Agricultural Policy Monitoring and Evaluation 2018

Chapter 10. European Union

Support to agriculture

The European Union has gradually reduced its support to agriculture since the mid-1990s. New instruments, in particular payments that do not require production have gained weight and price distortions have been significantly reduced. At the same time, more payments are submitted to environmental compliance. Around 50% of support to producers is conditional on mandatory environmental constraints. An additional 8% of support to producers goes to voluntary environmental schemes that go beyond the mandatory requirements.

Support to producers as a share of gross farm receipts (%PSE) has stabilised at around 20% since 2010. Payments not requiring production account for about 45% of support. The production-linked support has decreased in 2017, mainly driven by decrease in market price support due to higher world prices for agricultural products, rather than a change in policy setting. Production-linked budget payments have decreased only slightly.

The greatest share of overall support to the agricultural sector (TSE) goes to producers (about 88%). Investments in knowledge and infrastructures are the main components of general services to the sector at large (GSSE) which represent the remaining 12% of TSE.

Main policy changes

In 2017, the main policy developments were linked to the full implementation of the CAP 2014-20, including the CAP simplification within the Omnibus regulation that introduced changes to the four CAP regulations on direct payments, rural development,1 common market organisation and horizontal regulation. The Omnibus regulation (EU Regulation 2017/2393), endorsed on 16 October 2017, amends the financial regulation governing the implementation of the EU budget and 15 sectorial legislative acts, including agriculture.

The end of the sugar production quota in 2017 is an important further step away from production and trade distorting measures.

A number of exceptional measures continued in response to market conditions in the dairy, fruit and vegetables, and pig sectors. In the dairy sector these included public intervention, support to private storage and voluntary supply management and public distribution. Additional packages were targeted to dairy and livestock producers to implement measures such as support to small scale farming, extensive production, environmental and climate friendly production, cooperation between farmers, improvement of quality and added value, training in financial instruments and risk management tools. Exceptional measures targeted to the fruits and vegetables sectors included market withdrawal, subsidised “non-harvesting” and “green harvesting”. In addition to expenditure from European Union funds, Member States were allowed to match these amounts with national funds.

Assessment and recommendations

• Over the past three decades, policy reforms have considerably reduced the level and improved the composition of support. The increased weight of payments that do not require production offers producers the flexibility to respond to market signals and to make their production choices independently from government intervention. In some sectors, however, prices paid to producers remain disconnected from world market prices, and potentially most distorting forms of support still represent a quarter of the PSE, suggesting that further improvements towards more market orientation are possible.

• The share of support requiring production decreased in 2017, mainly due to lower market price support following higher world prices, while budgetary payments that encourage specific commodity production decreased only a little. This form of support influences production choices at the farm level and may distort competition.

• Market access for agricultural products has improved through bilateral agreements and the reduction of applied tariffs. However, import and export licensing, Tariff Rate Quotas and special safeguards continue to apply to a number of products. These measures push support up when world prices decline.

• The CAP 2014-20’s small farmers scheme and the flexibility to introduce additional payments for the first hectares have redistributive effects which, however, could have effect on structural adjustment.

• Climate change adaptation and mitigation in agriculture are addressed via measures aiming at improving environmental performance: cross-compliance and greening under Pillar 1, and agri-environmental and climatic measures under Pillar 2. Around 50% of support to producers is conditional on mandatory environmental constraints. Payments also support farmers who engage in voluntary environmental schemes that go beyond the mandatory conditions. The growing share of these payments within the PSE highlights the European Union’s move towards more targeted support for overcoming market failures.The efficiency of these measures should be assessed against the environmental objectives.

• The CAP 2014-20 partly reverses the downward trend of production and trade distorting support. Member States have used greater flexibility to implement coupled payments for specific sectors. Other less market and resource allocation distorting means could be used to support achieving long-term competitiveness and productivity gains. Short-term income variations can be addressed with risk management tools. Policies should focus on offering European farmers a levelled playing field, deepening market orientation and better targeting support to improve the long-term productivity, sustainability and efficiency of the sector.

Figure 10.1. European Union: Development of support to agriculture

Source: OECD (2018), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Support to farmers (%PSE) has declined gradually over the long term. In 2015-17, support has been around 19% of gross farm receipts, slightly above the OECD average. The share of potentially most distorting support has decreased significantly over time due to decline in market price support (MPS) , falling well below the OECD average (Figure 10.1). In 2017, the level of support has decreased due to both lower budgetary payments and lower MPS. The decrease in MPS results from a smaller price gap as world prices increased more than domestic prices (Figure 10.2). Effective prices received by farmers, on average, were slightly higher than world prices; large differences between commodities persist with domestic prices for beef and veal and poultry being more than 20% and for rice 47% above world prices. MPS is the main component of Single Commodity Transfers (SCT): rice, beef and veal, and poultry had the highest share of SCT in commodity gross farm receipts, but SCTs for sheep meat, sugar and potatoes were also substantial (Figure 10.3). Overall, SCT represent 26% of the total PSE. The expenditures for general services (GSSE), mainly on knowledge and infrastructure, relative to agriculture value added were in line with OECD average. Total support to agriculture as a share of GDP has declined significantly over time. About 88% of the total support is provided to individual farmers (PSE).

Figure 10.2. European Union: Decomposition of change in PSE, 2016 to 2017

Source: OECD (2018), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Figure 10.3. European Union: Transfer to specific commodities (SCT), 2015-17

Source: OECD (2018), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Table 10.1. European Union: Estimates of support to agriculture

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Contextual information

The European Union is the largest economic region covered in this report. Its average GDP per capita is below the OECD average but well above the average of all countries covered in the report. The share of agriculture in the economy has declined over the past two decades, it accounts for 1.3% of GDP and 4.3% of employment. However, economic conditions, farm structures and production systems are very diverse across and within the 28 Member States. Across the European Union, agriculture occupies more than half of the total land area and nearly 60% of the agricultural area is arable. Crops, including cereals, oilseeds, fresh fruit and vegetables, and plants and flowers, account for about 57% of overall agricultural production. The remainder are livestock products, including dairy, beef and veal, pig meat, sheep meat, poultry and eggs.

