For most of its life, DG Agriculture has been concerned with managing agricultural markets, increasing farm productivity and guaranteeing European farmers a good income. In the 1990s, under the leadership of Commissioner Franz Fischler, it began paying more attention to broader economic development and environmental concerns in rural areas. This new interest led to the establishment of the Rural Development Reguation, a suite of new policy instruments (a ‘second pillar’ of the CAP) that comprised a set of mostly farm-based subsidy schemes designed to run alongside the traditional farming policies of the EU’s common market organisations (the ‘first pillar’ of the CAP). The Commission recently held a big rural development conference in Cyprus and this was accompanied by the publication of a short paper looking at the role of agriculture in rural economies across the EU and a large dataset of rural development statistics and indicators. Continue reading “Commission perspectives on agriculture and rural development”
Moving towards a flat rate farm payment?
It is sometimes said that the Common Agricultural Policy establishes a level playing field across Europe, allowing farmers to take part in the European single market without fears about a plethora of national subsidies distorting prices, giving some a helping hand and holding others back. If only it were true. The fact is that when it comes to the biggest ticket item in the CAP, the €36 billion in direct payments (the decoupled single payment scheme plus various commodity-linked direct payments), the CAP is far from being a common agricultural policy. Continue reading “Moving towards a flat rate farm payment?”
Buckwell expresses doubts about SFP and pillars
Agra Focus has been conducting a series of interviews on EU farm policy and one of the longest and most interesting to date is with Allan Buckwell. He is currently policy director with the (England and Wales) Country and Land Business Association, but is also chair of the policy committee run by the European Landowners Association. He was for many years a respected agricultural economics and policy academic at the now sadly diminished Wye College. Perhaps his most interesting role in policy terms was when he spent a year in DG Agri in 1995-6 and chaired a group which wrote a report on a Common Agricultural and Rural Policy for Europe. Continue reading “Buckwell expresses doubts about SFP and pillars”
Irish farmers 71% reliant on subsidies
In yesterday’s Irish Times I went ‘head to head’ with Michael Ring, a Fine Gael member of the Irish Dáil (legislature). I was putting the case for transparency in public expenditure on farm subsidies and Michael was arguing against. He made the claim that transparency in the CAP will “will give a clear indication of income of each farming household”. To be fair, nobody is arguing for the disclosure of farm incomes, just for the disclosure of the amount of government handouts to each farm. But could it be that the two figures are rather similar? And what does that mean for the economic viability of farming in Ireland? Continue reading “Irish farmers 71% reliant on subsidies”
Turkeys vote for Christmas
By approving a set of proposals to water down the already modest Commission proposals for the health check, the agriculture committee of the European Parliament has reinforced its reputation for thinking rooted firmly in the past and largely captured by the narrow set of producer interests who do well from the CAP status quo. As I have argued before, the lack of ambition of the health check is playing into the hands of the growing number of those who would like to see the CAP swept away altogether. Continue reading “Turkeys vote for Christmas”
Free market think tank weighs in on CAP reform
The European Centre for International Political Economy (ECIPE) is a rare creature among Brussels think tanks: first, it advances a strong free trade agenda and second, it does not rely on EU institutions for its funding (its website says that its ‘base funding’ comes from the Free Enterprise Foundation in Sweden). Earlier in the summer EPICE published a briefing paper about the CAP written by Valentin Zahrnt. There’s not a whole lot new in the paper and there is a lot in common with a policy brief I wrote for the Centre for European Reform back in December 2005. The author comes down firmly on the non-trade-distorting, public money for public goods agenda advanced most strongly by Sweden, Denmark and the UK (and more moderately by the Netherlands). Continue reading “Free market think tank weighs in on CAP reform”
Who gets what in EU rural development funds
In December 2006 European Union heads of government agreed a new Financial Regulation, the legal text that sets out the rules for the EU budget. The new Financial Regulation contains new requirements on the public disclosure of end beneficiaries of EU funds. The first significant fruits of the new budget transparency law are due by 30 September 2008, the deadline set out in the implementing regulations relating to expenditure under the Common Agricultural Policy. By this date each member state is obliged to provide a web-based search tool detailing all end beneficiaries of EU funds spent under rural development programmes between 1 January 2007 and 14 October 2007 (sometimes referred to as the second pillar of the CAP). Continue reading “Who gets what in EU rural development funds”
+++Netherlands government position paper+++
The Dutch have a well-deserved reputation for straight talking and so it is with the Government’s new position paper on the future of the CAP. As the following paragraph shows, there is no ambiguity over where the Netherlands government stands on the great targeting debate:
In the long term – as described in the present document– there will no longer be any question from the Dutch point of view of generic support for agriculture but solely of targeted payments for promoting competitiveness and sustainability and for socially desirable performance. This approach means that a drastic change will be necessary over the next few years. The disappearance of generic income support and market measures will, after all, mean that the instruments that account for 95% of Dutch CAP receipts (some EUR 1.2 billion a year) will disappear. In their place, there will be a new range of instruments that will reward agriculture-related activities – in a transparent and accountable manner – which represent added value for society but are not rewarded by the market, or are not rewarded sufficiently.
