A summary of the Common Agricultural Policy
The Common Agricultural Policy (CAP) functions by implementing of the so-called first and second pillar measures. The first CAP pillar deals with issues of regulation of the common market of agricultural and food products and ensuring income of the agricultural producers (direct payments), while the second pillar deals with structural issues in agriculture and rural areas (rural development measures). In addition to the first and second pillars, the CAP in a wider sense also encompasses other segments of the policy necessary for sustainable agricultural production and functioning of the common market – food safety, environmental protection, nature protection, animal welfare, product quality, product promotion, climate change, state aid rules and other issues. The components of the CAP and the framework structure of the budget are shown in Figure 1.
In its fifty years of existence, the CAP went through numerous transformations and in respect of the volume of the acquis and EU budget disbursements (42% in 2007–2013) it may be said that it ranks among the most complex EU common policies. Expenses for implementation of the CAP measures are planned for seven-year periods. Year 2013 is the final year of the current financial period (2007–2013). The new financial period starts in 2014 and it shall also bring a reform of the existing CAP.
Implementation of the CAP is financed by two agricultural funds – the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD).
In the first pillar of the CAP, control of the EU market encompasses mechanisms for regulation of the internal market which have very limited effect today within the meaning of the type and volume of products affected by those trading system mechanisms. Functioning of these mechanisms is facilitated by EAGF financing. Expenses for implementation of the market regulation mechanisms comprise approximately 10% of the total costs of the CAP in 2007–2013. In terms of disbursements from the EU budget, the most significant agricultural and food product market regulation mechanisms include aid in wine, fruit and vegetable sectors, export subsidies and intervention buying and storage. Apart from the mechanisms which have a direct effect on EU budget expenses, other important market regulation mechanisms are in application as well – production restrictions (milk, sugar, vineyards), common customs tariff, market standards etc. Expenses for implementation of the market regulation mechanisms comprise approximately 10% of the total planned costs of the CAP in 2007–2013.
In case of the direct payments within the first pillar of the CAP, this is a compensation for the specific and unfavourable position of farmers in relation to producers in other sectors of economy. Direct payments are awarded at the annual level and today they are mostly in the form of payments unrelated to production, i.e. they are not related to the type and volume of agricultural production. Since their introduction in 1992 until today, the direct payments went through numerous transformations – form payments coupled with the type and volume of production, e.g. payments per hectare of cereal, and payments per animal, to those decoupled from the type an volume of production – the so-called “rights to payment” using a historical, regional or hybrid model. The expenses for these measures comprise as much as 70% of the total planned CAP expenses in 2007–2013. Direct payments are financed using the EAGF. All users of the direct payments are required to meet multiple compliance conditions, i.e. application of standards in protection of the environment and the nature, health of humans, animals and plants, animal welfare and occupational safety.
The second pillar of the agricultural policy deals with issues of rural areas (public – physical and social infrastructure, diversification of activities), structural issues in agriculture (competitiveness – knowledge, age structure, modernisation, association, quality, research and development) and resource usage issues (soil, water, air, biodiversity, renewable energy sources). The objectives of the second pillar of the CAP are competitive agricultural production, sustainable management of resources and balanced territorial development. The rural development policy in the Member States is implemented through implementation of the Rural Development Programme whereby different measures are selected from a wide spectrum of aid:
- grants for implementation of capital projects (normally up to 50% of the value of the eligible costs of the project) – co-financing of investments in long-term assets (buildings, equipment, infrastructure) of the economic and public sector – regional and local self-government, local action groups,
- grants for implementation of current projects – co-financing of current operating expenditure for the economic sector, for the local action groups and implementation of research projects,
- compensations, at the annual level, per hectare of agricultural land or per animal. The expenses for this measure comprise approximately 20% of the total planned CAP expenses in 2007–2013 and they are financed using the EAFRD. Application of the Common Agricultural Policy in Croatia. Following Croatia’s accession to the EU, all European Regulations became directly applicable, including those defining implementation of the CAP, with the restrictions arising from the negotiation results. National legislation (acts, regulations, ordinances etc.) facilitate unhindered implementation of the EU legislation within the meaning of defining the competent and implementing authorities, inspection procedures, penalty provisions and choice of mode of measures / rules where the EU legislation permits.
