Memorandum by the Countryside Council
for Wales
OVERVIEW
1. What should be the long-term objectives
of the CAP? Does the title "Common Agricultural Policy"
aptly fit your perceived objectives of the policy? What do you
consider to be the main pressures on the CAP as it currently is?
The EU has invested considerable effort over
the years in attempting to re-position farm payments in the light
of WTO negotiations. The Macsharry reforms involved shifting a
considerable proportion of CAP spending into the Blue Box, whilst
the more recent Fischler reforms, based around the creation of
the Single Payment Scheme (SPS) appear to have shifted the bulk
of spending into the Green Box. Much of Pillar 1 (the SPS) and
Pillar 2 (rural development) are now justified on the bais of
the multifunctional nature of European farming.
In CCW's opinion it is now time to convert rhetoric
into reality by establishing a "Common Rural Policy"
equipped to support multi-functional and sustainable farming.
This should ensure that farmers and other land managers are equipped
to deal with the challenges posed by climate change; reverse the
loss of biodiversity and maintain both quality and quantity of
water supplies whilst supporting both the social and economic
health of rural communities.
THE REFORMED
CAP
2. What has been your experience so far with
the reformed CAP? What has worked well and less well? And where
can lessons be learned?
The 2003 CAP reforms introduced the concept
of "decoupled" payments so that the majority of agricultural
subsidies could be paid independent of the volume of production.
The new Single Farm Payment (SFP) constitutes an income support
which is linked, via cross compliance, to environment, food safety
and animal welfare standards as well as the requirement to keep
all farmland in good agricultural and environmental condition
(GAEC).
The application of decoupling has not been uniform
across Europe. The only countries to have discontinued all coupled
payments are: Germany (from 2009), Ireland, Luxemburg, England,
Wales and Northern Ireland. The countries continuing with highest
level of coupled payments are Austria, France, Portugal and Spain.
CCW is primarily concerned with the environmental
impacts of CAP reform. However, these are not easy to predict
and are likely be both negative as well as positive. Changes in
land management appear to be taking place relatively slowly and
the resulting environmental impacts will take even longer to emerge.
In addition, a wide range of drivers besides the CAP have an influence
on land management decisions. These drivers include world trade
patterns, climate change, regulation and consumer demands as well
as the various "flanking measures" that accompanied
decoupling such as cross compliance and agri-environment schemes.
Within Wales, work commissioned by CCW and the
Welsh Assembly Government has focused on the need to develop indicators
capable of assessing change at regional/ local levels as well
as at the national scale. This is because the CAP reforms are
likely to result in different changes in different parts of Wales
according to the type of farming systems that are present. Gathering
data at the national scale alone presents considerable risks as
any changes at the regional level may cancel each other out and
hence will not be picked up. Existing national data sets such
as those based on the Breeding Bird Survey need to be expanded
to ensure that statistically valid data on environmental change
is available on a regional basis.
In addition, the work carried out in Wales has
identified the need to use both "top-down" national
level approaches to monitoring (combining remote sensing and Countryside
Survey techniques) along with "bottom-up" approaches
where environmental change at the farm (or even part farm level)
can be matched against farm management change. Such bottom up
approaches should allow for economic drivers to be matched to
changes in farm management and hence to environmental impacts.
THE SINGLE
PAYMENT SCHEME
3. Do you consider the Single Payment Scheme
to be a good basis for the future of EU agricultural policy? What
changes might be made at the EU level to the Single Payment Scheme,
including to the rules governing entitlements, in the short and/or
the longer-term?
The SPS is an income support measure which may
have only a limited lifespan bearing in mind the pressures likely
to arise from additional EU expansion, financial discipline, EU
budget reviews and any further review of the WTO Green Box. Indeed,
there is already debate at EU Council level over the possibility
of introducing mandatory farm insurance schemes. These would in
turn bear down on the capacity to fund the SPS at current levels.
With this in mind, CCW is of the view that it would be more appropriate
to devote scarce and declining resources to assisting the industry
to adopt the challenges that lie ahead, in particular climate
change and the need to meet evolving market demands. Transferring
an increasing proportion of funds from Pillar 1 to Pillar 2 (either
through modulation or budgetary review) represents the most effective
way of funding this process of adaptation.
