On 26 June 2013, the European Commission, EU Council and European Parliament reached a political agreement on the 2013 CAP reforms. In broad terms this included agreement on:
- a “fairer” distribution of direct aid payments between member states and among farmers;
- eligibility for direct aid payments being limited to “farmers currently active”;
- the linking of 30% of direct aid payments to agreed “greening” measures, and recognition of the equivalence of certain national schemes with the required greening measures (the 30% payment will automatically be made available to certified organic farmers), with punitive fines for non-compliance with the greening requirement;
- an expansion of the scope for “coupled” support, with “EU governments that have historically provided higher levels of coupled payments” being allowed to continue to do so at moderately expanded levels;
- a revision of the existing system of public intervention and private storage to make it “more responsive and more efficient”;
- the establishment of a new safeguard clause backed up by a “crisis reserve” of €400 million, for use in response to market disturbances, financed from deductions from direct aid payments (with these being reimbursed the following year if unutilised in any given year);
- increased support to producer organisations – broadened out beyond the fruit and vegetable sector;
- additional measures to strengthen the position of producer organisations in the supply chain, particularly in the dairy sector (within certain specific exceptions to EU competition rules);
- abolition of sugar production quotas from 1 October 2017 and introduction of measures to strengthen functioning of the sugar supply chain (see companion Agritrade article ‘ Impact of CAP reform agreement on the sugar sector’, 6 August 2013);
- a broadening out of the range of tools available to regions and member states under the rural development budget (including some new risk management tools), with no minimum allocation stipulations related to particular types of activities.
The modifications of direct aid payment rules will not come into effect until 2015, given that the required changes to payment agency procedures will require some time to set in place.
However, while “the political contours of the future CAP” have been agreed, “the Commission will still need to prepare a detailed legislative text setting out the agreement that has been reached.” In addition, EU member states still need to agree on the next 7-year financial framework.
Some analysts see the June 2013 CAP reform package as “no more than some minor fine-tuning of the status quo CAP regulations”, providing greater flexibility, but at the cost of increased administrative complexity. It is argued that the reforms agreed do not lead to “a decisive paradigm shift in favour of a ‘public money for public goods’ philosophy”.
Beyond the agreement on the date for abolition of sugar production quotas, there are three areas of reform potentially of interest to the ACP. The first relates to continuation of “coupled” payments, which to a certain extent can be seen as permissive of recoupling of support in particularly sensitive sectors. From an ACP perspective, this can be seen as closing off any possibility of expedited cotton sector reforms.
The second area relates to the creation of the “crisis reserve” to deal with market disturbances. This facility can be used to cushion EU producers from the worst effects of global market price volatility. Potentially, this could shift the burden of adjustments to lower world market prices to non-EU producers.
While financing for this facility is 20% lower than initially proposed and is drawn from existing direct aid payment allocations, rather than being additional to direct aid payments, its use could nevertheless pose problems for some third countries at particular times of market disturbance in particular sectors. Its actual deployment will therefore require close monitoring (particularly in the dairy and, potentially, the poultry sectors).
A third area of interest relates to the automatic nature of the 30% direct aid payment to organic farmers. At a time when concerns have been expressed about the cost-increasing effects of new EC proposals for the implementation and financing of food and feed controls (see Agritrade article ‘ Concerns expressed over impact of revision of EU food and feed controls...’, 11 August 2013), the provision of this automatic additional support to EU organic farmers could serve to distort competition between EU and non-EU organic producers, to the detriment of ACP suppliers in some sectors. Although the EU system of direct aid payments is fully WTO-compatible, this automatic additional support raises the broader issue of the impact of direct aid payments on the relative competitive position of EU and non-EU agricultural producers.