Agricultural Policy Monitoring and Evaluation 2021

11. European Union

Support to agriculture

Producer support in the European Union,1 measured by the Producer Support Estimate (PSE), is close to the OECD average. After falling from the 1990s through the early 2000s, support to producers in the European Union as a share of gross farm receipts stabilised at around 19% since 2010, compared to 18% for all OECD members.

While trade protection measures, including import and export licensing, tariff rate quotas (TRQ) and special safeguards, remain in effect for a number of sectors, support in the form of price distortions declined substantially over time. In 2018-20, market price support (MPS) accounted for 18% of support to producers, down from 46% in 2000-02.

Most support to producers comes from budgetary support – largely in the form of direct payments. Production distortions from these payments declined since the early 2000s. As of 2020, nearly half of budgetary support is decoupled from production; one third is based on current production and 18% is based on input use. Moreover, nearly 60% of payments to producers are contingent on mandatory environmental constraints, and an additional 14% of payments to producers come from voluntary agri-environmental schemes with conditions beyond the mandatory requirements.

Expenditures for general services to the sector (GSSE) in 2018-20 averaged 10.4% of total support, or 4.7% of agricultural value-added – a slight increase compared to 2000‑02 but still below the OECD average. While the relative importance of GSSE is largely unchanged over the past two decades, the composition of GSSE expenditures has shifted. Expenditures on agricultural knowledge and innovation systems continued to predominate, as their share of total expenditures grew 12 percentage points to 54% in 2018‑20. Expenditures on marketing and promotion also rose (now responsible for 22% of GSSE), while support for development and maintenance of infrastructure and public stockholding both declined.

Total support to the sector declined in relative terms over the past twenty years. In 2018-20, total support was estimated at 0.6% of GDP, compared to 1.0% in 2000‑02.

Recent policy changes

Much policy activity in 2020 focused on ensuring that the food and agricultural sectors could cope with the impacts of COVID-19. A raft of measures was implemented on this front at the EU-level, including flexibility under the Common Agricultural Policy (CAP), exceptional market measures, and direct support to farmers and rural areas. In this framework, Member States responded with their own policy packages, targeting the most affected sectors. In particular, spending on state aid initiatives under the Temporary State Aid Framework soared in 2020 and early 2021, with 22 countries implementing sector-specific aid packages totalling nearly EUR 6.2 billion (USD 7.1 billion), equivalent to more than 11% of CAP expenditure in 2020.

The European Union also released the Recovery Plan for Europe, a long-term recovery initiative from the COVID-19 emergency. In particular, the Next Generation EU initiative under this plan will fund some activities for the agricultural sector to support Member States in recovering, repairing and emerging stronger from the crisis.

Other policy initiatives were either released or came closer to completion in 2020. In particular, on 27 November, the European Parliament and the Council agreed on transitional rules for the CAP in 2021-22 (based on the principal of continuity of the current CAP) while negotiations continue on CAP reform. In addition, in May, the European Commission released more details about proposed Green Deal initiatives most relevant to the agricultural sector. Specifically, the Farm to Fork and Biodiversity strategies seek to halt biodiversity loss in Europe, transform EU food systems into global standards for competitive sustainability, protect human and planetary health, and safeguard the livelihoods of all actors in the food value chain. The Farm to Fork Strategy outlines a 27‑point action plan covering four primary policy domains: (1) ensuring sustainable food production; (2) stimulating sustainable food processing, and wholesale, retail, hospitality and food service practices; (3) promoting sustainable food consumption and facilitating the shift towards healthy, sustainable diets; and (4) reducing food loss and waste. The strategy includes several agriculture-specific targets, including reducing chemical pesticide use by 50%, reducing nutrient loss by at least 50% and increasing the share of farmland under organic farming to at least 25%. The Biodiversity Strategy is a long-term plan to protect nature, reverse the degradation of ecosystems and build resilience to future threats. It also contains agriculture-specific targets, including reversing the decline of pollinators and establishing biodiversity-rich landscape features on at least 10% of farmland.

On 31 December 2020, the United Kingdom left the EU Single Market and Customs Union, ending the free movement of people, goods and services. The draft EU-UK Trade and Cooperation Agreement agreed on 24 December 2020 lays down the rules governing trade and movement between the two. Of relevance to agriculture, the trade component of the agreement includes duty and quota free imports on all goods that comply with rules of origin provisions.

Several additional trade agreements were negotiated or came into effect in 2020. The Agreement on Cooperation on, and Protection of, Geographical Indications (GI) between the European Union and the People’s Republic of China (hereafter “China”) was signed on 14 September. The EU-Viet Nam Free Trade Agreement entered into force on 1 August. On 28 April, the European Union and Mexico finished negotiations on a new trade agreement to supersede the EU-Mexico Global Agreement in force since 2000.

Assessment and recommendations

• The Farm to Fork and Biodiversity Strategies outline a welcome ambition to improve the productivity, sustainability and resilience of the European Union’s agricultural sector. At the same time, it is unclear how the particular targets chosen as desired outcomes will affect overall productivity and sustainability. Moreover, the strategies should place more emphasis on the need to continue to improve water management as a prerequisite for improved sustainability and resilience – an area that will become increasingly important under projections for a drier, hotter Europe.

• Current CAP proposals continue to support, within existing budgetary limits and regulations, commodity-specific assistance (in the form of voluntary coupled support) which has been shown to distort markets and may worsen environmental outcomes. Additionally, while the new national strategic plans represent an opportunity to better target policies to national circumstances, they risk increasing divergence in the national implementation of the CAP, including on coupled support. Phasing out programmes known to contribute to negative environmental outcomes or effectively addressing these impacts, could improve CAP coherence with Farm to Fork strategy. This approach would be an important first step to consider in the national plans in order to achieve current environmental ambitions.

• The European Union’s long-term COVID-19 recovery packages (in the form of Next Generation EU and the reinforced budget) are a welcome development, attempting to leverage the crisis as an opportunity to build a more resilient agricultural sector.

• Numerous ad hoc assistance packages announced under the Temporary Framework for State Aid indicate that either the current risk management policy toolbox is not appropriate for dealing with catastrophic events, or the incentives to take up existing tools are misaligned. Policymakers should discuss with sector stakeholders to determine what policies best address gaps in farm-level risk management – keeping in mind that the prospect of undefined ad hoc assistance packages erodes incentives to invest in risk management and resilience, particularly when such programmes are susceptible to political objectives and do a poor job of delivering assistance where needed.

• Despite huge disruptions in food and agricultural markets caused by the COVID‑19 emergency, European food and agricultural systems proved resilient in ensuring that consumers were able to access food. The Green Lanes initiative and efforts to facilitate market information likely assisted in these efforts. However, the crisis also increased calls for a reassessment of the preparedness of the European Union in relation to food security crises. Policymakers should be cautious and avoid adopting approaches that could undermine incentives to adapt and transform industries to manage future shocks.

Figure 11.1. European Union: Development of support to agriculture

Note: * Share of potentially most distorting transfers in cumulated gross producer transfers. EU12 for 1986-88, EU15 for 2000-02, EU28 for 2018-19 and EU27 plus UK for 2020.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Figure 11.2. European Union: Drivers of the change in PSE, 2019 to 2020

Note: EU28 for 2019 and EU27 plus UK for 2020.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Figure 11.3. European Union: Transfer to specific commodities (SCT), 2018-20

Note: EU28 for 2018-19 and EU27 plus UK for 2020.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Table 11.1. European Union: Estimates of support to agriculture

Million USD

	1986-88	2000-02	2018-20	2018	2019	2020p
Total value of production (at farm gate)	233 558	225 093	457 423	466 823	452 697	452 748
of which: share of MPS commodities (%)	75.0	73.3	73.4	73.7	73.6	73.0
Total value of consumption (at farm gate)	212 900	226 789	448 379	464 115	435 556	445 464
Producer Support Estimate (PSE)	95 385	79 781	106 077	108 994	104 698	104 538
Support based on commodity output	86 308	40 997	19 633	21 839	20 160	16 900
Market Price Support1	80 672	37 067	19 330	21 523	19 864	16 601
Positive Market Price Support	81 784	37 067	19 561	21 814	20 268	16 601
Negative Market Price Support	-1 112	0	-231	-290	-403	0
Payments based on output	5 637	3 930	304	316	296	299
Payments based on input use	5 056	6 833	15 115	14 745	14 780	15 821
Based on variable input use	960	3 047	6 412	6 284	6 286	6 667
with input constraints	0	0	38	31	42	41
Based on fixed capital formation	2 986	2 259	6 271	6 471	6 140	6 202
with input constraints	0	94	111	108	109	115
Based on on-farm services	1 109	1 527	2 432	1 990	2 354	2 952
with input constraints	90	274	10	10	10	10
Payments based on current A/An/R/I, production required	3 587	31 196	27 899	27 529	27 053	29 115
Based on Receipts / Income	147	99	614	328	324	1 188
Based on Area planted / Animal numbers	3 440	31 097	27 286	27 201	26 728	27 927
with input constraints	940	13 953	22 261	22 279	21 739	22 767
Payments based on non-current A/An/R/I, production required	0	0	4	3	3	7
Payments based on non-current A/An/R/I, production not required	0	10	41 920	43 486	41 239	41 034
With variable payment rates	0	0	0	0	0	0
with commodity exceptions	0	0	0	0	0	0
With fixed payment rates	0	10	41 920	43 486	41 239	41 034
with commodity exceptions	0	0	0	0	0	0
Payments based on non-commodity criteria	478	1 078	987	949	973	1 037
Based on long-term resource retirement	476	846	149	157	148	142
Based on a specific non-commodity output	2	176	769	739	776	792
Based on other non-commodity criteria	0	57	69	53	50	103
Miscellaneous payments	-43	-334	519	443	490	623
Percentage PSE (%)	38.4	29.8	19.5	19.7	19.5	19.3
Producer NPC (coeff.)	1.66	1.22	1.05	1.05	1.05	1.04
Producer NAC (coeff.)	1.62	1.42	1.24	1.24	1.24	1.24
General Services Support Estimate (GSSE)	9 118	8 355	12 369	12 690	12 002	12 416
Agricultural knowledge and innovation system	1 788	3 492	6 720	6 969	6 623	6 568
Inspection and control	194	281	1 177	1 180	1 170	1 180
Development and maintenance of infrastructure	1 331	2 222	1 719	1 895	1 577	1 684
Marketing and promotion	1 210	996	2 710	2 614	2 597	2 919
Cost of public stockholding	4 571	1 294	28	15	20	49
Miscellaneous	24	69	16	16	15	16
Percentage GSSE (% of TSE)	8.3	9.1	10.4	10.4	10.2	10.6
Consumer Support Estimate (CSE)	-69 408	-33 000	-17 808	-20 344	-18 411	-14 668
Transfers to producers from consumers	-80 268	-36 084	-18 489	-21 260	-19 172	-15 036
Other transfers from consumers	-1 699	-717	-152	-65	-265	-128
Transfers to consumers from taxpayers	4 992	3 537	469	511	400	496
Excess feed cost	7 567	264	365	470	626	0
Percentage CSE (%)	-33.4	-14.8	-4.0	-4.4	-4.2	-3.3
Consumer NPC (coeff.)	1.63	1.19	1.04	1.05	1.05	1.04
Consumer NAC (coeff.)	1.50	1.17	1.04	1.05	1.04	1.03
Total Support Estimate (TSE)	109 495	91 672	118 915	122 195	117 101	117 450
Transfers from consumers	81 967	36 801	18 642	21 325	19 436	15 164
Transfers from taxpayers	29 228	55 589	100 426	100 934	97 929	102 414
Budget revenues	-1 699	-717	-152	-65	-265	-128
Percentage TSE (% of GDP)	2.5	1.0	0.6	0.6	0.6	0.7
Total Budgetary Support Estimate (TBSE)	28 824	54 606	99 586	100 671	97 237	100 849
Percentage TBSE (% of GDP)	0.7	0.6	0.5	0.5	0.5	0.6
GDP deflator (1986-88=100)	100	152	191	189	193	..
Exchange rate (national currency per USD)	0.91	1.09	0.87	0.85	0.89	0.88

.. Not available

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. A/An/R/I: Area planted/Animal numbers/Receipts/Income. EU12 for 1986-88; EU15 for 2000-02; EU28 for 2018-19; and EU27 and the United Kingdom for 2020. 1. Market Price Support (MPS) is net of producer levies and excess feed cost. MPS commodities for the European Union are: wheat, maize, barley, oats, rice, rapeseed, sunflower, soybean, sugar, milk, beef and veal, sheep meat, pig meat, poultry, eggs, potatoes, tomatoes, plants and flowers, and wine.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Description of policy developments

Overview of policy trends

The CAP has been the European Union’s agricultural policy framework since its institution in 1962, although the mix of policy instruments has evolved substantially over time (Table 11.2). The Treaty of Rome that established the European Community outlined the CAP in 1957 (OECD, 2011[1]; European Parliament, 2021[2]). Agriculture made up a much larger share of Europe’s economy at the time, and the income gap between rural and urban households was increasing. Moreover, the region was a net food importer with concerns about securing adequate food supplies during the Cold War (Grant, 2020[3]). In this context, the Treaty of Rome laid down five main objectives for the CAP:

1. To increase agricultural productivity by promoting technical progress and ensuring the optimum use of the factors of production, in particular labour

2. To ensure a fair standard of living for farmers

3. To stabilise markets

4. To assure the availability of supplies

5. To ensure reasonable prices for consumers

Measures targeting these objectives were financed from the European Agricultural Guidance and Guarantee Fund (EAGGF), split into separate Guidance and Guarantee sections. Different rules governed the two: the Guidance Section financed operations related to structural policy and development of rural areas, while the Guarantee section funded expenditures on market and price policies (European Parliament, 2021[4]).

From the CAP’s institution until the 1990s, support prices were high compared to world market prices. Combined with an unlimited buying guarantee, European farmers produced increasing surpluses. The cost of these policies was large, however, such that by the 1980s the EU introduced quantitative production restrictions in the form of quotas on milk and sugar production.

The CAP’s first major reform occurred in 1992, in conjunction with negotiations on the General Agreement on Tariffs and Trade (GATT). The MacSharry Reform brought a major shift in how the public sector delivered support to agriculture. Instead of supporting production (through intervention buying and export subsidies), the regime shifted to supporting producer incomes directly, to close the gap between supply and demand, and reduce overall expenditures (European Parliament, 2021[5]). This wide-ranging reform included reducing cereal intervention prices, introduced compensatory payments per hectare for cereals or per head for livestock, and introduced a mandatory set-aside scheme to take land out of production. In conjunction with the reform of budgetary support measures through the MacSharry package, MPS also declined thanks to EU commitments under the 1995 Uruguay Round Agreement on Agriculture. Namely, bound tariffs were gradually reduced, and other border measures were tariffied (including replacing variable import levies with ad valorem or specific tariffs and tariff rate quotas) (OECD, 2011[1]).

Subsequent reforms built on the foundation of the MacSharry Reform, reducing distortive support to the agricultural sector or changing how support is delivered. The Agenda 2000 reform focused on aligning EU and world prices, offsetting the reduction of price support with increased direct aid to producers (European Parliament, 2021[5]). In addition, the Rural Development Regulation was introduced as Pillar 2 of the CAP. Finally, this package instituted the first environmental cross-compliance conditions for granting aid.

The 2003 Fischler Reform2 further developed and consolidated these measures. It saw the introduction of the single payment scheme (SPS), decoupling most support from production (European Parliament, 2021[5]). Furthermore, receiving the full payment required cross-compliance related to the environment, animal welfare, plant protection and food safety. This package also introduced modulation, allowing Member States to transfer funds between the two pillars to reinforce rural development objectives. The reform also prioritised financial discipline, freezing the budget of Pillar 1 and imposing annual compulsory ceilings. This coincided with the splitting of the budget into the European Agricultural Guarantee Fund (EAGF) to finance Pillar 1 and the European Agricultural Fund for Rural Development (EAFRD) to finance Pillar 2 from 2007. Additionally, this round of reform introduced the single common market organisation (CMO) in 2007, which codified the regulation mechanisms of the existing CMOs. Reform programmes for specific commodities (cotton, hops, olive oil, tobacco, sugar, fruits and vegetables, and wine) were introduced from 2003 to 2008, with the aim of reducing distortive payments and restoring market-based incentives (OECD, 2011[1]).

Measures taken under the 2009 Health Check sought to continue the direction of the 2003 reform. Namely, decoupling of aid continued and nearly all payments (with the exception of suckler cow, sheep and goat premia) were consolidated into the SPS. It also further reduced market intervention for a number of products, abolished set-aside and introduced phase-out of milk quotas. Additional flexibility for direct payments was introduced as well (OECD, 2011[1]).

The 2013 Reform set out a more global, integrated approach to agricultural support, undertaken through four lines of action (European Parliament, 2021[5]):

1. Converting decoupled aid into a multifunctional support system with aid directed toward specific objectives. Accordingly, the SPS was replaced by a system of payments with seven components: (1) a basic payment; (2) a greening payment for environmental public goods; (3) an additional payment for young farmers; (4) a ‘redistributive’ payment for first hectares of farmland; (5) support for areas with specific natural constraints; (6) aid coupled to production; and (7) a simplified system for small farmers.

2. Consolidating the two CAP pillars, with direct aid and market measures funded through Pillar 1, and rural development funded through Pillar 2 and co-financed by the Member States.

3. Consolidating CMO tools into safety nets in case of market disruption or price crisis, and ending other supply control measures, namely the sugar and milk quotas.

4. A more integrated, targeted and territorial approach to rural development, including simplifying the range of available instruments to focus on certain core objectives.

The instruments of the 2013 Reform remain in place, although the next round of reform is underway. All told, through the rounds of CAP reform, the absolute budget figure for the CAP has more than doubled over the past 30 years, partly related to additional Member States joining the European Union. At the same time, CAP expenditures as a share of the total EU budget declined sharply, from 74% in 1985 to 37.4% in 2019 (EC, 2020[6]).

