Agricultural Policy Monitoring and Evaluation 2020

11. European Union

Support to agriculture

Support to agriculture in the European Union has declined gradually since the 1990s. Support to producers as a share of gross farm receipts (%PSE) has stabilised at around 19% since 2010. Although support in the form of price distortions has been reduced substantially, trade protection measures (including import and export licensing, Tariff Rate Quotas (TRQs) and special safeguards) remain in effect for a number of sectors. Overall levels of market price support declined in 2019, as the gap between domestic and world prices narrowed for some of the most protected products.

Production distortions from payments have also declined since the early 2000s and most payments today do not require production. Payments not requiring production accounted for 41% of support on average in 2017-19. At the same time, more payments are contingent upon environmental compliance – more than 60% of payments to producers are conditional on mandatory environmental constraints, and an additional 14% of payments to producers come from voluntary agri-environmental schemes with conditions that go beyond the mandatory requirements.

The greatest share of overall support to the agricultural sector (TSE) goes to producers (89% in 2017-19). Public expenditure for general services to the sector at large (GSSE) relative to total support was 10% in 2017-19, similar to the 9% in 2000‑02. However, the composition of GSSE has evolved. Agricultural knowledge and innovation accounts for 56% of the GSSE, up from 42% in 2000-02. Expenditures for both infrastructure and public stockholding have declined over the period, falling respectively from 27% and 15% in 2000-02 to 15% and 1% in 2017-19.

Main policy changes

Much of the policy discussion in 2019 and early 20201 was dedicated to shaping the next iteration of the Common Agricultural Policy (CAP). In that vein, the first tranche of transitional regulations needed to bridge the gap between the current CAP and the future one was approved by parliament in December 2019, with the new CAP not expected to enter into force before January 2022. In addition, EU rules on state aid for Member States were revised in 2019. The Commission raised the maximum amount of support that individual farmers can receive to EUR 20 000 (USD 22 388) per farm over three years without the need for prior approval by the European Commission.

Various regulatory changes outside of the CAP, but with implications for the agricultural sector, went into effect in 2019. These included new rules that banned certain unfair trading practices in the agricultural industry, strengthened food inspections, harmonised rules on the sale of fertiliser, and established harmonised risk indicators for pesticides across Member States in order to facilitate the monitoring of trends in pesticide risk reduction at Union level.

At the Member State level, a host of policy changes focused on the agri-environment and climate. Countries implemented new regulations aiming to improve air quality and reduce ammonia emissions, improve water availability and quality, improve soil conditions, strengthen the circular economy, and achieve national climate targets.

Assessment and recommendations

• Policy reforms undertaken over the past three decades have substantially reduced the level of support to the sector and shifted the composition of support to less production and trade-distorting measures. In spite of substantial progress, relatively significant support continues for some products – particularly for beef and veal, poultry meat and rice – and potentially most distorting forms of support still represent nearly a quarter of support to producers,

• While market access for agricultural products has improved through bilateral agreements and the reduction of applied tariffs, import and export licensing, tariff rate quotas (TRQs) and special safeguards continue to apply to a number of products.

• Climate change plans, activities, and emissions reduction targets are being implemented both at the EU level and within individual Member States, with the goal of achieving carbon neutrality by 2050. The effectiveness of these initiatives may be constrained by both support to fossil fuel consumption through fuel tax rebates for agricultural use in some Member States, and continued product-specific support which has been associated with higher greenhouse gas (GHG) emissions. A more coherent commitment to sustainability goals would involve a phase-out of these types of measures.

• Support to general services has fallen in both absolute and relative terms in the past five years, and is less than the OECD average. At the same time, the sector faces increasing uncertainty due to climate change and other unknown risks. In order to ensure that the sector has access to advances in technology and practices that will allow farmers to manage on-farm risks more effectively, both the European Union and individual Member States should consider additional investments in innovation generally, and in science-based research, development, technology transfer and extension services in particular.

Policy responses in relation to the COVID-19 outbreak

Agricultural policies

Policy measures are being deployed at both EU and Member State level in order to mitigate the impact of the COVID-19 pandemic on the agricultural sector.2 At EU level, policy measures taken specifically related to the agricultural sector3 include direct support measures, certain time-bound derogations from competition rules, and administrative flexibilities (EC, 2020[1]). Several of the announced direct support measures were part of the Commission’s Coronavirus Response Investment Initiative plus (CRII+),4 which sought to increase flexibility around the utilisation of European Structural Investment Funds (ESIF), including the European Agricultural Fund for Rural Development (EAFRD)5 (EC, 2020[2]). This funding flexibility under CRII+ included making available loans or guarantees of up to EUR 200 000 for farmers or other rural development (RD) beneficiaries at favourable terms. In addition, CRII+ also permitted Member States to allocate remaining, non-committed RD funds to help farmers and other agri-food sector actors cope with the impacts of COVID-19, including by supporting supply chain adjustment to direct sales, advisory services, or investments in food marketing and packaging. The Commission estimates that roughly EUR 6 billion is still available under rural development programmes (RDPs), with the sum rising to EUR 17 billion if amounts under pending calls for application are also considered (EC, 2020[3]). Outside of CRII+, the Commission released a Temporary Framework for state aid measures on 19 March, which relaxed state aid rules, including some specificities for agriculture. Under the framework, Member States are allowed to provide direct grants of up to EUR 100 000 per farm for producers of primary agricultural products, provided that the aid is not based on the price or quantity of product sold (EC, 2020[4]). This quantity can be topped up with EUR 20 000 in “de minimis” aid, which does not require prior approval from the Commission, such that farmers can receive total state aid of up to EUR 120 000. The framework also permits aid up to EUR 800 000 for food processing and marketing firms.

Various administrative flexibilities were also introduced in the context of the CAP. On 6 April 2020, the Commission extended the CAP payment application deadline for both direct payments and RD payments from 15 May 2020 to 15 June 2020 (EC, 2020[5]). While the extension has been granted for all Member States, the final decision on whether to extend the deadline lies with each individual Member State. The Czech Republic, France, Greece, Luxembourg, Portugal and Spain have announced that they will apply the extended deadline. Second, payment advances will be raised to ease farmer cash flow constraints, with advances (available from mid-October) increased from 50% to 70% for direct payments, and advances for some RD payments increased from 75% to 85%. Croatia, Greece, Italy, Luxembourg and Portugal have all announced that they will advance CAP payments accordingly. Reduced on-farm spot checks were also announced as a means to minimise physical contact and reduce administrative burden (EC, 2020[1]).

In addition, on 22 April the Commission announced three exceptional measures. First, the Commission proposed a private storage aid scheme 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 temporarily withdraw some supplies of these products from the market for a period, depending on the product, of between 2 to 3 and 5 to 6 months. Second, the Commission would introduce further flexibility into existing market support programmes for apiculture, fruits and vegetables, olive oil, wine and school schemes to allow the programmes to reorient funding toward crisis management. Finally, the proposal includes an exceptional derogation from EU competition rules for the milk, flowers and potatoes sectors to allow operators to collectively adopt self-organised market measures to stabilise markets, with the provision that such measures remain in place for a maximum of six months (EC, 2020[6]).

At the Member State level, the response measures applied or announced vary, but typically fall into a few broad categories: administrative or regulatory flexibilities, general economy-wide support measures applicable to the agricultural sector, targeted agriculture and agri-food sector support, specific commodity sector support and labour measures. In the realm of administrative and regulatory flexibilities, some Member States have temporarily halted or delayed on-farm compliance inspections (Estonia, Finland, Ireland, Luxembourg and Portugal) or other compliance activities (compliance for animal husbandry subsidies in Hungary, or organic farming checks in Portugal). In Finland in particular, the government has strongly encouraged inspection activities to be carried out using digital document checks and remote interactions where possible. Several countries announced that they would temporarily relax conditionality, cross-compliance or greening mandates (Hungary, Ireland, and Portugal). Ireland announced that they would also defer application dates and extend regulatory compliance deadlines for several programmes, including their Young Farmer scheme, Targeted Agricultural Modernisation Scheme and National Reserve scheme. Other countries instituted more targeted flexibilities. For example, France issued an exceptional authorisation on the remote sale of plants without a plant passport. In Germany, the government announced that they would delay the full application of the amended “Fertiliser Application Ordinance” until January 2021. The government of Portugal adapted certain livestock biosecurity measures, including extending the validity of health certificates for livestock, and extending the deadlines for livestock identification. In Spain, the enrolment period for agricultural insurance contracts was extended, and the government also relaxed documentation requirements for the transport of animals. Several Member States also specified either extended deadlines for completion of RD projects (Portugal and Romania) or extended reporting deadlines related to project execution (Romania).

Most countries instituted some type of economy-wide support measures,6 some of which could be applied to farms, processing plants, or other firms in agri-food value chains. Some countries offered direct support for certain affected businesses (France, Germany, Greece, Luxembourg and Spain) or to freelancers and the self-employed (Austria, Belgium, Denmark, Germany, Luxembourg and Slovakia). Wage compensation, either for employers or employees, was also common (Croatia, Czech Republic, Denmark, Estonia, France, Ireland, the Netherlands and Slovakia). Many Member States provided support through tax concessions, with some offering tax deferrals or rebates, including for income taxes or VAT (Austria, Belgium, Croatia, Denmark, Estonia, France, Germany, Italy, Latvia, Lithuania, Luxembourg, the Netherlands and Slovakia); deferred or suspended social contributions for some or all firms (Belgium, Croatia, Estonia, France, Hungary, Italy, Luxembourg, Poland, Slovakia and Spain); or late tax payment penalty suspensions or late payment waivers (Czech Republic, Estonia, Lithuania and the Netherlands). Other measures targeted access to finance, with some countries offering credit guarantees (Austria, Belgium, Denmark, Estonia, France, Greece, Ireland, Italy, Latvia and Spain); improved access to investment or business loans, including at concessional rates (Austria, Czech Republic, Denmark, Estonia, Germany, Ireland, Italy, Latvia and Portugal); or increased access to or state guarantees for export credit (Denmark and Portugal). Other less common measures included economic support for high-risk employees and reduced working hour requirements for senior employees (Denmark); delayed payments for rent, water, gas and electric bills (France); access to mediation for credit issues and business conflicts (France); and loss carryback on income tax for 2020 for corporate and personal income taxpayers (Poland).

In addition, several Member States announced targeted support to the agriculture and agri-food sectors. These interventions were largely of two basic types: establishing emergency support funds or support payments for producers or agricultural firms experiencing severe reductions in income or substantial increases in labour costs (Austria, Belgian region of Flanders, Czech Republic, Finland, Greece, Latvia, and Slovenia), or offering special financing options like loan guarantees, designated credit lines, waving or reduction of loan fees, or loan repayment holidays (Belgian region of Flanders, Croatia, Czech Republic, Estonia, Finland, Germany, Hungary, Italy, Latvia, Lithuania, the Netherlands, Poland, and Portugal). Other countries offered temporary exemptions or delays on contributions to retirement, health or disability pensions for farmers (Poland, and Slovenia); VAT reimbursements or accelerated VAT refunding for farms and agricultural businesses (Hungary); deferment of agricultural insurance premium payments (Greece); compensation for school schemes suppliers in the face of school closures (Latvia); land sale and leaseback schemes for owners of arable land, to alleviate serious liquidity issues caused by COVID-19 (Estonia); or postponements of rent and fee payments due for land owned by the government (Croatia).

Some Member States have announced support measures for specific agricultural commodity sectors that have been particularly affected by either supply chain disruptions or collapsing demand. In the Belgian region of Flanders, compensation was offered to growers in certain sectors whose fresh products (including flowers and ornamental plants) could not be sold due to the pandemic. Croatia instituted assistance measures for several sectors, including a support programme of HRK 53 million (EUR 7 million) to maintain production and employment for smallholder farms in various sectors (fruit and vegetables, flowers, seeds, plant reproductive material, beef, pigs, equines, sheep, goats and poultry); temporary measures to assist smallholder dairies by arranging government purchase of their products and distributing them for food donation; and through the delay of contractual commitments under the country’s wine sector programme. Italy announced measures for several sectors, including allocating EUR 29.5 million for supply chain competitiveness funds for maize, legumes, soy and wheat; EUR 40 million for durum wheat through the grains fund; EUR 7.5 million for sheep meat and lambs; EUR 2 million for buffalo milk; and EUR 5 million for the national pig fund. In Latvia, EUR 19 million of the national emergency fund was specifically designated for the livestock sector. The Netherlands has announced a EUR 600 million compensation scheme for horticultural producers who have experienced severe losses due to declining demand (particularly floriculture growers), with the state compensating up to 70% of losses. An additional programme of EUR 50 million was announced to compensate Dutch French fry potato growers experiencing cascading demand effects from shuttered restaurant and food service businesses. In Portugal, sector support was offered to the wine industry (including reimbursement for expenses occurred for cancelled international promotional events) and the fruit and vegetable sectors. Spain offered direct aid for the lamb and kid sectors of up to EUR 30 per animal.

