On 9 April last I took part in a workshop organised by the Policy Department for Regional Development, Agriculture and Fisheries of the European Parliament on behalf of the Parliament’s Agriculture Committee on “The Multiannual Financial Framework and the Common Agricultural Policy for the period 2028-2034”. Elsa Rėgnier, a research fellow at the French think tank IDDRI Institut du Développement Durable et des Relations Internationales made a presentation on the MFF budgetary implications for the CAP, while my contribution focused on the future governance of the CAP.
The EP Policy Department has made a web page available that summarises the discussion, and which links to the presentations and to the video recording of the event. In this post, I reproduce my opening remarks to the workshop, and conclude with some reflections on the discussion. The opening contributions were limited to 8 minutes and for that reason were limited in the scope of the issues that could be covered.
Future governance of the CAP
The Commission’s MFF proposal includes a major restructuring of the budget framework, including the creation of a new single European Fund.
This proposal has given rise to significant debate. In this presentation I focus on two issues.
- The implications of integrating agricultural policy into the single NRPP fund for the governance of the CAP
- The implications of the increased flexibility given to Member States for the common nature of the EU’s agricultural policy.
The Committee has made clear its preference to maintain a stand-alone two pillar structure for the CAP in the next MFF. If adopted, some governance issues would still require attention. Does it make sense to maintain the two Pillar model, or would there be benefits in moving towards a single unified CAP fund?
A two Pillar structure will require separate allocation keys to allocate resources between Member States. These allocations traditionally form part of the European Council MFF conclusions.
While allocation rules for Pillar 1 are broadly in place, no such rules exist for Pillar 2 and agreement will be difficult. Maintaining CAP budget shares where overall NRPP allocations are redistributed may have unforeseen effects. Any allocation keys will also affect future accession countries, an issue no longer relevant in the Commission proposal.
The Committee’s preferred model may not be adopted. The discussion then turns to possible amendments to move the outcome closer to the Committee’s preferences.
One issue is to consolidate Articles relevant to the CAP currently in the Fund Regulation into the CAP Regulation to improve legislative coherence. The Commission President’s letter of 9 November already proposed some reorganisation. The Council Presidency is considering whether additional Articles might be added, and the Parliament might do so as well.
At national level, merging the funds will increase competition for CAP resources but also affect governance. It is expected that Member States will devote a separate CAP chapter in their NRPP Plans, though this is not obligatory and could be made so.
Agricultural stakeholders fear that this governance structure will allow greater influence of non-agricultural interests. There are also upsides. Requiring ministries to work together may facilitate more coherent responses to national and territorial challenges.
National governments have EU targets in areas such as climate, biodiversity, water and soil, while farmer action remains voluntary. Giving other ministries more influence on CAP design could support these objectives. Outcomes will depend on Member State capacity for good communication and coordination between ministries which cannot be taken for granted. Commission technical assistance could play an important role.
Implications of giving flexibility to Member States
A key element of the single Fund proposal is to give Member States more responsibility to design CAP interventions. This flexibility is highly valued by Member States but increases the likelihood that the CAP interventions in each Member State will look very different, raising the question whether we still have a ‘common’ policy. I underline that this issue arises whether the two-Pillar structure is maintained or a single Fund is implemented.
The CAP has never been uniformly implemented, nor would this make sense. The question is whether flexibility has gone too far.
Some proposed changes increase flexibility, including removing ring-fencing requirements for young farmers and agri-environment-climate schemes. There is also a change in the basis for calculating the ceiling for coupled payments, likely allowing increases in many Member States.
But the proposal is not only about flexibility. It makes a wider range of interventions mandatory. The proposed range for the new DABIS payment is narrower than current differences across the schemes it replaces.
The concern that the level playing field will be threatened by increased flexibility is, in my view, overstated. We can distinguish between income support payments (DABIS and coupled payments) and other payments. The latter support ecosystem services, risk management or investment, or are payments to non-farm groups, and are generally not seen as distortive.
The greater concern is differences in DABIS and coupled payments. But as noted, the range for average DABIS payments is narrower than at present, and could be further narrowed if the Committee wished. The main threat to the level playing field is coupled payments, where the Parliament itself has called for an increase.
The other concern is that Member States may divert spending from EU-wide challenges to national priorities. One response could be to reintroduce ring-fencing. Ring-fencing creates a minimum degree of policy convergence.
The Commission has indicated that it expects at least 6% of CAP allocations for generational renewal. Environmental NGOs argue for ring-fencing for agri-environment-climate schemes. The Commission has also proposed a 10% earmarking of the NRPP Fund for rural targeting. This faces challenges in identifying relevant expenditures in rural areas. A more workable option would be ring-fencing for LEADER or integrated territorial initiatives.
Ring-fencing specifies what must be spent but not what must be achieved. It can lead to formal compliance without substantive impact. It also does not account for different structural needs across Member States.
