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The common agricultural policy – instruments and reforms

The common agricultural policy (CAP) has undergone six major reforms, the most recent of which were in 2013 (for the 2014-2020 financial period) and 2021 (for the 2023-2027 financial period). The latest reform and new legislation came into force in January 2023.

Legal basis

Treaty on the Functioning of the European Union (TFEU), Articles 38 to 44.

Regulation (EU) 2021/2115 of the European Parliament and of the Council of 2 December 2021 establishing rules on support for strategic plans to be drawn up by Member States under the common agricultural policy (CAP Strategic Plans) and financed by the European Agricultural Guarantee Fund (EAGF) and by the European Agricultural Fund for Rural Development (EAFRD) and repealing Regulations (EU) No 1305/2013 and (EU) No 1307/2013 (3.2.7).

Regulation (EU) 2021/2116 of the European Parliament and of the Council of 2 December 2021 on the financing, management and monitoring of the common agricultural policy and repealing Regulation (EU) No 1306/2013 (3.2.5).

Regulation (EU) 2021/2117 of the European Parliament and of the Council of 2 December 2021 amending Regulations (EU) No 1308/2013 establishing a common organisation of the markets in agricultural products, (EU) No 1151/2012 on quality schemes for agricultural products and foodstuffs, (EU) No 251/2014 on the definition, description, presentation, labelling and the protection of geographical indications of aromatised wine products and (EU) No 228/2013 laying down specific measures for agriculture in the outermost regions of the Union (3.2.6).

Objectives

The successive CAP reforms have adapted the mechanism that the CAP uses in order to better attain the stated aims of the Treaty (3.2.1). The latest reform from 2021 focuses on 10 specific objectives linked to common EU goals for social, environmental and economic sustainability in agriculture and rural areas.

Achievements

A. The 1992 reform: the great turning point

Ever since it was first introduced in 1962, the CAP has fulfilled its objectives by ensuring secure food supplies. Then, with its policy of support prices that were very high compared with the world market prices and an unlimited buying guarantee, the CAP started to produce more and more surpluses. In order to close the widening gap between supply and demand and bring agricultural expenditure under control, the Council introduced a radical change to the CAP by replacing the system of protection through prices with a system of compensatory income support.

B. Agenda 2000: a new stage to build on the 1992 reform

The outcome of the agreement reached at the end of the Berlin European Council (24-25 March 1999) was that the reform would focus mainly on a new alignment of EU prices with world prices, the introduction by Member States of environmental cross-compliance as a condition for granting aid, the reinforcement of socio-structural and accompanying measures and the budgetary stabilisation underpinned by a strict financial framework for 2000-2006.

C. The June 2003 reform: towards a CAP based on decoupled aid

On 26 June 2003, EU agriculture ministers meeting in Luxembourg reached an agreement that effectively overhauled the CAP and introduced a series of new principles and/or mechanisms:

  • Decoupling of aid from volumes produced, to make farms more market-oriented and to reduce distortions in agricultural production and trade. Decoupled aid has now become a ‘single farm payment’, based on guaranteeing income stability;
  • Compatibility with World Trade Organization rules, insofar as the ultimate objective of aid decoupling was to ensure that it was included in the ‘green box’ (3.2.11);
  • Public redistribution of payment entitlements allocated to farms on historical bases with the help of two mechanisms: modulation, allowing funding to be transferred between the two pillars of the CAP to reinforce rural development; and the potential application of a regional decoupling model to allow harmonisation of payments per hectare allocated according to regional criteria;
  • Financial discipline, a principle subsequently enshrined in the 2007-2013 financial perspective, whereby the budget of the first pillar of the CAP was frozen and annual compulsory ceilings imposed;
  • Finally, a single common market organisation (single CMO) was established in 2007, by codifying the regulation mechanisms of the existing 21 common market organisations (CMOs).

D. The 2009 ‘Health Check’: consolidation of the 2003 reform framework.

The ‘Health Check’ launched by the Council on 20 November 2008 revised a long list of measures applied following the CAP reform of 2003. It was designed to:

  • Reinforce complete decoupling of aid through gradual elimination of the remaining payments coupled to production by moving them into the single farm payment scheme;
  • Partially reorient first pillar funds towards rural development by increasing the modulation rate for direct aid;
  • Inject flexibility into the rules for public intervention and control of supply in order not to have an adverse impact on the ability of farmers to react to market signals.

E. The 2013 reform: a more global and integrated approach

The broad outlines of the CAP for the 2014-2020 period concern:

  • Converting decoupled aid into a multifunctional support system. The system of decoupling agricultural aid and providing generic income support instead, which began in 2003, gave way to a system in which instruments were once again coupled to specific objectives or functions. Single farm payments were replaced by a system of payments in stages or strata. Only active farmers were eligible for the new basic payments per hectare (3.2.8). What is more, it was provided that the direct payment envelopes available to each Member State would gradually be adjusted until they were all at a minimum per hectare payment in euros by 2019 (the ‘external convergence’ process).
  • Consolidating the two pillars of the CAP: the first pillar, which funds direct aid and market measures entirely through the European Agricultural Guarantee Fund; and the second pillar, which covers rural development through co-financing arrangements. Modulation for direct payments under the second pillar was replaced with a mandatory reduction in basic payments above EUR 150 000 (‘phased reduction’). Inter-pillar flexibility was also enhanced: since 2015, Member States have been able to transfer funds between the two pillars (up to 15% of originally allocated amounts from the first to the second pillar, and up to 25%, for some Member States, of originally allocated amounts from the second to the first pillar) (3.2.8).
  • Consolidating single CMO tools which have become safety nets for use solely in the event of price crises or market disruption. The abolition of all supply control measures was confirmed: the sugar quota regime expired in September 2017 and the system of vine planting rights was replaced by an authorisation system in 2016. The new quota-less milk scheme, in force since 2015, was preceded by the adoption of a ‘milk’ mini-package The new single CMO also comprised a crisis reserve to respond to market disturbances.
  • A more integrated, targeted and territorial approach to rural development. Better coordination of rural measures with the other structural funds was also envisaged (3.1.1). The wide range of existing instruments within the second pillar of the CAP was simplified so as to focus on support for competitiveness, innovation, ‘knowledge-based agriculture’, establishing young farmers, sustainably managing natural resources and ensuring balanced regional development (3.2.9).

F. The post-2020 reform: ‘green orientation’ and strong emphasis on results and performance

The post-2020 reform, which determines the CAP for the 2023-2027 period, was marked by a lengthy process starting with the publication of the Commission’s legislative proposals in June 2018 and concluding with the final adoption of the agreed on texts in December 2021. The Commission’s presentation of the European Green Deal Plan and the farm to fork and biodiversity strategies in 2020 brought an additional layer of complexity to the negotiations. The reform package comprises three regulations: the Strategic Plans Regulation (3.2.7), the Horizontal Regulation (3.2.5) and the CMO Amending Regulation (3.2.6).

The 2023-2027 CAP focuses on 10 specific objectives:

  • Fair income for farmers,
  • Increased competitiveness,
  • An improved position for farmers in the food chain,
  • Climate change action,
  • Environmental care,
  • Biodiversity and landscape preservation,
  • supporting generational renewal,
  • Vibrant rural areas,
  • Food and health quality,
  • Fostering knowledge and innovation.

The new CAP aims to build a sustainable food system and, in so doing, will contribute to the objectives of the Green Deal, the farm to fork strategy (3.2.10) and the biodiversity strategy, by protecting and enhancing the variety of plants and animals in rural ecosystems. In order to meet the Green Deal targets, the new CAP introduces enhanced conditionality (linking direct income support to environmentally friendly farming practices), eco-schemes and national strategic plans.

Each Member State is required to draft its national strategic plan describing the use of CAP instruments based on its current conditions and needs. National strategic plans represent a new delivery model for the CAP, based on greater flexibility for the Member States, a lower administrative burden and stronger environmental protection.

The current CAP introduces a new annual monitoring and reviewing framework, based on a common set of indicators, that requires the Member States to monitor their progress against their targets and to submit an annual performance report. A twice-yearly review of the performance of the CAP strategic plans will allow for the assessment of the EU Member States’ progress on reaching their targets and achieving the CAP objectives.

CAP expenditures continue to be financed through two funds: the European Agriculture Guarantee Fund (which provides for direct payments and all market-related expenditure) and the European Agricultural Fund for Rural Development (which provides for rural development measures). The new CAP supports farmers through the following measures and schemes:

  • basic income support for sustainability,
  • payments for small farmers,
  • complementary income support (for sustainability and for young farmers),
  • eco-schemes (for the climate, the environment and animal welfare),
  • coupled income support,
  • crop-specific payments,
  • sectoral interventions,
  • projects on rural development.

Role of the European Parliament

On the whole, the European Parliament has supported all of the CAP reforms. It fell in with most of the Commission guidelines for the 2003 reform while declaring itself in favour of partial decoupling and rejecting the idea of a phased reduction of aid. Parliament also renewed its calls for full codecision on agricultural policy, a goal that was attained when the Treaty of Lisbon came into force (1.1.5 and 3.2.1).

Discussions on the future of the post-2013 CAP had begun in Parliament even before the Commission presented its communication and legislative proposals. Parliament adopted a resolution based on an own-initiative report on 8 July 2010. MEPs set their priorities for the new CAP for the 21st century: food security, fair trade, maintaining farming activity across the whole of Europe, food quality, preserving biodiversity and protecting the environment, fair remuneration for the public goods supplied by farmers and, finally, rural development based on the creation of green jobs. These priorities were confirmed in a resolution of 23 June 2011 on the Commission’s communication on the CAP towards 2020.

The European Parliament amended the legislative proposals on the post-2013 CAP and the amended text became Parliament’s mandate for negotiation with the Council (decisions on direct payments to farmers, the Single CMO Regulation, support for rural development by the European Agricultural Fund for Rural Development and the financing, management and monitoring of the CAP). This was the basis on which, following more than 40 trilogue meetings, political agreement was reached and Parliament adopted its stance on the new regulations relating to agriculture, on 20 November 2013, immediately after adoption of the financial arrangements for 2014-2020.

The negotiations with the Council on the CAP post 2020 started on 10 November 2020 and continued through a series of trilogue meetings. In late June 2021, negotiators reached an agreement on the three proposals in the CAP reform package. The EU agriculture ministers endorsed this agreement on 28 June 2021, and Members of the Committee on Agriculture and Rural Development did the same on 9 September 2021. Parliament voted on the three proposals in the CAP reform package during its November II plenary session in 2021.

 

Vera Milicevic