Bicameral decision-making in the European Union: The Direct Payments Regulation Paul James O Neill

Bicameral decision-making in the European Union: The Direct Payments Regulation 2014-2020 Paul James O Neill

Title Page Name: University: Paul James O Neill University of Limerick Student Number: 11057394 Dissertation Title: Dissertation Supervisor: Degree Programme: Bicameral decision-making in the European Union: The Direct Payments Regulation 2014-2020 Dr Frank Häge Master of Arts in European Politics and Governance Date: 29 September 2014 ii

Abstract The Lisbon Treaty extended the ordinary legislative procedure to agricultural policy in 2008. Negotiations for the CAP Reform Package 2014-2020 was the first major test of the European Parliament s legislative influence in agricultural policy. This study investigates the effect of the empowerment of the European Parliament on agricultural policy by making a substantial contribution to the empirical legislative decision-making literature. The negotiation of the Direct Payments Regulation is described at the policy level of analysis by reconstructing the internal and interinstitutional decision-making process in the Council and the Parliament. The stylised facts are exhibited in figures that demonstrate how positions and mandates are formulated in the respective institutions. The decision-making is separated into three stages: formulation of internal mandates; negotiation of interinstitutional compromise; and formal adoption of compromise text. The analysis provides a description of the frequency and substance of all committee meetings at all levels of the process. In addition, a novel method of data collection produces position data on 12 issues for all of the primary decisionmaking actors. A range of propositions is formulated that takes the policy positions of actors at the issue level as the key determinant of explaining vote choice at the policy level. The linking of the three decision-making stages at the policy level and at the issue level reveals the Council as the more powerful collective actor. The asymmetric power between the legislative actors may pose a problem for policy-making in agriculture, particularly with the weak Commission found under codecision. Moreover, low party group cohesion where MEPs vote along national lines may actually create more agricultural protection than existed under the consultation procedure. In this scenario,

the EP is more of an ally than a counterbalance to the Council, particularly for southern and eastern member states. iv

Contents Title Page... ii Abstract... iii Acknowledgements... vii List of Tables... viii List of Figures... ix List of Abbreviations... x 1. Introduction... 1 Direct Payments Regulation... 2 Plan of the study... 3 2. Background to the EU s Common Agricultural Policy... 5 Introduction... 5 1958 to 1992... 7 1993 to 2004... 8 Post-2005... 10 Conclusion... 12 3. Literature Review... 13 Introduction... 13 Internal and external factors... 14 Institutional Factors... 18 2013 Reforms... 21 Conclusion... 22 4. Research Design and Theoretical Framework... 25 Introduction... 25

Theoretical Framework... 27 Formulation of intra-institutional negotiating mandates... 30 Negotiation of an interinstitutional compromise... 34 Formal adoption of the compromise text... 37 Conclusion... 40 5. Case selection and methodological issues... 42 Data collection for reconstructing the negotiation process... 42 Issue identification and position data collection... 44 6. Reconstruction of decision-making process... 49 Internal decision-making... 49 Negotiation of an interinstitutional compromise... 57 Formal adoption of the compromise text... 59 Conclusion... 60 7. Issue level analysis of the decision-making process... 62 Selected topical issues from the Direct Payments Regulation... 62 Formal adoption in the EP... 81 Formal adoption in the Council... 84 Conclusion... 85 8. Summary and final remarks... 87 References... 91 Annex... 103 vi

Acknowledgements First and foremost I would like to thank Dr Frank Häge for supervising the dissertation. His insights and constructive criticism on coursework at undergraduate and postgraduate level had considerable influence on the development of the study. I would also like to acknowledge and thank Dr Bernadette Connaughton and Dr Rory Costello for their helpful comments on the research proposal and guidance on the research question. I am also very grateful to all of the lecturers, tutors, staff and students from the Department of Politics and Public Administration that provoked my interest in political science over the past four years. I would also like to thank Dr Brendan Halpin from the Department of Sociology for allowing me to take two modules in quantitative research. I must also thank the Council Secretariat for granting me timely access to Council documents. Finally, I am thanking Natasha. vii

