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? 2

How much: the path of CAP expenditure 1980-2020 billion EUR (current prices) 70 EU-10 EU-12 EU-15 EU-25 EU-27 EU-28 60 50 40 30 20 10 0 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 Export refunds Other market measures Market expenditure Coupled support Decoupled support Direct payments Rural development Source: DG Agriculture and Rural Development. 3

For whom: redistribution of Direct Payments Source: DG Agriculture and Rural Development. 4

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 5

The objectives of CAP reform Challenges Reform objectives Policy objectives Viable food production Enhanced Economic Fairer competitiveness Sustainable Improved Greener management of natural Environmental sustainability resources and climate action Simpler Greater Balanced territorial effectiveness Territorial development 6

100 150 200 250 300 50 0 1948 (2005 = 100) Source: World Bank 1950 1952 1954 1956 Annual real commodity price indexes 1958 1960 1962 1964 1966 Agriculture 1968 1970 1972 1974 1976 1978 Fertilizers 7 1980 1982 1984 1986 1988 Energy 1990 1992 1994 1996 Metals & minerals 1998 2000 2002 2004 2006 2008 2010 2012

US energy prices… 25 ( $ per mmbtu ) Crude oil (World Bank average) 20 Natural gas (US) Coal (Australia) 15 10 5 0 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Source: World Bank. 8

…and their link to world natural gas prices 20 ( $ per mmbtu ) US 15 Europe Japan (LNG) 10 5 0 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Source: World Bank. 9

Climate change – Possible impacts on EU agriculture ▲ Floods risk ▲ Hotter and drier summers ▲ Sea levels ▲ Risk crop pests, diseases ▲ Crop, forage yields ▼ Animal health, welfare ▼ 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 ▼ Water availability ▲ Risk drought, heat spells Source: DG Agriculture and Rural Development, based on EEA reports, JRC ▲ Risk soil erosion and MS academic studies. ▼ Growing season, crop yields ▼ Optimal crop areas 10

Importance of primary sector in employment 11

How: the future CAP at a glance Enhanced Improved Greater competitiveness sustainability effectiveness Enhanced market Greener Direct Payments Improved targeting orientation Better functioning of the Greener Rural Development More equitable distribution food supply chain Bridging the gap between Increased focus on Strategic approach to knowledge and practice research and innovation spending 12

How: enhanced competitiveness Phasing out of quotas and other restrictions to production  Enhanced market Streamlining market measures; enhancing the safety net  orientation Strengthening the crisis management mechanism  Better Reinforced framework for POs and IBOs  functioning of the Financial support for creation of Producer Organisations  Strengthened support to short supply chains  food supply chain Bridging the gap European Partnership for Innovation in Agriculture  between Enhance agricultural research and knowledge transfer  knowledge and Enhance Farm Advisory Services  practice 13

EU-28 agricultural trade structure, 2003-13 in million Euro Source: COMEXT 150000 Exports 100000 50000 0 50000 100000 Imports 150000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Commodities Intermediate Final products Other products Confidential Trade Balance 14

100 150 200 250 300 350 € /T 50 03/07/01 Source: elaboration by DG Agriculture and Rural Development 03/11/01 03/03/02 03/07/02 03/11/02 03/03/03 03/07/03 03/11/03 EU cereal support price 03/03/04 EU competitiveness - Wheat 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 EU Wheat Rouen 03/07/07 101.31 15 03/11/07 03/03/08 03/07/08 03/11/08 03/03/09 03/07/09 03/11/09 US SRW Wheat 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

€ /100kg carcass 100 150 200 250 300 350 400 450 03/01/00 347 Source: elaboration by DG Agriculture and Rural Development 03/06/00 03/11/00 324 03/04/01 03/09/01 EU Intervention Price 301 03/02/02 03/07/02 03/12/02 03/05/03 EU competitiveness - Beef 03/10/03 03/03/04 03/08/04 03/01/05 US Omaha 03/06/05 03/11/05 03/04/06 03/09/06 16 156 03/02/07 EU Beef A/C R3 03/07/07 03/12/07 03/05/08 03/10/08 03/03/09 03/08/09 03/01/10 Brazil Arroba do boi 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

100 150 200 250 300 350 400 450 € /T 15/01/00 Source: elaboration by DG Agriculture and Rural Development 15/06/00 15/11/00 15/04/01 15/09/01 EU Milk Equivalent Support Price 15/02/02 282 15/07/02 15/12/02 15/05/03 EU competitiveness - Milk 15/10/03 15/03/04 15/08/04 263 15/01/05 15/06/05 15/11/05 244 15/04/06 World Milk Equivalent Price 17 15/09/06 225 15/02/07 15/07/07 15/12/07 220 15/05/08 15/10/08 15/03/09 15/08/09 15/01/10 15/06/10 EU Milk Price 15/11/10 15/04/11 215 15/09/11 15/02/12 15/07/12 15/12/12 15/05/13

How: improved sustainability Introduce mandatory "green" practices at farm level Greener direct  Link these practices to 30% of direct payment budget  payments Reinforce cross-compliance  Greener rural Priorities on "resource efficiency" & "eco-systems"  Enhance ambition for environment/climate measures  development Mandatory min of 30% for environmental actions spending  European Partnership for Innovation in Agriculture Increased focus  Enhance agricultural research and knowledge transfer  on research and Enhance Farm Advisory Services  innovation 18

How: greater effectiveness Improved Provisions for active farmer and young farmers  Green payment  targeting Specific support to regions, sectors and farm size  More equitable Convergence of payments among MS  Convergence of payments among farmers  distribution Flexibility in choice of regionalisation for MS  Strategic Improved integration with other EU policies  approach to Strategic approach in rural development programming  Improved monitoring and evaluation of policy  spending 19

The new greening architecture of the CAP Implementation mechanism Voluntary with compensation for cost incurred and income forgone environmental Rural Cumulative Mandatory benefits development with financial support (decoupled “green” Greening payment per hectare) Regulatory Cross compliance (Statutory Agricultural area Management Requirements and (eligible for direct payments) Good Agricultural Environmental Conditions) 20

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 Thank you 21