Speech by Commissioner Phil Hogan at EU Agricultural Outlook Conference 2017
Your excellencies, Members of the European Parliament, distinguished guests, ladies and gentlemen, it is my pleasure to see so many people here this morning for this, the third, edition of the EU Agricultural Outlook Conference.
In its three years, this conference has come to be a highly-regarded and eagerly-awaited event and I hope that this year’s event won’t be any different.
Following the last two years, in which the themes were “Agriculture at the Centre of Global Challenges” and “Climate Challenges and Resource Availability Challenges for EU Agriculture”, this year our focus is directly on Food and Farming.
The inevitable backdrop to this year’s conference is the Commission’s Communication on “The Future of Food and Farming” and my contribution will largely relate to the Communication and some of the ideas set out in the Communication. I also intend to take the opportunity to respond to some of the initial reaction that I’ve received, whether in the European Parliament, the Council of Agriculture Ministers or from various stakeholders.
Background to Communication
Last year, I was particularly pleased that the opening statement of the Outlook conference was delivered by the President of the European Commission, Jean-Claude Juncker. Those of you were here will recall his confirmation of the Commission’s intention to adopt, before the end of 2017, a Communication on the future of the Common Agricultural Policy (CAP) post-2020. Speaking of that Communication, he went on to say that “Simplification and modernization will be the key words and the primary objective of the Communication”.
Well, here we are a year later and less than three weeks after the Commission has delivered on that commitment and adopted our Communication.
Following the President’s announcement last December, we launched a public consultation in February. In setting the scene for that public consultation, we set the background against which the need to simplify and modernise the policy had to be seen, notably that
- agricultural prices have fallen substantially and market uncertainty has increased, due amongst others to macroeconomic factors, geopolitical tensions, inhibiting a clear long-term planning of the sector;
- the emphasis of trade negotiations has moved more visibly from multilateral to bilateral deals, requiring a careful balancing of offensive and defensive interests, with due attention paid to certain sensitive sectors; and
- the EU has signed up to new international commitments, especially those concerning climate change (through the 21st Conference of Parties COP 21) and broad aspects of sustainable development (through the UN’s Sustainable Development Goals – SDGs), and is also exposed to other geopolitical developments such as new large-scale migration.
At that time, we also made it clear that the focus on developing policy priorities for the future would be taken “without prejudice to the next Multiannual Financial Framework”. I make this point, not alone because it is something to which I will return but because, for some people, the adoption of the Communication seemed to be the first time that they realised that this would be the case.
The Communication reflects the conclusions of that public consultation, which attracted a record number of over 320 000 responses (compared with just 5 000 on the last occasion). What that shows and what is supported by the preliminary data from the Eurobarometer survey is that there is widespread support for the Common Agricultural Policy and that the majority of people believe that farmers need direct income support to maintain our European food security and that agricultural policy should deliver more benefits for our environment and climate.
While it is important to repeat that the Communication was drafted without prejudice to the next MFF, it is also important, in terms of the issue of direct payments, to be crystal clear about our commitment to the maintenance of direct payments, lest there be any misunderstanding. Paragraph 3.2.1 of the Communication says “direct payments remain an essential part of the CAP in line with its Treaty obligations.” In his presentation of the Communication to the Council of Agriculture Ministers last Monday, VP Katainen confirmed that we are keeping “the existing two-pillar structure which, in our view, serves our farmers and rural areas well.”
We know that farmers are facing challenges, whether that it is in the form of extreme weather events – several of which we’ve seen this week – price volatility or diseases. At least 20 per cent of farmers lose more than 30 per cent of their income, compared with the average for the previous three years. I know of no other profession or occupation which has to live with such income uncertainty.
To illustrate the extent of the challenges facing farmers, my services are publishing today three background papers on the economic, socio-economic and climate and environmental challenges facing EU agriculture and rural areas.
The economic paper contains a robust SWOT analysis which concludes that the emerging economic challenges relate principally to income levels and income volatility. Of course, what that does is to prove the value of direct payments as income support, through the provision of a stable annual income buffer.
Of course, the second pillar also remains as an invaluable aspect of the Common Agricultural Policy. A strong rural development pillar helps to ensure the vitality of rural areas. As the Communication notes, “the CAP is the rural champion of the Union.”
We are committed to reinforcing support for rural communities through capacity building, investments, innovation support, networking through the provision of innovative financing tools for improving skills, services and infrastructure.
This commitment to a strong second pillar is our concrete response to the Cork 2.0 Declaration, entitled “A Better Life in Rural Areas” and its ten policy orientations.
