The Future of the CAP: A German Perspective

The Future of the CAP: A German Perspective

Renate Künast, Germany’s Federal Minister for Consumer Protection, Food and Agriculture, addressed an EPC briefing on 27 May 2002, on her ideas for the future orientation of the Common Agricultural Policy (CAP). Ms Künast, a member of the Alliance 90/Greens political party, has served in her current post – created by the German government in the wake of the BSE crisis – since January 2001. The meeting was chaired by Eberhard Rhein, Senior Policy Adviser to The EPC. A question and answer session followed. This is not an official record of the proceedings and specific remarks are not necessarily attributable.

Ms Künast began with a quote from French writer Antoine de Saint-Exupéry: “As for the future, we shouldn’t want to predict it, but make it possible.” This sums up the minister’s own goal for agricultural policy: not to steer vaguely towards the future, but to make the future possible through concrete action.

Means to an End

As for the future of the CAP, the minister underscored that it was not an end goal, but rather just a means to an end. “We must therefore strive to shape the common agricultural policy for a sustainable future,” she said.

Food Crises

Recent crises in the agricultural sector had challenged CAP preconceptions. More importantly, they shook consumer confidence in the food they eat and this has had lasting effects. The lesson learned is that food must be safe, which means being high quality and produced by sound methods. Measures to improve food safety – and restore consumer confidence – have been undertaken at both EU and national level. But the minister asked whether this was really enough.

Taxpayers’ Demands

Once people lose their appetite for food because of various crises, they feel every right to question the legitimacy of state aid to farmers. Ms Künast argued that more and more taxpayers were willing to finance agricultural policy measures that they accept as necessary services to society. “Who would be happy to finance surpluses moved to costly intervention stores to be subsequently exported with refunds?” she asked.

Farm Subsidies

There are a number of reasons for state aid to farmers. One of the most important is recognition of the fact that farmers safeguard our natural resources, the food we live on. This is one aspect we must not lose sight of. Still, securing this support on a sustained basis requires better arguments today. “We must achieve a turnaround in the current common agricultural policy,” Ms Künast said.

Adapting the CAP

The German government strongly believes that there is no getting around a fundamental re-orientation of European agricultural policy. The CAP must be adapted to changing conditions both within the EU and the rest of the world; it must be adapted to EU enlargement, the WTO framework and the requirements of Agenda 21. This was the only way to secure the future of farming.

Reform Objectives

Ms Künast highlighted two major objectives in farm policy reform:

• Paying greater attention to consumer interests and therefore introducing a stronger market orientation; and
• Gearing farming more to the economic, social and ecological principles of sustainability.

Four Cornerstones

In order to achieve these two goals, the German government has formulated four cornerstones of a reform policy in a Government position paper. These are:

• More market orientation and quality competition: Traditional instruments of the CAP such as internal price support, export refunds and state intervention favour a type of production which does not meet market requirements; they can also harm the environment and ha rm the quality of food produced. The phasing out of these kinds of measures should place producers in a better position to respond to market signals; this would serve consumer interests as well.
• A greater market orientation would also enhance the conformity of agricultural policy measures with WTO rules and contribute to fair trade; this in turn will create better opportunities for developing countries.
• Reducing the production-tied support instruments: this points in the same general direction as No. 1. Intervention for cereals, for example, should be scaled back to act as a mere safety net. Compulsory intervention for beef will take end on 1 July 2002. Ms Künast suggested replacing production premiums with a grassland premium. She also said she welcomed the inclusion of other products in a reform of CAP such as sugar, sheep and goat meat, rice, tobacco and olive oil.
• Progressive decoupling of premium payments from production: The product-linked premium system introduced by the 1992 agricultural reform and Agenda 2000 must be adapted to the new goals of agricultural policy, meeting WTO rules as well.
• With an eye towards EU enlargement, Ms Künast mentioned the possibility of a basic acreage premium for all farmland uses, including grassland, or a farm premium to replace the various premiums being paid for different crops or land uses as well as animal premiums. This re-orientation of acreage and animal premiums also marks a key step towards the greening of farming.
• Stepped up support for rural development: this, plus promoting the environment, is a crucial area in a reorientation of CAP. Agenda 2000 put these areas together in the so-called second pillar and they make up 10% of EU farm spending today. Ms Künast said this percentage must be increased, thus upgrading the second pillar into an efficient instrument.

Sustainable Farming

“Our target is the promotion of a sustainable farming sector and living environment in rural areas,” the minister said, calling for support to be focused on those areas desired by society: environment; nature and animal protection, services. In other words, it must be worthwhile for farmers to render the services desired by society. “Farming is the most beautiful way of conserving the environment,” she said. But we must ensure that the farmers – and society at large – are aware of and proud of this fact.

“Modulation”

Funding of the CAP’s second pillar can be improved by transferring funds from the first pillar, a process known as modulation. Ms Künast said that her government supported compulsory modulation in the EU, adding that modulation could foster a number of projects and measures benefiting farming and rural areas.

