eu cap in international perspective oecd monitoring … · • 52 oecd and emerging economies spent...
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EU CAP IN INTERNATIONAL
PERSPECTIVE
OECD MONITORING AND EVALUATION
SALV, Brussels 16 November 2017
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Most of the USD ½ trillion spent to support farmers
distorts markets, is inefficient for public objectives
• 52 OECD and emerging economies spent USD 519 billion to support farmers (avg 2014-16).
• On average, 16% of gross farm receipts stem from public policies.
– OECD average: 18% - Emerging economies average: 14%
• Most of that (three-fifths) is transferred through price support.
– Among the most distorting forms of support, not efficient to achieve stated public objectives
• Only USD 90 billion are spent on general services.
• Those can help agriculture and food to be more productive, sustainable and resilient to external shocks, e.g.
– Investments in people: education, skills training and others
– Investments in physical infrastructure (including digital technologies)
– Investments in a well-functioning innovation, knowledge and information system
– Biosecurity inspections and controls adapted to the sector‘s needs
• Countries should improve coherence across policies, reduce distortive support and redistribute towards investments that help the sector to achieve its societal objectives.
OECD Trade and Agriculture Directorate 227/11/2017
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• Information on policy developments in countries
• Includes comparable measurement of support to
agriculture (PSE methodology)
• Consistent over time and across countries
• Covers OECD and many emerging economies
• 52 countries – two-thirds of global agricultural value
added
30th Annual Report on
OECD Monitoring and Evaluation of Agricultural policies
27/11/2017 OECD Trade and Agriculture Directorate
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Levels of support to producers in OECD and
emerging economies are converging
Support to farms as percentage of gross farm receipts
Source: OECD (2017), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database),
http://dx.doi.org/10.1787/agr-pcse-data-en
-5
0
5
10
15
20
25
30
35
40
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
%
Grand Total OECD 11 emerging economies
27/11/2017 OECD Trade and Agriculture Directorate
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But producer support varies widely across individual
OECD countries and emerging economies
Support to farms as percentage of gross farm receipts (1995-97 and 2014-16))
Source: OECD (2017), "Producer and Consumer Support Estimates", OECD Agriculture statistics (database),
http://dx.doi.org/10.1787/agr-pcse-data-en
-20
-10
0
10
20
30
40
50
60
70%
2014-16 1995-97
1) 1995-97 replaced by 2000-02
2) EU (15) for 1995-97, EU (28) for 2014-16
3) 2014-16 replaced by 2013-15
4) Not including non-OECD EU Member States
27/11/2017 OECD Trade and Agriculture Directorate
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Trade distortions have been reduced more than
support – thanks to changes in the support structure…
OECD Trade and Agriculture Directorate 6
Relative change in the trade impact of countries policy packages and in the Producer Support Estimate,
selected countries, 1995-97 to 2014-16 (as measured in percent of gross farm receipts, respectively)
1) 2014-16 replaced by 2013-15
2) 1995-97 replaced by 2000-02
3) EU (15) for 1995-97, EU (28) for 2014-16
-100% -80% -60% -40% -20% 0% 20% 40%
Chile
European Union 3
South Africa
United States
Russia
Canada
Switzerland
Japan
Israel
Norway
Turkey
Philippines 2
China
Indonesia 1
OECD
Trade impact change (relative) %PSE change (relative)
27/11/2017
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A significant part of support remains commodity-
specific, distorting signals faced by producers
OECD Trade and Agriculture Directorate 7
Single Commodity Transfers, all countries, 2000-02 and 2014-16
(Percentage of gross receipts for each commodity)
-20
-10
0
10
20
30
40
50
Barley Wool Eggs Oats Soy-bean
Sun-flower
Sorghum Poultry Pigmeat
Palmoil
Sheepmeat
Beefand veal
Milk Wheat Maize Rape-seed
Sugar Cotton Rice Allcomm.
%2000-022014-16
Source: OECD (2017), "Producer and Consumer Support Estimates", OECD Agriculture statistics (database),
http://dx.doi.org/10.1787/agr-pcse-data-en
27/11/2017
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Countries generally agree on what is needed
• Numerous objectives shared across countries:
– ensuring food security
– enabling producers to improve their living standards by operating in an open and
transparent trading system
– sustainable productivity growth
– building resilience
– ecosystem services
– inclusive growth and development.
• Countries also agree that more coherence is needed with other
policies
• OECD Agriculture ministerial 2016
OECD Trade and Agriculture Directorate 827/11/2017
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To achieve these objectives, countries should shift the
focus of their agricultural and food policies
• More emphasis is needed to:
– Ensure an integrated approach to agricultural and food policies
– Prioritize investments in people’s education and skills and agricultural innovation
systems;
– Prioritize investments in strategic physical infrastructure;
– Clarify and streamline risk management policies;
– Target funds to specific objectives and intended beneficiaries.
– Phase out market price support.
– Phase out output and input subsidies.
OECD Trade and Agriculture Directorate 927/11/2017
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Evaluation of the CAP 2014-20
• Evaluation of the main new features
• Special focus:
– Coupled support
– Risk management
– Environmental measures
• ex-ante assessment using the OECD indicators
of support and the CAPRI model
Published in July 2017
OECD Trade and Agriculture Directorate 10
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Consecutive reforms have shaped
today’s CAP
New instruments have replaced most
distorting forms of support
OECD Trade and Agriculture Directorate 1127/11/2017
0%
5%
10%
15%
20%
25%
30%
35%
40%
45% % of gross farm receipts Support based on: Commodity output
Input use
Current A/An/R/I, production required 1
Non-current A/An/R/I, production required
Non-current A/An/R/I, production not required
Non-commodity criteria
Miscellaneous
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Stable overall budget: how is it spent?
