The new Common Agricultural Policy (CAP) Passwords: Sustainability and Innovation

March 2014

The new Common Agricultural Policy (CAP)

 

On November 20, 2013 the European Parliament approved the Regulations of the new Common Agricultural Policy (CAP) in force for the seven-year period 2014-2020. For the first time the CAP was approved under the co-decision procedure by the European Parliament and the Council of the European Union. It is the positive outcome of two long years of negotiations, launched in October 2011, when the European Commission proposed the new Regulations.    

Why the reform?

 !   To update the CAP to an enlarged EU of 28 Member

States and tackle the new challenges in agriculture: protection of the environment, food safety, innovation and competitiveness in world markets.

!   To bring the CAP into line with the Multiannual Financial Framework 2014-2020 and new budget requirements.

The CAP as a symbol of European integration  

!   Already present in the Treaties establishing the European Economic Community (EEC) in 1957.

!   The first communitarised sector in which EU institutions have exclusive competence.

!   Contains Regulations directly applicable in all EU Members States.

   

Its scope goes beyond agriculture since the CAP involves several related sectors: healthy and quality

food, care for the landscape and protection of the environment, safeguard of communities, etc.

1957 !   To increase agricultural

productivity and profitability to ensure a fair standard of living for farmers.

!   To stabilise markets and assure the availability of supplies.

!   To ensure that supplies reach consumers at reasonable prices.

The objectives  

Today !   Food safety, to satisfy the

needs of the world’s population which will reach 9 billion in 2050.

!   Agricultural sustainability and ability to tackle the challenges of climate change.

!   Protection of rural areas and maintenance of agricultural economies.

1962 Establishment of the CAP

The objective: to protect the market. Common Market Organisations (CMOs) were created to ensure fixed prices all over Europe and protect those prices from global competition by establishing customs duties and export support. The flaws: the protectionist approach and isolation of the European market from global competition slowed down the modernisation of agricultural holdings, ultimately damaging consumers.

CAP: overview  

The ’80s Initial adjustments Rather than an organic reform, it involved a series of provisions to solve the most obvious critical issues, first and foremost surplus produce.

The approach changed: from product support to producer support.

Main points !   Reduction in guaranteed fixed prices and compensation to

farmers through per hectare payment (not linked to the quantity produced, but to the produce).

!   Support for farmers who respect the environment > the importance of sustainable agricultural production begins to be affirmed.

Unsolved issues

!   The financial unsustainability of the CAP. !   Imbalance between market support and environmental

measures.

1992: the Mac Sharry Reform

 

!   Decoupling of aid: CAP payments are linked to the number of cultivated hectares rather than to the quantity produced.

!   Support is no longer linked to production, farmers can decide if and what to produce, adjusting supply to demand.

 The CAP > from product support to income support for producers.

!   Members States have ample discretionary powers to adapt the CAP to the conditions in their respective countries.

!   The Rural Development Policy, introduced a few years earlier in Agenda 2000, becomes an important part of the CAP. The objectives: food quality, protection of the environment, animal welfare and support for young farmers.

 

2003: the Fischler Reform, a turning point  

Internal factors    !   Uncoupled direct aid (pillar I) solved some distortions

of the agricultural markets, but also created extreme distribution inequalities.

!   The Rural Development Policy (pillar II), especially its application, needed to be improved.

2010-2011: why another reform?  

2010-2011: why another reform?  

External factors !   The reform of the Multiannual Financial Framework

of the EU: the CAP represents approximately 40% of EU resources > the revision of the EU budget has to review the way in which agriculture is financed.

!   An EU with 28 Member States: agricultural models and their level of development differ enormously in an enlarged Europe. Adjustments had to be introduced so that the CAP could be modulated to adapt to national specificities.

!   Climate change. !   The advent of food security.

CAP 2014 - 2020: a long legislative process  

October 12, 2011

The European Commission presented the CAP Reform Package based on the 2010 Communication “The CAP towards 2020” and the results of a public consultation on this issue. The proposal is linked to the reform of the EU Multiannual Financial Framework 2014-2020. For the first time the approval process is launched between the European Parliament, the Council and the European Commission (the so-called Trilogue). EU Member States express divergent positions on several issues; negotiations are further complicated by the fact they have to take place concurrently and in a coherent manner with negotiations regarding the EU Budget.

