Examination of Witness (Questions 170-199)
Witness: Dacian Cioloº,
European Commissioner with Responsibility for Agriculture and
Rural Development, gave evidence.
[This evidence was taken by video conference]
Q170 Chair:
Good morning. You're most welcome, Commissioner. I am the Chairman
and I welcome you. Can we start with the questions?
Commissioner Cioloº:
First of all, I would like to apologise for my delay. I just
came from Parliament; I was invited for a discussion in a committee
discussing the future of the European Union, so this is why I
was a little bit delayed.
Q171 Chair:
You're most welcome, Commissioner. Could I just start by asking
this? In your mission statement, you have potentially conflicting
objectives that you might find it difficult to achieve through
the reform; in particular, there is the objective of delivering
high environmental production standards while, at the same time,
ensuring a fair standard of living for the agricultural community.
Are you confident that your reforms will deliver what you hope
to achieve through your mission statement?
Commissioner Cioloº:
Thank you very much for the first question. Of course, the challenges
that you have raised regarding agriculture are several. You talk
about delivery of public goods and the standard of living of farmers.
This is why I think that the first Pillar—[Interruption.]
There's just a little bit of a problem[1].
Q172 Chair:
Could we turn down the volume at this end? We are doing that,
Sir. I caught most of that, and it will be recorded, Commissioner.
Thank you. Carry on.
Commissioner Cioloº:
When we talk about agricultural policy for the future, first of
all I think we have to take into account the Treaty of the European
Union. One of the most important objectives of the Common Agricultural
Policy is to ensure a good standard of living for farmers, but
I think also the Common Agricultural Policy has to integrate current
challenges more and more. These current challenges are grounded
in the production and delivery of public goods around good management
of natural resources. This is why I think that the direct payment,
which was in the CAP, needs to remain to stimulate production[2],
because direct payments were coupled with production. With the
last reform in 2003 and the new reform that we propose, we will
reorient the objective of that payment in order to, first of all,
ensure a minimum level of income for farmers—ensure a minimum
stabilisation of the income of farmers—and, at the same
time, use this direct payment to stimulate farmers to produce
public goods and to link a part of these direct payments to the
delivery of public goods. Of course, I don't think there's a
contradiction between these two objectives, but it will depend
on the resources that we have for the Common Agricultural Policy.
Chair: Thank you. Commissioner,
can we just break for one moment to resolve a technical difficulty?
Commissioner Cioloº:
Okay, thank you.
Q173 Chair:
Commissioner, can I just ask one of your technicians to listen
for one moment? We've turned the volumes down at this end. We
understand the volumes at your end are too loud, or possibly you
might be too close to the microphone, Sir. How does that sound
to everybody? Commissioner, if I ask you just one last question
before I turn to a colleague: it looks from remarks you've made
that you prefer Option 2 of the Options you outlined. Is
that the end point of the reform, or an intermediate step towards
more radical reform, such as Option 3?
Commissioner Cioloº
: It will depend on the objectives
that we have in the future with the Common Agricultural Policy.
If we still want to ensure a good supply for our markets of products
with a high level of quality standards, as well as safety standards
and diversity, and at the same time we have not only cross-compliance
rules but also new attempts for our farmers regarding the delivery
of public goods, I don't see how our agriculture can, at the same
time, be competitive in the international market and have higher
level of standards than farmers in other parts of the world.
This is why I think that if the expectation of European society
evolves, of course the CAP will evolve also, proportionally.
If not, we have to make a choice. Do we want to
maintain our production capacity in the European Union with our
specific highlevel standards, also taking into account what
is happening in the world now with food security and food supply?
At the same time, do we need agriculture for 10 million
farmers to play a role in the management of natural resources?
This delivery of a public good means higher costs of production
for our farmers, so there is the issue of competitiveness and,
at the same time, the delivery of a public good only in Europe—not,
at the same time, in the United States, Latin America, Asia and
other parts of the world, in order to be on the same level of
competitiveness. If we have this specific request for our farmers
in Europe, I think we also have to maintain the instruments.
Maybe these instruments can evolve; maybe in the future we can
use more and more of the money to stimulate innovation, to stimulate
farmers to invest in innovation and modernisation. Maybe some
categories of farmer will need less direct payments than others.
We have already started this process with this reform. Generally
speaking, we have to have a proportion between our requests and
our capacity to support this policy financially.
