The common agricultural policy (CAP) in the European union at present and 2020 year perspective

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The common agricultural policy (cap) in the European union at present and 2020 year perspective

Bartosh Mitskevich

(Поступила в редакцию 01.11.10)

Аннотация

agricultural implementation market modernize

В статье на основе анализа основных индикаторов раскрывается роль современной общей сельскохозяйственной политики (ОСП) в развитии сельскохозяйственных регионов 27 стран-членов ЭС и ее осуществление в перспективе. Подчеркивается, что со времени принятия ОСП, она всегда оперативно реагировала на изменения и отвечала потребностям времени. В период реализации программ были предприняты попытки модернизации сельского хозяйства для его более рыночной ориентации. В этом контексте, благодаря соответствию новым экономическим, экологическим, технологическим, климатическим потребностям, которые существуют в польском обществе, ОСП может содействовать устойчивому росту сельского хозяйства. В заключении представлены самые важные стратегические цели ОСП.

Annotation

The paper present role of present and future Common Agricultural Policy (CAP) in rural areas development of EU-27 Member States. There were presented main indicators of present CAP in EU states. It was also underlined in the paper that since its creation, the CAP has always been adapted to respond to the challenges of its time. Significant reforms have been made in recent years, notably in 2003 and during the CAP health check in 2008, to modernize the sector and make it more market-oriented. The Europe 2020 strategy offers a new perspective. In this context, through its response to the new economic, social, environmental, climate-related and technological challenges facing our society, the CAP can contribute more to developing intelligent, sustainable and inclusive growth. In conclusions the main, most important topics of future CAP were presented.

Introduction

The Common Agricultural Policy is due to be reformed by 2013. A formal public consultation on the CAP post-2013 will be undertaken in the end of 2010 when the Commission will publish a policy paper setting out different options for the future CAP.

The latest reform of the EU Common Agricultural Policy (CAP) that started in June 2003 refers to making European farming more competitive in a global world and more sustainable by meeting the expectations of the public, as well as to developing rural areas from the environmental, social and economic point of view. Farmers and other rural businesses should improve their capacity to respond to new challenges. For the new Member States the accession to European Union represents a major economic and social opportunity and a pressure for fundamental changes in micro and macro management. It is also a new step in reconsidering the agriculture and rural areas in the process of sustainable development.

Since its creation, the CAP has always been adapted to respond to the challenges of its time. Significant reforms have been made in recent years, notably in 2003 and during the CAP health check in 2008, to modernise the sector and make it more market-oriented. The Europe 2020 strategy offers a new perspective. In this context, through its response to the new economic, social, environmental, climate-related and technological challenges facing our society, the CAP can contribute more to developing intelligent, sustainable and inclusive growth.The CAP must also take greater account of the wealth and diversity of agriculture in the EU's 27 Member States.

At the end of this year the European Commission will publish a Communication on the future of the CAP after 2013. But, before setting down any initial policy guidelines for this strategic sector, Commissioner Cioloє launched a public debate on the Common Agricultural Policy's future, objectives, principles and contribution to the «Europe 2020» strategy to inform the preparatory work for the decision-making process.

In addition to how the CAP can contribute to developing the Europe 2020 strategy, the public debate centred around four main topics:

1. Why do we need a European Common Agricultural Policy?

2. What are society's objectives for agriculture in all its diversity?

3. Why should we reform the CAP and how can we make it meet society's expectations?

4. What tools do we need for tomorrow's CAP? 

The aim of the paper is to present the future agriculture policy of the European Union states. In the research work, descriptive and analytic methods were used that allowed to get to know process of structural changes in EU agriculture. Tabular data were in turn based on the Information System of the European Commission, section of Agriculture and Rural Development. The research work was done in 2009 basing on analytic data source from Ministry of Agriculture, domestic and international agricultural publications and data from Main Statistic Bureau.

Results of studies

Present results of reforms

Following a path of successive reforms since 1992, the Common Agricultural Policy is currently centred on three main policy axes, which aim to respectively support product prices, producer income, and structural adjustment.

With the CAP constrained by a fixed budgetary allocation, its reform process has been consistent with a gradual, but systematic improvement in the efficiency of its policy measures by gradually replacing the least policy-efficient by the most policy-efficient measures, while at the same time decreasing its relative share in the EU budget. Graphic 1 graphically depicts this reform process both in terms of the relative size of each axis in nominal budgetary terms and in terms of the declining share of the total CAP budget in the EU GDP.

Graphic 1. Evolution of CAP expenditure and CAP reform path. Source: European Commission Statistical data.