Access to sufficient agricultural labour was a primary concern in many countries, and a host of initiatives were introduced to that end. Regulations related to eligibility of foreign workers (including extending seasonal work permits or temporary worker visa eligibility days, or permitting temporary employment of foreigners without work permits as seasonal workers in agriculture) were relaxed in Austria, Estonia, the Belgian region of Flanders, Finland, Germany and Poland. Similarly, exceptions were granted to border entry restrictions in Finland and Germany7 to allow seasonal workers to enter from abroad. Though not specifically oriented toward foreign workers, special provisions were made to ensure that state border crossings of farmers and agricultural employees, along with agricultural machinery, would continue to be permitted in the Czech Republic and Poland in the face of general movement restrictions. Other member states mounted specific campaigns to recruit atypical workers (such as the recently laid-off, students and refugees) as temporary agricultural labourers (Czech Republic, France, Finland, Germany, and the United Kingdom8). Web-based platforms were established to link agricultural producers and food processors in need of seasonal labour with available workers in Austria, France, Germany, Hungary, Luxembourg, and the United Kingdom. Similarly, the Irish Agriculture and Food Development Authority (Teagasc), in conjunction with Farm Relief Services and farming organisations, established a Regional Farm Labour Database to link farming families with available relief workers in the event that a farmer contracts COVID-19 and is unable to work. The government of Estonia increased funding for farmers’ back-up service support, to ensure that affected farmers in both the livestock and plant production sectors would be able to access replacement labour if the farmer contracts COVID-19. In France and Spain, specific allowances were made to permit unemployed persons to engage in temporary agricultural labour – in Spain, the unemployed can continue to receive their unemployment benefits while also working as agricultural labourers. Italy and Spain also specified certain safety measures for agricultural workers, with Spain announcing provisions limiting the number of agricultural workers allowed to be transported per vehicle, and also allowing tourism accommodations to be used to house agricultural workers. Farmers in the Czech Republic and Poland were granted eligibility for a specific daily allowance for self-employed workers who stay home and care for children or disabled persons. In Italy, specific support was made available for agricultural workers only – any agricultural worker who carried out at least 50 days of agrarian work in 2019 is eligible for compensation of EUR 600 for the month of March.

Agro-food supply chain policies

COVID-19 posed specific challenges to the region’s agro-food supply chains, as movement restrictions posed by EU Member States to contain the disease also blocked transportation routes, resulted in long queues at border checks, and exacerbated the shortage of seasonal farm workers. In response, the Commission worked with Member States to create “Green Lanes” through which shipments of goods (including food and livestock) are able to cross borders in 15 minutes or less, including any checks or health screenings. Provisions of the “Green Lane” guidelines include striving to conduct checks without drivers leaving their vehicles, and accepting the electronic submission of documents (EC, 2020[7]). The Commission also designated seasonal agricultural workers as “critical”. This included the publication of guidelines allowing free movement of seasonal and cross-border agricultural workers within the European Union, and a derogation allowing the entry of seasonal agricultural workers originating from third countries (EC, 2020[1]).

As an additional means of easing supply chain disruptions, the Commission also instituted a two-month temporary regulation (EU 2020/466) relaxing EU rules on food inspections. Under the regulation, inspections of animals, feed, food or plants may be carried out by other specifically authorised persons if a representative of the competent inspection authority is not able to be present, and testing or diagnoses can be performed by designated laboratories in lieu of official laboratories. Additionally, the regulation allows for the exceptional acceptance of electronic documents, provided that a paper copy be provided as soon as feasible (EC, 2020[8]).

As part of an ongoing evolution, the European Union is making use of its existing EU market observatories to closely monitor conditions in agricultural markets, including trade in food products. Additionally, the Commission is supporting greater information sharing and global market transparency through its AMIS chairmanship.

Member States have also allowed some flexibility in regulations applied to the greater agri-food value chain. Several countries issued temporary derogations on laws defining mandatory rest periods for drivers transporting goods (Latvia, Portugal, Spain, and the United Kingdom). Cyprus9 temporarily amended the existing law on animal slaughtering practices to allow kosher slaughtering to facilitate sheep and goat meat exports to Israel amid current market disruptions. In the Czech Republic, the relevant ministries issued an exception allowing distilleries to produce disinfectants from denatured alcohol. In Denmark, the government has decreed flexibility in extending the working hours for slaughterhouses in order to maintain meat production levels while also protecting the health of workers. The government of Lithuania has permitted online trading in non-food horticultural and other agricultural goods for delivery and pickup. Portugal announced that physical inspections on border checks would be temporarily reduced or suspended. In the United Kingdom, competition law was temporarily suspended to allow supermarkets to share data with each other on stock levels, and to co-operate to keep shops open and share distribution depots and delivery vans.

Other governments made overtures for improving demand for domestic agri-food goods either through market promotion or by helping farmers or firms identify alternative distribution channels. The government of Bulgaria mandated that all retailers with at least 10 stores provide Bulgarian food products within the categories of food products already for sale, further mandating that Bulgarian-origin milk represent 90% of retailer dairy offerings. Italy opted to dedicate additional resources to the promotion of domestic agricultural goods, adding EUR 150 million in funding to the country’s “Made in Italy” campaign. The government of Portugal encouraged the consumption of local products through the expansion of sales channels and the promotion of alternative channels for reaching consumers. Online platforms intended to facilitate the linking of agricultural producers direct to consumers were set up in Austria, Bulgaria, and Romania. In Ireland, Bord Bia (the Irish Food Board) launched a EUR 1 million marketing grant scheme under their “Navigating Change” COVID-19 response programme to assist food producers and manufacturers in accelerating e-commerce operations and expanding marketing activities in the context of rapidly changing market conditions.

Some countries announced initiatives to bring together stakeholders across the agri-food value chain to proactively confront any issues impeding functioning food markets. In Denmark, a Government and Business Corona Unit was established to improve the collaboration between business and labour organisations to address potential sectoral economic distress. Similarly, Portugal established a “Monitoring and Assessing the Conditions for Supplying Goods in the Agri-Food and Retail Sectors” group, which includes stakeholders and business association in the retail, distribution and logistics sectors.

Consumer policies

Consumer-oriented policies are, at the present time, largely limited to the Member State level. The government of Portugal announced enhanced enforcement of laws against price speculation, and the government of Romania announced that the Consumer Protection Office and the Competition Council would be making unannounced visits to retailers to verify price conformity and prevent price gouging. Other countries opted to intervene very directly in agri-food markets. The government of Croatia imposed a price freeze on flour, milk, eggs, pasta, meat, fish, fruits, vegetables and baby food. In Poland, relevant ministers were authorised to institute, in certain cases, maximum sales prices and official retail margins for foodstuffs. Similarly, the government of Slovenia announced the possibility of regulating prices of individual foodstuffs in accordance with that country’s Emergency Act on Agriculture. In addition, Slovenia announced an expansion of state food reserves, with the government also making allowances for the temporary erection of food storage warehouses. Slovenia’s legislation on emergency intervention measures for agriculture, forestry and food also included a host of provisions intended to ensure sufficient food supplies on the domestic market, including the possibility of restricting the circulation of agricultural products, foodstuffs or animals intended for human consumption.

Actions targeting vulnerable populations were undertaken at both the EU and Member State levels. The regulation on the EU’s Fund for European Aid to the Most Deprived (FEAD) – which provides food and/or basic material assistance to those in need – was amended on 23 April (EU 2020/559) with a set of measures designed to address the COVID-19 crisis, including allowing for alternative schemes of delivery like electronic cards or vouchers, enabling the purchase of protective equipment for those delivering aid, and providing flexibility in complying with monitoring and control requirements in order to reduce administrative burden and avoid disrupting delivery of support. In the Member States, Italy instituted some measures to facilitate food provision to the poor, including an additional EUR 300 million allocated to the country’s fund for the indigent. In the Czech Republic, food that was originally destined for the country’s fruit, vegetable and milk school schemes were instead distributed to food banks, in the wake of school closures. The government of Portugal announced support for the distribution of fruits and vegetables through social solidarity NGOs and the national food bank network. Food parcels were delivered directly to vulnerable citizens in the United Kingdom, and digital supermarket vouchers were provided to low-income families with children in lieu of free school meals from closed schools.

Other

Outside of specific measures and regulations, movement restrictions and stay-at-home orders due to the COVID-19 outbreak have impacted some policy processes relevant to the sector. In particular, the outbreak delayed the release of the European Commission’s “Farm to Fork” strategy, which had originally been scheduled for late March. Negotiations around the next multi-annual financial framework and the Common Agricultural Policy were also delayed.

Figure 11.1. European Union: Development of support to agriculture

Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.

Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Support to producers (%PSE) in the European Union declined substantially from the 1980s through the early 2000s, but has stabilised around 19% since 2010, varying only slightly from year to year based on individual commodity market conditions. In 2017-19, support was 19% of gross farm receipts – slightly above the OECD average. The share of most distorting support decreased over the same period, driven largely by declining market price support (MPS), and is now half of the OECD average (Figure 11.1). Support declined slightly in 2019, with a small increase in budgetary payments more than offset by a decline in MPS. This reduction in MPS indicates that the gap between prices received by EU farmers and world reference prices narrowed, almost entirely due to exchange rate fluctuations, as movements in both producer prices and border prices denominated in USD were negligible (Figure 11.2). For products that received the highest levels of support relative to gross farm receipts (beef and veal, poultry meat, rice and sugar), MPS was the dominant component of their single commodity transfers (SCT), while commodity payments accounted for the bulk of the SCT for sheep meat (Figure 11.3). The vast majority of support – 89% in 2017-19 – is captured by individual farmers, with most of the remainder designated for general services (GSSE) to the sector (Table 11.1). GSSE relative to agriculture value added was 4.6% in 2017-19, less than the overall OECD average of 5.7%. More than half of GSSE spending is devoted to knowledge and innovation systems. Total support to agriculture as a share of GDP has declined significantly over time, as has the share of the sector in the economy.

Figure 11.2. European Union: Drivers of the change in PSE, 2018 to 2019

Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Figure 11.3. European Union: Transfer to specific commodities (SCT), 2017-19

Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Table 11.1. European Union: Estimates of support to agriculture

