Community context Perspectives for CPMR action

Transcription

1 Revision of the Common Agricultural Policy Comments of the CPMR Technical Note from the Secretariat General Approved by the Political Bureau at its meeting on 21/07/2003 in Napoli Community context Perspectives for CPMR action On 10 July 2002, the European Commission adopted a communication on the mid-term review of the Common Agricultural Policy (CAP), in accordance with the conclusions of the Berlin Council in March At its meeting in Brussels in October 2002, the European Council took a budget decision on the financing of the CAP for the period: there will be an annual ceiling for expenditure on the first pillar (direct market subsidies) equivalent to the level of expenditure reached in The expenditure of the new Member States will be included in this levelled-off budget. On the other hand, no decision was made on the second pillar, which finances rural development. On 21 January 2003, the European Commission published legislative proposals on the rules for implementing the CAP, drawing on the principles of the July 2002 mid-term review and adapting them to the budget framework agreed by the Council. These proposals provoked intense debate, both in the European Parliament (several resolutions were voted, notably one on horizontal aspects following the Cunha Report) and in the Committee of the Regions (the Savy Report). Under the Greek Presidency of the Union, the Agriculture Council met regularly and under several different circumstances, before concluding an agreement in Luxembourg on 26 June The terms of this agreement take up the principles defended by the Commission, but major changes were introduced, notably concerning the decoupling of the amount farmers receive in direct subsidies and the quantities produced. Member States can now ultimately decide that if they do not want to have decoupling in their countries, they can instead introduce partial decoupling, with a proportion of subsidies therefore remaining dependant on quantities produced. This note sets out an assessment of the outcome of this process from the viewpoint of peripheral maritime regions. It also outlines a set of principles which should underpin the implementation of the new system, not just for the first but also for the second pillar. As far as the second pillar is concerned, the financial amounts freed up by the introduction of decoupling and modulation are limited, and the modification of the community instruments that underpin the transfer of funds from the first to the second pillar is also restricted in scope. The real review of community agricultural and rural development policy will take place during the period. This review is already being looked at by European Commission departments, and the CPMR is and will remain present in the debates preceding the formalisation of this policy s future instruments, whether they be part of structural policies (i.e. the place given to ERDF funding of rural development in the future Objectives 1 and 2), or under the second pillar of the CAP (i.e. the new EAGGF rules). The European Union ultimately has two political means at its disposal for contributing to the development of rural areas, and the debate on the way community efforts can be pursued with regard to these areas beyond 2006 requires us to take a detailed look at both the two CAP pillars and the rural strand of regional policies. Bearing in mind the importance of farming and food production activities in most of its member regions and the contribution rural development can make to balanced development across the EU, the CPMR has the utmost intention of participating in the European debate on these issues. It has set up an internal inter-commission working group reflecting its member regions geographical diversity 1

