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CAP 2014-2020: A long road to reform

Politicians approved in June 2013 an agreement on the first large reform of the Common Agricultural Policy (CAP) in a decade, after months of haggling over how ambitious to make the policy on overhauling direct payments, ending quotas, and making farmers more environmentally accountable. The long road to a deal means that many policies will not come into force before 2015.

Background

Launched in 1962, the Common Agricultural Policy, or CAP,  is a system of EU agricultural subsidies and programmes comprising the biggest single budget outlay for the EU – some 38% of the overall budget compared to nearly 70% in the 1970s.

Under the agreement on the EU’s €960-billion budget for 2014-2020, spending for agriculture and rural development will be around €380 billion, with some €280 billion set aside for direct payments to farmers and around €80 billion for rural development. The rest goes mainly for export support.

The European Commission proposed overhauling the CAP in October 2011, recommending fundamental changes in the 2014-2020 framework, including:

  • Reform of direct payments to support farmers (Pillar 1) and the budget for rural development and conservation (Pillar 2);
  • The end to quotas and other forms of market support;
  • A greater emphasis on environmental measures, with up to 30% of the funding granted to farmers who diversify production, rotate their land or maintain permanent pastures.

These proved to be some of the most contentious points throughout the legislative process in the European Parliament and in negotiations between MEPs, national agricultural ministers and the Commission.

Twenty-one months after those proposals were unveiled, negotiators finally reached a deal on 26 June 2013.

The process was a historic one – it was the first CAP ever produced under a new system put in place by the 2009 Lisbon Treaty, in which the European Parliament gained an equal role in influencing farm legislation and the budget. Previously, the European Parliament had a rubber-stamp vote on farming policy.

But the slow decision-making process, highlighted by intense lobbying, meant the agreement came too late to implement by 2014. Thus, the European Commission prepared contingency plans for introducing the new measures in 2015 and a transitional period to shift from the existing to a new payments scheme in 2014.

Issues

When the European Commission proposed overhauling the CAP in October 2011, it called for fundamental changes in the 2014-2020 framework. These included the reform of direct payments to farmers (Pillar 1) and changes to the rural development fund (Pillar 2); the end to quotas and other forms of market support; and a greater emphasis on environmental performance.

While the final document retained some of these goals, the parliamentary process and final negotiations led to a law that in most cases cut middle ground and gave the 28 member states more leeway, including over new environmental performance rules.

Under a separate agreement on the EU’s €960-billion budget for 2014-2020, spending for agriculture and rural development will be around €380 billion, with some €280 billion set aside for direct payments to farmers and around €80 billion for rural development. The rest mainly goes for export support.

Agriculture was spared from major cuts made elsewhere in the EU’s spending framework.

Besides supporting farmers, CAP supporters see the new rules as enhancing food security in a world facing climate shocks – such as crop-destroying droughts in the summer of 2012 and floods in Central Europe in June 2013 – but also helping farmers compete with cheaper imports from emerging markets in Latin America, Asia and Africa.

The post-2013 CAP addresses some of those concerns by prolonging production quotas in some sectors and establishing a risk-management fund under Pillar 2 to help insure Europe’s farmers against climate change and pest infestation.

"This agreement will lead to far-reaching changes: making direct payments fairer and greener, strengthening the position of farmers within the food production chain and making the CAP more efficient and more transparent,” Dacian Ciolo?, the commissioner for Agriculture and Rural Development, said on 26 June 2013 as the freshly minted deal was presented before the Parliament’s agricultural committee.

“These decisions represent the EU's strong response to the challenges of food safety, climate change, growth and jobs in rural areas. The CAP will play a key part in achieving the overall objective of promoting smart, sustainable and inclusive growth," Ciolo? said.

Despite its monolithic political and fiscal importance for the EU, agriculture is a small part of the economy: it accounts for 1.7% of GDP and 4.6% of employment, OECD figures show. Agri-food products were 6.5% of exports in 2009.

Money: Less for big farms, more for harmonisation

In Robin Hood fashion, the new CAP gradually reduces the Pillar 1 payments to farming corporations and large landowners receiving more than €150,000 per year although the deal left unresolved a cap on how much any farmer could receive.

