International Agricultural Policy a.y. 2014-2015 The... · 2019-12-16 · The Treaty of Rome 1957...
Transcript of International Agricultural Policy a.y. 2014-2015 The... · 2019-12-16 · The Treaty of Rome 1957...
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International Agricultural Policy
Prof. Francesco Zeccae-mail: [email protected]
The influence of Common Agricultural Policy (CAP)
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The Common Agricultural policy (CAP) Evolution• 1957 Treaty of Rome :Common Agricultural Policy;
• CAP as a ”coupled” model of agricultural policy (protectionism);
• CAP reforming during the 80s and 90s;
• Agenda 2000;
• Fishler Reform;
• Health Check;
• The new CAP 2014-2020.
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The Treaty of Rome 1957▪ The Treaty of Rome establishing the EEC provides for member
Countries to intervene in agriculture through a CommonAgricultural Policy based on the followings principles:
▪ Single Market(same trade policy);
▪ Priority to the absorption of Community goods;
▪ Financing solidarity(not depending from the advantages forproducts and/or beneficiary Country);
▪ Article 39 of the Treaty defines the objectives of theintervention;
▪ Article 40 of the Treaty defines the adopting instruments.
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The CAP genesis
• EU Reg.26/1962 general framework of CAP;
• Similar agricultural policies in the six foundingCountries;
• Agriculture and CAP as a ”laboratory” ofEuropean integration;
• The CAP is the first (and for a long time the only)common policy;
• For at least two decades, the CAP is considered thecorner-stone of EU.
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The CAP objectives• Income support for a large population of family farms;
• Increase in production and productivity;
• Food security (increase in self-sufficiency ratio);
• Market stability;
• Consumers protection(adequate standard of living).
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The CAP instrumentsPrice support and market intervention policy:
• very strong for the key sectors (cereals, beef, milk),• weaker for the Mediterranean crops (wine, fruits & vegetables);
The base-mechanism of price support:
▫ minimum guaranteed price;▫ Open ended intervention of buying agencies;▫ Import taxation and export subsidies.
The ”structural” policy (aids to investments in farming) isweak and residual: only the 5% of the total agriculturalexpenditure.
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Price support and market intervention▪ For each agricultural product is defined by a special regulation the
common market organization (CMO)(from 2007 one CMO for all the agricultural products);
▪ CMO represents the only one juridique frame of agricultural market;
▪ The operating mechanism is based on four price categories defined annually:
Target price indicated by the Community ;
Intervention price or minimum guaranteed price;
Admission price for imports;
Restitution price return for the export (of surplus products).
▪ Application of the principle of automatic guarantee and unlimited.
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The coupled model of CAP• The support given by price policy is ”coupled” to
the quantity of production:
▫ It supports the generic ”status” of agricultural producer;
▫ It cannot target the support to specific goals, since it cannot ”select” among different farmers, areas, production modes;
▫ It implies all the protection needed to keep domestic prices well above world prices.
• It is socially uneven and economicallyinefficient.
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The coupled model of CAP
• The distribution of the benefit of coupled supportamong farmers is uneven:
▫ 10% of farms (the largest, and less in need for income support) capture 80% of the total support
• The distribution of the cost is uneven as well:
▫ it is paid by consumers;▫ It acts as a digressive tax (Engel's law);▫ (The poorest) consumers support (the richest) farmers.
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The coupled model of CAP
The support is inefficient
▫It is an incentive to over-produce;
▫It is an incentive for low quality and not environmentallyfriendly production;
▫It insulates domestic market from international markets;
▫It distorts both production and consumption;
▫It could be see by the farmers as substitute of structuraladjustment.
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The coupled model of CAP• The support is uneven and inefficient, but it is
“winning” on the political market:
▫ It benefits a large population of farmers (more o less, but to everybody);
▫ Its cost is ”hidden” in the ”market” price;
▫ Consumers don’t realize the bill they are paying, and they are not organized as a pressure group;
▫ Its implementation is easy and its administrative cost relatively low, at least until the EU is a net importer.
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The crisis of the coupled model• During the eighties:
▫ Growing surpluses (milk, cereals, beef, wine);
▫ Growing expenditure and financial unbalances among membercountries (UK’s rebate: financial mechanism reducingcontribution) ;
▫ Environmental (in)sustainability;
▫ International (in)sustainability (trade disputes and GATT UruguayRound);
▫ Decline of political importance of agriculture;
▫ Deterioration of CAP “reputation” within EU: from corner-stone to thumb-stone.
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The influence of GATT Uruguay Round
• Until the 1986 agricultural has been excluded fromGeneral Agreement on Tariff and Trade(GATT);
• In 1986 the structure of the CAP is put in the indictmentduring the GATT Uruguay Round ended in 1994;
• The effects of the CAP are not in line with the multilateralagreements on trade in which is inserted agriculture;
• The Uruguay Round states the incompatibility of allsubsidies to agricultural production except those that meetthe principle of decoupling.
