If the CAP doesn't fit - reform it

The Common Agricultural Policy (CAP) objectives, as outlined in Article 39 of the Treaty of Rome, are to increase agricultural productivity, secure European Union (EU) food supplies, stabilise prices and ensure a 'fair standard of living' for EU farmers. These have remained unchanged since 1957. Jules Pretty outlines possibilities for reform.

The 1992 reforms of the CAP (known as the McSharry reforms) did not change the Treaty of Rome objectives, though they did weaken the link between production and farm income by introducing a system of direct payments to farmers and a move away from market support as a means of securing farm incomes.
    These reforms also included for the first time measures designed to fulfil environmental objectives. Regulation 2078/92 requires each member state to implement an 'agri-environmental' programme. But the amount of farmland designated under these measures varies across member states. The average for the EU as a whole is about 13%, and ranges from 0.2% in Belgium to 100% in Austria. Designations do not, however, guarantee that all farmers have adopted conservation friendly farming. In England, Scotland and Wales, only 28% of the designated Environmentally-Sensitive Areas (ESAs) has been voluntarily entered into the scheme.
    In 1997, Commission President Jacques Santer published proposals for the next round of CAP reform in Agenda 2000. These have helped focus attention on the reform process, but many feel there are major flaws: over the likely lack of acceptability to World Trade Organisation (WTO) partners; the negligible attention paid to environmental enhancement; the increased budgetary expenditure; the lack of protection for small farms; and continued bureaucratic complications.

Four pressures on the CAP
The first pressure on existing policy is budgetary: the cost of the CAP in 1997 was some 41.2 billion ECUs (US$38 billion), which was over a half of the EU's total budget, and represents a cost of about 108 ECU per European citizen. This is no longer internally defensible. The CAP has encouraged farming that has damaged natural resources and contributed to rural community breakdown. The 18 million unemployed people in the EU have few or no assets, yet the EU's seven million farmers with assets receive more than half of the total budget. Birdlife International calculates that the CAP costs 108 times more than the EU's youth, culture and education budget; 312 times more than the EU's environment budget; and 2,161 times more than the EU's consumer protection budget(1).
    The second pressure is over EU enlargement. Several European countries are hoping to gain membership of the EU by 2002, with others to follow. The EU could not afford to pay all these additional farmers similar support. MAFF calculated in 1996 that the cost of expanding the CAP to Poland, Hungary, Czech Republic and Slovenia would be an additional 15 billion ECUs per year.
    The third pressure comes from the WTO, and indirectly from the US. The high levels of support for production are counter to the WTO's attempts to expose all producers across the world to similar prices. Payments to farmers will increasingly have to be for environmental and social goods if they are to continue to be permitted. The US has prepared itself for future negotiations by passing the 1996 Federal Agricultural Improvement and Reform Act, which decoupled support from production and abolished supply controls.
    The fourth pressure comes from increasing consumer disquiet over the farming and food system. Consumers pay for the type of farming we have several times over: through their taxes being used for direct support; through high food prices(2); and through the external costs being imposed on natural and social capital. Consumers are decreasingly likely to want to compensate farmers when they themselves bear all these costs.

The make-up of a new policy
There is emerging consensus from a wide range of environmental, farming, consumer and community groups across Europe that the public's support through the CAP should be targeted much more towards delivering public environmental and social benefits(3). In October 1996, the UK Agricultural Reform Group convened a seminar in Brussels at which farming and environmental interests from all fifteen member states were represented. The seminar was also attended by HRH The Prince of Wales, EU Commissioner for the Environment, Ritt Bjerregaard, and  the Chef du Cabinet of Franz Fischler, Commissioner for Agriculture(4). 
    Despite the great differences represented, participants at this seminar agreed that all payments to farmers would have to be decoupled from production, and recoupled to environmental and social goods. Payments would be in the form of a Basic Area Payment, and would be made conditional on farming protecting or regenerating the environment. Farming can deliver so much, yet it has failed so to do. Many believe that the opportunity exists for it to recapture a key role in rural regeneration. The advantage of such a Basic Area Payment is that it would both be totally decoupled, and so 'WTO-friendly'; and be extremely simple and so compatible with the existing IACS system(5).
    Environmental payments would be tied to a menu of options for farmers. These would have several tiers, giving farmers the choice to select their practices and the types of support they could expect.

• Tier 0-the basic regulatory floor, in which farmers receive no public support, farm at world prices, but follow codes of practice and regulations that seek to minimise environmental damage.

• Tier 1-public support for habitat protection and restoration, such as for woodland management, ponds, hedgerows, wetlands. This tier essentially supports greening of the edge, but not the middle.

• Tier 2-payments for a transition towards sustainable agriculture, incorporating integrated crop and livestock management and the use of regenerative technologies; this  support does much more than protect the environment, it seeks to rebuild natural capital.

• Tier 3-support for organic farming and redesign of food and farming systems.

The basic idea is that all farmers would have access to these payments. They would not be limited to designated parts of the EU territory. Set aside would be eliminated. The second set of payments would be for rural development initiatives. These would be explicitly for supporting capital development, through local participatory processes and business development to encourage the growth of job opportunities. Additional support in the system may also be necessary for both market and transitional assistance.
    There are many other difficult and contentious features that need resolution. These include:

• modulation-should there be an upper limit for payments according to farm size?

• intervention-there may be a need for a limited intervention scheme for cereals, but should the rest go?

• quotas-Agenda 2000 proposes to maintain dairy quotas to at least 2006, with no suggestions to get rid of the others affecting suckler cows, sheep and sugar beet. A basic area payment would render suckler and sheep quotas unnecessary; should milk and sugar beet both be continued?

