CAP in Europe: 2013 and beyond (preliminary ideas) Toomas Kevvai Ministry of Agriculture

Measure of time  Talking of the CAP future, generally the period is meant  has in essence been settled, now “health check” of the implementation of the decisions made in 2003 is in process  can broadly be connected with the budget negotiations for the EU next financial period of

As Einstein has already told 80 years ago: Common believe is not common knowledge or actual and/or future reality.

Was Malthus right?  Foodstuffs production opportunities of the world are limited  World population is growing  Prices of agricultural products on record level  New agricultural commodities markets: bioenergy

 The statement of Mr. Jeroen van der Veer (CEO of Shell) concerning the world energy situation:  “After 2015, easily accessible supplies of oil and gas probably will no longer keep up with demand.” en/our_strategy/shell_global_scenarios/two_energy_futures/two_energy- _futures_ html)

Cereals needed for bioethanol World cereals production (rice excluded) 2016: 1850 million tons Source: OECD

Solar energy (world and European need for electricity)

Quantities not problematic – price problematic  Even with growing biofuel production adequate food supplies can be guaranteed for the world food security  … provided that food will be distributed on equal terms  Food security is not a quantity problem  … but depends on purchasing power, i.e. on incomes and prices

How wealthy are we?   Estonian residents - on an average 814,456,058  In the world, more than people

Is invisible hand acceptable when we are talking about food supply  Are net exporters ready to guarantee food supply for export markets in case of failure in their own food production chain?  Wise man don’t keep all the eggs in one basket

Challenges for CAP  Increasing input prices – energy as fuel, fertilizers etc  Increasing demand instead of supply limiting instruments  Climate change – agriculture as problem and/or solution  Market orientation versus environmental sustainability

Technical challenges  Decoupled payments – to whom, why, common market common approach?  Partial coupling for environmental, social etc reasons  Safety net  Direct payments versus rural development (structural actions, agri- environment)

What should be taken into account? CAP World food market Bioenergy Non-food agricultural commodities Climate change Increase in consumption GMOBiodiversityEnvironment

CAP internal balance

Short review  The CAP main elements at the moment 2 pillars De-coupling of support payments Decrease in the impact of market regulation 3 axes of rural development policy European Agricultural Guidance and Guarantee Fund European Agricultural Fund for Rural Development

The two pillars of the EU Common Agricultural Policy Market regulation Rural development policy I pillar II pillar Common internal market - customs duties - export refunds - consumption aid Direct payments Increase in competitiveness Agri-environment and landscapes Rural enterprise and village development LEADER approach

The EU budget and the share of the CAP in it  In the budget of 2008, expenditure on agriculture and rural development constitutes 53,8 billion EUR or 41,67% of budget volume.  Thus, expenditure on agriculture and rural development makes up only 0,43% of the EU gross national income.

The two pillars of the EU Common Agricultural Policy Market regulation Rural development policy I pillar II pillar 80% 20%

Proportion of the I pillar (direct payments) and the II pillar support payments from the EU budget (estimate – data of 2006)

The two pillars of the EU Common Agricultural Policy in Estonia Market regulation Rural development policy I pillar II pillar 50%

The CAP I pillar

Present direct payments  Single Payment Scheme Entitlements Regional and historic approach  Single Area Payment Scheme  Partially coupled support payments Article 69  Cross Compliance

The CAP future issues  Principles of direct support payment Public good? Entitlements? Cross compliance has come to stay – expand? If and how many coupled direct payments? Integration of direct payments and LFA

Direct payments and LFA  Contradiction? € Low fertility Poor climatic conditions High agricultural intensity LFA Direct payments

Market intervention  Export subsidies shall be phased out by 2013  Limitations on production shall be phased out by 2014 (milk quota will be the last)  Support payments coupled with the production of a certain impact

The CAP II pillar

The CAP II pillar rural development policy Agricultural fund for rural development Single programming, financing, monitoring and auditing I Competitive ness II Environment and land use III Economic diversification and quality of life LEADER Rural development

3 axes?  Competitiveness of agriculture and forestry > 10%  Agricultural landscapes and environment > 25%  Diversification of rural enterprise and village development > 10%

LEADER approach  LEADER – a method to improve local initiative or waste of administrative costs?  LEADER – minimum share > 5%

CAP goals (treaty) Are those still relevant, have their context changed?

Aim and some “keywords”  To increase agricultural productivity by promoting technical progress, by ensuring reasonable development of agricultural production and by the optimum use of factors of production, particularly labour force Energy efficiency ? GMO ? Decoupled payments ? Entitelments ?? Research and development ? Innovation ?

Aim and some “keywords”  To ensure fair standard of living for the part of the population engaged in agriculture, primarily by the increase in individual earnings of those working in agriculture Non-agricultural living standard in rural areas ? Decoupled payments, entitelments – farmers or landowners ?

Aim and some “keywords”  To stabilise markets Stabilizing for which direction? To avoid sharp decreases or increases?  To guarantee food security Export taxes?  To secure reasonable consumer prices How ?

Aim and some “keywords”  Reduction of negative environmental impact of agriculture Strong agri environmental programmes ? Cross-compliance

Concluding ideas

CAP first pillar needs ideolodical and financial revision  SPS – LFA  Direct payments coupled with public good  Abolishing historical reference which defines direct payments envelopes according of intensity of certain commodities production between member states

Direct payments and LFA  Contradiction? € Lower public goodHigh public good Direct payments with integrated LFA

CAP second pillar should be stronger  Increasing need for stong agri- environmental programmes  Real structural development  Landscape management and biodiversity  Local food chains  Low input agriculture  Research and development  Innovation  Sustainable bioenergy

The CAP II pillar rural development policy Agricultural fund for rural development Single programming, financing, monitoring and auditing I Competitive ness II Environment and land use III Economic diversification and quality of life LEADER Rural development

Balance between I and II pillar  The balance should move toward II pillar  But – strict rules for limiting cofinancing and additional state aid to minimize unfair competition

Thank You for Your attention!