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What is the likely cost of greening Pillar 1?

The Commission’s proposals for the design of direct payments after 2013 include a greening component which, according to the draft legislative proposal (yet to be released on 12 October next and thus subject to change) will be mandatory for farmers in receipt of the basic income payment – thus becoming what I called in an earlier post a form of super-cross-conditionality.

In the impact assessment to be released with the legislative proposal the Commission has made some estimates of the cost of implementing these green measures. In this post, I examine these costs using information in the draft version of the impact assessment (Annex 12 Impact of Scenarios on the Distribution of Direct Payments and Farm Income).

This version was completed before June 2011 and the favoured proposal in the draft regulation now differs somewhat from the version examined in June. In particular, the obligation to maintain a green cover during winter has been dropped, but on the other hand the area to be setaside under the ecological focus requirement has been increased from 5% to 7% (see this post for a summary of the draft direct payments regulation).… Read the rest

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The future for national envelopes and Member State flexibility in Pillar 1

A feature of the move towards decoupled direct payments in the EU since the Fischler 2003 reform has been greater flexibility for Members States in the management of these payments. This can be seen in various ways: the different options on which to base the Single Payment Scheme; different cross compliance requirements including definition of Good Agricultural and Environmental Conditions; different possibilities for modulating payments between Pillar 1 and Pillar 2; and provisions for ‘national envelopes’ and for the retention of partial coupling.

In this post I examine the future for national envelopes and partial coupling in the light of the Commission’s draft regulation on direct payments after 2013. At issue is the extent to which the draft proposals expand the scope for coupled payments and national flexiblity more generally in the post-2013 period.

National envelopes sometimes refer to the overall ceiling on the funding for direct payments allocated to each Member State, but here I use it in the more specific sense to refer to the share of direct payments over which Member States have some discretion over how to make these payments.… Read the rest

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Court of Auditors launches broadside against deficiencies in agri-environment schemes

Are we as taxpayers getting good value for money from agri-environment payments under the EU’s rural development (RD) policy? This is an important question, given that agri-environment payments will amount to around €22 billion during the 2007-2013 RD programming period, alone accounting for around 23% of all Pillar 2 spending. It becomes more important given that the Commission is flagging that it wants to direct even more funding towards the provision of environmental public goods in the next programming period.

Breakdown EU Rural Development spending 2007-2013Breakdown EU Rural Development spending 2007-2013

A European Court of Auditors report published last Monday (September 19) provides a rather critical response to this question. The Court summarises its findings as follows:

Agri-environment is a key EU policy which aims to respond to society’s increasing demand for environmental services. This report assesses whether this policy is well designed and managed. The Court found that the conditions for assessing whether or not the objectives of the policy have been achieved are not in place.

… Read the rest
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The mystery of the EU's disappearing AMS

Alan Swinbank of Reading University in the UK has been doing some detective work to understand the dramatic fall in the scale of the EU’s trade-distorting support (reported in the Amber Box under WTO rules) in the EU’s latest notification to the WTO which covers the marketing year 2007/08. His findings are reported in the latest issue of the online Estey Centre Journal of International Law and Trade Policy.
As previously reported on this blog, the EU figure for Amber Box support (called the Current Total Aggregate Measure of Support in WTO jargon) fell from €26.6 billion in 2006/07 to €12.4 billion in 2007/08. The significance of this reduction is clearly shown in the figure below.

EU WTO Domestic Support NotificationsEU WTO Domestic Support Notifications

It turns out that the reason for the more than halving of the reported EU AMS in 2007/08 compared to 2006/07 is that the EU no longer calculates an ‘equivalent measure of support’ for fresh fruit and vegetables.… Read the rest

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The mystery of the EU’s disappearing AMS

Alan Swinbank of Reading University in the UK has been doing some detective work to understand the dramatic fall in the scale of the EU’s trade-distorting support (reported in the Amber Box under WTO rules) in the EU’s latest notification to the WTO which covers the marketing year 2007/08. His findings are reported in the latest issue of the online Estey Centre Journal of International Law and Trade Policy.

As previously reported on this blog, the EU figure for Amber Box support (called the Current Total Aggregate Measure of Support in WTO jargon) fell from €26.6 billion in 2006/07 to €12.4 billion in 2007/08. The significance of this reduction is clearly shown in the figure below.

