CAP Reform Profile - Czech Republic
1 A Summary of the Czech Republic Government’s Position on the Future Reform of the CAP
Expenditure on the CAP should decrease, especially the amount allocated to Pillar 1. Although Pillar 1 should be maintained, the priority should be given to Pillar 2, so that agriculture can contribute to the general EU goal to increase competitiveness. Another reason is the need for policy to address those issues regarded as the public goods (externalities) provided by agriculture and the ‘new challenges’ (e.g. climate change, biodiversity loss).
In the near future, further CAP reform should be done in such a way that it provides for the equal treatment of farmers across the EU. This means that modulation and degressivity should not significantly decrease the total amount of support to a sector in any one country which is not in proportion to the decreases made in other Member States.
2 The Position the Czech Republic Adopted During the CAP Health Check Negotiations
a. A higher rate of compulsory modulation
The Czech Republic sees modulation as a tool to promote Pillar 2 and supports the concept. It is seen as a means to increase the competitiveness of agriculture. Despite the fact that the Czech Republic supports the principle of modulation, it is of the view that it should be implemented in a way that ensures the equal treatment of farmers across the EU (e.g. no degressivity according to size of farms and equal rates of modulation for all farms). If modulation was applied at the same rate in all Member States, it would simplify the policy and not motivate large farms to artificially split their holdings. The Czech Republic therefore took issue with the proposed progressive rates of modulation during the Health Check, rather than the proposed higher rate. Progressive modulation is seen to create unequal conditions for farms across the EU and especially affect those Member States with a high proportion of large farms. If the Commission’s original proposals had been adopted (of 13 – 22% by 2013), more than 70% of agricultural land in the Czech Republic would have been subject to lower direct payments. This decrease in direct payments is, according to the Czech position, seen to significantly change conditions for competition in the EU.
b. Expanding the role of cross compliance
The full implementation of cross compliance is rather new for the Czech Republic. The policy is supported, but certain issues are discussed, such as high administration costs. It is preferred to replace those requirements which are considered too demanding (in contrast to its potential impacts) with simpler requirements, or even to decrease the number of requirements.
c. The use of Article 68
It is expected that there will be quite a demand from farmers to use the opportunity provided by Article 68. The support for sensitive sectors is currently provided by so called ‘top-ups’ from national resources. The funds generated by Article 68 are expected to be used to support sensitive sectors (e.g. cattle and sheep production), improve production and protect landscape. The Czech Republic regarded the limit on the transfer (2.5% of the envelope) as too strict and therefore sought to increase it. The eventual Health Check agreement saw the limit increased to 3.5%.
d. The ‘new challenges’
It is envisaged that the agri-environment measure will be reformulated [in the Czech Republic] to increase its effectiveness and to respond to the priorities under the 'new challenges', especially those relating to water and biodiversity protection.
It is envisaged that the agri-environment measure will be reformulated to increase its effectiveness and to respond to the priorities under the 'new challenges', especially those relating to water and biodiversity protection. The proportion taken by Axis 2 in the overall Rural Development Program budget is already very high and requires significant national resources for co-financing. Therefore despite the potential additional financial means originating from modulation, there will be a limit to the amount of support that can be provided to the priorities given under the 'new challenges'. In addition, further discussion is needed to find the proper balance between these priorities. The ways of addressing the other issues under the ‘new challenges’ are also under discussion.
3 The Arguments the Czech Republic is Using Regarding the Future Development of the EU Budget
The Czech Republic supports further emphasis on cohesion policy. It believes that economic growth and competitiveness should be in the hands of the Member States. The Czech Republic also states that the EU budget should focus on financing only those activities and policies which ensure a sufficient European added value and which cannot be carried out more effectively by the Member States. The agriculture budget should also gradually be reduced and part of the support should be shifted from Pillar 1 to Pillar 2. In addition, the ‘new challenges’ should be treated in accordance with the subsidiarity principle and the concept of 'European added value'.
4 The Position the Czech Republic is Adopting with Regards to the Prospect of a More Fundamental Reform of the CAP in the Future (2013)
The structure of the EU budget should be focused further on cohesion policy, the ‘new challenges’ and EU added value. The total budget for the CAP should decrease and be focused more on rural development.
The objectives of a post 2013 EU agricultural policy should be to:
- Increase competitiveness;
- Promote sustainable agriculture which provides public goods at a socially acceptable level; and
- Address the new challenges (e.g. climate change, biodiversity loss, quality of life in rural areas).
In meeting these objectives, the overall structure of the CAP should stay the same. Total expenditure on the CAP should decrease and the proportion of support to each Pillar should change, with a shift from Pillar 1 to Pillar 2. The trade barriers regarding the import of agricultural products from developing countries should be replaced. The equal treatment of farmers and agricultural sectors in the Member States should be ensured.
