ACE2006 AGRICULTURAL ECONOMICS
CAP PROGRESS, DAIRY QUOTAS AND SUBSEQUENT REFORMS
1. Evolution of European Policy (inevitable
-
with
benefit of 20/20 hindsight?) See, also, DG Agri's Celebratory Site (CAP reaches 50 in 2012).
- Antecedents of the CAP:
- Common urge to protect and support the agricultural sector
against
"unjust"
world prices - the consequence of recent histories of food insecurity
(because
of war) and the predmominance of agriculturally dependent populations
(and associated sympathy amongst the rest of the population for
assisting
farmers).
- Differences between UK and Contintental (especially German)
support
policies
(deficiency payments versus import tariffs, plus the levels of each) -
stemming from the political weight of small farms in Bavaria,
especially,
and the differences in commonwealth ties to the "New World".
- The generation of the CAP as a bargain between Germany and France
(primarily),
with France accepting free trade with Germany for industrial goods in
return
for the opportunity to supply German agricultural and food needs at CAP
supported prices.
- The almost inevitable development of the original CAP from a
revenue
generating
device for the early Community to a fiscal drain, associated with
mounting
surpluses - you should understand and be able to explain why
(economically!).
- The atttraction of UK accession (as a net importer) at the time
when
the
Original 6 Common Market countries had begun to enter the surplus stage
- The nature of the debate surrounding UK entry - concentrating
on
uncertain
general economic benefits and the certain costs of the CAP to the UK
- The coincidence of dramatic change in world market conditions
with UK
entry,
and the consequences for the economic structure of the UK industry
- The inevitable complication of the policy as compromise was
sought
between
the expense of the policy (to the taxpayer, and limited EU budget) and
the political need to continue support to farmers (with inevitable
conflict
between countries where the farming vote was more politcally powerful -
both in number and in political position [reflecting political
landscape
and structure of the industry] (Germany, Ireland and France), and those
where it is less important (especially the UK) - leading to:
- Prudent support price increases (and weakening of intervention
prices -
how?)
- Maximum Guranteed Quantities (limits on exposure of EU budget)
- Co-responsibility levies (taxing farmers for over-production
against
MGQs)
- leading eventually to Dairy Quotas (1984) - why, and why not in
other
commodities?
- The build up of opposing pressures:
- budgetary costs and expanding EU budget requirements
- Increasing aggrevation of trading partners (especially the US)
(because??)
- culminating in the GATT Uruguay Round - putting agriculture at the
top
of the Multilateral Trade Negotiation (MTN) agenda for the first time
- Increasingly obvious failure of policy to either preserve farm
structures
or farm incomes
- Increasingly divergent demands of countryside (as opposed to
farming)
interests
in policy and market outcomes (environment, animal welfare, food safety
etc) - See later in this course.
- Finally, the seismic shock of the collapse of the USSR and the
unification
of Germany fundamentally altered German interests in farm policy - away
from prtection of Bavaria towards efficient and effective assistance to
the Eastern Lander.
- Generating the first real reform: the MacSharry reform -
shifting
the burden of support from users/consumers to taxpayers, albeit at the
risk of some increase in the latter, though now capped by the 'quota'
limits
on cropland areas and livestock numbers.
- This progression continued under A2K, which, despite its
rhetoric, pays
scant attention to the real difficulties of CEC enlargement.
- Which leaves considerable problems for the EU in the future,
since the
political pressures for farm support in Central Europe are difficult to
reconcile with a now very different set of pressures applying in
Western
Europe (leaving on one side the very substantial differences within
each of these country blocks).
[For a recent, detailed and authoritative account of the history of the
CAP, see OECD: Evaluation
of Agricultural Policy Reforms in the European Union, Oct. 2011: "This report provides an overview of the
main characteristics and structure of the current Common Agricultural
Policy (CAP) and its developments in the last 25 years in a changing
environment within and outside the EU.
