farm policy reform: the european experience dan rotenberg, counselor - agriculture delegation of the...
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Farm policy reform: the European experience
Dan Rotenberg, Counselor - AgricultureDelegation of the European Commission to the U.S.
Domestic and trade impacts of US farm policyNovember 15, 2007 – Holiday Inn Capitol
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CAP has been radically reformed since 1992
Main stages: 1992 (Mac Sharry reform), 1999 (Agenda 2000) and 2003 (Fischler reform)
On-going process: sugar, F and V, wine, “health check”…
Reforms driven by both internal and external factors
Internal: budget considerations, EU enlargement, environmental concerns.
External: trade impact and WTO implications
OutlineOutline
3
The CAP : from Past to PresentThe CAP : from Past to Present
More price cuts + compensation
Identify EU Farm Model
Rural development
Protect environment
Enlargement
Competitiveness
Price cuts + compensation
Have an UR agreement
Stabilise budget
Protectincome
Competitiveness
Price support
Secure food supplies
Improve productivity
Stabilise markets
Income support
Production control
Slow downexpenditure
Reduce international
friction
Reduce surpluses
Single Farm Payment
Marketorientation
Consumer concerns
Environment
Farm income
DDA context
Early years1960’s
Crisis years70’s - 80’s
1992 CAPReform
Agenda 2000
2003 CAP Reform
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From product price to direct producer support…– gradual elimination or reduction of support prices into safety-nets– partial compensation of product support drop by shift to producer support
…to decoupling of direct aids…– single farm payment based on historical references…– …requiring compliance with set of existing statutory standards
…and to a better balance of support– enhancement of Rural Development policy instruments to meet new standards– shift of funds from market support to rural development– financing new market reforms with redistribution of direct aids
CAP reform at a glanceCAP reform at a glance
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European model of agriculture
a competitive EU agricultural sector
environmentally friendly production methods
quality products
contribution to rural landscapes
dynamic sustainable rural economy
a minimized impact on world stage
2003 CAP reform – key objectives2003 CAP reform – key objectives
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2003 CAP reform and DDA 2003 CAP reform and DDA negotiations: a pre-emptive actionnegotiations: a pre-emptive action
Decoupling of payments means shifting direct paymentsto the green box (non-trade distorting payments)
Prices reduction means reduced need for export refunds
The EU has done its homework with its CAP reform:
-move on domestic support
-move on export subsidies
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The sugar case: reacting to international pressure EU25: key sugar player (production: 20 million MT;
14% of world production; net exporter: 4.7 million MT of exports and 1.9 million MT of imports; more than 300.000 producers in 21 MS)
Key elements of support: intervention price, quota system, border protection, preferential access, export subsidies.
But not sustainable: EBA (DFQF from 2009) and WTO challenge (sugar panel – April 2005).
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Sugar reform and its impact
Internal prices cut by 36% and abolition of public intervention
Farmers partially compensated of income loss through direct payments (merged into the Single payment scheme)
Restructuring fund to encourage uncompetitive producers to renounce to their quotas
Impact: production to fall (6 millions MT), exports to disappear, imports to increase.
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The effects of the CAP reform
Internally
Externally
10
The path of CAP expenditureThe path of CAP expenditure
0
10
20
30
40
50
60
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
billion €
Export subsidies Market support Direct aids Rural development
EU-10 EU-12 EU-15 EU-25
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Agricultural Budget: from 0.63% in 1990/92 to 0.45% in 2005/06 and 0.35% in 2013
The decline share of CAP budgetThe decline share of CAP budget
- 46%
Share of the EU agricultural expenditure in the Gross National Income of the European Union (1991-2013) - (constant 2004 price)
0.30%
0.35%
0.40%
0.45%
0.50%
0.55%
0.60%
0.65%
0.70%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
in %
Share of CAP budget in the EU GNI
12
Reduction of export subsidies since 1992Reduction of export subsidies since 1992Total export refunds in mio €
0
2 000
4 000
6 000
8 000
10 000
12 000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 aftersugarreform
-80%
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EU agricultural trade structure balanced• move from quantity to quality• EU agricultural exports mainly (70%) in high value added products• price-dependent bulk commodities represent just 7 % of EU exports
Net export position of the EU decreased in key sectors• most of this decline is driven by CAP reform• most gains go to Southern Hemisphere (Brazil)…
EU = largest market for developing countries
EU = first importer and first exporter of agricultural products
Evolution of EU role in world agricultural tradeEvolution of EU role in world agricultural trade
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EU net export share (reform impact)
-5%
0%
5%
10%
15%
20%
25%
30%
35%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Wheat Beef Poultry
A declining share of EU net exports on world marketsA declining share of EU net exports on world markets
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EU net export share (pre-reform)
0%
10%
20%
30%
40%
50%
60%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Sugar Butter SMP
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The EU domestic support impact on beef…The EU domestic support impact on beef…
0
40
80
120
160
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
1992=100
Price support Export subsidiesTariff protection PSEWorld price
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…and the evolution of EU beef trade!
-40
0
40
80
120
160
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
1992=100
Net exports PSE World price
18
Imports from developing countries (2005)Imports from developing countries (2005)
(billion US dollars / % of total)
68,6%
20,0%
45,7%
33,8%30,4%
24,9%
37,7%
0
10
20
30
40
50
60
70
EU25 Canada US Japan Australia New Zealand Sum on 5
Commodities Intermediate products Final Products Share of total (%)
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Trade 1988-2006 EU with Extra-EuAgricultural products
-20 000
-10 000
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
year
mil
lio
n E
uro
imports
exports
balance
Source : Eurostat COMEXT 28 June 2007 (S.R. 4)
20
Trade 1988-2006 EU with Extra-EuRaw products
-30 000
-20 000
-10 000
10 000
20 000
30 000
40 000
50 000
60 000
70 000
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
year
mil
lio
n E
uro
imports
exports
balance
Source : Eurostat COMEXT 28 June 2007 (S.R. 4)
21
Trade 1988-2006 EU with Extra-EuProcessed products
5 000
10 000
15 000
20 000
25 000
30 000
35 000
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
year
mil
lio
n E
uro
imports
exports
balance
Source : Eurostat COMEXT 28 June 2007 (S.R. 4)
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Conclusions on EU farm policy reformConclusions on EU farm policy reform
Key factors:
- consumers concerns
- budget pressure
- WTO commitments
- EU enlargement
Key elements:
- decoupling (ends subsidy hunting)
- conditionality on payments
Key lesson: ‘Farm policy reform is a marathon, not a sprint’
