CAP Reform Profile - France

1 A Summary of French Position on the Future Reform of the CAP

2 Description and Analysis of the Key Issues Shaping the CAP Reform Debate in France

2.1 The French position and line of argument

2.1.1 Redistribution of CAP funds following the Health check

2.2 The Fundamental Factors influencing France’s Overall Position

2.3 New political forces in the French agricultural world

2.3.1 The case for grass

2.3.2 Environment: still a secondary issue

3 Conclusion: a smoke screen reform or a genuine basis for the future?

Sources

1 A Summary of French Position on the Future Reform of the CAP

Generally speaking, the French government believes in the broad idea that in a changing and unstable context (e.g. with respect to markets and climate change) there is still a need for a strong CAP in the future. The Minister of Agriculture, Michel Barnier, has frequently reminded us of this position. At the same time, the French position is characterised by a kind of ambiguity: “change with continuity” could be a way to sum it up. While the French approach to the Health Check was seen as an opportunity to introduce new schemes, it was also rather cautious with regard to the magnitude of changes that might be implemented by 2013.

France believes a post-2013 CAP needs to be re-legitimised, but should retain the same overall shape at EU level as at the moment (i.e. direct payments and market interventions through Pillar 1 and rural development measures through Pillar 2). Nor is France proposing radical changes to the EU budget and funding sources, a position that can be seen in its contribution to the EU budget review consultation.

The French government has identified four goals for the future of European agricultural policy up to and beyond 2013:

  • The food security of the EU. Food is a strategic sector for the EU and is an important part of European identity; therefore food security must be the first goal of the CAP. Dependence on the import of some products should be alleviated (e.g. protein crops such as soya).
  • Contribution to the world food balance. Europe has an important production potential, and must use it to address the increase in global food demand.
  • Preserve the balance of rural areas. The CAP has to promote the diversity and viability of EU agriculture, in order to maintain a dense network of farms, food and retail businesses in rural areas.
  • Contribute to the fight against climate change and to the improvement of the environment. This is a new way to legitimise the CAP.

In March 2009, the minister of agriculture unveiled proposals to shift a greater proportion of the total CAP budget towards grass-based livestock producers. One of the main objectives of this policy was to address the disparity between the amounts currently received by arable and livestock producers. This is to be achieved through the following four broad headings (the corresponding amounts in brackets include European and national contributions):

  • Strengthening the rural economy and employment in the territories (€ 265 M)
  • Setting up a new support for grass-based livestock and a support for forage production (€ 980 M)
  • Measures to promote sustainable development (€ 129 M)
  • Setting up a risk management scheme (€ 140 M)

These changes will be achieved through a combination of greater decoupling of direct payments in the arable, suckler cow and sheep sectors (art. 63), combined with the (re-)introduction of coupled payments for particular sectors under Article 68, the creation of a new productive grassland aid premium, and through increased expenditure on Pillar 2 measures (via modulation), including the LFA measure and the agri-environment grassland premium (PHAE).

2 Description and Analysis of the Key Issues Shaping the CAP Reform Debate in France

2.1 The French position and line of argument

[Reallocation of funds following the Heath Check] has been politically justified as a way to preserve the majority of direct payments in the future i.e. accept lower payments now in order to be able to keep some payments after 2013

The central issue of the CAP Health Check for France was the reallocation of public funds according to a more targeted and better justified use. The main idea has been to redistribute funds from the better off (mostly crop farms) and redirect them to those in the most difficult economic situation, a system of support “based on historical references that can no longer be explained”.

Whilst such an approach has unsurprisingly been opposed by most large crop farmers, it has been politically justified as a way to preserve the majority of direct payments in the future i.e. accept lower payments now in order to be able to keep some payments after 2013. On the other hand, the new beneficiaries, mainly grass-based farms, are viewed as deserving greater support from Pillar 1 than has historically been the case. In order to prevent strong political resistance, Michel Barnier, the French minister of agriculture has been quite explicit in stating that: “What is at stake is the existence of a CAP. We have no choice: our agricultural policy, in order to be preserved for the future, must be justifiable – I would even say four times justifiable: economically justifiable, ecologically justifiable, socially justifiable, territorially justifiable.”

A less explicit issue, though also important, is the balance between Pillar 1 and Pillar 2 in the whole approach. On this issue, the French position has remained much the same over recent years. In practice, this means that limited effort has been made towards increasing the budget for Pillar 2, because in the context of heavy public debt, France is reluctant to increase national co-financing for the CAP.

