Archive for February, 2010

EU2020: an elephant in the room?

Is agriculture headed for a downsizing?

Less than a month remains before the European Commission launches its proposals for a new economic strategy, dubbed ‘EU2020′. And less than a month remains for goals such as food security, the maintenance of farm livelihoods and rural land stewardship to be meaningfully inserted into the paper.

Key insights into the new strategy came in the form of President Barroso’s comments to EU leaders at the February 11th informal summit in Brussels.

The Commission chief indicated that the new plan should take on the mantle from the defunct Lisbon Strategy by enabling a full transition to a “smarter, greener economy”. This means raising r&d investment, upping education spending, and prioritising hi-tech sectors and high value-added jobs in the bid for growth and international competitiveness.

The CAP, currently deploying more than 40% of the EU budget, is the elephant in the room.

Agriculture is only directly referenced once, as one of the sectors which should seize ‘green growth’ and resource efficiency, under the auspices of a new “Industrial Policy for the globalisation era”.

Writing on the wall for next budget

Meanwhile Barroso has insisted that the post-2013 EU budget “fully reflects the agreed political priorities” of the EU2020 strategy.

In other words, the current political exercise will identify sectors with high growth potential and prioritise public and private investment in them; and if a sector is not deemed among these, then its share of the post-2013 budget is earmarked for the chop.

This means allowing over-arching strategic goals to reign supreme over the nitty-gritty of budget items and whether they are individually considered to merit more, less or equal spending in the next multi-annual EU budget.

With the Commission clearly intent on bolstering funding for the designated growth areas, and recession-stricken member states unlikely to agree to raising the overall EU budget, taking from the CAP booty becomes an almost inevitable solution.

Structural funds given post-Lisbon blessing

Cohesion policy is the only area that currently rivals the CAP on budgetary outlays, but is likely to be spared the same scrutiny.

In a recent document aimed at dissecting the failings of the Lisbon strategy, the Commission singled out ‘Lisbonised’ structural funds as a rare success story in channelling EU funding to “growth-enhancing investments such as innovation, R&D and business support”. There is in fact said to be scope for mobilising more of the EU budget to support the holy duo of “growth and jobs” in these sorts of ways.

Regional Policy Commissioner Johannes Hahn said this week that cohesion policy needs to “get on the train” and ensure it is not left behind by the EU2020 strategy. However, with structural funds pulled intact from the Lisbon post-mortem, it is the CAP which risks being left standing on the platform.

With more than 80% of farm payments granted primarily as a form of income support, agricultural spending is clearly aimed at a unique strategic sector with its own challenges and its own assets. Unfortunately for farmers, these do not correspond directly to what is described in the EU2020 blueprints.

Can Ciolos rebrand the CAP?

Although only two weeks into the job, Farm Commissioner Dacian Ciolos clearly has a job on his hands to convince President Barroso and his fellow commissioners to insert goals related to the primary sector into the new economic agenda. Instead, the CAP – or what remains of it – will have to respond to a logic of growth and competitiveness which has been drawn up with other economic activities in mind.

While a forward-looking strategy is never likely to be focused on income support itself, there may still be ways to salvage a meaningful place for the CAP within the new strategy.

There are a few buzzwords for the CAP to hook itself onto, and especially Barroso’s focus on ‘green growth’. In her final months in office, Ciolos’ predecessor Mariann Fischer Boel made continued reference to the term as some kind of lifeline for the CAP in the imminent budgetary battle. In this case it is the CAP’s ‘rural development’ side which takes precedence, namely its array of agri-environmental, diversification and competitiveness schemes.

Rural development is the sort of cross-cutting policy framework which is likely to sit well with a strategy aimed at supporting innovation while managing resources efficiently. Only this week Competition Commissioner and Vice-President Joaquín Almunia talked about all EU subsidies needing to respond to “horizontal objectives”. CAP payments which address food and environmental security while supporting innovative rural companies and producing/reinventing jobs seems to fit the bill more readily than traditional farm support.

