Policy Memo no 42 , August 2013
Author: Lucian Luca
After much debate, the Reform of the Common Agricultural Policy (CAP) has been agreed, but its implementation leaves much to decide for Member States.
RCEPs report “European funds for agriculture: Romania’s options for direct payments (2014-2020)” analyzes Romanias’ general reform options and proposes a series of recommendations: what should it choose from the menu, given the realities of domestic agriculture and how mutually reinforcing these options are.
RCEPs’ expert and author of this report, Lucian Luca, held consultations with a panel of experts and farmers (with different orientations and interests), using the Delphi methodology to find common points of interest and consensus to present a clear image of the existing options and preferences in the society.
The new CAP aims to be more flexible, more equitable, and not the least “greener”. To receive subsidies, farmers must demonstrate, within certain given parameters, that they preserve pastures, diversify crops and allocate at least 5% of the arable area of the farm (7% in 2017) for areas of ecological interest, ie. shrubs, hedges , forested areas, etc.
But the hottest topics of the reform and also the most relevant questions to which Romania must answer are:
1. Should we choose the small farmers scheme? This allows Member States to introduce a payment scheme for small farmers (those receiving less than 1250 euro direct payments per year), which simplifies the administrative record, farmers being exempted from the requirements of greening and receiving either a nationwide fixed amount (no matter how much land they own) or an amount per area (as before). A new and particularly relevant element for Romania is to provide a compensation of 125% of the payments received by small farmers when exiting the agriculture domain (continued policy life annuity).
2. Should there be a ceiling on amounts for very large farms? There has been a debate for many years now, in both the EU and the U.S., regarding subsidies paid to large farms. Because money is given based on land ownership, those who have accumulated much land will receive larger subsidies. There are farms in Romania that receive around 10 million euro per year. We agree that people should not be punished for success. At the same time, we must also ask ourselves whether, given the land areas, the subsidy defeats its purpose as a public policy. The Commissions proposal is to cap the payment received by a holding to 300 thousand euros and a progressive reduction in payments between 150 thousand and 300 thousand euros per holding (amounts between 150 thousand and 200 thousand euros would have to be reduced by 20% those between 200 thousand and 250 thousand euro by 40%, those between 250 thousand and 300 thousand euro by 70%). The funds saved by each state would remain in that State, but transferred from Pillar I (subsidies) to Pillar II (rural development). We support this proposal, so that all remaining money (over 300,000 euros) to be available for that firm but not as a subsidy, but rather as investment money.
Besides these two major issues, the report includes recommendations on a whole set of important issues that Romania will have to take into account when formulating options for direct payment options. RCEP recommendations are:
– Maintaining the lower limit of the farm and parcel eligible for direct payments to its current size, or holding at least 1 ha, consisting of at least 0.3 ha plots – the exit from the agricultural sector being made voluntarily through the smallholders’ scheme. We emphasize this issue, given that MARD intended to intention this threshold, in an attempt to force out this category of farmers from agriculture
– Granting the additional payment of 25% to youth under 40 years, installed in less than than 5 years (binding in all states), but possibly not in the case of acquisition companies (but only by individuals taking over farms , including the authorized ones);
– Providing transitional national payments only for animals (cattle and sheep, possibly coupled payments for each species), and not also for crops, and their financing to be ensured as far as possible from funds transferred from Pillar 2 and not funds provided by the state budget;
– Not using the option of introducing additional redistributive payments for the first 30 ha or less (it doesn’t have a well defined objective in the case of the Romanian agriculture);
– Failure to introduce the option of paying extra for farms in areas with natural constraints (following these holdings to be offset by payments provided through Pillar 2).
This report is part of the “Debating policies, enhancing expertise” developed by the Romanian Center for European Policies SMIS code 40667, co-financed from the European Social Fund.
This material does not represent the official position of the European Union or the Romanian Government.