Stamp on the existing order or true
reform?: Common Agricultural Policy post
2013 negotiation process and stakes of
Polish and Dutch governments
Magdalena Domańska
Student number: 1306677
magdalena.domanska@hotmail.com
July 2014, Leiden
________________________________________________________________________________ __Leiden University
Master International Relations
Track European Union Studies 2012-2013
Supervisor: Prof. Dr. Ir. Gerrit Meester
Stamp on the existing order or true reform?: Common Agricultural Policy post 2013 negotiation
process and stakes of Polish and Dutch governments...0
Word Count:...2
Research problem and methodology...3
1. Structure of Polish and Dutch agricultural sectors...6
1.1. Polish agriculture and its position in national economy...6
1.1.1. Position of the agricultural sector in Polish economy...6
1.1.2 Structural characteristics and position in Europe...6
1.1.3. Recent transformation of the agricultural sector...7
1.2. Dutch agriculture and its position in national economy...9
1.2.1. Position of the agricultural sector in Dutch economy...9
1.2.2. Structural characteristics and position in Europe...11
1.2.3. Developments in the Dutch agricultural sector...12
1.3. Comparison of the agricultural sectors in Poland and the Netherlands in the light of their economies...13
2. Evolution and current shape of the CAP...15
2.1. CAP reforms and evolution of policy paradigm...15
2.2. Theory of the CAP reform process...19
2.3. Relation between the EU budget and CAP expenditure...20
2.4. State of play 2007 - 2013 and measures proving national differentiation with respect to Poland and the Netherlands...21
2.4.1. Support for farmers...21
2.4.2. Common organisation of agricultural markets...23
2.4.3.The CAP financing...23
2.4.4. Rural development...24
3. The CAP decision-making process and the role of the institutions...27
3.1. Introduction...27
3.2. Ordinary legislative procedure...27
3.3. Trialogues...28
3.4. Status of the institutions in the CAP decision and reform process...29
3.4.1. Introduction...29
3.4.2. European Commission...30
3.4.3. Council of Agricultural Ministers...31
3.4.5. European Council...36
4. Negotiations on the CAP post 2013 and positions of Polish and Dutch governments...39
4.1. Commission Communication: The CAP towards 2020: Meeting the food, natural resources and territorial challenges of the future in light of Polish and Dutch government proposals...39
4.1.1. Introduction...39
4.1.2. Objectives of the future CAP...39
4.1.3. Direct payments system...41
4.1.4. Market management and intervention...43
4.1.5. Rural development policy (RDP)...43
4.2 From the Commission proposals to political agreement...44
4.2.1. Introduction...44
4.2.2. Direct payments...44
4.2.3. Horizontal regulation...49
4.2.4. Rural development...50
4.2.5. Single CMO...51
4.3. Reactions of the Polish and Dutch governments to the Commission proposals...52
4.3.1. Introduction...52
4.3.2. Direct payments...53
4.3.3. Single CMO...56
4.3.4. Rural development...57
4.3.5. Horizontal regulation...58
4.4. Finalisation of the negotiations and political agreement...58
5. Conclusions...59 Annex 1...62 Annex 2...62 Annex 3...62 Annex 4...63 Annex 5...63 Annex 6...64 Acknowledgments...64 Bibliography...65
Word Count:
Main body (without footnotes, bibliography and table of contents): 19 861 words Bibliography, footnotes and table of contents: 8 661 words
Research problem and methodology
This paper below is devoted to recent reform of the Common Agricultural Policy (CAP), its process, main actors and main policy issues. The negotiation process and its outcome is analysed in view at the agricultural sector and government positions of two Member States (MS). Further the paper follows governments' positions before and during the negotiations as well as the inter-institutional negotiation process. This paper aims at answering two main questions. What are the main elements of the reform and how the reform was shaped and what stakes from both government positions appear during the inter-institutional negotiations? An additional question regards the extent to what the MS have an influence on the CAP policy process in the circumstances where (as it was till the end of the Irish presidency in June 2013) there were 27 national interests?
The literature on the CAP reform process is very rich. Numerous valuable accounts on the previous reforms provide the theoretical basis for this paper. The analysis of the 2013 CAP reform is interesting, not only because it is a recent process but also and more importantly it is the first post-Lisbon CAP reform negotiated under the co-decision procedure.
The comparison between Polish and Dutch agriculture serves as an illustration of the different challenges and interests, which this policy should serve. Poland and the Netherlands are very different when it comes to its economy, the position of agriculture in the economy, the political position in the EU and globally, and the history of its integration. It is interesting to analyse, on the one hand how these aspects shape the view of these countries on the CAP and how this policy influences the agricultural sector in the MS.
Though it is an important aspect of the decision process, the activities of the pressure groups on the national and the European levels are not included in this paper because any comprehensive analysis of their activities seems to exceed the scope of this paper. The focus is on both MS views and the position in the negotiations against the inter-institutional decision making process. In addition, a rather general approach covering many issues was adapted in order to enable the comparisons between the institutions and between Poland and the Netherlands. However, the
complex political and economic issues and therefore regards it as the biggest limitation of the paper.
In this paper the comparative study method is applied. The Dutch- and Polish agricultural sectors and policy documents are the objects of this research.1 Chapter 1 and part of Chapter 4
are devoted to this subject. Chronological and institutional method are often used in the studies of the CAP reform.2 Chapter 2 presents the evolution of the CAP and state of play at
the time of the negotiation start and refers to chronological method. Chapter 3 describes the institutional setting, in which the reform was negotiated and as such it applies institutional method. Chapters 2 and 3 present also the theories of the EU agricultural policy making process as well as the positions and usual stakes of the institutions, which are the main actors of the negotiation process.
The approach adopted in this paper partly refers to the framework of the policy progress proposed by Schmidt and Radaelli. This framework lists five main factors explaining policy change in the conditions of the European Union. These factors are:
- policy problems that establish the need for a change (presented in the both members states and the Commission proposal);
- the policy legacies which may or may not be compatible with the proposed solution (brief history of the CAP presented in Chapter II);
- policy preferences that may or may not change in the light of the problems and proposed solutions (In this paper, the needs of the two MS based on their economic situation are regarded as a part of this factor);
- the capacity of actors to respond to problems and the proposed solutions (Institutions are regarded as main actors and therefore this issue will be addressed in Chapter III) and finally; - the discourse that has a power of enhancing the capacity.
Comprehensive description taking into account the position of all the MS and interests groups, which could be regarded as a legitimate account of the last factor, is beyond the scope of this paper. 3
1 W. Lawrence Neuman, Social Research Methods, Qualitative and Quantitative Approaches, 7th edition, Boston, Pearson, 2011, p. 486.
2 A, Oskam, G. Meester, H. Silvis, EU policy for agriculture, food and policy areas, Wageningen: Wageningen Academic Publishers, 2010, p. 26.
Chapter 4 is devoted to the comparison of the negotiation position of the institutions and both MS. In the conclusions, the presented negotiation process will be put in the theoretical basis provided in Chapter 2 and 3. Moreover, preliminary assumptions on the potential of the reform for both MS will be gathered.
