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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Perspectives on the CAP2020 debate

I am currently in Brazil attending the 28th International Conference of Agricultural Economists. Yesterday, there was a well-attended session on “The European Union’s Common Agricultural Policy after 2013: what is happening, what is likely to happen, and why?” which was designed to provide an opportunity to explain and interpret the CAP reform debate to those attending the conference from other parts of the world. There were three presentations in the session which I link to in this post.

Giovanni Anania (University of Calabria)’s presentation first summarises the Commission’s original Oct 2011 proposals, explains the decision-making process and describes what has happened so far in the negotiations. He then makes an informed speculation on the likely outcome, emphasising the forces pushing for more flexibility in implementing the Commission proposals. He hypothesises that there may be an inverse relationship between the ultimate financial envelope allocated to the CAP and the extent of flexibilities that are ultimately agreed.… Read the rest

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COMAGRI Chair calls for maintenance of CAP budget in real terms

Paolo De Castro, Chair of the European Parliament’s Committee on Agriculture and Rural Development (COMAGRI), is also the rapporteur for the COMAGRI opinion on the Commission’s proposal for a new MFF regulation. His draft report circulated last month is a trenchant call for additional money for farmers and greater flexibility in how it can be spent.

While the rapporteur’s draft has yet to be discussed by COMAGRI, it is likely to be approved as it builds on previous Parliament reports and resolutions. The COMAGRI opinion is a set of suggestions to the Budget Committee which has the ultimate responsibility for drafting the Parliament’s view on whether to consent to the Council’s (and, ultimately, the European Council’s) decision on the MFF ceilings in the 2014-2020 period. It provides an interesting insight into COMAGRI’s thinking on the role of the budget in a time of economic crisis.

The De Castro recommendations

The starting point for De Castro’s draft report is the Commission’s level of CAP spending in its MFF proposal.… Read the rest

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How much progress has been made on agreeing the 2014-2020 MFF?

Discussions on the CAP regulations post-2013 and negotiations on a new multi-annual financial framework (MFF) for the period 2114-2020 are inextricably linked. As EU politicians and civil servants take to the beaches for their summer vacation this month, it is timely to review how far the negotiations on the MFF package have come and how close/far we are to/from an agreement. The official view (see the Council MFF website) is that we are on course to reach political agreement on the MFF package by the end of this year. This would allow legislative work to be finalised in sufficient time for the new MFF, new rules on own resources and new spending programmes to apply from 1 January 2014, but this may be more wishful thinking than a real forecast.

The MFF package is more than the MFF Regulation which decides the ceilings for the different expenditure chapters in the EU budget for the 2014-20 period.… Read the rest

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What role for agriculture in rural development?

The European Commission partially justifies the Common Agricultural Policy (CAP) of the EU with the CAP’s contribution to ‘viable rural communities’. Maintaining viable rural communities was one of the three strategic aims for the CAP set out in the Commission’s Communication on the CAP towards 2020 in November 2010. It was justified in the following terms:

To maintain viable rural communities, for whom farming is an important economic activity creating local employment; this delivers multiple economic, social, environmental and territorial benefits….
Agriculture is an integral part of the European economy and society. In terms of indirect effects, any significant cut back in European farming activity would in turn generate losses in GDP and jobs in linked economic sectors – notably within the agri-food supply chain, which relies on the EU primary agricultural sector for high quality, competitive and reliable raw material inputs, as well as in non-food sectors. Rural activities, from tourism, transport, to local and public services would also be affected.

… Read the rest
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Is selling 'experiences' a potential growth path for European agriculture?

Three researchers at Leuven University, Jo Swinnen, Kristine Van Herck and Thijs Vandermoortele, in a recent paper in the newly-launched BAE Bio-based and Applied Economics journal put the spotlight on the potential to base future growth in European agriculture on the willingness of consumers to pay a price premium in exchange for various ‘experiences’ (working paper version available here ). They suggest that this may be a more promising growth strategy, at least in some sectors or for some regions, than a more conventional emphasis on producing food, albeit of high quality, at low cost.

Definition of experience goods

The researchers base their proposal on two pieces of evidence. The first is evidence generally that there is rapid increase in the demand for experience-related products and services. It is important here to explain what the authors mean by experience goods.
Products and services are assumed to consist of three components, each of which add value.… Read the rest

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Eurobarometer food security survey

What are we to make of the findings in the latest Eurobarometer survey of EU public opinion on Europeans’ attitudes to their own food security? (The survey also covered attitudes to global food security, food quality and the countryside).

