CAP Reform – future challenges SASSPO Policy Dialogue, Helsinki Professor Mark Shucksmith School of Architecture, Planning and Landscape.

CAP Reform – future challenges

SASSPO Policy Dialogue, Helsinki

CAP Reform – future challenges

SASSPO Policy Dialogue, Helsinki

Professor Mark ShucksmithProfessor Mark ShucksmithSchool of Architecture, Planning and Landscape

Agenda 2000 ChallengesAgenda 2000 Challenges

External:External: Competing in global markets (->Lisbon agenda)Competing in global markets (->Lisbon agenda) EU enlargement (->long transitions…) EU enlargement (->long transitions…) WTO trade negotiations (->DOHA now suspended…)WTO trade negotiations (->DOHA now suspended…)

InternalInternal The risks of growing surplusesThe risks of growing surpluses Budgetary constraintsBudgetary constraints Consumer interests, notably food safetyConsumer interests, notably food safety Revitalising rural economiesRevitalising rural economies Environmental concernsEnvironmental concerns Decentralising decision-makingDecentralising decision-making

Structure of PresentationStructure of Presentation

• What pressures to reform the CAP lie ahead?What pressures to reform the CAP lie ahead?• The continuing challenge of world trade.The continuing challenge of world trade.• The contribution of CAP expenditure to EU The contribution of CAP expenditure to EU

priorities and strategic objectives:priorities and strategic objectives: Lisbon agenda of global competitivenessLisbon agenda of global competitiveness Territorial cohesion and ESDPTerritorial cohesion and ESDP The interests of New Member StatesThe interests of New Member States

• Some conclusionsSome conclusions• Possible directions for reformPossible directions for reform

The suspension of DOHAThe suspension of DOHA

• The main external pressure was from DOHA – now The main external pressure was from DOHA – now suspended due to obstacles of US domestic subsidies and suspended due to obstacles of US domestic subsidies and EU/G10 market access, among other issues.EU/G10 market access, among other issues. Will DOHA be revived? Not soon given US elections and expiry Will DOHA be revived? Not soon given US elections and expiry

of fast-track approval, but similar pressures for multilateral of fast-track approval, but similar pressures for multilateral agreement will re-emerge eventually (before 2013).agreement will re-emerge eventually (before 2013).

Will Single Farm Payments remain in Green Box?Will Single Farm Payments remain in Green Box? EU moving to pursue bilateral agreements with China, ASEAN EU moving to pursue bilateral agreements with China, ASEAN

and other emerging economies in pursuit of Lisbon agenda.and other emerging economies in pursuit of Lisbon agenda.

• Mrs Fischer-Boel: suspension of DOHA does not diminish Mrs Fischer-Boel: suspension of DOHA does not diminish urgency of implementing 2003 CAP reforms, but “CAP urgency of implementing 2003 CAP reforms, but “CAP health check” in 2008 not fundamental reform and is health check” in 2008 not fundamental reform and is “certainly not about trying to cut budgets”. But 2013…?“certainly not about trying to cut budgets”. But 2013…?

The Contribution of CAP to EU Strategic Priorities and ObjectivesThe Contribution of CAP to EU

Strategic Priorities and ObjectivesLisbon Agenda of global competitivenessLisbon Agenda of global competitiveness

Difficult to argue that Pillar 1 supports this aim: EU Difficult to argue that Pillar 1 supports this aim: EU strategy has been to negotiate such support away in strategy has been to negotiate such support away in return for access for EU exports of goods and services.return for access for EU exports of goods and services.

However, an important aspect of Lisbon agenda is However, an important aspect of Lisbon agenda is promoting the competitiveness of rural territories. promoting the competitiveness of rural territories.

OECD (2006) has observed this “new rural paradigm” OECD (2006) has observed this “new rural paradigm” across many countries – focussed on places not sectors, across many countries – focussed on places not sectors, and on investments not subsidies. They say “traditional and on investments not subsidies. They say “traditional policies to subsidise farming have not been able to policies to subsidise farming have not been able to harness the potential of rural regions.” New challenges harness the potential of rural regions.” New challenges are identified in terms of policies and governance. are identified in terms of policies and governance.

