Twenty years after the Carpe (Buckwell) report: impacts and remaining challenges?

Abstract

The CARPE report urged radical Cap reform before Eastern Enlargement. Its four proposed elements were: market stabilisation, environmental and cultural landscape payments ECLP, rural development incentives RDI and transitional adjustment assistance. The two Pillar CAP since Agenda 2000 has most of the actions suggested for ECLP and RDI, but compensatory direct payments have become permanent rather than transitional.

Introduction

Soon after his appointment in 1995, European Agriculture Commissioner Franz Fischler set up several internal and external exercises to consider the further development of the Common Agricultural Policy (Cap)1. One of these exercises built on an invitation by the Directorate-General for Agriculture of the European Commission (DG Agri) to Allan Buckwell to bring together a group of experts who, through working together on an analysis of the inconsistencies and problems inherent in the existing Cap, would endeavour to define a series of principles and elements which could form the broad outline of a new integrated rural policy. This group of nine experts worked through a series of meetings from November 1995 to July 1996 with the active participation of six Commission officials, reporting to the head of the Analysis and Conception Unit in DG Agri2.  Their report, ‘Towards a Common Agricultural and Rural Policy for Europe (CARPE)’ was presented to the Commissioner in July 1996 and was published in Issue No 5 of European Economy dated 1997 but which finally only appeared in March 1998, Buckwell et al (1997). Fischler was supportive of ideas to push the CAP in the direction of Rural Development, as evidenced by the 1996 Cork Conference. However, the resistance to radical change from farming interests was apparently strong enough to delay publication of the CARPE report3.
The report was structured in two parts. The first four chapters argued why the CAP could not continue as it was. The last four chapters outlined the elements of what the authors considered would be a preferable policy. The next two sections summarise these briefly before the final section evaluates the influence of the report.

Why was CAP reform considered necessary in the mid-1990s?

