The Political Economy of the 2014-2020 Common Agricultural Policy

An Imperfect Storm

Johan F.M. Swinnen

• Publisher: Centre for European Policy Studies
• Year: 2015
• ISBN:
  9781783484850
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Agricultural Public Policy
• Index: Politics & International Relations

After five years of debates, consultations and negotiations, the European institutions reached an agreement in 2013 on the Common Agricultural Policy (CAP) for the 2014-2020 period. The outcome has major implications for the EU’s budget and farmers’ incomes, but also for Europe’s environment, its contribution to global climate change and to food security in the EU and in the world. It was decided to spend more than €400 billion during the rest of the decade on the CAP. The official claims are that the new CAP will take better account of society's expectations and lead to far-reaching changes by making subsidies fairer and ‘greener’ and making the CAP more efficient. It is also asserted that the CAP will play a key part in achieving the overall objective of promoting smart, sustainable and inclusive growth. However, there is significant scepticism about these claims and disappointment with the outcome of the decision-making, the first in which the European Parliament was involved under the co-decision procedure. In contrast to earlier reforms where more substantive changes were made to the CAP, the factors that induced the policy discussions in 2008-13 and those that influenced the decision-making did not reinforce each other. On the contrary, they sometimes counteracted one another, yielding an ‘imperfect storm’ as it were, resulting in more status quo and fewer changes.
This book discusses the outcome of the decision-making and the factors that influenced the policy choices and decisions. It brings together contributions from leading academics from various disciplines and policy-makers, and key participants in the process from the European Commission and the European Parliament.

1. THE POLITICAL ECONOMY OF THE 2014-2020 COMMON AGRICULTURAL POLICY: INTRODUCTION AND KEY CONCLUSIONS

JOHAN SWINNEN^*

After an elaborate process, a decision on the Common Agricultural Policy (CAP) for the 2014-2020 period was reached in 2013. The process involved the main European institutions: the European Commission (Commission), the Council of the European Union (Council), the European Council¹ and the European Parliament (EP). It involved consultations with European citizens and ‘stakeholders’ and intense lobbying activities on the part of various interest groups. The process started informally as early as 2008 and more formally in April 2010, when the Commission launched a public debate on the CAP’s future. In June 2013, a political agreement was reached between the Commission, the EP and the Council under the Irish Presidency.² In the last months of 2013, the regulations were formally adopted by the Council and the EP. Delegated Acts to clarify technical implementation details were approved in April 2014. Afterwards member states went to work on how they would implement various policy areas where they had flexibility in implementing the regulations.

The length and complexity of the process are not indicative of the reform outcome. Bureau & Mahé (ch. 3) even argue that comparing, for example, the 2003 CAP reforms with the recent CAP decisions, there appears an inverse correlation between the length of the process and the significance of the policy reforms. Many authors in this book share the opinion that the outcome of the decision-making process was disappointing. In fact, nobody seems to be very enthusiastic about the outcome – albeit not always for the same reasons.

The subtitle of the book, and part of the title of my political economy analysis in chapter 17, “An Imperfect Storm”, refers to the contrast with the 2003 reforms where many different factors (economic, political, institutional, etc.) combined to create a ‘perfect storm’ triggering a radical reform of the CAP (see Swinnen, 2008a). In contrast, the factors that induced the policy discussions in 2008-13 and that influenced the decision-making did not reinforce each other. On the contrary, they sometimes counteracted one another, yielding an ‘imperfect storm’ as it were, which was reflected in much less dramatic changes in the CAP and much more emphasis placed on the status quo in several important policy elements.

The CAP is a complex policy involving many different components and issues. Accordingly, the contributors to this book are recognised experts on their particular topics. I will therefore refrain from going into too much detail in this chapter and refer the reader to the specific chapters that deal with specific analyses and more details. Hence, my key conclusions here will be a rather brief summary, focused on what I thought were common themes and findings.