An alternative is to rely on the CAP steering mechanism, strengthened if necessary. The Commission is required to adopt national recommendations identifying key challenges and guiding implementation.
AGRIFISH Ministers insist these should be timely and non-binding, and would prefer to remove the possibility of updates during the programming period. Commissioner Hansen has indicated they will be strategic and not include quantitative targets.
The European Court of Auditors, in its Opinion, calls for greater use of indicative targets and clearer links between recommendations, funding allocation and the level playing field.
If the Committee wishes to avoid that flexibility results in an increasingly uncommon CAP, strengthening this steering mechanism would be a good place to start. It will also be important to insist on the importance of rigorous evaluation of CAP interventions as envisaged under the Performance Regulation, also to enable proper Parliamentary oversight.
Final reflections on the role of the budget
That concludes my prepared remarks. Judging by the contributions from the MEPs that took part in the debate, the budgetary issues around the CAP and the implications of merging CAP spending into the proposed single NRP Fund remain crucial concerns for the AGRI Committee. This is giving rise to a very different dynamic in the negotiating process than what we saw in the 2021 CAP reform.
Interestingly, some of the concerns are similar. The Commission’s MFF and accompanying CAP proposals for the 2021-2027 programming period were published in June 2018. From the outset, the AGRI Committee opposed the lower CAP spending ceiling and the increased flexibility given to Member States under the new delivery model. In September 2018, COMAGRI called for a legal analysis of the Commission’s proposal related to subsidiarity, comitology and the institutional prerogatives of the Parliament. Nonetheless, by end October 2018 the AGRI rapporteur for the CAP Strategic Plans Regulation Esther Herranz Garcia had already published her draft report. The AGRI Committee adopted the report in April 2019, but it did not reach the plenary before the EP parliamentary elections in June 2019 (the European Parliament’s excellent Legislative Train entry on the rules establishing CAP Strategic Plans describes the timeline).
With a new AGRI rapporteur Peter Jahr appointed in September 2019 after the election, Parliament agreed to continue working on the three CAP files. The start of COVID-19 lockdowns in March 2020 and the publication of the Farm to Fork Strategy in May 2020, as well as the new Commission structure which gave Executive Vice-President Franz Timmermans responsibility for implementing the Green Deal, clearly introduced a new set of issues.
Still, what the Parliament was waiting for was the European Council conclusions on the MFF budget which came in June 2020 (although the formal approval with Parliament’s consent was delayed until November 2020, this did not affect the CAP allocation in the budget). This not only established the overall size of the MFF, the contribution of own resources, the allocations between Member States, and the allocation for the CAP, but the conclusions also set out specific elements relevant to the CAP Strategic Plans Regulation (for example, the rules around capping of area-based payments and co-financing rates for rural development measures).
Once the budget was decided, the Parliament then reached its first reading position in October 2020. The Council also reached its general position in October 2020 allowing trilogue negotiations to begin in November 2020. The Commission provided its guidance recommendations on the design of Member State Strategic Plans in December 2020. The final CAP package was agreed in June 2021.
Politico had a recent article reporting that EU lawmakers threaten to delay technical negotiations on the sectoral files until after the European Council decides on the overall size of the EU MFF budget. The article implies that this was a new tactic by the Parliament, but this is not the case. Sectoral trilogue negotiations on the CAP have always waited until the MFF conclusions were agreed. This is partly because the negotiators are unwilling to proceed in the dark, but also because the Council’s MFF conclusions have contained elements which, in practice, pre-determine the position of the AGRIFISH Council in the negotiations and usually the final outcome (my chapter in the book edited by Jo Swinnen The Political Economy of the 2014-2020 Common Agricultural Policy describes this sequencing for the 2014-2020 reform, while my contribution in the report prepared by Metis for the European Parliament Governance: the reform process of the CAP post 2020 seen from an inter-institutional angle describes the sequencing for the 2021-2027 CAP reform).
Nonetheless, there are important mood differences between the negotiations on the Commission’s sectoral proposals on this occasion compared to the last two reforms. While the AGRI Committee has never been satisfied with the allocation for the CAP under the Commission’s proposal, once the decision was made the budget issue was off the table. The Committee could then concentrate on the elements specific to the CAP Regulations.
On this occasion, the Commission has only proposed a minimum allocation for the CAP. While it is evident that the final CAP budget will be significantly greater (see my blog post here), in the absence of specific figures the AGRI Committee members have focused on the minimum amount, which would imply a significant reduction in nominal let alone real terms.
The AGRI Committee preference is to retain a stand-alone two-Pillar CAP budget independent from the NRP Fund. As I noted in my prepared remarks, establishing an independent CAP budget will require more than just adding new lines to the MFF budget. It would have knock-on implications for the whole architecture of the NRPP Regulation which will not be easy to redesign through an amendment process.