In June 2013, I had an opportunity to exchange the views with officials from the Polish and Dutch Permanent Representations dealing with agricultural dossiers in the Special Committee for Agriculture. The objective of these interviews was to focus my further research, look behind the curtain of the decision making process and confirm some theories and assumptions with practitioners. However, opinions of Andrzej Babuchowski and Frits Thissen quoted in this paper cannot be interpreted, regarded as- or attributed to the official position of the governments they are representing and are merely an expression of their personal opinions.
3 V.A. Schmidt, C.M. Radaelli, Policy Change and Discourse in Europe: Conceptual and
Methodological Issues, West European Politics, Volume 27, Issue 2, 2004, p. 186; compare I. Garzon, Reforming the Common Agricultural Policy: History of Paradigm Change, Palgrave Studies in
1. Structure of Polish and Dutch agricultural sectors 1.1. Polish agriculture and its position in national economy 1.1.1. Position of the agricultural sector in Polish economy
Poland's economy was the only economy in the European Union (EU) to avoid a recession after 2008-09 economic downturn. However, GDP per capita remains below the EU average and unemployment is higher than the EU average. GDP purchasing power parity4 in 2012 was
estimated at $814,1 billion. in 2012 GDP growth was 2% and decreased compared to previous years when it was 4.3% in 2011 and 3.9% in 2010. In 2012, GDP per capita was $20900 which ranked Poland, the 89th place in the world. In 2012, Poland had a negative foreign trade
exchange account balance. Germany and other EU countries are Poland´s most important trade partners. As for non-EU trade relations, China and Russia are significant importers, Russia is the fourth partner in terms of Polish exports (2012).5 Quarterly analysis of the
economy in 2013 seems to support the view of the economic slowdown, present in the EU, reaching Poland.6
As for the position of an agricultural sector in the economy and the employment structure, it creates 4% of the GDP (2012) and provides employment to 12,9% of the labour force (2010).7
60,9% of the population lives in urban areas (as defined in national terminology). Moreover, food and live animals constitute 7,6% of the exported commodities in terms of value.8 The
volume of international trade in agricultural products has increased after Polish accession to the EU and the export volume has been higher than the import volume. The main exported products are fruit and vegetables as well as tobacco products, sugar and cereals. When it
4 the sum value of all goods and services produced in the country valued at prices prevailing in the United States in the year noted. (The World Factbook)
5 Central Intelligence Agency (US), The World Factbook, retrieved on 7 September 2013 from https://www.cia.gov/library/publications/the-world-factbook/geos/pl.html.
6 National Polish Bank, Biuletyn Informacyjny, Warszawa, April 2013, p. 1.
7 FAO Statistical Yearbook 2013, World food and agriculture, Food and Agriculture Organization of the United Nations, Rome 2013, p. 15.
comes to animal products, meat, meat products and live animals were the main export commodities.9
1.1.2 Structural characteristics and position in Europe
According to Eurostat data from 2010, there are 1506,5 thousand agricultural holdings in Poland, constituting more than 12% of the total number of agricultural holdings in the entire EU, making it the third economy in the EU in terms of the number of agricultural holdings after Romania and Italy. Moreover when it comes to the economic value of the sector it is among the ten biggest in the EU.10 Utilized agriculture area (UAA) was 14447,3 thousand
hectares, which ranks Poland on the fifth position in the EU. Whereas the average size of the holding in the EU is nearly 15 hectares, in Poland it is approximately 9,5 hectares. However, in order to see the real picture of the sector we should take into account that almost eight in ten holdings are smaller than 10 hectares. Only 8% of the holdings have at least 20 hectares and as little as 2% of all the holdings have a size of at least 50 hectares (based on own calculations, Annex 1). Moreover, when it comes to productivity, Polish holding scores less than the average EU holding (Annex 4).
Last but not least, whereas the average Polish farm is smaller than its EU counterpart and agriculture in Poland has been traditionally engaging relatively high percentage of the labour force, it is also important to draw attention to regional differentiation in agriculture. In general farms in the western and northwest regions are much bigger and more market-oriented, whereas the farms in the eastern and southeast regions are smaller and focused on a self subsistence- and social role.11 Agricultural production in Poland is relatively extensive and
low-cost and as a result less efficient than in the EU-15. However, relatively low
9 A. Kowalski, Analiza Produkcyjno-Ekonomicznej Sytuacji Rolnictwa i Gospodarki Żywnościowej w
2011 roku, Edycja 49, Instytut Ekonomiki Rolnictwa i Gospodarki Żywnościowej - Państwowego
Instytutu Badawczego Warszawa 2012, p. 239-250.
10 Eurostat European Commission, Eurostat Pocketbooks, Agriculture, fishery and forestry statistics,
Main results - 2010-11, Luxembourg, Publications Office of the European Union, 2012, p. 24-26.
11 L. Dries, J.F.M. Swinnen, Institutional Reform and Labor Reallocation During Transition: Theory
Evidence From Polish Agriculture, World Development Vol. 30, No. 3, 2002, p. 464; compare: S.
Krasowicz, Regionalne zróżnicowanie zmian w rolnictwie polskim, in: Wybrane elementy
Regionalnego Zróżnicowania Rolnictwa w Polsce, Instytut Uprawy Nawożenia i Gleboznawstwa, -
accumulation of chemicals in the soil can enable development of organic and ecological farming.12
1.1.3. Recent transformation of the agricultural sector
1.1.3.A. Structural changes in the agricultural sector
Analysis of the agricultural sector in Poland would not be complete without viewing it in the context of a transition from the centrally planned economy to market economy and its, still relatively recent, EU accession. Whereas, the former made the political-, economic- and social reforms towards the market economy possible, the latter structured them and
accelerated their pace.13 One of the developments after 1989 was polarisation in agricultural
sector. This polarisation resulted in gaining economic power by part of the holdings on the one hand, and a decline of the total number of holdings on the other. In 2002 just 6% of holdings owned by individuals and of the area bigger than 1 hectare were capable of
expanded reproduction.14 It is moreover estimated that only 17-25% of them had an ability to
compete on the common European market. The great majority of holdings was not even capable of simple reproduction15 and some of them were forced even to cease production. In
this situation before the EU accession just 1,5% of the holdings were competitive which resulted in anxiety among the farmers.16
12Polish agriculture in light of the EE agriculture (Polskie rolnictwo na tle rolnictwa UE) Foundation of Assistance Programmes for Agriculture FAPA, Agricultural Policy Analysis Unit, Warsaw 2008, p. 3.
13 A. Kowalski, Wpływ akcesji do Unii Europejskiej na warunki ekonomiczne rolnictwa, in Sytuacja
Ekonomiczna Polskiego Rolnictwa po Akcesji do Unii Europejskiej, edited by J.S. Zegar, Instytut
Ekonomiki Rolnictwa i Gospodarki Żywnościowej - Państwowego Instytutu Badawczego, Warszawa 2009, p. 7.
14 In model of expanded reproduction value of production is higher than the value of production means which enables to start subsequent cycle of production on the expanded scale; E. Mendel, Marxist Economic Theory, London: Merlin Press, 1968, p. 324.
15 There is no economic growth if the added value is created, it is spent by the employer/producer on consumption.
16 Główny Urząd Statystyczny, Zmiany zachodzące w gospodarstwach rolnych w latach 2002-2010, praca zbiorowa wykonana pod kierunkiem prof. dr. hab. W Jóźwiaka i prof.dr.hab. W. Ziętary. Powszechny Spis Rolny 2010. Warszawa 2013, p. 9-10.