Q174 Richard Drax:
Commissioner, good morning. Just to quote you, if I may, you
said recently that you felt there was a need to "renew the
legitimacy and credibility of the CAP". Both a public consultation
and the Eurobarometer have indicated that the public think the
CAP is going in the right direction, so why do you need to legitimise
it?
Commissioner Cioloº:
I don't think that the public debate is that the CAP goes 100%
in the right direction. The conclusion was that a large majority
of European citizens want and are ready to support farmers in
the European Union, but with some conditions, and not all these
conditions are already met by the current CAP. The citizens in
Europe want to be sure that food is safe, is diverse enough, is
of high quality and is at good prices.
At the same time, citizens want agriculture to deliver
more public goods in terms of management of natural resources.
Citizens also want agriculture to be maintained even in Less
Favoured Areas, because it's the only economic activity in some
rural areas. People think that we have to have more balanced
support between several categories of farms, that the level of
payment for very big farms is too high, and that there is not
enough chance for the small farms to play a role in some important
areas, in terms of the delivery of diversity of food and quality
of food. In reaction to this, we have to make that reform. To
conclude, the message that I understood was this: we still need
the Common Agricultural Policy, but this Common Agricultural Policy
has to be more in line with the expectations of the citizen.
The Common Agricultural Policy has to integrate with all of the
other expectations, like those regarding the environment, climate
change and territorial cohesion.
Q175 Barry Gardiner:
Commissioner, good morning. I think it's difficult to see how
you resolve the tension, in that you seem to be facing both ways.
On the one hand, you said earlier this morning in your response
to the Chairman that we have to ensure a good standard of living
for farmers but then, at the same time, we should be paying public
money only to secure public goods. There is this tension between
those two aims; it is reflected in the tension regarding competitiveness,
and the need for the improved competitiveness of the industry,
and also in your remarks just a moment ago about the need to maintain
cohesion and about small farmers. These tensions seem to be pulling
the reform apart; intellectually, they are not coherent. Now,
single farm payments allow more inefficient businesses to continue.
They don't improve conditions or competitiveness and they don't
necessarily deliver the public good for that public subsidy.
How are you going to resolve those tensions?
Commissioner Cioloº:
I don't think that there is a tension in the CAP between ensuring
good standards of living of farmers and the delivery of public
goods if the first Pillar of direct payment is reformed, because
more than 90% of the direct payment is decoupled from production.
These direct payments already have a role in maintaining the
minimum level of payments. Anyway, this minimum level of income
for farmers is not enough for a farmer to live on if he is not
competitive at the same time. Now, the first objective for a
farmer is not to try to have more and more direct payments from
the CAP, as it was in the past. His production choice is not
in this direction—to have more and more payments—because
payments are decoupled from production. His objective now is
to be more and more competitive, to answer more and more market
signals. This is the result of our market instruments and the
decoupling of direct payments. But if we don't have this minimum
support for income and compensatory payments, the risk is that
a lot of farmers who can be competitive without the crosscompliance
rules that we have in Europe but not in other parts of the world—who
in normal situations can be competitive—will not be competitive.
This is why payment is justified to maintain a minimal level
of standards, but not all the level of standards that a farmer
needs.
An important part of this level of standards is recovered
through the market, by farmers. As for the delivery of public
goods, we ask our farmers to do more than is set out in the basic
regulations in Europe regarding the environment or animal welfare.
This delivery of public goods has a cost that is not internalised
by the market price. We have to cover this type of complementary
cost with this supplementary payment. In the first Pillar that
we propose for the future Common Agricultural Policy, we will
have a clear separation between the part of payment to support
this minimum level of income and another part of payment stimulating
the production of public goods—in all Europe, not only Less
Favoured Areas. This is the difference between the greening in
the first Pillar and agrienvironmental methods in the second
Pillar. In the second Pillar, regions or Member States can decide
to use this for some categories of farmers or some categories
of measures but now, in the first Pillar, all Member States and
all farmers will need to take into account these good practices
in order to have part of the payments. This is why I think that
it's not real tension. We tried to make these pillars so that
there was not contradiction but complementarity between these
two objectives.
As for competition, I don't think there is a contradiction
here if we want to maintain agriculture, even in Less Favoured
Areas. If we decide to produce only in the good areas for agriculture,
we don't need support for Less Favoured Areas, but that would
mean that, over the next years, we would not have farmers in a
lot of regions in Europe and we would concentrate production in
very favourable regions only. In the short term, it could be
a solution, but I think in the long term we risk having a problem
of pressure on resources—soil and water—in these regions,
more problems of pollution and also problems of diversity of food
and, especially, problems regarding the management of the landscape,
because small farms in some areas have an important role, a separate
role, in the management of landscape, not only in production.
