EU Farm Subsidies: Deal Reached to "Green" Direct Payments, Retain Coupled Support

27 June 2013

EU officials have agreed to push ahead with reforms to "green" EU direct farm payments in the next seven years - although national governments will still be allowed to provide "coupled" support for particular products.

EU member states reached a compromise deal yesterday on the final shape of a package of measures with the European Commission and Parliament, following two months of talks on parliamentarians' revisions to the reform proposals first tabled by the Commission. (See Bridges Weekly, 13 March 2013 and 12 October 2011)

The reforms will maintain direct payments to EU farmers, while introducing new "greening" requirements intended to improve the environmental sustainability of European farming and make the subsidies more palatable to taxpayers at a time of fiscal austerity and cuts in public services throughout the union.

Irish agriculture minister Simon Conveney, who helped broker the deal during Ireland's six-month presidency of the Council of the European Union, described the new agreement as "a balanced package."

"I am confident that farmers throughout the European Union will benefit from these developments, and that European citizens can be assured that resources are being spent in an efficient, equitable and sustainable manner," he said.

Payments to large farms

A proposed cap on payments to large farms reportedly emerged as a sticking point in the final stage of the talks on the bloc's controversial Common Agricultural Policy (CAP).

Scottish Liberal MEP George Lyon reported that no agreement had been reached "on degressivity, capping, flexibility between pillars, and crisis reserve." In a comment on the social media network Twitter, he said these issues would now form part of broader negotiations on the bloc's multi-annual budget framework.

The Commission later also confirmed that all issues linked to the budget framework had been excluded from the new package.

While the Commission had originally proposed that payments be capped at €300,000, with phased reductions for payments of more than €150,000, European member states had sought to make any cap or reductions voluntary.

"Coupled" payments: reversing reforms?

Under the new deal, all member states will be allowed to "couple" eight percent of farm payments to production, from the total national "envelope" which they receive from Brussels. Successive farm policy reforms in the EU to date have substantially lowered the extent to which farm subsidies are tied to production, reducing their impact on trade.

The new rules will also allow an additional two percent of coupled support to be provided for protein crops, which are often used as animal feed.

However, EU governments that have historically provided higher levels of coupled payments will be allowed to continue doing so. Those that tied more than five percent to production in any year from 2010 to 2014 will be allowed to provide 13 percent of coupled payments under future rules, with an additional two percent for protein crops.

EU member states that tied more ten percent of support to production during the same period will also be allowed to provide up to 13 percent, if the Commission agrees.

Who is an "active farmer"?

Airports, railway services, water works, real estate services, and permanent sports and recreational grounds will no longer be able to receive farm subsidies under the new rules.

The Commission had called for agreement on who should be defined as an "active farmer" - and hence eligible to receive subsidy payments under the reformed CAP.

The deal would establish a short mandatory negative list - based on the Commission's proposals - of entities that would not be able to claim farm subsidies under the new rules.

"Greening" direct payments

The new CAP will maintain elements to "green" farm payments, along the lines of the original proposals from the European Commission - and despite attempts by EU member states to relax these requirements by introducing a more flexible "menu" of environmental measures that individual governments could choose to require as a condition for providing farm subsidies. (See Bridges Weekly, 16 May 2012)

The deal also stipulates that farmers will not receive funding twice for performing the same environmental action - although plans approved by the European Parliament in March could have allowed this to happen when farmers received direct payments alongside separately-funded support for agri-environment programmes. (See Bridges Weekly, 13 March 2013)

Instead, farmers will have to respect three types of environmental criteria in order to receive a new "basic payment" under the reformed CAP. The new rules will require producers to maintain permanent grassland, protect "ecological focus areas" or EFAs, and diversify their crops.

The negotiated package would stipulate that farms over 15 hectares should safeguard ecological focus areas covering five percent of arable land on their holdings - including fallow land, terraces, landscape features, buffer strips, agro-forestry, and other measures.

The Commission had originally proposed a seven percent figure instead - although the new deal could require farmers to expand protection for ecological areas to that level in 2017, following a report from the Commission and subject to a legislative proposal.

Some holdings will still be exempt from the new requirement - such as those where more than 75 percent is grassland or forest.

Meanwhile, EU members will be required maintain the ratio of permanent grassland at national, regional, or farm level - rather than at farm level, as the Commission had originally proposed.

2017: Sugar quotas phased out

Production quotas for EU sugar would be phased out by 2017 under the new reform package.

The Commission had called for the current system to be abolished by the end of September 2015, whereas the parliament had sought an extension until five years later.

"I am pleased to see that EU sugar production quotas will be extended slightly, but it is not for long enough," said Gerd Sonnleitner, president of the EU farm group COPA.

Mixed reactions

"The political agreement we reached today is a victory both for EU farmers and consumers," said a statement from Agriculture Committee chair Paolo De Castro, who led the final negotiations on the package on behalf of the European Parliament.

The European Commissioner for Agriculture and Rural Development, Dacian Cioloş, also expressed his satisfaction with the package. "This agreement will lead to far-reaching changes: making direct payments fairer and greener, strengthening the position of farmers within the food production chain and making the CAP more efficient and more transparent."

Others were not so sure, however. A statement from Trees Robijns at the environmentalist group Birdlife Europe called the result "a major blow to those who championed a more sustainable, forward-thinking policy - one which would deliver for people and the environment as well as protecting the long term interests of farming."

A coalition of green groups, including the European Environmental Bureau and others, cautioned that "for the first time in CAP history, this reform risks going backwards from the progress made in previous reforms."

Meanwhile, EU farm groups welcomed the announcement, saying it had ended the uncertainty facing EU farmers and would enable them to move ahead with making investment plans.

Sonnleitner singled out more "flexible" greening measures under the reform package as "a step in the right direction." Farm groups had "been lobbying hard for this for four years," he added.

Next steps

Although the outline deal announced on Wednesday clarifies the political contours of the future CAP, the Commission will still need to prepare a detailed legislative text setting out the agreement that has been reached.

Crucially, EU member states will also need to reach agreement on the new budget framework for the next seven year period as part of the overall deal.

Once fully finalised, the new measures would then be implemented beginning in 2014.

ICTSD reporting.

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