Drawing on material presented at the
OECD Workshop on the Disaggregated Impacts of CAP Reform, held on 10-11
March 2010, and model-based scenarios, it analyses the impacts of
policy changes on production, trade, land use, farm structure, the
environment and some aspects of rural development, using changes in the
level and composition of OECD indicators of support, notably the
Producer Support Estimate (PSE).
This report further suggests improvements in the market orientation,
competitiveness and risk management at all levels of the food chain,
and pleads for clarifying the link between policy measures and
objectives through better targeting, and strengthening evidence on
which to base policies."]
2. Meaning and Implication of Economic Analysis -
the
illustrative case of elimination of EU Dairy Quotas
Question 1. why were Quotas
introduced
in the first place?
Quotas
were introduced (April 1st. 1984) in response to the growing surpluses
and increasing taxpayer costs of the previous policy - unlimited
support
(in effect - aside from some co-repsonsibility levies, which were
largely
ineffective) at price Pm. The quota
involved
a small reduction from previous production levels, which were then
fixed.
Hence, the EU taxpayer gained, both by the initial reduction, as shown
here, and also by the fact that committment to support was now limited,
and no longer open-ended. Consumers were not affected at all by
the
change, while producers only suffered relatively minor losses as shown
- clearly quotas were economically a good thing compared with the
previous
open-ended support - a step in the right direction?
Incidentally,
the alternative to quotas - an equivalent reduction in the support
price
(to generate the new excess supply of EUx) - would have generated a
slight
increase in net gain (because of the consumers' gain), but a major
reduction
in producers surplus - hence was dismissed by the Council of
Agricultural
Ministers as being impractical politically, at that time.
Question 2: Just how bad a thing are quotas?
First,
there are very considerable practical problems in calibrating the
principles
illustrated in this diagram with realistic representations of the real
world - especially the supply and demand responses both within the EU
and
in the rest of the world, and equilibrium quota rents. Even, in
the
case of milk, identifying Pm and Pwa
causes problems,
since
both are only known with certainty for butter and SMP, not for raw
milk.
However, we can leave these issues on one side, and hope that
accidentally
unrealistic estimates of these nearly unknowable points (footnote)
will either be unimportant or cancel out. Nevertheless, as the
mechanics of the world market show, it is important to make
sensible judgements about the slope of the RoWxd curve (as it
passes
through 'known' point X, and, subsequently, what it might look like if
and when the EU adopts a free trade policy).
Whatever judgements we might make about these practical analytical
issues,
the diagram suggests a clear social gain - the Tax gain (given
that the EU is in significant surplus in milk products) is
clearly
larger than the net loss in surplus (the difference between the
consunmer
gain and the producer loss). This will always be true so
long
as demand curves slope downwards and supply curves slope upwards.
That is the way the world is - this diagram is simply the partial
analogue
of the gains from trade logic outlined earlier. Any set
of economic models representing
this
industry will necessarily come to this conclusion that free trade is a
good thing, so long as they obey the principles of economics.
The conventional explanations of what consumers and producers
surplus
measures mean and how they are to be explained is contained in the policy
primer notes. However, recalling the general equilibrium
gains
from trade of last week - the long run gains all accrue as consumer
gains
(or, alternatively, as additional producer incomes earned through
additional
trade). How are these related to the apparent partial gains shown
above? A sensible question, and not one addressed in the text
books
(or any of the literature that I am presently aware of). A
practical
and provisional answer is as follows.
The annual consumer surplus gain from the policy reform is a measure
of the potential for a perpetual stream of annual gains forever into
the
future. The producer surplus loss, however, is a measure of the
(negative)
incentive for the production adjustment - the shift round the
production
possibility frontier. Once this adjustment is achieved, there is
no further loss. The producers surplus measure is, in effect, the
annual equivalent of the extent to which the present policy has
increased
the capital value of the fixed and specialised assets employed in the
dairy
sector, which would otherwise be employed elsewhere. This capital
value is a finite sum, not an infinite stream - it is part of the
present
fixed costs of the industry, which would be reduced if the policy were
to be reformed (eliminated). The producers' loss is temporary, the
potential
gain is permanent. The partial welfare arithmetic (the conventional
measure
of the costs/benefits of policy change) seriously confuse these by
treating
them as exactly comensurate.