That is why, if we want to have a Common Agriculture Policy for
27 Member States, we have to take into account the diversity.
Of course, there are some clear European objectives. That is
what we try to do with this reform.
Q176 Thomas Docherty:
Good morning. You attended the Oxford farming conference last
week, and your speech was well received by quite a lot of the
people who were there. Do you agree with the Secretary of State
for Defra that the current CAP is morally wrong?
Commissioner
Cioloº: Morally wrong?
Thomas Docherty: Yes.
Commissioner Cioloº:
I cannot concede that all the Common Agricultural Policy is morally
wrong. Why could it be wrong? First of all, the current Common
Agricultural Policy has evolved a lot, if we compare it with the
Common Agricultural Policy of 20 or 15 years ago. I just want
to underline the fact that export subsidies represented last year,
in 2010, only 1% of the total budget of the CAP, so how can we
say that the Common Agricultural Policy has an influence on agriculture
in other parts of the world? 90% of the direct payments are decoupled.
We eliminate and we reform a lot of market measures with the
role of the market. Of course, the Common Agricultural Policy
needs to evolve, but I don't think we can say that it's morally
wrong, because we ask a lot of our farmers and it is normal that
we pay those farmers for that. It's the only sector, I think,
in Europe that has to play an economic role and plays a part in
the market but, at the same time, has to integrate a lot of rules
imposed by society. The automotive industry, the textile industry
and other industries do not integrate a lot of expectations from
people in the way that agriculture does. This is why I think
it's not morally wrong to support agriculture when we have specific
expectations from agriculture.
Q177 Thomas Docherty:
I'll just quote what the Secretary of State specifically said
at the conference: "The CAP continues to distort trade by
maintaining high EU prices. This gives rise to high import tariffs
and the use of export subsidies to clear market surpluses—all
of which undercuts production in developing countries."
Do you agree with that?
Commissioner Cioloº:
I would like to give you just one example. This year, the world
price for sugar, for example, was higher than in the European
Union. We had market intervention in the milk sector because
we had these prices, and we put on the European market this surplus
of production, currently during 2010, without affecting the price
on the market. This is why, with the reform of some farms and
the reform of direct payments, I don't think that we can now say
that we influence the level of prices in countries in the south.
I also want to remind you that European markets import more food
from these countries in the south than the United States, New
Zealand, Australia and Japan together. This is also the result
of the openness of our market.
I don't think that you can say that we have a very
high level of protection in the market. It was the case 20 years
ago, but we have a new policy now. Policy has been reformed in
the last 20 years a lot in this direction. I also remind you
that the discussion in Doha was not blocked because of the resistance
of the European Union, but because of the resistance of the other
partners; they tried to play it, in media communication with the
world, that their position was more open than the European Union's,
but that is not the case. If we look at the figures, I think
it's clear that the CAP is now adapting and does not affect the
decisions of production in the countries from the south. That
is why I cannot agree with this position.
Q178 George Eustice:
Thank you, Commissioner. You talked earlier about competitiveness
and how some of the requirements for production standards that
we put on farmers actually affect their competitiveness. I wanted
to ask you whether there was anything more proactive that the
reform of CAP could do to make our farming more competitive, in
particular looking at research and development, where there is
a lot of evidence in the last 20 years that its status has declined
and the levels of research we're doing are not high enough. Secondly,
ought the Rural Development Funds to have a greater emphasis on
business development, rather than environmental schemes?
Commissioner Cioloº:
Regarding research, development and innovation, even yesterday,
I had a good discussion with the relevant Commissioner on this,
and we now work together in order to ensure that in European research
policy, agrifood industries and agriculture will have an
important position, an important place. At the same time, my
objective is to create in the Common Agricultural Policy financial
instruments in order to encourage farmers and the agri-food industry
to take the results from the research and to put them into practice.
We think now of a common framework for research and innovation,
of creating a network and partnership between research and development
institutes and the farmer organisations of the farming industry,
and of doing more preparation in order to ensure the transfer
to practical results.
