12. European Union
Producer support in the European Union (EU), measured by the Producer Support Estimate (PSE), is close to the OECD average. After falling from the 1990s through the early 2000s, EU support to producers as a share of gross farm receipts stabilised since 2010 and stood at 19% in 2019-21.
While trade protection measures, including import and export licensing, tariff rate quotas (TRQs) and special safeguards remain in effect for several sectors, support in the form of price distortions declined substantially over the last two decades. In 2019-21, market price support (MPS) accounted for 18% of support to producers, down from 46% in 2000-02.
Most support to producers is budgetary, largely in the form of decoupled direct payments. Policy reforms undertaken over the past three decades substantially reduced the level of support to the sector and shifted the composition of support to less production and trade-distorting measures. As of 2021, nearly half of budgetary support is based on historical entitlements, while one-third is based on current production and 17% on input use. Moreover, 54% of payments to producers are contingent on mandatory environmental constraints and an additional 14% come from voluntary agri-environmental schemes with conditions beyond the mandatory requirements.
Expenditures for general services to the sector (GSSE) in 2019-21 averaged 12% of total support, or 3% of the value of agricultural production – a decrease compared to 2000-02 and below the OECD average. While the relative importance of GSSE slightly declined over the past two decades, the composition of GSSE expenditures shifted. Expenditure on agricultural knowledge and innovation systems grew nine percentage points to 51% of total expenditures in 2019-21. Expenditures on marketing and promotion also rose (now responsible for 25% of GSSE), while support for development and maintenance of infrastructure and public stockholding remained static in absolute terms since 2000-02.
Total support to the sector declined in relative terms over the past 20 years. In 2019-21, total support was estimated at 0.7% of GDP, compared to 1.0% in 2000-02.
The COVID-19 pandemic was the focus of much agricultural policy activity in 2021, though emphasis shifted from emergency responses to financial recovery. On 28 January 2021, the EU decided to prolong the State Aid Temporary Framework adopted on 19 March 2020 until 31 December 2021, to support the economy in the context of the coronavirus outbreak. Member States utilised this option to provide policy support packages for their most affected sectors. The European Commission (EC) adopted exceptional measures to support the wine, fruit and vegetable sectors, including increasing support for risk management tools such as harvest insurance and mutual funds, and extending the flexibility measures until 15 October 2022.
Preparations for the next Common Agricultural Policy (CAP) programming period (2023-27) continued in 2021. In January, the EC published a list of potential agricultural practices that the eco-schemes could support in the future common CAP, and in May the Commission released its recommendations for Member States. The reform for a “fairer, greener, more animal friendly and more flexible CAP” passed European Parliament approval and was adopted by the Council in December 2021.
In July 2021, the European Commission adopted a package of proposals to make climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas (GHG) emissions at least 55% compared to 1990 levels by 2030. This was a significant increase in ambition from the EU’s first Nationally Determined Contribution (NDC) target of at least 40% and this package will target increased mitigation from land use. Several Member States, including Belgium, Denmark, Germany, Portugal and Ireland, announced national climate action plans in 2021, which included ambitious sectoral GHG emission targets ranging from 11% to 55% absolute emission reductions1 by 2030 for their agricultural sectors. Member States consider the reformed CAP as the main vehicle to support these ambitions.
The EU-UK Trade and Cooperation Agreement entered into force on 1 May 2021 after approval by the European Parliament and adoption by the Council. Free Trade Agreements are still under negotiation with Australia, the People’s Republic of China (hereafter “China”), Indonesia, New Zealand and the Philippines.
Despite a large part of its budget earmarked for climate action, the current CAP programme has not seen significant reductions in EU agricultural emissions in the last decade. For agriculture to contribute to the ‘EU Fit for 55’ objectives, future EU CAP climate expenditure should link to agricultural emission reduction targets at national and EU level. The new carbon farming initiative and increased focus on emission hotspots (such as peatlands) is a positive step in this regard.
Policy reforms over the past three decades substantially reduced the level of support to the sector and shifted the composition to less production and trade-distorting measures. Despite substantial progress reforming support for the sector, significant support continues for some products – particularly for beef and veal, poultry meat and rice. Potentially most-distorting forms of support still represent nearly a quarter of support to producers. It is recommended that funding for such supports be repurposed towards the European Green Deal objectives.
Agricultural productivity growth in the European Union remains low. While some of this can be attributed to strict EU and national environmental regulations, regulations also limit the use of some agricultural innovations. The policy focus on innovation is a positive development, and progress in the use of sustainably productive technologies and continued increase in GSSE innovation expenditures could increase EU productivity and also contribute to environmental objectives.
Two positive resilience developments were noted in 2021. The EC published a contingency plan in late 2021 to ensure food supply and food security in times of crisis. This European Food-Security Crisis-Preparedness and Response Mechanism (EFSCM) has rendered itself useful in light of the challenges posed by the post COVID-19 pandemic phase and Russian aggression against Ukraine. The EU also updated its climate adaptation strategy, for which agriculture is a key sector. However numerous ad hoc assistance packages announced under the Temporary Framework for State Aid indicate that either the current risk management policy toolbox is not appropriate for dealing with catastrophic events or the incentives to take up existing tools are misaligned. The new national CAP strategic plans provide an opportunity for policy makers to address these shortcomings.
Overview of policy trends
The CAP has been the European Union’s agricultural policy framework since its institution in 1962, although the mix of policy instruments has evolved substantially over time (Table 12.2). The Treaty of Rome that established the European Community outlined the CAP in 1957 (OECD, 2011[1]; European Parliament, 2021[2]). Agriculture made up a much larger share of Europe’s economy at the time, and the income gap between rural and urban households was increasing. Moreover, the region was a net food importer with concerns about securing adequate food supplies during the Cold War (Grant, 2020[3]). In this context, the Treaty of Rome laid down five main objectives for the CAP:
1. To increase agricultural productivity by promoting technical progress and ensuring the optimum use of the factors of production, in particular labour
Measures targeting these objectives were financed from the European Agricultural Guidance and Guarantee Fund (EAGGF), split into separate Guidance and Guarantee sections. Different rules governed the two: the Guidance section financed operations related to structural policy and development of rural areas, while the Guarantee section funded expenditures on market and price policies (European Parliament, 2021[4]).
From the CAP’s institution until the 1990s, support prices were high compared to world market prices. Combined with an unlimited buying guarantee, European farmers produced increasing surpluses. The cost of these policies was large, however, such that by the 1980s the European Union introduced quantitative production restrictions in the form of quotas on milk production.
The CAP’s first major reform occurred in 1992, in conjunction with negotiations on the General Agreement on Tariffs and Trade (GATT) and following the result from the US-EU soya panel. The MacSharry Reform brought a major shift in how the public sector delivered support to agriculture. Instead of supporting production (through intervention buying and export subsidies), the regime shifted to supporting producer incomes directly, to close the gap between supply and demand, and reduce overall expenditures (European Parliament, 2021[5]). This wide-ranging reform included reducing cereal intervention prices, introduced compensatory payments per hectare for cereals or per head for livestock, and introduced a mandatory set-aside scheme to take land out of production. In conjunction with the reform of budgetary support measures through the MacSharry package, MPS also declined thanks to EU commitments under the 1995 Uruguay Round Agreement on Agriculture. Namely, bound tariffs were gradually reduced, and other border measures were imposed (including replacing variable import levies with ad valorem or specific tariffs and tariff rate quotas) (OECD, 2011[1]).
Subsequent reforms built on the foundation of the MacSharry Reform, reducing distortive support to the agricultural sector or changing how support is delivered. The Agenda 2000 reform focused on aligning EU and world prices, offsetting the reduction of price support with increased direct aid to producers (European Parliament, 2021[5]). In addition, the Rural Development Regulation was introduced as Pillar 2 of the CAP. Finally, this package instituted the first environmental cross-compliance conditions for granting aid.
The 2003 Fischler Reform2 further developed and consolidated these measures. It saw the introduction of the single payment scheme (SPS), decoupling most support from production (European Parliament, 2021[5]). Furthermore, receiving the full payment required cross-compliance related to the environment, animal welfare, plant protection and food safety. This package also introduced modulation, allowing Member States to transfer funds between the two pillars to reinforce rural development objectives. The reform also prioritised financial discipline, freezing the budget of Pillar 1 and imposing annual compulsory ceilings. This coincided with the splitting of the budget into the European Agricultural Guarantee Fund (EAGF) to finance Pillar 1 and the European Agricultural Fund for Rural Development (EAFRD) to finance Pillar 2 from 2007. Additionally, this round of reform introduced the single common market organisation (CMO) in 2007, which codified the regulation mechanisms of the existing CMOs. Reform programmes for specific commodities (cotton, hops, olive oil, tobacco, sugar, fruits and vegetables, and wine) were introduced from 2003 to 2008, with the aim of reducing distortive payments and restoring market-based incentives (OECD, 2011[1]).
Measures taken under the 2009 Health Check sought to continue the direction of the 2003 reform. Namely, decoupling of aid continued and nearly all payments (with the exception of suckler cow, sheep and goat premia) were included into the decoupled direct payments - SPS. It also further reduced market intervention for a number of products, abolished set-aside and introduced phase-out of milk quotas. Additional flexibility for direct payments was introduced as well (OECD, 2011[1]).
The 2013 Reform set out a more global, integrated approach to agricultural support, undertaken through four lines of action (European Parliament, 2021[5]):
1. Converting decoupled aid into a multifunctional support system with aid directed toward specific objectives. Accordingly, the SPS was replaced by a system of decoupled payments with seven components: (1) a basic payment; (2) a greening payment for environmental public goods; (3) an additional payment for young farmers; (4) a ‘redistributive’ payment for first hectares of farmland; (5) support for areas with specific natural constraints; (6) aid coupled to production; and (7) a simplified system for small farmers.
2. Consolidating the two CAP pillars, with mostly decoupled direct aid and market measures funded through Pillar 1, and rural development funded through Pillar 2 and co-financed by the Member States.
3. Consolidating CMO tools into safety nets in case of market disruption or price crisis, and ending other supply control measures, namely the sugar and milk quotas.
4. A more integrated, targeted and territorial approach to rural development, including simplifying the range of available instruments to focus on certain core objectives.
