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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OECD Agricultural Policy Monitoring and Evaluation Report 2013

Today the OECD published its annual update of trends in producer and consumer support to farmers (measured as the Producer Support Estimate, PSE and the Consumer Support Estimate, CSE, respectively). It shows overall support levels rising in 2012, following the historical low recorded in 2011.

For the OECD countries the share of support in farm receipts is 19%, up from 18% the previous year. There are sharp divergences behind these figures with the highest support countries recording increases (Japan 56%, Korea 54%, Norway 63% and Switzerland 57%) while relatively low support countries fell further (Israel 11%, Mexico 12%, United States 7%). The EU mirrors the overall OECD trend with a rise from 18% to 19%.

Some emerging economies which are key players in agriculture continued to increase support to their farmers – for China, the share of support in producer receipts is now 17%, for Indonesia 21% and for Kazakhstan 15%.… Read the rest

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The end of export subsidies?

Well, not quite. But with the publication of the final texts of the CAP political agreement last week we can now scrutinise the detail and fine print. Changes to the language on export subsidies in the single Common Market Organisation regulation go further than before in limiting the future use of export subsidies, without quite taking the final step of eliminating them altogether.
I previously discussed the EU’s use of export subsidies in this post last year. I highlighted both the sharp fall in the use of export subsidies by the EU, the high cost to taxpayers and citizens of using this instrument to support market prices and farm incomes and the growing political support for their abolition.
I argued in the post that the EU should use the opportunity of the revision of the CMO regulation to eliminate export subsidies, while recognising that a less satisfactory outcome would be a self-denying ordinance by the Council and the Parliament not to make use of the instrument after 2013.… Read the rest

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EU budget negotiations and farmers’ 2013 single farm payment

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

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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

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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

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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

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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

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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

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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

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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