Prof. Andrzej Czyżewski, Dr. of Economics,
University of Economics in Poznań
Sebastian Stępień, Dr. of Economics, University of Economics in
Poznań
The
circumstances and directions of changes in Common Agricultural Policy
in
the view of Health Check
Introduction
In the past years the Common
Agricultural Policy in the European Union has undergone significant
transformations due to progressing world-wide economic globalisation and
liberalisation processes as well as the pressure of European society and international
organisations. The incentive to changes was also the fact of growing support
costs and too high budget commitments. As a result in the years 2003-2004 a
deep reform of CAP was carried out which changed a lot of intervention
mechanisms on the agricultural market and stating the shape of the CAP for the
period of 2007-2013. Those targets where especially stressed which aimed at the
EU agricultural market competitiveness growth on the world-wide market along
with preserving the level of rural inhabitants incomes and natural environment
safety. Therefore the agricultural policy was to support not only its
productive function but also other non-productive functions creating the
background for the multifunctional and sustainable farming i.e. providing the
economic, social and environmental criteria[1].
Simultaneously on the basis of
the agreement in force drew by the agricultural ministers of the EU-15 in
Luxemburg of 26 June 2003 and the arrangements of the EU Board of 22 April 2004
the European Commission was obliged to evaluate the reformed agricultural
policy functioning and its simplification[2].
In November 2007 the Commission published the announcement “Preparations to CAP
functioning evaluation”, the same beginning the 6-month-period of formal consultations
of that document with farming-related representatives of various circles. This
review so-called “Health Check”, is to assess the CAP functioning and to make a
proper correction of reformed instruments and as a result to pass a package of
legislative acts concerning CAP along with the French presidency, it means in
November-December 2008. It is extremely important time because the accepted
solutions will be the issue of the EU budget in years 2009-2013 and in the next
financial perspective of 2014-2020.
The main aim of this paper is
to present the concepts of the EU agricultural basic support mechanisms
directions’ changes accepted within “Health Check” review and their evaluation
in view of the EU agricultural markets stabilisation. The authors will focus on
those aspects of medium-term review which according to them are the most
crucial to further Union agricultural development. They amount to the answers
to the following questions:[3]:
The future of Single Payment Scheme
The
direct subsidies are the basic instrument of the EU support and they should be
considered in view of the public goods creation linked to the external effects
existence. It is connected with the creation of rural areas multifunction and
the agriculture itself[4].
The share of the CAP payments grew in
the EU budget in the past years which allowed to compensate partially the
reduction of prices and to separate to some extent the support from the
production. In the same time due to the growing world-wide competitiveness and
trade liberalisation the demands for the agricultural producers changed and the
payments mechanism followed transforming and started to take into consideration
the environmental requirements, the animal wealthiness and good framing
practice. During the debate within the medium-term union budget review the
issues of Single Payment Scheme were broadly discussed. The sense of continuing
the support as well as its shape were considered. Generally there is an
agreement that further support is needed which can be explained with following
arguments[5]:
·
in case of the I Pillar support abolition it can be expected that many
of farms will not be able to function in free market. Mostly bigger farms with
field crops and dairy products will become unable to create incomes in which
the payments constitute a major part of the total income;
·
the abolition of payments will significantly weaken the EU agricultural
competitiveness in the world. It is caused by the fact that the world price
competitiveness of agri-food comes first of all from beneficial soil and
climate conditions; in view of that the American production will gain the
comparative advantages;
·
the risk caused by the Single Payment Scheme liquidation is connected
with the supply reduction and the farming products price increase on the
internal market which will be disadvantageous for the consumers. Moreover, this
phenomenon can be of a progressive tax character because higher costs can be
borne by households of the lowest incomes but the highest share of food
expenditures;
·
moreover direct payments influence the production quality assurance and
taking into consideration environmental requirements. Thanks to the payments
the EU farmers can produce goods which fulfil the veterinary, sanitary and
quality standards and for which the consumers’ demand continually grows. Thus
the direct payments are the price which the society pay in exchange for the
food safety (in a quantity and quality sense), as well as becoming independent
from countries like the USA, Brazil or Argentina.
