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The future of direct payments

As Valentin’s blog post yesterday explains, the CAP is not only a European agriculture policy, it’s a European income redistribution policy. The centrepiece of the CAP is the €42 billion a year in ‘direct aids’ or income support to farmers, funded entirely from the pooled EU budget. Valentin points out that in an era of fiscal austerity, the idea of billions of euros moving from one country’s taxpayers to another country’s farmers is likely to be politically controversial. Particularly when the biggest payouts go to Europe’s wealthiest citizens and most profitable companies.

As national governments decide by how much they are going to pay of nurses and school teachers, how many university places they will cut and which taxes they are going to have to increase, the idea that aids to farmers are ringfenced from cuts will come as a surprise to many. But this is exactly what European leaders agreed to in 2002, in a deal devised by Jacques Chirac and Gerhard Schroeder that fixed the CAP’s direct aids budget at a constant level until the end of 2013.

The result is that the German Chancellor Angela Merkel remains committed to the deal agreed by her predecessor, in which Germany will this year put €2.4 billion more into the CAP direct aids budget than it will get out, while Greece will get €1.2 billion more than it puts in. France will remain a net beneficiary although its gains this year of €868 million are set to halve by 2013 to €409 million.

When the protection of the CAP direct aids budget does finally expire, it seems certain that something will have to be put in its place. As the CAP2020 blog reports, a new study on subsidies and farm viability finds that in the absence of subsidies 83% of farms would continue to have a positive farm income but only 18% have a positive farm income once the costs of their own labour and assets are taken into account. Previous studies have suggested that the major impact of removing direct aids is that farm asset values will fall, especially land values. From the point of view of the general public there is no harm in lower land prices, though a young farmer who has taken out a hefty bank loan to buy land or an older farmer who plans to sell his land to provide for a retirement income would be entitled to think otherwise. It doesn’t take a genius to see that the upheavals – political and economical – of an overnight abolition of the current €42 billion a year that goes into the pockets of Europe’s farmers would be such that this is a very unlikely scenario.

There is no shortage of studies pointing failings of the current system of direct aids. Two of the best are the study by Jorge Nuñez Ferrer for the European Parliament and a short paper by the academics David Harvey and Attila Jambor. An excellent new report commissioned by European Parliament looks beyond the problems of current direct aids and considers how they might be replaced by a system that is politically viable but economically rational. A hard task, you might say. The study’s lead authors are Jean-Christophe Bureau, an occasional contributor to this blog, and Heinz-Peter Witzke. I was invited in an informal advisory role along with capreform.eu blogger Alan Matthews and a handful of others.

The report is among the best contributions to the debate on the future of the CAP. It contains a very useful overview of how the various member states line up on key issues and also surveys the various proposals tabled by farm unions and environmental and other civil society organisations. As far as conclusions go, the authors back the ‘public money for public goods’ mantra that was endorsed in a joint statement by Birdlife International and the European Landowners Organisation.

Creative Commons: http://www.flickr.com/photos/dr3wie/2668464207/sizes/m/Bureau and Witzke argue there needs to be a gradual transition away from the current distribution of direct aids to one which more accurately reflects the contribution of different farm types towards a variety of public goods. A flat rate per hectare income support payment would remain but should be co-financed, the authors argue, and payment limits should be introduced to very large farms, according to the number of people employed. Member states would be free to shift money from income support into public goods-type schemes. The effect of the proposed system would be considerable redistribution among current winners and losers with the general theme being more support for extensive farming systems, generally to be found in upland regions such as the alpine pasture pictured (above, right).

You can read the 167 page report in full here.


Photo credit: dr3wie // Flickr.com Creative Commons

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Which member states pay for wasteful farm income support?

So, is examination of member states’ financial net contributions a shameful exercise: hiking up national egoism and ignoring the larger benefits of European integration? Not at all. If CAP funds were spent exclusively on European public goods, such as climate change mitigation or the protection of endangered species, national bottom lines would indeed not matter. The money should be allocated wherever greenhouse gas reductions can be achieved most cheaply or where the need for wildlife protection is the greatest.

But as things stand, CAP subsidies are mostly free handouts to member states and their farming communities – they do not create commensurate value for European citizens. This applies in particular to the Single Farm Payment which farmers receive as long as they keep their land in ‘good agricultural and environmental condition’. These minimum conditions largely correspond to the legal baseline – that is, all farmers need to do is to respect the law.