The new rules stipulate that each farmer receive at least 60% of the average national or regional direct payment by 2019, a reshuffling that advocates say will help smaller landholders.

In 2013, 20% of farmers were to receive 80% of the direct payments under the CAP’s Pillar 1, leading to criticism that corporations and celebrities – including the British monarch – were among the big beneficiaries of farm subsidies.

The agreement also seeks to close the subsidy gap between farmers in the 15 older EU member states and the 13 joining after 2004, including the most recent entrant, Croatia. This became a rallying point for Baltic farmers, who received some of the lowest payments in the EU, typically one-third of their counterparts, or €100 per hectare compared to the more than €400 per hectare for farmers in the Netherlands, Belgium and Italy.

Member states will also be required to move towards paying farmers based on the hectares they cultivate, replacing the varying schemes administered by national governments that also varied between newer and older EU states.

The new “basic payment system” will require a uniform payment per hectare and obliges national governments to devote at least 70% of their Pillar 1 funds to these payments.

The CAP deal also sets in place the gradual harmonisation of payments between the older and newer countries, requiring that no single state receives less than 75% of the EU average by 2019.

Also under the new rules, outdoor sports and recreational facilities, airports and railways and water treatment facilities will no longer be classified as providing agricultural benefits. The agreement’s inclusion of a definition of “active farmer” was praised by reformers who saw the old rules as ripe for abuse.

Support: A boost for young, small farmers

The CAP is sprinkled with incentives for young people and smallholder growers to stay in farming, a recognition of the need to reshuffle the demographics of a trade where an estimated one-third of farmers are over 65.

Under the deal, farmers with a few hectares of land could qualify for an additional payment of up to €1,250 per year, while national governments could use up to 2% of their CAP Pillar 1 funds to encourage people under the age of 40 to become farmers.

“We have positively discriminated in favour of young farmers to give them mandatory top-ups, which is good for the future of farming in Europe,” Simon Coveney, the Irish farm minister who helped negotiate the final deal, told the Parliament's agricultural committee on 26 June.

Joris Baecke, president of the European Council of Young Farmers (CEJA), also welcomed the deal. “This is an historic moment for young farmers – the first reform to include a mention, let alone a mandatory measure for young farmers under Pillar 1.”

The agreement also opens the door to giving under-40 farmers extra financing under Pillar 2, which provides money for rural development and conservation projects. Through this programme, they would be eligible for business start-up grants (up to €70,000) while small farmers would qualify for start-up aid of up to €15,000.

Pillar 2 – which accounts for about 20% over overall CAP spending – proved to be a divisive issues during the negotiations. Farm ministers backed efforts to tear down the firewall the Commission proposed between the two pillars and to allow national governments the flexibility to shift Pillar 2 funds to Pillar 1 to provide extra income support to food producers. Critics argued this would open the door to farmers being paid twice for the same work.

However, environmental campaign groups welcomed the last-minute decision to require that 30% of Pillar 2 funds be set aside for conservation projects, reversing earlier efforts to reduce the minimum requirement.

Liberalisation: A U-turn on quotas

Members of Parliament exercised their power as co-equal negotiators to alter longstanding commitments to end remaining production quotas and market-support mechanisms. Parliament gained the new legislative authority over the CAP under the Lisbon Treaty of 2009.

MEPs used the power to upend market liberalisation efforts backed by the Commission, agreeing to extend sugar quotas and vine planting rights that were to have expired by 2016.

French MEP Michel Dantin (EPP), who led the efforts in the Parliament’s agriculture committee on the quotas and planting rights, welcomed the end agreement.

“We have now reinstated the capacity for organisation and management,” Dantin told journalists. “Farmers now have the certainty that they will not be abandoned by their public authorities.”

Sugar quotas will end in 2017, two years later than planned under a 2005 agreement. MEPs succeeded in introducing a new vine planting scheme after 2016 that will allow for a gradual growth – up to 1% per year – rather than the blanket end of protections for grape growers.

A new Crisis Reserve Fund is also to be created using Pillar 1 money, though funds that are unspent from one year would be refunded the following year.  

