EU Multiannual Budget - Financial Framework for 2014-2020: Common Agriculture Policy and Common Fishery Policy

On June 29, 2011 The European Commission published the proposal for the EU budget for the next financial framework (2014-2020).

Elements of the EU multiannual budget that falls under the competence of Ministry of Agriculture of Latvia are: common agriculture policy, direct payments, market mechanisms, rural development and are mainly encompassed in the Heading 2 (management of natural resources) of the EU budget.

The funding of the Common Agricultural Policy, direct payments, common market organization and rural development measures for the period 2014-2020 is planned to reach about 36.2 % of the total EU budget.

The Commission proposes to allocate €281.8 billion for Pillar I of the Common Agricultural Policy and €89.9 billion for rural development for the 2014-2020 period. This funding will be complemented by a further €15.2 billion in other Headings:

• €4.5 billion for research and innovation on food security, the bio-economy and sustainable agriculture (in the Common strategic framework for research and innovation);
• €2.2 billion for food safety in Heading 3;
• €2.5 billion for food support for most deprived persons in Heading 1;
• €3.5 billion in a new reserve for crises in the agriculture sector (outside the multiannual finance perspective);
• Up to €2.5 billion in the European Globalisation Fund (outside the multiannual finance perspective);

Common Agriculture Policy (CAP) within the proposed EU Budget for the Financial Framework (2014-2020)

The Main changes proposed by the European Commission for the Multi-Annual Financial Framework for 2014-2020 with regard to the CAP are as follows:

• Convergence of direct payments;

• Greening of direct payments;

• Capping the level of direct payments;

• Inclusion of the European Agricultural Fund for Rural Development (EAFRD) in the common strategic framework for all structural funds;

• Restructuring of the market measures. The Commission proposes not only to restructure the current market instruments, but also to create 2 new instruments outside the multiannual financial framework:

o an emergency mechanism to react to crisis situations (for instance a food safety problem)
o a new scope for the European Globalisation Fund, including transitional support for farmers to ensure the adaptation to the new market situations  as a result of the effects of globalization.

Common Fisheries Policy (CFP) within the proposed EU Budget for the Financial Framework (2014-2020)

The proposed funding by the Commission from the Heading 2 (management of natural resources) of the EU budget to the Common Fishery Policy is EUR 6,685 billion.

The commission proposes to establish European Fisheries Fund that will be composed of 4 pillars:

• Reasonable, green fishing (shared management);

• Reasonable, green aquaculture (shared management)

• Sustainable and inclusive territorial development (shared management)

• Integrated maritime policy (direct centralised management ).

Latvia’s position on the most important EU budgetary matters with regard to CAP and CFP

The Convergence of direct payments

Latvia indicates that the Commission’s proposal for the redistribution and adjustment of direct payments is not acceptable to Latvia, due to several reasons:

• the proposal does not ensure fair and equitable support for farmers in form of direct payments among EU Member States, which will negatively affect the competiveness among farmers of certain EU member states;

• from preliminary calculations made by the Republic of Latvia according to the method suggested by the Commission, it is clear that Latvia’s farmers would receive only EUR ~49 in addition to the existing direct payments, or EUR 144 in total per ha in 2020, which means that during the period 2014-2020 Latvia will come closer to the average EU level of direct payments only by 20%.

• The proposal does not solve the inequality among Member states, because there will still be countries that receive unjustifiably low direct payments. For instance, according to the Commission’s proposal in 2020 Latvia will receive only 54% of the EU average direct payment level. 

• The Commission’s proposed principles for fair and equitable distribution of funding and adjustment of direct payments are contrary to the aspects of objectivity. The proposal of Commission does not change the system of direct payments and does not solve the issue of unfairness and inequality, since it means that after 2013 the EU support will still be distributed according to historical and out-dated criteria that does not characterize the actual situation and thus there will still be Member States that receive inadequately low support.

• Taking into account that since 2004 Latvian farmers receive the lowest level of direct payments in EU, the Commission’s proposal to progressively level the direct payments is unacceptable. The new system of direct payments must come into force in 2014 without transition periods.

• The proposal contradicts the the conclusions made at European Council in 2008 that stated necessity to ensure fair competition conditions for all EU farmers and sustainable agriculture in the whole of the EU, as well as the Communication of the European Commission “The CAP towards 2020” (Nov. 18, 2010) that expressed the necessity of the CAP reform in order to achieve a fair and equitable support for all EU member states and to reconsider the distribution mechanisms of direct payments.

Latvia continues to emphasize that future direct payment system must be based on objective criteria that characterizes the factual situation, namely, agricultural area utilised for farming, GDP per capita, costs of preservation of the agricultural area (labor costs, costs of agricultural machinery, amortization, fuel costs).

In order to ensure fairness and objectivity of direct payments for all farmers of the EU, Latvia proposes to introduce minimum (80% of EU average) and maximum (120%) levels of support that a Member State might receive as an income support.

According to the Commission’s proposal for greening of direct payments, Latvia does not support the proposal to make 30 % of direct support conditional on "greening".

Restructuring of market mechanisms

Latvia considers that the current proposal with regard to the market management instruments is weak and unclear.

Latvia has already emphasized before that, in order to have more effective risk management and “safety net” instruments for the prevention of extraordinary situations and the absorption and amortization of chock caused by market fluctuation, the current market instruments must be reconsidered.

Rural development

Latvia considers that the Commission’s proposal regarding rural development is too general. Latvia calls for explanations regarding the proposal in compliance with the Commission’s expressed view in its Communication “The CAP towards 2020” (Nov. 18, 2010) that with regard to the support distribution for rural development among EU member states, the option to  use objective criteria must be considered.

Latvia considers that with regard to the calculations of support distribution for rural development, criteria like agricultural area utilised for farming, gross value added, NATURA 2000 areas, forest areas and GDP per capita should be used. At the same time it is important for Latvia to preserve the Less Favoured Areas payments also in future, in order to support farmers and producers of agricultural products, who are dependent on relatively worse agro-climatic conditions.

Common Fisheries Policy

Latvia welcomes the view of the Commission that the administrative burden must be reduced and the use of financial instruments must be simplified. At the same time, during the process of simplification, the interests of fisheries and maritime must be taken into account.

Latvia considers that the aid measures among all areas of fisheries- fisheries, maritime affairs and processing of fish – must be balanced.  Aid must be foreseen to those regions, where the fisheries have a substantial significance.

Generally Latvia could support the structure of future European Fisheries Fund proposed by the Commission, however further discussions regarding each of the 4 pillars that are mentioned in the Communication of the European Commission are needed.

Recent activities

On June 14, 2011 the Parliament of the Republic of Latvia (Saeima) adopted a communication and informed the European Parliament and the Commission about Latvia’s position with regard to the Commission’s proposal for direct payments (June 29, 2011) within the framework of the EU budget for the next financial framework (2014-2020).