Keep chewing this bone: a trickle of ideas on a future CAP

For European farmers, the principal activities prompted by the EU’s Common Agricultural Policy (CAP) in the first half of 2015 have centered of course on the task of understanding their government’s decisions on the detailed arrangements for the implementation of direct payments and getting their application forms completed to secure and activate their payment entitlements. The 2013 reform of direct payments offered a great deal of flexibility for Member States to adjust the implementation details to suit their own national circumstances. These covered issues ranging from the minimum size of claim, the definition of “active farmer”, the nature and extent of first hectare payments, or payment limits, the use of the provisions for coupled payments, the small farmer scheme, top-ups for farms in areas of natural constraints, and the provisions for new entrants. Last but not least, the details of the three greening actions (maintenance of permanent grass, crop diversification and the 5% ecological focus areas), where governments have a wide range of choices. There are now available compilations of the decisions made by the Member States on these matters.[1] However, it will take many more months to discover the uptake on the ground of all these provisions put in place by governments and even longer to detect any impacts on agricultural production and on the environment.

Meanwhile administrations have submitted their rural development programmes to the Commission and by early June just under half have been approved and are now back in the hands of national administrations to launch and invite participation. It will take well into 2016 before all these programmes are operational.

In parallel, political attention in Brussels has focused, inter alia, on CAP simplification. The Commission, Council and Parliament all appreciate that the outcome of the last reform process, driven heavily by farmer and certain national interests, has considerably complicated the direct payments regime. A swing back to simplification might have been expected even without the high-level drive led by Commission President Juncker to relieve business from unnecessary regulation, allowing them to focus on jobs and growth. However, Commissioner Hogan has insisted that CAP simplification, which mostly refers to direct payments, cannot change the basic regulations and is focusing hard on the initial establishment of the new system, particularly trying to ensure that controls are more flexible and proportionate to the task as the new payments regime is bedded in.

Despite this intense activity generated by the present policy, there is a widespread, though not universal, acceptance that the CAP regulations, which will run until the end of 2020, are not optimal. Further reform will be necessary and that this will take many years to formulate and then negotiate. Consequently, discussions have been taking place amongst many of the stakeholder groups about the potential directions of travel. What follows is an impressionistic account of some of these discussions which have come to the attention of the author. It makes no claim to be comprehensive, and is offered in the hope it might stimulate others to share the reflections they have had or come across.

It certainly seems to be a shared perception that the CAP which has evolved to this point is not supremely well adapted to any of its prime functions. Starting with some farming interests, many seem to feel the CAP has become too burdened with trying to solve wider social functions which are not the sole or main responsibility of farming (e.g. climate change) and not enough focused on the task for which it has the principal responsibility (food production). This line of thinking suggests that the CAP should revert to being ‘a policy for agriculture’. When pushed to explain what this means, one line of response is to refer to such actions as: R&D, improving productivity, stimulating innovation and thus competitiveness and seeing agriculture ‘as the Brazilians do’ i.e. as a vital part of the economy providing jobs, output and exports. Asked what this would mean for direct payments, it is not uncommon to hear it acknowledged that large parts of European agriculture could do without them. Usually, however, such assertions are quickly qualified by mentioning that managing without direct payments would only be possible if the European regulatory burden were not so much higher than competitors face e.g. in the Americas.

Another response uses the model of North, rather than South, American policy towards agriculture. This argument suggests that the CAP must do more to help agriculture cope with the volatility in production and in markets. This quickly turns to discussion of the dominant focus on risk management in US farm policy. For some, such enthusiasm is dampened when it is pointed out that this subject has been investigated repeatedly over the last two decades since the MacSharry reform. The result has been a relatively clear arrangement. In addition to the substantial buffer provided by direct payments, risk management is devolved to the Member States to deploy from a toolkit situated in the rural development regulation in the second pillar. A major consideration in addressing this issue is that the benefits of such measures fall very unevenly across the Member States; more help and expenditure almost certainly accrues to southern Europe where yield variability is greater. Partly for this reason, others suggest that the financing of risk management should be dealt with by establishing a third pillar of the CAP which could be structured to cope with the fluctuating annual budgetary demands, which are not easily accommodated within the annual budget of Pillar 1, or multi-annual programmed budgets of Pillar 2. It has to be pointed out, however, that this last approach still does not avoid the problem that the only feasible source of funds to support a third, risk management, Pillar would be from drawing down the Pillar 1 budget for all MSs in the next financial perspective. So this does not overcome the hurdle of uneven sums and rates of support from which Member States draw on the volatility pillar.

More fundamentally, the wish for an agricultural policy which can somehow ditch the ‘social and environmental baggage’ reflects a serious misconception. It also overlooks the point that for a significant part of European agriculture the social and environmental services provided may amount to at least as much, if not greater, social value than the agricultural output. One suspects this wish particularly reflects the views of the commercial core of farming.

The misconception is the false opposition posed between food security and measures to improve the sustainability of farming. This notion has been promoted vigorously by farmers’ organisations since the series of commodity price spikes which emerged in 2007/8. This was especially apparent over the issue of the proposed 7% Ecological Focus Area (EFA) as part of the greening of direct payments. The cry that was taken up and echoed throughout the debate on the size and management of EFAs was that they must not impair agricultural production at all. Indeed this was even reflected in the views of the European Council when they settled the financial perspective for this period.

