An Approachto the Post-2013 Reform

COMMON AGRICULTURAL POLICY -

AN APPROACHTO THE POST-2013 REFORM

PhD student Niculescu Oana Marilena[1]

ABSTRACT

The paper proposed for being presented aims to analyze the necessity and importanceof Common Agricultural Policy’s (CAP) reform after 2013. The objectives of the paper are the analyzing of different visions belonging to big European think-tanks, the position of the European Commission in the attempt to prove the opportunity of building a new EU agricultural policy. The challenges CAP is facing are: food safety, environmental and climate changes, territorial balance sign in outlining the CAP contribution to the “EU 2020 strategy”. The methodological approach used consists in collecting and analysis data, their validation, followed by the dissemination of the results with a view to building and expressing a personal position regarding CAP. The main results consist in the fact thatthe reform of the CAP must continue in order to promote competitiveness, efficient use of resources, adoption of meassures to ensure food safety, social and territorial balance in the context of climate changes.

KEY WORDS: Common Agricultural Policy, reform, challenges, think-tank, EU 2020 Strategy

JEL CLASSIFICATION CODE:Q18, Q13, F59

1. INTRODUCTION

The paper presented and entitled “Common Agricultural Policy – an approach to the post-2013 Reform” aims to analyze the need and importance of the reform after 2013. The objectives of the paper consist in analyzing different visions of the big European think-tanks, the position of the European Commission in the attempt to prove the opportunity of building a new EU agricultural policy. The reform of the CAP is strongly connected and will have a high contribution to the “EU 2020 Strategy” in terms of smart, sustainable and inclusive growth. The relevance of the research work has the purpose to build and express a personal position regarding CAP post-2013.

2. LITERATURE REVIEW

The paper is related to the internal and international research consisting in several books, studies and documents that analyze these aspects of the most debated, controversial and reformed EU policy. The opportunity of a new EU agricultural policy and its reforming represents a subject deeply debated by EU member states and, as well,a theme analyzed through many studies, documents like the research made by the Romanian Centre for European Policies, Centre for European Policy Studies, big European think-tanks, the position of European Commission and European Commissioner for Agriculture Dacian Ciolos regarding CAP after 2013 andthe need of carrying on the reform.

A personal study is represented by the paper entitled “Common Agricultural Policy from Health Check decisions to the post-2013 reform” presented at the International Conference “European Integration – New Challenges” held in may 2011 at the Faculty of Economics, University of Oradea.

3. RESEARCH DESIGN AND METHODOLOGY

The research methodology used consists in collecting and analysis of internal and international data, their validation, followed by the dissemination of the results with a view to building and expressing a personal position regarding CAP. The paper tries to prove the need of building a new EC agricultural policy and, as well, the necessity of the reform.

4. RESULTS OF THE RESEARCH

1. The reforms of the CAP

In over half of century of existence, CAP has been the most debated, controversial, analyzed and reformed EU policy. The main reforms in the evolution of CAP are:

-McSharryReform(1992), the most radical for the European agriculture till then, its main elements being the cutback of agricultural support prices to render them more competitive in the internal market and on the world market, compensation given to farmers for income loss as well as other measures regarding market mechanisms and the protection of the environment. The reform comprised measures for the reinforcement of the competitiveness of agricultural commodities in domestic and world markets, the promotion of a fair and decent standard of living for the farming community, the creation of substitute jobs and other sources of income for farmers and the formation of a new policy for rural development, which became the so-called second pillar of the CAP;

- Agenda2000, an action program, its main objectives being to give the EU a new financial framework for the period 2000-2006 including the expected enlargement. The bulk of the CAP budget remained allocated to direct market and income support measures. It introduced new elements like cross compliance and modulation;

- FischlerReform(2003), initially called Mid Term Review, its main objective being the increasing of the support for the rural space. Introducing a conceptual framework with a metaphoric name, “the perfect storm”, Swinnen summarizes several models and theories that argue that the acceptance of Fischler Reform was facilitated by three factors: the effect of institutional reforms, a Commission with a pro-reform position, changes regarding the policy makers involved. The radical changes of the reform were: the decision of decoupling (single farm payment regardless the output), the transition to a policy based on quality, free market and rural development;[2]

- Adopted in 2008 by the ministers of agriculture of the EU member states,HealthCheck represents a package of amendments to policy regulations, changes that represent only small steps towards the reform. The changes adopted solved difficult problems so that the intervention on markets is reduced, modulation is extended and decoupling is carried on. Health Check resumes to less tools for market regulation and for funds transfer from the first pillar to the second one, financing of the rural development programs. Although most member states were aware that a reduction of agriculture’s budget could not be avoided, the debates within Health Check could not define a common position of member states, not even as principles, regarding the direction of the reform after 2013. Health Check is already a matter of past, debates within EU are subject to the new CAP after 2013 and its reform.

