Author: Alan Matthews

Alan Matthews is Professor Emeritus of European Agricultural Policy in the Department of Economics at Trinity College, Dublin, Ireland. His major research interests are agricultural policy analysis, the impact of international trade on developing countries, and computable general equilibrium analysis of trade and agricultural policy reforms. He has worked as a consultant to the European Parliament, the OECD, the Food and Agricultural Organisation of the United Nations and the UN Industrial Development Organisation, and has been a panel member in a number of WTO Dispute Settlement procedures. He is a former President of the European Association of Agricultural Economists but writes here in a personal capacity.
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Commission proposes increased agricultural spending in reinforced MFF

My previous post discussed the rationale for the Commission’s revised MFF proposal put forward on 27 May 2020 which includes a proposal for a European Recovery Instrument (ERI) to finance front-loaded expenditure in the next MFF plus a slightly revised ‘standard’ MFF (which the Commission refers to as a ‘reinforced’ MFF). In broad terms, the reinforced MFF allows for commitment appropriations amounting to €1,100 billion over the 2021-2027 period, while the ERI would help to finance a further €750 billion of spending in the 2021-2024 period, in constant 2018 prices.  Together, they add up to a total proposed spending of €1,850 billion over the MFF period.  

The following table tracks the debate on the overall size of the MFF since the Commission’s initial proposal in May 2018. It also describes the allocation for the CAP budget in the various proposals. The farm unions and their supporters have paid particular attention to comparing the latest Commission proposal with commitment appropriations under the current MFF.… Read the rest

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Commission proposes European Recovery Fund as part of revised 2021-2017 MFF

The stakes for the European Union have never been higher. In a year when the latest Commission economic forecasts project a 8% decline in GDP as a result of the measures taken to contain the spread of the coronavirus, the question is whether the European Union can provide a response that is macroeconomically significant and builds on the principles of solidarity inherent in the concept of a common citizenship. If it fails to deliver, we can say good-bye to the European Union and prepare to take our chances in an unforgiving geo-political world where the only other leaders are an increasingly authoritarian and self-centred China and an increasingly unpredictable and self-centred America.

The Commission has done its homework. Building on a Franco-German initiative the previous week, it put forward on 27 May 2020 a proposal for a recovery plan instrument and a reinforced Multi-annual Financial Framework (MFF) that is innovative, ambitious, and worthy of support.… Read the rest

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Climate measures in Irish agriculture

Today, I made an online presentation to a virtual workshop jointly organised by MAREI, the Marine and Renewable Energy Ireland centre at University College Cork and the Economic and Social Research Institute, Dublin on climate and energy policy research. The talk discussed measures in agriculture to reduce Irish agriculture’s greenhouse gas footprint in the context of the country’s policy goals for climate stabilisation. Below is a transcript of the talk.

Agriculture is the single largest contributor to Ireland’s greenhouse gas emissions, accounting for 34% of total national emissions in 2018, but 46% of the emissions that are limited by the EU Effort Sharing Decision. If we are to reduce emissions in line with our national targets for 2030 and 2050, agricultural emissions must clearly be reduced. Yet they have been increasing in recent years.

Reducing absolute emissions is more difficult in agriculture because of the absence of obvious technical solutions such as exist for energy generation, transport and the built environment.… Read the rest

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Financing emergency aid to address market disruption due to COVID-19

There has been strong pressure on Commissioner Wojciechowski to get the Commission to do more to protect farmers and agricultural markets from the adverse effects of the lock-down responses to the coronavirus pandemic.

The Commissioner has argued that there is no funding available for these measures in the EU budget. In this post, I assess the funding that may be available to the Commissioner. I conclude that available funding is limited but not exhausted. It now seems time to make use of the crisis reserve that was put in place for exactly this eventuality as well as unused margins under the European Agricultural Guarantee Fund (EAGF) in the EU budget.

The EU budget is a very complex entity, and it is not easy for an outsider to have a complete understanding of how it works. There may well be errors in the following account, and if so, I would be grateful to have them pointed out.… Read the rest

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U.S. farm support to explode in election year 2020

The U.S. has agreed on a $2 trillion stimulus package, the largest economic stimulus in its history, in response to the economic impacts of Covid-19. U.S. farm groups lobbied hard to be included in the package, and $23.5 billion was included in the final package for farm aid. This farm aid comes on top of the two trade aid packages of $12 billion and $16 billion introduced by the Trump Administration in 2018 and 2019, respectively, to provide relief to commodity producers hurt by the retaliatory tariffs introduced by various countries in response to tariffs on their exports to the U.S. introduced by President Trump.