As the policy evolves and new challenges emerge, the second pillar allows us to do so much more. Nowhere is this more the case than in the area of innovation and technology. The next session of today’s conference is dedicated to the whole area of research and innovation, where the focus will be on deepening synergies between agriculture, the bio-economy and research and the need to adapt the EU farming sector.
Adapting the EU farming sector is not a choice, it is a necessity. We are committed to maintaining the market-orientation of the CAP and, despite the views of the critics, it has been good for European agriculture and European farmers.
International Trade & Competitiveness
Agriculture and food production in Europe are part of global economy of constantly moving parts and standing still is simply not an option. That means that, as international trade increases, the competitiveness of European agricultural production will continue to be tested by our international trading partners.
The EU is the world’s largest trader and, as I’ve said many times before, the best address in the world for high-quality food. After a record year for agri-food exports in 2016 (€131 billion of exports and €112 billion of imports), the strong trade performance continued in 2017. The EU’s trade balance in agri-food products has now been positive for 7 years in a row. This has brought significant benefits to our sector and there is huge potential to continue to do so.
In our trade negotiations, we will continue to recognise and reflect the sensitivity of those products which face stronger competition from future market access to the EU. Our objective will be to make sure that we obtain an outcome which provides sufficient safeguards for these more sensitive products.
We will work hard to find the right balance for agriculture within our trade agreements, finding an appropriate equilibrium between offensive and defensive interests, which includes SPS issues and the protection of geographical indications.
But, as much as European food is sought the world over for its quality and safety reputations, trading is ultimately about competitiveness.
Competitiveness is about investment and we must invest in our farms in terms of modernisation, innovation, diversification and the uptake of new technologies and digital-based opportunities such as precision agriculture and clean energy in order to improve individual farm sustainability, competitiveness and resilience, including against the negative impacts of climate change.
Environmental and Climate Action
Climate change, climate action and sustainable development are (or at least should be) priorities for all of us. The European Union is, of course, fully committed to its international obligations which include the COP21 targets and the United Nations’ Sustainable Development Goals. The CAP and farmers and agri-food businesses have a key role to play.
The DG AGRI background paper on the “Climate and Environmental Challenges Facing EU Agriculture and Rural Areas” (which is published today) identifies the issues of climate change, water (pollution and scarcity) and soil (erosion, organic matter and compaction) as particular challenges facing farmers. In terms of air quality, agriculture is the main emitter of ammonia in the EU. In terms of biodiversity and landscapes, the paper describes plant and animal species in Europe as “a pool of genetic diversity that needs to be preserved and will help our society face various challenges.”
It is for all these reasons that the Communication clearly commits the CAP and, by extension, farmers to “a higher level of environmental and climate ambition, and address citizens’ concerns regarding sustainable agricultural production.”
But, the overwhelming fact is that farmers need to achieve a higher level of environmental and climate ambition for themselves and their production. For example, we see increases in air temperature which are having some benefits, particularly in northern Europe, while making the cultivation in other parts.
We’ve also seen how “extreme events” are occurring more frequently, with droughts and heatwaves affecting various regions, while heavy rain, floods and gales are increasing in places like the Baltics and Finland.
Already this year, we have seen catastrophic forest fires in Portugal, severe drought in several countries and exceptional rainfall in a number of northern European countries. The Commission responded to these crises by approving advance payments to hard-hit farmers and allowing MS to derogate from certain greening requirements, for example, the ‘no production requirement’ on land lying fallow so that livestock can graze those areas. In all, 12 MS benefitted from this facility.
“Greening” & ECA Report
The current CAP has a green architecture, with a number of elements. However, it is very compliance-driven, based on the application of EU-wide detailed rules and the extensive use of controls. In the context of further simplification of the CAP, there is very limited scope for further progress in the framework of the current compliance-based approach. We propose moving to a performance-based approach, where the focus will be on delivering results, which is essential for the achievement of our environment and climate-action ambitions.
The principal element of the existing greening architecture is the greening measures themselves, to which 30 per cent of the direct payment is linked. Our own evaluation indicates that there have been some benefits associated with greening, particularly with regard to EFAs. Indeed, this is confirmed in last week’s report from the Court of Auditors.
However, we have concluded that, as with many other aspects of the CAP, a “one-size-fits-all” approach is not appropriate in terms of delivering genuine environmental ambition.
Consequently, the current green architecture of the policy should be replaced by a more ambitious approach, which will deliver on the twin aims of increased environmental and climate action ambition and greater simplification.