- Croatia’s accession to the EU means a great change for domestic production and domestic market of agricultural and food products. We have become a part of the single EU market without customs barriers between Member States’ territories, free flow of goods and services and the common trading regime entailing the customs union and single trade arrangements with third countries. As of 1 July 2013, the remaining customs protection of agricultural and food products was repealed regarding imports of goods from the EU, and the CEFTA agreement and other trade agreements signed by Croatia no longer apply.
As regards application of the first and second CAP pillar mechanisms after 1 July 2013 in Croatia, the situation is as follows:
- the market regulation mechanisms apply according to the applicable EU legislation and after accreditation of the payment agency for individual measures
- the direct payments apply according to the applicable EU legislation for production year 2013. Those are:
- single payment scheme (SPS) in the form of the “right to payment” according to the regional payment model (payments per hectare of production area with single amounts for the entire territory of the Republic of Croatia, different amounts for grassland areas and all other arable agricultural land) and a form of the “right to payment” from the so-called national reserve for sensitive sectors (milk, cattle fattening, sheep, goats, tobacco),
- production coupled payments in milking cows, sheep and goats per animal,
- specific payments – cows undergoing milk yield control,
- direct payments for the so-called exceptionally sensitive sectors (dairy cows, sows, sugar beet, olive oil and tobacco) categorised as state aid, i.e. aid financed solely using the State budged in the transitional period of three years
- rural development measures in 2013 are implemented under the IPARD programme
Reform of the Common Agricultural Policy in the new programme period (2014–2020)
In accordance with the objectives of the Europe 2020 strategy, the EU has established three main objectives of the new, reformed CAP –sustainable production of food, sustainable management of natural resources and amelioration of the climate change and balanced territorial development. Novelties shall be reflected in 4 new “umbrella” regulations – a regulation on direct payments, a regulation on common regulation of agricultural and food products market, a regulation on rural development and a horizontal regulation on financing, management and monitoring of implementation of the CAP for financing of measures in the new programming period of 2014–2020 which shall still be based on use of assets of the two agricultural funds, the EAGF and the EAFRD. Since enactment of regulations is running late, it is likely that application of the reformed CAP measures shall be delayed until 2015.
The proposed reform changes concern:
- In direct payments – Harmonisation of the amount of direct payments per hectare among the Member States and within the Member States; Voluntary reduction and restriction of payments for large farms; Greater flexibility between the EAGF and EAFRD funds – transfer of assets from one fund to the other in both directions; New distribution of the “right to payments” among farms after expiry of the current programme period; Introduction of new components of the direct payments (decoupled from the type and volume of production), and those mandatory (the “basic” component in the form of classic “rights to payments” per hectare and the “green” component in the form of an addition to the “basic” component conditioned by application of additional agronomy practices which preserve the environment and biodiversity); Introduction of new voluntary components of the direct payments limited by the amount of the assets in relation to the total envelope for direct payments (the “redistributive” payments, payments in the areas of high natural limitations, payments for young farmers, payment for small farms, production-coupled payments)
- In market regulation mechanisms – Simplifications of procedures for application of market regulation mechanisms; Extension of the existing system of sugar production quotas until the market year of 2016/2017; Abandoning the existing system of limitation of expansion of vineyard surfaces after 2015; Establishment of a new system of authorisation of planting and opportunities to increase the vineyard areas by 1% per year
- In rural development measures – Common rules for use of assets from the EU structural funds – the Cohesion Fund, the European Regional Development Fund, the European Social Fund, the EAFRD and the European Maritime and Fisheries Fund (so-called the “CSF” funds); Six priority areas of action (Incentives to knowledge transfers and innovations in agriculture, forestry and rural areas; Increasing competitiveness of agriculture and sustainability of farms; Promotion of organisation of food chain and risk management in agriculture; Preservation and improvement of ecosystems dependent on farming and forestry; Promotion of effective use of resources and transition to low-carbon economy tolerant to the climate change in agriculture, forestry and the food sector; Incentives to social inclusion, reduction of poverty and economic development of rural areas); New rural development measures and changes to the financing conditions.