These measures, along with other efforts to create a “safety net” to protect European farmers from cheaper foreign competitors, didn’t satisfy all MEPs.

Julie Girling, agriculture spokeswoman for the British Conservative party, said the agreement was a throwback to the CAP’s historical market protections.

"British farming is among the most efficient in Europe but there is really nothing here to reward that,” she said in a statement. "Instead, old-fashioned market intervention is back in a big way, potentially taking us back to the bad old days of butter mountains and wine lakes."

Greening: Big ambitions put on hold

When Ciolo?, the agricultural commissioner, unveiled his 2014-2020 CAP proposal on 12 October 2011, he called for “a new partnership between European citizens and its farmers to meet the challenges of food security, sustainable use of natural resources and growth.”

What followed was a high-pressure lobbying campaign over what would become known as a “greener” policy, incorporating new conservation rules for both farmers and member states. These included:

  • Maintaining permanent pasture;
  • Diversifying cultivation, with farmers obliged to grow at least three crops on their arable land, two of which must represent at least 5% of the land each and the third not more than 70%.
  • Maintaining an "ecological focus area" of at least 7% of farmland - excluding permanent grassland - through field margins, hedges, trees, fallow land, landscape features, biotopes, buffer strips and forest.

National governments charged with administering the CAP quickly expressed concerns that the policies would be more burdensome, while farm groups feared being locked into standardised environmental rules despite the diverse landscape of European agriculture. Environmental groups, meanwhile, hailed the effort and called in some cases for going beyond what the Commission proposed.

In the end, the environmental proposals proved some of the most controversial, leading to battles in Parliament between the more green-focused environmental committee and its agricultural counterpart.

Frustrated in advance of the vote in the European Parliament over the post-2013 farming policy, the agriculture committee’s chairman, Paolo De Castro, on 11 March 2013 publicly lashed out at environmental groups. He blamed their pressure campaigns for halting a time-saving legislative manoeuvre that would have allowed the committee to decide which of the hundreds of CAP amendments would go before the Parliament for a vote.

“I do not want our committee to be viewed as a committee that does not want the opportunity for a full debate in the plenary,” De Castro (Socialists & Democrats, Italy) said at the time, adding: “We’ve all received letters and e-mails from environmentalists, trade unions” and other pressure groups objecting to the special procedure.

In the end, environmental groups saw little to celebrate in a deal that includes broad exemptions from mandatory greening measures first proposed by the Commission.

Under the agreement, the EU’s 28 governments must make 30% of the direct payments contingent upon meeting certain environmental criteria, although member states have leeway to decide when to apply sanctions, a change from the Commission’s proposal that called for EU-wide performance standards.

In a step away from what the Commission first proposed, the CAP also:

  • Exempts farms of under 15 hectares from new requirements to create “ecological focus areas,” or EFAs, land that is to be set aside to promote biodiversity and help absorb farm runoff. Initially, the requirement will apply to 5% of farmland in 2015 with a possible increase to 7% pending a review in 2017, re-writing the Commission’s original proposal to require a minimum 7%. Opponents say the new rules would exempt more than one-third of all farmland and 89% of farmers from the rules.
  • Exempts farms of less than 10 hectares - or one-third of EU farms - from new crop diversification rules that are aimed at improving soil quality. Farmers with 10 to 30 hectares would have to plant two crops, while those over 30 hectares would be required to plant three. Up to 75% of land can be planted with a “main crop”.
  • Exempts farmers from some EU environmental and water pollution laws, defeating efforts by the Commission and some MEPs to bring agriculture in line with other industries. Agricultural runoff is a leading source of nitrate contamination of fresh water supplies, environmentalists say.

“This is a major blow to those who championed a more sustainable, forward-thinking policy – one which would deliver for people and the environment as well as protecting the long-term interests of farming,” said Trees Robijns, agricultural policy officer at BirdLife Europe.

Tony Long, who heads the Europe office the WWF conservation NGO, said both the ministers and Parliament had failed to shepherd a greener deal through the negotiations.