Political agreement between the European Parliament and the EU Member States in the Council was reached on transitional rules for the CAP for 2021-22 on 27 November 2020. These transitional rules are based on the principle of continuity of the 2014-20 CAP rules, while also including new elements to ensure a smooth transition. From 2023-27, although with a similar annual budget as the transitional period, the current Pillar 1 and Pillar 2 system will be included in Member States’ national CAP strategic plans (covered later in the chapter).
All told, through the rounds of CAP reform, the absolute budget figure for the CAP more than doubled from 1990 to 2010 (partially related to additional Member States joining the European Union), it has remained relatively stable in absolute terms since then. At the same time, CAP expenditures as a share of the total EU budget declined sharply, from 65.5% in 1980 to 35% in 2020 (EC, 2021[6]).
Total support to the agricultural sector as percentage of agricultural gross value-added in the European Union largely comes from budgetary allocations. Market price support declined significantly from 1986 through the 2000s, but remains mostly unchanged since around 2010. The most substantial change to PSE composition began in the mid-2000s after the Fischler reform decoupled most payments to farmers from production (Figure 12.4).
Main policy instruments
The Common Agricultural Policy is the 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[7]).
The CAP typically covers a seven-year period – currently 2014-20, but extended to the end of 2022 with the passage of transitional CAP rules in 2020. It comprises two pillars: the European Agricultural Guarantee Fund 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 and EU Member States.3 Member States deploy RDPs over the seven-year CAP period. The CAP 2014-20, while in many ways the continuation of the CAP 2007-13, offered a number of novel features (OECD, 2017[7]).
The implementation of the CAP 2014-20 started with measures under Pillar 1, followed in 2016 by implementation in the Member States of 114 national and regional Pillar 2 RDPs.4 In 2018, the CAP simplification took place within the revision of the EU financial rules, also known as the Omnibus regulation (OECD, 2018[8]).
The overall budget for the CAP during the years 2014-20 was EUR 408 billion (USD 465 billion), of which 76% was initially 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 envelope5 between the two pillars. As of December 2018, twelve transferred funds from Pillar 1 to Pillar 2 while five transferred funds from Pillar 2 to Pillar 1, with a net result of EUR 3.76 billion (USD 4.28 billion), or less than 1% of expenditures transferred from Pillar 1 to Pillar 2 over the period (EC, 2020[9]).6
Pillar 1 defines and funds market measures under the common market organisation, as well as direct payments – mostly decoupled per hectare payments that do not require production (see next paragraph), but also payments to a few specific sectors, such as fruits and vegetables. To this end, for the entire period of the CAP 2014-20, entitlements to direct payments were assessed and allocated to those deemed to be active farmers.
The Basic Payment Scheme (BPS) and the Single Area Payment Scheme (SAPS) – the BPS equivalent that offers a uniform decoupled per hectare payment rate in all but three Member States that joined the European Union after 20007 – made up 46% of the EU Pillar 1 direct payments envelope in Budget Year 2021 (Table 12.3). However the proportion spent by member States on these two schemes varies significantly, and reflects their spending choices on optional measures under Pillar 1. Both the BPS and the SAPS require cross-compliance with environmental and other standards, though exceptions apply. Additional conditions are attached to the per-hectare Greening payment that accounts for 27% 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, rising to 25% from 2018 onward) in addition to forfeiting a share of the greening payment on the non-compliant area.
In the ten Member States that apply the SAPS, commodity-specific payments may be granted from national budgets within limited envelopes. Transitional National Aid (TNA) is mostly disbursed as decoupled payments. In claim year 2019 (the most recent year for which these data are available), only 15% of TNA was paid as coupled support (EC, 2020[10]). It may apply on a per area basis to arable land, hops and starch potatoes; a volume basis to milk; and a headage basis to livestock. Member States may review TNA budgets and supported commodities on an annual basis. The maximum TNA payments allowed decreased gradually from 75% of the 2013 level of SAPS aid in 2015 to 50% in 2021.
As the CAP 2014-20 is implemented, the gap in per hectare payment rates of the BPS and the SAPS will narrow, both between countries (external convergence) and between farmers and regions within countries (internal convergence8). Internal convergence applies to BPS when a flat rate is not yet applied, 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 lets Member States 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 take-up of the VCS vary greatly, both in terms of the level of support and the commodities supported. On several occasions, Member States reviewed VCS budgets and commodity attributions, making some minor adjustments. All except Germany chose to offer VCS, using 10% of the EU direct payments budget on average during the 2019-21 period. This compares to 3% spent previously under Article 68 coupled support, as reported in the EU general budgets.
A top-up payment to young farmers in addition to the BPS and SAPS applies in all Member States. In 2021, this payment accounted for 1.3% 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 chose to attribute a portion of their rural development envelopes to support young farmers, representing 4.5% of total planned rural development expenditures (ENRD, 2016[11]). The bulk of this spending is directed toward business development and investments.
Fifteen Member States chose to offer small farms simplified payment attribution conditions – the Small Farmers Scheme – that waives requirements attached to the greening payment and cross-compliance. The payment cannot exceed EUR 1 250 (USD 1 424) per farm and, depending on the method chosen by the Member State, the overall envelope may be limited to 10% of national direct payments.9
Denmark and Slovenia implement the Pillar 1 direct payment to Areas with Natural Constraints (ANC). Under this payment, ANC are defined based on eight biophysical criteria.10 Denmark uses 0.3% and Slovenia 1.6% of their national direct payments envelope for ANC payments (EC, 2019[12]). 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 and accounts for 19% of Pillar 2 public expenditure funds (including Member States’ contributions from national budgets) in 2021. In the past, Member States used up to 140 different criteria for assessing ANC status for Pillar 2 payments. However, these were consolidated into the same eight biophysical criteria that apply to Pillar 1 ANC payments.
Nine Member States or regions have chosen to grant higher payments to the first hectares11 under the so called redistributive payment, using 4% of the European Union’s direct payments envelope, as reported in European Union’s 2021 general budget.
Member States that implement the redistributive payment may opt-out of so-called “degressivity” and six Member States and regions did so.12 Under degressivity, BPS amounts above EUR 150 000 (USD 170 932) 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. Fourteen13 applied the minimum reduction. Ten Member States used the option to increase the amount exempt from the 5% reduction by the value of salaries paid. A further ten Member States have chosen to apply a full cap on the BPS at levels varying from EUR 150 000 (USD 170 932) to EUR 600 000 (USD 683 728).
A Crisis reserve is earmarked to be used in case of emergency. It is funded from the Pillar 1 direct payments budget. If unused, the envelope reverts for distribution as Pillar 1 direct payments in the same year. The crisis reserve is renewed each year and to date has never been used 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 the development of local agricultural production with 1% of the direct payments envelope in 2021.
Pillar 1 also funds measures that support commodity markets, representing 4.7% of the overall agriculture and rural development budget in 2021. Prices paid to EU domestic producers averaged 4% above world market prices in 2019-21.
While the possibility for public intervention for cereals (namely common and durum wheat, barley, and maize) exists, the last intakes of cereals into public storage occurred during the 2009/10 marketing year (EC, 2013[13]). 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, maize and paddy rice can be opened under special circumstances by means of tendering. Public intervention also applies to paddy rice. Until 30 September 2017, sugar was supported with production quotas, coupled with a minimum price for sugar beets. After the end of the sugar quota regime, provisions for agreements between sugar factories and growers were maintained, and white sugar remained eligible for private storage aid. The support regime for cereals and sugar also includes trade protection through tariffs and 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 utilise export subsidies. The possibility to grant export refunds has been completely abolished in the 2021 CAP Reform.
Fruits and vegetables are eligible for voluntary coupled support and commodity specific payments; they are also supported through various market measures mainly through Producer Organisations. 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, and 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 measures apply at farm level while others are provided to producer organisations or the sector at large. For olive oil and flax fibre private storage may be activated as an optional scheme. In the CAP 2014-20, recognition of producer and inter-branch organisations expands 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 school children covers consumption of fresh fruits and vegetables, processed fruits and vegetables, and banana products. The scheme’s budget grew rapidly from EUR 29 million (USD 33 million), when it was implemented in 2010, to EUR 117 million (USD 133 million) in 2016. A similar scheme supported milk consumption for schoolchildren, with a budget of EUR 64 million (USD 73 million) in 2016. In August 2017 both schemes merged under the title “School Schemes” and the budgets combined into EUR 216 million (USD 246 million) in 2021.
In the dairy sector, intervention prices are used for butter and skimmed milk powder (SMP), while import tariffs are applicable to all milk and dairy products Intervention purchases cannot exceed 50 000 tonnes for butter, and 109 000 tonnes for SMP, respectively representing 2% and 7% of production in 2021. Above those limits, purchase is made by tender. Intervention purchases were opened for both products as a response to sector shocks due to COVID-19, prior to which no intervention purchases were made for butter since 2009, while the last intervention purchases for SMP took place in 2018.
Floor prices,14 tariffs and TRQs support the beef market. Import protection provides support for pig meat. The market support regime for sheep meat comprises 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. Indeed, private storage was opened for butter, SMP, cheese, beef and sheep meat in 2021 in response to the COVID-19 emergency (see Domestic policy responses to the COVID-19 pandemic). Furthermore, specific provisions are made for milk and milk products.
A system of authorisations for new vine planting support the wine sector. Since January 2016, new vine planting 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 had until 31 December 2020 to transition to the new system. The sector is also supported through promotional measures in both the European Union and third countries, restructuring and conversion of vineyards; compensation for green harvesting; setting up of 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) funds15 in Member States through partnership agreements. The EAFRD finances 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 12.4). Pillar 2 funds are implemented through national (or regional) RDPs. RDPs also support projects that use the LEADER approach (Liaison Entre Actions de Développement de l’Économie Rurale) 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 was delayed, and by 2018 most payments for programmes within the RDP 2007-13 had 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 RDPs that cover the entire duration of the CAP cycle. In their plans, Member States could choose from a menu of 19 measures to meet the six priority areas of Pillar 2.16 Two conditions apply: (1) 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 (2) another 5% must be spent on the LEADER approach.
At the aggregate, 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 2014-20 in the vast majority of Member States.