Negotiations
on the direct payments additionally concerned further separation of payments
from the magnitude and structure of agricultural production so-called
decoupling[6]
and system unification among the EU members. The first postulate should be
considered a step in good direction because to a significant extent it
eliminates the overproduction problem and allows the farmers to follow the
signals from the market. In this sense we can consider „decoupling” as
necessary to assure the economic effectiveness on the local as well as
international market[7],
and it also allows to strengthen the EU position on the WTO forum.
Simultaneously the new mechanism requires form the rural households to obey
strict rules of environment protection and animal wealthiness therefore the
function of direst payments should be the producers’ compensation of lost incomes
and costs borne linked to the realisation of a number of new public functions
connected with the positive external effects of agricultural activity. It also
seems right to unify the system and to move to one system (unified payment per
household – SPS or payment per hectare – SAPS[8]),
all the more that farmers of all union
member countries will be obliged to fulfil the same requirements regarding the
environment and food safety (so-called cross-compliance), and the union support
will depend on that. It seems the system of the EU means distribution which
covers the historical level of production is unfair, especially from the point
of view of new member states including Poland, therefore it is postulated to
switch to regional model of single payments[9].
In a further perspective it can contribute to equal the competitiveness between
the EU-15 countries and the new members and as well it will cause the
simplification of procedures and it will be more farmer-friendly.
However it must be noticed that the decision of a single payments scheme
change in the direction of unified payment will cause significant move of the
EU budget redistribution (it is estimated that it will reach approx. 6-7
billion euro)[10]. The beneficiaries will be mostly new member
states like: Romania, Bulgaria and Poland as well as poorer countries of “old”
Union, i.e. Greece, Portugal, Spain. On the other hand the losses will be borne
by those countries until now to a big extent used the European farming support
like France and Germany. An objection can be expected from those countries
while negotiating the shape of a future Single Payment Scheme. To convince them
the it must be indicated that the proposed changes are complementary with CAP
aims and this is a difficult task. Nowadays it is clearly visible that one of
the main targets of the Union policy which s the support of countries of the
lowest development level in view of the available data is not fulfilled. Such
situation requires the renewal of a detailed debate on CAP aims and stating the
instruments of the implementation.
The support of rural areas development via the
modulation mechanism
The EU policy concerning rural areas evolved along
with the CAP development. Initially it was focused on the structural problems
in the agri-food production sector to become the policy concerning a different
farming significance in the society regarding the implemented CAP reforms,
especially the challenges which should be undertaken in a wider – social,
economic and environmental context of rural areas. Already in 1999 during the
agreements of Agenda 2000 it was pointed out that the significance of
agricultural sector decreases and its non-productive significance increases:
providing traditional cultural values, landscape and specific eco-systems preservation
as well as co-creation of the rural areas character. During ht e meeting in
Luxemburg in June 2003 ministers of agriculture agreed that the EU faring
policy should head to strengthen II Pillar of CAP and that its superior aim is
to create conditions in which farming will become multifunctional, market
balanced and it will be able to sustain rural areas, i.e. to protect the
environment and contribute significantly in the rural life vitality[11].
One of the mechanisms which were implemented then was the obligatory modulation
which was to assure bigger financial means for the rural areas development.
According to this instrument, from January 2005 single payments granted for the
EU farmers become gradually reduced[12].
Initially this system covers only countries of the EU-15 and it will come into
force in new member states when they reach the level of payments in “old”
countries.
In the
beginning the modulation system was to counteract the excessive privileges of
the largest farms which get non-proportionally big support[13].
Such share of financial means can be regarded as less effective because in
large farms further opportunities of productivity growth are heavily limited
and additionally by taking into consideration the historical scheme, we see the situation when the income is
sustained without the incentive to improve the managing efficiency. The
possibilities to improve it via structural transformation often are over
because of a limited number of entities and poor labour sources which could be
transferred to other use. It leads to adaptive actions which depend on the
improvement of the EU means absorption
instead of efficiency improvement[14].