The core element in the CAP reform process has been the decline in support for products and their prices towards support for producers and their income. This process implied a parallel shift of the cost of the policy from consumers towards taxpayers. The decline in support prices has been significant in all sectors, ranging from 1%-16% in dairy products to 57% in rice. In some sectors, support prices have been abolished all together. The results of this reform process have been:

1. The decrease in the gap between EU and world market prices.

2. The decrease in the exportable surplus of all supported EU products, or even the transformation of the EU into a net importer where previously it was the major world net exporter (in beef, and now potentially in sugar), driven primarily by the increase in domestic consumption. The decline in budgetary expenditure related to market measures, that represented 74% of all EU agricultural expenditure in 1992 to just 10% by 2007.

3. The move away from these measures of the CAP that are generally perceived to be the most trade-distorting, such as market intervention and especially export subsidies.

4. The decline in the level of stocks going to intervention, and thus the decline in the downward pressure the put on market prices (graph. 2).

Graphic 2. EU public stocks. Source: European Commission Statistical data.

To compensate producers for the potential income loss as a result of the shift away from product support, the CAP initially introduced in 1992 coupled payments to producers, based on either fixed areas/yields or a fixed number of animals. This move resulted in the reversal of the previously declining trend in agricultural income in the late 1980 s.

Subsequently, with the 2003 reform, producer support became more and more decoupled, promoting more market orientation and a fixed level of income safety net available to farmers. To guarantee «value for money», cross compliance provides a mechanism which contributes to the respect of a set of mandatory standards by penalising producers in case of non-respect. Yet despite structural adjustments, incomes in the agricultural sector remain below average income levels in other sectors of the economy. Their development since 2000 also lags behind the national income growth in EU-15 and only keeps up with it in EU-10, where income increase has been substantial (graph. 3). At the same time, farmers face income disparities, subject to region and size.

Graphic 3. Agricultural income/AWU unit as % of total economy income/labour unit (deflated). Source: European Commission Statistical data.

Expected results of CAP reforms after 2013

The move of support towards full decoupling in 2003 has raised certain questions with respect to the balance of support, both among farmers within the same member states and among member states, which will have to be addressed with future reforms. The situation is characterised by a very different picture of the distribution of support depending on the criterion used - per beneficiary or per area, as a share of GDP or public expenditure, with respect to farm income or average wage, etc.

An integral part of the CAP reform process has been the parallel reform of Rural Development measures that assist the overall process of structural adjustment of the sector in three broad areas: investment and modernisation, agri-environmental measures, and measures related to the support of the wider rural economy. To further strengthen the budgetary allocation towards Rural Developments, modulation introduced a cut in direct payments, with the corresponding funds channelled to Rural Development. The balance of Rural Development support between the community budget and the Member State budget, as well as the balance between the three broad axes of Rural Development, differs from Member State to Member State because it is exactly in this area that subsidiarity applies. Adjustment challenges and needs are not uniform across MS, and the measures required are naturally different. Yet these measures move in a complementary direction to the overall reform process by enhancing the general market orientation of the policy while providing the necessary product and producer safety-nets.

Agricultural policy in Europe needs coherent rules for the common market and a common approach towards providing basic income support. It needs a common safety-net mechanism and specific measures targeted towards national or regional needs in view of ensuring that agricultural activity can be sustained throughout Europe, even under less favourable regional situations. This is a particular challenge in the face of open and volatile markets and unpredictable natural events.

No single instrument can meet all of these needs, nor can these needs be addressed in isolation. There is a clear interdependency amongst the needs which means that measures targeted at meeting one objective will also influence other objectives, e.g. an agri-environmental measure will also provide an income support, but is at the same time dependent on an existing agricultural presence to provide the additional environmental benefits (going beyond the baseline). The existing Common Agricultural Policy provides a package of measures and policies divided into three main types, market expenditure, direct aids and rural development, but they are all designed to meet different aspects of interdependent objectives. A review of these existing instruments should address the following needs for a European Agricultural Policy whilst taking account of the cross-cutting links that exist between them.

Most stakeholders and think tanks, research institutes and others believe that a common agricultural policy at EU level is more desirable than a series of national/regional policies, or no agricultural policies at all. Many, but not all, argue that several reforms of the CAP in recent years have taken agricultural policy in the right direction. There is widespread agreement that a common EU policy is the key to ensure a level playing field within the EU, guaranteeing fair competition conditions. The general public too stressed the need for fairness throughout the agri-food chain and among member states. Many respondents underlined that the CAP is essential for EU food security - this was the first comment made by many respondents, from all of the groups making submissions.

Many respondents, from all sections of society, argue that a CAP should aim to maintain diversified farming systems across Europe, particularly in remote areas, and to ensure delivery of multiple public goods. However there are divergent views about how the CAP should achieve this. Some believe that the CAP is essential in order to allow farmers to continue in business in circumstances where markets cannot provide the right economic returns, and where they face high costs of production often associated with providing public goods. Such respondents argue that farmers should therefore be supported for being farmers and rewarded for additional public goods they may provide. Other respondents believe that the main focus of the CAP should be on public good provision, with farmers only being supported where these goods are delivered, and on contributing to territorial cohesion, maintaining and enhancing the vitality of rural areas.

