reforms and the future of the cap

June 24, 2011 Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

reforms and the future of the CAP

Istvan [email protected]

PhD School of Economics and ManagementSZIE Gödöllő, Hungary

mailto:[email protected]


Outline• I. Introduction• II. 1992 – Mac Sharry• III. Agenda 2000• IV. Mid-Term Review 2003• V. Health Check and simplification• VI. CAP post-2013• Conclusions


I. IntroductionHungary as a major food supplier of Europe until the 20th century


I. IntroductionJános KÁDÁR and the (post)communist regime


I. Introduction

Hungary today


I. Introduction• Original CAP objectives

• Principles for CMOs:

• Historical background and specificities by product• CMOs in a dynamic world – SINGLE CMO• Not to exclude but to co-ordinate competition

1. Unity of the market

2. Community preference

3. Common finance

Modernization

Stable food markets

Income levels in agriculture

Food security

Consumer food prices


I. Introduction• CAP: a policy facing the challanges of a diverse 21st century agriculture and that of rural areas


1992 – Raymond Mac Sharry

„The CAP reform agreement was an acheivement of enormous proportions. It succeeded in controlling surpluses, in controlling the budget, in raising farm incomes, in providing for environmental protection and in providing good quality food at reasonable prices for the consumer.”

University of Limerick


II. 1992 – Mac Sharry

• Structural surpluses, price conflicts• Financial difficulties due to the anomalies

of the exchange mechanism• Fiscal limits of the EU budget• Unsuccessful adjustments of the CAP in

the 80s• Expansion of the rural development notion

Phenomena triggering a profound reform



• CMOs included in the 1992 reform:

• 1996: F&V

Measures and elements

• Council regulation (EC) No 2200/96 of 28 October 1996 on the common organization of the market in fruit and vegetables• Council regulation (EC) No 2201/96 of 28 October 1996 on the common organization of the markets in processed fruit and vegetable products• Council regulation (EC) No 2202/96 of 28 October 1996 introducing a Community aid scheme for producers of certain citrus fruits

Cereals

Oilseeds

Protein crop

Beef

Ovine

Tobacco

input-based direct payments

set-aside

redifined institutional prices



• 1999: wine

• Accompanying measures

Measures and elements (contd.)

Council regulation (EC) No 1493/1999 of 17 May 1999 on the common organisation of the market in wine

Agri-environmental measures

Afforestation

Preferential pension scheme

pre-RD measures



• In spite of the profound reform of the cereals sector => temporary results and regaining structural surpluses

• Highly protective CMOs ignored: sugar, milk• Supply control measures: costly and eludable• Fraud• Manifestation of the need for further reforms

Criticism (general)


Agenda 2000

„Agenda 2000 is an action programme whose main objectives are to strenghten Community policies and to give the European Union a new financial framework for the period 2000-06 with a view to enlargement.”

European Commission


III. Agenda 2000It was launched in 1999 in the form of twenty legislative texts relating to the following priority areas:

-continuation of the agricultural reform;

-increasing the effectiveness of the Structural Funds and the Cohesion Fund;

-strenghtening the pre-accession strategy for candidate countries;

-adopting a financial framework for the period 2000-06 in order to enable the Union to meet the main challanges of the beginning of the 21st century.


III. Agenda 2000The importance of the 2000-2006 period – agriculture

Developments arising from WTO talks

Enlargement: 10 NMSs , pre-accession funds (PHARE, SAPARD, ISPA)

An integrated RD scheme: 2nd pillar of the CAP (built upon former „accompanying measures”)

Main objectives – agriculture (compliance with original ones?)

Competitiveness

Food safety

Environment, animal welfare

Farm income

Management of natural resources, landscape

Maintaining rural communities: diversification of incomes

The future of European rural areas: sustainability (2nd pillar)


III. Agenda 2000Measures adopted

• price cuts;• partial compensation through direct payments;• modulation;• voluntary cross complience;• national envelope;• modifications to the supply management tools;• second pillar: more numerous and more integrated

RD measures (young farmers, etc.) – FEOGA Guarantee and Orientation finance.


III. Agenda 2000Evaluation

• EU made major steps in terms of:

• BUT the original concept was severly „diluted”

by the compromise efforts

adaption EU farmers to global tendencies

handling the internal problems of CAP

preparation for the enlargement

The difference between EU price levels and that of global markets declined too slowly – remaining structural surplus

Cereals remain the most subsidized sector (production area)


III. Agenda 2000• BUT the original concept was severly „diluted” by

the compromise efforts (contd.)

Existing tension in beef and milk CMOs not eased

Adopted measures did not satisfy WTO commitments/expectations - EU position in WTO talks weakened

Illusionary budget savings

Conditions for obtaining direct payments: performance falls short of expectations

Enlargement: CEE countries


IV. Mid-Term Review 2003

„The studies indicate that „decoupling” aid from production would result in production adjustments where needed, but would clearly not lead to production abandonment.”