Million USD

	1986-88	2000-02	2017-19	2017	2018	2019p
Total value of production (at farm gate)	233 558	225 093	450 445	439 889	462 632	448 815
of which: share of MPS commodities (%)	75.0	73.3	73.8	73.8	73.9	73.9
Total value of consumption (at farm gate)	212 900	226 789	439 074	422 905	461 897	432 419
Producer Support Estimate (PSE)	95 385	80 915	102 483	98 748	107 449	101 252
Support based on commodity output	86 308	40 997	18 263	16 263	20 591	17 935
Market Price Support1	80 672	37 067	17 890	15 760	20 275	17 635
Positive Market Price Support	81 784	37 067	18 040	16 001	20 350	17 768
Negative Market Price Support	-1 112	0	-150	-241	-75	-133
Payments based on output	5 637	3 930	373	504	316	300
Payments based on input use	5 056	6 833	13 650	12 512	14 456	13 982
Based on variable input use	960	3 047	6 075	5 819	6 341	6 064
with input constraints	0	0	31	22	31	42
Based on fixed capital formation	2 986	2 259	5 630	4 611	6 259	6 019
with input constraints	0	94	101	85	108	109
Based on on-farm services	1 109	1 527	1 945	2 082	1 855	1 899
with input constraints	90	274	54	21	65	76
Payments based on current A/An/R/I, production required	3 587	32 331	28 489	27 871	29 297	28 299
Based on Receipts / Income	147	99	190	184	204	183
Based on Area planted / Animal numbers	3 440	32 231	28 299	27 687	29 093	28 116
with input constraints	940	15 087	23 500	22 646	24 249	23 605
Payments based on non-current A/An/R/I, production required	0	0	3	4	3	3
Payments based on non-current A/An/R/I, production not required	0	10	40 988	41 184	41 932	39 849
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	40 988	41 184	41 932	39 849
with commodity exceptions	0	0	3	8	0	0
Payments based on non-commodity criteria	478	1 078	927	761	1 001	1 019
Based on long-term resource retirement	476	846	206	204	220	194
Based on a specific non-commodity output	2	176	670	506	729	775
Based on other non-commodity criteria	0	57	52	51	53	50
Miscellaneous payments	-43	-334	161	152	168	164
Percentage PSE (%)	38.4	30.1	19.1	18.9	19.5	19.0
Producer NPC (coeff.)	1.66	1.22	1.04	1.04	1.05	1.04
Producer NAC (coeff.)	1.62	1.43	1.24	1.23	1.24	1.23
General Services Support Estimate (GSSE)	9 118	8 355	11 826	11 627	12 162	11 690
Agricultural knowledge and innovation system	1 788	3 492	6 622	6 369	6 832	6 665
Inspection and control	194	281	1 008	972	1 082	970
Development and maintenance of infrastructure	1 331	2 222	1 763	1 854	1 746	1 688
Marketing and promotion	1 210	996	2 329	2 195	2 461	2 331
Cost of public stockholding	4 571	1 294	86	219	22	18
Miscellaneous	24	69	17	17	18	18
Percentage GSSE (% of TSE)	8.3	9.0	10.3	10.5	10.1	10.3
Consumer Support Estimate (CSE)	-69 408	-33 000	-16 742	-14 387	-19 312	-16 528
Transfers to producers from consumers	-80 268	-36 084	-17 273	-15 081	-19 800	-16 938
Other transfers from consumers	-1 699	-717	-113	-94	-89	-157
Transfers to consumers from taxpayers	4 992	3 537	417	416	455	381
Excess feed cost	7 567	264	227	372	122	186
Percentage CSE (%)	-33.4	-14.8	-3.8	-3.4	-4.2	-3.8
Consumer NPC (coeff.)	1.63	1.19	1.04	1.04	1.05	1.04
Consumer NAC (coeff.)	1.50	1.17	1.04	1.04	1.04	1.04
Total Support Estimate (TSE)	109 495	92 807	114 726	110 791	120 065	113 322
Transfers from consumers	81 967	36 801	17 386	15 175	19 888	17 094
Transfers from taxpayers	29 228	56 723	97 453	95 709	100 265	96 384
Budget revenues	-1 699	-717	-113	-94	-89	-157
Percentage TSE (% of GDP)	2.5	1.1	0.6	0.6	0.6	0.6
Total Budgetary Support Estimate (TBSE)	28 824	55 740	96 836	95 031	99 790	95 687
Percentage TBSE (% of GDP)	0.7	0.6	0.5	0.5	0.5	0.5
GDP deflator (1986-88=100)	100	152	187	186	188	..
Exchange rate (national currency per USD)	0.91	1.09	0.88	0.89	0.85	0.89

.. 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; and EU28 from 2017 when available.

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 (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Contextual information

The European Union is the largest economic region covered in this report, accounting for 20% 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 11.2). Close to half of the region’s landmass is dedicated to agriculture, with nearly 60% of agricultural area categorised as arable. 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 11.2. European Union: Contextual indicators

	European Union		International comparison
	2000*	2018*	2000*	2018*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	9 926	22 931	24.8%	20.3%
Population (million)	378	512	8.8%	9.9%
Land area (thousand km2)	3 127	4 238	3.8%	5.1%
Agricultural area (AA) (thousand ha)	140 572	181 646	4.7%	6.1%
			All countries¹
Population density (inhabitants/km2)	114	116	53	62
GDP per capita (USD in PPPs)	26 283	44 650	9 275	21 924
Trade as % of GDP	11	13	12.4	15.3
Agriculture in the economy			All countries¹
Agriculture in GDP (%)	1.8	1.5	3.1	3.6
Agriculture share in employment (%)	4.3	4.0	-	-
Agro-food exports (% of total exports)	6.0	6.8	6.2	7.3
Agro-food imports (% of total imports)	5.8	5.6	5.5	6.3
Characteristics of the agricultural sector			All countries¹
Crop in total agricultural production (%)	54	57	-	-
Livestock in total agricultural production (%)	43	43	-	-
Share of arable land in AA (%)	53	58	32	33

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

1. Average of all countries covered in this report. EU treated as one.

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

GDP growth in the region has been positive since 2013, fluctuating around 2% since 2015 (Figure 11.4). The unemployment rate has declined steadily over that time period, falling from a high of 11% in 2013 to 7% in 2018. Inflation has remained under 2% since 2013. In spite of these positive aggregate indicators, 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 11.5). The region is a net food exporter, with agro-food products accounting for 6.8% of all EU exports and 5.6% 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 processed goods for industry accounting for the largest share of imports (29%).

Figure 11.4. European Union: Main economic indicators, 2000 to 2019

Note: EU28.

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

Figure 11.5. European Union: Agro-food trade

Note: Numbers may not add up to 100 due to rounding.

Source: UN Comtrade Database. Extra-EU trade: EU15 for 2000-2003; EU25 for 2004-06; EU27 for 2007-13 and EU28 from 2014.

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 11.6). 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 environmental pressures as shown in various environmental indicators (Table 11.3). From 2000 to 2018, the region’s nitrogen balance fell by one-third, the phosphorous balance declined nearly 90%, and the share of agriculture in water abstractions fell by 35%. At the same time, agriculture’s contribution to greenhouse gas (GHG) emissions rose by 13%.

Figure 11.6. 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 11.3. 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*	2018*	2000*	2018*
Nitrogen balance, kg/ha	74.0	49.1	33.3	29.1
Phosphorus balance, kg/ha	7.3	0.9	3.3	2.3
Agriculture share of total energy use (%)	2.0	2.6	1.7	2.0
Agriculture share of GHG emissions (%)	9.0	10.1	8.1	8.9
Share of irrigated land in AA (%)	..	..	-	-
Share of agriculture in water abstractions (%)	41.3	27.0	46.0	49.0
Water stress indicator	..	..	9.9	8.9

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.

Description of policy developments

Main policy instruments

The Common Agricultural Policy (CAP) is the main 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[9]).

The CAP typically covers a seven-year period, currently 2014-20. It is composed of two pillars: the European Agricultural Guarantee Fund (EAGF) finances Pillar 1, and measures under Pillar 2 are based on Rural Development Programmes (RDP) co-financed by the European Agricultural Fund for Rural Development (EAFRD) and EU Member States.10 Member State RDPs are deployed over the seven year CAP programming period. The CAP 2014-20, while in many ways the continuation of the CAP 2007-13, offers a number of novel features (OECD, 2017[9]).

The implementation of the CAP 2014-20 started in 2014 with the first measures under Pillar 1, followed in 2016 by the implementation of 118 national and regional Pillar 2 Rural Development Programmes (RDP)11 in the Member States. Later in 2018, the CAP simplification took place within the revision of the EU financial rules, also known as the Omnibus regulation (OECD, 2018[10]). Furthermore, the CAP had provided for opportunities at set times during implementation when Member States could review and notify adjusted decisions with regard to several choice measures.

The overall budget for the CAP over the 2014-20 period was set at EUR 408 billion (USD 457 billion), of which initially 76% were 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 envelope12 between the two pillars. Over the period, twelve Member States transferred funds from Pillar 1 to Pillar 2, while five Member States transferred funds from Pillar 2 to Pillar 1; with a net overall result of EUR 3.76 billion (USD 4.21 billion) transferred from Pillar 1 to Pillar 2 over the period (EC, 2019[11]).13

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). To this end, entitlements to direct payments were assessed and allocated for the entire period of the CAP 2014-20 to those deemed to be active farmers through the exclusion of a number of activities and businesses, known as the negative list. More flexibility was introduced in the active farmer condition in 2018. Most Member States abandoned the negative list, while some country specific alternative criteria were used to prove farming activity in those that continue to apply it.

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 which joined the European Union after 200014 – make up 51% of the EU direct payments envelope on average in 2019 and 2020 (Table 11.4). Wide variations across Member States are observed that reflect Member States’ spending choices on optional measures under Pillar 1. Both the BPS and the SAPS are conditional to cross-compliance requirements, although 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, and raised to 25% from 2018 onward) in addition to forfeiting a share of the greening payment on the non-compliant area.

Table 11.4. Direct payments budget under Pillar 1, 2019

	Budget 2020 (EUR million)	Share in direct payments	Share in decoupled direct payments
Direct payments; of which:	40 621
Decoupled direct payments, of which:	34 502	85%
Basic Payment Scheme (BPS)	16 189	40%	47%
Single Area Payment Scheme (SAPS)	4 376	11%	13%
Greening	11 819	29%	34%
Voluntary Coupled Support	4 084	10%

Note: Other decoupled payments represent about 6% of direct payments under Pillar.

1. The 2020 EU fiscal year (November to October) is attributed to year 2019 in the PSE system.

Source: OECD calculations based on European Commission, EUR-Lex budget 2020.

In the ten Member States that apply the SAPS, commodity-specific payments may be granted from national budgets within limited envelopes. The Transitional National Aid (TNA) can be disbursed as decoupled payments while a fixed share may be spent on current production. They may apply on a per area basis to arable land, hop and starch potatoes; on a volume basis to milk; and on a headage basis to other livestock. Member States may review TNA budgets and supported commodities on an annual basis. The maximum TNA payments allowed decreases 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 is set to narrow, both between countries (external convergence) and between regions within countries (internal convergence15). Internal convergence applies to the regionalised BPS 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 offers Member States the choice to 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 the take-up of the VCS vary greatly, both in terms of the level of support and the commodities supported. On several occasions, Member States have reviewed VCS budgets and commodity attributions, making some minor adjustments. All Member States, except Germany, have chosen to offer VCS, using 10% of the EU direct payments budget on average. This compares to the 3% that was spent previously under Article 68 coupled support, as reported in the European Union’s general budgets.

A top-up payment to young farmers, in addition to the BPS and SAPS, applies in all Member States. In 2019, this payment accounts for 1.4% 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 have chosen to attribute a portion of their rural development envelopes to support young farmers, representing 4.5% of total rural development expenditures (ENRD, 2016[12]). The bulk of this spending is directed toward business development and investments.

Fifteen Member States have chosen to offer small farms simplified payment attribution conditions – the Small Farmers Scheme – that waives the requirements attached to the greening payment and cross-compliance. The payment cannot exceed EUR 1 250 (USD 1 399) per farm and, depending on the method chosen by the Member State, the overall envelope may be limited to 10% of national direct payments.16

Denmark and Slovenia implement the Pillar 1 direct payment to Areas with Natural Constraints (ANC). Under this payment, the ANC are defined based on eight biophysical criteria.17 Denmark uses 0.3% and Slovenia 1.6% of their national direct payments envelope for ANC payments (EC, 2019[11]). 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 using 21% and 19% of Pillar 2 public expenditure funds (including Member States’ contributions from national budgets) in 2018 and 2019, respectively. In the past, Member States used up to 140 different criteria for assessing ANC status for Pillar 2 payments. However, these have been consolidated into the same set of eight biophysical criteria that applies to Pillar 1 ANC payments.

Ten Member States or regions have chosen to grant higher payments to the first hectares18 under the so-called redistributive payment, using 4.1% of the European Union’s direct payments envelope as reported in European Union’s general budget.

Member States that implement the redistributive payment may choose to opt-out from so-called “degressivity” and six Member States and regions have chosen to do so.19 Under degressivity, BPS amounts above EUR 150 000 (USD 167 908) 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. Fourteen Member States20 have chosen to apply the minimum reduction. Ten Member States have used the possibility to increase the amount that is exempt from the 5% reduction by the value of salaries paid. Ten Member States have chosen to apply a full cap on the BPS at levels varying from EUR 150 000 (USD 167 908) to EUR 600 000 (USD 671 630).

A Crisis reserve is earmarked to be used in case of emergency situations. It is funded from the Pillar 1 direct payments budget. If it is not used in the current year, the envelope is reverted for distribution as Pillar 1 direct payments in the same year. The crisis reserve is renewed each year and has not been used up to now 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 also the development of local agricultural production with 1.1% of the direct payments envelope in 2019.

Pillar 1 also funds measures that support commodity markets, representing 4.4% of the overall agriculture and rural development budget in 2019. Prices paid to EU domestic producers averaged 4% above world market prices in 2017-19.

