Implications of CAP Reform: Forming a Devon View Michael Winter University of Exeter

Aims of Talk To consider the immediate prospects for the Mid- Term Review of CAP. To examine the possible implications of modulation. To suggest that a new orthodoxy is emerging around the positioning of European agriculture in the international policy context. To question the significance of CAP in this wider context.

1. Mid-Term Review (MTR) of CAP EC has just published “Prospects for Agricultural Markets ”. This includes analysis of the latest US Farm Bill.

MTR cont/ Milk – market improving. Therefore no early reform to dairy sector. Quotas to continue. Beef - market improving. Therefore no early reform. Sheep- no changes expected. Cereals - market expected to improve (following this year’s difficulties). Likely cut of 5% in intervention price.

MTR cont/ Modulation – up to 20% of direct aids skimmed off for Rural Development. Likely to be gradually in 3% steps. Rumours that modulation savings may not be handed back to governments that trimmed them – perhaps shared instead with poorest areas of the EU.

2. Modulation Currently voluntary (UK and France only, with Portugal and Germany considering). In UK rising from 2.5% in 2001 to 4.5% in 2005/06 across board. MTR offers possibility of compulsory modulation.

Implications of compulsory modulation Very difficult to determine until we know: A. How the modulated money will be spent. B. The precise details of any new Agri- Environment Scheme. C. The level of scheme uptake.

The impact of 10 % modulation and the implementation of a Broad and Shallow Agri-environmental Scheme in the SW

3. The New Orthodoxy Farmers must be responsive to markets Globalisation of food markets Segmentation of food markets Farming is multifunctional Farming has negative environmental and other impacts (externalities). Rewarding multifunctionality and regulating externalities is the only justification for policy intervention.

Background to Orthodoxy Farming & FMD crisis Maturing of agri-environmental debate Europe’s response to WTO Who buys into the new orthodoxy? EU and UK policy community Mainstream farming organisations Mainstream environmental and food NGOs

Tensions and uncertainties Global Markets v Regulation Positive v Negative Externalities State Regulation v the New Governance

How important is CAP? It is not the sole determinant of prices. It is not the sole driver of the rural economy. It is not the only source of rural policy. It is not the only consideration for farmers. In short CAP is but one factor and not necessarily the most important one to the future of rural Devon. The challenge is to ensure that we use the opportunities of CAP reform but are not held back waiting for THE reform.