CAP Reform Profile - Spain

1 The Context: Reasons Behind the Spanish Government’s Position

2 The Future Challenges for Agriculture

2.1 The Food Challenge

2.2 Climate Change and the Environmental Challenge

3 Basic Principles for a Future European Agriculture Policy

4 The Spanish Government Position on the CAP Health Check

Sources

From the perspective of the Spanish government, the traditional CAP objective of food security remains in place, although there is an increasing acknowledgement of the need to address social and environmental values too. In the future, agricultural policy will need to respond to public demands linked to the maintenance of landscapes, the conservation of natural resources and biodiversity, food safety and sustainability.

The current system of agricultural support has been justified on the basis of these needs, especially the maintenance of a strong Pillar 1 (i.e. direct payments). However, more suitable strategies are needed to achieve greater social legitimacy, as well as international recognition, for the system of support.

Rural development policy (Pillar 2) alone is not considered sufficient to allow the agricultural sector to meet the objectives outlined above, mainly due to the nature of Pillar 2 schemes, although the level of funding is also a factor. As a result Pillar 1 instruments are needed insofar as they ensure that support remains within the agricultural sector. However, greater flexibility, in the way in which these instruments are applied (e.g. Article 68), is seen as desirable given the negative effects that might arise in some regions as a result of further decoupling.

1 The Context: Reasons Behind the Spanish Government’s Position

The Spanish position on CAP reform is conditioned by two factors. Firstly, the relative importance in the national economy of both the agricultural sector as a whole and of distinct forms of production. Secondly, the high degree of regional autonomy in the administration of agricultural policy (i.e. the CAP), which can make reaching a common national position a great deal of effort.

The commercial power of the Spanish agricultural sector internationally has… been an important factor in the maintenance of such defensive positions (in favour of CAP support).

The gross added value of agriculture in 2006 was close to 24,000 million Euros, representing almost 2.6% of GDP, a relatively modest figure that masks strong regional disparities. The importance of agriculture to the economy is greater in the south and in the interior of the country. Fruit and vegetables represent around half the value of Spanish agricultural production, although the range of regional climatic characteristics ensures a great deal of diversity between systems of production. Vineyards, olive groves, cereals, industrial crops are of significant importance in some regions as are different forms of livestock production, such as beef or dairy, sheep and goat meat, or pork. The combination of this diversity of production between regions and administrative decentralisation has resulted in the maintenance of strong defensive positions (in favour of support) in many sectors of production.

The commercial power of the Spanish agricultural sector internationally has also been an important factor in the maintenance of such defensive positions. The balance of foreign agriculture trade has been positive since 1996. In 2007, the external trade balance of agriculture was 2,250 million Euros, rising to 3,237 million Euros if the food sector is also included. The main exports are olive oil, wine, citrus fruits and pigmeat stand out in terms of exports, whereas the main imports are soft wheat and tobacco.

The agricultural sector has experienced a large reduction in agricultural employment in recent years. In 1986, 14.2% of the total active population was employed in agriculture. Ten years later the share had fallen to 7.6%, with a further decline to 4.3% and a total of 967,000 employees in 2007. As a result of this downward trend, the maintenance of employment linked to agricultural production has been a key objective for the Spanish administration and sectoral representatives. At the same time, transformations have taken place in the types of employment found in rural areas with social consequences. A range of factors have shaped the development of social and labour relations in rural areas including: the increase of pluriactivity and part-time farming, the outsourcing of activities, the decrease of family labour coupled with the rise in waged farm labour, and the growing importance of a migrant workforce. Such factors mean that a reformed agricultural policy is under pressure to take account of broader considerations in rural areas and not just those factors affecting agricultural production.

2 The Future Challenges for Agriculture

The Spanish Government’s view is that future European agricultural policy should respond to two key challenges:

  • The food challenge; and
  • Climate change and the environmental challenge.

The European model of agriculture should support productive, modern and technically advanced agriculture that protects the environment and landscapes and integrates farmers into the social and economic fabric of rural areas.

2.1 The Food Challenge

The traditional Spanish position in favour of productive agriculture has been reinforced by the recent crisis of elevated food prices. From the Spanish government’s point of view, this situation means that a number of issues, not even considered by the Health Check, need to be taken into account when considering reform of the CAP in the longer term.