The first half of the report was taken up with a detailed discussion of why the CAP as it existed in the mid-1990s was inappropriate for the longer-term future. It was argued that unless agreement could be found on what was wrong with the CAP it was unlikely that consensus could be found on the way forward. The three principal reasons for further reform were first, to prepare for eastern enlargement, second, to deal with domestic dissatisfactions with the Cap, as seen by farmers, by food consumers and society generally, and third, to accommodate the move to more liberalised international trade.
The issue of Eastern Enlargement emerged at the same time as the EU was undergoing and anticipating important changes. Following the 1992 Maastricht Treaty the European Communities were further integrating into the European Union and forging ahead with monetary integration which would culminate in the creation of the Euro. Simultaneously, a defining issue was the impending enlargement of the EU to embrace the ten newly democratised Central and Eastern Europe Countries (CEECs)4. These countries were poorer and more agricultural than the EU15. The report argued that the mid-1990s CAP with its relative high prices, its cumbersome and distortive supply management and inappropriate compensation payments was completely unsuited to the CEECs. Simply to have applied this CAP to those countries would have caused them significant economic and operational problems. It would also have posed challenges to the EU budget and international trading relations. There was a significant requirement in the CEECs to improve the productivity and competitiveness of their farm and food sectors and to help stimulate rural activity to absorb the potentially large outflow of under-employed labour in the farm sector. The focus of agricultural policy for these countries should be to help with their positive adjustment rather than focus, as in the EU15, on compensating for reductions in support prices.  
Turning to the domestic dissatisfactions with the Cap, few groups then claimed the CAP to be a well-articulated and operated policy. In the mid-1990s farmers suddenly found themselves enjoying relatively high commodity prices and generous compensatory arable and livestock payments. Incomes from farming were at a high. However, farming organisation leaders were aware of the vulnerability of these new direct payments especially their sheer visibility compared to the previous system of price support and the hard-to-justify distribution favouring the largest producers. When pressed to explain the direct payments farmers leaders could only offer broad and vague ideas such as ‘food security’ and ‘payments to properly steward the countryside’.
Although economists consistently pointed out the scale and regressive nature of the consumer costs of the high-price classic pre-MacSharry Cap, this did not resonate as a strong political issue in most Member States. Societal concerns were (and remain) more focussed on the perception that the CAP encouraged unhealthy over-intensification of farming at the expense of food safety, nature conservation and animal welfare. The fact that this technology-driven intensification progressed further and faster in the least supported sectors (pigs, poultry and horticulture), and was observed in all developed countries regardless of their domestic agricultural support policies did not dent this belief.
A more powerful domestic critique of the CAP had emerged from environmental interests. This had been growing steadily since the early 1960s5.  By the mid 1990s a considerable body of evidence documented the negative environmental impacts on soil, water, air, biodiversity and landscape of modern agricultural structures and technologies. These indicated the challenge to natural ecosystems of maintaining production intensities which were thought necessary to maintain food output for the constantly growing, and enriching, population, but without undermining the long run capacity to do so. Although the climate impact of accumulating CO₂ and other Greenhouse gases was strongly discussed amongst climate scientists and environmentalist in the 1990s, and was discussed in the CARPE report, the agricultural contribution to harmful emissions did not figure strongly in the debates on the CAP until much later.
The CARPE report adopted the language of externalities, market failures and public goods to explain environmental concerns about over-production of ‘bads’ such as pollution, depletion of biodiversity and soil erosion, and under-provision of ‘environmental goods’ such as herb-rich meadows and treasured cultural landscapes. The necessary policy response was to find ways to stimulate collective actions to correct, respectively, this over- and under-provision. To do this the report proposed building on the early environmental measures in the Cap, for example the early agri-environment schemes which were one of the MacSharry accompanying measures.
This analysis indicated that the CAP was an unbalanced policy in the mid-1990s. The prime imbalance was the over-dependence on market policy at the expense of structural, environmental and rural development measures. This incoherence showed up in the resources applied to these broad areas of policy and in many of the measures within each of these three strands. It also resulted partly from an intrinsic difficulty of decision making in a supra-national organisation where the needs of each Member State have to be taken into account. This inevitably led to national exemptions, exceptions and qualifications which steadily complicated the policy to the point of incoherence.
The third consideration pressing for CAP reform in the 1990s was the movement to more liberalised trade in agricultural products. Together with the pressure to contain growth in budget expenditure this was the major explanation of the MacSharry reform which turned the CAP from principally a commodity market intervention system to a system of direct compensatory payments to individual farmers. This had been necessary to reduce EU agricultural prices towards world price levels inter alia to reduce the scale of export subsidies. The Agreement on Agriculture in the Uruguay Round of multilateral trade negotiations under the General Agreement on Tariffs and Trade (Gatt) came into force on 1 January 1995.  The Agreement contained commitments on market access, domestic supports, and sanitary and phytosanitary regulations and a goal to eliminate export subsidies. Anticipating this agreement drove the direction of the MacSharry reform. However, the partial nature of that reform, which didn’t touch many highly protected sectors and created new arable area and livestock headage payments which were still clearly coupled to production, indicated that it was only the first stage of a larger policy change. 
In summary, the CARPE report concluded that the legitimacy of the classic CAP had expired. The EU had developed into the world’s largest player in international food markets so it was unwise to arrange its domestic prices higher than its competitors. Furthermore, it argued that it was vital that the new Member States understood the pressures for change and that the high price support, supply management and compensation payments should all be substantially modified before Eastern enlargement. The policy was also doing far too little to steer farming onto a more environmentally sustainable basis.

