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One year after the budget review conference: What has happened with the CAP reform process?

Until recently, I have walked through Brussels with this grey-blue bag that all participants of the 2008 budget review conference received. In the meantime, it has fallen apart, and I don’t have anything to replace it. This is somewhat similar to the CAP & EU budget debate: the 2008 conference presenting the results of the consultation process briefly attracted broad attention, but subsequently, the debate fizzled out and was overwhelmed by the financial and economic crisis.

This does not mean that nothing happed in 2009. One of the most important CAP issues was certainly the enhanced transparency of subsidy recipients. This brought the CAP into the headlines and created plenty of bad press for export subsidies and the Single Farm Payment. However, the outrage did not translate into a search for alternative policies. Another issue that drew attention to the CAP was the situation on the milk market and the protests by milk farmers. To some extent, complaints by development NGOs and trading partners about the resumption of dairy subsidies also got into the media. From one point of view, all this has been god news for CAP reform, simply because almost anything that attracts attention is favorable for reform. Those who defend the status quo are aware of and ready to fight for their interests, much more than the majority of citizens that pay, in one way or another, the price for a wasteful CAP.

On the other hand, the developments may have lowered expectations for the CAP post-2013. That is, actually removing milk quotas (as decided in the Health Check), re-directing money from large to small farms (as attempted in the Health Check), and phasing out export subsidies (as announced in the Doha Round) could become benchmarks for success rather than self-evident minimum requirements of reform. Besides, the political pressure exercised by milk farmers may have discouraged politicians from advocating far-reaching CAP reform.

There were also some larger conferences in Brussels and the member states; inter-ministerial multi-stakeholder processes have begun to define national visions and positions; and cross-cutting reform coalitions are emerging. But I believe that the major significance of 2009 lies not in the debates we had this year but in the legacy of this year’s events for 2010 and beyond.

First, public debts have risen tremendously in most member states as governments saved failing businesses and stimulated the economy. These debt levels are incompatible with the Stability and Growth Pact, and they are unsustainable in the face of an aging population. Under these circumstances, it will become increasingly clear that the EU budget will not grow after 2013, so competition for funding will intensify. There is also a possible threat of cuts to the EU budget that may convince pro-Europeans to invest their political capital into more effective, and thus more legitimate and defensible EU spending. The stress on public finances will also make itself felt more indirectly. As governments will be forced to increase taxes and to curb spending on sensitive items, such as social security and health care, the political climate will be most hostile to wasteful subsidies. It will be awkward for governments to reduce unemployment benefits at home but to continue to lavish public money on landowners in the EU.

Second, I expect the climate debate to become more relevant for agriculture after a climate deal has hopefully been reached. At the moment, the debate focuses on the objectives that should be set (depending on the climate models) and the political feasibility of a deal (depending on the US, China, India …). Once we have an agreement with clear targets in our hands, the question will be: how can the EU live up to its commitments? And then we start thinking about the fact that agriculture is responsible for about 10% of EU greenhouse emissions; that this share is likely to increase as cars become more energy efficient, while ruminant digestion is hard to improve; and that the CAP does next to nothing to make agriculture more climate-friendly.

Third, the ratification of the Lisbon Treaty will give the European Parliament co-decision power in agriculture. In the past, the EP could give its opinion on the CAP but its consent was not needed to enact CAP legislation. Therefore, the Committee on Agriculture and Rural Development was unimportant and primarily attracted MEPs who were close to farm interests. In the future, other MEPs – notably members of the committees on the budget, the environment, development, and industry, research and energy – can be expected to push for CAP reform. More generally, the EP as a whole will have an interest to ensure that its new powers in agriculture are exercised responsibly and are not subjected to narrow national interests or dictated by farm lobbies.

Fourth, elections have been held in October 2009 in Germany, which is not only the biggest member state but also a swing state when it comes to CAP reform. In the Health Check negotiations, Germany strongly defended conservative positions, shielding milk farmers and blocking progressive modulation. This is everything but a natural position dictated by national interests. After all, Germany is the major net contributor to the EU budget, it is strongly dependent on a liberal world trading system that is constantly undermined by agricultural protectionism, and the deep-rooted ideals of a social market economy run counter to the current CAP. Now, the elections have replaced the uninspiring coalition between conservatives and social democrats with a clear conservative-liberal majority. This outcome is a mandate for bold reform. Angela Merkel had already propagated profound changes in the 2005 campaign. Prodded by her liberal coalition partners, she may finally fulfill the promises which got her the job. It is also noteworthy that the CSU, the independent Bavarian branch of the conservatives that traditionally caters to farm interests, has scored its worst outcome in its history. This weakens their ability to stymie CAP reform.

So in 2009 the long-term CAP debate was less forceful than I would have hoped, but this year’s developments bode well for 2010.

How do you interpret, from a CAP perspective, the year that has lapsed since the big budget conference, and its implications for CAP reform?

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