CAP changes could interfere with competition

By Rick Pendrous

- Last updated on GMT

Related tags Common agricultural policy European union

Production subsidies in some Members States will continue to distort competition across the EU when the Common Agricultural Policy (CAP) ‘Health...

Production subsidies in some Members States will continue to distort competition across the EU when the Common Agricultural Policy (CAP) ‘Health Check’ is adopted by agriculture ministers next month, UK farmers have argued.

According to the National Farmers’ Union (NFU), under proposals currently being considered subsidies will still be paid to support inefficient farm production in some EU countries - particularly in the livestock sector.

At a recent Home Grown Cereal Authority (HGCA) conference on the outlook for the grain market, NFU vice president Paul Temple said: “This is down to politics and a lot of horse trading and I don’t like it.”

The Department for Environment, Food and Rural Affairs (DEFRA) agriculture spokeswoman Sonia Phippard also expressed concern about the resistance by some Member States to ‘decoupling’ - breaking the link between subsidies and production.

“Governments’ role is only to deal with market failure,” said Phippard. “It is not there in the cereals sector; [it is] more so in the livestock sector where the market is not working so well.”

However, a vote among delegates to the conference, which included a large number of arable farmers, showed 60% thought the Health Check would have limited impact on their business.

The Health Check proposals were set out by EU farm commissioner Mariann Fischer Boel earlier this year. They were intended to make the direct aid system more effective and simpler while taking account of the changing world economy and environment.

They were meant to review the CAP reforms of 2003 and prepare the way for a longer-term of EU budget review from 2009/10 before the more radical changes expected in 2013. Part of their purpose is to wean EU farmers away from dependence on production, instead supporting rural development. CAP currently accounts for around £32bn or 40% of the EU’s budget.

However, UK farmers in particular feared the proposals were being hijacked by vested national interests. That was particularly true in France, which rather than removing subsidies wanted them retained in some form for its powerful agricultural sector - especially as worldwide demand for food increased. France has many more small farmer enterprises in comparison to countries such as the UK and Germany. Another issue for UK farming surrounded proposed increases to the EU’s milk quota scheme before it is phased out in 2015.

Much concern in the UK also relates to so-called ‘modulation’, which determines how payments are made for rural activities other than traditional agricultural production. The so-called ‘progressive modulation’ proposals, which would see payments to larger farming enterprises progressively reduced between now and 2013, are a particular concern for the UK - both for farmers and DEFRA.

While noting that DEFRA supported the increased use of modulation in principle, Phippard said: “We do not support progressive modulation. We think it is a really bad idea.”

Although the NFU wants to see compulsory set-aside scrapped as proposed in the Health Check, there are indications that under some amendments a certain percentage might be retained. Some Member States and environmental lobby groups fear the removal of set-aside would undermine a number of positive environmental schemes.

Under existing set-aside rules, farmers are paid for leaving some 10% of their land fallow. However, the set-aside changes could bring around 10M acres of land back into production across the EU.

HGCA policy analyst Marsha Ribeiro stressed: “Set-aside was never intended as an environmental tool.” Rather, it was meant to be a “market management tool”, she said. Any accidental environmental benefits set-aside generated, the European Commission was looking to achieve in other ways, she added. Temple added: “It is about managing the environmental benefits so they are equal across Europe.”

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