House of Commons - The Common Agricultural Policy after 2013 - Environment, Food and Rural Affairs Committee

The Common Agricultural Policy after 2013 - Environment, Food and Rural Affairs Committee Contents

3 Drivers for reform of the CAP

58. This is the fifth round of CAP reform in the last twenty years and is unlikely to be the last; the Minister described it as "another stepping stone towards whatever will be".[83]The Commission has given no clear indications as to the long-term future of the Common Agricultural Policy. However, it is likely that some form of common policy will still be needed to avoid distortion of competition.[84]

59. Defra were critical of the Commission for failing to set out a "clear vision for the future of CAP expenditure".[85] The RSPB also felt the lack of a direction for the future CAP left farmers "in limbo" and said it would be "excellent if there was a clear signal in 2014 about those groups of farmers that were going to receive income support in the long term", and those that would not.[86] Changes to the single farm payment are seen by 65% of uplands farmers as their most important challenge for the future, highlighting the importance of a clear future trajectory for the CAP.[87]

60. The drivers of past reforms of the CAP have been internal budgetary pressures and external political pressures, such as the need to reach an agreement on the WTO Uruguay trade round. The Tenant Farmers Association (TFA) felt that these drivers were weaker this time round as "there is not really the WTO impetus that there was in the last reform, or the reform before that. I know that the budget issues are still important, but they are not as important as they were when the CAP budget was more than half the total amount of spending in the EU".[88] Although agreement on the WTO Doha Development Round is being sought, this is not expected to require radical changes to the structure of EU agricultural support as direct payments are considered to be compatible with WTO conditions for non-trade distorting support (that is, 'Green Box').[89]

61. A recent political analysis of past CAP reforms concluded that external pressures are more likely to lead to ambitious reform.[90] The NFU agreed that lack of external factors driving reform made ambitious changes more difficult to achieve.[91]

62. We believe that the absence of external pressures from the WTO should not prevent the Commission striving for ambitious reform. The recent Foresight report into the Future of Food and Farming describes the confluence of a growing population, increasing wealth and changing diets, and the potential effects of climate change as a "major threat that requires a strategic reappraisal of how the world is fed".[92] One of the key messages of the Foresight report is that future food security can only be achieved through 'sustainable intensification' (Box 4).

Box 4: Key recommendations of the Foresight Global Food and Farming Futures project[93]
Action has to occur on all of the following four fronts simultaneously:

More food must be produced sustainably through the spread and implementation of existing knowledge, technology and best practice, and by investment in new science and innovation, and the social infrastructure that enables food producers to benefit from all of these
Demand for the most resource-intensive types of food must be contained
Waste in all areas of the food system must be minimised
The political and economic governance of the food system must be improved to increase food system productivity and sustainability, including reducing agricultural subsidies and encouraging free trade

63. The Royal Society has described sustainable intensification as where "yields are increased without adverse environmental impact and without the cultivation of more land".[94] The UK Government has committed itself to "work in partnership with our whole food chain including consumers to ensure the UK leads the way on sustainable intensification of agriculture".[95] A reformed Common Agricultural Policy could surely play a key part in achieving this policy objective.

64. We believe that the absence of external pressures from the WTO should not prevent the Commission striving for ambitious reform. The aim for this round of CAP reform should be to enable EU farmers to achieve the 'sustainable intensification' that is required to meet the global challenges of feeding a predicted world population of 9 billion by 2050 without irrevocably damaging our natural resources.

65. Our predecessor Committee's report on UK food security concluded that "clear leadership from Defra is crucial to the security of the UK's food supplies" and encouraged Defra to report its actions to promote UK food security as part of the Departmental Annual Report.[96] Subsequently, the previous Government published Food 2030, its "vision for a sustainable and secure food system for 2030".[97] The NFU recently called on the Government to produce a new 'food plan' to reflect the challenges identified in the Foresight report.[98] In response, the Secretary of State referred to Food 2030 but said: "It has not been at the top of my agenda".[99] So far, the Government has not signalled any intention to produce a new food strategy.[100]

66. The Government's position on the Common Agricultural Policy must be coherent with its strategy for ensuring food security. Defra should decide whether, and if so how, it intends to implement the previous Government's Food 2030 strategy, taking into account the recommendations of the Foresight Future of Food and Farming report and the UK's position on the future Common Agricultural Policy.

Future agricultural policy and world trade

67. The EU is one of the major players in agricultural trade, importing mainly commodities and exporting high quality and processed products. The evolution of the CAP has been closely linked to the opening up of EU agriculture to world markets, presenting both a challenge and an opportunity for UK producers.