Table 10.2. European Union: Contextual indicators

	European Union		International comparison
	1995	2016*	1995	2016*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	7 849	20 256	28.4%	23.8%
Population (million)	371	510	13.0%	14.9%
Land area (thousand km2)	3 320	4 413	4.5%	5.8%
Agricultural area (AA) (thousand ha)	142 078	185 509	5.3%	6.9%
			All countries analysed1
Population density (inhabitants/km2)	112	115	38	45
GDP per capita (USD in PPPs)	21 058	39 615	9 650	24 866
Trade as % of GDP	8	12	10.2	14.3
Agriculture in the economy			All countries analysed1
Agriculture in GDP (%)	2.2	1.3	3.0	3.1
Agriculture share in employment (%)	5.1	4.3	-	-
Agro-food exports (% of total exports)	7.6	7.3	7.7	7.3
Agro-food imports (% of total imports)	9.1	6.6	7.8	6.7
Characteristics of the agricultural sector			All countries analysed1
Crop in total agricultural production (%)	53	57	-	-
Livestock in total agricultural production (%)	47	43	-	-
Share of arable land in AA (%)	53	58	30	30

Note: *or latest available year. 1. Average of all countries covered in this report. EU treated as one.

Source: OECD statistical databases, UN Comtrade, World Development Indicators and national data.

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After having dipped into recession in 2009 and 2012, GDP growth in the area recovered in 2013. Unemployment is down to less than 9% from its record high of 11% in 2013, but with persisting large differences across Member States. Inflation has been relatively low reaching about 1.7% in 2017. The European Union is the world’s largest importer of agro-food products and, since 2013, also the largest exporter. Since that year, the European Union has been a net agro-food exporter. In 2016, agro-food products accounted for 7.3 % of all EU exports and 6.6% of all EU imports. Most of the region’s agro-food exports (61%) consisted of processed goods for final consumption, while only 16% were primary products for further processing. Agro-food imports include primary and processed goods for consumption and industry in almost equal proportions.

Figure 10.4. European Union: Main economic indicators, 1995 to 2017

Note: EU28.

Source: OECD statistical databases.

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Figure 10.5. European Union: Agro-food trade

Note: Numbers may not add up to 100 due to rounding. Extra-EU trade. EU15 for 1995-2003; EU25 for 2004-06; EU27 for 2007-13 and EU28 from 2014

Source: UN Comtrade Database.

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Over the 2005-14 period, the annual agricultural output growth of the European Union averaged 0.4%, well below the world’s average of 2.4%. Total Factor Productivity (TFP) grew by 1.9% per year on average, to some extent driven by the reduction of intermediate inputs and primary factors. The slower output growth is a net effect of the TFP growth and reduction of production factors. The sector is using less nutrients and water than in the 1990s. Agriculture accounts for 2.6% of total energy use, slightly more than in the 1990s, and above the OECD average of 1.9%. The share of GHG emissions has increased by one percentage point and was equal to 10% in 2016, 1.5 percentage point above the OECD average.

Figure 10.6. European Union: Composition of agricultural output growth, 2005-14

Note: Primary factors comprise labour, land, livestock and machinery. EU28.

Source: USDA Economic Research Service Agricultural Productivity database. Available at: www.ers.usda.gov/data-products/international-agricultural-productivity/documentation-and-methods.aspx#excel.

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Table 10.3. European Union: Productivity and environmental indicators

	European Union		International comparison
	1991-2000	2005-2014	1991-2000	2005-2014
			World
TFP annual growth rate (%)	1.12%	1.93%	1.60%	1.63%
			OECD average
Environmental indicators	1995	2016*	1995	2016*
Nitrogen balance, kg/ha	74	50	33	30
Phosphorus balance, kg/ha	9.1	1.4	3.7	2.4
Agriculture share of total energy use (%)	2.3	2.6	1.8	1.9
Agriculture share of GHG emissions (%)	9	10	8.5	8.5
Share of irrigated land in AA (%)	..	..	-	-
Share of agriculture in water abstractions (%)	34	23	45	43
Water stress indicator	..	..	10	10

Note: * or latest available year. EU treated as one.

Source: USDA Economic Research Service. OECD statistical databases, UN Comtrade, World Development Indicators and national data.

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Description of policy developments

Main policy instruments

The Common Agricultural Policy (CAP) is the main agricultural policy framework of the European Union. Outside the CAP framework, Member States may implement measures funded from national budgets that target specific sectors, including agriculture, or objectives, as long as they comply with the European Union’s state aid rules and do not distort competition within the common market (Box 10.1).

The CAP typically covers a seven-year period, currently 2014-20. It is composed of two pillars. The European Agricultural Guarantee Fund (EAGF) funds Pillar 1. Measures under Pillar 2 are based on Rural Development Programmes (RDP) co-financed by the European Agricultural Fund for Rural Development (EAFRD) and EU Member States. Member State RDPs are deployed over the seven year CAP programming period. The CAP 2014-20, while in many ways the continuation of the CAP 2007-13, offers a number of novel features (OECD, 2017).

Box 10.1. State aid in the EU agricultural and forestry sectors and in rural areas

State aid and its conditions apply in all sectors and are not specific to agriculture. Article 107 of the Treaty on the Functioning of the European Union (TFEU), defines state aid as “any aid granted by a Member State or through state resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods […], in so far as it affects trade between Member States”.

Although state aid is, in principle, prohibited, State aid can be authorised by the European Commission (EC) if it is found to be compatible with the internal market. All measures financed exclusively from national budgets are subject to state aid control.

Rules for state aid in the agricultural sector follow the general principles of competition policy, they are consistent with the common agricultural and rural development policies and take into account the EU’s international commitments. State aid rules apply to agricultural products. Market measures, direct payments and rural development measures in the CAP are exempted from state aid control.

All state aid cases that have been the object of a Commission decision since 1 January 2000 are available in the Commission’s competition case database, including information on block exemption cases registered by the Commission.

Sources: EC competition case database:http://ec.europa.eu/competition/elojade/isef/index.cfm?clear=1&policy_area_id=3;

Statistics on state aid expenditures in the EU agricultural and forestry sectors and in rural areas: http://ec.europa.eu/eurostat/tgm_comp/table.do?tab=table&init=1&plugin=1&language=en&pcode=comp_ag_01;

General information on EU state aid: http://ec.europa.eu/competition/state_aid/scoreboard/index_en.html; Further information on state aid policy in agriculture, forestry and in rural areas: https://ec.europa.eu/agriculture/stateaid_en.

The implementation of the CAP 2014‑20 was progressive, starting in 2014 and completed in 2016 with the implementation of the 118 national Rural Development Programmes (RDP) under Pillar 2 by EU Member States.

