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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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

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More on capping direct payments

I want to revert to the topic of the capping of direct payments under the CAP, which I last discussed here and here. It is not the most important issue in the Commission’s legislative proposals for the CAP after 2020. But the issue of the fairness of direct payments was raised as an issue in the CAP Communication, and the proposed capping has been defended as a significant step in the better targeting of these payments. There is thus some interest in asking how effective it is likely to be.

The current situation

The current situation reflecting the distribution of payments in claim year 2015 is shown in the following graph. The graph shows the cumulative number of beneficiaries and their cumulative share of total direct payments in that year. What emerges clearly is the large number of very small beneficiaries. On average, at EU level, half of the direct payments beneficiaries receive less than €1,250 per year (around €100/month), corresponding to 4.5% of the total direct payments envelope.… Read the rest

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Wales charts course towards radically different farm policy

Wales is one of the three devolved government regions which along with England make up the four countries in the UK. Its agricultural sector is, in absolute terms, small. Around 38,400 holdings farm an area of 1.9 million hectares, with an average farm size of 49 hectares. Just over 15,000 of these holdings receive support under Pillar 1 of the CAP as many of them are deemed to be ‘very small’ with insignificant agricultural activity. These farms produce output valued at £1.6 billion in 2017, contributing a gross value added of €457 million and a total income from farming (TIFF) of £276 million in that year (statistics taken from Wales Statistics and Research, Farming Facts and Figures, Wales 2018 and the Aggregate agricultural output and income web page).

Total receipts under the Basic Payment Scheme (BPS) amounted to £234 million while agri-environment payments under the Glaistir scheme amounted to a further £55.7 million in 2017.… Read the rest

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The Article 92 commitment to increased ambition with regard to environmental- and climate-related objectives

Article 92 of the draft CAP Strategic Plan regulation is headed “Increased ambition with regard to environmental- and climate-related objectives”. In my previous discussion of the proposed green architecture in the CAP post 2020, I interpreted this Article as a commitment to no back-sliding on expenditure on agri-environment and climate objectives in the new CAP. For this reason, I took a more positive view of the potential of the new legislation to live up to the Commission’s declared ambition in this area than reflected in initial statements from environmental NGOs.

In the wake of further conversations with Birdlife Europe who have had the benefit of discussions with DG AGRI officials, I conclude that my initial interpretation of Article 92 as guaranteeing no back-sliding in expenditure was incorrect. On closer reading the Article says nothing about financial commitments and indeed seems hardly to bind Member States to any substantive commitments at all.… Read the rest

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The greening architecture in the new CAP

Environmental NGOs were harsh in their immediate criticism of the legislative proposals on the new CAP. Greepeace said that the EU farming plan “could spell disaster for the environment”. BirdLife Europe said that “The European Commission’s claim that the new proposal will deliver a higher environmental and climate ambition has fallen flat”, arguing that the new plan “does not guarantee any spending on biodiversity and grotesquely slashes funds ring-fenced for the environment across the board”.

Birdlife Europe has produced a detailed assessment of the Commission’s proposals in a handy tabular form, pointing out both weaknesses in the proposals themselves as well as omissions where the proposals could be strengtened (a summary of this assessment has appeared on this blog).

In this post, I review some of the issues raised by these critiques and explain some of the key differences between the proposed new greening architecture and the policy that it would replace.… Read the rest

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France’s puzzling interest in increasing the CAP budget

The Commission’s CAP legislative proposals which were published on 1 June 2018 attracted some immediate reactions from different groups of stakeholders setting out their positions. The proposals are far-reaching and complex. Together with the impact assessment, they amount to 662 pages of text. They require time and careful analysis to fully understand. In the coming weeks, I hope to examine some of the key elements one at a time.

I begin with the budgetary allocations by Member States which are included as Annexes to the draft CAP Strategic Plans regulation. This combines the current direct payments and rural development regulations into one.

This has a certain topicality because agricultural Ministers from six Member States – FR, ES, IE, PT, FI and EL – met in Madrid recently to formulate a declaration calling for the CAP budget to be maintained at its current level. This declaration – which is open to agricultural Ministers from other Member States to support – will be presented and discussed at the next AGRIFISH Council on June 18-19.… Read the rest