Elements of the Common Agricultural Policy
The Common Agricultural Policy encompasses nearly all aspects of agricultural production, from the measures supporting development, improvement of production and processing conditions, assurance of high quality and safety of products, their sales and marketing, to ensuring better working and living conditions in rural areas while preserving the environment and caring about the climate change. This text presents only a fraction of elements of the agricultural policy.
Aid in agriculture
With the annual budget of approximately 59 billion EUR, the CAP bolsters competitiveness and sustainability of agriculture in Europe by financing a range of support measures through the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD). The implementing authority in Croatia is the Paying Agency for Agriculture, Fisheries and Rural Development.
The first pillar of support encompasses direct payments and market measures. Through the direct payments, farmers are offered a great support in stabilisation of their income while meeting safety standards and standards concerning the environmental protection and animal welfare. The market measures are used to define product standards (e.g. milk, meat, honey) and increase availability of milk, fruits and vegetables to the youngest generations through school programmes (school milk, school fruits and vegetables). The national beekeeping programmes are implemented, among other things, within the market measures.
The second pillar of aid consists of rural development programmes. A detailed review of the Rural Development Programme of the Republic of Croatia for 2014–2020 is available here.
Quality is an important topic for each farmer and each consumer – for food produced in compliance with the basic standards and within the framework of quality schemes characteristic for the Europe. EU legislation prescribes strict conditions guaranteeing high standards of all European products. Besides, the quality schemes point out food produced following strict specifications.
Agricultural products produced in the European Union reflect rich diversity of various traditions and regions of Europe. In order to protect and promote the products, the European quality schemes have been defined: Protected Designation of Origin (PDO), Protected Geographical Indication (PGI) and Traditional Speciality Guaranteed (TSG). All the products may be searched in the Database of Origin and Registration (DOOR).
The European Commission aims to ensure a high level of food safety and health of plants and animals throughout the European Union area using a series of interlinked “field to table” measures while ensuring an effective internal market. Implementation of this approach includes various activities, specifically:
- Providing an effective system of control and assessment of compliance with EU standards applicable to food safety and quality, animal health and welfare, animal fodder and health of plants within the EU and in third countries if they are exporting to the EU;
- Management of international relations with third countries and international organisations in the field of food safety, animal health and welfare, animal fodder and health of plants;
- Cooperation with the European Food Safety Agency (EFSA) through ensuring management on scientifically based risks.
The EU has one of the highest standards of food safety in the world as the result of the established legislation and its implementation ensuring food safe for consumers. A key tool ensuring cross-border flow of information and rapid response in event of detection of risks to human health is RASFF – the Rapid Alert System for Food and Feed. The RASFF allows rapid exchange of information among its members (the EU-28 national authorities competent for monitoring of food safety, the European Commission, the EFSA, the ESA, Norway, Liechtenstein, Iceland and Switzerland). Because of the RASFF, many risks were eliminated before they could become harmful to European consumers.
Agriculture and the environment
Comprehensiveness of the care for the environment within the framework of the Common Agricultural Policy is aimed at preventing risk of destruction of the environment and increased sustainability of agricultural ecosystems. About one half of the land in the EU is farmed, therefore agriculture is significant for the environment.
Over the centuries, agriculture contributed to creation and maintenance of a unique landscape and habitat where forests, swamps and arable land are intermingled. Integrity of the environment and visual value of the landscape make the rural areas attractive as areas where businesses are set up, as a choice of the place to live in and for tourism and leisure.
The link between the abundance of the natural environment and agricultural practices is very complex. Agriculture sustains many valuable habitats in Europe and a large number of wildlife species relies on agriculture for its survival. However, inappropriate agricultural practices may have an adverse effect on natural resources such as pollution of the soil, water and air, fragmentation of habitats and loss of diversity of plant and animal life.