Also, we will use the financial instruments that
we have in the second Pillar more and more to stimulate investment
in the modernisation of the farmer or in trading, so that there
is an innovation component—to try to innovate in order to
be more competitive in terms of production, but also in terms
of diversity of products on the market. I also want to remind
you that the agrifood industry in Europe is the first exporter
of food in the world. We export not commodities, like the United
States, but specially elaborated products; high addedvalue
products. We have to go in this direction, but this needs more
investment in innovation. We will do this in rural developments.
My answer to your second question is that, in the second Pillar,
we will have more instruments and it's our objective to promote
more instruments in order to support the business development
of the agriculture and agrifood industries in two directions:
the reduction of production costs with good, sustainable management
of natural resources, and the diversification of production for
the market.
Q179 Dan Rogerson:
In the communication, you made it clear that you would like to
focus support on active farmers and, indeed, that you would seek
to define who is not an active farmer. Clearly, there would be
some concerns among people who are currently in receipt of money
about that. Are you able to define a little more clearly for
us what you mean by the groups you wish to exclude—whom
you would define not as active farmers?
Commissioner Cioloº:
The objective of this definition is also to answer a request of
European auditors, who think that it is not morally right, to
take an expression one of your colleagues used, for the Common
Agricultural Policy to pay landowners who don't use this land
to produce—for agriculture. A farmer produces products
for the market and a public good, and I think both objectives
have to be covered by a farmer, so the objective is to try to
eliminate for the time payment for nonagriculture, and to
focus more of these payments on the farmers who produce not only
food and agricultural products for the market but also a public
good. That is the objective. It's clear that we have very diverse
situation, with regard to who is a farmer in Spain, the UK, Poland,
Sweden, Italy, France and so on. The idea is not to eliminate
these farmers, but to try to eliminate the farmers who request
the same level of payments only because they have a certain area
of land.
Q180 Dan Rogerson:
In the United Kingdom we have, for example, some environmental
charities that are large landowners, and their focus is on things
such as biodiversity. There may be some production, but that
would be incidental to the aims of those charities. What view
would you take towards them and do you think they should still
be in receipt of money under Pillar 1?
Commissioner Cioloº:
First of all, if it's agricultural land, and it's not productive
land but is only maintained in good agricultural condition, I
think maybe we have to take into account this area with payments,
but maybe not the same level of payments as those for productive
farmers. We are now realising an impact assessment for several
different situations, in order to see what answer we could give
in this specific situation.
Q181 Dan Rogerson:
So you haven't decided yet whether there must be some agricultural
production on all of that land?
Commissioner Cioloº:
If this land is used for agricultural production and, at the same
time, it's maintained for the production of environmental or public
goods, I think it will be integrated in our definition of agricultural
land. My objective is not to have a restrictive definition at
European level, because it's rather impossible to take into account
the diversity. Our objective is to give, in the European regulation,
some elements that the Member States will have to take into account
when they define the specific situation of active farmers at the
level of Member States.
Q182 Dan Rogerson:
Just to confirm, you would expect some agricultural goods to be
produced for someone to be defined as an active farmer?
Commissioner Cioloº:
Yes. If not, we cannot talk about agriculture or the farmer.
Q183 Dan Rogerson:
In England, there is a large tenanted sector. Would you agree,
for our understanding of your definitions, that the tenant would
be the active farmer in those circumstances?
Commissioner Cioloº:
Yes. I think it's a juridical problem of the contract between
a landowner and the farmer who produces on this land. Even now,
we are clear that the beneficiary of payments is the farmer, and
he can benefit from these direct payments for his own land or
for the contracted land that he works. I think even now, that's
the situation. I don't want now to go into this detail, because
I don't know the juridical situation in the UK very well, but
even now, Member States have enough flexibility to take into account
this specific situation. If a farmer has worked the land, it's
normal that this farmer has the right to payments.
Q184 Dan Rogerson:
That's your starting point, and then there are some clarifications.
A final question: how would you expect Member States to audit
this process of determining whether someone is an active farmer
or not? What evidence would you expect them to look for?
Commissioner Cioloº:
We had the first discussion at the Agriculture Council of Ministers
on that subject, and the conclusion was that we have a diversity
of situations, and we have to integrate around this diversity
of situations. We can't expect to have a common definition at
European level. This is why now the objective of the Commission
is to come with, let's say, a negative definition—who is
not an active farmer—and then the Member States will define
who is an active farmer, taking into account the specific situation
at national level. Of course, we have some Member States that
find that this definition could be complicated. I have not understood,
however, that the majority of Member States reject this idea of
a definition of active farmers, because it's also the main request
concluded by the public debates. As Commissioner for Agriculture,
I think I have to give an answer in the proposal for the reform
of this treaty. Then the Council and the Parliament, which have
the power of decision on the reform, will decide, but I think
we have to find a solution to this, if we want to be credible
with the utilisation of public money.
