Health check of the CAP reform - …

              Health check of the CAP reform -
                     The cure needs adjustment
   1. CAP health check - Lacking orientation in a changing landscape
   2. Transparency initiative - Missed opportunity to review CAP expenditure
   3. Single farm payments - Future income support needs public legitimacy
   4. Cross compliance - Time to encourage sustainable practices
   5. More market - Concentrated market power undermines fair competition
   6. Less Market intervention - Giving up supply management is a political error
   7. Food and energy security - No suggestions for a sustainable balance
   8. Rural development - More money is not enough
   9. Financial perspectives - Co-responsibility is European added value
   10. Fair trade - Cohesion and solidarity are competitive values



1. CAP Health Check - Lacking orientation in a changing landscape
The communication from the Commission on the mid-term review of the 2003 CAP
reform is a stocktaking exercise rather than an orientation for improved reform
strategies now and after 2013. Current reform measures phase-out subsidies which
are linked to production (decoupling); simplify direct payments to farmers (single
farm payment); withdraw from market intervention and supply management (ending
quotas); and reorganise structural and financial support given to farmers and to the
wider rural economy (modulation in favour of rural development).

The communication does not adequately reflect on important changes taking place in
the public debate and the geopolitical landscape:

Firstly, the Commission's transparency initiative now obliges member states to make
individual subsidies public. Where governments already published figures, they
revealed that the reform continues an unbalanced distribution of subsidies: a very
small number of large land owners, not all of them farms and food companies still
profit most from the CAP budget. Furthermore, current entitlements are based on
landownership and historic yields, not on individual needs and regional
disadvantages. In a footnote, the Commission considers possibilities of capping top
individual payments. But a broader discussion on reallocation of public funds based
on new challenges like climate change, loss of biodiversity and fertile soil, public
health, animal welfare, water scarcity and quality and rural employment is clearly
avoided. Regarding the upcoming debate on financial perspectives of the EU, the
Commission has missed the opportunity to provoke new ideas for a more balanced
and sustainable use of CAP money.

Secondly, the Commission's negotiation strategy in the WTO for a further opening of
agricultural markets worldwide has brought the EU's export subsidies under scrutiny.



www.greens-efa.eu
Increasing imports of farm products from third countries, especially in the meat sector
put an increasing number of smaller European producers out of business. These
imports often do not meet the conditions European farmers have to respect and are
therefore cheaper. The cross- compliance principle which obliges farmers to respect
environmental and animal welfare laws is therefore looked upon by many farmers'
organisations as competitive disadvantage. Although the proposed less bureaucratic
controls of cross-compliance are useful, the Commission has failed to openly discuss
the problems linked to increased feed and food imports which undermine the Union's
achievements in environmental, animal welfare and social conditioning of public aid.
European requirements in the fields of sustainability and animal welfare should in
principal equally apply to imported products, although exceptions could be made for
products from developing countries. We urge the European Commission to implement
this in WTO negotiations.

Thirdly, climate change and efforts to replace mineral oil with the use of energy crops
has also fundamentally changed the picture. The Commission has only marginally
touched upon these issues. A global boom of investments in agro-fuels and repeated
harvest losses due to draughts and floods have substantially reduced world market
supply of food while growing population and changing eating habits have increased
demand for feed and food in the emerging economies. Facing rising feed and food
prices, the Commission has abolished set-aside and proposes to phase-out dairy
quotas. But the communication does not mention the growing competition for land
between food and fuel production and the growing risks for global food security. To
insist on compulsory targets for adding agro-fuels to mineral fuels, before any
environmental and social impact assessment of agro-fuel production and imports has
been carried out, is a serious political error.

Finally, the Commission has not encouraged a democratic exercise on future goals of
the CAP. If all member states ratify the new treaty by next year, the Parliament will
finally gain co-decision for the CAP, which might apply for the upcoming legislative
proposal on the health check. However, the treaty will not change the goals of the
CAP, which have existed since the 1960s. Those goals, related to a reasonable
income for farmers and acceptable prices for consumers, remain valid in principle, but
they should now be complemented by new relevant goals and measures related to
sustainable use of natural resources, diversification of incomes and balanced rural-
urban development. With a focus on rural innovation and employment, animal
welfare, public health, reduction of greenhouse gas emissions and sustainable use of
biodiversity, the communication could have been an efficient remedy against
continuing agro-lobbyism and euro-scepticism. The Commission's communication
lacks vision. Civil society and stakeholders will continue to demand a more radical
and more sustainable new look to the CAP.