The structure of the EU budget should be simple, effective, and transparent. Therefore it should be focused further on cohesion policy, the ‘new challenges’ and EU added value. The total budget for the CAP should decrease and be focused more on rural development.
5 The Issues Shaping the Government’s View
...rural development measures should be...supported to a higher level than is the case currently...
It is felt that the overall framework and objectives of the CAP should remain the same but in general the expenditure should be gradually reduced on the CAP. However, there is a clear demand for the higher support for Pillar 2 at the expense of Pillar 1. The argument is that the CAP should contribute to competitiveness while addressing non-market issues (externalities/public goods).
It means that there is a strong feeling that the rural development measures should be more important and supported to a higher level than is the case currently, especially with regards to the aim to increase the quality of life in rural areas. The Czech position considers all Axes to be of high priority. Axis 2 currently receives the highest expenditure in the RDP. The goals of Axis 3 (rural development in the widest perspective) are also declared as important, but the level of its support is not currently pitched at a corresponding level. This is partly a result of the competition for resources and a feeling of some pressure groups that the funds are primarily aimed at farming.
The Czech Republic strongly supports the gradual replacement of market instruments protecting agricultural trade both internally (in the EU) and internationally. Those barriers restricting developing countries from entering the EU market should be removed.
Despite its clear targeting at competitiveness, the CAP should effectively address the protection of the environment (water, soil and biodiversity protection), food security, and safety.
There is a growing awareness of the need for Czech agriculture to adapt to climate change and a wide discussion has started to find ways to address this. The Czech Republic has supported the production of biofuels for several years and is considering doing so for other renewable energy sources.
As mentioned briefly above, food security is regarded as an issue. Given the food crisis in other parts of the world it is felt that the Member States should be able to respond to potential future challenges in this respect. Part of the reason could rest on past experiences of the lack of food security in Europe. Food security should be reached by maintaining the current output of agriculture, rather than by other means.
There is quite strong support for the continuation of cohesion policy in the future as there are still quite wide disparities in the EU. This became even more evident after the last EU enlargement. Therefore the Czech Republic will strongly support the concentration of support to less developed countries and their regions. The Czech Republic believes in territorial cohesion supported by a higher emphasis on cross-border and interregional cooperation. Some analysis should be conducted to assess whether current cohesion policy meets current needs, as this is not fully clear at present. There is also a need for a better integration between cohesion policy and the CAP.
It is believed that agricultural policy should help farmers to adapt to the risks associated with production. The preferred tool is to create a special fund, which should be used to help farmers to cope with extreme situations.
...there is strong support for retaining greater control [at Member State level] of policy areas that are considered to be of national significance.
Concerning transboundary issues (as in the other issues) the Czech Republic prefers using the principle of subsidiarity first, but doing so in an integrated way with other Member States while the EU promotes related actions. Therefore the Member States should take the key steps in ensuring the issues are well addressed. This is significant, for example, with regard to climate change. But, in general, it is expected that the EU will promote addressing these issues and supporting those approaches related to 'EU added value' (e.g. research). For biodiversity conservation and social and economic cohesion, there are still legitimate reasons for a certain level of European policy intervention. But, as mentioned above, there is strong support for retaining greater control of policy areas that are considered to be of national significance.
The Czech Republic supports the Lisbon strategy saying that the Member States should support competitiveness, where the EU can support European added value more effectively than Member States alone. In particular, support for research, life-long learning, and exchange of students and teachers should help in reducing the technological gap between top-ranking countries and those lagging behind.
Agriculture is not of great economic importance in the Czech Republic (it constituted less than 3% of GDP in 2005 (a)). About 2.8% of the total workforce were employed in agriculture in 2005. The Czech Republic is an importer of agricultural commodities. The main products are grain, beef, poultry and pork.
The proportion of farmers within the total population is not high and therefore farmers are not so important during elections. On the other hand farmers are known to the Czech population as a rather successful pressure group. They are able to lobby for change of the national part of agricultural policy with some success (especially the representatives of large farms).
The Ministry of Finance is quite strong but not known as a major player in changing the Czech position on the CAP. The Ministry of Environment is stronger in some aspects of environmental protection but weaker in others when compared to the role of the Ministry of Agriculture in shaping the Czech position.
a. Ministry of Agriculture (2006), The Green Report - Report on the State of Czech Agriculture and Food Industry in 2005. Prague, summary accessible here.
This profile is partly based on informal discussion with officials in October and November 2008 and the Government document: Attitude of the Czech Republic for negotiations on Health Check, 2008. Prague (not published).
21 Jan 2009
This profile was written by Jaroslav Prazan of The Research Institute of Agricultural Economics (VUZE) in the Czech Republic.