List of Tables Table 3.1 Selected literature on the EU s Common Agricultural Policy... 24 Table 4.1 Voting weights in the Council of the European Union... 39 Table 5.1 Selected issues in Direct Payments Regulation... 46 Table 5.2 Delegations comments on the Direct Payments Regulation... 48 Table 7.1 Propositions for intra- and interinstitutional decision-making and voting.. 63 Table 7.2 Summary results at issue level... 81 Table 7.3 MEP votes by political group on the Direct Payments Regulation... 82 Table 7.4 MEP votes by nationality from EU-15 on the Direct Payments... 83 Table 7.5 MEP votes by nationality from EU-13 on the Direct Payments... 84 Annex I. Member states issues 1-6... 103 Annex II. Party groups issues 1-6... 104 Annex III. Member states issues 7-12... 105 Annex IV. Party groups issues 7-12... 106 viii

List of Figures Figure 6.1 Internal decision-making on the Direct Payments Regulation... 57 Figure 6.2 Interinstitutional decision-making on the Direct Payments Regulation... 59 Figure 7.1 Financial discipline adjustment cut-off point... 65 Figure 7.2 Removal of direct payment entitlements... 66 Figure 7.3 Capping and reduction of direct payments... 68 Figure 7.4 Flexibility to move funding between pillars... 69 Figure 7.5 Internal convergence to uniform level... 70 Figure 7.6 Equivalent greening practices... 72 Figure 7.7 Crop diversification... 73 Figure 7.8 Permanent grassland... 74 Figure 7.9 Ecological focus area... 75 Figure 7.10 Payment for young farmers... 76 Figure 7.11 Voluntary coupled support... 78 Figure 7.12 Small farmer payments... 79 ix

List of Abbreviations ALDE Alliance of Liberals and Democrats AT Austria BE Belgium BG Bulgaria BSE Bovine spongiform encephalopathy CAP Common Agricultural Policy COMAGRI Committee for Agriculture and Rural Development of the European Parliament CY Cyprus CZ Czech Republic DE Germany DG-AGRI Directorate-General for Agriculture and Rural Development of the Commission DK Denmark ECR European Conservatives and Reformists EE Estonia EL Greece EP European Parliament EPP European People s Party ES Spain EU European Union FI Finland FR France G/EFA Greens/European Free Alliance GATT General Agreement on Tariffs and Trade GUE/NGL European United Left Nordic Green Left HR Croatia HU Hungary IE Ireland IT Italy x

LT Lithuania LU Luxembourg LV Latvia MEP Member of the European Parliament MFF Multiannual Financial Framework MT Malta MTR Mid-term Review (2003) NL Netherlands PL Poland PT Portugal QMV Qualified majority voting RO Romania S&D Alliance of Socialists and Democrats SE Sweden SI Slovenia SK Slovakia UK United Kingdom WPHAQ Working Party for Horizontal Agricultural Questions WTO World Trade Organisation xi

1. Introduction In 2013, after over two years of negotiations, the European Parliament (EP) and the Council of the European Union adopted the legal framework to manage agricultural policy in the European Union (EU) for the following six-year period. Although the substance of the reform was conservative compared to earlier adjustments, the legislative decision-making of the CAP Reform Package 2014-2020 was distinctive in several respects. 1 First, the slow pace of economic recovery from the financial crisis put the spotlight on the cost of the EU s common agricultural policy (CAP) in discussions for the EU Multiannual Financial Framework (MFF). Second, there was a comprehensive review of the entire policy with the objective of integrating each of the policy instruments into a more efficient and effective decision-making framework. Third, and of most interest to the legislative decision-making literature, the EP was granted equal decision-making power with the Council in the agricultural policy field. After the Lisbon Treaty (2008) extended the ordinary legislative procedure to agriculture, it was the first time that a substantial proportion of agricultural policy was subject to codecision between the Council and the EP. It is the movement of agricultural policy into mainstream EU decision-making that this study explores by focusing on one of the main legislative proposals from the reform package. 1 European Commission (2013) Overview of CAP Reform 2014-2020, Agricultural Policy Perspectives Brief [online], 5, available: http://ec.europa.eu/agriculture/policy-perspectives/policy-briefs/05_en.pdf [accessed 15 Sep 2015]. 1