Trilogue negotiations regarding the CAP Reform ended on June 26. Small adjustments were made in September, and on November 20 the seven Regulations of the new CAP were approved by the EU Parliament at its first reading.

2013

The most important novelties

 

Direct Aid (pillar I)  

!   Support paid only to active farmers, anyone who practices an agricultural activity. The EU specifies what they are not and excludes, for example, sports clubs, golf courses, real estate services, airports and railway stations. EU States have the option to apply a stricter definition of possible beneficiaries of this financial support.

!   Elimination of uncoupled aid: replaced by a system of direct payments with a minimum threshold of aid to farmers so that resources can be distributed more uniformly across the agricultural land of each Member State/Region.

!   Agriculture has to produce public heritage, especially environmental heritage; as a result, beneficiaries have to adopt environmentally and climatically friendly farming practices.

Direct Aid (pillar I)

 !   Convergence: within 2019 Members States will distribute

flat rate aid at national or regional level across all farmlands. To avoid penalising specialised productions which require greater resources and investments, a flexibility mechanism has been introduced for Member States. The latter can gradually reach a flat rate by envisaging, within 2019, a minimum mandatory payment per hectare equal to 60% of the national or regional average, but with the possibility to limit losses for each holding to 30% of the initial value.

Direct Aid (pillar I)  

Greening This is the second most important element of the national ceilings of the CAP worth 30% of the total national resources available. The three measures for which green aid is provided:  !   crop diversification; !   maintaining permanent

grassland; !   maintaining ecological

focus areas.

Young farmers This is an annual top-up payment for a maximum of five years, compulsory for Member States, and it is awarded to new entrant young farmers under 40. EU States may also introduce further eligibility criteria.

Direct Aid (pillar I)  Other optional payments

National Governments can use part of their national ceiling to finance other activities. !   Small farmers: lump sum payment, between 500 and

1250 euros, replacing direct payments (basic aid and other related aid), to simplify access to aid by small farm holdings (minimum one hectare).

!   Areas with natural constraints: an annual payment for farm holdings located, either in full or in part, in areas with natural environmental constraints. The State may grant up to 5% of the national envelope, and can choose to support only certain Regions and/or with specific characteristics.

!   Voluntary coupled payment: a supplementary support for certain kinds of cultivations which States consider strategic for economic, social and/or environmental reasons, or because they are facing unusual difficulties (i.e. grains, flax, hemp, rice, dairy products, olive oil, etc.).

Rural Development (pillar II)  

Rural development is financed by the European Agricultural Fund for Rural Development (EAFRD), at least 20% of which is co-funded by Member States. The CAP Reform 2014-2020 has also introduced the principle of flexibility between pillars, allowing Member States to transfer up to 15% of the annual resources earmarked for direct aid to Rural Development.

Rural Development (pillar II)

 

Six priorities   1.  Fostering knowledge

transfer and innovation. 2.  Enhancing the

competitiveness of all types of agriculture and farm viability.

3.  Promoting food chain organisation and risk management in agriculture.

4.  Enhancing the ecosystems dependant on agriculture and forestry.

5.  Promoting resource efficiency and supporting the shift towards a low-carbon economy.

6.  Promoting social inclusion.

Three objectives

1.  Improving the competitiveness of agriculture.

2.  Sustainable management of natural resources and climate action.

3.  Balanced territorial development of rural areas.

Based on the approach adopted by the previous plan (2007-2013), Member States and Regions develop their own strategies and Rural Development Programmes (RDPs) and tailor them to the specific characteristics of their own territory.

Two novelties

!   The Rural Development Policy must contribute to

achieving not only the objectives of pillar I, but more to the other EU structural funds, especially the European Regional Development Fund (ERDF) and the European Social Fund (ESF), which are managed as part of the Common Strategic Framework (CSF).

!   Thematic sub-programmes can be presented in support, for example, of the short supply chain, mountain areas, etc.

Rural Development Plan (pillar II)  

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