Original publication: July 2015
Authors:
Consiglio per la ricerca in agricoltura e l’analisi dell’economia agraria (Council for Agricultural Reseach and Economics) (CRA-INEA), Roma, Italy: Roberto Henke (project leader), Maria Rosaria Pupo D’Andrea (scientific editor), Theodoros Benos (consultant), Tatiana Castellotti, Fabio Pierangeli, Simona Romeo Lironcurti.
Università di Roma Tre, Roma, Italy: Fabrizio De Filippis, Mara Giua, Laura Rosatelli.
Bundesanstalt für Agrarwirtschaft (Federal Institute of Agricultural Economics, AWI) Vienna, Austria: Thomas Resl, Karin Heinschink.
Short link to this post: http://bit.ly/2kyJ6cl
Available languages:
– Study:
– Annex I:

Background

In the course of its 50 years of life, the Common Agricultural Policy (CAP) has progressively recalibrated its objectives while, at the same time, drastically modifying its tool box. In 1957, at the time of the signing of the Treaty of Rome, a CAP was called for that answered the need to increase agricultural productivity, ensure a fair standard of living for farmers, stabilise markets, ensure the availability of supplies and make products available to consumers at reasonable prices. Over time, many changes occurred, such as in the socioeconomic context, in the domestic and the international arena, and in areas allowing for greater attention to be given to environmental issues and to acknowledge the multifunctional role of agriculture. All these factors have contributed to major changes in the CAP, and to the progressive shift from a price policy approach to new forms of support to agriculture and rural areas aiming at supporting farmers’ income and the production of public goods (De Filippis and Fugaro, 2005; European Commission, 2007).

 

One of the most evident results of this process has been the transformation of the CAP from a product-specific policy (the CMOs) to a producer-specific policy. Moreover, along the path of reforms, Member States were progressively given the possibility to tailor the CAP according to their specific needs, within a general common framework of rules, and so to choose whether, and to what extent, to implement specific tools.

With the 2014-2020 CAP reform some important changes have been introduced (European Commission, 2015; COPA-COGECA, 2015). The most important of these is probably the new system of direct payments which replaced the SPS (and the SAPS in new Member States) introduced by the 2003 Fischler reform. The new and articulated system of direct payments responds to different goals of the CAP: the basic component represents a support to the farmers’ income. It is more homogeneously distributed in terms of per-hectare support, both across Member States and, within each Member State, across farms. The other components of the direct payments are of a selective nature and oriented to remunerate specific behaviour of farmers (such as in the case of the agricultural practices beneficial to the climate and the environment remunerated by ‘green payments’) or a specific status (such as being a young farmer or having farms located in areas with natural constraints).

The new form of payments represents the first explicit attempt to link part of direct payments to the remuneration of public goods and services, a goal that has strongly influenced the debate preceding the proposals of reform.

An explicit goal of the reform has been to introduce a more selective form of support, with payments better targeted and more equitably distributed among farms, sectors and regions. In this respect, in addition to ‘degressivity’ (i.e. the reduction of support on larger beneficiaries on the premises that these beneficiaries can be efficient also with a lower level of support, given their possibility to adjust (economies of scale) ) and ‘external convergence’ (a mechanism included in the Multiannual Financial Framework (MFF) 2014-2020), the reform introduces a more uniform distribution of the per-hectare basic farm payments (‘internal convergence’), payments for young farmers, a ‘redistributive payment’ shifting support from larger farms to smaller ones and payments for farms located in areas with natural constraints (European Commission, 2014).

Some components of the new direct payments are mandatory, while decisions to implement some other components are left to the individual Member States. The mandatory components are: the basic payment, the ‘green payment’ and the payment for young farmers. The voluntary components are: the redistributive payment, payments for areas with natural constraints, payments coupled to production, and the small farmers scheme. Even for the mandatory components, the Member States have some room for manoeuvre in terms of how such components are implemented. Overall, the new CAP reform increases the flexibility granted to the Member States, which are called on to decide on the following: which of the optional payments to adopt; the amount of resources devoted to each payment within a given range and the eligibility criteria to be applied in this regard; the distribution of the funds between the first and second pillar of the CAP; the profile of the beneficiaries of the support; and, overall, the criteria for ensuring a certain rate of distribution of support on their territories. These choices go well beyond the mere management of decisions coming from the EU, giving Member States the possibility to influence the distribution of financial resources among farms, sectors and regions.

Aim

In this study, Member States are classified according to typologies of behaviour, in order to both draw a political geography of the new CAP and to shed light on the further steps of the CAP reform process.
The reading keys through which the reform can be analysed are the following:

  • The speed of transition towards a flat-rate payment, taking into account the starting point, the speed and the final point of convergence (partial or total), the presence of regional ceilings and the type of ‘green payments’ (flat or individual): all of these elements help us understand the extent to which a flat-rate payment has been achieved across the European Union.
  • The strictness in the selection of beneficiaries, taking into account the national implementation of the provisions on ‘active farmers’, the choice of minimum requirements, and the additional requirements for other payments such as young farmers payment, natural constraints, coupled support.
  • The redistribution of support between farmers, sectors and regions, which is related to decisions by Member States to derogate from the achievement of a flat-rate payment, to implement the degressivity at a higher degree than mandatory and to apply the redistributive payment.
  • The “national CAP tailoring”, that is to say, the extent to which the Member States have shown flexibility in choosing the tools at their disposal and in shaping these instruments to their needs. The rate of national differentiation refers to measures that aim at bringing the current CAP closer to the specific feature of each Member States’ agriculture. We consider the possibility of shifting financial resources between CAP pillars, since this is an indicator of the extent to which each Member State tries to adapt the whole amount of CAP funds to its own needs and strategic targets. We also consider the presence of more targeted payments, which help clarify whether the new system of direct payments is well calibrated in respect to the needs of the Member States. Moreover, we consider the possibility for Member States to adapt the model of basic payment (and that of ‘green payment’) to the national redistributive objective. Finally, in this regard, we consider the possibility for them to favour a higher percentage of reduction (up to capping) over the mandatory reduction on payment (the degressivity) in order to limit the payment for larger beneficiaries and, at the same time, increase the financial resources for rural development policy or to adopt the redistributive payment, increasing the unit amount of basic payment available for smaller farms.

Link to the full study: http://bit.ly/563-386

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