There are consistent views from all strands of society that the main purposes of EU agriculture should be:

1. Provision of a safe, healthy choice of food, at transparent and affordable prices.

2. Ensuring sustainable use of the land.

3. Activities that sustain rural communities and the countryside.

4. Security of food supply.

Many respondents argue that citizens want EU agriculture to respect the environment, decrease its impact on global warming and maintain biodiversity, water resources etc. Many feel that sustainable family farming produces a wide range of benefits and is recognised for that by European citizens. A significant number of respondents stressed the importance of the agriculture sector in providing employment in rural areas. This view was particularly prominent in a number of member states. There is a widespread view that citizens want high quality food products. Most argue that these should be provided at reasonable prices to consumers. Many others say farmers too need fair prices for food products. For the general public food should be healthy, natural (many say specifically that this means no GMOs or pesticides should be used) and produced in an environmentally friendly manner (concerning water, soil and air quality) and traceable. Many say that imported foods should meet the EU's high standards.

The main arguments put forward for further CAP reform are to:

1. Enable farmers, the food chain and consumers to deal with the increased instability/volatility of agricultural raw material and food prices.

2. Address increasing global demand (and the general trend towards increasingly open global markets).

3. Restructure payments within the CAP, and simplify administrative procedures.

4. Give greater importance to non-market items, such as environment, quality and health standards, sustainability.

5. Respond to the effects of climate change.

6. Take into account the various higher expectations from consumers, for example with regard to the origin of foodstuffs, guarantees of quality etc.

7. Strengthen the competitiveness of European agriculture.

8. Ensure better coordination with other EU policies applying to rural areas.

Other issues raised include: a lack of equity in applying the CAP across the 27 member states; the functioning of the food chain; the need for market management tools; the small farmer versus large farmer debate; the impact of the CAP on the developing world. A large number of respondents argue for the current direction of the CAP to be maintained with relatively minor alterations. However, another significant proportion of respondents favors re-focusing the CAP to link agricultural production, and farmers compensation, more closely to the delivery of public goods such as environmental services. Responses from the general public indicate that there would be widespread support for this. There are varying views between these two poles. There are calls for greater citizen involvement in the devising and implementing of future policy.

A wide variety of tools were suggested under various scenarios, including new market stabilisation instruments, training programmes, local strategies, producer groups, food promotion and improved market and other data/information sources. A strongly held view, particularly among the general public is that «industrial» agriculture should have little place in the CAP, its support being more appropriately directed to more deserving recipients (in disadvantaged areas, mountain zones, organic farmers or one of several other categories mentioned).

Conclusions

Nowadays it is hard to draw conclusions from the array of views received. However a number of themes emerged which have considerable support from the wide range of contributors. These themes represent the middle ground among respondents. Some would want to go further; others less far. From the submissions, we have identified 12 directions to be followed. The EU should:

1. Take a strategic approach to CAP reform. Go for total, not partial, solutions taking account of CAP challenges on the one hand and the interplay between the CAP and other internal and external EU policies on the other hand.

2. Ensure that the CAP guarantees food security for the EU, using a number of tools to achieve this aim.

3. Continue to push the competitive and potentially competitive sectors of European agriculture towards operating in a market context, giving more importance to innovation and dissemination of research.

4. Transform market intervention into a modern risk- and crisis-management tool.

5. Recognise that the market cannot (or will not) pay for the provision of public goods and benefits. This is where public action has to offset market failure.

6. Bear in mind that the correct payment to farmers for the delivery of public goods and services will be a key element in a reformed CAP.

7. Protect the environment and biodiversity, conserve the countryside, sustain the rural economy and preserve/create rural jobs, mitigate climate change.

8. Rethink the structure of the two support pillars and clarify the relationship between them; make adequate resources available for successful rural development.

9. Implement a fairer CAP - fairer to small farmers, to less-favoured regions, to new member states.

10. Introduce transparency along the food chain, with a greater say for producers.

11. Create fair competition conditions between domestic and imported products.

12. Avoid damaging the economies or food production capacities of developing countries; help in the fight against world hunger.

Literature

1. Agricultural statistics. Main results 2007-09. Eurostat. European Commission. Brussels, 2010.

2. Agriculture in 2009. Department of Agriculture and Environment Statistics. Main Statistical Bureau, Warsaw, 2010.

3. Prospects for agricultural markets and income in the European Union 2008-2015. European Commission. Directorate - General for Agriculture and Rural Development. Brussels, 2009.

4. The Common Agricultural Policy alter 2013 - Public debate. European Commission, Brussels, 2010.

5. The European Model of Agriculture - Challenges Ahead. Ministry of Agriculture, Warsaw, 2007.

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