Table 11.2. European Union: Agricultural policy trends

Years	Main Milestones	Key Policy Features
pre-1992	Coupled support phase: CAP financed by the European Agricultural Guidance and Guarantee Fund (EAGGF), European Union expansion to 15 members	Support prices greater than world prices Unlimited buying guarantee Production quotas for certain products, including dairy and sugar
1992-1999	MacSharry Reform: CAP, EU Expansion 1995 (Austria, Finland, Sweden), Uruguay Round Agreement on Agriculture	Shift from product support through prices to producer support through income-supporting measures, with the reduction in intervention prices compensated by increased direct aid per hectare or livestock headage payments Establishment of set-aside payments to encourage land retirement Tarrification of border measures and gradual reductions in bound tariffs
2000-2002	Agenda 2000 CAP Reform: CAP divided into Pillar 1 and Pillar 2 (Rural Development)	Further reduction of EU market support prices in closer alignment with world prices, partly offset by direct aid to producers in the form of increased area or headage payments First introduction of compulsory environmental cross-compliance Introduction of Rural Development Regulation as a second pillar of the CAP
2003-2008	Fischler Reform: CAP Pillars 1 (financed by EAGF) and 2 (financed by the European Agricultural Fund for Rural Development EAFRD), EU Expansion 2004 (Malta, Cyprus, Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Slovenia, Hungary) and 2007 (Bulgaria and Romania)	Decoupling much of CAP support from volume of production, with fixed single farm payment (SPS) introduced based on historical references Cross-compliance for environmental and public health objectives compulsory for receiving full payments Single common market organisation (CMO) introduced Reform programmes initiated for cotton, hops, olive oil, tobacco, sugar, fruit and vegetable and wine regimes
2009-2013	Health Check: CAP Pillars 1 and 2	Further reduction of EU market intervention for certain products Phasing out of milk quotas initiated Abolition of set-aside Integration of nearly all payments into SPS New cross-compliance requirements introduced
2013-present	2013 Reform: CAP Pillars 1 and 2, EU Expansion 2013 (Croatia) and Contraction 2020 (United Kingdom)	Decoupled aid converted to multifunctional support (including basic payment, greening payment, small farmer payment, etc.) Consolidation of two pillars of CAP, with direct payments and market measures under Pillar 1 Consolidation of CMO tools, abolition of supply control measures (including ending milk and sugar quota schemes) External and internal convergence, with payment envelopes gradually adjusted to move toward a uniform minimum per hectare payment

Source: (European Parliament, 2021[5]); (OECD, 2011[1]).

Total support to the agricultural sector as percentage of agricultural gross value-added in the European Union largely comes from budgetary allocations (Figure 11.4). Market price support declined significantly from 1986 through the 2000s, but remains mostly unchanged since around 2010. The most substantial change to PSE composition began in the mid-2000s after the Fischler reforms decoupled most payments to farmers from production.

Figure 11.4. European Union: Level and PSE composition by support categories, 1986 to 2020

As a percentage of gross farm receipts

Note: A/An/R/I:Area planted/Animal numbers/Receipts/Income.

Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments.

European Union refers to EU12 for 1986-94, EU15 for 1995-2003, EU25 for 2004-06, EU27 for 2007-13, EU28 for 2014-19, and EU27 and the UK for 2020

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Main policy instruments

The Common Agricultural Policy is the agricultural policy framework of the European Union. In addition to the CAP, Member States may implement measures funded from national or sub-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 (OECD, 2017[7]).

The CAP typically covers a seven-year period – currently 2014-20, but extended to the end of 2022 with the passage of transitional CAP rules in 2020. It comprises two pillars: the European Agricultural Guarantee Fund finances Pillar 1, and measures under Pillar 2 are based on Rural Development Programmes co-financed by the European Agricultural Fund for Rural Development and EU Member States.3 Member States deploy RDPs over the seven-year CAP period. The CAP 2014-20, while in many ways the continuation of the CAP 2007-13, offers a number of novel features (OECD, 2017[7]).

The implementation of the CAP 2014-20 started with measures under Pillar 1, followed in 2016 by implementation in the Member States of 118 national and regional Pillar 2 RDPs.4 In 2018, the CAP simplification took place within the revision of the EU financial rules, also known as the Omnibus regulation (OECD, 2018[8]).

The budget for the CAP 2014-20 was EUR 408 billion (USD 465 billion), of which 76% were initially allocated to Pillar 1 (covering market related expenditure and direct payments), and the remaining 24% to Pillar 2 (rural development spending, including agri-environmental payments). The CAP 2014-20 allows Member States to transfer up to 15% of each envelope5 between the two pillars. As of December 2018, twelve transferred funds from Pillar 1 to Pillar 2 while five transferred funds from Pillar 2 to Pillar 1, with a net result of EUR 3.76 billion (USD 4.28 billion), or less than 1% of expenditures transferred from Pillar 1 to Pillar 2 over the period (EC, 2019[9]).6

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 (see next paragraph), but also payments to a few specific sectors, such as fruits and vegetables. To this end, for the entire period of the CAP 2014-20, entitlements to direct payments were assessed and allocated to those deemed to be active farmers.

The Basic Payment Scheme (BPS) and the Single Area Payment Scheme (SAPS) – the BPS equivalent that offers a uniform per hectare payment rate in all but three Member States that joined the European Union after 20007 – make up 50% of the EU Pillar 1 direct payments envelope in Budget Year 2021 (Table 11.3). Wide variations across Member States reflect their spending choices on optional measures under Pillar 1. Both the BPS and the SAPS require cross-compliance, though exceptions apply. Additional conditions are attached to the per-hectare Greening payment that accounts for 29% of the Pillar 1 direct payments budget. As of 2017, farmers who do not comply with all the requirements of greening may be subject to new greening administrative penalties (equivalent to 20% of the farmer’s greening payment in 2017, rising to 25% from 2018 onward) in addition to forfeiting a share of the greening payment on the non-compliant area.

Table 11.3. Direct payments budget under Pillar 1, 2020

	Budget 2021 (EUR million)	Share in direct payments	Share in decoupled direct payments
Direct payments; of which:	37 432
Decoupled direct payments, of which:	31 545	84%
Basic Payment Scheme (BPS)	14 172	38%	45%
Single Area Payment Scheme (SAPS)	4 406	12%	14%
Greening	10 778	29%	34%
Voluntary Coupled Support	4 019	11%

Note: Other decoupled payments represent about 7% of direct payments under Pillar 1. The 2021 EU fiscal year (November to October) is attributed to year 2020 in the PSE system.

Source: OECD calculations based on European Commission, EUR-Lex budget 2021.

In the ten Member States that apply the SAPS, commodity-specific payments may be granted from national budgets within limited envelopes. Transitional National Aid (TNA) is mostly disbursed as decoupled payments. In claim year 2018 (the most recent year for which this data is available), only 15% of TNA was paid as coupled support (EC, 2020[10]). It may apply on a per area basis to arable land, hops and starch potatoes; a volume basis to milk; and a headage basis to livestock. Member States may review TNA budgets and supported commodities on an annual basis. The maximum TNA payments allowed decrease gradually from 75% of the 2013 level of SAPS aid in 2015 to 50% in 2020.

As the CAP 2014-20 is implemented, the gap in per hectare payment rates of the BPS and the SAPS will narrow, both between countries (external convergence) and between farmers and regions within countries (internal convergence8). Internal convergence applies to BPS when a flat rate is not yet applied, while under the SAPS a uniform payment rate at national level already applies to each hectare.

In the CAP 2014-20, Member States may choose to allocate part of their direct payments envelope to commodity-specific payments within defined ceilings (up to 13%) and under defined conditions. The voluntary coupled support (VCS) expands the coupled support scheme under Article 68 of the previous CAP 2007-13, and lets Member States allocate a larger envelope to more sectors or regions and under a wider set of specific conditions. Such support may be granted to create an incentive to maintain current levels of production in the sectors or regions concerned. Choices of Member States on take-up of the VCS vary greatly, both in terms of the level of support and the commodities supported. On several occasions, Member States reviewed VCS budgets and commodity attributions, making some minor adjustments. All except Germany chose to offer VCS, using 10% of the EU direct payments budget on average from 2018-20. This compares to 3% spent previously under Article 68 coupled support, as reported in the EU general budgets.

A top-up payment to young farmers in addition to the BPS and SAPS applies in all Member States. In 2020, this payment accounted for 1.5% 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, while others apply a payment proportional to the BPS or SAPS received. In addition to this compulsory young farmer scheme, 25 Member States chose to attribute a portion of their rural development envelopes to support young farmers, representing 4.5% of total planned rural development expenditures (ENRD, 2016[11]). The bulk of this spending is directed toward business development and investments.

Fifteen Member States chose to offer small farms simplified payment attribution conditions – the Small Farmers Scheme – that waives requirements attached to the greening payment and cross-compliance. The payment cannot exceed EUR 1 250 (USD 1 424) per farm and, depending on the method chosen by the member state, the overall envelope may be limited to 10% of national direct payments.9

Denmark and Slovenia implement the Pillar 1 direct payment to Areas with Natural Constraints (ANC). Under this payment, ANC are defined based on eight biophysical criteria.10 Denmark uses 0.3% and Slovenia 1.6% of their national direct payments envelope for ANC payments (EC, 2019[9]). A payment targeted to areas with natural or other specific constraints can also be budgeted under the RDP, labelled as the Less Favoured Areas payment in the previous CAP. It is implemented in 25 Member States and accounts for 19% of Pillar 2 public expenditure funds (including Member States’ contributions from national budgets) in 2020. In the past, Member States used up to 140 different criteria for assessing ANC status for Pillar 2 payments. However, these were consolidated into the same eight biophysical criteria that apply to Pillar 1 ANC payments.

Ten Member States or regions have chosen to grant higher payments to the first hectares11 under the so-called redistributive payment, using 4% of the European Union’s direct payments envelope, as reported in European Union’s 2020 general budget.

Member States that implement the redistributive payment may opt-out of so-called “degressivity” and six Member States and regions did so.12 Under degressivity, BPS amounts above EUR 150 000 (USD 170 932) per recipient are reduced by a minimum of 5%. Funds deducted under this provision are transferred to Pillar 2 and used to fund the member state’s RDPs. Fourteen13 applied the minimum reduction. Ten used the option to increase the amount exempt from the 5% reduction by the value of salaries paid. Ten have chosen to apply a full cap on the BPS at levels varying from EUR 150 000 (USD 170 932) to EUR 600 000 (USD 683 728).

A Crisis reserve is earmarked to be used in case of emergency. It is funded from the Pillar 1 direct payments budget. If unused, the envelope reverts for distribution as Pillar 1 direct payments in the same year. The crisis reserve is renewed each year and up to now has not been used 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 the development of local agricultural production with 1.2% of the direct payments envelope in 2020.

Pillar 1 also funds measures that support commodity markets, representing 4.7% of the overall agriculture and rural development budget in 2020. Prices paid to EU domestic producers averaged 5% above world market prices in 2018-20.

While the possibility for public intervention for cereals (namely common and durum wheat, barley, and maize) exists, the last intakes of cereals into public storage occurred during the 2009/10 marketing year (EC, 2013[12]). 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 was supported with production quotas, coupled with a minimum price for sugar beets. After the end of the sugar quota regime, provisions for agreements between sugar factories and growers were maintained, and white sugar remained eligible for private storage aid. The support regime for cereals and sugar also includes trade protection through tariffs and TRQs. No export refunds have been granted since July 2013. Furthermore, since the WTO Ministerial conference in Nairobi in December 2015, the European Union has committed not to resort to export subsidies.

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 and ad valorem duties, but no export subsidies. Support co-financed by Member States also applies to the fruit and vegetables sector, and the olive oil and table olives sectors. These support a wide range of actions from production planning, quality measures, market withdrawal and harvest insurance to training, promotion and communication. Some measures apply at farm level while others are provided to producer organisations or the sector at large. Private storage may be activated as an optional scheme for olive oil and flax fibre. In the CAP 2014-20, recognition of producer and inter-branch organisations expands 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.

Also targeting the fruit and vegetables sector, a consumer support system directed toward schoolchildren covers consumption of fresh fruits and vegetables, processed fruits and vegetables, and banana products. The scheme’s budget grew rapidly from EUR 29 million (USD 33 million), when it was implemented in 2010, to EUR 117 million (USD 133 million) in 2016. A similar scheme supported milk consumption for schoolchildren, with a budget of EUR 64 million (USD 73 million) in 2016. In August 2017 both schemes merged under the title “School Schemes” and the budgets combined into EUR 216 million (USD 246 million) in 2020.

In the dairy sector, intervention prices are used together with import protection for butter and skimmed milk powder (SMP). Intervention purchases cannot exceed 50 000 tonnes for butter, and 109 000 tonnes for SMP, respectively representing 2% and 7% of production in 2020. Above those limits, purchase is made by tender. Intervention purchases were opened for both products as a response to sector shocks due to COVID-19, prior to which no intervention purchases were made for butter since 2009, while the last intervention purchases for SMP took place in 2018.

Floor prices,14 tariffs and TRQs support the beef market. Import protection provides support for pig meat. The market support regime for sheep meat comprises tariffs and TRQs, with most country-specific TRQs subject to a zero customs duty. TRQs also support the poultry and eggs markets. Private storage may be activated as an optional scheme for butter, SMP, certain cheeses, beef, pig meat, sheep meat and goat meat. Indeed, private storage was opened for butter, SMP, cheese, beef and sheep meat in 2020 in response to the COVID-19 emergency (see Domestic policy responses to the COVID-19 pandemic). Furthermore, specific provisions are made for milk and milk products.

A system of authorisations for new vine planting support the wine sector. Since January 2016, new vine planting is 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 had until 31 December 2020 to transition to the new system. The sector is also supported through promotional measures in both the European Union and third countries, restructuring and conversion of vineyards; compensation for green harvesting; setting up of mutual funds; investment in tangible and intangible capital; income insurance; development of new products, processes and technologies; and distillation of by-products.

Rural Development is part of the EU-level Common Strategic Framework covering all support from European Structural and Investment (ESI) funds15 in Member States through partnership agreements. The EAFRD finances Pillar 2 of the CAP 2014-20 to serve six priority areas: (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 11.4). Pillar 2 funds are implemented through national (or regional) RDPs. RDPs also support projects that use the LEADER approach (Liaison Entre Actions de Développement de l’Économie Rurale) relying on a multi-sectoral approach and local partnerships to address specific local problems, and technical assistance for the implementation of Pillar 2 measures.

Table 11.4. CAP expenditure by source and use (estimated 2020)

CAP expenditure (EU funding), of which:	Share in EU funding:
Administrative expenditure	0.01%
Interventions in agricultural markets CMO	4.73%
Direct Payments	67.60%
Rural Development – EU funding	27.12%
Research and innovation – Horizon 2020	0.04%
Rural Development (total public expenditure) of which:	Share in total public expenditure:
Rural Development EU funding	66.8%
Rural Development national funding	33.2%
Priority 1: knowledge	Allocated through other priorities
Priority 2: competitiveness	20.9%
Priority 3: food chain organisations	9.6%
Priority 4: ecosystems	48.5%
Priority 5: resource efficiency	5.0%
Priority 6: social inclusion	13.6%

Source: OECD calculations based on European Commission, EUR-Lex budget 2021 (for EU funding) and EAFRD financial execution (for Rural Development and allocation to priorities). Total public expenditure comprises EU funding and Member States national funding of Rural Development.

The implementation of RDP 2014-20 was delayed, and by 2018 most payments for programmes within the RDP 2007-13 had terminated. At the same time, payments for farm restructuring under CAP 2007-13 were prolonged, including early retirement, conversion of arable land into grassland and afforestation of agricultural land.

Member States participate in the funding of Pillar 2 payments (also called co-financing) in accordance with RDPs that cover the entire duration of the CAP cycle. In their plans, Member States could choose from a menu of 19 measures to meet the six priority areas of Pillar 2.16 Two conditions apply: (1) a minimum 30% of rural development funding from the EU budget must be spent on measures related to the environment and climate change adaptation, including forestry and investments in physical assets; and (2) another 5% must be spent on the LEADER approach.

At the aggregate, 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 vary, investment is one of the top three measures, receiving the highest shares of expenditure for the period 2014-20 in all but Austria, Germany and Sweden.

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. Horizon 2020 programmes relevant to agriculture focus on securing sufficient supplies of safe and high-quality food and other bio-based products. The Horizon 2020 budget under the agriculture and rural development title increased substantially since it was initiated in 2013, from EUR 1 million (USD 1.1 million) to EUR 257 million (USD 293 million) in 2019. A total of EUR 3.8 billion (USD 4.3 billion) is available for the period. Horizon 2020 is set to be replaced by Horizon Europe for 2021-27.

Programming for CAP 2014-20 ended in 2020. However, its structure remains in place for 2021-22 under transitional rules based on the principle of continuity while negotiations for the next CAP conclude (see next section).

Domestic policy developments in 2020-21

Overall spending

The EU budget for agriculture and rural development in 2020 declined 3% to EUR 55.4 billion (USD 63.1 billion), reflecting the withdrawal of the United Kingdom from the European Union.17 Consequently, the share of total expenditures allocated to direct payments under Pillar 1 fell from 71% to 68%, the share spent on rural development measures under Pillar 2 rose from 24% to 27%, and the share devoted to market measures was unchanged at 5%.

EU budget and the next CAP

On 10 November 2020, the Council and European Parliament reached an agreement on the next long-term EU budget for 2021-27 (the multiannual financial framework, or MFF) of EUR 1.21 trillion (USD 1.38 trillion) in current prices, with the Council adopting the regulation [Council Regulation (EU, Euroatom) 2020/2093] on 17 December 2020 following the consent of the European Parliament. They also agreed on an additional EUR 808 billion (USD 921 billion) funding package to support the European Union’s recovery from the COVID-19 induced economic crisis, deemed NextGenerationEU (for further details on NextGenerationEU, see Domestic policy responses to the COVID-19 pandemic). With a view toward building a greener, more resilient and digital-friendly Europe, more than 50% of the combined total amount will be directed toward policies on research and innovation (Horizon Europe); fair climate and digital transitions (Just Transition Fund and the Digital Europe Programme); and preparedness, recovery and resilience (Recovery and Resilience Facility, rescEU and EU4Health).

