Clean bill of health
On May 20, 2008, the European Commission published new draft legislation as part of its 'health check' on the Common Agricultural Policy (CAP). The aim of the draft legislation is to simplify, streamline and modernise the CAP.
The Commission's key proposals are:
- Phasing out milk quotas: milk quotas will be phased out by 2015 to ensure an appropriate transition for producers. The Commission proposes five increases of 1% to annual quotas between now and then.
- Abolishing set-aside: the Commission proposes abolishing the requirement for arable farmers to set aside 10% of their land.
- Decoupling payments: the remaining production-linked payments will be replaced with single annual payments conditional on meeting a range of environmental and agricultural standards.
- Simplifying cross-compliance: the environmental and other conditions attached to farm payments will be simplified by removing conditions that are unrelated to farmer responsibility.
- Enhancing Article 69 of the EC Treaty: the Commission wants to relax this provision, which allows member states to retain 10% of direct payments in order to generate funds for rural development programmes by enabling the funds retained to be used in additional ways to those currently prescribed.
- Increase in modulation: the Commission proposes enhancing this mechanism which currently provides for the transfer of 5% of direct subsidies to the Rural Development Budget. Under the proposals, the modulation rate will be increased from 5% to 13% by 2012. The increased budget obtained will remain within the member state in which it was generated.
- Minimum claim size: the Commission proposes that member states apply a minimum payment of €250 and/or a minimum size of at least one hectare.
- Reducing reliance on intervention: the Commission proposes abolishing intervention for durum wheat, rice and pig meat. At a time when food prices have hit historically high levels, it is appropriate that the Commission has proposed removing the remaining supply controls of the CAP. Preliminary analysis indicates that the phasing out of dairy quotas would lead to an increase in production at EU level. This in turn would cause a drop in prices. Replacing the remaining production-linked payments with single annual payments will allow farmers to adapt their output to market demand. It is hoped this will lead to a reduction in prices in other markets.
On the whole, the Commission's proposals have been welcomed, with many of the government's ambitions for the 'health check' being fulfilled.
Bernardine Adkins is a partner in Wragge & Co LLP's antitrust team.