2 (Mediterranean, Atlantic, Nordic and Islands), which is coordinated by Limousin Region. This group has met five times since April Drawing on the results of this work, the Secretariat General drafted a technical reaction to the Commission s Communication in July 2002, together with a note, in August 2002, on the need for articulating and coordinating regional policy and rural development policy. Lastly, at its meeting in Thessaloniki on 16 and 17 May, the CPMR s Political Bureau declared that the thematic priorities of post-2006 regional policies should take rural development into account, drawing on a document entitled Regional policy: meeting the challenge of competitiveness ). THE FIRST PILLAR OF THE CAP DECOUPLING AND MODULATION: WHAT WILL BE THE IMPACT AT REGIONAL LEVEL? The Commission s proposals The Commission s approach, as set out in its proposals of July last year and last January, is in line with the underlying logic of the CAP reforms initiated in 1992 (the Mac Sharry reform) and continued in Even though the Commission did not want to link the two exercises, the CAP review has been affected by the timetable for the Doha round of the World Trade Organisation (WTO) negotiations, and more precisely the WTO s ministerial meeting in Cancun next September. The reduction of public subsidies for the trade of agricultural products will be a major point on the agenda. To guarantee a certain level of income for European farmers, the Commission proposed: - to continue to pay direct subsidies at the same level for the current period (calculated on the basis of the amount) but only on a flat rate basis (an overall subsidy for the whole of the agricultural undertaking) and without farmers needing to produce the crops or raise the animals which initially qualified them for the direct subsidies. This is the principle of decoupling. - but each year, from 2007 to 2013, the flat rate amount provided to farms will be reduced. Small farms which receive direct subsidies of less than 5,000 euros would be exempt from such degression. Community funds thereby freed-up would be transferred to the budget for the second pillar of the CAP. This is the principle of modulation. While these proposals guaranteed a certain level of income for farmers, the overall effect of the progressive reduction of support prices and direct subsidies would automatically lead to a decrease in most farmers income. The Commission stressed the idea that two factors would make up for this shortfall: - The decrease in prices would reduce product supply, and market prices would duly increase as a consequence; - Because they would receive a consistent and regular level of direct subsidies, farmers would be able to take the risk of changing what they produced, with a view to targeting more profitable markets. They would also be able to increase the added value of their business by diversifying or focusing on non-agricultural activities such as tourism, direct sales, services etc.. The farmer would therefore become a fully-fledged entrepreneur, responsive to market pressures. The positive aspects of the Luxembourg agreement The compromise does not bring the EU Common Agricultural Policy s existence and continuation into doubt, at least not until

3 It does not fundamentally throw doubt on the overall financial subsidy devoted to the agricultural sector up until The progressive reduction of the total amount devoted to direct subsidies between 2005 and 2013 will, in overall terms, ultimately be counterbalanced by an increase in funding for the CAP s second pillar. In all probability, the funding allocated to rural development should almost wholly benefit farmers themselves. This will somewhat compensate for the lack of community funding received by farmers who do not qualify for direct subsidies and the transfer of funds will therefore, broadly speaking, be beneficial to farmers in disadvantaged areas. But this rebalancing will remain very limited in scope, bearing in mind the modest sums that will be transferred (1.2 billion euros per year). Furthermore, the degression mechanism chosen for direct subsidies undoubtedly has an element of economic and social cohesion since small farms receiving less than 5,000 euros per year will be exonerated. On first analysis, it would seem that farmers in peripheral maritime regions will therefore be less affected by these reductions that the average European farmer. Lastly, a proportion of the funds freed-up in each Member State via the introduction of degression will be subject to redistribution (equalisation) between countries, using three criteria. Two of these criteria are in line with social and economic cohesion: GDP per capita and the relative importance of agricultural employment. Even here, the redistributive effects will be limited, because the amounts redistributed will remain lower than 20% of the funds freed-up by modulation. Furthermore, the redistribution of these amounts between regions within each country benefiting from equalisation will be subject to purely national decisions, and they will not necessarily benefit farmers in disadvantaged regions. The negative aspects of the Luxembourg compromise This is a far-reaching reform which will bring about a profound change in the status of European farmers. It would not be right to defend the principles just in terms of budgetary criteria or the need to prepare a strong negotiation position in the WTO. From this point of view, the Commission s proposals, of which the spirit has been taken up by the Council, have shortcomings due to insufficient argumentation and justification at political, economic and social level, as well as the absence of a territorial approach. They seem somewhat defensive and as if they had been developed under force, whereas they could have included dynamic features reflecting an ambition to develop certain sectors. - Farmers are not guaranteed a sufficient and stable income from what they produce Farmers who receive direct payments will receive less (except small farmers who are under the franchise level and farmers in ultra-peripheral regions). They will of course, with their new theoretical status as entrepreneurs who are responsive to market pressures, attempt to branch out into more profitable activities and markets, but we know that such changes in production have a limited scope in the agricultural sector due to the implicit constraints of the activity: - the need to be fully integrated in a particular branch; - the high levels of investment in productive capital, with purchase of equipment often being impossible for single farms alone. The former cannot reasonably be envisaged without price guarantees, which cannot be given for speculative activities; - diversification towards direct sales of products (whether processed or not) or tourism services can only be envisaged if there are sufficient potential consumers in the area. This is not the case for sparsely-populated peripheral maritime regions (the Nordic, insular and inner rural Mediterranean areas). Farmers who do not receive direct payments because their products are not covered by the common organisations of the markets concerned will at best see their situation unchanged. 3

