Europe’s farm reform off to rocky start

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The European Commission's long-awaited proposals to overhaul the Common Agricultural Policy (CAP) have left most EU politicians and stakeholders disappointed.

Absolutely no one, except for the European Sugar Users association (CIUS), seems happy with the Commission’s legal proposal to reform the CAP, presented on 12 October.

First to express disappointement were the many political groups in the European Parliament, which for the first time will be co-deciding on the matter alongside EU member states following the entry into force of the Lisbon Treaty.

While most member states have remained silent for now, France and the UK – the two countries with the most diverging views on the CAP – both reacted with reservations. The UK said the proposal failed to offer radical reforms, while France found the ‘greening’ part of the CAP too complicated and not reflecting economic reality.

The EU farmer's lobby Copa-Cogeca said the proposals lacked teeth to improve the profitability and productivity of the EU agri-food sector.

And environmental NGOs declared themselves unsatisfied by the weakness of the draft ‘greening’ measures which they say will fail to put an end to intensive agriculture practices (see detailed reactions in the "Positions" below).

Greening

The EU executive has proposed making 30% of the CAP’s direct payments conditional to three 'greening' measures:

  • Maintaining permanent pasture.
  • Diversifying cultivation with farmers obliged to cultivate 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, afforested area.

While green NGO’s welcomed the last measure in particular as an important contribution to protecting biodiversity, others described a requirement to set aside at least 7% of each farm's land for ecological purposes as “pure nonsense” at a time when food and energy is becoming scarce.

And while the 'greening' measures would be voluntary, in the sense that there is no sanction for failing to respect them other than loosing the subsidy, many fear they will represent another unnecessary administrative burden for farmers.

Environmentalists meanwhile found that the proposed crop rotation requirement does not go far enough as it fails to end intensive monocultures that damage soil and use a lot of fertilisers. Nor will it change anything regarding the EU’s dependency on the soya and maize imported to feed European livestock, they argue.

Distribution of payments

One proposal that received broad backing is a commitment to give CAP support only to active farmers, and not to those with no tangible agricultural activity. But just as many were disappointed by the definition of an active farmer, which they consider too broad: support would indeed still be given to farmers whose revenue from non-agricultural activity represent 95% of their annual income.

A proposal to progressively cap payments to bigger farms at a maximum of €300,000 per year was also not considered bold enough, as part of the salary and social security costs will be deducted from the total. The capping would therefore effectively affect only a few farms.

Meanwhile, a proposal to provide special support of up to 2% of the national envelope for new entrants to young farmers was in general welcomed.

Co-funding of first pillar

Environmental NGOs have also raised alarm about a proposal that would allow those member states that get less than 90% of the EU average for direct payments to channel up to 5% of their Rural Development funds to their 1st Pillar national envelope, which provides direct income support to farmers. Meanwhile all member states could transfer up to 10% of their national allowance under Pillar 1 to their Rural Development envelope (Pillar 2).

The first pillar direct payments are 100% financed by the EU while pillar two is co-funded by member states and aimed at pre-defined rural development and environmental measures.

For green NGOs, the “reverse shift from the second to the first pillar”, makes allowances for many of the ‘newer’ EU member states, thus represents a possibility for countries to shift money away from targeted environmental spending toward blunt income support.

Sugar

The Commission is also looking to end the last remaining quota regime for sugar. The bloc's system of national sugar production limits and minimum prices should end by 30 September 2015, accompanied by reductions in import tariffs.  

The proposed move was opposed by the European sugar manufacturer (CEFS) but welcomed by the European sugar users (CIUS).

Manufacturers said that the impact assessment used by the Commission to justify the abolition of the quota system “includes several inconsistencies such as the assumed increase in European production, whilst yields, beet and sugar prices are all expected to decrease.”

Users expect the abolition of quotas to stimulate competition in the market and help them overcome the “supply difficulties” they’re facing.