Most of the budget for the future CAP is included in the MFF, with EUR 291.1 billion (USD 331.7 billion) in current prices allocated for Pillar 1 activities under the European Agricultural Guarantee Fund (EAGF) and EUR 87.4 billion (USD 99.6 billion) earmarked for Pillar 2 through the European Agricultural Fund for Rural Development (EAFRD). An additional EUR 8.1 billion (USD 9.2 billion) in funding for EAFRD will come from NextGenerationEU (intended to help rural areas make the structural changes necessary to achieve the goals of the European Green Deal and digital transition), bringing the total Pillar 2 allocation to EUR 95.5 million (USD 108.8 million). Additionally, some budgetary flexibility for Member States to implement the CAP is foreseen: Member States will have the option to transfer up to 25% of their CAP allocations between income support and rural development, and will be able to apply additional flexibilities for certain specific purposes, including supporting environment and climate objectives, supporting young farmers, and in cases of countries with below-average direct payments.

On 21 and 23 October 2020, the Council and the European Parliament respectively agreed on their negotiating positions on the reform of the CAP, based on the initial 2018 proposal from the Commission. Accordingly, trilogue negotiations between the Council, the Parliament, and the Commission are underway. Although the exact details of the final CAP 2021-27 are to be ironed out under the trilogue negotiations, some features of the reform are already agreed (Box 11.1).

Box 11.1. CAP 2021-27

The new CAP will feature changes in both the overall approach of the CAP, and the programming through which assistance is delivered. With respect to the policy approach, the European Commission has proposed to simplify and modernise how the CAP works, shifting the emphasis from rules and compliance towards results and performance.

The framework of the policy will be based upon nine specific objectives,1 focusing on the social, economic, and environmental goals of the CAP. In order to achieve these objectives, the Commission will provide a toolbox of broad policy measures, which EU countries can shape around their own needs and capabilities.

The Commission will also provide a common set of result indicators as part of a new performance, monitoring and evaluation framework, which will be used to assess the progress of EU countries in reaching the CAP objectives. The selected indicators will be presented visually and interactively in the dashboard by theme, including farming income support, climate change and air quality, market orientation and organic production.

A main new feature of the CAP 2021-27 is the leading role of the EU member countries in designing and implementing their own national policy strategies. Each EU country will draw up its own CAP strategic plan, setting out how they will direct CAP funding towards specific targets and how these targets will contribute to the overall EU objectives. When drawing up their plans, each country will liaise with the Commission, hold consultations with experts and stakeholders, and undertake an extensive SWOT (strengths, weaknesses, opportunities, and threats) analysis of their specific needs. All strategic plans will be submitted to the European Commission for evaluation and approval before they are implemented. Additionally, EU countries will submit an annual performance report to show progress towards the targets that have been set.

1. The nine objectives are to ensure a fair income to farmers; to increase competitiveness; to rebalance the power in the food chain; climate change action; environmental care; to preserve landscapes and biodiversity; to support generational renewal; vibrant rural areas; and to protect food and health quality.

Source: (EC, 2020[13]).

In December 2019, the newly elected EU Commission adopted the European Green Deal as a main strategic policy document to transform the European Union into a zero net emissions economy. As part of this effort, the Commission approved in May 2020 two documents with direct implications for the CAP: the Farm-to-Fork (F2F) and the Biodiversity Strategies. While both strategies are multifaceted, they include various specific outcome objectives relevant for agriculture. For example, the F2F fixes specific targets on use of chemical pesticides, fertilisers and antimicrobials, and on nutrient losses and organic farming, while the Biodiversity Strategy fixes specific objectives on protected land, chemical pesticides and share of agricultural land under biodiversity landscape features (further details of the strategies are discussed below in the section on agri-environment, climate and sustainability).

Policy initiatives undertaken by Member States in the future CAP will be defined through country-specific strategic plans, which also provide the framework for countries to illustrate how they intend to work towards achieving the objectives outlined in the F2F and Biodiversity Strategies. Toward that end, on 18 December 2020, the Commission provided each EU Member State with country-specific recommendations for their CAP strategic plans. These recommendations are intended to assist in the drafting of the national plans by identifying the key areas on which each EU country should focus in order to ensure the achievement of the nine specific CAP objectives (i.e. environmental, social and economic challenges and a cross-cutting objective on knowledge and innovation), as well as compliance with Green Deal ambitions (in the form of six Farm to Fork and Biodiversity strategy targets18). The Commission has asked Member States to determine specific national values for these targets and align their CAP strategic plans accordingly. Once plans are submitted by Member States, they will be subject to approval by the Commission according to criteria to be laid down in the future CAP strategic plan regulation. This process of devising country-level strategic plans was assisted by the 14 January 2021 publication of a list of potential agricultural practices that the new eco-schemes under the next CAP could support. In order to be supported by eco-schemes, these practices should cover activities related to climate, environment, animal welfare and antimicrobial resistance; be defined on the basis of the needs and priorities identified at national/regional levels in CAP strategic plans; have a level of ambition beyond the requirements and obligations set by conditionality; and contribute to reaching EU Green Deal targets. Practices eligible for support under the eco-schemes include agro-ecology practices such as crop rotation with leguminous crops; husbandry and animal welfare plans such as providing and managing regular access to open air areas; carbon farming, including conservation agriculture; protecting water resources by switching to less water intensive crops; and organic farming or integrated pest management practices as already defined in EU legislation.

Various activities related to these strategic plans were initiated in 2020 in the Member States as well. For instance, officials in the Czech Republic began to develop their plan in 2020, and public consultations on Poland’s draft plan began in December 2020. Similarly, officials from the Ministry of Agriculture in Spain conducted preparatory meetings with regional governments and stakeholders on the proposed National Strategic Plan regulation.

While final provisions for the next iteration of the CAP have yet to be finalised, a political agreement between the European Parliament and the EU Member States in the Council was reached on transitional rules for the CAP for 2021-22 on 27 November 2020. These transitional rules are based on the principle of continuity of the current CAP rules, while also including new elements to ensure a smooth transition. This agreement also covers the integration of the European Recovery Instrument (ERI) funds into the European Agricultural Fund for Rural Development (EAFRD), which is intended to facilitate the recovery of farming and rural economies in the aftermath of the coronavirus pandemic and reinforce their resilience toward future shocks. In addition, because trilogue negotiations between the Parliament, the Council and the Commission on the next CAP are ongoing, the provisional start date of the next CAP reform has been pushed back to 1 January 2023.

Markets and sector support

Much of the sector-specific support enacted in Member States in 2020 came as a result of market disruptions due to COVID-19 (see section Domestic policy responses to the COVID-19 pandemic), but some Member States carried out sector-specific support programmes not exclusively related to COVID-19. The government of Bulgaria increased their direct support levels for a variety of fruits, including deciduous fruits, apples, pears and table grapes.19 Officials in Estonia announced that voluntary coupled support would be re-implemented from 2021 for ewes and mother goats, having last been provided in 2015‑16. In Italy, the government announced the establishment of a fund for the protection and relaunch of the beekeeping, brewing, hemp and nut supply chains, with EUR 10 million (USD 11.4 million) allocated for 2021.

Under the provisions of the European Union’s wine sector support programme, the government of Austria extended sales promotions for Austrian wine to third-country markets, in line with the framework of the national support programme. They also expanded investments in wine quality-enhancing measures that are increasingly necessary due to changing climatic conditions, including fermentation control, cooling investments, and conversion of vineyards (covering investments in irrigation, vineyard maintenance, and re-cultivation of slopes and terraces). Similarly, 2020 wine support programme expenditures in Hungary were dedicated to activities including restructuring and converting vineyards, carrying out information campaigns within the European Union, and promoting Hungarian wine outside of the European Union.20

On 31 March 2020, the European Commission published the budget for the EU school scheme for the 2020/21 school year.21 The scheme supports the distribution of fruits, vegetables and milk to schoolchildren throughout the European Union. Under the budget, EUR 145 million (USD 165 million) was allocated for fruit and vegetable distribution, and EUR 105 million (USD 120 million) for milk and dairy products. These amounts can be topped up with national funds, however.

The implementation date of a new EU law on organics, originally published in 2018 (EU 2018/848), was pushed back by one year, until 1 January 2022. The regulation is designed to ensure fair competition for farmers, prevent fraud and maintain consumer trust by simplifying production rules, strengthening control systems, and allowing group certification possibilities for small farmers, among other provisions. Member States approved the delay in October 2020 in response to requests from MEPs grant additional time to draft and adopt national-level implementing legislation. Also related to organics, the government of Luxembourg took a number of actions in 2020 under its national action plan for the promotion of organic farming. First, the aid rate per acre for conversion to organic farming was increased, effective in the 2020/21 crop year. Second, the government has announced that by 2025, 50% of products served in collective catering establishments will come from Luxembourg – 40% of which will be organic, and the remainder will prioritise farms that are undergoing organic conversion. Pilot projects for at least one nursery, high school, hospital or elder care facility are foreseen for 2021.

Several food labelling initiatives were undertaken at EU and Member State level in 2020. On 21 December 2020, the European Commission launched the Food Labelling Information System (FLIS) – an online tool that facilitates business compliance with EU labelling requirements. Through the tool, firms can access mandatory labelling requirements by food product, with the information available in 23 languages. In August 2020 in Bulgaria, legislation was updated to reach compliance with EU regulations on fresh meat labelling, distinguishing products sourced from disease-free farms in regions where a contagious animal disease is detected from products sourced from disease-free regions. A new law came into effect in France in May 2020 that prohibits the use of food product names commonly used to designate animal origin from being used to promote foods containing vegetable proteins, including terms such as “burger”, “sausage” or “cheese”; requires all the countries of origin for blended honey to be listed on the label in descending order by weight; and mandates origin labelling for cocoa products. Spain approved a similar decree on quality standards for honey, which require blended honey products to identify all countries of origin on the label. Meanwhile in Italy, a new measure went into effect requiring country-of-origin labelling on processed pig meat products, including the country of animal birth, rearing and slaughter.

On 25 November 2020, the Commission launched a new search database for geographical indications in the EU (GIview22), which provides a single entry point for data on GIs registered in the European Union, as well as information on non-EU GIs protected at EU level through bilateral and multilateral agreements, and on EU GIs protected in non-EU countries.

Various quality promotion initiatives were launched in the Member States as well. Efforts in France focused on the promotion of local foods. In November 2020, a new national charter promoting fresh and local products was signed between the government and large national retailers. Activities covered under the charter include promotional events, long-term work on territorial food plans that link consumers and producers, and events educating consumers on food origins. Italy designated EUR 3 million (USD 3.4 million) over 2021-23 to promote Italian agro-food products and the Mediterranean diet. A new Grass Fed Beef Standard was launched for Irish beef producers through Bord Bia (the Irish Food Board) in 2020, requiring, among other provisions, that a minimum of 90% of an animal’s diet during their lifetime come from grass or grass-based forages in order to be eligible to use the “Grass Fed” logo.

Agri-environment, climate and sustainability

On 11 December 2019, the European Commission proposed a European Green Deal (EGD) to move toward a cleaner, circular EU economy and stop climate change, revert biodiversity loss and cut pollution through a just and inclusive transition. The first climate action initiatives to be taken under the EGD, foreseen for the coming years, include:

• A European Climate Law to enshrine the 2050 climate-neutrality objective into EU law

• European Climate Pact to engage citizens and all parts of society into climate action

• 2030 Climate Target Plan to further reduce net greenhouse gas (GHG) emissions by at least 55% by 2030.

In addition, by June 2021, the Commission will also review and, where necessary, propose to revise all relevant policy instruments to deliver additional GHG emissions reductions.

As part of the EGD, on 20 May 2020, the Commission released the EU Farm to Fork and Biodiversity Strategies, outlining priority actions and commitments to halt biodiversity loss in Europe, transform EU food systems into global standards for competitive sustainability, protect human and planetary health, and safeguard the livelihoods of all actors in the food value chain. The Farm to Fork Strategy (F2F) adopts a food systems approach, encompassing production, processing and consumption of food. The strategy contains a 27-point Action Plan, with these initiatives divided into four primary policy domains:

1. Ensuring sustainable food production

2. Stimulating sustainable food processing, wholesale, retail, hospitality and food services’ practices

3. Promoting sustainable food consumption, facilitating the shift towards healthy, sustainable diets

4. Reducing food loss and waste.

Preparations and consultations on the F2F continue, including on the implications of the F2F for international co-operation and trade policy. The F2F strategy includes several agriculture-specific targets to achieve by 2030: reduce chemical pesticides use by 50% and also use of the most hazardous pesticides by 50%; reduce nutrient loss by at least 50%; no more loss in soil fertility; reduce fertiliser use by at least 20%; reduce sales of antimicrobials for land and sea farmed animals by 50%; and increase the share of farmland under organic farming to at least 25%.

The Biodiversity Strategy is the second key component of the EGD with the most direct linkages to the agricultural sector. This strategy is a comprehensive long-term plan to protect nature, reverse the degradation of ecosystems, and build resilience to future threats (including the impacts of climate change, forest fires and disease outbreaks). Specific commitments to be delivered under the strategy by 2030 include reversing the decline of pollinators, establishing biodiversity-rich landscape features on at least 10% of farmland, and managing 25% of agricultural land under organic farming, while also promoting the uptake of agro-ecological practices (EC, 2020[14]). In addition to this EU-wide initiative, at the country level, Austria launched the Biodiversity Dialogue 2030 in 2019 with the intent of developing goals and measures amongst all relevant stakeholders. Toward this end, a public consultation was held in 2020, which will help inform the direction of future programming.

The F2F and Biodiversity Strategy targets are not yet codified in European regulations. Rather, Member States will work towards the goals set out in these strategies through their individual CAP strategic plans.23 The Commission has analysed how the current proposals for CAP reform can contribute to the achievement of the EGD and its component strategies, including identifying the steps needed to make CAP fully compatible with these frameworks, such as a need to show increased ambition with regard to environmental and climate objectives, mandatory eco-schemes, ring-fenced spending for the environment and climate of 30% of the rural development budget, and assessment of coupled income support and interventions in light of its consistency with the need for overall sustainability (EC, 2020[15]).

Member States also put in place action plans or measures intended to help address climate change, by reducing emissions to meet obligations under the Paris Agreement or by mitigating the impacts of a changing climate. By mid-2020, national or sectoral climate plans from all Member States had been approved, with the Commission publishing a detailed EU-wide assessment of the final plans in September 2020 (EC, 2020[16]). Actions in Ireland were particularly noteworthy, as they released a climate plan specific to the agricultural sector – the “National Climate & Air Roadmap for the Agriculture Sector.” This roadmap sets a vision for a climate neutral Irish agricultural sector by 2050, including 29 actions with specific targets aimed at reducing the environmental footprint of the sector. The approach contains three prongs (reducing emissions, enhancing the development of sustainable land management, and contributing to sustainable energy), and includes a mixture of immediate actions to be taken, as well as more medium- to long-term initiatives. Specific actions outlined in the roadmap include reductions in nitrogen fertiliser applications, phasing out applications of unprotected urea24 by 2023, and re-wetting carbon rich soils to convert them from carbon sources to carbon sinks.

In addition to work on national climate plans, the government of Denmark allocated DKK 100 million (EUR 13.4 million, USD 15.3 million) to establish the Danish Climate Forest Fund (private citizens and companies are also able to donate to the fund). The fund will be used to plant forests and re-establish natural hydrology on carbon-rich low-lying agricultural land. Donors to the fund will receive carbon dioxide units indicating their contribution to the fund. Outside of the fund, the Danish government has allocated an additional DKK 2 billion (EUR 268 million, USD 306 million) for setting aside carbon-rich low-lying agricultural land to restore natural hydrology over 2020-29. In Greece, the importation from other EU Member States of agricultural machinery that does not meet minimum engine emissions requirements was banned from 1 January 2020. The government of Luxembourg planned additional measures for 2020 and 2021, including the introduction of investment aid for low ammonia emission spreading machines and for covering outdoor slurry tanks. Spain spent EUR 8 million (USD 9 million) in 2020 on its “Plan Renove”, which funds the replacement of old farm machinery with new machines that have lower emissions.

Other actions targeted improved overall environmental sustainability. In December 2020, the European Commission announced that EUR 86 million (USD 98 million) – nearly half of the total EUR 182.9 million (USD 208.4 million) EU budget for the promotion of agro-food products – would be dedicated to promoting products in line with Green Deal objectives, including campaigns promoting consumption of food produced under sustainable farming practices or organic production. In Belgium, the country’s dairy sector implemented a sustainability monitor in 2020. The sustainability monitor follows sustainability initiatives throughout the value chain, including on farms, during transport, and in milk processing companies, and the industry has plans to develop it further in 2021. In June 2020, based on a midterm evaluation of the main measures in the Danish water management plan 2015-2021, the government of Denmark introduced more stringent measures in the country’s Nitrates Action Programme, including higher requirements for nitrogen utilisation in organic fertiliser and lower nitrogen quotas on organic soils. France undertook several actions intended to reduce pesticide use, including more transparency through the publishing of monitoring indicators each year on their Ecophyto plan, a decree on supervising the use of pesticide products near homes and imposing safety distances, and a new EUR 30 million (USD 34 million) support programme for the purchase of pesticide-related equipment to reduce the risk of spreading pesticides outside of the field or increase the precision of applications. In Greece, a joint decision was issued in 2020 by the Ministry of Rural Development and Food, the Ministry of Health, and the Ministry of Environment and Energy regarding updating the national action plan for the sustainable use of pesticides. The government of Italy announced EUR 10 million (USD 11.4 million) in 2020 to improve the conditions of sustainability in livestock production and meat processing companies.

