CHAPTER 6: Eu Policy and regulation|
"Millions of hectares are being lost to
agriculture in the rest of the worldin China, Australia
and the USand probably even in Europe. Some of the big
new emerging powers are buying millions of hectares of agricultural
land in Africa and South America. We in Europe are sitting here
saying, 'Agriculture is the old economy', in what I call an innovation-hostile
environment. A lot of political groups are telling us to farm
as we did in the 19th century, selling our tractors and doing
it in the old way because it will be good for the environment
... This is the strategic debate. Does Europe say that it can
provide food for 500 million rich Europeans and import what we
do not have, or does it play a role in feeding 9 billion people,
including 1 billion people in China and India who are starting
to eat meat?"
Mr Georg Häusler, Head of Cabinet, DG Agriculture,
138. Various aspects of EU policy relate to innovation
in agriculture, some of which have already been explored earlier
in the report. In this chapter, we look in some detail at the
Common Agricultural Policy (CAP) itself and consider some of the
other policies which have an impact on the ability of the agricultural
industry to innovate.
139. In its Communication on CAP reform in November
2010, the Commission
refers within the rural development section to "support for
innovation, knowledge transfer and capacity building" but
goes into no detail. We therefore seek, without repeating relevant
conclusions of the preceding chapter, to probe further on how
the reformed CAP can promote innovation in EU agriculture. We
gave an earlier indication of our thinking in the comments which
we published in January 2011 on the Commission's Communication.
DIRECT PAYMENTSPILLAR 1 OF
140. Under Pillar 1, direct payments to farmers
and market management measures are funded; we explored with witnesses
how direct payments could support innovation. For the European
Commission, Mr Häusler observed that the direct payment
"gives a solid base for most of our European farmers: it
gives them security, predictability and a planning period"
and warned that, "if we did not have first pillar money,
no farmer will invest".
This argument was supported by Mr de Castro and was based
on farm income statistics indicating that the average income in
farming is substantially lower than that in the rest of the economy.
A similar line was taken by the Polish Government who saw Pillar
1 as protection for basic needs and necessary for survival in
less favourable years.
Both the NFU and the CLA agreed that farmers required "a
certain level of income ... to be able to invest in new technologies".
141. The alternative view on direct payments
was that they act as a brake on innovation. Some of those advocating
this argument asserted that innovation has been more apparent
in historically unsupported sectors, such as pigs and horticulture.
From the AHDB, we heard that "the unsubsidised UK pig industry
has had to be continuously innovative and this enabled it to survive
through a very difficult economic period in the 1990s".
Similarly, the Macaulay Land Use Research Institute (now part
of the James Hutton Institute) observed that "technological,
product and marketing innovation has been notable in those sectors
for which a CAP commodity regime was, prior to 'decoupling'
light or absent, such as pigs, poultry, potatoes and most fruits
The UK Government considered that the single farm payment "stultifies
competition" and called for a strategy looking forward towards
the gradual reduction and eventual elimination of the Single Farm
Payment, a position supported by the Danes.
142. While there was a general consensus that
direct payments should, or at least would, continue, there was
also a strong recognition that payments should encourage environmental
innovation. Professor Moloney was clear that subsidies could
be "based on the introduction of innovative approaches that
reduce our carbon footprint or benefit biodiversity at the same
Dutch agreed that financing under Pillar 1 should reward innovative
behaviour: "a farmer has to do something to get direct payments,
either in competitiveness or sustainability"
and the Commission acknowledged that "we want to get something
in exchange for our money."
The Polish Government supported a payment to support ecosystem
143. Others recognised that Pillar 1 was likely
to go further in future in making payments conditional on meeting
environmental goals, but warned against over-complexity. Mr de
Castro acknowledged the need to encourage farmers "to go
in the right direction with good practice, taking care of the
environment ... but at the same time we need to make them more
competitive, to be strong enough to win".
COPA-COGECA suggested that payments should be based on "win-win
measures that had a positive impact for the environment or reducing
emissions, but also had a positive impact on the farmer, enabling
him to have better resource efficiency, for example encouraging
precision farming, manure processing and biofuel processing on
farms". Any farmer not wishing to pursue such a path would
be free to do so but would not receive that part of the payment.