Others have emphasised the need to reform the EU Cohesion Policy (CP) too. This accounts for about a third of all EU funding. Through the Structural Funds and the Cohesion Funds, the EU seeks to target regions where development is 'lagging behind', industrial regions, and regions in decline. Many argue that funds have not been best targeted at local needs. The opportunity to integrate CAP and CP funds into one single coherent and integrated 'Sustainable Regional Development Policy', a suggestion put forward by WWF(6). But once again, defence of territory and funds within the EC make this an unlikely outcome.

Obstacles to logical reform
Many now believe that there exists an emerging consensus about what the reformed CAP should look like. Yet, it is clear that reform will be much less fundamental than hoped. This is because there are three critical levels of support that are needed if CAP reform is to happen: within each EU member country; within and between Commissions in Brussels; and within the Council of Ministers.

Domestic issues
The first place where consensus must emerge is in member countries. Governments on behalf of their many domestic stakeholders must decide that reform is worth pursuing and will bring benefits. Policy reform is therefore strongly influenced by member country political contexts. Britain under a Labour government is more supportive of CAP reform than a year ago when the then Cabinet had taken a europhobic line on relations with the EU.
    But Germany, a natural supporter of more environmentally-sensitive agriculture with many innovations in domestic policy, is currently implacably opposed to any CAP reform because of the approaching September 1998 general election and the current government's desire not to lose favour with the vote-rich, large-farmer lobby. As a result, certain other states will follow Germany's lead, owing to their large financial clout.
    The current British Agriculture Minister, Jack Cunningham, who also chairs the Council of Agricultural Ministers, has decided to put CAP reform at the top of his personal agenda, despite the fact that internal crises in farming, such as with BSE and food standards, dominate much domestic discussion. But he needs support from at least seven out of 15 other agriculture ministers if any progress is to be made at all. One way to help consensus to emerge within countries is to draw attention to existing reforms in Europe, both inside and outside the EU (see Box).

European Commission
Policy reform is also influenced strongly by the views of and competition between the different Directorates General (DG) of the European Commission. The President of the Commission, Jacques Santer, presides over all the Directorates, each of which is headed by a Commissioner. These are political appointees made by member countries on a rotational and pro-rata basis. The Directorates of direct relevance to agricultural and rural policy reform are DG VI (Agriculture), DG XI (Environment), and DG XVI (Structural and Rural Development).
    The problem is that these Directorates tend to see themselves as being in direct competition with each other, and so do not tend to collaborate. The competition between Commissioners is fierce. In November 1996, DG VI held the Cork conference on Integrated Rural Development. This set out new integrative principles for both more sustainable farming and rural community development. The agreement was widely supported by rural and environmental groups alike, and seemed to represent a significant step towards sustainable development. But in the first half of 1997, integrated rural development rapidly disappeared off the political agenda owing to DG XVI's insistence that agriculture should stay off their patch. As a result, the Agenda 2000 proposals are very weak on rural development.

Federal and Inter-Country Issues
Policy reform packages are finally agreed in the Council of Ministers, which is chaired by the EU member state holding the six-monthly presidency of the EU (the UK is the incumbent during January to June 1998). Each minister is aware of his or her cabinet's priorities for policy reform across all sectors of economies and, as a result, internal policy logic for the agricultural and rural development sector will be traded off during negotiations for reforms in other sectors.
    Although everyone may agree in private that a set of reforms are necessary and likely to be beneficial at home or even across the whole EU, one or more countries may use the opportunity to form alliances to move forward other agendas. Country x, for example, may agree to support one particular aspect of agricultural reform being promoted by country y only if y supports its attempts to have a Japanese company invest in its own economy.

The current state of play
Despite these many problems in the policy processes, it is likely that some progress will be made, with more payments shifted to the agri-environment envelope. A move from the 1997 level of 4.1% of CAP budget for agri-environment schemes to, say, 25% would represent substantial progress. 
    This would fundamentally change forever the business of farming in Europe. But opportunities to make huge strides towards rebuilding natural and social capital for the benefit of rural people throughout Europe will probably be missed in this round. However, these pressures are unlikely to go away. It is possible that all this can still be achieved during the first decade of the 21st century as consensus continues to grow.

References
1. Birdlife International, A Future for Europe's Rural Environment: Reforming the CAP, Sandy, Beds, 1997.
2. The OECD calculates that the CAP cost consumers 28 billion ECU in 1990 by raising food prices.
3. For more details, see Pretty J N, The Living Land, Earthscan Publications Ltd, London (in press).
4. The ARG was formed in 1993 by a small number of environmentalists and farmers in the UK who wished to see what common ground could be created for the benefit of farming and the rural natural and social environment. It has since staged a variety of seminars on sustainable farming, rural partnerships and policy change. In October 1996, it held an international seminar in Brussels entitled The Ground We Share, which brought together 60 farmers and environmentalists from all 15 EU countries, as well as policy makers and civil servants. It publishes the newsletter ARG-Europe Policy Notes.
5. Simon Gourlay, Ed., Beyond Agenda 2000, An Alternative Proposal,  ARG, London, 1997.
6. WWF, At Cross Purposes: How EU Policy Conflicts Undermine the Environment, WWF, Godalming, 1997.

Jules Pretty is Director of the Centre for Environment and Society, John Tabor Laboratories, University of Essex, Colchester CO6 4LH, UK, jpretty@essex.ac.uk.

[This article first appeared in Pesticides News No. 39, March 1998, pages 6-7]