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The CAP reform in the ’80s
• The first approach to CAP reform is based onadministrative measures ( defensive and gradualist) :
▫ ”Cautious” price fixing;
▫ New structural policy (less intensive farming);
▫ Reconsidering the principle of unlimited guarantee, introduction ofquotas mechanism (milk quotas);
▫ Co-responsibility principle(penalize those in the previous campaign hasexceeded certain levels of production).
• The ”core” of the CAP (price policy) is not discussed; all themeasures are aimed at smoothing its undesiredconsequences.
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The CAP reform in the 80s:administrative
measures in practice
• Co-responsibility principle: modest reduction inguaranteed prices (2%) and recovery of financial resourcesfor the management of excess production;
• Limited guarantee: introduction of limits on the unlimitedguarantee on prices;
• Production control based on an individual referencequantity above which applied sanctions against themanufacturer,
• Budget stabilizers: automatic and progressive reduction ofthe minimum price guarantee.
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The CAP reform in the ’80s:new structural
policy• Numerous Community Initiatives on agro-environmental;
• Granting of an annual premium per hectare to farmers who
operate in environmentally sensitive areas;
• Interventions in support of extensification of crops and livestock,
and set-aside land;
• Overall agricultural policies based on requirements and
constraints and incentives.
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The Mac Sharry reform - 1992 ( first step
towards de-coupling)
• The Mac Sharry package:
▫ 30% reduction in support prices (cereals and beef);
▫ Set aside (exemption for small farmers);
▫ Compensatory payments for price reduction (fixed aids per hectare, partially de-coupled, based on a historical yield);
▫ ”Accompanying” measures (agro-environment).
• The reform is accepted by the US and ratified by GATT Agreement (1994): decoupling principle applied to the ”green box”/ compensatory payments in the ”blue box” (exempted).
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The Mac Sharry Reform
• The Mac Sharry reform is a turning point:
▫ It gives a clear signal about the decline of the old CAP, paving the way for a de-coupled model;
▫ It launches a new set of measures(accompanying measures), in the middle between market intervention and rural development;
• But only a first, timid and transitional step:
▫ Its budget cost is very high;
▫ It leads to extra-compensations and tend to “freeze” the uneven distribution of the support among farmers;
▫ Its main role is to close the GATT negotiation.
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Agenda 2000(Strategic document)
• The driving forces:
▫ Eastward enlargement (incompatibility of the old CAP in anenlarged EU);
▫ Implementation of the GATT Agreement (CAP reform”locked in” by International commitments);
▫ Growing importance of Consumers’ interests on new issues(quality, safety, environment);
▫ Further decline of the ”old CAP” in the process of Europeanintegration (from Economical Union to Political Union);
▫ Rural development Vs Market intervention (Corkdeclaration).
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Agenda 2000
• The general objective of Agenda 2000 has beenpreparing the ground for the Enlargement:
▫ screening the economic and social situation of the candidates;▫ reviewing all the policies of the EU, in order to promote their
adaptation;
• The most sensible issue is agriculture and, inparticular, the need of a radical CAP reform;
• For the first time the entire set of objectives of the CAPis under discussion:
• The new magic word is the multi-functionality ofEuropean agriculture.
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Agenda 2000 :the objectives
• Increase the capability to compete of Europeanagriculture;
• Sustain agricultural income and employment (but inthe context of rural development);
• Promote quality (no quantity);
• Compensate the production of Public goods, in theinterest of consumers and citizens:▫ Environment;▫ Food safety (in place of food security);▫ Animal welfare.
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Agenda 2000 : the instruments
• Less Market intervention(first pillar), more funds torural development(second pillar);
• Ulterior price reduction;
• Ulterior market orientation;
• More decoupled aids (only partially compensatingprice reductions);
• Simplification of bureaucratic procedures.
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Fischler mid term reform – 2003
:completing the decoupling process
• The support passed definitively from product toproducer (totally decoupled aid);
• The main form of support becomes the Single FarmPayment (income support for farmers);
• Cross - compliance: payments could be conditionedto proper environmental behavior of farmers;
• CAP charges no longer dependent on consumers buttax payers;
• Consequence: obligation to justify the expenditure onagriculture by the EU institutions.
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Fischler reform – 2003 :completing the
decoupling process
• Modulation mechanism(reduction of incomesupport of greater farms:2%) to obtain resources forrural development;
• Integration between the two pillars in order to makeacceptable policy to support agriculture;
• The reform is set in the sign of themultifunctionality of the primary sector despite thefinancial commitment is still insufficient;
• No more single policy with unique instrument butearly differentiation .