Arguably the main common theme is the discussions and decisions on ‘greening’ of the CAP, i.e. reforms of the CAP to enhance its impact on the environment and climate change. It was a major element in the public debate, in the Commission’s proposals, in the ensuing negotiations on the future EU budget in the European Council, among and within the member states, and in the EP. It was the subject of intense lobbying by interest groups and of severe expost critiques.

Other common themes include the new role played by the European Parliament, the complex relationship between the CAP and the overall budget negotiations under the multi-annual financial framework (MFF), the impact of the Eastern enlargement and of the food price spikes on global markets, etc. In this chapter I attempt to present a set of conclusions from the many chapters and identify where there is consensus and where not.

At the same time, this chapter is an attempt to guide the reader to the other chapters where more detailed arguments can be found. For the reader’s reference, I include a series of tables in Annex to the book (Kovacs et al.), which summarise the positions taken by the European institutions on specific reform elements, as well as the final decisions on the CAP for 2014-2020.³ I refer to chapters 2 and 3 for a detailed analysis and discussion of the 2013 CAP decisions.

1. A CAP ‘reform’?

“Reform”

(Oxford Dictionaries Online 2015)

Verb:

“Make changes in (something, especially an institution or practice) in order to improve it.”

Noun:

“The action or process of reforming an institution or practice.”

In the conclusions of my edited volume on the 2003 CAP reform (Swinnen, 2008a), I addressed the question: Were the Fischler reforms radical reforms? (And the general consensus was that in several ways they were radical reforms.)⁴ The question with the 2013 CAP decisions is not so much whether they are radical reforms (the consensus on this is “no”), but whether they are captured appropriately by the term ‘reforms’ at all.

In answering this question, it is important to consider two sub-questions: How large are the (policy) changes? In what direction do the (policy) changes go? Reform means change, but change is, in itself, an ambivalent term because it hinges on the direction of the change. Many authors in this book struggle implicitly with this issue when they are trying to evaluate the policy decisions. Alan Matthews (ch. 19) acknowledges that “the discussion can get very confused” because people have very different interpretations of what they mean by ‘reform’. Some of the difficulties in interpretation and evaluation are also reflected in the categorisation of Anania & Pupo D’Andrea (ch. 2) of member states along a “more or less conservative” dimension and in the discussion in Erjavec et al. (ch. 9) discussion of “conservative member states” and the different discourses surrounding the policy measures.

Anania & Pupo D’Andrea (ch. 2) as well as Bureau & Mahé (ch. 3) conclude that a general evaluation of the CAP decisions is “difficult” and arrive at a mixed evaluation, which differs for specific elements of the decision. Haniotis (ch. 5) summarises his view on how the targets set at the beginning of the process were achieved as follows: “Fairer? Yes. Simpler? Definitely not. Greener? Still unclear.”

The general assessments in this book seem to be that: a) there have been some policy changes (obviously); b) some of the policy changes are ‘new’ (e.g. it is the first CAP reform with explicit⁵ redistribution of budgets between member states); c) that the policy changes are relatively minor; and d) the policy changes are not always coherent in terms of the perspective on the objectives of the CAP that they serve (e.g. some are consistent with the long run ‘reform process’ of less market interventions; others are inconsistent with this).

Bureau & Mahé (ch. 3) conclude that from many perspectives the process has been “a lost opportunity”, and Anania & Pupo D’Andrea (ch. 2) that “those who hoped the financial resources would not be severely cut ... and for the reformed CAP to bring as few changes as possible, are probably quite satisfied by the result”. As I already pointed out, some of the main critical evaluations relate to the ‘greening‘ aspects of the CAP, which leads Erjavec et al. (ch. 9) to conclude that “the reform was an empty shell” – an assessment shared by many others in this book (see further). Perhaps illustrative of the overall assessment is that several authors consider one of the main ‘achievements’ of the reform the status quo outcome in the area of market orientation of the CAP (e.g. Bureau & Mahé (ch. 4) and Swinbank (ch. 8)).⁶

In summary, this brief introductory review should make it clear that the 2013 decisions on the CAP for the 2014-2020 period are not very accurately summarised by the concept of ‘reform’. In fact, some observers object to the concept for the 2013 decision, arguing that it gives the outcome (and the process) too much credit – and would prefer to use ‘repackaging’ or ‘recalibration’. That said, almost all authors in this book use the term ‘CAP reform’, as do many people who are not contributors to this book, mostly as a term of convenience rather than a value judgement.