On the one hand, only two out of five (43%) respondents are concerned about food security in their own country, while more than half (56%) are either not very concerned or not at all concerned. Only two out of five (40%) respondents are concerned about food security at EU level, while more than half (57%) are either not very concerned or not at all concerned. On the other hand, in all Member States a large majority of respondents supported the view that the EU should produce more food to reduce its dependence on imports. Levels of agreement exceeded the EU average of 81% in 17 of 27 Member States.

Responses to survey questions are in part determined by the way the question is asked.… Read the rest

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The EU as a destabilising force in world grain markets

I have argued before on this blog that the EU’s policy during the food price spike of 2007-08 in lowering applied tariffs on staple foods may have helped to mitigate the impact of higher food and feed prices on livestock producers and, to some extent, on consumers, but at the expense of exacerbating the global price increases facing other countries, including developing countries.

The EU’s policy of varying applied tariffs within its bound rates contributed to destabilising world market prices just as did the export restrictions applied by other countries, and undermines its moral authority, in the G20 and elsewhere, in seeking strengthened WTO disciplines on export restrictions as a way to enhance global food security.

In a paper [requires library access] published in the American Journal of Agricultural Economics in January this year, Philip Abbott of Purdue University provides some quantitative evidence of this effect. His methodology is straightforward. He compares the evolution of producer prices for staple commodities with the trend in retail food prices over the 2006-2008 period, distinguishing between major grain exporters which left borders open and major grain exporters which restricted exports.… Read the rest

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Co-financing rates in Pillar 2

The Agricultural Council meeting on 18 June held a discussion on the proposed rural development regulation in response to a Presidency questionnaire (the webcast of the Council discussion is here). One of the questions posed by the Presidency was:

Is the proposed provision concerning increased EAFRD contribution rates relevant for meeting the objectives of the rural development policy, or should alternative operations qualify to receive a higher rate of co-financing?

According to the minutes of the Council meeting:

Co-financing rates for rural development support are part of the negotiating box for the MFF (2014- 2020). Member states spoke in general terms of the need for a simple and targeted system for financing activities to meet the EU objectives for rural development. In its proposal, the Commission envisages a single maximum co-financing rate for most of the measures supported by the European agricultural fund for rural development (EAFRD) with only a few exceptions which could benefit from higher co-financing rates.

… Read the rest
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Paper on CAP greening

I presented a paper at a seminar of the European Association of Agricultural Economists today which reviews the debate on greening the CAP in Pillar 1 in the light of the Commission’s original legislative proposal, the discussions in the Council summarised in the Danish Presidency’s progress report this month, and the COMAGRI rapporteurs’ reports.
The message of the paper is that the greening proposals under discussion are a missed opportunity. They serve primarily to try to justify the continuation of the existing level of Pillar 1 direct payments. The Commission’s original proposals for three simple, generalisable measures would lead to limited additional environmental benefits, and the various flexibilities proposed by the Council and COMAGRI rapporteurs would reduce the additional benefits even further.
The main changes sought by the Council and COMAGRI rapporteur would make greening in Pillar 1 voluntary, would provide a range of options by which farmers could claim eligibility, and would greatly complicate the adminstration of Pillar 1, running completely counter to member states’ desire for greater simplicity.… Read the rest

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A mandatory minimum spending requirement on agri-environment-climate change measures in Pillar 2?

The Agricultural Council meeting on 18 June 2012 held a discussion on the proposed rural development regulation in response to a Presidency questionnaire. One of the questions posed by the Presidency was:

Should the Rural Development regulation contain a requirement for a minimum percentage of the EAFRD budget to be spent on environment related actions, and which measures should be taken into account when calculating the spending on environment related actions?

The press release following the meeting highlighted the range of views in the Council on these issues:

Member states broadly support the principle that the CAP should significantly contribute to addressing the challenges concerning environment, biodiversity and climate change mitigation and adaptation. However, member states opinions were divided over setting a threshold in recital 28 of the rural development proposal, where the Commission suggests, as a guideline that member states spend a minimum of 25% of the total contribution from the EAFRD to each rural development programme on climate change mitigation and adaptation and land management.

… Read the rest