Massimo Romagnoli


20/02/2019
UE POLICIES - AGRICULTURE
BRIEFING
EU policies – Delivering for citizens
Agriculture
SUMMARY
The common agricultural policy (CAP) is one of the oldest common policies in the EU. Its significance is reflected in the proportion of the EU's budget devoted to it, representing approximately 40 % of the total. Developed at a time when Europe was unable to meet most of its own food needs, it was necessary to encourage farmers to produce food by means of guaranteed prices. The policy has undergone regular reform and has evolved over the years. These reforms have sought to improve the competitiveness of the agricultural sector, promote rural development and address new challenges in areas such as the environment and climate change.
Evidence from a series of Eurobarometer surveys indicates how EU citizens have a high level of awareness of this policy area. There is a recognition that it is succeeding in meeting citizens' expectations in terms of delivering healthy high-quality food as well as contributing to the protection of the environment.
When it comes to agriculture, Parliament's eighth term has focused on taking forward not only implementation of the last CAP reform in 2013 but also a series of significant legislative achievements. The areas covered include, for example, animal health, plant health and the organic sector, as well as a range of policy-related simplification measures that entered into force on 1 January 2018. On the non-legislative front, Parliament has pursued its scrutiny role rigorously.
Looking to the future, there are still a number of substantial issues for the current Parliament to address. These include determining in co-decision with the Council the future policy direction of the CAP for the post-2020 period, negotiations over the next multiannual financial framework (MFF) including the overall budgetary allocation for the next CAP, and the associated legislative framework.
In this Briefing
State of play
Public expectations for EU involvement
EU framework
Deliveries of the current parliamentary term Potential for the future
EPRS | European Parliamentary Research Service
Author: James McEldowney Members' Research Service PE 635.524 – February 2019
EN

EPRS | European Parliamentary Research Service State of play
The common agricultural policy (CAP) is often recognised as being one of the EU's oldest policies and is viewed as an important common policy for all the countries of the EU. As such, it is managed and funded at European level from the resources of the EU's budget. It was created at a time when Europe had difficulty meeting most of its own food needs. The policy was designed to encourage farmers to produce food by guaranteeing internal prices and incomes.
Approximately 38 % of the EU budget is spent on agriculture and rural development. This money finances income support for farmers in the form of direct payments, measures to promote rural development and market measures, where the EU can take measures to deal with difficult market situations such as a sudden drop in prices. In the case of direct payments, they can remunerate farmers for environmentally-friendly farming and delivering 'public goods' such as taking care of the countryside.
Since the entry into force of the Treaty of Rome, in which the foundations of the CAP were laid down, the policy has been the subject of successive reforms. In general, these have sought to improve the competitiveness of the agricultural sector, promote rural development and address new challenges. These changes have culminated in the most recent reform, covering the 2014 to 2020 period, which was adopted in 2013. The current Parliament has therefore had to deal with the implementation of this reform. In addition, it has had to consider new proposals for the CAP for the post 2020 period, which were proposed by the Commission on 1 June 2018.
Challenges
As part of its proposals for modernising and simplifying the CAP, the Commission published a series of background documents1 examining the main climate and environmental, socio-economic and economic challenges facing EU agriculture and rural areas.
Low farm incomes: these are significantly below average wages in the economy in a large majority of Member States. EU-28 average farm income is only around 40 % of average income.
Falling employment: as a source of employment in the primary sector, agriculture faces a long-term trend of sectoral decline. One in four agricultural jobs have disappeared since 2005.
Low EU agricultural productivity growth: the EU's agricultural productivity growth is low, averaging only 0.8 % per annum in the period 2005-2015. This situation was further compounded by low levels of public investment in agricultural research and development over the years 2012 to 2016.
Compliance costs: it is reported that EU farmers face higher costs for compliance with legislation compared to their competitors (in the case of pigs and poultry farms for example, compliance costs can amount to between 5 and 10 % of production costs). Ageing farm population: in 2013, close to one-third of all farmers in the EU were older than 65, while only 5.6 % were younger than 35 years. For each farmer younger than 35, there are 5 to 6 farmers older than 65 in Europe. Furthermore, young farmers face difficulties in accessing both capital and land.
Low levels of training: more than two-thirds of EU farmers have not received any agricultural training other than their own practical experience.
Price and income volatility: the sector has been the subject of both price and income volatility. In the case of the former, this has been demonstrated for the main agricultural sectors such as diary, beef, pig meat and cereals. In the case of the latter, evidence shows that up to 20 % of farmers have experienced income drops above 30 % each year.
Challenges such as those outlined above exist within a rural context, characterised by significant variations and disparities in relation to age structure, levels of remoteness, economic activity,
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Agriculture
education and labour market features and relative poverty. Research shows how isolated rural areas suffer much more from a lack of social inclusion and a poorly performing labour market compared to those rural regions that are close to urban areas. Agriculture within the EU is considered to be highly vulnerable to climate change. It is also seen as a significant driver of greenhouse gas emissions through land use and land use change.