In line with EU efforts on sustainability, various initiatives were undertaken with respect to both the bioeconomy and circular economy in 2020. On 11 March 2020, the Commission adopted “A New Circular Economy Action Plan for a Cleaner and More Competitive Europe” as one of the main blocks of the EGD (EC, 2020[17]). While the action plan is economy-wide, “Food, water and nutrients” is one of the strategy’s seven identified key product value chains. Actions in the strategy relevant to the agricultural sector include a legislative initiative on re-use to substitute single-use packaging, tableware and cutlery by reusable products in food services; the new Water Reuse Regulation, to encourage circular approaches to water reuse in agriculture; and an Integrated Nutrient Management Plan, with a view to ensuring more sustainable application of nutrients and stimulating the markets for recovered nutrients (the Commission will also consider reviewing directives on wastewater treatment and sewage sludge and will assess natural means of nutrient removal such as algae). Then in October 2020, the European Investment Bank launched a new European Circular Bioeconomy Fund, with a target size of EUR 250 million (USD 285 million). The goal of the fund is to provide financing to early stage companies with proven technologies to help scale up operations and expand into larger markets. Target investments for the fund include circular and bioeconomy technologies, biomass/feedstock production to increase agricultural output or reduce environmental footprint, and bio-based chemicals or materials. The Commission also published a factsheet on 23 November 2020 outlining how the bioeconomy contributes to achieving the goals of the EGD (EC, 2020[18]). This publication emphasises how the bioeconomy, as a catalyst for systemic change, tackles the economic, social and environmental aspects of the Green Deal, seeking new ways of producing and consuming resources while respecting planetary boundaries and moving away from a linear economy based on extensive use of fossil and mineral resources

In the Member States, plans to improve the circular economy are also underway. In the Flanders region of Belgium, the Flanders Circular partnership set out in 2020 to develop a circular work programme for the food chain. Guidelines of the work programme were defined in 2020, and implementation will begin in 2021. In addition, a bioeconomy policy plan was developed by the Flemish Department of Economy, Science and Innovation and the Department of Agriculture and Fisheries in 2020. This plan includes a series of actions ranging from stimulating research and innovation, guiding new collaborations between industry and agriculture, and accompanying policy measures (such as monitoring, international co-operation, training and education). The government of Estonia in 2020 included the circular bioeconomy in the new Estonian Agricultural and Fisheries Strategy 2030 as a horizontal priority, with the strategy implemented through the CAP. Additionally, the government announced that EUR 23.8 million (USD 27.1 million) from the Recovery and Resilience Facility would be used for supporting the bioeconomy in Estonia. The Netherlands continued to develop its “Circular Agriculture” vision in 2020, and plans to announce more concrete measures and projects in 2021. In Portugal, the government introduced the National Strategy against Agricultural and Agribusiness Waste in September 2020, and also put into action the second phase of the Action Plan for the Circular Economy, targeting the revision of the waste management framework with a focus on the management and prevention of bio-waste.

Although typically considered part of circular economy initiatives, various policy measures specifically targeted food waste in 2020. At the EU-wide level, in December 2020, the European Food Safety Authority (EFSA) released a new decision tool to help food business operators decide when to apply the “use by” or “best before” date to their food products, as clear packaging information and appropriate date marking can help to reduce food waste.25 In Austria, the “Food Is Precious” initiative was launched, including awareness and information campaigns, encouragement of donating food that is still edible, and the promotion of research activities. The government of France launched a new “anti-food waste” national label in 2020, which aims to valorise efforts and initiatives to reduce food waste. In addition in France, in January 2020 the law against food waste was extended to all private collective caterers, requiring all operators to have an agreement with an association authorised to accept food aid donations in order to donate all unsold food still fit for human consumption. Germany continued to implement its National Strategy on Food Waste Reduction by concluding an agreement with seven umbrella associations of the German agro-food industry and the hospitality sector in March 2020, setting reduction goals and strengthening co-operation. In Italy, social protection and food waste reduction were linked through an increase in funding of EUR 40 million (USD 45.6 million) for that country’s Fund for the distribution of foodstuffs to vulnerable people for 2021, including securing food that is still edible but no longer saleable. The government of Latvia implemented a number of food waste-related regulations. In August 2020, a regulation on the requirements for the distribution of food after the end of minimum validity entered into force, specifying what types of food can be donated after having passed the “Best before” date, and for how long after said date. A second regulation allowing retail companies to donate animal origin products such as eggs to charitable organisations went into effect in March 2020. In Romania in July 2020, a new law clarified the country’s rules on food donations, including stipulating that donated food is not subject to VAT. Then in August 2020, Romania issued an implementing regulation that offered other tax incentives to companies which donate food products nearing their expiration dates. A number of activities took place under Spain’s strategic framework “More Food, Less Waste” in 2020, including the first national quantification of waste from food consumption away from home, and the publication of a new report on food waste in the food chain.26

In conjunction with activities on sustainability, several countries undertook policy actions related to water quality and availability. Greece has several water-related actions planned for 2021, including completing the sector development programme 2021-25 (in accordance with the national policy for water management and the national strategy for adaptation to climate change, to include actions such as efficient usage of water resources and plans for the reconstruction of agri-environmental infrastructure); completing the second revision of river basin management plans according to the EU Water Framework Directive; updating the adopted code of good agricultural practices for the protection of waters against pollution by nitrates from agricultural sources; and signing Ministerial Decisions on sludge recycling from urban waste water, bio waste management for compost in agriculture, and a code of good agricultural practices for ammonia emissions control. In Hungary, the Act on Irrigation Farming came into force on 1 January 2020. The law outlines new responsibilities for the state in the area of irrigation development, designating irrigation districts as mid-level state planning units that must prepare irrigation development plans. The regulation also contains rules for the establishments of irrigation easements to allow farmers to use the lands of others for the purpose of water transfer. Italy announced in 2020 that it would dedicate EUR 630 million (USD 718 million) over the next seven years for investments in irrigation infrastructure to combat hydrogeological instability.

Animal health and welfare

Member States in particular enacted a variety of programmes in 2020 seeking to improve animal welfare. In Austria, from 2021, EUR 120 million (USD 137 million) will be made available for investments in animal welfare. In conjunction, the country will introduce new subsidy standards for piglet rearing, pig fattening and cattle farming, and from 2022, the country will no longer provide subsidies for the construction of new barns which meet only legal minimum standards. Instead, the subsidy rate for investments in animal-friendly housing for pigs and turkeys will be increased from 25% to 35% of the investment cost. Other foreseen animal welfare measures in Austria include a reduction in calf transports,27 the establishment of the national-level Austrian Animal Health Service,28 and rapid implementation of research results in animal husbandry practice by ensuring that research projects have a strong link to practical implementation options. In Bulgaria, subsidy rates to cattle farmers demonstrating compliance with animal welfare standards in their production practices were raised to EUR 20 (USD 23) per head for farms with up to 50 animals, and to EUR 30 (USD 34) per head for farms with more than 50 animals. Bulgaria also amended its Veterinary Medical Act to introduce more stringent registration and operation requirements for backyard farms.

On 28 January 2020, the Minister of Agriculture and Food of France announced 15 new measures for the protection of animal welfare, including phasing out certain breeding practices such as live castration of pigs and chick crushing, strengthening awareness and training in animal welfare, improving the quality of life of farm animals,29 and improving animal transport conditions.30 The measures were developed in consultation with the concerned sectors and animal rights associations, complementing and reinforcing measures already in place. An extension plan to fight against the abandonment of pets was subsequently presented on 21 December 2020. On 3 July 2020, the German Parliament agreed on a legislative proposal that bans mating stalls for sows by 2029 and reduces the period of time sows are allowed to be kept in farrowing crates by 2036. Farmers are supported in the transition. In Poland, 2020 marked the launch of the animal welfare measure under that country’s Rural Development programme, beginning with financial support for introducing practices to improve the welfare of cows and pigs. The country plans to extend the measure to cover sheep in 2021. In line with this push towards animal welfare in Poland, on 26 June 2020, the country’s Minister of Agriculture and Rural Development appointed a special delegate (specifically a Plenipotentiary) for the protection of animals. This Plenipotentiary is tasked with promoting positive attitudes towards animals and with developing legal solutions concerning the protection of animals and the conditions in which they should be kept. Foreseen roles include identifying the most serious problems concerning the protection of animals and proposing appropriate solutions; co-operating with organisations of farmers, animal breeders and organisations whose objective is to protect animals; and analysing, evaluating and monitoring the functioning of provisions on the protection of animals. In Spain, the rules related to intensive pork farms were modified in 2020, including stipulations on the maximum productive capacity, minimum infrastructure conditions, equipment requirements, biosecurity and animal welfare.

Animal and plant disease

Member States faced an assortment of animal and plant disease outbreaks in 2020, and addressed them with specific policy measures. Cases of African Swine Fever (ASF) continue to be identified in some Member States, with subsequent policy responses. In response to the first case of ASF in wild boar detected in Germany in September 2020, the government of the state of Brandenburg announced that they would spend EUR 6 million (USD 7 million) to construct a permanent fence along the German-Polish border to limit the movement of wild boar and decrease the risk that the disease would cross into domestic pig populations. The State Veterinary Administration of the Czech Republic issued emergency veterinary measures defining the area near the border with Poland and Germany as an area of intensive boar hunting – from 16 November 2020, a hunting premium of CZK 2 000 (EUR 76, USD 86) will be paid for each wild boar caught. Also in November 2020, officials from the Czech Republic, Germany and Poland announced that they would create an African Swine Fever task force to more regularly exchange information and ensure better co-ordination of containment measures (including hunting). Programmes to compensate for ASF-related losses were put in place in some countries. The government of Bulgaria provided a support package of EUR 17 million (USD 19 million) to compensate for losses due to mandatory culls from an outbreak of ASF there in 2020. In addition, the Bulgarian Government launched two programmes with a combined budget of EUR 31 million (USD 35 million) in the summer of 2020 that aim to repopulate small farms affected by ASF by improving farm-level biosecurity and helping small farms to purchase new animals. Farmers in Latvia also faced an outbreak, with pig farmers there receiving EUR 1.1 million (USD 1.3 million) in compensation for culls in 2020. Exceptional assistance to pig producers as a result of ASF was also provided in Lithuania. Support was also given to farmers in Poland – producers in the areas covered by ASF restrictions were made eligible for compensation for lost income, with aid of up to PLN 118 000 (EUR 26 559, USD 30 265) available. Finally, in December 2020, Belgium regained ASF‑free status from the OIE. Accordingly, the ban on repopulation of pig farms will be lifted from early 2021. At the same time, a variety of measures related to wild boar populations (including fencing, monitoring and destruction) will remain in place over the coming months to prevent new outbreaks of the disease.

Responses to other animal diseases were also noted. Different strains of avian flu were identified in various Member States in late 2020, including Belgium, Denmark, France, Germany, the Netherlands and Poland. Bird culls were ordered in Denmark and Germany. In France, an adaptive strategy was followed, allowing prefects to conduct preventative slaughters for all poultry species within 3 km of identified contaminated hotspot areas – through January 2021, 61 such hotspot areas had been identified in the Landes department. Officials in the Netherlands ordered bird culls for affected farms, banned transport of animals for farms located within 10 km of affected properties, and ordered free range poultry producers to move their birds indoors after the disease was discovered in wild bird populations. In May 2020, the government of Bulgaria allocated EUR 3.3 million (USD 3.8 million) for bluetongue vaccines following the last outbreak there in 2014. Meanwhile, poultry farmers in Latvia received nearly EUR 125 000 (USD 142 443) of compensation in 2020 in response to an outbreak of salmonellosis there.

Measures were also taken to combat plant pests and diseases. In August 2020, the Commission published a new plan to combat the further spread of xylella fastidiosa, a bacteria that attacks olive and fruit trees and other plants, including through increased surveillance, awareness building and monitoring. The plan also requires Member States to carry out annual surveys and develop contingency plans. Separately, on 7 August 2020, the government of Italy approved a EUR 68 million (USD 77 million) assistance package for olive farmers in the Puglia region who had been affected by xylella in 2016 and 2017. In addition, the Puglia region announced a further EUR 40 million (USD 46 million) to support investments to plant new olive varietals more resistant to xylella. Italy also provided an assistance package of EUR 80 million (USD 91 million) in 2020 to reimburse producers for damage caused by the Brown marmorated stinkbug. The government of France released a sugarbeet action plan in August 2020, as that country’s sugarbeet production faced an outbreak of jaundice virus. The plan includes provisions to prevent pest infestation, research and development, de minimis compensation of losses, and plans for a bill to allow the use of certain pesticides on seeds under certain conditions.

Livestock, plant health, and plant genetic resources

Some Member States introduced regulations related to livestock, plant health, and plant genetic resources. The government of Poland passed a new Act on the Organisation of the Breeding and Reproduction of Livestock, which establishes the principles for breeding species classified as livestock, and introduces provisions for granting financial support for breeding livestock from the state budget. Poland also put in place the Act on the Protection of Plants against Pests and the Act on the Main Inspectorate of Plant Health and Seed Inspection (both of which are implementing statutes for EU regulations), which strengthen the phytosanitary requirements for plant trade and plant health, including by requiring that imported plants possess a phytosanitary certificate, and by distinguishing priority pests from quarantine pests. In Spain, a new regulation on plant genetic resources was approved in March 2020, which regulates access to Spanish genetic resources following the Nagoya Protocol. The regulation’s objective is to improve plant genetics while also enhancing the participation and access of farmers to the management of these resources. Estonia announced the launch of its “Collection, Conservation and Utilisation of Plant Genetic Resources for Food and Agriculture in 2021-2027” programme in 2021, building on the country’s network for the conservation of plant genetic resources for food and agriculture that was established in 2007.

Apiculture

Hungary reported various activities in support of apiculture in 2020. The Hungarian National Beekeeping programme for 2019-2022 already offered support for the acquisition of equipment by beekeepers, expansion of professional skills, initiatives to maintain bee health, and scientific research. In 2020, new aid schemes were offered to facilitate market access to beekeeping products and to strengthen consumer confidence. Further, support to maintain bee health was doubled in 2020. All told, in 2020 the government raised support for beekeeping to the maximum level that can be provided under national authority.

Digitalisation

Certain Member States enacted actions to improve digitalisation in their agricultural sectors and policy implementation in 2020. The Belgian region of Wallonia verified the validation of all farm payments using data from Copernicus Sentinel Satellites in 2020 following the testing phase initiated in 2019, completely replacing on-farm controls throughout the entire Wallonian territory. Similarly, the Belgian region of Flanders applied the same verification method to the whole territory in 2020. Officials in Flanders also began developing a geotagged photo app in 2020, in preparation for the implementation of the next CAP. In Germany, fourteen sites, located on farm holdings all over Germany, were established to test digital applications to protect the environment, improve animal welfare, promote biodiversity and reduce workloads in both crop production and animal husbandry. In July 2020, Portugal launched the Smart Farm Colab – a collaborative laboratory for digital innovation in agriculture. The lab’s objectives include to contribute to disseminating the use of digital technologies, as well as to generate innovative and automated digital solutions for the agricultural sector along the whole value chain, with a focus on the Western region of Portugal and products such as fruit, vegetables and wine. The laboratory covers the application of sensors in soil or in harvesting machines, as well as data collection through satellites and drones. In Spain, training and technical assistance were provided and improvements were made in the interoperability of data in 2020, all in the context of the country’s 2019 strategy for the digitalisation of agro-food, forestry and rural sectors and to reduce the urban-rural digital gap. Further, the country reported that a new regulation facilitating the digitalisation of the monitoring and notification of emissions from livestock is forthcoming. And in the context of the European EIP-AGRI initiative, the country also issued its third call for innovative projects related to digitalisation under its National Rural Development Programme in 2020, with EUR 17 million (USD 19 million) available.

Food safety and traceability

Regulatory changes inside Member States touched on a number of areas in 2020. Regulatory actions related to food safety and traceability occurred at both the EU and Member State level. In January 2021, the European Food Safety Authority (EFSA) published its first opinion on insect-derived novel food products, concluding that foods derived from dried yellow mealworm are safe for human consumption (EFSA NDA Panel, 2021[19]). Also related to food safety, in October 2020, the European Commission adopted the new EU Chemicals Strategy for Sustainability, which includes initiatives such as phasing out the use of the most harmful substances (such as PFAS) in food contact materials and establishing a “one substance one assessment” process for the risk and hazard assessment of chemicals (EC, 2020[20]). In June 2020, the Bulgarian Parliament approved a revised Food Act that simplifies existing food legislation, strengthens food traceability and improves consumer protection. Among other provisions, the Act mandates the same labelling for food online as food sold in brick-and-mortar stores; bans advertisements for foods and drinks which are high in trans-fats, salt and sugar; and requires food banks to be approved and registered as non-governmental organisations.

Contracting

The government of Romania introduced several new regulations, including one in April 2020 that permits direct partnerships between commercial retailers and agricultural co-operatives, producer associations, and producers via 12-month contracts, and another in June 2020 that defines the conditions for natural persons or companies to be able to acquire agricultural land (including requiring the person or firm to have resided in or carried out agricultural activities in Romania for at least the past five years).

Risk management

Much of the risk management policy focus of 2020 was on putting in place measures to help producers cope with the impacts of COVID-19 (see Domestic policy responses to the COVID-19 pandemic). Several countries also offered ex post assistance for natural hazards. In June 2020, the government of the Belgian region of Flanders recognised the drought of the summer of 2019 as an agricultural disaster. In Bulgaria in November 2020, two aid packages were offered to farmers affected by summer and fall drought, totalling EUR 15.55 million (USD 17.72 million). In Croatia, the Ministry of Agriculture brought forward area payments amounting to HRK 35 million (EUR 4.6 million, USD 5.3 million) in response to earthquakes and floods in December 2020, and in January 2021, the ministry provided further area payments, bringing total payments to earthquake-affected farmers to HRK 93 million (EUR 12.3 million, USD 14.1 million). In the spring of 2020, the Czech State Agricultural and Intervention Fund received applications for assistance intended to mitigate the damage caused by spring frosts in 2019, and financial support was paid out during summer 2020 to eligible producers of affected fruit species. Due to the persistent drought, some German Länder permitted animal grazing on areas laying fallow or cultivated with catch crops declared as ecological focus areas, or alternatively their use for fodder production. A variety of measures were put in place in France in 2020 to respond to that country’s drought conditions. Throughout July, August and September 2020, livestock producers in a number of departments were permitted to use fallow land for animal grazing, while producers in other departments were permitted to report the planting of catch crops and declare those under their ecological focus area. Advance CAP payments were also increased, tax contributions for most affected farmers were postponed or reduced, a relief tax measure was instituted for unbuilt land, and disaster relief was made available for producers who exceeded the designated threshold of damages. Lithuania offered support in 2020 for horticultural and berry-producing holdings which suffered losses as a result of frosts in 2019. The government of Romania offered direct assistance to producers affected by drought, instituting a relief package of EUR 217 million (USD 247 million) for wheat and barley producers. A financial aid package of EUR 0.87 million (USD 0.99 million) was put in place in Slovenia in 2020 to compensate producers who experienced yield reductions in 2019 due to adverse weather conditions. Spain offered EUR 100 million (USD 114 million) in credit guarantees to farmers who had been affected by drought in 2020.