144. As we said in commenting to the Commission
in January of this year, we see no case for payments that are
made available without an environmental justification or, at the
very least, without environmental conditionality. Moreover, payments
that are essentially income support payments do not encourage
innovation. We consider that payments under Pillar 1 of the
CAP should be made in return for delivery of public goods, responding
to climate change, protecting biodiversity and encouraging environmental
145. We agree, however, that better integration
of environmental considerations into Pillar 1 must not lead to
further bureaucratic complexity. The sustainable intensification
of the CAP must be achieved on the basis of real improvements
to the EU's and Member States' knowledge transfer systems. More
effective advice to farmers must strengthen the adoption of best
practice which will have both economic and environmental benefits.
As set out in Chapter 5 of this report, we see significant potential
for improvement both in the Farm Advisory System of the CAP, and
in national arrangements for farm advice, notably in the UK.
RURAL DEVELOPMENTPILLAR 2
OF THE CAP
146. In our April 2011 report on the EU Financial
Framework from 2014,
we concluded that Pillar 2 is a vital method of helping farmers
to innovate, and we supported a strengthening of it in financial
terms by moving funds from Pillar 1. This movement of funds from
Pillar 1 to Pillar 2 is otherwise known as "modulation".
147. We heard various suggestions as to how Pillar
2 (see Box 12) might more effectively support innovation. The
European Commission told us that it is considering offering a
higher rate of co-financing
to promote innovation in Pillar 2: "there is a lot of new
technology on the market that farmers do not use yet, or do not
use enough, for cost and other reasons".
Such an increase in co-financing would boost the proportion of
funding from the EU budget, thus reducing the proportion required
from national budgets.
148. The Danish Government would like to see
greater flexibility for enhanced public support, at least "for
innovation projects that address the future challenges",
although it did not specify that this should mean higher rates
of co-financing. In particular, the Danes would support changes
in order to allow greater public financing (whether EU or national)
of renewable energies such as biogas. Higher levels of investment
are currently restricted by state aid rules to products listed
in Annex I of the Treaty (which are almost exclusively food products)
as long as the results of the project are made public. They would
also like changes to allow support for single projects because
innovation is often performed by individual enterprises.
Rural Development Regulation
|Articles 26-30 of Regulation 1698/2005 provide for the funding of measures "aimed at restructuring and developing physical potential and promoting innovation". In particular:
· the modernisation of agricultural holdings (Art 26);
· improvement of the economic value of forests (Art 27);
· adding value to agricultural and forestry products (Art 28);
· cooperation for the development of new products, processes and technologies in the agriculture and food sector, and in the forestry sector (Art 29);
· infrastructure related to the development and adaptation of agriculture and forestry (Art 30)
Pillar 2 offers a suite of measures that can be supported, with the aim that Member States and regions have the flexibility to tailor their rural development programmes to their respective needs.
149. The Polish Government pointed to the potential
of the current articles 28-30 of the Rural Development Regulation
to be used to give money to investors to use knowledge generated
somewhere else: the money could be directed for the development
of new technologies to help research institutions to work on something
that is of interest to industry or farmers.
The NFU also considered that Pillar 2 could be used more effectively
to support projects of a genuinely innovative nature, suggesting
that Pillar 2 has been too orientated towards agri-environment
schemes, "rather than a focus on what would increase productivity
150. Morrison's considered that they should be
able to access rural development funding in order to support new
innovations that could then feed through into the agricultural
This suggestion was underlined by the Danish Government, who called
for greater flexibility in the levels of funding allocated to
larger companies: "large companies act as well as small and
medium sized companies as a driving force behind innovation".
151. Under Pillar 2, support for innovation-related
projects must be core and a balance must be ensured between purely
agri-environmental projects and funding to support agricultural
innovation, whilst recalling that the two are often compatible.
One example might be support for projects using agricultural
materials, such as straw in bio-energy. In that light, we recommend
that Pillar 2 be sufficiently flexible to encourage innovation
in relation to all forms of agricultural material, whether food
or not. Alongside such flexibility, we support the European Commission's
proposal that a higher rate of co-financing be made available
to support innovation-related projects under Pillar 2. Such an
increase in financing can be supported, at least in part, by reducing
the level of direct payments under Pillar 1. This would involve
modulation from Pillar 1 to Pillar 2.
OF THE PRECAUTIONARY APPROACH
152. Some witnesses suggested that the European
Union is hostile to innovation. Mr Häusler, of the Agriculture
DG, described "the microcosm of Brussels" as "an
Examples of pertinent areas of regulation are offered in Box 13.