What were the key ideas for the Common Agricultural Policy for Europe, CARPE?6

The report proposed the objective of a common agricultural and rural policy for Europe should be “to ensure an economically efficient and environmentally sustainable agriculture and to stimulate the integrated development of the Union’s rural areas.”  It suggested the resources deployed for efficient agriculture, improved environmental land management and rural development should be much more equally balanced.  Further, that there should be a move from a sectoral to territorial approach, and a move away from the distortions and imbalances which over-stimulated some sectors at the expense of others, and pushed farmers to aim at quantity rather than quality in their production decisions. In the process the aim must be to better integrate European agriculture into the world food system from which it had insulated itself in the past.
To do all this building from existing policy measures the CARPE would require four elements: Market Stabilisation (MS), Environmental and cultural landscape payments (ECLP), Rural development incentives (RDI) and Transitional adjustment assistance (TAA). Some key characteristics of the four elements are summarised in table 1 below.
The first element, market stabilisation, would be a much-reduced, residual of the Commodity Market Organisations which made up the bulk of the pre-MacSharry Cap.  It would provide a collective EU-wide “safety net for commodities subject to uncontrollable market fluctuations”.  Although this was not explicitly spelled out, it was certainly implicitly understood that risk management requires a much broader approach than simply market intervention including measures to diversify rural businesses, help them increase revenues through better integration in the food chain, and improved quality and marketing.
The environmental and cultural landscape payments were “offered to protect against damage and depletion of rural resources and cultural landscapes of rural areas, and to encourage enhancement of these resources and the social fabric of rural areas. In principle ECLPs should cover the whole territory”.  It was stressed that “these aids are called payments not subsidies or transfers because they are paid from the public purse to those who contract to supply public services.  They are payments for a service not a charitable transfer. The services must therefore be delivered or payments will not be made.  This means that the ECLPs have to be objectively defined and justified in relation to specified targets and must include built-in monitoring.”  It was certainly envisaged that this element could grow to become a substantial part of the policy in terms of demands on public funds.  It would have several tiers of operation.  “At the base level, Tier 0, are conditions which farmers and all land managers must respect without payment.”  The ‘zero’ indicates zero payment or ‘O’ for obligatory demonstrating legally defined standards for “clean air and water, well-husbanded soil, healthy food and humanely cared-for animals.” Above this base level, two further tiers were defined for which payments could be expected.  Tier 1 for “farming systems which provide high nature value” and Tier 2 which is concerned with “specific environmental management practices” which will generally involve “more restricted areas and more intensive actions on the part of managers to preserve or create environmental effects of greater significance.”
The concept of the third element of CARPE, rural development incentives was wide. The agricultural development incentives envisaged were a broad range of possible actions to improve structures and productivity through help for farm consolidation, early retirement, infrastructure, information, skills, marketing, improving quality and horizontal and vertical collaboration in the food chain. The wider rural development supports could include: rural institutional development, technical assistance, human capital development, infrastructure especially telecommunications and information technologies, housing, social and business services, and village renewal.

Table 1 - Overview of the elements of CARPE

The fourth element of the policy transitional adjustment assistance was conceived as a way of provoking farmers to realise they had to accept change and prepare for it as well as providing physical (monetary) assistance to ease the adjustment to the new market oriented reality. Two key features of this element were stressed: first, “TAA is forward and not backward looking.” A major criticism of the arable and livestock payments was precisely that they were backward-looking compensation based on past production levels. Second, help for transition cannot go on for ever. The payments were to help farmers make a transition and to be transitional themselves. They were described as the “political lubrication to ease the friction of moving the policy forward” and they should be “decoupled from agricultural production, should not distort competition and may have environmental conditions attached.”
The presentation of CARPE concluded with an acknowledgement that acceptance of its ideas required changes in attitudes and perhaps institutions.  It flagged the need for simplification. It acknowledged that the financing and co-financing of the measures were critical factors to be resolved, and it stressed that the proposed changes were particularly necessary to pave the way for the eastern enlargement of the EU. 

How much impact has CARPE had?  What did it miss or misjudge?  

