A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Pierre Pagesse.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
Personal accounts

Financial prospects of the CAP


By Jean Bizet
Senator, vice-president of the European Union Delegation of the Senate Founding member of WOAgri


Jean Bizet, Senator of the Manche and founding member of WOAgri, gave a speech at the conference organized by IRIS on December 13th 2006 entitled “Which agriculture for Europe”? He spoke about the financial prospects of the CAP, underlining the strategic importance of this policy for the future of Europe, contrary to the British point of view, shared by Mariann Fischer Boel, which is that agriculture is an adjustment variable in international negotiations.
Below you will find his unabridged speech.



The burden of the CAP on the European Union budget

A finger has often been pointed at the large proportion of the European budget that is allocated to the Common Agricultural Policy (CAP). This is probably because the CAP is very visible, if you see what I mean. Most public expenditure for agriculture is taken from the European budget.

This situation applies to no other common policy. During discussions on financial prospects, it has been said that it is not appropriate that the European Community spends more on agriculture than on research. Even Tony Blair made provoking comments.

This comparison does not make sense. It is true that the amount allocated to research in the European budget is very small. Günter Verheugen, Vice-President of the European Commission, responsible for Enterprise and Industry, during his recent visit to the Senate, underlined the fact that the research budget in some companies is sometimes larger than in the European Union.

Of course this situation cannot be compared with that of the CAP. If we take an objective view of European expenditure on agriculture, it is not the bottomless pit often described by our British friends. If the taxpayer had a modest income, his income tax would decrease by approximately 2.5% and the advantages for the consumer would be minimal if we consider the small proportion of each household budget that agricultural products represent. However, there would be significant disadvantages: there would be less security of supply, product quality and health security could not be guaranteed, there would be damage to the countryside, increased imbalance in land management, loss of employment with the disappearance of a large number of farms and the relocation of certain ag-food industries. Finally, we must remember that a great effort has been made to bring agricultural expenditure under control with the implementation of the 2007–2013 financial framework. Expenditure on direct aid and market management will decrease regularly during this period, from 43 billion euros in 2007, to 40 billion in 2013. These measures will come into effect at the same time as the European Union welcomes two new Member States, Bulgaria and Rumania, and probably a third, Croatia. In 2013, expenditure on direct aid and the management of agricultural markets will represent 32% of the European Community budget, compared to 36% in 2004. If we examine the financial framework of sectors concerning conservation and natural resource management, which also includes rural development (the 2nd pillar of the CAP) and the Common Fisheries Policy, expenditure will decrease during the 2007-2013 period from 55 billion to 51 billion constant euros, which is a reduction of 7%. If we take into consideration that these two or three other countries have joined the European Union, we can see that agricultural expenditure has been significantly reduced.

Prospects

What can we expect in 2008 – 2009 and 2013?

The agreement on financial frameworks includes a “check up” for the CAP in 2008–2009. At a recent conference in Helsinki held by the Parliamentary Commission of Agriculture, during which Mariann Fischer Boel, Commissioner responsible for Agriculture and Rural Development made a speech, it was clear that nobody, not even the British, was seriously considering using the 2008–2009 intermediary assessment to question the financial framework. However, the Commission does not rule out making some significant modifications to the CAP at this time. Several measures could be considered: an increase in the compulsory modulation of direct payments to finance sustainable development, setting a ceiling on direct zones, legal simplification (uniting 21 common market organizations into one), the abolition of the second exceptions to decoupling and finally, the abolition of the withdrawal of arable land.

Concerning the Doha Round, the Commission’s progress seems to be held back by the current deadlock in WTO negotiations. An agreement could have provided a reason for new changes. However, it is difficult to justify new changes that would be implemented shortly before a new WTO agreement imposes others. In fact, after the victory of the Democrats in the American elections, the most probable hypothesis would therefore be an agreement in 2008–2009 to conclude the Doha Round probably after the end of the current president’s term. All this should lead to a combination of new adaptations of the CAP and the conclusion of the Doha Round. This would help the European Union to have a more coherent approach, which would limit the statutory instability that everyone complains about. Whatever happens, we must bear in mind the three main objectives of the Hong Kong preliminary agreement: the abolition of export subsidies after 2013, which today seems probable, the reduction of domestic support and the opening of new markets. Of course, under these terms, the CAP will not be able to remain as it is today.

We do not yet know if the President of the United States will have his authorization renewed. Tactically, it would be tragic if we acted today without knowing what the United States was going to do, and without knowing how much leeway G.W. Bush will have to negotiate. Even if an early reform of the CAP was essential in 2003 to restart negotiations and achieve the Hong-Kong preliminary agreement, in the future we must not accept a second early reform of this kind, to which the United States will not respond and which will not help matters to move forward quickly.

What will happen after 2013? Beyond the 2008-2009 “check up”, discussions have already begun about what will happen after 2013. Targets are already being discussed: continue to encourage the growth of the second pillar at the expense of the first, abolish, if this has not already been done, the last aspects of coupling with production that may remain (therefore, setting up regulation by the market alone) and finally, diversify opportunities by the production of non-food crops.

Premises for a debate

This debate has just begun, and some comments can be made.

First, the concept of decoupled direct aid is not completely satisfactory. It is essential to be in line with WTO rules, so that our policy is “WTO compatible”. This does not mean that we must do nothing. Times change and during the Helsinki inter-parliamentary meeting (mentioned above), many criticisms were made. Public opinion has difficulty accepting these aids. They seem unfair because the owners benefit from them, generating a certain guaranteed income, and not the farm-worker, and they are based on out-dated references.

Nor do they seem to be the best way to create competitiveness in agriculture or to make what we could call the rural community viable. Also, in certain areas, the absence of an incentive to produce could create problems for the transformation industry, which could have difficulties obtaining supplies.
Finally, in the agricultural sector, can we rely on decoupled aid and on market mechanisms; can we do without price management tools? These are questions that must be put forward.

Times change and we need to consider possible evolutions. We will probably have to shift from making cutbacks to more targeted spending. The second point is that we hope that Europe will remain a major exporting country of agricultural products. The remarks of the President of France at the Agricultural Show in Clermont-Ferrand last October specifically made this point clear.

Finally, one last point. France will no doubt play a major role in these discussions in 2013. The evolution of the European budget will place us in the same position as our German partners: we will be able to make alternative proposals. There is a real strategic dimension to agriculture and we already feel that discussions of this subject in the European Union are taking on a different tone. Agriculture will remain an important part of the market and will inevitably take on a high-tech dimension in the future.
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Paris, 22 September 2014