In this context the modulation must be treated as a tool which transfers some
means from bigger to smaller rural households and contributes to the
development of the latter so this system should be continued. It is also
important that the money achieved in this way was allocated to less developed
regions to decrease the differences in rural areas among the member states. In
a present shape the modulation does not lead to disproportion levelling because
most of the means stays in a particular country.
The
European Commission proposes to extend the modulation (2% per year in the
period 2009-2012) and to transfer more money to support rural areas from II
Pillar. Such attitude is especially important for the EU-15 where further
production support in inefficient because the efficiency growth abilities are
limited and the progressing costs increase creates no additional value. Whereas
in case of new member states there are areas where the added value growth is
possible by the development of purely agricultural functions. Therefore the
modulation process should be lower there. Otherwise the system can sustain the
disproportion of farming support amongst the EU-15 countries and the new
members because it will be possible to move the elements of historical
payments. That would be against the basic aim of common policy which is the
levelling of differences between the EU regions. Therefore for countries such
as Poland possible growth of the modulation coefficient is allowed on the
condition that the financial means redistribution scale between member states
increases on the basis of objective criteria. Simultaneously the modulation in
new member states should be implemented gradually, similarly as in the EU-15.
Otherwise the income and competitive disequilibrium of national households can
appear because they would not reach by 2013 the support level of the EU-15.
No matter the interests of
particular member states it should be stated that a further expansion of
modulation range and transfer of some financial means to support rural areas is
a step in a good direction and the more it is accepted by the tax-payers who
finance CAP and who nowadays criticise its shape. They feel that farming should
serve the function of a public good which guarantees landscape and cultural
values as well as biological diversity. To get those “services” the farmers
should be paid for. Otherwise they will quit such an activity and they will get
involved in the production of agricultural sources which profitability grows
along with the food demand and food prices grow on the world market[15].
Also the fact that the non-agricultural activity significance in rural households
income creation is getting bigger and their functioning is dependent not on the
production scale but on economic, social and environmental conditions is in
favour of transferring some financial means from I to II Pillar[16].
Numerous examples prove that thanks to the support directing it is possible to
secure or create new employment in rural areas along with the balanced rural
development rules. Thus the environment, landscape and cultural values of rural
areas and the development of non-agricultural functions of rural areas are the
values which should particularly be taken into consideration when creating the
support structures within II Pillar of CAP.
There is another premise which
argue for the transfer of financial means from I to II Pillar within the
modulation mechanism and which was considered too little when evaluating the
CAP functioning. The point is that II Pillar of CAP allows to implement
mechanisms which have or can have a positive influence on climate change
limitation. There are numerous actions which include in that trend. Those are,
inter alia, the actions that consider water management (retention increase,
actions against floods), erosion protection, forestation (in the context of
retention increase, erosion protection as well as green-effect gases
absorption), renewable energy, transport solutions, energy-saving
modernisation, biological diversity protection. Properly created rural areas
development policy is able to face those challenges. So it is important that
CAP includes also problems of the climate change results.
Presented arguments justify
modulation mechanisms subsistence, moreover its range expansion, however the
change of CAP targets is not possible without the transformation within the
financial means redistribution among the member states. It causes problem
because the redistribution means “winners” and “losers”. Therefore an open
discussion should be held on the CAP functioning changes which started with
“Health Check” and which has not been closed yet.
Reorientation of market support instruments
Globalisation conditions,
negotiations within WTO[17]
and the EU expansion of 12 countries require refocus on the CAP instruments,
taking into consideration especially beneficial medium-term forecasts for the
seed and dairy market. The answer to the present situation in June 2007 the EU
member states reached the agreement in the issue of Common Market Organization
replacing 21 union sector organisations. The aim was to simplify CAP
mechanisms, reformation of managing, increasing the support efficiency and
accommodation to new market reality as well[18].
