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23/07/2016

Food crisis set to weigh on CAP reform

Sustainable Dev.

Food crisis set to weigh on CAP reform

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Soaring global food prices dominated a ministerial debate yesterday (19 May) on how Europe’s €45 billion farm subsidy scheme should be reformed. The Commission is due to unveil concrete plans for the Common Agricultural Policy ‘Health Check’ later today.

During the Agriculture Council, traditional proponents and opponents of the EU’s agricultural policy sought to harden their arguments by emphasising the need to address rocketing commodity prices and food scarcity.

On the one hand, countries led by France stressed the need to preserve farm subsidies in order to sustain and even boost agricultural output at a time when demand from emerging economies such as China and India is constantly on the rise and when harvests have become ever more uncertain due to extreme weather conditions caused by global warming.

On the other, countries like the UK and Denmark insisted that such policies – originally intended to guarantee minimum price and income levels for European farmers – are outdated in the current context and are pushing up prices to levels that are dangerously high for the world’s poorest countries. They are calling for a more market-oriented policy. This, they argue, would also allow large portions of the farm budget to be reallocated towards areas where it is much-needed like research and energy. 

EU Agriculture Commissioner Mariann Fischer-Boel is set to unveil her proposals for the so-called CAP ‘Health Check’ today (20 May). Certain short-term measures have already been introduced to allay the hike in food prices across Europe, including increasing the volume of available arable land by abolishing mandatory set-aside, increasing milk production quotas for 2008, reducing buffer stocks and export refunds and suspending import duties on almost all cereals. 

But the proposals are set to go further. Among the options under consideration are the permanent abolition of the set-aside requirement, a gradual phase-out of milk quotas by 2015, adjustments to market price aid in the cereal sector and a transition from energy crop subsidies to more effective solutions to bolster the bio-energy sector which do not adversely impact upon the production of foodstuffs and feed. 

Positions

"There are some who say that high prices can constitute an opportunity for farmers since high prices should encourage increased production and yield greater profit for them. On the other hand, high prices are a serious problem for net importing countries, especially developing countries," commented Slovenian Agriculture Minister Iztok Jarc after the meeting. 

UK Agriculture Minister Hillary Benn argued that maintaining or raising support schemes for agricultural production "would be a mistake". And UK finance minister Alistair Darling recently called for an end to "all elements of the CAP that are designed to keep EU agriculture prices above world market levels," saying it was "unacceptable that at a time of significant food price inflation, the EU continues to apply very high import tariffs to many agricultural commodities". 

But France rejected the idea that liberalising trade was the solution and said Europe must instead become self-sufficient in food. "The solution to the crisis is not, first of all, through free trade," said French Agriculture Minister Michel Barnier

He insisted that the food crisis highlighted the persistent need for the CAP, which he said represents the "cornerstone of the continent's food security". "If you remove the tools for regulating and stabilising markets, as the Commission is proposing to a certain extent, and if you dismantle all agricultural aids, we will no longer have a Common Agricultural Policy," he cautioned. 

He instead suggested exporting the European model to promote food security to other parts of the world, including developing areas like North Africa, where neighbouring countries could help each other in the same way as EU countries do (EurActiv 29/04/08). 

Speaking to ministers at the Council, EU Agriculture Commissioner Mariann Fischer Boel sought to ally concerns about the rising food prices, saying they would not last in the long run. "Prices are likely to fluctuate in the medium term around a level that is higher than what we have seen in recent decades," she said. "But we do not think that the record levels reached in recent months are likely to persist." 

She further dismissed French ideas to increase protection for European food production. "I am not interested in a protectionistic approach to the agricultural production in Europe - a Fortress Europe, if that is the idea. It might be beneficial in the short run, but extremely dangerous in the long term. And it would contrast completely with the negotiations we have at the World Trade Organisation, the WTO. It's about more open markets, more competition," she said in an interview with Danish daily Politiken on 19 May. 

She nevertheless insisted that "the CAP is still the right tool to provide the right level of support to farmers in times of crisis and to sectors with special problems, such as farmers producing milk in disadvantaged regions". 

But she noted that "regardless of what protection we offer to farmers, it is paramount to me that the measures act like a safety net and not a comfortable chair". 

Copa-Cogeca, the EU farmers’ professional organisation, warned that it would be "precipitous" to make any major changes to the EU’s agricultural policies amid the current "changing global environment". 

"There are indications that the era of abundant supplies of agricultural commodities is changing and we are moving into a period of not only rapidly increasing food demand, but also much greater market volatility for agricultural commodities," it warned, adding that this means that "the CAP of the future may need to place more emphasis than in recent years on ensuring that Europe's agricultural production capacity is optimised so that its 500 million citizens are ensured stable and secure supplies of food, produced to the highest standards of safety and sustainability, and that the EU plays its role in meeting world demand." 

In a document issued on 19 May, it therefore argues against full decoupling of farm payments from production and called for price intervention mechanisms for cereals to be maintained as "an important safety net at times of serious disruption on the world market". 

Background

The last round of CAP reforms was launched in 2003 and featured a 'decoupling' of agricultural production from subsidy payments. The aim was to bring an end to the over-production and waste generated by the generous support schemes in place since after the Second World War, when many Europeans were going hungry. 

The new system involves a Single Payment Scheme (SPS) under which subsidies are allocated according to indicators such as land size rather than production volume. Cross-compliance measures, whereby farmers are required to meet certain environmental, food safety and animal welfare standards, were also introduced as a pre-condition for receiving payments. Furthermore, monies originally reserved for direct aids and market support were shifted towards rural development objectives with a view to "greening" the CAP, which accounts for over 40% of the EU budget. 

When reviewing the bloc's long-term budget (2007-2013) in 2005, EU countries agreed to carry out another mid-term review of its agricultural policies in 2008, before an in-depth reform in 2013. 

Timeline

  • 20 May 2008: Commission to present proposals for a review of the CAP.

Further Reading