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Dacian Cioloș

Member of the European Commission
responsible for Agriculture and Rural Development

A new partnership between Europe and its farmers

Speech presenting the legislative proposals on the reform of the Common Agricultural Policy to the European Parliament

Brussels, 12 October 2011

Ladies and Gentlemen,

European agriculture is entering a new and important phase.

We have now had the public debate that I launched in this very place on 12 April 2010. There has been a exchange of views on the Communication.

I would like to thank you for the added value you have provided during this period, in particular through your participation in the public debate, through the Lyon and Dess Reports and also through all the discussions we have had.

The process has shown that the Common Agricultural Policy needs to be redefined.

A new balance has to be established through a genuine partnership between society as a whole, which offers the financial resources through a public policy, and farmers, who keep rural areas alive, who are in contact with the ecosystems and who produce the food we eat.

The key aims of this reform are:

  • to ensure that the competitiveness of all European farming safeguards our food security;

  • to lay down the foundations for long-term competitiveness that is both environmentally and economically sustainable;

  • to ensure that agriculture flourishes throughout Europe;

  • and finally, a spearhead objective: to simplify the CAP.

1) Ensuring the competitiveness of all European farming safeguards our food security.

The measures to strengthen the competitiveness of European agriculture must take account of the changing context and economic environment of recent years, through two factors: the markets and producer incomes.

Since the 1990s, concern has moved away from the international competitiveness of European agriculture to focus instead on the instability of agricultural markets and the volatility of prices and incomes.

The risks for European agriculture do not come just from unpredictable weather conditions or climate change but also from market instability and sudden falls in prices or producer incomes.

Producer income itself is a further recurring problem.

Here are our responses:

  • New direct payments

The effectiveness of our current policy has lessened over time. The current payments, based on a plethora of systems conceived using historical reference values, have lost their effectiveness. They are undermined by their lack of credibility and transparency in the eyes of the public.

We need a new start. Our historical reference values are outdated. I suggest that we bring in an improved model, enabling support to be better targeted and linked to surface area, with 2014 as the reference year.

The area of agricultural land utilised will form the backbone of the new payment model, where account will be taken of both the production dimension and the public goods produced on this land.

This approach will require a move towards convergence, since a similar level of support should be given where a production base and the level of production of public goods are one and the same.

Why then has the convergence level been limited to one third of the difference between the lowest payments and 90% of the European average during this period?

As you know, the CAP goes through a reform when decisions on the budgetary perspectives are being taken. We have to bear in mind our objectives but also the political feasibility of reaching a decision on the entire budget, the CAP budget included.

Politics – and especially at European level – is the art of the possible and of finding the right balance. The most important thing is to encourage movement in the right direction, which is exactly what we are doing by entering this first phase until 2020 on the one hand and by setting ourselves the objective of greater fairness in the context of forthcoming financial perspectives on the other.

In the case of convergence factors within the Member States and regions, which do not depend on external budgetary aspects but which are also very important, we have set an objective to be reached more quickly. Convergence must be a feature of the aid paid from autumn 2019 under the 2020 budget.

  • There will be differentiated support based on objective needs

The CAP must contribute to strengthening the viability of the agricultural sector in all its diversity, which has led us to work on an clear differentiation of support. For this reason we are proposing a direct support system to Member States that changes over time:

  • There will be specific aid for young farmers. Member States will be able to use up to 2% of their national allocations to make an additional payment representing 25% of the average of the rights over five years, for a maximum of 25 hectares. This structural measure is a response to the demographic challenge. This is a challenge that concerns all Member States. The continuing habitation and vitality of rural areas is at stake. This scheme should therefore be compulsory for all Member States

  • There will be coupled aid. We must have the courage to go against fashion and widely held but outdated economic theories where this is objectively necessary and essential to maintain vulnerable sectors. We propose to keep this system, within its current overall limits, wherever the use of coupled payments is justified.

