Under the microscope: the Common Agricultural Policy

“Being a farmer these days is not just a job, but a way of life,” Massimo begins, describing his life as the owner of a small, family-run farm in northern Italy. In their profession, he explains, the family does not have fixed working hours. Moreover, each year the profits are just enough to afford a decent life and cover their expenses.

Farmers’ incomes are 40% lower in the EU than those of non-agricultural workers. This is not the only factor filling a farmer’s life with challenges. Although their activity is subject to sudden changes, they must make long term decisions. Raising cows takes years and yet, one season of drought heavily affects the quality and quantity of milk produced.

This is why the European Union helps this sector with subsidies through the Common Agricultural Policy (CAP).

The CAP enabled Massimo, like many other farmers in the EU, to establish his enterprise in the ‘90s. Keeping on with the activity would be borderline impossible without the aid of such subsidies. On average, around 25% of a farmer´s income stems from direct EU payments.

On the face of it, it may seem archaic to pay so much attention to the CAP in today's Europe. After all, this sector may have been the essential cog in the continent’s economy half a century ago, but in 2019, agriculture accounted for just 1.3% of the EU-27’s GDP.

Yet, more than one-third of the EU budget is still devoted to the CAP. This sum corresponds to around €54 billion of yearly expenditure and reflects the fact that agriculture is about more than just the provision of food. It shapes our landscapes and ecosystems, steers economic resources.

This high budget allocation sheds some light on a sometimes obscure truth: shaping the CAP means shaping and the yearly economic stimulus package.

The CAP was launched in 1962 and, today, it is divided into two main funds, known as pillars. The first mainly consists of direct payments to farmers to support their income. The second invests in projects for rural development. The two pillars are financed through the “European Agricultural Guarantee Fund” (EAGF) and the “European Agricultural Fund for Rural Development” (EAFRD) respectively. While the former is covered completely by the EU-budget, the second is co-financed by local institutions.

Alessandra smiles while searching for her funding documents, proudly telling the story of the two small butchers shops her family owns. Founded in 1909 by Alessandra’s grandmother, the responsibility of running the shops has since been shared amongst her sons, daughters, granddaughters, and grandsons. ”And who knows”, she adds, “the family tradition could be even older, but we can´t remember further in the past”.

In 2017, they succeeded in getting an important contribution form the EARFRD to invest in a new van and two weighing machines. Through word of mouth, they discovered that by forming a local production chain with other small companies, it was possible to get funding for regional development. With the aid of the artisan’s confederation, they successfully applied for funding and around 30% of their investments were covered.

At first glance, Alessandra’s and Massimo’s stories seem to outline the success of the CAP. However, both – particularly Alessandra’s butcher shops – relate to the second pillar. It is here that the focus of subsidies is to stimulate innovation, rural development and the promotion of organic farming. At least 30% of each regional development program’s finances must fund measures to protect the environment and fight climate change.

However, the EARFRD is relatively small when compared to the EAGF. Although the EAGF accounts for around ¾ of the CAP´s financing, its subsidies are mainly area-based payments and no guarantee of ecological or social standards is required. A standard payment per hectare is normal, regardless of how it is then farmed. Since all of the CAP’s recipients are available in a public database, it is easy to assess the result of the current funding system. While many small farmers have difficulties sustaining themselves, around 80% of the CAP´s subsidies finance the largest 20% of companies.

“Public money for public benefit” is a pearl of old wisdom for progressive movements. Underlying their position in a common declaration, agricultural politicians from the German Social Democrats (SPD) base their claim for strong CAP reform on this principle. The goal is to abolish all purely area-based payments. Demanding that the European Parliament dedicate at least 30% of the direct payments to eco-schemes is, therefore, seen only as the first step. These schemes are linked to the protection of the environment and the end-goal is to provide support for farmers who observe agricultural practices that are beneficial to the environment and the climate.

This is not the only way in which the parliament’s position lets down those hoping for radical reform. One major critique is that there is a complete lack of reference to the European Green Deal and the Paris Agreement. This is the reason why the SPD did not support the schemes. They were not alone. An important minority of the Progressive Alliance of Socialists and Democrats (S&D) decided, as did the Greens and the United Left, not to vote in favour of the parliament’s proposal. The Danish Social Democratic MEP Marianne Vind, tweeted on the day of the vote, saying “After nearly 2000 amendment requests, too many green elements have been removed”.

However, she points out that the new position is better than its predecessor. Indeed, it does contain many progressive elements. For instance, the application of the aforementioned eco-schemes and the decision to cap direct payments at €100,000. Moreover, at least 6% of the direct payments should benefit small and medium-sized enterprises, which would guarantee a more social distribution of funds.

Like the commission and the council, the parliament – with 425 votes in favour and 212 against – adopted this position. Over the coming months, representatives of the three institutions will be negotiating an agreement for the next 7-year period of the CAP. It is worth noting that this new regulation will only impact a 5-year period, due to the elongation of the current period, to include 2021-2022.

Although the parliament´s stance is the most progressive of the three bodies’, it was heavily criticised by environmental organizations such as Fridays For Future. With campaigns such as #VoteThisCAPDown or #WithdrawtheCAP, they call for a new, radical reform of the CAP. Greta Thunberg wrote that the CAP “incentivises harmful agricultural practices”. Frans Timmermans seemed to evaluate the possibility of withdrawing the proposal completely, but the commission’s president has already vetoed this move.

When asked about the parliament’s reform proposals, Massimo said, “I believe it would be a good idea to bound the payments to more criteria regarding, for example, ecological standards. In addition, I would like the controls to be more concrete and less paper-based”. Although implementation is handled by the local authorities, the responsibility for the definition of the selection criteria falls at the feet of the EU. So, for Massimo at least, the parliament’s proposal is a step in the right direction.

The importance of the CAP, however, goes beyond the farmers. As a German parliamentary expert on the topic put it, big cities and their governments are also affected and, importantly, can heavily influence agricultural policy. Canteens in universities and public offices have huge market power. This leverage would not only provide healthy food offered at fair prices but would enforce sustainable agriculture. Another important element is education: how can we buy sustainable products if we aren't able to recognize them? How can we identify seasonal vegetables if don´t know when they are normally ripe?

These considerations underline one of the assertions of Maria Noichl, “agricultural policy is politics for the whole society”. In 2014, she was elected a Member of the European Parliament for the SPD and is the S&D’s shadow rapporteur for the CAP.

She emphasizes that the CAP is not only about the farmer´s sustainment, nor solely about citizens’ nutrition. It affects all aspects of society. When, in 2015, she was an election observer in Burkina Faso, she could spot European milk being sold at a cheaper price than local milk. “Our system of subventions sustains an export of agricultural products that can harm local economies”. This clearly shows us how shaping the CAP shapes EU policy as a whole. In the current system, financially speaking at least, quantity trumps quality.

While the battle for strong reform of the first pillar becomes less and less winnable, we cannot deny that we are seeing improvements. The most important changes are that direct payments are likely to be capped and bound, in part at least, to ecological criteria.

The extent to which the character of the CAP will be improved for the period up to 2027 depends on the outcomes of ongoing negotiations. It is essential, then, that pressure on stakeholders is kept at a high level. Our goal must be to attain a system where the principle of “public money for public benefit” is applied in full.

As the window for the CAP 2021-2027 to hit such an ambitious target continues to close, the foundations are already being laid to achieve these goals through the post-2027 CAP.