Explanatory Memorandum to COM(2024)577 - - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2024)577 - . |
|---|---|
| source | COM(2024)577 |
| date | 10-12-2024 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
Through successive reforms, the Common Agricultural Policy (‘CAP’) has shifted towards income support and market orientation with free formation of prices for agricultural products. Those reforms mainly responded to endogenous challenges, surpluses and crises. However, most of the challenges of the agricultural sector are driven by factors that are external to agriculture and require a broader policy response.
The CAP already provides for certain measures that aim at strengthening the position of farmers in the food supply chain. However, the pressure on agricultural incomes is expected to continue as farmers face increasing risks, rising input costs and more stringent production requirements.
The Covid-19 pandemic and Russia’s ongoing war of aggression against Ukraine have led to an unprecedented increase of energy-related agricultural inputs costs and a prolonged period of high inflation, affecting farmers’ costs and food prices. In parallel, farmers continue to undertake efforts to make their production more sustainable in line with EU standards.
Moreover, many consumers, dealing with an increased cost of living, have directed their consumption patterns towards less expensive food products. This has further destabilised the distribution of value added along the food supply chain, creating instability in the allocation of profits and costs between the actors of the chain, fuelling protests and increasing mistrust.
On 15 March 2024, the Commission put forward a reflection paper in which it announced a set of measures intended to enhance the position of farmers in the food supply chain. A targeted amendment of Regulation (EU) No 1308/2013 and related CAP Regulations was included in the set of measures that the Commission announced.
The Agriculture and Fisheries Council of 26 March 2024 supported the measures announced in the reflection paper.
The Political Guidelines for the next European Commission 2024-2029 emphasise the need for farmers to have a fair and sufficient income and the need to correct existing imbalances, strengthen farmers’ position and further protect them against unfair trading practices.
Moreover, the Strategic Dialogue on the Future of EU Agriculture, announced by the President of the European Commission in her State of the Union Address on 13 September 2023 and launched in January 2024, which brought together 29 major stakeholders from the European agri-food sectors, civil society, rural communities and academia in its final report1 called for adjustments to the farmers’ position in the value chain. The Guiding Political Principles of the Strategic Dialogue report clearly highlight that market conditions must allow for decent revenues for farmers and other food chain actors and that power relations in the food chain must be well balanced. The first chapter of recommendations of the Strategic Dialogue deals with a fair and competitive food value chain through strengthening farmers’ position in the food value chain. Recommendations refer, in particular, to contracts, inviting to consider data on production costs and prices as relevant elements in contractual negotiation, and the possibility to open up negotiations in case of an exceptional cost increase. They also mention the importance of mediation mechanisms. Concerning cooperation, they call for reinforcement of Producer Organisations (POs), Associations of Producer Organisations (APOs), as well as simplification of their recognition process and targeted support in their favour. The Strategic Dialogue recognises that economic, environmental, and social dimensions of sustainability are of equal importance for European societies in general and the agri-food systems in particular, and that the CAP should promote positive environmental and social outcomes and support the diversification of sustainable business model, including for example short supply chains.
In line with the recommendations of the Strategic Dialogue report, it is thus appropriate to take measures to strengthen the contractual position of farmers and restore the trust of the actors in the food supply chain.
• Consistency with existing policy provisions in the policy area
- to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour;
- thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture;
- to stabilise markets;
- to assure the availability of supplies;
- to ensure that supplies reach consumers at reasonable prices.
This proposal is consistent with those objectives and with the general philosophy of the CAP Regulations currently in force (the Common Market Organisation Regulation2, the CAP Strategic Plan Regulation3, and the Regulation on the Financing, management and monitoring of the CAP4).
• Consistency with other Union policies
This proposal amends a limited number of provisions of the CAP Regulations currently in force, without altering their essence. As those provisions are consistent with other Union policies, the proposal is also consistent with those policies.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The legal basis for this proposal is the first subparagraph of Article 42 and Article 43(2) of the Treaty on the Functioning of the European Union (TFEU) because: (i) the proposal amends Regulation (EU) No 1308/2013, Regulation (EU) 2021/2115 and Regulation (EU) 2021/2116, which are all based on Article 43(2) TFEU; and (ii) Regulation (EU) No 1308/2013 is also based on the first subparagraph of Article 42 TFEU and this proposal also contains provisions that regulate the (non)application of competition rules.
• Subsidiarity (for non-exclusive competence)
This proposal amends existing Regulations adopted at the EU level and that are applicable in all Member States.