The realisation of this process, according to the European Commission, is to be
connected with the elimination of the intervention instruments which are hardly
ever used. The Commission’s opinion was that not all the existing market
intervention mechanisms are efficient in solving present European farming
problems and they do not correspond with present framing conditions. To reach
one of the main targets of CAP which is the ability of European farming to
compete on the world markets we should create such a support system which will
react to the market signals to the highest extent[19].
Assessing the Commission’s
postulates concerning the liquidation of some of support instruments it should
be noticed that they are heavily the result of the agri-food price growth
(crops, milk) on international markets. However the observed economy is likely
to be of a short-term character therefore it should not be the justification to
limit the market intervention. It must be stressed that the market mechanisms
work the way that they are “inactive” in case of high prices. De facto they
serve the function of the “safety net” in the situation of a bad economy on the
agricultural market. A total abolition of support mechanism would be
irreversible and would threaten with a drop of agri-food producers’ incomes. It
is worth mentioning that the largest farming competitors (i.e. the USA, Canada,
Australia) also use wide range of intervention, the same liquidation of the EU
support would lead to the loss of competitiveness. Permanent abandonment of
legal opportunities to support and stabilise agri-food prices would be
justified in favourable market conditions (which means stable market situation)
but those are hard to expect. A new “safety net” should be the more market
orientated, protect the producers against losses (i.e. include risk managing
mechanisms) and reach the farmers directly. The system should be based on the
household income support and not on the support of particular production
branches. The priority should be to provide such instruments which would create
a stable, environment-friendly agricultural production, not violating WTO
regulations.
On the other hand it seems
that maintenance of a present level of a price support in the conditions of
trade liberalisation (inter alia as a result of WTO actions) is in the long
perspective impossible[20].
Therefore gradual abandonment of intervention should include following
postulates:
·
preservation of the EU farming competitiveness by ensuring the budget
support in this sector and in case of price decrease guarantying extra means
for adaption actions;
·
allocation of the means (saved thanks to planned modifications) in other
purposes supporting the competitiveness (e.g. promotion and marketing of
agri-food products, trainings for farmers, support of technical advances etc.);
·
new solutions should not introduce elements differing the competitive
position in various regions and the EU member states.
The support changes should
also consider the milk quotas and production limits (e.g. potato starch) and
the system of set-asides system. In first case the proposal of milk quotas
expiration after 2013 is right. Admittedly, the limits abolition can cause milk
prices’ drop but as it seems all those producers who will have modernised their
production by then can expect its development. Similarly other production
limits should be abolished as well as the set-asides, especially in case of
agri-food prices growth and food supply problems in emerging countries.
A new approach to risk management
A substantial issue discussed within “Health Check” is the concept of
risk management in the EU farming. The issue is important because in climate
change conditions, trade liberalisation, animals’ and plants’ diseases increase
etc. this risk continuously grows and the EU policy heads in the direction of
market stabilising instruments abolition of the farming incomes. Also the
limits and restrains in using herbicides and pesticides which directly influence
the risk growth of agricultural production (vulnerability to diseases, pests,
etc.) are significant and they are easily transferable to the price risk. So
far the EU farming has used such tools of income stabilisation as animals’
registration systems, vaccinations, the control of brought agricultural
products, extraordinary support means which took place in case of e.g. a threat
of a bird-flu epidemic[21].
However, it seems that in the perspective of coming years those instruments
will have to be supplemented with new methods of risk management which should
concentrate mostly on taking actions to limit the risk and to prevent the
crisis situation appearance. In this context it seems right to create an
insurance system which would sooth not only negative farming income
consequences in a new situation but also the effect of natural disasters like
droughts, floods etc. which in case of climate changes will become more and
more common. Then, a new CAP “safety net” should be not only more market
orientated but also protect the producers against losses, i.e. to include risk
management mechanisms which would efficiently stabilise the agricultural
incomes[22].