The overall budget for the CAP over the 2014-20 period is set to EUR 408 billion (USD 453 billion); of which initially 76% were allocated to Pillar 1, covering market related expenditure and direct payments, and the remaining 24% to Pillar 2. The new CAP allows Member States to transfer up to 15% of each envelope2 between the two pillars. Initially, 11 Member States transferred funds from Pillar 1 to Pillar 2, while 5 Member States chose to transfer funds from Pillar 2 to Pillar 1, with a net result of EUR 500 million per year of transfers from Pillar 1 to Pillar 2. The distribution between Pillars was re-examined in 2017. As a result, two Member States have increased their transfers from Pillar 1 to Pillar 2 and one Member State introduced it for the first time.3

Pillar 1 defines and funds market measures under the common market organisation, as well as direct payments, mostly per hectare payments that do not require production. To this purpose, entitlements to direct payments were assessed and allocated for the entire period of the CAP 2014‑20 to those deemed to be active farmers. In 2017, the distinction between active farmers and non-active farmers became optional.

The Basic Payment Scheme (BPS) and the Single Area Payment Scheme (SAPS) — its equivalent that offers a uniform per hectare payment rate in all but three Member States which joined the European Union after 20004 — make up about half of the EU direct payments envelope on average in 2017 (Table 10.4). Wide variations across Member States are observed that reflect Member States’ spending choices on optional measures under Pillar 1 (Figure 10.7). Both the BPS and the SAPS are conditional to cross-compliance requirements, although exceptions apply. Additional conditions are attached to the per-hectare Greening payment that accounts for 29% of pillar 1 direct payments budget (Table 10.4). As of 2017, farmers who participate in the voluntary greening scheme, but do not comply with all the requirements may be subject to additional sanctions up to 20% of SAPS or BPS.

Table 10.4. Direct payments budget under Pillar 1, 2017

	2017 appropriations (EUR million)	Share in direct payments	Share in decoupled direct payments
Direct payments; of which:	39 662
Decoupled direct payments; of which:	33 192	78%
Basic Payment Scheme (BPS)	15 296	39%	46%
Single Area Payment Scheme (SAPS)	4 101	10%	12%
Greening	11 696	29%	35%

Note: Other decoupled payments represent about 6% of direct payments under Pillar 1.

Source: OECD calculations based on EUR-Lex budget 2018.

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In the ten Member States that apply the SAPS, commodity-specific payments funded from national budgets may be added to the SAPS to accompany transition from market measures within limited envelopes. The transitional national aid (TNA) is paid from national funds to specific commodities. TNA payments can be disbursed as decoupled payments while a fixed share may be spent on current production. They may apply on a per area basis to arable land, hop and starch potatoes, on a volume basis to milk and on a headage basis to other livestock. Member States may review TNA budgets and supported commodities on an annual basis. The maximum TNA payments allowed falls gradually from 75% of the 2013-level of SAPS aid in 2015 to 50% in 2020.

As the CAP 2014-20 unfolds, the gap in per-hectare payment rates of the BPS and the SAPS is to be narrowed between countries (external convergence) and between regions within countries (internal convergence). Internal convergence only applies to the BPS as, under the SAPS, a uniform payment rate at national level already applies to each hectare.

In the CAP 2014-20, part of the direct payments envelope is allocated to commodity specific payments at the EU level within defined ceilings. The new voluntary coupled support (VCS) expands the previous coupled support scheme under Article 68 and offers Member States the choice to allocate a larger envelope to more sectors or regions and under a wider set of specific conditions. Such support may be granted to the extent necessary to create an incentive to maintain current levels of production in the sectors or regions concerned. Choices of Member States on the take-up of the VCS are very variable, both considering the level of support and commodities supported (Figure 10.7). All Member States, except Germany, have chosen to offer VCS, using 10% of EU direct payments budget on average. This compares to 3% that was spent previously under Article 68 coupled support as reported in European Union’s general budgets.

Figure 10.7. The Basic Payment Scheme, the Single Area Payment Scheme and the Voluntary Coupled Support as a share of direct payments (Pillar 1), 2017

Note: BPS: Basic Payment Scheme (BPS); SAPS: Single Area Payment Scheme; VCS: Voluntary Coupled Support.

Source: European Commission, budget.

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A top-up payment to young farmers, in addition to the BPS and SAPS, applies in all Member States. In 2017, the payment uses 1.1% of the European Union’s direct payments envelope, as reported in the general budget. Member States have chosen to implement this measure in different ways. Some offer recipients a flat payment rate on a limited number of hectares and others apply a payment proportional to the BPS or SAPS received. In addition to this compulsory scheme, 25 Member States have chosen to attribute a portion of their rural development expenditure, 4% on average, to support young farmers. The bulk of the latter goes to business development and investments.

Fifteen Member States have chosen to offer small farms a simplified payment setup – the small farmers scheme ‑ that waives the compliance to greening and cross-compliance requirements. The payment cannot exceed EUR 1 250 (USD 1 382) per farm and, depending on the method chosen by the member state, the overall envelope may be limited to 10% of national direct payments.

The Areas with Natural Constraints (ANC) measure of the RDP is implemented by all Member States, except Denmark, Estonia and the Netherlands, using 27% of Pillar 2 public expenditure funds (including Member States contributions from national budgets) in 2017. Until now, Member States have used up to 140 different criteria for assessing ANC status. These will be replaced by a common set of eight biophysical criteria. Initially scheduled for 2018, the deadline for reassessment of eligible areas by Member States was pushed back to 2019. Denmark implements an additional direct payment to ANC from Pillar 1 funds. Under this payment, the ANC are defined based on eight biophysical criteria, using 0.3% of its national direct payments envelope.

Nine Member States or regions have chosen to grant higher payments to the first hectares, under the so-called redistributive payment, using 4.1% of the European Union’s direct payments envelope as reported in European Union’s general budget.

Member States that implement the redistributive payment may choose to opt-out from so-called degressivity. Degressivity imposes a minimum 5% reduction to the BPS amounts above EUR 150 000 (USD 165 880) per recipient. Six Member States and regions have chosen to opt-out.55 Nine Member States have used the possibility to increase the amount that is exempt from the 5% reduction by the value of salaries paid. Nine Member States have chosen to apply a full cap on the BPS at levels varying from EUR 150 000 (USD 165 880) to EUR 600 000 (USD 663 510). Funds that are deducted as a result of degressivity are transferred to Pillar 2 and used to fund the member state’s RDPs.

A Crisis reserve is earmarked to be used in case of emergency situations. It is funded from the Pillar 1 direct payments budget. If it is not used in the current year, the envelope is reverted for distribution as Pillar 1 direct payments in the same year. The crisis reserve is renewed each year and has not been used up to now as an emergency fund.

The POSEI scheme (Programmes dʼOptions Spécifiques à lʼEloignement et à lʼInsularité) supports farming in the European Union’s outermost regions by using production-related payments. The scheme supports access to food, feed and inputs for local communities, and also the development of local agricultural production with a little more than 1% of the direct payments envelope in 2017.