OECD Trade and Agriculture Directorate 1227/11/2017
Notes: Total public expenditure includes national co-financing and national top-ups. An annual average expenditure on national Rural
Development Programmes (RDP) is calculated by the OECD using the seven year national RDPs as published.
Source: EU budget data 2017 and OECD calculations based on published national RDPs.
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CAP 2014-20: Less commonality
Choice measures:
• Higher payments to first hectares [9 MS]
• Simpler conditions for small farms [15 MS]
• Reduced BPS above150K [22 MS]
• Coupled support [0% to >50% of MS DP]
– more relaxed conditions
– more (18) commodities
– more budget: 10% of DP budget
To fund choice measures => BPS down.
OECD Trade and Agriculture Directorate 1327/11/2017
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The lion’s share of coupled support
goes to livestock sectors
OECD Trade and Agriculture Directorate 14
Beef and veal; 41%
Milk and milk products; 20%
Sheep meat and goat meat;
12%
Protein crops; 11%
Fruit and vegetables; 5%
Sugar beet; 4%
other; 5%
27/11/2017
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Coupled support should be ended
• VCs distort markets and resources
between sectors
• Short-term income problems should be
addressed with risk management tools
• P2 instruments can support farm efforts to
achieve long-term competitiveness and
productivity gains
OECD Trade and Agriculture Directorate 15
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Risk management
• Less market intervention => more exposure to risks
• OECD analysis of RM in agriculture: – 3 layers: normal, marketable and catastrophic risks.
– Need to look at all policies holistically
• Little take up of CAP RM:– Direct payments limit downside income risks
• one-fifth of farm receipts results from policies.
– Schemes and services may exist at MS level.
• Crowding out of farm-level actions and markets?
• RM measures may work counter to enhancing resilience
OECD Trade and Agriculture Directorate 1627/11/2017
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Illustration: RM strategies and policies
in Spain
OECD Trade and Agriculture Directorate 1727/11/2017
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Need to revisit Risk Management tools
• Integrated approach for normal, marketable and catastrophic risk:– Look at all risk exposure and incentives
– Clarify 3 layers
– Clarify public and private roles
– RM for income fluctuations or income levels?
– What is a disaster, and how to act?
– Resilience!
• Farmers must be co-responsible
• RM targeted at farm income requires detailed info on farm household income (Canada model).
OECD Trade and Agriculture Directorate 18
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Environmental measures
• Environmental components include:
– Cross-compliance: compulsory
– New Greening: compulsory,
• 3 conditions
• Agri-environment & climate measures
(P2): voluntary
– Continuation of former agri-environmental
payments
OECD Trade and Agriculture Directorate 19
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Greening assessment
• Marginal overall impact on EU aggregate production,
prices and trade.
• Local effects could be more notable and farming
practices would change in few areas:
– Ecological Focus Area increases land set-aside.
– In turn, this may increase intensive practices (within permitted
limits) on remaining productive land.
• Voluntary measures (P2) are more targeted and more
relevant to local objectives and conditions of member
states
OECD Trade and Agriculture Directorate 20
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Simplify and target environmental
components
Improve policy coherence:
• review all measures affecting environmental performance,
• assess local environmental conditions,
• Provide support where it is needed to achieve objectives.
Target measures to environmental outcomes at the farm level.
Enhance effects of environmental measures through:
• Improving farmer access to information and guidance.
• Monitoring correct implementation on farm.
• Adapting choices to local environmental conditions.
• Enforce environmental baseline; supplement with voluntary schemes
OECD Trade and Agriculture Directorate 21
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Overall impacts from CAPRI model
• small aggregate effects on production, prices, trade,
welfare and the environment.
• BPS & coupled support & convergence =>
redistribution between sectors and between MS.
• Greening only impacts some specific land allocations.
• Greening >< VCS = inconsistent signals.
OECD Trade and Agriculture Directorate 2227/11/2017
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Future directions
Better target support to
• the provision of public goods, such as environmental stewardship and climate change mitigation.
• Foster (climate) resilient farming practices.
• Stimulate innovation – widely defined; incl. education
This will require
• Policy coherence between incentives to produce, environment and risk management – and with non-agriculture policies
• Clarification of risk management needs
• Clarification of tax provisions in MS
• Re-design of income support to address income problems.
• Explore voluntary/contractual approaches to support farm businesses and enhance environmental outcomes instead of blanket support
OECD Trade and Agriculture Directorate 2327/11/2017
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Further reading
OECD Trade and Agriculture Directorate 24
http://dx.doi.org/10.1787/9789264278783-en
27/11/2017
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Much more information available in electronic form
• The whole Monitoring report including the country chaptersand the Statistical Annex is available on http://dx.doi.org/10.1787/agr_pol-2017-en.
• Data for the calculations of support are available at http://dx.doi.org/10.1787/agr-pcse-dat-en.
• An interactive database with the indicators of support is alsoavaliable on www.oecd.org/agriculture/PSE
• A compare your country (CyC) is also available at www.compareyourcountry.org/support-for-agriculture.
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THANK YOU
• Visit TAD website: www.oecd.org/tad/agricultural-
policies/
• Contact us: [email protected]
• Follow us on Twitter: @OECDagriculture
OECD Trade and Agriculture Directorate 26