balance and food security. Without farmers, there is no food system. And without a credible future for the next generation, no agricultural policy can succeed.
This post was written by Pablo Palencia Garrido-Lestache.
The latest edition of the journal Nature Food includes an article by Anniek Kortleve and co-authors on the role that stranded assets in European agriculture might play during food systems transformation. The context they consider is a shift towards plant-based diets which it is assumed will lead to a corresponding reduction in the demand for livestock products (animal sourced foods, ASF). The paper estimates the value of the capital assets that would become redundant under diet shifts of different magnitudes. It highlights the role that depreciation of assets can play to limit the extent of stranded assets, while also arguing that targeted policy support will be needed to avoid prolonged lock-in and to accelerate more rapid food system transformation.
Stranded assets can result from a shift in demand, but also due to climate change. Think of investments in fruit trees or vineyards that are no longer productive in a particular area because of water scarcity or high temperatures. However, the focus of this paper is on the consequences of diet change.
The paper makes a valuable contribution to understanding the sources and extent of resistance among livestock producers to calls to reduce the consumption of ASFs, whether for climate, health or welfare reasons. It is not just that this implies a loss of income for producers, as alternative land uses may not be feasible or equally profitable. But behind the loss of income are also the investments in productive capital and in social and cultural capital which may or may not have alternative uses. The merit of this paper is that it puts the spotlight on the potential scale of losses in productive capital for specific dietary transitions.
What the paper finds
The dietary transitions chosen are based on the EAT-Lancet scenarios which examine three scenarios with different levels of ASF substitution with plant-based foods. The paper models reductions of 9.5%, 60% and 100% in ASF consumption from current levels, representing moderate, low and zero ASF scenarios. Its methodology is based on an extended input-output model (the FABIO model) calibrated to the year 2020, and includes both the EU27 and the UK.
The paper acknowledges that farm production depends on different kinds of assets, including land, farm buildings, machinery and breeding stock (where the three latter groups make up fixed assets). Intangible assets such as knowledge, social capital and place-based expertise also play a significant role. An important scoping decision in the paper is that only assets in primary production are accounted (no doubt reflecting the reliance on the FADN database for asset values) including both assets used directly in animal production but also in the production of animal feed. The potential for stranded assets in upstream or downstream industries, such as dairy processors or slaughterhouses, as a result of these diet shifts is not considered.
The paper finds that 78% of the fixed assets in primary agriculture (excluding land) are linked to ASFs, with €158 billion allocated to livestock production and €100 billion to upstream animal feed production. This means approximately 40% of stranded assets from a plant-based shift would be in crop agriculture for feed, implying the need for distinguishing policies for both animal- and plant-agriculture. The paper also calculates the asset intensity of producing a kg of food in different sectors which it argues could be a useful tool when it comes to targeting transition support.
A 9.5% reduction in ASF consumption (moderate ASF scenario) would potentially strand €61 billion of fixed assets (or 20% of the total); a 60% reduction (low ASF scenario) €168 billion (49%) and a 100% reduction (zero ASF scenario) €255 billion (reported as 73%, but the actual figure seems closer to 78%). The reason why the value of stranded assets does not increase linearly with the size of the diet shocks is because the composition of the diet switches in the three EAT-Lancet scenarios is different.
The paper also assumes that land assets used for ASF production would become redundant. In fact, the scale of stranded land assets, estimated at €153 billion, €370 billion or €551 billion for the three scenarios, is considerably greater than for fixed assets alone. However, for reasons later discussed, I do not put much credence in these figures and they do not play a big role in the paper.
The paper notes that the increase in plant-based consumption in the diet scenarios would require additional fixed assets (a 3–24% rise in buildings and a 0.5–20% rise in machinery and equipment assets). The analysis cannot address whether these assets are newly developed or repurposed from ASF production systems although some of the machinery and buildings currently used for feed production could presumably be repurposed to produce plant-based foods for human consumption without much difficulty.
Fixed capital assets depreciate and lose value over time. An insight of the paper is that the longer the time period over which the transition takes place, the lower the value of stranded assets, on the important assumption of a complete investment stop. The paper illustrates this by examining the scale of stranded assets under the different diet scenarios for phase out periods of 10 and 30 years. Given the set-up of the paper, the transition period will be a function of the speed with which consumers switch from ASFs to plant-based diets.
To calculate the value of stranded assets, the paper applies a standard 9% annual depreciation rate to all fixed assets which is hardly realistic, but the value chosen does not undermine the message itself. The argument is more vulnerable to the criticism that, the longer the transition period, the less convincing will be the assumption that there is no further investment in the farm. That farmers in 30 years’ time would still be content to operate with the milking parlour they have today without making any changes does not seem to me to be very plausible.
Conclusions
The final section of the paper discusses the implications of the analysis for the management of the transition. Obviously, eliminating subsidies that might encourage farmers to invest in assets that could become potentially stranded should be a first priority. High stranded asset exposure, especially in bovine, pig meat and dairy systems, may delay EU dietary and climate action by increasing political resistance or financial vulnerability among producers. The paper argues for targeted policy support to farmers who want to adjust their farm businesses and possibly compensation for those who are unable to adjust. The Dutch government schemes which pay livestock farmers for voluntary definitive closure of their livestock farms to reduce nitrogen deposition on nature conservation sites are an example. These compensate farmers up to 100% (or even 120%) for the loss of production capacity and production rights.
There are some limitations to the estimates of the likely value of stranded assets due to the methodology used to derive them. The methodology assumes that changes in EU consumption translate directly into changes in EU production which ignores the role of international trade. As the paper recognises, assets that are currently used in the production of ASFs can be repurposed but an input-output model is not able to capture the extent to which this may happen, thus exaggerating the scale of the losses. This is especially a limitation in the estimate of the land asset losses where alternative uses will certainly be possible in most cases. (On the other hand, the land assets included in the study only cover land owned by the holding belonging to the holder. As half of agricultural land in the EU is rented, this suggests there could be a downward bias in the land asset estimate). In the case of fixed assets, the role played by depreciation, especially if there is an investment stop, will also reduce the value of stranded assets, so the published figures are at the high end.
No doubt the exact values can be further refined. This does not take away from the value of the paper in highlighting the role of potential stranded assets as a concern that needs to be factored into any discussion of a green transition.
In the autumn of last year, the European Parliament came close to rejecting the Commission’s MFF proposal as the basis for negotiations. In October 2025, the leaders of four of the main political groups in the Parliament – EPP, S&D, Renew and Greens/EFA – wrote to President von der Leyen stating plainly that the Commission proposal had not taken the Parliament’s core requests into consideration and demanding an amended proposal reflecting these requests to allow negotiations with the Parliament to move forward (a copy of this letter was made available by Politico Europe).
In response, the Commission in a non-paper (made available by Euractiv) proposed several amendments to its proposal, which were subsequently included in a speech made by President von der Leyen at a plenary debate of the Parliament on the MFF’s architecture and governance in November 2025. This included a proposal for a rural target expressed as a minimum percentage of the NRP Plans’ general allocation envelope outside of the earmarked amounts for the CAP and CFP as well as the Catalyst Europe loans to be spent in rural areas.
Specifically, the Commission proposed the following amendment to Article 10(5) of the draft National and Regional Partnership Plans Regulation.
At least 10% of the financial envelope referred to in paragraph 2(a) and of the amount referred to in paragraph 4 shall be dedicated to rural areas, calculated by using the code 02 referred to in Part 1 of Annex II of Regulation (EU) [Performance Regulation]. The amount set out in paragraph 2, point (a) letter (ii), as well as the external assigned revenue from the Social Climate Fund, shall be excluded from the basis for the calculation of this minimum allocation.
In plain language, the idea is that the proposed 10% target for expenditure dedicated to rural areas would build on the proposed system of tracking expenditure in the performance regulation that already includes a category for rural areas. This is similar to the way the target for social expenditure in the new Fund would also be tracked.
The purpose of this post is to highlight that fulfilling this commitment will be easier said than done. Previous experience with tracking rural expenditure in cohesion policy does not bode well for the operationalisation of this commitment. There will be a need for much greater clarity in any text emerging from the trilogue negotiations as to how this measurement will take place.
Previous experiences: 2014-2020 programming period
Rural tracking was fully implemented in cohesion policy in the 2014-2020 period as part of tracking investment by type of territory. Programmes were asked to provide information on the “territorial dimension” in the planning phase and, annually, in implementation, Seven territorial codes were defined for the 2014-2020 period. Rural areas were defined in line with the EUROSTAT typology of degree of urbanisation. The typology is based on a cross EU analysis of population location and density using the sq km population grid. The degree of urbanisation distinguishes three types of local administrative units (LAU). Rural areas (thinly populated areas) with a majority of the population living in rural grid cells (cells outside urban clusters) were designated with code 03.
The Commission estimated that 9% of all cohesion resources were planned to be spent in rural areas. There is a separate discussion to be had on whether this typology of rural areas is satisfactory or not, but this is not the topic of this post.
The Commission cautioned against relying too heavily on this estimate, for several reasons. Around half of all cohesion policy investments could not be categorised by territorial type. Many investments cover both urban and rural areas and may therefore not be classified under either type. Planned allocations to one territory type may nonetheless have spillover effects in another (for instance, investments made to improve the businesses or social infrastructure of a small town can be registered as urban, but benefit the surrounding rural area). One presumes that the same issues will also apply to rural tracking in the 2028-2034 period.
Current 2021-2027 monitoring
In 2021-2027, EU cohesion policy has five objectives: a more competitive and smarter Europe (PO1); a greener, low carbon transitioning towards a net zero carbon economy (PO2); a more connected Europe by enhancing mobility (PO3); a more social and inclusive Europe (PO4); and a Europe closer to citizens by fostering the sustainable and integrated development of all types of territories (PO5). PO5 has two specific objectives. The first objective addresses sustainable and integrated development in urban and functional urban areas. The second refers to strategies that focus on sustainable and integrated development of non-urban areas, taking also into account rural-urban linkages. 18 Member States have programmed allocations under this specific objective 5.2.
