The reform of the EU's Common Agricultural Policy: drivers and - - PowerPoint PPT Presentation

The reform of the EU's Common Agricultural Policy:

drivers and challenges

ABARES – Outlook 2014

Canberra, 4-5 March 2014

Tassos Haniotis Director, Economic Analysis, perspectives and evaluations DG Agriculture and Rural Development European Commission

Outline

Four basic questions of (any) reform

• 1. How much?
• 2. For whom?
• 3. Why?
• 4. How?

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3

How much: the path of CAP expenditure 1980-2020

Source: DG Agriculture and Rural Development.

10 20 30 40 50 60 70 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

billion EUR (current prices)

Export refunds Other market measures Market expenditure Coupled support Decoupled support Direct payments Rural development

EU-28 EU-10 EU-12 EU-15 EU-25 EU-27

For whom: redistribution of Direct Payments

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Source: DG Agriculture and Rural Development.

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Why: the main drivers of CAP reform

What sort of "insecurities" drive the current policy debate?

• Commodity price developments: volatility, co-movement and level
• Supply concerns: terms of trade, productivity, climate change
• Demand concerns: food chain "bottlenecks" in price transmission, economic crisis

The CAP reform process can be viewed as an effort to address

• Market failures, especially those linked to economic and environmental sustainability
• Policy failure in areas linked to the fairer distribution and "green" targeting of support
• ″Jointness″ in delivery of private and public goods (one as prerequisite for the other)

The CAP shifts its focus and its policy paradigm

• Retargeting of support shifts reference from farmer/beneficiary to (fixed) land
• "Greening" in all its aspects moves focus to condition support on land use
• Research, Innovation, Monitoring and Evaluation to better target land use changes

The objectives of CAP reform

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Challenges Environmental Economic Territorial

Policy objectives Sustainable management of natural resources and climate action Balanced territorial development Viable food production Reform objectives Improved sustainability Enhanced competitiveness Greater effectiveness

Fairer Greener Simpler

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Annual real commodity price indexes

Source: World Bank

50 100 150 200 250 300 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 (2005 = 100) Agriculture Fertilizers Energy Metals & minerals

US energy prices…

Source: World Bank.

8

5 10 15 20 25 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12

Crude oil (World Bank average) Natural gas (US) Coal (Australia) ( $ per mmbtu )

…and their link to world natural gas prices

Source: World Bank.

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5 10 15 20 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12

US Europe Japan (LNG) ( $ per mmbtu )

Climate change – Possible impacts on EU agriculture

10 ▲ Floods risk ▲ Hotter and drier summers ▲ Sea levels ▲ Risk crop pests, diseases ▲ Crop, forage yields ▼ Animal health, welfare ▼ Water availability ▲ Risk drought, heat spells ▲ Risk soil erosion ▼ Growing season, crop yields ▼ Optimal crop areas ▼ Summer rainfall ▲ Winter storms, floods ▲ Length growing season, yields ▲ Suitable farmland ▲ Pests, diseases risks ▲ Winter rainfall, floods ▼ Summer rainfall ▲ Risk drought, water stress ▲ Soil erosion risk ▲ Yields, range of crops

Source: DG Agriculture and Rural Development, based on EEA reports, JRC and MS academic studies.

Importance of primary sector in employment

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How: the future CAP at a glance

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Improved sustainability Enhanced competitiveness Greater effectiveness

Enhanced market

• rientation

Greener Direct Payments Improved targeting Better functioning of the food supply chain Greener Rural Development More equitable distribution Bridging the gap between knowledge and practice Increased focus on research and innovation Strategic approach to spending

How: enhanced competitiveness

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Better functioning of the food supply chain Enhanced market

• rientation

Bridging the gap between knowledge and practice

 Phasing out of quotas and other restrictions to production  Streamlining market measures; enhancing the safety net  Strengthening the crisis management mechanism  Reinforced framework for POs and IBOs  Financial support for creation of Producer Organisations  Strengthened support to short supply chains  European Partnership for Innovation in Agriculture  Enhance agricultural research and knowledge transfer  Enhance Farm Advisory Services