The European Court of Auditors’ Special Report in fact provides considerable justification for our approach, given its conclusions that
- greening, as currently implemented, is unlikely to significantly enhance the CAP’s environmental and climate performance;
- because the budget allocation for greening is not justified by the policy’s environmental content, the payment remains essentially an income support scheme; and
- the policy’s likely results do not justify the significant complexity which greening adds to the CAP.
The new green architecture which we are proposing, and which we will include as part of the legislative proposals to be put forward next year, will build on the positive experiences of both the greening and cross-compliance measures and will make full use of modern technology.
The Commission’s Communication also pre-empted one of the recommendations of the ECA report, i.e. the need for the Commission to develop a complete intervention logic for the EU environmental and climate-related logic for the environmental and climate-related action regarding agriculture.
The Communication proposes the establishment of ambitious environmental targets within the CAP and an overhaul of the existing green architecture in order to more effectively meet those targets, including greater flexibility for member states to choose the options most suited to their local needs and need for rigorous monitoring and controls of member state actions.
Implementation/Delivery of a “Common” Policy
This approach is fully consistent with the broader implementation or delivery approach which we have proposed in the Communication. As with the greening practices, we do not believe that a “top-down” or “one-size-fits-all” approach is appropriate for the implementation or delivery of the CAP.
How can it be appropriate that the same conditions should be applied from the Arctic Circle to the Azores or from the Russian border to the Atlantic Ocean ?
I want to dwell on this issue because I have listened very carefully to the initial reaction to our proposals from various sources, including the European Parliament, the Agriculture Council and in various stakeholder fora, including our civil dialogue groups.
Principally, people are concerned that we are moving away from what they regard as the vital importance of the “C” in the CAP and towards what some people have begun to describe as the “renationalisation of the CAP.”
What I want to do, therefore, is to put some flesh on the bones and to provide some reassurance that the Commission is not, as some have suggested, “shirking our responsibilities” or abandoning a central feature of the CAP for over 50 years, viz. the common nature of the policy. Neither are we dismantling the internal market, which is one of the key achievements of the CAP and something from which farmers benefit every day.
The principle of what we are proposing is greater subsidiarity for the MS, but with a very distinct role for the Commission to ensure alignment and coherence in the choices made by the MS with EU priorities and objectives.
At EU level, we will set high-level objectives. These will revolve around the Treaty objectives of the CAP as well as those identified in the Communication
- to foster a smart and resilient agricultural sector;
- to bolster environmental care and climate action;
- to strengthen the socio-economic fabric of rural areas.
These high-level objectives will then be translated into a set of specific objectives, which will be concrete priorities and take into account relevant EU legislation.
Each of the specific objectives will be accompanied by a set of results and qualified output indicators, which will allow MS to define the targets.
The MS will be required to prepare a CAP Strategic Plan, which will be subject to approval by the Commission. The preparation of the plan will require an ex-ante assessment of the MS needs, a definition of their targets and an indication of their choice of interventions, e.g. decoupled income support, coupled support, investment support and environmental actions.
The CAP Strategic Plans and their approval by the Commission will ensure EU added-value and will preserve a functioning agricultural internal market. In terms of maintaining the ‘common’ feature of the policy, the new approach will ensure that MS will not take decisions in isolation, but within the framework of a structured process in which the Commission will have a central role.
The Commission’s assessment will focus on
- the soundness of the SWOT analysis and strategy proposed by the MS;
- the consistency between the EU objectives and the targets defined by the MS; and
- the consistency with the interventions chosen as well as the targets and the financial allocations made.
This process is a crucial step in order for the Commission to guarantee that the policy is implemented according to the common EU objectives. The Commission needs to and will have a very proactive role in working with the MS to ensure that they submit for approval coherent intervention logics and sufficiently ambitious schemes.
I understand and have clearly heard concerns that this lighter approach could result in MS applying unnecessary obligations on beneficiaries. As part of the Commission’s scrutiny of the Strategic Plans, we will be very mindful of avoiding over-regulation and “gold plating”.
Later this afternoon, I am pleased that you will be joined by my colleague, the Budget Commissioner, Mr Gunther Oettinger, who will address the subject of An EU Budget Fit for Tomorrow: A Quest for European Value-Added. Well, the new delivery model for the CAP represents progress towards a results-based policy.
This approach means that target-setting and performance measurement will be at the MS level. The relationship between the EU and the beneficiary will be significantly simplified, so that the MS would be in charge of setting the requirements for the beneficiary and no longer will Brussels be determining the width or length of hedgerows or the number of trees in a field. In fact, this is the approach that the Budget Commissioner has been seeking from me.
I have listened to the reservations from various quarters and I fully appreciate that what we are proposing is a significant step-change, given that it will change the respective relationships between the Commission, the MS and the beneficiaries.