The Committee has also proposed figures for the CAP allocation that would maintain the CAP budget in real terms, and which are far beyond what the Commission has proposed (an increase from the minimum ring-fenced amount of €293.7 billion to €427.6 billion). The risk is, of course, that if the European Council MFF conclusions result in a cut in the MFF budget below the Commission proposal, the cuts might also fall on a stand-alone CAP budget.
If the Committee’s preference for a stand-alone CAP budget were not agreed, then the budget issue will continue to aggravate the negotiations even after the European Council MFF conclusions are known. This is because the conclusions will only contain a figure for the minimum CAP ring-fenced amount for income support interventions (which could well be lower than that contained in the Commission proposal), but there would still be the requirement for Member States to add to that (for mandatory CAP interventions that must be financed, together with possible additional voluntary transfers, from the unearmarked amounts). This uncertainty over the size of the CAP budget, which will exist throughout the negotiations on the NRP and CAP Regulations, is likely to be a continuing irritant throughout the exercise.
Final reflections on the role of governance
The other major source of concern was that the CAP as a policy would be fragmented and diluted under the Commission proposal such that it would no longer be a recognisable policy, and that the additional flexibility for Member States would lead to such a wide variation in interventions that it would no longer be recognisable as a common policy.
As I noted in my prepared statement, the former issue can be addressed by unifying the relevant CAP articles in the CAP Regulation, and by insisting that there is a mandatory CAP chapter in the NRP plans (thus ensuring there is a separate preparatory partnership (Article 6, NRP Regulation) and potentially a monitoring committee (Article 54, NRP Regulation) – while this is highly likely in any case, it is not a mandatory requirement in the NRP Regulation). Of course, the CMO Regulation continues as a stand-alone Regulation.
The second issue, that of flexibility undermining the common nature of the CAP, was also a concern of the AGRI Committee in discussing the 2021-2027 CAP reform. Many MEPs referred to the potential for renationalisation of the CAP. But this argument deserves more objective interrogation. The very term ‘renationalisation’ suggests that there is a certain uniformity in the current CAP which is far from being the case.
The fear of renationalisation has two dimensions. One is budgetary subsidiarity, meaning that the greater flexibility for Member States will lead to greater disparities in the size of the CAP budget between Member States. I pointed out to the Committee that the current differences in the size of the CAP budget (adding Pillar 1 and Pillar 2 together) varies from €630/ha of potentially eligible area in Greece to €273/ha in Latvia (see my post https://capreform.eu/an-uncommon-cap/). Whether the range in CAP support per ha will be greater or narrower in the next CAP remains to be decided.
In my prepared remarks, I also argued that, from a single market perspective, it is not the overall size of the CAP budget that is important but rather those interventions that are most likely to distort the level playing field. I therefore made the distinction, which may be controversial, between CAP interventions that farmers perceive as unfair (especially differences in direct income support payments such as area-based payments and coupled payments) and the variety of other CAP interventions.
Investment aids may strengthen the competitiveness of farming in one Member State, but improved competitiveness benefits the Union as a whole and such aids are not perceived as distorting (for example, structural adjustment assistance provided through investment aids is a Green Box measure under the WTO). Agri-environment-climate interventions are also not seen as distorting, either because they are based on an income foregone/cost incurred criterion or because their effect is to reduce rather than increase production.
This is why, in my prepared remarks, I singled out the DABIS payment and coupled payments as the CAP interventions most likely to trigger allegations of unfair competition within the single market. But the proposed range in the DABIS payment is carefully calibrated to slightly narrow the divergence in average payments across Member States as compared to the current CAP. The main threat to the single market is loosening the ceiling on coupled payments, which are clearly the most distorting of all CAP interventions and where, regretfully, the Parliament has taken all too lenient a position.
But the issue whether the Commission proposal undermines a ‘common’ agricultural policy is not only about distorting the playing field within the single market. It is also about whether the CAP genuinely seeks to achieve common EU objectives, or whether it is simply a mechanism for inter-state transfers. To my mind, this is where the debate should focus.
In my prepared remarks, I identified two mechanisms which can be used to ensure that the CAP chapters in Member State national plans contribute not only to national but to EU objectives. One is to reintroduce ring-fencing (minimum percentage shares) for specific interventions. This ensures a minimum convergence of national plans. I make clear there are pros and cons to minimum ring-fencing, but there is a strong case to reintroduce it for agri-environment-climate measures.
The alternative mechanism is to rely on the Commission steering mechanism established in Article 2 of the CAP Regulation. The problem is that this mechanism is very under-specified in this Article. While what the Commission recommendations should cover is set out in this Article, how they are intended to influence the Member State CAP chapters is left very unclear, as the European Court of Auditors has pointed out. The fundamental issue is how the Commission recommendations are expected to influence the national allocations between CAP interventions, and what happens if Member States ignore these recommendations. The AGRIFISH Council has made clear its views, but COMAGRI has yet to give this issue its attention.
This post was written by Alan Matthews.
Photo: Laburnum in spring flower, own photo.
