If the CAP fits: Romanian farmers await European reforms

Greater financial support is only one of the benefits that Romanian farmers stand to reap from the Common Agricultural Policy (CAP) for 2014-2020, said Dacian Ciolos, the European Commissioner for Agriculture and Rural Development, last week at the end of his visit to Romania. BR takes a look at the local ramifications of the proposed CAP reform.

Simona Bazavan

While keeping farm spending roughly at its current level of EUR 55 billion per year until 2020, or about 40 percent of the total EU budget, the legislative proposals made by the European Commission to overhaul the existing CAP after 2014 bring profound changes, including to the way funds will be distributed between member states. Romania, along with other new joiners, will gain additional funding in the fiscal period 2014-2020.

The main changes to the CAP include making support more transparent, fairer, simpler and more focused, while at the same time backing environmental protection and linking agricultural production to research and innovation.

After the draft reform of the CAP for 2014-2020 was presented on October 12 in Brussels, Romania was the first country visited by the agriculture commissioner to expand on the pending amendments.

“The main aim of my visit to Romania was presenting the draft law on the CAP reform. I think that, judging by the meetings I had, I was able to convey the main messages regarding the contents of the reform from Romania’s viewpoint. There are elements that better reflect the country’s specifics, compared to the present CAP, and others that Romania will probably want to amend,” said Ciolos.

Romanian farmers reap higher direct payments

One of the most important changes proposed for the new CAP is a new basic payment scheme which, if implemented, will reduce discrepancies between the levels of payment stipulated by the current legislation – between farmers, regions and member states. About seven EU countries will enjoy increased direct payments, including Romania, although some countries, such as Poland, have complained that solving the imbalances problem will take too long.

Ciolos had previously announced in Brussels that farmers in all countries should receive at least 90 percent of the average level of direct payments – currently about EUR 270 per hectare – but added that this target could be only partially implemented by 2020, according to Reuters.

Romanian farmers could receive EUR 200 per hectare in direct payments from the EU from 2018, said Ciolos. The present level of the subsidy is about EUR 100 per hectare and it will reach approximately EUR 135 in 2013.

Overall, direct payments for local farmers will grow by about EUR 3 billion by 2020, but they will receive EUR 200 per hectare – which is the maximum level for 2014-2020 – from 2018. The commissioner also explained that there are currently EU countries that receive lower per hectare payments than Romania, naming the Baltic States. Higher levels are reported in countries like Italy or Greece where farmers receive about EUR 400 per hectare on average.

His proposal to balance direct payments between member states also means that some states will receive less than they do now. Ciolos stressed that this redistribution process also has a political dimension, especially as the decision regarding the new CAP will be taken simultaneously with the decision regarding the EU’s budget for 2014-2020.

“We make this proposal without knowing what the exact budget for CAP will be,” said Ciolos, adding that the member states that presently have the highest per hectare payments are also net contributors to the EU budget, paying more in than they receive back.

The commissioner commented that a very rapid redistribution process could persuade some member countries to vote against the global budget, which would affect not only the CAP but all budgetary allocations. “And then countries like Romania could see considerably reduced allocations, which is why we should find a balance between how much we take from countries that are net contributors and how much we give to net beneficiaries, plus what the transition period will be,” said the commissioner.

The proposal has already provoked debate in Western member states, prompting some politicians to express fears that it will lead to a major shift in farm support from the high-cost production systems in Western Europe to the low-cost economies of Eastern Europe.

Another proposal, which has met opposition in Romania too, is capping direct payments for large farms. The amount of support that any individual farm could receive from the Basic Payment Scheme would be limited to EUR 300,000 per year, and payments between EUR 150,000 and EUR 300,000 will also be progressively reduced.

The measure is necessary to create more transparency in how funds are being used and is not intended to hit large farms, which will continue to benefit from targeted support schemes, argued Ciolos. “If by this reform we are not able to bring about more transparency and clarity in the way funds are being used, the CAP risks receiving less money altogether during the next financial framework,” stressed the commissioner.

As part of the draft project, member states will also have the option of transferring up to 10 percent of their national allocation for direct payments (1st pillar) to their rural development allocation (2nd pillar).

Planting the seeds for greener future growth

The draft reform also proposes simplified support schemes for small farms that have decided by 2014 to take part in the program, by offering an annual fixed payment of between EUR 500 and EUR 1,000. This will bring considerable simplification both for farmers and national administrations.

At the same time farm consolidation and increasing the number of medium-sized farms is encouraged through a financial scheme targeting smaller farmers who decide to sell their land. Under the draft reform, young farmers will benefit from 25 percent higher direct payments per hectare in the first five years after setting up a farm from 2014, the measure coming in addition to existing installation aid. Additional schemes that support investments and target quality and performance improvements as well as the creation of farmers’ organizations could also benefit Romania, suggested the commissioner.

Making subsidies more environmentally friendly by imposing practices such as crop diversification and rotation, and requiring arable farmers to leave seven percent of their farmland ecologically fallow, has already caused discontent among some farmers’ representatives from Western member states, but these proposals should not be a problem for Romanian farmers who are more accustomed to such practices, argued Ciolos. Overall, the draft reform stipulates that 30 percent of direct subsidies will be conditioned on meeting these environmental criteria.

But in order for Romania to fully take advantage of the future CAP, administrative and legal adjustments must be made by 2014, stressed Ciolos, giving the example of the legal framework for land consolidation and farmers’ organizations as well as the restructuring of the agricultural research sector.

With the draft reform project, the process of adopting the new CAP is just beginning and over the coming months agriculture ministers from all 27 member states as well as the European Parliament will propose changes and table amendments. According to Ciolos, the CAP for 2014-2010 should be adopted by early 2013.

Referring to how the adopted CAP for 2014-2020 will shape up, the commissioner said he hopes that community spirit will prevail and the CAP will not turn into a collection of 27 national agriculture policies.

“It is only normal to make adjustments and effect harmonization in order for the CAP to continue to be common (…). Europe has evolved since 2003 and so should the CAP, and we shouldn’t look at things from the perspective of winners and losers,” said Ciolos, adding that he hopes that in the end, the entire European agriculture sector will stand to win by gaining a public policy instrument that will allow it to reach its productive and environmental potential.

“At a wider level, I also hope that European contributors will win through the quality of the products that they buy, their price and the way the environment and rural landscapes are preserved,” concluded the commissioner.

simona.bazavan@business-review.ro

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