Modernising and Simplifying the Common Agricultural Policyfile/170918_Cyprus_Haniotis.pdf ·...
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Modernising and Simplifying the Common Agricultural Policy Cyprus – 18 September 2017 Tassos Haniotis Director AGRI.C - Strategy, Simplification and Policy Analysis European Commission #FutureofCAP
Transcript of Modernising and Simplifying the Common Agricultural Policyfile/170918_Cyprus_Haniotis.pdf ·...
Modernising and Simplifying the Common Agricultural Policy
Cyprus – 18 September 2017
Tassos Haniotis Director
AGRI.C - Strategy, Simplification and Policy Analysis European Commission
#FutureofCAP
2
Summarising the CAP debate
Achievements of the CAP reform path
• Bridging the gap between world and EU farm prices, thus increasing competitiveness
• Turning the EU from a major trade player for both exports and imports into a net agro-food exporter
• Providing relative income stability within a very volatile income and price environment
Shortcomings of the CAP reform path
• Despite progress, the environmental performance of EU agriculture requires further improvement
• Productivity growth is mainly driven by the outflow of labour, and less by research or innovation
• Questions on equity, safety net and simplicity of the CAP are still hotly debated
Drivers and future challenges
• The changing commodity, economic and price environment
• The changing trade environment – especially the shift from multilateral to regional agreements
• New climate change, environmental and broader sustainability priorities
2
The path of CAP reform…
Source: DG AGRI.
0,0%
0,1%
0,2%
0,3%
0,4%
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0,6%
0,7%
0,8%
0
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40
50
60
70
80
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80
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81
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14
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15
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20
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% GDP billion EUR
Export subsidies Other market measures Coupled support
Decoupled support of which direct payments of which green payments
Rural development - environment/climate Rural development - other measures CAP as share of EU GDP
EU-10 EU-12 EU-15 EU-25 EU-27
outlook 2015-2020
3
4
…bridged the gap between EU and world prices…
Source: AGRI calculations based on European Commission AGRI and OECD data.
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
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
Ratio between EU and world prices
Wheat Milk Beef (US) Beef (BR) Sugar
…with all the pros and cons this brings…
Source: DG Agriculture and Rural Development calculations based on ESTAT and OECD/FAO data.
100
150
200
250
300
350
400
450
500
15/0
1/0
0
15/0
6/0
0
15/1
1/0
0
15/0
4/0
1
15/0
9/0
1
15/0
2/0
2
15/0
7/0
2
15/1
2/0
2
15/0
5/0
3
15/1
0/0
3
15/0
3/0
4
15/0
8/0
4
15/0
1/0
5
15/0
6/0
5
15/1
1/0
5
15/0
4/0
6
15/0
9/0
6
15/0
2/0
7
15/0
7/0
7
15/1
2/0
7
15/0
5/0
8
15/1
0/0
8
15/0
3/0
9
15/0
8/0
9
15/0
1/1
0
15/0
6/1
0
15/1
1/1
0
15/0
4/1
1
15/0
9/1
1
15/0
2/1
2
15/0
7/1
2
15/1
2/1
2
15/0
5/1
3
15/1
0/1
3
15/0
3/1
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15/0
8/1
4
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1/1
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6/1
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1/1
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4/1
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€/100 kg EU and world dairy prices
EU Milk Equivalent Support Price Oceania Milk Equivalent Price EU Farm Gate Milk Price
283
265 246
227 221 217
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…turned the EU from major agro-trade player…
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…in a rapidly expanding world trade environment…
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…into a net agro-food exporter
Source: COMEXT.
-150
-100
-50
0
50
100
150
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EU agricultural exports and imports 2005-15 (in billion €)
Commodities Other primary Processed (incl. wine)
Food preparations Beverages Non-edible
8
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Summarising the CAP debate
Achievements of the CAP reform path
• Bridging the gap between world and EU farm prices, thus increasing competitiveness
• Turning the EU from a major trade player for both exports and imports into a net agro-food exporter
• Providing relative income stability within a very volatile income and price environment
Shortcomings of the CAP reform path
• Despite progress, the environmental performance of EU agriculture requires further improvement
• Productivity growth is mainly driven by the outflow of labour, and less by research or innovation
• Questions on equity, safety net and simplicity of the CAP are still hotly debated
Drivers and future challenges
• The changing commodity, economic and price environment
• The changing trade environment – especially the shift from multilateral to regional agreements
• New climate change, environmental and broader sustainability priorities
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10
Although EU farm income remained relatively stable…
Source: AGRI calculations based on ESTAT and ERS/USDA data.