EU-28 agricultural trade structure, 2003-13

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150000 100000 50000 50000 100000 150000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Commodities Intermediate Final products Other products Confidential Trade Balance

Source: COMEXT

Exports

in million Euro

Imports

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EU competitiveness - Wheat

Source: elaboration by DG Agriculture and Rural Development

50 100 150 200 250 300 350 03/07/01 03/11/01 03/03/02 03/07/02 03/11/02 03/03/03 03/07/03 03/11/03 03/03/04 03/07/04 03/11/04 03/03/05 03/07/05 03/11/05 03/03/06 03/07/06 03/11/06 03/03/07 03/07/07 03/11/07 03/03/08 03/07/08 03/11/08 03/03/09 03/07/09 03/11/09 03/03/10 03/07/10 03/11/10 03/03/11 03/07/11 03/11/11 03/03/12 03/07/12 03/11/12 03/03/13 03/07/13 03/11/13 €/T EU cereal support price EU Wheat Rouen US SRW Wheat

101.31

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EU competitiveness - Beef

Source: elaboration by DG Agriculture and Rural Development

100 150 200 250 300 350 400 450 03/01/00 03/06/00 03/11/00 03/04/01 03/09/01 03/02/02 03/07/02 03/12/02 03/05/03 03/10/03 03/03/04 03/08/04 03/01/05 03/06/05 03/11/05 03/04/06 03/09/06 03/02/07 03/07/07 03/12/07 03/05/08 03/10/08 03/03/09 03/08/09 03/01/10 03/06/10 03/11/10 03/04/11 03/09/11 03/02/12 03/07/12 03/12/12 03/05/13 03/10/13 €/100kg carcass EU Intervention Price US Omaha EU Beef A/C R3 Brazil Arroba do boi

347 324 301 156

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EU competitiveness - Milk

Source: elaboration by DG Agriculture and Rural Development

100 150 200 250 300 350 400 450 15/01/00 15/06/00 15/11/00 15/04/01 15/09/01 15/02/02 15/07/02 15/12/02 15/05/03 15/10/03 15/03/04 15/08/04 15/01/05 15/06/05 15/11/05 15/04/06 15/09/06 15/02/07 15/07/07 15/12/07 15/05/08 15/10/08 15/03/09 15/08/09 15/01/10 15/06/10 15/11/10 15/04/11 15/09/11 15/02/12 15/07/12 15/12/12 15/05/13 €/T EU Milk Equivalent Support Price World Milk Equivalent Price EU Milk Price

282 263 244 225 220 215

How: improved sustainability

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Greener rural development Greener direct payments Increased focus

• n research and

innovation

 Introduce mandatory "green" practices at farm level  Link these practices to 30% of direct payment budget  Reinforce cross-compliance  Priorities on "resource efficiency" & "eco-systems"  Enhance ambition for environment/climate measures  Mandatory min of 30% for environmental actions spending  European Partnership for Innovation in Agriculture  Enhance agricultural research and knowledge transfer  Enhance Farm Advisory Services

How: greater effectiveness

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More equitable distribution Improved targeting Strategic approach to spending

 Provisions for active farmer and young farmers  Green payment  Specific support to regions, sectors and farm size  Convergence of payments among MS  Convergence of payments among farmers  Flexibility in choice of regionalisation for MS  Improved integration with other EU policies  Strategic approach in rural development programming  Improved monitoring and evaluation of policy

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The new greening architecture of the CAP

Agricultural area (eligible for direct payments) Cross compliance Greening Rural development

Cumulative environmental benefits

Regulatory (Statutory Management Requirements and Good Agricultural Environmental Conditions) Mandatory with financial support (decoupled “green” payment per hectare) Voluntary with compensation for cost incurred and income forgone

Implementation mechanism

For further information

Political agreement on the CAP2020 http://ec.europa.eu/agriculture/cap-post-2013/agreement/index_en.htm Legal proposals http://ec.europa.eu/agriculture/cap-post-2013/legal-proposals/index_en.htm Impact assessment http://ec.europa.eu/agriculture/policy-perspectives/impact-assessment/cap-towards- 2020/index_en.htm

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Thank you