While the possibility exists for public intervention for cereals (namely common and durum wheat, barley and maize), it has not been applied in recent years. 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 through production quotas, coupled with a minimum price for sugar beets. After the end of the sugar quota regime, existing provisions for agreements between sugar factories and growers have been maintained, and white sugar remained eligible for private storage aid. The support regime for cereals and sugar also includes trade protection through tariffs and tariff rate quotas (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. The CAP Reform proposal includes the elimination of the legal base for the European Union to grant export refund/subsidies in any sector.

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 as well as 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 of these measures apply at farm level while others are provided to producer organisations or to the sector at large. Private storage may also be activated as an optional scheme for olive oil and flax fibre. In the CAP 2014-20 the rules on recognition of producer organisations and inter-branch organisations are expanded 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 the consumption of fresh fruits and vegetables, processed fruits and vegetables, and banana products. The scheme’s budget has grown rapidly from EUR 29 million (USD 32 million) when it was first implemented in 2010 to EUR 117 million (USD 131 million) in 2016. A similar scheme supported milk consumption for schoolchildren, with a budget of EUR 64 million (USD 72 million) in 2016. In August 2017 both schemes were merged under the title “School Schemes” and the budgets combined into EUR 215 million (USD 241 million) in 2019.

In the dairy sector, intervention prices are used for butter and skimmed milk powder, together with import protection. Intervention purchases at fixed price cannot exceed 50 000 tonnes for butter, and 109 000 tonnes for skimmed milk powder (SMP), representing 2% and 7% of production, respectively, in 2019. Above those limits, purchase is made by tender. No intervention buying-in took place in 2019.

The beef market is supported by floor prices, tariffs and TRQs. Support for pig meat is provided by import protection. For sheep meat, the market support regime is comprised of 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. Furthermore, specific provisions are made for milk and milk products.

The wine sector is supported through a system of authorisations for new vine planting. Since January 2016, new vine planting is authorised, but 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 have up to 31 December 2020 to transition to the new system. The sector is also supported through promotional measures, both in the European Union and in third countries, restructuring and conversion of vineyards, compensation for green harvesting, setting up 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) funds (the EAFRD, ERDF, Cohesion Fund, ESF and EMFF) in Member States through partnership agreements. The EAFRD uses 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 11.5). Pillar 2 funds are implemented through national (or regional) Rural Development Programmes (RDP). RDPs also support projects that use the “LEADER approach” (Liaison Entre Actions de Développement de l’Économie Rurale) – i.e. relying on a multi-sectoral approach and local partnerships to address specific local problems; and technical assistance for the implementation of Pillar 2 measures.

The implementation of RDP 2014-20 had a delayed start and by 2018, most payments for programmes within the RDP 2007-13 had been 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 the RDPs that cover the entire duration of the CAP cycle. In their plans, Member States can choose from a menu of 19 measures to meet the six priority areas of Pillar 2. Two conditions apply: 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 another 5% must be spent on the LEADER approach.

On average and at EU28 level, 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 2014-19 in all but four Member States.21

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. The focus of the Horizon 2020 programmes relevant to agriculture is 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 has increased substantially since it was initiated in 2013 from EUR 1 million (USD 1.1 million) to EUR 257 million (USD 288 million) in 2019. A total of EUR 3.8 billion (USD 4.3 billion) is available for the period.

Programming for CAP 2014-20 was originally set to conclude this year. However, the next iteration of the CAP is still under negotiation (see “Domestic policy developments in 2019-20”).

Table 11.5. CAP expenditure by source and use (estimated 2019)

CAP expenditure (EU funding), of which:	Share in EU funding:
Administrative expenditure	0.2%
Interventions in agricultural markets CMO	4.4%
Direct Payments	70.9%
Rural Development – EU funding	22.9%
Research and innovation – Horizon 2020	0.5%
Rural Development (total public expenditure) of which:	Share in total public expenditure:
Rural Development EU funding	66%
Rural Development national funding	34%
Priority 1: knowledge	Allocated through other priorities
Priority 2: competitiveness	19.4%
Priority 3: food chain organisations	10.3%
Priority 4: ecosystems	51.6%
Priority 5: resource efficiency	5.1%
Priority 6: social inclusion	13.6%

Source: OECD calculations based on European Commission, EUR-Lex budget 2020 (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.

Domestic policy developments in 2019-20

Overall spending

At EUR 57 billion (USD 64 billion) in 2019, the EU budget for agriculture and rural development under Title 05 Agriculture and Rural Development was mostly unchanged from 2018 levels. The proportion of spending directed towards major budget priorities also varied little from 2018 – about 4% of spending went to market intervention measures, 71% to direct payments under Pillar 1 and 23% to rural development measures under Pillar 2.

CAP transitional regulations

Much of the policy discussion at the EU-wide level in 2019 was dedicated to shaping the next version of the CAP. Negotiations continued throughout 2019, but new legislation was not in place by the January 2020 deadline required to shift to the next CAP in 2021. Instead, a transitional period is to bridge the gap between the old and the new CAP, which will not come into force before January 2022. The first tranche of regulations required for this transition package – an extension of the financial discipline provisions along with an extension of the possibility to shift funding between the two pillars – was approved by Parliament on 18 December 2019 (European Parliament, 2019[13]). The second part of the package, which is to provide details on how funds will be spent in 2021, has not yet been finalised by the Council.

Markets and sector support

In June 2019, the last of the intervention stocks of skimmed milk powder (SMP) were sold into the market. Public intervention stocks were built between 2015 and 2017 (reaching about 380 000 tonnes) following a substantial fall in prices for SMP.

Provisions for private storage aid for olive oil were approved on 11 November 2019 under the CAP’s CMO Regulation. A large olive harvest in 2018/19 in several Member States contributed to excess supply, high stock levels, and low prices, particularly in Spain, Portugal and Greece. To be eligible for the aid, bulk quantities of at least 50 tonnes of olive oil must be stored for a minimum of 180 days in any olive-oil producing Member State. The first tender was opened on 21 November 2019.

Other sector-specific initiatives focused on improving supply chain efficiency. In Italy, following a decline in prices in the sheep milk sector, the government established a fund of EUR 10 million (USD 12 million) in order to encourage quality and competitiveness through supply chain contracts, and to facilitate improved management of supply measures.

In July 2019, the Commission announced that it would provide EUR 50 million (USD 56 million) in aid to Irish beef producers through the Beef Exceptional Aid Measure (BEAM) programme (regulation EU 2019/1132). This aid was matched by national funds, for a total of EUR 100 million (USD 112 million) in assistance. Under the programme, producers could apply for aid of up to EUR 100 (USD 112) per finished22 animal up to a maximum of 100 such animals per herd, or for aid up EUR 40 (USD 45) per suckler cow, up to a maximum of 40 such animals per herd. In order to be eligible for the aid, producers were required to commit to reducing their production of nitrogen from bovine livestock manure on the holding by 5%.23 Ireland implemented an additional beef sector-specific programme in 2019 that aimed to improve both the economic and the environmental efficiency of beef production on suckler farms, called the Beef Environmental Efficiency Pilot (BEEP) programme. EUR 20 million (USD 23 million) was made available for the scheme in 2019, which included measuring the weaning efficiency of suckler cows and calves, the provision of detailed feedback on the performance of individual animals to participating farmers, and integration of this data into Ireland’s cattle breeding database.

In June 2019, exceptional support of EUR 350 000 (USD 391 784) was approved for French breeders of laying hens affected by contamination from the insecticide Fipronil in 2017.

In July 2019, exceptional support was granted for Italian egg and poultry producers in response to the outbreak of avian influenza there in 2017 and 2018. EUR 32 million (USD 36 million) in aid will be provided from EU funds, which will be matched by Italian national funds for a total of EUR 64 million (USD 72 million).

A variety of initiatives were introduced at the national level to further support for organic production in 2019. In the Czech Republic, a new national payment scheme was introduced to support the conversion of orchards to organic farming. In July in France, new rules for organic greenhouse production were agreed upon by relevant partners, including no marketing by French producers of summer vegetables between 21 December and 20 April, and that new greenhouses producing summer vegetables will be required to use only renewable energy sources beginning in January 2020, while existing greenhouses will be required to utilise renewable energy from January 2025. In Luxembourg, the government is drawing up a national organic action plan, which aims to achieve conversion of 20% of the country’s utilised agricultural area to organic production by 2025. The plan will also include an adjustment of the support provided to organic production and conversion of farmland to organic beginning with the 2020/21 crop year.

Several initiatives were undertaken in 2019 with the objective of improving market information and transparency in agri-food markets and supply chains. In June 2019, the Council endorsed regulation EU 2019/1381, updating the EU General Food Law EU 178/2002 and amending portions of eight other sector-specific regulations (EC, 2019[14]). The update mandates that the European Food Safety Authority (EFSA) publish industry studies related to product risk assessments, and to provide more transparent, public explanations for how risk management decisions are reached. The regulation was published in September 2019, and will apply from March 2021. Then in October 2019, the regulation on the reporting of agricultural prices (EU 2017/1185) was amended (EU 2019/1746) (EC, 2019[15]). While current EU law requires the reporting of prices for primary production and a few processed products, this amendment extends reporting requirements to other levels of the supply chain, including further to processors, as well as for wholesalers, traders and retailers. The new rules take effect on 1 January 2021, and will apply to the cereals, dairy, fruit and vegetable, meat, oilseeds, olive oil and wine markets. Aside from these new regulations, the European Commission inaugurated two new market observatories in 2019 – one for fruit and vegetables in October, and one for wine in November – with the goal of improving transparency and short-term market analysis of these sectors. The observatories will provide market data, analysis, short-term outlook reports and medium-term prospects. In conjunction with the observatories, periodic meetings of market experts will be convened to discuss and analyse current market conditions. While the fruit and vegetable observatory will focus on pip fruit, citrus fruit, stone fruit, and tomatoes, the wine observatory will cover all types of wine, including protected geographical indications.

A variety of food labelling laws were either drafted or came into effect in 2019. In Bulgaria, the Ministry of Agriculture introduced a new voluntary logo for agricultural products produced in mountainous regions. In July 2019 in France, the government submitted a draft decree to the European Commission on new requirements for the labelling of country of origin for honey. While the Commission determined that the decree in its current form was in violation of EU rules, the government of France is working to revise the draft to be in compliance with EU law. In September 2019, Germany decided to introduce, on a voluntary basis, the Nutri-Score food labelling system, which has already been used in France, Spain, Belgium and Portugal. The label provides an aggregate signal to consumers, based on the content of sugar, fat and salt, but also that of vegetables, fibres and proteins.

Support for quality products continues to be a priority for Member States and the European Union as a whole. In November 2019, the European Commission announced the programme of work and funding levels for initiatives dedicated to marketing and consumer awareness for quality EU agri-food products like geographical indications or organic products, allocating EUR 200.9 million (USD 225 million) for 2020, with the potential for additional co-financing from Member States. The programme of work for 2020 dedicates the bulk of this funding to expanding markets in non-EU countries with the greatest potential for growth in demand, including Canada, the People’s Republic of China (hereafter “China”), Japan and the United States. The European Commission also launched the new eAmbrosia platform for geographical indications in April 2019. This single online database consolidated the three separate existing online registries of geographical indications for agri-food products, wine, and spirit drinks into a single online database. The consolidation was completed on 10 January 2020. At the country level, controls for existing quality product schemes were strengthened in Italy in 2019, through the addition of new staff at the Ministry of Agriculture, Food and Forestry’s Control Body.

Agri-environment and climate

Various agri-environmental activities were undertaken in the European Union in 2019, intended to improve the condition of air, soil, water and biodiversity; to apply stronger regulations to agrichemical products; to draft or implement new national strategies on the bioeconomy or circular economy, including initiatives to reduce food waste; or to reduce emissions in order to contribute to climate change mitigation.

In December 2019, the European Commission presented their first proposal on the European Green Deal to Parliament, Council and various related committees (EC, 2019[16]). The proposal lays down a strategy to help the European Union become the world’s first climate neutral territory by 2050, improve the efficient use of resources by moving to a more circular economy, restore biodiversity and cut pollution through targeted actions in a number of areas (Box 11.1). Most directly related to agriculture are the “Farm to Fork” and Biodiversity strategies, which are set to be presented to the Commission in the spring of 2020.

Box 11.1. Agriculture in the European Green Deal

Seeking to ensure that the future growth of the region also considers environmental quality and sustainability, the European Green Deal lays out a multi-dimensional action plan for the future. The plan calls for three broad areas of action: transforming the EU’s economy for a sustainable future, positioning the European Union as a global leader on climate change and environmental action, and the launching of a European Climate Pact to engage the public on climate action.

