Lithuania oversees decision on CAP reform
The Lithuanians took over from the Irish to preside over the council of ministers as of 1 July. The Lithuanian president, Dalia Grybauskaitė says he hopes for a “better, stronger, more united future together.” There are still divisions on CAP reform and, while the Irish were successful in achieving a political settlement on CAP reform and the multiannual financial framework prior to stepping down, there are many areas of the reform package still uncertain.
The political agreement dealt with many of the controversial issues. However, it is now up to the Lithuania to progress the legislative texts through the council of ministers and there are some issues still undecided. The final text was sent to delegations on 6 September. This is unlikely to be just rubber-stamped. Much debate and political bargaining about the full legislative texts will inevitably be followed by more questions over the detailed commission rules further down the line.
Four laws
The political agreement relates to four European parliament and council regulations on (1) direct payments, (2) the single common market mechanism, (3) rural development and (4) horizontal measures on financing, managing and monitoring the CAP.
Member states that use historical references for calculating direct payments (the basic payment scheme) will have to change to base area payments per hectare. There are several options as to how this can be achieved. In addition, 30% of the allocation given to each farm is for green practices, although existing beneficial practices (for example organic production) can be considered to replace the requirement for greening payments.
There is a scheme to encourage young farmers under 40, and member states will be able to use 10% of the allocated payments to top up payments for small farmers, and up to 5% for farmers in less favoured areas or areas with natural constraints. In addition, existing loopholes will be closed to ensure that only genuine farmers receive direct payments. The year 2014 will be a new reference year for land area, but there will be a link to the 2013 direct payments to cut the risk of speculation. Direct payments will be cut if payment estimates are higher than the available pillar 1 budget, but there is likely to be more debate on this controversial issue in the coming months.
A new preamble to the draft regulation states, “In order to ensure the viable development of products and thus a fair standard of living for dairy farmers, their bargaining power vis-à-vis processors should be strengthened, which should result in a fairer distribution of value-added along the supply chain.” Producer organisations are encouraged. Later, the draft talks about improving the links between the commission and member states’ competition authorities because of the high concentration in the food industry.
Market management
On market management mechanisms, it was agreed to continue sugar quotas until 30 September 2017. No provision has been made to continue milk quotas, which end automatically as the regulation does not allow for their continuation. The importance of protected designations of origin for cheese is highlighted, as is the need to protect particularly small or vulnerable rural regions following the demise of milk quotas. Member states will be allowed to regulate supplies of such cheese if necessary. There is to be a revision of the current systems of intervention and private storage aid to make these schemes more “responsive and efficient.”
A new market measure to be introduced includes a safeguard clause for all sectors, as well as a €400 million reserve for the commission to use in response to any market difficulties. This will be funded by reducing annual payments and if not used, will be added to the direct payments the following year.
The school milk scheme is extended, together with a school fruit and vegetable scheme, to encourage healthy eating habits by children. The authority to decide which milk products are eligible for the scheme has been delegated to the commission, along with the rules on marketing and price monitoring. Aid for the use of SMP in animal feed and casein in cheese will be abandoned.
Changes too to the second pillar on rural development will mean that member states will have to spend at least 30% of their rural development money on measures related to land management and measures to battle climate change. The new rules envisage more flexibility and allow member states to decide on their own programmes to tailor make the schemes to best provide for their own rural environment. One priority will be to promote the organisation of food chains to include processing and marketing.
The new regulations should come into force on 1 January 2014 so the Lithuanian presidency has quite a task ahead, as there is much detail to be decided amongst the 28 member states. It is unlikely that much will be agreed until the end of the year. This will not give the authorities enough time to introduce the new schemes in time for 1 January so transitional arrangements also will have to be finalised. The commission is therefore proposing that 2014 will be a transition year for the direct payments scheme and the new systems will be in place from 1 January 2015 instead.
These reforms clearly are not as radical as past reforms have been and in some ways entrenches the protectionism engrained in the CAP. They certainly do not enhance the recent trend towards liberalization and freer markets, the aim of earlier reforms, including MacSharry and Fischler. There is much flexibility in the way the rules can be interpreted by member states, and that in itself will lead to very different practices in different areas of the EU.
The European commissioner for agriculture, Dacian Ciolos, states that the agreement leads to “far reaching changes, making direct payments fairer and greener” and strengthens “the position of farmers within the food production chain and making the CAP more efficient and more transparent”. Time will tell, when the detailed legislation is finally agreed, if this is the case.