Other Member States made changes in their risk management programming. In the Belgian region of Flanders, the decree of 5 April 2019 removing the distinction between general and agricultural disasters came into effect on 1 January 2020. With this change, all damage caused by recognised exceptional weather conditions will be addressed through the Flemish Disaster Fund. The Czech Republic’s Support and Guarantee Fund for Farmers and Forestry (SGFFF) set up insurance support rates for 2020, providing subsidies for entrepreneurs in agriculture and forestry of between 50% and 65% of the premium. Hungary announced various changes in risk management programmes. First, the Ministry of Agriculture there announced that from 2021, the country’s risk management system would be expanded to include a mutual risk management fund within the framework of the agricultural crisis insurance system. Participation in the fund will be voluntary, but participating producers must sign up for a minimum term of three years. Additionally, the annual budget for insurance premium support was increased from HUF 5 billion (EUR 14.2 million, USD 16.2 million) in 2019 to HUF 7 billion (EUR 19.9 million, USD 22.7 million) in 2020. In Italy, a budget of EUR 60 million (USD 68 million) was set for insurance interventions under the National Solidarity Fund for the period 2021-23, and EUR 70 million (USD 80 million) was designated for compensatory measures for farms damaged by weather and phytosanitary events under the National Solidarity Fund for 2021. In addition, EUR 20 million (USD 23 million) was returned to the Regions to repay advanced payment on relief credit to agricultural businesses damaged by disasters and adverse weather events. In Poland, new procedures were put in place to determine eligibility for applying for public aid in times of drought. These procedures involve the use of a designated public application to verify requests for aid using the level of harvest losses and data on the climatic water balance from the Institute of Soil Science and Plant Cultivation in Puławy. The application generates a protocol on quantifying the damage for the farmer, and on that basis, the farmer can apply for aid. The application is intended to standardise the process of quantifying damages caused by drought, eliminate errors, and reduce processing time for aid applications.

Support to and regulations on specific groups of farmers

Targeted policy initiatives are underway in various Member States to support particular groups of farmers. In Hungary, a new law on family farms entered into force on 1 January 2021. The law aims to develop a family-based agricultural model relying on small and medium-sized farms, encouraging the establishment of viable economic co-operation and supporting the strengthening of the agricultural middle class as one of the key tools of increasing agricultural economic efficiency. Hungary also revised the permitted legal organisations of family farms, which can now choose from three legal forms of operation: they can remain owner farmers, establish a family farm of owner farmers, or set up a family agricultural company. In the Belgian region of Flanders, two new producer organisations were officially recognised in 2020 – “milk.be” for dairy producers, and “belpotato.be” for potato growers. Similarly in the Belgian region of Wallonia, two new producer organisations were recognised in 2020, both in the beef sector. In Spain, the Ministry has indicated that one of their priority actions for 2021 is strengthening producer organisations and associations, and in 2020 they supported activities to integrate farmers in co-operatives and associations, providing EUR 37 million (USD 42 million) for more than 30 projects. Italy has been providing incentives to young farmers in the form of the State paying social security contributions for the first 24 months for any agricultural business opened by an operator under 40 years old. EUR 44 million (USD 50 million) was designated for this programme in 2020, and EUR 55 million (USD 63 million) was budgeted in 2021. Specific programmes to support women farmers were instituted in Italy and Spain. In Italy, a revolving fund of EUR 15 million (USD 17 million) was established to guarantee zero-interest mortgages for female agricultural entrepreneurs – including those in production agriculture and the processing and marketing sectors – in 2020. An additional EUR 15 million (USD 17 million) was designated for the measure in 2021 for loans up to EUR 300 000 (USD 341 864) with a maximum duration of 15 years. The Ministry of Agriculture in Spain is working on the implementation and improvement of the Law of shared ownership of farms to ensure improved access of women to farm ownership as a means to strengthen the role of women in agriculture. Additionally, the ministry organised an innovation excellence competition for women in agriculture in 2020.

Taxation

Various Member States adjusted tax provisions relevant to their agricultural sectors in 2020. In Austria, the sparkling wine tax was abolished in 2020. Major tax cuts, including social contributions and small business taxes, were implemented in Hungary in 2020, with substantial implications for the country’s agricultural sector. In addition, tax rates for cigarettes and smoking tobacco were increased in Hungary, bringing them in line with the EU mandatory minimum tobacco taxes. Elsewhere, on 1 January 2020 in Latvia, the excise tax rate on fuel for primary agricultural producers and aquaculture was raised from EUR 55.8 to EUR 62.1 (USD 63.6 to USD 70.8) per 1 000 litres of fuel, in line with an increase of the standard fuel tax rate.

Investment

Food and agriculture were supported through more targeted investment subsidies in some Member States in 2020. In Bulgaria, the Ministry of Agriculture introduced a subsidy programme for investments in small slaughterhouses amounting to EUR 1.28 million (USD 1.46 million). The programme will subsidise up to 50% of an eligible investment, up to a ceiling of EUR 45 000 (USD 51 280) per beneficiary. The Czech Republic’s Support and Guarantee Fund for Farmers and Forestry (SGFFF) in 2020 focused on providing support to small and medium-sized enterprises in the form of investment and operating loans, at a concessionary rate of 2.5% annually. A new interest rate subsidy programme was introduced in Hungary to incentivise investments in agricultural enterprises. The support will be made available for loans up to HUF 100 billion (EUR 285 million, USD 324 million), with interest subsidies set at 80% of the nominal interest rate, but not more than 2 percentage points annually. Other calls for investment were opened in Hungary to increase the competitiveness of livestock farms (HUF 50 billion) (EUR 142 million, USD 162 million), modernise horticultural farms (HUF 30 billion) (EUR 85 million, USD 97 million) and support small farms with turnover of EUR 3 000 – EUR 6 000 (USD 3 419 – USD 6 837) to develop production activities (HUF 2.5 billion) (EUR 7.1 million, USD 8.1 million). Italy enacted several agricultural investment packages in 2020, including EUR 29.5 million (USD 33.6 million) to strengthen the competitiveness of agro-food supply chains, EUR 30 million (USD 34 million) for wheat pasta supply chain contracts, and EUR 30 million (USD 34 million) to eliminate the cost of guarantees for agricultural entrepreneurs and to facilitate access to credit for investments in technological innovation, precision agriculture and product traceability. An additional investment programme was set up in 2021, with EUR 150 million (USD 171 million) designated for a Fund for the development and support of agricultural, fisheries and aquaculture sectors to promote supply chains, increase competitiveness, improve the quality of products, and support quality employment, among other objectives.

Other investment packages were introduced with a specific focus on longer-term industry transformation. At EU level, the “Next Generation EU” plan under the “Recovery Plan for Europe” was introduced, both in response to COVID-19 and to orient longer-term strategic investment (covered in more detail in the Domestic policy responses to the COVID-19 pandemic). One Member State likewise enacted a policy package that contained long-term investment programmes not directly related to COVID-19. Ireland proposed the Future Growth Loan Scheme, which makes up to EUR 800 million (USD 912 million) in 7‑10 year loans available under favourable terms to support strategic long-term investment. This scheme is available to eligible sectors in Ireland, including those in primary agriculture. Certain endeavours may qualify for Future Growth Loans, including investment in tangible and intangible assets on agricultural holdings linked to primary agricultural production (excluding purchases of livestock or of land other than site costs, or investment in connection with the processing and marketing of agricultural products. The programme is offered by the Government of Ireland, through the Department of Enterprise, Trade and Employment and the Department of Agriculture, Food and the Marine, and the Strategic Banking Corporation of Ireland, supported by the EIB Group’s Guarantee Facility.

Innovation and knowledge

On 4 December 2020, the European Commission launched a new EU Soil Observatory (EUSO). The EUSO aims to support policymaking in the European Union by providing the Commission and the broader soil user community with the soil knowledge and data flows needed to safeguard soils; supporting EU Research and Innovation on soils; and raising societal awareness of the value of soils. In order to carry out this mission, the EUSO aims to collect high-resolution, harmonised and quality-assured soil information to track and assess progress by the European Union in the sustainable management of soils and restoration of degraded soils; support the outcomes of targeted research; foster networking, co‑operation and partnerships among users of soil data and information; and underpin policy development through meaningful indicators and assessments (EC, 2021[21]). In particular, this work is expected to help with tracking country progress in meeting sustainability objectives of the next CAP and the F2F Strategy. At the Member State level, in January 2020, France launched their “Institut Agro” – the National Institute of Higher Education for Agriculture, Food and the Environment. The Institute is the result of a merger between two existing programmes (AgroCampus West and Montpelier SupAgro), with the joining of more institutions envisioned in the coming years. The Institute’s goals include supporting the agricultural and food sectors with research and innovations to facilitate agroecological, digital and climate transitions, and its work will be closely linked to INRAE, the National Research Institute for Agriculture, Food and the Environment. Portugal launched the Innovation Network under the Agricultural Innovation Agenda 2020-30 in September 2020. The Innovation Network is composed of 24 research centres and focuses on products such as fruit and vegetables, wine, olive oil, and cereals, and aims to address aspects of digitalisation and sustainability in these agro-food sub-sectors, targeting in particular technology adoption.

Institutional changes

A handful of institutional changes were implemented at the country level. In Austria, in conjunction with a re‑organisation of ministries in January 2020, the new Federal Ministry of Agriculture, Regions and Tourism (BMLRT) was established. BMLRT’s agenda includes agriculture, domestic food production, regional value creation, forestry, water management, mining, tourism and regional policy. The Ministry will also be responsible for broadband expansion, telecommunications, postal services and the agendas for civil service. In Poland, inspection services for the merchantable quality of food were re‑organised on 1 July 2020, consolidating the activities of the Trade Inspectorate and the Agricultural and Food Quality Inspectorate under the sole responsibility of the Agricultural and Food Quality Inspectorate.

Domestic policy responses to the COVID-19 pandemic

Policy responses to the COVID-19 pandemic took place at various levels, with some measures implemented for the whole of the European Union, while other initiatives were enacted within individual Member States. The European Union implemented three main types of policies in the agricultural sector in response to COVID-19: CAP flexibilities, exceptional market measures, and direct support to farmers and rural areas. Within this framework, Member States chose which measures to implement, based on their own specific circumstances. Member States also put in place their own regulatory flexibilities, tax concessions and social contribution measures, investment assistance, and allowances to farm households to help farmers and agro-food enterprises cope with the financial impacts of the COVID-19 emergency. At the same time, agricultural producers or firms in a number of countries were able to access more general economy-wide assistance packages (which are not covered here), including in Austria, Belgium, the Czech Republic, Estonia, France, Germany, Hungary, Luxembourg, the Netherlands, Poland, Spain and Sweden. Response measures also responded to labour concerns within the sector, ensured minimal interruptions to food supply chains, and helped to ensure that affected consumers had adequate access to food. Finally, some policies were put in place to facilitate longer-term recovery and sector transformation.

CAP and regulatory flexibilities

Regarding CAP flexibilities, the deadline for CAP payment applications was extended by one month, offering more time to farmers to fill in their application for both income support and rural development payments. This measure was taken up by several Member States, including Czech Republic, France, Italy, Luxembourg, Slovenia and Spain. Additionally, because it was necessary to minimise physical contact to reduce the transmission of the virus, on 16 April 2020, farm spot check requirements (to ensure compliance with eligibility conditions) were reduced as a means to reduce administrative burden and avoid unnecessary delays.31

Other flexibilities were introduced with respect to rural development included postponement of the submission of country-level annual reports by national authorities, lifting the requirement on seeking amendments to partnership agreement, and allowing Member States to amend their rural development programmes by using money still available under their rural development programme to finance relevant actions to face the crisis.

Outside of CAP flexibilities, Member States also introduced some of their own regulatory flexibilities. For example, in Belgium, the mandatory two-day collection period for AA milk was increased to three days. In Estonia, the “no tax debt” requirement was waved for payment applications to the Agricultural Registers and Information Board, and deadlines for the implementation of activities were extended. The government of France allowed veterinarians to use telemedicine services on a trial basis for 18 months, beginning in May 2020. The French Government also exceptionally authorised the remote sale of plants and plant products without a plant sanitary passport. Romania introduced an ordinance in mid-April 2020 that provided flexibility from biofuel mandates for local petroleum stakeholders. Poland put in place regulatory flexibilities on certain plant protection regulations (such as postponing the periodic re-inspection of plant protection product equipment) and organic farming inspections, and also put in place a possibility to conduct tenders for the leasing of properties by electronic communications. Spain extended the subscription period for agricultural insurance lines whose contract date ended before 16 April 2020, and also adopted flexibilities for the documentation required for the transport of animals and the rules on driving and rest periods for the transport of goods.

Exceptional market measures

Three exceptional market measures were adopted on 22 April 2020, allowing Member States to provide assistance to certain targeted sectors (EC, 2020[22]). First, a private storage aid scheme was proposed (as authorised in the Common Market Organisation (CMO) Regulation) for certain dairy (butter, cheese and skimmed milk powder) and meat products (beef, goat and sheep meat), which would allow the temporary withdrawal of these products from the market for a period of between 2-3 and 5-6 months, depending on the product. Second, the Commission introduced further flexibility in the implementation of existing market support programmes for apiculture, fruits and vegetables, table olives and olive oil, wine and school schemes (covering milk, fruit and vegetables). This flexibility aimed to limit available supply in each sector to lead to a rebalancing of markets. In addition, it allowed the re-orientation of funding priorities towards crisis management measures. Finally, the proposal included an exceptional derogation from certain EU competition rules under Article 222 of the CMO regulation for the milk, flowers and potatoes sectors. This derogation allowed operators to self-organise and implement market measures at their level for a maximum period of six months.32 Storage by private operators was also allowed, and consumer price movements were monitored closely to avoid adverse effects.

Member States uptake of these exceptional measures varied. The European Union reported in November 2020 that while private storage aid had been opened for cheese, butter, skimmed milk powder, sheep meat, and beef meat, quantities contracted in storage were in most cases less than half of initial allowances (WTO, 2020[23]).33 Both Belgium and Latvia reported opening private storage aid (beef, butter and cheese in the case of Belgium, and beef only in the case of Latvia). Belgium authorised market stabilisation measures for potatoes, including encouraging free distribution, and use of potatoes for animal feed and anaerobic digestion. The government of Wallonia also supported the donation of potatoes to food bank platforms, encouraged supermarkets to extend the period of supply of local potatoes on supermarket shelves, and supported a promotion campaign to stimulate the consumption of fresh potatoes and processed products. The government of Spain put in place some operational flexibilities for fruits and vegetables and the national beekeeping plan.

Several Member States implemented wine sector support measures after the COVID-19 emergency substantially impacted wine demand – both due to a substantial decline in tourist arrivals, and due to lockdown-related restaurant closures. These wine support measures were first made available in the package of exceptional measures adopted on 22 April 2020, with additional wine sector support packages adopted on 7 July 2020 and 28 January 2021.34 As provided for under these support packages, several Member States chose to redirect funds under national support programmes for wine to crisis management measures for the sector. These measures included crisis distillation of wine into other alcohols (reported in Austria, France, Italy, Hungary, Portugal, Romania, Slovenia and Spain), providing storage aid (for example, in Bulgaria, France, Italy, Portugal, Slovenia and Spain), and permitting green harvesting of grapes (including in Bulgaria, Hungary, Slovenia and Spain). One specific example of a wine support programme comes from Luxembourg. That country’s Viti-vinicole Institute developed and implemented a wine distillation pilot project in close collaboration with Luxinnovation to obtain basic products used in the manufacture of disinfectants thru wine distillation. The project aimed to both assist in the fight against the pandemic by producing the disinfectants, and also provide economic assistance as an indirect aid programme for wineries and distilleries.

Flexibility was also introduced into the school schemes programme. With the spring lockdowns and widespread closures of schools, the implementation of the 2019/20 school scheme was severely impacted, as perishable fruit, vegetable and dairy products could not be delivered as originally intended. In response, the European Commission clarified that the crisis could be recognised as a case of “force majeure” to reimburse suppliers for perishable goods (fruit, vegetables and dairy products) that were meant to be distributed to schools participating in the scheme.

Direct support instruments

Various direct support instruments were permitted in response to COVID-19. The first of these was flexibility in the use of financial instruments under rural development. These included allowing farmers or other rural development beneficiaries to benefit from loans or guarantees to cover operational costs of up to EUR 200 000 (USD 227 909) at favourable conditions, such as very low interest rates or favourable payment schedules. This provision was used in the Czech Republic, Estonia, and Poland, for example.

The second type of direct support was the development of a new temporary rural development measure – Measure 2135 – introduced to allow countries with remaining rural development funds to pay farmers and small agro-food businesses in 2020. The measure was intended to be a vehicle to provide immediate relief to stakeholders most impacted by the crisis, allowing countries to offer support of up to EUR 5 000 (USD 5 698) per farmer and EUR 50 000 (USD 56 977) per small or medium enterprise. Through the fourth quarter of 2020, nine Member States had utilised this measure – Bulgaria, Cyprus, Estonia, France, Greece, Italy, Poland, Romania and Spain. In Romania, for example, funds under this measure were disbursed to farmers as lump sum payments based on farm size for cattle farmers, sheep and goat farmers, and fruit and vegetable producers. In addition to funds already disbursed in the countries mentioned above, Slovenia allocated EUR 3.5 million (USD 4.0 million) to this measure in its November 2020 amendment of that country’s RDP.