EU WTO Domestic Support NotificationsEU WTO Domestic Support Notifications

It turns out that the reason for the more than halving of the reported EU AMS in 2007/08 compared to 2006/07 is that the EU no longer calculates an ‘equivalent measure of support’ for fresh fruit and vegetables.… Read the rest

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How will Rural Development funds be allocated among the member states?

The early September draft of the Commission legislative proposal for the new Rural Development regulation to be released on October 12th next was inconclusive on how Pillar 2 spending would be allocated across the Member States. The annual amounts available to each member state will not be determined in the Regulation, but will be left to a subsequent Commission implementing act, taking into account (a) objective criteria linked to the three objectives of the Regulation (agricultural competitiveness, sustainable land management and balanced territorial development) and (b) past performance.

The draft impact assessment on the new regulation which also has yet to be formally released provides some further guidance on the Commission’s thinking, and shows how the distribution across member states would be affected by the use of different objective criteria. The simulations show how judicious selection of the criteria can almost exactly reproduce the status quo!

Various options are considered in the impact assessment.… Read the rest

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Global food prices remain very high

The Commission has published its latest international food price monitoring newsletter for September. This tracks price changes for five major food groups included in the FAO food price index. After hitting a record level of 237.7 in February 2011, the FAO Food Price index continues lingering above levels observed during the 2007/08 food crisis, settling at 231.0 in July 2011 and 231.1 in August 2011. Compared to June 2011 levels, meat and sugar indices strengthened, while other eased slightly. These high food prices continue to fuel concern about food price inflation in developing and emerging economies.

FAO food price index Sept 2011

… Read the rest
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Commission’s impact assessment of direct payments changes

The Commission’s impact assessment of the range of changes to direct payments included in its draft legislative proposals provide useful additional detail on the economic impacts to be expected from these changes and thus their political feasibility. The impact analysis has yet to be released officially but the relevant annex of the draft assessment can be found here.

Annex 3 of the impact assessment (IA) addresses all of the proposed changes in Pillar 1: greater convergence between Member States; the move toward flat rate payments within Member States or regions; additional income support in less favoured areas; capping of payments; the small farmer scheme; specific support for young farmers; a better definition of ‘active farmers’; as well as coupled aids (the ‘green’ payment option is evaluated in Annex 2 of the IA).

The IA considers a variety of options on which to base greater convergence of payments between Member States.… Read the rest

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Draft market organisation regulation confirms market orientation with safeguards

The two previous posts covered the Commission’s draft proposals for the Direct Payments regulation and the Rural Development regulation. In this post, I cover its draft proposal for a revised single common market organisation regulation.

Summary

• There is the first formal acknowledgement that the Commission is not going to propose legislation to renew the sugar quota regime when it expires in 2014/15, although there will be a one year extension. Ending the sugar quota system is given as an example of simplification of the CAP under the proposal.
• A single animal disease/loss of consumer confidence provision is extended to plant products given the experience with the e.coli outbreak in Germany over the summer.
• The general market disturbance clause is expanded to cover all sectors in the CMO. In this context, we should also recall the proposal for a new Special Reserve in the MFF regulation for crises in the agriculture sector with an annual ceiling of €500 million to be mobilised over and above the ceilings of the financial framework.… Read the rest

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Leaked rural development regulation has few surprises

In a previous post I looked at the draft Direct Payment regulation, one of four key regulations which will shape the future CAP after 2013. In this post, I look at what is proposed in the Rural Development regulation. This comes with the health warning that the actual legislative proposals will not be released until October 12th, and some of these proposals may change in the meantime.

Summary of proposals

• Greater coordination of EAFRD spending to ensure complementarity of RD programming with the programming of the other shared-management funds, the Regional Fund, the Social Fund, the Cohesion Fund and the Fisheries Fund. The funds are placed under a Common Strategic Framework (CSF) at EU level which will be transposed into Partnership Contracts at national level. The CSF will replace the current approach of establishing separate sets of strategic guidelines for these funds. In principle, monies from these other funds can be used to support the priorities in the RD Regulation.… Read the rest