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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Achieving green growth in EU agriculture

In one month’s time the Rio+20 international conference on sustainable development will take place with a focus on the ‘green economy’ and environmental governance. Green growth is the pursuit of economic growth and development, while preventing environmental degradation, biodiversity loss and unsustainable natural resource use.
The European Commission has launched several initiatives under the Europe 2020 strategy to boost the green economy. A key aspect of this strategy is the Roadmap for a resource-efficient Europe, which sets out a strategic framework for the efficient use of natural resources in Europe. Other initiatives include the OECD’s horizontal strategy for Green Growth, while the UNEP recently introduced its Green Economy Initiative.
What makes the green growth concept attractive to policy-makers and businesses is the idea that taking account of environmental concerns is not just a burden, a constraint on growth, but can be a source of growth and new jobs. A number of EU member states have made greening the economy and creating new opportunities for green business a growth priority with a strong emphasis on sustainable growth, eco-innovation and cleantech industries.… Read the rest

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Delivering environmental benefits through agri-environment schemes

Downloaded from http://www.flickr.com/photos/13847552@N03/3906560447/ under Creative Commons licence

The ‘big idea’ in the Commission’s legislative proposals for the reform of the CAP post-2013 is greening, to be implemented by requiring all farmers in receipt of the basic payment to adopt three measures – crop diversification, ecological focus areas and the maintenance of permanent pasture – as appropriate. While there is a broad acceptance that the CAP should focus more on environmental objectives, there is still huge debate on the size of this shift and on the efficacy and relevance of the Commission’s proposals.
One of the main criticisms from member states has been the inflexibility of the proposals which are designed in a ‘one size fits all’ manner (for example, see the recent speech by UK Minister Caroline Spelman on the Commission’s greening proposals). Member states are seeking greater flexibility in the greening practices to be implemented, either in the form of a menu approach or through automatic qualification of farms following approved management practices as in organic farming, the so-called ‘green by definition’ approach.… Read the rest

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The greying of Europe’s farmers

Problems in the generational transfer of farms have been a focus of EU agricultural structures policy since the 1990s and in individual member states for an even longer period. Europe’s farmers are getting older, and the shortage of ‘new blood’ entering the industry is frequently seen as a problem requiring a policy response to correct.

The ageing of the agricultural population results from a combination of two things: a reduced rate of entry by new young recruits, and a reduced rate of retirement or exit by older farmers. This is taking place in the context of a long term reduction in the agricultural labour force in EU countries.

There is no doubt that the average age of farmers is increasing steadily. Unfortunately, the age of farm holder tabulations from the 2010 Agricultural Census have not yet been released by Eurostat, so the latest data we have are still from 2007. In 2007, 31% of holders of agricultural holdings in the EU-15 were 65 or older (28% in 1997 and 24% in 1990).… Read the rest

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The greying of Europe's farmers

Problems in the generational transfer of farms have been a focus of EU agricultural structures policy since the 1990s and in individual member states for an even longer period. Europe’s farmers are getting older, and the shortage of ‘new blood’ entering the industry is frequently seen as a problem requiring a policy response to correct.
The ageing of the agricultural population results from a combination of two things: a reduced rate of entry by new young recruits, and a reduced rate of retirement or exit by older farmers. This is taking place in the context of a long term reduction in the agricultural labour force in EU countries.
There is no doubt that the average age of farmers is increasing steadily. Unfortunately, the age of farm holder tabulations from the 2010 Agricultural Census have not yet been released by Eurostat, so the latest data we have are still from 2007. In 2007, 31% of holders of agricultural holdings in the EU-15 were 65 or older (28% in 1997 and 24% in 1990).… Read the rest

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Court of Auditors wants clearer objectives for post-2013 CAP reform

The European Court of Auditors is best known as the watchdog of the reliability and legality of the EU’s accounts. In its special reports it often undertakes an assessment of specific areas of Union activity, and it has published various reviews of specific aspects of agricultural expenditure over the years.

It can also submit opinions at the request of one of the other institutions of the Union, and it has just released an opinion on the Commission’s legislative proposals for the CAP post-2013 announced in October 2011.

The opinion focuses on whether and to what extent the Commission’s legislative proposals remedy weaknesses already identified by the Court following its audits. Subsequently it presents some further reflections resulting from the Court’s analysis of the proposals.