In the Common Provisions Regulation (EU) 2021/1060 territorial codes are provided but only for the territorial delivery mechanism and territorial focus dimension in P05. Rural areas are given the code 04 but this only applies to the territorial delivery mechanisms used in P05.
Unlike cohesion policy in the previous period, there was no attempt to specifically track broader expenditure in rural areas. Further, the only ringfencing in this programming period requires a minimum of 8% of the European Regional Development Fund (ERDF) should be allocated at the national level for sustainable urban development, focusing on green and digital transformations.
The Commission’s 2024 report on the long-term vision for rural areas comments on the support from cohesion policy for rural areas. It highlights the support channelled through integrated territorial development strategies designed and implemented by respective territorial authorities, strengthening the economic and social fabric of rural areas. But it notes that cohesion policy interventions provide support to rural areas through all policy objectives, although it admits that, because cohesion policy interventions have wide territorial impacts, it is difficult to attribute its actions to one type of territory.
The report concludes that; “Currently there is no comprehensive source indicating and quantifying the extent to which these funds contribute to rural areas. The European Parliament and the Council suggested to work towards a clearer identification and monitoring of the contribution of EU instruments to rural areas in the future” (p. 7).
Conclusion
The Commission has proposed to set a target that 10% of the NRPF general allocation (less the ring-fenced amounts for the CAP and CFP) as well as Catalyst Europe loans should be dedicated to rural areas. This requires a robust mechanism to monitor progress towards this target. The Commission proposes to track this expenditure by requiring Member States to provide a specific code for expenditure in rural areas.
However, experience in the 2014-2020 programming period where this type of tracking was previously tried shows how limited it is. Member States were unable to allocate around half of all cohesion expenditure to a territorial category. Also, because of the existence of spillover effects where investment in urban areas may have spillover benefits for rural areas, it is questionable whether the Commission approach, even if it could be applied, would be anyway meaningful. The Commission’s own conclusion in its review of progress under the long term vision for rural areas that there is no comprehensive source quantifying the extent to which cohesion funds contribute to rural areas likely remains valid.
One suggested improvement could be to apply the Rio markers approach already used by the Commission for climate and environment tracking and proposed for use to track social spending. Instead of just a binary territorial classification (rural or non-rural), this allows for a more differentiated scale. An investment or intervention that demonstrably has no benefit for a rural area is given a score of 0, an investment or intervention that is totally dedicated to a rural area is given a score of 100, while investments or interventions that can have some spillover benefits for rural areas are given a score of 40. These percentage scores are then applied to the relevant expenditures to calculate the overall amount dedicated to rural areas.
The Rio markers approach in climate mainstreaming has been (rightly) criticised by the European Court of Auditors and others, not least when applied to CAP expenditure. Nonetheless, it would represent an improvement on what the Commission has proposed for the rural target, which does not appear to be workable and which will only store up trouble in the longer term.
I am not an expert in nutrition and, if I am honest, I have been sceptical of the significance of occasional health-related claims such as the claimed link between red meat and cancer. But that there is a link between diets and ill-health is indisputable. What is less clear is the nature of these links, which has been brought into sharp focus by the publication of the latest U.S. Dietary Guidelines for Americans 2025-2030 by U.S. Department of Health and Human Services Secretary Robert F. Kennedy, Jr. and U.S. Department of Agriculture Secretary Brooke Rollins two days ago on 7 January 2026.
In 2021, the OECD published a report prepared by Koen Deconinck Making Better Policies for Food Systems which argued that achieving better food policies for food systems requires overcoming frictions related to facts, interests and values. The latest U.S. Dietary Guidelines provide a relevant case study of the way differences in the interpretation of facts can influence policy recommendations. Of course, the way facts are interpreted are influenced by interests and values.
This is particularly relevant in the present case given Secretary Kennedy’s prior public record on diet-related ill health, as articulated through his Make America Healthy Again agenda. This agenda frames rising chronic disease as the outcome of structural failures in the food system, emphasising the role of ultra-processed foods, excessive sugar consumption, and industrial food formulations, while expressing scepticism about long-standing low-fat dietary paradigms.
It promotes a return to whole foods, higher protein intakes, and reduced reliance on refined carbohydrates, and places strong emphasis on prevention, metabolic health, and reduced dependence on pharmaceutical treatment (Reuters, 2026). While several elements of this framing resonate with mainstream nutrition debates, the prioritisation of animal-source foods and the relative de-emphasis of established concerns around saturated fat have been viewed by parts of the nutrition community as reflecting a selective emphasis within the existing evidence base.
Diets and health
Many European Union populations face significant diet-related health challenges (European Commission 2024; World Health Organization 2022). According to Eurostat, more than half of adults in the EU live with excess weight, with obesity rates increasing steadily across most Member States over the past decade. The World Health Organization estimates that overweight and obesity are major risk factors for non-communicable diseases including cardiovascular disease, type 2 diabetes, musculoskeletal disorders, and several cancers, and that diet-related risk factors account for a substantial share of avoidable morbidity and premature mortality in Europe. These outcomes are unequally distributed, with higher prevalence among lower-income and lower-education groups, reinforcing concerns about social gradients in health.
Diet and food consumption patterns are central to debates about these trends. Public authorities at EU and national level increasingly point to high intakes of energy-dense, nutrient-poor foods, excess consumption of added sugars, saturated fats and salt, and insufficient intake of fruits, vegetables, whole grains and fibre as key drivers of poor health outcomes. At the same time, there is disagreement about the relative importance of specific dietary components and about the most effective policy responses.
Three areas of controversy are particularly salient. First, ultra-processed foods have become a focal point of debate. Using the NOVA classification, these foods are defined as industrial formulations containing multiple ingredients and additives and designed for convenience and palatability. Observational studies associate high consumption of ultra-processed foods with obesity and other non-communicable diseases, but critics question whether these associations reflect causal effects or broader lifestyle and socioeconomic confounding (Monteiro et al. 2019: UK Standing Advisory Committee on Nutrition, 2023, 2025).
Second, saturated fats remain contested. Long-standing dietary advice has emphasised limiting saturated fat intake due to its association with raised LDL cholesterol and cardiovascular risk, yet some recent analyses argue that food matrices and dietary patterns matter more than individual nutrients (Mozzafarian et al., 2010; Astrup et al., 2020).
Third, added sugars, particularly in sugar-sweetened beverages, are widely implicated in obesity and metabolic disease, although debate persists over appropriate regulatory tools and thresholds (World Health Organization, 2015).
Why nutritional advice is particularly prone to revision
Nutritional science is especially vulnerable to shifts in interpretation because of the nature of its evidence base (Ioannidis, 2013). Long-term randomised controlled trials of whole diets are difficult to conduct due to ethical, practical, and financial constraints. Diets cannot be blinded, adherence is hard to enforce over extended periods, and health outcomes of interest often take years or decades to manifest. As a result, much of nutritional evidence relies on observational and epidemiological studies, which are sensitive to measurement error, confounding, and model specification.
Dietary intake data are commonly based on self-reported food frequency questionnaires or recalls, which are known to be imperfect. Small changes in analytic assumptions, population selection, or statistical adjustment can materially affect estimated associations. As methods evolve and new cohort data become available, earlier conclusions may be revised. This does not imply that nutritional science is arbitrary, but rather that uncertainty is higher than in fields where controlled experimentation is more feasible. These features make nutritional advice particularly exposed to reinterpretation and policy change.
The 2025–2030 U.S. Dietary Guidelines
The new U.S. dietary guidelines represent a marked shift in emphasis relative to earlier editions. For one thing, they are much shorter (a total of 9 pages compared to 164 pages for the 2020-2025 version). They place greater weight on whole, minimally processed foods and explicitly discourage consumption of ultra-processed foods. Protein is given a central role, with recommended intakes increased from the long-standing benchmark of 0.8 grams per kilogram of body weight per day to a range of approximately 1.2–1.6 grams per kilogram per day for adults, with animal-source foods such as meat, poultry, eggs, seafood, and full-fat dairy explicitly presented as acceptable components of healthy dietary patterns alongside plant-based protein sources.
Added sugars are framed as undesirable at any level, with guidance indicating that intakes should be kept very low, in practice not exceeding roughly 10 grams per meal. Saturated fat is formally retained under a quantitative cap of less than 10% of total daily energy intake, but this constraint is less prominently emphasised than in earlier editions. Guidance on alcohol no longer specifies numerical limits to one or two drinks per day; instead, the text states that Americans should consume alcohol in moderation and that drinking less is better for health, with abstention recommended for some population groups. These recommendations are accompanied by revised visual guidance, elevating protein and fats from whole foods relative to refined carbohydrates and grains.
Compared with previous editions, which stressed balance across food groups, favoured low-fat dairy, and consistently highlighted saturated fat reduction, the new guidelines adopt a more permissive stance toward animal products and dietary fats. While some numerical limits, such as the cap on saturated fat as a share of total energy intake, formally remain, the overall framing departs from the MyPlate paradigm that has structured US dietary advice for more than a decade.
Scientific disagreement and the role of interpretation
The Dietary Guidelines for Americans 2025–2030 illustrate how apparent disagreements over facts emerge through processes of interpretation and prioritisation within particular political and institutional contexts. Reactions within the scientific and public health communities to the publication of the Guidelines highlight how the same body of evidence can be read in different ways. Supporters argue that the stronger focus on protein and whole foods reflects emerging evidence on diet quality, metabolic health, and the limited benefits of low-fat formulations. Critics counter that the guidance risks downplaying robust evidence linking high intakes of saturated fat and red and processed meat to cardiovascular disease, and that it may confuse the public by appearing to reverse long-standing advice.
