Contract SSPE-CT Meeting standards The impact of compliance on the competitiveness of European agriculture Floor Brouwer, Irina Bezlepkina and Roel Jongeneel LEI, Wageningen UR, The Netherlands Project website:

Contract SSPE-CT Context of the study The 2003 CAP reform introduced decoupled payments to farmers (Single Payment Scheme) A financial leverage system was introduced to encourage compliance with European standards that might have been ignored in the past (cross compliance)

Contract SSPE-CT Rationale of the study Risk of land being abandoned with payments that are decoupled from production; a system of Good Agricultural and Environmental Conditions (GAEC) was introduced coping with that In receipt of direct payments farmers need to comply with EU standards in relation to environment, public, animal or plant health and animal welfare

Contract SSPE-CT Key objective of study What is the value-added from introducing cross compliance as a tool to improve compliance with existing standards? Investigate costs implications and competition effects of compliance to EU standards on the world market in the specific context of cross compliance

Contract SSPE-CT PART 2 The economics of cross compliance

Contract SSPE-CT Council Regulation (EC) 1782/2003 A farmer receiving direct payments shall respect the statutory requirements and the GAEC The competent national authority shall provide the farmer with the list of SMRs and the GAEC to be respected In case of non-respect, reduction or cancellation of the direct payments to be granted in the calendar year in which non- compliance occurs

Contract SSPE-CT Annex III of Council Regulation 1782/2003 Statutory management requirements from legislative acts in different areas are referred to in Articles 3 and 4: Environment Public, animal and plant health Identification and registration of animals Notification of diseases Animal welfare

Contract SSPE-CT Case: identification & registration of animals Bovines –2 Eartags –Cattle passports –Notification of livestock changes –On-farm registers (to be kept for 10 years) Ovines and caprines –1 Eartag –On-farm records (inventory of animals, details of movement of sheep and goats, to be kept for 6 years) Detailed rules are specified by EU regulations  similar in EU Member States, more stringent rules in some countries (e.g. time limits for registration)

Contract SSPE-CT PART 3 Compliance with standards and costs of compliance

Contract SSPE-CT Measuring degree of compliance Monitoring and inspection services –Systematic/non-systematic inspections –Sample selection –Inspection intensity Expert / extension services information Survey –Direct approach –Indirect approaches –Trajectory checking

Contract SSPE-CT Measuring costs of compliance Cost character Cost type Other issues: –ex-ante or ex-post evaluation –accumulation of costs with interacting regulations Ordinary costs of compliance Additional costs of compliance Compliance costs Administrative costs Financial costs Operational costs Investment costs abatement costs yield loss adjusted barn storage paperwork time license

Contract SSPE-CT Costs of compliance Social costs could be high

Contract SSPE-CT Conclusions on first part Degrees of compliance for SMRs as well as GAECs tends to be high, but degrees of non-compliance are significant with implementation of Nitrates Directive and I&R (e.g. non-compliance could be up to 30% for I&R)

Contract SSPE-CT Conclusions on first part There is evidence that the introduction of cross compliance improves the degree of compliance with EU standards Costs of cross compliance as an enforcement mechanism are limited; additional costs mainly relate to requirements that have been ignored in the past

Contract SSPE-CT Conclusions on first part Improved compliance rates reduce distortions of competition within the EU as resulting from potentially uneven enforcement of standards. Harmonizing the respect of standards create a level playing field for farmers within the EU and thus improves the competitiveness of those farmers who have been already in compliance with those standards

Contract SSPE-CT PART 4 The international dimension (external competition and international trade)

Contract SSPE-CT Selected products and standards ProductEvaluated standards Dairy Nitrates (EU, non-EU) Identification and Registration (EU) Food Safety (bST) (non-EU) Beef Nitrates (EU) Identification and Registration (EU) Food Safety (growth hormones) (non-EU) Cereals GAEC Standards (EU, non-EU) Pigs & Poultry Nitrates (EU) Animal Welfare (EU) Clean Water (non-EU) Fruit & vegetables, olive Nitrates (Spain) Plant Protection Product (Spain) GAEC Standards ( in particular water conservation in Spain)

Contract SSPE-CT Dairy: Nitrate, Ident.&Registration, Food safety Percentage changes EU15 Import EU15 Export Nitrate 100% Identification& Registration Nitrate 100%; US, Can, NZ bST-ban US (growth promoting hormone) Comments: N-directive most important General impact small (focus on exports) Similar behavior other countries neutralizes impact bST-ban in US would favor EU dairy exports

Contract SSPE-CT Summary of impacts selected products & standards (100% compliance) EU-15 Imports (%-change) EU-15 Exports (%-change) Product trade balance (million US$ in constant prices of 2001) Dairy Beef Pigs & poultry Cereals

Contract SSPE-CT Selectie van papers Bezlepkina, I. et al. (2008) Costs of compliance with EU regulations and competitiveness of the EU dairy sector. Paper presented at XIIth EAAE Congress, Ghent, Belgium, August, Bezlepkina, I.et al. (2008) New member States and Cross Compliance: The case of Poland. Paper presented at the EAAE Seminar, November, Viterbo, ItalyNew member States and Cross Compliance: The case of Poland Brand, H en Jongeneel, R. (2008) Cross-compliance In: EU-beleid voor landbouw, voedsel en groen; van politiek naar praktijk. Wageningen: Wageningen Academic Publishers,

Contract SSPE-CT Selectie van papers Herzfeld, T.; Jongeneel, R. (2008) Economics of compliance: Developing a theoretical framework and an application to agriculture. Ede : 8th International Chain Conference, Floor Brouwer, Glenn Fox and Roel Jongeneel (Eds) The economics of regulation; compliance with public and private standards in agriculture. CABI (in voorbereiding)