Assessing the Impact of CAP Reforms:Assessing the Impact of CAP Reforms:policy issues and research challengespolicy issues and research challenges

AgSAP ConferenceAgSAP ConferenceEgmond aan Zee, 10-12 March 2009Egmond aan Zee, 10-12 March 2009

Tassos HaniotisHead of Unit, Agricultural Policy Analysis and PerspectivesDG for Agriculture and Rural DevelopmentEuropean Commission

T. Haniotis AgSAP – Egmond aan Zee, 10-12 March 2009 2

OutlineOutline

Recent experiences with Research and the CAP policy agenda

The CAP reform process in perspective

Key policy questions in the CAP policy debate

Challenges and opportunities for Research

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The HC Impact Assessment experienceThe HC Impact Assessment experience

The starting point– Description of existing policies and situation– Identification of issues to be addressed in the HC

Developing the policy options– Status-quo used as reference scenario (“baseline”)– The scope of alternative options (the selection process)– Limitations and constraints (the political context)

Impact analysis and results– Main IA Report and its characteristics– Background and the various Annexes

• The role of internal AGRI analysis• The role of external studies and evaluations (the role of Scenar2020)

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The analytical tools of the Impact AssessmentThe analytical tools of the Impact Assessment

The scope of quantitative analysis– Econometric models to assess impact on markets from:

• changes in cereal intervention and set-aside abolition• phasing-out of dairy quotas

– Microeconomic static analysis to assess impact on farm margins from:• further decoupling• impact from market measures (cereals, dairy)• flatter rates and payment limitations

– Statistical analysis to assess impact from:• payment limitations and modulation• risk management tools

The scope of qualitative analysis– To assess the impact of changes in cross-compliance– To assess suitability of RD measures related to new challenges

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Lessons from the HC Impact AssessmentLessons from the HC Impact Assessment

Extent and scope– Limitations of scope driven by relevant institutional realities – Same realities need to be addressed by Research Community

Methodology– Qualitative assessment more “popular” to policy makers – Quantitative analysis requires clear, updated baseline – Link of legal proposals to results much stronger than ever before

Dissemination of results– External studies form integral part of IA– AGRI analysis often ignored by Research Community – Policy relevance of results essential

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The CAP reform process in perspectiveThe CAP reform process in perspective

The recent past: CAP radically reformed its policy orientation – Mainly decoupled direct support, subject to a “baseline” (cross-compliance)– Significantly reduced price intervention mechanisms – More targeted Rural Development policy (both funds and policy instruments)

The present context– Significant increase/decline in food prices re-focused attention on agriculture – “Health Check” policy questions relevant to future CAP reform process

The debate about the future of the CAP– The balance between the “C” and the “P” of the CAP and its link to the EU budget– Main impact of no policy was found to be territorial and environmental (Scenar2020) – Balance between “two pillars” and three axes of the CAP at the core of debate

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Where do we go from here? Where do we go from here?

0

10

20

30

40

50

60

70

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

% GDPbillion €

0,0%

0,1%

0,2%

0,3%

0,4%

0,5%

0,6%

0,7%

Export subsidies Market support Direct aidsDecoupled payments Rural development % of EU GDP

EU-10 EU-12 EU-15 EU-25 EU-27

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Key policy questions for the future CAP debateKey policy questions for the future CAP debate

Market prospects and issues related to product safety-nets– Challenges from the economic crisis and its long-term impact– Instruments of safety-net intervention and their relevance

Direct support and issues related to producer safety-netsDirect support and issues related to producer safety-nets– Rebalancing support within and among Member StatesRebalancing support within and among Member States– Extent and scope of income supportExtent and scope of income support– Targeting of support for public goods and its link to a “baseline”Targeting of support for public goods and its link to a “baseline”– The relationship between private goods and public goods and the issue of “jointness”The relationship between private goods and public goods and the issue of “jointness”

Adjustment challenges and the reform processAdjustment challenges and the reform process– The three axes of RD policy and the nature of their link with other CAP instruments The three axes of RD policy and the nature of their link with other CAP instruments – Balance and tensions between competitiveness, environment and the rural economyBalance and tensions between competitiveness, environment and the rural economy

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The evolving role of EU support prices - wheat The evolving role of EU support prices - wheat

0

50

100

150

200

250

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

( in € per metric tonne )

EU intervention price EU common wheat market price US (SRW Gulf)

Beginning of reform

Note: Years are marketing years. Sources: DG AGRI and Global Insight (IMF).