In order to transform the region’s economy, the plan both acknowledges the importance of both designing a set of deeply transformative policies and mainstreaming sustainability in all EU policies. The policies to be designed cover a number of policy areas, including on climate, clean energy, circular economy, building standards, transportation and mobility, a “Farm to Fork” strategy for a healthy and environmentally-friendly food system, ecosystems and biodiversity, and a toxic-free environment. At the same time, sustainability will be mainstreamed into EU policy through the pursuit of green finance and investment, the greening of national budgets, the mobilisation of research and innovation, and the activation of education and training.

The agricultural sector will potentially be affected by a number of these policy areas, but actions under the “Farm to Fork” strategy are likely to be most relevant. As currently proposed, the strategy includes targets such as:

• Stipulating that at least 40% of CAP spending contribute to climate action

• Shifting the focus of payments from compliance to performance, rewarding producers for improved environmental and climate outcomes

• Seeking to significantly reduce the use of chemical products in agriculture

• Ensuring that actions are taken to improve the circular economy in the food value chain

• Stimulating sustainable food consumption and promoting healthy food.

In addition, the sector’s future productivity growth and sustainability goals are likely to benefit from the enhanced focus on research, innovation education and training.

Proposals in these areas are scheduled to be rolled out in the coming months, and are likely to have an influence on the final design of the future CAP.

Source: (EC, 2019[16]).

Regarding air quality, in Estonia, the Estonian National Air Pollution Control Programme for 2020-30 was introduced in March 2019. For agriculture, the programme targets cutting ammonia emissions, largely through improved manure handling, covering of manure storage facilities, and injecting liquid manure into the soil. These activities are also supported through Estonia’s 2014-20 Rural Development Plan, which contains provisions to support investments that improve manure storage and handling. In Ireland, a Code of Good Agricultural Practice for Reducing Ammonia Emissions from Agriculture was released, with the intention of helping farmers to identify appropriate measures for their individual farm enterprises that will reduce ammonia emissions. Luxembourg set a goal of reducing ammonia emissions by 22% by 2030. The government’s plan is focused on reducing particulate ammonia emissions related to the spreading of liquid manure beginning from crop year 2019/2020. To accomplish this objective, they are offering higher aid levels for producers that use slurry injectors, and they are banning tablecloth and nozzle diffuser injectors from 2025.

The Czech Republic implemented new environmental regulations aimed at improving soil conditions on 1 January 2020, restricting the area permitted to be grown in continuous monoculture to a maximum of 30 hectares as set in the new country-specific Good Agricultural and Environmental Condition of Soil standard. Compliance with this standard is required for the sowing of 2019 winter wheat. At present, these restrictions are applied only on fragile lands.

With respect to water availability and quality, on 18 December 2019, a provisional agreement was reached between the European Commission, the Council, and the Parliament on a new regulation outlining minimum requirements for water reuse. The goal of the new rules is to facilitate the use of treated wastewater for agricultural irrigation as one means of alleviating the risk of water shortages as climate conditions change. The rules introduce minimum water quality requirements for treated water, monitoring and control systems, and mandatory risk management plans for wastewater treatment plants. Formal adoption of these rules is expected in 2020. Different Member States also enacted various provisions related to water supply and quality in 2019. Denmark instituted a targeted regulation on nitrogen leaching in 2019, applying differentiated rules based on an area’s water pollution risk, allowing for better cost-effectiveness by focusing efforts on the most vulnerable areas, in line with the EU Water Framework Directive and the EU Nitrates Directive. In November 2019, the Danish government increased the requirements under this targeted regulation for 2020, after finding that the load of nitrates measured in the sea did not decline as anticipated. Elsewhere, the Estonian parliament adopted a new Water Act on 30 January 2019, which entered into force on 1 October 2019. This act clarifies and simplifies several requirements for the agricultural sector, including specifying maximum nitrogen usage levels for certain crops.24 In Greece, a joint ministerial declaration on the protection of water against pollution by nitrates from agricultural sources was signed in 2019, setting an action plan for nitrate use in vulnerable zones. Under the declaration, specific measures to address nitrate pollution are defined for each agricultural zone according to its particular soil and climate conditions, and a programme of controls and sanctions will be implemented to ensure compliance. The Parliament of Hungary adopted a new law on irrigation for agriculture in December 2019. Among other provisions, the new law codifies the legal conditions around irrigation authorisations and encourages the establishment of co-operative irrigation arrangements between farmers. Ireland’s Department of Agriculture, Food and the Marine carried out a voluntary review of Ireland’s Nitrates Derogation in 2019, and decided to make a number of changes, which included the adoption of a farm scale liming programme, mandatory use of low emission slurry spreading equipment and recording of grass production on farms. In Luxembourg, new regulations were introduced regarding the usage of certain inputs at a distance of less than 10 meters from the banks of natural watercourses.

Germany dedicated new resources to biodiversity with the approval of a new framework for the protection of insects in the agricultural landscape in December 2019. The country made available EUR 50 million (USD 56 million) in new funding (plus an additional EUR 33 million (USD 37 million) of co-funding from the Länders) for measures under the framework, including to promote the establishment of flowering areas, hedges, shrubs and orchards, and the extensive use of permanent grassland and organic farming. In addition, non-productive investments in nature conservation and measures taken by farmers within the framework of contractual nature conservation may also be eligible for support.

Several activities and policy changes were implemented in 2019 within the context of the EU Action Plan for the Circular Economy (see Box 11.2). At the Member State level, four countries reported the drafting or entry into force of national bioeconomy, circular economy or sustainability strategies for the coming years. In March 2019 in Austria, a federal level strategy on the bioeconomy was adopted, with the long-term goals of reducing fossil fuel and total energy consumption, and substituting renewable raw materials for non-renewables. In Belgium, the Flanders region updated their draft bio-economy plan in 2019 (within the context of their Vision 2050 plan) to further concretise the bioeconomy vision and align it with the update of the European bioeconomy strategy, including the development of additional biomass through improved landscape management, as well as increased focus on research and innovation to improve the bioeconomy within certain value chains. The German Federal Cabinet approved the National Strategy for the Bioeconomy in January 2020, with the objective of creating a sustainable, cycle-oriented and innovative German economy. Activities under the strategy include funding research on expanding biological knowledge and the use of biological processes and systems, supporting digitalisation and cutting-edge technologies across various disciplines, making more biogenic raw materials available to industry, and creating new potential for a sustainable economy. In Portugal, the country’s Action Plan for the Circular Economy went into effect in 2019, including activities focused on consolidating governance and objectives from the country’s Commitment to Green Growth strategy, as well as policies for air quality and climate change.

Many EU Member States also took actions in the agricultural sector to contribute to national climate targets in 2019, including the finalisation of national action plans in the Belgian region of Flanders, the Belgian region of Wallonia, Germany, Greece, Ireland, Luxembourg and Portugal (Table 11.6). Of particular note, Ireland’s Climate Action Plan sets out a decarbonisation pathway to 2030, which is consistent with the adoption of a net zero emission target by 2050. The plan targets cumulative CH₄ and N₂O emission reductions of 16.5 MtCO₂eq to 18.5 MtCO₂eq from the agricultural sector between 2021 and 2030. These reductions account for 17% of total emission reductions set by this plan over this period. In annual terms, they represent between 8-9% of the projected 21 Mt of absolute emissions from agriculture in 2030. The Climate Action Plan also targets emissions abatement of 26.8 MtCO₂eq through LULUCF actions primarily related to forestry over the period 2021 to 2030. Agricultural landholders are expected to play an important role in delivering these LULUCF emission reductions, primarily through afforestation and by reducing the management intensity of peatland.

Other countries implemented specific activities designed to reduce emissions. The government of Denmark in 2019 allocated funds for a pilot project that focuses on the provision of multiple ecosystem services of arable land, which will combine agricultural production with greenhouse gas reduction, climate adaptation, nitrogen reduction and biodiversity. The project is intended to provide experience and evidence that can be used to achieve national climate goals, including on how peatland set aside can be used for GHG reduction on a larger scale. In Finland, the government has announced plans to become carbon neutral by 2035, including by sourcing 30% of aviation fuel from biofuels and by strengthening the carbon sequestration properties of agricultural land. In France, the Ministry of Agriculture and Food earmarked up to EUR 500 000 (USD 559 692) to fund new anaerobic digestion projects on farms in April, with a view to reducing methane emissions. This move was followed in September by approval of two new digestates derived from methanisation to be used as fertilisers. Ireland established EUR 10 million (USD 11 million) in renewable energy grants for farmers under their Targeted Agricultural Modernisation Scheme, aiming to improve farm-level energy efficiency and reduce electricity use on farms by supporting investments in solar PV installation on farms, as well as the installation of LED lighting. Italy is providing investment incentives for farmers of up to EUR 25 million (USD 28 million) for biogas plants up to 300 KW that are powered at least 80% by waste produced by farms and no more than 20% by second harvest crops. The government of Spain implemented their Plan Renove in 2019, dedicating EUR 5 million (USD 6 million) to assist farmers in purchasing new machinery with lower emissions in order to contribute to reaching national climate targets. At present, more than half of agricultural machinery in Spain is more than 18 years old, and requests for aid under the programme exceeded available funds in 2019.

Box 11.2. Food Waste and the EU’s Circular Economy Action Plan

European Union activities on the Circular Economy are outlined in the Commission’s 2015 action plan for the Circular Economy. The action plan aims to ensure that the value of products is maintained where possible throughout the supply chain, and to minimise the generation of waste with a view toward developing a more sustainable, resource efficient, and competitive economy.

The plan also contains an Annex, prescribing a timetable for implementing the list of relevant actions. These actions are spread across different themes, including production, consumption, waste management and innovation. Most relevant for the agricultural sector are activities targeting the reduction of food waste, both at the EU-wide level and within individual Member States. In September, the Commission published a common EU methodology to measure food waste. Using this methodology, Member States will begin to collect data on food waste beginning in 2020, and start to report on national food waste levels beginning in 2022, with the goal of halving food waste levels by 2030 (the target noted in SDG 12.3). In conjunction with these new measurement standards, in December 2019 the EU Platform on Food Losses and Food Waste published new “Recommendations for Action in Food Waste Prevention”, including the development of national food loss and waste strategies, integrating food loss and waste reduction into food policy or climate action strategies, raising awareness on food waste prevention for consumers, and strengthening the capacity for innovation related to food loss and waste.

At the Member State level, programmes within broader national food waste reduction strategies and frameworks were either instituted or advanced in the Belgian region of Flanders, the Belgian region of Wallonia, Germany, Luxembourg, and Spain. In addition, in order to move toward compliance with the 2018 revised EU waste legislation and earlier guidelines on food donations, various Member States implemented new rules or regulations intended to facilitate food donations, including France, Latvia, and Slovakia.

Sources: (EC, 2015[17]); (EC, 2018[18]); (EC, 2019[19]); (EU Platform on Food Losses and Food Waste, 2019[20]); (EC, 2018[18]); (EC, 2017[21]).

Table 11.6. Member State climate plans and strategies

	Strategy	Targets	Main Activities or objectives
Flanders (Belgium)	VEKP Climate Plan	35% reduction in emissions by 2030 compared with 2005 levels	Increased support for energy efficiency and renewables Promotion of precision fertilisation and guidelines for farmers Implementation of an agreement on enteric emissions for cattle Adaptation of fertilization practices Adaptation of animal feed
Wallonia (Belgium)	Air-Climate-Energy Plan (PACE)	40% reduction in emissions by 2030 compared with 1990 levels	Sustainable management of inputs (including Promotion and use of more climate neutral fuels Improved territorial management More efficient energy consumption by agricultural holdings
Germany	Climate Protection Programme	Climate mitigation goal: Reduction in emissions to 55% of 1990 levels by 2030; greenhouse gas emissions neutrality by 2050; reduce agricultural sector emissions by 14% by 2030 compared to 2020 levels	Reduce the nitrogen surplus Derive energy production from organic residuals in biogas production Extend organic agriculture Reduce emissions in livestock production Increase the energy efficiency of agro-technology Maintain or build up humus/soil organic matter levels in arable land Reduce food waste Conservation and sustainable management of forests and timber use Protect permanent grassland Protect peatlands/organic soils and reduce the use of peat in growing media
Greece	National Plan for Energy and Climate	16% reduction in emissions by 2030 compared with 2005 levels	Agricultural and livestock waste management Development of advanced biofuels Promotion and use of renewable energy sources Actions targeting energy efficiency improvement, including restrictions on importing used cotton harvesting machines manufactured before 2002
Ireland	Agriculture, Forest and Seafood Climate Change Sectoral Adaptation Plan	Build resilience to the effects of climate change in these sectors	Ensure a joined up approach to adaptation planning Raise awareness of the impacts of climate change in these sectors Reduce the vulnerability of these sectors Embed adaptation planning into agriculture, forest and seafood sectoral policies
Ireland	Climate Action Plan	8-15% reduction in emissions by 2030 compared with 2017	Establish a Climate Action Delivery Board to ensure compliance Set specific decarbonisation targets for different sectors, including power generation, waste, transport and agriculture Achieve annual reduction of 8-9% of projected agricultural GHG emissions in 2030
Luxembourg	National Energy and Climate Plan	40% reduction in emissions by 2030 compared with 2050 levels	Measures to reduce GHGs, including methane from the agricultural sector
Portugal	Climate Change Adaptation Programme of Action	Improve agricultural water use efficiency by 80% by 2030, e.g.	Sets out nine action lines to reduce the main climate change impacts and vulnerabilities Prioritises adaptation measures Suggests indicators Advises on potential sources of funding

Source: Individual Member State submissions.