2. Public funds for public goods? Greening of the CAP?

A factor that received a lot of attention both from economists and ecologists was the need to link the CAP payments much more strongly to ‘environmental’ or ‘public good’ objectives. Ecologists had long been arguing to use the payments to reduce the negative impact of EU agriculture on climate change, to enhance biodiversity, etc. (see chs 6, 10 and 20 by Potočnik, Hart and Buckwell, respectively). Economists saw this as the next step in the long-term reform path of farm support: from distortive interventions in the 1970s and 1980s to less distortive payments in the 1990s (after MacSharry), to decoupled payments in the 2000s (after Fischler), to (more?) targeted payments in the 2010s, as e.g. reflected in an early report by Bureau & Mahé (2008) and the statement of a group of ‘leading agricultural economists’ (Anania et al., 2010). These objectives were summarised in the ‘public funds for public goods‘ statement.

However, farm organisations were mostly opposed to these arguments as they saw them as posing additional constraints and increasing their production costs. Opponents of specific greening measures also claimed that they would increase bureaucracy and would be costly to monitor and to implement.

The 2013 decision on this part of the CAP is the one that has received the most critiques. Many authors in this book see this as a major weakness or failure of the reform – maybe best captured by the judgement of “greenwash instead of greening” by Erjavec et al. (ch. 9). Hart (ch. 10) refers to others who, despite the Commission’s claim that greening is now a permanent element of the CAP, even argue that the 2013 decisions take a step backwards instead of forward for the integration of environmental concerns in the CAP.

A different perspective is presented by De Castro & Di Mambo (ch. 5) who argue that the “greening of the first pillar can be viewed as a reinforcement of the environmental cross-compliance … and is … necessary to strengthen the contribution of the sector to the correct management of environmental resources”. They explain the position, which dominated the EP’s Committee for Agriculture and Rural Development (COMAGRI), that the Commission proposals did not sufficiently take into account the implementation problems for the farmers and the problems of compliance and payment controls, and measurements of environmental impacts of farmers’ obligations. This perspective (or the unofficial purposes that it served) was very influential in the end, not just in the EP but also in the Council.

The explanations offered in several chapters why the requirements on ‘greening‘ in the final agreement were so weak is a combination of several elements. The first is that the reform proposals presented by Commissioner Dacian Cioloş (2010-14) were not very ambitious to begin with. This lack of ambition is explained, among other reasons, by a limited commitment to greening and the relative inexperience of the Commissioner and his cabinet. Anticipating opposition in the Council and the EP, they seemed to have wanted to minimise conflicts by proposing a compromise in the first proposal (Erjavec et al., ch. 9). Yet, despite this ‘weak’ proposal, Hart (ch. 10) explains that the reactions to the Commission’s greening proposals “were almost universally negative”. Farming organisations criticised the obligation to set aside land; environmental organisations were disappointed with the limited ambition; economists criticised it for proposing inefficient instruments; the Council claimed the proposals would lead to more bureaucracy; etc.

Another factor is the role of the European Parliament where the COMAGRI was able to control much of the decision-making, with farm interests having more influence than environmental organisations (Roederer-Rynning, ch. 13; Hart, ch. 10; Knops & Garrone, ch. 16). At the same time, much of the positions of the EP were shared by the Council of Ministers, which joined the EP on many aspects that weakened the greening requirements (Bureau &Mahé, ch. 3; Fertő & Kovacs, ch. 15). Erjavec et al. (ch. 9) argue that the most important and effective opposition came from the member states in the Council. Sahrbacher et al. (ch. 11) also argue that on the issue of capping and degressivity it was the Council’s position that was dominant in the decision-making.