Two preliminary points are necessary before answering these questions. First, the CARPE report was one of many reports and representations made during the reform process of the late 1990s. The process of EU policy making is very open. The European Commission and Parliament take considerable trouble to be accessible and to hear the views of all civil society groups. No one can accuse the EU of making policy in an inaccessible and rushed way. No single study group, or interest group can ever claim to have had dominant influence over any policy change. Other research and interest groups were making analyses along broadly similar lines to the ideas of the CARPE group. Second, an objective assessment of the influence of CARPE cannot possibly be offered by its chairman; all he can do is reflect on policy developments which have been consistent with the report and those which have not been followed, and speculate on the reasons.
The Fischler cabinet, and the analysis and conception unit of the DG Agri services were sympathetic to the critique and solutions offered by CARPE.  The idea to move from a sectoral to more territorial policy was well aired at the first Cork Rural Development conference in November 1996 and in the Cork Declaration (1996) produced by that conference. The ultimate result of all this was expressed in the Agenda 2000 reform which created a two-pillar Cap, European Parliament (1999). The first Pillar contained market support and direct payments. These were 100% funded under the on-going European Agricultural Guarantee and Guidance fund (EAGGF).  Agenda 2000 took further the reductions in price supports replacing them with, still coupled, direct payments.  The second pillar for Rural Development was launched with its own regulation and co-financed by EAGGF and by the Member States7. The Rural Development pillar embraced most of the measures under the ECLP and RDI elements suggested by CARPE and adopted most of the characteristics listed in table 1 for these elements of the CARPE. The key innovations were programmed, regionalised, co-financed, multi-annual schemes which had built-in monitoring and evaluation, all in strong contrast to the principles of Pillar 1. However, the scale of the second pillar, expressed in budgetary terms, was far smaller than envisaged under CARPE. Significantly, there was no acceptance of the idea that compensatory direct payments should be seen as transitional. Indeed as time passed they were increasingly referred to as income support measures despite there being no effort whatsoever to target them according to the income level of the recipients.
Whilst Agenda 2000 pushed the CAP a significant way in the direction towards a CARPE it was immediately accepted that there was much more to do to prepare the CAP for the Eastern Enlargement due to take place in 2004. This led Fischler in his second mandate (2000-05) to propose a mid-term review, European Commission (2004). This extended the replacement of commodity market support ultimately to all sectors and consolidated the compensatory payments for each farm into a single farm payment (SFP) which was supposed to be decoupled from production8. This process itself took several years. The SFPs soon accounted for a very large part (currently 72%) of the total CAP budget. Meanwhile, although the MacSharry and Agenda 2000 reforms allowed supply management in the arable sector (set aside) to be ended, it took many more years for the dairy and sugar production quota systems to be ended. Thus the warning in the CARPE report that the compensation-based direct payments and supply management controls would be inappropriate for the new Member States was not heeded. This resulted in a complex set of special provisions for direct payments and the application of quotas in the CEECs. In the process this established that the ‘common’ policy could become less and less common as national flexibility was accommodated.  Even more seriously, the fact that the New Member States were granted a simplified version of the single farm payment has ensured that the top priority for agricultural Ministers in those States is to achieve parity on the payment rates per hectare their farmers receive with farmers in the EU to their west. Whilst politically this is completely understandable it propagated and prolonged the sheer inefficiency of the direct payment system9. The CARPE report patently failed convincingly to explain the seriousness of not reforming direct payments before enlargement.
One constant in the CAP reform debate, which was acknowledged in CARPE is the heartfelt cry at each reform for simplification of instruments. It is unfortunately the case that objectives for agriculture are progressively widened (e.g. to reduce GHG emissions) and more operational flexibility is demanded, both of which take the policy in the opposite direction.  Some issues come and go in the debate. A live issue in the mid 2010s which is not mentioned in the CARPE report are the economic and contractual relations in the food supply chain. There is also more attention in recent years to the challenge of encouraging innovation in farming and the food industry, although many innovations, particularly those based on gene science, create nervousness in some parts of the EU.
Overall, upon rereading the CARPE report twenty years after it was published it was striking how remarkably similar are today’s debates on the Cap, but also it is noted that some matters which economists had thought were settled, are still questioned. Two key issues were and remain: the direct payments, their purpose and distribution between Member States and between farmers; and the appropriate tools for risk management. Many thought the drive for ‘market orientation’ which followed the Uruguay Agreement on Agriculture, and its expression in the CAP for decoupled payments, was an irreversible shift. However, there are signs that even this is increasingly questioned as it is claimed that the fruits of globalisation have not been shared fairly.
Similarly, the argument that the CAP should increasingly focus on correcting market failures and imperfections is accepted, but to what extent and how to do this is still not a settled matter. The CARPE contention that more attention should be paid to integrating environmental land management into the Cap, and dealing with the challenge of supporting farming in marginal areas is accepted in policy rhetoric. But the practical decisions sometimes tell another story. The process of ‘modulating’ (i.e. switching) funds steadily from Pillar 1 to 2  was dealt a blow in the 2013 reforms under Commissioner Ciolos which allowed Member States to reverse the flow of funds back to Pillar 1 from pillar 2, CAPreform.EU (2013). Even more seriously, given the magnitude of funds involved, the CARPE prescription that land management payments should be voluntary and in regionalised, programmed, multi-annual schemes was reversed by the Ciolos Pillar 1 Greening10 This mandates the adoption of simple, generalised annual greening actions in Pillar 1 involving 30% of the value of the pillar 1 payments. The effectiveness of this approach to greening is still being assessed. Whether this turns out to be a longer-term reversal, or a temporary hiccup remains to be seen.
Throughout the reform debates of the last two decades it has been clear that reforms of EU farm policy is still heavily restricted by what is acceptable to farming organisations11. Their influence and direct involvement is certainly diminished compared to their intimate involvement in the days of classic CAP price fixing.  However, and even with the direct full involvement of the European Parliament in the legislative process, farm Ministers in the European Council, together with MEPs with strong agricultural interests sitting on Com Agri, and the instinctive agricultural interests of many officials in DG Agri of the European Commission ensures that farm interests are still strongly influential on the reform process. Only procedural and institutional change could change this12.
The CAP is difficult and slow to reform. It has evolved considerably, but remains an expensive and badly articulated policy. Internal dissatisfactions, especially budget pressure, combined with enlargement and external pressure have brought about change since the mid-1990s. Whilst the first two especially budget pressure remain and may intensify, Brexit and the attacks on globalisation and WTO13 may weaken these other forces for change. CAP reform is indeed a substantial challenge for the EU. Not only is the CAP wasteful of scarce EU finances, but it does not sufficiently help farmers adapt to climate change. Yet there is considerable scientific evidence and consensus that agricultural sustainability is threatened by climate change, nutrient leakage, soil erosion and biodiversity depletion. This suggests the policy should be increasingly devoted to helping farmers innovate and adjust to these challenges. CARPE’s proposed adjustment assistance did not fly, it is up to today’s generation to imagine new policy approaches and instruments to help farmers adapt.