European Commission


IV. Mid-Term Review 2003Based on an initiative to technically adjust the Agenda 2000 package…„Further” decoupling: Single Payment Scheme (SPS)

historical model, payment entitlement (PE)regional model, hybrid models

Compulsory Cross Compliance – Farm Advisory System CMOs: some included in Council regulation (EC) 1782/2003, some under separate CMO reformsStrenghtening second pillar – EAFRD Modulation, national reserve



Standard – SPS conversion (2005-2006-2007)SAPS – SPS conversion (2007-2008-2009) or 2011?Cross compliance implementation (GAECs: 2004-2005

SMRs: 2009-2011-2011)To be highlighted from a Hungarian point of view:

Lack of „Bottom-up approach” in:Representation of agricultural interests (the Chamber?)Rural development (EAFRD scandals, LEADER)Farm advisory systems, rural extension



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Level of Support in the EU-15 and in Hungary (2004) (€/ha utilised agricultural area)


V. Health Check and simplifiation

„The CAP has proven that EU agriculture can take such steps successfully and change, but needs to allow farmers to adjust in the context of a predictable policy path.”

Commission communication to the Council and the European Parliament


V. Health Check and on-going simplifiation

• Single CMO, simplification of cross compliance (my experiences)

• A quick reminder: Reform Treaty of Lisbon• Health Check (link to Budget Review)

Mid-term review?

Technical adjustment?

Profound reform?

The role of Marianne Fischer-Boel (Slovenian and French Presidency)


Assumptions to be drawn on the doorstep of the reform 2014-2020• CAP seems to enter the fast lane• Continous efforts to meet market

expectations and react (adjust) to global changes

• Success each time or continous failure?• Hungary and NMSs: to jump on a moving

train• Future vision: several scenarios


Context- Latest developments in policy and on the

markets;- Crisis and EU budget (2014-2020)- Environmental concerns and ambitions- Lisbon Alignment and increased role of the

European Parliament (Dess Report)- Role of presidencies, Hungary included

VI. CAP post-2013


PRECEDINGS

• CAP reform on the agenda of each presidency since 2008

• Summer 2010: broad public consultation driven by the Commission

• Nearly 5,000 organisations, enterprises and individuals participated

• Many MSs declared preliminary positions

• COM Communication of November 18, 2010 takes note of the above circomstances


Place and role of the Communication in the decision making process

• First official COM position• Requires official reaction from MSs

• Leaves vast room in politically sensitive issues

• Opportunity to harmonise MS positions

• Adopting conclusions (Council/Presidency)

• COM words legislative proposals based upon the discussions and the conclusions


Main content features of the PRES conclusions

Majority of MSs accepts and supports the objectives proposed by COM

1. Viable food production:farm income and competitivity of the sector

2. Sustainable management of natural resources:public goods provided by farmers to be compensated

3. Balanced territorial development:mainataining rural communities and employment

(which are considered to contribute to the fulfilment of the EU2020 objectives)


Main content features of the PRES conclusions (contd.)

• Destiny of agriculture and rural areas are to be handled jointly in the future, too

• Strong and a two-pillar structures CAP is needed

• Pillar I Pillar II

Further simplification is needed (both for farmers and authorities)

•greener•more equitable

•Promoting competitivity•Enhancing innovation•Focus on environment and climate change


Main content features of the PRES conclusions (contd.)

Direct payments• DPs have already proven their value and usefulness;• Remain a basic component of the CAP;• Are deemed to compensate high EU standards;• Also compensate public goods and services

provided by the farmer;• Equitable, pragmatic, economically and socially

sustainable distribution, reducing the links to historical references on a step-by-step basis

• A transition period has to be established for adaptation;


Main content features of the PRES conclusions(contd.)

Direct payments• Certain extent of flexibility should be provided to

the MSs;• The possibility of coupling should be maintained

for the sensitive sectors/region;• SAPS should be available for the countries in

question beyond 2014;• Active farmers should be the primary beneficiaries;• Capping is rejected by the MSs;• Further greening is welcome, but it should not

result in more complicated administration;• LFA payments should stay in pillar II



Market issues• EU agriculture must continue its market orientation to be more

competitive;• Existing tools form a safety net;• COM should be more responsive when activating tools;• More efficient functioning of the food chain is required: more

equitable distribution of income;• External trade: producers of third countries should respect the same

standards as in the EURisk management• Increasing production risks should be tackled on EU level;• The system should be voluntary and compatible with existing

national schemes



Rural development• Valuable policy that has to remain robust;• Competitivity, sustainability, economic potential of rural areas:

various tasks;• Generation change => young farmers and new entrants;• Infrastructure, knowledge;• Diurect sales, local markets;• Agri-environmental schemes are successful, should remain in

use;• Innovation is a central element: CAP both promotes and requires it;• Climate change: agriculture is also involved in slowing the process

and in adapting to it;• Programming: common rules should not get more complicated,

MSs should reflect their specificities even better;• Striving for synergy with regional and cohesion policies


Thank you for your kind attention

reforms and the future of the cap

Documents

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