Following a number of reports from the European institutions, it is apparent that a lack of consensus on details between the EC, the European Parliament (EP) and the EU Council has stalled the CAP reform process. With the EP’s new co-decision-making powers under the Lisbon Treaty, this requires the launch of ‘trilogues’ – trilateral dialogues – between these EU institutions. Currently some 30 trilogue meetings are envisaged to try to resolve the impasse. These trilogue negotiations cover four main texts:
- “the proposal for a regulation establishing rules for direct payments to farmers” (including ‘greening’ measures and the distribution of payments);
- “the proposal for a regulation establishing a common organisation of the markets in agricultural products” (dealing with crisis management and general safeguards as well as support to producer organisations);
- “the proposal for a regulation on support for rural development” (including risk management schemes);
- “the proposal for a regulation on the financing, management and monitoring of the CAP” (including efficient management of aid and transparency issues).
While there is broad agreement on many aspects of the reform package, important issues still need to be resolved, including:
- “the level of the rebalancing of direct aid payments to farmers within member states” (internal convergence);
- redressing the balance of CAP aid between member states;
- capping payments and ensuring that CAP aid is targeted exclusively at active farmers;
- how to ensure efficient greening of CAP instruments (including the extent and modalities for greening);
- how to more effectively support young farmers, small farmers and less favoured regions
- the mechanisms to use for stabilising farm incomes (including through strengthening producer organisations and shortening supply chains);
- the mechanisms to be kept in place or established to deal with “difficult market situations” (the role of private storage aid, public intervention, the crisis reserve and scope for emergency measures);
- the extent of coupled payments to be allowed.
These measures form part of an integrated package. For example, speaking in the EP in March 2013, Agriculture Commissioner Dacian Cioloş set the proposed abolition of sugar production quotas in the context of the establishment of mechanisms for stabilising farm incomes and dealing with “difficult market situations”.
Academic analysis published on website Capreform.eu has suggested that increasingly “the central theme of the Cioloş CAP reform is… enhanced member state flexibility in policy design”, a so-called “pick and mix approach” to permitted policy measures. While such flexibility can be positive, allowing accommodation of local circumstances, it is noted that there is a danger that it can lead to “distortions of competition between farmers in different countries”. The analysis cites proposals to “[allow] member states to voluntarily recouple direct payments to production” (for example, in the cotton sector).
The core CAP reform trilogue negotiations are further complicated by financial considerations relating to the 2014–2020 multi-annual financial framework (MFF) and EC proposals published in April to reduce direct aid payments to EU farmers in 2014 by 4.98% below scheduled expenditures, following the heads of government agreement on the MFF.
The inter-institutional dialogue in the EU is likely to result in greater flexibility in the deployment of CAP policy measures by individual member states. As analysts have pointed out, the differential application of policy measures by EU member states could lead to “distortions of competition between farmers in different countries”. This applies not only to competition between farmers within the EU, but also – in the context of a multiplicity of free-trade area agreements – to competition between EU and non-EU farmers.
Particular concerns arise with regard to greater flexibility in the use of coupled support, for example in the cotton sector, where this could undermine ACP efforts led by the C-4 group of African cotton-producing countries to secure stricter disciplines on cotton sector support through the WTO.
Concerns also arise regarding the granting of flexibility in the use of national aid and emergency market intervention measures. These could serve to support EU production and exports in the longer term (see Agritrade article ‘ Policy tools critical to turning around crisis in the EU dairy sector’, 4 May 2010) and shift necessary production adjustments arising from world market price declines to non-EU producers, including, in some sectors, producers in the ACP.