CAP Reform – future challenges
SASSPO Policy Dialogue, Helsinki
Professor Mark Shucksmith
School of Architecture, Planning and Landscape
Agenda 2000 Challenges
External:
 Competing in global markets (->Lisbon agenda)
 EU enlargement (->long transitions…)
 WTO trade negotiations (->DOHA now suspended…)
Internal
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The risks of growing surpluses
Budgetary constraints
Consumer interests, notably food safety
Revitalising rural economies
Environmental concerns
Decentralising decision-making
Structure of Presentation
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What pressures to reform the CAP lie ahead?
The continuing challenge of world trade.
The contribution of CAP expenditure to EU
priorities and strategic objectives:
 Lisbon agenda of global competitiveness
 Territorial cohesion and ESDP
 The interests of New Member States
Some conclusions
Possible directions for reform
The suspension of DOHA
• The main external pressure was from DOHA – now
suspended due to obstacles of US domestic subsidies and
EU/G10 market access, among other issues.
 Will DOHA be revived? Not soon given US elections and expiry of
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fast-track approval, but similar pressures for multilateral agreement
will re-emerge eventually (before 2013).
 Will Single Farm Payments remain in Green Box?
 EU moving to pursue bilateral agreements with China, ASEAN and
other emerging economies in pursuit of Lisbon agenda.
Mrs Fischer-Boel: suspension of DOHA does not diminish
urgency of implementing 2003 CAP reforms, but “CAP
health check” in 2008 not fundamental reform and is
“certainly not about trying to cut budgets”. But 2013…?
The Contribution of CAP to EU
Strategic Priorities and Objectives
Lisbon Agenda of global competitiveness
 Difficult to argue that Pillar 1 supports this aim: EU
strategy has been to negotiate such support away in
return for access for EU exports of goods and services.
 However, an important aspect of Lisbon agenda is
promoting the competitiveness of rural territories.
 OECD (2006) has observed this “new rural paradigm”
across many countries – focussed on places not sectors,
and on investments not subsidies. They say “traditional
policies to subsidise farming have not been able to
harness the potential of rural regions.” New challenges
are identified in terms of policies and governance.
Territorial cohesion and ESDP
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ESPON study of the territorial impact of the CAP:
 Pillar 1 - Market Price Support, Direct Payments, etc
amounts to €90bn pa, including market support as well
as expenditure. This support strongly benefits richer,
core regions, with lower unemployment rates. This
reflects their larger farms, farm type and core location.
 Only direct payments are consistent with territorial
cohesion objectives, but these are outweighed by
dominant Market Price Support (€56bn pa.)
 This main element of the CAP works against cohesion.
Map 4.1 Total Pillar 1 support per AWU, 1999
Territorial Cohesion – Pillar 2
• Surprisingly, the ESPON study found that Pillar
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2 (€4.6bn) does not support cohesion either.
Agri-Environmental, and even LFA payments
tend to benefit richer regions, mainly because
of differing national priorities, but also because
of co-financing difficulties. Poorer countries
prioritise farm modernisation.
Territorial Cohesion – the MTR
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The ESPON study found that the Mid Term Review of
the CAP will make little difference.
Impacts of the MTR reform proposals were analysed
using outputs from Bonn University’s CAPRI model,
at NUTS3 level. Farm incomes are hardly affected,
and there is no relationship with cohesion indicators.
The reformed CAP will still work against cohesion,
unless national implementation aims at territorial
cohesion through their Rural Development Plans.
Impacts of Selected Measures
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Case Studies of selected measures:
 Agri Environment programme – used more in NW Europe;
effective more in uplands than intensively farmed areas.
 Less Favoured Area Scheme – most used in prosperous
regions of livestock farming. Often underpins High Nature
Value systems but could be better targeted.
 Early Retirement Scheme – very little additionality.
 LEADER and Article 33 measures – appeared to be most
effective in terms of promoting territorial cohesion and in
promoting the Lisbon agenda in terms of the economic
competitiveness of poorer rural regions.
The implications for CAP reform are considered later.
