Original publication: October 2018
Author: Dr ir R.A. Jongeneel, with contributions from Dr. H. Silvis, Wageningen UR
Short link to this post: http://bit.ly/2zStfOk
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Background

The legislative proposals on the CAP beyond 2020, unveiled on 1st June, fleshes out details of EU’s future Common Agricultural Policy. The European Parliament’s Committee on Agriculture and Rural Development (AGRI Committee) wishes to organise a workshop on 15 October 2018 on the following subject: ‘Towards the CAP of EU 27 beyond 2020: appraisal of main legislative and budgetary issues’. This study is a contribution to that workshop.

 

Aim

The primary aim of this study is to support the EP legislative works towards a new CAP post 2020. The study provides an assessment of the structure and types of interventions as proposed by the European Commission (Title III of the proposal COM (2018) 392).The analysis consists of a qualitative assessment on the main proposed changes in operational terms. The study tries to detect possible lacks and/or inconsistencies in the light of the CAP-wide objectives and/or societal priorities concerning agriculture. As such it describes the main changes proposed by the European Commission and detects lacks and/or inconsistencies in order to respond effectively to farmers’ and wider rural communities concerns and to achieve the EU-wide environmental and climate-related objectives. In addition it provides a set of policy recommendations on how the EP, as co-legislator can improve the types of interventions and allocations proposed for the CAP beyond 2020.

Context and approach

The CAP needs to address existing and upcoming challenges and to account for shifts in the local and global contexts.

The EU faces still many challenges with respect to farm income, the environment and climate, and the rural areas, which underscore the need for targeted and tailored policy interventions, taking into account the heterogeneity over and within Member States.

The legislative proposals include changes in specific CAP objectives (increased emphasis on climate), the delivery model (subsidiarity), the architecture and key principles with respect to direct payments. As regards the RDP the changes with respect to the available instruments are limited, but priorities and budget allocation show changes.

As Title III provides a framework of interventions, within which Member States can operate and define their specific interventions, and which requirements they should respect, the assessment provided will approach the interventions at this level. Aspects that are included in the policy assessment are: analysis of the proposed interventions, their relationship to the current CAP (changes, adjustments, new), aspects, conditions and requirements of the measures that may impact their functioning, proposals and recommendations for improvements.

Direct payments

The EU’s income support to farmers is suffering from inequalities and from a lack of targeting and need-oriented criteria. The new CAP proposals address this problem only to a limited extent, since the basic mechanism (hectare-based payments) is not changed.

The enhanced conditionality contributes to establishing a baseline with respect to climate, the environment, biodiversity, and health, which goes beyond the current level. The extended greening requirements apply to all holdings receiving direct payments.

Eco-schemes that are obligatory for Member States and voluntary for farmers create possibilities to reward farmers for actions improving climate and the environment, which go beyond the baseline as established by the enhanced conditionality. Arguments are provided to further enlarge their potential and coverage.

The obligatory reduction of direct payments (capping) is not likely to be very effective due to the mandatory side condition to deduct the salaries of paid workers and imputed labour costs of unpaid labour. Making the side condition optional rather than mandatory could make the measure more effective. To better recognize the contribution of this measure to redistribute income support an argument is made to exempt direct payments aimed at other objectives from being capped and an alternative formula for payment reduction is proposed.

Coupled income support for sustainability should be used in a targeted (or discriminatory) way rather than in a generic way, whereas otherwise it will distort the level playing field and go against the principle of the EU Single Market.

Level playing field concerns are identified for at least three types of interventions: i) the enhanced conditionality (potential differences in requirements over Member States, combined with differences in basic income support for sustainability); ii) the payments for eco-schemes which can overcompensate the costs of efforts mad; iii) coupled income support and some types of support provided under the heading of sectoral interventions. In order to avoid this Member States should be requested to motivate their choices and it is recommended to consider introducing safeguards.

The interventions made available under Title III offers Member States a wide range of opportunities, the number and flexibility of which has been increased relative to those in the current CAP. Given the priority placed at addressing climate objectives the ‘guidance’ on interventions specifically addressing this objective is too limited.

Rural development

The main change in the Rural Development policy is the new delivery model (from compliance to performance). With respect to its core principles and its coverage it there are only limited changes.

The Agri-environment, climate and other management commitments have a wide coverage (comprising measures contributing to all 9 specific objectives of the CAP), with a special focus on environment and climate (obligatory).

Natural or other area-specific constraints and Area specific disadvantages resulting from certain mandatory requirements interventions contribute to fairness to farmers and are crucial policy interventions in an EU with very heterogeneous production and regulatory conditions.

The investment intervention plays a crucial role in helping agriculture to address its many challenges and facilitating the transition to a more sustainable agriculture while ensuring its long term viability. When properly implemented it should primarily address market failure (non-productive investments) and restoring assets after crises. Its importance justifies introducing a minimum spending share requirement.

Investments and Young farmer support need a careful specification in order to ensure a level playing field and compatibility with WTO requirements.

Risk management need to be embedded in a broad approach (including awareness raising, farmer advice, accounting for interactions between various policy measures and private sector provisions) in order to contribute to a consistent, tailored and effective policy in which the proposed policy foresees.

Cooperation and Knowledge and information sharing interventions, when properly combined with other interventions, play a key role in an effective innovation and farm modernisation strategy. The support and extension of the coverage of farm advisory services is welcomed.

Recommendations

The income support urgently needs correction for reason of fairness, efficient use of financial resources, and increasing importance of other priorities than farm income.

To improve the capping instrument an alternative criterion based on a normative calculation of farm labour and a maximum compensation ceiling per unit of labour is recommended.

Coupled income support should be properly balanced with the EU Single Market concept (level playing field, specialization and least cost-provision of food) and for that reason the percentage of farmers receiving coupled income support (evaluated at sector level) should be bound to a maximum.

It is recommended to make eco-schemes more flexible and increase their coverage in order to strengthen a results/performance based approach in green and public services (entry level schemes) and also to make them subject to ring-fencing.

Investment support should be primarily targeted to addressing market failures. Its importance in relation to innovation, sustainability, and long-run farm viability justifies introducing a minimum spending share requirement (e.g. 5%).

Level playing field issues need attention in case of coupled income support, some sectoral intervention measures, eco-schemes, young farmer support and investments interventions. In the case of coupled income support and eco-schemes restrictions on support (rates) are recommended. Level playing field concerns are also a reason to do checks on WTO compatibility.

Link to the full study: http://bit.ly/617-502

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2 Comments

The CAP Strategic Plans beyond 2020: Assessing the architecture and governance issues in order to achieve the EU-wide objectives – Research4Committees · October 24, 2018 at 4:50 pm

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The CAP Strategic Plans beyond 2020: The sectoral approach in the CAP beyond 2020 and possible options to improve the EU food value chain – Research4Committees · October 25, 2018 at 7:56 am

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