The first aspect of the Spanish position is that it has become evident that the market alone is not sufficient to resolve situations such as the current crisis and as a result some policies to support production will be required. The second key issue is the strategic role which agriculture plays in food security, for which the maintenance of a competitive and productive agriculture sector is seen as a necessity. Responsibility for food security at a global level should be one of Europe’s priorities with steps being taken to ensure that levels of production are increased or at least maintained. The European model of agriculture should support productive, modern and technically advanced agriculture that protects the environment and landscapes and integrates farmers into the social and economic fabric of rural areas.

A final issue with consequences for both the agricultural sector and European agriculture policy is the recently observed increase in volatility and instability of world food prices, for which the adoption of risk management strategies will be required.

2.2 Climate Change and the Environmental Challenge

The development of a productive, efficient and competitive agriculture must be compatible with environmental protection. Increased production must be achieved sustainably in a way which preserves natural resources and biodiversity. Cross compliance is seen as an instrument, fundamental not only to enhancing sustainable agriculture, but also to endowing agricultural support with legitimacy. However, a widely held view is that its efficiency as an instrument has been limited by its complexity and the difficulties of checking compliance with standards. Thus a simplification of cross compliance is needed, in order to avoid duplication of requirements between the Single Payment and Rural Development schemes.

In Spain, it is important to note that it is not possible to discuss productive and sustainable agriculture without reference to irrigation.

In Spain, it is important to note that it is not possible to discuss productive and sustainable agriculture without reference to irrigation. Difficult climatic conditions mean that irrigation is a fundamental driving force of productive agriculture and thus the completion of the National Irrigation Plan has been a high priority for national agricultural policy. The main objective is not so much to increase the area of irrigated land but rather to accelerate the process of modernisation linked to water efficiency savings, cost reductions and reduced environmental impacts. On the other hand, agricultural water use should not take precedence over the supply of water for human consumption and the sustainable use of resources.

Climate change will also condition agricultural development through the adoption of measures intended to reduce pollution and levels of greenhouse gas emissions associated with agriculture, and, because of the need for agriculture to adapt to future changes too.

The Spanish government considers biofuel production to be an opportunity for the agricultural sector and rural development more broadly and remains committed to the targets set at EU and national level for transport fuels originating from biofuels by 2010 (5.75% and 5.83% respectively) and beyond (10% by 2020). With this objective in mind, the government has encouraged the fulfilment of (biofuels) contracts between the energy industry and the agricultural sector. At the same time, the Spanish government is also clear that the production of biofuels, as a means of reducing dependence on fossil fuels and greenhouse gas emissions, must not have significant negative consequences on capacity for food production. The long term objective is to focus efforts on the development of second generation fuels. However, in the short and medium term it will be necessary to find an effective balance between (potentially conflicting) environment and production objectives.

For the Spanish government the starting point for reform of agricultural policy is that the CAP is necessary and that the respective level of expenditure which this implies is therefore justified.

In Spain the search for equilibrium and resolution of conflict between environmental and production objectives has been focused on research and development and technological progress. However, in general the government has also been keen to identify positions of consensus between stakeholders with primarily environmental and conservationist concerns, and those whose concerns are mainly agricultural or production related. The administration of environmental and agricultural matters in one Ministry is intended to enable an integrated approach to resolving such issues.

3 Basic Principles for a Future European Agriculture Policy

The Spanish government subscribes to the objectives on the future of the CAP presented by the French Presidency at the informal meeting of the Agricultural Council which took place in September 2008:

  • To guarantee the food security of the European Union.
  • To contribute to a balanced global supply of food.
  • To maintain the territorial cohesion of rural areas.
  • To maintain and conserve the environment, and to participate in the fight against climate change through an agriculture sector which reconciles economically viability with environmentally sustainability.

Some basic principles are needed in order to obtain these objectives and to establish the basis for a future common agricultural policy since the Health Check does not approach the challenges facing agriculture in any great depth.

... a strong Pillar 1 is required as Pillar 2 alone is not regarded as sufficient to protect the diversity of European agriculture.