Q185 George Eustice:
I wanted to ask you about the issue of capping direct payments
in Pillar 1. I think you suggested a cap for larger farms
at €300,000. As you said earlier, the rationale for those
direct payments under Pillar 1 is that those farms deliver public
goods and protect the environment. Isn't it the case that even
a large farm may do as much for the environment as a small one?
Why is it justified to place a cap on those large farms?
Commissioner Cioloº:
The objective for this direct payment is to support a minimum
level of income for a farmer; with very large and big agricultural
societies it is difficult to discuss a minimum level of income
of a farmer. When we have a turnover of several hundred thousands
of euros, even millions of euros, we don't talk about the level
of income of a farmer, but rather about the remuneration of capital
invested in a business. This is why I think that to use public
money to support the remuneration of capital for these kinds of
big farms is not justified, and is not in line with the Treaty,
which asked from the Common Agricultural Policy a good standard
of living for farmers. I have in my country, in Romania, farmers
who have 1,000 hectares. It is difficult for me as Commissioner
to explain to the taxpayer that we will give €1 million
or €2 million a year as subsidies to these farmers to
support their minimum level of income. This is why I think we
have to put a limit on these payments. I don't know if it will
be €200,000, €300,000 or more, this maximum level of
payments. There is already an amount to cover, partly, increasing
production costs for these farmers, because they respect several
norms and rules. Even these farmers will be eligible for some
payments, I think. We started to limit this part of the payment
in the Pillar. If this farm is delivering public goods, they
should be remunerated for these public goods.
Q186 George Eustice:
A final point on that: is there a danger that the larger farm
holdings will simpler reorganise themselves into smaller holdings
to get around any cap? Therefore, what you'll end up with through
doing this is simply a larger number of smaller holdings still
owned by the same landowner, but you will still have to pay out
those large payments.
Commissioner Cioloº:
You know, I'm an agricultural engineer, and I know that a manager
in agriculture, when he takes a decision to concentrate the land,
does so to make some economies of scale. I don't know if a farmer
will decide on the size of his farms only to ensure a payment.
Here we have a problem with economic logic in agriculture. Especially
with big farms, I don't think their objective is only to have
a big amount of payments from public money. I don't think that
we will have a very important phenomenon of the splitting or separation
of farms only to have payments. I think a farmer uses other logic
when he decides on the structure of production and farms, and
is thinking not only about having a level of direct payments.
Although direct payments could be important at a certain level,
I don't think they're the most important objective of a farmer
when he decides on the level of farms and the structure of production.
Chair: Commissioner, are
you able to stay two minutes extra at the end?
Commissioner Cioloº:
I can stay until 12 noon—11am in London.
Q187 Chair:
Turning to your proposed reforms and rewarding environmental activities
in Pillar 1, can you clarify whether the mandatory greening
component that you describe would be an additional requirement
on farmers, just as crosscompliance is, or do you intend
it to be more like a reward for carrying out the additional activities
to benefit the environment?
Commissioner Cioloº:
Crosscompliance and ecoconditionality are the result
of environmental regulation in the European Union. This regulation
already exists, and we only link the direct payments in respect
of this regulation. With the greening, we propose that our farmers
do more, in terms of the management of natural resources, the
quality and fertility of soil, and biodiversity, and we will use
part of direct payments as an incentive in order to do more production
of public goods.
What does "mandatory greening" mean? It
means that we will propose in the regulation six or seven measures
for all of the European Union, like rotation of the type of agriculture
and maintaining pasture—we gave some examples in the communication.
The Member States will be obliged to propose this to farmers,
so this is mandatory. It's not voluntary for the Member States,
as with some agrienvironmental measures in the second Pillar.
It's mandatory, because it's compulsory for Member States to propose
the implementation of the CAP to the farmers: two or three from
this menu of six or seven measures most adapted to the specific
situation in this Member State. The farmer who respects this
new norm will have a complementary payment.
Q188 Chair:
Thank you. Could you tell us why you opted for greening Pillar
1, as opposed to allocating more funds to targeted programmes
under Pillar 2?