More fundamentally, the French vision of agriculture is still permeated with the need to sustain production, which fits more with the Pillar 1 philosophy (even though decoupling should have broken the link between payments and production). Thus, the new Pillar 2 schemes implemented following the conclusion of the CAP Health Check can be said to resemble Pillar 1 schemes in the sense that they provide economic support for territorially based agricultural sectors and farms through the LFA measure and the agri-environment grassland premium scheme (PHAE). The latter scheme is expected to 75% EU funded (rather than the 50% typical of Pillar 2 measures) as it is considered to respond to the “new challenge” of biodiversity.

2.1.1 Redistribution of CAP Funds Following the Health Check

Some farming systems, including more extensive and environmental-friendly ones, have historically been under-supported through the CAP

In total, nearly 14% of existing Pillar 1 payments (and 18% of direct payments) will be redirected, through three of the main tools arising from the CAP Health Check in November 2008:

  • modulation, which allows France to generate € 945 M for Pillar 2 in the coming four years (2010-2013). It will mainly be directed to the Agri-Environmental Grassland Premium (PHAE) (€ M 584) and targeted agri-environmental measures.
  • a more innovative use of art. 68 for the targeted use of coupled payments, worth around € 1,500 M as follows: sheep-goat sector (€ M 540 over 4 years), mountain milk (€ M 180); risk management (€ M 400), protein crops (€ M 160) and, recently introduced in France, a measure for the maintenance of organic farming (€ M 200). There are also minor schemes for suckler veal calves in quality schemes and durum wheat in traditional areas;
  • the use of art. 63 generates the largest budget (around € M 3,000), to be used for new fully decoupled single farm payments,: much of this is for the “productive grassland premium” (€ M 2,800) and also for potatoes and forage crops (each € M 120).

Overall, grass-based livestock production is clearly the winner, as it benefits directly (through PHAE, productive grassland premium) or indirectly (LFA, sheep-goat and dairy mountain milk) from the three budgetary channels. In the view of author, this reform, at least partially, addresses what had been a huge inequity for years; namely that some farming systems, including more extensive and environmental-friendly ones, have historically been under-supported through the CAP relative to crop farmers.

2.2 The Fundamental Factors Influencing France’s Overall Position

France is the main [EU] producer of arable crops and beef which have historically received the greatest share of direct payments

In order to fully understand and analyse this shift it is important to consider the context in which it took place. France is the largest agricultural producer in Europe and a leading exporter of many commodities. As such, it has weighed in more significantly than some other countries in decisions regarding CAP reform. Its share of the overall CAP budget – around 21% – can be explained by the fact that France is the main producer of arable crops and beef which have historically received the greatest share of direct payments. In addition, as the second largest dairy producer in the EU, France has also historically been in receipt of large amounts of funds through market intervention measures.

It is sometimes said that the French position on the CAP is determined by its position as a net beneficiary of European subsidies (i.e. the French contribution is less than the amount it receives in return). Whilst this is no longer the case, France remains a relatively low net contributor to the EU budget effort, due in part to its large allocation through the CAP. As a result French officials tend to be quite defensive of CAP expenditure, pointing out that (a) the CAP is the only policy entirely delegated to the EU level and (b) at around 1% of all public expenditure in Europe, CAP expenditure is comparable, for example, with the USA.

In addition to defending the CAP budget, France is strongly supportive of maintaining production at levels to meet demand in the EU market; a philosophy referred to as “productivisme” which has many implications for the French vision of agriculture and the CAP. Much importance is thus given to the Pillar 1 with a deeply rooted link between production and all rural territories, which explains the French commitment for maintaining coupled payments for those sectors which “manage” the landscape and contribute to the rural economy through the food chain.

A fundamental aspect of the view the French position, when defending the economic contribution of the agricultural sector, is a focus on production rather than the costs of production. The French accompanying document to the CAP Heath Check states that “depending on market prices, payments represent for those farms which benefit from them, between 80% and 150% of farm income, even more when prices are particularly low.” (id.) Thus for some farmers, CAP support may exceed the market value of the commodities they produce. In such cases an economically rationale strategy could be to quit production, at least temporally. However, this has never been seriously considered by major French agricultural stakeholders, due to the difficulty of “getting back” into production when prices eventually go up, something which might not be possible without the retention of a strong Pillar 1.