The launch of the European Innovation Partnership for Agricultural productivity and Sustainability (EIPAGRI) in 2012 was followed by integrating the Horizon 2020 programmes specific to research and innovation in agriculture into the CAP 2014-20. Horizon 2020 programmes relevant to agriculture focus 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 increased substantially since it was initiated in 2013, from EUR 1 million (USD 1.1 million) to EUR 257 million (USD 293 million) in 2019. A total of EUR 3.8 billion (USD 4.3 billion) is available for the period. Horizon 2020 was replaced by Horizon Europe for 2021-27, in which EUR 9 billion (USD 10.6 billion) of funds have been earmarked for sustainable food systems.
Programming for CAP 2014-20 ended in 2020. However, its structure remains in place for 2021-22 under transitional rules based on the principle of continuity while negotiations for the next CAP were concluded (see next section).
The European Commission presented its proposal for the common agricultural policy (CAP) reform in 2018, introducing a new way of working to modernise and simplify the EU’s policy on agriculture. Following extensive negotiations between the European Parliament, the Council of the European Union and the Commission, agreement was reached and the new CAP was formally adopted on 2 December 2021 (EC, 2021[14]). It is due to be implemented from 1 January 2023. The new CAP is based on a more flexible performance and results-based approach that takes into account local conditions and needs, while increasing the EU’s ambitions in terms of sustainability, including social sustainability, which will be addressed through the new concept of social conditionality (i.e. farmer payments will be linked to compliance with certain labour laws). It is built around ten objectives, which are also the basis upon which EU Member States design their CAP strategic plans.
Member States will implement the new CAP with a CAP strategic plan at national level. Each plan will combine a wide range of targeted interventions, through decoupled direct payments addressing the specific needs of that Member State and deliver tangible results in relation to EU-level objectives, while contributing to the ambitions of the European Green Deal (EC, 2019[15]). Member States are required to produce a thorough assessment of what must be done, based on a strengths, weaknesses, opportunities and threats (SWOT) analysis of their territory and agri-food sector. Member States were given until 31 December 2021 to submit their national CAP strategic plans. Following this, the Commission has six months to approve the plans ahead of their implementation in January 2023. The approval process is based on the criteria laid down in the new CAP strategic plan regulation (EP, 2021[16])
The Commission will assess whether the Member States’ CAP strategic plans contribute to, and are consistent with, EU legislation and commitments in relation to climate and the environment, including those laid out in the Farm to Fork (EC, 2020[17]) and biodiversity strategies (EC, 2020[18]).
The Commission provided each Member State with tailor-made recommendations, accompanied by a communication (EC, 2022[19]). These recommendations are to assist policy makers in the drafting of the national CAP strategic plans by identifying the key areas on which each Member State should focus. Based on an analysis of their agricultural sector and rural areas, the recommendations aim to ensure:
The achievement of the ten specific CAP objectives, touching upon environmental, social and economic challenges, as well as a cross-cutting objective on knowledge and innovation.
The contribution to the Green Deal ambitions and more specifically six Farm to Fork and biodiversity strategy targets. These are quantified EU level targets on the use and risk of pesticides, sales of antimicrobials, nutrient loss, area under organic farming, high diversity landscape features and access to fast broadband internet. The Commission asks EU countries to determine specific national values for these targets and align their CAP strategic plans to them.
By early April 2022, all 27 EU Member States had submitted and published their National CAP strategic plans for the 2023-2027 period (EC, 2022[19]).
In addition to the CAP, the European Union’s trade policy plays an important role in supporting the European agriculture sector, through the use of a number of measures (covered in more detail later in this chapter). The European Commission published a number of reports in 2021 on the impact of free trade agreement on the EU agri-food sector.17 18
Climate change mitigation policies in agriculture
In July 2021, the EU adopted a package of proposals to make climate, energy, land use, transport and taxation policies fit for reducing net GHG emissions by at least 55% compared to 1990 levels by 2030 (EC, 2021[20]). This package is part of the EU’s revised NDC.19
There are no sector-specific targets at EU level for emissions from agriculture. Mitigation efforts for non-CO2 GHGs emitted by all sectors outside the ETS are covered under the EU’s Effort Sharing Decision (ESD) (Decision No 406/2009/EC) and CO2 emissions relating to forestry, wetlands, cropland and grassland management, addressed primarily under the Land Use, Land Use Change and Forestry (LULUCF) Decision (Decision No 529/2013/EU) to 2020. The LULUCF Decision provides guidance and accounting rules for Member States to complete their obligations. Member States report greenhouse gases emitted on their territory using activity data linked to sources of emissions (e.g. fertiliser usage, animal types and numbers) with the relevant emission factors.
Following the 2013 CAP reform, the “sustainable management of natural resources and climate action” is now one of the CAP’s three objectives, which address climate under both pillars. Climate-friendly land use and management practices, including investment in climate action and capacity building are supported through a mix of mandatory and voluntary instruments.
Agriculture accounts for 10.5% of EU GHG emissions. Agricultural emissions20 comprise methane (54%) and nitrous oxide (46%). Emissions from agriculture fell by more than 20% since 1990, although they remain largely unchanged since 2010, while agricultural production continues to grow.
In 2021, several Member States announced agricultural sectoral emission targets. Belgium announced a National Climate Framework to reduce GHG emissions, covering 2021-30. This framework includes a chapter on agricultural GHG emissions, which has a target of a 25% reduction in agriculture GHG emissions by 2030 (versus a 2005 baseline). Ireland’s “The Climate Action Plan 2021” set a target to reduce overall national emissions 51% by 2030 and reach net-zero emissions no later than 2050. This includes a target of 22-30% reduction in agriculture emissions by 2030 compared to a 2018 baseline, and the measures and actions to achieve this reduction. On 4 October 2021, Denmark reached parliamentary agreement by a broad coalition of political parties on a green transition of the agricultural sector. The agreement contains a binding climate target for the agricultural and forestry sector of 55% to 65% CO2eq emissions reduction compared to 1990 by 2030. In June 2021, Germany’s parliament passed a revised Climate Change Act with a target of 31-34% reduction in agricultural GHG emissions relative to 1990 by 2030. Portugal established objectives for sectors not covered by EU ETS, including a GHG emission reduction goal for agriculture of 11% compared to 2005 levels by 2030.
Other Member States, while not having explicit sectoral emission targets for agriculture, will need the sector to contribute to National Effort Sharing decision targets. In Finland the government set a 29% GHG emissions reduction target from 2019 to 2035. This includes agriculture’s GHG emissions in the effort sharing sector and GHG emissions related to agricultural land use in the LULUCF sector. The main instrument for GHG emission reductions will be the national CAP strategy plan measures over the 2023-2027 financing period.
France’s Agriculture Ministry presented an action plan in 2021 to fulfil the 2020 French Low Carbon Strategy, which has targeted an 18% reduction by 2030 in agricultural emissions, compared to a 2015 baseline. This plan includes six sets of actions: (1) accelerating the use of improved agricultural practices that mitigate GHG emissions; (2) developing the carbon sequestration potential of soils and forest biomass; (3) sustaining demand and consumption of low impact food products; (4) fostering climate change adaptation in agriculture and forest supply chains; (5) teaching and innovating via R&D on alternative production methods; and (6) guaranteeing a high level of environmental responsibility (starting at the Ministry). The Netherlands’ new coalition government agreed to allocate an amount of EUR 25 billion (USD 29.4 billion) cumulative until 2035 for a transition fund to tackle environment and climate challenges in agriculture and nature.
The EC made proposals on 15 December 2021 for Sustainable Carbon Cycles to remove, recycle and sustainably store carbon (EC, 2021[21]). Regarding agriculture, the EC set out three sets of action to support carbon farming: (1) promoting carbon farming practices under the CAP and other EU programmes, such as LIFE and Horizon Europe’s “Soil Deal for Europe” research mission; (2) standardising the monitoring, reporting and verification methodologies for carbon farming, to allow development of voluntary carbon markets; and (3) providing improved knowledge, data-management and tailored advisory services to land managers.
Estonia started to develop a methodology for audits of its farms in 2021 to measure carbon footprints and their key products, and to recommend improvements. France launched the Carbon Diagnostic Coupon (Bon Diagnostic Carbone), with a budget of EUR 10 million (USD 11.76 million), to be allocated to recently settled farmers (five years or less). Applicants can get a 90% price reduction on a diagnostic that measures their GHG emissions and their potential to store carbon, and the development of an action plan and accompanying support to reduce GHG and increase carbon sequestration with the methods of the Low-Carbon Certification (Label Bas Carbone).
Domestic policy developments in 2021-22
Overall spending
The EU budget for agriculture and rural development in 2021 was EUR 55.71 billion (USD 65.5 Billion),21 a small increase of EUR 0.31 billion compared to 2020. Total expenditure under Pillar 1, was EUR 40.4 billion (USD 47.5 billion) (76.8%), with EUR 15.3 billion (USD 18 billion) (23.2%) allocated under Pillar 2.
Markets and sector support
On 23 March 2021, the European Commission presented an Action Plan for the development of organic production (EC, 2021[22]). Its overall aim is to boost the production and consumption of organic products, to reach 25% of agricultural land under organic farming by 2030, as well as to increase organic aquaculture significantly. Structured around three axes - boosting consumption, increasing production, and further improving the sustainability of the sector - 23 actions are put forward to ensure a balanced growth of the sector. A number of Member States also announced initiatives or supports for their domestic organic sectors. Denmark has allocated DKK 3.6 billion (EUR 484 million, USD 569 million) to organic farming area support, to help achieve its ambition of doubling the organic farming area by 2030. A strategy will also be developed with the aim of achieving a two-fold increase of the domestic organic consumption and exports. Poland drafted “A Framework Action Plan for Organic Food and Farming for 2021–2027”.
There has been follow-up in Member States to the Directive on trading practices in the agricultural and food supply chain adopted by the European Parliament and the Council on 17 April 2019. The Directive aims at protecting farmers, farmers organisations and other weaker suppliers of agricultural and food products against stronger buyers. Certain Member States introduced or strengthened legislation related to enhancing the transparency and information across different actors in the food supply chain, often transposing the directive into national law. Spain passed the new Food Chain Law 16/2021 to improve the bargaining position of farmers in the food chain, enhancing the transparency and information across the different actors in the chain. Poland adopted the new Act on the Prevention of the Unfair Use of a Contractual Advantage in the Trade in Agricultural and Food Products. In October, France adopted the EGAlim 2 law to support farm income. In December, Austria published the Law on the improvement of local supply and conditions of competition. Italy approved the Legislative Decree no. 198/2021, on unfair commercial practices in business-to-business relations in the agricultural and food supply chain.