However, 'the accession shock' turned out to be smaller than previously expected. In 2004, farmers income rose by 135% due to direct payments.17 Nevertheless, the proportion of Polish
farmers' income to their European counterparts was still approximately 1 to 3 in 2009. This difference is caused by different productivity levels between Polish and European agriculture on average and lower levels of direct payments.18 Moreover, the opening of the EU market
enabled increased trade in the agricultural products. In the first five years of accession the export value of the agricultural products increased from four to above 11 billion euro.19 Some
of the holdings used a subsidies mechanism available before and after the EU accession. As a result, 15-16% of all the holdings were capable of expanded reproduction in 2008 and an estimated 4% were capable to compete on the EU market.20 Moreover the accession
stimulated the development of the agro-food industry due to the increasing levels of income and export.21 Between 2000 and 2012 the average price of a hectare of an agricultural area in
private turnover has increased from 4786 PLN (PLN - Polish zloty; 4786 PLN is approximately 1144,97€) to 25445 PLN (approximately 6087,32€) in 2012.22
1.1.3.B. Changes in the production structure 1990-2009
Between 1990 and 2009, the structure of crop production has changed from extensive to intensive. It is however worth noting that in 2009, just one third of the 24-25 million tonnes of the total crop production ended up on the market, whereas the rest was used for farms needs proving that the national crop market is still shallow and underdeveloped, especially
compared to the big crop producers, where 70% of the production reaches the market.
17 Ibidem, p. 9-10.
18 Z. Floriańczyk, Dochody przedsiębiorców rolnych według rachunków ekonomicznych dla
rolnictwa, in Sytuacja Ekonomiczna Polskiego Rolnictwa po Akcesji do Unii Europejskiej, edited by
J.S. Zegar, Instytut Ekonomiki Rolnictwa i Gospodarki Żywnościowej - Państwowego Instytutu Badawczego, Warszawa 2009, p. 84.
19 A. Kowalski, Wpływ akcesji..., supra note 13, p. 17.
20 Główny Urząd Statystyczny, Zmiany zachodzące..., supra note 16, p. 9-10. 21 A. Kowalski, Wpływ akcesji..., supra note 13, p. 19.
22 Agriculture in 2012, Central Statistical Office, Agriculture Department, Statistical Publishing Establishment, Warsaw, p. 133.
Another characteristic of the shift from extensive to intensive farming is a decrease in labour consuming crops cultivation. For example between 1990 and 2009 potato farming decreased by two thirds, and at the end of this period it still exceeded the demand and was higher than the EU average.Sugar beet farming decreased as well and in 2009/10 for the first time Poland was net sugar importer. This decrease is a consequence of a reform of the sugar sector and decreasing of the sugar quota, which resulted in decreased- sugar beet price and profitability. This led to halving the production compared to 1990. Milk production was decreasing in the beginning of 1990s' as a result of the decreasing number of livestock. Afterwards, it was compensated because of the improvement in production methods.23
Animal productivity has improved mostly due to changes in the structure of animal
production. The amount of poultry stock has increased whereas the stock of beef cattle has decreased and pig production remained on more or less same level. This development led to an increased demand for cereals as production of these livestock groups is dependent on them. Moreover, the export of animal production was stimulated.24 After the accession animal
production increased, whereas crop production stabilised.25
1.2. Dutch agriculture and its position in national economy 1.2.1. Position of the agricultural sector in Dutch economy
The Dutch economy is the sixth-largest economy in the euro-zone. Despite of the contraction of the economy as a result of the global financial crisis, the unemployment level is still relatively low compared to other euro-zone countries. Food processing is one of the important branches of the industry next to chemical, petroleum and electrical industry. GDP purchasing power parity in 2012 was estimated at $718.6 billion. As a result of the global financial crisis, in the last years the economy has been continuing to alternately contract and manifest a slight growth. In 2012 GDP decreased by 0.9%, whereas in 2011 and 2010 growth was respectively 1 and 1.6%. In 2012 GDP per capita was $42.900, ranking the Netherlands 23rd in the world. The Netherlands had a positive foreign trade exchange account balance in 2012 and 2011. EU
23 J. Seremak-Bulge, Relacje Podażowo-popytowe, in Sytuacja Ekonomiczna Polskiego Rolnictwa po
Akcesji do Unii Europejskiej, edited by J.S. Zegar, Instytut Ekonomiki Rolnictwa i Gospodarki
Żywnościowej - Państwowego Instytutu Badawczego, Warszawa 2009, p. 34-36. 24 Ibidem, p. 33-40.
MS are the most important receivers of the Dutch export regarding the value, with Germany being the biggest one and receiving more than a quarter of the total Dutch export value. When it comes to imports, non-MS, like China, Russia and USA are also important partners.
However, Germany is the biggest importer.26
As for the position of an agricultural sector in the economy, the primary sector as such produces 2.8% of the GDP and employs just 2% of labour force. 83% of the total population lives in urban areas. However these numbers do not portray the situation accurately, as Dutch agriculture is very efficient and produces large inputs for the food-processing industry and for exports. Moreover, Dutch agriculture is innovative and knowledge-based, which can be supported by the fact that the Netherlands is traditionally in top ten in the world when it comes to percent of agricultural GDP spent on agricultural research (2006-2010) which amounts to 4.08%27
Foodstuffs are one of the important commodities when it comes to Dutch participation in the international trade, making up 20% of its exports.28 The country's advancement in production
and processing makes it the second largest exporter of agricultural products in the world and the largest in the EU.29 Only the United States has a higher value of agricultural exports.30
Main exported products are: ornamentals and other plants, meat, dairy and vegetables. In the studies of the Dutch agricultural sector a term agribusiness is used. This term refers to the agriculture as the primary sector, processing and distribution of agricultural goods as well as providing products and services necessary to produce agricultural products, like energy, fertilizers, transport and professional services. This sector contributes approximately 10%
26 Central Intelligence Agency (US), supra note 5, retrieved on 21 September 2013 from. 27 FAO Statistical Yearbook 2013, supra note 7, p. 15, 20.
28Central Intelligence Agency (US), supra note 5.
29 Ministerie van Landbouw, Natuur en Voedselkwaliteit Programmadirectie
GemeenschappelijkLandbouwbeleid, European Agricultural Policy 2020: The Dutch outlook, retrieved from http://www.cap2020.ieep.eu/2008/12/22/european-agricultural-policy-2020-the-dutch-outlook on 24 September 2013, p. 5.