Animal health and welfare

Measures at both the Europe-wide and individual country level sought to enhance animal health and welfare in 2019. First, following the publication of a report on the status of animal welfare in the European Union by the European Court of Auditors in November 2018, the European Commission in May 2019 announced that they would conduct an evaluation of their current animal welfare strategy. At the country level, in the Czech Republic, a new programme was introduced that provides aid to farmers to improve the welfare of suckler cows. The government of Estonia put into place their action plan to reduce microbial antibiotic resistance in veterinary medicine for 2019-23, which includes treatment guidelines for veterinarians and the creation of training, monitoring, surveillance and research plans. In September in Germany, the Federal Cabinet approved the introduction of an animal welfare label.

Apiculture

In June 2019, the European Commission announced that they would raise the amount of funding available for national apiculture programmes to EUR 120 million (USD 134 million) over the 2020-22 programming period, up from EUR 108 million (USD 121 million) over 2017-19 (EC, 2019[22]). This amount will be matched by Member State funds, and can be used to support education, research, honey quality improvement, business support, or fighting hive-damaging parasites. Accordingly, several Member States initiated new apiculture programmes in 2019. Bulgaria reported that the European Commission approved their national apiculture programme for 2020-22 in June 2019. Their programme includes support for mobile beekeeping expenditures, training, funding for trade fairs, inspections for pesticide residues, and research on combatting certain diseases affecting bees. Similarly, Estonia’s national apiculture programme for 2020-22 was approved in July 2019. Estonia’s programme focuses on preserving biodiversity and crop yields, and includes measures to register beehives in the national register of farm animals, as well as a new apiculture market monitoring initiative.

Digitalisation

EU Member States reported using digital technologies to help achieve policy objectives in a number of areas in 2019 (Box 11.3). With respect to digital-focused policy changes, however, the only policy development of 2019 was the approval of a new strategy for the digitalisation of the agro-food, forestry and rural sectors in Spain. The strategy’s objective is to reduce the urban-rural digital gap through two primary mechanisms: training and technical assistance, and improving the interoperability of data from the administration, research and private sectors.

Box 11.3. Applications of digital technologies for agriculture in the European Union

Digital technologies hold many potential applications for agricultural policy, including by enabling new data-driven monitoring and compliance systems, allowing the design of highly differentiated and targeted policies, improving the measurement of risk and management of uncertainty, and enabling a better understanding of the environmental impacts of agriculture in order to formulate policy objectives which more holistically capture these impacts. EU Member States indicated their dedication to using digital technologies in agriculture with the signing of a declaration of co-operation on “A smart and sustainable digital future for European agriculture and rural areas” on the EU’s 2019 “Digital Day” on 9 April 2019. The declaration recognised the potential of digital technologies for confronting many of the challenges faced by the EU’s agro-food sector, pledged to strengthen support for research on applications of digital technologies in agriculture, set the goals of creating a Europe-wide infrastructure for innovation on smart food applications and a European dataspace for smart agro-food applications, and resolved to maximise the impact of European support in achieving policy objectives by better utilising digital technologies.

A number of specific initiatives undertaken in 2019 provide some examples of how digital technologies are increasingly being utilised in EU Member States.

• The Belgian region of Wallonia tested a pilot procedure to evaluate compliance for basic payments, crop diversification and the maintenance of fallow land using data obtained from the Sentinel Copernicus Satellites, as a replacement to in-person checks. The pilot project covered 15% of Wallonian territory, and 2 666 producers.

• The Belgian region of Flanders used a digital monitoring control system in 2019 for the whole region to assess basic payment eligibility, exemptions for greening and support for young farmers.

• The Ministry of Agriculture in Bulgaria began an upgrade of its electronic animal registration, identification and traceability system (VetIs), after onsite verifications early in 2019 indicated that there were major discrepancies between existing records and the situation on farms.

• As part of their country’s action plan to reduce antimicrobial resistance in veterinary medicine, the government of Estonia will create an e-database for reporting antibiotic use by animal species by 2023.

• In September 2019, lawmakers in the Sicilian Regional Assembly in Italy voted to approve a blockchain platform to improve the traceability of food and agricultural products.

Sources: (OECD, 2019[23]) (EC, 2019[24]).

Natural hazard response

EU rules for responding to adverse events under state aid provisions were revised in 2019, with the Commission raising the maximum amount of support that individual farmers can receive to EUR 20 000 (USD 22 388) per farm over three years, without the need for prior approval by the European Commission. Keeping these new limits in mind, national aid was approved in 2019 for producers facing a variety of circumstances. Adverse weather and natural hazards resulted in ad hoc payments or other forms of relief to producers in several member states. Primarily in response to hot and dry conditions, in August, Member States and the Commission agreed to a series of support measures, including advancing CAP payments and providing derogations on certain greening obligations in order to allow farmers to produce sufficient fodder for animals. In Austria, the federal and regional governments provided EUR 22 million (USD 25 million) in support in the form of direct aid and interest subsidies in 2019 for drought-related income losses in 2018. For farmers in Bulgaria, EUR 2 million (USD 2 million) in compensation was made available from the Bulgarian state agricultural fund after a March frost heavily damaged apricot and strawberry production. Farmers in the Czech Republic received around EUR 80 million (USD 90 million) in compensation in 2019 for damaged incurred during the drought of 2018. Furthermore, additional compensation of EUR 2.0 million (USD 2.2 million) was approved for the compensation of fruit farmers whose production was damaged by 2019 spring frosts. Compensation for impacts of the 2018 drought was also made available in Finland, where EUR 20 million (USD 22 million) in national support was paid out for the event during the spring of 2019. In France in August 2019, producers in 69 departments received approval for derogations to use fallow land to feed livestock. A programme in Hungary provided compensation for producers whose means of production were damaged by tornadoes and severe thunderstorms in the summer of 2019. In Italy, EUR 20 million (USD 22 million) in 2019 was allocated to help producers recover from various natural hazards. In response to drought conditions in 2018, farmers in Latvia received EUR 4.4 million (USD 5 million) in 2019. In Romania, support specific to beekeepers affected by extreme weather events during March-May 2019 was announced, with up to EUR 20 000 (USD 22 388) available per beneficiary. Two temporary support programmes were implemented for the beekeeping and hops sectors in 2019 in Slovenia, where EUR 0.5 million (USD 0.6 million) was provided to beekeepers to compensate for losses due to adverse weather conditions. Sweden provided SEK 1.08 billion (EUR 102 million, USD 114 million) in crisis support to primary producers in 2019 for damages incurred during the 2018 drought. An additional SEK 30 million (EUR 2.8 million, USD 3.2 million) was made available for development projects specifically in the horticultural sector as a means of alleviate the effects of the 2018 drought.

Support to specific groups of farmers

Several EU initiatives were undertaken in 2019 with the goal of assisting young farmers. In April 2019, the European Investment Bank (EIB) launched a loan package of EUR 1 billion (USD 1.1 billion) earmarked for agriculture and the bioeconomy, targeting largely small and medium agricultural enterprises, as well as young farmers. These loans will be channelled through partner financial institutions, who will match the EU financing. The EIB package is comprised of three separate programmes: a EUR 700 million (USD 783.6 million) programme targeting agricultural small and medium enterprises for which 10% of loans are earmarked for farmers under the age of 41, a pilot loan of EUR 75 million (USD 84 million) designated solely for young farmers and a EUR 200 million (USD 224 million) pilot loan programme for agriculture and climate action. By December 2019, 95% of the financing had already been approved for lending. At the Member State level, in Romania, the government announced that it would offer financial support for operations employing young people in agriculture, and also released guidelines on promoting the employment of young persons in the agriculture, aquaculture and food sectors. Support to young farmers in Spain nearly tripled from EUR 18.9 million (USD 22.3 million) in 2018 to EUR 53.6 million (USD 60 million) in 2019 thanks to the application of the Omnibus Regulation, and the country also established a new programme to help provide capacity building through internships of young farmers to more experienced farms.

Other country level programmes targeted different, specific groups of farmers. In Portugal, new support measures were launched for small scale, family farmers,25 including providing a lump sum assistance for weekly market trips and providing investment assistance for the modernisation of equipment. In Spain, the Ministry of Agriculture sought to strengthen the role of women in agriculture through the implementation of a new law on shared ownership of farms, the provision of EUR 785 000 (USD 878 717) support to women farmers’ organisations, and through the organisation of a competition for innovation excellence for women. The eleven winners of the competition were each awarded a prize of EUR 150 000 (USD 167 908).

Fuel tax relief

The government of the Czech Republic continued to increase expenditures on fuel tax relief. In 2018, fuel tax relief was extended to fuel used in livestock production, and in 2019 this support was extended to fuel used in fruit, vegetable and wine production.26 In October 2019, Romania extended its list of institutions eligible to receive compensation on fuel excise duties to include research and development institutes in the agricultural sector. The Slovak Republic reinstituted their fuel tax reimbursement scheme for farmers – the programme had previously been abolished in 2011. In Sweden, the CO₂ tax rate applied to diesel fuel used in agricultural machinery was reduced to SEK 1 930 (EUR 182, USD 204) per cubic meter beginning from July 2019, with a tax rate of SEK 2 430 (EUR 229, USD 257) per cubic meter set to apply from July 2019 to December 2019.

Regulations

Various regulations were implemented in 2019 with a view toward improving the competitiveness, traceability and transparency of EU agricultural supply chains. In April 2019, a new directive banning unfair trading practices in the agricultural industry (EU 2019/633) was released, with the new rules set to take effect from 2021. The rules are intended to protect smaller suppliers with limited market power against larger buyers with greater resources. Practices banned under the new rules include payment delays beyond 30 days for perishable goods and 60 days for other products, cancelling orders for perishable products on short notice such that suppliers cannot find an alternative outlet, requiring the supplier to pay for product deterioration or loss that occurs on the buyer’s premises and the misuse of trade secrets by buyers.

New rules intended to thwart food fraud and strengthen food inspections came into force on 14 December 2019, consolidating a dozen existing laws. These rules, laid down in the Official Controls Regulation published in 2017 (EU 2017/625) , establish a system of risk-based controls along the supply chain, authorising national authorities to perform inspections at all segments of the supply chain for all animal, plant, feed and food products. Some of the features of the regulation include creating an integrated system of border controls, establishing EU reference laboratories, improving co-operation between Member States, requiring countries to carry out unannounced inspections in order to detect fraudulent or deceptive practices, and improving transparency by periodically publishing the results of said inspections.

New EU rules for wine-making practices were finalised in April 2019 as part of the implementing regulation for EU 1308/2013 (EC, 2019[25]). These new rules were meant to simplify rules on authorised wine-making practices in the bloc, bring them into line with oenological practices advocated by the International Organisation of Vine and Wine and ensure that EU regulations on wine are in compliance with obligations under the Lisbon Treaty.

In July 2019, new regulations on fertiliser entered into force, following their publication in the Official Journal in June (EU 2019/1009). This new regulation harmonises rules and standards on the sale of fertilisers made from phosphates, organic, and secondary raw materials inside the European Union. Among other provisions, the law limits allowable ranges of certain contaminants, such as cadmium, in mineral fertilisers. These new rules for fertiliser were drafted in the context of the European Union’s strategy on the circular economy, with the intention that waste products can be transformed into nutrients that can be utilised for crop production.