So while the definition of ‘green growth’ is still up for grabs, Ciolos may choose to brand rural development accordingly. Doing so could ensure that the CAP, or at least an element of it, has a firm foothold in the EU2020 quicksand, and can dig in for the subsequent budget battle. Rural Development would become the standard-bearer of what the CAP is or can be about.

The risks are obvious: pursuing the green growth/rural development approach at this stage could pre-judge the shape of CAP reform, and lock Ciolos into shifting a bigger share of its payments into the rural development framework, or even applying agri-environment style principles to all farm payments (for more on eco-conditionality see my last blog entry).

Plan B: frontal attack on EU2020

However, a more frontal attack may be launched on the EU2020 vision à la Barroso, and the idea of devoting every penny of the EU budget to mobilising growth and jobs.

There are certainly grounds for questioning the thrust of an economic strategy which does not address the farm sector. Arguably, a true ‘industrial strategy for the globalisation era’ should be aimed at supporting existing jobs and livelihoods in sectors where globalised exchanges pit the EU most brutally against lower cost production models.

Whether this argument will be made hinges on how many of the EU’s decision-makers ultimately see maintenance of farm livelihoods and production in vulnerable areas as a priority equal to increasing r&d in high value-added sectors.

If Ciolos does decide to launch a challenge along these lines, he would likely have the support of 22 member states and large swathes of the European Parliament. And behind them the strength of the EU’s vocal and organised farm unions.

Changing the thrust of the new guidelines may be an impractical goal, but the argument could at least be spelled out for keeping the EU2020 strategy and the 2013 budget talks on two parallel but separate tracks.

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Good CAP Bad CAP

Proponents of a greener farm policy have raised the stakes in the CAP debate

The CAP is under assault. But not from the traditional army of budget disciplinarians, aiming their scythes at the farm budget. Instead, the new assailants are wearing green and are carrying pots of gold. However, attached to their shining treasure are a multitude of strings, and a radically different logic for subsidising EU farmers.

Over recent weeks and months, a flurry of reports have emerged in favour of an eco-oriented CAP.

Last week the European Parliament heard French MEP Stephane Le Foll set out his vision for a food and environment policy to supplant agricultural policy, alongside the release of a joint report from environmental NGO Birdlife and the European Landowners Organisation (ELO) calling for an eco-centric CAP. These followed the release of December’s RISE foundation report, arguing for an environmental market-based CAP.

The movement is by no means confined to this curious marriage of landowners, conservationists and left-wing MEPs. Perhaps the most crucial new addition to the CAP debate came in the form of last week’s report from the Institute for European Environmental Policy, calling for the CAP to deliver more ecosystem services in line with society’s demands. The study was paid for and ordered by the European Commission.

Green view coming into focus

A basic logic has been outlined: the current CAP is not delivering sufficient ‘public goods’, and as a policy impacting directly on the bulk of European private land, it must be re-centred on the provision of eco-system services, and must be budgeted accordingly.

The public goods in question are listed as biodiversity protection, climate change mitigation, soil carbon sequestration, landscape preservation and much more.

The most radical version of the argument calls for CAP payments to lock farmers into a contract requiring the delivery of public goods in given quantities. Under these scenarios, an environmental marketplace – balancing society’s demand for public goods against their supply from the farming sector – would define CAP support levels and put a concrete price on farmland nature protection and climate change mitigation.

It is acknowledged in some quarters that the number coming out the other end of the calculation could be huge.

Others call for a clear shift from agricultural policy to a ‘food and environment’ policy. But here too the change would be more than symbolic: tougher environmental obligations would be attached to all farm payments, and would no longer remain an add-on for optional schemes in the CAP’s 2nd pillar. 

Despite variations in the small-print, momentum is clearly gathering for a ‘good CAP’ with a new green logic and a new subsidy structure, to strike a final death blow to the era of unaccountable ‘bad CAP’ subsidies and market support. With three years to go until the EU revamps its budget, a body of work is already coming together to anchor the environmental view.

Food security, the biggest public good?

However, major doubts remain over the viability of a radical agri-environmental approach to the CAP. The question essentially hinges on whether food security – the founding and recently revalued raison d’être of the CAP – is in fact considered as a public good.

