CAP Reform – future challenges SASSPO Policy Dialogue, Helsinki

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

2. Agenda 2000 Challenges External: • Competing in global markets (->Lisbon agenda) • EU enlargement (->long transitions…) • WTO trade negotiations (->DOHA now suspended…) Internal • The risks of growing surpluses • Budgetary constraints • Consumer interests, notably food safety • Revitalising rural economies • Environmental concerns • Decentralising decision-making

3. Structure of Presentation • What pressures to reform the CAP lie ahead? • The continuing challenge of world trade. • The contribution of CAP expenditure to EU priorities and strategic objectives: • Lisbon agenda of global competitiveness • Territorial cohesion and ESDP • The interests of New Member States • Some conclusions • Possible directions for reform

4. The suspension of DOHA • The main external pressure was from DOHA – now suspended due to obstacles of US domestic subsidies and EU/G10 market access, among other issues. • Will DOHA be revived? Not soon given US elections and expiry of fast-track approval, but similar pressures for multilateral agreement will re-emerge eventually (before 2013). • Will Single Farm Payments remain in Green Box? • EU moving to pursue bilateral agreements with China, ASEAN and other emerging economies in pursuit of Lisbon agenda. • Mrs Fischer-Boel: suspension of DOHA does not diminish urgency of implementing 2003 CAP reforms, but “CAP health check” in 2008 not fundamental reform and is “certainly not about trying to cut budgets”. But 2013…?

5. The Contribution of CAP to EU Strategic Priorities and Objectives Lisbon Agenda of global competitiveness • Difficult to argue that Pillar 1 supports this aim: EU strategy has been to negotiate such support away in return for access for EU exports of goods and services. • However, an important aspect of Lisbon agenda is promoting the competitiveness of rural territories. • OECD (2006) has observed this “new rural paradigm” across many countries – focussed on places not sectors, and on investments not subsidies. They say “traditional policies to subsidise farming have not been able to harness the potential of rural regions.” New challenges are identified in terms of policies and governance.

6. Territorial cohesion and ESDP • ESPON study of the territorial impact of the CAP: • Pillar 1 - Market Price Support, Direct Payments, etc amounts to €90bn pa, including market support as well as expenditure. This support strongly benefits richer, core regions, with lower unemployment rates. This reflects their larger farms, farm type and core location. • Only direct payments are consistent with territorial cohesion objectives, but these are outweighed by dominant Market Price Support (€56bn pa.) • This main element of the CAP works against cohesion.

7. Map 4.1 Total Pillar 1 support per AWU, 1999

8. Territorial Cohesion – Pillar 2 • Surprisingly, the ESPON study found that Pillar 2 (€4.6bn) does not support cohesion either. • Agri-Environmental, and even LFA payments tend to benefit richer regions, mainly because of differing national priorities, but also because of co-financing difficulties. Poorer countries prioritise farm modernisation.

12. Territorial Cohesion – the MTR • The ESPON study found that the Mid Term Review of the CAP will make little difference. • Impacts of the MTR reform proposals were analysed using outputs from Bonn University’s CAPRI model, at NUTS3 level. Farm incomes are hardly affected, and there is no relationship with cohesion indicators. • The reformed CAP will still work against cohesion, unless national implementation aims at territorial cohesion through their Rural Development Plans.

14. Impacts of Selected Measures • Case Studies of selected measures: • Agri Environment programme – used more in NW Europe; effective more in uplands than intensively farmed areas. • Less Favoured Area Scheme – most used in prosperous regions of livestock farming. Often underpins High Nature Value systems but could be better targeted. • Early Retirement Scheme – very little additionality. • LEADER and Article 33 measures – appeared to be most effective in terms of promoting territorial cohesion and in promoting the Lisbon agenda in terms of the economic competitiveness of poorer rural regions. The implications for CAP reform are considered later.