References

• AA.VV. (1996), Transformaciones de la Pac en una política rural más integrada, Revista Espanola de Economia Agraria, n.176-177 [link]

• Buckwell A. et al (1997), Towards a Common Agricultural and Rural Policy for Europe, European Economy, Reports and Studies, No. 5, European Commission Directorate General for Economic and Financial Affairs, Brussels

• Buckwell A. and Sotte F. (Eds) (1997), Colitvare L’Europa, Per una nuova politica e rurale commune, Liocorno Editori

• Buckwell A. et al (2017), CAP– thinking outside the box: further modernisation of the CAP– why, what and how? RISE Foundation, Brussels.

• Cork Declaration (1996), [pdf]

• Commission of the European Communities (1995), Study on alternative strategies for the development of relations in the field of agriculture between the EU and the associated countries with a view to future accession of these countries, (Agricultural Strategy Paper), Cse(95) 607, Dgvi and Dgi, Brussels.

• European Parliament (1999), The Agenda 2000 reform of the CAP [link]

• European Commission (2003), Mid Term Review of the CAP [link]

• CAP reform.EU (2013), Ciolos Reform of the CAP [link]

• European Parliament (2017), Developments in the financing of the CAP [link]

• Hart K., Baldock D., Buckwell A. (2016), Learning the lessons of greening of the CAP. A report for the Land Use Policy Group in collaboration with the European Nature Conservation Agencies Network, Institute of European Environmental Policy, London

• Swinnen J. (2008),  The Perfect Storm: The Political Economy of the Fischler Reforms of the Common Agricultural Economy, Centre for European Studies, Brussels

• Swinnen (2015), The Political Economy of the 2014-2020 Common Agricultural Policy, An Imperfect Storm, Centre for European Studies, Brussels.

Annex 1

• 1. The Commission itself produced a Strategy paper in December 1995 which gave prominence to the challenge of eastern enlargement, European Commission (1995).
• 2. The members of the group are listed in Annex 1.
• 3. Such was the frustration of some of the group with this delay that the ideas were published in Spain (AA.VV., 1997) and in Italy (Buckwell and Sotte, 1997).
• 4. And of course the two island states of Malta and Cyprus.
• 5. The publication of Rachel Carson’s 1962 book Silent Spring is often taken as an early milestone in the public awareness of environmental concerns.
• 6. This section quotes directly from the CARPE report to indicate the language which was used even twenty years ago illustrating how little change there has been in the interim!
• 7. The funding arrangements for the two CAP pillars subsequently changed, see European Parliament (2017).
• 8. The decoupling was not complete from the outset and subsequent reforms have widened the scope for coupled payments.
• 9. The Rise Foundation report on Cap, Buckwell et al (2017) ie 20 years after CARPE, argued that a key reason for further CAP reform was that the Pillar 1 direct payments are inefficient, ineffective and inequitable.
• 10. Hart, Baldock and Buckwell (2016) explains the Greening of Pillar 1 in detail.
• 11. The political reform of CAP reform has now been analysed in detail especially the 2004 Fischler “perfect storm” and the 2013 Ciolos “imperfect storm”, see Swinnen 2008 and 2015.
• 12. The Rise report Buckwell et al (2017) outlines how this might be done.
• 13. For example those emanating from the US President.