Making those who pay for this waste aware of their unfavorable position actually serves European integration. The CAP absorbs more than 40% of the EU budget, depriving the EU of the renewed momentum it could gain if it became more relevant for attaining the priorities of the future. Citizens are ready to support an EU that creates real value added – by tackling climate change, promoting European infrastructure, or enhancing internal and external security. They are never going to endorse an EU that lavishes money on one politically powerful sector to the detriment of the entire economy.

The distributional issue behind CAP reform will become ever more critical over the next years. Public debts will continue to rise and painful spending cuts will make the population more sensitive to wasteful expenditures. Also, the strain on financial solidarity in the EU provoked by the debt/Euro crisis will spur interest in the transfer mechanisms hidden in the EU budget.

So who is cutting the best deal in the CAP? And who has pulled the short straw? A short paper of mine can be downloaded here. The paper focuses on member states’ receipts of direct income support under the first pillar, which total €42 billion. These are compared with member states’ contributions to financing the direct income support. The national contributions are comprised of the contributions based on value added taxes (VAT) and gross national income (GNI), corrected for the UK rebate and other exceptions.

The most important net contributor to direct income support in 2010 is Germany with €2.44 billion, followed by Italy with a negative net balance of €1.6 billion. Other important net contributors are the Netherlands, Belgium and the United Kingdom.

The biggest beneficiaries, each gaining more than €1 billion, are Greece, Poland and Spain, followed by France, Ireland and Hungary. All these countries defend a large CAP budget and a strong first pillar. Irrespective of their public justification, the money their farmers receive from other member states’ taxpayers certainly plays a role in their love for the old-style CAP.

The net balance for all major net payers will further deteriorate in the coming years. In 2013, Germany will make a net contribution of roughly €3 billion, followed by Italy with €1.9 billion, the Netherlands with €900 million and Belgium with €800 million. The strongest deteriorations in the net balance affect Germany, France, the United Kingdom, Italy and Belgium. France sees its net gains shrink from €868 million in 2010 to less than half in 2013.

Is it advisable for the EU-12 to push for a strong first pillar with much direct income support? Clearly, the EU-12 will be much better off by shifting the money from the CAP to the EU’s cohesion funds. EU-12 member states receive a share of every € spent that is three times higher for cohesion funds than for direct income support under the CAP. The ratio for Estonia is 5, for the Czech Republic, Latvia and Romania 4 or higher, and for Poland and Slowenia above 3.

You can download the entire paper here.

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The historic roots of agricultural protectionism in Europe

Great Britain went through a protectionist phase in agriculture after the defeat of Napoleon in 1815, lasting for three decades until the repeal of the Corn Law in 1846. In food-importing Great Britain, the interruption of trade through Napoleon’s Continental Blockade had driven up food prices and farmers resisted the subsequent resumption of trade in peacetime. But the historic roots of continental agricultural protectionism, I always thought, were somewhat more recent, namely the transport cost revolution of the second half of the 19th century. As it became economically efficient to transport grain by train from the US Midwest to the East Coast, and then by ship to Europe, agrarian interests defended the higher rents on scarcer European land against the international convergence of factor prices.

However, I stumbled upon an intriguing paragraph by Findlay and O’Rourke (Power and Plenty, p. 374) that dates some continental agrarian protectionism back to Napoleonic wars: ‘in 1811, faced with the growing scarcity of sugar, Napoleon issued a decree promoting beet cultivation through a variety of means, leading to a rapid growth in the number of factories. This new industry, which eventually spread to several other Northern Hemisphere countries, would soon become dependent on government subsidies and protection, since tropical producers retained important underlying cost advantages. Indeed, government production and export subsidies became so prevalent that in 1902 nine European countries … signed the first international primary commodity agreement, the Brussels Convention, which aimed at abolishing sugar subsidies. In this sector, therefore, war time import substitution had not only a long-run effect on subsequent trade policies, but also a large negative impact of tropical sugar producers, particularly from the 1870s onwards … Between 1860 and 1900, European countries increased their share of world trade in sugar from zero to 60%. … By 1902, free-market sugar prices had declined to little more than a third of their 1880 level.’

What an outstanding example of policies’ path dependence! There is a dangerous tendency in man to rationalize the past and call for continuity. Generally it feels better to say: ‘We have done what we had to do. Now times are changing and we need to adapt by building on what we have already achieved’, than to admit ‘We have seriously messed up in the past and now we need to start again with a clean slate.’ It would be preferable to be honest and concede that agricultural protectionism – including but also antedating the CAP – was a big mistake and that we need to move on to an entirely different policy targeting sustainable land use.