15. Quality of Life in Rural and Urban Areas of Europe – EU Foundation This analysis of EQLS will be published shortly. The analysis is presented in terms of four clusters of countries: • EU12 High Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Sweden, UK. • EU7 Intermediate Cyprus, Czech Republic, Greece, Malta, Portugal, Slovenia, Spain • EU6 Low Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia • CC3 Bulgaria, Romania, Turkey

16. Domains analysed EQLS data was analysed over 7 main domains: • Income and Deprivation • Housing and local environment • Education and internet use • Employment and working conditions • Work-life balance • Access to work, school, family, friends & services • Subjective well-being

17. Income and Deprivation

18. Main findings • In richer countries, urban-rural differences are minimal, while such differences become greater the poorer the country cluster (with rural households being more disadvantaged) • The policy implication is that it is rural areas of the poorer countries which should be targeted by convergence and cohesion measures. • There is no strong evidence of a superior quality of rural life which compensates for material disadvantage, and which might lessen the need for intervention.

19. Main findings • The reshaping of the structural funds and cohesion policy accords with the results in so far as they show large inequalities between country clusters. • However, this intervention might favour urban areas of the poorer countries, while it is their rural areas that are most in need. • The low education levels and IT usage of these rural areas, and legacies of deindustrialisation, might militate against their capacity for convergence investment, despite their greater needs.

20. Major challenges for policy Rural and Agricultural Policies • How can CAP promote territorial cohesion, given its focus on agricultural sector in richer regions of the richer countries? • Can CAP funding be switched to broader rural development activities, targeted at the poorer rural regions of Europe? • LEADER-type measures, in particular?

21. Major challenges for policy Structural Policies • Is there a worry that these will be focused on urban areas in NMS and CC3, to the neglect both of rural areas in NMS and CC3 (assumed to be addressed adequately by the CAP) and of poor urban neighbourhoods in richer countries? • Should territorial rural development be funded through the CAP or through the Structural Funds?

22. Will there be further reforms? • Some progress made in Agenda 2000 and MTR reforms, constraining expenditure to 46% of EU budget, starting to reduce trade-distorting effects. There is discussion of environmental impacts. • But: farmers are still subsidy-dependent rather than internationally competitive; subsidies go to better-off farmers in richer regions; consumers pay high prices. It hardly supports EU objectives – economic, social policy or territorial cohesion. • Radical changes in CAP have always derived from external forces, not internal factors.

23. Future challenges – some conclusions • DOHA was the main pressure for radical reform. This will re-emerge by 2013, but not by 2008? • Pressure from Lisbon agenda: supports the ‘new rural paradigm’ against farm policy community. • Territorial cohesion: will NMS & cohesion countries seek CAP reform (especially if the structural funds are squeezed)? Rural-urban inequalities in poorer member states. • Tensions arise from growing diversity of national circumstances -> partial renationalisation? • EU crisis of legitimacy may require CAP reform.

24. Some directions for CAP reform? • If DOHA negotiations had cut Pillar 1 Market Price Support, this would have improved the consistency of the CAP with the EU’s territorial cohesion objectives. • David Harvey recently published some proposals in Eurochoices. CAP farm spending is the only EU measure which is not co-financed. He argued: • Make CAP spending discretionary and co-financed (25% EU) • The EU should contribute at a higher rate in poorer states • Retain the existing CAP as a framework for state action and spending • This would allow the abolition of the UK rebate and the redirection of EU funds towards competitiveness and cohesion objectives. • Mrs Fischer Boel has recently advocated subsidy-capping.

25. Some directions for CAP reform? • Encourage member-states to spend more of CAP on LEADER-type measures (Axis 4, 2007-13). • Increase Pillar 2 budget progressively, as proposed by the Commission, but more quickly. • Target Pillar 2 measures more effectively. • Single Farm Payments should be modulated progressively in richer regions (eg by business size) • Broaden RDR to include more measures for sustainable rural development beyond agriculture. • Support rural community development and the “new rural paradigm” (OECD 2006).