Agriculture, EU – Baltic States, Legislation, Markets and Companies, Modern EU

Common Agricultural Policy (CAP) is the oldest EU common policy (it was adopted in 1962). Almost each new Commissioner in the College terms, tried to “revolutionise” European agro-sector; hence the sector went through about 5-6 major CAP reforms. However, the member states agricultural production is still far from being perfect and efficient; besides, new global challenges require adoption of accommodation efforts. Such new efforts cannot be done just by the policies “from above”: they need active and effective steps through political-economic decisions in the member states (so-called subsidiarity approach), with a proper coordination from the Commission.     

Since February 2017, the European Commission conducted consultations with the member states on the future of the common agricultural policy (CAP) in order to better understand how the current policy could be simplified and modernised. During the three month consultation period, the European Commission received more than 320 000 replies, mostly from individuals. The consultation found that most respondents wanted to keep a strong common agricultural policy at EU level but that it needed to be: simpler and more flexible, more focused on meeting key challenges, ensuring a fair standard of living for farmers, preserving the environment and tackling climate change. 

Main ideas of a “new CAP policy”

The new policy’s goal is to allow the EU states greater freedom in agriculture investment with only restrictions concerning ambitious Union common goals on environment, climate change and sustainability. As soon as, generally, agricultural policy is a shared competence between the EU institutions and the member states, the delimitation must be approved by both sides. 

Commission Vice-President in charge of Jobs, Growth, Investment and Competitiveness, Jyrki Katainen underlined at the communication’s publishing that “we have to make sure that CAP keeps delivering healthy and tasty food for consumers with jobs and growth in rural areas”. 

The EU’s new proposal is to modernise and simplify CAP, following the results of the broad consultation with stakeholders. The new Commission’s “delivery model” provides greater subsidiarity to the states, i.e. making agriculture am outcome of national political economy guidelines. However, the states will have to prepare their strategic agro-plans, which will enable simplification, better coherence and monitoring of results.

Reference: http://europa.eu/rapid/press-release_IP-17-4841_en.htm?locale=en

Commissioner responsible for the EU agriculture and rural development, Phil Hogan said that revised CAP would expect to deliver on new challenges which required urgent actions aimed at fostering smart and resilient agricultural sector, bolstering environmental concerns and climate action while strengthening the rural areas’ social-economic spheres. Thus a new CAP implementation will make “accent” on national efforts while giving the EU states and regions a much greater degree of subsidiarity, i.e. with less prescriptive approach at the states’ level in order to bring the CAP closer to those who implement it on the ground.''

However, CAP’s two pillars will remain: direct payments/market measures and rural development: the first pillar supports farmers on an annual basis in the form of direct payments and market measures, which are subject to compliance with basic rules and environmental objectives. The second pillar is a multiannual and flexible investment tool, more adapted to the local realities of each EU state, in particular to help support longer term projects.

These two pillars will be simpler and more flexible while the states’ detailed actions in their plans will be agreed on the EU level. Thus, each EU state would then develop their own strategic plans – approved by the Commission – setting out how they intend to meet the new CAP objectives. Rather than on compliance, the attention will be paid more on monitoring progress and ensure that funding is focused on concrete results. Moving from a one-size-fits-all to a tailor-made approach means the policy and its real-life implications will be closer to those who implement it on the ground. Besides, support for farmers will continue through the system of direct payments.

The future CAP should reflect higher sustainable development ambition regarding resource efficiency, environmental care and climate action. Among others, new CAP proposals include:

·         Encouraging the use of modern technologies to support farmers on the ground and provide greater market transparency and certainty;

·         Greater attention to encourage young people to take up farming, to be coordinated with Member States' own powers in such areas as land taxation, planning and skills development;

·         Address citizens' concerns regarding sustainable agricultural production, including health, nutrition, food waste and animal welfare;

·         Seek coherent action among its policies in line with its global dimension, notably on trade, migration and sustainable development; and

·         Creating an EU-level platform on risk management on how best to help farmers cope with the uncertainty of climate, market volatility and other risks.

Future CAP will have common objectives and measures: from common set of measures, the EU states, either at national or regional level, will be able to pick their preferred panel of options to achieve the goals set at EU level. Moving from a one-size-fits-all to a tailor-made approach means that the EU requirements will be reduced to a strict minimum. The actual needs on the ground will be assessed and fed by the states into a CAP strategic plan approved at the EU level; the Commission aims at establishing “a pact of trust” with the EU rural areas and the farmers. Strengthening of farm advisory services for farmers and the full implementation of geospatial aid applications will also of course further support the simplification of aid applications and the implementation of investment measures.

CAP role in promoting rural prosperity

The CAP is not only acting on the farming sector, but helps boosting local rural economies and enhancing rural prosperity. Rural development funds can for example support the setting up of an artisan's business. New jobs' opportunities and increase of growth potential can appear in rural areas through support of new rural value chains such as clean energy, the emerging bio-economy, the circular economy and ecotourism, investments in infrastructure, natural and human capital, including vocational training, programmes to develop new skills, quality education and connectivity. “Smart villages”, as an emerging concept, will help communities address issues of inadequate infrastructures and employment opportunities.