The AHDB agreed that the right EU policy and regulatory environment
to encourage innovation in agriculture "has been substantially
absent", with specific reference to biotechnology and crop
Similarly citing pesticides and GMO legislation, the European
Crop Protection Association (ECPA) noted that policies affecting
agriculture's ability to innovate are often led by departments
other than the Commission's Agriculture DG. The ECPA urged DG
Agriculture to exert greater influence over other, related, policy
areas. We are
clear that policy incoherence in the Commission is a serious obstacle
to agricultural innovation. The European Commissioner responsible
for agriculture and food must ensure that the need to promote
innovation in EU agriculture is respected by other parts of the
Commission when they take decisions which will impact on the food
and farming sector.
A snapshot of EU regulation
Novel foods are defined in EU legislation as foods
which have not been consumed in the EU to a significant degree
before 15 May 1997. A regulatory framework is in place,
but attempts at agreeing a revised one recently failed.
Food products from cloned animals are considered
a novel food, but are not banned, nor are those from the offspring
of cloned animals. In October 2010, the European Commission published
a Report in which
it proposed a temporary ban on cloning in the EU, although it
is yet to do so. Particular debate surrounds the marketing of
products derived from the offspring of clones. While such products
are thought to be safe, animal welfare concerns have been raised.
New EU rules for the authorisation of plant protection
products in commercial form and for their placing on the market,
use and control within the EU came into effect on 14 June 2011.
The new rules use strict hazard-based criteria; some fear that
this may reduce the pesticides available on the market, with an
impact on crop yield.
Genetically Modified Organisms
The EU regulatory framework on GMOs currently consists
of two pieces of legislation.
In both cases, the relevant company makes an application for approval
in the first instance to the Member State concerned. Under the
framework, various authorisations for the placing on the market
of GM food and feed have been granted but only two products have
been accepted for cultivation in the EU: a GM maize product, MON
810, in 1998; and a starch potato, for industrial use, in 2010.
In summer 2010, the Commission proposed
changes to the regulatory framework in an effort to open the way
for more GM products to be approved, if only for cultivation in
some, not all, Member States. In spring 2011, there was little
prospect that these proposed changes would soon be agreed.
153. According to Article 191(2) of the Treaty,
the precautionary principle
should underpin EU environmental and related legislation. The
Dutch Government reminded us that a restrictive regulatory environment
in food safety was created by a number of problems, such as the
BSE crisis: "it is not there for nothing."
Nevertheless, there was a feeling that the EU had taken the principle
too far and that, by doing so, it had significantly limited innovation
Professor Moloney asserted: "the precautionary principle
is very dangerous when used capriciously or just in selective
cases". Mr de
Castro told us that "the precautionary principle is very
important" but that it is important to look seriously at
whether there is any evidence for damage to human health and the
environment from agricultural innovations.
154. Similarly, Dr Barsby emphasised the
need for "science-based regulation and decision-making"
and added that, because political issues get embroiled with the
science, issues arise with timing of the introduction of new innovations.
Dr Little confirmed that the regulatory framework has a substantial
impact on investment decisions. He noted that BASF had managed
to get a GM crop authorised for cultivation in 2010 (amflora potato),
13 years after the first: "you certainly don't want to invest
in products for Europe if you believe that it is going to be another
13 years before the next one is going to be allowed in".
The political step at the end of the food safety assessment process
was recognised as an issue by others.
US witnesses observed that food safety assessment in the EU is
similar to elsewhere, based on the codex alimentarius,
but that, in the EU, there is a political step at the end of the
155. Instead, argued some witnesses, the EU should
look to encourage innovation in EU agriculture, which would require
a re-orientation of the precautionary principle. The Dutch Government
raised the possibility that the regulatory environment could make
adoption of innovation an assumption, with the requirement being
to prove that an innovation is unsafe rather than that it is safe.
Dr Bushell emphasised the need for a regulatory environment
that, rather than "stopping things happening" is "benefiting
the outcomes that we want from agriculture and how it is encouraging
innovation in order to get better outcomes".
Dr Little put the regulatory regime into historical perspective,
noting that the CAP went through a period of overproduction. Consequently,
there was little initial interest in technology that allowed more
production. He noted, however, that we "are now in a situation
where in some ways the overall policies of the EU to reduce productivity
have to be reversed".
156. There was particular criticism from witnesses
of the restrictive regime for authorisation of GMOs for cultivation
in the EU. Several confirmed that, if GM crops were allowed to
be more widely available in the EU, they would almost certainly
be planted. On
behalf of European farmers, COPA-COGECA told us that EU farmers
should certainly have the choice to cultivate GM crops.