1. The post-2013 Reform

Nowadays, new economic, social and environmental challenges need to be addressed in Europe, agriculture being in the front line for these challenges. This dynamic policy, reformed on many occasions, resulted in a multi-functional policy; though, it has been often criticized for its efficiency in achieving its objectives. The initial objectives have remained unchanged but the weight given to different objectives and instruments used for their achievement have changed radically. Intervention prices are set at low levels, whereas direct payments combined withcross-compliance contribute to providing basic public goods, delivered through sustainable farming.The CAP is facing challenges like: food safety, environment and climate changes and territorial balance. Although CAP has developed, many changes are still needed in order to answer to new challenges like the improving of the sustainable management of natural resources (water, biodiversity, soil), the maintenance of competitivity in the conditions of globalization growth, the recovery of the diversity of agricultural structures and output in EU, the strengthening of the territorial and social cohesion in rural areas of EU, increasing the support of CAP for member states, farmers and active farmers.Responding to these challenges, CAP will also contribute to the “EU 2020 Strategy” concerning:

- smartgrowth (by increasing resource efficiency and improving competitiveness through technological knowledge and innovation, developing high value added and quality products, developing green technologies and using information and communication technology, investing in training, providing incentives for social innovation in rural areas and improving uptake of research);

- sustainablegrowth(by maintaining the food, feed and renewable production base, ensuring sustainable land management, providing environmental public goods, addressing biodiversity loss, promoting renewable energies, fostering animal and plant health, increasing resource efficiency through technological development and using results of research, further reducing emissions, enhancing carbon stocks and fully developing the potential of rural areas; and

- inclusivegrowth (by unlocking economic potential in rural areas, developing local markets and jobs, accompanying the restructuring of agriculture and supporting farmers'income to maintain a sustainable agriculture throughout Europe (European Commission, 2010: 6).

The Commission’s Communication on the CAP toward 2020 recommends the following strategic aims: to guarantee long-term food security for European citizens and to contribute to growing world food demand; to provide European citizens with quality, value and diversity of food produced sustainable, that is in line with requirements of natural resources and public health; to maintain viable rural communities, contributing to employment and to territorial balance, the increase of CAP support of member states, farmers and active farmers. Based on these aims, the Commission has formulated three objectives for the future CAP: viable food production, sustainable management of natural resources and climate action and balanced territorial development.

In June 2009, at the informal Council in Brno (Czech Republic), in the debate regarding the future of Europe, several European think-tanks were involved, with interests ranging from commercial and international affairs to land use and food security with studies, reports and conferences.

Some of them expressed their position even before that moment, an example being Notre Europe which prepared some years ago several studies regarding the future of European agriculture.

Groupe de Brouges (reflection group regarding EU agriculture and sustainable development) launched in 2008 the paper “The dilemmas of globalization” that underlines the multifunctional role of agriculture as well as the fact that conserving landscapes and biodiversity requires public intervention in agricultural production. The core-business of farming is and should remain the sustainable production of food. Food security and food sovereignty are important matters on Europe's agenda and on the world's having in view that the growth of the world's population will probably be higher than the growth of rate of food production. In a report workshop held in Athens (Greece) in April 2011 it was stated that CAP must try and find a better balance of the differences between northern and southern countries, must try to find a way to make small farmers more competitive. There is a lack of vision, strategy and policy concerning green development, new technologies should be available for all inhabitants of rural areas. There is still a big difference among EU countries to be competitive and market transparency must be improved. Other goals are: an increased quality of products, a safe environment, a sufficient income for farmers. More emphasis should be put on education both for farmers and consumers; policy must be aimed more at keeping young farmers in rural areas, especially in southern and eastern Europe. There is a too much emphasis on Pillar I, that is why we should give more importance to quality of life issues (Pillar II). The real reform would be a reduction of direct payments/reduction of budget, a new way of thinking about competitiveness, agriculture and food sector. The competition on land is becoming a bigger issue. Utilized agricultural area represents an important percent, so that is a lot of pressure on it, both from within the agricultural sector as from outside to use this cheap land for other uses such as housing, infrastructure, industry and recreation. The interconnection with other policy fields in order to increase competitiveness and sustainability is important as well as the role of farmers unions in order to increase horizontal integration of farmers and their role in the CAP. There is a lack of policy instruments within the CAP. We should first make an ex-post assessment of the current CAP measures (cross-compliance, agro-environmental schemes, farm modernization schemes); secondly, we should make an ex ante assessment of reform proposals. From these assessments we should be able to say whether we need to improve current measures or develop new measures. Criteria to determine levels of sustainability are needed. We need to integrate the cultural dimension in the CAP reform and to find a way to bring an integrate model defined as a integrated strategy (economic, ecological, cultural, educational, etc.). Regarding the territorial balance, its multidimensional character has been provided by geographical mobility, the resulting disequilibrium within an area may be caused by the movement of its population for various reasons. The negative trends within the less favored areas leads to declining number of farm holdings that are securing a subsistence level of living and to increasing levels of unemployment. The role of innovations has been of crucial importance for rural areas due to regional imbalances. Rural development activities can contribute to the promotion of innovations in various areas, the role of education and research being stressed in this respect.