The key, therefore, to policy reform is to design (and then market
and
sell to the interested parties) a sensible transition policy which, at
least partially, compensates the present owners of these assets for
their
capital loss. Convincing people of the sense of policy
elimination
becomes the most critical part of policy analysis - the specific
estimates are largely beside the point - though the relative sizes of
gains
and (temporary) losses are clearly important in illustrating the case
for
reform. Here, there are several additional considerations which
are
important - as illustrated in the analysis of eliminating quota:
(Colman
et al, 2002 - for Defra) - as you will see on this page, there are
also more recent reports than the April 2002 report by Colman (see
especially, the FAPRI report of January 2007, for model simulations,
using the FAPRI model:Analysis of the Impact of the Abolition of Milk
Quotas, Increased Modulation and Reductions in the Single Farm Payment
(FAPRI); and also Phasing out Milk
Quotas in the EU - Final Report - April, 2008. by Drew Associates,
which also uses the FAPRI model, as well as the Manchester Dairy
Model (MDM; Colman). For the latest on the European
Situation, see the Europa site for the 2009 Dairy
Market Situation Report, and the DG
Agri Milk and Milk Products Press releases
This
Table,
in bn. euros, shows the conventional measures of producers' and
consumers'
surplus changes, and changes in taxpayer costs. Producers' lose
9.9bn.
per year (about 75bn. in total, capitalised over ten years at a real
interst
rate of 5%). Consumers and taxpayers combined stand to gain
10.3bn.
per year without the policy in place (enough to completely compensate
producers'
loss over 9 years, if the latter is converted to an annual annuity
payment
at 3% real interest rate (reflecting the lower risk associated with
public
funds compared with private commerical risks).
However, there is also a significant cost associated with
implementing
and policing the present policy (and raising the necessary tax revenues
to finance it). This would also be saved if the policy were to be
eliminated - shown here at 10% of the transfer to producers - a
conservative
estimate.
This estimate is partial - it takes no account of the general
equilibrium
effects of the reform - which would effectively inject the static gain
(0.71bn.) into the circular flow of income - generating second round
additional
gains according to the value of the multiplier - another 0.14bn as
estimated
here.
There are also dynamic gains, resulting from the increased market
incentives
for continual productivity improvements and matching productive
potentials
to emerging market demands, adding a further 1.4bn, to the
potential
gains from policy reform.
Overall, the EU stands to gain 2.3bn. (net of the produecers' loss)
from the policy reform. Once producers' had been fully
compensated
for their loss, the gain would be an estimated 12.5bn. per year,
indefinitely,
as the gain to consumers and taxpayers plus the net gain to the
economy.
See here for an executive summary of this
report.
Question 3. So why did this change take so long?
The short, and perhaps glib, answer is that the time was not right
- the context and circumstance of the policy has not yet reached its
breaking
point, at least not realtive to the alternatives being talked of (e.g.
the Curry Commission made not mention at all of reforming the dairy
sector
- only of making adjustments to area and headage payments!). However,
the European Commission has now (2010) implemented a policy of
eliminating dairy quotas by 2015, by gradually increasing the total
quota, and hence reducing (eventually to zero) the quota rents - as has
already happended in the UK. The European Commission is determined that
the quotas will not be neccessary after 2015, despite the 'crisis' in
the dairy sector in parts of Europe - over-supply and falling prices
(as happended in the UK).
Consider the history of the CAP - policy was introduced, and then
changed,
in repsonse to changing circumstances and contexts, opportunities and
threats,
as represented in the political market place (where both votes and
political
support are traded). It is a mistake to think that political
decisions
are all made on the basis of 'one person, one vote'. The votes
(and
associated political pressure and political party support) of the
producers
for support (although smaller in number) will be more strongly
expressed
because of their gains per head than the opposition of consumers.