The EU is the world’s largest grower of sugar beets.

French farm minister Bruno Le Maire said that France supports the principle of greening CAP subsidies, but insisted that it must be “simple”, give incentives and take into account budget considerations. Greening should match the economic reality of farms and cut red tape. “For the time being, the Commission proposals do not meet these objectives,” he added.

UK Environment Secretary Caroline Spelman declared pleased with the message that the CAP has to do more to help the environment, and that its budget cannot keep increasing in the midst of an economic crisis. “But while some of the Commission’s rhetoric is right, overall we’re disappointed and the proposals as they stand could actually take us backwards,” she said.

MEP Luis Capoulas Santos (Socialist & Democrats), who will be leading the negotiation on CAP reform on behalf of the European Parliament, said that "the package needs to be greatly improved, if it is to win the support of the Parliament," as “there is too much bureaucracy, less money and not enough justice.”

According to Santos, the proposed implementing measures “are so bureaucratic that they will induce many farmers to renounce EU incentives and opt-out from the greening policy we are trying to introduce in Europe.” Moreover, “there will be still strong inequalities among EU countries and farmers as the money saved from capping the largest farms is not then redistributed to the smallest farms,” he said.

He also criticised the Commission's proposed definition of an active farmer, saying it qualifies “Queen Elizabeth [as] a farmer”.

Italian MEP Paolo De Castro (Socialist & Democrats), chair of the Parliament’s Agriculture Committee, stressed that “environmental sustainability cannot exist without having first ensured the economic sustainability of our farms and in this regard, the risks are now much more common and extensive than in the past. We are facing a reform of great importance that will take us into a new era, in which the volatility will become a systematic phenomenon and farmers will need new tools to manage a new and difficult situation."

MEP George Lyon (UK), from the Liberal and Democrats group (ALDE), said that the greening of the direct payments as proposed by the Commission “is nothing more than green-wash and the measures run a real risk of making European farmers less competitive. To quote just one concrete example, it is complete nonsense to require 7% of each farm's land to be set aside for ecological purposes at a time of food and energy scarcity."

He however, welcome the proposals to target payments at active farmers, young farmers, green measures and farmers situated in areas under natural constraints “who most need support” as well as the proposed further alignment of the CAP with the EU's 2020 strategy under rural development, “in particular stressing research and innovation.”

The Parliament’s Green group, for its part, regretted that “the proposals have been severely watered-down to meet the demands of change-resistant member states and the agro-industry lobby.”

French Green MEP José Bové said that “the proposals have been stripped of all ambition and, as such, will fail to provide the basis to properly reform the CAP and ensure it is a tool to promote sustainable agriculture and fair incomes for farmers.”

German Green MEP Martin Häusling regretted that proposals fall short on the “core goal of this reform” which should be “redressing the perverse system of payments to ensure it promotes a fair distribution of funds, which prioritises support for smaller farmers and local food systems, rather than benefiting large farmers and the agro-industry”. He also deplored that the threshold or cap, beyond which direct payments should be 'degressive', “is set far too high, benefiting large farmers and the agro-industrial complexes”.

"The EP will make full use of its co-decision prerogative", said German MEP Albert Dess (European People's Party), welcoming the proposals as a good starting point for a discussion. But, referring to the proposed greening measures, he stressed that "we will under no circumstances accept more red tape.”

Irish MEP Mairead McGuinness (European People's Party), declared “concerned that the Commission in its document has warned farmers that they cannot rely on support conditions remaining unchanged because of economic development or the budgetary situation."

Copa-Cogeca, the EU farmers lobby, called “for more emphasis to be put on measures which improve the profitability and productivity of the EU agriculture and agri-food sector, as well as benefiting the environment.”

Copa and Cogeca Presidents together stressed that “it does not make sense to require every single farm to stop producing on a certain percentage of their land (ecological set-aside) when world food demand is set to rise by 70% by 2050 and production is threatened by more extremes of drought, flooding and storms. The Commission proposal also runs counter to the Commissions’ 2020 strategy for growth and employment”.