Another thought that comes to mind from this historical perspective: both causes of agricultural protectionism, from the early and late 19th century, are classical examples of special interests defending their rents to the detriment of collective welfare. The idea that agricultural subsidies/protectionism originated with the food shortages of the Second World War is clearly a myth. Whilst this experience facilitated the creation of the CAP, the real driving forces of the second half of the 20th century have remained the same as ever: the sectoral interest of agriculture.

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A three pillar CAP?

Attila Jambor and David Harvey presented a new paper to the Annual Conference of the Agricultural Economics Society a few months ago in which they argue that “two pillars are not enough for a sustainable future for the CAP”. They note that:

“The CAP, post 2013, is supposed by many to be required to contribute to meeting the major and diverse challenges of: global food security and climate change; environmental and land conservation and management; rural development; agrarian transition; food quality and safety; bioenergy and biofuels; regional and sectoral competitive (dis)advantages; market volatility and business risk and, no doubt, other issues as well.”

They also suggest that all of this must be achieved with a smaller share of the EU budget. Despite a wide range of contributions to the debate on the future of the CAP, the authors argue that “the critical ideas for reform still largely echo the Buckwell Report (EC, 1997), and reflect the accepted economic logic”. The issues to be addressed “can be grouped under three major policy headings: food markets; rural development; the environment” which conveniently correspond with the three widely-accepted aspects of sustainability (economic, social and environmental). This makes a lot of sense though the authors admit that

There is a challenge… to develop a coherent framework for such a Food Market Pillar. What should government (specifically the European Government) be doing that it is not doing already to secure a healthy and safe food market for its constituents?

Nevertheless, the authors strongly assert that the current pillar one of the CAP, which is dominant in terms of share of the budget, is “intellectually and logically incoherent”:

“There is no economic case for the continued, indefinite support of farmers simply because they are farmers. Payments can only be justified by associated contributions to society not otherwise compensated by the market. Furthermore, as already accepted by the Farm Council, Pillar 1 as presently constituted is not legitimate either. The wide variations in rates of payment, both between farms and between countries, bear no obvious relationship to any justifiable criterion for support.”

In a thoughtful section of the paper on the political economy of pillar one, Jambor and Harvey make two valuable observations. First, it is widely accepted that the variation in the rates of payment of direct aid “between farms and between countries” is politically unsustainable and there is a strong motivation towards greater fairness in any system of direct aids post-2013. Second, any move towards leveling out the rates of payment will lead to a significant changes to the allocation of the EU budget among member states and is therefore politically unpalatable since countries have a strong tendency to defend their own share of the EU pot. They argue that a flat rate payment system may have to be refined with “segmented rates for different regions, farm types and sizes so as to secure sufficient support in both the Farm Council and the European Parliament”.

They also address the prospect of a total phasing out of direct aids to farmers and suggest such a radical reform is unlikely. As they put it:

“There are, essentially two critical issues which prevent such a ‘radical’ change: the farmers’ legitimate concerns about whether or not they can possibly survive without ongoing support; public concerns about what the countryside and rural economies would look like in a world without support for farmers. Neither or these questions can be answered persuasively without actually seeing what such a world would look like. So both generate more than sufficient room for doubt and debate to a) substantially discourage our political system from risking such a change; b) encourage all sorts of propositions as to what might happen which can then be used to justify continued payments to avoid these market failure outcomes.”

The authors reveal their true colours as agricultural economists by coming down in favour of converting direct aids into a bond scheme, “a single, once-and-for-all payment [that] would provide farmers with a more secure capacity for the substantial adjustment and adaptation, which will be necessary for agriculture to meet future challenges.” What they fail to note is that most environmentalists dislike the bond scheme since it reduces the leverage of direct payments to achieve (modest but identifiable) environmental improvements through cross compliance, i.e. the things that farmers are required to do to qualify for aid. Politically, this is the real Achilles heal of the bond scheme.

The paper is concise, cogently argued and well worth a read:

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A tale of two visions

The reformist zeal of the 15 professors in the German scientific advisory board on agriculture is remarkable, and their statement (in German) largely concurs with the declaration for ‘A Common Agricultural Policy for European Public Goods’ signed by experts from all across Europe half a year ago. The statement even goes beyond the recent proposals (in German) made by the German Advisory Council on the Environment (SRU): agricultural economists overtake environmental experts in their demands for CAP reform.

