European Parliament report on Sustainable Competitiveness and Innovation

This report, How to improve the sustainable competitiveness and innovation of the EU agricultural sector, was commissioned by the European Parliament Research Department, conducted by a consortium led by the Countryside and Community Research Institute (CCRI) and published in May 2012.

Its purposes were threefold. First, to explain the extent to which the instruments of the current CAP contribute towards improving the sustainable competitiveness of the CAP and stimulate innovation. Second, to evaluate the extent to which the proposed reforms of the CAP currently under debate can further support and improve achievement of these goals. Third, to make recommendations for further changes.

Not surprisingly the conclusion on the first part was that the current policy does not realize its potential, particularly the untargeted and passive direct payments and market support regimes. These are not well-designed and targeted instruments to help improve sustainability, competitiveness or innovation. Most instruments with potential to do this are found in the Rural Development Regulation. This is why it is particularly disappointing that the former strategic direction of CAP reform in place since the mid-1990s has apparently ground to a halt. The strategy was gradually to switch supports away from production based subsidy towards rural development. The Pillar 2 toolkit contains the more active instruments for improving productivity and competitiveness whilst dealing directly with agriculture’s contribution to the rural environment and society. But the Commission proposes to freeze the resource allocation between the Pillars for the EU as a whole.

The study suggests that the proposals for rural development do offer potential to further improve sustainable competitiveness but that there are insufficient safeguards to overcome the already evident conservatism in programmes’ design and delivery. It suggests that there should be a specified minimum share of CAP expenditure devoted to Rural Development, mentioning the ambitious target of 40%.

The recommendations stress the need for monitoring and review. Managing authorities of the CAP should be required to devise specific eligibility, selection and targeting criteria for all investment aids, in particular which take account of local conditions and are clearly designed to improve the additionality of funding, and stimulate change that is demonstrably beneficial in economic, environmental and social terms.

In Pillar 1 the Farm Advisory Provisions should be strengthened sufficiently so that at least 25% of registered farmers could benefit from support and advice. The greening measures should be accompanied by clear strategies on which aspects of environmental standards will be improved. The report suggests that whilst direct payments are not a key instrument to promote sustainable competitiveness, their distribution should explicitly help cohesion objectives and pay less attention to backward-looking compensation considerations.

In Pillar 2 the study suggests the Commission should add a provision which specifically incentivises risk-taking in innovative actions within RDPs, and take steps to prevent the ‘performance reserve’ mechanism from disincentivising innovation. The study says that there is scope to reduce the rigidities of CAP financial regulations for the EAFRD and remove the inconsistencies with other EU funds. There are also recommendations: to strengthen the work of the networks for Rural Development and its evaluation; to consider a minimum threshold expenditure share for knowledge transfer, information and advice measures within RDPs; and to stipulate a maximum share for risk management, given that such a large share of CAP is already devoted to basic payments.

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09 Aug 2012