On 20 September, the UK and Polish agriculture ministers issued a joint call for a reform of the CAP in a way that prepares European agriculture for the ‘challenges and opportunities of 2050 and beyond […] rather than protecting practices whose time is past’. This joint statement included a call for ‘a convergence of direct aid payments’, and press reports suggested that this included a call for ‘a reduction in direct income support to farmers’.
The UK and Polish ministers agreed that CAP reforms should enable the agri-food sector to ‘respond to and earn improved returns from the global market’. Specifically a call was made for Pillar 1 of the CAP (direct aid payments and market measures) to be downsized, and for greater emphasis to be placed on Pillar 2, which focuses on investment support rather than production subsidies. According to UK officials, the aim should be ‘to create a more competitive farming industry that is not reliant on any direct subsidies’. Particular emphasis was placed on ‘the positive environmental dimension of modernisation, enabling changes towards agricultural production technologies which are more environmentally friendly’, including the provision of environmental public goods such as biodiversity protection and healthier soil or water.
This joint position was met with scepticism by French government officials, who claimed that behind the joint statement there were ‘two rather divergent visions of agriculture’, with Polish officials seeking ‘to increase direct aid payments to its farmers’ as part of this convergence process, rather than focusing on bringing down the payment levels received by EU15 farmers. French officials described the joint statement as ‘like a marriage of carp and rabbit’.
The joint statement reflects the position of the UK National Farmers’ Union (NFU) which called for ‘clearer market signals and a more production-geared policy framework that will allow Britain’s farmers to truly meet rising domestic and global demand for food’. The NFU president rejected the assumption implicit in the EC’s policy approach that that ‘Europe’s farmers cannot compete on the world stage’. He maintained that with the right policies, EU farmers can compete, and called for EU policies which ‘encourage production and do not penalise scale and efficiency’.
In response to increased price volatility, the NFU president noted that UK farmers want to form supply chain agreements that allow them to ‘become preferred suppliers of traceable and sustainable products, where risk is managed and shared’. He emphasised the need for ‘a supply chain where the balance of power is not abused’, which was why the NFU ‘have pushed for the Grocery Supply Code of Practice and an adjudicator to police it’. He further appealed for joint action ‘to improve the transparency of the market and the efficiency of the supply chain’. He also called for ‘the development of more sophisticated management of input costs’.
As background to the CAP reform debate, the EU Court of Auditors has posted a special report on agri-environmental measures, finding that the objectives of these support measures were vague, making it difficult to determine the effectiveness of the measures. The report recommended that such support be more precisely targeted on specific environmental needs, to enable better reporting of the progress made in attaining clearly articulated policy objectives.
While the UK may be pushing for a less protected system of agricultural production, the French government continues to push for effective safety nets, with the Polish government trying to combine these positions. These divergent positions are based on different visions of the type of EU agriculture to be promoted (industrial farming versus smallholder farming).
These contrary forces are likely to leave the EC in a position to secure broad endorsement for its proposals. The real test of this will arise around the annual budget process, the extent of ‘modulation’ (which transfers funds between Pillar 1 and Pillar 2) and the specific conditions under which particular types of aid are deployed (e.g. agri-environmental measures).
Any process of change in the CAP is likely to be gradual and carefully managed. This gradual, carefully managed process of reform, which extends into the sphere of agricultural trade policy change, potentially holds important lessons for ACP governments as they approach the final stages of the EPA negotiations.
As shown in the recent WTO EU trade policy review and leaked EC proposals for the 2013 round of CAP reform, the EC remains committed to the use of traditional trade policy tools for as long as market conditions continue to make their use necessary to insulate EU farmers and agri-food processors from increasingly volatile global agricultural commodity markets (see Agritrade articles ‘ Agricultural dimensions of the WTO EU trade policy review’, September 2011, and ‘ EC proposals for the reform of the CAP leaked’, October 2011).