CAP in Europe: 2013 and beyond (preliminary ideas)

1. CAP in Europe: 2013 and beyond (preliminary ideas) Toomas Kevvai Ministry of Agriculture

2. Measure of time • Talking of the CAP future, generally the period 2014...is meant • 2007-2013 has in essence been settled, now “health check” of the implementation of the decisions made in 2003 is in process • 2014... can broadly be connected with the budget negotiations for the EU next financial period of 2014-2020

3. As Einstein has already told 80 years ago: Common believe is not common knowledge or actual and/or future reality.

4. Was Malthus right? Foodstuffs production opportunities of the world are limited World population is growing Prices of agricultural products on record level New agricultural commodities markets: bioenergy

5. The statement of Mr. Jeroen van der Veer (CEO of Shell) concerning the worldenergy situation: • “After 2015, easilyaccessible supplies of oil and gas probably will no longer keep up with demand.” http://www.shell.com/home/content/aboutshell-en/our_strategy/shell_global_scenarios/two_energy_futures/two_energy-_futures_25012008.html)

6. Cereals needed for bioethanol World cereals production (rice excluded) 2016: 1850 million tons Source: OECD

7. Solar energy (world and European need for electricity)

8. Quantities not problematic – price problematic Even with growing biofuel production adequate food supplies can be guaranteed for the world food security … provided that food will be distributed on equal terms Food security is not a quantity problem … but depends on purchasing power, i.e. on incomes and prices

9. How wealthy are we? • http://www.globalrichlist.com/ • Estonian residents - on an average 814,456,058 • In the world, more than 6 000 000 000 people

10. Is invisible hand acceptable when we are talking about food supply • Are net exporters ready to guarantee food supply for export markets in case of failure in their own food production chain? • Wise man don’t keep all the eggs in one basket

11. Challenges for CAP 2013+ • Increasing input prices – energy as fuel, fertilizers etc • Increasing demand instead of supply limiting instruments • Climate change – agriculture as problem and/or solution • Market orientation versus environmental sustainability

12. Technical challenges • Decoupled payments – to whom, why, common market common approach? • Partial coupling for environmental, social etc reasons • Safety net • Direct payments versus rural development (structural actions, agri-environment)

13. What should be taken into account?

14. CAP internal balance

15. Short review • The CAP main elements at the moment • 2 pillars • De-coupling of support payments • Decrease in the impact of market regulation • 3 axes of rural development policy • European Agricultural Guidance and Guarantee Fund • European Agricultural Fund for Rural Development

16. The two pillars of the EU Common Agricultural Policy I pillar II pillar Market regulation Rural development policy Common internal market - customs duties - export refunds - consumption aid Direct payments Increase in competitiveness Agri-environment and landscapes Rural enterprise and village development LEADER approach

17. The EU budget and the share of the CAP in it • In the budget of 2008, expenditure on agriculture and rural development constitutes 53,8 billion EUR or 41,67% of budget volume. • Thus, expenditure on agriculture and rural development makes up only 0,43% of the EU gross national income.

18. The two pillars of the EU Common Agricultural Policy I pillar II pillar Market regulation 80% Rural development policy 20%

19. Proportion of the I pillar (direct payments) and the II pillar support payments from the EU budget (estimate – data of 2006)

20. The two pillars of the EU Common Agricultural Policy in Estonia I pillar II pillar Market regulation Rural development policy 50% 50%

21. The CAP I pillar

22. Present direct payments • Single Payment Scheme • Entitlements • Regional and historic approach • Single Area Payment Scheme • Partially coupled support payments • Article 69 • Cross Compliance

23. The CAP future issues • Principles of direct support payment • Public good? • Entitlements? • Cross compliance has come to stay – expand? • If and how many coupled direct payments? • Integration of direct payments and LFA

24. Direct payments and LFA • Contradiction? Direct payments € LFA Low fertility Poor climatic conditions High agricultural intensity

25. Market intervention • Export subsidies shall be phased out by 2013 • Limitations on production shall be phased out by 2014 (milk quota will be the last) • Support payments coupled with the production of a certain impact

26. The CAP II pillar

27. The CAP II pillar 2007-2013 rural development policy Rural development 2007-2013 LEADER III Economic diversification and quality of life I Competitiveness II Environment and land use Single programming, financing, monitoring and auditing Agricultural fund for rural development

28. 3 axes? • Competitiveness of agriculture and forestry > 10% • Agricultural landscapes and environment > 25% • Diversification of rural enterprise and village development > 10%

29. LEADER approach • LEADER – a method to improve local initiative or waste of administrative costs? • LEADER – minimum share > 5%

30. CAP goals (treaty) Are those still relevant, have their context changed?

33. Aim and some “keywords” • To increase agricultural productivity by promoting technical progress, by ensuring reasonable development of agricultural production and by the optimum use of factors of production, particularly labour force • Energy efficiency ? • GMO ? • Decoupled payments ? Entitelments ?? • Research and development ? • Innovation ?

34. Aim and some “keywords” • To ensure fair standard of living for the part of the population engaged in agriculture, primarily by the increase in individual earnings of those working in agriculture • Non-agricultural living standard in rural areas ? • Decoupled payments, entitelments – farmers or landowners ?

35. Aim and some “keywords” • To stabilise markets • Stabilizing for which direction? To avoid sharp decreases or increases? • To guarantee food security • Export taxes? • To secure reasonable consumer prices • How ?

36. Aim and some “keywords” • Reduction of negative environmental impact of agriculture • Strong agri environmental programmes ? • Cross-compliance

37. Concluding ideas

38. CAP first pillar needs ideolodical and financial revision • SPS – LFA • Direct payments coupled with public good • Abolishing historical reference which defines direct payments envelopes according of intensity of certain commodities production between member states

39. Direct payments and LFA • Contradiction? Direct payments with integrated LFA € Lower public good High public good

40. CAP second pillar should be stronger • Increasing need for stong agri-environmental programmes • Real structural development • Landscape management and biodiversity • Local food chains • Low input agriculture • Research and development • Innovation • Sustainable bioenergy

41. The CAP II pillar 2013+ rural development policy Rural development LEADER III Economic diversification and quality of life I Competitiveness II Environment and land use Single programming, financing, monitoring and auditing Agricultural fund for rural development

42. Balance between I and II pillar • The balance should move toward II pillar • But – strict rules for limiting cofinancing and additional state aid to minimize unfair competition

43. Thank You for Your attention!