The third direct support initiative was in the form of higher advances of farm payments. To increase farmer cash flow, the Commission allowed higher advances to farmers under CAP for income support through direct payments (advanced payments raised from 50% to 70%) and also for certain rural development payments (advanced payments raised from 75% to 85%). Countries taking advantage of the direct payment advance included Italy and Poland, while advanced RDP payments were applied in Poland and Spain.

The final direct support measure allowed higher state aid for farmers and food processing companies through the State Aid Temporary Framework, adopted on 19 March 2020 (originally set to expire on 31 December 2020, in October 2020 the provision was prolonged for an additional six months to 30 June 2021 and recapitalisation support provisions were extended through 30 September 2021 (EC, 2020[24])). Most prominently, this measure increased the payment limits for individual entities (to a maximum of EUR 100 000 (USD 113 955) per farm, or EUR 800 000 (USD 911 638) for food processing and marketing companies), and also raised the maximum total aid package limits for Member States. This amount can also be topped up by ‘de minimis’ aid – that is, national support specific to the agricultural sector that can be granted without prior approval from the Commission and has a ceiling of EUR 20 000 (USD 22 791)36 per recipient. Member States took full advantage of these relaxed State Aid provisions, releasing dozens of support packages targeted toward agricultural industries whose sales had been most affected by the COVID-19 pandemic (Table 11.5). All told, through 31 March 2021, announced State Aid measures directed toward agriculture in response to COVID-19 totalled nearly EUR 6.2 billion (USD 7.1 billion) – equivalent to more than 11% of the annual CAP budget for 2020 – although it is not yet known exactly how much of the assistance has been paid out. Most of this additional support is coupled to specific production.

Table 11.5. State aid measures specific to agriculture in response to COVID-19

Member State	Date	Amount	Eligible Sectors	Aid Type
Belgium (Brussels-Capital)	April 2020 (SA 57056)	EUR 200 000	Firms active in primary production of agricultural products and in aquaculture for the food sector	Direct grants
Belgium (Flanders)	July 2020 (SA 58014)	EUR 35 million	Potato growers (EUR 10 million); Ornamental plant growers (EUR 25 million)	Direct grants
Belgium (Wallonia)	September 2020 (SA 58649)	EUR 10 million	Producers and stockers active in the potato sector	Direct grants
	March 2021 (SA 62393)	EUR 6.5 million	Pig farmers with breeding sows	Direct grants
Bulgaria	August 2020 (SA 58328)	EUR 29 million	Farmers breeding large and small ruminants; potato growers	Direct grants to cover principal and interest on loans provided by the State Fund for Agriculture
Croatia	December 2020 (SA 59815)	EUR 9.3 million	Cattle and sow breeders; producers of apples, mandarins and potatoes	Direct grants
	March 2021 (SA 62105)	EUR 400 000	Farmers in the pig fattening sector	Direct grants
Cyprus	June 2020 (SA 57587)	EUR 1.8 million	Farmers active in primary agricultural production (in particular, producers of vegetables, strawberries, herbs, Valencia oranges, flowers, producers who participate in farmers’ markets, and producers without access to irrigation)	Direct grants
	August 2020 (SA 58340)	EUR 500 000	Owners or managers of pig farms in which breeding sows are reared	Direct grants
	December 2020 (SA 60263)	EUR 560 000	Producer groups and producer organisations active in the agricultural sector	Direct grants
	March 2021 (SA 62228) (successor to SA 57587, which expired 31 Dec 2020)	EUR 1.8 million	Farmers active in primary agricultural production (in particular, producers of vegetables, strawberries, herbs, Valencia oranges, flowers, producers who participate in farmers’ markets, and producers without access to irrigation)	Direct grants
Czech Republic	June 2020 (SA 57475)	EUR 36.3 million	SMEs active in primary agriculture	Direct grants
	July 2020 (SA 57848)	EUR 370 million	Firms active in primary agriculture, food and feed production	Direct grants
	November 2020 (SA 59336)	EUR 110 million	Firms active in primary agriculture and food production	Direct grants
	March 2021 (SA 62044)	EUR 110 million	Firms active in primary agriculture and food production	Direct grants
Estonia	April 2020 (SA 57028)	EUR 200 million	Firms active in agriculture, fishery and food processing sectors, as well as companies in rural areas	Public guarantees and loans
	October 2020 (SA 58678)	EUR 1.5 million	MSMEs active in the food processing sector	Direct grants
	March 2021 (SA 60666)	EUR 15.8 million	Farmers active in dairy cow, pig, sheep and goat rearing, as well as in the potato, quail, strawberry and vegetable sectors (EUR 12 million); Farmers active in the beef cattle, organic cereals, and organic laying hens sectors (EUR 3.8 million)	Direct grants
Finland	May 2020 (SA 57231, SA 58794, SA 61959)	EUR 30 million initially, modified to EUR 78 million	Firms active in primary agriculture	Direct grants
France	March 2021 (SA 62255)	EUR 25 million	Horticultural producers	Direct grants
Greece	May 2020 (SA 57194)	EUR 10 million	Floriculture primary producers	Direct grants
	July 2020 (SA 58029, SA 58048, SA 58069)	EUR 51.23 million	Farmers active in primary agricultural and livestock sectors - primarily sheep and goat producers (EUR 31.7 million), asparagus farmers (EUR 4.7 million), and sellers in open air markets (EUR 14.8 million)	Direct grants
	October 2020 (SA 58929)	EUR 39.6 million	Producers in certain horticultural sectors (Kalamon table olives, early watermelon, spring potatoes, greenhouse growers of tomatoes, cucumbers and eggplants in Crete)	Direct grants
	March 2021 (SA 62095)	EUR 26 million	Firms active in primary agriculture in buffalo breeding, outdoor watermelon production, greenhouse crops (with the exception of Crete), and summer and autumn potatoes	Direct grants
Hungary	May 2020 (SA 57198, SA 61842)	EUR 283 million initially, modified to EUR 694.4 million, then to EUR 972.2 million	SMEs in the agro-food value chain	Loan guarantees
	May 2020 (SA 57329, SA 61842)	EUR 99 million initially, modified to EUR 198 million, then to EUR 278 million	Firms in the agro-food, fisheries, aquaculture, forestry and game management sectors	Direct grants
Ireland	August 2020 (SA 58387)	EUR 50 million	Farmers and companies active in the beef sector	Direct grants
	March 2021 (SA 62293)	EUR 45 million	Farmers and companies active in the beef sector	Direct grants
Italy	April 2020 (SA 57068, SA 58033, SA 59447 SA 59978, SA 61438)	EUR 100 million initially, modified to EUR 350 million	SMEs in the agricultural, forestry, fishery and aquaculture sectors	State guarantees on investment and working capital loans; direct grants
	April 2020 (SA 57005)	EUR 50 million	Firms in the agricultural, forestry and fishery sectors in the Friuli Venezia Giulia region	Loans with subsidised interest rates; direct grants
	May 2020 (SA 57185)	EUR 30 million	SMEs in the agriculture and fishery sectors	Zero-interest loans
	May 2020 (SA 57349)	EUR 70 million	Firms in the agricultural and fishery sectors in the Campania region	Direct grants
	May 2020 (SA 57439)	EUR 12 million	Firms in the agricultural sector	Direct grants
	July 2020 (modified Dec 2020) (SA 57947, SA 59509)	EUR 1.2 billion initially, modified to EUR 1.5 billion	Firms active in the agriculture, forestry, fishery, aquaculture and related sectors	Direct grants; loan guarantees; repayable advances; tax and payment advantages; reduction or cancellation of social security and welfare contributions; tax deductions; debt write-offs; other payment facilities
	October 2020 (SA 58418)	EUR 8.5 million	Agricultural co-operatives	Tax offset of up to 70% of losses on VAT calculations
Latvia	April 2020 (SA 56932, SA 57125, SA 57802, SA 58123, SA 58728, SA 59305, SA 59865, SA 62128)	EUR 35.5 million	Firms active in agriculture, fisheries, food and school catering	Direct grants
	May 2020 (SA 57287)	EUR 1.5 million	Primary agriculture producers	Zero-interest loans
	March 2021 (SA 62195)	EUR 3 million	MSMEs active in primary agricultural production	Direct grants
Lithuania	June 2020 (SA 57514, SA 58344, SA 60073))	EUR 30.5 million initially, modified to EUR 49.7 million	Bovine animal (EUR 12 million) and milk (EUR 37.7 million) producers	Direct grants
	June 2020 (SA 57529, SA 60073)	EUR 59 million	Firms in the agriculture, food, forestry, rural development and fisheries sectors	Direct grants; loan guarantees
	July 2020 (SA 57508)	EUR 20 million	Poultry and egg processors (estimated 25 firms)	Direct grants
	July 2020 (SA 57823, SA 60073))	EUR 47.5 million initially, modified first to EUR 90 million, then to EUR 135 million	Firms active in the production and processing of pig, vegetable and aquaculture products	Direct grants; interest rate subsidies
	October 2020 (SA 58856, SA 60073))	EUR 12 million	Poultry producers and poultry processing firms	Direct grants
	November 2020 (SA 59345)	EUR 5 million	Firms active in the fur farming sector	Direct grants
Luxembourg	December 2020 (SA 59726)	EUR 1.5 million	Beef, goat, pork and sheep meat producers	Direct grants
	December 2020 (SA 59945)	EUR 124 500	Winegrowers	Direct grants
	December 2020 (SA 59944)	EUR 500 000	Firms active in the processing and commercialisation of seed	Direct grants
	March 2021 (SA 62239)	EUR 1 million	SMEs active in the pig production sector	Direct grants
Netherlands	May 2020 (SA 57217)	EUR 650 million	Firms in the floriculture, horticulture and potato sectors, of which EUR 50 million is earmarked for potato growers	Direct grants
Malta	September 2020 (SA 58306, SA 60675)	EUR 1.5 million	Farmers	Direct grants
	October 2020 (SA 58297, SA 60675)	EUR 2.5 million	Animal farmers (Dairy, beef, swine, sheep, goat, laying hen, broiler, bee, and rabbit)	Direct grants
Poland	June 2020 (SA 57568)	EUR 9 million	Firms active in primary agriculture	Interest rate subsidies
	July 2020 (SA 58105)	EUR 95 million	MSMEs in the primary agricultural sector	Direct grants
	November 2020 (SA 59382)	EUR 40 million	Chrysanthemum flower producers	Direct grants
	December 2020 (SA 60060)	EUR 39.2 million	MSMEs active in pig breeding	Direct grants
Portugal	August 2020 (SA 58423)	EUR 5 million	SMEs active in the agricultural and agro-food sectors in the region of Madeira	Subsidised interest rates
Romania	September 2020 (SA 58450)	EUR 24.7 million	Firms active in the pig breeding sector	Direct grants
	September 2020 (SA 58452)	EUR 22.7 million	Firms active in the poultry breeding sector	Direct grants
	September 2020 (SA 58453)	EUR 7.4 million	Firms active in the bovine breeding sector	Direct grants
	November 2020 (SA 59520)	EUR 12.4 million	Winegrowers	Direct grants
Slovenia	October 2020 (SA 58887)	EUR 1.5 million	Farmers and SMEs active in the processing of agricultural products	Direct grants
	October 2020 (SA 59149)	EUR 378 million	Farmers and self-employed in additional sectors	Direct grants
	December 2020 (SA 60270)	EUR 197 000	Farmers and fishermen	Direct grants
	March 2021 (SA 62332)	EUR 3.7 million	Wine producers and grape growers	Direct grants
	March 2021 (SA 62223)	EUR 4 million	Apple growers	Direct grants
	March 2021 (SA 62118)	EUR 1.5 million	Enterprises active in ancillary farming activities (e.g. agro-tourism, catering)	Direct grants
United Kingdom	December 2020 (SA 60013)	EUR 1.1 million	A company active in Scotland in the processing of agricultural products in the poultry sector	Direct grant
TOTAL		EUR 6.16 billion

Note: Measures reported in this table represent assistance packages specific to the agricultural sector approved under Articles 107(2)b, 107(3)b and 107(3)c TFEU, and under the State Aid Temporary Framework. Note that agricultural sector actors may also have benefitted from all-sector “umbrella” schemes in some countries. The table includes all measures reported as of 31 March 2021.

Source: (EC, 2021[25]; EC, 2021[26]).

Some Member States reported assisting sectors heavily affected by COVID-19 by reallocating existing support. In Denmark, authorities decided to boost the slaughter premium for producers of beef and veal – available through voluntary coupled support – by EUR 8.706 million (USD 9.921 million) to EUR 32.86 million (USD 37.45 million) in 2020, with the assistance financed by a transfer of funds from the Basic Payment Scheme. Portugal instead chose to fund an assistance package to its producers through an exceptional transfer of EUR 85 million (USD 97 million) from Pillar 2 to Pillar 1. The assistance included higher support to small-scale farmers [increased from EUR 600 (USD 684) to EUR 850 (USD 969) per beneficiary] and higher payment rates for specific products under voluntary coupled support – EUR 222 (USD 253) per hectare for rice producers, EUR 22 (USD 25) per animal for sheep producers, and EUR 94 (USD 107) per animal for milk cows.

A number of countries instituted assistance measures for their agricultural sectors that were funded under the state aid de minimis or other support mechanisms. Austria enacted the Hardship Fund Act on 27 March 2020 to partially compensate the economic losses of agricultural holdings significantly affected by the crisis through monthly lump sum payments of a minimum of EUR 1 000 (USD 1 140). Austria also instituted a programme to reimburse fixed costs for Austrian enterprises if their turnover declined by at least 30% from the previous year, with reimbursements up to EUR 100 000 (USD 113 955) per primary agricultural enterprise. Belgium set up a nuisance premium programme, providing assistance of EUR 4 000 (USD 4 558) to companies whose physical facilities had to close due to COVID-19. Belgium also put in place a compensation premium of EUR 3 000 (USD 3 419) for firms that did not have to close, but suffered large losses in sales due to COVID-19 measures. France provided compensation for the destruction of horticultural products due to the lack of markets during the lockdown, and also provided support for equine services (principally pony clubs) that were also forced to close due to the crisis. Spain provided support in response to the difficulties to the market goat and sheep sectors, to reduce the oversupply of Iberian pork, and to assist the cut flowers sector.

COVID-related animal culls also took place in certain Member States. After a mutated strain of COVID was identified on several Danish mink farms, 17 million mink were culled in Denmark. The Danish Government was approved to pay out DKK 1.9 billion (EUR 255.5 million, USD 291.2 million) as compensation. Mink culls were also ordered in Ireland, the Netherlands, and Spain – all due to identifications of cases of COVID-19 in the animals, or as a preventative measure.

Taxation and social contribution measures

Some Member States used the tax system or amended social contribution schemes to reduce the impact of the crisis on the agricultural sector. Austria put in place a large tax relief package, including reductions of pension contributions; introduction of income smoothing; reduced tax rates for wage and income; and abolition of the eligibility conditions for the full flat tax rate with regard to agricultural area, livestock units and intensive orchards, with the last provision retroactive from 1 January 2020. In the Czech Republic, an amendment was adopted extending the deadline to claim a refund from excise taxes on oil used for agricultural primary production and forest management from 31 March 2020 to 12 May 2020. Lawmakers in the Czech Republic also revised the Act on Excise duties in 2020 to allow beer released to immediate storage (on which excise duty had already been paid) to be returned to conditional tax exemption status. Germany made available a tax deferral programme for businesses affected by COVID-19. Hungary offered reductions in outstanding tax liability by 20%, accelerated disbursement of the amount of reclaimed value added tax, and extended tax return filing deadlines. In addition, agricultural firms in Hungary in sectors particularly affected by the pandemic were exempted from paying certain employment-related taxes for a given period. In Estonia, the diesel fuel excise duty was reduced by 25% from 1 May 2020 to 20 April 2022. A variety of tax concessions were also enacted in Italy. Farmland and agricultural income were exempted from the tax base for income tax purposes in 2020 (with a similar provision put in place for 2021); VAT concessions for the sale of live animals, cattle and pigs, and a reduction on the VAT of ready and cooked meals down to 10% were extended from 2020 into 2021; a tax credit was given to agricultural and agro-food businesses belonging to the “Wine Roads” network; firms were given an exemption from paying the minimum registration tax from agricultural land in 2021, among other provisions; and horticultural firms were exempt from paying taxes, social security and welfare contributions through 15 July 2020. In Poland, farmers subject to pension insurance were released from their obligation to pay pension insurance contributions for the second quarter of 2020, with those contributions financed by the Agricultural Social Insurance Fund from the state budget. Farmers in Slovenia could also apply for a deferral or exemption from paying social security contributions.

Investment assistance

Other countries provided aid in the form of investment assistance, including loan guarantees, subsidised loans, or investment grants. Loan guarantee programmes were set up in a number of Member States, including Austria, Belgium, Germany, Greece, Ireland, and Spain. Other countries opened new credit lines and loan schemes. In Hungary, the Széchenyi Agricultural Card Overdraft loan product was launched, providing flexible conditions and a credit line of HUF 200 million (EUR 569 395, USD 648 852) for working capital loans. The loans have include a 100% interest and guarantee fee subsidy to agricultural enterprises for the entire loan term, provided the loan was issued by 31 December 2020. Agricultural enterprises could also apply to the economy-wide Széchenyi Investment Loan Plus scheme, which offered loans of up to HUF 1 billion (EUR 2.8 million, USD 3.2 million) for terms of up to six years at concessionary interest rates of 0.5% annually. Other schemes were opened to support working capital funding of agricultural enterprises (through the MFB Hungarian Development Bank Ltd., MFB Agricultural Current Asset Loan Programme 2020, MFB TÉSZ Loan Programme 2020 and MFB Food Industrial Working Capital Loan Programme 2020). The country also launched the Crisis Agricultural Guarantee Programme through the AVHGA Rural Credit Guarantee Foundation, which provided HUF 60 billion (EUR 171 million, USD 195 million) for financing opportunities for micro, small and medium-sized enterprises for working capital loans, overdrafts and investment loans. Portugal set up a EUR 20 million (USD 23 million) credit line with interest rates subsidised at 80%, in order to cover losses faced by producers of cut flowers.