Pillar 1 also funds Market Price Support measures, with 5.2% of the overall agriculture and rural development budget in 2017. While the possibility exists for public intervention for cereals, namely common and durum wheat, barley and maize, it has not been applied in recent years. Purchase at the cereal intervention price is limited to 3 million tonnes of common wheat, beyond which purchase is by tender. Public intervention for durum wheat, barley and maize can be opened under special circumstances by means of tendering. Public intervention also applies to paddy rice. Until 30 September 2017, sugar has been supported through production quotas. The minimum price for quota beet has been set to EUR 26.29 (USD 29.07) per tonne. After the end of the sugar quota regime, existing provisions for agreements between sugar factories and growers have been maintained, and white sugar remained eligible for private storage aid. The support regime for cereals and sugar also comprises trade protection through tariffs, tariff rate quotas (TRQs). Export subsidies were abolished following the 2015 WTO Ministerial conference in Nairobi. No export refunds have been granted since July 2013.

Fruits and vegetables are eligible for voluntary coupled support and commodity specific payments; they are also supported through various market measures. These include crisis intervention measures that may be managed by producer organisations, an entry price system (minimum import price) for some products, ad valorem duties, but no export subsidies. Support co-financed by Member States also applies to the fruit and vegetables sector as well as the olive oil and table olives sector. These support a wide range of actions from production planning, quality measures, market withdrawal and harvest insurance to training, promotion and communication. Some of these measures apply at farm level while others are provided to producer organisations or to the sector at large. Also directed to the fruit and vegetables sector, until mid-2017, a consumer support system targeted to school children covered the consumption of fresh fruits and vegetables, processed fruits and vegetables, and banana products. The scheme’s budget has grown rapidly from EUR 29 million (USD 32 million) when it was first implemented in 2010 to the EUR 150 million (USD 166 million) in 2016; in 2017 EUR 10 million (USD 11.2 million) was destined to that scheme. The scheme covered the supply and costs related to logistics and distribution. Member States contributed 25% from national budgets while this share was lowered to 10% in less developed and outermost regions. Private storage may also be activated as an optional scheme for olive oil and flax fibre. In the CAP 2014-20 the rules on recognition of producer organisations and inter-branch organisations are expanded beyond fruits and vegetables. Compensation may be greater when producers claim support via producer groups as was the case with compensation payments related to the Russian Federation’s embargo on imports.

In the dairy sector, intervention prices are used for butter and skimmed milk powder together with import protection. Intervention purchase cannot exceed 50 000 tonnes for butter, and 109 000 tonnes for skimmed milk powder (SMP). Above those limits, purchase is made by tender. Until mid-2017, the consumption of milk and milk products by school children was supported through the school milk scheme with an overall budget of EUR 75 million (USD 83 million) in 2017. The support rate was set to EUR 18.15 per 100 kg (USD 20.07) and limited to 0.25 litre of milk per child and per school day. Member States could top-up the school milk payment with national subsidies.

In August 2017, a single school scheme was introduced to eventually replace the milk and fruit and vegetables school programmes with a budget of EUR 188 million (USD 211 million) foreseen for 2018. The programme is initiated and financed by the European Union and may be co-financed by Member States.

The beef market is supported by floor prices, tariffs and TRQs. Support for pig meat is provided by import protection. For sheep meat, the market support regime comprises tariffs and TRQs, with most country-specific TRQs subject to a zero customs duty. For poultry and eggs, there are TRQs. Since the WTO Ministerial conference in Nairobi in December 2015, the European Union is committed not to resort to export subsidies. Private storage may be activated as an optional scheme for butter, SMP, certain cheeses, beef, pig meat, sheep meat and goat meat. Furthermore, specific provisions are made for milk and milk products.

The wine sector is supported through a system of authorisations for new vine planting. Since January 2016, new vine planting is authorised while limited to 1% of the planted vine areas per year. Authorisations would be automatically granted to producers to replace grubbing of an existing vine area. Member States have up to 31 December 2020 to transition to the new system. The sector is also supported through promotion measures, both in the European Union and in third countries, restructuring and conversion of vineyards, compensation for green harvesting, setting up mutual funds, investment in tangible and intangible capital, income insurance, development of new products, processes and technologies, and distillation of by-products.

As a result of these measures, prices paid to domestic producers were 5% above world market prices in 2015-17, and the support they generated (Market Price Support) represented 20% of the estimated support to agricultural producers.

Pillar 2 funds are implemented through national (or regional) Rural Development Programmes (RDP). RDPs also support projects that use the “LEADER approach” (Liaison Entre Actions de Développement de l’Économie Rurale) — i.e. relying on a multi-sectoral approach and local partnerships to address specific local problems; and technical assistance for the implementation of Pillar 2 measures. Rural Development is part of the EU-level Common Strategic Framework covering all support from European Structural and Investment (ESI) funds (the EAFRD, ERDF, Cohesion Fund, ESF and EMFF) in Member States through partnership agreements.

Member States participate in the funding of Pillar 2 payments (also called co-financing) in accordance with the RDPs that cover the entire duration of the CAP cycle. In their plans, Member States can choose from a menu of 19 measures to meet the six priority areas of Pillar 2. Two conditions apply: a minimum 30% of rural development funding from the EU budget is spent on measures related to the environment and climate change adaptation, including forestry and investments in physical assets; and another 5% is spent on the LEADER approach. The six priority areas of Pillar 2 of the CAP 2014 20 are as follows: 1) fostering knowledge transfer and innovation; 2) enhancing competitiveness of all types of agriculture and the sustainable management of forests; 3) promoting food chain organisation, including processing and marketing, and risk management; 4) restoring, preserving and enhancing ecosystems; 5) promoting resource efficiency and the transition to a low-carbon economy; and 6) promoting social inclusion, poverty reduction and economic development in rural areas (Table 10.5).

On average and at EU28 level, the greatest share of the new RDP budget is allocated to three measures: Investments, Agri-environment and Climate and Areas with Natural Constraints. While Member States’ choices may vary, Investment is part of the top three measures in all but two Member States (Austria and Sweden).

Table 10.5. Rural Development funding of Priorities as a share of total expenditure (estimated 2017)

	Share of measure in CAP total public expenditure (calculated as the sum of EU and national co-funding excluding top-ups)
Administrative expenditure	0.2%
Interventions in agricultural markets CMO	4.6%
Direct Payments	66.6%
Rural Development EU funding	17.5%
Rural Development national funding	10.5%
Rural Development total public expenditure, of which:	28.0%
Priority 1: knowledge	allocated through other priorities
Priority 2: competitiveness	5.0%
Priority 3: food chain organisations	2.0%
Priority 4: ecosystems	16.6%
Priority 5: resource efficiency	1.3%
Priority 6: social inclusion	2.5%
Research and innovation - Horizon 2020	0.2%
CAP EU budget	89.5%
CAP total public expenditure (including national co-financing)	100.0%

Source: OECD calculations based on EUR-Lex budget 2018 (administrative expenditures and all Pillar 1 items) and EAFRD financial execution (Rural Development and allocation to priorities). CAP EU budget corresponds to the sum of administrative expenditures, Pillar 1 and EU-funded Rural Development. CAP total expenditure comprises CAP EU budget and nationally co-financed Rural Development.