4 This is the case for fruit and vegetable producers, winegrowers and poultry and pig farmers. For the latter, the anticipated medium-term rise in the prices of their supplies, of cereals for example, will lead to a fall in income. - Specific circumstances in Scandinavia and the Mediterranean are not taken into account Nothing is proposed for sectors with no income compensations systems such as wine-growing or fruit and vegetable production for example, which are major yields in the Mediterranean. The principle for calculating direct subsidies, which is based on historical factors, is perpetuating a two-tiered development of European farms: on the one hand there are those that receive direct subsidies, and on the other there are those that do not. This therefore exacerbates the sectoral (and regional) inequalities that the CAP has been generating ever since its inception. As far as Mediterranean farms are concerned, it should nonetheless be pointed out that Commission has been asked to publish a Communication on the reform of the olive oil, tobacco and cotton COMs in the Autumn of It also intends to make proposals on wine, fruit and vegetables in There is a certainly a risk that farms will be abandoned and agro-food sectors will be weakened In the Member States which opt for total decoupling, it can be expected that there will be consequent reductions in agricultural activity in certain vulnerable areas. This will lead to the weakening of certain agro-food sectors, which will have to cope with reductions in their supplies. There may be major social implications for vulnerable areas where agriculture is still the cornerstone of the rural economy and the guarantor of an open and attractive countryside (island and mountain regions, those that are difficult to access, etc.). - The regional impacts of the reforms have been insufficiently evaluated A general question arises concerning the evaluation and consideration of the regional impact of the changes planned: the effect on regional economies, on employment in rural areas, the alteration of landscapes which might affect the attractiveness and tourism potential of regions that are heavily dependent on this activity. The European Commission has not carried out such an evaluation, and has instead limited itself to quantitative macroeconomic and sectoral impact analyses. If the CAP is to be considered as a common policy, it is certainly the EU executive s responsibility to take account of the effects of reform on territorial cohesion, and to propose appropriate policy solutions. This is one of the major shortcomings of the proposals, and the CPMR requests that the painstaking task of carrying out ex ante evaluation be done at regional level, before the Luxembourg agreement is implemented. It therefore invites the European Commission to use the flexibility in budget and timetable provided for by the Luxembourg agreement to propose, in the implementation regulations, a permanent mechanism for financing and conducting such impact assessment and research activities. - There is an exaggerated emphasis on some factors, such as the verification of good agricultural practice and the attention given to animal wellbeing If such principles are applied in a uniform and standardised manner at European level, they could come to hamper the development of rural areas. Agro-environmental measures have been pioneering in the context of environmentally-friendly policies. They are designed to limit the negative impact of intensive agriculture on many European landscapes, and have in a way been forerunners of the principles of the Gothenburg strategy. However, this has led to an uncontrolled multiplication of constraints: the Habitat, Birds and Nitrates directives, Natura 2000, etc.. 4