The importance of agriculture to the wider agri-food sector also needs to be considered. In 2007 the agri-food sector in France had a positive commercial balance €9 billion. Thus, it is often argued that downstream food industries benefit from the CAP due to the low purchase price of commodities that occurs when production efforts are maintained. Due to the wide geographical spread of the food industry throughout France and the variation from mass production to quality niches, the argument for the food economy (rather than the farm economy) to underpin territorial development makes more sense in the French context, than perhaps in other Member States where the agro-food sector is a less significant source of employment and economic activity.

The structure of French farms is probably one of the most difficult challenges to face any French Minister of Agriculture

The variation and instability of market prices (e.g. current crop prices which are below the cost of production) is also considered important and is the reason why France insisted on the inclusion of provisions for risk management tools in the health check agreement.

Furthermore, the structure of French farms is probably one of the most difficult challenges to face any French Minister of Agriculture due to a divergence between small family farms and large commercial enterprises. A huge restructuring (i.e. loss) of familial holdings in many regions would have a political cost that no politician would want to face. Even if farmers are numerically few (4% in total employment in 2002), they still “hold” the territory and are politically and symbolically quite influential.

2.3 New Political Forces in the French Agricultural World

2.3.1 The Case for Grass

The recent reallocation of 14% of CAP expenditure over the next 4 years, following the Health Check, although not enormous in absolute terms, can nevertheless be considered as initiating a fundamental shift in the French policy following years of resistance — since 1992 in fact — when historical payments had been defended all the way.

Notably pressure for change has come not just from outside France (i.e. at European level) but also from within France. One of the most powerful effects of the CAP reforms of 1992 and 1999 was to make visible the payments to farms and, thus, to enable their legitimacy to be questioned. The CAP reform of 2003 was much more than a simple “review” and the principle of full decoupling — though not accepted by many French stakeholders — has undermined the reasons for payments to farmers. The implementation of the Single Farm Payment (SFP) has revealed fractures within the agricultural world, notably between the crop farmers on the one hand and the grass-based livestock farmers on the other.

In the past the fate of crop and livestock farms was rather similar in terms of income. However, in recent years crop farmers have take a greater share of the SFP, whilst also benefiting from high prices in the 2007-2008 period. More problematic has been the fact that such high prices, whilst benefiting the income of cereal farmers, entails greater feed costs to most livestock farmers, including grass-based ones. Between 2005 and 2007, income/ha nearly doubled for crop farms, from 250 to 500 €/ha while it dropped by one third for beef farms, from 300 to less to 200 €/ha , a situation which highlighted the need for change in the French system. In recent years the situation has become even less acceptable for many stakeholders for a number of underlying reasons:

  • Generally speaking, livestock farms are more likely to be “family” run compared to crop farms, (more “commercially”) a rather positive attribute for most stakeholders in France.
  • The livestock sector is often associated with deeply rooted values linked to high quality food products (e.g. AOC - Appellation d'Origine Contrôlée - cheeses) and landscape in many regions popular with tourists. Such “multifunctionality” is commonly used to provide a strong justification for the retention of CAP support.
  • Grass-based farms have been seen as the “losers” in previous CAP reforms (e.g. in terms of SFP allocations) while their environmental contribution is considered important. This has been obvious at regional level (comparing grass and crop regions for example). In regions like Bretagne, the discrepancy in receipts under the SFP schemes has been highlighted by grass-based farmers (See, for example, the debate which took place at the Sénat on the Water Law of 2006).
  • In addition, Michel Barnier comes from Savoie, an emblematic area of extensive dairy farms with many AOC cheeses, which might have played a role in his vision of what was at stake.

All these factors have converged towards a greater support to grass-based livestock farms. Although the LFA and PHAE measures in the 2000-2006 RDP had already begun to address this discrepancy, the CAP health check reform has taken a step further in this direction and addressed remaining discrepancies (e.g. in the sheep and goats sector).

2.3.2 Environment: Still a Secondary Issue

[Accompanying measures for sustainable development are] the least well-funded of the Health Check schemes and appears to lack ambition, mostly catching up what should had have been introduced in the past

In this overall context, environmental issues have been raised, but many ambiguities should be noted. Indeed, the French implementation of the changes introduced by the CAP Health Check specifies an axis for “Accompanying a way of sustainable development”, which strengthens organic farming, new challenges (including climate change and biodiversity) and protein crops. However, it is the least well-funded of the Health Check schemes and appears to lack ambition, mostly catching up what should had have been introduced in the past (e.g. maintenance of organic farming) or what could not be obtained though cross-compliance (e.g. production of protein crops).

