reforms and the future of the CAP

1. reforms and the future of the CAP Istvan MADARASZ istvan_madarasz@yahoo.com PhD School of Economics and Management SZIE Gödöllő, Hungary Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

2. Outline • I. Introduction • II. 1992 – Mac Sharry • III. Agenda 2000 • IV. Mid-Term Review 2003 • V. Health Check and simplification • VI. CAP post-2013 • Conclusions Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

3. I. Introduction Hungary as a major food supplier of Europe until the 20th century Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

4. I. Introduction János KÁDÁR and the (post)communist regime Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

5. I. Introduction Hungary today Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

6. I. Introduction • Original CAP objectives • Principles for CMOs: • Historical background and specificities by product • CMOs in a dynamic world – SINGLE CMO • Not to exclude but to co-ordinate competition Modernization Stable food markets Income levels in agriculture Food security Consumer food prices • Unity of the market • Community preference • Common finance Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

7. I. Introduction • CAP: a policy facing the challanges of a diverse 21st century agriculture and that of rural areas Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

8. 1992 – Raymond Mac Sharry „The CAP reform agreement was an acheivement of enormous proportions. It succeeded in controlling surpluses, in controlling the budget, in raising farm incomes, in providing for environmental protection and in providing good quality food at reasonable prices for the consumer.” University of Limerick Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

9. II. 1992 – Mac Sharry Phenomena triggering a profound reform • Structural surpluses, price conflicts • Financial difficulties due to the anomalies of the exchange mechanism • Fiscal limits of the EU budget • Unsuccessful adjustments of the CAP in the 80s • Expansion of the rural development notion Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

10. II. 1992 – Mac Sharry Measures and elements • CMOs included in the 1992 reform: • 1996: F&V Cereals Oilseeds Protein crop Beef Ovine Tobacco input-based direct payments set-aside redifined institutional prices • Council regulation (EC) No 2200/96 of 28 October 1996 on the common organization of the market in fruit and vegetables • Council regulation (EC) No 2201/96of 28 October 1996 on the common organization of the markets in processed fruit and vegetable products • Council regulation (EC) No 2202/96 of 28 October 1996 introducing a Community aid scheme for producers of certain citrus fruits Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

11. II. 1992 – Mac Sharry Measures and elements (contd.) • 1999: wine • Accompanying measures Council regulation (EC) No 1493/1999 of 17 May 1999 on the common organisation of the market in wine Agri-environmental measures Afforestation Preferential pension scheme pre-RD measures Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

12. II. 1992 – Mac Sharry Criticism (general) • In spite of the profound reform of the cereals sector => temporary results and regaining structural surpluses • Highly protective CMOs ignored: sugar, milk • Supply control measures: costly and eludable • Fraud • Manifestation of the need for further reforms Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

13. Agenda 2000 „Agenda 2000 is an action programme whose main objectives are to strenghten Community policies and to give the European Union a new financial framework for the period 2000-06 with a view to enlargement.” European Commission Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

14. III. Agenda 2000 It was launched in 1999 in the form of twenty legislative texts relating to the following priority areas: • continuation of the agricultural reform; • increasing the effectiveness of the Structural Funds and the Cohesion Fund; • strenghtening the pre-accession strategy for candidate countries; • adopting a financial framework for the period 2000-06 in order to enable the Union to meet the main challanges of the beginning of the 21st century. Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

15. III. Agenda 2000 The importance of the 2000-2006 period – agriculture Developments arising from WTO talks Enlargement: 10 NMSs , pre-accession funds (PHARE, SAPARD, ISPA) An integrated RD scheme: 2nd pillar of the CAP (built upon former „accompanying measures”) Main objectives – agriculture (compliance with original ones?) Management of natural resources, landscape Maintaining rural communities: diversification of incomes The future of European rural areas: sustainability (2nd pillar) Competitiveness Food safety Environment, animal welfare Farm income Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

16. III. Agenda 2000 Measures adopted • price cuts; • partial compensation through direct payments; • modulation; • voluntary cross complience; • national envelope; • modifications to the supply management tools; • second pillar: more numerous and more integrated RD measures (young farmers, etc.) – FEOGA Guarantee and Orientation finance. Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

17. III. Agenda 2000 Evaluation • EU made major steps in terms of: • BUT the original concept was severly „diluted” by the compromise efforts adaption EU farmers to global tendencies handling the internal problems of CAP preparation for the enlargement The difference between EU price levels and that of global markets declined too slowly – remaining structural surplus Cereals remain the most subsidized sector (production area) Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

18. III. Agenda 2000 • BUT the original concept was severly „diluted” by the compromise efforts (contd.) Existing tension in beef and milk CMOs not eased Adopted measures did not satisfy WTO commitments/expectations - EU position in WTO talks weakened Illusionary budget savings Conditions for obtaining direct payments: performance falls short of expectations Enlargement: CEE countries Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

19. IV. Mid-Term Review 2003 „The studies indicate that „decoupling” aid from production would result in production adjustments where needed, but would clearly not lead to production abandonment.” European Commission Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