On 15 December 2021, the European Commission allocated EUR 185.9 million (USD 218 million) to its 2022 Work Programme to fund promotion activities for EU agri-food products at home and abroad. The programme focuses on campaigns that are in line with the ambitions of the European Green Deal, supporting objectives from the Farm to Fork strategy, Europe’s beating cancer plan, the EU organic action plan and the Communication on the European citizens’ initiative “End the cage age”. Campaigns will also highlight the high safety standards of EU agri-food products, as well as the diverse and traditional range of products supported by EU quality schemes. A number of quality promotion initiatives were launched in Member States as well.
Agri-environment and sustainability
In addition to the EU specific policy initiatives on climate change mitigation, covered in a previous section, the European Union and its Member States had a number of agri-environment and sustainability policy initiatives in 2021, some of which also included climate change objectives.
The “European Green Deal” (EGD), proposed by the European Commission on 11 December 2019 (EC, 2019[15]), aims to “boost the efficient use of resources by moving to a clean, circular EU economy and stop climate change, revert biodiversity loss and cut pollution, through a just and inclusive transition”. Key actions in 2021 relating to the roll-out of the EGD included:
On 17 November 2021, the European Commission adopted new proposals for curbing EU-driven deforestation; facilitating intra-EU waste shipments to promote circular economy and tackle the export of illegal waste and waste challenges to third countries and; developing a new Soil strategy, to have all European soils restored, resilient, and adequately protected by 2050 (EC, 2021[23]).On 4 December 2021, the European Commission issued policy guidance for a fair transition towards climate neutrality (EC, 2021[20]), to complement the package on delivering the Green Deal presented in July.
On 7 December 2021, the European Commission published a staff working document on the information policy on the CAP, which indicated the potential for further complementarity between CAP information measures and those of the European Green Deal (EC, 2021[24]).
In addition to an increased focus on climate action within the European Union and its Member States, a number of other agri-environment and sustainability policy developments were initiated or launched in 2021. On 7 July 2021, The EU Code of Conduct on Responsible Food Business and Marketing Practices, which is one of the first deliverables of the Farm to Fork Strategy and an integral part of its action plan, was launched (EC, 2021[25]). It sets out the actions that the actors ‘between the farm and the fork’, such as food processors, food service operators and retailers, can voluntarily commit to undertake to tangibly improve and communicate their sustainability performance.
In November 2021, the EU soil strategy for 2030 was launched (EC, 2021[26]), which sets out a framework and concrete measures to protect and restore soils, and ensure that they are used sustainably. It sets a vision and objectives to achieve healthy soils by 2050, with concrete actions by 2030. It also announces a new Soil Health Law by 2023 to ensure a level playing field and a high level of environmental and health protection. A number of Member States also announced initiatives on soil conservation and protection. There is a new Bund-Länder Agreement in Germany on climate protection “moorland soil protection” (“Moorbodenschutz”). Financial incentives are envisaged for the rewetting of peat soils on a considerable scale. The programme also includes measures for reducing the use of peat in growing media, with the goal being to largely eliminate the use of peat in horticulture within this decade. Austria agreed the implementation pact “Soil Strategy for Austria - Strategy for the Reduction of Further Land Consumption and Soil Sealing” by 2030. Denmark stated the ambition of restoring and rewetting 100 000 hectares of carbon rich peat soils by 2030 with the purpose of reducing both GHG and nitrogen emissions from agricultural soils and forests in Denmark. To help achieve this ambition, DKK 4.4 billion (EUR 592 million, USD 696 million) allocated to restore natural hydrology on 50 500 hectares of agricultural land and extensive management of 38 000 hectares, including previous political agreements. Ireland announced EUR 2.7 million (USD 3.17 million) in funding will be provided for the expansion of the National Agricultural Soil Carbon Observatory (NASCO). Data collected by the Observatory will underpin the development of a carbon farming model that aims to reward actions that remove carbon and store it in soils.
In 2021, a number of Member States had policy initiatives related to reducing deforestation in agricultural supply chains. Austria has developed a protein strategy to reduce the dependence on imports and to expand domestic soy production, with the goal of halving soy imports by 2030. In France, significant support has been provided in 2021 for increased domestic vegetal protein production as part of the French recovery plan. This includes support for purchasing agro-equipment to produce vegetal proteins, a new fund of EUR 20 million (USD 23.5 million) that offers support for oilseeds that produce proteins (oléaprotéagineux, such as rapeseed) and sowing of forage legumes. In addition, support was provided for the development of vegetal protein supply chains: EUR 50 million (USD 58.8 million) has been allocated to projects supporting the functioning and development of supply chains. Denmark also launched a joint Action plan against global Deforestation, with the objective that Danish agricultural production should not lead to unintended deforestation or the loss of biodiversity beyond Danish borders. The government aims to ensure that all imported soy and palm oil is verified and documented as deforestation free by 2025. The Netherlands launched its National Protein Strategy in December 2020, which aims to increase the level of self-sufficiency of new and existing vegetable proteins over the next five to ten years in a sustainable way. The government also intends to invest in research into new protein-rich sources for both humans and animals, and stimulate the extraction of proteins from residual flows, which is consistent with its circular agriculture22 vision.
Biodiversity was also an important sustainability theme in 2021. Key actions in 2021, within the Biodiversity action plan, included: on 16 July 2021, the European Commission proposed a new strategy to protect and restore EU forests (EC, 2021[27]), and on 25 November 2021, the European Commission announced more than EUR 290 million (USD 341 million) in EU funding for nature, environment and climate action projects (EC, 2021[28]) under the LIFE programme. The new LIFE projects are targeted towards helping Europe become a climate-neutral continent by 2050 and putting Europe's biodiversity on a path to recovery by 2030. In 2021, Portugal resumed subsidies for the sustainable management of agricultural habitats located in ecologically protected regions. This covered more than 1 250 farmers for an amount of EUR 5.6 million (USD 6.58 million).
Estonia included the circular bioeconomy as a horizontal priority in its new sectoral Agriculture and Fisheries strategy 2030. EUR 23.8 million (USD 28 million) of the Recovery and Resilience facility funding will be used for bioeconomy and bioeconomy related Research development and Innovation (RDI) capacity. Lithuania provided EUR 15 million (USD 17.64 million) investment support for biogas production from agriculture residues in 2021.
In October 2021, the European Commission published a roadmap23 outlining its intention to propose EU-level targets for food waste reduction as part of the revision of the EU Waste Framework Directive. This initiative is part of the Farm to Fork Strategy, which aims to make the EU food supply chain more sustainable. In addition, in March 2021, the Commission extended the mandate of the EU Platform on Food Losses and Food Waste, which serves to guide work at the EU level and has inspired further action on the ground in the Member States.24 In May 2021, Denmark initiated the development of an internationally recognised, auditable (ISO) standard for measuring “food loss” and “food waste” (ISO/TC 34/SC 20). Collection of uniform data is important to identify target areas and to follow the progress towards achieving the SDG 12.3. The Danish Government has also initiated “The Food Waste Hunters 2.0” where food businesses are offered professional assistance to reduce food waste at retail and wholesale. In 2021, in Spain the “More food, less waste” strategy has been particularly active following the publication of the report on food waste in the food chain in 2020. The government has launched a public consultation based on the future Food Waste Law and a new media campaign on “No food is thrown away here”. In Estonia, the national food waste and prevention programme in 2021 had a primary focus on food safety, with date marking and raising the awareness of food business operators. In Poland, the project “The development of a system for monitoring wasted food and limiting food waste – PROM” was completed in November 2021. On the basis of the results of the project, the National Support Centre for Agriculture (KOWR) prepared the document “The strategy for rationalising losses and limiting food waste”. This strategy is the first attempt in Poland to apply a comprehensive approach to preventing losses and limiting food waste at the national level. It sets out, among others, recommendations and proposals for specific actions by all the actors in the food chain.
Animal health and welfare
Some Member States introduced new regulations or provided support for improved animal health and welfare in 2021. France and Germany, building on initiatives in 2020, announced the banning of slaughtering young male chicks and restrictions on the castration of male pigs. In addition, Germany has also changed its animal welfare provision regarding the domestic transport duration of live animals for slaughter to a maximum of four and a half hours in case the temperature exceeds 30 degrees Celsius. This provision came into effect on 1 January 2022. Germany also has started a new initiative in early 2022, to develop a mandatory labelling system for food of animal origin which provides information on different forms of animal husbandry.25
The Czech Republic expanded subsidy programmes aimed at improving living conditions in animal husbandry. The Austrian Pact for Animal Welfare is intended to create incentives for farmers to increase investments in animal welfare. The pact contains 6 priorities: support for investment in animal-friendly husbandry systems (EUR 120 million, USD 141 million per year); support for ongoing efforts to improve animal welfare (e.g. pasture management); reduction of calf transports (e.g. development of local marketing strategies); further development of the Common Agricultural Policy towards more animal welfare; establishment of the Austrian Animal Health Service; and implementation of research results in animal husbandry practice.
Animal and plant disease
A number of different animal and plant pests and diseases affected or threatened some Member States in 2021, for which specific policy measures were introduced. The EU pork sector continues to combat Africa Swine fever (ASF). Since ASF first entered Lithuania in 2014, a total of 13 EU Member States have been affected by the disease. Romania reported the highest number of domestic pig outbreaks in 2021 with a total of 1 665 pig herds affected. Lithuania and Hungary did not detect any ASF outbreaks in domestic pigs in 2021 but continue to report cases in wild boar. The European Union has legislation in place to prevent the spread of ASF within and between Member States through the implementation of control measures on the movement of pigs and pig products and prohibits the movement of wild boar between Member States (European Commission Implementing Decision 2021/605). The prevalence of ASF plays a significant role in the international pig meat trade as many third countries block market access for EU Member States where the disease is present (Niemi, 2020[29]).
The government of Bulgaria approved an ASF Action Plan to support backyard farms in addressing ASF and also approved the 2021-23 plan for ASF Surveillance and Eradication. The Czech Republic introduced emergency measures and bounties for the catching of 2 500 wild boars in response to the ASF threat. In Latvia, a compensation from the national budget of EUR 213 000 (USD 250 000) was paid in 2021 to pig farmers affected by ASF. In Poland, an aid support scheme was introduced for pig producers who have been obliged to temporarily cease pig production in relation to an ASF outbreak.
