17 January 2018

What future for the European Union’s Common Agriculture Policy beyond 2020?

Reflection on the future EU Multinannual Financial Framework (MMF) for the next seven year period starting in 2020 has begun. As largest budget item in the MMF, the EU Common Agriculture Policy (CAP - 38% of current MMF) and its future will be a major issue.

A short historical recap

Launched at a time when Europe was facing food shortages, after World War II, the CAP had for a long period given priority to boosting production while ensuring farmers with a standard of living comparable to that of other workers.

This was pursued, in a first phase, by providing massive support to production. With the creation of the World Trade Organisation (WTO - 1995) much of the policies implemented under the CAP became incompatible with international trade regulations.

This triggered a major reform of CAP which involved the transformation of support provided to production into direct payments to farmers that were “decoupled” from production and mainly linked to the land farmers are using.

In the current MFF, these direct payments, made under Pillar I of the CAP represent 71% of CAP spending. A second pillar, Pillar II (24% of current CAP spendings), was created to provide support to on- and off-farm investment and land management (landscape, environment…).

During negotiations of the present MFF (2014-2020), one major innovation was the inclusion of green payments that aim at making agriculture more sustainable and reducing greenhouse gas emissions from agriculture.

The current situation

Problems faced by European agriculture are very different today from what they were at the time when the CAP was created or even when, more recently, the current pillar system was established. Today:

1. •Europe is exporting food while an increasing number of European households are food insecure;
   

2. •The average share of food in the budget of households is considerably lower than several decades ago but income of farmers and other workers in the food chain are sometimes dramatically low (in France it is estimated that one-third of farmers live in poverty, threatening the sustainability of family farming that is highly valued by Europeans);
   

3. •Food-related health hasards are on the rise (see the latest Lactalis milk contamination case), creating a lack of trust by consumers in the quality of the food they can purchase (the better-off switching increasingly from ‘conventional’ food to organic food) [read];
   

4. •The sustainability of European agriculture is at risk (for example, the level of cereal yields in France has been decreasing, while the level of biological activity in soils has been declining at an alarming speed and negative environmental consequences of agriculture are highly visible);
   

5. •As everywhere else in the world, the food system is a major contributor to GES emissions that cause climate change and that EU countries have committed to reduce [read];
   

6. •There is a growing concern among the population over animal welfare, the provision of services such as landscape management and over rapid rural desertification.
   

It is quite evident that unless the CAP is reformed in-depth, it is unlikely that these challenges will be met. This view is further supported by recent evaluations of the current performance of CAP.

With respect to farmer income, performance has been poor (see our earlier remark on farmer and food worker income), and the system of direct payments under Pillar I of the CAP accentuate inequality. According to Matthews [read], out of 7.2 million beneficiaries of Pillar I payments, most get very little, while 131,000 farmers get more than 50,000 euro by unit, totalling 1/3 of total direct payments!

Moreover, direct payments contribute to increase land value with its negative consequences for the establishment of young farmers which is becoming costlier. To illustrate this case, the price of land has been multiplied by 4 to 5 in 10 years in Central and Eastern European members of the EU, although it would not be realistic to attribute all of this increase to direct payments.

With respect to the environment, the greening of payments has been strongly criticised. A report prepared for the European Court of Auditors [read] found that these payment were “unlikely to significantly enhance the CAP’s environmental and climate performance.” This is in part due to the fact that the Commission did not: 

1. •“develop a complete intervention logic for the green payment”;
   

2. •“set clear, sufficiently ambitious environmental targets that greening should be expected to achieve.”
   

The report concludes that the “green payment remains, essentially, an income support scheme”, that it “led to changes in farming practices on only around 5 % of all EU farmland” and contributed to add complexity to the CAP.

What about the future of CAP?

This complexity of CAP may very well be a recipe for conservatism. This is the argument developed by Heinemann [read] who believes that current complexity - and the added complexity in case the long list of issues faced by European agriculture are factored into the future CAP - may be used to justify existing features of the CAP (i.e. direct payments) although they are neither an effective - and even less an efficient - means to achieve stated objectives.

Heinemann also thinks that a better balance between the amounts allocated to the two Pillars is unlikely. His view - that will be considered as shocking by many - is that, unless CAP is reformed, the huge amount of money that goes into it (50 billion euros every year) would better be utilised for funding other priorities e.g. funding the provision of asylum to refugees, increasing development aid to bring it to the level of commitments, contributing to climate change funding, etc.

He foresees that negotiations will once again deal more with the net balance of contributions made vs. payments received by each Member State than with how best allocate resources so as to effectively and efficiently achieve objectives that are aiming to solve today’s and future problems of the European food system.

Others are of the opinion that the EU cannot simply continue to equate agriculture with food, as it has been doing so far, and that dealing just with agriculture, in isolation, will not help to tackle major issues faced by the EU in the food and agriculture sector. They feel that there is a need for a well coordinated EU Food Policy that would combat current policy fragmentation.

For the EU-funded project TRANSMANGO, the EU CAP is characterised by a “neglect of… aspects of the food system such as environmental and climate change concerns, as well as perspectives on healthy diets” which depend, in addition to the agricultural policy, on food safety, public health, trade, environmental protection and employment policies which tend to be handled separately and certainly have less financial resources at their disposal than the CAP. [read]

However, developing a EU Food policy, as indispensable as it may sound, would add to the complexity of the negotiation process that will, along with major electoral deadlines, make that, according to observers, the new CAP will only be operation after 2022 and may even become less and less “common” as it there seem to be increasing chances that the CAP be “nationalised”. Such a nationalisation would likely lead to policy differences that would further exacerbate competition on the European market, with an expected negative impact on family farms that would suffer from aggressive commercial policies and with the further spreading of unsustainable practices used by large industrial farming.

From our perspective, at hungerexplained.org, we would welcome that some thoughts be also given to reducing to the maximum possible negative impacts of the CAP on agriculture in poor countries, where examples are many on how imported CAP supported products are a constraint to local agricultural development.

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To know more :

1. •Heinemann, F. The Common Agricultural Policy and the Next EU Budget - Reflection Paper No.1: Preparing for the Multiannual Financial Framework after 2020, Bertelsmann Foundation, 2017.
   

2. •Jereb, S, et al., Greening: a more complex income support scheme, not yet environmentally effective, Special Report, European Court of Auditors, 2017.
   

3. •Lallouët-Geffroy, J., Politique agricole commune 2020 : le bal des négociations est ouvert,  Reporterre, 2017 (in French only).
   

4. •Matthews, A., Rethinking EU budget spending on agriculture in the next MFF, CAP Reform.eu, 2017.
   

5. •Oostindie, H. et al., D7.1-7.2 Policy Recommendations, TRANSMANGO, 2017.
   

Earlier articles on hungerexplained.org related to the topic:

1. •A review of two recent publications and of forthcoming studies illustrates EU’s thinking on food and agriculture, 2017.
   

2. •Price policies can help promote healthier diets: the example of Europe, 2015.
   

3. •International trade in agricultural commodities, 2014.
   

4. •Accord sur le budget de la Politique Agricole Commune (PAC) de l’Union européenne pour la période 2014-2020: un peu plus de vert et d’égalité, mais aussi une certaine re-nationalisation de la politique agricole, 2013 (in French only).
   

Last update:    January 2018

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