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CAP Health check – 2008:objectives
• Collect a number of considerations on the review clauses ofthe 2003 CAP reform;
• Propose changes that do not constitute a new reform;
• Adapt the 2003 reform to the period 2009-2012;
• Contribute to the discussion on future priorities in the fieldof agriculture;
• Finalize current impact analysis of alternative options.
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CAP Health check – 2008:actions
• Integration into the single payment of all coupledpayments in 2012;
• Creating national ceiling for specific support;
• Ulterior reduction of market support;
• Increasing the modulation of 10% by 2012;
• The modulation funds are devoted to achieving specificenvironmental goals: the contrast in climate change,renewable energy, water management, biodiversity.
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CAP 2014-2020• Confirmation of the joint in two pillar;• The first pillar direct payments completely decoupled;• No more single payment but seven types of payment;• The policies of the first pillar shall be established at
Community level and are fully funded;• The second pillar relates to the rural development
policies;• The policies of the second pillar are managed and
programmed at the National and / or Regional levelco-financed by the Member States;
• Integration and complementarity with the territorialcohesion policies.
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CAP OVERALL EVALUATION
• The decline of the old CAP has been ratified;
• Rural development has been simplified (thematicpriorities and not measures);
• Multifunctionality is still considered not as moderndimension of European Agriculture but as alternativesolution to the development of traditional productionactivities;
• Links stringent and complementarity between the first andsecond pillar;
• Differentiation of payments may result in the risk ofbureaucratization.
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The influence of CAP Reform at global level:
effects • The CAP reform tends to eliminate the weight of the
mechanisms of production support;
• The CAP reform shifts the interest towards a type ofagricultural activity to more functions;
• The CAP reform has been the key reference point ofnegotiation strategy within the WTO;
• With the revision of the agricultural policy the EU hascomplied with the requirements of the WTO byreducing trade distorting domestic support;
• Are seconded the constraints imposed by the WTO;
• EU attended to the pressures of DevelopingCountry(blue box favourite Developed Countries).
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The influence of CAP Reform at global level
Given the multiple aspects of the effects of reform andconsidering the different positions at the International levelit is detected:
1. An EU agricultural market far from being open toCountries in the Developing world;
2. An EU agricultural policy increasingly moved to ruraldevelopment;
3. An EU budget distributed in such a way as to beclassified as a type of support progressively exempt fromreductions made by the WTO.
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The influence of CAP Reform at global level
4. The financing of rural development by shifting theincome assistance appears feasible in DevelopedCountries;
5. The concept of multifunctionality disagreesDeveloping countries ;
6. The Developing Countries have difficulty infinancing policies non commercial ;
7. For this reason: opposition at multilateral level andstrict control of subsidies and payments toagriculture.
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The influence of CAP Reform at global
level
• The multifunctional approach is considered restrictivetowards a progressive opening of markets;
• The multifunctional approach is seen as an internalgoal of the EU to overcome their trade-distortingpolicies;
• The multifunctional approach is seen as poorlyapplicable in less developed Countries.
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The influence of CAP Reform at global
level• Need for a sharing of the multifunctional approach in
order to find convergence policies;
• Need of partial solution of trade and economic relationswith Developing Countries;
• Financial reinforcing of specific actions to policies forintegrated development of rural areas homogeneous ascompensation of lost political support to producers;
• North South conflict resolved through a significantincrease in financial resources to support the agricultureand contribute to the development.
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Sources• EC DG Agriculture :Agenda 2000 CAP for the future;
http://ec.europa.eu/agriculture/publi/review99/08_09_en.pdf
• EC COM (2010) 672 The CAP towards 2020: meeting the food, natural resources and territorial challenges of the future ;
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0672:FIN:en:PDF
• EC (2014) The EU’s common agricultural policy (CAP): for our food, for our countryside, for our environment;
http://ec.europa.eu/agriculture/cap-overview/2014_en.pdf
• EC (2012) The Common Agricultural Policy a story to be continued;http://ec.europa.eu/agriculture/50-years-of-cap/files/history/history_book_lr_en.pdf
• EC (2005) Fischler CAP Reform 2003;http://bookshop.europa.eu/en/the-2003-cap-reform-pbKF6004733/?CatalogCategoryID=un8KABstLQ4AAAEjIYcY4e5K
• EC COM(1991) 379 Reform of the Common Agricultural Policy (Mac Sharry)
http://ec.europa.eu/agriculture/cap-history/1992-reform/com91-379_en.pdf
• EC (2008) Health check of Common Agricultural Policy;
http://ec.europa.eu/agriculture/healthcheck/index_en.htm
• The Treaty of Rome 1957
http://www.epg.acp.int/fileadmin/user_upload/rometreaty2.pdf
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Sources
• EC (2014) Overview of CAP Reform 2014-2020
http://ec.europa.eu/agriculture/policy-perspectives/policy-briefs/05_en.pdf
• EEC Reg.26/1962
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:31962R0026&from=EN