  • Member States will also have the option of targeting up to 5% of their first pillar aid towards support for agriculture in less-favoured areas. This is also a step towards greater fairness and a contribution to food security. At the same time we will keep the rural development measure for less‑favoured areas, with an increase in the maximum aid amount to EUR 300 per hectare.

In this way we will mobilise all of the European Union's productive capital. This will happen not only by making use of all our farmers, wherever they may be, but also through income support that is better targeted towards the farmers and structures that really need them.

I seriously doubt that golf clubs or airports need farming income support.

We therefore propose to establish a definition of 'active farmer' with precise criteria so as not to penalise real farmers, including those working part-time. Active farmers will be those who make a tangible contribution to agricultural production and the management of natural resources. This is why we have introduced a criterion whereby the direct aid received must represent at least 5% of the non-agricultural income of the direct aid applicant We have also set a requirement as regards the minimum amount of work to be done on agricultural land, since the CAP is not intended to remunerate so-called 'couch-potato farmers', if you will forgive the pun.

By the same token, above a certain aid amount, is still acceptable to talk of basic income aid? I am sure you will agree that it is not.

The Commission proposes making income aid degressive after €150 000, the ceiling for this aid being reached at €300 000. This meets the concerns raised by the Parliament in June in the Dess Report regarding the risk that the legitimacy of direct payments might be called into question; it also satisfies the clear wishes of one in two Europeans.

This mechanism takes into account the diversity of agriculture and will not penalise holdings that actually create jobs. The wages bill will be deducted from the threshold at which degression is triggered, as well as from the overall ceiling.

This also takes into account the sound management of natural resources expected of every farm, big or small. "Green" aid will not be subject to degression or a ceiling.

2) To lay down the foundations for a new competitiveness that is both environmentally and economically sustainable.

The CAP must also be able to meet the challenge of both economic and environmental sustainability. These two forms of sustainability cannot be separated in a sector that derives its existence and its economic performance from natural resources and their use, resources that are not just factors of production but also public goods.

  • Preserving natural balances.

For many years farmers were encouraged to engage in unlimited production, paying no heed to the prevailing conditions in our ecosystems or the fragility of our natural resources. Constant accusations of being polluters has been their reward. We cannot afford to repeat this error.

We must encourage farmers to consider long-term competitiveness in their daily work, thanks to sustainable agricultural production practices.

The "greening" practices envisaged – and we can improve on them together – are meant to include the aim of long-term food security.

If a strip of woodland protects the soil against erosion by water and wind, this does not represent a loss in terms of food security. Quite the contrary: those few hectares of non-productive land maintain food security by preserving even more land than is needed to form this protective strip.

Providing aid that is linked to some simple agricultural practices whose positive effects are well established (crop diversification, permanent pasture areas and preserving biodiversity reserves and landscape features) encourages better management of natural resources.

We have chosen to have a limited number of compulsory implementing measures throughout Europe because, on the one hand, these measures allow us to combat effectively and simply climate change, the loss of biodiversity and soil erosion while on the other hand they are not unduly onerous on farmers or administrations. The measures apply throughout EU territory. Distortions between farmers are thus avoided.

Through this mechanism we clearly put both farmers and taxpayers in a 'win-win' situation.

  • an unprecedented effort for knowledge-based agriculture

In tandem, we are also going to deploy new funds for research and innovation. The agriculture of tomorrow will be knowledge-based. Putting this concept into practice will allow us to produce more with less, to reconcile the environmental and economic interests and make the agricultural sector more competitive and sustainable. It will also provide a better alignment between market demands and production constraints.

To this end, in the financial projections I have proposed doubling agronomic research expenditure.

This does not just mean funding laboratory work. Even the best ideas are useless if they do not make it out of the laboratory. We must develop the technologies that are most relevant for farmers. We must also facilitate transfers of knowledge and strengthen cooperation between the scientific and farming communities.