The PHAE is more difficult to analyse as it is the main agri-environment measure and thus increasing expenditure on it could be interpreted as making a major contribution for the environment. However, the added-value is questionable on two counts (a) from a budgetary point of view, the CAP Health Check has merely compensated for a 15% cut in France’s EAFRD allocation compared to the 2000-2006 programming period and (b) more fundamentally, the specifications are still rather undemanding, partly because the measure has been recycled from earlier versions of the grassland premium. France still has not engaged any policy to specifically target HNV farming, and the PHAE seems to provide too weak a cornerstone for preserving biodiversity at a large scale.

It should be noted that the so called “productive grass area payment”, the most significant measure of the French implementation of the Health Check, with 700 M€, might create some confusion at first sight. Firstly, it should not be mixed up with PHAE, as it encompasses all types of grassland (including the intensively managed temporary pastures). Secondly, whilst the eligibility criteria shall indeed take into account the proportion of grassland (with specific limits on livestock density) present over a reference period (this still needs to be defined), it will result in an additional fully decoupled grass area payment. However, in principle there is nothing to prevent a farmer from ploughing up his pasture after the grass area payment has been set. In most cases, the grassland area will probably be sustained, but estimates suggest that as much as 20% of the area could be ploughed, possibly in areas grassland should be maintained as a priority. As long as the strengthening of cross-compliance on permanent grassland is not envisaged, the grass orientation of this reform might not be as strong as it might appear at first.

In order to fully understand the French position on the environment, it should be put in light of the “Grenelle de l’environnement”, a presidential initiative launched shortly after Nicolas Sarkozy’s election in May 2007 , which set out a broad environmental programme for the coming years. For agriculture, the “Grenelle” identified four measures in 2008:

  1. reduction in the use of pesticides by 50% by 2018 (if possible),
  2. development of organic farming (to make up 20% of UAA by 2020),
  3. environmental certification of farms (with the introduction of the confusing High Environmental Value farm label, regardless of the EU High Nature Value requirements),
  4. (increased energy efficiency of farms, with 100,000 diagnoses to be performed in 5 years.

In addition links between biodiversity and agriculture are proposed through the implementation of a “green and blue net” (i.e. ecological corridors) across the territory.

From the national perspective, the CAP Health Check did not go beyond any measures already set out in the Grenelle. The clearest link between the Health Check and the Grenelle relates to the organic farming budget. Thus the “Objectif Terres 2020” referred to in the CAP Health Check roadmap is mainly a recycling of the Grenelle plus the addition of a set of good practices, but with no specific means of delivering its goals. Notably, hardly any reference is made to the need to strengthen Axis 2 of Pillar 2 and the reference to cross-compliance is rather vague. On this basis, the environmental case still is quite fuzzy.

3 Conclusion: A Smoke Screen Reform or a Genuine Basis for the Future?

It is as if most of the French government’s energy went into the CAP Health Check process and the French Ministry of Agriculture could not see any further.

In evaluating the progress made in France in terms of needed CAP reforms it needs to be taken into account that the conservative forces were so strong that it was probably difficult to go any further. The question is whether a first step has been taken towards a more targeted and efficient CAP (i.e. supporting public amenities, which could be of several kinds – economic, environmental and social).

It remains unclear though what environmental impacts the Health Check redistribution will have, given the few extra demands placed on how and why the money is spent. A certain scepticism can be shared when considering how vague the challenges to be tackled are, from climate change to biodiversity. Nonetheless, an optimistic interpretation can still be put forward, namely that the reform is a first step, reshaping the most glaring injustices before proposing a more in-depth reform that seriously takes into account the environmental challenges.

Doubts remains about the time frame for achieving such a reform though. Most of the views expressed so far are quite vague and general, with no official documents setting out a coherent programme for a reformed CAP post-2013. It is as if most of the French government’s energy went into the CAP Health Check process and the French Ministry of Agriculture could not see any further. Michel Barnier will leave his post as minister of agriculture shortly and his successor is not yet known. It is clear that his successor will have the huge task to continue the reform convincingly, which will require a way to be found to effectively implement the ideas set out in “Objectif Terres 2020”, the paper that seeks to provide a new French agricultural model.

Sources

CSO: Conseil Superieur d’Orientation et de Coordination de l’Economie agricole et agroalimentaire.

Bilan de santé de la PAC : mise en oeuvre pour une PAC préventive, juste et durable.

Comptes de l'Agriculture, décembre 2008, d'après SCEES, RICA et comptes nationaux.

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PUBLICATION DATE

05 Jun 2009

AUTHOR

Xavier Poux

FURTHER INFORMATION

Xavier Poux is based at AScA in Paris.


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