But there are concerns whether these differences in interpretation do not also reflect industry influence in the development of the guidelines (Center for Science in the Public Interest 2026). Under the standard U.S. process for updating the Dietary Guidelines for Americans, a Dietary Guidelines Advisory Committee is periodically appointed under the Federal Advisory Committee Act to conduct an independent review of the scientific evidence on diet and health. The Committee’s Scientific Report is intended to provide the primary evidence base on which the Departments of Health and Human Services and Agriculture then develop successive editions of the Dietary Guidelines. In the 2025–2030 cycle, the Dietary Guidelines Advisory Committee was established under the Biden Administration. In December 2024, the Committee published its Scientific Report setting out its assessment of the evidence base and its recommendations. However, the final 2025–2030 Dietary Guidelines diverge in important respects from that report.
Instead, Secretary Kennedy dismissed the Advisory Committee’s Scientific Report on the grounds “that it had framed its analysis through a health equity lens”. Instead, the Secretary selected a new group of nutrition experts and panels to produce an alternative Scientific Foundation for the Dietary Guidelines. Media investigations indicate that several members of these review groups disclosed financial ties to meat, dairy, infant formula, or supplement industries. Such institutional arrangements can shape problem framing, evidence weighting, and the translation of scientific findings into policy advice, even in the absence of explicit interference. More broadly, this episode can be interpreted through the lens of the commercial determinants of health (World Health Organization 2023), which emphasise how corporate strategies such as research funding, lobbying, and participation in advisory processes can influence nutrition science and policy .
The apparent tension between Secretary Kennedy’s long-standing criticism of the food industry and the appointment of nutrition experts with close ties to specific producer sectors has been explained in several ways. One is a distinction, implicit in the Make America Healthy Again agenda, between highly processed food manufacturers, which are portrayed as central contributors to poor health, and producers of what are framed as “real” or traditional foods, such as meat and dairy, whose interests are treated as less problematic. A second explanation emphasises expertise rather than neutrality: given the pervasiveness of industry funding in nutrition research, it is argued that strict exclusion of experts with industry ties would significantly narrow the pool of qualified advisors, with disclosure seen as a sufficient safeguard. A third interpretation points to political economy considerations, noting that livestock and dairy sectors are economically and electorally significant in the MAGA base and that accommodating their interests can help stabilise support for dietary guidance that would otherwise face resistance.
Beyond disagreement over the interpretation of evidence within the accepted scientific domain, political choices also shape the scope of admissible evidence itself. A further illustration of how interests and values shape which facts enter policy debates concerns the treatment of environmental sustainability. In several countries, including Canada and a number of EU Member States, recent dietary guidelines explicitly integrate evidence on environmental impacts, such as greenhouse gas emissions and resource use, alongside nutritional considerations. In the United States, the scope of relevant evidence is itself politically circumscribed.
For the 2025–2030 cycle, the terms of reference given to the Dietary Guidelines Advisory Committee explicitly confined its remit to diet–health relationships, excluding consideration of environmental sustainability. This exclusion reflects a longer-standing political process, reinforced by congressional direction since the mid-2010s, that has sought to keep environmental considerations outside the Dietary Guidelines framework, particularly following industry and congressional opposition to earlier attempts to link reduced red meat consumption to environmental sustainability outcomes (the evolution of the Guidelines and the controversy around the 2015-2020 Guidelines are described in U.S. Congressional Research Service, 2023). As a result, neither the Committee’s Scientific Report nor the final Dietary Guidelines engage substantively with environmental evidence, despite its growing prominence internationally.
Conclusion
The debate surrounding the latest U.S. dietary guidelines illustrates how disagreements over facts are frequently politically mediated. They are shaped not only by scientific uncertainty, particularly prevalent in nutrition science, but also by underlying interests and institutional arrangements.
Where evidence is complex, probabilistic, and methodologically constrained, scientific interpretation plays a decisive role. Different judgments about the strength, relevance, and implications of evidence can legitimately lead to different policy recommendations. However, when combined with concerns about commercial influence, these disagreements can undermine trust and intensify politicisation. The deliberate exclusion of environmental sustainability from the evidentiary remit of the Dietary Guidelines process further underscores that political choices about scope and relevance shape not only how facts are interpreted, but which facts are permitted to enter policy deliberation at all.
Nutrition policy thus exemplifies how facts in food policy do not speak for themselves: they are interpreted, weighted, and sometimes excluded through political and institutional processes that reflect underlying interests and values, rather than scientific uncertainty alone.
This post was written by Alan Matthews.
Acknowledgement: I am not a nutrition expert. For this post, I have used ChatGPT, a large language model developed by OpenAI, for assistance in structuring the argument, clarifying points of interpretation, and identifying relevant sources. I have critically reviewed the material provided, and I remain responsible for the final text.
The figures in Table 1 have been slightly revised since the original post to calculate the flexibility amount as 25% of a country’s NRPF financial allocation less its minimum ring-fenced amount for CAP income support (from which the allocation for CAP investment supports for farmers and foresters should be deducted). In the original post I had based the calculation on the NRPF general allocation.
Commission President von der Leyen sent a letter to the Cypriot Presidency of the Council and to the President of the European Parliament yesterday 6 January 2026, in which she proposed to make additional resources available as of 2028 to address the needs of farmers and rural communities (with thanks to Politico Europe for the link).
This letter was sent on the same day as the Cyprus Presidency invited all Agriculture Ministers to a meeting also attended by the Commissioners for agriculture, trade and health to provide reassurances to Italy and other Member States to sign up to the contentious EU-Mercosur free trade agreement on Friday. The proposal in the letter would be a form of side-payment to bring the wavering countries on board.
The formal part of the proposal, in an annex to the letter, proposes to add a new sub-paragraph to Article 14 of the National and Regional Partnership Fund Regulation which sets out how the resources made available under the so-called General Allocation of the Fund can be used. Specifically, the following text would be added to Article 14.
“When submitting or amending its plan before the midterm review, Member States may use up to two thirds of the amount available for the midterm review for interventions referred to in Article 35(1) or for measures dedicated to rural areas.”
The flexibility amount
As this paragraph is pure legalese, I provide some context in this section. We first need to understand the notion of a flexibility amount. This is defined in Article 14(2) as money that is available to a Member State under its NRP Fund in the 2028-2034 period but which cannot be programmed immediately and which must be held in a flexibility reserve.
This flexibility amount is significant. It amounts to 25% of the financial allocation in the NRP Fund less an amount that is broadly the ring-fenced amount for CAP income support. The financial allocation is the sum of the NRPF general allocation plus the minimum ear-marked amount for migration, security and home affairs, as set out in Article 10(2)a of the NRPP Regulation.
In calculating the size of the flexibility amount, I say that the deduction from the NRP Fund financial allocation is broadly equivalent to the ring-fenced amount for CAP income support. This is because the amount that Member States allocate to investment support for farmers and foresters will be excluded when calculating the deduction and thus the size of the flexibility amount.
The use of the flexibility amount is strictly regulated in the NRP Regulation. One-fifth of the amount can be used by Member States to provide assistance in the case of natural disasters, adverse climatic events, and animal diseases in the first three years of the programming period 2028-2030.
Another three-fifths (plus any unused amount from the first fifth) is available for programming at the Mid-term Review which should be completed by 31 March 2031. While the Mid-term Review provides an opportunity for a Member State to revise its targets and instruments, the intention of the Commission is that the flexibility amount means that Member States will also have additional resources available to address any new challenges that might have arisen between agreement on the NRP Plan and 2031. Part of this reserve can be brought forward and used for programming at the request of a Member State “in duly justified and exceptional circumstances”.
This leaves the remaining fifth of the flexibility amount which can then be requested as of 2031, again to provide assistance in the event of crises. If there is still an unused amount as of June 2033, it can be made available at that point for programming for any amendment of the Plan.
Neither the general objectives for the NRP Fund (Article 2) nor its specific objectives (Article 3) specify that the Fund can be used to provide assistance for natural disasters or climatic crises, although this is provided for in Article 34 of the NRP Regulation.
The 45 billion euro question
Against this background, we can interpret the significance of the Commission proposal presented yesterday. The reference to Article 35(1) refers to the full list of CAP interventions and all are eligible for support.
The Commission has consistently presented the ring-fenced amount for CAP income support as a minimum amount, which Member States could add to from the unearmarked amounts in their NRP Fund allocations (minimum amounts are also earmarked for fisheries, less developed regions and for migration, security and home affairs). A big constraint on Member States being able to programme additional amounts for the CAP, apart from political battles within Member States on the priority to be given between the CAP and cohesion spending, is the Commission proposal to freeze the programming of the flexibility amounts until at the earliest the Mid-term Review.
The Commission proposal is that (a) two thirds of the flexibility amount reserved for the Mid-term Review can now be programmed from the start of the programming period but (b) only if this forwarded amount is used for CAP spending or for measures dedicated to rural areas. The attraction for Agriculture Ministers is that this not only unfreezes resources and makes them available for programming from the start of the programming period, but it locks in that these unearmarked resources have to be used for the CAP or rural areas.
Critics will correctly point out that this amount is not guaranteed additional spending. It does not increase the mandatory ring-fenced amount for CAP income support. But it will give Agriculture Ministers a stronger negotiating hand within their Member States. They will now be able to point out to their Finance Ministers that if the amount is drawn down immediately from the EU budget and used for the CAP or rural areas, the money becomes available to the Member State from 2028 instead of having to wait until 2031 to unfreeze these amounts. In addition, if 20 Member States decide to make use of the option but 8 do not (counting Belgium as 2), there will be significant additional pressure within the 8 countries to follow suit.
Any funding additional to the minimum ringfenced funding for the CAP will require national contributions from Member States depending on the appropriate co-financing rates set out for the specific type of region where the expenditure takes place. There are no requirements set on the types of CAP interventions that Member States can support with this additional funding. But as using these funds for cohesion or other objectives will require a similar level of co-financing, this is not in itself a disincentive to use this opportunity.
