Reform of the CAP

The European Parliament is busy tabling amendments and agreement is a long way off at the latest meeting on CAP reform in Brussels, Joan Noble says

Over 7000 amendments have been tabled so far to the European Commission’s proposal to reform the Common Agricultural Policy. It is clear that the Parliament is keen to emphasise their new role as a legislator as they examine the proposal in detail. The Lisbon Treaty, which came into force in 2008, extended powers on agricultural legislation to the European Parliament, who is taking its responsibility seriously. Substantive discussion on the reform is seen as a priority to the current presidency of the council, Cyprus, but there are so many diverse views and considerable lobbying is going on in Brussels. As amendments are tabled it is clear that agreement is a long way off.

New techniques
The Lisbon Treaty not just extended legislative power to the European Parliament on agriculture but changed the way legislation is enacted. No longer is it up to the 27 governments to agree the proposal (where often compromise was agreed with trade offs to meet voting requirements). Now the European Parliament’s agricultural committee considers the proposal and puts forward amendments which for approval at the European Parliament’s plenary session.
Once the amended proposal has been approved by the Parliament, the European Commission has to give its consent to the amendments and put forward an amended proposal to the Council. If the Commission does not agree with the Parliament’s amendments, the Council has to adopt them unanimously and the legislation may have to go through the conciliation process for the reform to find its way to the statute book. It is now a longer and more complicated process with far more legislators involved.

Intervention proponent
The rapporteur of the European Parliament committee on agriculture and rural development, French MEP, Michel Dantin, favours intervention in European agricultural markets – particularly to protect farmers from the volatility of a free market. However, there are many MEPs with more liberal views. The Single CMO was a first step to a more market orientated agricultural policy and the European Commission was hoping, with their proposal, to extend the more flexible less interventionist approach.
The plan is to abandon production quotas in both milk and sugar sectors. Already Dantin has proposed an amendment to extend sugar quotas until 2020. This will not address the problems that have emerged in supplies of sugar for the food industry since the 2006 reforms. It is clear that market management in that sector has not been enough to secure supplies.
The CAP reform proposal includes provision for the continuation of contractual arrangements between farmers and processors for both sugar and milk. While this may be anti-competitive, it is necessary especially as the processing industries become more consolidated.
In the explanatory statement in the Dantin report, a paragraph on milk says: “Regarding milk and milk products and taking into account the repeated market crises and the projected abolition of the quota scheme, an aid and levy system based on individual milk production trends needs to be put in place, should the market become seriously disrupted. This system should be such as to encourage producers, when market prices come close to the reference prices, to take collective responsibility for dealing with market fluctuations. In some cases, an approach along these lines could serve to right the market to the point at which private storage aid or public intervention would not be necessary.”
As always, money is a problem. While some MEPs are keen to see the agricultural budget stay the same in real terms, the Cypriot presidency, keen to get a budget deal by the end of this year, seems to be moving towards the more realistic approach of adjusting spending downwards. This seems obvious in the current economic climate as so many European countries are affected by the continuing debt crisis.
The continuing euro crisis adds further difficulties for the legislators. Currency fluctuations complicate the picture and can have a significant impact on trade flows. It is important though that the EU legislators do not agree a reformed CAP that will disadvantage the important food industry in Europe, whose growth must be encouraged to help bring Europe out of this prolonged recession. A competitive food market in Europe is an essential part of this.

Trade agreements
The Commission estimates that the EU economy will be boosted by €250 billion with trade agreements being negotiated. It estimates that once the agreements with Canada, India, Singapore, Malaysia and Mercosur are confirmed there could be a boost of 2% to GDP as exports would increase.
The dairy sector is well placed to take advantage of the new agreements: this is the way forward while the Doha talks are stalled. Talks with Japan if agreed are likely to significantly increase exports of processed foods. The Japanese market is very protective and apart from import tariffs, its market is protected through non tariff barriers. Japan is already a large export market for EU food and agricultural products. A free trade agreement with South Korea increased dairy exports substantially and EU food manufacturers should respond quickly to take advantage of these trade agreements when they are finalised.
EU farmers and agricultural production may be protected through the high import tariffs that are charged now but if the stalled Doha talks are reinvigorated (although there is little sign of that as the global economic downturn is conducive to greater protectionism) and as more free trade agreements are agreed, agricultural production will have to be able to compete on the world market with less protection.
With the world’s population increasing the OECD-FAO predicts that food production has to to increase by 60% over the next forty years to meet demand. The OECD-FAO suggests that it is important that yields and productivity are improved to meet demand as land is limited. The EU regulators should keep this in mind and allow a more market orientated agricultural policy to ensure a competitive agricultural policy to meet future needs not just in Europe but through exporting to other countries as well.

Joan Noble is a leading commentator on European affairs. To comment on Euro View, e-mail us at [email protected]