EU Dairy Industry Not Convinced by Latest CAP Reform

The central focus in this latest reform round concerns revision of the system of direct payments, strengthening rural development, and adaptation of the single CMO (Common Market Organisation) regulation.

Oct 26 2011 --- The Commission recently published its latest legislative proposals for the reform of the Common Agricultural Policy (CAP). The EU dairy industry is not convinced that these latest proposals will help the dairy sector to maintain its competitive position, whilst addressing financial, management and environmental challenges.

The proposals from the Commission on the CAP represent a further revision of the policy after previous reforms which took place during the last 20 years. The central focus in this latest reform round concerns revision of the system of direct payments, strengthening rural development, and adaptation of the single CMO (Common Market Organisation) regulation.

Responding to the publication of the proposals, Secretary General of EDA (European Dairy Association), Joop Kleibeuker said: “The CAP has been moving towards greater market orientation over the past 15 years. The dairy sector is now operating in an increasingly globalised market place. Our primary concern is to ensure that the dairy sector maintains its competitiveness, on the EU and world market, whilst addressing growing environmental and other challenges”.

“We are not convinced that the Commission has got the balance right. There is too much in the package that could create competitive distortions in the European single market and reduce competitiveness in the world market. Impeding productive efficiency, whilst not doing enough to address competitiveness, could endanger the economic sustainability of European dairy farming”, Kleibeuker continues.

EDA sees the introduction of a national flat rate in each member state, leading to a national redistribution of the single farm payment between the different farm sectors, as a concrete example of this lack of balance.

According to analysis from the Commission, this new regulation will decrease dairy farmers’ income significantly across the EU. It should be noted that a sustainability-linked direct payment should not only take into account environmental aspects, but also the contribution to social cohesion in rural areas that a sector such as dairy provides. EDA believes moreover that proposals for coupled support could lead to a situation in which some member states subsidize milk production. The provision of insurance against the loss of income could reduce the incentives in certain states to adapt production to market developments. Furthermore, the measures foreseen in the current proposals to support research and innovation are insufficient.

“It is obvious that there is still a lot of work to do, but the EU dairy industry remains committed to cooperate with the Commission, the Parliament, the Council and the various member states to improve this package and achieve the best outcome for the EU dairy industry", Kleibeuker concludes.