Given the lack of minimum ringfencing within the CAP budget for agri-environment-climate actions, a case could be made that additional funds made available for the CAP in this proposal should be confined to these environmental interventions. However, given the political purpose which this side- payment is intended to achieve, expecting this kind of fine-tuning was always going to be unrealistic.
The additional text proposed by the Commission allows the unfrozen flexibility amounts to also be used for measures dedicated to rural areas. To the extent that Member States favoured rural development measures, this would reduce the additional funding that would directly benefit farmers.
The CAP through its Pillar 2 always included measures designed to support rural development, including LEADER and rural business support schemes. In its November 2025 non-paper to the Parliament, the Commission had already proposed to amend the NRP Regulation to include a dedicated target for rural areas. It had proposed that at least 10% of the NRP Fund financial allocation (again after deducting the minimum amount for CAP income support) should be dedicated to rural areas, calculated by using the code 02 in the Performance Regulation. This refers to any expenditure that takes place in a rural area and is thus a much wider definition of rural development expenditure than traditionally associated with the CAP.
In this way, expenditure traditionally funded by cohesion policy can also be funded from the unfrozen flexibility amounts. This will please advocates of cohesion policy who otherwise have been dismayed by the apparent ability of farm groups to ‘jump the queue’ in accessing unearmarked resources under the NRP Fund. However, for the same reason, this broader remit for the use of the unfrozen resources may limit the extent to which farmers will benefit.
There is also a strong possibility that at least some of this additional CAP and rural area spending will not be additional. The minimum ringfenced amount for the CAP only refers to income support interventions. This term covers more than direct payments, it refers to all those payments (including investment aids) that are received by individual farmers. There are other CAP interventions, such as LEADER, support for knowledge sharing, and territorial and local cooperation initiatives, which are not counted as CAP income support. But the proposed CAP Regulation makes it mandatory for Member States to allocate funding to these interventions in their NRP Plans (in the case of territorial and cooperation initiatives, this only refers to EIP-AGRI operational groups). Funding these interventions will in any case require allocating money from the unearmarked amount in the NRP Fund.
One assumes, if these interventions are mandatory, they will have to be programmed from day one of the NRP Plans. So at least a portion of the unfrozen flexibility amount which can be brought forward is likely to be used to finance mandatory CAP interventions which would have to have been financed in any case. As a result, the net impact of the Commission proposal will be somewhat smaller than the headline amount.
A final element in the Commission proposal confirms that farmers will still be able to access the unprogrammed amounts in the Flexibility Amount for assistance in case of natural disasters, adverse climate events and animal diseases. The sums are substantial, amounting to 10% of the NRPF Fund financial allocation to each Member State less broadly the ringfenced amount for CAP income support.
Impacts will differ across Member States
If all Member States made use of this option in designing their NRP Plans, and if expenditure on rural areas were limited to interventions, such as LEADER, traditionally funded from the CAP budget, it would add a further €45 billion to the minimum CAP ringfenced budget of €293.7 billion, or an additional 15%. By highlighting also the doubling of the agricultural crisis reserve in the new Unity Safety Net, and as well the possibility of benefiting from borrowing under the Catalyst Europe fund (an option which I highlighted in my previous post on this blog), the Commission concludes that
“the combination of these policy and budgetary tools will provide the farmers and rural communities with an unprecedented level of support, in some respects even higher than in the current budget cycle...”.
However, there will be very different impacts across Member States (Table 1). In this table, I have calculated the maximum potential impact the Commission proposal would have on the CAP budget available per Member State. There is an extraordinarily consistent pattern. All recently-acceded countries would gain more than the EU average in additional spending (for example, Slovakia 40%, Poland 36%, Hungary 28%). On the other hand, all older Member States (except for Portugal and Greece) would receive a smaller increase in their CAP budgets compared to the EU average. While the increases for Italy (16%) and Spain (12%) are significant, the increases for France (7%), Austria (5%) and Ireland (4%) are hardly so.
From a Mercosur perspective, Giorgia Meloni handsomely succeeded in her objective to gain additional support for Italian farmers, while other major opponents (France, Austria and Ireland) fared less well.
Table 1. Impact of Commission proposal on minimum budget available for the CAP 2028-2034 Note: The flexibility amount is calculated as 25% of the difference between a country’s NRPF financial allocation and its minimum CAP ring-fenced amount for income support. This slightly underestimates the flexibility amount as CAP investment aids to farmers and foresters should be excluded from the CAP income support amounts that are deducted, but these allocations will not be known until the approval of the CAP chapters in the National Plans. The table assumes that all of the unfrozen flexibility amount will be used for CAP interventions rather than expenditure generally dedicated to rural areas. Source: Commission Fact Sheet, Europe’s Budget Member States allocation, 2025
This post was written by Alan Matthews.
Update 7 Jan 2026. Add paragraph on possible substitution between the unfrozen flexibility amounts and mandatory non-CAP income support expenditure in the NRP Plans. Corrected €45 million to €45 billion.
Update 27 Jan 2026. I have corrected Table 2 to reflect that the 25% flexibility amount will be calculated based on the full NRP Fund financial allocation to Member States and not only its general allocation, less the relevant ring-fenced amounts for the CAP.
Photo credit: stevepb and used under a Pixabay content licence.
The New Year 2026 will see negotiations on the EU’s next medium-term budget step up in gear. Many Member States have called to set a deadline of end 2026 to agree on the next Multi-annual Financial Framework (MFF). This is necessary if the new MFF programmes are to start on 1 January 2028.
That this is a very ambitious deadline is an understatement. The Danes set a cracking pace in organising the Council’s MFF discussions under their Presidency, and presented a first draft of the famous ‘negotiating box’ to the European Council meeting in December 2025. This draft, without figures, was presented under the sole responsibility of the Presidency. The accompanying progress report recognised that significant political as well as technical issues remain to be resolved. Bridging these divides under the Cypriot and Irish Presidencies will require a massive effort in the coming twelve months.
Although it is the Council that negotiates the MFF budget, the European Parliament (EP) must also give its consent. The EP has begun the process of formulating its position by preparing an interim report on the MFF proposal, intended to signal in advance what its minimum demands will be. The joint rapporteurs in the Committee on Budgets (one from the EPP and the other from the S&D political groups) published a draft Interim Report in early December. This will undergo amendment before being voted on in the Committee and presented to Parliament for decision most likely in May.
Agricultural stakeholders will be significantly affected by the outcome of these budget negotiations. In this post, I want to focus on the potential role of EU borrowing in these negotiations. As the EU Treaties lay down that the EU must be financed wholly from its own resources, its ability to borrow in limited circumstances is often overlooked, But the EU has increasingly resorted to borrowing in recent years, most recently to finance the €90 billion loan to Ukraine agreed in the European Council conclusions in December 2025. The repayment of the loan taken out to fund the Next Generation EU (NGEU) programmes in the wake of the COVID-19 pandemic in 2020 weighs heavily on the EU’s ability to increase its programme spending in the next MFF. We look at possible options to address this issue.
The MFF package also includes the Own Resources Decision (ORD) where the Parliament must be consulted but its opinion is not binding. However, it can only enter into force after ratification by all Member States in accordance with their constitutional procedures. This gives national parliaments a de facto veto over the EU’s revenue system, the size of its budget and its borrowing authority. This constitutional architecture needs to be kept in mind when discussing possible options for the next MFF.
The EU’s borrowing options
Article 310 of the Treaty on the Functioning of the European Union requires that revenue and expenditure in the EU budget must be in balance. In turn, Article 311 states that the revenue of the Union consists of its own resources, without prejudice to other revenue. The Treaties do not define what counts as own resources. Instead, these are established and updated as necessary in the ORD adopted by the Council subject to unanimous approval and national ratification. The Lisbon Treaty introduced changes to the provisions related to the system of own resources which enable the abolition of an existing category of own resources and the establishment of a new category. The ORD can also authorise borrowing if necessary, and repayment modalities, but subject to strict rules.
We can distinguish between four mechanisms that can facilitate additional EU expenditure through borrowing.
1. Providing additional fiscal flexibility. This involves amendments to the EU Stability and Growth Pact to provide greater fiscal space to Member States for specific expenditures. The SGP is a set of rules for EU countries to coordinate fiscal policies and to maintain sound public finances by limiting deficits to around 3% of GDP and government debt to around 60% of GDP. Where a country exceeds these limits, an Excessive Deficit Procedure can be activated where countries receive recommendations for corrective action and where failure to comply can lead to financial penalties or suspension of EU funds.
The ReArm Europe/Readiness 2030 package activates the national escape clause of the Stability and Growth Pact for defence spending. This will allow a country to temporarily deviate from the SGP limits without triggering sanctions or formal excessive deficit procedures, provided that the increased spending relates to defence. Specifically, Member States can increase defence spending by up to 1.5% of GDP per year above their previously agreed net expenditure paths without being deemed in breach of fiscal rules. This flexibility can be used for four years (2025–2028), allowing sustained build-up of defence budgets.
What is relevant to highlight here is that this mechanism involves additional national spending through borrowing but has no implications for EU borrowing per se.
2. Borrowing for back-to-back loans. Here the EU borrows on financial markets (making use of its high creditworthiness to secure favourable borrowing rates) and lends the money to Member States for specific purposes. Such borrowing was used to provide loans to Member States under the SURE programme (Support to mitigate Unemployment Risks in an Emergency) created in May 2020 during the COVID-19 pandemic. The EU also has three other loan programmes to raise funds and pay for financial assistance to countries experiencing economic difficulties (for balance of payments assistance to EU countries outside the euro zone, the European Financial Stability Mechanism for euro countries in economic difficulty, and macro financial assistance to non-EU partner countries). The most recent example is the SAFE financial instrument (Security Action for Europe) whereby the EU will provide up to €150 billion in low-cost, long-term loans to EU Member states for joint defence procurement.
