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Home arrow Economics arrow Disaggregated impacts of CAP reforms : proceedings of an OECD workshop.


Continued reform?

The 2003 CAP reform was intended to make European agriculture more competitive and market-oriented with less distortion of production and trade, and at the same time to provide income support to farmers and to prevent abandonment of land. As we approach the end of the current programme period in 2013 and the arguments for continued CAP reform are debated, it is important to ask whether the 2003 CAP reform has achieved these objectives. The reform has undoubtedly increased market orientation and improved farm incomes. A move to a full and uniform decoupling in all regions would improve the situation even further, but not in a dramatic way. At the same time, it can be argued that the objective of improving competitiveness has not been achieved due to slower structural change and higher land rental prices that followed from the reform. Implementation of a bond-type scheme would constitute a better option from a competitiveness perspective, but this solution gives little value for money and may be difficult to achieve for political reasons. A more realistic and efficient solution for society is to gradually phase out the Single Payment Scheme and instead use targeted support (under Pillar 2) to preserve landscape and environmental values in the particular regions that would be adversely affected by such a reform (e.g. increasing agri-environmental payments for preserving extensive grasslands). Nevertheless, it is likely that emotional arguments for continuing some type of general support payments will be made (e.g. for the provision of unspecified public goods). However, given the negative impact of such payments on competitiveness, particularly in regions favourable to agriculture, the motivation and social opportunity costs of making these payments available to all EU farmers should be carefully evaluated.

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