In terms of addressing those reservations, I and my services are fully committed to working with MS over the coming months to ensure the necessary clarifications are provided and that, in the context of preparing the legislative proposal, in which the details of the new delivery model will be fully spelt out, full account is taken of those concerns and, where necessary, that the necessary reassurances are given.
I want also to specifically acknowledge the role which the European Parliament can play in this process. I was particularly pleased to have been able to present the Communication to the Committee on Agriculture and Rural Development on the night of its adoption. I doubt that there is a better informed committee in the European Parliament than the Agriculture Committee. Under the chairmanship of Paolo De Castro, that Committee played a highly important and influential role in shaping the last reform and under the current chairmanship of Mr Siekierski, they have an equally important role to play on this occasion. I look forward to the appointment by the Committee of a rapporteur on the Communication and I can assure whoever that is of my full cooperation in their work.
One other issue on which there has been much comment is the question of the budget for the next CAP. You are all aware that the Commission will present a proposal on the MFF for the next programming period in 2018. Of course, it will be the European Council and the European Parliament that will ultimately decide the budget. In doing so, they will have to consider the gap left by the departure from the EU of the UK as well as the other budgetary challenges and see how that gap can be closed and whether, for example, MS are prepared to increase the contribution from 1 per cent to 1.1 or 1.2 per cent of GNI.
There is a school of thought that we should have waited for that proposal before coming with the Communication on the CAP.
I don’t share that view because I believe that the Communication and the debate which will follow in the coming months can influence the subsequent debate on the MFF by setting out a clear policy direction for the future of a policy which has and continues to add value and underpin a sector which, when taken together, provides around 44 million jobs.
I believe that we need a well-funded budget for the CAP so that the policy can continue to deliver the objectives which are in the interests not just of farmers but for society as a whole. As the CAP evolves with a greater focus on the provision of public goods, we should see the CAP as a policy for all the people of Europe.
Another significant development is the Omnibus Regulation, the agricultural part of which will come into effect on 1 January next. The changes contained in the proposal will continue the drive towards a simpler, more modern CAP. They will make the lives of farmers and other CAP beneficiaries easier as well as providing simpler risk management tools to help farmers. We will also have clearer rules governing intervention in markets and greater flexibility for MS to support specific sectors of economic, social or environmental importance through voluntary coupled support, even when those sectors are not in crisis.
The provisions of the Omnibus will also provide stronger support for farmers’ position in the food supply chain. We know that the integration of European agriculture and food supply chains in general in globalised markets presents opportunities, but also risks. Primary producers no longer operate in an environment where minimum prices are guaranteed. What we need to do is to ensure that we have properly functioning food supply chains and that the farmer takes home a fair share of the added-value that is generated in those chains.
It is in this context that I announced the initiative to improve the food supply chain, taking account of both unfair trading practices and market transparency issues. Currently, there is an impact assessment ongoing, which will cover unfair trading practices. We also plan to address market transparency in the course of 2018. Moreover, the Commission Work Programme for next year provides for a legislative proposal and it is foreseen that this proposal will be adopted by the College around April and will reflect the analysis in the impact assessment.
Last year, President Juncker started a conversation when he confirmed the Commission’s commitment to adopt a Communication on the future of the CAP. The Communication is an important milestone in that conversation. Many of you have been part of the debate and I want you to continue to participate. We are at an important point now. We have listened to the views expressed in the public consultation and tried to reflect many of them in the Communication. We are now embarking on the next stage – the preparation of a legislative proposal.
Last week, the Council had its first orientation debate on the Communication and I expect and look forward to several more such discussions in the coming months, under the Bulgarian Presidency. My services have already arranged technical meetings with the MS to elaborate our thinking.
We value the feedback of you, our stakeholders, and I encourage you to reflect on the Communication and be part of the debate. As we said at the conference in this very room last July, “have your say”.
Ladies and gentlemen, the Communication maps a way forward for a sector that is dynamic and vibrant as well as innovative and entrepreneurial. Farmers are many things – suppliers of food and our environmental boots on the ground. They are an essential component of our society and we need them.
I want farmers not alone to survive, but to thrive. I want farmers to stay on the land, not alone for their sakes, but for the sake of society, for whose benefit those farmers provide public goods. I want farmers not alone to be the “first stewards” of the countryside, but to be the bedrock of vibrant, viable rural communities in which people will aspire to live and do business.
Food can only be produced sustainably by well-qualified farmers with top class policy tools and the assistance of research and innovation. That is the orientation for the future and that is the way to ensure the continuity of the EU value-added in Agriculture.