Download the report here. Hat tip: Roger Waite at Agra Facts.
The great targeting debate
Czech agriculture minister Petr Gandalovic made an curious statement at the informal Agriculture Council meeting held earlier this week in the French Alps. Mr Gandalovic, who will assume the chairmanship of the Council under the Czech EU Presidency in the first half of 2009, told his colleagues:
“The more specific you make the policy, the more room you give to bureaucrats who make the decisions. Non-targeted payments give more power to farmers.”
In case it’s not clear, Mr Gandalovic was making the case against targeted payments. In doing so, perhaps inadvertently, he touched on a question that goes to the very heart of the debate about the future of the CAP: the extent to which the CAP’s 54 billion euros of annual public expenditure should be targeted on clearly defined objectives and measurable outcomes. It is a debate raging right now within DG Agriculture, a power struggle that is pitting CAP ‘modernisers’ who seek a greater role for the current rural development pillar against CAP ‘consolidators’ who defend the “Fischler settlement” and the current Commission Health Check agenda. What it boils down to is a debate over the fundamental role of public policy in agriculture. Continue reading “The great targeting debate”
The CAP and Europe's subsistence farmers
When the Commission unveiled its proposals for the health check back in November 2007, the DG Agri spin machine highlighted the proposals to introduce upper limits on the subsidies that are paid to Europe’s largest, wealthiest and most competitive farmers. What got much less attention was the plan to introduce lower limits, at a level of €250 per annum. This could make life even harder for some of Europe’s poorest farmers and shepherds who barely get a look-in when it comes to Brussels handouts.
According to the Commission’s impact assessment, the introduction of the single farm payment and the enlargement of the EU into central and eastern Europe has dramatically increased the number of very small farms claiming subsidy from the CAP. As things stand, 31 per cent of single farm payment recipients receive less than €250. The Commission argues that:
The very large number of small beneficiaries of CAP direct payments reflects more general structural aspects of EU agriculture. For many of these small beneficiaries, agriculture may be only one of several economic activities. These activities may be related more or less directly to agriculture. Consequently, any change in the payment rules would be unlikely to have significant agricultural employment impacts but could remove an alternative income source in rural areas with many small and part-time farmers.
The implication is that it is just part-time or hobby farmers who have entitlements of less than €250 per year, the favoured example being the stockbroker with a pony paddock. There is no doubt that such cases exist, but it is also worth remembering that some parts of Europe have a large number of subsistence or near-subsistence farmers. They are concentrated in the new member states and in particular in Bulgaria, Romania and Poland. The Commission does conced that “lower limits could be criticised in some member states as an unfair treatment of small farmers.”
Despite what farm ministers and agriculture commissioners would have us believe, the CAP is neither targeted at helping poor farmers nor at supporting sustainable and high nature value farming practices. If it were, it follows that low-intensity upland grazing in remote mountainous regions where there are high levels of poverty, low levels of literacy and very few other employment options ought to qualify as a high priority area. The irony is that for shepherds in places like the Fagaras mountains in Romania (pictured) the CAP is inaccesible and irrelevant. EU food safety regulations restrict how they can sell their traditional, hand-made cheeses but they get precious little from the EU’s subsidy system. €250 might be crumbs to a cereals farmer in the Paris Basin, but to a Romanian shepherd, it’s a sizeable sum. Introducing lower limits on payments risks further penalising a very hard-pressed and marginal group. There must be ways of addressing the relatively high transaction costs of paying out very small sums of money. Perhaps entitlements could be claimed every other year, so a recipient gets two year’s payments in one go?
The table below shows estimates of the number of subsistence and near-subsistence farms by member state, defined as less than 1 ESU (European Size Unit)*
The Standard Gross Margin may be different from actual margin on a farm because of the wide variation between farms with the same physical composition. A European Size Unit (ESU) is a measure of the economic size of a farm business based on the gross margin imputed from standard coefficients for each commodity on the farm. In concrete terms, 1 ESU is roughly corresponds to:
– either 1.3 hectares of cereals
– or 1 dairy cow
– or 25 ewes
or equivalent combinations of these.
* A European Size Unit (ESU) is a measure of the economic size of a farm business based on the gross margin imputed from standard coefficients for each commodity on the farm. The application of these standard coefficients results in the Standard Gross Margin (SGM) for a farm or group of farms. 1 ESU = 1200 SGM.