sou · GLB3151 · 1998-01-01 00:00:00 — To the Cabinet Minister and Head of the On 27 1995 the Swedish government decided to set up a parliamentary committee with the aim of developing, from a Swedish perspective, a comprehensive proposal for reform of the EUs Common Agricultural Policy (CAP). On 6 October 1995 the Head of the appointed the Director General and Head of , , as chairman of the committee and, as members of the committee, the Members of Parliament Bo Bernardsson, , , , , , , , and . , and also research student . On Member of Parliament was appointed as a member to replace Bo Bernardsson with effect from 1 January 1996. On 6 October 1995 Principal Administrative Officer at G. Öhgren was appointed secretary to the committee, and on (née ), Administrative Officer at , was appointed deputy secretary. On the following special advisers were appointed to the committee: , Director of the , research secretary of the Swedish Agricultural Union, farmer of the , and research secretary of the Workers Union. On the same day the following experts were appointed: First Secretaries , , and , Ministry for Foreign Affairs, the Assistant of the Environment, and Assistant and of the . On General of the was appointed expert to the committee from 1 October 1996 onwards. We have assumed the name KomiCAP. In order to analyse various parts of the Common Agricultural Policy the committee appointed three expert groups. The task of the first expert group was to analyse the factors from the rest of the world which now and in the future can have a bearing on the Common Agricultural Policy. A first report on the consequences for the Common Agricultural Policy of the WTO commitments and an enlargement to the East was presented to the committee in and has also been published as SOU 1996:171. The expert group was lead by the Head of Division, , , and was otherwise made up of the following members: , Ministry for Foreign Affairs, , , , , and of the . Secretaries were , , and , . In a second report the group have analysed how the CAP affects food supply in the world, especially its effect on food production in the developing countries. Whilst working on the second report the members of the expert group were changed in that of the replaced and , , replaced . The secretariat comprised , and , all from . The expert groups second report EU:s jordbrukspolitik och den globala livsmedelsförsörjningen 1 was published in February 1997, SOU 1997:26. The task of the second expert group was to analyse the Common Agricultural Policy as practised up to the present day and also to analyse the extent to which the various instruments of the CAP contribute towards achieving the objective that market orientation should increase, and that the number of agricultural policy instruments should be reduced along with their influence on the market. Chairman of the expert group was Head of Department of , and the group was otherwise comprised as follows: , , , Ministry for Foreign Affairs, of the , , Swedish Agricultural Union, , , , , , Workers Union, , , and , 1 Common Agricultural Policy and Supply. from was secretary of the group. The expert group has presented two reports to the committee. The first report Effekter av EU:s jordbrukspolitik 2 SOU 1996:136, presented to the committee in , comprises an analysis of the Common Agricultural Policy in practice up to the present day. In a second report, Alternativa utvecklingsvägar för EU:s gemensamma jordbrukspolitik 3, SOU 1997:50, 1997, the group has presented two alternatives for how the Common Agricultural Policy can be developed in the future, based on analysis of the objectives and instruments of agricultural policy. The task of the third expert group was to analyse how issues relating to the environment, regional allocation along with quality and ethics are addressed within the CAP. Prof. of Sciences was chairman of the expert group. Otherwise, the group was comprised as follows: of the , , Ministry of the Environment (up until 1996), , , , , , , , , , , , Ministry of the Environment (from 1996, replacing ) and , . Secretary to the expert group was of . The report EU:s jordbrukspolitik, miljön och regional utveckling 4, SOU 1997:74, 1997, comprises the groups analysis of the consequences of the current agricultural policy particularly in environmental and regional allocation issues, and how various alternatives for reform might affect agriculture in . Now that the mission has been completed we would hereby like to present our report Food and the Environment - Swedish strategy for the 2 Effects of the Common Agricultural Policy. Only available in Swedish. 3 Future Options for the Common Agricultural Policy. Only available in Swedish. 4 Common Agricultural Policy, the Environment and Regional Development. Only available in Swedish. future of EU agriculture Reservations and special comments are attached to the report. /Hans G. Öhgren AIM OF THE INQUIRY ................................................. Organization of the work.................................................. CURRENT COMMON AGRICULTURAL POLICY .17 Objectives for the Common Agricultural Policy ................ Former Swedish agricultural policy objectives................... CAP FACING THE FUTURE....................................... The CAP, consumers, taxpayers and producers................. The CAP, the economy and employment .......................... The CAP and the environment .......................................... The CAP and regional development.................................. The CAP and the rest of the world.................................... The CAP and WTO agreements........................................ The CAP and enlargement to the East............................... A NEW COMMON AGRICULTURAL POLICY ....... Needs for changing the CAP............................................. Proposals for future objectives for the Common Principal objective - safe food at reasonable prices ............ How is consumer demand met?......................................... What must society do?...................................................... 6 Table of contents AGRICULTURE AND THE ENVIRONMENT........... Principal objective - sustainable agriculture ....................... Instruments for a sound environment ................................ Where should decisions be made? Who finances environmental payments? AGRICULTURE AND THE ANIMALS ...................... Objective - strict requirements for animal welfare.............. Instruments for improved animal husbandry ...................... Who should decide and who should provide the finance? Objectives - regional balance and viable rural areas ........... Instruments for regional development ............................... Where should decisions be made? Who finances measures for regional development?............ CHANGES TO THE COMMON AGRICULTURAL The future role of agriculture............................................ Instruments for a new agricultural policy .......................... Consequences of a new agricultural policy ...................... SOURCES AND REFERENCES ................................ RESERVATIONS AND COMMENTS....................... has been directed to produce a comprehensive proposal for reforms of the EUs Common Agricultural Policy - the CAP. The reforms should be aimed at making the CAP more market- oriented, deregulated and environmentally adapted. In order to analyse different aspects of the CAP in line with the directive, the committee has appointed three expert groups. Their work is presented in five SOU reports and may be regarded as appendices to this report. Objectives and instruments of the current CAP The objectives of the Common Agricultural Policy of Union were set out in the in 1957, and were intended to ensure that Union would be self-sufficient in food by stimulating agricultural production and protecting the production from competition from the outside world. The CAP is therefore largely aimed at supporting the producers within Union. The CAPs objectives reflected the needs which existed after the second world war but have not been changed in the 40 years which have passed since then, despite the fact that Union is currently self-sufficient, and furthermore is a net exporter of many agricultural goods. Since the introduction of the CAP new measures have been adopted alongside the old ones which remain in force, albeit in somewhat different forms. Today the instruments of the CAP comprise market price support (chiefly export refunds, measures of intervention, production limitations and border protection), direct support (area and headage payments), environmental payments and regional and structural support, which are different according to the types of products concerned. The major part of EU funding to agriculture goes to market price support and direct support. Market price support maintains a generally high price level within Union which stimulates production within the Union and leads to lower prices on the world market. This means that the CAP, in addition to its budget costs, places a burden on consumers through high costs for food. In addition to this, producers in developing countries are disadvantaged by the low prices created by the agricultural subsidies of the industrial countries. Environmental payments and regional and structural support make up a fairly small, yet increasing, part of the EU agriculture budget. Areas less favourable for agricultural production suffer because of the market regulations in the sense that the elements of market regulation support with the highest price tags accrue to agriculture in the EUs high producing areas. However, without regional support agricultural production would probably be less than it is today in less favoured areas. As far as the environment is concerned it can be observed that agricultural production leads to both a series of environmental problems and to certain beneficial environmental effects. On the other hand it is more difficult to determine which environmental effects are the result of the CAP. It is, however, clear that there is a lack of instruments to ensure that agricultural production will be environmentally friendly. Why is the CAP in need of reform? There are a number of reasons why the CAP is in need of reform, both from internal and external point of view. Firstly, the CAPs objectives have not been adapted to the fact that the food situation has changed in the 40 years which have passed since they were formulated, both inside Union and in the rest of the world. Our preferences today are also different. Issues relating to consumers, the environment, animal welfare and questions of regional development must be given more emphasis in the agricultural policies of the future. Secondly, we see a number of shortcomings and disadvantages in the system of CAP instruments. Measures taken today within the CAP are complex and difficult to grasp. Certain types of instruments counteract each other, questioning both the efficiency and legitimacy of those instruments. In addition, the CAP leads to food prices and budget costs which are excessively high. We also consider that the efforts made within the CAP for animals, the environment and rural development are insufficient. Greater attention must be paid to the measures agreed at the on Environment and Development in , 1992. Thirdly, there are also several factors in the world around us which indicate that the CAP is in need of reform. Producers in developing countries suffer from the low prices caused by the EUs high levels of tariffs and subsidised exports. The commitments of the Summit 1996 in are not sufficiently fulfilled in the present CAP. Forthcoming WTO negotiations will be likely to lead to demands for significant reductions in agricultural subsidies. Furthermore, an enlargement of Union towards the East is a high priority issue. A reform of the CAP is also desirable in that