Other programmes provided support for existing loans. The Czech Republic’s SGFFF announced their new “OPERATION 2020” programme in June 2020, which offered a reduction in loan principal for small and medium-sized primary agriculture enterprises negatively affected by the pandemic. Italy established a EUR 100 million (USD 114 million) fund under its “Cura Italia” Decree to cover interest on bank loans for agricultural and fishing companies. In Poland, a facility was set up to allow a deferral for debt repayment toward the Agency for Restructuring and Modernisation of Agriculture (ARMA).

Investment grants were offered in a few countries. Austria provided tax-free, non-repayable grants worth 7% of the cost of the investment in agricultural or forestry enterprises, with the maximum support raised to 14% of total costs for investments related to greening, digitalisation and health. The country also enacted a EUR 58 million (USD 66 million) “Processing of Agricultural Products” programme to support 26 firms. Poland offered up to PLN 1 500 (EUR 338, USD 385) specifically towards the purchase of a desktop or laptop computer, both to ensure that farmers were able to submit applications electronically to public administration entities, and to ensure that farm household children would be able to attend remote school.

Allowances to farms and farm households

Other allowances were provided related to the farm household. Farmers in the Czech Republic were eligible for a nursing allowance for the self-employed from 1 April 2020. Farmers in France who either suffered from COVID-19 or who were obliged to stay home due to their children not being in school could apply to receive compensation for work support of up to EUR 112 (USD 128) per day from the Mutual Agricultural Fund. In Poland, the right to receive a child-care allowance from the Agricultural Social Insurance Fund was extended for insured farmers and their household members due to constraints in the functioning of childcare and educational establishments. Also in Poland, a measure was established to provide an allowance for farmers or their household members during a period of obligatory quarantine or hospitalisation due to COVID-19. Farmers in Slovenia were also eligible to receive support for an inability to work due to COVID-19 infection, with the amount equal to the actual loss of income per month, but not more than 80% of the national minimum wage.

Labour

The bulk of policies put in place relevant to agro-food supply chains in the European Union and its Member States were to facilitate or accommodate the agricultural labour force. One of the first actions taken in response to border closures was the publication of practical guidelines to ensure the free movement of critical workers, including seasonal agricultural workers, within the European Union (EC, 2020[27]). Seasonal workers were considered critical to the agricultural sector if they were vital to harvesting, planting and tending functions – particularly with respect to the crop season already underway when restrictions were put in place.

Indeed, securing labour became a huge concern for many countries, and a number of them put in places measures to facilitate the recruitment of agricultural labour. In the Czech Republic, the Ministry of Agriculture set up an information hotline to answer questions on agricultural labour, and also set up several platforms to connect the supply and demand of seasonal workers (including by linking universities, labour offices, and information services for chambers of commerce and labour unions). The Czech Republic also put in place the priority processing of seasonal visas for the agriculture and food sectors, and programmes were set up to invite university students to participate in work in the agricultural, food and forestry sectors to address labour shortages. The government of Estonia provided support for the replacement of agricultural workers who had contracted COVID-19. France set up a support plan to ease rules governing access to employment for the agricultural and agro-food sector, including measures to simplify recruitment, a platform to match employment supply and demand, and incentives to the unemployed to join the sector temporarily. Finland doubled its quota of seasonal farm workers allowed into the country from outside of the European Union to 9 000 workers in order to cover domestic farm labour needs in light of other EU movement restrictions. Germany put in place a plan from April through June 2020 to ensure that seasonal workers were able to travel to the country, provided that travel occurred by air and to/from dedicated airports, under which employers paid all expenses for transportation, health checks and other costs due to social distancing requirements. Germany also extended eligibility for contracts that do not involve payments to the social security system to allow temporary workers to stay longer. Furthermore, several online platforms helped to connect producers in need of seasonal workers with people eligible for employment in planting and harvesting activities. Hungary extended the annual time limits for both occasional and seasonal workers from 120 to 180 days in order to ease labour shortages. In May 2020, Italy issued the “Relaunch” Decree, which addressed labour shortages in agriculture by encouraging recipients of social safety net programmes to sign agricultural contracts, and allowed some foreign workers to obtain a six month residency permit to increase the number of workers available for agricultural labour. The government of Spain established extraordinary measures to encourage recruitment of seasonal workers in the agricultural sector, including unemployed persons living near farms, migrants, and young people from third countries.

Some Member States put in place programmes or measures intended to ensure adequate living and working conditions for agricultural workers. France extended their accommodation plan for seasonal agricultural workers, providing EUR 150 (USD 171) per month, up to a total of EUR 600 (USD 684) for these workers. In the Netherlands, the COVID-19 pandemic brought to light the conditions of migrant agricultural labourers in the country. In response, the Dutch government set up a “Protection of Labour Migrants” Taskforce, which has recommended some actions to improve the labour conditions of agricultural migrant workers. Spain put in place rules to ensure the safety in transport and accommodation of farmworkers during the pandemic.

Food supply chains

At the national level, various initiatives were introduced that targeted the functioning of food supply chains. In May 2020, the government of Bulgaria authorised a temporary market regulation (through 31 December 2020) mandating that most dairy products sold in retail chains with over ten shops be produced from 100% Bulgarian milk. In a similar vein, in June 2020, the Bulgarian government adopted an additional temporary market regulation mandating that retail chains allocate designated store shelf space to locally-produced foods, including fruits and vegetables, through 31 December 2020. The Bulgarian Government also allocated EUR 2.56 million (USD 2.92 million) under the COVID-19 de minimis scheme to assist the marketing of greenhouse vegetables. The government of the Czech Republic prepared emergency plans for possible food supply disruptions, and reported that the vast majority of food businesses also had emergency plans in place. One preventative measure taken by Czech businesses, for example, was the fragmentation of the operations of larger bakeries, such that they were less integrated and could continue production in the event that one site needed to shut down operations due to quarantine. In Portugal, the Ministry of Agriculture launched a digital marketplace (Prove Viseu Dão Lafões) in May 2020 for selected agro-food products (including wine, cheese, honey and jam) as part of the existing Elimenta Quem o Alimenta campaign that directly connects small producers to consumers.

Other countries instituted measures to ensure smooth supply chain functionality. Agricultural industry stakeholders in France held discussions with the government regarding measures to facilitate the continuation of the logistics chain for the transport of goods, with the government agreeing to grant regulatory derogations where needed to ensure the fluidity of transport operations, among other measures. In Luxembourg, the government instituted a “Food Policy Council” made up of stakeholders from the entire local/regional public and private food system to promote better co‑ordination of local actors in the food system, their networking and the sharing of information on the activities of each.

Domestic consumer policies

Several COVID-19 response policies attempted to assist consumers in need, although many of these measures also benefitted producers. In both the Czech Republic and Poland, food originally intended for the school scheme was diverted to food banks after schools were closed by lockdown, and Poland also implemented a provision to make produce that would have been provided to schools available to pupils attending remote lessons instead. Italy spent EUR 20 million (USD 23 million) purchasing olive oil and EUR 21 million (USD 24 million) on Protected Designation of Origin (PDO) cheese using part of the EUR 300 million (USD 342 million) set aside for a food aid emergency fund, which comes from the European Fund for Aid to the Most Deprived. The olive oil was to be bought through public tenders and distributed to those in need. Italy also allocated EUR 250 million (USD 285 million) for its Food Emergency Fund, designed to ensure the distribution of food staples to destitute people. In Poland, the government put in place provisions to set maximum wholesale prices or retail trade margins for goods and services important for the protection of human health or safety or in terms of household living costs. These included agricultural goods, and the Agricultural and Food Quality Inspectorate, among other government ministries, was tasked with ensuring that enterprises adhered to the measure. Portugal put in place a payment of 40% of the average market value obtained in the past five years to producers of selected fruits (raspberry, blackberry, blueberry and strawberry) who delivered their products to social solidarity non-profit associations or food banks in lieu of having the products go to waste.

Other measures were taken to improve consumer safety. In the Czech Republic, for example, new rules were adopted in April 2020 allowing farmers’ markets to resume, provided that more space was provided between stalls, hand sanitisers were available, and snacks for immediate consumption were prohibited.

Long-term recovery and transformation

Aside from the immediate crisis response and sector support measures, the European Union also proposed a broad, longer-term response and recovery effort, which will have implications for agricultural policy as well. This “Recovery Plan for Europe” is comprised of two major initiatives: “Next Generation EU”, and a reinforced EU budget (the Multiannual Financial Framework or MFF), both approved in December 2020 for 2021-27. Next Generation EU is a proposed temporary recovery instrument with a budget of EUR 750 billion (USD 855 billion), with three primary objectives, each with their own supporting initiatives:

• Supporting Member States in recovering, repairing and emerging stronger from the crisis, including:

  • The European Recovery and Resilience Facility [EUR 560 billion (USD 638 billion), of which EUR 310 billion (USD 353 billion) will be available for grants and EUR 250 billion (USD 285 billion) for loans]

  • REACT-EU recovery assistance for cohesion and EU territories [EUR 55 billion (USD 63 billion) of additional cohesion policy funding from 2020-22]

  • Supporting Member States in accelerating the green transition to a climate-neutral economy through the “Just Transition Fund” of up to EUR 40 billion (USD 46 billion)

  • Reinforcing the European Agricultural Fund for Rural Development (EAFRD) with and addition EUR 15 billion (USD 17 billion) in funding, to support rural areas in making structural changes in line with the European Green Deal, Biodiversity and Farm-to-Fork strategies

• Kick-starting the economy and help private investment:

  • An enhanced InvestEU Programme, [EUR 15.3 billion (USD 17.4 billion)], combined with a new Strategic Investment Facility to be equipped with EUR 15 billion (USD 17 billion)

  • A new solvency Support Instrument to support the equity of viable companies [EUR 31 billion (USD 35 billion)]

• Learning the lessons of the crisis and addressing Europe’s strategic challenges:

  • The establishment of EU4Health, a new health programme to strengthen health security and prepare for future health crises [EUR 9.4 billion (USD 10.7 billion)]

  • Reinforcing rescEU, the EU’s Civil Protection Mechanism, to better respond to large-scale emergencies [EUR 3.1 billion (USD 3.5 billion)]

  • Reinforcing other programmes that aim to make the European Union more resilient in addressing challenges brought along by the pandemic and its consequences, including Horizon Europe, the Neighbourhood, Development and International Cooperation Instrument (NDICI), Humanitarian Aid Instrument, Digital Europe Programme, Connecting Europe Facility, and the Instrument for Pre-Accession Assistance (IPA)

Individual countries also announced ambitious long-term sector recovery and transformation plans in response to the COVID-19 crisis. In September 2020, France announced an agriculture and forestry plank of the French recovery plan, allocating EUR 1.2 billion (USD 1.4 billion) to reinforce food sovereignty; accelerate the transition to agro-ecological practices while ensuring consumer access to healthy, sustainable and local food; and support agriculture and forestry’s adaptation to climate change. Specific measures under the plan include:

• A National Strategy on Vegetal Proteins to increase French production of protein-rich feeds (such as soybeans) and pulses by 40% over the next three years, with EUR 100 million (USD 114 million) in support, as a means to reduce import dependency for animal feed.

• EUR 346 million (USD 394 million) to accelerate the agro-ecological transition.

• EUR 200 million (USD 228 million) to improve access to healthy, sustainable and local food.

• EUR 300 million (USD 342 million) to adapt French agriculture and forestry to climate change, including by improving resilience to drought through investments in water resource management and more drought-tolerant crop varieties.

In the same vein, Luxembourg set up an “Innovation Hub” to facilitate the networking of different actors from different sectors to jointly develop innovative solutions to challenges related to agricultural policy, the need for a sustainable production system and the climate emergency. The Ministry of Agriculture of Luxembourg has also requested the building of a digital agricultural platform for information, communication and data exchange for farms, to provide more holistic agricultural advice in the face of a multitude of future challenges.

Trade policy developments in 2020-21

The European Union’s simple average MFN applied tariff rate for agricultural products was 11.4% in 2019, down from 12% in 2018 (WTO, 2020[28]). This applied tariff rate for agricultural products remains nearly three times the average applied tariff rate for non-agricultural products, calculated at 4.2%. This higher average for agriculture is partially a result of applied duties above 15% for a number of product categories, including for animal products, dairy, sugars and confectionary, and beverages and tobacco. EU import duties for durum wheat, common wheat, rye, maize and grain sorghum are based on the difference between European reference prices and world benchmark prices. Duties on rye, maize and grain sorghum were adjusted seven times in 202037 due to both changes in relative prices and exchange rate movements, rising to a high of EUR 10.40 (USD 11.85) per tonne from 5 May 2020 to 22 June 2020. From 27 August 2020, these duties were set at EUR 0 (USD 0) per tonne (EC, 2020[29]). Prior to the fluctuations in 2020, duties on these products had been set at EUR 0 (USD 0) per tonne since 3 March 2018 (EC, 2020[30]).

During the 2019 calendar year and 2018/19 marketing year, the European Union administered 124 import tariff rate quotas (TRQs). During that time period, nearly a third of the quotas (38) were filled at 80-100%, including those for fresh or frozen chicken cuts, tomatoes, almonds, grain sorghum, cane or beet sugar and pasta. However, nearly half of TRQs (60) had a fill rate of less than 10%, with 21% of quotas registering no import volumes (WTO, 2020[31]).

The price-based special safeguard system was operationalised in marketing year 2019/20 for certain frozen chicken carcasses, boneless chicken cuts, and some preparations of poultry meat. During the same period, the volume-based special safeguard action was not invoked. However, the system was made operational at the level of calculation of figures for the trigger volumes for some fruit and vegetable products, including tomatoes, cucumbers, artichokes, courgettes, oranges, clementines, mandarins, lemons, table grapes, apples, pears, apricots, cherries, peaches and plums (WTO, 2020[32]).

Duties on Indica rice imported from Cambodia and Myanmar were reduced from EUR 175 (USD 199) per tonne to EUR 150 (USD 171) per tonne on 1 January 2020, and then further reduced to EUR 125 (USD 142) per tonne on 1 January 2021. These tariffs were introduced following a 2018 safeguard investigation that determined that duty-free rice imports from the two nations under the European Union’s “Everything But Arms” tariff preference regime caused economic damage to the rice sector in Europe. These safeguard tariffs are scheduled to no longer be applied in 2022.

On 9 September 2020, EU tariffs on imports of certain husked rice were revised up to EUR 65 (USD 74) per tonne from EUR 42.50 (USD 48.4)  per tonne as a result of EU imports of rice greater than 650 000 tonnes from 1 September 2019 to 31 August 2020. This tariff revision was carried out in accordance with Commission Regulation No. 1549/2004 regarding the arrangements for importing rice. Prior to this revision, rice tariffs were last adjusted in March 2020, after imports over the previous six months fell below the triggering threshold, and duties were revised downward accordingly.

The European Union also undertook various additional trade policy initiatives in 2020. Related to trade policy enforcement, the European Commission appointed its first Chief Trade Enforcement Officer, (CTEO) created as a new Deputy-Director General within the Directorate-General for Trade on 24 July 2020. The CTEO will be tasked with ensuring that the provisions of EU trade agreements (including sustainable development and labour rights commitments) are implemented and enforced. Then on 22 September 2020, the Commission undertook a new responsible business conduct initiative towards more sustainable cocoa production, by establishing a new multi-stakeholder dialogue comprised of representatives from Côte d’Ivoire, Ghana, the European Parliament, EU Member States, cocoa growers and civil society. This dialogue aims to deliver concrete recommendations to advance sustainability across the cocoa supply chain through collective action and partnerships, and will be supported by technical assistance for cocoa-producing countries. Finally, on 13 October 2020, the Commission launched a new trade facilitation initiative in the form of a new Access2Markets portal designed to support trade by small businesses either exporting from, or importing into, the European Union (EC, 2020[33]). The portal provides product-by-product information on tariffs & taxes, customs procedures, rules of origin, trade barriers, product requirements and statistics for all EU countries and for more than 120 export markets around the world.

Trade Agreements

The European Union released its fourth annual report on the implementation of EU Free Trade Agreements on 12 November 2020 (EC, 2020[34]). The report noted that, in 2019, EU agro-food exports and imports under FTAs grew 8.7% and 8.3%, respectively, rising in value and growing faster than overall agro-food trade. In fact, EU agro-food trade with FTA partner countries as a share of total agro-food trade has been rising over the past ten years, reaching 40% of total agro-food imports, and 30% of total EU agro-food exports in 2019. The report also offered examples of how trade agreements have helped to provide a forum to address potential or existing trade barriers due to sanitary and phytosanitary measures. The European Union currently has 45 applied trade agreements in force, and negotiations are underway with additional trading partners (EC, 2020[35]). In July 2020, the European Commission also published Sustainability Impact Assessments for two additional agreements that have yet to be finalised – the EU‑Mercosur Association Agreement and the EU-Indonesia Agreement. Both assessments include sectoral analyses and recommendations for agriculture.

On 31 January 2020, the United Kingdom left the EU Single Market and Customs Union, ending the free movement of people, goods and services with the European Union. The rules governing trade and movement between the two are laid down in the draft EU-UK Trade and Cooperation Agreement, which was agreed on 24 December 2020 and approved by the Parliament and Council on 30 December 2020. The Agreement has three pillars: a free trade agreement; a partnership framework for law enforcement and judicial co-operation; and a horizontal governance agreement. Terms of the free trade agreement include duty and quota free imports on all goods that comply with rules of origin provisions (EC, 2020[36]).

Effective on 1 January 2021, EU trade preferences for the Western Balkans38 were extended for five years (through 31 December 2025) (EC, 2020[37]). These preferences are in the form of Autonomous Trade Measures (ATMs), including the suspension of customs duties otherwise applied to fruit and vegetables exported to the European Union and an additional wine quota. These preferences have been in force since 2000.

