25 Mai 2016

A EUROPEAN POLICY IN NEED OF OVERHAUL OR ADAPTATION?

While the debate on the necessary evolution of the future CAP is about to rebound, thanks to the informal Council of agricultural ministers and to the Dutch presidency, this weekend, it is a good opportunity to come back on the discussion that has been on going around Farm Europe activities for now more than one year.

This work, based on the strategic note published here in January, has been focusing on 3 main topics which should be at the core of any agricultural policy in the future: Resilience, Sustainability and Investments.

The 2014 reform has consolidated the ‘public goods’ component of the Common Agricultural Policy. However, the economic reform of this policy which remains the primary aim of common European policy, is still to take place. Economic reform is a matter of meeting the most pressing societal challenge: sustainability of production, or, in other words, the ability of agriculture to meet the needs of the planet and of the responsibility which the EU must assume in this regard.

In responding to this issue, all actors are confronted with a number of challenges:

the challenge of sustainable and consistent agricultural and industrial investments;

the challenge of integrating innovation with efficient technologies;

the challenge of market volatility, and ensuring that it does not interrupt the sustained growth of production.

In the EU, agricultural productivity has declined for over two decades. Income per unit of agricultural work has stagnated since the mid-90s in the EU-15, despite the restructuring of farms and the decline in the AWU: the efforts made by the agricultural sector seem to be consumed by the constant decrease of public aid (CAP) in real terms and the transfer of value added towards other links in the chain.

Today, many sectors find themselves in urgent need of investment to ensure their competitiveness.

Understanding the indivisibility and mutuality of the two components – environmental sustainability on the one hand, and economic sustainability on the other – seems to be the primary condition for ensuring sustainable development and effective public policy.

In this context, three key words are essential: Resilience, Sustainability and Investment.

Does the current CAP provide adequate responses?

Responding to market volatility:

The EU is the only major agricultural area in the world responding with a scheme of aid decoupled from production. Beyond the comparative advantages of the EU system, it is disputable whether or not the European model remains appropriate when all its competitors play with a different set of rules. Confronted with market crises, the new CAP arrangements remain, to this day, rudimental (schemes for income stabilisation in 2nd pillar) or have proved ineffective in the face of recent crisis (emergency measures and markets measures of the single CMO).

Henceforth, it is necessary to appraise the possibility of moving part of the CAP to a system of income and margin insurance in two stages: with a first level of basic (European) insurance (by sector?), financed by the CAP and for a minimum level of insurance tied to average production costs; a 2nd level of guarantees, chosen by farmers, of positive margins or positive revenue, (by production?), co-financed by the EU and based on a number of measures, whether European, national, or regional. It should also be assessed the possibility of developing individual savings at farm level, for example via accounting provision.

Sustainability and compensation for public goods:

Both the greening measures and measures of the 2nd pillar are criticised due to their complexity and/or their questioned efficiency. For the future, we could work on a single system of aids, with:

1) one measure to respond to the challenge of providing public goods at the European level, allowing economic actors to decide and to mobilise the most appropriate means to achieving this;

2) one measure to punctually compensate the costs linked to the commitment to go beyond the minimum in order to respond to specific regional issues;

3) one measure to address the structural lack of competitiveness of a region or of a specific sector in a particular region.

For the ‘basic public goods’ component, can we address the need to move towards an objectives-based policy, concerning the environment/emissions (greening and agri-environmental measures)? From this perspective, two schemes are conceivable (one being exclusive of the other):

Either based on the ergonomics of the current greening policy, to recognise the use of advanced farming techniques as a mean of fulfilling all greening requirements;
Or based on a balance sheet of farm emissions, with a definition of the objectives to be achieved but not of the means to achieving them.

For the component of sustainability, consumption patterns may be considered, via, for example programmes of distribution allowing the delivery of real ‘food stamps’ based on the American model, by promoting healthy eating in schools (school canteens) and public services (hospitals, the canteens of administrations, etc.), and with distribution to organisations for the poor. These “EU food stamps” must be subject to criteria of origin for such purchases.

Policy of Investment:

Should the CAP establish greater means of support for investments? If yes, is there a need for a European plan for competitive investments in the agricultural sector, in order to stimulate a technological leap towards an “agriculture of performance”?

In this context, and given the new economic environment of increased market volatility and the need for investments, do the financial tools on which investments are based require adjustment?

▪ Bank guarantees

▪ Insurance “income loss, margin loss”?

▪ Role of public support via the CAP?

▪ Role of the EIB, commercial banks, and insurance companies?

All of these issues and their possible paths for the future are under analysis in the daily Farm Europe’s work and will be assessed and discussed at the Global Food Forum to take place in Milan, Italy, later this year (for more details, do not hesitate to contact us at : info@farm-europe.eu).

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