50
75
100
125
150
175
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
EU and US nominal farm income (2010=100)
EU net cash income US net cash income EU entrepreneurial income US net farm income
…EU agricultural productivity increased slowly…
80
85
90
95
100
105
110
115
120
125
130
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Productivity growth in EU agriculture
3-year moving average (2005=100)
Total Factor Productivity
Land
Labour
Capital
Intermediate inputs
Productivity growth key to meet challenge
• …of feeding more people… • …feeding them better nutritionally… • …and doing so in a resource-constrained world
Annual TFP growth in the EU is at 0.8%
• …with main productivity gains from labour outflow… • …substituted by capital prior to economic crisis • …but now growing without increasing capital inflow
EU-N13 exhibit higher productivity growth • … but from lower starting level… • …with some labour definition adjustments… • …and higher investment
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…impacting on positive environmental externalities
Source: AGRI calculations based on ESTAT data.
60
80
100
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
EU fertiliser use (average 2004-06=100)
Nitrogen Phosphorous GHG ag emmisions
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Summarising the CAP debate
Achievements of the CAP reform path
• Bridging the gap between world and EU farm prices, thus increasing competitiveness
• Turning the EU from a major trade player for both exports and imports into a net agro-food exporter
• Providing relative income stability within a very volatile income and price environment
Shortcomings of the CAP reform path
• Despite progress, the environmental performance of EU agriculture requires further improvement
• Productivity growth is mainly driven by the outflow of labour, and less by research or innovation
• Questions on equity, safety net and simplicity of the CAP are still hotly debated
Drivers and future challenges
• The changing commodity, economic and price environment
• The changing trade environment – especially the shift from multilateral to regional agreements
• New climate change, environmental and broader sustainability priorities
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Main issues for the future CAP debate: public money for private and/or public goods?
Source: DG AGRI.
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% GDP billion EUR
Export subsidies Other market measures Coupled support
Decoupled support of which direct payments of which green payments
Rural development - environment/climate Rural development - other measures CAP as share of EU GDP
EU-10 EU-12 EU-15 EU-25 EU-27
outlook 2015-2020
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Real commodity prices exhibit dramatic changes recently
Source: World Bank.
0
20
40
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80
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120
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160
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200
1960
1962
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1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
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2008
2010
2012
2014
2016
(2010 = 100)
Agriculture Fertilizers Energy Metals & minerals
Climate linked loss events in dramatic increase
Source: © 2017 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE (January 2017)
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Natural catastrophes worldwide - number of events
Meteorological events Hydrological events Climatological events
Meteorological events: Tropical storm, extra-tropical storm, convective storm, local storm Hydrological events: Flood, mass movement Climatological events: Extreme temperature, drought, forest fire
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Some useful reminders
Greening was introduced to address specific weaknesses in the CAP
• AEMs ambition at farm/local level was found to cover only part of the utilised agricultural area
• Cross-compliance and GAEC were considered too weak in terms of ambition and implementation
• An intermediate layer of a few, but similar measures for all was expected to raise overall ambition
The outcome of the decision making process made things more complex
• The "one-size-fits-all" approach turned out to be the source of most complications
• On grassland and crop practices, legislation ended up lagging behind developments on the ground
• The most limited measure (EFA) ended-up dominating the debate, often in isolation of its target
Still, the challenges that greening aimed to address remain pertinent
• Air, water, biodiversity and soil represent even higher challenges than before (climate change)
• EU legislation covers the first three, but no EU legislation exists for soil
• Best practices expand (with results takes years to materialise), but the knowledge gap increases
The risk we need to avoid: throwing the baby out with the bath water….
Greening raised questions on the link of its layers…
Cross compliance Question: Only regulatory elements included?
2nd layer of agri-environmental measures Question: Which criteria to link to 1st layer?
1st layer of agri-environmental measures Question: Conditional or not?
Control
Results
Performance
SIMPLIFICATION
MODERNISATION
Research
Innovation
Advice
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…that can be answered with a better distinction of tasks…
Farm level
Free choice of best practices from MS list? Monitoring of performance and/or compliance of practices?