According to the scientific advisory board on agriculture, market price, direct income and farm-level investment support should be removed. There is no reason to fear a massive breakdown in EU agriculture: 61% of German agricultural area is rented out, so that large share of direct payments does not benefit farming anyway; bioenergy makes it increasingly attractive to continue farming; structural change will allow significant cost reductions to make farming more competitive; several agricultural sub-sectors are economically viable, and have been so for a long time, without receiving significant subsidies and tariff protection; the extra costs of higher EU standards are low for most farms (less than €50/ha); and targeted payments to maintain agriculture in areas threatened by undesirable land abandonment can compensate adverse effects.

Coping with fluctuating market prices will be a key entrepreneurial challenge for farmers – and not a cause for government intervention. Governments may have some role to play to address production risks that cannot be efficiently insured – especially with regard to droughts. However, adaptation to climate change falls again primarily into farmers’ responsibility, while governments should limit their activity to providing public goods (such as meteorological forecasts, research and innovation).

A sectoral approach tied to agriculture is not a suitable mechanism for regional development. Furthermore, responsibility for regional development should be shifted to lower levels of governance.

Significantly more funds should be dedicated to targeted public-goods programs. In addition to the traditional objectives of climate change and wildlife biodiversity, the importance of maintaining the diversity of the agricultural genetic pool is highlighted. It should be examined which of these public-goods policies are best integrated into the agricultural resort and which should be transferred to other ministries.

This is a world apart from the official German position, dated March 31, 2010, and agreed by the federal and Länder ministries. The ministries favor the status quo plus some more Health-Check style modifications. The two-pillar system with a strong first pillar, centered on direct income support, should be maintained. The CAP should be further simplified and remaining market interventions be reduced to a safety net. Socio-economic objectives should remain central. And the current distribution of subsidies across member states should be upheld.

When will these two worlds clash? So far, the Ministry of Economy (liberal, FDP) and the Finance Ministry (conservative, CDU) have been silent on CAP reform and left the issue largely to the Ministry of Food, Agriculture and Consumer Protection (Bavarian conservatives, CSU). But the strain of the financial and economic crisis on public budgets – together with the growing public discontentment with Germany’s responsibility to pay for the EU and other member states’ deficits – makes a showdown inevitable.

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The limits of (evaluating) rural development policies

The evaluation of rural development policies has improved over the years. The current mid-term evaluation, with all member states applying the sophisticated Common Monitoring and Evaluation Framework (CMEF) underpinned by voluminous Commission guidelines, is another step forward. DG Agri is adding further tools to make evaluations even more productive, such as an Internet platform for all stakeholders involved in the evaluation process.

The philosophy of monitoring, learning and adjusting is correct – but it can lead to an excessive trust in our abilities to manage economic processes, including their social and environmental implications. We must recognize the limits of our ability to glean information about the diverse challenges on the ground, to identify the locally diverse and multifaceted effects of policy interventions, to process this information intelligently and impartially, and to draw adequate conclusions. In other words, we must take the limits of top-down government seriously.

Some problems of evaluation are clear-cut and, theoretically, remedies are within reach. For instance, the data needs of evaluators could be better integrated into routine statistics and evaluators could be made more independent from policymakers. However, the very fact that these problems exist though they are simple to understand and to resolve – and that they exist not only with regard to the CAP but in all policy areas and countries – gives reason to doubt future progress. Sound evaluation tends to hurt; it always focuses on the weaknesses and adopts ever tougher benchmarks. Policymakers and administrators therefore take care that evaluation does not become (too) sound.

In addition, evaluation is beset with dilemma that even the most ambitious reformer cannot resolve. The advantages of control can be offset by a loss of trust: lower-level actors may prefer to have an impeccable formal record rather than to be effective and innovative. The benefits of evaluation must be balanced against their administrative demands on governments and farmers. The system should be sophisticated (and thus yield value even for the most advanced member states) yet also manageable for those member states with the weakest analytic resources. Evaluation reports should be quickly available and incorporate the long-term effects of policy measures. Reports should be adapted to local circumstances – and be comparable across member states. Indicators should be stable, so that evaluators can learn how to handle them and that policymakers can observe how policies work across time, but they should also change in response to new insights and challenges. As a result of such dilemma, improvements in one regard tend to come at hidden costs in other dimensions.

In brief, policy evaluation is not like a new technology whose potential is still hard to grasp; it is an age-old technique whose inherent limits are well known. This matters for policy design.