The Common Agricultural Policy (CAP) has identified three priority areas of action for protection and strengthening of the rural heritage of the EU:
- Biodiversity, preservation and development of “natural” systems of agriculture and forestry for preservation of traditional agricultural landscapes;
- Water management and water use;
- Confronting the climate change.
The CAP ensures that its rules are aligned with the environmental protection requirements and that the CAP measures provide incentives to development of agricultural practices which shall preserve the environment and protect the landscape. Farmers are provided incentives to continue their positive role in preservation of the nature and the environment. This is achieved through:
- Targeted aid through rural development measures promoting sustainable agricultural practices;
- Increased alignment with the environmental protection regulations, penalising non-compliance with those regulations by farmers through reductions of the CAP aid payments.
European food quality logos
Through the quality programmes in the EU, the Common Agricultural Policy (CAP) provides tools to emphasise quality and tradition related to registered products. Those logos are used to confirm to consumers that the products are original ones and not imitations seeking to exploit good name and reputation of the original product. As a result, these systems and their logos help producers / groups of producers to better market their products and they also provide them legal protection against abuse or falsification of product names.
Specifically, EU product quality schemes pertain to agricultural and food products, wine, alcoholic beverages and aromatised wine registered by the producers or groups of producers in accordance with the prescribed rules.
All the products may be searched in the Database of Origin and Registration (DOOR) where product specifications may be read.
Protected Designation of Origin (PDO)
- originating from a specific place, region, or in special cases, a state,
- whose quality or characteristics, in essence or exclusively, arise under influence of special natural and man-made factors associated with a specific geographic area, and
- whose all stages of production take place in the designated geographic area
The Protected Designation of Origin has been awarded to 8 products from Croatia:
- Šoltansko maslinovo ulje,
- Paška janjetina,
- Korčulansko maslinovo ulje,
- Krčko maslinovo ulje,
- Istarski pršut,
- Ogulinski kiseli kupus/Ogulinsko kiselo zelje
- Ekstradjevičansko maslinovo ulje Cresand
- Neretvanska mandarina.
Another 4 products from Croatia are in the process of protection of designation of origin:
Protected Geographical Indication (PGI)
- originating from a specific place, region, or state,
- whose quality, reputation or other characteristics are attributed to their geographic origin, and
- whose at least one stage of production takes place in the designated geographic area.
At this time, seven products from Croatia have been awarded the Protected Geographic Indication designation:
- Zagorski puran,
- Poljički soparnik / Poljički zeljanik / Poljički uljenjak
- Dalmatinski pršut,
- Drniški pršut,
- Lički krumpir,
- Baranjski kulen, i
- Krčki pršut.
Another 3 products from Croatia are in the process of obtaining the Protected Geographic Indication designation:
Traditional Speciality Guaranteed (TSG)
A name is acceptable for registration as a traditional speciality guaranteed when it describes a specific product or food that is:
- the result, considering the method of production, processing or composition of an appropriate procedure for the product or food, or
- produced using raw materials or ingredients that are used traditionally.
This category does not contain any products from Croatia yet.
Generational renewal in agricultural sector
Facilitation of inclusion of adequately educated farmers in the agriculture sector and especially generational renewal
Age structure of farmers in the Republic of Croatia is very unfavourable. More than 58.8 % of heads of family farms is older than 55, while only 4.1 % is younger than 35. The economic crisis and previous wartime events contributed to migration from rural to urban areas, especially among the younger population, resulting in overall decline of rural population and an increase of age of the population. This presents a serious threat to further development and even survival of rural areas themselves. Young people are a crucial resource for development of modern and competitive agricultural sector, primarily because of their desire and capability to adapt more easily to technological changes, new practices and changes of market conditions – which is a requirement for increased productivity and competitiveness. Consequently, generational renewal family farms should be spurred on. Development of agriculture and diversification of farms contributes to retention and employment of young people in agriculture, simultaneously mitigating adverse trends of migration to cities. The need to create conditions to provide incentives to young people in the sector of agriculture arises from the above. This is to be achieved by creating better and more attractive living and working conditions for young people who wish to be farmers – by supporting their use of new technologies in creation of a positive and dynamic atmosphere for entrepreneurship in agriculture.