The European Union and China signed the Agreement on Cooperation on, and Protection of, Geographical Indications (GIs) on 14 September 2020. The agreement, which was concluded in November 2019, commits both parties to protecting 100 of the other’s GI products upon entry into force, with lists of an additional 175 GIs from both parties to be registered within four years. European products gaining protection under the agreement include Cava, Gorgonzola, Irish cream and Prosciutto di Parma, while the list of Chinese products includes Anhua Dark Tea, Cangshan Garlic, Xixia Mushroom and Wuchang Rice (EC, 2020[38]). The agreement entered into force on 1 March 2021.

The EU-Viet Nam Free Trade Agreement entered into force on 1 August 2020. Under the terms of the agreement, the European Union will progressively phase out duties for most products over a period of seven years, while Viet Nam will reduce tariffs on EU goods over ten years. The European Union established duty-free tariff rate quotas for a variety of Vietnamese agricultural imports under the agreement: 30 000 tonnes of milled rice; 20 000 tonnes of husked rice and 30 000 tonnes of fragrant rice, as well as quotas for sweet corn, garlic, mushrooms, sugar and manioc starch. The tariff on broken rice will be phased out over five years, starting with a 50% cut. Viet Nam will progressively eliminate duties for EU products –beef and olive oil will be liberalised over three years; dairy, fruit and vegetables will be liberalised over five years; frozen pork meat, food preparations and wine will be liberalised over seven years; and chicken and beer will be liberalised after ten years. At the end of the implementation period, an average tariff of 1.1% will apply to agricultural goods originating in Viet Nam and 2.1% to processed agricultural products while the average tariff for EU agricultural exports will be 2.6%. Viet Nam will also recognise and protect 169 EU GIs, while 39 Vietnamese GIs will be recognised and protected in the European Union (EC, 2019[39]).

On 28 April 2020, the European Union and Mexico finished negotiations on a new EU-Mexico trade agreement, which will supersede the EU-Mexico Global Agreement that has been in force since 2000. The new agreement will fully liberalise more than 85% of the agricultural tariff lines that were left out of the original accord. For the remaining lines (with the exception of sugars and sweeteners), market access was negotiated in the form of TRQs. The European Union established TRQs for imports of various Mexican products, including beef, chicken breast, egg yolks, and frozen ham. In turn, Mexico established TRQs for imports of certain European products, including mature cheeses, fresh cheeses, skimmed milk powder, pork and poultry. In addition to improved market access on agricultural products, the agreement promotes co-operation on issues related to animal welfare and antimicrobial resistance (EC, 2018[40]). The agreement is awaiting signature and conclusion from the European Council and Parliament.

Disputes

On 17 February 2020, the European Union requested that a panel be established in the dispute over anti-dumping duties imposed by Colombia on imports of certain preserved or frozen potatoes originating in Belgium, the Netherlands and Germany. Subsequently, a panel was composed to consider the dispute on 24 August 2020 (WTO, 2020[41]).

Trade policy responses to the COVID-19 pandemic

The European Union put in place some trade measures in response to COVID-19, but most were unrelated to agriculture.39 One measure that did impact agricultural supply chains was the designation of Green Lanes to ensure that trans-European trade in goods under a functioning single market could continue even in the presence of internal border controls erected to protect public health (EC, 2020[42]). These Green Lanes, based on designated key border crossing-points, had border crossing checks not exceeding 15 minutes. Passage was granted for all goods, including agro-food products. Provisions were also made to accept e-certificates or copies of original documents to facilitate trade, through 1 February 2021.40 For example, authorities in Germany reported accepting these e-certificates.

Contextual information

The European Union is the largest economic region covered in this report, accounting for 21% of the economic activity of all countries covered herein. While the contribution of agriculture to both GDP and employment has declined since 2000, the share of agriculture in the region’s exports increased (Table 11.6). More than 40% of the region’s landmass is dedicated to agriculture, accounting for nearly 60% of arable land use. Crops (including cereals, oilseeds, fresh fruit and vegetables, and plants and flowers) predominate in agricultural output, accounting for 57% of total production. Livestock products – including dairy, beef and veal, pig meat, sheep meat, poultry and eggs – account for the remainder.

Table 11.6. European Union: Contextual indicators

	European Union		International comparison
	2000*	2019*	2000*	2019*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	9 928	24 082	24.9%	21.1%
Population (million)	378	513	8.8%	9.9%
Land area (thousand km2)	3 127	4 242	3.7%	5.0%
Agricultural area (AA) (thousand ha)	140 572	181 102	4.6%	5.9%
			All countries1
Population density (inhabitants/km2)	114	116	53	63
GDP per capita (USD in PPPs)	26 288	46 776	9 265	21 975
Trade as % of GDP	11	12	12.3	14.6
Agriculture in the economy			All countries1
Agriculture in GDP (%)	1.8	1.4	2.9	3.5
Agriculture share in employment (%)	4.3	3.9	-	-
Agro-food exports (% of total exports)	6.0	7.2	6.2	7.3
Agro-food imports (% of total imports)	5.8	6.3	5.5	6.7
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	57	57	-	-
Livestock in total agricultural production (%)	43	43	-	-
Share of arable land in AA (%)	53	58	32	34

Notes: *or closest available year. EU15 for 2000 and EU28 for the most recent year.

1. Average of all countries covered in this report.

Sources: OECD statistical databases; UN Comtrade; World Bank, WDI and national data.

GDP growth in the region fell 6.2% in 2020, reflecting the fallout of the COVID-19 emergency. Prior to 2020, GDP growth had been positive since 2013 (Figure 11.5). Despite the economic contraction, the unemployment rate increased only marginally to 7.1% in 2020 – likely due to government rescue packages intended to blunt the economic impact of the crisis. In fact, in spite of the crisis, the unemployment rate in 2020 was reported as more than three points lower than the 10.8% reported in 2013. Inflation declined in 2020 to 0.7%, remaining under 2% since 2013. While these indicators reflect the EU aggregate, economic conditions vary widely among the different Member States.

The European Union has been the world’s largest agro-food exporter since 2013, and remains one of the largest importers as well (Figure 11.6). The region is a net food exporter, with agro-food products accounting for 7.2% of all EU exports and 6.3% of all EU imports. The region’s agro-food exports are overwhelmingly comprised of processed goods for final consumption (63%), while imports are more evenly distributed among the four categories, with primary goods for industry accounting for the largest share of imports (29%).

Figure 11.5. European Union: Main economic indicators, 2000 to 2020

Note: EU28. Information regarding 2020 refers to European Union – 27 countries, excluding the United Kingdom

Sources: OECD statistical databases; World Bank, WDI; ILO estimates and projections and Eurostat.

Figure 11.6. European Union: Agro-food trade

Note: Numbers may not add up to 100 due to rounding. Extra-EU trade: EU15 for 2000-2003; EU25 for 2004-06; EU27 for 2007-13 and EU28 from 2014.

Source: UN Comtrade Database.

At 0.5%, agricultural output growth in the European Union over the period 2007‑16 was far below the world average of 2.2% (Figure 11.7). Total Factor Productivity (TFP) grew over the period by 1.1% on average, driven by a reduction in primary factor inputs including labour, land, livestock and machinery.

Rising TFP has been achieved in the sector along with a reduction of certain environmental pressures, as illustrated through various environmental indicators (Table 11.7). From 2000 to 2019, the region’s nitrogen balance fell by nearly one quarter, the phosphorous balance declined by more than 70%, and the share of agriculture in water abstractions fell by 36%. At the same time, although the European Union has achieved reductions in these indicators, some still remain high by comparison. For example, the region’s nitrogen balance is nearly double the OECD average. And while the region achieved improvements in most environmental indicators, agriculture’s contribution to greenhouse gas (GHG) emissions worsened over the period, rising by 14% from 2000 to 2019.

Figure 11.7. European Union: Composition of agricultural output growth, 2007-16

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

Source: USDA Economic Research Service Agricultural Productivity database.

Table 11.7. European Union: Productivity and environmental indicators

	European Union		International comparison
	1991-2000	2007-2016	1991-2000	2007-2016
			World
TFP annual growth rate (%)	0.8%	1.1%	1.6%	1.6%
			OECD average
Environmental indicators	2000*	2019*	2000*	2019*
Nitrogen balance, kg/ha	71.7	54.2	33.2	28.9
Phosphorus balance, kg/ha	7.5	2.0	3.4	2.6
Agriculture share of total energy use (%)	2.0	2.5	1.7	2.0
Agriculture share of GHG emissions (%)	9.0	10.3	8.4	9.5
Share of irrigated land in AA (%)	..	..	-	-
Share of agriculture in water abstractions (%)	41.3	26.5	46.0	43.4
Water stress indicator	..	..	9.3	8.5

Note: * or closest available year. TFP annual growth rate: EU28. Environmental indicators: EU15 for 2000 and EU28 for the most recent year.

Sources: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.

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[4] European Parliament (2021), Financing of the CAP, European Parliament, https://www.europarl.europa.eu/factsheets/en/sheet/106/financing-of-the-cap.

[5] European Parliament (2021), The Common Agricultural Policy - Instruments and Reforms, https://www.europarl.europa.eu/factsheets/en/sheet/107/the-common-agricultural-policy-instruments-and-reforms.

[2] European Parliament (2021), The Common Agricultural Policy (CAP) and the Treaty, European Parliament, https://www.europarl.europa.eu/factsheets/en/sheet/103/the-common-agricultural-policy-cap-and-the-treaty.

[3] Grant, W. (2020), “The Common Agricultural Policy: An Overview”, EuropeNow 37, https://www.europenowjournal.org/2020/11/09/the-common-agricultural-policy-an-overview/.

[8] OECD (2018), Agricultural Policy Monitoring and Evaluation 2018, OECD Publishing, Paris, https://dx.doi.org/10.1787/agr_pol-2018-en.

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

[1] OECD (2011), Evaluation of Agricultural Policy Reforms in the European Union, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264112124-en.

[41] WTO (2020), DS591: Colombia - Anti-Dumping Duties on Frozen Fries from Belgium, Germany and the Netherlands, World Trade Organization, https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds591_e.htm.

[28] WTO (2020), European Union Tariff Profile, World Trade Organization, https://www.wto.org/english/res_e/statis_e/daily_update_e/tariff_profiles/E28_E.pdf.

[23] WTO (2020), Notification G/AG/GEN/159/Add.3 Updated Ad Hoc Report on Covid-19 Measures Taken by the EU (Including by Its Member States) in the Agricultural Sector, World Trade Organization, Geneva, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/AG/GEN159A3.pdf&Open=True.

[31] WTO (2020), Notification G/AG/N/EU/57/Rev.1 on European Union Imports under Tariff Quotas, World Trade Organization, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/AG/NEU57R1.pdf.

[32] WTO (2020), Notification G/AG/N/EU/62 on European Union Use of Special Safeguard, World Trade Organization, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/AG/NEU62.pdf&Open=True.

Notes

← 1.  For 2020, estimates include the United Kingdom. Although the United Kingdom withdrew from the European Union on 31 January 2020, the UK budget for agricultural expenditures in 2020 continued to be sourced largely from the European Commission, and the United Kingdom remained part of the Common Market in 2020.

← 2.  Also referred to as the June 2003 reform or the 2003 “Luxembourg” reform.

← 3.  Co-financing rates vary by measure and by Member State.

← 4.  Member States commonly have one national RDP, while some countries have regional RDPs. Belgium and Finland each have 2 RDPs, France has 30, Germany 15, Italy 33, Portugal 3, Spain 19 and the United Kingdom 4.

← 5.  Member States with average direct payment per hectare below 90% of the EU average can transfer up to 25% of rural development funds to direct payments.

← 6.  The following Member States have opted for transfers of funds from Pillar 1 to Pillar 2 throughout the CAP 2014-20 exercise: Belgium, the Czech Republic, Denmark, Estonia, France, Germany, Greece, Latvia, Lithuania, the Netherlands, Romania and the United Kingdom. In turn, Croatia, Malta, Hungary, Poland and the Slovak Republic chose to transfer funds from Pillar 2 to Pillar 1.

← 7.  The SAPS applies to all Member States joining since 2004 except Slovenia, Malta and Croatia, which implement the BPS with the EU15.

← 8.  The BPS is “regionalised” in five Member States – Greece (3 regions), Spain (50 regions), France (2 regions), Finland (2 regions) and the United Kingdom (separate regions within Scotland and England) – meaning that a different payment rate per hectare applies depending on the region. In Germany, regionalisation by Länder ceased to apply in 2019.

← 9.  Member States can choose their preferred method to calculate their SFS payments: lump-sum payment (an equal amount to all farmers in the scheme); payment due each year (individual farmers receive a single payment equivalent to what would have been due under other payment schemes); and payment due in 2015 (individual farmers receive a single payment that depends on the amount that would have been due in 2015). Member States that opt for the “payment due each year” method are not subject to the 10% maximum, provided they do not round up lower payment amounts to EUR 500 (USD 570). For more information, see (EC, 2017[44]).

← 10.  The criteria are low temperature, dryness, excess soil moisture, limited soil drainage, unfavourable texture and stoniness, shallow rooting depth, poor chemical properties, and slope.

← 11.  Payments are granted on a maximum number of hectares, which varies by country or region: Belgium (Wallonia), 30 ha; Bulgaria, 30 ha; Croatia, 20 ha; France, 52 ha; Germany, 46 ha with a higher per hectare payment rate for the first 30 ha; Lithuania, 30 ha; Poland, from 3 to 30 ha (with no payment below 3 ha); Portugal, 5 ha as from claim year 2017; Romania, 30 ha with a smaller per hectare payment rate for the first 5 ha; and the United Kingdom (Wales), 54 ha.

← 12.  Belgium (Wallonia), Croatia, France, Germany, Portugal and Romania.

← 13.  The Czech Republic, Denmark, Cyprus, Estonia, Finland, Latvia, Luxemburg, Malta, the Netherlands, Slovenia, Slovakia, Spain, Sweden and the United Kingdom (England).

← 14.  If the average market price in an EU country or in a region of an EU country drops below EUR 2 224 (USD 2 534) per tonne over a representative period, the European Commission may use public intervention to support beef prices (EC, n.d.[43]).

← 15.  In addition to the EAFRD, these include the European Regional Development Fund (ERDF), Cohesion Fund, European Social Fund (ESF), and the European Maritime and Fisheries Fund (EMFF).

← 16.  In 2020, an additional measure was added, M21: Exceptional temporary relief to farmers and SMEs active in processing, marketing and/or development of agricultural products particularly affected by the COVID-19 crisis.

← 17.  While the United Kingdom was included in PSE estimations for 2020, this section discusses only the EU budget for 2020. Note that for PSE purposes, the Pillar 1 budget for budget year 2021 is counted in 2020.

← 18.  These are quantified EU level targets on use and risk of pesticides, sales of antimicrobials, nutrient loss, area under organic farming, high diversity landscape features and access to fast broadband internet.

← 19.  For fresh deciduous fruits, aid was raised to EUR 925 (USD 1 054) per ha for farms up to 30 ha and to EUR 617 (USD 703) per ha for larger farms of apples and pears, while for table grapes, the rate was set at EUR 448 (USD 511) per ha for farms up to 30 ha, and at EUR 354 (USD 403) per ha for larger farms.

← 20.  Funds were also spent on green harvesting measures and crisis distillation of wine by-products. These measures are covered separately in the section on COVID-19 response.

← 21.  Commission Implementing Decision (EU) 2020/467.

← 22.  Available at: https://www.tmdn.org/giview/.

← 23.  Indeed, the Agriculture and Fisheries Council’s Conclusions of 19 October 2020 reflected the overall support of Agricultural Ministers for the F2F Strategy, and their endorsement of its goal of developing a sustainable European food system while also stressing the importance of taking national specificities and different starting points into account, in particular for the quantitative targets set in the strategy.

← 24.  The strategy mandates that nitrogen fertiliser be applied in a form that is coated with a urease inhibitor to reduce nitrous oxide losses – so-called “protected” urea.

← 25.  See https://www.efsa.europa.eu/en/news/use-or-best-new-tool-support-food-operators.

← 26.  Available (in Spanish) at https://www.menosdesperdicio.es.

← 27.  Three measures are foreseen to achieve a reduction in calf transports, by fostering growth in regional sales: a new quality standard to be included in the existing AMA quality label, including promotion and marketing strategies; extension of support for quality beef to include calf fattening; and extension of the support programme for animal welfare in stables to include calf fattening

← 28.  Previously there had not been a national animal health service – only services available at the Länder level.

← 29.  Through conditioning CAP funding for investments in livestock buildings on meeting animal welfare standards, and ensuring that state funding henceforth goes toward buildings that promote the natural expression of livestock behaviour.

← 30.  By increasing loading checks by officials and private veterinarians, strengthening sanctions for non-compliance with EU regulations, and imposing a register and temperature recording conditions for shipping.

← 31.  Commission Implementing Regulation (EU) 2020/532.

← 32.  For example, the milk sector would be allowed to collectively plan milk production and the flower and potatoes sector would be allowed to withdraw products from the market.

← 33.  Specifically, 100 000 MT was offered for cheese, while only 43 669 MT was contracted; 140 000 MT was offered for butter but only 65 004 MT was contracted; 90 000 MT was offered for SMP but only 18 300 MT was contracted; 140 MT was offered for sheep meat but only 15 MT was contracted; and 2 215 MT was offered for beef, but only 1 959 MT was contracted.

← 34.  Provisions from the last package are applicable through 15 October 2021 and retroactive from 16 October 2020.

← 35.  M21: Exceptional temporary relief to farmers and SMEs active in processing, marketing and/or development of agricultural products particularly affected by the COVID-19 crisis (art 39b).

← 36.  This can be raised to EUR 25 000 (USD 28 489) in some specific cases.

← 37.  See EU 2020/573 of 24 April 2020, EU 2020/615 of 4 May 2020, EU 2020/864 of 22 June 2020, EU 2020/959 of 2 July 2020, EU 2020/1192 of 11 August 2020, EU 2020/1218 of 25 August 2020.

← 38.  These preferences apply to products originating in Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia.

← 39.  For example, exports of personal protective equipment such as masks, gloves and face shields were temporarily subject to an export authorisation beginning on 15 March 2020.

← 40.  Implementing Regulation (EU) 2020/466.