The CAP is going against the flow of current major agricultural policies. The restructuring of the American agricultural policy proves it once again. As the negotiations for the free trade agreement US/EU are fully under way, this situation will lead to further fragility for European Union farmers.
“In agriculture, we trust”. More than an agricultural policy, the new Farm Bill is the symbol of a national union. As Barack Obama recently called it, this “Swiss army knife” supports farmers while raising the international outreach of American agriculture, and playing a wide societal role thanks to food aid2. This is the reason why no upheaval has undermined the American agricultural policy. Even better, farmers have the certainty of guaranteed incomes for the next ten years.
In fact, the new Farm Bill confirms the American pragmatism. If a procedure is no longer adapted to the situation, it is eliminated. This is what happened to direct decoupled aid, to be replaced by focusing on insurance systems, that is to say on support coupled to both production and markets.
A policy based on risk coverage
Another incongruity for Europeans: The $956 billion budget authorized for the next ten years could in fact be spent over the next five years. The new budget commitments will then be made in 2018, depending on expenditures since 2014. Between 2008 and 2013, $972 billion were spent, or twice of what should have been used if budget spending had been linear. We are indeed very far from European budget practices that set a multi-annual envelope that cannot be exceeded!
Other than the lines of domestic food aid and biofuel support that secure the flow of a share of the American agricultural production––which represents a form of regulation––legislators focused their attention to the exogenous and endogenous risks through chapters I and XI of the programming law (see page 3).
With nearly 70 percent of budget expenditures excluding domestic food aid, insurance thus becomes the cornerstone of the American support system. In addition to crop insurance, farmers will have access to price or income support systems, and even margin insurance for dairy farmers, who are guaranteed incomes to shelter them from climate or market risks.
And if in the end, the new American Farm Bill was the best ambassador of European farmers to provide the Common Agricultural Policy with a new direction? Up to now, the CAP totally goes against the flow, since close to 60 percent of our support represents direct decoupled payments, even if complex and conditional mechanisms for flexibility provide some bypass ways (such as greening, redistribution payments for the young and coupled aid).
The CAP that is programmed to 2010 does not protect European farmers from the market instability that has been increasing since the 2000s (market financialization, increased globalization and China’s specific stand).
In fact, our only program to confront market trepidations only accounts for €300 million yearly. It is quite inadequate to be effective.
European farmers are not as driven by the same political will as their American, Brazilian and Chinese competitors… to be competitive on global markets.
Far from pleading for the adoption of a “European” Farm Bill, since an agricultural policy is foremost the echo of agronomic, societal, economic and cultural specificities, momagri proposes to provide the CAP with a new strategic direction by taking advantage of the time until the 2017 revision of the European budget framework. Knowing that experts agree to recognize that agricultural market instability and international competition will become harsher, it is now urgent to raise an awareness: The CAP can no longer remain against the flow of other major agricultural policies throughout the world.
Unsettling the structure of certainties in Brussels
momagri, which is conducting work to unsettle the structure of certainties in Brussels, is startled by the lack of information from the various EU institutions. European senior officials are convinced that any anti-crisis––and even counter-cyclical––mechanism is incompatible with the WTO, and would generate an unacceptable scrambling of market signals. The new Farm Bill brings a contrary and vivid demonstration against such objections. Is it naiveté, dogmatism, incompetence or a refusal to see the real picture? In any event, its vote represents a new political confirmation of the strategic role of agriculture in the United States. Let’s hope that the Farm Bill will prove to the Brussels-based authorities the relevance of a policy that provides farmers with solutions to the market and climate fluctuations, and to international competition. At the risk of only accepting an imbalanced free trade agreement with the United States.
At any rate, it is with this aim that momagri will propose, in July 2014, a new strategic direction for the 2020 CAP that would be overhauled around a counter-cyclical and income stabilizing mechanism, which would not be more expensive than today… while being broadly compatible with European commitments toward the WTO.
Where does 99 percent of American governmental support go?
They are used to fund the following four chapters of the Farm Bill (out of a total of 12 chapters):
- Chapter I: Field crop programs
The chapter includes the safety nets of sales insurance that are free of charge and labeled “Marketing Loans”, “Price Loss Coverage (PLC)” and “Agricultural Risk Coverage (county3 ARC + individual ARC), with a total budget of over $44 billion.
- Chapter II: The environment
Endowed with a $57 billion budget, it faces a reduction in the number of programs to 13 from 23, leading to a one percent budget decline.
- Chapter IV: Domestic food aid
It maintains close to 80 percent of the total budget with $756 billion ($8.6 billion less than the previous Farm Bill). The flagship Supplemental Nutrition Assistance Program (SNAP) is much more than food aid. It is also production outlet mechanism, since food purchases by Americans include 99 percent of production on national land.
- Chapter XI: Agricultural insurance
With an allocation of close to $89 billon, it supplements the toolbox outlined in Chapter I, which protects farmers against market instability and input volatility. The Supplemental Coverage Option (SCO) and the Stacked Income Protection Plan (STAX) are among the new insurance plans whose premiums are subsidized.
2 American food aid accounts for close to 80 percent of the Farm Bill budget. As a pillar of the supply security policy, food aid to the most disadvantaged citizens is provided mostly through food stamps to purchase food products. In March 2013, a total of 47.7 million people received food stamps (the symbolic number of 40 million beneficiaries was reached in 2010).
3 A territorial division that is smaller than a State and is administrated by local authorities. (Source: FranceAgriMer)