It has also been argued that political support for farm subsidies
(however
implemented) can also be expected from the consumers and taxpayers, so
long as these groupd believe that farmers would be unjustly treated
without
such support - i.e. that altruism counts in political decisions.
Indeed, we had better hope this to be true - otherwise, the political
system
is merely a system for producers to exert their power over the market,
since it is in their apparent interests to control the market, if at
all
possible. Monopoly is the natural ambition of business.
Competition
is its only countervail. Businesses seek to eliminate or subdue
competition
whenever they can get away with it. If government can be
persuaded
to assist in this, then so much the better.
So, Question 4. when did the timing
become
right?
Several pressures can be identified which
built over time:
- producers only win from the policy if they were the original
owners of
the assets (especially quota rights themselves) - increasingly, present
producers have had to buy their way into the supported industry, and
are
no better off than they otherwise would be without it (although would
clearly
suffer a capital loss if it were to be abandoned with no compensation)
- so producers might begin to think themselves better off without it -
a major pressure for reform.
- Competing claims on a small EU budget, especially as the euro
area
develops
and as enlargement comes closer, puts additional pressure on the budget
costs of the present policy
- However, offsetting this, is the potential budgetary cost of
compensating
farmers for policy change (since the budget would have to become
responsible
for the consumer share of the present support, at least for a while) -
so, don't expect any compensation for the removal of quotas - the most
obvious way of eliminating them is to progressively increase the quota,
while simultaneously reducing the support (intervention) prices, either
directly, or by limiting the quantities which can be put into
intervention.
- The business of CEC enlargment involved allocating them
a
share
of the total EU dairy market, and hence allocating them quota - how
much,
and how should it be re-allocated to allow growth and development of
presently
underdeveloped industries in the CECs?? This has also become a
substantial
pressure for reform, simply because the present system becomes
both unmanageable and increasingly unacceptable
in the enlarged community. Unless quota rights are allowed to
become
freely tradeable between countries, that is. But this has so far
proved
even more unacceptable than elimination
- Pressure from trading partners - disadvantaged by the present
policy -
and expressed in the Doha round of the WTO - which will eliminate
export subsidies, and further reduce import levies.
- Pressure from the dairy processing sector, trying to adapt and
adjust
to
the ever changing market place within the constraints of quotas on
throughput.
- Examples (particularly from Australia) of policy reform elsewhere
-
added
to by the increasing weight of analysis and estimates of the costs of
the
present policy?
- The Australians have recently (as of 2000) embarked on a
transition
poliucy
to eliminate their own dairy quotas (introduced to restrict supplies
and
thus increase market prices, as with Canada) by levying a temporary (8
yr.) tax on all
dairy consumption, the proceeds of which are paid in unconditional
fixed
amounts to existing dairy producers. Quotas and associated trade
restrictions
are all eliminated, After 8 years, both the tax and the fixed producer
payments will cease. The fact that the payments are funded
through
an explicit consumer tax lends weight to the belief that the transition
policy will not become permanent.
Notwithstanding all these rather pragmatic arguements - there is no
solid analytical framework available for assessing the 'right'
conditions
(contexts and circumstances) for policy change. We could easily
spend
the rest of this course talking about why this is the case, and what
sorts
of frameworks we might think of developing.
Nevertheless, as a result of the 2008 CAP Health Check, the Council of
Ministers have taken the decision to gradually increase the quota, and
at the same time reduce the intervention prices and intervention
procedures for SMP and butter, so as to eliminate quotas by 2015. You
should make sure you understand how this is going to work. By
2012, only a few countries are persistently at or in excess of their
quota levels (i.e. liable to pay the associated super-levy - Austria,
Ireland, Netherlands, Denmark (and Cyprus) - many others are well below
their national quota (e.g.Poland by 2%, UK by 10%) - see Agra Europe, November 6th 2012)
Question 5: what critical
problems remain for the CAP?