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The launch of the European Innovation Partnership for Agricultural productivity and Sustainability (EIP-AGRI) in 2012 was followed by integrating the Horizon 2020 programmes specific to research and innovation in agriculture into the CAP 2014-20. The focus of the Horizon 2020 programmes relevant to agriculture is on securing sufficient supplies of safe and high quality food and other bio-based products. Its budget under the agriculture and rural development title has increased since it was initiated in 2013 from EUR 1 million (USD 1.11 million) to EUR 108 million (USD 121 million) in 2017.

Box 10.2. Measures addressing climate change mitigation and adaptation

The European Union and its Member States are committed to a binding target of at least 40% reduction in greenhouse gas emissions by 2030 compared to 1990, to be fulfilled jointly, as set out in the conclusions by the European Council of October 2014. The target represents an economy-wide absolute reduction from base year emissions. The European Union has already started to prepare for the implementation of Paris Agreement commitments from 2021 onwards. Currently, the internal legislation governing the reporting and accounting of emissions and removals in the agriculture and land use, land-use change and forestry (LULUCF) sector has been agreed politically and should be adopted in spring 2018.

Agricultural sector specific measures consist of CAP elements that aim at improving environmental performance: cross-compliance and greening under Pillar 1, and agri-environmental and climatic measures under Pillar 2.

Aside the EU-wide measures, Member States have been developing their national policies to tackle climate change using a variety of means, some of which are targeted to the agricultural sector. National climate protection plans have been developed and national targets for emissions have been set.

Sector specific policy instruments are identified in consultation with stakeholders to respond to extreme climatic events such as droughts, extreme precipitations (rain and hail) and floods (Belgium, the Netherlands). Climate risk related insurance funds are created (Belgium, the Netherlands). Research and advisory services offer farmers information and training on climate change adaptation (Austria, Belgium, Estonia, France, Germany, the Netherlands, and Sweden) and climate change mitigation (Ireland). The implementation of new species and varieties is promoted (Belgium, Estonia), multi-trait animal breeding strategies (Ireland) and close monitoring and control of pests, plant and animal diseases are implemented (Estonia).

Mitigation measures include sustainable management of land, water and other natural resources (Austria, Estonia, France, Germany, Greece, Hungary, Ireland, Portugal, the Netherlands, and Sweden). Support is provided to technologies reducing emissions of greenhouse gases and ammonia coming from handling and storage of manure (Germany, France, Hungary, Ireland, and Sweden). Links between agriculture and forestry sectors are reinforced to increase carbon sequestration (France, Germany, Ireland, and Portugal).

Domestic policy developments in 2017-186

Between 2016 and 2017 the EU budget on agriculture and rural development (title 05) decreased by about 7% to EUR 53 billion (USD 60 billion), of which about 5% was disbursed as market intervention measures, 74% as direct payments under Pillar 1 and 20% as rural development measures under Pillar 2.7 The main policy developments in the past years are linked to the full implementation of the CAP 2014-2020, including the CAP simplification - Omnibus regulation.

The Omnibus regulation (EU Regulation 2017/2393), endorsed on 16 October 2017, amends the financial regulation governing the implementation of the EU budget and 15 sectorial legislative acts, including agriculture. The agreement is aimed at simplifying the CAP through a number of changes to the four CAP regulations on direct payments, rural development, common market organisation and horizontal regulation (Box 10.3).

Box 10.3. Omnibus regulation: changes to the CAP regulations.

The regulation governing direct payments was amended with a new definition of the term active farmer, where the distinction between active and non-active farmers becomes optional, allowing those Member States where it created excessive administrative burden to discontinue it. Current rules on permanent grassland have been modified to provide greater flexibility in implementing the requirement. Greening payments have been amended to include also areas farmed with plant varieties such as silvergrass (miscanthus) and silphion (silphium perfoliotum), as well as land left fallow for melliferous plants as ecological focus areas. Payments for young farmers are to be granted for five years from the submission date, as long as the submission is made within five years from the setting up of the farm and, in addition, Member States may increase young farmers’ payments in the first pillar up to 50% within the existing ceilings. Finally, Member States are able to review their decision on voluntary coupled support on annual basis.

Common market organisation rules have been revised to extend the possibility to collectively negotiate value sharing terms in contracts to sectors other than sugar and will have a voluntary nature (value sharing). Some of the producer organisations prerogatives such as planning production, optimising production costs, placing on the market and negotiating contracts for the supply of agricultural products on behalf of members, already existing in sectors such as olive oil, beef and arable crops, will be extended to all sectors with a view to improving the position of farmers in the supply chain. In light of such extension, additional safeguard mechanisms were added to guarantee that competition is not excluded. Rules governing fruit and vegetables’ operational programmes, wine and import quotas have been simplified and technically improved.

Rural development’s income stabilisation tool was amended to include new sector-specific measure that allows triggering support if average annual income in the sector drops by more than 20%. Further, support for insurance contracts becomes available when more than 20% of the average annual production of the farmer is destroyed. Rules governing financial instruments have been revised to promote their use and harmonise them with other EU Structural and Investment Funds.

Horizontal regulation has been amended to increase financial discipline by simplifying existing procedure ensuring that CAP expenditures do not exceed the limits specified in the EU budget. The procedure is now managed by the European Commission alone. The Commission is also called to review the operation of the crisis reserve in the context of the preparations for the next multiannual financial framework to ensure efficient and timely interventions in times of market crisis.

As part of the implementation of the CAP 2014‑20, the Transitional National Assistance (TNA) applies as a complementary payment to the SAPS and the maximum payments allowed gradually falls from 75% of the 2013-level of SAPS aid in 2015 to 50% in 2020. For example, in the Czech Republic the TNA payment rates were further reduced in 2017 compared to 2016 and mostly provided in the form of area or livestock unit payments for arable land and cattle. In the Slovak Republic TNA payments in 2017 were only provided for cattle. Estonia re-introduced TNA as of 2017. The total envelope of EUR 19.3 million (USD 21.7 million) was attributed to seven schemes including arable crops, seeds, suckler cows, ewes, milk and cattle. In 2018, the envelope will decrease to EUR 18.4 million (USD 20.7 million). In Poland, the soft fruit scheme was replaced by the strawberry scheme and the sugar beet scheme has been applied to the whole area of sugar beet cultivation covered by the contract.

