CAP in Europe: 2013 and beyond (preliminary ideas)

Toomas KevvaiMinistry of Agriculture

Measure of time Talking of the CAP future, generally

the period 2014...is meant 2007-2013 has in essence been

settled, now “health check” of the implementation of the decisions made in 2003 is in process

2014... can broadly be connected with the budget negotiations for the EU next financial period of 2014-2020

As Einstein has already told 80 years ago:

Common believe is not commonknowledge or actual and/or future reality.

Was Malthus right?

Foodstuffs production opportunities of the world are limited

World population is growing Prices of agricultural products on

record level New agricultural commodities

markets: bioenergy

The statement of Mr. Jeroen van der Veer (CEO of Shell) concerning the world energy situation:

“After 2015, easily accessible supplies of oil and gas probably will no longer keep up with demand.”

http://www.shell.com/home/content/aboutshell-en/our_strategy/shell_global_scenarios/two_energy_futures/two_energy-_futures_25012008.html)

Cereals needed for bioethanol

0

20

40

60

80

100

120

140

160

Mil

lio

n t

on

nes China - maize

Canada - wheat

Canada - maize

EU - wheat

EU - maize

USA - maize

World cereals production (rice excluded) 2016: 1850 million tons

Source: OECD

Solar energy (world and European need for electricity)

Quantities not problematic – price problematic

Even with growing biofuel production adequate food supplies can be guaranteed for the world food security

… provided that food will be distributed on equal terms

Food security is not a quantity problem … but depends on purchasing

power, i.e. on incomes and prices

How wealthy are we?

http://www.globalrichlist.com/ Estonian residents - on an average

814,456,058 In the world, more than 6 000 000

000 people

Is invisible hand acceptable when we are talking about food supply

Are net exporters ready to guarantee food supply for export markets in case of failure in their own food production chain?

Wise man don’t keep all the eggs in one basket

Challenges for CAP 2013+

Increasing input prices – energy as fuel, fertilizers etc

Increasing demand instead of supply limiting instruments

Climate change – agriculture as problem and/or solution

Market orientation versus environmental sustainability

Technical challenges Decoupled payments – to whom, why,

common market common approach? Partial coupling for environmental,

social etc reasons Safety net Direct payments versus rural

development (structural actions, agri-environment)

What should be taken into account?

Environment

Biodiversity

GMO Increasein

consumption

Climate change

Non-food agriculturalcommodities

Bioenergy

World food market

CAP

CAP internal balance

Short review The CAP main elements at the moment

2 pillars De-coupling of support payments Decrease in the impact of market regulation 3 axes of rural development policy European Agricultural Guidance and Guarantee

Fund European Agricultural Fund for Rural

Development

The two pillars of the EU Common Agricultural Policy

Market regulation Rural development policy

I pillar II pillar

Common internal market

- customs duties

- export refunds

- consumption aid

Direct payments

Increase in competitiveness

Agri-environment and landscapes

Rural enterprise and village development

LEADER approach

The EU budget and the share of the CAP in it

In the budget of 2008, expenditure on agriculture and rural development constitutes 53,8 billion EUR or 41,67% of budget volume.

Thus, expenditure on agriculture and rural development makes up only 0,43% of the EU gross national income.

The two pillars of the EU Common Agricultural Policy

Market regulation

Rural development policy

I pillar II pillar

80%

20%

Proportion of the I pillar (direct payments) and the II pillar support payments from the EU budget (estimate – data of 2006)

0

2

4

6

8

10

12

14

16

BE CZ DK DE EE IE GR ES FR IT CY LV LT LU HU MT NL AT PL PT SI SK FI SE UK BG RO EL-27

The two pillars of the EU Common Agricultural Policy in Estonia

Market regulation Rural development policy

I pillar II pillar

50% 50%

The CAP I pillar

Present direct payments

Single Payment Scheme Entitlements Regional and historic approach

Single Area Payment Scheme Partially coupled support payments

Article 69 Cross Compliance

The CAP future issues

Principles of direct support payment Public good? Entitlements? Cross compliance has come to stay –

expand? If and how many coupled direct

payments? Integration of direct payments and LFA

Direct payments and LFA

Contradiction?

€

Low fertility

Poor climatic conditions

High agricultural intensity

LFA

Direct payments

Market intervention

Export subsidies shall be phased out by 2013

Limitations on production shall be phased out by 2014 (milk quota will be the last)

Support payments coupled with the production of a certain impact

The CAP II pillar

The CAP II pillar 2007-2013 rural development policy

Agricultural fund for rural development

Single programming, financing, monitoring and auditing

I

Competitiveness

II

Environment and land use

III

Economic diversification and quality of

life

LEADER

Rural development 2007-2013

3 axes?

Competitiveness of agriculture and forestry > 10%

Agricultural landscapes and environment > 25%

Diversification of rural enterprise and village development > 10%

LEADER approach

LEADER – a method to improve local initiative or waste of administrative costs?

LEADER – minimum share > 5%

CAP goals (treaty)

Are those still relevant, have their context changed?

Aim and some “keywords” To increase agricultural productivity by

promoting technical progress, by ensuring reasonable development of agricultural production and by the optimum use of factors of production, particularly labour force Energy efficiency ? GMO ? Decoupled payments ? Entitelments ?? Research and development ? Innovation ?

Aim and some “keywords” To ensure fair standard of living for the part of

the population engaged in agriculture, primarily by the increase in individual earnings of those working in agriculture Non-agricultural living standard in rural areas ? Decoupled payments, entitelments – farmers or

landowners ?

Aim and some “keywords” To stabilise markets

Stabilizing for which direction? To avoid sharp decreases or increases?

To guarantee food security Export taxes?

To secure reasonable consumer prices How ?

Aim and some “keywords” Reduction of negative environmental impact of

agriculture Strong agri environmental programmes ? Cross-compliance

Concluding ideas

CAP first pillar needs ideolodical and financial revision

SPS – LFA Direct payments coupled with public

good Abolishing historical reference which

defines direct payments envelopes according of intensity of certain commodities production between member states

Direct payments and LFA

Contradiction?

€

Lower public good High public good

Direct payments with integrated LFA

CAP second pillar should be stronger

Increasing need for stong agri-environmental programmes

Real structural development Landscape management and biodiversity Local food chains Low input agriculture Research and development Innovation Sustainable bioenergy

The CAP II pillar 2013+ rural development policy

Agricultural fund for rural development

Single programming, financing, monitoring and auditing

I

Competitiveness

II

Environment and land use

III

Economic diversification and quality of

life

LEADER

Rural development

Balance between I and II pillar

The balance should move toward II pillar

But – strict rules for limiting cofinancing and additional state aid to minimize unfair competition

Thank You for Your attention!