The amendments seek to strengthen the position of farmers in the agri-food supply chain by: (i) simplifying the rules on recognition of producer organisations; (ii) reinforcing the rules on contractualisation; (iii) setting out rules on the use of cross-sectoral optional terms for “fair”, “equitable” and equivalent terms, as well as for “short supply chains”; (iv) introducing the possibility to grant Union financial support to Member States for measures undertaken by operators in periods of severe market imbalances; and (v) improving the degree of organisation of the farming sector in Member States by supporting producer organisations implementing operational programmes, and improving the take-up of sectoral interventions in the other sectors as referred to in Article 42(f) of Regulation (EU) 2021/2115.
The amendments maintain the level-playing field between producers and the degree of harmonisation already achieved by the existing Regulations. It is therefore considered that they cannot be implemented by Member States acting alone.
• Proportionality
The proposal amends existing Regulations only to the extent strictly necessary to achieve the objectives outlined above, while ensuring that the amendments remain targeted and providing for appropriate flexibilities.
The proposed amendments modify only specific aspects of a limited number of provisions in the existing Regulations. They enhance and further strengthen existing provisions regarding contracts involving farmers and their organisations with other actors in the chain, as well as reinforce the bargaining power of producer organisations and their associations, reduce the administrative burden for their recognition, and establish an inducive framework for voluntary schemes and agreements aimed at improving farmers’ remuneration and social sustainability initiatives.
• Choice of the instrument
Since this proposal amends existing Regulations of the European Parliament and of the Council, the amendments must also be introduced by a Regulation of the European Parliament and of the Council.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
The proposal for targeted changes to the CMO Regulation and other CAP-related Regulations is one of the measures announced in the Commission’s reflection paper of 15 March 2024. Due to the urgency to respond to the pressing challenges that the agricultural sector is currently facing and the urgency to act to respond to farmer protests, no ex-post evaluation/fitness check of existing legislation was conducted.
• Stakeholder consultations
Due to the urgency to act to respond to the pressing challenges of the European agricultural sector, no call for evidence or public consultation have been conducted. However, relevant stakeholders were consulted through targeted meetings (see ‘Collection and use of expertise’).
• Collection and use of expertise
While no call for evidence or public consultation were conducted due to the urgency to act, the Commission has presented the proposed measures several times to the Council, an enlarged Civil Dialogue Group meeting with the relevant stakeholders, the European Network of the Competition authorities and in bilateral meetings involving all relevant EU based associations within the agri-food supply chain, including consumers.
• Impact assessment
In view of the urgency to act to respond to the pressing challenges that the agricultural sector is currently facing, no impact assessment could be conducted.
However, the measures proposed have been developed on the basis of input received from stakeholders, in particular the enlarged Civil Dialogue Group meeting, the European Network of the Competition authorities and in bilateral meetings involving all relevant EU based associations within the agri-food supply chain, including consumers, as well as from the Chairman of the European Parliament’s Committee for agriculture and rural development.
They are also in line with the relevant recommendations of the Strategic Dialogue on the Future of EU Agriculture of September 2024.
The impact of the proposal will depend on the take-up of certain voluntary measures by farmers and buyers of agricultural products, as well as on the decisions of Member States to make use of the options and derogations provided.
A staff working document will be produced within three months after the adoption of the proposal. It will clearly describe the issues addressed, the targeted changes proposed and their likely impact, as well as a summary of stakeholder feedback received.
• Regulatory fitness and simplification
The present proposal is one of the measures announced in the Commission’s Reflection Paper of 15 March 2024 as part of the Simplification Package. Quantification of the reduced administrative burden will be presented in the staff working document, to the extent possible.
• Fundamental rights
This proposal respects the fundamental rights and observes the principles recognised by, in particular, the Charter of Fundamental Rights of the European Union.
4. BUDGETARY IMPLICATIONS
This proposal does not have any quantifiable budgetary impact.
While measures 12-17 (listed under Point 5 Other elements – Detailed explanation of the specific provisions of the proposal) may accelerate the implementation of operational programmes by producer organisations and consequently increase the expenditure, any related expenditure will remain under the EAGF sub-ceiling.
As regards the agricultural reserve funded under EAGF, the proposal does not provide for any changes to its overall amount. While the use of the reserve to finance measures adopted pursuant to Article 222 CMO may have consequences regarding the possible allocation of amounts for other exceptional measures in a given year, these cannot be quantified at this stage.