5 So, for example, the negotiations on the rural development programmes came up against a barrier when it came to defining the notion of environmentally-friendly practices. In its mid-term review, the Commission set itself the important objective of developing a single reference framework for environmental protection instruments. However, the potential impact of this change and its ultimate feasibility have given rise to many questions. For the cross-compliance of subsidies to be implemented in a manageable way, a single method should be applied to all aids, so as to spare farmers an even heavier technical and administrative burden regarding environmental matters. From this point of view, the Luxembourg compromise on cross-compliance is a good starting point which should progressively become a reference framework. - A CAP which pays little attention to global solidarity Considering that the European Union has a role to play in reducing disparities in development across the world, and consequently in the improvement of the situation of rural economies and farms in developing countries, the CPMR considers that this should be reflected in any review of the CAP. On this issue, the Luxembourg agreement and the Commission s efforts to sell it to the public are seemingly disappointing. More emphasis is in fact given to positions with regard to the EU s developed partners/opponents in the WTO, the Cairns Group and the USA. This demonstrates that a major European effort is being made with regard to internal subsidies. Developing countries are hoping for progress on the other two pillars of the WTO agriculture debate: export subsidies and market access. Specific comments on decoupling Decoupling would be useful if it simplified the administration of the CAP, but the Luxembourg comprise bears no signs of progress on this issue due to its optional and partial nature. As far as the principle is concerned, the CPMR considers that decoupling is acceptable, because it is legitimate to aim to give the market a bigger role in determining what farms produce and to provide farmers with a more visible status as entrepreneurs. It should however be part of a strategy for promoting territorial cohesion, characterised by the continued survival of as many farmers with sufficient income as possible, and across all rural areas. The disappearance of the possibility Member States have for allocating farms an extra amount (3,000 euros per employee) so as to take account of the number of people working on the land, which happened between July 2002 and January 2003 and was confirmed in Luxembourg, seems to us to go against efforts aimed at helping agricultural populations to remain where they live. From our point of view, the new arrangements should have been applicable to all European farms, whatever they produce, including those that are not subject to the common organisations of the markets. Specific comments on modulation On first analysis, the principle of degression of direct subsidies agreed on, and some of the methods proposed for implementing this, seem to be acceptable for two reasons: 5

6 The funds freed-up by modulation will help to replenish the budget of the second pillar and to finance rural development activities; By excluding small farms which receive less than 5,000 euros of lump sum subsidies per year, the system will, as has already been pointed out, help to reduce economic and social disparities between sectors, and between regions. It will therefore help to preserve agricultural and rural activities in vulnerable areas. As far as peripheral regions are concerned, these points should be qualified by the following remarks: - only a small number of farms currently receive direct subsidies; - the total financial sums that will be shifted over to the second pillar are limited (see the part of this note devoted to rural development). Comments on the introduction of a ceiling The idea of introducing a ceiling of 300,000 in the lump sum subsidy amount that each farm can receive has been abandoned. This backtracking is difficult to defend with regard to European public. With a view to taking better account of the differences in the real specific situations in the European Union, the CPMR would have been favourable to differentiated ceilings in different areas, taking account of agricultural, agro-food and rural employment, as well as the different levels of economic prosperity. Funds freed-up for rural development: amounts and regional distribution The amount of funds freed-up The Luxembourg compromise provides for the transfer of an amount under 10 billion euros to the second pillar for the period. This is a decrease in comparison to what the Commission was proposing before the budget decisions at the Brussels Summit, but an increase compared to what it proposed in Geographical distribution of the freed-up funds This overall envelope will be shared out among 15 Member States using criteria relating to agricultural land-coverage, agricultural employment and GDP per capita, all of which are entirely acceptable from the CPMR s point of view. It is now appropriate to raise the matter of how the criteria for distributing the amount between regions are defined. Respecting the principle of subsidiarity, the Commission cannot ultimately weigh on the decisions Member States make regarding how they divide their budgetary envelope between their regions. The CPMR would like the Member States to take account of the territorial cohesion criteria when they divide funds between their regions, and they should give special attention to areas with a permanent disadvantage, such as islands and mountain areas. At one and the same time, this would be a compensation for the disadvantage and a way of exploiting the specific assets of these areas (their landscapes, environmental resources, etc.) SECOND PILLAR OF THE CAP: TWO COMMUNITY POLICIES SUPPORTING RURAL DEVELOPMENT 2003 is a key year for the discussion and debate on post-2006 community policies, especially on the CAP and regional policies. It is not up to the CPMR to choose whether an essential and integrated 6