Potential
Despite these challenges, EU agriculture is recognised for its output of safe, high-value foods. It has developed a high level of quality in respect of food safety, nutritional value, and production methods. Its production structures are highly diversified. Part of its success in terms of export performance is reflected in a positive agro-food trade balance. Though the structure of farming within the EU is highly diversified, the sector benefits from operating within a single market of European consumers. The Commission has noted that a common approach towards supporting agriculture helps to ensure a level playing field for EU farmers.
EU agricultural products have proven to be very competitive on world markets. The value of EU exports reached €137.9 billion in 2017 – an increase of just over 5 % compared to 2016. The trade balance for agri-food products in 2017 was also positive with an export surplus of €20.5 billion. Market access for EU agricultural products has improved through bilateral agreements involving an ambitious programme of trade negotiations.2 One example is the Economic Partnership Agreement between the EU and Japan, which entered into force on 1 February 2019. The European Parliament gave its consent in December 2018, clearing the way for the conclusion and entry into force of the biggest trade agreement ever negotiated by the EU.3
The Commission's communication on the CAP post-2020 notes the significance of research and innovation. Increasingly the potential contribution innovation can make to agriculture and rural areas is being recognised, not least through the contribution investment in research and development can make to productivity growth in agriculture as well as in terms of sustainable development. In this regard, the Commission's long-term strategy for agricultural research and innovation has an important role to play. In addition, the potential role and opportunities that precision farming can offer European agriculture have been recognised in a study undertaken for members of the European Parliament by Parliament's Scientific Foresight (STOA) unit on 'Precision agriculture and the future of farming in Europe'.
Public expectations for EU involvement
Evidence on how important agriculture and rural areas are to EU citizens is available from a Eurobarometer survey undertaken in December 2017. Entitled 'Europeans, Agriculture and the CAP', it follows on from previous surveys on this topic dating back to 2007.
Some key findings from the December 2017 survey indicate the following:
More than nine out of ten people (92 %) think agriculture and rural areas are important for the future, as shown in Figure 1. This represents an increase of two points since 2009. At least 85 % in every Member State think agriculture and rural areas are important for the future, ranging from 98 % of respondents in Portugal, 97 % in Belgium and 96 % in Spain to 85 % in Romania and 87 % in Croatia. Compared to 2015, most countries have either recorded no change or a slight decline in the proportion who think agriculture and rural areas are important.
There is an indication that those aged 25 and over are the most likely to say agriculture and rural development are very important for the future. While 56 % of those aged 55 and over consider this to be the case, the figure falls to 44 % for 15 to 24 year-olds.
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EPRS | European Parliamentary Research Service
In terms of what the main
responsibilities of farmers should
be, these were considered to
cover: the provision of safe,
healthy food of high quality
(55 %), ensuring the welfare of
farmed animals (28 %) and
protecting the environment and
tackling climate change (25 %),
while 22 % mentioned supplying
the population with a diverse
range of quality products.
Ensuring the provision of safe,
healthy and high quality food
was considered by more than six
out of ten respondents (62 %) to
be the main objective of the EU in
terms of agricultural and rural
policy. This represents a six-point
increase from 2015. Protection of
the environment and tackling
climate change were mentioned
by 50 % of respondents
representing a six-point increase
from 2015. There was also a three-
point increase in the proportion
who mentioned ensuring a sustainable way to produce food at 46 %.
Examining the surveys in terms of what they reveal about the profile and significance of the CAP, the evidence points to a high level of awareness of the CAP on the part of respondents (some 67 % having heard of it); and more than six in ten respondents (61 %) agree that the CAP benefits all European citizens and not only farmers. There is a recognition that the CAP is succeeding in those areas considered to be most important by respondents such as in the provision of healthy food of high quality and the protection of the rural environment. There is also a consistency in the survey results concerning the perceived importance of the priorities of the CAP. For example,
almost nine in ten (88 %) considered strengthening farmers' role in the food chain to be important. This is a significant finding as the issue of unfair trading practices in the food supply chain is the subject of a legislative proposal in the current Parliament. This is further explained in an EPRS briefing;
almost 84 % considered developing research and innovation to support the agri-food sector to be important;
while 84 % also thought that encouraging young people to enter the agricultural sector was important.
This support for the CAP and the priorities cited above is also reflected in citizens' attitudes to financial aid for farmers, the current CAP budget and future financing levels. More than four in ten (45 %) think the financial support currently given to farmers is about right and just over one quarter (26 %) feel it is too low, again reflecting a level of consistency in these results, give or take a few percentage points when the 2013, 2015 and 2017 surveys are compared (Figure 2). When EU citizens were probed as to the main reasons to justify the CAP's share of the total EU budget, the following responses were elicited:
30 % of respondents felt such aid made it possible to ensure sustainable farming;
Figure 1 – Do you think that, in the EU, agriculture and rural areas are ... for our future? (%-EU)
Source: Special Eurobarometer 473, European Commission, February 2018.