The Avian influenza epidemic season, which started in October 2020, continued in 2021. In the second quarter of 2021, the epidemiological situation improved in the majority of the EU Member States (EC, 2022[30]), however, outbreaks in wild birds continued to be confirmed by several Member States during the summer months. The European Union passed a new Bluetongue disease regulation applicable from 21 April 2021 (EC, 2021[31]). The new approach moves from a disease listed for immediate eradication, to a disease that may be subject to optional eradication programmes. This disease was responsible for 205 outbreaks in 10 Member States in 2021.
In France, the Ministry of Agriculture and Food started a new promotional campaign in 2021, to encourage farmers to reduce the use of antimicrobials to only when needed and at the right level (les antibios, comme il faut, quand il faut) to limit the risk of antimicrobial resistance.
Livestock genetic resources
In Bulgaria, the Ministry of Agriculture continued to increase the budget in support of breeding associations and subsidise the use of high-quality genetics by farmers, with breeding associations receiving EUR 4.2 million (USD 4.94 million) in early 2021.
Pollinators and Apiculture
On 27 May 2021, the European Commission published a report (EC, 2021[32]) on the implementation of the EU Pollinators Initiative, adopted in 2018 to address the decline of wild pollinating insects and, on 28 June 2021, the European Commission welcomed political support by Member States to improve the protection of bees, limiting the maximum permitted level of honeybee colony size reduction at 10% after the use of a plant protection product, through a forthcoming Regulation enabling the implementation of the Bee Guidance Document (EC, 2021[33]). Some Member States also announced policy developments in 2021. Germany, through its Action Program for the Protection of Insects aims to improve the conditions for insects. The special framework plan “Insect protection in agricultural areas” was implemented in 2020. In 2021 its budget was expanded from EUR 50 million (USD 58.8 million) per year to EUR 85 million (USD 100 million), complemented by co-financing of the Bundesländer.
In Austria, bee health is the focus of the extensive research project “Zukunft Biene” (Future Bee), with a total of EUR 2.5 million (USD 2.94 million) invested to date. In Hungary, support measures were announced for beekeepers, increased support through the Hungarian National Apiculture Programme, extension of the 2020 income replacement allowance, increased income tax allowance from 2021 onward. In Poland, a new national agriculture de minimus aid measure was introduced in 2021 to provide aid of PLN 35.5 million (EUR 7.79 million, USD 9.15 million) to beekeeping operators.
Digitalisation
On 9 March 2021, the European Commission presented a vision and avenues for Europe’s digital transformation by 2030 (EC, 2021[34]). In addition to the focus on skills, digital transformation of businesses and secure and sustainable digital infrastructures, the Digital Compass for the EU’s digital decade also includes digitalisation of public services. In the agricultural sector, this work is related to a preparatory action for a Common European Agricultural Data Space, which was launched on 17 November 2021, under the Digital Europe Programme (DIGITAL). Production data supplemented by publicly held data will present new opportunities for monitoring and optimising the use of natural resources and will contribute to achieving the objectives of the Green Deal and Common Agricultural Policy.
In the agricultural sector, a good example of the digital transformation is the ongoing development of the Agri-food Data Portal, which is a data sharing tool for domains such as agri-food markets, CAP indicators, farm economics, geoportals (i.e. geospatial data), EU financing and EU Member State fact sheets (EC, 2022[35]). Further actions, developed in collaboration with Member States, are “Checks by Monitoring” applying automated analysis procedures to free Copernicus Sentinel satellite data for the monitoring of agricultural activities and conditions and the “Area Monitoring System” (AMS, not yet in use), which is a new element of the Integrated Administrative Control System in the post-2020 CAP. Two Member States, Belgium and the Czech Republic, elected to use the CAP check by monitoring option (using sentinel satellites) to reduce the number of physical farm inspections in 2021.
Germany has committed EUR 50 million (USD 58.8 million) to the digitalisation of agriculture trials. In fourteen test sites, located on farm holdings throughout the country, the testing comprises digital applications to protect the environment, improve animal welfare, promote biodiversity and reduce workloads in both crop production and animal husbandry. In addition, starting in 2021, the use of artificial intelligence (AI) in agriculture, food chain, health nutrition and rural areas is supported with EUR 41 million (USD 48.2 million). This activity includes 35 projects of industrial research as well as experimental development. In addition, an agricultural data platform26 has been published. In Spain, the second action plan 2021-23 of the 2019 strategy for the digitalisation of agro-food, forestry and rural sectors, has started to apply 21 specific measures with a budget of EUR 64 million (USD 75.3 million). Some of these measures will be framed under the Recovery, Transformation and Resilience Plan (EU Recovery and Resilience Facility RRF). Among these measures, a new credit line aimed at promoting innovative technology digital projects for small and medium enterprises in the agri-food sector and rural areas started in 2021 worth EUR 33 million (USD 38.8 million). In the Framework of the Agro-food Strategic Project for Economic Recovery and Transformation (PERTE), Spain aims to spend over EUR 454 million (USD 534 million) in the digitisation of the agri-food sector.
France launched the French AgriTech platform supporting startups and to support to the development of technological innovation in the sector of AgriTech and FoodTech. EUR 200 million (USD 235 million) will be invested over five years for innovating projects for the Third Agricultural Revolution, food and health. In addition, the fourth plan of investment for the future, has dedicated significant funding to two projects: (1) developing innovative solutions to support competitiveness and resilience of the agriculture and agri-food sector in its agro-ecological transition (EUR 428 million, USD 503 million); and (2) conceive solutions for more sustainable and healthier food (EUR 449.5 million, USD 528.8 million).
Food safety and traceability
On 30 March 2021, the Transparency Regulation in the Food Chain came into effect (EC, 2021[36]). The regulation aims to increase trust in science and in EU policy-making by bringing greater transparency of the EU’s risk assessment in the food chain; increased independence of scientific studies; strengthened governance of European Food Safety Authority (EFSA) and scientific co-operation; and more comprehensive and effective risk communication. In November 2020, Germany implemented the front-of-pack nutrition label scheme “Nutri-Score” into German law. Enterprises can now use the logo on a voluntary basis. “Nutri-Score” was developed through extensive consultations with all stakeholders, including the food industry, health and consumer associations. It provides more clarity when making food choices and better guidance for consumers that are able to compare the nutritional value of foods easily and at one glance. The introduction of the “Nutri-Score” label scheme was accompanied by an information campaign to inform and support both consumers and companies. While harmonised European Union rules are being developed, the Nutri-Score has already been adopted on a voluntary basis by several other European countries, including France, Belgium, Spain, Luxembourg, and the Netherlands.
Risk management
On 24 February 2021, the European Commission published an updated EU Strategy on Adaptation to Climate Change (EC, 2021[37]). With this strategy, the Commission wants to foster EU adaptation to climate change throughout all sectors of the economy, including agriculture. This includes finding practical solutions to adapt to droughts, promote “nature-based solutions” and increase plant and crop resilience through better use of genetic diversity and non-harmful plant genetic resources for adaptation. The European Commission also has an EU Climate-Adapt portal,27 showing the national adaptation plans of Member States, in which agriculture and land use are featured prominently. In 2021, the risk management policy focus of certain Member States varied between supports to assist producers cope with depressed markets due to the COVID-19 pandemic (see COVID-19 section) or weather related impacts.
In 2021, the Czech Republic approved an updated version of its national Strategy for Adaptation to Climate Change and its National Action Plan for Adaptation to Climate Change.
A new national aid scheme was launched in Poland to support agricultural producers whose farm holdings suffered losses in 2020. The aid rate was differentiated depending on crops, percentage yield losses per hectare of the crop area and the type of a disaster. The payments in 2021 varied between PLN 500 (EU 110, USD 129) and PLN 1 200 (EU 263, USD 309) per hectare. The aid is reduced by 50% in the case of farmers who have failed to insure at least 50% of the crops affected by losses. Germany also provided support for its farmers negatively impacted by climate events. After the devastating floods in 2021, the German Federal Government made available emergency aid that is used for reconstruction in the flooded areas, including agriculture, forestry, viticulture, and aquaculture as well as the reconstruction of rural infrastructure. In 2021, two Bundesländer supported insurance solutions for frost and storm damage for the first time in Germany.
The Czech Republic provided ex post support for tornado damage to crop, livestock, fruit and vegetable growers, and wine producers in 2021. Compensation was provided for up to 100% of damage caused. The State Agricultural Intervention Fund provided cash advances quickly to applicants affected by tornado damage during the period from 12 July 2021 to 17 August 2021.
France provided ex post compensation for exceptional spring frost damage, to fruit growers and viticulture enterprises. The government responded by compensating farmers and fruit growers, as part of a EUR 1 billion (USD 1.17 billion) broader plan in April 2021. The frost compensation plan included multiple actions, from guaranteed credit to tax credits, funding of losses, emergency fund, and investments in equipment. In November 2021, the government also announced support for producers impacted by floods earlier in the year. In addition, EUR 8.4 million (USD 9.88 million) was provided as tax credits to producers impacted by droughts during the summer of 2021. Other measures were taken, such as exempting some CAP requirements.
Agricultural insurance schemes and climate adaptation planning were also prominent topics for certain Member States in 2021. France initiated a number of agricultural risk management initiatives in 2021. A broad dialogue on agriculture and water towards improved climate change adaptation was launched titled “Varenne agricole de l’eau et de l’adaptation au changement climatique”. The government set up a working group on how to reform instruments to manage climatic risks in agriculture and the French Agriculture Minister has signed an official circular to department prefects to give them more autonomy and responsibility when facing droughts in agriculture. Portugal allocated EUR 70 million (USD 82 million) within the programme “Improving the Efficiency of Existing Irrigation”, to finance studies and works for irrigation.