“Agriculture ministers have a lot to be responsible for. At every turn they have sought to water down the environmental credentials of the final Common Agricultural Policy deal and have stonewalled any of the limited drives by the European Commission and Parliament to make improvements. 

“The European Parliament has proven that it is not ready to handle its new full co-decision powers on the Common Agricultural Policy. At every turn the Agriculture Committee has tried to water down this reform.  It even managed to throw out the few improvements the Parliament plenary had requested of them.”

The new CAP: Clinching a deal

Despite the criticism over greening, there was praise for the European Parliament’s inaugural role in the bargaining – a departure from the days when decisions were made by a handful of national leaders.

MEPs have exercised that authority, re-writing parts of the European Commission’s original farming proposal and working through 40 rounds of negotiations with national ministers and the Commission in the three months after lawmakers approved, on 13 March 2013, four packages of legislation that make up the new CAP.

“The inclusion of the European Parliament is good for food democracy,” said Samuel Féret, a French environmental campaigner who has been monitoring CAP negotiations since 1996. “It’s not perfect, but it is better than in the past.”

Coveney, the Irish agricultural minister, acknowledged the “interinstitutional frictions” in reaching an accord on the 2014-2020 policy before his country’s EU presidency ended on 30 June.

“I think we have found a balance that everyone can agree with,” said Coveney, a former MEP who noted that it was the first time the Parliament had more than a rubber-stamp role in crafting agriculture policy.

“This has been new for everybody. But we do have a responsibility to deliver what in my opinion is the most important sector in Europe, that being the agri and food industry.”

Positions

“Organic movements acknowledge that the revised Council position slowly steers the CAP towards greener and fairer outcomes. However, a weak Pillar 1 greening and still no decisive commitments for a strong and green Pillar 2 show the resistance of member states to deliver a more ambitious and effective reform,” Thomas Fertlvice president of IFOAM EU, which represents organic farmers, said in a statement.

“Rural Development measures offer the most potential to deliver greater sustainability. While some improvements have been put in place, these will only have a real impact if there is strong financial firepower in the Pillar 2 budget. There is one last chance for the Commissioner and for MEPs to push only for advanced sustainability measures such as organic farming and high-level agro-environment-climate measures to get financial prioritisation under a Pillar 2 earmark in order to increase farm resilience, protect natural resources and to secure long term food security."

The European Starch Industry AssociationAAF, said it was “relieved” that CAP negotiators agreed to end sugar and isoglucose quotas in 2017. Isoglucose is a sweetener derived from EU maize or wheat starch. Jamie FortescueAAF managing director, said: “This long-awaited decision to end quotas will unleash production, investments and growth in the European starch industry, a sector recognised for its innovative applications. This is also good for European farmers and for our customers”.

The European Sugar Users (CIUS) in the food and beverage industries, welcomed the compromise found between the EU institutions to end sugar quotas in 2017. “The end of sugar production quotas in 2017 will enable the supply chain to operate in a more market-oriented environment. This is an important step in achieving supply security, which is a prerequisite for economic growth. It will also allow the EU sugar sector to play an increasingly important role on the world market,” said Robert Guichard, president of CIUS whose members include the likes of Coca-Cola, Kraft Foods and the Kellogg company.

Faustine Defossez, agriculture campaigner for the European Environmental Bureau, an NGO, said the “negotiators have agreed to ask taxpayers to keep on spending hundreds of billions for the next seven years on a policy which will continue to damage our natural resources and threaten our long term food security.

“We are aware that some important details still have to be decided in the months to come, but at this stage no cosmetic change could hide this complete failure for people, farming and the environment.”

In the European Parliament, MEPs had differing views on the results.

“This was damn tough,” Irish MEP Mairead McGuinness (European People's Party) said at a meeting of the Parliament’s agriculture committee where the trilateral agreement was unveiled. Turning towards Agricultural Commissioner Dacian Ciolo?, she said: “But we worked through it and the Commissioner is smiling now but he wasn’t always smiling.”

"The political agreement we reached today is a victory both for EU farmers and consumers. This is the first time Parliament has been involved in the reform of EU farm policy as a full co-legislator and we proved that we are fully capable of doing the job. We managed to improve the proposals while defending Parliament's mandate," said Italian MEP Paolo De Castro (S&D), agriculture committee chair and head of Parliament's negotiating team.