Institut Francais de Relations Internationales (reflection centre regarding international affairs) organized in 2008 a seminar regarding CAP, the conclusion being that it represents an appropriate response to the complexity of challenges that agriculture is facing. In September 2011, at the international conference held in Brussels, it was stated that the CAP post 2013 should improve the sustainability and long-term competitiveness in the agro-food sector.

Land Use Policy Group launched in 2009 its own acknowledgement regarding the CAP, focusing on rewarding the environmental services resulting from land management. The new policy should ensure the addressing of climate changes, promote the sustainable use of natural resources, the preservation of biodiversity, the use of new and smarter technologies with a positive impact on the environment, the integration of land management in the economic and social policies, the monitoring of these objectives and the support of the entire land management system; it should avoid the export of environmental problems by developing high international standards.

In June 2010, SAF Agriculteurs de France, a French agricultural think-tank, recommended the replacing of single farm payment with an agreement built around an European agricultural contract based on two elements: food security and environmental conservation. This contract will be supplemented by a system of “specific contracts” for those who wish to undertake new measures for environmental conservation. These contracts will be elaborated and negociated after consulting all of the stakeholders. This fundamental change offers a new chance to the relation between society and farmers through clarifying public spending, to farmers as suppliers of services, to political actors who will find a new action field.

European Centre for International Political Economy (ECIPE) had an interesting contribution through its study regarding the winners and losers from CAP reform. The study argues the phasing out of single farm payment and proposes the replacing of the existing structure of CAP based on 2 pillars, with another one containing a public goods pillar (containing all efficient policies to be preserved) and a discretionary pillar (containing all inefficient policies to be removed over time). The paper also assesses the criteria likely to guide future allocation of CAP payments, such as GDP per capita, agricultural and forest areas, areas with Natura 2000 status and estimates the share of member states in total CAP payments under different post-2013 scenarios. This reveals differences between the negociating positions that countries adopt and the payment receipts they can expect from the reform.

The conservative scenario assumes that two third of the funds should be allocated according to the procedure till 2013 and one third according to the size of agricultural area and to the size of GDP/capita. The progresist scenario reverses these percentages, being less addicted to the past. The scenarios differ through the importance given to the GDP/capita related to the agricultural area. Allocations are equally influenced both by the past and by the combination area/GDP but GDP/capita has a higher contribution in the case of scenario based on a high GDP.

The study with the highest impact (Bureau and Mahe / Notre Europe)[3] proposes a new vision regarding direct payments, by introducing an integrated system of contractual payments consisting in three levels:

- decoupled payments with a view to maintain the agricultural area;

- payments connected to the natural handicaped areas ( concerning less favoured areas);

- "green points" payments for areas which adopt certain production technics

It is expected that the redistribution of payments on these bases would allow farms located in areas with a particular social value and in environmentally sensitive zones to be sustainable, to provide the expected identified public services and to contribute to food diversity. This contractual payment scheme would develop a set of incentives for the delivery of positive externalities on the environment.

The suggestions are made in the way that agriculture should become more competitive, the current payment schemes must be replaced with a simplified and smaller one, public intervention must be maintained to guarantee a floor price (safety net).

1. Building a future after 2020

It is clear that a new vision for agriculture is required.