Author: Alan Matthews

Yet another post on a trade topic, but this is justified by the news from Geneva last week where the WTO Doha Round’s attempts to hang on to life become fainter and weaker. Pascal Lamy was in sombre mood at the meeting:

What we are seeing today is the paralysis in the negotiating function of the WTO, whether it is on market access or on the rule- making.  What we are facing is the inability of the WTO to adapt and adjust to emerging global trade priorities, those you cannot solve through bilateral deals.

While no government has yet declared that the Doha Round is dead, it is clearly on life support. It is therefore important to consider the options facing the WTO before the next Ministerial Conference in Geneva on December 15-17. Two recent volumes from VoxEU.org edited by Richard Baldwin and Simon Evenett provide a good discussion of the current malaise  (see Next Steps: Getting Past the Doha Crisis and Why World Leaders Must Resist the False Promise of a Doha Delay).… Read the rest

In September 2010 the European Commission forwarded a draft agreement on further reciprocal liberalisation of agricultural trade with Morocco to the Council and the Parliament, and ultimately the member states, for approval. This draft agreement has nothing to do with responding to the Arab Spring, although its ratification now takes place in that context.

The agreement springs from the authorisation given by the EU Council in 2005 to open negotiations under the 2000 Euro-Mediterranean Agreement which provides that the Union and Morocco will gradually implement greater liberalisation of their reciprocal trade in agricultural products, processed agricultural products and fishery products. The negotiations were concluded in December 2009 and the Commission forwarded the agreement for approval in September 2010 with the hope that it would come into effect in 2011. The agreement is in line with the Barcelona Process and the European Neighbourhood Policy.

However, the agreement has run into opposition in the Parliament from a mixture of motives, including foreign policy issues related to Morocco’s claim over Western Sahara and traditional agricultural opposition to further trade liberalisation, strengthened on this occasion by the after-effects of the e.coli… Read the rest

One issue which was not specifically addressed as part of either the Commission’s November 2010 Communication on the CAP post 2013 nor its proposal for the Multiannual Financial Framework is the future of the financial discipline mechanism for CAP Pillar 1 spending. Financial discipline is the process by which EU Farm Ministers each year determine if percentage reductions are required to keep Pillar 1 spending within the budget (in practice, by making reductions in direct payments).

Financial discipline explained

Financial discipline was introduced in the Fischler 2003 CAP reform to take effect over the period 2007-2013. The aim is to anticipate budgetary problems before they occur. Each year, the Commission assesses whether there is a prospect of a budget overrun during the coming year and, if necessary, proposes action to address this. The Commission must make a proposal for adjustments to spending if it projects that Pillar I spending (market measures and direct aids of the CAP) is likely to exceed the Pillar 1 ceiling reduced by a margin of €300 million.… Read the rest

In presenting its proposals for the 2014-2020 MFF on June 29th last, the Commission Services produced a helpful guide to the proposals in the form of a Q&A Questions and Answers memo. Intriguingly, there appear to be two versions in circulation.

For example, one version on the EUBusiness.com website (also picked up by NFU Online) contains the following paragraph on CAP Pillar 2.

The allocation of rural development funds will be revised on the basis of more objective criteria and better targeted to the objectives of the policy. This will ensure a fairer treatment of farmers performing the same activities. In order to avoid a reduction in farmers’ income, the Commission will propose to allow Member States, if they so wish, to maintain the current nominal level of funding through transfers from Pillar Two to Pillar One.

However, in the version now available on the Commission’s MFF website, this paragraph reads:

The allocation of rural development funds will be revised on the basis of more objective criteria and better targeted to the objectives of the policy.

… Read the rest

One of the revelations in the Commission’s proposed Multiannual Financial Framework was its proposal to move funding for the programme of food assistance to the most deprived persons out of the CAP Pillar 1 budget to the European Social Fund, thus saving an estimated €3.5 billion which could then be used for other agricultural spending.

Whether the EU should be funding social programmes of this kind remains controversial in the Council of Ministers, although there is unalloyed enthusiasm for the programme in the European Parliament given that the majority of parliamentarians there favour spending of all kinds.