Territorial cohesion and ESDPTerritorial cohesion and ESDP

• ESPON study of the territorial impact of the CAP:ESPON study of the territorial impact of the CAP: Pillar 1 - Market Price Support, Direct Payments, etc Pillar 1 - Market Price Support, Direct Payments, etc

amounts to €90bn pa, including market support as well amounts to €90bn pa, including market support as well as expenditure. This support strongly benefits richer, as expenditure. This support strongly benefits richer, core regions, with lower unemployment rates. This core regions, with lower unemployment rates. This reflects their larger farms, farm type and core location. reflects their larger farms, farm type and core location.

Only direct payments are consistent with territorial Only direct payments are consistent with territorial cohesion objectives, but these are outweighed by cohesion objectives, but these are outweighed by dominant Market Price Support (€56bn pa.)dominant Market Price Support (€56bn pa.)

This main element of the CAP works against cohesion.This main element of the CAP works against cohesion.

Map 4.1 Total Pillar 1 support per AWU, 1999  

Territorial Cohesion – Pillar 2Territorial Cohesion – Pillar 2

• Surprisingly, the ESPON study found that Pillar Surprisingly, the ESPON study found that Pillar 2 (€4.6bn) does not support cohesion either. 2 (€4.6bn) does not support cohesion either.

• Agri-Environmental, and even LFA payments Agri-Environmental, and even LFA payments tend to benefit richer regions, mainly because tend to benefit richer regions, mainly because of differing national priorities, but also because of differing national priorities, but also because of co-financing difficulties. Poorer countries of co-financing difficulties. Poorer countries prioritise farm modernisation. prioritise farm modernisation.

Territorial Cohesion – the MTRTerritorial Cohesion – the MTR

• The ESPON study found that the Mid Term Review of The ESPON study found that the Mid Term Review of the CAP will make little difference.the CAP will make little difference.

• Impacts of the MTR reform proposals were analysed Impacts of the MTR reform proposals were analysed using outputs from Bonn University’s CAPRI model, using outputs from Bonn University’s CAPRI model, at NUTS3 level. Farm incomes are hardly affected, at NUTS3 level. Farm incomes are hardly affected, and there is no relationship with cohesion indicators. and there is no relationship with cohesion indicators.

• The reformed CAP will still work against cohesion, The reformed CAP will still work against cohesion, unless national implementation aims at territorial unless national implementation aims at territorial cohesion through their Rural Development Plans.cohesion through their Rural Development Plans.

Impacts of Selected MeasuresImpacts of Selected Measures

• Case Studies of selected measures:Case Studies of selected measures: Agri Environment programme – used more in NW Europe; Agri Environment programme – used more in NW Europe;

effective more in uplands than intensively farmed areas.effective more in uplands than intensively farmed areas. Less Favoured Area Scheme – most used in prosperous Less Favoured Area Scheme – most used in prosperous

regions of livestock farming. Often underpins High Nature regions of livestock farming. Often underpins High Nature Value systems but could be better targeted. Value systems but could be better targeted.

Early Retirement Scheme – very little additionality.Early Retirement Scheme – very little additionality. LEADER and Article 33 measures – appeared to be most LEADER and Article 33 measures – appeared to be most

effective in terms of promoting territorial cohesion and in effective in terms of promoting territorial cohesion and in promoting the Lisbon agenda in terms of the economic promoting the Lisbon agenda in terms of the economic competitiveness of poorer rural regions.competitiveness of poorer rural regions.

The implications for CAP reform are considered later.The implications for CAP reform are considered later.

Quality of Life in Rural and Urban Areas of Europe – EU Foundation

This analysis of EQLS will be published shortly. The analysis This analysis of EQLS will be published shortly. The analysis is presented in terms of four clusters of countries:is presented in terms of four clusters of countries:

• EU12 HighEU12 HighAustria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy,

Luxembourg, Netherlands, Sweden, UK.Luxembourg, Netherlands, Sweden, UK.