The proposals of the European Commission presented during medium-term
review head in the direction of a creation
of common reassurance system to solve the problems which occur as a result of
natural disasters or climate changes. The insurance is to be limited to crops
insurance in case of natural disasters and a mutual insurance against animals’
diseases. The money will come, inter alia, from the modulation (up to 10% of
single payments value, member states will be able to transfer to support the
agricultural insurance system) and spent within the rural areas development on
the condition that they fulfil the criteria of a “green box”. However, it
should be considered if such an offer does not violate the competitiveness
among the member states. Disproportions can conclude from the fact that the
maximum amount of the financial means which the member states can allocate in
financing the agricultural insurance system is stated as 10% of a national
ceiling of payments granted for particular country. So those countries which
historically had a higher limit will be able to spend more on the support and
simultaneously they will get a higher refund from the common budget[23].
Because of that it would be advisable to create appropriate financial
mechanisms of a structural character, referring to the economically weakest and
the most affected regions.
When creating such a system of
an agricultural insurance we should remember to fulfil the condition of the
insurance commonness which would guarantee a low insurance premium. In case of
it being voluntary there is always risk that too few farmers would decide to
participate in the system and the means allowed for this purpose will not be
fully used. Simultaneously a part of the premium would have to be covered from
the public means. The European Commission proposes that the farmer’s share in
the premium would be of a 60% and the 40% would be covered form the public
means. For Poland and other member states with a fragmented farming 60% of
self-contribution seems seriously too much – it should not exceed 50%.
Secondly, it should be differed taking into consideration the difference in the
financial support per capita, moreover taking into consideration the production
volume and assets value. In countries were the farmers thanks to historical
rules get higher support, the self-contribution should also be higher and in
new member states lower. After some time (when the payments equal) those shares
should also be balanced[24].
Moreover, the level of co-financing should differ for the field crops and
animal breeding. In the first case it will be easier to separate the influence
of weather factors from the subjective than in case of animal breeding. This
subjective factor would be e.g. skills and diligence of the producer so-called
the management factor. In other words, the results of animal breeding are more
vulnerable to management which is the factor dependent on the farmer than in
the field crop in which the results are of a random character[25].
Hence, the insurance companies find the field crops more attractive and apply
lower premiums. Therefore in case of field production the share in a premium
can be higher than in case of animal breeding.
In turn the issue of involving
public means in supporting agricultural incomes stays open. Despite violent
food prices fluctuation in the past years, within “Health Check” there were no
specific reform directions presented. Using the experience of other countries
some incentives and stimulus could be created which would prompt the farmers to
take care of the income risk insurance
on their own (however that insurance should stay voluntary). Those could be for
example tax exemptions from insurance payoffs so the “subsidy” would take place
after the damage. It could also be the insurance premium inclusion into the
income costs for commercial agricultural producers. Simultaneously the capital
market development, especially of the securitisation or re-insurance
instruments can limit the amount of public means involved in this range in the
near future. When creating the insurance rules against prices fluctuation the
experience of other countries like the USA, Canada and Australia[26]
which created appropriate instruments should be used. Particularly interesting
can be: the income risk insurance on the basis of prices fixed on the stock
exchange quotations[27], the indexed
insurance with regard to the crops’ level, the insurance on the basis of the
amounts deposited in advance on a special bank account[28]
etc. Those proposals can be applied in the EU by:
·
directing public
means financing the compensation disbursement for the farmers who insured a
particular income level but they did not reach it because of the independent
reason also because of market fluctuations,
·
the budgetary means
support only for those farmers and only when their incomes fall by a stated
percent or magnitude with regard to an insured level,
·
securitisation of
insurance reassurance and participation in irregular compensations which
changes the insurance costs for the farmer.
The insurance would
be of a commercial voluntary character which would realise the co-participation
rule of agricultural producers in insuring their incomes with certain subsidies
of the state. To make the above system work properly an efficient functioning
of commodity stock is necessary as well as logistic and financial involvement
of insurance and financial sector.