The Union financial assistance of fruit and vegetables’ producer organisations approved by Member States for the implementation of operational programmes will be limited to a certain percentage (from 4.1 % to 5.5 % depending on the type of beneficiaries and the objectives pursued) of the value of marketed production of those producer organisations.
The proposal contains provisions giving Member States a degree of flexibility in relation to the financial allocations for types of intervention in form of direct payments and for types of intervention in ‘other’ sectors. The funds made available for Union financial assistance to producer organisations operating in ‘other’ sectors will be limited to amounts transferred (within the limits of the related legal provision) from direct payments decided by the Member States and approved by the Commission. In case Member States decide to use that flexibility, it will impact solely the allocations of direct payments and ‘other’ sectors, and the change remains within EAGF. The impact cannot be quantified at this stage.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
The present proposal amends Regulation (EU) No 1308/2013, Regulation (EU) 2021/2115 and Regulation (EU) 2021/2116. Therefore, the implementation plan and monitoring, evaluation and reporting arrangements remain the same as under the current framework.
• Explanatory documents (for directives)
Contents
• Detailed explanation of the specific provisions of the proposal
First, minimum requirements for the use of terms describing commercial modalities ensuring the fair allocation of value-added to farmers should be established. The aim is to increase the transparency and reliability of the use of those terms to ensure the fair allocation of value-added along the food supply chain, to prevent the misuse of such terms and to ensure that consumers have reliable information about the fair allocation of value-added to farmers and short supply chains.
Second, each delivery of agricultural products should be covered by a written contract, subject to certain exceptions and to the possibility for the Member States to exempt certain agricultural products from that requirement.
Third, written contracts should include certain elements ensuring transparency and predictability in the calculation of the final price.
Fourth, contracts with a duration of more than six months should include a revision clause to allow farmers, producer organisations or associations of producer organisations to request a revision of the contract, in particular in situations where the price would no longer cover production costs and to terminate the contract if such request is refused.
Fifth, Member States should establish a mediation mechanism and make it available to parties that wish to use it.
Sixth, existing rules on the definition and recognition of producer organisations should be simplified. Moreover, to enhance collaboration between organic product producers, the establishment and recognition of producer organisations by those producers should be made explicitly possible.
Seventh, existing rules on producer organisations should be clarified to ensure that producer organisations are established at the initiative of farmers and are controlled in accordance with rules that enable farmer members to scrutinise democratically their organisations and the decisions of such organisations.
Eighth, it should be permitted for non-recognised producer organisations, including cooperatives, to negotiate contract terms, on behalf of their members for some or all of their production.
Ninth, recognised associations of producer organisations should be able to negotiate contract terms on behalf of their recognised producer organisations members.
Tenth, the promotion of the use of initiatives with optional terms used to designate commercial modalities, such as ‘fair’, ‘equitable’ or their equivalent terms and ‘short supply chain’ should be included in the list of objectives that a recognised interbranch organisation can pursue.
Eleventh, vertical and horizontal cooperation initiatives concerning agricultural and food products, which aim to apply certain social sustainability requirements that are more stringent than the mandatory requirements, should not be subject to the application of Article 101(1) TFEU.
Twelfth, Regulation (EU) 2021/2115 should be amended as regards the types of interventions in certain sectors. Moreover, the Union financial assistance to operational programmes in certain sectors should be increased.
Thirteenth, the Union financial support to operational programmes implemented by producer organisations in the fruit and vegetable sector in Member States in which the degree of organisation of producers is below 10 % for three consecutive years preceding the implementation of the operational programme should be increased from 50 % to 60 %.
Fourteenth, a specific incentive should be granted to young farmers and new farmers joining a recognised producer organisation and who undertake investments implemented at their premises.
Fifteenth, the Union financial support to producer organisations and associations of producer organisations in the event of adverse meteorological events, natural disasters, plant diseases or pest infestations should be increased from 50 % to 70 % of the actual expenditure incurred, under certain conditions.
Sixteenth, Member States should be allowed, as of 2025, to use up to 6 % of their allocations of direct payments to support the sectors set out in Article 1(2), points (a) to (h), (k), (m), (o) to (t) and (w), of Regulation (EU) No 1308/2013 and sectors covering products listed in Annex VI to Regulation (EU) 2021/2115.
Seventeenth, Regulation (EU) 2021/2116 should be amended to enable the use of the agricultural reserve in support of specific categories of collective actions by certain private operators adopted with a view to stabilise the sectors concerned by a severe market imbalance.