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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Hogan addresses COMAGRI on environmental ambition in CAP

Commissioner Phil Hogan gave a presentation last week (Jan 24th) on the proposed environmental and climate architecture in the Commission’s legal proposal for the CAP post 2020 to the AGRI Committee of the European Parliament (the video session can be reviewed here). Today Monday (Jan 28th) the Commissioner gives a similar presentation to the AGRIFISH Council.

There are of course technical issues to be clarified around the Commission’s proposals. How will the proposed eco-schemes in Pillar 1 relate to agri-environment-climate measures (AECMs) in Pillar 2? How will Member States’ level of environmental and climate ambition in their CAP Strategic Plans be evaluated, and how will the level of effort across Member States be compared by the Commission when it approves these Plans? How will double funding be avoided, and what measures will Member States be able to fund in their eco-schemes?

However, the Parliament rapporteurs and the Member State representatives on the Working Party on Horizontal Agricultural Questions (CAP reform) under the AGRIFISH Council have ample opportunity to raise these technical issues with the Commission.… Read the rest

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Measuring farmers’ dependence on public payments

There is considerable interest in the amount of support that farmers in the EU receive through public payments. The Commission in its MFF proposal in May 2018 proposed a reduction in the CAP budget (partially offset by increased co-financing contributions from Member States). Member States in the AGRIFISH Council and farm unions as well as the European Parliament have pushed back against this reduction.

A French Memorandum presented to the June 2018 meeting of the AGRIFISH Council asserts that “this decrease on both pillars would undoubtedly threaten the viability of European farms, the income of farmers and their ability to meet the citizen requirements for a healthy, sustainable, affordable and quality food as well as protection of environment and adaptation to climate change”.

To assess whether this is likely to be the case or not, we need factual information on the current importance of CAP payments in farm incomes.… Read the rest

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Update on the budgetary framework for the CAP post 2020 negotiations

As with the 2013 reform, the legislative process for the Commission’s CAP post 2020 proposal runs parallel to the discussions on its Multi-annual Financial Framework (MFF) proposal. This parallel process creates three complications for the CAP post 2020 negotiations.

The first is that the timing of the agreement on the MFF influences the timeline for concluding the CAP negotiations (let us call this the sequencing issue).

The second is that the size of the CAP budget is not known when the details of the CAP legislation are being negotiated (I refer to this as the budget issue). Uncertainty over the budget may bias the negotiations towards a more conservative CAP, in the sense of one with a lower level of environmental and climate ambition. However, I express scepticism that a higher budget would lead to a greater level of environmental and climate ambition, unless this is specifically mandated in the European Council conclusions on the MFF.… Read the rest

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State aid rules and the CAP 2020 legislation

State aid rules play an important role in the management of the single market. State aid is defined as any advantage granted by public authorities through state resources on a selective basis to any organisations that could potentially distort competition and trade in the EU. Unless otherwise permitted, State aid is viewed as incompatible with the single market and is prohibited. However, the Treaty leaves room for the granting of State aid in respect of several policy objectives, considering the possibility of market failures and the need for a well-functioning and equitable economy. For example, of relevance to the agricultural sector and forestry, the Treaty considers aid to make good the damage caused by natural disasters or exceptional occurrences as compatible with the single market. It may also consider State aid to promote the economic development of the agricultural and forestry sectors and of rural areas compatible with the single market, provided that it does not adversely affect trading conditions.… Read the rest

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Market and trade effects of the next CAP reform

It is not possible to be definitive about the market and trade effects of the next CAP reform, for two reasons. One is that the Commission’s legislative proposal published in June 2018 is just that, a proposal, that may well be altered, even quite radically, before the new CAP regulations are agreed. The other is that, under the Commission’s proposal, Member States are given significantly more flexibility than they have at present to craft their own agricultural policy interventions in the context of their CAP Strategic Plans. Until these Plans are approved, it is not possible to predict, inter alia, the level of environmental and climate ambition that EU farmers will be asked to meet after 2020, the extent of targeting and redistribution of Pillar 1 direct payments, or the use that will be made of coupled payments.