Conclusions
Globalisation and integration
of the world economy as well as new challenges referring to climate changes,
rising food prices and trade liberalisation indicate the necessity of many
present CAP directions revision. In this context the medium-term review „Health
Check” of the EU budget takes place. The European Commission introduced a
number of evaluations and postulates concerning the CAP functioning. Main areas
of the discussion focused on four issues: the future of a Single Payment
Scheme, rural areas development, market intervention and risk management.
Analysing Commission’s proposals regarding the future CAP shape following
conclusions can be presented:
·
the EU farming on account of its specific character should still be
supported and should not fully be subjected to market rules and simultaneously
it must preserve its common character, i.e. common functioning and financing
(from the EU budget) rules; any forms of that policy renationalisation,
especially within the ways of its financing, would create a threat for the
competitiveness conditions in the EU;
·
the support reorientation form market one to the single payments should
be assessed positively as a more efficient method in stabilising farming
incomes; single payments to a much smaller extent should be linked with the
production size and structure and the best destination system would be SAPS
because it provides unified competitiveness conditions and simplification of
payment management and the farmer itself would be able to foresee the level of
support in a long-term because it will independent from the structure and size
of production which can fluctuate;
·
a step in a good direction is the strengthening the financing of rural
areas via the modulation system; II Pillar plays an important modernisation and
pro-development role and further more it meets the social expectations which
are shown in agricultural policy requirements, harmonically linked with the
policy of rural areas and taking into consideration the issues of food quality
and health as well as bio-diversity of
natural landscape;
·
the deregulation of some agricultural markets seems right which is about
limiting or abolishing intervention by the market instruments; this postulate
also includes the European consumers’ expectations as well as external conditions
inter alia existing within WTO; however some range of price intervention should
stay and constitute a kind of a “safety net” in case of agricultural economy
deterioration; a complete abolition of support mechanisms would be irreversible
and would expose the producers to an income drop;
·
in a situation of new challenges it is necessary to implement efficient
methods of risk management which should also sooth the negative effects of
abandoning present support mechanisms; of such a character the new insurance
against natural disasters and animals’ diseases proposed by the European
Commission should be; implementation of those instruments is fully justified
but on the condition of the insurance being obligatory and its co-financing
from the public funds; simultaneously for the agricultural incomes
stabilisation new insurance systems against economy fluctuations should be
developed using the experience of such countries like the USA, Canada or
Australia.
References
1. Analysis of the
Health Check Proposals: the reform of the mechanisms for direct support, European
Parliament, Directorate General Internal Policies of the Union, Brussels 2008, p. 3.
2. Communication from
the Commission to the European Parliament and the Council: Preparing for the
"Health Check" of the CAP reform, Commission of the European
Communities, Brussels 2007.
3. Czyżewski A.:
The Briefing Note in the third part of the workshop „Market regulation vs. Risk
management: how to cope with the instability on the agricultural markets?”, public hearing on 9
June 2008 in European Parliament, the Budget Committee (COBU), Brussels 2008.
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A., Kułyk P., Przegląd ważniejszych obszarów
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Biofuels. Impast Assessment, European Commission, Brussels 2006.
8. Information of the
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9. Introduction do
Risk Management, Risk Management Agency, USDA, Washington 1997.
10. Matuszczak A.: Dualny rozwój rolnictwa i
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[1] Information of the
Polish Government opinion on CAP after 2013, Kancelaria Prezesa Rady
Ministrów, Warszawa 2006.
[2] Polska wizja Wspólnej Polityki Rolnej
wobec wyzwań oceny funkcjonowania WPR, Ministerstwo Rolnictwa i
Rozwoju Wsi, Warszawa 2007, p. 3-4.
[3] Communication from
the Commission to the European Parliament and the Council: Preparing for the
"Health Check" of the CAP reform, Commission of the European
Communities, Brussels 2007, p. 3.