Towards fairer and just support for agro-SMEs

In 2015, the first year of implementation of the last CAP reform, 20% of farmers in the EU received around 80% of direct payments. This raises understandable concerns of economic efficiency and social equity in the public debate. In fact, this reflects the concentration of land and the nature of the support, which is largely area-based.

Furthermore, more than half of its beneficiaries are very small farms and most of the payments (72% in 2015) go to medium-size professional (family) farms (from 5 to 250 ha) who manage most of the EU agricultural land (71%) hence are the main responsible for the delivery of public goods and environmental benefits.

Still, the Commission is committed to explore ways to further target direct payments more effectively and ensure a fair and better targeted support of farmers' income across the EU, as evoked in the Reflection paper on the future of EU finances. The following non-exhaustive list of possibilities should be further explored:

·         A compulsory capping of direct payments taking into account labour to avoid negative effects on jobs;

·         Digressive payments could be introduced as well, as a way of reducing the support for larger farms;

·         Enhanced focus on a redistributive payment in order to be able to provide support in a targeted manner e.g. to small- and medium-sized farms;

·         Ensure support to genuine farmers, focusing on those who are actively farming in order to earn a living (and not a part-time job).

Future CAP in supporting farmers’ efforts to protect environment

Farmers receiving income support from the CAP will have to apply various environment- and climate-friendly practices. The EU states will determine the details, in line with the need to meet the EU objectives but also taking into account national, regional and local circumstances. The system will draw on strengths currently observed in the CAP but will involve fewer and less complex rules in EU legislation.

Eco-friendly action which goes beyond this foundational level of good practice will be supported through schemes which are voluntary for farmers - at a relatively basic level, and above that more advanced schemes. Important that the EU states will be responsible for designing the schemes, in such a way as to meet EU objectives translated into national, regional and local terms.

The CAP will also place strong emphasis on unlocking the potential of research, innovation, training and the use of advice to improve care for the environment and climate, including through greater resource efficiency.

Start-ups, young farmers and generation renewal in the sector

Generational renewal should become a priority in a new policy framework; here the EU states are in the best position to stimulate generational renewal using their powers on land regulation, taxation, inheritance law and/or territorial planning.

CAP should give flexibility to the EU states to develop “tailor made schemes” that reflect the specific needs of their young farmers.

Thus, CAP strategic plans could include support for skills development, knowledge, innovation, business development and investment support. The CAP should also help mitigate this risk in the first years after launching a farming business by providing an EU-wide system of support to the first installation.

Access to financial instruments to support farm investments and working capital should be facilitated and better adapted to the investment needs and higher risk profiles of new entrants. Support to the new generation of farmers could be combined with the appropriate incentives to facilitate the exit of the older generation and the transfer of knowledge among generations as well as to increase land mobility and facilitate succession planning.

EU in stimulating agro-investments and financial support 

A flexible CAP investment tool is essential to support competitiveness, innovation, climate change adaptation and mitigation and ultimately the sustainability of agriculture and rural areas. 

Modernising a farm, setting up new technologies, renovating irrigation systems are all actions that require a lot of frontload money and are substantial financial efforts that farmers cannot be expected to do on their own. Available public funds for grants are not sufficient to address the growing investment needs of the sector. Rough estimations show that the market gap for financing agriculture in the EU-27 (without the UK) is between €1.6 and €4.1 billion for short-term loans, and between €5.5 and €14.8 billion for long-term loans.

Financial instruments, such as loans, guarantees and equity funds, can ease access to finance for those farmers (e.g. small holders, new entrants, etc.) or agro-food producers, who find it difficult to obtain the necessary funds to either enter the business or develop it. By bringing together EU and private funding, they shall have a multiplier effect, i.e. increased investment volumes and leverage.

Perspectives  

During 2018, discussion and work on the concrete objectives, architecture and design of the future policy will advance in parallel with the work on the next MFF. It will be done through some forms of “impact assessments” exploring different options by making use of the elements gathered from the states and farmers, e.g. using the public consultation’s results carried on in 2017, by Re-Fit inputs, the outcomes of the Cork 2.0 “The CAP: have your say” conference and intensifying the collection and processing of evidence.

Following the expected Commission proposal for the next MFF in May 2018, legislative proposals on the future CAP will be revealed before the summer-2018.

More information in:

Communication (http://europa.eu/rapid/press-release_MEMO-17-4842_en.htm?locale=en

Source: Commission press release “The future of food and farming”, Brussels, 29.xi.2017. In:   

http://europa.eu/rapid/press-release_IP-17-4841_en.htm?locale=en; Latvian version at: http://europa.eu/rapid/press-release_IP-17-4841_lv.htm