Origins of the programme

The scheme had its origins as an emergency measure in the exceptionally cold winter of 1986/87, when surplus stocks of agricultural produce were given to Member State charities for distribution to people in need. The measure was subsequently formalised and based on intervention stocks. As agricultural surpluses reduced, the programme has been supported by a direct financial contribution, and the scheme was amended in the mid-1990s to make it possible to supplement intervention stocks with market purchases in certain circumstances.… Read the rest

The publication of the Commission’s proposals for the next Multiannual Financial Framework (MFF) 2014-2020 brings a little more clarity to its thinking on the likely shape of CAP reform post 2013.

Overall, the proposal represents a slight increase in the total size of the EU budget in the next programming period, by between 3.5% and 5% depending on whether one looks at commitment or payment appropriations. While a number of member states have sought a total freeze in real terms, this still represents a much more modest increase than that proposed recently by the European Parliament (which was a 5 percentage point increase in the share of the EU budget in GNI). The Commisison proposal would see the share of the EU budget in GNI shrink (in payment appropriations) from 1.06% in the current MFF to 1.00% in the next MFF.

The CAP budget

In commitment terms, the proposal allocates €281.8 billion for Pillar 1 of the CAP and €89.9 billion for Pillar 2 of the CAP (representing 76% and 24% of the total CAP budget, respectively).… Read the rest

A concern about increased price volatility facing EU farmers marks virtually every statement on the challenges facing the CAP post 2013, with the presumption that new instruments to address this challenge should be part of the CAP reform proposals. Income insurance and ‘contractualisation’ (greater use of written contracts and new collective bargaining powers for producer organisations) are the new tools most often mentioned in this context. A new report by Stefan Tangermann published by the International Centre for Trade and Sustainable Development punctures these claims and flatly concludes that intensified risk management instruments for EU agriculture are not warranted.

His argument is based around five points.

• Farmers may well face greater price volatility in the future, but there is little that can be done to dampen volatility of agricultural prices on international markets. While use of trade policy can help to limit the transmission of world price volatility into the EU market, this is always at the expense of trading partners including developing countries and so should be avoided.

… Read the rest

Much of the recent discourse around CAP reform emphasises that European agriculture has an important role to play in the future in contributing to global food security. This concern has been driven by the growing awareness of the challenge of increasing global food production in a sustainable way, which in turn was underlined by the impact of the two recent food price spikes (2007-08 and 2010-11) on global hunger.

Estimates by the U.N. Food and Agriculture Organization (FAO), the U.S. Department of Agriculture (USDA), and the World Bank concluded that between 75 million and 160 million people were thrown into hunger or poverty as a result of the 2007/08 global food crisis. One response to this finding is that it apparently contradicts the conventional wisdom that low global food prices (for example, brought about by high OECD agricultural protection) were responsible for increasing hunger and poverty in developing countries in previous years (see the paper by Jo Swinnen for a discussion of this issue).… Read the rest

This month (June 2011) sees the real start of the negotiations on the future EU budget framework for the coming years. On Thursday 9 June the Parliament will vote on the opinion prepared by its Policy Challenges Committee setting out its views on the size, structure and duration of the next multi-annual financial framework (MFF).

On 29 June the Commission will publish two legislative proposals, one on future own resources and the other on the MFF. These will be accompanied by impact analyses including of potential new own resources. This will be the first real indication of the Commission’s thinking on the future resources to be made available for the Common Agricultural Policy, although many months of hard negotiating lie ahead before an eventual agreement is reached. The current MFF runs until the end of 2013.

The Policy Challenges Committee report

A year ago, the Parliament set up a special committee on the policy challenges and budgetary resources for a sustainable European Union after 2013, also known as the SURE or Policy Challenges Committee.… Read the rest

The enterohaemorrhagic E. coli (EHEC) ‘cucumber’ crisis raises many questions. The most immediate is the public health dimension. The scale of the outbreak has been described as unprecedented by public health officials and the cause of the outbreak has yet to be localised. To date there have been 18 fatalities, all but one in Germany, and at least 499 people have haemolytic uraemic syndrome (HUS), a life-threatening kidney disease (see update from a German spokesman here). For comparison, according to the University of Edinburgh National Creutzfeldt-Jakob Disease Research & Surveillance Unit, 209 people have died in the EU (168 in the UK alone) from vCJD (‘mad cow disease’) since 1990.

The outbreak also raises questions once again about the governance of the food system – is the mixture of market incentives, public regulation, legal liability and socially-enforced moral standards of behaviour working sufficiently well to warrant consumer trust in the governance of food safety?… Read the rest