Copa President Gerd Sonnleitner also expressed concern over further mandatory environmental constraints on farmers, which will “just add more costly burdens onto EU farmers”, threatening competitivity and economic viability of farming families and agri-cooperatives. “Farmers must be able to choose the measures which are most appropriate for their farm,” he said.

Cogeca President Paolo Bruni added that Copa-Cogeca is very worried about the fact that “there is not a clear definition of a producer organisation in the EU Commissions proposal. It is also paramount that EU competition rules are adjusted to help producer organisations, such as cooperatives, to grow in size and scale.”

The European Coordination Via Campesina (ECVC) said that the Commission proposals will leave “markets without driver, farmers without income, payments without justice” and “defends the interests of industry, big retailers and the import-export sector”.

ECVC rejects the payment per hectare and defends the payment per active person. “The payment per ha, decoupled from production, has perverse effects on the price of agricultural land and leads to income for the owners,” it said.

It also believes that the ceilings proposed to level off the direct payments are too high. “The recovered amount would be very weak,” – 0.2% of the total basic payment for Germany and only 1.3% for the EU-27. “The EP and the Council must lower these ceilings, to release more funds in favour of small-scale farms and the less favoured areas or sectors,” it said.

The Central Union of Finnish Agricultural Producers and Forest Owners (MTK) said that the proposals do not pay enough attention to the profitability of agriculture, nor to income of farmers and that the proposal threatens the competitiveness of EU agriculture.

“The proposals’ greening objectives are in conflict with the global objectives of increasing agricultural production and the general greening rules proposed are not compatible with Finland’s special conditions. Farmers might also be confronted with more red tape,” it said.

CEJA, the European Council of Young Farmers, welcomes the measures for young farmers in the proposed CAP package, but “calls for the capping level for top up payments to be increased to 50 hectares. Young farmers tend to run larger farms than the average national farm size, and the threshold for the top up should reflect this.”

Yara International, the world's largest producer of nitrogen-based fertilisers, "cautiously" welcomes the Commission's reform proposals. “At Yara we know that it is possible to reconcile the dual needs for greater food production and  greater environmental protection. The key to succeeding on both accounts is a strong focus on  nutrient management and resource-efficency. We are pleased to see that the Commission proposes to make efficient use of resources a priority for the agri-­environmental schemes in pillar 2, and in the   further debate on this we  encourage MEPs and  the Member States to look at the technical solutions  that are available for achieving cost-­effective greening with benefits for the farmer, environment and climate alike,” said Willem Sloot, Head of industry relations at Yara International.   

“Alongside  delivering environmental public goods, ensuring food security  must  remain   the key priority for European farmers, but mandatory setting aside land as proposed by the Commission is  however counter-productive in this regard,” Sloot added. 

FoodDrinkEurope, the EU's food industry association, said it was disappointed that “the proposals do not place more emphasis on productivity”. Jesús Serafín Pérez, President of FoodDrinkEurope, said: “Europe’s food and drink industry purchases and processes 70% of EU agricultural production and, as such, has an inherent interest in promoting a competitive, productive and sustainable EU agricultural sector which delivers adequate quantities of agricultural raw materials that correspond to specific quality criteria and that are competitively priced. The CAP reform should reflect this interdependence between European farmers and the food industry.”

FoodDrinkEurope asks for the CAP “to more explicitly address the need to support productivity growth in both pillars, while protecting EU productive potential and safeguarding natural resources, such as soil and water. In particular, pillar one measures should contain more tangible objectives to drive concrete results.”

The European Sugar Manufacturers'Association (CEFS) express strong concerns on the Commission’s proposal aiming at ending the sugar quota system in 2015. "This decision comes as a surprise as CEFS understood that the Commission initially intended to prolong the current system," it said.