How to use of Farm Advice for farm-level feedback and improvements?
EU value-added
Which targets on climate, soil, air, water, biodiversity? Which global list of recognised best practices?
How to use evolving scientific knowledge as basis for EU-wide challenges?
MS/regional level
MS and/or regionalised relevant list of AECMs? Simpler legislation reflecting public goods targets?
Could control incentivise the use of new technologies?
Control
Results
Performance
Research
Innovation
Advice
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…linked to the targeting of both private and public goods
Cross-compliance
Presently, limited number of regulatory elements Is it possible to enhance with updated regulatory priorities?
Regionalised Basic Payment Scheme
National or regional average rate? MS choice of economic/agronomic criteria?
1st layer of best practice measure
1st layer of best practice measures
Flexible choice of MS from EU-wide list of best practices? Simplified and adapted control with use of modern technologies?
Free choice of best practice at farm level ?
Challenge: Strengthening
the joint delivery of
private and public
goods
Income support Voluntary choice of IST
Voluntary AECMs Investments
Private Goods
Public Goods
Policy response: better targeting of soil, air, water,
biodiversity based on regional
challenges
Region1 Region2 Region3 Region4
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Investing in a modern farming sector
Accompany the shift to new financial instruments
address access to land and capital for young farmers better link new financial instruments to farm assets increase job attractiveness for younger generation
Prioritise knowledge-based climate change action
reliance on technological transformation of farming modernisation of the sector to address new challenges
simplification of support and control mechanisms
Better link of research/innovation/advice
incentives to recognise risk-taking nature of farming encouragement of feedback between advice and farm practices
address knowledge gap between farmers
Challenge: need for
generational renewal of human
and physical capital
Addressing the sectorial/horizontal dimension
of growth and jobs
Addressing the territorial dimension of growth and jobs
CAP funding What link to CSF?
Policy response: farm sector
renewal based on
Knowledge and
innovation aiming to address
sustainability
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Turning tensions into synergies and better targets
Tensions that the future CAP has to address
• The economy versus the environment – and the impact of cost pressure on environmental ambitions
• Subsidiarity versus simplification – especially with respect to EU value added priorities
• Jobs versus growth – the difficult, but also promising impact of new technologies on agriculture
Synergies that the future CAP has to develop
• Find the right balance of support between the private and the public good – both face market failures
• Redefine the balance between EU, MS and farm responsibilities – to simplify and avoid policy failures
• Address jobs and growth challenges in rural areas and in the food chain – to enhance resilience
Main questions that the future CAP has to reassess and address
• Better targeting requires a clear choice of the main target – is it the farm or its land?
• Shift towards performance requires a fundamental rethinking of control logic (what, why, how)
• Technologies (especially of EU-lead) provide major opportunities, but meet resistance in their use
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The future of Food in the EU and the CAP
Drivers on the demand side
• Food quantity and food security – coexistence of food abundance and food poverty
• Food quality and sustainability – different priorities of public policies and private initiatives
• Food and the health debate – the challenges for human, animal and plant health
Constraints on the supply side
• Price "messages" do not always reflect consumer preferences (sometimes, they "create" preferences)
• Adjustments in production patterns are both costly and long-term (and may miss moving targets)
• The role of food chain in passing the right messages to producers is (for many) put into question
Where do producers and consumers meet?
• The role of retail as a driver for change (from the creation of new products to waste)
• The role of food industry in driving tastes and preferences (and the "salt, sugar, fat" debate)
• The role for food policy to achieve objectives by balancing regulation, incentives, subsidies
Reports and data available at:
https://ec.europa.eu/agriculture/index_en.htm
https://ec.europa.eu/agriculture/policy-perspectives/index_en.htm
https://ec.europa.eu/agriculture/policy-perspectives/impact-assessment/index_en.htm
https://ec.europa.eu/agriculture/markets-and-prices/index_en.htm
https://ec.europa.eu/agriculture/events/2016-outlook-conference_en
https://ec.europa.eu/agriculture/statistics_en
https://ec.europa.eu/agriculture/statistics/facts-and-fugures en
https://ec.europa.eu/agriculture/cap-indicators_en
https://ec.europa.eu/agriculture/consultations/cap-modernising/2017_en
Thank you for your attention!
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