Commissioner Cioloº:
In Pillar 2, agrienvironmental measures take into account
a specific situation in an area, in a region. We finance some
agrienvironmental measures for some farmers who decide to
do this, but taking into account the specific situation. The
production and delivery of public goods is not to as high a level
as it would be if we had this greening of the production of public
goods in all the European Union, for all Member States and for
all farmers. This is why we propose introducing a part of these
agrienvironmental measures of greening in the first Pillar—in
order to have more linkage of these direct payments to the production
of public goods, but in all Europe, and with the same metric for
all states, in order not to create a disturbance in the market
between some farmers and others.
Q189 Amber Rudd:
Good morning. How do you envisage money being shared between
the two main elements of the new direct payments—that is,
basic income support and the greening component?
Commissioner Cioloº
: How will we divide the budget in
the first Pillar between the support of income element and the
greening? That is the question?
Amber Rudd: Yes.
Commissioner Cioloº:
It's difficult now to say exactly what will be the percentage
for greening. We are analysing several scenarios, but I think
we can go up to maybe one third of the direct payments being linked
to the production and delivery of public goods of greening.
Amber Rudd: One third?
Commissioner Cioloº:
Yes. It will depend; that may be the proposition of the Commission,
but you are aware that the final decision on the reform is taken
by the Council and by the Parliament. I hope to have arguments
for going up to this level, with the part for greening.
Q190 Amber Rudd:
Are you considering basing the payment for greening activities
in Pillar 1 on objective criteria, such as the additional
cost of delivery or the environmental benefit?
Commissioner Cioloº:
I can see that this part of the greening payments is exactly the
level of the production costs for a farm that decides to integrate
this measure. The objective, in fact, for us is to use this part
of the payments to incentivise a farmer to do more, not only to
have a payment in exchange. The interest is to have a good level
of fertility of soil, for example, or good biodiversity or good
management of water. The farmer does this not only to have payments
for public goods in exchange, but also because it's in his economic
interest. If he wants to have a good level of production per
hectare, he needs to have a good level of fertility of soil or
good quality of water. To use a part of these direct payments
as an incentive instrument is already a good start in reorienting
the Common Agricultural Policy in another direction—and,
I hope, in a good direction.
Q191 Neil Parish: Good
morning, Commissioner. I have lived through all the reforms of
CAP and the historical element of the payment, where the old 15
Member States received their payment due to the amount of production
they had on that land during 2001 and 2002. New Member States,
like your own of Romania, are paid on an area basis. You are
committed to changing this. I wish you well, because of course
you're going to have to spread money, with Latvia on €70
a hectare and Greece on €550. How do you intend to sort
this out over the next period?
Commissioner Cioloº:
First of all, I am happy to see you again. We had the opportunity
to work together when Neil Parish worked for COMAGRI in the Parliament.
I'm happy to see that you're still very active in the field.
To answer your question, of course it's an ambition to propose
a more equitable system of payments; another is a realpolitik
emphasis—the political realism at European level to obtain
this. As a Commissioner, I have to propose this and then make
a proposal that could be politically acceptable to the Member
States, in order to reduce these discrepancies between several
Member States. The idea is to propose, at the end of this transitional
period, a common system for all 27 Member States. Now, as
you mentioned, we have two different systems. One is based on
historical reference per farm or per region, and the other is
an areabased payment without technical detail about the
specific situation.
The idea is, at the end, to have a mixture of areabased
payments and some regionalspecific situations, and also
to propose, during the transitional period, a reduction in the
payment in Member States where the level of payment is higher
than the European Union, and to increase the payment for the other
part. I am also very aware that it will depend on the level of
the total budget of the CAP. If we reduce the budget, we will
see how much it will be reduced by, and which Member States would
be affected by this. It's very possible that part of this reduction
of payment for some Member States will be done by an eventual
reduction of the budget of the CAP. This is why we have to take
into account all these elements when we calculate and propose
a methodology for the criteria for payments.
Q192 Neil Parish:
Thank you, Commissioner. My theory is that in a single market,
you have to have a reasonably uniform level of payment across
the whole of Europe. Otherwise, the payments given to farmers
in different Member States distort the market. I do think it's
important for you to deal with this.
Commissioner Cioloº:
Yes. In a common market we have to ensure that the same categories
of farms are treated in the same direction, with the same criteria.
We have to recognise that farmers work with a certain level of
fertility of soil, and a certain level of production costs or
standards of living. We have differences between Member States,
taking these criteria into account, and we also have to take into
account the different occupations of farmers.
