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The sacred cow of the two pillars

Latest proposals of the European Commission seems to maintain the two-pillar structure of the CAP, in which Pillar 1 finances direct payments as well as market measures while Pillar 2 funds rural development measures. The clear separation of objectives between the two Pillars is now somewhat blurred by the latest proposals. It seems that Pillar 1 funds can be used for measures traditionally addressed by rural development funds (e.g. payments to the provision of public goods), creating the need for raising Pillar 1 funds partly by a backward modulation (i.e. transferring funds from Pillar 2 to Pillar 1). This argument stands on dubious theoretical grounds as each and every communication since 2000 was in favour of transferring funds to rural development and easing the currently unequal financial distribution between the pillars.… Read the rest

Public goods measurement concerns in the CAP post 2013

The term public goods first entered into the CAP debate in 2007 when it was used in an agricultural context by the environmental NGOs. Since then it has gradually infiltrated the mainstream policy debate appearing in many papers and speeches from research papers to the highest level of decision making. The need for securing mainly environmental public goods in the future CAP is echoed by an increasing number of stakeholders, rallying behind the slogan of “Public Money for Public Goods”, developed by Zahrnt (2009). Becoming the primary focus, the concept is now used more generally to refer to any sort of public benefit from agriculture, thereby justifying the need for public support, as expressed by various stakeholders.… Read the rest

EFAs v. Set-Aside

Earlier this week, at the European Parliament, I moderated a seminar on the Commission’s proposal for ‘greening’ measures for the direct payments of the CAP, with a particular emphasis on the plans for ecological focus areas. The event was organised by the European Environmental Bureau and hosted by Austrian MEP Karin Kadenbach, who sits on the Parliament’s environment committee.

To qualify for the 30 per cent of the direct payments budget that the Commission has earmarked for ‘greening’ the CAP, farmers with grazing livestock will be required to preserve permanent grasslands, arable farmers will be required to cultivate a diversity of (three) crops and practice basic crop rotation.… Read the rest

New Commission study on impacts of Doha Round

The G20 Cannes Summit, despite being side-tracked by the continuing eurozone crisis, did address other issues of importance to the global economy. In the section of its final communiqué on trade, the heads of state reaffirmed their ritualistic commitment to the Doha Round mandate. However, they went on to note that “It is clear that we will not complete the [Doha Development Agenda] if we continue to conduct negotiations as we have in the past.” Instead, they called for “fresh, credible approaches to furthering negotiations, including the issues of concern for Least Developed Countries and, where they can bear fruit, the remaining elements of the DDA mandate” to be pursued in 2012.… Read the rest

'Greening' – a return to compulsory set-aside

Among others, the latest proposal of the EU Commission aims to green the Common Agricultural Policy (CAP). One of the proposed measures looks very much like a new ‘set-aside’ programme. Generally, the programme stipulates that individual farmers have to set aside seven per cent of their arable land. Some exceptions are allowed in case individual farmers already produce environmentally friendly, e.g. organic production, or have already contributed to desired environmental effects. As the proposal is not yet put into legal form, it may be worthwhile to discuss the new measure’s rationale, to evaluate its associated costs and effects on incentive compatibility and to look for alternatives for achieving the objectives.… Read the rest

‘Greening’ – a return to compulsory set-aside

Among others, the latest proposal of the EU Commission aims to green the Common Agricultural Policy (CAP). One of the proposed measures looks very much like a new ‘set-aside’ programme. Generally, the programme stipulates that individual farmers have to set aside seven per cent of their arable land. Some exceptions are allowed in case individual farmers already produce environmentally friendly, e.g. organic production, or have already contributed to desired environmental effects. As the proposal is not yet put into legal form, it may be worthwhile to discuss the new measure’s rationale, to evaluate its associated costs and effects on incentive compatibility and to look for alternatives for achieving the objectives.… Read the rest

Russian WTO accession by end year?

An announcement last week by Karel de Gucht, the EU Trade Commissioner, that the EU and Russia had struck a deal on remaining outstanding bilateral issues in negotiating Russia’s accession to WTO membership raises the prospect that this economic giant could become a WTO member by the end of this year.

Russia and the WTO

Russia first made its application in 1993 so has been negotiating its accession now for 18 years, by far the longest of any accession process by a WTO applicant. This reflects in part the country’s economic size (it is the sixth largest economy in the world on a PPP basis).… Read the rest

Farmers and the European Globalisation Adjustment Fund

A row has broken out over the Commission’s proposal to use the European Globalisation Adjustment Fund (EGF) in the next financial perspectives period to help farmers who might be adversely affected by the conclusion of EU trade agreements. According to a report in Europolitics, the European Trade Union Confederation (ETUC) is opposed to farmers being included in the list of potential beneficiaries of the Fund. The union confederation wants the funds reserved for workers, and argues that farmers should be helped under Pillar 2 of the CAP.

Background

In the new EGF regulation the Commission has proposed that its scope should be extended to provide transitory support to farmers to facilitate their adaptation to a new market situation resulting from the conclusion by the Union of trade agreements affecting agricultural products.… Read the rest

On the justification for direct payments

Despite the numerous critiques of direct payments expressed in the vast majority of the professional literature analysing the future of the CAP, the European Commission seems to maintain them in the future. In order to justify the decision, the EC has found out a new slogan for saving this ineffective policy instrument –  the provision of public goods.

However, this is not the first time in history when the Commission searches for justifications in order to save direct payments. Founded in 1992, the original idea behind direct payments was to compensate farmers for the price cuts of the MacSharry reform. This can be treated as an economic justification for the instrument as farmers, at least to the Commission, will be better off with this support than without them.… Read the rest

The legislative timeline for CAP reform

The publication of the Commission’s legislative package for CAP reform is merely the starting gun for the EU’s legislative procedure to debate the regulations before they can take effect. The regulations now enter the co-decision procedure involving the Council of Ministers and the European Parliament (EP).

In an article this week in the Irish farming press, Mairead McGuinness set out the timeline as seen from the Parliament’s perspective. Mairead McGuiness is the EPP Group shadow rapporteur for the direct payments report contained within the legislative package, and thus centrally involved in formulating the EP’s position.

According to McGuinness, the current timeline envisages that draft reports will be prepared for consideration by the Agriculture Committee by April next, with a vote in Committee taking place in September on the changes proposed by MEPs.… Read the rest