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SPEECH/08/255












Mariann Fischer Boel

Member of the European Commission responsible for Agriculture and Rural Development



The CAP Health Check: straight ahead for responsive and sustainable farming





















Presentation of the Health Check Proposal to the COMAGRI
Strasbourg, 20 May 2008

[President, Honourable Members],

It's a great pleasure to have the chance to address you once again on what is an important day for the Common Agricultural Policy.

It was two years ago that I fired the starting-gun for the discussions leading up to the CAP Health Check.

Back then, farm prices were still quietly falling in real terms, as they had been for 30 years, and energy and climate change had not yet become the top of priority of the Commission and indeed the whole EU.

Some claim that we're now playing a totally different ball game.

Hardly a day goes by without an avalanche of media headlines about rising agricultural prices, their causes and their impact around the world. Rather unexpectedly, Thomas Malthus seems to have come back into fashion! And yes, energy and climate change have moved right to the top of our agenda.

We need to take great care when looking at the price increases. There are a number of causes behind them – some are short-term, others long-term, and they differ from sector to sector.

We are already seeing some prices fall from their peaks. From last autumn to April this year, dairy prices dropped by around 30 per cent. From March to April, wheat prices fell by almost 20 per cent.

Nevertheless, the fact remains: the economic and political backdrop to the Health Check is not the same as it was two years ago. Does this mean that the Health Check is no longer relevant? Absolutely not!

Let's recall the direction that the CAP has been taking, especially through the reforms of 2003 and subsequent years:

  • Through decoupled payments, we have continued to give farmers a certain level of financial security but we have been liberating them to respond to market signals.
  • Through cross-compliance, we have linked these payments to "public goods" such as high standards of environmental care.
  • We have been adapting our market instruments (such as public intervention) to make them act like a safety net without blocking normal market signals.
  • And through rural development policy, we have been helping farms to restructure, and we have been caring for the environment and nurturing dynamic rural areas.

There is nothing in the current situation that shows we should make a U-turn, either to the left or to the right.

On the one hand, it's not the time to start micro-managing European farm production, pushing and pulling the levers of policy week by week to hit targets set in Brussels. Even the best administrators can't second-guess the world's needs for farm products – or allocate resources efficiently to meet those needs.

On the other hand, nor is it the time to simply abolish the CAP. The market has a very important role to play, but left to itself, it will not care for our landscapes or respond to other public demands. And if we strip farming of all defences against occasional crises, we gamble with our food supply.

Therefore, now is the time to push further ahead in the direction which we have already taken.

  • We must clear away obstacles which are hindering farmers' responses to market signals.
  • We must make our support systems more effective, efficient and simple – and more consistent with competitiveness.
  • And we must help farms and other country businesses to meet various developing challenges, such as climate change.

In other words, the Health Check must make sure that the reformed CAP is really delivering what we need from it in the 21st century - for a European Union of 27 Member States, and in the wider world as it is now.

As the proposals are freely available and time is limited, I will now leave out a lot of detail to focus on a few key points.

Market instruments

First of all, market instruments.

As I said a moment ago, it's more important than ever that farmers should be free to respond to growing demand.

The milk quota system is still a straitjacket for our dairy producers. It has been agreed that this straitjacket will come off in 2015. In the meantime, we need to loosen it, so that our producers can already get their foot in the door in emerging markets.

Therefore, on top of the quota increase of 2 per cent which has taken effect this year, I propose to raise quotas by a further 1 per cent annually from 2009 to 2013, inclusive.

The other main constraint on production is compulsory arable set-aside. It is totally out of date in an era of decoupled payments, and I propose to abolish it.

We would keep its environmental benefits in two ways. Within rural development policy, we would give incentives for environmental set-aside. And we would introduce a cross-compliance requirement concerning buffer strips along watercourses.

Also under the heading of market instruments, systems such as public intervention and aid for private storage must function as a genuine safety net for times of real crisis. A safety net is not the same thing as a comfortable chair!

For example, cereals intervention could work more effectively in this sense if it were based essentially around bread wheat, with a tendering system in operation at all times.

Intervention for other cereals would come into operation only under special circumstances.

All dairy intervention should also be based on tendering. And the various other support schemes in the dairy sector should either be made optional in any given year, or abolished. They were designed to run down butter mountains which are now long gone!

The Single Payment Scheme

Likewise, what I propose for the Single Payment Scheme reflects a concern both for market-responsiveness and also for the right kind of security.

Farmers whose direct payments are not tied to production are farmers who can respond quickly and accurately to what the market needs. Therefore, in principle, we should push ahead with full decoupling. This would give us a bonus in terms of simplification.

For example, keeping some arable payments partially coupled has brought no market benefits but has added red tape. In this sector and several others, it's time to phase in full decoupling.

On the other hand, as the Parliament has pointed out, there are regions where certain coupled payments are for the time being still the best way of avoiding serious economic, social or environmental problems. So we should allow a few exceptions to the rule of full decoupling.

The Single Payment Scheme already helps to give farmers security for difficult times – and of course, as most economists agree, decoupled direct payments are the most efficient way of giving such security.

But there's a way in which we can go further.

As the Parliament has requested, I propose to make what is currently referred to as "Article 69" more flexible. The new version, "Article 68", will not be different only in its number! Among various other things, Member States could use it to support risk management measures – crop insurance schemes for natural disasters, and mutual funds for crises linked to animal and plant disease.

Also within the Single Payment Scheme, it's time to let some Member States change their chosen model of the scheme, if they wish. Large payment differences based on historical payment patterns may be hard to understand and justify in the long term. Therefore, I propose to give Member States the chance to flatten out payment rates per entitlement, moving towards a more "regional" system.

Of course, another question raised by the Parliament and other groups in connection with the Single Payment Scheme is what exactly constitutes a "farmer".

Under the current rules, even companies whose main purpose is not farming can receive direct payments under certain circumstances if they carry out an agricultural activity. I intend to give Member States the power to withhold direct payments from these companies. It must be clear to all that direct payments are there to help "farmers", as defined according to common sense!

New challenges

Finally, a few words on "new challenges".

I don't think anyone will dispute that we have to raise our game in the areas of climate change, water management, renewable energy and biodiversity.

It's mainly through rural development policy that the CAP can make a contribution in these areas. However, rural development funding for 2007 to 2013 is already allocated. So to take further action, we need more money.

Therefore, I'm particularly grateful to the Parliament for its suggestion of "progressive modulation", which I have taken on board and adapted in the Health Check proposals.

The proposed system would make vital new funding available to take action in the four areas mentioned.

And it's significant that a larger contribution would come from farmers who receive larger direct payments.

I believe this is a good response to public questions about larger direct payments. And I believe it would spread the financial transfers in a reasonable and acceptable way – especially as the money transferred would stay in the Member State in question.

Conclusion

Overall, these proposals are right for the times that we live in.

They steer a path between the dangers of inefficient micro-management on the one side and irresponsible no-rules liberalism on the other.

They will move us further along the road of competitive and sustainable farming – that can respond to demand and be part of the solution to the broader challenges that the world faces.

I look forward to debating them with you!

Thank you.


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