A couple of earlier papers on the evolution of the CAP by yours
truly:
European Union Cereals Policy:
an Evolutionary Interpretation (Australian Journal, 1995)
Policy
dependency and reform: economic gains versus political pains
(Agricultural Economics, 2004)
See the current (2009 and 2010) UK Government's (Defra and HM Treasury)
"Vision
for
the CAP"(produced in 2005) - to which I have contributed a pair of memoranda: a critique of the
"vision" and an 'alternative'. The CRE (Professors Ward and Lowe)
have also submitted their own CRE view,
concentrating on rural development aspects (Pillar 2 of the CAP).
See, also, the European
Commission's Health Check.
October. 2010: DG Agri's
leaked draft communication on the future of
the CAP, post 2013.
and also the 2009 BEPA
Budget Review workshop on the future of the CAP - especially the
Swinnen and Hanniotis Presentations;
also: Bureau, J-C. and Witzke, H-P, 2010, “The Single Payment Scheme
after 2013: New Approach – New Targets”, Study
for European Parliament: Directorate General for Internal Policies,
Policy Department B: structural and cohesion policies. (search for the
title as specified above).
And Ferrer
J.N. and Kaditi, E.A., 2010, “The EU added value of agricultural
expenditure – from market to multifunctionality – gathering criticism
and success stories of the CAP”, Report prepared by the Centre for
European Policy Studies (CEPS) for the European Parliament, 2010 (which
is still subject to discussion within the EP, and has not yet been
released formally)
For your lecturer's views, see: CRE DP27
Review of the Challenges of CAP Reform Jambor, A. and Harvey, D., where
you will also see reference to CRE DP28 CAP Reform Options: A Challenge
for Analysis and Synthesis, by the same authors. This paper has now
been revised to: Harvey &
Jambor "On the Future of Direct Payments: CAP Bond Revisited" (Oct.
2010). See here for the PPT slides
used at the Irish Agricultural Economics Society Conference (Oct.
2010), and here for the review paper:
CRE:
DP27 Review of the
Challenges of CAP Reform, Jambor, A. and Harvey, D. (if you open
this one, you will find links to many of the analyses and commentaries
of the current state of CAP referenced here - see, especially, Zahrnt,
V. (2009a) Public Money for Public Goods: Winners and Losers from CAP
Reform, ECIPE Working Paper, No. 08/2009, Brussels, Belgium, which
documents the development of the SFP, and (Table 5, P.12,) shows the
extraordinary variation across the EU member states on (effectively)
the SFP rates per ha. This review paper also has links to the major web
sites dealing with CAP reform.
Also: RELU (Rural Economy and Land Use Programme) - Briefing
Paper no 12: Informing the Reform and Implementation of the Common
Agricultural Policy, Oct. 2010.
NOTE: the current negotiations about the future of the CAP post
2013 are taking place under the new 'constitutional' condition of the
EU, under which (following the Lisbon Treaty)
the European Parliament has the responsibility for co-decision with the Council of
Ministers (of the Member States) for approval of European Commission
proposals for policy change - including the CAP and the European
Budget. This is notably different than the position prior to the
treaty, when the EP only had the right to be consulted, (and ignored),
rather than co-decision powers. It remains to be seen how this might
affect the evolution of the CAP and its major constraint - the EU
Budget.
See: European Commission:
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE
COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE
OF THE REGIONS: The CAP towards 2020:
Meeting the food, natural resources and territorial challenges of the
future, Nov. 17. 2010
and also The EU Budget Review, Oct.
10, 2010.
AgraEurope reports on New
CAP payment data (19.11.2010) and commentary
on the Commission's communication paper.
November 2011: Commission
publishes new
legislative proposals for the future of the CAP post 2013 (and a shorter
explanatory memorandum) - which will be subject to debate and
approval (with necessary amendments) by both the Council of Ministers
and the European Parliament, and are also subject to amendment asand
when the overall EU budgetary agreement is reached, which may curtail
some of the spending envisaged in these proposals.