Scientists expressed frustration. Professor Oldroyd commented
that "currently what we have is science essentially locked
down"; Professor Moloney added that the regulatory framework
had made it difficult for agricultural scientists to access funding
in areas that will eventually matter.
157. There was also a reminder that a restrictive
approach to the growth of GM crops in Europe means that much of
the plant protein on which EU animals are fed needs to be imported.
Professor Moloney observed: "we will be eating them
and using them, but we won't be growing them".
158. Some witnesses, on the other hand, supported
the current restrictive approach as regards GM technology specifically.
Pete Riley was not convinced "that GM will be the answer
to increased yields."
He emphasised that a plant "will thrive in an environment
as a result of its total genetic base rather than single gene
and he highlighted the growing problem of the increasing resistance
of weeds to a particular herbicide (glyphosate) in areas where
GM crops resistant to glyphosate have been grown. The co-existence
of GM crops and organic crops was raised as a concern.
Dr Julian Little was confident that both crops can co-exist.
He observed that no problems had arisen in terms of organic accreditation
as a result of GM field trials in the UK.
However, Emma Hockridge described GM crops and organic crops as
"mutually incompatible" and brought to our attention
the example of an Australian farmer who had lost his organic certification
as a result of GM contamination from a neighbouring farm.
159. As regards the development of genetic technology
in livestock, Professor John Oldham emphasised the need to
"be careful to make sure that we do not compromise the interests
of animals." It was also observed that, as a result of complex
genome mapping, many of the characteristics of interest of animals
and plants are under the control of hundreds of genes, thus making
genetic modification challenging. Genomic mapping might help instead
with genetic selection. Professor Geoff Simm warned against
the "danger that we see GM as a silver bullet to a lot of
the problems that we face".
Similarly, Professor Godfray considered that "GM is
extraordinarily important, but it is one of a suite of innovations
from high-tech to low-tech that we need", such as utilising
new genomics to mark selected genes and characteristics.
160. We were interested to observe European Commission
actions in relation to the EU regulatory framework and the precautionary
principle. A Communication in 2000 (see paragraph 153) outlined
the Commission's interpretation of the principle in some detail,
but the Commission made clear that it should be seen as "the
point of departure for a broader study of the conditions in which
risks should be assessed, appraised, managed and communicated".
Since then, the Commission itself has not reflected specifically
on the precautionary principle.
161. In the summer of 2010, the Commission brought
forward a proposal to amend the regulatory framework, in order
to allow greater discretion for individual Member States to authorise
cultivation of GM crops in their own territories once a food safety
assessment had been completed at EU level. Discussion of this
proposal continued into 2011 but, at the time of preparation of
this report, the indications were that in its current form the
proposal was unlikely to resolve the current impasse in Europe.
162. More recently, the Commission published
a report on the socio-economic implications of GMO cultivation
on the basis of contributions sent by the Member States.
The report is inconclusive due to a statistical framework which
we found to be particularly poor. A review of international literature
on the economic implications of GMOs was also undertaken on behalf
of the Commission, which similarly indicated inconclusive results.
We urge the Commission and Member States to act with urgency
in determining a robust set of factors, indicators and rules for
data collection that will facilitate a better understanding of
the socio-economic implications of GMOs.
163. Good regulation is evidence-based, taking
into account environmental, economic and social considerations.
We are clear that the precautionary principle must continue to
underpin regulatory decisions with regard to food safety. It must,
however, be applied with due consideration of available scientific
evidence of potential risks and benefits. Reluctance to take a
risk can be a risk in itself if, for example, global food security
is likely to be threatened.
164. A wide range of innovative new technologies,
including biotechnologies, is available for use and for further
research. No single one should be seen as the silver bullet that
will transform EU agriculture, either in the arable or in the
livestock sector; and each needs to be assessed for its wider
environmental impact as well as for its benefit to agricultural
production. But we are clear that it is critical for reasons
of productivity, sustainability and competitiveness that appropriate
technologies can be adopted swiftly after proper testing. The
EU decision-making procedure should seek to help, rather than
hinder, the adoption of appropriate new technologies. We would
not recommend that new techniques should routinely be assumed
to be safe unless proven otherwise, but there is undoubtedly a
need for a much clearer articulation of the potential risks and
benefits of any technology. In advancing this debate at a political
level, it would be appropriate for the European Commission to
re-visit its 2000 Communication on the Precautionary Principle
and to re-consider the application of the principle in the light
of the grand challenges faced by society.