Nonetheless, some guidance on the likely scale and direction of the market and trade effects is available from the Impact Assessment (IA) that accompanied the Commission’s legislative proposals.… Read the rest

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Member State CAP allocations and progress on the MFF

The Commission’s presentation of its CAP legislative proposals in June 2018 includes Annexes setting out the Member State allocations both for Pillar 1 direct payments (Annex IV of the draft CAP Strategic Plan Regulation) and Pillar 2 rural development (Annex IX of the same draft Regulation). In its draft legislative proposals for the 2013 CAP reform, the Commission had also included an Annex setting out the Pillar 1 Member State allocations (based on the external convergence formula that it had put forward in its MFF proposal a couple of months previously).

But this was not the case for Pillar 2 allocations. Here, the draft Regulation specified that the annual breakdown by Member State would be decided by the Commission by means of an implementing act taking into account (a) objective criteria linked to the three objectives for rural development policy set out in the draft Regulation, namely, competitiveness of agriculture, sustainable management of natural resources, and climate action; and balanced territorial development of rural areas; and (b) past performance.… Read the rest

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Evaluating the legislative basis for the new CAP Strategic Plans

The main novelty in the Commission’s legislative proposals for the CAP after 2020 is the New Delivery Model (NDM) which has been described by Commissioner Hogan as representing a shift from a compliance-based to a performance-based or results-based governance system for the CAP.

As set out in a recital to the CAP legislation: “In the CAP based on delivery of performance (‘delivery model’), the Union should set the basic policy parameters, such as objectives of the CAP and basic requirements, while Member States should bear greater responsibility as to how they meet the objectives and achieve targets. Enhanced subsidiarity makes it possible to better take into account local conditions and needs, tailoring the support to maximise the contribution to Union objectives.”

The key instrument designed to underpin the NDM will be the requirement for each Member State to draw up a Strategic Plan setting out its assessment of needs, the specific CAP objectives it intends to address, its intervention strategy including the targets it intends to achieve with respect to these objectives, and the interventions it plans to use.… Read the rest

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Recent trends in EU WTO domestic support notifications

The EU submitted its latest domestic support notification to the WTO for the 2015/16 marketing year on 23 August last. This notification is interesting because it covers the first full year of operation of the new CAP in 2015, as the new direct payments architecture was first implemented in that year. This post examines the trends in domestic support in this and recent notifications, and speculates on how the figures might be affected by the Commission’s legislative proposals for the CAP announced on 1 June last.

Trend in overall domestic support

The broad trends in domestic support provided to EU agriculture according to the WTO classification is shown in the Figure below. Domestic support under the WTO Agreement on Agriculture is the sum of (a) expenditure on general services that provide benefits or services to agriculture and the rural community, (b) support (expressed in monetary terms) provided for agricultural products that benefit agricultural producers, as well as (c) non-product-specific support provided in favour of agricultural producers in general.… Read the rest

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CAP spending in the next MFF

Last week, the European Parliament secretariat (Policy Department for Structural and Cohesion Policies) presented a briefing authored by Albert Massot and Francois Negre to the AGRI Committee comparing the Commission’s CAP legislative proposals for the period after 2020 with the current regulations. It consists of two documents: a relatively short contextual statement, and an annex containing six ‘Dashboards’ which in a two-column format set out in specific detail how the CAP reform package (2021-2027) proposed by the Commission on 1st June 2018 compares with the current CAP (2014-2020) regulations, topic by topic. It makes a very useful contribution in structuring the debate around the Commission’s CAP proposals.

In this post, I want to pick up on just one issue addressed in the briefing, namely the budgetary framework. In previous posts (here and here), I have tried to establish what the Commission’s MFF proposal made on 2 May 2018 implies for the future CAP budget.… Read the rest

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The redistributive payment is more effective at redistribution

Capping of direct payments is not the only instrument proposed by the Commission to allocate more support to small and medium-sized farms. In addition to a mandatory ‘basic income support for sustainability’, the Commission CAP proposal would also require Member States to introduce a ‘complementary redistributive income support for sustainability’. This redistributive payment is currently voluntary under the 2014-2020 CAP.

Under the current CAP, the redistributive payment is applied by 9 Member States: BE-Wallonia, BG, DE, FR, HR, LT, PL, RO and UK-Wales. The financial allocation to the scheme takes up from 0.5% to 15% of the Member States national ceiling for direct payments. The payment aims at achieving a more effective income support for smaller farmers by granting an extra payment per hectare for the first hectares below a certain threshold.

All farmers eligible for BPS/SAPS receive the redistributive payment. However, they only receive this payment up to a certain number of hectares per holding.… Read the rest