Common Agriculture Policy Course number: EUI05/A-7

1. Common Agriculture Policy Course number: EUI05/A-7 Lecturer:

2. Aims of the lecture • To familiarize participants with foundations of Common Agriculture Policy, • To allow participants to appreciate what are the main characteristics of Common Agriculture Policy, • To facilitate understanding of phasing in of new Member States into Common Agriculture Policy, • To enhance the general knowledge of EU affairs among the Ukrainian civil servants.

3. Introduction Foundations laid down in the original version of EEC Treaty (now Treaty on Functioning of the European Union), CAP and relevant secondary legislation came into force in 1962, NOTE: CAP has always taken a lion share of EU budget as it comprises direct payments to farmers, NOTE: CAP is a very heavily regulated area with a lot of EU secondary legislation.

4. Aims of Common Agriculture Policy

5. Evolution of CAP 1962 – creation of Common Agriculture Policy, 1984 – reform: measures to tackle overproduction, 1992 – reform: centre of gravity moves from market support to producer support, direct payments to farmers, 2003 - reform: link between subsidies and production are removed, 2013 – reform: strengthening of competitiveness of CAP, promotion of sustainable farming and innovation.

6. Towards 2020 • On 1 June 2018, the European Commission presented legislative proposals on CAP beyond 2020. • Aim: to make the CAP more responsive to current and future challenges: for instance, climate change or generational renewal, • The 9 objectives of future CAP: • to ensure a fair income to farmers, • to increase competitiveness, • to rebalance the power in the food chain, • climate change action, • environmental care, • to preserve landscapes and biodiversity, • to support generational renewal, • vibrant rural areas, • to protect food and health quality.

7. CAP: legal basis An area of shared competence: Article 4(2)(d) TFEU, The legal bases for the EU to legislate in the are of agriculture are set out in Articles 38-44 TFEU. EU implements the Common Agriculture Policy, which extends the internal to agriculture and trade in agricultural products, subject to special rules which do not apply to other products traded in the internal market, NOTE: agricultural products are defined as: “the products of the soil, of stockfarming and of fisheries and products of first-stage processing directly related to these products” (Art. 38 para. 1 TFEU).

8. CAP: legal basis Article 40(2) TFEU: special rules may include ‘regulation of prices, aids for the production and marketing of the various products, storage and carryover arrangements and common machinery for stabilising imports and exports’. NOTE: relevant rules are set out by Regulation No 1308/2013 establishing a common organisation of the markets in agricultural products, NOTE: CAP must also take into account the over-arching principles expressed in the Treaties including in relation to the protection of the environment and sustainable development and respect for animal welfare.

9. Secondary legislation

10. Key terms Cross compliance - Support for farmers is conditional upon compliance with EU rules on the environment, food safety, animal health and good agricultural and environmental condition, Pillar one or two of CAP - The CAP is divided into two parts — Pillar One deals with direct payments and market management measures, and Pillar Two deals with rural development, Single payment scheme - The EU’s main agricultural subsidy scheme under Pillar One. Payments are ‘decoupled’, that is they are not tied to the amount of agricultural production by recipients, Direct payments - EU subsidies to farmers within Pillar One of the CAP.

11. Key terms Market price support - policies which control EU markets for agricultural products and aim at ensuring that the price at which a farmer sells a good in the market place does not fall below a certain minimum level. Includes measures such as: public intervention, private storage, marketing and quality standards, import and export rules, crisis measures, aid schemes and competition and state aid rules. Rural development - area of CAP expenditure which aims to achieve specific public benefit policy aims.

12. Financing of CAP • Regulation No 1306/2013 lays down rules for spending under the two main CAP funds: • European Agriculture Guarantee Fund (EAGF) - mainly finances direct payments to farmers and agricultural market support measures, • European Agricultural Fund for Rural Development (EARFD) – national rural development programmes.