First, policy objectives should be spelled out clearly and guidance on suitable indicators should be provided directly in the legislation establishing the policy instrument. Currently, objectives are often left vague and actual policies designed in a way that makes a mockery of subsequent evaluation (e.g. when the very intention of a policy is to create windfall gains for farmers but the evaluator is asked to ‘show’ its beneficial effects on competitiveness).

Second, the number of policy objectives and instruments should be limited. DG Agri counts more than 150 indicators to assess rural development – this plethora favors box-ticking over thorough analysis. Interestingly, environmental impacts tend to be easier to measure than socio-economic impacts. It is, for example, impossible to get a solid grip on the net job effects of farm modernization subsidies – especially when cross-sectoral effects are accounted for. This is yet another argument for focusing the CAP on sustainable land use.

Third, difficulties of policy evaluation and learning at the top speak in favor of devolving responsibility to lower levels of governance. Local authorities are best able to identify their needs, to see which solutions work best and to get results at lowest costs. Co-financing is therefore an important tool to create strong incentives for local and national authorities to use their informational advantage for more effective rural development.

This post is based on the personal lessons that I took away from a recent seminar on rural development evaluation. The seminar presentations can be downloaded here.

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The development angle

“Waste at home and damage abroad”. That is how one Member of the European Parliament described the common agricultural policy. Gabrielle Zimmer, a German MEP who sits on the parliament’s development committee, was speaking at a conference convened last month by the United Nations Millenium Campaign to look at the impact of Europe’s farm tariffs and subsidies on developing countries.

According to Eckhard Deutscher, Chair of the OECD Development Assistance Committee (DAC) and another participant in the same meeting,

“The biggest challenge the EU’s development aspirations are facing is the lack of policy coherence. The trade, development, agriculture and environmental policies are simply out of sync with regard to developing countries.”

Eveline Herfkens, Founder of the UN Millennium Campaign, pulled no punches,

“An unreformed European agriculture policy will continue to hamper the EU’s and other donors’ efforts to eradicate poverty and will perpetuate human suffering.”

European countries lead the world as donors of development aid, but for decades the EU has pursued agriculture policies which have had the reverse effect – whether it’s trade barriers that make it harder for developing countries to export farm produce to Europe or subsidies that encourage European farmers to overproduce, driving prices down and undercutting unsubsidised farmers in poorer countries.

In the first few years of the last decade, the Make Trade Fair campaign made the weather in the debate over reform of the CAP, perhaps supplanting the environmental critique as the most politically salient attack on the policy. The decoupling of support in the Fischler reforms theoretically broke the link between farm subsidies and over-production although there are those who say that any farm subsidy has an impact on production. At the Hong Kong WTO ministerial in December 2005 the EU offered to end all export subsidies by 2013 if other countries reduced their supports to exporters.

It’s possible that United Nations Development Programme’s annual report for 2005  represents the high-water mark of the influence of the development advocates on thinking about agriculture policy:

“When it comes to world agricultural trade, market success is determined not by comparative advantage, but by comparative access to subsidies—an area in which producers in poor countries are unable to compete. High levels of agricultural support translate into higher output, fewer imports and more exports than would otherwise be the case. That support helps to explain why industrial countries continue to dominate world agricultural trade.”

The global food price spike of 2007-08 presented a problem for the development critique of farm subsidies. Suddenly, the problem for developing countries was not low commodity prices but high commodity prices. Backers of a production-boosting farm policies in rich countries were quick to jump on this turnaround, arguing that European and American farmers had a moral duty to ‘feed the world’ and that the CAP should underpin this aim.

A more subtle analysis would argue that developing country farmers have suffered as a consequence of the CAP for decades, and that it is precisely because of the chronically retarded state of agricultural development in many developing countries that food prices spiked and the effects were so damaging. A rapid supply response was just not possible because developing countries lack capital for agricultural investment, skills, market structures and so on. These are not things that can be built overnight. It could be added that biofuel subsidies and mandates contributed to the food price spikes by increasing demand for food crops like corn and oilseeds that are used to make biofuels.

The extent to which the CAP continues to cause harm to developing countries is the subject of an ongoing research by Alan Matthews, a contributor to this blog, and I’m told his findings will be published in a book in September 2010. As for the future of the CAP, there seems to be no guarantee that we are safe from a return to the production-boosting paradigm of the past. Momagri, a shadowy French farm lobbying organisation, is just one influential voice pushing for just such a change of direction. The United Nations Millenium Campaign has stepped into the debate on the future of the CAP at a critical time. It remains to be seen whether other development advocates and influential NGOs like Oxfam will rejoin the fray.

