Seminar on the Common Agricultural Policy after 2020 | Simply better CAP post 2020 - mission impossible? | bit.ly/1YiEYch

1. CAP through
the eyes of
a scientist
Seminar on the CAP after 2020
Jyrki Niemi
Natural Resources Institute Finland
(Luke)

2. • have followed a certain logic towards what
economists consider less distorting and more
market-oriented policy instruments
• the MacSharry and Agenda 2000 reforms
replaced market price support with coupled
direct payments
• the Fischler 2003 reform and the Fischer Boel
Health Check replaced coupled by decoupled
payments and set a date for the final
elimination of supply controls on milk, sugar
and vineyard areas
How has CAP evolved? (1)
2
CAP reforms taken since 1992 until 2013

3. • against the evolutionary background, a
radical reform in 2013 would have
moved from untargeted decoupled
direct payments to targeted transfers
designed to achieve specific objectives
• public money for public goods
• discarding the old two-pillar structure and
replacing it with a public good pillar
• drive to rural development
3
The latest reform in 2013
How has CAP evolved? (2)

4. • budget was cut → smaller CAP
• direct payments redistributed
• between the Member States
• between farmers in each MS
• greater subsidiarity by providing increased
flexibility to MS → less common policy
• enlarged the scope for re-coupling of direct
payments → reversing the decoupling trend?
• the greening CAP adopted → strategic gain
• introduced measures to give producers greater
bargaining power in the supply chain
The 2013 reform – what did it
achieve?

5. 5
Any effort to take a longer view over
the CAP must address two questions:
• What are the prime challenges
facing EU agriculture post
2020?
• What types of market failures
require an agricultural policy?
Where is the CAP going?

6. (1) Supporting farm incomes
- direct payments justified as basic income support
- payments represent a considerable share of incomes
- however, uneven distribution of benefits, and leakages to
non-intended beneficiares
➨ increase the cost of farming (land prices)
➨ can direct payments be defended after 2020?
Prime challenges of the CAP (1)
6
(2) Competitiveness and productivity
-the focus of the policy is on promoting innovation
(development, diffusion and uptake of new technologies)
➨ is there an added value of the EU policy?
➨ investment/productivity enhancement tools?
➨ a structure based on family farms or corporate
entities?

7. Prime challenges of the CAP (2)
7
(3) Managing risks and crises in agriculture
-EU producers no longer isolated from the world market
- how price volatility and other risks should be tackled?
-the role of the EU and publicly-funded schemes?
➨ risk management at EU level benefits MS very unevenly
- currently, most MS focus on ex-post ad hoc payments
➨ ex ante rules for criteria to be applied and procedures
to be followed in responding to catastrophic risks needed
(4) Farmers’ position in the food chain
- options for arranging contractual relations within the
chain and legal possibilities for organizing farmers’
collective actions
➨ is binding EU legislation needed to tackle the issue of
fairness in the supply chain?

8. Prime challenges of the CAP (3)
(6) Climate policy and the CAP
-need to reduce agricultural emissions by 2030
➨ what type of policy design is needed?
-CAP 2013 Pillar 2 policies are currently extremely weak
➨ cost-efficient emissions reduction policy requires
coverage of agricultural and land use emissions
8
(5) The environmental record of the CAP
-limited improvements observed regarding the
environmental footprints of agriculture (little evidence on
the efficiency of cross-compliance or greening)
➨ need for payments which compensate farmers for
providing public goods (ecosystem services)?

9. Prime challenges of the CAP (4)
9
(7) The rural impacts of the CAP
-a considerable proportion of EU agriculture operates in
remote areas with difficult natural constraints
- coherence of agricultural and RD policies important
➨ payments to farms in rural zones with natural
handicap which cannot compete but are essential to the
rural fabric
(8) Financing of the CAP
- source of political tension and a cause inefficiencies
-CAP is over-constrained by benefit distribution
- pillar I is EU-financed and only pillar II is co-financed
➨ how much really has to be commonly financed &
administered?

10. ► Focus on essential market failures
- well-functioning markets rather than policy interventions are best way to
attain a competitive agricultural sector
- e- essential market failures are prospective targets for action
► Allocate public money according to returns in social
value and services
- for example, by targeting payments to preserve soil fertility and water
resources, rural landscape, to maintain a critical level of farming activity, to
protect biodiversity, or to fight against climate change
► Extend subsidiarity in the design and the financing of
the CAP measures
- responsibility for implementation of certain policies could be left on member
states
- national policies should be in conformity with the EU’s constitutional
principles, including the EU competition policy and the principle of Single
European Market
► Recognise administrative and transaction costs in the
design of policies
- administrative costs can be particularly heavy in the early stages of a
program
Directions for future?
10

11. Sources of the presentation
• Brady, M, Höjgård, S., Kaspersson, E. & Rabinowitz, E. 2009. The
CAP and future challenges? Available at
http://www.agrifood.se/Files/AgriFood_Other_20147.pdf
• Buckwell, A. 2015. Keep chewing this bone: a trickle of ideas on a
future CAP. Available at http://www.cap2020.ieep.eu/2015/
• Buckwell, A. & Baldock, D. 2014. Some thought on the CAP post
2020. Available at http://www.cap2020.ieep.eu/2014
• Bureau, J. & Mahe, L. 2008. CAP reform beyond 2013: An idea for a
longer view . Available at http://www.notre-europe.eu
• Matthews, A. 2015. Prospects for CAP reform 2020. Available at
http://capreform.eu/
• Matthews, A. 2015. Use of risk management tools in the CAP.
Available at http://capreform.eu/
• Rosa & Selnes 2012. Simplification of the CAP. Assessment of the
European Commission’s reform proposals. LEI report 2012-011.
• Swinnen 2015 (edit). The Political Economy of the 2014-2020
Common Agricultural Policy: An Imperfect Storm. Centre for
European Policy Studies (CEPS), Brussels. Available at
https://www.ceps.eu/ publications/political-economy-2014-2020-
common-agricultural-policy-imperfect-storm

12. Thank you!
Jyrki Niemi, professor
Natural Resources Institute Finland (Luke)
Koetilantie 5
00790 Helsinki
Tel. +358 29 532 6390
jyrki.niemi@luke.fi
www.luke.fi