30 Ministry of Agriculture, Nature and Food Quality, Facts and figures 2010, The Dutch agricluster in
both to the GDP and the total employment rate.31 However, the role of the imported raw
materials in the agro industry should be noted. Their processing, supply and distribution contribute to almost 3,8 % of total GDP, whereas processing of the domestic raw materials and their production amounts respectively to 3,5% and 1,9% of the total value of the GDP.32
Broader agribusiness sector includes globally operating companies like Unilever, Heineken or FrieslandCampina.33 Therefore, assessments regarding the importance of the primary sector to
the whole Dutch economy cannot only be based on the primary sector contribution to the GDP but should be put in the context of the entire agribusiness. As presented earlier, almost a half of the processing and logistic services are dependent on raw materials imported from abroad. However, the importance of the domestic primary sector for the entire agribusiness should not be underestimated because it created a basis on which processing and agro-logistic companies built their capacity to expand abroad.34
1.2.2. Structural characteristics and position in Europe
There were 72,3 thousand agricultural holdings in the Netherlands according to the Eurostat data from 2010, which is below one percent of the total EU number, but in the group of the thirteen MS with less than one million holdings. Utilized agriculture area (UAA) is 1872,4 ha.35 53% (988 000 ha) of this area is used for grassland, 13% (236 000 ha) for fodder cereals,
28% (535 000 ha) for other arable land, 5% for horticulture in the open and 0,5% for greenhouses.36 The Netherlands is among ten EU MS with the smallest UAA. As for the
average size of the holdings, it is approximately 25 hectares, which is more than 15 hectares of the EU average. In the light of the comparisons with Poland it is important to mention that
31 P. Berkhout, H. Silvis, I. Terluin, Landbouw-Economisch Bericht 2013, LEI-rapport 2013-041, LEI Wageningen UR, p. 38.
32 own calculations based on P. Berkhout, H. Silvis, I. Terluin, Landbouw-Economisch Bericht 2013, LEI-rapport 2013-041, LEI Wageningen UR, p. 38.
33 Ibidem, p. 48.
34 Raad voor de leefomgeving en infrastructuur, Ruimte voor Duurzame Landbouw, Maart 2013, Den Haag. p. 61, 79.
35 Eurostat Pocketbooks, Agriculture, fishery and forestry statistics, supra note 10, p. 26.
in the Netherlands 42% of all the holdings are smaller than 10 hectares, 42% are at least 20 hectares and approximately 16% have at least 50 hectares. (based on own calculations, Annex 1)
1.2.3. Developments in the Dutch agricultural sector
Scale enlarging, a decrease in the number of farms and production intensification are interlinked processes which characterise Dutch agriculture. The number of farms has been gradually decreasing over the last decades. The reasons for this decrease are: ageing of farm owners, farm-succession situation and technical development. The latter enables farming on the bigger scale and reduces the demand for the workforce in certain sectors. Number of farms in sectors which are relatively intensive and less land dependent was decreasing sharper. However, the main reason for the decrease in the number of farms is ''more or less voluntary finishing of the company activity due to rather modest income perspectives in the agriculture".37
Dutch agriculture is also characterised by a high and ever rising level of specialisation, described as the share of production in one sector taking place on the specialised holdings in the given branch. Dutch holdings have a high level of specialisation which enables farmers to achieve better results and acquire knowledge necessary to engage in a more complex
production process.38
The process of enlarging of Dutch farms is a very important and controversial development. There is a number of reasons enabling and stimulating this process to occur. Firstly,
technological development and rising labour productivity enables bigger scale of production. Secondly, a certain level of mechanisation and farm scale enables reduction of production costs and gaining competitive advantage. Lastly, small farms disappear because they are not commercially viable and are being overtaken by subjects that are economically stronger. Statistics presented below might be an illustration of these three processes.39
37 Ibidem, p. 122-123.
38 P. Berkhout, P. Roza, Landbouw-Economisch Bericht 2012, LEI-Rapport 2012, Wageningen UR, p. 133.
The number of the horticultural farms has decreased by 60% over last 30 years, whereas the total area used for this type of production has remained almost at the same level. In spite of this process of scale enlarging, Dutch horticulture is still of relatively small scale in hectares with only less than 5% of all the farms bigger than 100 ha. Floriculture, which is very specific of the Dutch economy, has undergone this process even more radically. The decrease of the number of holdings is comparable to horticulture whereas twice as much area is used for this kind of production currently, compared to 1980. In the greenhouses this process has been even more extreme. Compared to 1980 the number of the farms has halved and the area devoted to this branch has increased by 75%. Poultry farms have been demonstrating the biggest increase in scale of production in the animal husbandry branch. Due to animal welfare- and public health issues, intensification of the livestock production has been a subject of criticism.40
Since 2000 employment in the primary sector has decreased from 281 000 to 209 000 persons. Another characteristic development in this area is the decrease of the number of family members and permanent employees at the cost of the temporary workers in the sector. Especially for smaller farms, the price of the labour takes a big share in total costs.41
The price of land in 2012 was on average 50 000 euro per hectare but the trade in the agricultural land was low. The process of enlarging the scale of agriculture is faster in less land dependent branches. In land dependent branches - like arable farming, horticulture in the open air and cattle raising - the availability of the land determines the possibility of holding enlargement. In the milk- and sugar sector, quota determine the possibility of production in the EU. In Dutch circumstances similar limitations occur in the poultry and pig sector because producers need special "animal rights" in order to diminish manure surpluses. Like in other MS, there are also direct payments rights per hectare of agricultural land. All of these entitlements can be subjects of trade in the Netherlands.42
Highly productive and intensive agriculture has an impact on the environment. The content of the nitrates in the soil poses an important agri-environmental issue in the Netherlands.
Whereas according to the Nitrates Directive from 1991, 170 kg/year/hectare of this substance
40 P. Berkhout, P. Roza, supra note 38, p. 135.
41 P. Berkhout, H. Silvis, I. Terluin, supra note 36, p. 123. 42 P. Berkhout, P. Roza, supra note 38, p. 152.
is allowed, in many Dutch regions it exceeds this level. Areas where the level of nitrates is the highest and reaches more than 300 kg/year/ha due to intensive livestock farms are Overijssel, Gelderland, North Brabant and Limburg.43
1.3. Comparison of the agricultural sectors in Poland and the Netherlands in the light of their economies
The Netherlands is one of the founding MS, whereas Poland joined the EU in 2004 and in the literature is still addressed as a new MS. This contrary characteristics determine the relation between Polish and Dutch agriculture and will appear repeatedly in the following summary. The difference in the contribution of the primary sector to the GDP is not as striking as the one referring to the percentage of working population active in agriculture. Whereas in the Netherlands agriculture engages 2% of the labour force, in Poland it engages almost 13%. However, in Dutch studies of the domestic agriculture its importance is advocated by the fact that it creates the basis for the agribusiness and the exporting potential of the Netherlands. Polish export of agricultural products has increased after the EU accession. Another difference is the character of these products. Contrary to Dutch export, Polish export still consists mostly of less processed products.
Though, a great deal of the progress has already occurred, Polish agriculture still needs to develop certain capacities and overcome some structural handicaps. On the other hand, in my opinion, this comparative advantage in the UAA number could give Poland potential for less extensive, sustainable production necessary for development of the bio-food industry. The main structural problem is a big group of the population employed in agriculture and farm proliferation. Changes in the production structure reflect changing consumer preferences of the Polish society. Though the EU integration, was awaited by the agricultural community with a note of anxiety, collected sources support a rather positive outcome of the EU
integration for agricultural population, at least in the first years of integration. Their income has risen, due to the participation in the direct payments scheme and the export of Polish agricultural products has risen.
43 Council Directive of 12 December 1991 concerning the protection of waters against pollution caused by nitrates from agricultural sources (91/676/EEC), Annex III; Ruimte voor Duurzame
The Netherlands in spite of limited land available for agricultural activity, has an agricultural sector of remarkable economic size comparable to this of Poland having nine times as much available UUA.44 This comparison confirms the high productivity of the Dutch agriculture.