A variety of rules and regulations on the use of agrichemical products also came into effect in 2019. First, a new Commission Directive (2019/782) was adopted in May 2019 establishing harmonised risk indicators for pesticides to facilitate the estimation of trends in risk from pesticide use. The risk indicators laid out in the Directive will facilitate Member State compliance with Directive 2009/128 on the sustainable use of pesticides, allowing Member States to calculate the indicators, identify trends in the use of certain active substances, identify areas where interventions may be needed, and make the results of the analyses and evaluations publicly available. In December 2019, approvals for insecticide products chlorpyrifos and chlorpyrifos-methyl were not renewed, with the decision published in the Official Journal in January 2020 (EC, 2020[26]). Use of the products is set to be phased out by April 2020. Approvals were also not renewed for desmedipham (EC, 2019[27]) and dimethoate (EC, 2019[28]) (products used primarily for sugar beets), which are scheduled to be phased out by July 2020. At the country level, the government of Estonia approved their national action plan for the sustainable use of pesticides for 2019-23 in May 2019. Among other measures, the plan focuses on the implementation of integrated pest management practices, and aims to ensure that chemical plant protection products are used only in cases where alternative control methods are not available. France began deploying its Ecophyto II + plan, through which the country aims to halve agrochemical use by 2025. Measures in place under the plan include improved transparency via publishing monitoring indicators earlier each year and the imposition of safety distances ending the spraying of products close to schools and nursing homes. France also announced a decision to ban two products that function similarly to neonicotinoids – flupyradiforone and sulfoxaflor – by the end of 2019. In Greece, a ministerial declaration was signed in 2019 on a National Action Plan for the Sustainable Use of Pesticides, with the goal of improving the control and sanction system on the use of professional pesticide equipment. An emergency ordinance establishing an institutional framework for the sustainable use of pesticides was approved in September 2019 in Romania. The ordinance sought to bring Romania in line with EU Directive 2019/782 (outlined above), by establishing harmonised risk indicators for pesticides as a means of achieving long-term goals of reducing the risks and effects for pesticide use on human health and the environment.

Additional Member States have moved to phase out or restrict the use of glyphosate. In July, members of the Austrian parliament voted for a glyphosate ban. However, the law did not come into force due to a breach of the European Union’s notification directive. The government of France has pledged to phase out glyphosate by the end of 2020 for uses for which non-chemical alternatives exist. In that vein, in December 2019, the French health and environment agency, ANSES, announced that it would withdraw market licenses for 36 glyphosate-based products (accounting for almost three-quarters of the glyphosate products sold in France), such that their use would not be permitted after the end of 2020. The government of Germany also enacted a plan to phase out glyphosate by December 2023, as part of an action programme on insecticides. Glyphosate will be banned in Luxembourg beginning in January 2021, with the government there introducing an additional per hectare payment starting in November 2019 to all holdings who stop using the product for the 2019/2020 crop year.

Risk management

Several Member States made changes to their risk management policies in 2019. In response to drought events in 2018, the government of Austria further developed its crop and livestock insurances, with an increase of insurance subsidies up to 55% of premiums. In Estonia, the government chose to implement for the first time rural development measure 17.1, which provides for financial contributions to premiums for insurance. The government provided EUR 1 million (USD 1.1 million) for the programme, which covers a variety of crops and commodities, but compensation was only paid out for cattle in 2019. In August, the government of France announced that it would pay higher indemnities for damage to animal herds due to large predators, with compensation to be provided for both direct losses (animals killed) and indirect losses (e.g. animal weight loss due to stress). In Slovenia, the insurance subsidy rate for field crops was raised to 50% in 2019, up from 40% in 2018, while the rate for livestock was raised to 30%, up from 20% in 2018. Subsidies for permanent crops like olives, grapes and hops was left unchanged at 50%.

Response to animal and plant disease threats

In response to animal and plant disease threats, Member States implemented both preventative and compensatory measures in 2019. At the beginning of 2019, the European Commission committed EUR 154 million (USD 172 million) for the surveillance, control and eradication of serious animal and plant diseases, including African Swine Fever (ASF), bovine tuberculosis, salmonellosis, and Xylella fastidiosa. Preventative measures included activities intended to both monitor disease incidence, as well as to prevent disease spread. In January 2020, Member States supported a European Commission proposal that consolidated preventative actions in countries affected by an outbreak of H5N8 avian flu. Prior to that, in the spring of 2019, authorities in Belgium took actions to contain an outbreak of H3N1 avian flu in the Flemish poultry sector. Various measures were taken to prevent the spread of the virus and to mitigate economic consequences, including the culling of animals on affected farms.

Countries have continued to take measures to prevent, contain, or compensate producers for the consequences of African Swine Fever (ASF). In Belgium, the government provided investment support for hygiene infrastructure and the installation of double fences in lieu of providing exceptional support to the pig sector as a result of low prices experienced in Wallonia due to ASF. The government of Bulgaria took a range of actions in an attempt to contain ASF, including the culling of large numbers of animals. In July, authorities established 20 km buffer zones around all commercial pig farms, and called for the voluntary slaughter of animals located on small farms without adequate biosecurity within that buffer zone, offering compensation for culled animals. They also allocated additional funding to border checks, depopulation of wild boars, stricter epizootic controls, and disinfection. In January 2020, all animal movements between pig farms and slaughterhouses was halted so that official checks could be carried out and appropriate disease control measures put into place. In Estonia, eligibility for support for investments in processing and marketing of agricultural products was extended to persons with hunting rights as a means of ensuring the development of facilities to manage and process game, helping to control wild boar populations and limit the spread of ASF. In Luxembourg, preventative measures included the construction of a fence near the Belgian border, the establishment of a new surveillance zone, and the launching of an information campaign to remind hunters and farmers to respect biosecurity rules. With respect to compensatory measures, the Czech Republic announced a new scheme to aid in the cost of the control and eradication of ASF, as well as to provide assistance to pig farmers whose herds have been affected by the disease. In addition, the country announced in February 2019 that it had succeeded in eradicating ASF in its territory.

Measures to control and respond to plant disease were also taken in 2019. First, European-wide emergency measures to prevent the introduction of citrus black spot disease were extended in February, requiring special import rules for citrus fruit from countries reporting the disease, including Argentina, Brazil, Uruguay and South Africa. At the country level, in Italy, EUR 5 million (USD 6 million) in assistance was made available to the olive oil sector as a response to the Xylella crisis as mortgage assistance for affected farms. An additional EUR 300 million (USD 336 million) has also been designated to assist farms for recovery. These measures followed the January 2019 decree that required the felling of all infected trees. In Slovenia, EUR 1.7 million (USD 1.8 million) in assistance was allocated to growers of hops for the prevention and management of a viroid disease affecting production.

Tax

Various Member States made changes to their tax regimes in 2019 in ways that impacted the agricultural sector. In Austria, the country’s tax reform is planned to lower the minimum social security contribution base for small farmers, abolish the sparkling wine tax, and introduce a tax measure for risk management in the form of a multiannual accounting period for the taxation of agricultural income. An income averaging scheme was put into place in Ireland, allowing producers there to pay tax based on the average of the previous five years of farming profits and losses. In Italy, the excise tax for beer was reduced from EUR 3.00/hl (USD 3.4/hl) to EUR 2.99/hl (USD 3.3/hl), and excise duties on beer produced in breweries with production of 10 000 hl or less were reduced by an additional 40%. Also in Italy, certain fiscal provisions were extended to additional family members who actively work on the farm.

Institutional changes and strategic plans

EU Member States made several institutional changes in 2019 to change programme delivery, bring together existing institutions or establish new ones. In the Czech Republic, from January 2020 an agreement between the Ministry of Agriculture and the State Agricultural Intervention Fund (SAIF) will result in SAIF processing payments for programmes financed from national funding sources in addition to its original mandate of administering funds from EU sources. In addition, the agreement designates SAIF the responsible organisation for statistical data collection for harvests, as well as having some responsibilities for emergency management in the aftermath of floods or droughts. Estonia announced that its Veterinary and Food Board would be combined with their Agricultural Board beginning on 1 January 2021. In France, on 1 January 2020, the new National Research Institute for Agriculture, Food and the Environment (INRAE) was created through a merger between the National Institute of Agricultural Research (INRA) and the National Research Institute of Science and Technology for Environment and Agriculture (IRSTEA). The mandate of the new INRAE is to support a transformation in French agriculture to become more sustainable, low-carbon, and resource efficient by producing research, innovation, education and support for more effective policies in this area. In Hungary, the Ministry of Agriculture established a new agency dedicated to irrigation in July 2019 – the General Department of Irrigation Development. Organised under the National Centre for Agriculture, this new department will be responsible for organising the demand of producers for water, and will operate as the agency in charge of irrigation administration. Finally, in September 2019, the government of Romania approved the establishment of a new Plant Genetic Resources Bank for vegetables, flowers, aromatic and medicinal plants. The Bank will be located in Buzau, and will be under the supervision of the Ministry of Agriculture.

A number of strategic plans covering a variety of topics were also developed in 2019. Austria developed new codes of behaviour for visitors to alpine pastures, as well as standards for livestock farmers. The government of Estonia approved their Programme for Plant Breeding 2020-30 on 10 December 2019. This programme describes the most pressing issues facing Estonian agricultural crop cultivation, and sets the objectives of the programme and the activities required to achieve them. A new National Programme on Food and Nutrition was launched in France in September, which includes goals such as the reduction of salt in foods, and the launch of a promotional campaign to encourage healthier behaviours. The government of Spain approved a National Strategy for the Demographic Challenge in March 2019, which focuses on reversing the depopulation of rural areas.

Trade policy developments in 2019-20

The European Union’s simple average MFN applied tariff rate for agricultural products was 12% in 2018, up from 10.8% in 2017 (WTO, 2019[29]). This higher average MFN applied tariff rate was the result of a more detailed wine nomenclature due to the HS 2017 revisions, as no changes were made in EU MFN applied rates in 2018. 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 reference prices. Duties on these products have been set at 0% since 3 March 2018 (EC, 2018[30]).

During the marketing year 2018/19, the European Union also administered 60 import tariff rate quotas (TRQs). During that time period, 12 were filled at 80-100%, including those for certain cuts of beef, certain cuts of chicken and poultry, millet, and biscuits. However, half of TRQs had a fill rate of less than 10% (WTO, 2019[31]).27

The price-based special safeguard system was operationalised in marketing year 2018/19 for certain frozen chicken carcasses, boneless chicken cuts, frozen boneless turkey cuts, dried eggs not in shell, 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, oranges, clementines, lemons, table grapes, apples, peaches, plums and cherries (WTO, 2019[32]).

In January 2019, the European Union instated new tariffs on Indica rice imported from Cambodia and Myanmar. The measure followed 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. Tariffs were set at EUR 175 (USD 196) per tonne in the first year, dropping to EUR 150 (USD 168) in the second year and EUR 125 (USD 140) in the third year (EC, 2019[33]).

In March 2019, in accordance with Commission Regulation No. 1549/2004 regarding the arrangements for importing rice, EU imports of 264 000 tonnes of rice triggered the doubling of import duties on husked rice from EUR 30 to EUR 65 per tonne (USD 34 to USD 73 per tonne). The tariff levels had not been revised since March 2012. Imports of husked rice from September 2019 to February 2020 fell to a level requiring a further revision in import duties, and from 9 March 2020, duties were set at EUR 42.50 per tonne (USD 47.60 per tonne).28

In April 2020, in accordance with Commission Regulation No. 642/2010 on rules of application for cereal sector import duties, import duties on maize, sorghum and rye were raised from EUR 0 per tonne to EUR 5.27 per tonne (USD 5.9 per tonne).29 Regulation EU 642/2010 stipulates that duties on these three cereals is based on the difference between a European reference price and the world benchmark price for maize. The benchmark price – the US maize price, c.i.f. Rotterdam – fell substantially in the preceding weeks, leading to the revised duty. Duties for these three products had been set to EUR 0 since 3 March 2018.

In June 2019, the European Union and the United States reached an agreement regarding the administration of the EU’s hormone-free beef quota. In 2009, the two trading partners reached a memorandum of understanding under which the European Union opened a 45 000 tonne quota of non-hormone treated beef to qualifying suppliers, including the United States. However, no provisions for partner-specific quotas were included in the original agreement, leading the United States to contend that the agreement did not provide sufficient market access. In response, the European Union agreed to reserve 35 000 tonnes of the quota for the United States, phased in over a 7-year period. Other major supplier countries (including Australia, Argentina and Uruguay) have not challenged the new allocation. Members of the European Parliament agreed to the deal on 28 November 2019, with the new quotas set to take effect in 2020.