Many would argue that securing adequate food production to feed the world is the biggest public good of them all, and is also in perennial under-supply given continued and worsening global hunger problems. 

Even in the EU context, continuing price volatility on agricultural markets has shown that producing food and making a living from it cannot be taken for granted. Furthermore, farm lobbies have warned that attaching any fresh demands to CAP subsidies could bury them in costly red tape, putting them at a major disadvantage vis-à-vis their international competitors.

This puts the environmental shoe on the other foot, leaving the EU vulnerable to charges of ‘carbon leakage’, as emissions are effectively outsourced to less stringently-regulated countries from where our food imports are increasingly derived.

While the case may sometimes be overstated, these arguments help to emphasise the international dimension, and the need to see EU food production within the context of global supply and global demand.

No food security without long-term ‘resource base’

Last week’s Commission-ordered report does acknowledge that food security is a crucial public good, but puts general faith in the market to trigger the right supply responses.

Public policy should instead be focused on producing long-term outcomes which safeguard food and environmental security, it was explained. The CAP should thus revolve around “the maintenance of a sustainable resource base, including safeguarding water supplies, managing the land to improve its resilience to flooding, maintaining soil fertility, and safeguarding the integrity and resilience of ecosystems”.

But what are the short-term implications of pursuing these objectives? Would farmland become a de facto nature reserve where city slickers come to marvel at the great bustard in flight, while crops and livestock steadily disappear?

The jury is still out on whether pursuing long-term environmental security (and by extension long-term food security) means limiting production today. A ‘climate change first’ agenda would almost certainly impose some constraints on food production: for example by putting carbon sequestering forests out of bounds when attempts are made to activate new agricultural land for upping production. Whether higher yields on existing land can make up the difference (and without entailing their own forms of environmental damage) remains the subject of heated scientific disagreement.

Does the public want public goods?

The argument is really only beginning, and the pendulum could conceivably swing either way in the run-up to the budget reforms. The public goods argument could fall flat if its supposed protagonist – the public – defies the assumption that it demands and is willing to pay for these ecosystem services.

However, there are other reasons to believe that the idea could take hold. Not least the possibility that farmers could start pushing the idea themselves. 

For various reasons – many to do with general EU-scepticism – there is already major public resistance to what the CAP costs. In order to justify a parallel or bigger budget in the future, a radical rebranding of farm policy may be needed.

Cometh the hour, cometh the issue: climate change. A CAP that shows itself to be taking the climate initiative and addressing dual objectives as fundamental as food and environmental security (in whatever eventual configuration) could put itself beyond budgetary reproach.

Climate change: CAP death knoll or saving grace?

The climate change debate has in fact heralded a major shift in society that can be harnessed by the farming community. For decades populations have been migrating to the city, and the share of farming in European GDP and in the workforce has been shrinking. However, the recent emergence of climate and environmental concerns has acted as a wake-up call, putting a new premium on the natural processes that metropolitan populations impact upon but are isolated from.

There is suddenly interest in what scientists, environmentalists, and those who understand nature, have to say. Farmers – as custodians of huge swathes of the EU’s rural land – can make themselves champions of this renaissance.

If agriculture can be revalued through the prism of environmental protection, then climate change might prove to be the CAP’s saving grace. And if the CAP can be greened in a way which genuinely does not exercise downward pressure on food production, and tackles the carbon leakage issue head on, then a well-budgeted, well-understood policy – serving the global public good – could conceivably emerge out of the other end of the reform process.  

There are certainly alternative versions of CAP reform on the table which farmers will find harder to palate.

Another recent report, this time from the European Centre for International Political Economy, came at the CAP from a very different angle. The paper, drawn up by business leaders from Ericsson, IBM, Nokia and other multinationals, warned that the CAP’s generous farm subsidies are continuing to anger the EU’s trading partners, and should be scaled down to strengthen the EU’s negotiating stance at the WTO.

This was all the confirmation farmers’ needed to know that the CAP’s traditional enemies are indeed sharpening their scythes and baying for blood. In this climate, will they be tempted to saddle their interests onto the environmental cavalry?

Photo courtesy of  Shaun Dovey, from FreeDigitalPhotos.net

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