The opinion is comprehensive, addressing issues in all four of the main draft regulations in the Commission’s package. One of the guiding principles behind the Court’s observations is whether the proposals facilitate sound financial management by shifting from the current focus on compliance and financial implementation towards a performance-based system, with clear objectives and criteria against which performance can be measured.… Read the rest

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How the CAP contributes to world market food price volatility

The contribution of export bans to the world food price spike in 2008 is now well-established, particularly for commodities such as rice (for example, see Abbott, 2012 and Sharma, 2011). Martin and Anderson (2012) have calculated that over the 2005-2008 period more than 45 per cent of the explained change in the international price of rice was due to changes in border restrictions that countries used in an attempt to insulate themselves from the initial increases in price.

Countries resort to export bans in an attempt to keep down the price of food to domestic consumers. When undertaken by countries whose level of trade is big enough to influence the world market price, then an export ban also has ramifications for other countries.

Not only does an export ban, such as the Russian grain export ban in August 2010, by restricting supplies to the world market have an immediate impact on world prices.… Read the rest

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Latest EU AMS notification confirms declining trend in WTO amber box support

The EU has just submitted its domestic support notification to the WTO for the year 2008/09 (hat tip to LB) and this year there are no surprises. Total support (using the WTO definition) was a shade over €80 billion, but the value of its trade-distorting support (the so-called ‘amber box’, given by its current total Aggregate Measure of Support) fell to its lowest level ever, at just under €12 billion.

In that year, the EU used just over 16% of its Total AMS commitment (its bound ceiling) of €72.2 billion. In other words, the EU could have reduced its AMS commitment by over 80% in that year and would still have fulfilled its WTO amber box obligation.

The AMS includes three main categories of support: direct payments that do not fall under the green or blue boxes as non-exempt direct payments; market price support for products for which an administered price exists; and an equivalent measure of support for those products where the domestic market is supported but where no obvious administered price exists.… Read the rest

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Are the CAP 2013 proposals a major reform?

The economist’s dilemma

Economists evaluating the Commission’s legislative proposals for the CAP post 2013 face a dilemma.

Economists work within a paradigm in which agriculture is an industry no different from any other, where markets by and large do a good job in allocating resources, and where the only justification for government intervention requires both the existence of market failures and demonstrating that governments have access to relevant information or resources which would allow them to address those market failures effectively.

This is an extremely powerful toolkit because it allows economists to distinguish between welfare-enhancing policy interventions and those which are largely about shifting resources and rents from one group to another (the distinction between PERTs and PESTs using Gordon Rausser’s terminology in his well-known 1982 AJAE paper).

Applied to the CAP, this paradigm produces unambiguous policy recommendations: eliminate support to farm incomes, confine public budgets to the purchase of environmental public goods through targeted programmes, and maintain a minimum crisis management capacity to deal with catastrophic risk.… Read the rest

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End the use of export subsidies in the 2013 CAP review

A rather specific feature of the EU’s agricultural policy has been its use of export subsidies to maintain market prices on its domestic market in the past. While the EU was not the only country to make use of this policy mechanism, it accounted for around 90% of global expenditure on formal export subsidies (while arguing that other countries provide export support through more indirect means, such as through state monopoly marketing boards or through food aid).

EU use of export subsidies has fallen dramatically although they still have not disappeared. Total expenditure on export refunds fell from €3.8 billion in 2003 to a projected €139 million set aside in the EU’s draft 2012 budget (at their peak in the late 1980s and early 1990s, they amounted to €10 billion per year). Pigmeat, poultrymeat, eggs, beef and some non-Annex 1 (that is, processed) food products are now the only beneficiaries.

It is surely time for the EU to renounce the use of this policy instrument in the new CAP after 2013.… Read the rest

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EU biomass targets put pressure on global land resources

There is a now a widespread awareness of the tensions created by mandated EU biofuels targets for global land use and food markets. The requirement that 10% of EU transport fuel should come from renewable sources by 2020 is set out in the Renewable Energy Directive 2009/28/EC adopted by the European Council in April 2009.

The other important target in this Directive is that 20% of the EU’s gross final consumption of energy should come from renewable sources by 2020. Indeed, from a land use and food markets perspective this target could have a potentially greater impact.

While much of this renewable energy in the electricity sector will come from wind, overall by 2020 biomass will remain the most important source of renewable energy in the EU (accounting for 57% of the total, according to an analysis of Member State National Renewable Energy Action Plans undertaken by The Netherland Energy Research Centre and reported in AEBIOM’s 2011 Annual Statistical Report).… Read the rest