Saturday, 13 July 2013

Historic reform of CAP?

Just how historic is the common agricultural policy “reform deal” that wound up the Irish EU presidency of the EU? The full text will not be available until the autumn, and it has still not  received the final approval of the European Parliament and the member-states, but that has not stopped the minister for agriculture, Simon Coveney, from claiming that the deal “represents a hugely significant development in the history of the CAP.”
The policy reform will cover the years 20142020, gobbling up nearly 40 per cent of the EU’s €960 billion multi-year
budget during that time. Its centrepiece is a requirement that 30 per cent of the roughly €278 billion in direct subsidy payments to farmers—the programme’s biggest share—be conditional on their satisfying new environmental rules. But environmental groups complained that agribusiness interests succeeded during negotiations in watering down these standards to a point where they are meaningless.
Historically, CAP supports have been tied to volume of production, and therefore have benefited big farmers most. Significantly, the deal does not include the cap of €300,000 on payments to large landowners sought by the EU commissioner for agriculture and rural development, Dacian Cioloş. Also, proposals that would prevent certain landowners, such as airports, golf courses, and campsites, from claiming EU farm subsidies remain provisional and may never become policy.
At present the CAP is based on a “two-pillar” structure. Pillar 1 is mostly composed of direct payments to farmers and landowners in the form of the single payment scheme (SPS) and accounts for about four-fifths of total CAP spending.
Pillar 2, known as “rural development,” aims to promote economic, social and environmental development, with a rationale similar to that of the EU’s structural and cohesion funds—but with a specific emphasis on rural areasand accounts for a fifth of total spending.
Pillar 2, therefore, has more of an environmental focus, requiring each rural development scheme to ensure that natural resources and the landscape are safeguarded. In addition, a quarter of the funds must be spent on improving the countryside and the environment.
Promoting “rural employment” is another CAP objective, and through pillar 2, support can be given for the “diversification of the rural economy.” But it has always been far from clear whether the CAP is the best vehicle for bringing about rural economic development and the creation of employment.
An OECD report stated: “Pillar 1 reforms create changes in the mindset of farmers who adopt a strategy of alterations in land use aiming to reach the maximum level of revenue. This has negative consequences for rural employment.”
Equally, a number of studies have pointed out that the CAP has had a limited or outright negative effect on rural employment. The OECD analysis found that the 2003 reforms “have not increased jobs in the regions, at best they manage only to maintain the existing level,” while a report on farms in Eastern Germany in 2010 found that CAP support gave rise to “few desirable effects on job maintenance or job creation in agriculture.”
The effect of rural development aid was non- existent, while parallel CAP measures resulted in job losses; for every €1 million spent on supporting processing and marketing on East German farms, seven jobs were lost in the short term and a further five in the long term.
The study concluded that “the relevant decision makers should reconsider whether the CAP ... is a useful policy to promote job creation in agriculture.” Pillar 1 is provided directly through the EU budget, while pillar 2 is subject to joint financing from the EU and national governments. The CAP’s internal subsidies are complemented by external tariffs and quotas on imports from third countries.
 The CAP is irrational in how money is raised and how it is spent. There remains no clear link between the wealth of a country and how much it receives from the CAP. Latvia, for example, gets £115 per hectare from the EU’s direct subsidies, the least of all member-states, despite average farmers’ income being only 35 per cent of the EU average. Lithuania, whose farmers are the poorest in Europe in absolute terms, receives the third-smallest amount from the scheme.
In contrast, wealthier member-states, such as France and Ireland, continue to do well out of the CAP. Nevertheless the president of the IFA, John Bryan, has dismissed the spin that is being put on the reform deal, saying: The reality is over 75,000 farmers will have some level of cuts imposed on them. Over 50,000 farmers are facing severe cuts to their incomes, ranging from 15 to 35 per cent, when you take into account other compulsory deductions that farmers will face as part of the CAP Reform and the overall MFF agreement.”
Bryan also says the CAP deal fails totally to deal with low incomes in vulnerable sectors. Europe’s biggest agricultural producer, France, will continue to scoop the largest share of CAP funds, at about €8 billion a year, followed by Spain and Germany, with about €6 billion each. So it’s another case of “reform” EU-style. 

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