The Agricultural Insurance policy of Spain is financed through state aid (and not the CAP risk management toolkit) and continues to be the main national risk management measure. The system covered in 2021 a total insured capital of EUR 15.6 billion (USD 18.4 billion) with about 309 000 insurance policies. The government budget to support insurance policies reached EUR 254 million (USD 299 million) in 2021. In Slovenia, compared to previous years, in 2021 the co-financing of insurance of primary agricultural production increased and standardised. The co-financing rate for all insurance premiums (field crops and permanent crops, animal diseases, etc.) is 55%. In 2019 and 2020, the co-financing rate for field crops and permanent crops was 50% and for animals 30%. In the Czech Republic, state aid funded financial support worth CZK 658 million (EUR 25.7 million, USD 30.2 million) was provided in 2021 for agricultural and forestry insurance. The support was provided in the form of compensation of part of insurance premium, within individual support programmes. The amount of support under individual programmes varies between 50% and 62% (for special crops) of the premium paid.
Hungary implemented its new Agricultural Crisis Insurance Scheme in 2021, as a voluntary scheme, with a period of subscription of three years for farmers entering into the system. The scheme offers partial compensation of revenue in case of extreme events affecting crop production. The Insurance Premium Support Scheme (funded under the RDP) budget was increased from HUF 7 billion (EUR 20 million, USD 23 million) in 2020 to HUF 13 billion (EUR 36 million, USD 43 million) in 2021.
Supports to specific groups of farmers
In Spain, a new strategy for encouraging young farmers was approved in 2021, and it will be part of the new National Strategic Plan with measures for young farmers. A new programme facilitates internships of young future farmers in good practice farms (CULTIVA) as a tool to promote the exchange of knowledge and experience. Spain is also incorporating a gender approach into some of the measures in the National Strategic Plan for the new CAP in both Pillar 1 and Pillar 2 of the CAP, where there will be a higher payment rate for female young farmers. In addition, the Ministry has provided a new support measure from 2021 for farms with shared ownership, to give visibility to women that work in the farms of their spouses with a budget of EUR 1 million (USD 1.18 million). In Hungary, a law facilitating farm transfer to the younger generation was adopted by the Hungarian Parliament at the end of 2021.
Taxation
In Austria, the “eco-social tax reform” is supporting investments with ecological components: a total of EUR 500 million (USD 588 million) has been earmarked for various measures to switch to renewable energy for heating (biomass, pellets, etc.), which applies to overall economy. Another goal is to establish as many energy self-sufficient farms as possible, which generate electricity for their own needs from building- and farm-integrated photovoltaic systems including storage facilities. A special investment programme for agriculture with a volume of EUR 25 million (USD 29.4 million) per year will be available for this purpose. Other measures relevant to agriculture include the reduction of health insurance contributions by 1.7%, especially for small incomes, including compensation for the loss of revenue for health insurance as of 1 July 2022, exemption from the own electricity levy for renewable energy and an investment allowance including a greening component (based on the investment premium).
Investment
Food and agriculture were supported through more targeted subsidies in some Member States in 2021. Ireland introduced a new EUR 70 million (USD 82.4 million) Capital Investment Scheme for the Processing and Marketing of Agricultural Products, to help farmers and those working in food production to develop and diversify, following the United Kingdom’s exit from the European Union. This investment is part of the EUR 100 million (USD 117.6 million) Scheme first announced on 28 December 2020. In France, a new plan was launched in July 2021 to modernise and secure French slaughterhouses. It included three components: (1) Investment: financed through the recovery plan fund (EUR 115 million, USD 135 million); (2) Control: new controls to ensure compliance with regulations, with a new inspection agency created, that will help local authorities in specific cases; and (3) Sanctions: ensure that prefects impose the right sanctions to non-compliant slaughterhouses.
In Spain, agriculture benefited from the Recovery, Transformation and Resilience Plan (EU Recovery and Resilience Facility RRF) with investments that prioritise precision agriculture, energy efficiency and circular economy with a budget of EUR 307 million (USD 361 million) for 2021-23. The ministry has had an ongoing role during decades to invest on improving irrigation both through its budget and the public agency SEIASA (Sociedad Mercantil Estatal de Infraestructuras Agrarias). In 2021, an investment plan for sustainable irrigation systems was launched, with the support of the EU RRF. Under the Spanish RRP, more than EUR 800 million has been earmarked to cover investments on modernising the irrigation systems covering approximately 100 000 hectares. Spain also spent EUR 6.5 million (USD 7.6 million) in 2021 on its plan to renovate farming machinery (Plan Renove), compared to EUR 8 million (USD 9.4 million) in 2020. It allows substituting old equipment by new machines that reduce emissions and are more compatible with environmental sustainability goals.
Germany announced a total budget of EUR 816 million (US 960 million) for the years 2021-24 for the Investment and Future Programme. This programme covers investments in agricultural machinery for precision agriculture, storage capacity of farm manure and small-scale facilities (including mobile ones) for manure separation, and planning and advisory services directly related to these investments. In Italy, the National Recovery and Resilience Plan (NRRP) was approved in January 2021. The NRRP includes the “Sustainable Agriculture, Green Enterprise and Circular Economy” component. Key objectives of this part are the promotion of environmental sustainability in the agricultural production chain, the support for innovative decarbonisation projects within circular economy processes, as well as the establishment of a national plan for the circular economy. In particular, the sustainable agriculture component accounts for a total budget of EUR 2.5 billion (USD 2.94 billion).
In Austria, the credit volume of agricultural investment loans was increased to EUR 180 million in 2021 (USD 212 million). These are loans subsidised with an interest subsidy. The interest subsidy is generally 36%, but 50% for certain subsidy cases and the disadvantaged area. In Latvia, two national financial instruments were introduced in the RDP for the transition period - Loans for rural small scale entrepreneurs (EUR 20 million, USD 23.5 million) and Credit guaranties (EUR 10 million, USD 11.76 million) which contributes to three RDP sub-measures - Aid for investment in agricultural holdings, Aid for investment in processing, Aid for investment in the creation and development of non-agricultural activities.
In Hungary, a new soft loan scheme (Agricultural Restart Investment Loan Széchenyi) was introduced in 2021, as part of the economic recovery package (Széchenyi Card Programme), offering preferential conditions for loans for agricultural and forestry conducting new investments, including those supported by the Rural Development Programme.
Innovation and knowledge
On 29 April 2021, the European Commission opened a debate on New Genomic Techniques following a study, which shows their potential for sustainable agriculture and the need for new policy (EC, 2021[38]). This study was followed up with a number of communication events, including on 29 November 2021, the European Commission organised a high-level event to help develop a system that enables breeders to bring better varieties to market, improves farmers access to such varieties; and allows coexistence with other forms of agriculture, to deliver a more sustainable and more resilient food system for the European Union (EC, 2021[39]). Gene-edited crops are currently only grown on test fields in the European Union (EC, 2022[40]).
In Portugal, the Ministry of Agriculture in October 2021, opened tenders for funding research and development projects, for a total budget of EUR 93 million as part of the Recovery and Resilience Plan. Projects are expected to address reduction of GHG emissions in the agricultural sector and enhance carbon sequestration as well as to promote digital transformation.
Domestic policy responses to the COVID-19 pandemic
The European Union implemented three main types of policies responses in the agricultural sector: CAP flexibilities, exceptional market measures, and direct support to farmers and rural areas. Within this framework, Member States chose which measures to implement, based on their own specific circumstances. Member States also put in place their own regulatory flexibilities, tax concessions and social contribution measures, investment assistance, and allowances to farm households to help farmers and agro-food enterprises cope with the financial impacts of the COVID-19 emergency. Response measures also responded to labour concerns within the sector, ensured minimal interruptions to food supply chains, and helped to ensure that affected consumers had adequate access to food. Finally, some policies were put in place to facilitate longer-term recovery and sector transformation.
Specific actions taken by the European Commission, in the context of the ongoing COVID-19 pandemic, are detailed on the European Commission website (EC, 2022[41]). While the emphasis of the actions has shifted to longer-term health policy and financial recovery packages, several have a more direct relation to the agriculture and food sectors.
The European Commission decided to prolong until 31 December 2021, the State Aid Temporary Framework, adopted on 19 March 2020 (EC, 2020[42]) to support the economy in the context of the coronavirus outbreak. The European Commission has also decided to expand the scope of the Temporary Framework by increasing the ceilings set out in it and by allowing the conversion of certain repayable instruments into direct grants until the end of next year.
On 6 October 2021, the European Commission adopted exceptional measures to support the wine, fruit and vegetable sectors (EC, 2021[43]), including increasing support for risk management tools, such as harvest insurance and mutual funds, and extending the flexibility measures already in place until 15 October 2022.
In addition, on 15 June 2021, the European Commission presented a Communication on the early lessons learnt from the COVID-19 pandemic, in which the importance of the Green Lanes initiative in maintaining the integrity of supply chains, ensuring supplies of food and medicines in the Single Market, was emphasised (EC, 2021[44]).
CAP and regulatory flexibilities
On 4 May 2021, the European Commission adopted rules to extend to 2021 flexibilities for carrying out checks required for CAP support. These rules aim at easing the administrative burden of national paying agencies by adapting to current circumstances while still ensuring necessary controls for CAP support. The rules allow replacing on-farm visits by the use of alternative sources of evidence, including new technologies such as satellite imagery or geo-tagged photos. This measure ensures reliable checks while respecting restriction of movements and minimising physical contacts between farmers and inspectors. Furthermore, rules include flexibility around timing requirements for checks. This allows Member States to postpone checks, notably to a period when movement restrictions are lifted. In addition, rules comprise a reduction of the number of physical on-the-spot checks to be carried out for area and animal-related measures under direct payments and rural development, rural development investments and market measures for the fruit, vegetables, wine, olive oil and apiculture sectors. The rules will apply retroactively to cover controls from the beginning of 2021.
On 4 August 2021, the European Commission adopted a measure allowing farmers to receive higher advances of common agricultural policy (CAP) payments. This measure will support and increase the cash flow of farmers affected by the COVID-19 crisis and by the impact of adverse weather conditions across the European Union. The measure will allow Member States to pay income support and certain rural development schemes to farmers with a higher level of advances: up to 70% (from 50%) of direct payments and 85% (from 75%) of rural development payments. The safeguards to protect the EU budget apply, so the payments can be disbursed once controls and checks have been finalised and as from 16 October 2021. This flexibility has been utilised by certain Member States in 2021.