MARKET MECHANISMS
4. What short and longer-term changes are
required to the CAP's market mechanisms? Suggestions made by the
Commission have included re-examination of certain quotas, intervention,
set-aside, export refunds and private storage payments
CCW wishes to comment only on the issues surrounding
Set Aside. As part of the CAP Health Check, Commissioner Fischer-Boel
has questioned the logic of supply side policies in the post-reform
decoupled era (where farmers should be more market orientated)
as well as emphasising the need to simplify the administration
of CAP.
Whilst Set Aside was originally introduced as
a market measure, it has now been shown to have incidental environmental
benefits. The available evidence suggests that these benefits
are likely to be substantial, especially since large areas of
Northern Europe are occupied by Set Aside. This often occurs in
areas where relatively little semi-natural habitat still remains,
and a proportion of this land is now managed specifically to provide
environmental benefits.
Birds appear to be one of the main beneficiaries
of the policy. Winter stubbles provide food sources whilst regenerating
cover provides enhanced habitat during the breeding season. In
addition, well situated Set Aside strips also have the potential
to contribute to reductions in diffuse pollution, by intercepting
soil particles, pesticides, herbicides, fungicides and fertilisers
before they can reach watercourses.
If Set Aside were to be abolished, we feel that
the environmental benefits currently delivered by this policy
would need to be provided by other means. One possibility would
be to increase the level of cross compliance requirements under
the Single Payment Scheme, perhaps by requiring that a minimum
percentage of each holding was managed for wildlife (as in Switzerland).
However, the value of the SPS is likely to drop over time due
to EU budgetary constraints—so substantially increasing
the level of cross compliance whilst at the same time reducing
the value of SPS entitlements could be problematical. Alternatively,
the environmental benefits provided by Set Aside could be replicated
using an expanded agri-environment programme. Thus the environmental
benefits of what is now part of Pillar 1 could in future be provided
by Pillar 2. As a result, we contend that the additional agri-environment
funding required should be sourced via an increase in the rate
of compulsory modulation. In the final analysis, however, the
environmental benefits provided by Set Aside may best be replicated
using a combination of simple cross compliance measures coupled
with rather more sophisticated agri-environment prescriptions.
RURAL DEVELOPMENT
5. What is your view on the introduction of
the European Agricultural Fund for Rural Development (EAFRD)?
Do you consider that it is meeting its objectives thus far? Is
it suitably "strategic" in nature, meeting the needs
of rural society as a whole rather than being restricted to aiding
the agricultural industry? How well is it being co-ordinated with
other EU and national policies on regional and rural development?
The final text of the new Rural Development
Regulation represents a substantial achievement in bringing together
a wide range of existing rural development measures under a common
programming framework. The establishment of a single fund for
rural development (EAFRD) reflects the response to the demands
for a simpler and more coherent approach to rural development
programming which resulted from experience with the previous mix
of Guidance and Guarantee funding under the EAGGF.
The previous round of Rural Development Plans
(RDP) exhibited marked differences between individual Member States
with richer parts of the EU prioritising environmental land management
and poorer regions placing a much greater emphasis on the modernisation
of agriculture. As a result, it is unsurprising that the Commission
has attempted to ensure the production of a more balanced set
of RDPs through the introduction of Axis 1 (improved competitiveness),
Axis 2 (land management) and Axis 3 (social and economic rural
development) together with a cross-cutting Leader Axis. However,
it is still to early to say whether this approach will be more
effective in delivering EU priorities than the previous system.
Examination of those RDP's already notified
to the Commission reveals that Axis 3 & 4 programmes account
for about 19% of planned spending, whilst Axis 1 accounts for
35% and Axis 2 for the remaining 46% (Agra- Europe 30 May 2007).
It is likely that in those member states with large numbers of
very small subsistence holdings, more traditional farm based approaches
to rural development will prove ineffective. However, there is
little available evidence to assess the environmental impact of
switching substantial resources into more traditional economic
rural development measures.
Prior to the establishment of the EAFRD, the
Welsh RDP was based on a mixture of EAGGF Guarantee and Objective
1 funding. From 2007, there is now a much clearer separation between
the role of EAFRD and Cohesion funding, with the WRDP providing
support for on-farm activity and the Objective 1 programme addressing
rural issues at a more strategic level. However, since both of
the new Welsh programmes have yet to start, it is not possible
to comment on the degree of complementarity achieved in practice.
6. Is there a case for a higher level of EU
financing of rural development? Do you have a view on the extension
of compulsory modulation from Pillar 1 (Direct Payments) to Pillar
2 (Rural Development)?
