The value of SFP payment entitlements (and the SAPS payment in the new member states) that farmers will receive later this year will be based on current eligibility rules (as set out in Council Regulation (EC) 73/2009 agreed following the CAP Health Check) but on the budgetary amounts set aside for 2014 under the new Multiannual Financial Framework (MFF) regulation for the coming period 2014-2020. This is because the 2013 direct payments are paid out of the 2014 EU budget which runs from 1 October this year.
This means that, even without the new CAP regulations agreed in June 2013 coming into force (which are now delayed to 1 January 2015), what farmers will receive in direct payments in 2013 will differ from what they were paid in 2012 for two main reasons:
• The overall budget for direct payments agreed for 2014, taking into account the additional demands on this budget arising from the phasing in direct payments in the new member states plus the provision for the new crisis reserve, is lower than before.… Read the rest
The Doha Round Bali ‘mini-package’ in agriculture
In the previous post, I discussed the process leading up to the forthcoming Bali Ministerial Conference of the WTO and the prospects for progress on a Doha Round ‘mini-package’. This ‘mini-package’ is planned to consist of three components: trade facilitation, some development/LDC issues and some agricultural elements (with the possibility of including other elements such as the dispute settlement review and the Information Technology Agreement if progress allows). In this post I discuss the issues being negotiated as part of the agricultural strand of this package.
The agricultural consultations have focused around three proposals tabled so far:
• a G-20 non paper which proposes an understanding on tariff rate quota (TRQ) administration provisions. This proposal envisages tighter disciplines for administering tariff-rate quotas, and how to deal with the possibility that the methods used might impede trade.
• a G-33 proposal on some elements of the draft modalities text on agriculture for early agreement to address food security issues.… Read the rest
Prospects for a Doha Round mini-package at Bali this year
With Brussels and national capitals closed for the month of August so little happening on the CAP front, it is timely for a stock-taking of the state of play in the multilateral trade negotiations.
In December later this year, the WTO at its 9th WTO Ministerial Conference in Bali, Indonesia will make yet another effort to salvage some concrete deliverables from the tortuous Doha Round negotiations. The negotiations have proceeded in fits and starts, but with more fits than starts, since the cancellation of what should have been the 7th Ministerial Conference (MC) in Geneva in December 2008 following the failure to agree on revised modalities documents.
The Doha Round negotiations were revitalised in early 2011 following strong political guidance by the leaders of the G20 at the Seoul Summit in November 2010. The objective was to reach outlines of a comprehensive package by the summer, and to finalise the agreement by the end of the year.… Read the rest
Intervention arrangements in the new CAP
Growing price volatility on agricultural markets has renewed focus on the role of market support instruments. In successive CAP reforms, the role of market instruments has changed from essentially determining the market price received by producers to providing a market safety net. Intervention prices are set at low levels which ensure that they are only used in times of real crisis.
The graph below illustrates the extent of support price reductions which have taken place for different sectors. These price cuts allowed the drastic decrease of public stocks in the EU between the early 1990s and recent years, which has in turn reduced the budget pressure stemming from overproduction.
However, intervention measures have not been abolished. The available market measures were used in the dairy market from January 2009 to beginning 2010 to limit the drop in EU prices. The purchase of public stocks provided a buffer to mitigate the downward path of prices, although their accumulation also had the effect of delaying the pace of price recovery to some extent.… Read the rest
CAP reform implementation consultations begin
The most defining characteristic of the political agreement reached on CAP reform in June 2013 in hindsight may not be the greening of Pillar 1 payments or the move towards greater ‘fairness’ in the CAP as a result of external and internal convergence, but rather the re-nationalisation of some aspects of agricultural policy with the devolution of much greater flexibility to member states in how the new CAP can be implemented.
This flexibility may be seen as a consequence of trying to manage a single CAP in an increasingly heterogeneous agricultural landscape in Europe following successive enlargements to an EU of 28 member countries. Or it might be seen as the price of reaching agreement on a complex political package in which each member state had particular political interests to defend, leading to a self-service menu of CAP reform options.
Flexibility in implementing the CAP can be a desirable feature if it results in a better alignment of agricultural policy with the needs of individual countries and regions – this has been the traditional argument behind the menu approach which is now a well-established feature of Pillar 2.… Read the rest
Does the CAP cap agricultural spending in the EU?