For me, the objective is that farmers working with
the same conditions, as regards the fertility of soil, level of
production costs or standard of living, have the same treatment.
Here we can have a distortion in the market if categories of
farms have different treatment. We have a difference between
cereal production, for example, and animal production; and milk
production and fruit and vegetable production. We have to take
into account these differences because, if we give the same levels
of payment for permanent pasture, for example, and an area of
vineyards, we have a problem, because the level of production
costs and also the benefits in a hectare of vineyards or a hectare
of cereals are also different. We have to take into account this
difference, but then apply the same criteria in all the European
Union; that is the ideal situation.
Q193 Neil Parish:
That leads me quite neatly to my final question, and that's on
decoupled payments. As you know, England in particular has got
rid of all coupled payments. Some Member States still have coupled
payments, which could distort the markets, especially in the beef
sector. Are you committed to getting rid of coupled payments?
Commissioner Cioloº:
We propose to generalise decoupled payments in all Europe and
to maintain coupled payments only in some specific regions, for
some specific products. We also have to recognise that, in mountain
areas for example, without coupled payments, we used to not have
milk production. Milk production is important not only for the
production of milk, but also for the maintaining of the landscape
and maintaining the population in this area. I don't think that
we will have a disturbance in the market if we have these partially
coupled payments for those specific situations. We have very
clear rules, regarding the utilisation of coupled payments, to
apply the same rules in all of the European Union.
Neil Parish: Thank you,
Commissioner. It's good to talk to you again.
Q194 Richard Drax:
Commissioner, we're almost there. I just, if I may, want to ask
a couple of last questions on small farms. What's the best way,
in your view, of supporting small farms? Is it by direct payments,
or what?
Commissioner
Cioloº: Even now, we have direct
payments for small farms and we also have support for the modernisation
of these farms. We have to maintain these two instruments. The
idea of direct payments is to ensure, like for the other farms,
a minimum level of income for farmers, in order to stimulate the
farmer to produce more for the market, to invest more, to innovate
and to develop their competitiveness. What I propose is to have
simplified direct payments for these small farms. Taking into
account the level of the farms, I think we can reduce the bureaucracy
for small farms a little, in order to give small farms access
to these direct payments.
The objective is to increase direct payments for
small farms not only because they are small farms. The idea is
to attract these small farms to the market and to stimulate them
to invest and make credit, in order to mobilise and to develop
their competitiveness. Now, in a lot of regions, that is not
the case, because of the starting budget that small farms need.
We think these basic direct payments, simpler for small farms,
can be used in order to stimulate small farms to be more integrated
in the market. I know that some people think that the idea of
the Commission is to pay small farms only because they are small
farms, and I also agree that this payment, if it's too high, can
stimulate the small farms to do nothing to modernise themselves.
The idea is not to increase direct payments for small farms,
but to make them simpler, and then to propose a lot of instruments—like
training, investment and organisation of production groups—in
order to integrate the small farms more into the market than at
present. In a lot of regions in Europe, we have a lot of small
farms that are not integrated in the market. It's subsistence
production. The objective relates to the Common Agricultural Policy
and investment, but this basic payment can play a role in this
direction.
Q195 Richard Drax:
Commissioner, lastly, bearing in mind that the definition of "small
farm" is so different right around Europe—different
sizes, different cultures, lots of differences—do you think
these sorts of direct payments to farmers could distort the market?
Commissioner Cioloº:
No. If we look, the level of production in the European market
is not affected by the small farms. Small farms produce especially
for local markets, and the level of production for these small
farms is not at a level that would disturb the market. I think
the question is: do we want to maintain these small farms, which
are essential for a lot of regions, and which could also play
an essential role in the diversification of production at regional
level; or do we want to eliminate farming for a lot of regions,
which have social problems and other problems? With the level
of payments that we seek to propose for these small farmers, taking
into account the specific economic and social situation of these
small farms, I don't think that we will create a disturbance in
the market but, of course, we are now undertaking an impact assessment
to see what type of impact these measures can have on the market
and on the social situation in some regions.
Q196 Chair:
Can I just ask you about the budget before you go? In your communication,
particularly under Option 2, you seem to increase the number
of objectives to be delivered by the Common Agricultural Policy.
How do you hope to achieve this on a reduced budget?