For the Spanish government the starting point for reform of agricultural policy is that the CAP is necessary and that the respective level of expenditure which this implies is therefore justified. It is vital that (future CAP) policy supports an agricultural sector which is productive, sustainable and competitive. For this reason, a strong Pillar 1 is required as Pillar 2 alone is not regarded as sufficient to protect the diversity of European agriculture. The attainment of these objectives justifies the granting of payments to the agriculture sector. However, greater flexibility in the use of Pillar 1 instruments is required in order to address the range of situations encountered throughout the European agricultural sector. It is possible that changes in the way that CAP instruments are applied will be needed; however, the maintenance of classic market management instruments is thought necessary in order to help prevent crisis situations in agricultural markets, as well as the sanitary and climatic risks associated with them.

Another matter, which has not been addressed as yet, is the legitimisation of CAP payments in terms of public opinion and the WTO. In order to achieve this, it will be necessary to establish a new strategy of action, which reinforces the role of the cross compliance, by simplifying it and (thus) making it more effective.

... the reinforcement of Pillar 2 should not come at the expense of removing financial resources from Pillar 1.

The importance attached to the maintenance of a strong Pillar 1 does not imply that Rural Development will not acquire a more important role in a future CAP. However, the reinforcement of Pillar 2 should not come at the expense of removing financial resources from Pillar 1. The instruments of Rural Development Policy are essential for achieving the levels of investment needed to ensure a productive agricultural sector. The importance of Rural Development Policy to the Spanish government is revealed by the recent approval of the ‘Law for the Sustainable Development of the Rural Environment’. The law is intended to improve the level of development for all inhabitants of rural areas, to maintain population levels, and to improve living conditions and yields.

A future CAP must also play a role in maintaining international solidarity. Irrespective of international commitments acquired through the Doha Round of WTO negotiations, the European Union should continue its programmes of development support. Such support can play a role in enabling less developed countries to put in place programmes to increase the productive capacity of their agricultural sectors, whilst at the same time the EU should remain the key export market for products from developing countries.

4 The Spanish Government Position on the CAP Health Check

Although the Health Check package includes some positive elements, it should allow greater flexibility to address needs specific to Spanish agriculture, and to respond as the current challenges faced by European agriculture.

With respect to the market management measures and taking into account the current agricultural market balance, Spain supports the abolition of compulsory set-aside and a cautious advance towards the full decoupling of direct payments. Full decoupling should not result in problems in the arable, olive oil and sheep meat / goat meat sectors. However, it could be problematic for the nut sector and for the production of protein and legume crops, fodder crops, durum wheat and rice. For these products, a transition period to total decoupling is desirable, probably by 2013. In the beef sector, Spain agrees with the Commission’s proposal to allow Member States to retain the suckler cow premium.

Lower rates of modulation would allow funds to remain within Pillar 1 of the CAP...

The maintenance of the current intervention measures for barley, wheat, rice and pig meat is also supported, regardless of whether or not they are currently in use. Such measures are regarded as providing an important safeguard for maintaining market stability.

Spain rejects the Commission’s proposals for increasing compulsory modulation, which are considered to be excessive. The Spanish government is in favour of reducing the proposed rates of modulation substantially, although any funds raised should remain linked to the agriculture sector. Lower rates of modulation would allow funds to remain within Pillar 1 of the CAP and greater use of a more flexible Article 68/69 to redistribute funds where deemed necessary. This would allow the government to undertake precise actions to support the maintenance of certain farming activities or types of production (e.g. in economically or environmentally vulnerable regions where farming activities may be at risk of abandonment).

Finally, with respect to risk management, the Spanish government wishes to maintain its own national agricultural insurance system. The adverse climatic conditions faced by Spanish agriculture have resulted in the development of an advanced insurance system, which is backed by central and regional public administrations and all stakeholders. Its maintenance is crucial to agriculture in Spain, as is the recognition of its compatibility with WTO rules.

Sources

Unpublished working documents and informal interviews with contacts within the Spanish administration in October/November 2008.

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PUBLICATION DATE

05 Dec 2008

AUTHOR

Isabel Bardají Azcárate

FURTHER INFORMATION

Isabel Bardají Azcárate is based at the Department of Agricultural Economics and Social Sciences at the Universidad Politécnica de Madrid (UPM).


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