These one-off borrowing operations rely on Article 122 TFEU which provides for solidarity between Member States in exceptional circumstances, and on Article 212 which provides for financial assistance to third countries. The debt is serviced by Member State repayments, and only the contingent default risk as well as administrative costs appear in the EU budget, as well as the cost of possible interest subsidies if loans are made at concessional interest rates (for example, fully covering interest rate costs for existing loans to Ukraine is estimated to cost approximately €11.5 billion in total over the next MFF, Darvas and McCaffrey, 2024). Thus, there is no repayment of principal line needed in the MFF because the loan is treated as a financial asset, not a grant. In each case, borrowing is justified as temporary, exceptional, and for a specific purpose.
In its MFF 2028-2034 proposal, the Commission proposed a new €150 billion loan support programme (dubbed Catalyst Europe) for the implementation of countries’ National and Regional Partnership Plans. The request for loan support should be justified by the higher financial needs linked to additional reforms and investments included in the NRP Plan and by a higher cost of the NRP Plan than the sum of the Union financial contribution and the national contribution. Because debt service would be covered by repayments from borrowing countries, these policy loans would remain outside the MFF ceilings. Still, this proposal for loan financing marks new ground because it is not specifically tied to an exceptional situation but rather to undertaking reforms and investments as part of ongoing EU budget expenditure.
In this proposal, as well as with the SAFE proposal, the Commission is gingerly embracing one of the recommendations of the Draghi report, which was to introduce regular and sizeable issuance by the EU of a common safe and liquid asset to enable joint investment projects among Member States and help integrate capital markets. Draghi’s focus was on the creation of a common European safe asset. Joint investment was a means to this end, although he also saw merit in increasing resources for productive investment. He recommended adopting the precedent of the NGEU model, in which issuance would remain mission and project specific. But Draghi was silent on which element of the NGEU model – loans or grants – he favoured.
3. Borrowing to provide grants for operational expenditure. This is a big ‘no no’ in the EU constitutional financial architecture and, to date, there has been only the one exception of the Next Generation EU programme (NGEU) in response to COVID. The NGEU allowed the EU to borrow up to €750 billion (in 2018 prices), of which €360 billion was to be used for back-to-back loans to EU countries and the remaining €390 billion was for grants for operational expenditure. The borrowing again was justified by Article 122 TFEU but it also required an amendment to the ORD to temporarily raise the own resources ceiling, to explicitly authorise the Commission to borrow this amount, and to specify how repayment would be managed. Without this ORD (ratified by all Member States), borrowing under Article 122 would not have been legally viable. Article 4 of the OCR specifies that “The Union shall not use funds borrowed on capital markets for the financing of operational expenditure” before then, in Article 5, permitting such borrowing “for the sole purpose of addressing the consequences of the COVID-19 crisis”.
The key difference with back-to-back borrowing is that, for the NGEU grant element, there is no offsetting repayment stream from beneficiaries. Servicing this debt requires specific EU budget resources. The interest and principal must be paid, either from new own resources (if agreed) or by higher GNI-based contributions, and directly compete with other EU spending. The NGEU created a structural claim on future EU budgets and this is reflected in the Commission MFF proposal which sets aside €168 billion in current prices for this purpose.
The EU Commission now (since 2023) uses a unified funding approach to EU borrowing. This means that the EU does not borrow for specific programmes but under a single branded “EU Bonds”. Proceeds from these bonds go into a central pool, and are then allocated internally to different policy programs. The framework utilises long-term EU-Bonds, short-term EU-Bills, and specialised instruments like NGEU Green Bonds. By enhancing liquidity, this approach reduces borrowing costs and supports broader EU financial objectives.
4. Permanent EU Treasury bonds. This final option for EU borrowing is purely speculative at the moment but deserves to be treated seriously. The EU has long looked enviously at the United States’ ability to issue Treasury securities, which are seen globally as a safe, liquid, and risk-free benchmark for pricing other financial assets. This status provides the US with lower borrowing costs and makes the dollar a central vehicle for international finance. For the EU, issuing comparable “EU Treasury bonds” could strengthen the international role of the euro, provide a deep, liquid asset for investors, and create a reliable, long-term source of funding for EU priorities.
However, such a development would constitute a qualitative regime change: under current Treaty rules, the EU cannot borrow on its own account for general expenditure. Any large-scale debt issuance would also require a legally guaranteed repayment source. In practice, this means the creation of EU Treasury bonds would necessitate an extension of own resources, ensuring that debt service could be met without depending on the political discretion or approval of Member States. Such a step goes far beyond the temporary, programme-specific borrowing instruments currently permitted.
Borrowing to respond to severe crises
The Commission has learned from the succession of crises since COVID-19 in 2020 of the need to be prepared. It is therefore proposing, as part of the Own Resources Decision accompanying its MFF 2028-2034 proposal, “to establish a new limited, extraordinary and targeted tool to respond solely to severe crises, severe hardship or serious threat thereof. This extraordinary crisis tool should allocate the budgetary resources for the granting of loans solely in the period of the upcoming MFF 2028-2034”.
Articles 6 through 8 of the proposed Decision mirror in many respects Articles 5 and 6 in the current ORD which enabled the joint borrowing to establish the NGEU instrument. The one important difference is that the Commission proposes only to use joint borrowing for the purpose of loans to Member States, while the NGEU instrument combined both loans and grants. As we have seen, such back-to-back lending is specifically allowed in the EU’s financial architecture.
Specifically, the new instrument would allow the EU to engage in extraordinary borrowing to address a severe crisis, severe hardship or serious threat thereof. The advantage of including this provision in the ORD is that it would allow the Commission to activate this instrument, should the need arise, using the simpler legislative procedure set out in Article 311(4) TFEU. This allows the Council to act in accordance with a special legislative procedure, requiring only the consent of the Parliament. It would avoid the requirement, should a serious crisis arise, of the need to seek the ratification by national parliaments as they would already have given this umbrella permission by ratifying the OCR itself.
There would be a budgetary implication of such borrowing as the EU would have to cover the contingent liabilities resulting from the borrowing empowerment. The Commission recognises there is a need for certainty about the Union’s liability. It proposes that the ceiling for appropriations for payments and the ceiling for appropriations for commitments should each be increased by 0.25 percentage points, with the sole purpose to cover all liabilities of the Union resulting from its borrowing for loans to address the consequences of such events. The sum of outstanding principal amounts which the Commission may be authorised to borrow on capital markets would be limited to the amount, which, in view of the forecast multiannual evolution of contingent liabilities resulting from this borrowing, remains within these 0.25 percentage point ceilings. I have seen an estimate that this might allow for up to €400 billion in borrowing, but I have not confirmed this estimate myself.
Borrowing for EU support for Ukraine
At the European Council on 18–19 December 2025, EU leaders endorsed a €90 billion financial support package for Ukraine covering 2026–2027, to be provided in the form of a loan financed by EU borrowing on capital markets and backed by the EU budget “headroom” (reserves and guarantees). This loan provides an interesting case study of how it fits into our borrowing typology.
First, the loan is justified on the basis of Article 212 TFEU. Second, and most important, the loan is structured as repayable by Ukraine (eventually through reparations) rather than as a grant financed by the EU budget. The European Council envisages repayment only when future reparations by Russia for the damage caused to Ukraine due to the invasion are paid, and until then the EU budget headroom is a legal backstop. It thus is deemed to be a back-to-back loan which would be agreed through a co-decision process rather than requiring, as for the NGEU borrowing, a specific amendment to the OCR. This option was chosen because of unyielding resistance by Belgium to use frozen Russian assets to assist Ukraine.
If the EU budget ends up servicing the debt (e.g., because reparations do not materialise), then at that point debt service would need to be reflected in future MFFs (as occurred with NGEU). But as it stands, the €90 billion support is structured to avoid automatic inclusion in the MFF’s mandatory repayment lines until the repayment situation crystallises.
A further noteworthy aspect is the use of the enhanced cooperation procedure (Article 20 TEU) with respect of this loan instrument based on Article 212 TFEU. Any mobilisation of resources of the Union’s budget as a guarantee for this loan will not have an impact on the financial obligations of Czechia, Hungary and Slovakia.
Given that Ukraine was likely to go bankrupt without this loan, the use of Article 212 to justify joint borrowing in itself is not unusual, although the scale of financing dwarfs what previously has been provided as macro-economic financial assistance to third countries. What is unusual is the ‘collateral’ accepted by the 24 Member States that agreed jointly to backstop this loan. Accepting that Russia will, at some point in the future, be willing to pay reparations to Ukraine at the end of the war is a brave bet on the future. However, the European Council conclusions make clear that Russian assets will remain frozen and could ultimately be used to repay the loan should Moscow refuse to pay reparations to Ukraine once the war ends.
Conclusions
This summary of issues around EU borrowing and the role it can play in the next MFF raises several issues for agricultural stakeholders.
Whether and how the NGEU borrowing should be paid back.
Whether the EU should be endowed with permanent borrowing powers.
How to expand the EU’s own resources.
Whether agriculture and rural development might benefit from the proposed Catalyst Europe loan programme in the next MFF.
Repayment of NGEU borrowing. The political agreement reached in 2020 envisaged that the repayment of both interest and principal on the grant component of NGEU borrowing would be financed by new own resources. This was intended to avoid the ‘cuckoo in the nest’ problem where debt servicing would crowd out expenditures on other programmes. The Commission tabled proposals to this end in 2021 and June 2023 and, more recently, in its proposal for an Own Resources Decision in July 2025. However, in the absence of a decision on new own resources, effective spending power at the EU level is mechanically reduced by interest and principal payments.