20. IV. Mid-Term Review 2003 Based on an initiative to technically adjust the Agenda 2000 package… „Further” decoupling: Single Payment Scheme (SPS) historical model, payment entitlement (PE) regional model, hybrid models Compulsory Cross Compliance – Farm Advisory System CMOs: some included in Council regulation (EC) 1782/2003, some under separate CMO reforms Strenghtening second pillar – EAFRD Modulation, national reserve Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

21. IV. Mid-Term Review 2003 Standard – SPS conversion (2005-2006-2007) SAPS – SPS conversion (2007-2008-2009) or 2011? Cross compliance implementation (GAECs: 2004-2005 SMRs: 2009-2011-2011) To be highlighted from a Hungarian point of view: Lack of „Bottom-up approach” in: Representation of agricultural interests (the Chamber?) Rural development (EAFRD scandals, LEADER) Farm advisory systems, rural extension Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

22. IV. Mid-Term Review 2003 Level of Support in the EU-15 and in Hungary (2004)(€/ha utilised agricultural area) Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

23. V. Health Check and simplifiation „The CAP has proven that EUagriculture can take such stepssuccessfully and change, but needs to allow farmersto adjust in the context of a predictable policy path.” Commission communication to the Council and the European Parliament Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

24. V. Health Check and on-going simplifiation • Single CMO, simplification of cross compliance (my experiences) • A quick reminder: Reform Treaty of Lisbon • Health Check (link to Budget Review) Mid-term review? Technical adjustment? Profound reform? The role of Marianne Fischer-Boel (Slovenian and French Presidency) Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

25. Assumptions to be drawn on the doorstep of the reform 2014-2020 • CAP seems to enter the fast lane • Continous efforts to meet market expectations and react (adjust) to global changes • Success each time or continous failure? • Hungary and NMSs: to jump on a moving train • Future vision: several scenarios Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

26. VI. CAP post-2013 Context • Latest developments in policy and on the markets; • Crisis and EU budget (2014-2020) • Environmental concerns and ambitions • Lisbon Alignment and increased role of the European Parliament (Dess Report) • Role of presidencies, Hungary included Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

27. PRECEDINGS CAP reform on the agenda of each presidency since 2008 Summer 2010: broad public consultation driven by the Commission Nearly 5,000 organisations, enterprises and individuals participated Many MSs declared preliminary positions COM Communication of November 18, 2010 takes note of the above circomstances Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

28. Place and role of the Communication in the decision making process First official COM position Requires official reaction from MSs Leaves vast room in politically sensitive issues Opportunity to harmonise MS positions Adopting conclusions (Council/Presidency) COM words legislative proposals based upon the discussions and the conclusions Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

29. Main content features of the PRES conclusions Majority of MSs accepts and supports the objectives proposed by COM Viable food production:farm income and competitivity of the sector Sustainable management of natural resources:public goods provided by farmers to be compensated Balanced territorial development:mainataining rural communities and employment (which are considered to contribute to the fulfilment of the EU2020 objectives) Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

30. Main content features of the PRES conclusions (contd.) Destiny of agriculture and rural areas are to be handled jointly in the future, too Strong and a two-pillar structures CAP is needed Pillar IPillar II Further simplification is needed (both for farmers and authorities) • Promoting competitivity • Enhancing innovation • Focus on environment and climate change • greener • more equitable Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

31. Main content features of the PRES conclusions (contd.) Direct payments DPs have already proven their value and usefulness; Remain a basic component of the CAP; Are deemed to compensate high EU standards; Also compensate public goods and services provided by the farmer; Equitable, pragmatic, economically and socially sustainable distribution, reducing the links to historical references on a step-by-step basis A transition period has to be established for adaptation; Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

32. Main content features of the PRES conclusions(contd.) Direct payments Certain extent of flexibility should be provided to the MSs; The possibility of coupling should be maintained for the sensitive sectors/region; SAPS should be available for the countries in question beyond 2014; Active farmers should be the primary beneficiaries; Capping is rejected by the MSs; Further greening is welcome, but it should not result in more complicated administration; LFA payments should stay in pillar II Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

33. Main content features of the PRES conclusions(contd.) Market issues EU agriculture must continue its market orientation to be more competitive; Existing tools form a safety net; COM should be more responsive when activating tools; More efficient functioning of the food chain is required: more equitable distribution of income; External trade: producers of third countries should respect the same standards as in the EU Risk management Increasing production risks should be tackled on EU level; The system should be voluntary and compatible with existing national schemes Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

34. Main content features of the PRES conclusions(contd.) Rural development Valuable policy that has to remain robust; Competitivity, sustainability, economic potential of rural areas: various tasks; Generation change => young farmers and new entrants; Infrastructure, knowledge; Diurect sales, local markets; Agri-environmental schemes are successful, should remain in use; Innovation is a central element: CAP both promotes and requires it; Climate change: agriculture is also involved in slowing the process and in adapting to it; Programming: common rules should not get more complicated, MSs should reflect their specificities even better; Striving for synergy with regional and cohesion policies Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary

35. Thank you for your kind attention Erasmus IP - SAFEPROINT, SZIE Gödöllő, Hungary