2. Transparency - missed opportunity to qualify Cap expenditure
The Commission's transparency initiative, which was pressed for by civil society
groups criticising the secrecy on the distribution of public money, obliges member
states to publish individual subsidies paid from the EU-budget, the latest in 2009. This
is an opportunity to review entitlements based on landownership and yields, and to
discuss future conditional payments linked to cohesion and employment principles.


www.greens-efa.eu                                                                     2
The 2003 CAP reform has not changed the fact that 30% of CAP subsidies go to 1%
of farming enterprises, most of which are competitive and thriving without these
subsidies. Even multinational companies like Nestlé, gulf yards and energy
corporations are CAP beneficiaries. The proposal to introduce upper and lower limits
in support levels, excluding top payments and very small receivers, may sound
balanced. But a much more acceptable principle for future income support would be
to condition payments according to employment and environmental performance of
farms of any size.


3. Single farm payments - Future farm aid needs public legitimacy

Since 2003, CAP payments to farmers are increasingly decoupled from production.
What is paid from the CAP budget is no longer compensation for price cuts but an
income support, justified with the multifunctionality of EU agriculture. If this is to be
politically sustainable, the taxpayers of Europe need to understand why such support
should be given. The Commission should therefore offer new eligibility criteria for
the single farm payments, focused upon support for services and goods which are of
public interest, but not covered by the market, such as biodiversity conservation, or on
compensation for regional or structural disadvantages. Avoiding this debate because
of pressure from agro-industrial lobbies carries the risk of linear cuts in the CAP
budget at the expense of those farmers and regions which really need support to adapt
to changing economical environment.
To avoid opposition from several countries which reject scaled cuts of payments, the
Commission proposes that modulation of payments should be compulsory in all
member states. This is in principle a valid measure. Modulation means that payments
are cut in single farm payments and transferred to the rural development schemes.
Many farming organisations and member states oppose this approach, because they
consider modulated money to be lost for farming. However, with rising prices for
cereals and other products, further income support may become less important, while
investments in diversification of incomes, biodiversity conservation and education
will be understood and supported by the general public. Farmers need a thriving
countryside - a holistic approach in rural development gives economic power to
regions which can carry sustainable farming.


4. Cross compliance - Time to encourage sustainable practices
The CAP reform of 2003 introduced the principle of conditioning public aid through
cross-compliance. In order to receive support from the EU, farmers must respect
existing environmental and animal welfare laws and regulations. Not complying can
imply cuts or complete withdrawal of support. The Commission is right in suggesting
that cross compliance rules should be easy to understand and to follow. However
besides controls and punishments, more should be done to encourage sustainable
practices through better training and process control. Cross compliance is put under
pressure through increased imports from countries where environmental and animal
welfare legislation is less developed and effective. The Commission should confirm
the principle of conditioning and extend it to social and employment aspects, as well
as to water scarcity and quality, instead of taking a defensive position by limiting its



www.greens-efa.eu                                                                      3
proposals to simplification. The Commission should ensure the implementation of
cross compliance in all Member states by supporting them with a Commission
guideline. National guidelines should be cross-checked on their environmental
efficiency, consulting nature conservation NGOs....


5. More market - Concentrated market power undermines fair
competition
The Commission praises the shift from market intervention to market liberalisation
policies as a new freedom for farmers to make their choices in response to market
signals. While phasing-out market intervention in many sectors has in principle
opened new possibilities for diversification, especially where surplus production was
encouraged and prices fell, most farmers need specific market development aid in
order to add value to their products and so get access to higher price markets.
However, the Commission proposes to limit this support to the most competitive
farms: this would exclude the great majority of European farmers from new market
possibilities. Furthermore, current EU legislation on marketing, hygiene and size
standards as well as a rapid concentration in the food retailing sector effectively deny
market access to smaller producers. The Commission should have focused on how a
reviewed CAP could assist the millions of small producers to add value to their
products and to diversify their incomes. It should also have addressed the problem
that the food industry and supermarket chains increasingly act like market and price
gatekeepers and use their market power to increase consumer prices to an extent
which is not justified by average farm gate prices. In order to challenge trends of
monopolisation of feed and food markets, the Commission should therefore take
action under competition measures