"In addition, the impact assessment used by the Commission to justify the abolition the quota system in 2015 includes several inconsistencies such as the assumed increase in European production, whilst yields, beet and sugar prices are all expected to decrease. Furthermore, this static approach of the study does not take into account any volatility and its impact on the specific, long-term business model of beet sugar production," CEFS stated.

European Sugar Users (CIUS), whose members include the Union of European Beverages Associations (UNESDA) and big multinationals like Danone, Coca-Cola, Unilever, Nestlé and Kellogg’s, welcomed the European Commission announcement to abolish the EU sugar quota system by 2015. “The current EU sugar regime is not delivering a sustainable sugar value chain and needs long term action. European sugar users continue to experience immediate supply difficulties which are having significant detrimental impact on their competitiveness,” it said.

“Sugar is the last significant agricultural commodity which has not been opened up to market forces. The process of deregulating the EU sugar sector should begin without delay in 2015 with the abolition of production quotas, accompanied by reductions in import tariffs to a level that will stimulate competition in the market. This would help to deliver a more competitive EU sugar market while ensuring greater security of supply for sugar users,” CIUS stated.

ePure, a trade group representing the Europeanrenewable ethanol industry, is “deeply concerned about the European Commission’s plans to set-aside 7% of EU agricultural land as “ecological focus areas,” in effect marking the reintroduction of the EU's set-aside policy.”

“This new set-aside proposal comes in addition to the continuous land idling in Europe, which already leads to a substantial loss of agricultural land in the EU. In parallel the Commission reflects on possible policy measures to hedge against potential indirect land use change (ILUC) effects of biofuels production. As the ILUC debate boils down to the availability of enough arable land to fulfill our needs now and in the future, the proposal shows a clear lack of consistency between the different EU policies,” ePure regretted.

“The solution to both the ILUC debate and the quest for an environmentally more sustainable agriculture lies in the enlargement of the scope of binding sustainability criteria,” it said.

The Confederation of European Forest Owners (CEPF) welcomed the proposal as a step towards supporting the sustainable development and a green economy in the EU, but regretted that it, however, is “not yet able to unleash the full potential of the forest sector for rural areas and its contribution to the EU 2020 strategy”.

“Rural Development, the second pillar of the CAP, is the EU policy of crucial interest for forest owners. This is the main support for forest related activities and for a diverse group of 16 million private forest owners, who take care of approximately 60% of Europe’s forests,” it said.

EuropaBio, a trade group representing EU biotech and chemical firms, welcomed the Commission’s support for science and innovation in agriculture and for “the bio-based economy set out in the new CAP proposal”.

Nathalie Moll, secretary general of EuropaBio said that “the bio-based economy offers Europe the potential to accelerate its transition to a more sustainable growth model while also developing a globally competitive sector capable of generating more jobs. Farmers must also be given the choice to use the tools they need in food production. Access to biotechnology not only helps farmers become more productive, it helps them compete globally.”

WWF European Policy Office expressed disappointment about the CAP reform proposal, saying it “risks giving €372 billion to intensive agriculture practices that will mainly benefit only bigger farms and will create damages to the environment."

Matthias Meissner, WWF leader on the CAP reform, said that “after lots of promises from the Commission to change farming practices in Europe and create a sustainable CAP, agriculture lobby groups and less progressive parts of the Commission, Parliament and Council have managed to delete all initial progress, producing a very weak proposal that continues to give money to farmers without monitoring their impact on the environment."

Friends of the Earth Europe (FoEE) said that the proposed reforms “are insufficient to protect the environment and the majority of farmers.” Stanka Becheva, FoEEe food campaigner regretted that “some of the simplest of measures are missing – ensuring arable farmers rotate crops on their fields with nitrogen-rich legumes would reduce our dependency on rainforest-damaging soy animal feeds. Its omission shows the influence of agri-business, pushing intensively-farmed monocultures at the expense of fairer and greener farming.”

