Towards a more effective Common Agricultural Policy

Published on
July 1, 2021

The Common Agricultural Policy (CAP) has been one of the pillars of European integration project ever since the Treaty of Rome (1957). In its first few decades, the CAP was very successful in stabilising agricultural markets, improving productivity and increasing the incomes of farmers. However, in the early 70s it was already becoming apparent that the creation of this highly productive agricultural system brought with it some profoundly negative environmental effects. The agricultural Commissioner Sicco Mansholt recognised this as early as 1972, and appealed for a move towards circular agriculture as a way of preventing the destruction of natural resources. Today, in 2021, that appeal is no less relevant.

In spite of the need for reform, the CAP remains characterised by a high degree of path dependency, meaning it is still functioning in accordance with decisions made in the past which severely constrain current policy options or the general willingness to change. This is evident in, for example, the fact that the exclusively socio-economic objectives of the CAP, as set out in the Treaty on the Functioning of the European Union, have remained unchanged since 1957. The current system of hectare-based payments is also a relic of the past. Originally developed to serve as temporary compensation for the removal of product support that didn’t comply with WTO rules, these hectare-based payments have turned into a perceived entitlement.

Lack of efectiveness

From both an ecological perspective (climate change, biodiversity loss, water and air pollution) and socio-economic perspective (productivity and farmer incomes) the CAP as it is today is insufficiently effective as a policy mix. Previous attempts to make CAP funds more environmentally oriented have turned out to be largely symbolic. There’s a broad scientific consensus that the CAP’s current contribution to the environment and climate is virtually nil. And if the objective is to increase productivity, hectare-based payments are not an effective instrument. Additionally, the Netherlands Court of Audit has calculated that while a third of Dutch farmers earn below gross minimum wage even with income support, a third of that income support ends up with farmers whose income is at least double the average. Across the EU, 80% of income support goes to 20% of farmers, or even to landowners who don’t farm the land themselves. Continuing market liberalisation and the overproduction associated with it have led to further pressure on the environment and on farmer incomes across agricultural sectors.

In spite of major challenges related to climate, biodiversity, nitrogen, water quality, public health and labour conditions in the supply chain, the CAP in its current form primarily serves the status quo. A more effective use of public funds would require a transition towards supporting the transformative capacity of the agricultural sector and the production of public services such as an attractive landscape and the restoration of biodiversity. Such a transition calls for stronger coherence between the CAP and other policy efforts, such as the Farm to Fork Strategy proposed by the European Commission under the Green Deal. This strategy attempts to implement a transition of the entire European food system. The anticipated compromise on the CAP between the European Council and the European Parliament is not expected to be sufficiently supportive of Green Deal objectives. At the national level, the question is how a more effective use of CAP funds could contribute to achieving legal objectives and obligations that currently are not being fulfilled, such as those relating to climate, nature and water quality.
Importantly, a transition of the Dutch and European food system would require the government to take more of a leading role in engaging every actor in the food chain, from suppliers to processing industries, retailers and consumers. At present I feel that environmental challenges are too readily assigned exclusively to the agricultural sector, even though individual farmers lack the capacity to actually tackle these challenges. This raises the need to align the CAP with a broader food policy. At the European level, the Farm to Fork Strategy is a promising move in this direction. At the national level, the second Rutte cabinet did develop the outlines of a food policy, but this policy has not been further developed under the third cabinet.

Quality of decision-making

The enduring ineffectiveness of the CAP is tied into the quality of the policy process, both at the European and national level. In international political science literature, agricultural policy is held up as the archetype of political clientelism: the development of (economically) favourable policies in exchange for political support in a closed network of agricultural interest groups, the executive and the legislative. The Netherlands is no exception to this. At the European level this manifests itself in, for example, the privileged access of the umbrella organization Copa-Cogeca to informal gatherings of the Council of Ministers. What is more, some of the European agricultural budget ends up enriching those who themselves also hold political power, or their cronies. For that reason alone it’s not surprising that member states keep attempting to delay necessary reforms. To tackle these challenges, European politicians, including those in the Netherlands, need to come to a more balanced consideration of interests, with the public interest and applicable legal frameworks taking precedence over private interests.

Implementation space within the NSP

In spite of these concerns, the new CAP does present some opportunities for politicians in the Netherlands. At the time of writing, no European-wide compromise has been made, but member states are very likely to be given more options for national-level implementation of the CAP through the creation of a National Strategic Plan (NSP). I would like to offer the following recommendations as part of the political decision-making process for the NSP:

  1. The CAP is not a panacea. Complying with legal obligations and political objectives in relation to agriculture requires a substantial additional national budget (such as the resources made available under the Dutch nitrogen policy).
  2. The question then is how to implement CAP resources as effectively as possible in relation to national resources, so that they reinforce each other. State support rules are less applicable under the CAP, for example.
  3. Some environmental objectives – such as improving water quality in relation to nitrate and phosphate, reducing the use of crop protection agents and banning tillage and ploughing in peat meadows – can only be achieved at the necessary scale through a national tightening of the rules (conditionality) rather than through subsidies (eco-schemes). The Treaty on the Functioning of the European Union (Art. 191) states that polluters should pay for causing environmental damage, not that polluters should be given support to pollute less.
  4. The application of Art. 66 and Art. 67 of the Regulation on Strategic Plans enables farmers to be fully compensated for raising water levels in peat meadow areas (a highly effective climate mitigation measure) and the creation of buffer zones around Natura 2000 areas (to support reductions in ammonia deposits and to combat drought). This ties in with the Dutch Climate Agreement, which states that the new CAP needs to be applied in a way that optimises the achievement of higher water levels and extensification around Natura 2000 areas.
  5. The NSP must take an area-based approach towards issues such as the climate (peat meadows), nitrogen (Natura 2000 buffer zones), biodiversity and to some extent the water objectives. Spreading the CAP budget across all farmers for all the objectives might be well-intended but will do nothing to benefit the climate, environment and biodiversity.