[4] A. Czyżewski, P. Kułyk,
Przegląd ważniejszych obszarów Wspólnej Polityki Rolnej
UE; rekomendacje dla „Health Check” 2008, Katedra Makroekonomii i Gospodarki
Żywnościowej, Akademia Ekonomiczna w Poznaniu, Poznań 2008.
[5] A. Czyżewski, S. Stępień,
Reforma mechanizmu WPR w ramach „Health Check” a potrzeba stabilizacji
rynków rolnych UE, Katedra Makroekonomii i Gospodarki
Żywnościowej, Akademia Ekonomiczna w Poznaniu, Poznań 2008.
[6] Despite the fact
that the reforms in 2003 introduced the
Single Payment Scheme independent from the production size or structure there
was a possibility of a partial dependence of the payments on the production
size (e.g. in case of oil seeds p to 25%, wheat – to 40%, calves and
mother-cows slaughter – to 100%). Within this system it was also possible to
so-called mixed system in which a part of the gained payments are the
historical payments and the rest - on
the regional basis (such a system was present e.g. in Great Britain). In a
further perspective such possibilities are to be limited. See. WPR – Nowoczesna
polityka rozwoju rolnictwa i obszarów wiejskich, Fundacja
Programów Pomocy dla Rolnictwa FAPA, Warszawa 2007, p. 25-43.
[7] Analysis of the
Health Check Proposals: the reform of the mechanisms for direct support,
European Parliament, Directorate General Internal Policies of the Union,
Brussels 2008, p. 7-8.
[8] Single
Area Payment Scheme – SAPS depends on the division of a regular annual
financial envelope which qualifies to the reference payment because of the area
used for farming and for the payments per each hectare for a particular year.
Reference area used for farming is a sum of all the areas in a particular
country on 30 June 2003 of fields, long-term crops, green areas and home
gardens and used by the owners which fulfil the criteria of minimum area for
the payment. The areas which constitute the reference area used in farming must
be of a good agricultural culture. Such a system takes place in 10 ne member
states. Whereas in SPS the payment per farm is equal an average payment of direct
payments received by the farm in reference period 2000-2002. The area entitled
to receive the support covers field areas and green areas, however excludes
long-term crops, forests and the ground used for non-farming purposes.
Receiving the support by farmers depends on obeying the requirements of food
safety and environment protection.
[9] In a historical
model for each farm a single payment was calculated (separate for a fallow
lands and for other fields entitled for the payment) which is dependent on the
production size in reference period (i.e. in 2000-2002). Hence, payments calculated per
hectare were different for each farm. A regional model of single payments
differs from historical model this way that the regional financial envelop is
shared among all farmers in the region also those who did not receive the
payments in the reference period. Regions are defined by the states members on
the objective criteria (e.g. Poland is one region and Great Britain has four
regions: England, Wales, Scotland and Northern Ireland) and for all farmers
from the particular region a regional payment per hectare applies, uniform for
all grounds or distinguished green lands and other entitled grounds. The
payment amount received by the farmers are calculated on the basis on the
quotient of global payment amount received by all the farmers in particular
region or country in reference period and the number of hectares entitled for
the payment. This way a single payment in region is stated. This amount is
multiplied by the right number of freehold entitled to get the support which
refers to the number of general freehold. It shows the magnitude of the single
payment received by the agricultural producer.
[10] Analysis of the
Health Check…, op. cit., p. 3.
[12] In 2005 the
reduction was 3%, in 2006 – 4%, and from 2007 it has been 5% of received by the
farm single payments, but there are those farmers excluded who annually receive
less than 5 000 ˆ of direct support. See
Modulacja w Polsce – wyliczenia szacunkowe, Fundacja Programów
Pomocy dla Rolnictwa, Sekcja Analiz Ekonomicznych Polityki Rolnej, Warszawa
2007, p. 2.
[13] For example, the
farms which receive more than 20 000 ˆ annually in 2005 in UE-25 absorbed as
much as 56,56% if total financial means and constituted only 5,55% of general
number of farms. See EU Strategy for Biofuels. Impast Assessment, European
Commission, Brussels 2006, p. 7.
