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The EU Common Agricultural Policy (CAP) Flavio Coturni Head of Unit - Agricultural Trade Policy Analysis DG for Agriculture and Rural Development European.

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Presentation on theme: "The EU Common Agricultural Policy (CAP) Flavio Coturni Head of Unit - Agricultural Trade Policy Analysis DG for Agriculture and Rural Development European."— Presentation transcript:

1 The EU Common Agricultural Policy (CAP) Flavio Coturni Head of Unit - Agricultural Trade Policy Analysis DG for Agriculture and Rural Development European Commission

2 Minsk, Belarus 3 December 2009 2 Overview  The CAP: a continued reform process  The cumulated effects of the various reforms  What about the future?

3 Minsk, Belarus 3 December 2009 3 Main drivers of reform  Reduce surplus production  Control expenditure  Maintain rural population  Address societal concerns (food safety, environment, animal welfare)  Enhance market orientation  Improve competition on the world market

4 Minsk, Belarus 3 December 2009 4 MacSharry Reform, 1992 Objectives: oImprove competitiveness oStabilise markets, income and expenditure oDiversify production oProtect the environnement Measures taken: Price cuts Compulsory set-aside - Full compensation for loss of income Accompanying measures (agri- environment programmes, afforestation, early retirement, diversification)

5 Minsk, Belarus 3 December 2009 5 Agenda 2000 Objectives: oImprove competitiveness oRural Development Policy oFacilitate the enlargement of the EU Measures taken: Further price cuts (beef -20%, cereals -15%) Partial compensations = direct payments A comprehensive RD policy Ceiling on agricultural expenditure

6 Minsk, Belarus 3 December 2009 6 Degressivity Modulation Strengthening the 2nd pillar Adjustment of intervention levels Decoupling of direct payments Consolidation of the CAP within strict limits of financial discipline Better balance of support Enforcing standards (environment, food safety, animal welfare) Improving the transfer- efficiency of direct payments Reinforcing farmers’ market orientation and entrepreneurial role Cross-compliance CAP Reform 2003 - Objectives and measures

7 Minsk, Belarus 3 December 2009 7 CAP Reform 2003: Complementary Reforms 2004 Cotton, hops, tobacco, and olive oil Continues the approach of reducing support prices by replacing them with decoupled direct payments. CAP Reform 2003: Complementary Reforms 2005 Sugar Price cut (white sugar - 36% over 4 years), partial compensation through decoupled payments (64% of the price cut).

8 Minsk, Belarus 3 December 2009 8 CAP Reform 2003: Complementary Reforms 2007 Fruits and Vegetables Integration of F&V into the Single Payment Scheme, wide range of tools for crisis management for Producer Organisations, promotion of consumption. CAP Reform 2003: Complementary Reforms 2007 Wine Phasing-out expensive market intervention measures and allowing the budget to be used for more positive, proactive measures which will boost the competitiveness of European wines.

9 Minsk, Belarus 3 December 2009 9 CAP Health Check, 2008  Simplifies and better targets direct support to farmers: more flexibility for MS to re-orientate direct support, assistance to sectors with special problems (Art. 68);  Responds to market opportunities and price crises by removing supply controls: (phasing out milk quotas, abolition of set-aside, market management tools are streamlined and updated);  Strengthen Rural Development to respond to new challenges: increase of modulation by 5% between 2009-2013 for climate change, renewable energy, water management, biodiversity, innovation

10 Minsk, Belarus 3 December 2009 10 A consistent reform process…  Reform orientation reflects policy objectives –to be competitive in world markets and simultaneously meet the highest environmental, food safety, quality and animal welfare standards within dynamic sustainable rural economies  Decisions of reform reflect clear political choice –continue support for EU agriculture (the “not if but how” question) –in a manner that meets citizen, taxpayer and consumer needs and expectations and that is the less trade-distorting

11 Minsk, Belarus 3 December 2009 11 …built on sound preliminary analysis  Impact assessment allows to identify the problem, to define the objectives, to develop policy options and to analyse their economic, social and environmental impacts  It ensures collegiality within the Commission (inter- service steering group) and consultation of affected stakeholders

12 Minsk, Belarus 3 December 2009 12 The effects 80% of the expenditure is now paid directly to farmers Farmers are now encouraged to produce in response to market incentives, not in response to support incentives Farmers are sanctioned if they do not respect strict standards regarding food safety, plant and animal health, environment, animal welfare (cross- compliance) Pillar 2 enhances the development of rural areas

13 Minsk, Belarus 3 December 2009 13 The paths of CAP reforms and expenditure… EU-10EU-12EU-15EU-25EU-27

14 Minsk, Belarus 3 December 2009 14 CAP budget cost trend EU-12EU-15EU-27

15 Minsk, Belarus 3 December 2009 15 WTO boxes (bn €)

16 Minsk, Belarus 3 December 2009 16 Reductions in EU price support Reductions in EU price support......bringing EU prices in line with world prices

17 Minsk, Belarus 3 December 2009 17 EU public stocks

18 Minsk, Belarus 3 December 2009 18 Export refunds, billion € and % of agricultural expenditure and exports

19 Minsk, Belarus 3 December 2009 19 Passing the stress test… A sound policy in turbulent times…

20 Minsk, Belarus 3 December 2009 20 Looking ahead: The CAP should…  leave room for farmers to be as market-orientated as possible;  give farmers some kind of safety net;  help farms to modernise;  help to provide public goods;  help to meet various challenges such as climate change;  help to compete in a changing international environment.

21 Minsk, Belarus 3 December 2009 21 The CAP beyond 2013  Institutional context –New European Parliament and Commission –Lisbon Treaty –WTO –New financial perspectives New priorities for EU budget Budget for CAP?  General economic context –Changing world Supply and Demand –The impact of the economic crisis –Oil price –Volatility, Food security, climate change

22 Minsk, Belarus 3 December 2009 22 General context: The fundamentals  Growth in consumption is expected to relocate to the developing world.  Other than wheat and coarse grains, production increasingly shifts away from developed countries towards developing countries.

23 Minsk, Belarus 3 December 2009 23 General context: the economic crisis

24 Minsk, Belarus 3 December 2009 24 General context: Oil price

25 Minsk, Belarus 3 December 2009 25 US Wheat volatility has increased since 1980 General context: Price volatility

26 Minsk, Belarus 3 December 2009 26 …and in the EU too…

27 Minsk, Belarus 3 December 2009 27 General context: Speculation?

28 Minsk, Belarus 3 December 2009 28 The CAP beyond 2013: Open questions 1.Direct payments –Income support vs. public goods –Redistribution within and among Member States 2.Market mechanisms –Safety net –Other instruments 3.Rural development –Balance between competition, environmental and rural economy challenges 4.Financing –Distribution between pillars and areas –Co-financing

29 Minsk, Belarus 3 December 2009 29 The CAP in one click http://ec.europa.eu/agriculture/index_en.htm

30 Minsk, Belarus 3 December 2009 30 Thank you for your attention!


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