The average Dutch holding is 20 times more productive than the European average (Annex 4).45 Dutch agriculture is characterised by increasing specialisation and intensification of
production enabling it to produce more effectively and develop a robust processing sector. On the other hand, intensive food production has negative consequences for the environment, animal welfare and food quality.
44 Eurostat Pocketbooks, Agriculture, fishery and forestry statistics, supra note 10, p. 26. 45 compare: Ruimte voor Duurzame Landbouw, supra note 34, p. 59.
2. Evolution and current shape of the CAP
2.1. CAP reforms and evolution of policy paradigm
The aim of the following Chapter is to present the main points regarding the reform process of the Common Agriculture Policy (CAP) till 2013. Subsequently the main theories regarding the reform process of the CAP will be presented in order to bring the background for the description of the negotiation process in Chapter 4.
CAP has been an inherent part of the European integration. Moreover, from the beginning it has been characterised by the heavy public expenditure distinguishing it among other
European policies.46 In the post-war period the need for regulating the agricultural market was
reasoned by the food security concerns.47 When the European Communities were emerging,
regulating the ''green pool'' had another very important role - the one of bringing the balance between "agricultural" France and "industrial" Germany.48 Contrary to the current situation, in
1958 farming population amounted to 20% of the labour force in the founding MS and had a considerable voting power.49
The treaty of Rome offered three possible solutions for common organisations of agricultural markets, but the European market organisation was decided for most of them, implying that the price regulation policy would have a central position within this policy.50 The Council of
46 N. Nugent, The Government and politics of the European Union, Hampshire: Palgrave Macmillan, 2010, p. 32.
47 R. Griffiths , Agricultural Development and Agricultural Trade, 1945-1973; in The Economic
Development of the EEC, edited by Richard T. Griffiths, Chelthenham: Edward Elgar Publishing
Limited, 1997, p. 355.
48 D. Dinan, Europe Recast, A History of European Union, London: Lynne Rienner Publishers, 2004, p. 94; S. Senior Nello, The European Union Economics, Policies & History, Berkshire: McGraw-Hill Higher Education, 2012, p. 281; N. Nugent, The Government and politics..., supra note 46, p. 354. 49 S. Senior Nello, The European Union Economics, supra note 48, p. 21.
50 G. Meester, European Integration and its relevance for agriculture, food and rural areas, EU
policy for agriculture, food and policy areas: in EU policy for agriculture, food and rural areas,
edited by A, Oskam, G. Meester, H. Silvis, Wageningen: Wageningen Academic Publishers, 2010, p. 31.
Ministers further determined a shape of the policy in the beginning of 1962 by setting out main three principles of the CAP. First of them, unity of markets resulted in liberalisation of the market between the MS and introducing common prices for agricultural products. Agreement on the common price levels for cereals and other products was reached only in 1964 and was close to the German level which was the highest in Europe.51 However, not all
the products were supported by a fixed price level. Complete price support applied to grains, sugar, milk and beef. Products such as olive oil, durum wheat, oil seeds and tobacco received only supplementary price support. Products such as poultry, eggs, wine and horticultural products were protected only by a common external tariff. Such organisation of the market secured mostly the interests of the German, French and Dutch farmers.52 The second principle
is a community preference which eliminated the barriers on trade between the MS and introduced common tariffs on imports from third countries and export refunds. Each time the price of a given agricultural product was changing on the global market, the variable entry tariff for exported products and the level of export subsidy for domestic farmers was adjusted. These protectionists instruments have been notoriously criticised by the international
community and contributed to ever rising funds devoted to the CAP. The third principle of financial solidarity was based on newly created European Agricultural Guidance and Guarantee Fund enabling common financing of the agricultural policy measures.53
In the context of this paper, it is worth to mention some stakes of the Netherlands in creation of the CAP, reflecting its liberal and pro-reformatory role. Firstly, the Netherlands was a supporter of the inclusion of common policy on agriculture in the common European market. Secondly, when the negotiations regarding CAP moved to the stage when its form was discussed, the Netherlands was supporting liberal solutions regarding the participation of the Six in the world trade in agricultural products. However, these ambitions were not pursued due to the prevailing 'French' protectionist point of view.54 Finally, the Dutch Minister for
Agriculture, Sicco Mansholt became the Commissioner in charge of implementing CAP. The structural reform plan presented during his office in 1968 – aimed at resolving the surpluses
51 R. Griffiths, Agricultural Development..., supra note 47, p. 360. 52 I. Garzon, Reforming..., supra note 3, p. 23.
53 S. Senior Nello, The European Union..., supra note 48, p. 283. 54R. Griffiths , Agricultural..., supra note 47, p. 355-356.
and low farmer’s income, was thought to be too radical for his times and its implementation was reduced.55
Though the main objectives of the policy were fulfilled, the unforeseeable effects of its measures were very negative, not only for the Community, but also for third countries and undermined the Community trade relations. Serious surpluses appeared as early as in late 1960s' and were gradually increasing to legendary butter- (1,2 million tonnes of butter in 1985 amounting to half of this year production) and grain- (26,5 million tonnes in 1991 at the total production of 180 million tonnes that year) mountains. CAP budget amounted to nearly 80% of the whole Community budget in 1970s' and 80s'.56 Moreover, the policy based on the high
cereal price led to an increase of the food prices affecting the consumer- and taxpayers
welfare.57 Last but not least as the big farmers benefited the most and the production of certain
products like cereals and milk was favoured, the policy resulted in rising inequality across Europe as well as between small and big producers.58
However, till late 1980s' and 90s' all these negative side effects did not suffice to pursue serious CAP reform.59 Some authors recognize the significance of quota for the dairy products
and cereal price stability instruments as having potential of introducing relevant changes into the CAP and resolving these sectoral problems.60
55 S. Senior Nello, The European Union..., supra note 48, p. 288.
56 European Commission, Directorate General for Budget, EU budget 2008 Financial Report, Annex 4.
57D. G. Demeskas, K. Bartholdy, S. Gupta, L. Lipschitz, T. Mayer, The effects of the Common
Agricultural Policy of the European Community: A Survey of the Literature, in: Economic Development of the EEC, edited by Richard T. Griffiths, Chelthenham: Edward Elgar Publishing
Limited, 1997.
58 L. Hubbard and C. Ritson, The reform of the CAP, in: Economic Development of the EEC, edited by Richard T. Griffiths, Chelthenham: Edward Elgar Publishing Limited, 1997, p. 399; S. Senior Nello, The European Union..., supra note 48, p. 292.