• EU7 IntermediateEU7 IntermediateCyprus, Czech Republic, Greece, Malta, Portugal, Slovenia, SpainCyprus, Czech Republic, Greece, Malta, Portugal, Slovenia, Spain

• EU6 LowEU6 LowEstonia, Hungary, Latvia, Lithuania, Poland, SlovakiaEstonia, Hungary, Latvia, Lithuania, Poland, Slovakia

• CC3CC3Bulgaria, Romania, TurkeyBulgaria, Romania, Turkey

Domains analysed

EQLS data was analysed over 7 main domains:EQLS data was analysed over 7 main domains:

• Income and DeprivationIncome and Deprivation

• Housing and local environmentHousing and local environment

• Education and internet useEducation and internet use

• Employment and working conditionsEmployment and working conditions

• Work-life balanceWork-life balance

• Access to work, school, family, friends & servicesAccess to work, school, family, friends & services

• Subjective well-beingSubjective well-being

Income and DeprivationIncome and Deprivation

Countries

Income in

EURO (mean)

Household Deprivation

(mean)

Household Deprivation among old people 65+

(mean)

Household Production

(% yes)

Subjective Economic

Strain (% yes)

Eu12 High rural 1177 0.6 0.5 16 27 urban 1298 0.7 0.6 5 30 EU7 Int rural 593 1.5 2.2 26 47 urban 721 1.1 1.7 6 51 EU6 Low rural 256 2.7 3.4 74 73 urban 371 2.3 2.9 20 68 CC3 rural 97 3.8 4.6 63 82 urban 210 2.8 3.9 11 75 EU25 rural 707 1.0 1.1 26 37 urban 803 0.9 1.1 7 38 Notes: Income: Household Equivalised income in Euro according to OECD scale 2. Household Deprivation: Mean of a 6-point index on non-affordable specific household items (warmth, holiday, furniture, meat, clothes, eating out). Household Production: Household grows vegetables or fruits, keeps poultry or livestock. Subjective economic strain: household cannot make ends meet with the monthly income. All differences between urban and rural areas are significant at the 5 per cent level. Source: the EQLS 2003.

Main findings

• In richer countries, urban-rural differences are In richer countries, urban-rural differences are minimal, while such differences become greater minimal, while such differences become greater the poorer the country cluster (with rural the poorer the country cluster (with rural households being more disadvantaged)households being more disadvantaged)

• The policy implication is that it is rural areas of The policy implication is that it is rural areas of the poorer countries which should be targeted by the poorer countries which should be targeted by convergence and cohesion measures.convergence and cohesion measures.

• There is no strong evidence of a superior quality There is no strong evidence of a superior quality of rural life which compensates for material of rural life which compensates for material disadvantage, and which might lessen the need for disadvantage, and which might lessen the need for intervention.intervention.

Main findings

• The reshaping of the structural funds and cohesion The reshaping of the structural funds and cohesion policy accords with the results in so far as they policy accords with the results in so far as they show large inequalities between country clusters.show large inequalities between country clusters.

• However, this intervention might favour urban However, this intervention might favour urban areas of the poorer countries, while it is their rural areas of the poorer countries, while it is their rural areas that are most in need.areas that are most in need.

• The low education levels and IT usage of these The low education levels and IT usage of these rural areas, and legacies of deindustrialisation, rural areas, and legacies of deindustrialisation, might militate against their capacity for might militate against their capacity for convergence investment, despite their greater convergence investment, despite their greater needs.needs.

Major challenges for policy

Rural and Agricultural PoliciesRural and Agricultural Policies

• How can CAP promote territorial cohesion, How can CAP promote territorial cohesion, given its focus on agricultural sector in richer given its focus on agricultural sector in richer regions of the richer countries?regions of the richer countries?

• Can CAP funding be switched to broader Can CAP funding be switched to broader rural development activities, targeted at the rural development activities, targeted at the poorer rural regions of Europe?poorer rural regions of Europe?

• LEADER-type measures, in particular?LEADER-type measures, in particular?

Major challenges for policy

Structural PoliciesStructural Policies

• Is there a worry that these will be focused on Is there a worry that these will be focused on urban areas in NMS and CC3, to the neglect urban areas in NMS and CC3, to the neglect bothboth of rural areas in NMS and CC3 (assumed to be of rural areas in NMS and CC3 (assumed to be addressed adequately by the CAP) addressed adequately by the CAP) andand of poor of poor urban neighbourhoods in richer countries?urban neighbourhoods in richer countries?