Agra Europe reports that there are already demands from the member
states for less rigidty in the 'greening' proposals for the single farm
payment (to be substantially changed in technical and legal terms to
the Basic Payment
Scheme (BPS) - of which
30% is to be conditional on three ‘greening’
measures aimed at benefitting the climate and environment:
• Crop diversification: arable farmers must cultivate
at least 3 crops a year, none accounting for more than 70% of his/her
land and the third making up at least 5%.
• Setting aside 7% of land as an ‘ecological focus
area’: i.e. field margins, hedges, trees, fallow land, landscape
features, biotopes, buffer strips and afforested area.
• Maintaining permanent pastures. Organic producers
will be exempt from the requirements.
Member States will have to use 30% of their national direct payments
envelope for the greening measures but this will not be subject to
‘capping’ (see below).
Money withheld from a farmer failing to meet the greening requirements
would be moved to a member state’s P2 rural development envelope.
Several ministers have questioned these provisions, demanding more
national flexibility, and questioning whether they could actually
achieve their objectives, at least without substantial additions to
complexity and monitoring costs.
The BPS will legally replace the SPS: current entitlementsunder the SPS
scheme “shall expire on 31 December 2013”. The entitlement to BPS
is to be established on the basis of each farmer's 2014 land area -
Establishing CAP entitlements on a future, rather than a past,
reference period is unprecedented; it did not happen with the initial
creation of SPS entitlements in 2003 (the reference period for which
was 2000-2002), or with the creation of milk quotas in 1984
(1981-1983). In the final communiqué issued on October 12,
the Commission makes clear that 2014 will be the new reference year for
land area, but says that “there will be a link to beneficiaries of the
direct payments system in 2011 in order to avoid speculation.” - There
will, no doubt, be a good deal of deabte about the details of this, and
I suspect that the outcome will be that current SPS entitlements are
effectively rolled over to create BPS entitlements - but watch this
space.
There is supposed to be some convergance in the BPS per
hectare: National envelopes for direct payments to be adjusted so that
those that receive less than 90% of the EU average payment per hectare
will gradually receive more from 2014 onwards. Countries getting less
than 90% of the average envelope will see the gap reduced by one-third
by 2018. Therefore, if a member state currently gets an envelope worth
75% of the EU average, this will gradually rise to 80%. The proposed
redistribution of P1 envelopes will see the Netherlands and Belgium
lose more than France or Germany, with Latvia and Romania netting the
biggest increases. Nevertheless, the differences in payments per
hectare remain very substantial. As Agra Europe comments
(AE2485 Chris Horseman, 18.10.11 ): "Average aid payments in Latvia, for
example, when fully phased-in in 2013, will be around €95 per hectare,
compared with the EU average rate of around €270/ha (and the Maltese
figure of around €700/ha). Increasing Latvia’s annual direct aid budget
from €163m in 2014 to €218m in 2019 should allow for this flat-rate aid
payment to be raised to around €144/ha by the end of the period – still
way below the EU average but a step towards greater equity. (Of course,
the very fact of raising the rate of aid will also inevitably
contribute to closing the disparity between land prices in Latvia and
other parts of the EU). ... In the final draft, the commitment (to
more equity in payments) was watered
down to state merely that the Commission was “committed to discussing a
longer-term objective” of achieving complete convergence through the
equal distribution of direct support across the European Union “in the
next Financial Perspectives after 2020”
Capping
payments per farm: Direct payments in excess of €150 000
per recipient (farm?) are to be ‘capped’ at progressive rates, with an
absolute ceiling of €300 000. This excludes the 30% of subsidies to be
based on ‘greening’ measures (see above). After employment costs (including
social security payments and taxes) are deducted, amounts
between €150 000 and €200 000 to be subject to a 20% reduction, rising
to 40% for those between €200 000 and €250 000, and to 70% for those
between €250 000 and €300 000. Again, there is likely to be some
considerable deabte about the relevance and importance of these
conditions, especially established at a uniform level across a widely
heterogenous Union.