The Parliament’s Budgets Committee draft interim report on the MFF calls for the 2028-2034 MFF to be set at 1.27% of EU gross national income (GNI), excluding NGEU repayments. It considers that NGEU debt servicing, representing an additional 0.11% of GNI, should be treated separately from funding for EU programmes within the future MFF architecture so as to ensure that available resources for these programmes remain unaffected, bringing the total to 1.38% of EU GNI. But wherever the NGEU repayment is placed in the MFF budget, in the absence of an increase in own resources it automatically competes with resources for spending programmes including agriculture.
The alternative proposed is to simply roll-over the NGEU debt, as would normally happen with sovereign debt. This option was raised in the Draghi report, where he noted that Member States could consider increasing the resources available to the Commission by deferring the repayment of NGEU. Apart from the fact that it would ease the pressure on spending programmes, there is a solid financial market argument for this course of action. Under current plans, the Commission will cease borrowing this year (2026) and then gradually buy back the stock of outstanding bonds until 2058. Other things equal, this would mean that the supply of EU bonds would gradually fall, reducing liquidity in the market and potentially increasing borrowing costs.
In practice, this would mean moving from Options 2 and 3 in my typology to Option 4 where the EU is endowed with permanent borrowing rights. This would certainly require a Treaty change. It would also require a significant expansion in the EU’s own resources as a permanent EU borrowing capacity must rest on a firm fiscal foundation. Without dedicated revenue streams, the burden of repayment would fall on politically contingent national contributions, undermining the credibility of EU debt in financial markets. At least in the short-run, these conditions are not likely to be present.
Could agriculture and rural areas benefit from the proposed new policy lending instrument? We have seen that the Commission has proposed a Catalyst Europe lending instrument with €150 billion in funding. The request for loan support should be justified by the higher financial needs linked to additional reforms and investments included in the NRP Plan. At first sight, this seems of limited interest for agricultural spending which mainly consists of income transfers rather than investment supports. Still, there are elements of agricultural and rural spending of an investment nature, such as building up AKIS capacity, rural infrastructure, or support for the installation of younger farmers. A recent paper by the IEEP and Concito (Muro et al, 2025) explored the role of the European Investment Bank in financing the green transition in EU agriculture. While this refers to opportunities for the EIB to fund private borrowing by farmers, it does suggest there are investment opportunities in agriculture that can also be supported by public funding.
An important constraint will be the fact that, in spite of the likely favourable interest rate on these policy loans, making use of EU borrowing instruments (whether SAFE or the proposed policy lending instrument) requires countries that are often already heavily indebted to take on more debt. Still, in the debate on future funding for the CAP, this possibility to draw down additional funding should not be overlooked.
2025 marked a decisive break in relations between the United States and Europe. From U.S. Vice-President Vance’s speech in February at the Munich Security Conference to the publication of the U.S. National Security Strategy at year’s end, Washington has framed the European Union not as a strategic partner but as an obstacle to U.S. objectives. This shift was illustrated throughout the year by escalating trade actions, growing divergence over Ukraine, and threats against tech regulation. By the end of the year, the EU had accepted an unequal trade deal with the United States, undermining its long-standing self-image as a ‘soft power’.
The EU is also addressing mounting tensions with China, a consequence of the widening Chinese trade surplus, its willingness to assert its control over rare earths and magnets, and a series of tariff actions affecting particularly agri-food products. Trade relations with Russia have been subject to restrictions since the Russian invasion of Crimea in 2014 and subsequent sanctions following its invasion of eastern Ukraine. Although EU sanctions do not prevent the export of food to Russia, Russia itself has imposed an import ban on most EU (and other sanctioning countries) food products, including meat, dairy, fish, fruit, vegetables, and cereals since 2014.
The question now is how the EU should respond to this altered geopolitical context.
This post examines the implications of the abrupt change in United States attitudes towards the EU in 2025 with a particular focus on agri-food trade. The deterioration in relations with the U.S., the normalisation of tariff escalation, and the growing role of security considerations in trade policy, have created a more uncertain and politicised environment for EU agri-food exports. Early evidence suggests that U.S. tariff measures introduced during the year have already had measurable negative effects for EU exporters. Agri-food policy can therefore no longer be considered in isolation from wider debates about economic security and geopolitical alignment. The EU now faces a set of difficult choices: how far to prioritise market openness over resilience, whether and how to respond to trade pressure, and how to reconcile agricultural, trade, and security objectives in a more fragmented global economy.
The new relationship with the U.S.
The tone was set in February 2025 with the speech by U.S. Vice-President Vance at the Munich Security Conference in which he ignored any threat from Russia and argued that the main dangers to Europe’s security were unregulated migration, the exclusion of far-right political groups, and restrictions on free speech.
On 2 April 2025, President Trump ignored U.S. commitments under the WTO and announced a range of bilateral reciprocal tariffs on its trading partners, including a 20% tariff on EU imports on top of existing tariffs. This came in addition to previously reinstated 25% tariffs on steel and aluminium implemented on 12 March 2025. On 9 April President Trump announced a pause on the full implementation of these tariffs for 90 days to allow negotiations with third countries to take place. The tariff rate on EU imports was reduced from 20% to the 10% baseline. In response to the pause, the EU Commission announced that it would suspend the implementation of counter-measures planned against the U.S. steel and aluminium tariffs.
Trump subsequently expressed impatience with the pace of the U.S.-EU negotiations, threatening on social media on raise tariffs on EU imports to 50% on 23 May. He subsequently raised steel and aluminium tariffs from 25% to 50% effective 4 June 2025. Then, on 12 July 2025, President Trump announced new 30% tariffs, in addition to existing tariffs, on EU goods to take effect 1 August 2025. In his extraordinary letter to President von der Leyen, he also threatening to increase this tariff rate by the amount of any tariff imposed by the EU if it chose to retaliate.
Then on 27 July, Trump and von der Leyen met at Trump’s golf course in Turnberry, Scotland. The two parties announced a political agreement to reduce U.S. tariffs to a flat-rate 15% tariff on all EU imports with just few exceptions such as steel and aluminium (the Turnberry agreement). The agreement also reduced the previous 27.5% tariff imposed on imports of EU cars and parts under Section 232 to 15%, while exempting imports of aircraft and aircraft parts as well as generic pharmaceuticals and their ingredients and chemical precursors from additional tariffs. Further, the U.S. committed to apply a tariff not exceeding 15% to imports from the EU of pharmaceuticals, semiconductors and lumber that are subject to Section 232 tariffs. In return, the EU committed to reducing or eliminating tariffs on a wide range of U.S. industrial and agricultural goods.
The agreement also includes targets for EU private investment in the U.S. ($600 billion in the years to 2028), for EU purchases of U.S. liquified natural gas and nuclear energy products valued at $750 billion, for EU purchases of U.S. AI chips for computing centres for at least €40 billion, and for increased procurement of U.S. defence and military equipment. These commitments were further elaborated in a joint statement on trade and investment (the European Union-United States Framework on an Agreement on Reciprocal, Fair, and Balanced Trade) by the EU and the U.S. in August 2025. At the same time, the EU formally suspended its previously announced rebalancing counter-tariffs.
The tensions between the EU and the U.S. have not only been about trade but also about security and defence strategy and Ukraine. The U.S. explicitly wishes to reduce its commitment to Europe’s security as it seeks to prioritise its resources and attention on other parts of the world. With some justification, it has demanded that Europe step up and take on greater responsibility for its own defence. At the June NATO summit in The Hague, 23 Member States also NATO allies agreed to increase defence spending to a 5% of GDP target. The European Commission has responded with its White Paper on defence Readiness 2030 proposal which foresees a significant increase in defence spending of up to €800 billion over the coming years, unlocked by giving Member States greater budgetary space within the Stability and Growth Pact as well as providing up to €150 billion in loans to Member States for jointly procuring defence equipment.
However, tensions persist around different perceptions of the threat that Russia poses and how to bring an end to the war in Ukraine. The Trump administration seeks to re-open relations with Russia with a view to economic normalisation, with those close to the administration seeing significant economic opportunities from closer cooperation. Within this framework, Ukraine is primarily viewed as an obstacle to a broader geopolitical accommodation with Russia, rather than being the central subject of any peace deal. This explains U.S. pressure on Ukraine throughout 2025 for rapid negotiations to agree to conditions to end the war, including acceptance of territorial concessions, limits on the size of its armed forces, and the absence of meaningful security guarantees.
The European position sees Russian aggression as a direct and continuing security threat, not only to Ukraine but to the European security order. Any settlement that validates territorial conquest is seen as creating a dangerous precedent for EU border states. The EU position is that Ukraine must be centrally involved in any peace negotiations, and that sustained financial and military support to Ukraine is necessary both for battlefield resilience and for negotiating credibility. The agreement in December 2025 by 24 EU Member States to provide a further €90 billion in financial support to Ukraine is an expression of this view.
At the same time, it is important that the EU continues to support meaningful negotiations to end the war. The American-led mediation efforts in Miami in late December 2025 failed to make a breakthrough. President Macron’s suggestion to open direct contact with the Kremlin, and Putin’s apparent willingness to speak with Macron, although controversial, makes sense in that context.
Finally, another pressure point in U.S.-EU relations is the Trump administration’s expressed desire to annex Greenland and his appointment in December 2025 of a special envoy with the brief to make Greenland a part of the U.S.. The U.S. already has broad powers to station defence forces on the island under the 1951 Greenland Defence Agreement between Denmark and the U.S., though still under Danish sovereignty. Greenlanders (pop. 57,000) have expressed a desire for independence from Denmark, and the Danish Self-Government Act of 2009 explicitly recognises the right of the Greenlandic people to self-determination and future independence. Both the Danish and Greenland governments have demanded respect for their borders in response to American actions.