Estonia has also revised its Voluntary Coupled Support (VCS) scheme and in 2017-20 only two measures will be implemented: support for dairy cows and fruit and vegetables with the total budget of EUR 6.1 million (USD 6.9 million) per year. In Hungary, in 2017 the VCS was extended to potatoes and payments to fruits and vegetables were diversified for those produced extensively or intensively, on top of existing VCS paid to suckler cows, milking cows, male bovine animals, sheep, rice, sugar beet, field vegetables and vegetables for processing, fruits, protein fodder, soybean and other protein crops. Lithuania introduced VCS for sugar and certified seeds. In Poland, payments to protein crops were replaced by payments to leguminous crops for production of grain and to fodder crops. Poland also provided support to cattle and cows up to 20 animals which meet eligibility criteria and to female sheep which also meet specific eligibility criteria.

A number of exceptional measures continued, deployed since August 2014 to address the effects of an import ban imposed on EU dairy and fruit and vegetables by the Russian Federation and those of coinciding “severe market disturbance” as qualified by the European Commission.

A voluntary supply management scheme to reduce milk production was attributed EUR 150 million (USD 166 million) in the 2017 budget year. All Member States, except Greece, took part in the scheme that offered EUR 0.14 (USD 0.15) for every kilogramme of reduced production. Each Member State could decide to top up that amount with EU funds distributed as national envelopes for extra support to the dairy sector. Member States were authorised to increase state aid to a maximum of EUR 15 000 (USD 16 590) per farmer per year, with no national ceiling (Box 2.11.1).

The two broader EU packages for the dairy and livestock sectors were attributed EUR 350 million (USD 387 million) in 2017, of which EUR 250 million (USD 276 million) in 2017 were paid to dairy producers. The packages support dairy and livestock producers to implement measures such as small scale farming, extensive production, environmental and climate friendly production, co-operation between farmers, improvement of quality and added value, training in financial instruments and risk management tools. In addition, Member States can match these amounts with national funds. Further to these, adjustments are proposed to the payment of the Voluntary Coupled Support to dairy cow herd owners, as a lump sum rather than per head of animal (EC, 2016).

In addition to European funds, many Member States continued implementing compensatory measures. In Belgium (Wallonia), EUR 6.5 million was allocated to pasture and in Belgium (Flanders), EUR 9.8 million were attributed to area payments, quality schemes for dairy and pig, and innovation. Estonia doubled EU funds allocated to the exceptional adjustment aid to milk producers (total of EUR 12.5 million or USD 14 million ) and pig farmers (total of EUR 3.4 million or USD 3.8 million) in 2017. In France, a fixed payment of EUR 150 (USD 168) per head applied to young male bovine animals of meat or mixed breeds weighing less than 360 kg, sold on the market in January and February 2017. Lithuania provided national aid to reduce milk production and to promote cooperation. Luxembourg offered interest subsidies to milk and pig producers, starting from March 2017, and doubled EU funding attributed to farmers who take up extensification. In Poland, additional financial support of EUR 22.5 million (USD 25.3 million) was provided to milk producers and farmers in other livestock sectors. In Slovenia EU funds of EUR 1.15 million (USD 1.3 million) were doubled with national expenditure to support dairy farmers who did not increase production in the first three months of 2017 compared to the same period in 2016.

Exceptional measures were also maintained for the fruits and vegetables sectors. They included withdrawals for free distribution and other purposes such as animal feed, composting or distillation. Other measures, such as “non-harvesting” and “green harvesting”, were also implemented. In Poland, support was extended until April 2018 including withdrawal of fruit and vegetables for free distribution or for use as feedstuffs and production of biogas. Apples accounted for about 90% of the total volume withdrawn. In 2017, Slovenia compensated producers for withdrawal for free delivery of 3 000 tonnes of fruit and vegetables. In January 2018, Italy approved an emergency aid programme for citrus. The EUR 10 million (USD 11.2 million) scheme includes the withdrawal of 4 500 tonnes of oranges from the market, of which 500 tonnes were immediately removed from the market, while the reminder was purchased by the government for distribution under feeding programmes.

Measures to compensate farmers affected by animal diseases in the poultry sector in France continued. In October 2017, a fund of EUR 20 million (USD 22.5 million) was secured to compensate farmers for their losses incurred in 2016 due to the Avian flu and negotiations with the European Commission of a similar fund for losses incurred in 2017 are on-going. France has also provided support to downstream industry and reinforced its protection strategy against Avian influenza by setting new biosecurity requirements in systematic screening of breeding farms, management of vehicle traffic within farms and conditions for protecting farm-bird feed from wild birds. In Latvia, poultry farmers affected by salmonellosis received compensation funds. In Estonia, compensation was paid to those pig farm owners whose herds were culled and feed and equipment were destroyed due to African swine fever (ASF; EUR 0.57 million or USD 0.64 million in 2017). In Latvia, pig producers affected by the ASF were compensated for taking up biosecurity measures and eliminating pigs from 1 December 2015 until 31 July 2017. Lithuania continued to address the ASF by information campaigns and biosafety measures. In Poland, compensation was paid to pig farmers whose herds were affected by the ASF and where animals were culled, and feed and equipment were destroyed. Additional aid was granted to small pig farms (below 50 pigs) that were ordered to suspend pork production due to increased sanitary restrictions to combat the spread of AFS. In Slovenia, payments were made in 2016 and 2017 to support breeders of cattle affected by anthrax in 2015.

In August 2017, Belgium has identified an unauthorised pesticide use (fipronil) in some of the egg farms. As a result, contaminated eggs were destroyed and some of the farms suspended their activity. To compensate farmers for the associated income losses, federal and regional (Wallonia) governments have provided support. Additionally, Flanders and Wallonia provided support to compensate for costs of destruction of manure coming from the contaminated farms.

In April 2017, Estonia adopted a new action plan for reducing resistance to antibiotics in the veterinary field for 2017-2021. The plan includes three fields: drugs and medicated feed for veterinary use; awareness of the use of antibiotics (training, advisory, extension); monitoring of antimicrobial resistance, scientific and applied research.