6. Less organisation - Giving up supply management without offering
good alternatives is a political error
In principle, the 2003 CAP reform supposed to reduce market intervention so that
farmers are no longer tempted to produce beyond the market demand but take more
initiative and responsibility for selling their products. However, the Commission
throws out the baby with the bathwater. The instruments for management of supply in
many sectors - such as quotas, planting rights or preferences for imports from
developing countries - can help to sustain stable prices. These instruments can also
protect sustainable farming practices in disadvantaged regions such as mountains and
islands. Milk quotas have allowed small farmers in many non-arable regions to stay
in business; sugar quotas have also slowed down a process of concentration in a few
advantaged regions. Supply management instruments can only be given up if good
alternatives, such as higher direct payments for farmers in disadvantaged regions and
measures to ensure fair prices for sustainable agricultural products, are offered.




www.greens-efa.eu                                                                     4
7. Food and energy security - No suggestions for a sustainable
balance
In its communication, the Commission has ignored the problems arising from one of
the most challenging changes taking place in global agriculture: an increasing
competition between resources used for food and for renewable energies. In spite of
widespread concerns about negative energy balances in agro-fuel production, high
emission of nitrous oxides from increased use of fertilisers and massive loss of
biodiversity through energy crop monocultures, the Commission continues to argue
for compulsory targets for agro-fuels. Harvest losses due to climate change, and
increased consumption of meat in the rising economies, which is a growing source of
greenhouse gases, are only taken under consideration from the point of view of
increased costs for the European livestock industry. In order to tackle climate change,
strong measures towards a climate friendly agriculture are needed, starting with
obligatory reduction targets for the sector.
World grain stocks are at their lowest levels in four decades. A further shift of
investments and land from food to fuel production puts global food security at serious
risk. Before launching new legislative proposals, the Commission should deliver a
full food security and environmental impact assessment of the EU agro-fuel targets,
including imports from developing countries, and should elaborate much more on
energy sufficiency and efficiency in the entire food chain, reflecting on better use of
waste products and decentralised energy systems.


8. Rural development - More money is not enough
Praising rural development as the future of the CAP and making new promises to shift
more money from the first (Single farm payments) to the second (rural development)
pillar to the CAP, the Commission tries to appease criticism of the severe cuts in the
draft rural development budget made by the European Council in order to reach a
compromise on the CAP financial perspectives in 2004. However, the now approved
rural development programmes of the member states clearly show that most of the
rural development money is clearly earmarked for investments in more intensive and
concentrated farming, leaving widespread other needs unmet. Furthermore the
European Court of auditors has recently dismissed the performance of the agro-
environmental schemes in many member states as inefficient regarding the goals,
especially in terms of water, biodiversity and soil conservation. Therefore, more
money transferred from farm subsidies to rural development aid is not a guarantee for
more sustainable practices, employment or integrated rural development as the
communication suggests. The Commission, and some member states, are still
underestimating the need for widespread investment in diversification of the rural
economy, in support to millions of small producers and small and medium-sized
enterprises and in raising the quality of life in rural regions. The need is for a major
campaign to create sustainable rural communities and economies which can provide
the sufficient and high quality food and renewable energies that Europe needs while
preserving landscapes and biodiversity




www.greens-efa.eu                                                                     5
9. Financial perspectives - Co-responsibility is European added value
The Commission is remarkably timid on the future financial framework of the CAP. It
shows how spending of the CAP budget would decrease, but totally fails to address
the challenges and risks posed by climate change, including floods, droughts, losses of
harvests and of biodiversity. This challenge, plus the long-term need for food
security, environmental management and integrated rural development, mean that the
CAP will continue having a vital common task for the nations of the European Union.
The Commission should provoke discussion about co-responsibility of the EU and the
member states and co-financing of the CAP, rather than fuelling speculation about
further re-nationalisation of the only fully integrated European policy.


10. Fair trade - Cohesion and solidarity are competitive values
The opening of agricultural markets has been the mantra of the Commission for more
than a decade now. This mantra has disappeared from the communication, either
because an agreement within the WTO is still not secured or because that agreement
is near. The argument that development in the South would only take place if
agricultural goods could flow freely across national borders has been effectively
challenged by the general public. Fair trade standards have been developed from the
bottom-up by farmers and consumers organisations, now making their way into larger
markets. Regarding human rights violation, destruction of rainforests, depletion of
water resources for exports into the EU, the Commission must acknowledge that
qualified market access, meaning social and environmental conditions and standards
for market access, is urgently needed and must actively be promoted in international
trade negotiations. And to avoid dumping of European products on the markets of
developing countries, it is necessary to phase out all export subsidies. By omitting
any discussion about current fair trade standards and instruments, which effectively
sanction social and ecological dumping within and outside the EU, the Commission
has failed to address the fundamental problems which remain unsolved in the ongoing
multilateral negotiations.




www.greens-efa.eu                                                                    6