ANIMAL WELFARE REGULATION
165. Another issue raised with us was that of
animal welfare standards in the European Union which can place
European farmers at a competitive disadvantage if the same standards
do not apply to others. The Commission acknowledged that high
animal welfare standards such as the Laying of Hens Directive
"puts the industry in a very difficult position compared
with ... its most important competitors."
Mr de Castro recognised the same concern but emphasised that
"we should be proud of our high standards of animal welfare"
and should encourage others, outside Europe, to rise to our standards.
166. Professor Oldham insisted that high
animal welfare standards need not imply higher net costs: while
the actual costs may rise, the returns may rise higher.
This was borne out by the Dutch hen housing example (see
Box 11 in Chapter 5). By working with industry, animal welfare
standards have been increased while improving productivity at
the same time.
167. We note concerns that high animal welfare
standards in EU legislation can harm the competitiveness of EU
farmers on the world market. Equally, however, we would not wish
to see a weakening in EU standards as a result. Rather, we have
been impressed to see how high animal welfare standards and business
efficiency can be mutually supportive, and we encourage partnerships
that can develop such win-win scenarios.
224 Q 538 Back
Op. cit. Back
Op. cit. Back
QQ 517-8, 520 Back
Q 207 Back
Q 560 Back
QQ 150, 152 Back
IEUA 2, para 4 Back
This term refers to the removal of a link between an agricultural
subsidy and a particular commodity. Back
IEUA 13, para 19 Back
QQ 500, 707 Back
Q 137 Back
Q 601 Back
Q 519 Back
Q 561 Back
Q 208 Back
Q 611 Back
Op. cit. Back
Most EU funding (with the exception of CAP direct payments) must
be matched by national or regional finance, in addition to any
private contribution-this is known as "co-financing".
The contribution from the EU budget varies according to the budget
line, region and Member State. Back
Q 522 Back
IEUA 40 Back
Council Regulation (EC) No 1698/2005 of 20 September 2005 on support
for rural development by the European Agricultural Fund for Rural
Development (EAFRD), as amended by Council Regulation 473/2009 Back
Q 548 Back
Q 152 Back
Q 473 Back
IEUA 40 Back
Q 511 Back
IEUA 2, para 4 Back
IEUA 8 Back
Regulation (EC) No 258/97 concerning novel foods and novel food
COM(2010) 585 Back
Regulation (EC) No 1107/2009 concerning the placing of plant protection
products on the market Back
Directive 2001/18/EC and Regulation (EC) No 1829/2003 Back
COM(2010) 375 Back
The "precautionary principle" has not been defined but,
in its Communication on the Precautionary Principle (COM(2000)1),
the Commission stated: "Recourse to the precautionary principle
presupposes that potentially dangerous effects deriving from a
phenomenon, product or process have been identified, and that
scientific evaluation does not allow the risk to be determined
with sufficient certainty". The acceptable level of risk
and uncertainty is a political decision to be resolved in each
Q 602 Back
QQ 48, 82 Back
Q 134 Back
Q 213 Back
Q 283 Back
Q 374 Back
Q 369 Back
The codex alimentarius is a series of food standards that
aim to provide a high level of consumer protection and fair practice
in the international trade of food and agricultural products.
It is overseen by the Codex Alimentarius Commission (CAC), an
intergovernmental body jointly sponsored by the Food and Agriculture
Organisation (FAO) and the World Health Organisation (WHO). Back
Q 188 Back
Q 602 Back
Q 369 Back
QQ 130, 154, 283, 306 Back
Q 617 Back
QQ 80, 119 Back
Q 130 Back
Q 379 Back
Q 384 Back
QQ 382, 640 Back
Q 368 Back
Q 382 Back
Q 640 Back
Q 649 Back
COM (2000) 1, page 21 Back
COM(2011) 214 Back
Kaphengst, Timo; El Benni, Nadja; Evans, Clive; Finger, Robert;
Herbert, Sophie; Morse, Stephen; Stupak Nataliya (2010): Assessment
of the economic performance of GM crops worldwide Back
Council Directive 1999/74/EC of 19 July 1999 laying down minimum
standards for the protection of laying hens Back
Q 511 Back
Q 216 Back
Q 641 Back