Training on Cross Compliance - module 2 Context of Cross Compliance IACS Technical Assistance Project Support to establishment of fully operation Paying Agency in line with the EU standards IPA 2007-0303-030101 Training on Cross Compliance - module 2 Context of Cross Compliance Dr. Deterd Goeman

Welcome Welcome to the participants also from the side of the IACS Technical Assistance project team The IACS Technical Assistance Project is responsible for implementing the tools, especially the SW for the administration and control of direct payments and rural development measures, but for a long time we felt that cross compliance was not covered by our project‘s scope Therefore we are glad to be able to provide now the CC training

Brief remarks to my background I was raised on a farm and educated as a farmer and still feel with the farmers After my study of agricultural economics I worked for 32 years in the Federal Ministry of Agriculture in Germany and was responsible mainly for market policy in Germany and the EU

What happened to the EU market policy? In that time I was heavily involved in the change from the EU price stabilizing farm income policy via Common Market Organization towards actual Single Payment Scheme (SPS) in favor of agriculture Far to high intervention price decisions and in consequence excess surpluses and conflicts with competitors in GATT negotiations forced the EU towards fundamental CAP reform in 2003 and caused this essential change It is my intention today to make some few remarks on the development and the philosophy behind Main question is “Do farmers get payments for nothing?“

CAP in the beginning The CAP with its price support stabilized at the beginning with only small intervention quantities and trade measures the income of farmers, in order to cover: The income expectations of farmers The structural development of agriculture towards a low man land ratio (productivity). Millions of farmers and farm hands left agriculture looking for more attractive jobs Expectations of consumers for reasonable food prices and healthy food and Those services for free which are now defined in cross compliance. For a while the EU tried to solve the surplus dilemma by introducing quota systems and production restrictions where possible.

The 2003 CAP reform The CAP reform in 2003 introduced a number of adjustments to agricultural support, with the primary objective: of promoting a more market orientated, sustainable agriculture, reflecting the concerns of European citizens. With the reform the CAP switched to more or less free market conditions and direct (decoupled) payments for the farmers with the effect that nearly a constant amount of the meanwhile increased funds was now distributed to the farmers This was only possible with new IT development and implementation of comprehensive control (IACS)

The philosophy behind The philosophy behind direct payments and cross compliance was virulent very early in all western economies fighting with agricultural policy problems In Germany looking on the high costs for the CAP – Germany is the biggest net contributor to the European budget - there came up ideas: to pay each farmer in Europe a civil servant salary with only the obligation to keep the landscape in good shape (landscape gardener approach) and farmers and EU budget would be better off than in the current system

The origin of Cross Compliance Where does the expression “cross compliance“ come from? In the US in the 1970 farmers were obliged: when taking part in one support program also to comply across other programs conditions This was the first time to use the expression “cross compliance“

The history of Cross Compliance in Europe The main concern in Europe was not compliance across other programs but rather more compliance with environment and animal welfare This was to a big extent due to the time of green party foundations Besides organizations caring for animal welfare got more and more political power in lobbying animal welfare on farms

Example from the UK In the UK they reported that a sheep farmer kept a huge flock during wintertime on a rather small area: claiming for the headage payment and being able to use the free not grazed area for other purposes. Therefore in light of this experience the UK minister of agriculture was the first one to introduce sanctions for behavior not in compliance with animal welfare and environmental requirements.

Public society expectations I mentioned these examples to demonstrate that CAP was criticised due to high costs and marginal intervention effects due to surplus situation (exception quota regimes). The public expected from farmers good behavior in environment and towards animals (hen cage discussion). The farmer unions argued that prices for their products did not cover any more their costs especially those caused by environment, public health and animal welfare expectations of the population.

Reform decision EU-Council of Ministers of Agriculture decided in June 2003 a fundamental reform of the CAP with following elements: Far reaching decoupling of premiums from production Linking the payments with conditions (Cross-Compliance) like: Good agricultural practice and environmental condition Statutory management requirements Introduction of obligatory Modulation

Decoupling Defining payment entitlements (PE) for each farmer Defining the amounts regarding the payments the farm got in the past (historic model) Defining the basic amounts due to the area (regional model chosen also by Croatia) Activation of the payment entitlement on the eligible area

The philosophy behind The philosophy behind direct payment and cross compliance is: That now the public society: EU, national member states, the tax paying population is paying for the services of the farmers, which farmers delivered before for free. In other words: Farmers get the direct payments for keeping cross compliance conditions, a behavior which the public society is expecting from agriculture.

Direct payments and controls Direct payments have the advantage that they can be received directly by the farmers without participation of other market stages looking for their own profits. However I feel pity with the farmers because: now they are heavily controlled and sanctioned if breaches of the requirements in the context of direct payments and cross compliance are discovered.

Direct payments and CC in accession process Besides many other advantages: it is the money flow from European Agricultural Funds giving a solid argument for accession to the EU. In this context everybody is primarily looking on: the direct payments for farmers even in case they do not produce on agricultural area only keeping it in good shape. Once again: „Do farmers get the money for doing nothing?“

Public vs. farmers Therefore the public has to learn: that farmers get the remuneration for services they provide for the public society in keeping Cross Compliance conditions, for example keeping their land in good shape. Farmers have to understand: what the Cross Compliance requirements are, why they are implemented and connected to direct payments and that they have to fulfill them in order to avoid sanctions

CC-related activities of the IACS TA project Therefore when there was an opportunity to get additional funds for our IACS Technical Assistance Project we from the team requested some part of the added funds for instructions of farmers and controllers in cross compliance and for four regional meetings in Croatia to make agricultural opinion leaders and farmers aware of the conditions to be kept when receiving direct payments. We will also prepare a bulletin about cross compliance which can be distributed to farmers. This training incentive is the first step because we think that there are deficits in Croatian agriculture concerning knowledge about cross compliance.

Thank you for your attention! IACS Technical Assistance Project Support to establishment of fully operation Paying Agency in line with the EU standards IPA 2007-0303-030101 At the end of my contribution I want to express my warmest thanks to Mr. Pavel Trojáček who organized together with the PAAFRD and the project team these training workshops. Thank you for your attention!