59 Ibidem, p. 39.
60 T.C. de Groot, Dertien is een Boerendozijn: Onderhandelingen in de Raad van Ministers van
Outside Community pressure facilitated a more radical reform of the CAP.61 General
Agreement on Trade and Tariffs negotiations on tariffs in industry had been taking place since 1947 but only the Uruguay Round started in 1986 had a clear agricultural mandate.62 The
Agricultural Agreement which concluded the Uruguay Round revolved around three main aspects of trade liberalisation: market access, domestic support and export support. Changes in domestic support constituted what EU policies researchers often call the CAP paradigm change. From then on, any sort of production-related public support was considered as trade distorting and signatories were obliged to reduce it by 20%. This forced the Community to make cuts in prices for certain products and compensate it to farmers by the animal and hectare premiums.63 Moreover, a number of 'accompanying measures' like subsidies for
afforestation or an early retirement scheme for farmers were introduced.64 Though the level of
compensation in the form of direct payments outbalanced the benefits of the price cuts for the EU budget, this reform paved the way for redirection and further market orientation of the CAP.65
Agenda 2000 indeed followed this path and conditioned the receipt of the full amount of direct payment on the compliance with certain environmental requirements. A voluntary possibility of the cutting the amount of the direct payments - modulation- was also introduced but initially it had a limited implementation. Moreover, rising awareness regarding the multi-functionality of agriculture and environmental concerns as well as structural and economic challenges of agricultural areas led to the creation of CAP pillar II aimed at development of rural areas. Last but not least the reform of common market organisation for certain products took place. In case of both last reforms changes were also reasoned by the
61 A. Cuhno, A. Swinbank, Exploring the Determinants of CAP Reform: A Delphi Survey of Key
Decision-Makers, Journal of Common Market Studies, 2009 Volume 47. Number 2, p. 259.
62 R. Huige, R. Lappere, G. Stanton, The WTO context; in: A, Oskam, G. Meester, H. Silvis, EU
policy for agriculture, food and policy areas, Wageningen: Wageningen Academic Publishers, 2010, p.
91.
63 S. Senior Nello, The European Union..., supra note, 48, p. 297.
64 A. Swinbank, CAP Reform, 1992, Journal of Common Market Studies, Volume 31, No. 3, September 1993, p. 363.
2004-2007 enlargement of the EU.66 Extending rules, which were in force in 15 MS, to the
states with which the EU had association agreements was politically and probably
economically impossible. In Central and Eastern European countries (CEEC) agriculture was still an important and, compared to the 15 MS, unmodernised economic sector. Therefore, EU budget for the CAP would inevitably increase huge redistribution between old and new MS. Though, the Mid-term Review (also called the Fischler Reform) further decoupled payments from production, the policy itself rather preserved the state-assisted paradigm of the CAP.67
Integration of the 12 states in 2004 with agricultural sectors with very specific needs even more contributed to the fourth, unwritten principle of the CAP: allowance for national
variations. In order to face various needs of the agricultural sectors, illustrated in the previous chapter by the example of Poland and the Netherlands, more flexibility and discretion is enabled in the policy making process.68 As can be seen for example in the Polish response to
the reform proposals, sometimes the broadening of the scope of this flexibility is being interpreted as renationalisation of the CAP. Nevertheless, as Frits Thissen said, the policy
decision process is different among the 28 MS currently, than it was among six MS. Therefore, what is needed in current CAP setting, given the very diverse economic and agricultural circumstances, to make it feasible, acceptable and pertinent, is a balance between the common European framework and the flexible elements. A strong common European
framework is needed to ensure a level playing field. Andrzej Babuchowski, supports this view and adds that common elements dominate the CAP. In his opinion, the CAP consists of the strong pan-European legal framework and facultative measures which the MS can introduce according to their domestic circumstances.
2.2. Theory of the CAP reform process
According to Garzon, the CAP is characterised by incremental policy development and can be described as path dependent policy. This implies a causal relationship between subsequent
66 Ibidem, p. 297-298.
67 C, Daugbjerg, Sequencing in public policy: the evolution of the CAP over a decade, Journal of European Public Policy 16:3, April 2009, p. 406.
68 N. Nugent, The Government and politics..., supra note 46, p. 363; E. Rabinowicz, EAAE
Presidential Address, Redesigning the CAP to meet the challenges of EU enlargement and the WTO:
what can agricultural economic research contribute?, European Review of Agricultural Economics,
decisions giving direction to the policy and developing its shape.69 In line with this theory,
after introducing certain measures in a given direction, following the same direction is more probable than shifting to another one. In addition it seems that the CAP fulfils almost all criteria which make given policy prone to path dependency. These are: collective nature of the policy, a high number of institutions involved in the decision making, power asymmetries resulting from political authority of certain actors, the complexity and opacity of policy, the short time horizons of politicians and the status quo bias of political institutions.70 In my
opinion in chapters 2, 3 and 4 of this paper, the comprehensive evidence is provided confirming the above listed characteristics of CAP and its decision making.
Daugbjerg came up with a modification of this theory. Contrary to the path dependency, called by him a self-reinforcing sequencing, the reactive sequencing does not imply further policy making to follow the same direction. It emphasises the fact that the policy reform results also in counter- reactions, which do not have the effect of reinforcing policy in a given direction but set in motion a chain of reactions. This approach brings us to the theory of cumulative change.71
Following the framework adopted by Garzon, path dependency does not exclude policy paradigm change as a result of cumulative changes happening over time. The latter is especially likely to change in multi-level, multi-issue and multilateral policy framework, which CAP definitely is. Garzon reviews studies of CAP aiming at singling out precise variables leading to the paradigm change. Finally, she concludes that these have certain limits in describing the CAP reform process and tends to support Coleman's view stating that the CAP is a result of a gradual negotiated process conducted over a number of years.72
69 for broader account on the path dependency: P. Pierson, When effect becomes cause - Policy
feedback and political change, World Politics, Volume 45 No 4, 1993; P. Pierson, Increasing returns, path dependence and the study of politics, American Political Science Review, Volume 94 No 2, 2000;
A. Kay, Path dependency and the CAP, Journal of European Public Policy, Volume 10 No 3, 2003; C. Daugbjerg, Policy feedback and paradigm shift in the EU agricultural policy: The effects of the
MacSharry reform on future reform, Journal of European Public Policy, Volume No 3, 2003) .
70 I. Garzon, Reforming..., supra note 3, p. 9-10.
71 C. Daugbjerg, Sequencing in public..., supra note 67, p. 398, 407. 72 I. Garzon, Reforming..., supra note 3, p. 9-12.
Finally, there are many interesting studies demonstrating the sorts of pressures influencing the direction of the CAP reform. In the beginning CAP represented the agricultural policy
network excluding other considerations and interest.73 Moreover, due to its complexity, CAP
was not included in the mainstream political agenda.74As the negative side effects of the
policy occurred international trade, environment, consumers and new farmers interests groups of farmers started to be vocal. This feedback led to transformation of CAP from mono-issue to multi-issue policy, engaging various interests groups. Food scares and for example recent European-wide horse meat scandal are reminders that all European citizens are dependent on agribusiness and farmers as the producers of raw materials. This phenomenon of agriculture societalisation, next to the food related concerns, includes also environmental and rural spatial concerns.75 Though the reasoning behind providing the assistance to farmers has changed
from price support to conditioning the part of the payment on the delivering environmental services, the CAP still rests on agricultural exceptionalism. According to this notion, qualities and goods produced and delivered by the farming sector are not marketable or they should not be left to the market forces in order to maintain their high quality and value. Therefore, farmers need incentives and support in order to be able to deliver these goods and values and in consequence state-assistance is inevitable.76 On the other hand, it is hard to deny that policy
has evolved towards more liberal set of measures. According to Grant and in line with
findings of De Groot, the most important reason behind introducing the more market-oriented approach can be the enlargement.77
2.3. Relation between the EU budget and CAP expenditure
The share of the budget devoted to the CAP in the end of 1970s was amounting to 80% of the total Community budget. Till the 1990s the Community expenditure was a result of the
73 Ibidem, p. 27.
74 T.C. de Groot, Dertien is..., supra note 60, p. 14.
75 European Agricultural Policy 2020: The Dutch outlook, supra note 29, p. 2.
76 C. Daugbjerg, A. Swinbank, An introduction to the 'new' politics of agriculture and food, Policy and Society 31, (2012), Elsevier, p. 262.