Some Member States developed sectoral plans. In April 2017, Estonia approved the 2018-2020 food sector export development plan aimed at increasing the share of value added products in Estonian exports, with five main fields of intervention: strengthening the market power, improving the availability of market information, supporting R&D activities, developing the image of Estonia and Estonian food abroad, supporting sales related support activities. In Italy, a law was implemented to regulate the wine sector by simplification of marketing, designation of origin, geographical indication, labelling and presentation, management, controls and sanction systems. Italy has also introduced measures aimed at promoting the supply chains for hemps and established a new regulation aimed at restoring, recovering and safeguarding the typical citrus plantations with a budget of EUR 3 million (USD 3.4 million) for 2017. In Romania, beginning in 2017, EUR 40 million (USD 44 million) are allocated annually, for a period of eight years, to support the tomato sector. Measures concerning the wine sector are underway. In 2017, Spain has been preparing the Global Strategic Plan for the agro-food sector horizon 2030, which is to be released in 2018.

Organic farming increased in 2017 in many Member States. For example, in Austria, the new entries into the national organic farming programme, part of the larger Agri-environmental Programme (ÖPUL), increased the number of organic farms to more than 22 000 in 2017. The overall programme attracted more than 80% of farmers in 2017 who in addition to the legal requirements admitted to an environmentally friendly management of their agricultural land. Organic farming was also very attractive in Bulgaria, where subsidies authorized in June 2017 totalled EUR 49.8 million (USD 56 million). In early 2018, the Ministry of Agriculture and Foods reported faster-than-anticipated subsidy usage, which prompted the ministry to restrict new organic subsidy applications in 2018. As a result of the implementation of the Organic Farming Development Plan 2014–2020 in Estonia, in 2017, the area of organic land increased to approximately 209 000 hectares, with 1 888 organic farms registered. In France, 3 000 farms have been converted to organic farming during 2017.

In Spain, the investments in irrigation continue via the new National Irrigation Strategy 2018-2025.

In Greece, a new legislative framework was adopted regarding handling and marketing of fresh and perishable agricultural products. The law imposes also mandatory origin labelling of milk and meat at retail outlets. France has also introduced labelling of origin of milk and meat in processed food from January 2017 for duration of two years as an experimental programme.

Some Member States have set up disaster compensation schemes related to climatic events. In Austria, EUR 23.3 million (USD 26.2 million) will be paid to compensate the effects of frost damage to wine growers. Italy has introduced measures for relaunching agriculture and the supply-chains of the areas affected by the 2016 earthquake in the centre of Italy, including a EUR 11 million (USD 12.4 million) compensation fund for breeding farms. In Slovenia, temporary support of EUR 3.5 million (USD 3.9 million) was provided to fruit and grape producers to compensate for the loss of revenue due to severe spring frost in 2016 and additional support is set to be provided in 2018 to compensate for effects of another severe frost that occurred in spring 2017. Temporary support was also granted to beekeepers to compensate the loss due to unfavourable weather conditions.

As part of risk management tools, Austria introduced drought index insurance for corn, winter wheat and grassland in 2017. The Austrian agricultural insurance system is a public-private partnership, where federal and state governments provide premium subsidies of 50% for insurances covering certain risks. In Estonia, the process to include risk management measures (crop, animal and plant insurance) into RDP was launched, to replace the current national scheme. In France, from 2018, subsidy rates for crop insurance apply independently of the number of subscriptions. Three risk layers are foreseen, with subsidy rates at 65%, 45% and zero subsidy. In Hungary, insurance premiums for loans are no longer subsidised by national programmes, but within the EU RDP risk management programme. The co-financing from the national budget was close to the amount paid in 2016 (EUR 5 million or USD 5.6 million). With the financing from the European Union, the insurance premium subsidy amounted to EUR 21 million (USD 23.6 million) in 2017 and is expected to be further extended in the coming years. In Slovenia, the rates of the insurance premium subsidy were changed for some commodities. The subsidy rate for fruits (including olives) was increased to 40% in 2017 (up from 30% in 2016) and to 50% in 2018; the rate for hops and grapes was increased to 30% in 2017 (up from 20% in 2016) and up to 50% in 2018. Further, the insurance subsidy rates for other crops were increased to 40% in 2018 (up from 20% in 2017), whereas the subsidy rates in livestock remained the same (20%). In Portugal, the continental rural development programme was extended to create a new risk management measure on mutual funds.

Slovenia has increased the support for young farmers for investments to eliminate the effects of drought, frost and climate change.

Several Member States, including Estonia, Poland and Slovenia, engaged in a new EU co-financed programme in the support of apiculture for the period 2017-19. This programme extends the measures already implemented in the 2014-2016 apiculture programme, and focuses primarily on: technical assistance to beekeepers and beekeepers’ organisations; combating beehive invaders and diseases, particularly varroosis; and support for the analysis of apiculture products to increase marketing and the value added of apiculture products. In 2017, France introduced new advisory services measures under its Development Plan for Sustainable Apiculture implemented in 2016.

The European Union renewed the current approval of herbicide glyphosate in December 2017 for a five-year period. The authorisation of glyphosate-based products by Member States must fulfil a long list of conditions to minimise the potential effects on environment and human health. In Denmark a new nitrates regulation replaced the existing system of reduced fertilisation standards in 2018.

Several countries developed strategies to combat food waste. France has signed an agreement on food waste covering 2017 to 2020, with the objective of halving food waste by 2025. Public and private partners agreed on priority actions including favouring the management of unsold food and food donations, strengthening innovation and partnerships between actors, deploying new communication tools and quantifying waste. Portugal elaborated the National Strategy to Combat Food Waste (ENCDA) and an Action Plan to Combat Food waste (PACDA).

Tax and social security rebates apply to farming in some Member States. In Hungary, VAT was reduced from 27% to 5% for pork in 2016 and, in 2017, for fresh milk, poultry and eggs. In January 2018, the 5% VAT was also applied to pork edible offal. Further, since 1 January 2017, the corporate tax formerly having two rates (19% and 10%) was unified and set at 9%. Since January 2018, initial investments resulting in product diversification and in new procedural innovations, including in agriculture, have also been included among investments eligible for tax advantage for developments. In Italy, the Stability Law 2017 envisages the exemption from the income tax paid by farmers on the cadastral values related to land for the period 2017-2019 and three-year exemption of social security contributions for farmers and professional agricultural entrepreneurs, aged less than 40, including those who have companies located on mountainous or disadvantaged land, and who enrolled for the first time in the agricultural social security in the period between 1 January and 31 December 2017. The Stability Law 2017 has re-introduced tax breaks related to the transfer of ownership between agricultural producers and their family members in mountainous areas. The goal of this measure is to ensure continuation of farming activities in these areas. Additionally, a tax credit of 65% is granted for farms that undertake modernisation of their agricultural holdings in 2017 and 2018.

The fuel tax concession has significantly increased in Czech Republic from EUR 45 million (USD 50.6 million) in 2016 to EUR 87 million (USD 97.8 million) in 2017 due to the extension of the right of the fuel tax relief to fuel used in livestock production.