Free Trade Agreements

In October 2019, the European Union released its third annual report on the implementation of EU Free Trade Agreements (EC, 2019[34]). The report noted that, in 2018, EU agro-food trade with FTA partner countries represented more than 40% of total agro-food imports, and 30% of total EU agro-food exports. Moreover, data indicate that EU agro-food exports under FTAs grew 2.2% from 2017 to 2018, while imports fell less than 1%. The report also indicated that recently-concluded FTAs have increased the legal recognition of EU GIs in third countries, and negotiations have also provided a forum for discussing and addressing trade barriers due to sanitary and phytosanitary measures. The bloc currently has 33 agreements in force, and negotiations are underway with additional trading partners.

The European Union–Japan Economic Partnership Agreement entered into force on 1 February 2019. The agreement substantially reduces tariffs and trade barriers for both partners. The European Union is scheduled to eliminate duties on 99% of tariff lines from Japan. Tariffs on beef, tea, alcoholic beverages and other priority products are to be eliminated (most upon the agreement’s entry into force). Once fully in place after 21 years, the agreement is set to liberalise tariffs on 85% of the EU’s agro-food products exported to Japan including the elimination of duties on 90% of agricultural products (EC, 2017[35]; EC, 2017[36]). Duties on most remaining products will be reduced over time, while Japan has opened TRQs for others. Aside from market access, the agreement establishes recognition of more than 200 EU Geographical Indications (GIs), as well as more than 50 Japanese GIs for wine, spirits and agricultural products.

The European Union–Singapore Free Trade Agreement came into force on 21 November 2019. Most agro-food imports already enter Singapore duty-free. However, the agreement will eliminate Singapore’s remaining import tariffs for agro-food products – notably beer, stout and samsu – on the agreement’s entry into force. The European Union will eliminate duties on most agro-food imports on the agreement’s entry into force, and duties on most remaining products – including certain fruits and vegetables, duck meat and pork – will be gradually eliminated in four or six stages. Duties on imports of some products will not be reduced, however, including for fructose sugar, certain sugar confectionaries and prepared or preserved sweetcorn. Aside from market access, the agreement indicates that Singapore will set up a system to register GIs, and once registered, around 190 EU products will enjoy enhanced protection there.

On 30 June 2019, the European Union and Viet Nam signed a bilateral free trade agreement, the EU-Viet Nam Free Trade Agreement. This agreement is pending the approval of the Vietnamese National Assembly, after the European Parliament ratified the agreement in February 2020. The agreement includes improved market access for Vietnamese agricultural commodities with the progressive reduction of duties over a maximum period of seven years. The European Union is set to open duty-free Tariff Rate Quotas for 30 000 tonnes of milled rice; 20 000 tonnes of husked rice and 30 000 tonnes of fragrant rice, as well as quotas for sugar, baby corn, garlic, mushrooms, manioc starch and eggs. 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 over a period of ten years, including for chicken, dairy, beef, wine, spirits, chocolates, pastas, apples, wheat, and olive oil. 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, at a comparable level to that of EU legislation. Vietnamese GIs will also be recognised as such in the European Union, and the agreement will allow new GIs to be added in the future.

After more than 20 years of negotiations, in June 2019 negotiators reached a political agreement on a European Union–Mercosur (comprised of Argentina, Brazil, Paraguay and Uruguay) free trade agreement. The text must still undergo a legal revision before being incorporated into the wider EU-Mercosur Association agreement, and the package still requires approval by the European Parliament and Council, in addition to ratification by the Mercosur member parliaments. Under the terms of the agreement, the members of Mercosur will gradually eliminate duties on 93% of agro-food products imported from the European Union, while the European Union is set to gradually eliminate duties on 82% of agro-food products. The European Union will also provide duty-free access quotas for some goods, including a 99 000 tonne carcass-weight equivalent quota for beef, 180 000 tonnes for poultry, 25 000 tonnes for pork, 60 000 tonnes for rice, 45 000 tonnes for honey and 1 000 tonnes for sweetcorn, all to be phased-in over six stages. In addition, the European Union will eliminate the in-quota tariff rate for the existing 180 000 tonne quota for Brazilian sugar for refining. Both blocs will open reciprocal TRQs for cheese (30 000 tonnes), milk powders (10 000 tonnes) and infant formula (5 000 tonnes). The agreement also establishes legal protection for more than 350 EU GIs, while 220 GIs from Mercosur will gain protection in the European Union.

After 47 years of membership, on 31 January 2020, the United Kingdom officially left the European Union. The departure of the United Kingdom – dubbed “Brexit” – has been negotiated under a Withdrawal Agreement. The two have entered into a transition period, slated to last until 31 December 2020, under which EU law will continue to apply in the United Kingdom. The future nature of the partnership between the United Kingdom and the European Union (with respect to areas such as regulatory harmonisation, trade in goods and services, and movement of people) has yet to be jointly agreed, with negotiations continuing during the transition period.

International Agreements on Geographical Indications

Two international agreements limited to geographical indications were also signed in 2019. The European Union and China reached a bilateral agreement on GIs on 6 November 2019, with each party agreeing to protect 100 of the other’s GI products. European products gaining protection under the agreement include Champagne, Feta, Irish whiskey, and Prosciutto di Parma, while the list of Chinese products includes Pixian Bean Paste, Anji White Tea, Panjin rice and Anqiu Ginger. The agreement is pending the approval of the European Parliament and Council, and is expected to enter into force in late 2020. On 26 November 2019, the European Union deposited official documents at the World Intellectual Property Organisation (WIPO) in Geneva to become a member of the multilateral Geneva Act of the Lisbon Agreement on Appellations of Origin and on geographical indications (GIs). The Geneva Act modernises the 1958 Lisbon Agreement for the Protection of Appellations of Origin and their International Registration by extending the scope of protection from solely appellations of origin to all GIs, and also permits membership by international organisations – such as the European Union – and not solely individual countries. Through the European Union’s membership in the Geneva Act, all EU GIs will now be eligible for protection in other countries party to the Act. The European Union became a member upon entry into force of the Geneva Act on 26 February 2020.

Disputes

The European Union requested consultations with the United States on 29 January 2019 concerning the imposition of countervailing and anti-dumping duties on ripe olives from Spain, as well as the legislation that was the basis for the imposition of those duties. On 16 May 2019, the European Union requested the establishment of a panel, which was composed on 18 October 2019 (WTO, 2019[37]).

On 1 April 2019, an agreement in the form of an Exchange of Letters between the European Union and China regarding tariff concessions on certain poultry meat products was approved by the Council, in connection with WTO dispute DS 492 (EC, 2019[38]). The agreement granted specific market access rights to China for two TRQs for processed poultry products, and entered into force on 1 April 2019 (WTO, 2019[39]).

The European Union requested consultations with Colombia on 15 November 2019 as a result of the anti-dumping duties that Colombia had imposed on imports of certain preserved or frozen potatoes originating in Belgium, the Netherlands and Germany (WTO, 2019[40]). On 18 February 2020, the European Union requested that a panel be established in the dispute.

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Notes

← 1.  This chapter covers policy developments through April 2020. As such, it was not possible to include more recent policy developments, such as the European Commission’s May release of the Biodiversity and Farm to Fork strategies.

← 2.  This section covers measures taken on or before 28 April 2020.

← 3.  Firms in the agriculture and agri-food sectors may also benefit from a variety of other programmes implemented at EU level, including financial assistance provided to Member States to cover the costs of short-term work schemes (under the Support mitigating Unemployment Risks in Emergency programme), direct support for small and medium-sized businesses, and EUR 40 billion in increased financing availability from the European Investment Bank Group to be directed toward bridging loans, credit holidays, or other measures to alleviate capital market constraints.

← 4.  Additional non-financial measures contained under CRII+ included postponement of Member State annual report submissions for Rural Development Programmes, and waving the requirement to amend Rural Development partnership agreements in cases where national RDPs were modified.

← 5.  EAFRD is the source of funding for payments under CAP’s Pillar 2.

← 6.  This paragraph should not be interpreted as an exhaustive list of which measures were taken in individual countries.

← 7.  A joint agreement of the German Federal Ministry of Food and Agriculture and the Federal Ministry of the Interior, Building and Community provides exceptions on COVID-19 related entry restrictions to allow up to 40 000 seasonal workers to travel from abroad to Germany in both April and May, provided that the travel is by air and only from designated airports. The expenses for the transportation (including flights), health checks, accommodation and additional costs are to be covered by employers.

← 8.  Although the United Kingdom is no longer a member of the European Union, it was still a member in 2019, and is thus covered in the ensuing chapter on the European Union. As there is no stand-alone chapter for the United Kingdom, response measures for that country have been covered here.

← 9.  Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the European Union: The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

← 10.  Co-financing rates vary by measure and by Member State.

← 11.  Member States commonly have one RDP, while Belgium and Finland each have 2, France has 30, Germany has 15, Italy has 33, Portugal has 3, Spain has 19 and the United Kingdom has 4.

← 12.  Member States with average direct payment per hectare below 90% of the EU average can transfer up to 25% of rural development fund to direct payments.

← 13.  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.

← 14.  The SAPS is applied all Member States joining since 2004 but Slovenia, Malta, and Croatia, which implement the BPS in addition to the EU15.

← 15.  The BPS is “regionalised” in five Member States [Greece (3 regions), Spain (50 regions), France (2 regions), Finland (2 regions), United Kingdom (separate regions within Scotland and England)], meaning that a different payment rate per hectare applies depending on the region.

← 16.  Member States can choose their preferred method to calculate their SFS payments – lump-sum payment (an equal amount is paid to all farmers in the scheme), payment due each year (individual farmers receive a single payment equivalent to what they would have been due under other payment schemes), and payment due in 2015 (individual farmers receive a single payment which depends on the amount they 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. For more information, see (DG Agri, 2017[41]).

← 17.  These criteria are: low temperature, dryness, excess soil moisture, limited soil drainage, unfavourable texture and stoniness, shallow rooting depth, poor chemical properties and slope.

← 18.  Payments are granted on a maximum number of hectares, which varies by implementing 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: no payment below 3 ha, from 3 to 30 ha; Portugal (as from claim year 2017): 5 ha; Romania:30 ha with a smaller per hectare payment rate for the first 5 ha; and United Kingdom (Wales): 54 ha.

← 19.  Belgium (Wallonia), Croatia, France, Germany, Portugal and Romania.

← 20.  The Czech Republic, Denmark, Cyprus, Estonia, Finland, Latvia, Luxemburg, Malta, the Netherlands, Slovenia, Slovakia, Spain, Sweden and the United Kingdom (England).

← 21.  Austria, Germany, Finland and Sweden.

← 22.  That is, an animal that has been fattened and is ready for market.

← 23.  This reduction can be achieved either through reduced stocking levels, or through herd restructuring, as laid out in Annex 3 under the programme’s Terms and Conditions. This 5% reduction would be measured over the period 1 July 2020 to 30 June 2021 compared to baseline levels over the period 1 July 2018 to 30 June 2019.

← 24.  As one example, farmers outside of nitrate sensitive areas are allowed to use more than 170 kg of manure nitrogen to fertilise crops with higher needs for fertilisation, such as maize and herbaceous grasses.

← 25.  In 2018, Portugal introduced a Family Farming Statute, defining “family” farms as those for which the operator is at least aged 18, has taxable income of no more than the fourth bracket for personal income tax (corresponding to annual taxable income between EUR 20 261 and EUR 25 000 (USD 23 912 and USD 29 505) in 2018), may not receive more than EUR 5 000 (USD 5 597) from CAP aid, and must also be in charge of a farm whose buildings are “rustic or mixed”. In addition, at least 50% of labour for the operation must be provided by family members.

← 26.  Tax relief support is provided ex post – producers fill a declaration on the amount of compensation to be paid according to their structure of production and some official declared normative of fuel consumption. In this manner, the support can be differentiated by product.

← 27.  From 1 January 2018, results of import and export tariff quota allocation are published on the European Commission’s website. See: https://ec.europa.eu/info/food-farming-fisheries/key-policies/common-agricultural-policy/market-measures/trqs_en.

← 28.  See Implementing Regulations (EU) 2019/371 and (EU) 2020/383.

← 29.  See Implementing Regulation (EU) 2020/573.