This is a serious denial of the fundamental purpose of greening measures which is to improve the (environmental) sustainability of European food production. The need for this is motivated by the overwhelming scientific evidence of undesirable impacts of many current production practices. These are leading to excessive soil erosion and depletion of soil fertility, especially organic matter; they have degraded biodiversity and thus vital ecosystem services such as flood protection and pollination; and they are emitting greenhouse gases which contribute significantly to harmful climate change (and thereby some of the volatility of which farmers complain). There is clearly more to be done to convince farming interests that these really do threaten the long run future of the sector. The right test of the effectiveness of greening measures is their impacts on these undesirable aspects of farming and thus on long-term productivity, and thereby food security, and not short-term production.

The resistance to the environmental and social aspects of the last CAP reform in the past reflects a certain absence of solidarity between sectors of agriculture. Of course farming does not neatly partition into commercial and productive versus marginal farming. However, there is a considerable proportion of EU agriculture, about half the total area which is less favoured in farming terms, a sizeable proportion of which operates in remoter areas with difficult natural constraints (thin, steep, stony, wet or dry soils), producing predominantly products from grazing animals. Much of this farming is economically marginal and highly dependent on CAP payments. To the outsider it might seem strange that more of the support is not channeled to precisely this sector – especially if a case can be made to manage these areas with greater emphasis on carbon sequestration, water filtration and storage, biodiversity restoration and maintenance and cultural landscape management. However to the commercial agricultural sector such supports are all too often deplored as ‘subsidising inefficiency’.

The apparent willingness of production agriculturalists to downgrade concerns about the environmental impacts of farming in the teeth of the ‘challenge of the nine billion population’ has not been lost on those whose dominant concern is the environment, both governmental and non-governmental. The perception is that over a long period, perhaps from the mid-1990s, there had been a gradual process of greater reconciliation between farming and environmental interests. Each recognized they needed each other. There was an acceptance of cross compliance, i.e. receiving payments in return for respecting environmental regulations. There was acceptance too that CAP resources were gradually migrating to Pillar 2 where significant parts are devoted to environmental management, remoter areas and wider rural, as opposed to solely agricultural, development. This all seemed to go in reverse during the latest reform process. Farming and green organisations pulled together to make a joint case to retain much of the CAP budget – and not least because it was acknowledged that a large portion of Pillar 1 expenditure should be deployed to help improve the (environmental) sustainability of agriculture. Having won this budget argument together, environmental interests then felt cheated as they saw the greening elements of the policy systematically diluted, and the transfer of resources to pillar 2 slowed, and, for some, reversed.

How to respond to this betrayal has been a starting point of debates amongst many environmental interests. Some conclude that the power of the farming lobby, especially waving the ‘food security’ flag, is unbeatable. This leads to the suggestion that the best course of action is to campaign vigorously for a new and separate environmental fund to be financed by redeploying (at least) the 30% of the CAP budget (both pillars) which is supposedly devoted to environmental management of agricultural areas. Others perceive that this might be infeasible politically in the economic climate, with the current focus on jobs and growth and re-examination of the fitness of environmental regulation. Some of this second group then conclude that environmental management efforts should focus on delivery – for example, through charitable and public ownership and management of sites, and by seeking private sector funding to offset the costs of environmental management.

On a different plane, another debate which could have profound relevance for the debate on the longer run future of the CAP is the broader discussion on global food and nutrition security. These issues are getting a thorough airing during the six months World Expo taking place in Milan this year under the banner: Feeding the Planet: energy for life. This is bolstered by the recasting of the Millennium Development Goals later this year with a new set of, highly ambitious, sustainable development goals, the first two of which are the elimination of poverty and hunger. A highly important strand of this global thinking is the recognition that the prime concern should indeed refer to both food and nutrition security. This serves to emphasise that the challenge is not simply about producing more food, but ensuring people can access it and that what they eat provides for a healthy life. With approximately equal numbers of people worldwide under-nourished, and extremely badly nourished, leading to chronic non-communicable disease (e.g. diabetes and coronary heart disease), it is argued that all aspect of policy relating to the food chain should be integrated to ensure a more coherent approach to these challenges. The implications of steering the CAP in this direction have yet to be explored.

Drawing these threads together, it is intriguing to see that in some ways both farming and environmental interests may be converging from opposite starting points to conclude that the CAP is not the right policy framework within which to improve the environmental management of agricultural land. If this is their direction of travel, this author thinks they are both wrong. Any lack of sustainability of core, commercial agriculture is essentially its questionable environmental sustainability. The potential non-sustainability of many agriculturally marginal areas in Europe may well be less to do with the environmental dimension as the economic and social dimensions. These issues will only be rectified by addressing them together. It will not help to create an agricultural policy which downplays environmental impacts and production of public goods, or an environmental policy which ignores the need to feed the growing population. The task is still to integrate these objectives in the one land management policy. The balance between the objectives is tough enough. Achieving the balance between actions at Brussels and Member State levels adds to the difficulty. This is why we have to keep chewing this bone.

[1] See DG Agriculture’s most recent Information Note: Direct payments post 2014 - Decisions taken by Member States by 1 August 2014: State of play on 07/05/2015. IEEP expects to publish some work on the implementation of greening in selected Member States later in the summer.

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