On 13 January, Dacian Ciolos gave testimony to the UK Environment, Food and Rural Affairs Committee on CAP reform.
Emphasis on international competition as a justification for income support
I don’t see how our agriculture can, at the same time, be competitive in the international market and have higher level of standards than farmers in other parts of the world.
But if we don’t have this minimum support for income and compensatory payments, the risk is that a lot of farmers who can be competitive without the crosscompliance rules that we have in Europe but not in other parts of the world-who in normal situations can be competitive-will not be competitive.
Ciolos showed strong commitment to the concept of ‘active farmers’. He stated one minimum requirement clearly. When asked whether he would “expect some agricultural goods to be produced for someone to be defined as an active farmer?”, Mr. Ciolos responded ‘Yes. If not, we cannot talk about agriculture or the farmer.’ But otherwise, he provided little substance on how a practical definition could look like, and he admitted:
We can’t expect to have a common definition at European level. This is why now the objective of the Commission is to come with, let’s say, a negative definition-who is not an active farmer-and then the Member States will define who is an active farmer, taking into account the specific situation at national level.
Cap on direct income support
Mr. Ciolos supported the idea of a cap. But when asked whether there is ‘a danger that the larger farm holdings will simpler reorganise themselves into smaller holdings to get around any cap’, he did not offer much clarification:
Especially with big farms, I don’t think their objective is only to have a big amount of payments from public money. I don’t think that we will have a very important phenomenon of the splitting or separation of farms only to have payments. I think a farmer uses other logic when he decides on the structure of production and farms, and is thinking not only about having a level of direct payments.
The idea is not to increase direct payments for small farms, but to make them simpler, and then to propose a lot of instruments-like training, investment and organisation of production groups-in order to integrate the small farms more into the market than at present.
We propose to generalise decoupled payments in all Europe and to maintain coupled payments only in some specific regions, for some specific products.
Financial allocation within the first pillar
Q: ‘How do you envisage money being shared between the two main elements of the new direct payments-that is, basic income support and the greening component?’
We are analysing several scenarios, but I think we can go up to maybe one third of the direct payments being linked to the production and delivery of public goods of greening.
Q: ‘Are you considering basing the payment for greening activities in Pillar 1 on objective criteria, such as the additional cost of delivery or the environmental benefit?’
I can see that this part of the greening payments is exactly the level of the production costs for a farm that decides to integrate this measure. The objective, in fact, for us is to use this part of the payments to incentivise a farmer to do more, not only to have a payment in exchange.
The oral evidence shows nicely the broadly practiced art of claiming, at the same time, that the CAP creates no distortions in the international economy (‘I don’t think that we can now say that we influence the level of prices in countries in the south.’) and that similar levels of payment are needed within the EU to avoid distortions (‘Here we can have a distortion in the market if categories of farms have different treatment.’).
Mr. Ciolos denied again that there is any conflict between supporting the delivery of public goods and the standard of living of farmers.
Of course, I don’t think there’s a contradiction between these two objectives, but it will depend on the resources that we have for the Common Agricultural Policy.
I don’t think that there is a tension in the CAP between ensuring good standards of living of farmers and the delivery of public goods if the first Pillar of direct payment is reformed
He furthermore repeated the idea that agriculture is more affected by governmental regulation than other sectors:
It’s the only sector, I think, in Europe that has to play an economic role and plays a part in the market but, at the same time, has to integrate a lot of rules imposed by society. The automotive industry, the textile industry and other industries do not integrate a lot of expectations from people in the way that agriculture does.
I am sure that a list of the costs of regulatory compliance in the automotive industry with all its safety requirements and environmental standards would be quite long. Also, remember the compliance challenge for the chemical industry under REACH. And all the emission standards that affect industrial production in the EU (and which do not apply to imports). And all the legislation on work safety, healthy working conditions, employee rights and job security that affect large companies much more than small farms.
A last point:
I also remind you that the discussion in Doha was not blocked because of the resistance of the European Union, but because of the resistance of the other partners
It’s true: the recent stalemates have not been directly provoked by the CAP. But weak and conservative signals on agriculture from the EU at the beginning of the Doha-Round did quite a bit in bogging negotiations down. With a clear and early commitment from the EU that substantial agricultural liberalization is on the negotiating table, the Doha negotiations might have take a different path.
You can download the transcript here. Please note: The transcript is not yet an approved formal record of these proceedings. Any public use of, or reference to, the contents should make clear that neither members nor witnesses have had the opportunity to correct the record.