Photo credit: Quarsan – Flickr Creative Commons

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10 May: Sugar is sweeter

Who wants to be a farm subsidy millionaire? Quite a few, it turns out.

According to data released by EU governments – and crunched by our sister organisation FarmSubsidy.org – the number of farmers and food companies who received individual payments of more than €1m this year rose by more than 20 percent on the previous year.

Count ’em up: Germany has 268 millionaire recipients, while France has 174 subsidy millionaires, including several banana-producing companies in French overseas territories. Altogether France’s subsidy millionaires took over €1bn in 2009. Besides the sugar refiners, big payouts went to dairy processors and trading companies, as the EU increased dairy export subsidies in 2009.

As capreform.eu and farmsubsidy.org’s Jack Thurston told The Guardian: “Messing around with agricultural markets helps the big guys who don’t need it. If smaller farmers who struggle to stay competitive need to be supported because they provide social and environmental benefits, they should be paid from social and environmental funds, because ultimately market interventions don’t work.”

Of course, when it comes to farm subsidies, sugar really is sweeter. According to the new data, the EU’s sugar companies were once again among the largest recipients of CAP payments.

In France, three sugar companies received the largest CAP payments (Tereos €178m, St Louis Sucre €144m, and Cristal Union €57m). Across the border, in Spain, the top recipient of subsidies was sugar company Azucarera Ebro, who nabbed €119m. And the second largest recipient in Germany was the world’s largest sugar processor and trader, Sudzucker, who claimed a cushy €42.9m.

And Britain? Alas, with an election taking place last Thursday, British civil servants decided to stop the public from seeing the data, because it might disrupt election campaigning. It would be unfair, Whitehall thought, to ask candidates questions about subsidy payments and better therefore to leave the public in blissful ignorance about the facts.

Unfair to whom exactly? Initial data harvesting by farmsubsidy.org reveals that possibly up to 70 of the 650 Conservative candidates standing at the election could be receiving some sort of subsidy. In a delicious twist, up to half a dozen euro-skeptic UKIP candidates could be receiving EU cash.

While the data does not indicate why these payments to sugar companies were made, it may be assumed they are part of the EU’s complex programme for reducing the capacity of the EU sugar sector, in line with its WTO obligations.

Other top recipients include dairy processing and trading companies that have benefited from the reintroduction of the EU’s export subsidies for milk powder and butter, which enable them to dump excess European milk production on world markets.

Once again, this year’s data has thrown up some peculiarities. The youngest recipient of CAP funds in Sweden is 14 years old, while two Swedish recipients are listed as 100 years old, but are both dead. An ice-skating club in the Netherlands took €162,444, an accordian club in Sweden €59,585. The revelations hit the headlines across the continent.

How did the EU’s farm commissioner Dacian Ciolo? react to all this? “I welcome the transparency initiative, and hope that our work with Member State Ministries of Agriculture in the last 12 months will ensure that the quality of data available is even better than it was last year – the first time that these figures were published.”

Last week also saw Ciolo? speak at a conference on the future of the CAP in Copenhagen. The EU’s farm commissioner stressed the need for “long-term, objective criteria” for direct payments, saying “public funds must be divided up fairly and transparently”. He also argued that a fairer distribution of support does not necessarily mean the “same thing” for all farmers and reiterated the need “to take account of the collapse of farmers’ earnings in 2009”.

Meanwhile, French farm minister Bruno Le Maire refused to accept a lower budget for EU farmers but agreed to link farm aid to the protection of public goods and services such as the environment, energy and water in the future. His Polish counterpart Marek Sawicki echoed this, arguing that the future budget should be “at least on the same level as we have today.” Le Maire also called for stronger market regulation, insurance schemes and increased intervention stocks.

On the other hand, Germany’s farm minister Ilse Aigner called for a clearer distinction between pillar 1 and 2 funds and for a complete decoupling of payments.

Aigner’s Dutch counterpart Gerda Verburg insisted on the need for “more targeted direct payments” from pillar 1 in order to “improve the competitiveness and sustainability of European agriculture through knowledge, innovation and investment”. Danish farm minister Henrik Høegh also called for an overhaul of Pillar 1.

Also last week, the  EU farm union umbrella group, COPA-COGECA, outlined its position on the future of the CAP. It agreed that direct payments must be maintained to help farmers deal with poor market conditions and market volatility.

