Fact of the Week – Common Agricultural Policy: time for a green revamp?

European agriculture is facing a perfect storm lately, with farmer protests in several EU Member States lamenting the current rock-bottom prices, especially for pork and dairy products. The 2014 Russian food-import ban cut access to a major export market for many European producers, the end of milk quotas in 2015 flung dairy farmers into a ruinous cycle of overproduction and free trade deals possibly exposing them to competition from agricultural heavyweights in the U.S. and Mercosur. 115 leading environmental, health, and social NGOs are calling on European Commission President Jean-Claude Juncker to initiate an in-depth review of food production and consumption in Europe by conducting a Fitness Check of the Common Agricultural Policy (CAP). They want to make the EU agricultural sector ‘greener’ and more sustainable. Why do they want this and does everyone agree?

Initial purpose

The CAP has evolved significantly since it was created by the Treaty of Rome (1957).  After World War II Europe faced severe food shortages, so the policy makers focused mainly on food security and productivity improvement.  Only after the 2003 reform of the CAP environmental factors and consumer concerns were taken into account as the earlier policy lead to considerable overproduction of certain products and produce.

Changing paradigm

The CAP is often explained as the result of a political compromise between France and Germany: German industry would have access to the French market; in exchange, Germany would help pay for France's farmers. Germany is still the largest net contributor into the EU budget. However, as of 2005, France is also a net contributor while the more agriculture-focused Spain, Greece, and Portugal are the biggest beneficiaries. Meanwhile, particularly urbanised Member States for which agriculture comprises only a small part of the economy (such as the Netherlands and the United Kingdom), are much smaller beneficiaries and the CAP is often unpopular with their national governments. Transitional rules apply to the newly admitted Member States, which limit the subsidies that they currently receive.

Adjustments needed

While the European Environmental Bureau (EEB) calls for a reduction to farming’s carbon footprint by facilitating a transition to a truly sustainable farming model. The EEB wants policies that focus on producing quality food, reducing waste, improving diets and shortening supply chains. Furthermore, the EEB acknowledges the need to protect farmers, reduce their reliance on dangerous pesticides through ecological farm practices, rebuild soil fertility and, crucially, secure farmers’ livelihoods by sustaining yields over time. However, Phil Hogan, the European Commissioner for Agriculture and Rural Development, and COPA & COGECA, which represents 2.3 million farmers and their cooperatives across the EU, see things slightly differently. They want the next CAP reform to focus on producers getting a fair price for their product, by considering greater use of mutual funds, export credit insurances and financial instruments, among other measures, further encouragement of producers to form producer organizations in order to negotiate fair prices and finding new market outlets. No wonder then, that Mr Juncker visited Mr Putin recently to discuss economic relations and possibly the current sanctions prohibiting the export of certainproduce to Russia. Whether this coincides with the proposal from the 115 NGOs remains highly doubtful.