Simplifying the CAP

Further CAP reforms, such as abolishing outdated production quotas, eliminating country-specific arrangements and capping subsidies, will be inevitable in coming years, both to comply with the Commission’s Better Regulation Agenda and to obtain a broader societal acceptance of the EU’s farm policy. EU leaders have agreed to carry out a “health check” of the CAP in 2008.

Cutting red tape is one of the Commission’s key instruments under the Lisbon Strategy to revitalise Europe's economy, and – as the source of the greatest chunk of EU rules and a key sector for the EU economy – the Common Agricultural Policy must also be revised to reduce the bureaucratic burden on farmers and national administrations. 

Simplification work on the CAP already dates back to 1992, but the most significant simplification effort took place in 2003 with the introduction of a new system of direct payments, known as the single payment scheme (SPS), under which aid is no longer linked to production (decoupling). (See our LinksDossier on the mid-term review of the CAP.)

Since then, rather than receiving various aids under a multiplicity of schemes for different products, farmers can receive an annual income-support payment, based on the size of their holdings, so long as they meet certain standards concerning public, animal and plant health, the environment and animal welfare. 

In 2003 and 2004 alone, 520 pieces of agricultural legislation were removed, thanks to this reform. 

Nevertheless, meeting with agricultural experts from around the EU on 3 and 4 October 2006 for a conference on simplifying the CAP, Agriculture Commissioner Mariann Fischer Boel and Enterprise Commissioner Günter Verheugen stressed that Europe’s agricultural legislation could and must be further simplified and improved, in accordance with the EU's 2005 Communication on "Better regulation for Growth and Jobs in the European Union".

The main areas in which the CAP can be revised better to contribute to Europe’s growth and jobs agenda are: 

  • Direct payments:  

The Single Payment Scheme still allows for numerous exceptions in order to cater for specific regional situations. Fischer Boel wants to put an end to such special arrangements to reduce administrative burdens. 

Furthermore, increased transparency regarding the recipients of EU aid has revealed that funds to support European farmers are not always handed out in an effective and efficient manner. Indeed, data shows that EU funds mainly benefit big businesses, who receive excessively large amounts, while administration costs are being pushed up because of the need to make thousands of tiny payments to small-scale farmers. 

Thus, in a July 2006 speech, the Commissioner envisaged that it may be necessary to "impose top and bottom limits to what farmers can receive under the Single Payment Scheme", when reviewing the CAP in the longer term. 

  • Common Market Organisations:  

CMOs are sets of rules that govern the EU's markets for given agricultural products, such as beef or cereals. There are currently 21 individual CMOs, but the Commission will present a plan, in December 2006, to replace them with a single one, with harmonised rules on intervention, import tariff quotas, export refunds, safeguard measures and state aids. 

The new rules could lead to the elimination of production quotas that remain in certain market organisations, such as milk quotas. Fischer Boel explained: “If we do not give the possibilities for producers to increase production without having to invest [in expensive milk quotas]…we put constraints on the sector to develop and be competitive in future.” 

  • Sectoral Reforms:  

A number of sensitive sectors were left out of the 2003 reform, including sugar, wine, bananas and other fruits and vegetables. However, outdated rules, excessive production quotas and overly generous subsidies have encouraged uncompetitive farmers to produce huge surpluses, forcing the EU to spend fortunes on storage and transformation. 

The situation has also generated loud complaints about dumping from the EU’s trade partners. 

Thus, despite strong opposition from European farmers (see EURACTIV 22 November 2005), who will suffer large income losses due to the loss of EU subsidies, the sugar sector has already been reformed. The new regime came into force in July 2006. 

Wine, bananas and fruit and vegetables are currently under discussion. 

Vice-President of the European Commission responsible for Enterprise and Industry Günter Verheugen said: “The European food industry is our number-one industry in terms of turnover [around €800 billion, 13.6% of the total], bigger than our automobile industry [at 11.3%] and chemicals [at 9.1%]; it is also the largest industrial employer with an estimated 4.1 million people. Quite obviously, the competitiveness of the European Food Industry relies on a healthy and dynamic European Agriculture.” 

“European Agriculture therefore plays an important part in the Lisbon Strategy, relaunched as the strategy for Growth and Jobs in early 2005. We are striving to have modern and simple European legislation and we will only achieve this if the Common Agricultural Policy is also on board.” 

Agriculture and Rural Development Commissioner Mariann Fischer Boel  said that simplifying the CAP “will make life easier for farmers, allowing them to get out of their offices and into the fields. It will also cut the bureaucratic burden on administrations.” 

However, she stressed: “Simplification is not about ‘scrapping the CAP’, nor is it about weakening controls over how we spend taxpayers’ money.” It is rather about ‘better equipping’ the CAP so that it can “continue to play its key role in the EU’s rural economy”, she said, adding: “One thing is obvious to me: to survive the waves of external change which are beating against it, the CAP must have the strength of simplicity.” 

She has also pointed to the fact that "capping" subsidies to European farmers will be one of the issues that will have to be addressed in order both to respond to “pressure to find savings in the CAP" and to obtain a "broader, societal acceptance of our reformed CAP". 

But, according to a European farmer speaking at the conference: "European agricultural policy took a wrong turn with the reforms started in 1993," saying that by choosing to respond to competition by lowering its prices and introducing direct payments rather than by protecting its market with tariffs, "the result is that our products are being dumped and that we have to live with the image of being subsidy addicts". He called for the EU to go back to "the good, old import duty", adding that the current system that links agricultural payments to cross compliance is "as logical as linking traffic rules and social-security payments".  

  • 2008: "Health check" of the CAP. 
  • 2009: General review of the EU budget, which will include reflections on the CAP's future beyond 2013.  

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