CAP Reform Profile - Denmark

1. A Summary of Denmark’s Position on the Future Reform of the CAP

2. Denmark’s Position on the CAP Health Check

3. Denmark’s Position on the Future Development of the EU Budget and the CAP

Sources

1. A Summary of Denmark’s Position on the Future Reform of the CAP

In short, it is the policy of the Danish Government that agricultural support under Pillar 1 should be abolished by 2025. This is supported by the broad majority of Members of Parliament, by agricultural associations and by the Danish Society for Nature Conservation.

...it is the policy of the Danish Government that agricultural support under Pillar 1 should be abolished by 2025.

The Government’s position is that the CAP should be retained in order to prevent market distortion and to avoid the re-nationalisation of support that could follow the abolition of a system of common support. The CAP should also be used to support research and innovation in order to sustain a competitive agricultural sector.

To the extent that agricultural support is maintained, it must be given to provide public goods such as environmentally friendly farming, the maintenance of landscapes, high animal welfare standards and food security.

2. Denmark’s Position on the CAP Health Check

The Danish government regards the Commission’s proposal as a positive step towards the liberalisation and increased market orientation of agricultural policy. This is in line with the general policy of the Danish government with respect to liberalisation and, in the longer term, the abolition of most forms of traditional agricultural support. It is stressed that a common agricultural policy will still be needed in order to avoid renationalisation and the distortion of competition. The Danish government wants to secure a long-term reduction in Pillar 1 support and finds that the current market situation provides a unique opportunity to initiate this.

The Danish government emphasises that the future CAP should prepare European agriculture for global challenges such as increased competition on the world market and those related to climate change, biodiversity, the environment, the protection of water resources and animal welfare. Over the course of a transition period, the transfer of financial resources from direct support to measures that can help the agricultural sector to meet these challenges is acceptable to Denmark. This includes a more broad application of those instruments that encourage innovation.

Specific points supported by the Danish government are:

  • The full decoupling of all direct support by 2013. However, if the suckler cow premium is not decoupled, it is stated that the special beef premium should also not be decoupled.
  • An increase in the rate of compulsory modulation. However, the government wants a lower degree of national co-financing, in the 25-33% range, and takes the position that the resources raised from modulation should stay within the individual Member State.
  • The permanent abolition of set-aside, as this is not considered to be a part of a market orientated agricultural policy.
  • The phasing out of export subsidies and abolition by 2013. The government also supports the further phasing out of market management instruments such as intervention, other price support and quotas. The abolition of the energy crop payment is also supported.
  • The phasing out of milk quotas and abolition in 2015. The government wants a larger increase in quotas than those proposed by the Commission.
  • The simplification of cross compliance. The government believes that there is a need to reduce the number of requirements in order to reduce the administrative burden placed on farmers. It is not clear if the measures in relation to landscape features and buffer zones proposed by the Commission are supported or not.
  • Simplification of the single farm payment. There is a need to introduce a higher minimum payment level, so as to avoid making payments where the administrative cost is higher than the actual payment received by the farmer.
  • A more flexible approach to Article 69, in order to provide more options for using up to 10% of direct payments for purposes such as improving quality, the environment and nature. This should not result in a re-coupling of support, although the government accepts that in vulnerable regions there might be a need for coupled payments to reduce the negative impact that might otherwise occur as a result of decoupling and the abolition of milk quotas. It is not clear whether the negative impact alluded to by the Danish government refers to the impact on the environment or on farm income. Furthermore, the government is not in favour of allowing Article 69 to be used to promote agricultural products.
  • The maintenance of Article 44 of Regulation 1234/2007 (the Single CMO Regulation), which provides the Commission with the option to introduce exceptional market instruments in case of animal disease. This is seen to provide a better ad-hoc solution to crisis situations than using Article 68 in this way. It is the government’s position that crisis management should not be used as an excuse to re-introduce old market instruments. The proposal to keep intervention in cereals to a minimum is supported. Furthermore, the Danish government wants to ensure that EU financed crisis management instruments are in line with the WTO Green Box rules.
  • Options need to be provided for the Member States to adjust payments towards a more uniform level. The model of support in the new Member States should be continued until 2013.

3. Denmark’s Position on the Future Development of the EU Budget and the CAP

The view of the Danish Government is that the use of funds from the EU budget in the future must create added value for the entire Union and its citizens. This means that added value should exceed the value that would be provided by alternative options, including the use of funds from national/regional budgets or by using a regulatory approach.

The current special rebates for some Member States are perceived as unfair. The Danish position is that Member states should finance common policies on an equal basis in the future. The agricultural policy is seen as the main reason for the maintenance of the rebate system, and that is seen to be the main hindrance to the development of a fair financing system.

The arguments for phasing out direct payments are linked to the effect it has on the economy, on consumers and on farmers.

It is the view of the government that the direct subsidies provided by Pillar 1 should be completely phased out by 2025, in parallel with a limited transfer of funds from Pillar 1 to Pillar 2. The phasing out of direct payments should not result in the renationalisation of the CAP and the CAP should maintain its role in defining common rules and requirements for EU farmers. The Danish government states that: ‘Establishing a simple gradually decreasing ceiling for CAP spending in parallel with a proportional reduction in levels of payments is considered the simplest model for the effective phasing out of direct subsidies’ (page 3, the Danish Government, 2008). The arguments for phasing out direct payments are linked to the effect it has on the economy, on consumers and on farmers. For the farmers, agricultural subsidies are capitalised into higher land prices, which in turn reduces the effect of direct payments. Concerning the economy, the subsidised retention of labour in a specific sector is not seen as an economically efficient use of resources. Structural reforms and liberalisation are needed to secure a more efficient agricultural sector, leading to lower prices and greater choice for consumers.

It is suggested that part of the rural development budget for a transitional period should be oriented to supporting the agriculture restructuring processes that are expected to follow the phasing out of direct support. Future rural development funds should be targeted at cross border environmental problems and the rate of Member State co-financing should be reduced.

Current rural development funds targeted at poorer areas, should, in the future, become part of EU Cohesion Policy, and a much higher percentage of the structural funds should be spent in relatively poor countries, linked to the overall wealth of the country. At the same time, the management of the structural funds should be reformed, streamlined and simplified to include a much better coordination of the different types of support targeted at specific land areas, including applying new principles for the allocation of funds.

Sources

Danish Government, 2008: The Danish Government’s contribution to the 2008/2009 Budget Review, 14.04.08.

Ministeriet for Fødevarer, Landbrug og Fiskeri, 2008: Grundnotat til Folketingets Europaudvalg om sundhedstjekket, 23.06.08.

Ministry of Food, Agriculture and Fisheries, 2008: The Future of Agriculture, 23.4.08.

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PUBLICATION DATE

31 Oct 2008

AUTHOR

Lone Kristensen and Erling Andersen, University of Copenhagen

FURTHER INFORMATION

This Profile was written by Lone Kristensen and Erling Andersen from the Danish Centre for Forest, Landscape and Planning at the University of Copenhagen.


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