Yet another factor is the fact that the MFF negotiations were separated from the decisions on the greening details, and the farmers-environmental organisation coalition (see further) fell apart after the budget decision was made. This resulted in a no-holds-barred, and successful attack on the greening conditions after the MFF budget was agreed (Matthews, ch. 8) without a strong and committed Commissioner to keep the coalition together and an institutional process that made sustaining coalitions more complex (Swinnen, ch. 17). The collapse of the coalition seems to have taken environment groups by surprise. Maybe they expected the same process as in 2002-03 and this time the surprise was on the ‘pro-reform’ side, while in 2003 the surprise was on the ‘anti-reform’ side (Swinnen, ch. 17) or they overestimated their capacity to overturn the COMAGRI amendments in the plenary vote (Roederer-Rynning, ch. 13).

A final element is that the increase in food prices induced much interest and concern for global food security and gave ammunition to the political arguments that environmental regulations that would restrict agricultural production would lead to higher food prices and undermine EU and global food security (Guariso et al., 2014; Haniotis, ch. 4; and Swinnen, ch. 17).

3. The multi-annual financial framework (MFF) and CAP reform

Several authors point to the importance of the link between the MFF negotiations and the CAP negotiations. There are several elements.

As Swinbank (ch. 12) explains, in 2005: “The British Government pressed for a new CAP reform debate, […], and in the European Council meeting of December 2005 secured a commitment for the Commission to undertake a full, wide ranging review covering all aspects of EU spending, including the CAP, and of resources, including the UK rebate, to report in 2008-09.” While Swinbank goes on to argue that the impact of the UK government on the 2013 CAP decision has been very limited, it is an interesting hypothesis that, if it had not been for Blair and the UK government in 2005, there may not have been a substantial discussion and negotiation about a ‘CAP Reform’ as we have witnessed in 2009-13 (although there would have been negotiations on the 2014-10 MFF).

The pressure to reduce CAP spending in the 2014-2020 MFF was reinforced by global events after 2008. The financial and economic crisis caused major economic and consequently budgetary problems for governments in all member states. It put pressure on budgets as tax revenues declined and demands for social spending (including unemployment benefits) increased (Haniotis, ch. 4; Swinnen et al., 2014).

Several authors, in particular Alan Matthews in ch. 7, explain how the parallel negotiations of the MFF and the CAP were important. He identifies three linkages: 1) the need to create a narrative to legitimise and defend the share of the CAP budget in the 2014-2020 MFF (reflected in the ‘public funds for public goods‘ argument and coalition); 2) the compression of the time to conclude the CAP negotiations as the EP and the Council delayed their approval of their CAP mandates until the budget figures were decided; and 3) the inclusion of particular CAP elements by the European Council in the MFF (in the so-called ‘negotiation box’), which influenced the later CAP decision-making as EP voting on the MFF involved different procedures (the EP could only vote on the whole package without the possibility of amendments) while several key CAP elements were in the ‘negotiation box’ of the Council MFF. This particular process reduced the influence of the EP and enhanced the influence of the member states (through the European Council) on the final CAP decision.

Matthews also argues that the second element (the shortening of the final negotiation phase) strengthened the hand of those arguing for minimal changes in the negotiations: “The insistence of the EP that no serious CAP negotiations should begin until the budget numbers are known worked to strongly favour those holding a status-quo oriented position on the reform proposals (for example, farm groups) while disadvantaging those who sought a more radical change in the orientation of the CAP (for example, environmental groups seeking a greater focus on environmental public goods).”

A key element emphasised by several authors is that the months after the MFF agreement (in March 2013) were crucial in the CAP decision, as many of the details of the CAP, including greening conditions, were decided (“further watered down” as Erjavec et al. and Hart describe it) in these months, after the MFF was decided and the budget was sealed. In those months ‘public funds for public goods‘ was no longer as relevant for securing political support as the CAP budget had already been agreed.

What is intriguing, however, from an historical perspective is that the t...