it would pave the way for such an enlargement. New objectives for the Common Agricultural Policy We consider it desirable that the Common Agricultural Policy is reformed in such as way as to ensure an optimum use of agricultural resources in the future. We therefore propose the following objectives for the Common Agricultural Policy: The Common Agricultural Policy should aim to facilitate: ·a wide and varied supply of safe food at reasonable prices In addition to these two principal objectives, the agricultural policy should also aim at ensuring that production, processing and distribution of food is carried out in such a way that ·biodiversity is conserved and promoted ·cultural heritage is preserved ·a varied farming landscape is promoted ·environmental load is minimized ·livestock production is carried out under strict requirements for animal welfare ·regional balance and viable rural areas are promoted ·internationally competitive agriculture within Union is promoted Instruments for achieving the proposed objectives A new Common Agricultural Policy must be designed so that production is given the best possible chance of achieving the objectives we have proposed. It is important that society should pass legislative measures and pay for services which can ensure the achievement of these objectives. In order to achieve a wide and varied supply of safe food it must be ensured that there is market competition at all stages of the chain of production and distribution, that producers are responsible for food safety and provide information on production methods, contents, etc. Public provision of training and information are other measures which may help to ensure that objectives are attained. Current EU market regulations generally work against developments in which the supply of food is driven by consumer demand and are therefore unnecessary. In order to achieve the proposed environmental objectives joint legislation which defines minimum requirements for permissible environmental impact is needed, together with the possibility of stricter environmental requirements at national level. Additionally, agriculture should be compensated for various types of environmental services, such as preservation of biodiversity, varied farming landscape and cultural heritage. Furthermore there is a necessity for stricter legislation to achieve better conditions for animals throughout Union. As far as possible, there should be a common legislation, but individual countries must, inter alia for ethical reasons be given the opportunity to impose stricter national requirements. The level of ambition for this common legislation both for the environmental and animal fields should be of the highest order. To promote a regional balance and viable rural areas it would be reasonable that support is made available to these ends. This should be done within the framework of common legislation in cooperation with other sectors of society. Measures should be designed to facilitate flexibility and structural development within agriculture. As such it would be desirable for the EU common market regulations to be removed in the long-term. The starting point for this should be that all sectors are reformed at the same time to avoid any profit imbalance between different agricultural goods. Care must be taken to ensure that reforms are carried out in ways which are socially acceptable. It may be reasonable to retain EU border protection during an interim period. It would be reasonable for direct payments for a limited time after the reforms to facilitate a re-shaping and re-structuring of the agricultural sector. These payments should provide the producers affected with the greatest possible flexibility in decision-making so that resources are not tied up in unprofitable production. The extent of the need for these payments must be determined by the prevailing conditions in each sector. A reform of the CAP before the next round of WTO negotiations, due to begin at the beginning of next century, is desirable since it would lead to a better negotiating position for Union. It would provide Union with more room to negotiate on the issues of special concern to us, i.e. ensuring environmentally friendly production and making demands for food safety. Given a driving role within the WTO Union would also be acting in line with the commitments subscribed to by Member States at the Summit in and at the 1992 UN Conference in . An enlargement of Union to the East is, as mentioned previously, a high priority issue since it would favour peaceful and economic development both in Central and Eastern Europe and within Union itself. In order to assist prospective Member States in their EU entry planning it is important that a relatively quick decision is taken on new directives for the CAP. When and how the Common Agricultural Policy can be reformed is primarily a question of negotiation, both within Union and at international level, and is affected by factors such as market and economic development within and outside the Union. We are seeking to reform the CAP in ways which would in time lead to the achievement of the objectives we have proposed. In order to be able to press for the measures we consider important, both within and outside Union, it is desirable that the reform process should start immediately. 