British MEP Julie Girling, agriculture spokeswoman for the British Conservative party, said the agreement would hurt competitiveness.

"British farming is among the most efficient in Europe but there is really nothing here to reward that,” she said in a statement. "Instead, old-fashioned market intervention is back in a big way, potentially taking us back to the bad old days of butter mountains and wine lakes."

"The CAP of the future will be fundamentally different and the dependency culture of the past is now a thing of the past. We have managed to ensure better environmental protection and avoid double funding. The MFF-related issues are still open, as Council did not have a mandate to negotiate on them, but these will be finalised once the EU's new long-term budget is approved," said Portuguese MEP Luis Manuel Capoulas Santos (S&D), rapporteur for direct payments and rural development.

“This is an historic moment for young farmers,” said Joris Baecke, president of the European Council of Young Farmers. “The mandatory nature of the young farmer scheme in the direct payments dossier means that every single young farmer starting out in the EU agricultural sector will get additional support. This will prove crucial in addressing an age problem which is affecting every single one of the 27 – soon-to-be 28 – EU member states.”

Gerd Sonnleitner, president of the Copa farmers’ organisation, said: “I am pleased to see that EU sugar production quotas will be extended slightly, but it is not for long enough. It will give producers a bit of time to adjust and ensure a stable sugar market as well as maintaining growth an employment in EU rural areas. The EU agri-food sector ensures 26 million jobs mostly in rural areas and it is a key driver for their economies, with knock-on effects in other sectors. This is crucial in the current economic climate.”

“But some elements of the deal run counter to the objectives of the CAP,” Sonnleitner said. “In particular, we oppose any transfers of funds from the first to the second pillar of the CAP. The first pillar of the CAP will be more important than ever if the EU is to ensure food security, stability and sustainability.”

Christian Pees, president of Cogeca, the farm cooperatives organisation, praised provisions in the CAP agreement to strengthen producers’ organisations. But he said that with farmers faced with support cuts of over 30% in some regions of the EU, “I seriously regret that the EU did not grasp the opportunity to strengthen farmers’ economic position so that they can meet future challenges. I am also disappointed that more was not done to ensure green growth: measures which benefit the environment at the same time as maintaining production capacity, resource efficiency and employment. Efficient measures to manage the market to reduce extreme volatility on agricultural markets are also needed. In addition, distortions of competition in the single market and the CAP must be avoided.”

The European federation of origin wines (EFOW) welcomed the deal. Riccardo Ricci Curbastro, president of the organisation, said: "The agreement reached today on the future CAP is great news for the wine sector in Europe. It provides us with new development opportunities that will allow us to contribute even more to the economy of our regions and to the trade balance of the EU. We would like to sincerely thank all those involved in this difficult negotiation: members of the European Parliament who have supported us since the beginning of the discussion on planting rights, in particular Michel Dantin and Paolo De Castro, the ministers of the wine producing countries who have defended the regulation but also Commissioner [Dacian] Ciolo?, who was able to meet the wine sector’s demands by opening a constructive discussion which lead to this historic agreement. "

Timeline

  • April 2010Launch of public debate on the EU's future farm policy.
  • Nov. 2010: Commission communication on the CAP towards 2020.
  • 12 Oct. 2011: Commission presents proposals to CAP reform proposals.
  • 2011-2013: Debate on the proposals in the European Parliament and the Council.
  • 20 Oct. 2011: EU agriculture ministers hold first exchange of views on the proposed reform.
  • 7 Nov. 2011: European Parliament’s Agriculture Committee hears national farm ministers.
  • 23-24 January 2013: Agricultural committee backs a less green, more ‘flexible’ CAP.
  • 12-13 March 2013: Parliamentary debate and vote on the different regulations and implementing acts.
  • April-June 2013: Negotiations between the European Parliament, European Commission and Council of national agricultural ministers.
  • 1 Jan. 2014: New CAP expected to enter into force, but delays in the approval process will likely postpone implementation until 2015.

Further Reading

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