Cross-Compliance:
Some modest steps towards simplification: (Aside from the greened
element above) There will be a reduced number of cross-compliance
requirements for the basic payment: - Statutory Management Rules (SMRs)
to be cut from 18 to 13. - Good Agricultural & Environmental
Condition (GAEC) rules to be cut from 15 to 8. The EU’s Water Framework
Directive and Sustainable Use of Pesticides Directive would also be
incorporated once they are transposed in the member states and
explained to farmers. Member states demonstrating farm controls success
rate of over 98% to be allowed to reduce checks.
Budgetary
expenditures: This is not easy to identify -
although the Commission claims that spending is to be held constant in
nominal terms at the 2013 level - hence declining in real terms as
inflation occurs of the the 2014 - 2020 period (Multiannual
Financial Framework (MFF) proposals, tabled in July 2011). However,
while the CAP itself will have less money available in real terms, less
will also be asked of it – with schemes hived off into other budget
headings - while reserves of funding will be made available to
agriculture through other channels. On the face of it, the real decline
in CAP funding is aggravated by the fact that the 2013 figure - the
basis for CAP spending in the next MFF - is itself artificially low due
to missing EU10 payments (the New Member States). EU10 SPS payments are
due to reach only 90% of the full phase-in by 2013, and only 70% in
Bulgaria and Romania. Full payments from 2014 onwards would leave an
effective €8.8bn shortfall over the 2014-2020 period.
However, DG Agri seems to have been able to generate an additional
cushion by several means to cope with this apparent shortfall. The Aid
for the Needy scheme is to be shifted into the European Social Fund
under a different budget heading, saving €2.5bn. A further €2.2bn
is freed up by "redefining" certain sanitary and veterinary spend
outside the CAP budget. The EU's "Globalisation
Fund" is to be extended to include farmers (€2.5bn.) to
compensate for "globalisation induced losses". Additionally, a €3.5bn
scheme, amounting to €500m for each year of the new budgetary period,
would form an emergency reserve
"to address unforeseen problems
linked to climate change, to market crises and other threats to our
farming and food production capacity". This allows the
Commission to reduce its traditional market management spending under
Pillar 1, allowing P1 to be devoted exclusively to direct
payments. Both the emergency and globalisation funds are to be
outside the MFF for the CAP. In short, these 'accounting'
redefinitions provide the CAP budget with enough 'headroom', in spite
of a notional freeze, to cope with increased SPS (BPS) payments,
especially to the NMS.
Stefan Tangerman has
written a concise and hard hitting criticism of these proposals. Alan
Matthews has a longer critique and review, for the ICTSD, focusing
especially on the potential effects on the rest of the world, and
especially the emerging and developing countries. Meanwhile,
there is already
the beginnings of what is bound to be a contentious
debate before the final agreed package comes into force in
2014. See, also, Ulrich
Koester's Nov. 2011 comments on the 'reform', and other resources
on the CAPReform Blog
web site, and also, more generally, the International (food &
agricultural trade) Policy Council's papers
on policy reform in the EU and the US (due to be revised and
'reformed' next year as the (typically 5 year) US Agriculture Act
expires.
The policy condition in pictures. (from DRH Gibson Memorial Lecture, Belfast, Oct. 2012)
Latest (November 2012) news on budget and CAP negotiations from AgraEurope.
Footnote:
Unknowable? It is worth remembering a fundamental principle of
physics:
the Heisenburg Uncertainty Principle: which roughly says: The
more
accurate is the determination of the position of a particle (an event
or
observation), the less accurate will be the associated information on
the
speed and direction of travel of the particle. There is an
irreducable
zone of uncertainty surrounding all events and observations. If
we
know their place (circumstance), we cannot know their status in time
(context),
and vice versa.
Back to Index