1 Aim of the inquiry In accordance with the directive (Dir 1995:109), see appendix 1, the committee is to produce a comprehensive proposal for reforms of the Common Agricultural Policy (CAP) together with a strategy for implementation of the reforms. The purpose of the reforms should be to make the CAP more market oriented, deregulated and more adapted to environmental needs. shall analyse the agricultural policy carried on in Union up to the present time, paying special attention to the macro-economic perspective and the interests of consumers and taxpayers. shall also analyse how agricultural policy affects efficiency, structures and incomes in production. The consequences of an enlargement of Union towards the East shall also be analysed. Against the background of the analysis of policy up to the present time the committee shall propose reforms aimed at market orientation and deregulation of the CAP. shall analyse how current policy should be reformed so that established environmental objectives can be achieved. An important part of the ongoing CAP reforms is a strengthening of the resources which, in the framework for agricultural policy, are reserved for the rural development, for example support in the development of supplementary employment to traditional agriculture. shall analyse how current policy should be reformed in order to achieve these objectives more efficiently. The effects of the current policy on food production in the developing countries are to be examined. The consequences for the CAP of an enlargement of Union towards Central and Eastern Europe, plus the effects of the WTO commitments shall be analysed. The effects of an increased interest in quality and ethical aspects of production are also to be included in the analysis. The increased relative importance of processed products in relation to raw materials shall be examined. The appropriateness of current competition legislation should be analysed. shall also present proposals for the division of responsibility for provision of finance between the common budget and national budgets. Proposals shall be made with regard to the need for and the possible forms of compensation for the agricultural sector. 14 Aim of the inquiry shall also propose how the reforms are to be implemented and give an account of strategic considerations. 1.2Organization of the work Given the very wide scope of the task in hand we have imposed certain limits. In recent years a number of committees have made suggestions concerning competition legislation. Within the time given, we have not found it possible to provide further analysis and consideration of this legislation. Neither have we found it possible to cover all of the strategic considerations as to how the reforms should be implemented stipulated in the directive. The work towards reform is an ongoing process. Furthermore, the positions of other Member States are not, in many cases, clearly expressed. They may also be changed in the course of time. At the beginning of 1996 we appointed three expert groups whose tasks were to analyse various parts of the CAP. These groups have submitted five different reports which we have approved for publication in the SOU series as follows5: Effekter av EU:s jordbrukspolitik These reports should be seen as appendices to this report since they formed a background material for our analyses and conclusions. 5 Only available in Swedish. Translation of titles: SOU 1996:136 Effects of the Common Agricultural Policy; SOU 1996:171 Consequences for CAP of WTO Commiments and Enlargement to the East; SOU 1997:26 Common Agricultural Policy and Supply; SOU 1997:50 Future Options for the Common Agricultural Policy; SOU 1997:74 Common Agricultural Policy, the Environment and Regional Development. Aim of the inquiry 15 Chapters 2 and 3 describe and analyse the current Common Agricultural Policy. These chapters are based on the analyses of the expert groups. In the chapters which follow, proposals for a new Common Agricultural Policy within Union are put forward and discussed. The various chapters of this report are concerned in principle with the following: Chapter 2 contains a description of the current Common Agricultural Policy. The objectives of the CAP are compared with the objectives of Swedish agricultural policy prior to EU membership. There is also an account of the instruments used within the CAP. Chapter 3 contains an analysis of the effects of the CAP on consumers, taxpayers and producers, effects on economy, employment, the environment and regional development. There is also a discussion of the CAPs effects on the rest of the world, with special attention to the food situation in the developing countries. Consequences for the CAP of existing WTO agreements, expected requirements of the next round of WTO negotiations plus the effects of an enlargement towards the East are discussed. As such, chapters 2 and 3 constitute a description and analysis of current agriculture policy, thereby providing a starting point for the proposals and discussions relating to a new agricultural policy which can be found in the following chapters. In chapter 4 we take up the most important reasons for our view that the CAP is in need of reform, followed by proposals for future objectives for the Common Agricultural Policy. In chapters 5-8 we develop our arguments relating to future objectives for the Common Agricultural Policy and also discuss the instruments needed to achieve those objectives. Chapter 5 contains a discussion of food production. We discuss food quality and safety, the need for competition and consumer needs for information. Chapter 6 takes up the subject of agriculture and the environment. It includes a discussion on sustainable agriculture and its significance in a future society in ecological balance. The impact of agriculture on the open landscape, culturally sensitive environments and biodiversity is discussed. Chapter 7 includes discussion of objectives and instruments for livestock farming. We discuss and suggest the requirements for animal production which society should put in place. 16 Aim of the inquiry In chapter 8 we discuss agriculture and regional development. We examine how structural and regional policy measures should be formed so as to facilitate the adaptation of agriculture to new circumstances. Chapter 9 is a summary of the objectives and instruments for future agricultural policy which we have proposed. This is followed by a discussion of how current agricultural policy must be changed to achieve the objectives we propose. 2 Current Common Agricultural Policy