Transitional CAP looks likely as EU grapples with Covid-19 crisis

Proposals to reduce agriculture spending and sweeping changes to CAP schemes may have to put on hold for up to two years

As farmers and other frontline workers step up to the challenge of keeping supply chains functioning during the coronavirus pandemic, the question of how policy-making can continue in this time of crisis has also become urgent.

This is true both at home, where the outcome of the general election needs to be resolved, and also at EU level where important decisions affecting the future of farming have been put on hold.

The most pressing issue, not only for farming, is the need to agree on the EU long-term budget, the Multi-annual Financial Framework (MFF), for the 2021-2017 period.

Although these dates make it sound as if this will only start to be relevant from next year, the MFF decision will determine the value of farm direct payments in Ireland later this year.

This is because direct payments to farmers in 2020 are financed from the 2021 EU budget due to the way the EU budget works. Farmers will recall that the definitive statement of their entitlements they received in 2016 outlined the number and value of the entitlements they were allocated only from 2015 to 2019 for this reason.

The extraordinary meeting of the European Council called to discuss the MFF in February failed to reach agreement with positions between the net contributor member states and the net recipient member states far apart. Farmers will be acutely aware that the CAP budget included as part of the package put on the table for that meeting represented a 5% reduction in nominal terms compared to CAP spending in the current MFF period.

Another meeting of the European Council should have taken place last week which might have provided another opportunity for discussion. However, this European Council meeting has been postponed and was replaced by a videoconference where only responses to the coronavirus pandemic were discussed.

When the MFF negotiations resume, they will take place in a vastly different economic context. The fall in economic output this year could rival that of the Great Financial Recession in 2008, depending on how long the economic lock-down continues.

Such a negative economic shock will require a major injection of public funds to overcome. Already, we are seeing European governments respond to the crisis with astronomical compensation packages for businesses and workers.

Whether this will encourage member states to look more favourably on increased EU spending including the CAP budget, or whether it will constrain their ability to finance such spending, is not yet clear. It will depend, in part, on the depth and persistence of the economic collapse.

Extension

There is still time to reach an MFF agreement before the end of this year but member states may be reluctant to resume serious negotiations until the economic fallout from the coronavirus pandemic is clearer.

If no agreement is reached, there is an automatic and temporary extension of the ceilings in the last year of the current MFF.

Paradoxically, this would result in a significantly higher MFF volume (around 1.15% of EU GNI) compared to the 1.11% proposed by the Commission and the 1.074% proposed by the

European Council President prior to its February 2020 meeting.

This would permit farm direct payments in 2020 to remain at their level in 2019. Whether this would happen would ultimately depend on the outcome of the EU’s 2021 budget negotiations later this year, where decisions in the Council are taken by qualified majority and the Parliament has equal status as co-legislator.

The Commission has already proposed a transition regulation to cover CAP payments in 2021. This was

Limbo:

EU policymaking in the coronavirus era will have to adapt until population immunity is built up and a vaccine is available introduced in the light of the slow pace of negotiations on the CAP reform package proposed by the Commission in 2018, due to disruptions caused by the Brexit negotiations, elections to the European Parliament in the middle of 2019, and the failure until now to agree a budget framework for the coming period.

All of this meant that the deadline for submission of national CAP Strategic Plans for approval by the Commission by 1 January 2020 could not be met.

The idea behind the transition regulation is that existing rules would continue to apply for at least one more year within the framework of the budget ceiling given by the new MFF.

However, member states are given some flexibility to design new multi-annual rural development schemes if they wish to use that option instead of rolling over existing schemes for one further year.

The Parliament’s AGRI Committee had intended to provide its opinion on this regulation in April with a vote scheduled in the whole Parliament in June which would allow negotiations to open with the Council of Agriculture Ministers. This schedule must now be put in doubt, making it less likely that the Department would have time to design new schemes.

Many are of the view that it would make sense to extend the transition regulation for a two-year period given this uncertainty.

Farm to Fork strategy

Another argument for a longer extension is that it would allow more time to absorb the implications of the Farm to Fork Strategy which is the agri-food component of the European Green Deal and to integrate its objectives into the CAP Strategic Plans.

The Strategy was originally expected to be announced this week but this has now also been postponed by at least one month.

It is expected to contain high-level targets for reduced use of fertilisers, pesticides and antibiotics, an expansion in organic farming while also highlighting the more ambitious targets to reduce net greenhouse gas emissions and incentivising carbon sequestration practices.

Finding a way to properly debate these potentially far-reaching proposals if the social distancing measures to address the coronavirus pandemic remain in place will be a challenge.

At a purely banal level, rules of procedure to allow decisions to be taken by videoconference rather than requiring a quorum at physical meetings will be necessary.

In summary, policymaking in the coronavirus era will have to adapt until population immunity is built up and a vaccine is available. A way will be found to make farm direct payments in 2020 but the level of these payments may not be known until much later this year.

On the other hand, delays in decision-making mean that any new CAP rules under the CAP Strategic Plans will now be postponed for at least one year and possibly two years.

There is much to welcome in the proposed move from a compliance-based to a results-based CAP, and as the environmental challenges we face do not simply disappear because of the coronavirus, this delay would be unfortunate.

It will be important to use the additional time as productively as possible to see how best to integrate the recommendations of the Farm to Fork Strategy as well as those expected from our own Agri-Food Strategy to 2030 Stakeholder Committee in a few months’ time.

A way will be found to make direct payments in 2020, but the level of these payments may not be known until much later this year.

Alan Matthews is Professor Emeritus of European Agricultural Policy at Trinity College Dublin