68. Although the EU has granted extensive market access to many of the least-developed countries under the 'Anything but Arms' initiative, prohibitive tariff barriers exist to prevent over-quota imports of sensitive products, such as meat and dairy, from more developed countries.[101] Resolution of the Doha Development Round could lead to cuts in tariffs of around 50% overall for developed countries, although 'sensitive' products, for example beef, would probably be protected.[102] The EU also committed itself to phasing out export subsidies during previous Doha Round trade talks. The WTO is expected to produce a new draft text for the Doha Development Round shortly.[103]Separately, the European Commission is negotiating a bilateral trade agreement with Mercosur; this could open up European markets to highly competitive agri-food exports from countries such as Brazil and Argentina.[104]

69. Econometric analyses conducted by the Agri-Food and Biosciences Institute (AFBI) indicate that trade liberalisation would have a significant effect on food production and prices in the UK, particularly in the livestock sector.[105] Dr Moss, a lead author on the study, concluded:

... your average farmer is not as aware of the protection that is there with the export subsidies and the import restrictions, but that is really what is maintaining the prices in many cases for Europe [...] It is only when that existing protection is removed that you start to see a big knock-on effect on the beef and sheep meat sectors particularly.[106]

70. Farming and land-owning organisations were concerned about the impacts of full trade liberalisation on British producers. They argued that imported products often did not meet the same welfare and environmental protection standards as British products and were therefore cheaper.[107] Under the WTO Agreement on Sanitary and Phytosanitary Measures, governments can regulate trade in agri-food products only on food safety, plant and animal health grounds and as long as these do not act as 'disguised trade barriers'.

71. The British Retail Consortium (BRC) claimed that retailers sourcing products from outside the UK apply similar standards as would apply if they sourced them from within the UK.[108] This implies that price differences arising from variation in production standards would not reduce the attractiveness of UK products to UK retailers. However, according to the British Pig Executive, in 2005 an estimated 70% of pork imports would have been illegal to produce in the UK on the grounds of pig welfare.[109]

72. Farming groups felt that achieving recognition of production standards, such as animal welfare, carbon footprint or water usage, was a key part of moving towards fairer trade and a more sustainable food chain. The AHDB said:

Where there are externalities (or public goods) which are not currently priced/valued by the market or through regulation/taxation on a standard basis across the world, UK farmers need to be supported to compete on an equal footing if we are not to merely export food production to countries where welfare or environmental standards are lower.[110]

The Foresight report also recommends that "future reform of institutions such as the World Trade Organisation cannot ignore the issues of sustainability and climate change".[111] While the CLA and NFU shared this aspiration, they felt that progress within the WTO framework would be slow.[112] Defra and the RSPB warned that consideration of standards of production should not become "protectionism by another name".[113]

73. Rather than adding trade barriers, there is a market-based alternative through better labelling of products to enable consumers to make informed choices. However, Professor Swinbank noted that society could not always be relied on to make the 'right' choices, arguing that "if in the longer run, with the information, consumers say they do not want to pay higher prices for animal welfare products, it raises a question about that animal welfare legislation itself".[114]The TFA were more blunt, claiming that, "I am afraid the vast majority of people, despite what we hear and see in the press, still buy on price".[115]

74. In the interests of fairer trade in the long-term, the EU should argue more strongly for recognition of standards of production (for example animal welfare, use of water, greenhouse gas emissions) within trade agreements. We believe this is essential in achieving the global shift towards sustainable intensification recommended by the Foresight Future of Food and Farming report.

83 Q 450 Back

84 The Commissioner told us that the CAP would have to continue in some form if EU citizens continued to expect EU farmers to produce at higher standards than competing producers in third countries (Q 173). The Minister argued that there would still need to be payments to reward farmers for providing public benefits and these would have to be delivered through a common framework to avoid competitive distortions between Member States (Q 450). See also paras 28-31 of this report. Back

85 Ev 171 Back

86 Q 4 Back

87 Uplands Farm Practices Survey, cited in Farming in the Uplands, Ev 68. Back

88 Q 48 Back

89 Ev 155-156, 158-159. 'Green Box' payments are deemed to be non trade-distorting, for example, decoupled payments are seen as 'Green Box' because they do not influence farmers' production decisions. Under the Uruguay Round Agreement on Agriculture there is no limit on the amount of Green Box support that signatories can offer. On the other hand, signatories are expect to reduce their spending on measures that do affect production ('Amber' Box), such as payments per head of livestock (coupled payments). Back

90 Cunha and Swinbank, An inside view of the CAP reform process, 2011, p 14. Back

91 Q 131 Back

92 The Future of Food and Farming-Final Project Report, p 40. Forecasts suggest the world population will grow to over 9 billion by 2050; economic growth will allow people in less-developed countries to demand a more varied and high-quality diet; and there will be greater competition for land at the same time as the effects of climate change may reduce area of land suitable for agriculture. Back

93 The Future of Food and Farming-Final Project Report, p 12. Back

94 The Royal Society, Reaping the benefits: Science and the sustainable intensification of agriculture, October 2009, p 1. Back