Exceptional market measures
On 28 January 2021, the European Commission adopted the extension of exceptional measures to support the wine sector by one year, making the measures applicable until 15 October 2021 and retroactive from 16 October 2020. Hard hit by the consequences of the COVID-19 crisis, the wine sector suffered from the closure of restaurants and bars across the European Union, the restrictions and cancellations of celebrations as well as rapid changes in demand.
In Slovenia, to deal with a market disturbance in the wine sector caused by the second wave of COVID-19, three measures were implemented and co-financed by the European Agricultural Guarantee Fund (EAGF). These measures were: crisis distillation (EUR 4.36 million, USD 5.1 million was paid out), storage of wine (EUR 50 000, USD 58 000 was paid out), and green-harvesting (EUR 0.12 million, USD 0.14 million was paid out), which together amounted to about EUR 4.53 million (USD 5.33 million) (European Agricultural Guarantee Fund - EAGF and national funds). All other measures related to the COVID-19 pandemic and other exceptional aids to different sectors were funded only by national funds and described below.
In Hungary, the wine and grape sectors continue to be supported through the 2019-2023 Hungary’s National Support Programme, relying on EU level sectoral aid financed through the European Agriculture Guarantee Fund (total aid EUR 145.5 million, USD 171 million).
The Czech Republic introduced a new license for the denaturation of alcohol for the disinfection production that came into force on 1 July 2021.
In Romania, in May 2021, the government established the legal framework for three temporary measures supporting the wine sector in 2021, namely distillation of wine, crisis storage aid and pre-ripening harvesting, in order to cushion the shock stemming from the COVID-19 pandemic.
In France (outside of recovery plan), the prime minister announced an exceptional support of up to EUR 60 million (USD 70.6 million) to the livestock farmers which faced significant difficulties due to the COVID-19 crisis. This aid was targeted towards farmers with revenues under EUR 11 000 in 2020 and showed significant losses. In April 2021, the government also announced a continuation of the allocation of replacement labour for eligible farmers and parents of young children, that have to stay home due to COVID-19 and associated isolation requirements.
Direct support instruments
Hungary continued to operate de minimis aid authorised under the EU Temporary Framework defined by the European Commission (2020/C 91 I/01 and its amendments) until 30 June 2022. A new soft loan scheme (Agricultural Restart Investment Loan Széchenyi), introduced in 2021 as part of the economic recovery package (Széchenyi Card Programme), offered preferential conditions for loans for agricultural and forestry conducting new investments, including those supported by the Rural Development Programme.
In Latvia, state aid was provided to farmers and producers in certain affected sectors to mitigate the negative effects of COVID-19. The aid budget was as follows: the pig sector for the period from November 2020 to October 2021 (EUR 12.7 million, USD 14.9 million), the cattle sector for the period from October 2020 to March 2021 (EUR 1.71 million, USD 2 million) and the poultry sector for the period March 2020 to May 2021.
In Romania, an Emergency Ordinance in June 2021, established a temporary state aid scheme to support the activity of cattle farmers in the context of the economic crisis caused by the COVID-19 pandemic. The ceiling for the subsidy that can be granted per farm is EUR 0.225 million (USD 0.265 million). In June 2021, the government approved the programme to support the production of vegetables in protected areas. This established a de minimis aid scheme to support the production of vegetables in protected areas in 2021. The crops which can be covered by the scheme are peppers, cucumbers, tomatoes, aubergines. The ceiling allocated to the support scheme is EUR 30 785 (USD 36 194) per farm. In Slovenia, state aid was provided to farmers in some affected sectors to mitigate the negative effects of COVID-19 (viticulture and wine production, apple production, potato production, beef production, pig production, sheep and goats breeding and other gainful activities on the farm). This support was provided on the basis of a 30% drop in income compared to the average for the previous three years. In addition to COVID-19 measures, due to the frost and other unfavourable weather conditions and other economic instability, exceptional state aid was provided to fruit and wine growers, beekeepers, and pig farmers. Estonia utilised the EU Temporary State Aid framework to support to support its agricultural sector during the COVID-19 pandemic. Direct payments of EUR 5.5 million (USD 6.5 million) were paid to assist the pig and dairy sector with the poor market situation. In total, EUR 15.8 million (USD 18.6 million) was paid out for a wide range of agricultural sectors in June 2021. Austria also had loss compensation for the pig, wine, potatoes and laying hens sectors (in addition to support to non-agricultural on-farm activities).
In Greece, several decisions were taken in 2021 to support specific sectors in the context of the EU temporary framework on state aid measures: production of outdoor watermelon, summer and autumn potatoes, greenhouse crops of tomatoes & cucumbers and buffalo farming. The total support credit amounted to EUR 24.3 million (USD 28.6 million). Pig breeding, breeding of indigenous Greek Black Pigs and apiculture (total support credit: EUR 19.9 million, USD 23.4 million).
The Czech Republic, foodstuffs from the school’s Fruit and Vegetables for Schools and School Milk programmes were distributed through food banks in the 2020/2021 school year, given the fact that schools were closed for some time of the school year.
Certain Member States also used taxation measures to support their agricultural sectors in 2021. Several countries applied excise reduction or tax rebates for agricultural diesel, to assist with the COVID-19 pandemic and or to help compensate for higher fuel prices in 2021 (see below):
Agricultural labour
Although the COVID-19 pandemic impact on the international movement of agriculture labour was considerably less than in 2020, a number of policies were initiated by Member States to facilitate in particular seasonal workers in 2021. In Austria, with the new Rural Employment Act as of 1 July 2021, clear regulations and accelerated legislative procedures have been implemented for agriculture and forestry in Austria for the first time. Not only the 30 000 employees in agriculture and forestry will benefit, but also the approximately 162 000 farms.
The Czech Republic during 2021 issued updated communications with rules for the entry and return of foreign workers, including workers in agriculture and in food industry. During the ongoing pandemic, foreign workers from third countries were allowed to enter the Czech Republic under defined conditions. The Qualified Employee Programme provides support to direct employers who need to bring qualified foreign workers to the Czech Republic.
In France, two campaigns were launched in July and August 2021, to help hire people in agriculture and the agro-food sector. The communication campaigns, focused on the attractiveness of these professions, were widely broadcast on various channels: TV, national daily press and regional daily press.
Food supply chains
Following the announcement in the Farm to Fork Strategy “to develop a contingency plan for ensuring food supply and food security” in the last quarter of 2021, in its Communication of 12 November 2021, the European Commission acknowledged the overall resilience of the EU food supply chain, identified existing shortcomings, and put forward actions to improve preparedness at the EU level (EC, 2021[45]). To do this, the European Commission will establish a European Food Security Crisis preparedness and response Mechanism (EFSCM), which comprise a group of food supply chain experts co-ordinated by the European Commission to exchange data, practices and strengthen co-ordination. Foresight, risk assessment and vulnerability analysis actions within the EFSCM will improve preparedness, prepare for what the future might bring and help to understand uncertainties and potential bottlenecks. Sharing information and best practice on national and European initiatives will take place through digital platforms. Member States will also be encouraged to continue to have or develop their own contingency plans at national level and share them. Co-ordination and co-operation with the international community will be ensured through supporting and participating in relevant global and regional initiatives, in particular AMIS.
Domestic consumer policies
In France, new measures aimed at favouring local procurement of meat and improve food quality in school meals,28 with three action levers: (1) Information: announcing a mandatory labelling in collective food services by end 2021; (2) Set the example: 100% high quality meat and fish (organic, quality labels etc.) in the state’s own food services; and (3) Investment: via the recovery plan. Small municipalities and territorial food projects will be able to access EUR 50 million (USD 58.8 million) from the France Relance plan to support these initiatives.
Long term recovery and transformation
NextGenerationEU is an initiative designed to boost the recovery and is the largest stimulus package ever financed through the EU budget. On 10 February 2021, the European Commission welcomed the European Parliament’s approval of Recovery and Resilience Facility (EC, 2021[46]), which is the key instrument at the heart of NextGenerationEU. Plans were submitted by Member States throughout 2021, and those endorsed by the European Commission (EC, 2021[47]) and which contain explicit rural or agricultural actions were: Austria: deployment of Gigabit connectivity in rural regions. Croatia: investment in digital infrastructure in remote rural areas. Denmark: extending rural broadband coverage. Estonia: deployment of high capacity networks in rural areas, and Spain: green and digital transformation of the agri-food system.
Trade policy developments in 2021-22
The European Union’s simple average MFN applied tariff rate for agricultural products was 11.2% in 2020, down from 11.4% in 2019 (WTO, 2022[48]). This applied tariff rate for agricultural products remains nearly three times the average applied tariff rate for non-agricultural products, calculated at 4.1%.
The price-based special safeguard system was operationalised in marketing year 2020/21 for certain frozen chicken carcasses, boneless frozen turkey cuts, 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, courgettes, oranges, clementines, mandarins, lemons, table grapes, apples, pears, apricots, cherries, peaches and plums (WTO, 2021[49]).
EU duties on imports of certain husked rice were adjusted twice in 2021,29 dropping to EUR 30 (USD 35.3) per tonne on 6 March 2021 and then increasing slightly to EUR 42.5 (USD 50) per tonne from 8 September 2021. Prior to the fluctuations in 2021, duties on this product had been set at EUR 65 (USD 76.5) per tonne since 8 September 2020.
Trade agreements
On 24 December 2020, the European Union and the United Kingdom reached an agreement on their future relationship and formally signed the EU-UK Trade and Cooperation Agreement on 30 December 2020 (EC, 2021[50]). The agreement entered into force on 1 May 2021 after approval of the European Parliament and adoption by the Council. On 8 March 2021, the European Union and the United States successfully concluded negotiations to adjust the European Union’s World Trade Organization (WTO) agricultural quotas. This is the culmination of two years of negotiations in the WTO framework to divide these EU quotas, with part of the volume remaining with the EU 27, and part going to the United Kingdom, based on recent trade flows. The agreement covers dozens of quotas and billions of euros of trade including for beef, poultry, rice, dairy products, fruits and vegetables and wines.
Agreements are still under negotiation with Australia, China, Indonesia, New Zealand and the Philippines (EC, 2022[51]). On 18 February 2021, the European Commission sets course for an open, sustainable and assertive EU trade policy, reflecting the concept of open strategic autonomy, in its “Trade Policy Review” Communication (EC, 2021[52]). In the agricultural sector, emphasis was given to the importance of transparency and the role of the Agriculture Market Information System (AMIS),30 crisis preparedness; support for agri-food Small and Medium-sized Enterprises (SMEs); the need to promote sustainable investment in agriculture in Africa; and the need to mainstream environmental sustainability aspects in the agricultural negotiations, in line with the necessity of the green transition of economies.
