Hogan: Trade deals have not harmed European agriculture

European Commissioner of Agriculture and Rural Development, Phil Hogan. [USDA/ Flickr]

This article is part of our special report Rural development in the reformed CAP.

Opening up to new markets in Asia and Africa has helped the EU become a net exporter of agricultural products, Phil Hogan told euractiv.com, responding to criticism of trade deals.

Phil Hogan is European Commissioner for Agriculture and Rural Development. He spoke to Sarantis Michalopoulos.

A midterm review of the EU’s long-term budget for 2014-2020 (the Multi-Annual Financial Framework) is scheduled for this year. Is the CAP in danger?

Obviously there are a series of ongoing studies and internal discussions, so we can’t preempt them.

However, I would underline that the CAP is not static. It has evolved considerably over the last 20 years. Indeed, many of the elements of the 2013 Reform are phased over several years – such as the fairer distribution of CAP Direct Payments within and between member states, or the greening requirements aimed at halting monoculture and soil sealing, which are only starting to have an impact now.

At the same stage, given the global challenges of climate change and global food security, I would argue that agriculture policy issues will get more important in the coming years on the world stage.   

How does the European Commission answer critics suggesting that EU commercial deals with third countries penalise European agriculture?

The Commission always carries out careful impact assessments of potential trade agreements. Bilateral trade agreements provide considerable opportunities for the EU agri-food sector as a whole.

The EU’s increased global trade in agriculture products has helped the EU agri-food sector expand, thereby providing additional growth and jobs.

In global terms, EU agricultural exports have performed much better than most other sectors in recent years and the EU has become a net exporter, especially for added-value products. This would indicate that commercial deals have not harmed European agriculture. Indeed, as people in Asia and Africa have more disposable income, we see they want to consume European food and drink, and our trade agreements open up these growing markets.

French pig farmers suspect VAT fraud from their German counterparts whose production is growing while their own is disappearing. How can the Commission deal with fiscal dumping?

We can confirm that our services received a complaint about the application of the special flat-rate scheme by some pig farmers in Germany. We will look at the complaint according to the relevant legislation, i.e., the EU VAT Directive.

The French farmers already had meetings with our services, and Commissioner Moscovici’s cabinet, at the end of last year, to look at the issue together.

As far as the Commission is concerned, the relevant part of EU legislation (Article 296) is being correctly applied in Germany. We’ve been clear on this throughout all of our contacts with the group of French farmers.

We intend to bring forward legislative VAT simplification measures to help businesses in particular to operate cross-border and want to reduce the administrative burdens experienced by such businesses. My colleague Commissioner Hill will be better placed to talk about these issues.

We will look at how the concerns of the French pig farmers can be resolved in this context.

The Commission wants to encourage young farmers. But in French milk production, for instance, some of them work 12 hours a day with no holidays and hardly earn the minimum wage.

Generational renewal and the setting-up of young farmers are a priority for the rural development policy in France. Thus, in the period 2014-2020, 1.2 billion euros of public funding will be allocated to this objective. This represents 7.5% of the 15, 93 billion euros of public expenditure for rural development in France.

The major policy instruments used to this end are the setting up support and the interest rate subsidies. For mainland France, the general conditions to access these types of support are defined in the national framework. Additionally, based on local needs and specificities, and in order to meet regional objectives, the regions could complement the basic amount of setting-up support defined in the national framework, with additional amounts.

Over the whole period, more than 38,500 farmers are expected to receive setting-up support and interest rate subsidies.

Additionally, training, advice and cooperation projects will have a special emphasis on young farmers.

Last but not least, it should be mentioned that in many regions, investment projects submitted by young farmers will get extra priority points and higher support rates.

During the 2007-2013 budgetary period, Italy had a low level of utilisation of its Rural Development funds and only managed to avoid a significant loss in the next period through a final sprint. Can Italy benefit from targeted coaching in order to improve its access to RD funds for the new period?

The implementation level of the Italian RD programmes during the 2007-2013 programming period has been systematically below the EU average. Nevertheless, the Italian authorities have recovered at the end of the programming period to achieve a delivery rate above the EU average (IT = 98,7; EU = 97.2 %).

The problems were particularly salient in the less developed regions of the South. The low level of utilisation was the result of various elements: a weak central hold on sectorial and regional programmes; dispersion of the funds over too many themes and priorities; insufficient administrative capacity of many bodies involved in the preparation, management and implementation of the Fund, as well as the effect of budgetary measures on the capacity of regional and local authorities to co-finance projects.

For the new programming period, also due to the administrative capacity issues highlighted, only a few RD programmes have taken up the possibility to use financial instruments. Given the impact that these instruments can have on an optimal use of EU funds, the targeted coaching for member state managing authorities provided by fi-compass could be one valuable element of support.

In Romania, the financial allocations of the European Union are unevenly distributed between public and private entities, with an overwhelming advantage for public institutions. Is there a criterion or a principle that underpins this type of distribution when it comes to agriculture-related funds? Is the European Commission looking at these elements when it evaluates the results of its financing schemes?

In the case of support under the CAP, the key factor for the Commission is whether the beneficiary and/or land concerned is eligible or not under the relevant EU rules, whether the EU support serves its objective and if the objectives have been met, rather than whether the beneficiary is public or private.

Direct payments are granted to farmers (i.e. persons – natural or legal – who perform an agricultural activity) who are active in the sense of the EU legislation as implemented by member states upon declaration of eligible hectares irrespective of the type of property. In claim year 2012, more than 1 million farmers in Romania benefited from direct payments.

In the case of the 2nd Pillar of the CAP, we consider that the largest part of support for rural development in Romania, under the National Rural Development Programme 2014-2020,   is in practice allocated to measures where all or the major part of beneficiaries are private (e.g. for investments in farm or food-processing businesses, setting up by young farmers or  producer groups, or payments to farmers for farming in an environmentally-friendly manner or in areas with natural constraints).

While it is not possible to make an exact calculation, as an indicative figure, we estimate that well over 5 billion of the 8.1 billion EAFRD allocation targets measures where beneficiaries are primarily private, while it is only support for a few measures (e.g, rural infrastructure, local development under Leader, forestry) where a major part of expenditure tends to be for beneficiaries who are public.

Slovakia has fairly low agricultural productivity. How do you view the decision made by Slovakia and some other countries to shift funds from the rural development pillar towards direct payments?

The labour productivity of agriculture in Slovakia is 62% of the EU average. The Slovak national authorities decided to transfer to the 1st pillar part of their rural development allocation.

It should be noted that the right for member states to transfer part of their financial allocation between pillars results from a political agreement reached in the context of the Multi-annual financial framework for 2014-2020. This option for member states is laid down in Article 14 of the Direct Payments Regulation 1307/2013, and is simply notified to the Commission without any need of further justification.

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