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The evolving role of EU support prices - butterThe evolving role of EU support prices - butter

0

500

1000

1500

2000

2500

3000

3500

4000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

( in € per metric tonne )

EU intervention price EU market price Oceania

Beginning of reform

Note: Years are marketing years. Sources: DG AGRI and FAO.

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Potential impact of an EU-wide revenue schemePotential impact of an EU-wide revenue scheme

billion €

0

9

18

27

36

45

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

% of farms

0

3

6

9

12

15

estimated compensation farms exceeding 30% income variation

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Key policy questions for the future CAP debateKey policy questions for the future CAP debate

Market prospects and issues related to product safety-nets– Challenges from the economic crisis and its long-term impact– Instruments of safety-net intervention and their relevance

Direct support and issues related to producer safety-nets– Rebalancing support within and among Member States– Extent and scope of income support– Targeting of support for public goods and its link to a “baseline”– The relationship between private goods and public goods and the issue of “jointness”

Adjustment challenges and the reform processAdjustment challenges and the reform process– The three axes of RD policy and the nature of their link with other CAP instruments The three axes of RD policy and the nature of their link with other CAP instruments – Balance and tensions between competitiveness, environment and the rural economyBalance and tensions between competitiveness, environment and the rural economy

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Average level of farm direct payments in the EU-25 Average level of farm direct payments in the EU-25 Source: AGRI-L1 calculations from DG AGRI, DG Budget data

BE

CZ DKDE

EE

IE

EL

ES

FR

IT

CYLV

LT

LU

HU

MT

NL

AT

PL PTSI

SK

FISE

UK

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

20 000

22 000

0 100 200 300 400 500 600 700

Direct aid (EUR) per ha UAA

Dire

ct a

id (E

UR

) per

ben

efic

iary

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Share of EU payments in GDP - 2007 Share of EU payments in GDP - 2007

% of GDP

0%

1%

2%

3%

4%

5%

Market support Direct payments Rural development Structural actions Total

Actual data

EU-15 EU-12 EU-27

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Key policy questions for the future CAP debateKey policy questions for the future CAP debate

Market prospects and issues related to product safety-nets– Challenges from the economic crisis and its long-term impact– Instruments of safety-net intervention and their relevance

Direct support and issues related to producer safety-nets– Rebalancing support within and among Member States– Extent and scope of income support– Targeting of support for public goods and its link to a “baseline”– The relationship between private goods and public goods and the issue of “jointness”

Adjustment challenges and the reform process– The three axes of RD policy and the nature of their link with other CAP instruments – Balance and tensions between competitiveness, environment and the rural economy

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Challenges and opportunities for ResearchChallenges and opportunities for Research

Commonality of issues analysed, diversity of approaches

The uneasy relationship between methodology and results

The policy relevance of addressed questions

Communication of results

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Challenges and opportunities for ResearchChallenges and opportunities for Research

Thank You !

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For further informationFor further information

CAP Health Check http://ec.europa.eu/agriculture/healthcheck/index_en.htm

EU agriculture and CAP reformhttp://ec.europa.eu/agriculture/index_en.htm

Economic Analysis and Evaluation http://ec.europa.eu/agriculture/analysis/index_en.htm

Agricultural Policy Analysis and Perspectiveshttp://ec.europa.eu/agriculture/analysis/perspec/index_en.htm