Padraig Walsh, COPA president, said adjustments to the CAP post-2013 should focus on increasing market stability and making farming more profitable. He added: “We definitely do no want to see any further renationalisation of the CAP or any increase in co-financing which would lead to distortions of competition and undermine the single market.”

The same day, Britain’s National Farmers Union launched a policy document on the future of the CAP. The NFU believes the CAP should focus on maintaining the UK’s productive capacity in Europe; providing a buffer against the threat posed to farmers by volatile markets; supporting efforts by farmers to become more competitive; and providing incentives to improve environmental performance.

Wyn Grant provides an initial reaction on his blog: “The NFU has been working on this policy statement for some time and as one would expect it is a strategically oriented and sophisticated analysis. Clearly it takes account of the perspectives of farmers, but it is also politically realistic in terms of what can be achieved.”

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Who will guard the guardians?

It is EU practice (and legislation) to subject the CAP to a sophisticated system of evaluations. For each member state’s rural development program (RDP), an ex-ante, mid-term and ex-post evaluation is being undertaken by independent bodies. Other studies, commissioned by DG Agri or DG Research, examine specific CAP instruments across Europe on a rolling basis. In addition, the European Court of Auditors scrutinizes selected CAP instruments (here you can find summaries of their CAP-related studies).

But how independent are the evaluators? How strong is their mandate? How useful are the findings? In a recent article in EuroChoices, Angela Bergschmidt, an evaluator from the Federal Research Institute in charge of agriculture in Germany, offers a bleak account:

[It is] a useless evaluation; costly, often low in scientific quality, unread and unnoticed by policymakers and the wider public.

Evaluation results have apparently not been used to implement changes in the new RDP either at EU level or with respect to adoption by the Commission of the RDPs of Member States.

my experience in Germany is that neither the Federal Ministry for Food, Agriculture and Consumer Protection nor the Ministries of the Federal States are convinced of the evaluation concept. The Administration is accustomed to implementing measures without performance review, adapting them mainly for fiscal or political reasons. As a consequence, the results of an evaluation are used as a line of reasoning if they fit into actual strategies.

the main concern of individual managing authorities is to fulfil formal evaluation requirements

the evaluation unit remains understaffed and is unable to carry out quality control procedures for the large number of RDP evaluations

A seminar on May 19 will take a closer look at ‘Rural Development Policy in the EU – Lessons from the Past and Options for the Future’. The seminar focuses on the evaluation process for rural development programs and how this can inform and improve rural development policy in the EU. One objective of the conference is to discuss how better evidence on the key questions of policy design can be gathered. This is a crucial challenge ahead of the fundamental post-2013 CAP reform. In addition, the researchers have summarized the evidence that is available from existing evaluation reports, drawing lessons for the future direction of policy.

A smarter CAP debate

The seminar is part of a new series of seminars on CAP reform.

The EU needs a smart CAP debate. The CAP is the EU’s most expensive policy, costing € 57 billion annually. The success of the EU 2020 strategy and the next long-term EU budget cycle depends on CAP reform. Furthermore, the CAP is a key lever for promoting biodiversity and fighting climate change. A policy debate of the highest standards is needed to prepare the ground for making the right decisions on CAP reform.

But the debate about the future of the CAP is often poorly informed and distorted. Emotions take centerstage: fears over food insecurity, compassion for small-scale farmers and attachment to the rural way of life can hinder evidence-based analysis. The debate is also driven by special interests, with farmers protesting in the streets and extensive lobbying behind closed doors. Narrowly-conceived national interests in maximizing the receipt of EU subsidies also bias perspectives and arguments.

ECIPE and reformthecap.eu are organizing a series of seminars to help non-experts determine the facts. More and more stakeholders are starting to take an interest in the CAP. They feel that something is wrong with the policy but find it hard to challenge the justifications provided by insiders who defend the status quo. The seminars will provide an overview of what research has to say on critical issues in reforming the CAP. The aim is to inform all stakeholders through easily accessible, high-quality presentations by recognized experts: providing the best science at your fingertips.

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EU boosts farm subsidy millionaires by more than 20 per cent in 2009

Today, farmsubsidy.org revealed the results of an intensive two-day harvest of new farm subsidy data published by the European Union’s member states in accordance with the new laws on disclosure of beneficiaries of EU funds.

The data, relating to payments made in 2009, has been harvested from twenty seven government websites, in some cases using advanced computer programming techniques. So far, data on 38.3 billion euros of payments have been harvested (from a total CAP budget of 55 billion euros). In some cases member states have made the data easy to access, in other cases they appear to take deliberate steps to block access. As at 11am on Tuesday 4 May, 99% complete data has been obtained from 21 member states. Only partial data from France, Greece, Cyprus, Italy and Portugal. The United Kingdom has withheld all its data for political reasons until after this week’s general election (though the Scottish Government has published its data).