[14] A. Czyżewski, P. Kułyk,
Przegląd ważniejszych obszarów…, op. cit.
[15] A. Czyżewski, S. Stępień,
Reforma mechanizmu WPR…, op. cit.
[16] A. Matuszczak: Dualny rozwój rolnictwa
i obszarów wiejskich, [w:] Uniwersalia polityki rolnej w gospodarce
rynkowej – ujęcie makro- i mikroekonomiczne (red. A. Czyżewski), Wyd. AE w
Poznaniu, Poznań 2007, p. 107-109.
[17] During the meeting
of WTO in Doha, the EU declared the abolition of All export subsidies by the
end of 2013 and readiness to open the market for the import from other
countries.
[18] Polska wizja Wspólnej Polityki Rolnej…, op. cit., p. 11.
[19] Communication from the
Commission…, op. cit., p. 6.
[20] The CAP reform
directions within the review planned for 2008/2009 – form the perspective of
Poland, Sekcja Analiza Ekonomicznych Polityki Rolnej FAPA oraz Departament Analiz i
Strategii UKIE, Warszawa 2008, p. 9-10.
[21] To some extent also
the decoupling mechanism itself limits the price risk because it lets the
farmer to change the production structure into the direction of the market
which gives a higher added value. However, the change in market support
instruments and transition to a single payment scheme requires New forms of
income stabilisation.
[22] A. Czyżewski:
The Briefing Note in the third part of the workshop „Market regulation vs. Risk
management: how to cope with the instability on the agricultural markets?”,
wystąpienie na sesji Komisji Budżetu i Rolnictwa Parlamentu
Europejskiego (COBU) dnia 12 czerwca 2008 r., Bruksela 2008.
[23] S. Stępień, Dyskusja na temat
propozycji Komisji Europejskiej przedstawionych w ramach „Healt Check”, Katedra
Makroekonomii i Gospodarki Żywnościowej, Akademia Ekonomiczna w
Poznaniu, Poznań 2008 (maszynopis).
[24] A. Czyżewski:
The Briefing Note…, op. cit.
[25] W. Rębisz: Ubezpieczenie dochodów
w rolnictwie, Biuletyn Informacyjny ARR
5/2004, p. 58.
[26] Introduction do
Risk Management, Risk Management Agency, USDA, Washington 1997.
[27] Such a system is
present in the USA with reference to wheat, maize and soya. A farmer who sells
grain makes a forward or future transaction. Forward transactions are usually
made between the farmer and elevator who is obliged to buy the grain in few
weeks on the fixed price accepted on the day of the agreement. Future
transactions on the commodity exchange also concern grain deliveries in a
stated time but in contrast to forward transaction are rarely put into
practise. So future transactions are speculative transactions and their role is
to level the price risk See K. Rojewski: Zarządzanie ryzykiem w produkcji
roślinnej poprzez ubezpieczenia i transakcje terminowe na przykładzie
USA, [w:] Kierunki zmian ubezpieczeń produkcji rolnej w Polsce (red. J.
Handschke, K. Łyskawa), Centrum Edukacji Ubezpieczeniowej, Warszawa 2008,
p. 82-83
[28] That type of
insurance is e.g. in Canada. This is a programme for farms in which a farmer
deposits particular amounts on a special bank account and the government pays
the same amount. The money is to be withdrawn in special situations of natural
disasters which cause the income drop below a stated level of stabilisation
coefficient. Whereas Australian Programme of Farms’ Deposit Management enables
the farmer in times of good prosperity to deposit a part of income on a
programme account. It exempts the agricultural producer from a part of a tax
and transfers the rest of it to a lower tax limit. This programme introduces a
tax privilege when withdrawing from the fund which in fact substitutes the
withdrawals which would take place in case of natural disasters if the fund did
not exist. The deposit fund withdrawals which take place in times of an income
drop below a stated indexes’ levels are in this programme tax exempted.