7 rural policy should be part of the second pillar of the CAP or whether it should be implemented via the future Objectives 1 and 2. On the other hand, the CPMR requests that rural areas be not forgotten, and that the probable simultaneous use of the two sets of instruments happen in a coherent and comprehensible manner for those concerned. We believe that the current set-up could be continued, under the condition that there is a good articulation at regional level and that the budgets deployed reflect the importance of the issues at stake: - on one hand, regional rural development plans co-financed by the EAGGF, in the framework of the second pillar of the CAP, which are primarily targeted at agricultural beneficiaries, sometimes as part of a multifunctional approach (tourism, landscape maintenance, etc.); - on the other hand, a rural strand within regional Objective 1 and 2 programmes co-financed by the ERDF, which permit the funding of various activities, based on regional topical priorities (action promoting the relationship between cities and the countryside in prosperous regions, general utility services in sparsely populated areas, local development projects which have notably been inspired by the experience of Leader and Leader +, etc.). Over the coming months, the CPMR will endeavour to clarify its proposals in the rural development area. Its agriculture and rural development inter-commission group will adopt this topic as a priority for discussion, and an interregional cooperation project will be launched to exchange experience about policies and measures developed by the regions. Furthermore, the CPMR intends to play an active role in the conference the Commission is planning to organise on this matter next November. The result of these activities will be enriched by the conclusions of the third report on cohesion and the mid-term evaluation of the rural development plans, which the Commission is due to publish in The CPMR s proposals could cover the following points: - the content of rural actions to be implemented as part of regional policies (measures to promote, adapting them so that they are eligible, modulating the level of subsidies in accordance with the different types of regions, etc.); - changes in the EAGGF regulation concerned with rural development. While this regulation is due to be modified in the short term to incorporate the new measures that were accepted in the Luxembourg compromise, it still needs to be worked on so that it will be responsive to the more fundamental changes expected after This regulation provides for various measures targeted at mountain areas and disadvantaged areas, which it does not clearly define, leaving their interpretation up to the Member States. The CPMR should also try to have these criteria are clarified, and ensure that the specific circumstances of islands are taken into account. Relevant proposals could also usefully be made in the field of product quality linked to geographic origin. TOWARDS A GREATER RECOGNITION OF THE ROLE OF REGIONS IN CAP AND COMMUNITY RURAL DEVELOPMENT POLICY GOVERNANCE? The CPMR is of course carrying out its duty by insisting on the need for a regional dimension to rural and agricultural policies, and this note has endeavoured to shed light on several issues: - ex ante evaluation of the development of the first pillar; 7

8 - regional implementation of rural development plans; - articulation at regional level between the second pillar of the CAP and regional policies. It now really appears that this essential role for the regions is being reflected in the debates of the Agriculture Council of Ministers. A number of signs in the Luxembourg compromise bear witness to the fact: - the Member States that opt for partial decoupling will have wide scope for regionalising this measure in their countries; - on the sensitive issue of the transfer of available production rights, the Luxembourg compromise here again provides for the possibility of making transfers within countries, and of setting up an equalisation system across their regions; - ultra-peripheral regions have been singled out for special attention, because they are exempted from modulation and they escape the common decoupling regime. For their own UPRs, Member States can ultimately decide whether they want to preserve a link between direct payments and production. Furthermore, the regions can play an advisory role to help their respective Member States make the decision between total or partial decoupling. This new context reflects the emergence of regions as important players at EU level, which should encourage the CPMR to continue to strive for a more important role in the CAP s implementation, thereby helping to ensure progress towards greater territorial cohesion between rural areas. 8