Latvia has introduced support to producer organisations in the fruits and vegetables sectors. Slovenia has abolished support for information and promotion activities carried out by producer groups in the internal market.

Under the sub-measure “support for new participation in quality schemes”, Slovenia introduced a new quality scheme for fruit and processed fruit products.

In addition to the CAP simplification within the Omnibus regulation mentioned above, several Institutional changes occurred in 2017. In France, the Parliament voted measures to protect land and limit land accumulation with an objective of maintaining diversified agricultural sector as much by the size of the farms as the modes of production, while allowing the renewal of the generations. In Hungary, the Agricultural and Rural Development Agency (ARDA), which functioned as the paying agency of agricultural support, was terminated on 1 January 2017. The paying agency activities were transferred to the Hungarian State Treasury. Tasks related to the EARDF were transferred to the minister responsible for agricultural and rural development, while the EAGF related tasks were transferred to the minister responsible for the agricultural policy. In Poland, a new institutional framework for supporting the agriculture and rural development came into force on 1 September 2017. As a result, the Agricultural Market Agency (ARR) and the Agricultural Property Agency (ANR) were closed down. Instead, a National Support Centre for Agriculture (KOWR) was set up and responsibilities of the Agency for Restructuring and Modernisation of Agriculture (ARMA) were revised. KOWR is now responsible for tasks in the area of programming development of rural areas in Poland and management of agricultural real property, while ARMA took over all responsibilities for disbursements of EU funds.

Trade policy developments in 2017-18

The European Union is committed not to resort to export subsidies since the WTO Ministerial conference in Nairobi in December 2015. No export refunds were provided for agricultural products since July 2013. Only residual amounts for outstanding licences have been paid since.

The European Union’s simple average MFN applied tariff rate for agricultural products was 11.1% in 2016 (WTO, 2018a), slightly up from its 2015 level. These levels compare with 4.2% for non-agricultural products. Import duties on high quality wheat have been suspended since 2012.

A range of import tariff rate quotas (TRQs) were filled at 80-100% during the 2017 calendar year, including those for chicken and poultry cuts, potatoes, tomatoes, carrots, sweet peppers, almonds, grapes, pears and most cereals. Most of the remaining TRQs had a fill rate of less than 5% (WTO, 2018b).

The price-based special safeguard system has been made operational for some frozen poultry and dried eggs in marketing year 2015/16. During the same period, the volume-based special safeguard action has not been invoked. However, the system has been made operational at the level of calculation of figures for the trigger volumes for some fruit and vegetable products (EU notification to the WTO, March 2017).

The European Union ban on imports of birds originating from countries affected by avian influenza was still in place in 2017.

In December 2017, the European Union implemented a revision in the trade legislation introducing a new methodology to calculate dumping on imports, including for agricultural products.

The EU-Canada Comprehensive Economic and Trade Agreement (CETA) entered into force provisionally on 21 September 2017, allowing application of about 90% provisions pending EU Member States ratification of the agreement by their national parliaments.

In September 2017, the European Parliament approved two EU-Iceland agreements, one on agricultural trade and one on mutual recognition of geographical indication. The agreement updated the 2007 European Economic Area Agreement that initially excluded agricultural and fisheries products from the free trade provisions.

In December 2017, the Economic Partnership Agreement between the European Union and Japan was finalised. Pending a final agreement on the investment protection chapter, the deal is expected to enter into force in 2019 (EC, 2018). The agreement will eliminate Japan’s duties for around 85% of EU agri-food products improving market access particularly for cheese, wine and meat and offer more than 200 Geographical Indications.

The trade negotiations between the European Union and the Mercosur countries have significantly advanced during 2017.Political agreement was reached with Mexico in April 2018.

Negotiation talks on the Transatlantic Trade and Investment Partnership (TTIP) that were initiated in July 2013 with the United States were put on hold in 2017.

Other free trade agreement negotiations have been initiated between the European Union and India (2007), Indonesia (2016), Malaysia (2010), Myanmar (2014), the Philippines (2016), Thailand (2013) and Viet Nam (2012). Other ongoing processes include negotiation with Morocco for a DCFTA. Negotiations were put on hold after the fourth round of negotiations in April 2014. In September 2017, the European Commission proposed negotiating directives to Australia and to New Zealand.88

Five countries currently have candidate status to the European Union, including Turkey (since 1999); the former Yugoslav Republic of Macedonia (since 2009), Montenegro (since 2010), Serbia (since 2012) and Albania (since 2014).

References

EC (2016), Press release, http://europa.eu/rapid/press-release_IP-16-2563_en.htm

EC (2018), Press release, http://europa.eu/rapid/press-release_MEMO-18-3326_en.htm

OECD (2017), Evaluation of Agricultural Policy Reforms in the European Union: The Common Agricultural Policy 2014-20, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264278783-en.

WTO (2018a), European Union tariff profile, http://stat.wto.org/TariffProfiles/E28_e.htm

WTO (2018b), European Union notifications to the WTO, Table MA: 2, January 2018, G/AG/N/EU/41.

Notes

← 1.  Within the rural development regulation, the income stabilisation tool was amended to include a new sector-specific measure that triggers support if average annual income in the sector drops by more than 20%. Further, support for insurance contracts becomes available when more than 20% of a farmer’s average annual production is destroyed.

← 2.  Member States with average direct payment per ha below 90% of the EU average can transfer up to 25% of rural development fund to direct payments.

← 3.  The following Member States have opted for transfers of funds from Pillar 1 to Pillar 2: Belgium, Czech Republic, Denmark, Estonia, France, Germany, Greece, Latvia, the Netherlands, Romania, the United Kingdom, and as of 2017 Lithuania. In 2017, France and the Netherlands have doubled the amount transferred between the pillars. Croatia, Malta, Hungary, Poland and Slovak Republic chose to transfer funds from Pillar 2 to Pillar 1.

← 4.  The SAPS is applied in Cyprus*, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Bulgaria, Romania. The BPS is applied in Slovenia, Malta, and Croatia, in addition to the EU15.

*Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.

*Note by all the European Union Member States of the OECD and the European Union: The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

← 5.  Belgium (Wallonia), Croatia, France, Germany, Lithuania and Romania.

← 6.  This section describes policy developments resulting both from the European Union’s CAP and national member states’ decisions. Examples from member states, used to illustrate these developments, are based on information available and are not intended to be exhaustive.

← 7.  Remaining funds are spent on Instruments of pre-accession, Administrative expenditure, Horizon 2020, Audit, Policy strategy and International aspects of the agriculture and rural development policy area.

← 8.  An overview of FTA and other trade negotiations is kept up-to-date in the following document: http://trade.ec.europa.eu/doclib/docs/2006/december/tradoc_118238.pdf