Commission 'Agricultural Policy Perspectives' Published

The prospect of CAP reform in 2013 has led to three main policy questions:

  1. What market measures would best support the agricultural sector and rural communities during times of economic volatility?
  2. How can agricultural support be more equitably distributed between farmers and Member States?
  3. What is the most effective means of addressing the environmental challenges facing Europe?

DG Agriculture has published three ‘Agricultural Policy Perspectives’ on its website to discuss direct payments, market measures and rural development providing a useful insight into DG Agriculture’s current thinking on these issues.

Direct payments

The Policy Brief on ‘The future of CAP direct payments’ (Brief No2) recognises the ineffectiveness of the current ‘targeting’ and ‘distribution’ of direct payments. The Commission argues against the introduction of a ‘flat-rate’ system for future payments, stating that it would overlook the fundamental differences between small and large farms resulting in an unequal balance of payments. The report stresses that both environmental and financial factors should be incorporated in the future design of payments, but it would appear that no clear alternatives have been worked up as yet, keeping the debate open. Any redesign of direct payments, however, would lead to significant redistribution of support between farmers and the paper highlights the need for a transition period in which farmers would have time to adjust. The nature and duration of such a transition will be a critical issue in the forthcoming CAP negotiations.

Market measures

Policy Brief 3 explores ‘The future of CAP market measures’ (Brief No 3) and explores the possibilities of introducing an ‘income stabilisation tool’ in Europe, based on the Canadian model. This would compensate farmers for their losses relative to their individual average annual income (within regulations laid down by the WTO green box that farmers must be suffering from a fall of more than 30 per cent and less than 70 per cent in their income). However, the Brief stresses that for a future market measure to be effective it must be well suited to other EU support mechanisms already in place, which this income stabilisation tool is not. The diverse agricultural conditions throughout the EU-27 act as the main deterrent to such a broad-brush policy mechanism. Furthermore, early estimates by DG Agriculture show that such a scheme could require an investment of as much as up to €6 billion per year.

It is interesting to note that the Commission is looking to models outside of the traditional market mechanisms used in the EU. However, the fact that the options considered do not seem to fit well with other elements of the CAP, suggests that their final decision with regards to market mechanisms might not be that revolutionary after all.

Rural development

The Policy Brief on ‘the future of Rural Development’ (Brief No 4) states that the current objectives of rural development policy need to be amended to refocus the policy outcomes on achieving a competitive and sustainable future for rural areas. In keeping with the Europe 2020 Agenda, the paper considers how rural development policy can be repositioned to achieve the priorities of ‘smart growth, inclusive growth, and sustainable growth’ (COM(2010) 2020) post 2013. The aspiration for rural development policy is for ‘more flexibility and better targeting the policy response to the challenges while at the same time reducing the administrative burden for administrations and beneficiaries’. The paper also highlights the need for rural development policy to be adequately funded. It does not foresee the need for the modulation mechanism in the future if the CAP budget is appropriately allocated between the two Pillars. However, it also intimates that there may be a need to revisit the allocation criteria for distributing rural development funding between Member States, an issue that has been a taboo in previous reforms.

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PUBLICATION DATE

04 Feb 2011

AUTHOR

IEEP