Assuming no change in market prices and other farm income in 2020 compared to the February 2020 USDA farm income forecast, if all of this emergency aid were paid out in 2020, then 40% of U.S. farm income in 2020 will derive from government payments. While not all of the emergency aid may be paid out in calendar year 2020, it is also likely that counter-cyclical payments will increase and other farm income will also fall compared to the February 2020 forecast in response to falling export and home demand.… Read the rest

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External convergence debate continues to simmer

One of the many issues that will need to be resolved when Heads of State and Government get around to once again considering the Multi-annual Financial Framework (MFF) 2021-2027 is what position to take on the external convergence of CAP direct payments.

The Commission has proposed a further narrowing of the differences in the average value of direct payments per hectare between Member States in the post-2020 CAP framework. For a number of countries from Central and Eastern Europe nothing less than full equality by the end of the MFF period will be acceptable. There is equally strong push-back from another group of Member States that argue there should be no further reductions in the CAP joint pillar allocations for the purpose of redistribution among Member States.

The call for the harmonisation of payments per hectare across Member States (external convergence) began in the run-up to the 2013 CAP reform. The phasing-in of direct payments following the enlargement to include 10 Central and Eastern European countries in 2004 was completed for these countries in 2013, yet significant differences in average payment levels per hectare persisted.… Read the rest

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Climate measures in agriculture

The need and opportunities to accelerate the reduction in agricultural greenhouse gas (GHG) emissions have been underlined in a number of recent reports (see, for example, the IPCC Special Report on Climate Change and Land (2018) or the IEEP report Net-Zero Agriculture in 2050: How to Get There (2019)). Following a period from 1990 to 2012 with a steady decrease in EU agricultural emissions amounting to 22% in total, these emissions have begun to increase since then, growing by 4% over the 2012-2017 period.

In this post, I examine the projected trend in agricultural emissions to 2030, drawing on the most recent European Environment Agency (EEA) report on Trends and Projections in Europe 2019 as well as the inventory of policies and measures that Member States have taken or plan to take to reduce these emissions in future. These policies and measures are discussed in the Eionet report Overview of reported national policies and measures on climate change mitigation in Europe in 2019 and collected in the EEA database on climate change policies and measures in Europe (both accessible from the EEA webpage on Policies and Measures).… Read the rest

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Coronavirus uncertainty as CAP decisions are postponed

There is increasing focus on how the coronavirus pandemic is likely to affect agricultural markets, food supply chains and farm incomes (for example, the series of IFPRI Resources and Analyses on COVID-19). Panic buying of long-life staples – as well as toilet roll, of course – led to temporary shortages on supermarket shelves but supplies were very quickly replenished.

In the medium-term, there are concerns that labour shortages, logistical difficulties in transporting goods across borders and falling export demand have the potential to cause disruption. The various actors in the European food chain issued a statement on 19 March calling attention to likely operational difficulties and asking the Commission to ensure that free movement of goods within the single market can continue, including through managing ‘green lanes’ at borders, to allow the food chain to function effectively.

The European Milk Board has called on the Commission to start preparing the launch of a voluntary milk supply reduction scheme as it expects processing capacity will not be sufficient to handle the volume of milk farmers are able to produce.… Read the rest

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The Commission’s Climate Law proposal: what it says and how it might be improved

On 4 March 2020 the Commission published its draft Climate Law, formally a Regulation to establish the framework for achieving climate neutrality. This legislation had been flagged in incoming Commission President von der Leyen’s Political Guidelines published prior to the ratification of her nomination by the European Parliament.

It was confirmed in the Commission’s Communication on the European Green Deal in December 2019 with the stated aims to set out clearly the conditions for an effective and fair transition, to provide predictability for investors, and to ensure that the transition is irreversible. It would also ensure that all EU policies contribute to the climate neutrality objective and that all sectors play their part.

The draft legislation came in for scorching criticism from the Swedish climate activist, Greta Thunberg, on the same day that it was published. Ms Thunberg had been invited by the European Parliament’s Environment Committee to speak at a committee meeting open to all MEPs.… Read the rest

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The protective effect of EU agricultural tariffs

The 2019 EU Trade Policy Review was recently published by the World Trade Organisation (WTO). The trade policy review process takes place every two years for major economies and is an important transparency tool. The country under review produces a policy report summarising major trade policy developments since the last review. A second report is written independently by the WTO Secretariat. These reports are then discussed by the full membership in the WTO’s Trade Policy Review Body. Indeed, the EU received more than 1,600 written questions from other WTO members on these reports to which it has provided written answers (unfortunately, the latter files are restricted and not publicly available on the WTO website).

The Secretariat’s report is a useful source of data and includes a section on agricultural tariffs. Most of the attention to agricultural policy in the EU in the past two years has been directed to domestic support in the context of the proposed changes to the CAP framework for the period after 2022.… Read the rest