The Community Strategic Guidelines for Rural
Development set out three priority areas under Axis 2 viz: biodiversity
and the preservation of high nature value farming and forestry
systems, water and climate change. Bearing in mind that Axis 2
accounts for only 46% of spending within those RDP's so far submitted
to the Commission, we believe that there is very strong case,
based on readily identifiable needs, for an increase in the level
of Pillar 2 funding. Additional EU funding is especially necessary
in the case of the UK, which currently receives only 3.7% of EAFRD
funding, despite having a large area of agricultural land.
Modulation is currently the only available means
of switching money from Pillar 1 to Pillar 2. During 2008/09 we
hope to see a profound review of the CAP budget, resulting at
the very least in a fundamental re-balancing between Pillars 1
and 2 after 2013.
Under the terms of the EU-level agreement reached
on 19th March 2007, UK administrations now have the capacity to
use voluntary modulation (VM) to substantially increase Pillar
2 budgets.
Compulsory modulation has the advantage of creating
a level playing field across the EU. However, 20% of receipts
have to be returned to the Commission, match funding is compulsory
and the application of the franchise means that any given modulation
rate produces rather less funds than expected. By contrast, VM
can be applied at a higher rate, 100% of receipts are retained
in the member state and match funding can be at a lower level
than with CM. However, VM creates significant regional disparities
by reducing the level of SFP in some locations but not others.
VM is also a more complicated tool than CM, and the present arrangement
leads to the perception among farmers that they are being unfairly
penalised, especially if access to Pillar 2 schemes is subsequently
rationed.
At the present time, both VM and CM require
match funding (at least within the UK). Whilst the major disadvantage
of CM is that that 20% of the receipts have to be returned to
the Commission, we believe that the balance of advantage now appears
to lie with an expansion of CM.
However, we believe that the UK must guard against
trading in VM for CM only to discover that the latter is set at
a rate insufficient to meet environmental needs. The Commissioner
was recently quoted (Agra Europe 25th May 2007) as favouring
a 10% compulsory modulation rate by 2013. This is considerably
less than the rate of 19% (both VM+CM combined) now applicable
in England (the Welsh rate is still to be established following
the recent Assembly elections).
In view of the above, CCW's support for an increased
rate of CM is conditional on (i) the retention of VM for the foreseeable
future (ii) a better system of allocating rural development funding
at EU level—with more emphasis on agricultural area and
rather less on past spend. It would also be preferable if the
CM arrangements could allow for all of the money collected at
member state level to be returned to the country of origin.
WORLD TRADE
7. What benefits can the EU's World Trade
Organisation obligations create for EU agriculture and, consequently,
for the EU economy as a whole?
A successful Doha round should benefit the EU
economy overall by expanding international trade across a wide
range of goods and services. From an agricultural perspective,
WTO negotiations have proved to be a driver for decoupling and
may well result in further reductions in Pillar 1 and a progressive
growth in Pillar 2. However, reductions in tariff barriers are
likely to increase imports of both beef and dairy products, with
consequent downward pressure on internal market prices. The environmental
impacts of this are not clear-cut as they will vary from region
to region depending on farming practice. In CCW's opinion, it
will be important for EU negotiators to use both the sensitive
product and special product (PGI, PDO etc) mechanisms to ensure
the protection of environmentally benign extensive farming systems,
in particular within the beef sector.
ENVIRONMENTAL PROTECTION
AND CLIMATE
CHANGE
8. To what extent has the system of cross-compliance
contributed to an improved level of environmental protection?
How is it linking with other EU policy requirements such as the
Water Framework Directive?
Cross compliance as a mechanism for ensuring
basic environmental protection for land in receipt of Single Farm
Payment was introduced in January 2005. Given its relatively recent
introduction, evidence of its environmental impacts is still very
limited.
Information on rates of non-compliance is also
rather limited, but the most common breaches of the Statutory
Management Requirements (SMR) at both UK and EU level are related
to animal identification and registration. Regarding the environmental
SMR's, breaches of the Nitrates Directive have also been identified
as significant. Regarding Good Agricultural and Environmental
Condition (GAEC), the most common breaches involve requirements
for a minimum level of land maintenance and standards on soil
erosion.
Cross compliance seems to function largely as
a means of encouraging compliance with EU and UK legislative standards—by
preventing those in receipt of income support from carrying out
damaging activity. By contrast, encouraging positive land management
activity is more properly regarded as the role of Pillar 2.