77 W. Grant, Economic patriotism in European agriculture, Journal of European Public Policy 19:3 (2012), p. 433.
agricultural decision-making and not the other way around.78 The introduction of the
Multiannual Financial Framework in 1988 might be seen as a successful undertaking to reverse this process.79
According to Article 312 Treaty on the Functioning of the European Union (TFEU), the Multiannual Financial Framework (MFF) is established for a period of at least 5 years and
determines the amounts of the annual ceiling on commitment and payment appropriations. The categories of expenditure, limited in number, shall correspond to the Union's major sector of activity. This rule ensures resources for the long-term projects and guarantees the
consistency and continuation of policy priorities.80 According to Article 310 TFEU, all the
revenues and expenditures are entered into the budget and the destination of the expenditure should not be earmarked according to the source of revenue. The MFF is adopted
unanimously by the Council subject to the consent of the EP.81 The annual budget of the EU
should comply with the MFF.82
In 2007-2013 the expenditure devoted to the CAP amounted to €371 244 billion and 43% of the total expenditure. The expenditure for the first pillar (direct payments and market
regulation) constituted almost 79% of the CAP spending. The biggest share of the total expenditure was devoted to cohesion policy.83 Nevertheless, the discussions regarding the
efficiency of agricultural spending are inherent part of the MFF negotiations.
78 T.C. de Groot, Dertien is..., supra note 60, p. 14.
79 M. Bos, The EU budget, in EU policy for agriculture, food and rural areas, edited by: A. Oskam, G. Meester and H. Silvis, Wageningen: Wageningen Academic Publishers, 2010, p. 87; N. Nugent, The Government and politics..., supra note 46, p. 367.
80 S. Senior Nello, The European..., supra note 48, p. 271.
81 Article 312, Consolidated Version of the Treaty on the Functioning of the European Union, 2010 O.J. C 83/53.[hereinafter TFEU].
82 Article 314, TFEU.
83 Annex I, Council of the European Union, Financial Perspective 2007-2013, Brussels, 19 December 2005, 15915/05.
2.4. State of play 2007 - 2013 and measures proving national differentiation with respect to Poland and the Netherlands
2.4.1. Support for farmers
In 2003, the single payment scheme (SPS) replaced most of the previously existing coupled payments and its aim was to guarantee farmers stable income, regardless of sort and amount of production, and to align their production with market demands. It was applied in old MS, Slovenia and Malta. The amount of payment entitlement was based on the reference period from 2000 to 2002.84 The amount was the three-year average of the total amounts of
payments, which a farmer was granted under the support schemes, divided by the number of hectares used by the farmer.85 Support was granted to a farmer on the condition that each
payment entitlement was corresponding to the amount of eligible agricultural area, meaning that the support is not automatic but dependent on the declaration of the eligible land and entitlements. The payment entitlements were subject to trade, lease and issuance by the MS government.86 The SPS in the Netherlands operated according to these rules.
A simplified version, the single area payment scheme (SAPS), was introduced in all the new MS, except the above mentioned Slovenia and Malta. In this system, there is no need of declaring the payment entitlements. The Commission established an annual financial envelope for the new MS and these funds were subsequently divided by utilized agricultural area. The 12 MS where SAPS was applied were envisioned to transfer to the single payment scheme in 2013.87 In both SPS and SAPS the eligibility for direct payments was conditioned on fulfilling
84 Article 38, Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers and amending Regulations (EEC) No 2019/93, (EC) No 1452/2001, (EC) No 1453/2001, (EC) No 1454/2001, (EC) 1868/94, (EC) No 1251/1999, (EC) No 1254/1999, (EC) No 1673/2000, (EEC) No 2358/71 and (EC) No 2529/2001 [hereinafter Council Regulation (EC) No 1782/2003].
85 Article 37, Council Regulation (EC) No 1782/2003.
86 Factsheet: The Single Payment Scheme, retrieved from the European Commission Agriculture and Rural Development website on 16.01.2013, p. 1.
the standards of cross-compliance in the areas of public animal- and plant health, the environment and animal welfare.88
As the direct support was introduced as a compensation for farmers receiving production support in old MS, the new MS were initially to be excluded from the payments. This unequal treatment raised fierce criticism in candidate countries. A compromise was a system according to which direct payments would phase in new MS from 25% in 2004 to 100% in 2013 of the level negotiated before the accession.89 Nevertheless, the differences in the direct payments
levels between new and old MS are still significant. In 2008 farmers in Poland received €210 per hectare, whereas in the Netherlands it was €460.90 Whereas in Poland all the farmers
receive the same amount of premium, in the Netherlands the situation was bit more complex and direct payments were dependent on the level of production in reference period. Therefore, payments varied from above €1000 per hectare (for some farmers in the veal meat sector) to even no payment at all in horticulture and permanent crops sectors.91
2.4.2. Common organisation of agricultural markets
Due to gradual liberalisation of the CAP market organisation measures in the period between 2007 and 2013 are very modest compared to the mechanisms which used to be available to the farmers in the past. Certain market intervention- and production limitation measures were available. Firstly, buying-in under public intervention and supporting private storage of cereals, rice, sugar, olive oil, table wine, beef , milk products, pig meat, sheep meat and goat meat are the elements of the price support system . Exceptional market support measures in beef and veal; milk and milk products; pig meat; sheep meat and goat meat; eggs or poultry meat sectors might be adopted in case of animal disease. Under certain conditions special
88 Article 5, Council Regulation (EC) No 73/2009 of 19 January 2009 establishing common rules for direct support schemes for farmers under the common agricultural policy and establishing certain support schemes for farmers, amending Regulations (EC) No 1290/2005, (EC) No 247/2006, (EC) No 378/2007 and repealing Regulation (EC) No 1782/2003. [hereinafter Council Regulation (EC) No 73/2009].
89 S. Senior Nello, The European Union..., supra note 48, p. 299-300.
90 Agricultural Policy Perspectives Briefs, Brief no 2, January 2011, European Commission Agriculture and Rural Development, p. 5.
91 R. Jongeneel et al, Bedrijfstoeslagnen na 2013 Omgaan met dalende bedragen, LEI-rapport
measures are also allowed in the cereals and rice sectors. Secondly, in order to limit production, a quota system for sugar and milk is in place. Finally, special aid schemes are applicable for certain groups of products or activities, e.g. promoting milk consumption among school children.92
Regarding the trade with third countries, the levying of any charge having equivalent effect to
a custom duty and application of any quantitative restriction or measure having equivalent effect are prohibited as prescribed in the Agricultural Agreement concluding Uruguay Round.