It is hardly a coincidence that, on the same day as the appointment of the special envoy, the Trump administration suspended leases for five large offshore wind projects that are under construction off the U.S. East Coast over what it called national security concerns. Two of these are owned by Orsted, a Danish company in which 50.1% of the shares are owned by the Danish government. Orsted’s Revolution Wind wind farm, which was 80% complete at the time, had already been subject to a stop-work order for national security reasons by the U.S. government in August 2025 which caused Orsted’s share price to collapse. The limited recovery in its share price after a judge lifted the ban in September was reversed by the latest move, putting further economic pressure on the Danish government. Trump’s desire to annex Greenland mirrors Putin’s desire to annex Ukraine and Xi’s desire to annex Taiwan.
Anyone who was deceived by the chaotic rollout of U.S. trade and security policies over the past year into thinking that these were aberrations or abnormalities will have had their illusions firmly shattered by the publication of the latest U.S. National Security Strategy in early December. After noting that continental Europe’s share of global GDP has been declining, it identifies Europe’s principal challenge as civilisational erasure. This is blamed on the activities of the European Union and other transnational bodies that are alleged to undermine political liberty and sovereignty, migration policies, censorship of free speech, and suppression of political opposition. To reverse these ills, the strategy proposes that America should cultivate resistance to Europe’s current trajectory by encouraging “patriotic European parties” that support the idea of Europe as a group of aligned sovereign nations. The U.S. administration effectively seeks to undermine the European Union and erase its achievements.
U.S. tariffs on EU agri-food exports
This section of the post focuses on the mundane issues of agri-food tariffs, but it is important that we see these within the context of this bigger picture. We start by assessing the tariffs imposed by the U.S., and then examine the concessions made by the EU.
On 2 April 2025 President Trump announced that goods imported from all countries into the U.S. from 5 April 2025 will be subject to a baseline tariff of 10%. The baseline tariff of 10% is in addition to the normal duty rate that previously applied to the import of goods into the U.S.. For selected territories including the EU, higher “reciprocal tariff” rates were announced to apply from 9 April onwards that took the place of the baseline tariff and were also in addition to the normal duty rate.
On 9 April President Trump issued a further Executive Order that suspended the additional reciprocal duties for 90 days (until July 9), on the argument that this would allow negotiations with countries that had signalled a willingness to engage with the United States to conclude. It also confirmed that the baseline additional tariff of 10% (in addition to existing MFN tariffs) would come into effect the following day, April 10. Subsequently, in Executive Order 14266 on 7 July, President Trump extended the period for negotiations before the reciprocal tariffs should kick in to 1 August.
As noted, Commission President von der Leyen and President Trump reached a framework deal on 27 July. The tariff component of this agreement was that the U.S. would apply from 1 August a single, all-inclusive tariff ceiling of 15% for EU goods. This included the MFN rate that was previously stacked on top of additional tariffs that the U.S. had introduced. Where the MFN rate exceeded 15%, this rate continues to apply but without any additional tariff. This agreement was incorporated into the White House Executive Order 14326 of 31 July which also stated that it would come into effect 7 days later. U.S. Customs Guidance confirmed that EU imports were subject to the new tariff regime from 7 August 2025. These tariff rates thus have applied to EU agri-food exports to the U.S. since that date. The continuation of these tariffs depends on the EU implementing its part of the Turnberry agreement, otherwise the tariffs will revert to those originally announced on 2 April.
An obvious question to ask is how the new U.S. tariff regime compares to the previous MFN regime for agri-food products. The U.S. International Trade Commission maintains an archive of the U.S. tariff schedule that allows a comparison with the current schedule post August 2025.
Unfortunately, it is not easy to make an overall comparison. This is partly because tariff rates within a specific product category (e.g. dairy products) can vary widely and would need to be aggregated (either as a simple average or weighted using trade weights) to calculate an average tariff. Also, in some cases, as for certain meat products or wines, MFN tariffs are levied as an absolute amount so the ad valorem percentage tariff varies depending on the customs value of the imported product. This makes a comparison difficult with the standard 15% tariff that now applies.
In general, however, U.S. MFN tariffs on agri-food products are quite low (some selected examples are given in Table 1). There are some products where the tariff charged on EU exports after 10 August has not changed, because the MFN tariff was already 15% or higher. But for many products exporters faced a considerable increase in tariffs in early August. The EU wine industry is particularly affected as it now faces import tariffs of 15% in its largest export market (existing U.S. wine tariffs are particularly complex and are not included in Table 1).
Table 1. Tariff rates for selected agri-food products before and after the EU-U.S. trade framework agreement. Source: U.S. International Trade Commission, 2025 Harmonised Trade Schedule.
Impact of increased U.S. tariffs on EU exports to the U.S.
A question is what impact has this had on EU exports of agri-food products to the U.S.? Assessing any impact to date is difficult because the latest trade data at the time of writing refer to October, so we have less than three months data to hand since the latest tariffs came into force. Furthermore, the dramatic increase in trade policy uncertainty throughout the year is likely to have influenced the pattern of trade. Exporters may have accelerated deliveries in the early part of the year to avoid additional tariffs, importers may have built up stocks, and this may have influenced the demand for imports from the EU towards the end of the year.
Another factor complicating the analysis is that the U.S. has also imposed higher tariffs on other trading partners. Tariffs make EU food products (butter, pasta, wine) more expensive relative to domestic U.S. production, but how it impacts the competitive position of EU exports relative to other exporters depends also on the tariffs they face .
The impact of tariffs also depends on the extent to which they are passed through to retail prices. Although much economic commentary has assumed that tariffs are fully passed through to U.S. consumers, this is not necessarily the case. There are several intermediaries between the importer and the consumer that may decide to absorb some of the tariff increase in order to maintain sales, while the EU exporter may also be motivated to lower its export price for the same reason. While this strategy may help to maintain the volume of sales, it will also lower export receipts.
The level of imports is also a function of income developments as well as trade policy. The U.S. economy has remained quite robust in 2025, with GDP growth projected to be around 1.7% to 1.9%. Although inflation has been running at around 3% and there are signs of a weakening labour market, consumer spending especially among higher-income households (supported by resilient stock markets) which are more likely to purchase high-quality EU food imports has remained strong.
Finally, the value of export sales will be influenced by changes in the USD/EUR exchange rate. The US dollar lost 6% of its value between Aug-Oct 2024 and Aug-Oct 2025. This means that sales to the US were worth 6% less when converted to euro, even if the volume of sales remained steady.
The latest DG AGRI Monitoring EU Agri-food Trade publication for October 2025 notes that overall EU agri-food exports have increased by 2% in value terms in the first ten months of 2025 compared to the same period in 2024, while the value of exports to the U.S. fell by 3% between the same periods. However, value changes in trade are heavily influenced by changes in prices (for example, prices for cocoa paste, butter and powder were up by 68% and prices for coffee by 29% between these periods). Changes in the exchange rate between these two periods should also be accounted for. We should thus be cautious to attribute this slight fall in the value of agri-food exports to the U.S. solely to trade policy alone.
More convincing evidence of the negative impact of the tariff changes is shown in Table 2. This compares the percentage change in the value of exports of agri-food products to the U.S., compared to total extra-EU exports, for the three-month period August-October 2025 after the latest tariff changes took effect, to the same three-month period in the previous year. Overall, exports to the U.S. were down 15% by value when exports worldwide held steady. Furthermore, in almost every product group, either sales to the U.S. fell when they increased worldwide, or they fell by more than the fall in worldwide sales. The only exceptions are cocoa products (chocolate) and meats. Given that consumer demand in the U.S. has been quite strong, this drop in the value of exports likely reflects the tariff changes as well as changes in the exchange rate, although changes in the monthly patterns of trade due to ongoing uncertainty may also have contributed. As noted, the drop in the value of exports could be due to a drop in the volume of sales, or because EU exporters decided to absorb some of the tariff increase by lowering their export prices.
Table 2. Percentage change in extra-EU exports to the U.S. and the world, August to October 2025 compared to August to October 2024. Note: Total exports calculated as the sum of HS two-digit classes HS01 to HS24 and thus include seafood. Only the HS classes with the highest value of export sales are included in the table. Source: Eurostat Comext.
Implementing the EU concessions
These U.S. tariffs are contingent on the EU implementing its reciprocal commitments. The European Commission submitted a legislative proposal on August 28, 2025, to the Council and the European Parliament to eliminate duties on all U.S. industrial goods and grant preferential treatment to certain U.S. agricultural and seafood products. A second proposal prolongs an elimination of customs duties on certain types of lobster granted in 2020 for a five-year period until 31 July 2025 and expands the scope of this concession to processed lobster.
The draft regulation provides that the applicable customs duties in the Common Customs Tariff on imports of industrial goods originating in the U.S. shall be 0%, variously referred to as an ‘adjustment’, ‘non-activation’ or ‘suspension’ of duties on imports from the U.S. According to the Commission, its proposal would extend duty-free treatment from 66% of total industrial goods imported from the U.S. to 100%.
For seafood and agricultural goods, preferential market access is provided to non-sensitive agricultural products only, where there is a Union interest to facilitate imports. This is done through a partial liberalisation for certain agricultural goods and through tariff quotas. The agricultural products affected and deemed to be non-sensitive include tree nuts, dairy products, fresh and processed fruits and vegetables, processed foods, planting seeds, soybean oil, and pork and bison meat. The Commission estimates this will lead to a loss in customs revenue of €4.9 billion, implying a loss of revenue to the EU budget of €3.6 billion given that Member States retain 25% of collected duties as compensation for collection costs.