Quality of Life in Rural and Urban
Areas of Europe – EU Foundation
This analysis of EQLS will be published shortly. The analysis is
presented in terms of four clusters of countries:
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EU12 High
Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy,
Luxembourg, Netherlands, Sweden, UK.
EU7 Intermediate
Cyprus, Czech Republic, Greece, Malta, Portugal, Slovenia, Spain
• EU6 Low
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Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia
CC3
Bulgaria, Romania, Turkey
Domains analysed
EQLS data was analysed over 7 main domains:
• Income and Deprivation
• Housing and local environment
• Education and internet use
• Employment and working conditions
• Work-life balance
• Access to work, school, family, friends & services
• Subjective well-being
Income and Deprivation
Main findings
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In richer countries, urban-rural differences are
minimal, while such differences become greater
the poorer the country cluster (with rural
households being more disadvantaged)
The policy implication is that it is rural areas of
the poorer countries which should be targeted by
convergence and cohesion measures.
There is no strong evidence of a superior quality
of rural life which compensates for material
disadvantage, and which might lessen the need for
intervention.
Main findings
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The reshaping of the structural funds and cohesion
policy accords with the results in so far as they
show large inequalities between country clusters.
However, this intervention might favour urban
areas of the poorer countries, while it is their rural
areas that are most in need.
The low education levels and IT usage of these
rural areas, and legacies of deindustrialisation,
might militate against their capacity for
convergence investment, despite their greater
needs.
Major challenges for policy
Rural and Agricultural Policies
• How can CAP promote territorial cohesion,
given its focus on agricultural sector in
richer regions of the richer countries?
• Can CAP funding be switched to broader
rural development activities, targeted at the
poorer rural regions of Europe?
• LEADER-type measures, in particular?
Major challenges for policy
Structural Policies
• Is there a worry that these will be focused on
urban areas in NMS and CC3, to the neglect both
of rural areas in NMS and CC3 (assumed to be
addressed adequately by the CAP) and of poor
urban neighbourhoods in richer countries?
• Should territorial rural development be funded
through the CAP or through the Structural Funds?
Will there be further reforms?
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Some progress made in Agenda 2000 and MTR
reforms, constraining expenditure to 46% of EU
budget, starting to reduce trade-distorting effects.
There is discussion of environmental impacts.
But: farmers are still subsidy-dependent rather
than internationally competitive; subsidies go to
better-off farmers in richer regions; consumers pay
high prices. It hardly supports EU objectives –
economic, social policy or territorial cohesion.
Radical changes in CAP have always derived from
external forces, not internal factors.
Future challenges – some conclusions
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DOHA was the main pressure for radical reform.
This will re-emerge by 2013, but not by 2008?
Pressure from Lisbon agenda: supports the ‘new
rural paradigm’ against farm policy community.
Territorial cohesion: will NMS & cohesion
countries seek CAP reform (especially if the
structural funds are squeezed)? Rural-urban
inequalities in poorer member states.
Tensions arise from growing diversity of national
circumstances -> partial renationalisation?
EU crisis of legitimacy may require CAP reform.
Some directions for CAP reform?
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If DOHA negotiations had cut Pillar 1 Market Price
Support, this would have improved the consistency of
the CAP with the EU’s territorial cohesion objectives.
David Harvey recently published some proposals in
Eurochoices. CAP farm spending is the only EU
measure which is not co-financed. He argued:
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Make CAP spending discretionary and co-financed (25% EU)
The EU should contribute at a higher rate in poorer states
Retain the existing CAP as a framework for state action and spending
This would allow the abolition of the UK rebate and the redirection of
EU funds towards competitiveness and cohesion objectives.
Mrs Fischer Boel has recently advocated subsidy-capping.
Some directions for CAP reform?
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Encourage member-states to spend more of CAP on
LEADER-type measures (Axis 4, 2007-13).
Increase Pillar 2 budget progressively, as proposed by
the Commission, but more quickly.
Target Pillar 2 measures more effectively.
Single Farm Payments should be modulated
progressively in richer regions (eg by business size)
Broaden RDR to include more measures for
sustainable rural development beyond agriculture.
Support rural community development and the “new
rural paradigm” (OECD 2006).