Every so often the debate about how far and how fast powers should be transferred from member states to the Union level within the EU and vice versa gains momentum. This debate about the optimal degree of centralisation or decentralisation in policy-making is known as the debate about subsidiarity in EU terminology.
The principle of subsidiarity is now part of the Lisbon Treaty but there are many observers who feel that this does not work very well. The optimal degree of policy centralisation is part of the debate on the response to the Eurozone crisis as well as a key element in David Cameron’s demand in his London speech in January 2013 for the repatriation of powers from the Union to member states.
Subsidiarity and agricultural policy
Economists take a very functional approach to subsidiarity. Drawing on the economics of federalism or multi-tier government, economists see the allocation of powers as a balance between taking decisions as close to voters as possible to maximise the chances that voters’ preferences are realised, while recognising the realities of interdependence which can justify the centralisation of powers.… Read the rest
WTO EU Trade Policy Review 2013
Every two years the WTO secretariat undertakes a review of the EU’s trade policy including agricultural policy measures which affect trade. The agricultural section of the review builds on the EU’s notifications to the WTO under various agreements, notably the Agreement on Agriculture (particularly the notifications on domestic support, export subsidies and tariff rate quota utilisation) and the notification under the Agreement on Subsidies and Countervailing Measures. The latest EU trade policy review for 2013 was released last week following discussion in the WTO Trade Policy Review Committee.
The Trade Policy Review provides succinct summaries of the relevant EU farm legislation and policy instruments, even if some of its data (for example, on levels of domestic support) are a little outdated because of the time required to submit the relevant notifications.
The report updates information on levels of agricultural tariff protection provided to EU farmers to 2013.… Read the rest
The CAP budget in the MFF Part 3 – Pillar 2 rural development allocations
When the European Council agreed on the EU’s multi-annual financial framework (MFF) for 2014-2020 in February this year, the overall allocation to the CAP’s Pillar 2 was made known but not the individual allocations to member states. Apparently, in order to secure a final agreement, each member state was told its own allocation but not that of the other countries.
It was not until May, after repeated requests from the European Parliament’s rapporteur on the rural development regulation, Luis Capoulas Santos, that the Commission communicated the individual country totals to the Parliament negotiators in the trilogue process. However, until the publication of the European Parliament secretariat’s Note European Council Conclusions on the Multiannual Financial Framework 2014-2020 and the CAP these figures were not generally available. In this post, the third and final in a series on the CAP budget in the MFF, we identify the winners and losers in the allocation of Pillar 2 funds (for the earlier posts in this series, see here and here).… Read the rest
The CAP budget in the MFF Part 2 – direct payment envelopes in Pillar 1
In my previous post I discussed some of the difficulties in comparing the money set aside for the CAP in the 2014-2020 Multiannual Financial Framework (MFF) and in the current 2007-2013 MFF. Among the issues highlighted were the counterfactual baseline to be used, whether to compare period-to-period or end-year to end-year figures, and the importance of adjusting the current MFF figures to ensure like-with-like comparisons with the next MFF period.
The European Parliament secretariat’s Note European Council Conclusions on the Multiannual Financial Framework 2014-2020 and the CAP also contains a detailed breakdown of Pillar 1 direct payment envelopes by member state for the two MFF periods, allowing us to see which countries are winners and losers under the decisions taken by the European Council.
The EP’s note calculates the national envelopes for each member state in the 2007-2013 period on the assumption that each country received the full 100% of its envelope, thus ignoring the impact of the phasing-in of these payments in the new member states.… Read the rest
The CAP budget in the MFF agreement
Today the European Parliament approved the political agreement on the MFF reached with the Irish Presidency, thus concluding the negotiations on the EU’s medium-term financial framework until 2020. A mandatory review will be undertaken by the Commission before the end of 2016 taking account of the economic situation at that time. The actual MFF Regulation and the accompanying inter-institutional agreement including various declarations by the parties will be voted in the Parliament in the early autumn once the Council has adopted the draft MFF regulation.
The overall MFF ceiling and the allocations by heading as agreed by the European Council in February 2013 were not changed in the final agreement. So the allocation for the CAP Pillars 1 and 2 remain as agreed last February. Many commentators have tried to compare the amount of money allocated to the CAP in the next programming period with that in the current period, and various figures have been circulated.… Read the rest