Farmsubsidy.org’s 2009 millionaires list (beneficiaries that received more than a million euros) shows a significant increase over last year. In 2008 we identified 1,040 farm subsidy millionaires. In 2009 already some 1,212 have been identified, receiving a combined total of 4.9 billion euros. This number is likely to rise as it does not include all data from Portugal and the UK. We expect that ultimately there will be a third more farm subsidy millionaires in 2009 than in 2008.

This year, the country with the largest number of farm subsidy millionaires is Germany. Between them, Germany’s 268 millionaire recipients took some 622,594,805 euros. France’s 174 farm subsidy millionaires, many of which are banana-producing companies in French overseas territories, took a combined 1,016,241,476 euros.

As was the case in 2008, the list of top recipients is dominated by sugar processing companies.

While the data does not indicate why these payments to sugar companies were made, it may be assumed they are part of the EU’s programme for ‘restructuring’ the sugar sector. This involves processing companies that wish to stay in business paying a levy into an EU fund to ‘buy out’ those companies giving up their processing quotas. Processing quotas are valuable because the EU price for sugar is fixed well above world market prices, representing a hidden subsidy from European consumers to sugar producers.

Other top recipients include dairy processing and trading companies that have benefitted from the reintroduction of the EU’s export subsidies for milk powder and butter, which enable them to dump excess European milk production on world markets. Export subsidies were reintroduced as part of the EU’s bail out of the dairy sector after milk prices fell from record highs in 2007/08 to record lows in 2009.

At the other end of the scale the data harvest has revealed some very small payments, some less than a euro. It is assumed that the costs of administering such modest aid payments vastly exceeds the face value of the payments.

According to the data from Sweden, which includes personal identification numbers, the youngest recipient of CAP funds is just 14 years old, while two Swedish recipients are 100 years old, though both are dead. The oldest living Swedish CAP recipient is a 98-year-old woman living in Dalsland.

A number of curious recipients of CAP funds was also revealed, illustrating the diversity of beneficiaries: an accordion club (Sweden – €59,585.10), a billiard club (Denmark – €31,515, a payment for beer and soft drinks), a Juri High School alumni society (Estonia – €44,884), Ons Genoegen ice skating club (Netherlands – €162,444), the Sint Maarten amateur football club (Netherlands – €354,566.62) and Schipol Airport in the Netherlands (€98,864.33). As in previous years, a number of banks and horse riding clubs were among the beneficiaries.
In Bulgaria, the national CAP paying agency appears to have paid itself a sum in excess of a million euros as well as payments to the 26-year-old daughter of the former Bulgarian deputy agriculture minister (who had responsibility for EU funds) in excess of €700,000 euros.

Farmsubsidy.org has also published an evaluation of which member states are meeting high standards of budget transparency, and which are failing.

The decision of UK civil servants to withhold the data during the general election campaign is without precedent and has provoked the disapproval of the Commission. According to the UK’s Department of Environment, Food and Rural Affairs, which has previously backed transparency in farm subsidies, the decision was made in the interests of political candidates who are beneficiaries of CAP funds.

The transparency ranking is topped by Hungary. Hungary also deserves special mention as the ‘most improved’ member state. Last year, the Hungarian government published data in an exceptionally unhelpful way: a series of PDF files that ran to thousands of pages. This year, the Hungarian government has provided comprehensive information on both EU-funded farm subsides and nationally-funded farm subsidies, in a user-friendly bulk-downloadable, electronic format. Other countries that have followed the best practice of providing the ‘raw data’ are Belgium, Denmark, Estonia, Czech Republic, Lithuania, Poland, Romania, Slovenia and Sweden.

This year’s transparency villains are Austria, Cyprus, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Portugal and Slovakia. These countries have all refused to provide the data for bulk download and their websites require ‘web-scraping’ robots to be programmed to harvest the data.

Greece is a particular problem case, suggesting that the Greek government’s difficulties with basic numeracy are not confined to its budget deficit. The Greek government’s farm subsidy website very inaccessible and the data presented on it contain arithmetical errors. For example, the published figure for total payments to certain beneficiaries was found to be less than the sum of the payments listed for those beneficiaries. A case of two plus two equalling one.

This is only the first cut of the 2009 data. More analysis is to come…