13. Regulation No 1307/2013 • It sets out the rules for direct payments made to support farmers under the CAP. These payments are made on the condition that farmers meet strict rules on the health and welfare of people and animals, plant health and the environment — known as cross-compliance. • EU countries must dedicate a certain proportion of their CAP funding allocation to compulsory support schemes: • standard per-hectare payments — to distribute support more fairly, all EU countries had to move towards a uniform payment per hectare from 2015 (a ‘basic payment scheme’); • green payments per hectare — to be granted to farmers for observing practices beneficial for the climate and environment (30% of national funding allocation); • young farmer per-hectare payment — for farmers no more than 40 years old, setting up for the first time as head of their farm, up to 5 years before claiming support; this payment is available for up to 5 years.

14. Regulation No 1307/2013 Direct payments are payments granted directly to farmers to ensure them a safety net, It is a basic income support based on the number of hectares farmed, They are mainly granted in the form of a basic income support, decoupled from production, stabilising their income stemming from sales on the markets, which are subject to volatility, Received on the condition that EU farmers respect strict rules on human and animal health and welfare, plant health and the environment, The amount of support received is not linked to the quantities of production, and is designed to provide EU farmers with a safety net against  volatile market prices, Direct payments include a basic payment and additional payments notably a so called green payment for farming methods that go beyond basic environmental protection. In certain member states, direct payments also include support for certain sectors in difficulty or for farmers working in areas with natural constraints,  The financial resources come from the European Agriculture Guarantee Fund (EAGF).

15. Organisation of markets Regulation No 1308/2013 establishing a common organisation of the markets in agricultural products) The Common Market Organisation (CMO) is a set of rules which regulates agricultural markets in the European Union. It builds on the rules for the common market in goods and services with specific policy tools that help improve the functioning of agricultural markets. The CMO sets out the parameters for intervening on agricultural markets and providing sector-specific support (e.g. for fruits and vegetables, wine, olive oil sectors, school schemes). It also includes rules on marketing of agricultural products (e.g. marketing standards, geographical indications, labelling) and the functioning of producer- and interbranch organisations. Finally, it covers issues related to international trade (e.g. licenses, tariff quota management, inward and outward processing) and competition rules.

16. Rural development measures • National and regional programmes address the specific needs and challenges facing rural areas, • Member States and regions draw up their rural development programmes based on the needs of their territories and addressing at least four of the following six common EU priorities: • fostering knowledge transfer and innovation in agriculture, forestry and rural areas, • enhancing the viability and competitiveness of all types of agriculture, and promoting innovative farm technologies and sustainable forest management, • promoting food chain organisation, animal welfare and risk management in agriculture, • restoring, preserving and enhancing ecosystems related to agriculture and forestry, • promoting resource efficiency and supporting the shift toward a low-carbon and climate-resilient economy in the agriculture, food and forestry sectors, • promoting social inclusion, poverty reduction and economic development in rural areas.

17. Organic farming • Regulation No 834/2007 on organic production and labelling of organic products: • lays down a legal framework for organic products, • contains the basic objectives and general principles for organic farming and illustrates the rules on production, labelling, controls and trade with non-EU countries, • Harmonises the rules on the production, labelling and control of organic products, and, by the same token, it seeks to ensure that there is fair competition between producers and greater confidence in these products among consumers.

18. Trade in agricultural products European Union has concluded agreements on trade in agricultural products with third countries (either as separate agreements or as part of more comprehensive trade agreements), Phasing into the Common Agricultural Policy remains one of the most difficult dossiers during accession negotiations, Traditionally new Member States are phased in into the financial schemes over a transitional period.

19. EU-Ukraine Association Agreement Key objectives and challenges: legislative harmonization in accordance with the Agreement to facilitate the access of Ukrainian goods to the EU market; the consequences of import embargo imposed by Russian Federation on European and Ukrainian goods; the EU and Ukrainian legislation on organic production (certification, problematic issues, control and conformity); the development of efficient land policy; the state and prospects of the grain market in Ukraine; the development of small and  medium agricultural enterprises in Ukraine.

20. Things to remember • Common Agriculture Policy is one of the most important policies pursued by the European Union, • It is also one of the heaviest regulated policies, • Large portion of EU budget is spent on financing of the Common Agriculture Policy, • It is revised in regular intervals, the next reform is forthcoming in 2020, • Trade in agricultural products is also covered in agreements with third countries, • Phasing into CAP remains one of the main dossiers in accession negotiations.