At this stage, the own-initiative report t constitutes Parliament's initial response to the Commission's general ideas on further CAP reform. At the next stage, the Commission will submit draft legislation, on which Parliament will have to be consulted.
Major shift in European agricultural policy in recent decades
Since 1992 the CAP has undergone three major overhauls, all designed to:
improve the efficiency and transparency of the CAP;
make farming more market-oriented;
better integrate new features – especially environmental and animal protection – into agriculture policy;
boost rural areas.
The earlier system of price support, which proved unable to solve the problem of farmers’ low incomes and also led to large surpluses that could only be disposed of on world markets with the aid of further subsidies, has been gradually replaced by a system of direct payments. The new reform plans (or "health check") must be seen against this background.
The main Commission proposals in the "health check" are:
further decoupling of aid from production,
a faster move to an area-based flat rate for direct payments,
the abolition of smaller, production-based measures or their integration into the system of decoupled direct payments,
further modulation (the shifting of funds from the first to the second pillars),
the capping of direct aid and an increase in minimum thresholds for payments, and
a commitment to end the milk quota and pave the way for a "soft landing".
Parliament's main demands
In the own-initiative report drafted by Lutz Goepel (EPP-ED, DE) and approved, as amended, by 510 votes to 88 with 80 abstentions, the European Parliament argues that the "health check" should enable the last round of reforms to be consolidated without reducing further the funding available under the "first pillar" nor applying discriminatory capping to direct aid. Account must also be taken of the special needs of regions in difficulty and of sensitive sectors such as stockfarming, while further simplifying the rules for farmers.
Direct aid, decoupling
The House rs giving Member States more flexibility to separate direct payments more from historical reference values at national level. MEPs want a study of the potential impact of an area-based premium, notably with regard to farms with high livestock densities.
The European Parliament approves the principle of faster decoupling of production aid (which has been broadly successful in making European farming more market-oriented). However, it believes special animal premiums should not be altered for the time being, given the difficulties in the stockfarming sector following the exceptional rise in feed prices. It calls on the Commission to devise a global strategy to safeguard stockfarming in the EU over the long term.
MEPs also stress that direct payments will still be needed after 2013, not only in the event of market failures but also to pay for the provision of public benefits by farmers and for Europe's high environmental, food safety and animal welfare standards.
Set-aside and cross-compliance
The House argues that the set-aside obligation, as well as direct payments without cross-compliance, should be abolished. However, it rejects the idea of broadening the scope of cross-compliance until substantial progress is made towards simplifying and harmonising monitoring rules. The environmental goals of set-aside could be achieved via rural development measures.
Market intervention, risk management
MEPs favour reducing intervention for market crops and, more broadly, replacing the current system by a safety net for crises, which are likely to occur more often as a result of global warming. They also believe that private sector or mixed insurance schemes must be developed urgently, with public financial support, while not affecting the level-playing-field between different Member States. The Commission is urged to consider backing a Community-wide reinsurance system for climate-related or environmental disasters.
No capping of payments to large farms
The House rejects, in its present form, the Commission proposal for capping direct aid for large farms, saying there is no clear link between the size and wealth of a farm. It stresses that the proposal does not factor in the workforce needed for larger farms and that it would put such farms at an unfair disadvantage.
Call for modulation to be made "progressive" as well as compulsory for all
The House also opposes further "modulation" of funding from the first to the second pillar, as this would be equivalent to a reduction of 8% in direct payments to farmers up to 2013. Instead, MEPs argue for "progressive modulation", based on an impact assessment of the consequences for farms. The funds thus generated would be distributed according to the prevailing rules on modulation and would remain in the regions or States in which they accrued. This progressive modulation, applicable over the period 2009-2013, would consist of a reduction of 1% of the total of direct aid from €10,000 to €100,000, 2% for €100,000 to €200,000, 3% for €200,000 to €300,000 and 4% for payments over €300,000.
The House would also prefer modulation to be compulsory for all Member States rather than voluntary for some (namely the UK and Portugal) as at present.
No re-nationalisation of the CAP
Parliament say modulation should not lead to re-nationalisation of the CAP and the level-playing-field between Member States should be respected as much as possible.
Article 69 revised, a key to new types of support?
The European Parliament believes that the current "Article 69" mechanism, which enables Member States to keep and reallocate up to 10% of direct aid to their farmers under the first pillar, should be reviewed so that funds are devoted as a priority to the preservation of livestock farming in mountain areas, those with water shortages, wetlands or disadvantaged areas, the restructuring of key agricultural sectors (e.g. the dairy and sheep sectors), area‑based environmental measures (e.g. organic farming) and risk management.
Preparing for the end of the dairy quota system
Aware that the current system of milk quotas is unlikely to be continued after 2015 in its present form, the European Parliament asks the Commission to put forward a convincing plan for the dairy sector for the period after 2015. MEPs argue for a 2% increase in dairy quotas in the milk year 2008/2009 on a voluntary basis for each Member State (see our separate article on milk quotas).
European Quality Mark
MEPs call on the Commission to introduce a 'European mark' to identify the quality of EU agricultural and food production on the European market as well as international markets, and identifying the strict standards, in relation to the environment, animal welfare and food safety under which production takes place.
Concern over supply
Finally, the House considers the scrapping of all form of regulation within the CMOs to be politically undesirable since, as the current situation shows, European and global reserves stand at dramatically low levels, which is having negative repercussions on consumer purchasing power and farmers’ incomes while at the same time encouraging speculation. The House emphasises that, besides this, instruments are needed to combat a potential economic downturn and the risks posed by health incidents and increasingly frequent natural disasters arising from the unsettled climate.