The commission can require import licences for certain groups of products. Import licenses are issued by MS. Similarly to import, export of certain products can be a subject to export licences. Moreover, for cereals, rice, some sugar products, beef and veal, milk and milk products, pig meat, eggs poultry meat and some other groups of products, there was a possibility of granting an export refund to compensate the farmer for the gap between the world- and European price of these products.93
2.4.3.The CAP financing
Currently, expenditure is managed through two agricultural funds. In 1962, the European Agricultural Guidance and Guarantee Fund was created to fund the CAP expenditure. Since the financial perspective 2007-2013 the management of the CAP two pillars is split between European Agricultural Guarantee Fund (EAGF) for pillar I and European Agricultural Fund for Rural Development (EAFRD) for pillar II.94
Pillar I expenditure is wholly covered by the EAGF whereas the expenditure for the pillar II is only co-financed by the EAFRD.95 The co-financing rule in second pillar is derived from the
structural policy and is also a manifestation of stricter financial discipline. It means that only a part of the projects is financed from the EAFRD and another part is complemented by public resources at national level or by the beneficiaries themselves. This rule was introduced to
92 Articles 6, 44, 47, 55, 102, Council Regulation (EC) No 1234/2007 of 22 October 2007 establishing a common organisation of agricultural markets and on specific provisions for certain agricultural products [hereinafter Single CMO Regulation].
93 Articles 128, 131, 161, 162, Single CMO Regulation; R. Huige, R. Lappere, G. Stanton, The WTO
context..., supra note 62, p. 92.
94 N. Nugent, The Government and politics..., supra note 46, p. 126. 95 Ibidem.
render the MS and beneficiaries more cost-conscious and, as a result bring more efficiency in using European funds for rural development.96
2.4.4. Rural development
Objectives of the rural development policy in period 2007 - 2013 were:
a) improving the competitiveness of agriculture and forestry by supporting restructuring, development and innovation;
b) improving the environment and the countryside by supporting land management; c) improving the quality of life in rural areas and encouraging diversification of economic activity.97 Partnerships between MS and relevant and competent regional-, local-, economic-
and social partners should be a base of cooperation towards implementation of the policy measures.98 Each MS was supposed to submit its national strategy plans defining the potential
for development, chosen strategy, priorities for rural development as well as indicative EAFRD resource allocations.99
Application of rural development measures in Poland and the Netherlands
Policy measures were grouped around four axes. Three of them corresponded to the rural development policy objectives listed above and the fourth, Leader, was designed to contribute to all three objectives by means of bottom-up approach. Representatives of the private-, non-governmental- and public sector were supposed to create Local Action Groups (LAG) which chose projects realised at given area.100
Regarding the measures in the first axis Poland concentrated on improving its unspecialised and underinvested agricultural holdings. Measures supporting young farmers and encouraging
96 M. Bos, The EU budget..., supra note 79, p. 85.
97 Article 2, Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD), [hereinafter Council Regulation No 1698/2005]
98 Article 6, Council Regulation No 1698/2005. 99 Article 11, Council Regulation No 1698/2005.
100 compare: The Republic of Poland, Ministry of Agriculture and Rural Development, National Strategic Plan for 2007-2013 Rural Development, p. 38 [hereinafter Polish NSP for Rural Development]; Nederlandse Plattelandsstrategie 2007-2013, p. 55.
earlier retirement were introduced in order to re-parcel land and transfer it to effective
holdings. Activities aimed at enhancing the human capital concentrated on improving farmers skills in the areas of competitiveness, pro-environmental and modern farming as well as food quality.101 In the Netherlands measures from the first axis were aimed at enabling agricultural
holdings to respond themselves to the market situation. Measures were aimed at bringing not only production- but also environmental performance and adjusting the agricultural sector to the expectation of the top segment of the market.102 Regarding the second axis, in Poland
areas threatened by marginalisation and abandonment and agri-environmental program were given priority.103 Polish environment and biodiversity are in relatively good condition
therefore the measures within the second axis were directed mainly at conservation of the natural resources. In the Netherlands the environmental needs are more pressing and the focus was on the agri-environmental measures. 104 Poland wanted to use the measures from the third
axis to transfer the ineffectively used human potential from agriculture to other sectors, employing measures aimed at diversification of economic activities. However, the most resources from this axis were devoted to improvement of the rural infrastructure and conservation of natural and cultural heritage.105 On the contrary, the unemployment on the
rural areas is not the major problem in the Netherlands. Hence, the measures were devoted mainly to enhancing the social cohesion between rural and urban areas as well as the
preservation of landscape quality.106Polish and Dutch rural areas pose different challenges. In
Poland the unemployment and weak infrastructure are the biggest handicaps, whereas the Dutch countryside faces great environmental challenges. As described above, the second pillar offers enough flexibility to address these different needs.
101 Polish NSP for Rural Development, supra note 100, p. 35. 102 Netherlands’ Rural Development Strategy 2007-2013, p. 103 Polish NSP for Rural Development, supra note 100, p. 36. 104 Netherlands’ Rural Development Strategy 2007-2013, p. 50. 105 Polish NSP for Rural Development, supra note 100, p. 37. 106 Netherlands’ Rural Development Strategy 2007-2013, p. 53-54.
Entire Poland was covered by the convergence objective for the least developed MS and regions and enjoyed high level of EAFRD contribution up to 75% for the measures in axis 1 and 3 and 80% for axis 2. Whereas the Netherlands could receive up to 50% for the measures in axis 1 and 3, and up to 55% in axis 2.107 Appropriation for 2007 - 2013 for Poland was € 13
billion and for the Netherlands it was €486 million.108 This difference in level of support
reflects the differences between the development of rural areas in both MS.
107 Article 70, Council Regulation No 1698/2005.
108 Annex, Commission Decision of 12 September 2006 fixing the annual breakdown by Member State of the amount for Community support to rural development for the period from 1 January 2007 to 31 December 2013 (2006/636/EC).
3. The CAP decision-making process and the role of the institutions 3.1. Introduction
The legislation of the CAP reform is conducted according to the ordinary legislative procedure called also co-decision procedure and within "the Community method". The Community method is based on the cooperation between the three EU institutions: the European Commission, the Council of Ministers and the European Parliament. Therefore explaining their role in the policy process is key to understanding the policy development. The European Council does not formally participate in the process. Nevertheless, its influence on the recent reform is beyond question, therefore its position in the negotiation process also deems to be presented. Firstly, the ordinary legislative procedure will be described and secondly the role of the institutions and their traditional stakes in the CAP negotiation process will be analysed.
3.2. Ordinary legislative procedure
Formerly known as the co-decision procedure, the ordinary legislative procedure puts the EP on the equal position as the Council. The EP has a power to veto the legislative proposals, which strengthens its bargaining power in the decision process.109 Authors argue that this
procedure opens the EU policy networks to the broader spectrum of interests.110
The first stage of the co-decision procedure is the proposal of the Commission to the Council and the EP. After the first reading, the EP adopts an opinion with or without the amendments. Subsequently, the Council examines the amendments made by the EP and it has a possibility to adopt the approved text or reject the amended text and adopt the common position. In case of the latter, a second reading in the EP is conducted within three months. The EP can act four ways. Firstly and secondly, it can either adopt the common position or not take any action on it. In both cases the proposal is adopted after the second reading. Thirdly, it can reject the common position by an absolute majority of its members, which leads to the proposal not being adopted. Finally, by an absolute majority of its members, the EP can propose
amendments to the common position. If this happens, the Commission delivers opinion on
109 N. Nugent, The Government and politics..., supra note 46, p. 181-182.
110 A. Greer, T. Hind, Inter-institutional decision-making: The case of the Common Agricultural