Commissioner Cioloº:
I don't say that I propose to reduce the budget and to increase
the objectives of the Common Agricultural Policy, but with the
payments that we have for the Common Agricultural Policy, the
Common Agricultural Policy can do more for the general objectives
of the EU 2020 strategy, for example. To talk about sustainable
growth, we cannot have sustainable growth in the agriculture and
agrifood sectors if we don't have the Common Agricultural
Policy. On the other hand, the Common Agricultural Policy can
do more for sustainable growth, with greening, more innovation
in the second Pillar and better orientation of support in order
to have sustainable development of competitiveness.
We also have in the EU 2020 inclusive growth. For
Less Favoured Areas, rural areas with agriculture, it is difficult
to have another economic activity. I think that we also have
a contribution to make to the objective regarding inclusive growth.
Utilisation of part of the CAP budget to do more in research and
innovation, and research and development, will stimulate the agrifood
sector to have smarter growth. This is important, because the
agrifood sector is the most important industrial branch
in Europe, in terms of turnover and employment. That is why I
think that the Common Agricultural Policy can have a positive
impact in the development of smart growth in the agrifood
sector. Of course, if the budget of the CAP is significantly
reduced, we have to be clear that we cannot ask our farmers to
fulfil all these requests or objectives.
Q197 Barry Gardiner:
Commissioner, I certainly welcomed the part of the communication
that spoke of the need for restructuring and consolidation of
the sector in order to address the current imbalance of bargaining
power along the supply chain. I thought that was very helpful.
Again, that is in tension with what you said about support for
small farms, but leaving that to one side, do you think that it
may be that, while you improve the position on the supply chain,
you create competitive distortions between Member States as a
result of this?
Commissioner Cioloº:
First of all, I don't think there is a contradiction between increasing
the bargaining power of farmers and support for small farms. Increasing
the bargaining power of farmers means that the small farmers can
work together in order to have more power of negotiation.
Barry Gardiner: Fair point.
Commissioner Cioloº:
But to be clear, we have small farms or we don't have agriculture—nothing—because
in some areas we cannot concentrate on the land, work in an efficient
manner and also maintain the population in these difficult rural
areas if we don't have small farms. I recommend that you visit
some mountain areas, not only in Romania or Poland, but in Italy,
Spain or some difficult areas in Finland. You will see that we
cannot have big farms. In Romania, we have big farms, but we
also have small farms. We cannot have big farms only. That is
why we have to take this diversity into account.
Q198 Barry Gardiner:
What about the competitive distortion that may exist between Member
States as a result of that?
Commissioner Cioloº:
As a result of the difference in support of farms?
Barry Gardiner: No, improving
the functioning of the supply chain.
Commissioner Cioloº:
This is not a specific problem for one Member State or another.
In the food chain, retail distribution and even the processing
sector are more and more concentrated. In the milk sector, for
example, we have some processors that have a network in all the
Member States. They have factories or plants for processing milk
in all Member States. That is why I think this issue has to be
treated at the European level, this question of bargaining power.
We tried to propose a solution for the milk sector, with a proposal
for regulation that we put on the table for the Council and the
Parliament at the end of last year. Also, this issue cannot be
treated only within the Common Agricultural Policy, because it's
a question of competition, the internal market and industrial
policy. That is why we decided, at the level of the Commission,
to work together—four Commissioners—so that we could
come forward with proposals regarding negotiation and bargaining
power in the food chain. To avoid disturbances between several
Member States, we have to come forward with some common ideas
at the European level.
Q199 Chair:
Can we thank you for being so generous with your time? How big
is a small farm—how many hectares?
Commissioner Cioloº:
Here we have the same situation as with active farmers. We cannot
impose a definition at the European level, because we have several
situations. We cannot define small farms only by taking into
account their area, because the area of land can be used in a
different manner from that intended. That is why I think we have
to have some economic criteria regarding the definition of small
farms, and we are working on that. We will propose some criteria
in order to define small farms.
Chair: Commissioner, we
look forward to continuing our discussions. On behalf of everybody
here, we thank you very much for joining us this morning.
Commissioner Cioloº:
Thank you also very much for this opportunity.
1 Note by witness: Evidence was provided by video conference
and there were considerable sound transmission difficulties, in
particular a significant echo effect for Commissioner Cioloº
while speaking from Brussels. Back
2
Note by witness: Again, sound transmission difficulties affected
proceedings. As is evident from the preceding sentence, production
in this respect relates to the production of public goods. This
was the meaning of the response provided by Commissioner Cioloº. Back
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