On 22 September 2021, the European Commission announced its plans for a new EU Generalised Scheme of Preferences (EC, 2021[53]), keeping the current structure with its three market access arrangements for low and lower-middle income countries (standard GSP); GSP+ for vulnerable countries, based on sustainable development and good governance commitments; and Everything But Arms for least developed countries. The aim of the proposal is to reinforce the scheme’s social, environmental and climate aspects, reduce poverty and increase export opportunities for developing countries. The European Commission’s proposal is based on an impact assessment (EC, 2021[54]), published on 22 September 2021.
On the second anniversary of the EU-Japan Economic Partnership Agreement, in February 2022, the list of protected Geographical Indications (GIs) was extended by 28 GIs each from EU countries and from Japan (EC, 2022[55]).
Disputes
On 19 January 2021, Malaysia requested WTO dispute consultations with the European Union regarding measures adopted by the European Union and its Member States affecting palm oil and palm crop-based biofuels (WTO, 2021[56]). Malaysia claims that the challenged measures of the European Union and EU Member States, France and Lithuania, are inconsistent with the WTO’s Agreement on Technical Barriers to Trade, the General Agreement on Tariffs and Trade 1994, and the Agreement on Subsidies and Countervailing Measures. On 11 November 2021, Brazil also requested WTO dispute consultations with the European Union regarding EU measures impacting the importation of certain poultry meat preparations from Brazil (WTO, 2021[57]). Brazil claims the application by the European Union of Salmonella food safety criteria on fresh poultry meat and certain poultry meat preparations are inconsistent with provisions under the WTO’s Agreement on Sanitary and Phytosanitary Measures and the General Agreement on Tariffs and Trade (GATT) 1994.
Initiatives on reducing deforestation
The European Commission on 17 November 2021, proposed a new Regulation to curb EU-driven deforestation and forest degradation. The proposed new rules would guarantee the products that EU citizens buy, use and consume on the EU market do not contribute to global deforestation and forest degradation. The Regulation sets mandatory due diligence rules for companies that want to place these commodities on the EU market with the aim to ensure that only deforestation-free and legal products are allowed on the EU market. The European Commission will use a benchmarking system to assess countries and their level of risk of deforestation and forest degradation driven by the commodities in the scope of the regulation.
The European Union is the largest economic region covered in this report, accounting for 17% of the economic activity of all countries covered herein. Although the contribution of agriculture to both GDP and employment has been relatively stable since 2000, the share of agriculture in the region’s exports has increased by approximately 50% during this period (Table 12.5). More than 40% of the region’s landmass is dedicated to agriculture, of which nearly 60% is dedicated to arable land use. Crops (including cereals, oilseeds, fresh fruit and vegetables, and plants and flowers) predominate in agricultural output, accounting for 57% of total production, although large differences exist across Member States. Livestock products – including dairy, beef and veal, pig meat, sheep meat, poultry and eggs – account for the remainder.
GDP in the region fell 4.4% in 2020, due to the fallout of the COVID-19 emergency. Prior to 2020, GDP growth had been positive since 2013 (Figure 12.5). Despite the economic contraction, the unemployment rate increased only modestly to 7.4% in 2020 – likely due to government rescue packages intended to blunt the economic impact of the crisis. In fact, in spite of the crisis, the unemployment rate in 2020 was reported as more than three points lower than the 10.9% reported in 2013. Inflation declined in 2020 to 0.7% but rose to 2.9% in 2021, the highest level in a decade. While these indicators reflect the EU aggregate, economic conditions vary considerably 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 12.6). The region is a net food exporter, with agro-food products accounting for 9.3% of all EU exports and 6.8% of all EU imports. The region’s agro-food exports are overwhelmingly composed of processed goods for final consumption (62%), while imports are more evenly distributed among the four categories shown in Figure 12.6, with processed goods for final consumption accounting for the largest share of imports (27%).
At 0.65%, agricultural output growth in the European Union over the period 2010-19 was significantly below the world average of 2.2% (Figure 12.7). Total Factor Productivity (TFP) growth was also below the world average over the period at 0.95% on average, but it was still sufficient to more than offset the impact of reduced primary factor input use, including labour, land, livestock and machinery, on agricultural output.
Rising TFP has been achieved in the sector along with a reduction of certain environmental pressures, as illustrated through various environmental indicators (Table 12.6). From 2000 to 2020, the region’s nitrogen balance fell by almost 30%, the phosphorous balance declined by 75%, and the share of agriculture in water abstractions fell by 35%. At the same time, although the European Union has achieved reductions in these indicators, some still remain high by comparison. For example, the region’s nitrogen balance is over 60% higher than the OECD average, with some Member States with nitrogen surpluses in excess of twice the EU average. While the region achieved improvements in most environmental indicators, agriculture’s GHG emissions as a proportion of total European Union GHG emissions increased over the period, from 8.9% in 2000 to 10.5% in 2020.
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Notes
← 1. Belgium has set a 25% reduction target by 2030, using a 2005 baseline. Denmark has set a 55% reduction target by 2030, using a 1990 baseline. Germany set a reduction target of 31-34% by 2030, using a 1990 baseline. Portugal has set an 11% reduction target by 2030 using a 2005 baseline. Ireland has set a 22-30% reduction target by 2030 using a 2018 baseline.
← 2. Also referred to as the June 2003 reform or the 2003 “Luxembourg” reform.
← 3. Co-financing rates vary by measure and by Member State.
← 4. Member States commonly have one national RDP, while some countries have regional RDPs. Belgium and Finland each have 2 RDPs, France has 30, Germany 13, Italy 33, Portugal 3 and Spain 19.
← 5. Member States with average direct payment per hectare below 90% of the EU average can transfer up to 25% of rural development funds to direct payments.
← 6. 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 and Romania. In turn, Croatia, Malta, Hungary, Poland and the Slovak Republic chose to transfer funds from Pillar 2 to Pillar 1.
← 7. The SAPS applies to all Member States joining since 2004 except Slovenia, Malta and Croatia, which implement the BPS with the EU15.
← 8. The BPS is “regionalised” in four Member States – Greece (3 regions), Spain (50 regions), France (2 regions) and Finland (2 regions) – meaning that a different payment rate per hectare applies depending on the region. In Germany, regionalisation by Länder ceased to apply in 2019.
← 9. Member States can choose their preferred method to calculate their SFS payments: lump-sum payment (an equal amount to all farmers in the scheme); payment due each year (individual farmers receive a single payment equivalent to what would have been due under other payment schemes); and payment due in 2015 (individual farmers receive a single payment that depends on the amount that 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 (USD 570). For more information, see (EC, 2017[61]).
← 10. The criteria are low temperature, dryness, excess soil moisture, limited soil drainage, unfavourable texture and stoniness, shallow rooting depth, poor chemical properties, and slope.
← 11. Payments are granted on a maximum number of hectares, which varies by 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, from 3 to 30 ha (with no payment below 3 ha); Portugal, 5 ha as from claim year 2017; and Romania, 30 ha with a smaller per hectare payment rate for the first 5 ha.
← 12. Belgium (Wallonia), Croatia, France, Germany, Portugal and Romania.
← 13. The Czech Republic, Denmark, Cyprus, Estonia, Finland, Latvia, Luxemburg, Malta, the Netherlands, Slovenia, Slovakia, Spain and Sweden.
← 14. If the average market price in an EU country or in a region of an EU country drops below EUR 2 224 (USD 2 534) per tonne over a representative period, the European Commission may use public intervention to support beef prices (EC, n.d.[62]).
← 15. In addition to the EAFRD, these include the European Regional Development Fund (ERDF), Cohesion Fund, European Social Fund (ESF), and the European Maritime and Fisheries Fund (EMFF).
← 16. In 2020, an additional measure was added, M21: Exceptional temporary relief to farmers and SMEs active in processing, marketing and/or development of agricultural products particularly affected by the COVID-19 crisis.
← 17. On 27 October 2021, the European Commission published on its first comprehensive annual report on implementation and enforcement of EU Trade Agreements (EC, 2021[60]). The 2021 report showed that EU exports have been boosted, thanks to stronger implementation and enforcement of trade deals and global rules. Agro-food trade with preferential partners grew by 2.2%, i.e. down from 8.7% in 2019, but twice as fast as overall agro-food trade (which grew by 1%). Agro-food exports under preferential agreements grew by 1.8%, while imports grew by 2.7% (EC, 2021[58]).
← 18. On 26 January 2021, the European Commission published a study on cumulative impact of Free Trade Agreements (FTAs) in the EU agro-food sector (EC, 2021[59]), which showed the overall positive impact on the EU economy and the agro-food sector.
← 19. The European Unions’ National Determined contribution covers all 27 of its Member States.
← 20. Emissions and removals from agricultural soils are covered under LULUCF.
← 21. https://www.europarl.europa.eu/factsheets/en/sheet/106/financing-of-the-cap#:~:text=The%20EU%20budget%20for%202021%20contains%20a%20total,of%20the%202021%20EU-27%20budget%20%28EUR%2055.71%20billion%29.
← 22. https://www.government.nl/ministries/ministry-of-agriculture-nature-and-food-quality/documents/policy-notes/2019/11/30/plan-of-action---supporting-transition-to-circular-agriculture.
← 23. https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13223-Food-waste-reduction-targets_en.
← 24. https://ec.europa.eu/commission/commissioners/2019-2024/kyriakides/announcements/speech-commissioner-kyriakides-10th-meeting-eu-platform-food-losses-and-food-waste_en.
← 25. https://www.bmel.de/EN/topics/animals/animal-welfare/state-run-animal-welfare-label-pigs.html.
← 26. https://www.landwirtschaftsdaten.de/.
← 27. https://climate-adapt.eea.europa.eu/.
← 28. https://agriculture.gouv.fr/de-nouvelles-mesures-pour-renforcer-la-qualite-de-lalimentation-en-restauration-collective.
← 29. See EU 2021/401 of 5 March 2021 and EU 2021/1458 of 7 September 2021.
← 30. Agricultural Market Information System (AMIS) http://www.amis-outlook.org/.