Reform Now

Ms Künast reiterated that the CAP must be adapted to changed conditions. Only by increasing support for rural areas and decreasing production-related support will we be able to make farming viable for the future and shape attractive rural areas. “Making the future possible” means tackling CAP reform, she said.

Discussion

Modulation in Germany and other countries

Despite initial resistance, Germany will begin modulation in 2003. As for other EU Member States, Ms Künast said that the United Kingdom and Portugal were already applying it. France had already done so, but the new government has stopped it. But she hoped to get the new agriculture minister to change his mind. “He knows that any reform has to be driven by Franco-German friendship,” she said.

Mid-term CAP Review

Ms Künast said that more flexibility was needed in the reform of the CAP. For example, CAP should give more flexibility in second-pillar criteria; it should, for example, not only allow for funding for the second pillar if there are new measures, but we must look at the criteria. A sentence is also n eeded in the CAP saying that if money is cut from the first pillar it should go to the second pillar of the same Member State. CAP reform will also be affected by EU enlargement and WTO negotiations.

CAP Reform and EU Enlargement

Ms Künast praised the fact that there was no conditionality between EU enlargement and agricultural reform, but added “nevertheless, these are very close parallel processes.” She warned that net payers would have ‘long nights’ and ‘long knives’ at the Copenhagen meeting at the end of this year, and called for a cap on CAP spending. A sentence will also be needed in the CAP on how the policy will continue after enlargement.

CAP Reform tied to Regions

The CAP is tied very closely to the idea of regions. Ms Künast pointed out that an important part of the process was recognising the emotional attachment people have to their region; they must have an idea as to where the food comes from, how the animals are raised, the distance the food travels to reach them, etc. The possibility for European products to be advertised as regional products should also be considered.

How to sell CAP to EU Member States?

Ms Künast said more than once that agricultural reform will only happen if there are 15 winners. There must, at the end of the day, be one good point for every country, she said. No one returns to his country saying he succeeded on one point but failed on another. There must also be an economic profit for the actors directly affected, that is to say the farmers. She also feels that the discussion about rural development should help win over some countries, such as Spain.

How to make rural areas attractive for young people and women?

Ms Künast said it was important to give farmers the possibility of ‘standing on different legs’ – in other words, supporting themselves not just through agricultural activities but through tourism and energy. In Germany, by the end of this year 1,300 biomass plants will be producing energy, taking cattle droppings and converting them to energy. She also said we must pay farmers for putting up hedges if we want to preserve biodiversity.

U.S. Farm Bill

Ms Künast criticised the U.S. farm bill for being a step backwards and just the opposite of what the U.S. has asked the EU to do. She said the measures would “cause some problems” for the international market, especially less developed countries. On the other hand, this could also work to the advantage of the EU, which may, as a result, be seen by underdeveloped countries as the one that cares more about their interests. “We are more open and more able to look at global interests than the U.S. is,” Ms Künast said.

Production Quotas

Ms Künast said that farming production quotas were one of the biggest problems. In Germany, there had been confused discussion about the issue, with everyone having a different view; older farmers usually say quotas give them a kind of security, while younger farmers say they cannot meet them. What is most important, Ms Künast said, is to look at the results. One should, for example, look at how one deals with quotas without destroying regions.

Organic Farming

Ms Künast said it was possible to talk about CAP and organic farming separately. Organic farming means both introducing ecological aspects in 100% of farming as well as fostering a specialised market for high-quality, organically farmed products. As for organic farming in Germany, Ms Künast said that now 5 500 products on the market are labelled as organic. Consumers see this new label both in large supermarkets and small shops. Organic farming in Germany is growing at about 20 to 30%, both for products and for consumers. The country is pouring a great deal of resources into marketing, which includes helping schools and universitie s teach students about organic farming.

European Food Agency

Ms Künast said it was important to proceed with the setting up the European Food Agency. Germany is currently building up two agencies, which will work in close cooperation with the European body: a federal institute for risk assessment and a federal food agency for risk management.

GMOs

At the top of the agenda is labelling. Ms Künast said she feared that if there were no decisions on labelling we could forget doing anything else in this area. She called on the EU to give a sign to the international market and the U.S. on this. She criticized the U.S. proposals on labelling, which put the burden on the party planning to introduce something to the market. Germany is seeking to introduce a label on products where GMOs have been used. She also suggested that animal feed was one market, which could be developed.

Sugar

Ms Künast did not expect the European Commission to include sugar in its agricultural reform proposal. She said policymakers needed to ‘use their brains’ in reforming the sugar regime.

Be prepared

In conclusion, Ms Künast noted that the EU was not favouring farmers over consumers as it embarked on CAP reform. But the EU did have to explain that farmers produced things for consumption. Every young farmer knew that one must be prepared for the international market as well as the questions and interests of consumers, she said.

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