Other weakness identified by FoEE include the maintenance of “export subsidies and indirect forms of export support”.

The European Environmental Bureau (EEB) noted that “environmental NGOs have repeatedly defended the CAP budget, but on the condition that farmers will be required to significantly improve the way they farm. However, the reformed CAP 2014-2020 as proposed will not contribute to preserving Europe’s natural resources like soil, water and biodiversity, thereby fatally undermining Europe’s food security.”

“In some cases the proposal is in fact going back on previous reforms,” the EEB said, referring to the introduction of “the option for coupled supports for cereals (e.g. maize, which requires many chemical inputs)". It also criticised the reform for allowing “a reverse shift from the second to the first pillar” whereby direct payments are 100% financed by pillar 2 funding, which are meant to serve environmental policy objectives.

BirdLife Europe was also deeply disappointed with the CAP reform proposals. “Despite their repeated promises of a green reform which would see the CAP rewarding farmers who deliver public goods, what has been published mostly fails to live up to the promise,” it said. Among the most problematic aspects of the proposal for the NGO are: “1. Reverse modulation: a large group of countries would have the ability to move money from Pillar 2 to Pillar 1. This goes against all previous reforms and moves money away from targeted and effective spending towards blunt income support. 2. Coupled support to many different products without clear Commission control on the reasons for the re-coupling. 3. Higher support rates in rural development for all measures apart from environmental ones.”

The Eurogroup for Animals said the Commission had missed the opportunity to address the animal welfare problems caused by very intensive systems of agricultural production. "No basic payment is foreseen to be given to farmers to improve animal welfare and in fact animal welfare is no longer stated clearly as an objective of the Common Agriculture Policy as it was previously in 2003," said Véronique Schmit, from the Eurogroup for Animals. “The future CAP will also continue to subsidise the export of live cattle to third countries, with the associated problems caused by long distance transport. The European Commission has missed the opportunity of standing firm and leading the way in ending export refunds,” she concluded

The UN Special Rapporteur on the right to food, Olivier De Schutter, said that “there is still too much public money being ploughed into making EU agriculture internationally competitive – money which cannot be matched in the developing world” and marginalises small-scale farmers in developing countries.

“Green requirements should underpin every penny of the taxpayer’s money - not a meager 30%. CAP reform should also do more to cut the EU’s dependency on the burgeoning soya and maize imports which feed European livestock, and strain natural resources in the rest of the world,” he added.

The European confederation of Development NGOs (Concord) further regretted that “there is no reference to a commitment phasing out export refunds and export subsidies, which still allows for the EU to export below full production costs, making farmers in the developing world lose out to unfair competition.”

Mats Persson, from the UK eurosceptic think tank Open Europe was quoted by Bloomberg saying that “the reformist bloc is outgunned and outnumbered. About 21 countries, which is obviously a strong negotiating block, are basically in favour of the status quo.” He further added that “whoever can get Germany on board wins the battle. Once you have the Franco-German bloc reaching a position, that tends to produce more or less the outcome for the EU as a whole.”

The Common Agricultural Policy (CAP) is a system of EU agricultural subsidies and programmes, which according to the European Commission costs each EU citizen around 30 euro cents a day.

At around €53 billion a year, the CAP currently represents some 40% of the EU's long-term budget for 2007-2013, compared to nearly 71% in 1984. The EU executive expects the figure to fall to 33% in 2013.

The majority (over 70%) of CAP spending goes to direct payments for farmers, while some 20% of the CAP budget is spent on rural development measures. The rest is handed out as export subsidies to food companies.

France is the biggest beneficiary of the policy by around 20%, followed by Germany and Spain (13% each), Italy (11%) and the UK (9%).

  • 20 Oct. 2011: Meeting of EU agriculture ministers
  • 7 Nov. 2011: European Parliament’s Agriculture Committee hears national farm ministers.

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