These keys objectives for laying the foundations of a genuine, knowledge-based agriculture will be at the heart of an innovation partnership that will enable the EU's productive potential to be harnessed.

  • Organising agricultural production chains to ensure the sustainable distribution of value-added

Alongside ecological sustainability, innovation and research, in the years to come we will also need as never before the tools for economic sustainability.

Within a food chain where the most essential link – primary agricultural production – is also the weakest, we must restore the balance and strengthen the position of farmers.

We must ensure a better distribution of value-added.

To this end I propose giving all farmers the opportunity to organise themselves in all the areas covered by Annex 1 to the Treaty. This measure costs nothing. It provides a legal framework adapted to the conditions prevailing in each agricultural sector and may help farmers to position themselves more effectively on the market.

Once the professionals request it, Member State recognition of producer organisations, associations of producer organisations and inter-branch organisations must be compulsory for all sectors.

I propose clarifying the rules on competition. There is no justification for preventing producer organisations from doing what all large companies do: plan effectively and adjust production to market demand, particularly in terms of quality and quantity.

Alongside the other tools that I propose, this arrangement will be a step towards greater economic sustainability, so allowing farmers to face increasingly frequent and increasingly tough crises.

  • Modern crisis management tools for overcoming economic challenges

I propose:

  • A reserve of €3.5 billion for market measures where there is a crisis on a market or a large-scale loss of consumer confidence.

  • An exceptional disturbance clause to cover the most serious unexpected events. The Commission must be able to take emergency measures without delay when a crisis happens: we all remember the recent E.coli crisis, or the major health crises of the last decade. We must have the weapons in place to tackle a crisis as and when it happens, and not several months later. Whether we act by activating safety nets that will become permanent, through intervention, or effective private storage, or through other additional exceptional measures, the important things is to be capable of acting quickly without waiting for the crisis to get worse or bring the agricultural sector involved to its knees. Efficiency and responsiveness, these are the bywords for the market management tools that I put before you here.

  • In the context of the second pillar, there will be a new crisis management tool to combat volatility. Its underlying philosophy will be 'Europe will play its part if you play yours', in other words: take out insurance, create funds and the Commission will provide support.

3) The territorial dimension: to ensure the competitiveness of agriculture throughout Europe

Lastly, we must avoid a territorial divide between highly competitive areas that endanger the sustainability of ecosystems on the one hand and on the other areas that are becoming increasingly deserted.

The CAP must help to sustain agriculture and its competitiveness throughout Union territory. The rural development programmes for 2014-2020 will play a crucial role.

  • More effective, objective-based governance

The Commission is proposing that Member States should move towards a new form of governance based on partnership contracts between themselves and the Commission, to include the Structural Funds and the Rural Development Fund. The "Partnership Contract" approach will include, among other mechanisms for both national coordination and coordination with the Commission, ex-ante conditions to be met by the Member States before the Commission can approve the programmes. This will facilitate programme implementation.

It is important to specify here that the rules common to rural development and the Structural Funds will only cover general principles and national strategy coordination; the specific features of the CAP and the solid links between both pillars are fully maintained in the horizontal Regulation that is part of the reform presented today.

I undertake to work very closely with the Member States in this preparatory phase to limit problems, misunderstandings and the need to make changes after the programmes are approved.

Proper preparatory work before the programmes are adopted will also allow us to develop clear and coherent strategies designed to effectively promote at all levels, from the global to the local, the competitiveness of agriculture and of rural areas.

Member States will no longer be bound to priority axes. They will have a real chance to define in a flexible way the strategies for unlocking local potential in the framework of Community objectives. But the obligations to apply certain measures such as agri-environmental measures or Leader approaches will remain.

This governance will modernise rural areas through investments in private and public infrastructure while stimulating a dynamic and innovative agricultural sector that allows the regions to branch out into other non-agricultural activities.