Restructuring of production, incentives for involvement of young farmers and improved sustainability and competitiveness of farms are aimed at generating competitive producers.
A large number of farms are facing problems brought by structural changes. Splintered farms are a big problem while increasingly old population remains active in agriculture and forestry. The farms often use production technology which was in use even before 1990, and lack of the basic prerequisites for development often means that they cannot develop modern technology and therefore support is needed to improve their competitiveness and sustainability. Support for the basic public irrigation infrastructure and reparcelling must create favourable conditions for development of more profitable and more effective agricultural production.
Balanced development of rural areas is a strategic objective of Croatia.
Croatia is severely affected by migration of population to urban areas and depopulation of rural areas. Using the RDP, Croatia aims to end the adverse trend and create conditions for its reversal through incentives to development of utility and social infrastructure in rural areas and improvement of basic services in villages as a prerequisite for creation of an attractive environment for life and work of young people and families.
The support to entrepreneurship and creation of new jobs in rural areas are measures which may affect retention of young people and active rural population and achieve return of those who had left in the long run.
Combination and explanation of rural development measures
On the basis of a SWOT analysis and assessment of needs, the RDP shall provide incentives to young farmers aimed at improving demographics of the agricultural sector and strengthening of generational renewal through investments in M06 by supporting transfer of specific knowledge and professional training as well as provision of advisory services adjusted to young farmers.
In order to enhance generational renewal of farmers and increase competitiveness of farms, the support will be directed to young farmers who have become the head of a farm for the first time and who, at the same time, possess adequate professional knowledge.
Young farmers guarantee future of agriculture and thereby the survival of rural economy and rural community. They also contribute through innovations in their work, but they face various problems such as inability to acquire arable land and bank loans. Therefore, there are barriers preventing young people from commencing agricultural production, purchase of agricultural machinery and agricultural land. Also, expanding the existing production facilities is a problem for young farmers who are already involved in agricultural production, denying them market sustainability and capacity to invest in innovations. Investments within the framework of this support measure shall be approved to young farmers for entering into the sector of agriculture – thereby allowing generational renewal.
Diversification of activities and creation of jobs shall be supported within the framework of these measures based on the SWOT analysis and the assessment of needs. A secondary contribution to this focus area is identified in measures 1 and 4.
Diversification of non-agricultural activities in rural areas prevents depopulation, creation of jobs and acquisition of other skills. Furthermore, investments in development of small enterprises related to rural natural and cultural heritage, including rural tourism, also help preserve and enhance local tradition and culture.
Support for investments in farms and processing also provides incentives to development of small businesses, retention and creation of jobs in rural areas, increased competitiveness and market-orientation of agriculture and food processing.
Beside, support is provided to young people in their decision to take up agriculture and remain in rural areas by becoming agricultural entrepreneurs.
Investments in modernisation of forestry technologies of logging and pre-industrial timber processing and marketing shall provide incentive to development of micro-, small and medium-sized enterprises in the forestry sector – which shall aid creation of jobs in rural areas and thereby curtailing the adverse employment trend, creating new employment opportunities in rural areas in general.
Support shall be provided for transfers of specific knowledge and advisory services.
Professional training for young farmers
Activities planned within the framework of this operation shall be aimed at the lack of fundamental knowledge and professional qualifications of young farmers who lack professional qualifications, agricultural diplomas or relevant higher education. They shall assume an obligation to enter into a specific training programme (medium-term training courses) on sustainable agriculture, organic farming, environmental protection and economic efficacy.
Young farmers training programmes may encompass the following areas:
- Establishment and management of farms;
- Animal welfare and agricultural biological safety;
- Application of new technologies, products and processes in agriculture;
- Farm safety awareness (e.g. risks related to slurry, work with animals, work with machinery);
- Cooperation, market orientation, chains of supply and local markets;
- Agricultural accounting;
- EU standards (environment, health, hygiene) and principles of cross compliance;
- Organic farming;
- Productions (high standards/profitability of agriculture);
- Energy efficiency and use of renewable sources of energy;
- Diversification of farms; These courses will be specifically designed for young farmers and they must not be a part of usual education.