CCW's view on the evolution of the cross compliance
is that it would be better to extend the "horizontal reach"
of the policy over time by adding additional simple controls across
a wider range of topics (water protection, waste, air quality,
climate change) rather than seek to "raise the bar"
by setting more demanding standards on existing topics. However,
the pace of evolution may be dictated in large part by the changing
value of SPS entitlements. Given that the SPS may very well have
ceased to exist by 2020, then cross compliance is a time limited
tool. In such a scenario it is perhaps best viewed as a policy
lever for encouraging farmers to develop a better understanding
of evolving market requirements.
9. How can the CAP contribute to mitigation
of, and adaptation to, climate change? What do you consider the
role of biofuels to be in this regard?
We believe that a revitalised CAP can help land
managers play a major role in helping to meet the challenges posed
by climate change. Areas to focus on include reductions in the
emissions of greenhouse gases; soil management techniques designed
to reduce and possibly reverse CO2 emissions; management of water
supplies in the light of reduced summer rainfall; reduction in
the risks posed by flooding and adoption of both energy saving
and energy generation measures.
The potential contribution of biofuels in relation
to tackling climate change is complex. While replacement of fossil
fuels with biofuel would seem to offer benefits by reducing CO2
emissions the reality is more complex. Current technologies tend
to concentrate on conventional crops such as oilseed rape and
cereals as feedstocks. Grown using conventional techniques to
maximise yields and then processed the resulting biofuels require
considerable inputs of energy. Thus the overall benefits in terms
of reduced greenhouse gas emissions can be marginal.
Using land for biofuels may also result in a
wide range of indirect effects. In particular, by competing with
land used to grow both human and animal feed, such crops are already
starting to drive up commodity prices. There is the possibility
of using Set Aside land, but this will have an environmental impact.
Relying on imports from countries with lower environmental safeguards
may lead to a global loss of biodiversity and a substantial increase
in overall CO2 emissions depending on where such crops are grown.
The development of second-generation biofuels may involve lower
environmental impacts, but the present generation seems likely
to result in an intensification of land use and more pressure
on biodiversity. From a Welsh perspective, the area of high quality
arable is relatively small, so first generation biofuels are unlikely
to be taken up on a significant scale. However, they may still
exert a substantial indirect impact by increasing the price of
animal feeds.
FINANCING
10. The Commissioner has expressed her dissatisfaction
at the financing agreement reached by the Member States at the
December 2005 Council. Do you consider the current budget to be
sufficient? Do you consider co-financing to be a possible way
forward in financing the Common Agricultural Policy?
In relation to co-financing, the European Parliament
has shown itself to be strongly opposed to any apparent re-nationalisation
of the CAP. In particular, during the recent debate over the draft
voluntary modulation regulation, Parliament applied a 20% reserve
to the EU rural development budget until such time as it was satisfied
that the regulation would be applied in a way that respected the
common policy framework. As a result, the Commission now appears
to have little appetite for engaging in similar debates in the
near future.
Co-financing has the advantage of instilling
a greater sense of discipline in those involved in the delivery
of spending programmes. However, it is less popular amongst those
member states who are net beneficiaries of the current system.
Whilst Pillar1 is entirely EU-funded at present, Pillar 2 spending
is already co-financed. One way of introducing a greater measure
of co-financing into the CAP would be to use compulsory modulation
to transfer funds from Pillar 1 to Pillar 2. This would attract
support from within the Commission and possibly also from sections
of the European Parliament.
ENLARGEMENT
11. What has been the impact on the CAP of
the 2004 and 2007 enlargements and what is the likely impact of
future enlargements of the EU on the post-2013 CAP?
The recent accession of countries such as Romania
has resulted in the addition of large numbers of very small peasant
farms which it is probably impossible to support using traditional
farm-based Pillar 1 or 2 measures. Should Turkey accede to the
EU, this problem would be magnified to an even greater extent.
The solution would appear to reside in an expansion of economic
rural development measures using a combination of Axis 3 (EARFD)
and Structural Funds. The environmental implications of such a
policy switch are difficult to predict and are likely to vary
from one location to another depending on the measures used and
the nature of the rural areas concerned.
SIMPLIFICATION OF
THE CAP AND
OTHER ISSUES
12. How could the CAP be further simplified
and in what other ways would you like to see the Common Agricultural
Policy changed in the short and/or the long term?
The Commission's current proposals appear primarily
to affect traders rather than producers. CCW does not envisage
any significant environmental impacts arising from the technical
simplifications currently proposed. From a general persective,
CCW also supports a streamlined and simplified approach, provided
this can be achieved without any damaging environmental side effects.
8 June 2007
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