• Should territorial rural development be funded Should territorial rural development be funded through the CAP or through the Structural Funds?through the CAP or through the Structural Funds?

Will there be further reforms?Will there be further reforms?

• Some progress made in Agenda 2000 and MTR Some progress made in Agenda 2000 and MTR reforms, constraining expenditure to 46% of EU reforms, constraining expenditure to 46% of EU budget, starting to reduce trade-distorting effects. budget, starting to reduce trade-distorting effects. There is discussion of environmental impacts. There is discussion of environmental impacts.

• But: farmers are still subsidy-dependent rather But: farmers are still subsidy-dependent rather than internationally competitive; subsidies go to than internationally competitive; subsidies go to better-off farmers in richer regions; consumers pay better-off farmers in richer regions; consumers pay high prices. It hardly supports EU objectives – high prices. It hardly supports EU objectives – economic, social policy or territorial cohesion.economic, social policy or territorial cohesion.

• Radical changes in CAP have always derived from Radical changes in CAP have always derived from externalexternal forces, not internal factors. forces, not internal factors.

Future challenges – some conclusionsFuture challenges – some conclusions

• DOHA was the main pressure for radical reform. DOHA was the main pressure for radical reform. This will re-emerge by 2013, but not by 2008?This will re-emerge by 2013, but not by 2008?

• Pressure from Lisbon agenda: supports the ‘new Pressure from Lisbon agenda: supports the ‘new rural paradigm’ against farm policy community.rural paradigm’ against farm policy community.

• Territorial cohesion: will NMS & cohesion Territorial cohesion: will NMS & cohesion countries seek CAP reform (especially if the countries seek CAP reform (especially if the structural funds are squeezed)? Rural-urban structural funds are squeezed)? Rural-urban inequalities in poorer member states.inequalities in poorer member states.

• Tensions arise from growing diversity of national Tensions arise from growing diversity of national circumstances -> partial renationalisation?circumstances -> partial renationalisation?

• EU crisis of legitimacy may require CAP reform. EU crisis of legitimacy may require CAP reform.

Some directions for CAP reform? Some directions for CAP reform?

• If DOHA negotiations had cut Pillar 1 Market Price If DOHA negotiations had cut Pillar 1 Market Price Support, this would have improved the consistency of Support, this would have improved the consistency of the CAP with the EU’s territorial cohesion objectives.the CAP with the EU’s territorial cohesion objectives.

• David Harvey recently published some proposals in David Harvey recently published some proposals in Eurochoices. CAP farm spending is the only EU Eurochoices. CAP farm spending is the only EU measure which is not co-financed. He argued:measure which is not co-financed. He argued: Make CAP spending discretionary and co-financed (25% EU)Make CAP spending discretionary and co-financed (25% EU) The EU should contribute at a higher rate in poorer statesThe EU should contribute at a higher rate in poorer states Retain the existing CAP as a framework for state action and spendingRetain the existing CAP as a framework for state action and spending This would allow the abolition of the UK rebate and the redirection of This would allow the abolition of the UK rebate and the redirection of

EU funds towards competitiveness and cohesion objectives.EU funds towards competitiveness and cohesion objectives.

• Mrs Fischer Boel has recently advocated subsidy-capping.Mrs Fischer Boel has recently advocated subsidy-capping.

Some directions for CAP reform? Some directions for CAP reform?

• Encourage member-states to spend more of CAP on Encourage member-states to spend more of CAP on LEADER-type measures (Axis 4, 2007-13).LEADER-type measures (Axis 4, 2007-13).

• Increase Pillar 2 budget progressively, as proposed by Increase Pillar 2 budget progressively, as proposed by the Commission, but more quickly.the Commission, but more quickly.

• Target Pillar 2 measures more effectively.Target Pillar 2 measures more effectively.• Single Farm Payments should be modulated Single Farm Payments should be modulated

progressively in richer regions (eg by business size) progressively in richer regions (eg by business size) • Broaden RDR to include more measures for Broaden RDR to include more measures for

sustainable rural development beyond agriculture. sustainable rural development beyond agriculture. • Support rural community development and the “new Support rural community development and the “new

rural paradigm” (OECD 2006).rural paradigm” (OECD 2006).