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Why no “Green Revolution” in new Member States?

 

Competitiveness and innovation in the agriculture of new Member States before EU accession can be assessed as relatively poor. In a part of the area, the situation even resembled the situation in developing countries. In the parts where a certain level of development was achieved, i.e. closer to the Central Europe part of EU, extreme structural deficits were perceived. There was an obvious need for a development policy that would support restructuring and enable a new development cycle of agriculture.

Strong RD funding for modernisation of farms

Comprehensive European resources from the pre-accession and accession rural development funds were thus of great help. The issue of raising competitiveness became one of the key priorities of the rural development programmes in the region, which account for 35 do 65 % of total funds per country. Comprehensive support programmes were formed, with support to capital investment to agricultural holdings and to the food processing industry as the prevailing measures.… 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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Cross compliance for labour laws?

The Global Mail reports on a shocking case of alleged abuses of migrant workers in the Spanish horticulture industry, concentrated in the southern Spanish region of Almería along a 200km strip of hothouses known as el mar de plásticos. This is where much of Europe’s salad vegetable crop is grown.

Allegations range from payment below the minimum wage, employment of illegal migrants, intimidation and, in the most recent case, murder. The UK’s Guardian newspaper’s special correspondent Felicity Lawrence wrote a startling report into labour abuses in €2 billion a year hothouse industry. She found:

Migrant workers from Africa living in shacks made of old boxes and plastic sheeting, without sanitation or access to drinking water.

Wages that are routinely less than half the legal minimum wage.

Workers without papers being told they will be reported to the police if they complain.

Allegations of segregation enforced by police harassment when African workers stray outside the hothouse areas into tourist areas.

… 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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What is rural development about?

On 1 January 2011, 41% of EU-27 population lived in urban regions, 35% in intermediate regions and only 23% in rural regions, as suggested by the latest release of Eurostat. What is more, the population of urban regions grew by 5.2 per 1000 inhabitants, that of intermediate regions by 2.2‰, while rural regions decreased by 0.8‰ in 2010. These figures are based on a revised urban/rural typology, developed by the European Commission, and are valid for NUTS3 regions. Regions are classified as rural, intermediate or urban based on population density and total population.

However, as expected, individual member states differ significantly regarding the share of their rural population. The largest proportion of the population living in rural areas can be found in Ireland (73%), Slovakia (50%) and Estonia (48%). As another side of the coin, the largest share of the population living in urban areas can be seen in Malta (100%), the United Kingdom (71%) and the Netherlands (71%).… 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

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The cost of flat-rate agri-environmental measures

The Commission’s proposals to require shallow, one-size-fits-all, green measures across the EU as a whole in return for a green payment in Pillar 1 have been widely criticised as overly prescriptive, yielding limited environmental benefits (‘greenwash’), administratively complicated for member states and unnecessarily costly in terms of the trade-off with food production.

I reviewed these criticisms in a recent note for the European Parliament’s COMAGRI (link to appear when the note is published shortly). In the note I favoured a continuation of the past CAP reform trajectory in which a larger share of the CAP budget would be shifted to Pillar 2 in order to allow more ambitious and targeted agri-environmental measures (AEM). The apparent unwillingness of the Council of Ministers to countenance a larger Pillar 2 budget (presumably because of the difficulties created by the need for co-financing as well as due to political opposition from farm groups) is the biggest political obstacle to this approach.… Read the rest