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Agriculture
Figure 2 – Do you think the financial support (which the EU gives) is too low, about right or too high? (%-EU)
Source: Special Eurobarometer 473, European Commission, February 2018.
28% felt it made it possible to guarantee the food supply of Europeans;
one quarter (24 %) indicated that the production of food products in the EU was more expensive than elsewhere as a result of stricter standards;
almost nine in ten (88 %) were in favour of the EU making subsidy payments to farmers for farming practices that are beneficial to the climate and the environment.
In terms of future financial support, which is
highly relevant given current discussions over
the next MFF and the CAP budget, more than
four in ten respondents (44 %) wanted to see
an increase in EU financial support to farmers
over the next 10 years, while just over one in
ten (12 %) wanted to see a decrease, and 29 %
wanted no change. This means that more
than seven in ten (73%) want to see EU
financial support to agriculture either remain
the same or be increased. The Commission's
analysis of the survey has identified a longer-term trend since 2007 that points to an increase (of 15 percentage points, i.e. from 29 % to 41 %) in the proportion who want funding to rise. The Commission also suggests that these results highlight 'the strong link between what Europeans want from agriculture and what they expect from the CAP and agricultural policy' (Special Eurobarometer). This reflects a shift in focus of the CAP from ensuring the supply of food to its current focus on food quality, animal welfare and environmental standards.
EU framework
Legal framework
The basic rules and objectives relating to the CAP are set out in Articles 38 to 44 and Annex I of the Treaty on the Functioning of the European Union (TFEU). Article 39 sets out the objectives of the CAP: (i) to increase agricultural productivity, (ii) to ensure a fair standard of living for farmers; (iii) to stabilise markets; (iv) to ensure reasonable prices for consumers.
The current legal framework for the 2014-2020 CAP is principally governed by four EU regulations, namely:
Regulation (EU) No 1307/2013 covering agricultural income support in the form of direct payments to farmers;
Regulation (EU) No 1308/2013 establishing a common market organisation of the markets in agricultural products;
Regulation (EU) No 1306/2013 covering horizontal issues such as the financing, management and monitoring of the CAP); and
Regulation (EU) No 1305/2013 dealing with rural development.
The legal framework for the CAP as outlined above is the subject of intense debate as part of discussions concerning the future of the CAP in the post 2020 period. At the end of November 2017, the Commission adopted a communication on the future of food and farming. This followed one of the largest public consultation exercises ever undertaken into the views and expectations of a wide
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EPRS | European Parliamentary Research Service
range of stakeholders as they relate to agriculture, rural areas, the CAP and its future. On 1 June 2018, the Commission adopted a set of legislative proposals setting out a legislative framework for the CAP for the 2021 to 2027 period, comprising three proposed regulations:
a proposal for a CAP strategic plan regulation (covering direct payments to farmers, rural development support and sectoral support programmes);
a proposal for a CAP horizontal regulation (covering financing, managing and monitoring the CAP;
a proposal for an amending regulation (amending regulations on the Single Common Market Organisation, quality schemes for agri-food products and on specific measures for the outermost regions and smaller Aegean islands).
Financial framework
Figure 3 shows the pattern of CAP expenditure over the years 1980 to 2017 both in absolute values and as a share of the EU budget. The trendline indicates that the CAP's share of the total EU budget has been declining over the past 25 years, ranging from 73% in 1985 to 41% in 2016.
This downward trend in the CAP's share of EU spending reflects in part the impact of the changes arising from successive reforms of the CAP.
In the 1980s, CAP spending
focused mainly on price support
through intervention and
export subsidies. In the 1992
CAP reform, market price
support was reduced and replaced by producer support in the form of direct payments. Agenda 2000 continued the reform process and rural development policy was introduced as a second pillar. In the 2003 reform, most direct payments were decoupled from production. The 2013 reform covering the 2014-2020 period entered into force on 1 January 2015. It re-orientated the CAP towards environment-related objectives including a new greening component as part of the system of direct payments. When it comes to the different types of intervention, the system of direct payments under the first pillar of the CAP represents around 72 % of the CAP budget. These payments take the form of basic income support based on the number of hectares. They are complemented by a series of other support schemes targeting specific objectives and types of farmer. The second pillar of the CAP supports the EU's rural development policy and is implemented through 118 rural development programmes drawn up by the Member States.
Deliveries of the current parliamentary term
Policy initiatives – legislative achievements
In addition to its role in relation to the CAP, on the wider legislative front, the European Parliament has delivered a number of key legislative proposals relating to agriculture, approved through the co-decision procedure. This includes two legislative files left unfinished at the end of the previous
Figure 3 – CAP expenditure as a percentage of total EU expenditure (2011 constant prices)
Source: European Commission, 2018.
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parliamentary term namely: animal health law and legislation on plant pests. Though the volume of legislation listed in box 1 may be limited in terms of the number of legislative files compared to the equivalent period in the case of national parliaments, the significance of these legislative achievements should not be underestimated. They involve meaningful reforms as the following brief analysis shows.
Data source: Legislative Observatory, European Parliament.




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