Specifically, liberalised goods are divided between three Annexes. Annex 1 goods are fully liberalised with a 0% tariff. In addition to industrial goods, this list also includes some vegetables (HS07), fruits (HS08), plant seeds (HS10 and HS12), and vegetable and fruit preparations (HS20). Annex II lists products where only the ad valorem element of the tariff is removed (certain vegetables, fruits and grape juice). Annex III lists seafood and agricultural products for which tariff rate quotas are opened. These include pigmeat (25,000t quota at 0% tariff), bison meat (3,000t at 0% tariff), fresh dairy products and dairy spreads (10,000t at 0% tariff), cheeses (10,000t at 0% tariff), nuts (500,000t at 0% tariff), soybean oil (400,000t at 0% tariff), animal feed preparations (40,000t at 0% tariff), cocoa powder and chocolate (40,000t at a preferential tariff rate), various food preparations (300,000t at preferential rates), and flavoured waters and non-alcoholic beer (20,000t at 0% tariff).
The Commission proposal also provides for the suspension of these concessions under certain conditions. This includes a standard safeguard clause where concessions can be suspended if they result in the import of goods in such increased quantities as to cause or threaten to cause serious injury to the domestic industry of the Union.
In addition, the draft legislation provides that concessions can be suspended in whole or in part “(a) where the United States fails to implement the Joint Statement or otherwise undermines the objectives pursued by the Joint Statement, or undermines access of Union economic operators to the United States market, or otherwise disrupts the trade and investment relationship between the Union and the United States; (b) where there are sufficient indications that the United States will act in the manner referred to in point (a) in the future; or (d) where a change of objective circumstances has occurred with regard to those existing at the time the Joint Statement was issued.”This gives the Commission the power to respond should the U.S. enact additional punitive tariffs or measures against EU imports although it does not mandate a response.
The Council adopted its negotiating mandate on the draft proposal in November 2025. The Council strengthened the procedures around the initiation of safeguard measures. It also added a provision on monitoring the economic effects in the Union of the trade liberalisation measures and a review clause.
The rapporteur of the Committee on International Trade in the European Parliament Bernard Lange published his draft report in October 2025. One of his proposed amendments specifies that any new tariff as a result of any ongoing or future U.S. Section 232 investigation or based on any other legal basis, entering into force after the signature of the Joint Statement, and that exceeds the all-inclusive 15 % tariff ceiling, should lead to the suspension of the application of the EU concessions. He also pushes back against any U.S. attempt to influence EU regulations by proposing that the EU concessions should be suspended in the event of any attempts by the United States to influence, through the threat of additional tariffs or of other restrictive commercial measures, Union legislative processes or the enforcement of Union legislation.
He proposes that any increase in the volume of imports by more than 10% should be deemed evidence of serious injury, or threat of serious injury, to Union industry. Regarding the provision (d) regarding a change in objective circumstances, the rapporteur would specify that this also includes changes affecting the essential security interests of the Union or of its Member States. He also proposes that the 0% tariff concession on U.S. steel and aluminium imports should be delayed until sustainable and mutually acceptable arrangements on trade in these and their derivative products are agreed with the U.S. He is clear that the Joint Understanding breaches long-standing WTO rules regarding Most Favoured Nation treatment and expresses the aspiration that it should lead to a comprehensive trade agreement in line with WTO rules.
The Parliament has pencilled in the 9 February 2026 as the indicative plenary sitting date to agree its first reading position, after which it would enter trilogue negotiations with the Council. The final shape of the EU commitments may well differ from what the Americans thought they had agreed in the Turnberry agreement and Joint Statement earlier in the year.
The U.S.-EU trade deal rests on shaky foundations
Although the Joint Statement issued in August 2025 refers to a framework for an agreement on reciprocal, fair and balanced trade, from an EU perspective the commitments are hardly fair and balanced. EU exports now face higher tariffs to enter the U.S. market, while the EU proposes to fully liberalise U.S. exports and to extend preferential access for certain seafood and agri-food products. The Commission argument is that the deal reached with the U.S. is more favourable than for other U.S. trading partners, and that it provides stability for transatlantic trade compared with the dangers of a spiralling trade war in the absence of an agreement.
However, whether the U.S.-EU trade relationship is now more stable or not is open to question. The Turnberry agreement rests on shaky foundations. The open hostility to the EU in the National Security Strategy does not give the sense that the U.S. wishes to be a reliable trade partner, and it has many opportunities to scupper the deal.
Already in November, Jamieson Greer, the U.S. Trade Representative, was warning that trade remains a ‘flashpoint’ in relations with Washington. Americans are clearly impatient with the slow pace of implementation of the EU’s commitments under the Joint Statement, which reflects the deliberative nature of the EU legislative process. The European Parliament will not vote on its position until February next year. It may also add amendments, such as its proposal to delay tariff cuts on steel and aluminium until the U.S. reduces its 50% tariffs on these metals, which will further complicate negotiations.
Meanwhile, the U.S. continues to widen the coverage of its tariff policy. Though not specifically directed against the EU, on 19 August 2025 it added some 407 product categories to the Section 232 steel and aluminium tariffs of 50% as well as opening new Section 232 investigations. This requires companies exporting these products to the U.S. to quantify the steel and aluminium content of their products and to pay the higher duties on that content, which is both complex and costly.
The most likely way in which the agreement will implode is around the issue of regulation of company practices. The U.S. has exerted sustained pressure on the EU’s sustainability agenda, openly criticising the extraterritorial reach of the Corporate Sustainability Due Diligence Directive and Corporate Sustainability Reporting Directive, as well as the Deforestation Directive and CBAM Regulation. In the Joint Statement in August 2025, the EU committed to reviewing these directives to minimise their impact on U.S. companies. Although also driven by pressure from EU companies and Member States, the EU co-legislators in November and December agreed to considerably water down these legislative acts, both in scope and obligations.
Regulation of tech companies under the EU’s General Data Protection Regulation, Digital Markets Act, the Digital Services Act, the AI Act and the forthcoming Digital Fairness Act remains a red-letter issue for the U.S. Senior U.S. officials have publicly criticised this legislation, arguing that it unduly burdens U.S. tech firms and infringes on free speech norms. When the EU earlier this month imposed a €120 million fine on Elon Musk’s X, American commentators immediately framed this as an attack on free speech, although the specific offences for which X was fined had nothing to do with free speech.
In a subsequent post on X on December 16, the U.S. Trade Representative listed a set of EU service providers that export to the U.S., including Accenture, Amadeus, Capgemini, DHL, Mistral, Publicis, SAP, Siemens, and Spotify, and threatened to impose fees or restrictions on these services if the EU continues to “restrict, limit, and deter the competitiveness of U.S. service providers through discriminatory means”. The EU’s competition chief Teresa Ribera subsequently defended the EU’s right to set regulatory standards. Then on Christmas Eve, the U.S. imposed visa bans on five individuals, including former EU Commissioner Thierry Breton, associated with regulation of the digital sphere and whom it has accused of working to censor freedom of speech. This issue is likely to escalate further in the New Year.
Conclusions
This post has described the unprecedented changes in the U.S.-EU relationship around trade in 2025. The question remains, how should the EU have responded, and how should it respond if, as I expect, the relationship further breaks down in 2026?
One group, whom I dub the ‘trade warriors’, point correctly to the very unbalanced trade outcome as reflected in the Joint Statement. They argue that the EU should have immediately responded with counter-measures. John Clarke, the former DG AGRI trade negotiator, wrote that “The EU should have been tougher much earlier, as China was. As Canada is”. Jean-Luc Demarty, a former Director-General of DG TRADE, advocated that the “EU should immediately apply reciprocal tariffs to the United States to the tune of €100 billion and trigger the anti-coercion instrument with regard to American digital and financial services, without penalising our business” (my translation). Professor Alberto Alemanno described the Turnberry deal as “an ideological and moral capitulation”. He bemoaned the fact that “By giving in to Trump’s demands, the EU missed a rare opportunity to demonstrate that large markets cannot be bullied.”
However, trade policy should be strategic, and not based on emotions. The purpose of retaliation should be to deter the aggressive use of trade policy by one’s partner by raising the cost of that policy. Whether retaliation is a sensible strategy or not depends on whether retaliation is likely to be effective as a deterrent. It also depends on the balance of costs, as retaliation also has a cost to the retaliating country (by raising the cost of possibly essential inputs to its own industry or goods to its consumers).
The effectiveness of retaliation and the balance of costs, in turn, depends on the extent of trade leverage that each partner can exert on the other. China could threaten effective retaliation because it is, for the moment, the monopoly supplier of rare earths and permanent magnets which are essential components for electric vehicles, wind turbines, medical equipment and defence industries. Canada attempted retaliation by announcing its own reciprocal tariffs but subsequently backed down on most of its counter-tariffs and opted to enter negotiations.
The EU’s scope to inflict pain on the U.S. economy is limited. In part, this is because of the very imbalance in trade in goods about which Trump complains. In 2024, the EU exported goods worth €532 billion compared to U.S. exports to the EU worth €333 billion. On this simple measure, the EU has more to lose from a tit-for-tat escalation. Further, the U.S takes 22% of extra-EU exports while the EU accounts for 18% of U.S. goods exports. But even these figures overestimate the trade leverage of the EU because it is a much more export-dependent economy than the U.S. – exports are equivalent to 16% of EU GDP but only 8% of U.S. GDP. Adding to this unfavourable starting point that Trump has an ideological commitment to tariffs that goes well beyond a rational cost-benefit calculation further underlines that retaliation was unlikely to have a deterrent effect. At the same time, other commentators have made the cross-linkage between tariffs and continuation of necessary elements of U.S. military support for Ukraine. Unpalatable as the decision may have been, the Commission made the right call to suspend counter-measures and continue with negotiations.
But this does not mean we should accept the status quo. The necessary response is to reduce our dependencies to allow more room for manoeuvre in any future stand-off, recognising that this is easier said than done. The EU is already making a start to increase Europe’s independent ability to defend itself. Similar steps need to be taken to increase our economic security. How exactly that should be pursued remains contested and controversial, including in the agri-food domain. But that is the important debate that needs to be taken up as we enter the new year of 2026.
This post was written by Alan Matthews.
Update 28 December 2025. Added paragraph on impact of exchange rate changes on value of EU agri-food exports to the U.S.
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