Member States will be able to adopt specific sectoral sub‑programmes for the modernisation of particular sectors in regions where they play an important role.

- More flexible and more relevant measures to support the competitiveness of rural areas

New measures to help the competitiveness and growth of rural areas based around six priorities: encourage innovation: increase competitiveness; work to organise and manage risks; preserve ecosystems; encourage efficient use of resources and promote social inclusion.

In this general context, twenty measures are planned, including:

  • A coherent package for knowledge-based agriculture, including in particular support for knowledge transfers, advice and information services (two measures) and cooperation between farmers and scientists.

  • An additional effort for agriculture where the emphasis is on quality. It will be possible to provide €3 000 per holding for quality initiatives and certification. A new measure specifically dedicated to organic farming will help farmers switch to or continue practising this kind of farming.

  • A genuine strategy for agriculture that invests in itself. More efficient tools will be available to encourage investment under a measure bringing together all categories of physical investment, with Member States having the chance to offer higher aid intensities for investments by young farmers, investments in less-favoured areas, innovative investments and collective investments.

  • Clear support for organised agriculture that markets its products better. We are going to support organisation through mechanisms for the creation and maintenance of producer groups that will be available to all Member States, old and new. Cooperation will be supported: collective initiatives such as the creation of short marketing circuits, collective efforts to develop new products and cooperation between small economic operators who wish to pool their resources. Leader local action groups will be reinforced.

  • A willingness to develop agriculture as a source of employment and entrepreneurship under a new measure entitled 'farm and business development'. The measure will support young farmers starting out, the development of small farms and the diversification of non‑farming economic activities; the aid may be up to €70 000.

4) A spearhead objective: to simplify the CAP.

In all the arrangements and tools that we have proposed, we have taken into account the need to simplify.

This will hold true for direct payments using a simple tool, for administrations and for farmers alike, i.e. a single new system with simplified management and a flat‑rate payment for small farmers. The flat-rate support is between €500 and €1 000. This aid will not prevent restructuring because, at the same time, the transfer of land by small farmers giving up farming to other holdings will be promoted through a new restructuring measure under the second pillar, encouraging small farmers who want to give up farming to do so.

Greening measures have also been designed in such a way that their implementation must make rational sense. They must be inspected and paid for at the same time, using the same arrangements as for basic income aid. It was out of the question to increase the number of inspections or the amount of paperwork, both for the sake of the farmers and the national administrations.

While ensuring rigorous management of public money, we can reduce the inspection burden by rewarding, for example, Member States which over several consecutive years have had an error rate of less than 2%.

Similarly, the conditions for the award of basic income aid will get simpler and focus on relevant objectives for farmers and in respect of the environment. The number of GAECs (good agro-environmental conditions) will be reduced from fifteen to eight; and five Statutory Management Requirements out of the current eighteen will be eliminated.

This reform of the conditions for the award of aid will bring more clarity to the eligibility rules; I must also stress that, in the context of greening, landscape features, stone walls, coppices and hedges, for example, will be taken into account in the 7% ecological reserve figure to be achieved.

Agriculture is at the heart of rural life and we need to support it in all its diversity. It gives us our food, but also a broad set of common public goods, our culture, traditions, values, natural resources, a future for our regions and our heritage.

The key phase of discussing the Commission's proposals now starts.

For the first time in history, these discussions will be on an equal footing between the Council and Parliament.

This is a historic opportunity for the Common Agricultural Policy. We must grasp it fully.

The democratic thrust of the CAP must help to strengthen this European bridge between an increasingly urbanised world on the one hand and increasingly strategic agriculture on the other. The importance of agriculture lies not in the number of farmers; quite the contrary!

The project that I put before you is intrinsically European. It is a project that, from the outset, has factored in diversity. There is of course scope for improvement, and this is what the phase we launch today is meant to achieve.

Agriculture requires patience, and the CAP must be seen as a long-term investment.

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