Direct Payments Regulation The decision-making process of the Direct Payments Regulation is reconstructed from the adoption of the proposal by the Commission to the formal adoption of the regulation by the EP and the Council. The study gives a detailed account of intra-institutional decision-making in both legislative institutions and the interinstitutional compromise agreement that followed. The stylised facts are exhibited in figures that demonstrate how positions and mandates are formulated in the respective institutions. In addition, a similar method reconstructs the interinstitutional negotiations until the delegations from the Council and the EP reached an early first reading agreement. While it is somewhat novel to follow to such an extent the internal and interinstitutional development of a legislative decision, the major empirical contribution of the study is to identify and spatially represent the preferences of key actors on 12 important issues from the regulation. In an exploratory exercise in data collection, it is shown that the preferences of many actors can be manually retrieved from documents publicly available on the institutions databases. While interviews are a more direct way of gathering evidence, there is a large amount of information that can be extracted relatively inexpensively from policy statements and amendments submitted to databases by member states and Members of the European Parliament (MEPs). A sufficient number of positions are found for MEPs and party groups in the EP and member states in the Council to generate a substantive empirical account on each issue. A simple first reading agreement model is constructed that takes account of the procedural and informal characteristics of bicameral decision-making in the EU. Early first reading agreements are made in three decision-making stages: formulation of intrainstitutional negotiating mandates; negotiation of an interinstitutional compromise; and 2

formal adoption of the compromise text in both legislative institutions. A range of propositions are formulated that take the policy positions of actors at the issue level as the key determinant of explaining vote choice at the policy level. In contrast to sociological assumptions, it is posited that key decision-makers are utility maximises and that there is a simple rational choice link between policy positions, institutional procedures and policy outcomes from the issue level to the policy level of analysis. Therefore, the main research questions are: What collective actor has the greatest influence on the legislative outcome? What individual actors have the greatest legislative success? Do intermediary actors such as the Council Presidency or the EP s Rapporteur have a noticeable impact on the legislative outcome? What impact does the introduction of the ordinary legislative procedure have on agricultural policy in the EU? The empirical evidence indicates that on balance the Council is collectively more successful than the EP, possibly because the Council s mandate is formulated through accommodation while the EP s mandate is more contested. The empirical evidence does not support claims of a Rapporteur effect on the outcome while hidden preferences prevent examination of a Presidency effect. Finally, the extension of codecision to the agricultural policy field adds more complexity to decision-making. A lack of party group cohesion may weaken the EP as a collective body when MEPs vote along national lines. Thus, the EP was more of an ally to the Council than a counterbalance in the decision-making of the Direct Payments Regulation. Plan of the study Chapter 2 presents background information on the development and evolution of agricultural policy in the EU. The background provides the context for the current reform programme and introduces some of the issues that continue to define the 3

discussion on agricultural policy. The key periods of reform and some of the main policy instruments proposed by the Commission are outlined. Chapter 3 reviews the literature that focuses specifically on CAP reform by outlining the various internal, external and institutional factors that have been extended in the literature to explain CAP reform. Rather than linking the study to the policy level literature, it is proposed to apply insights from the quantitative issue level literature to investigate the legislative decision-making of the Direct Payments Regulation. Chapter 4 develops a simple legislative model that reduces the decision-making process into three different stages and presents the aims of the empirical part of the study. For each decision-making stage theoretical and empirical literature is used to formulate a range of propositions that guide the remainder of the study. In Chapter 5 the collection method is outlined for the descriptive data, and the identification process for the 12 issues that are used in the later analysis is explained. Chapter 6 presents a comprehensive reconstruction of the legislative decision-making process of the Direct Payments Regulation. Each committee meeting is traced in the EP and in the Council to generate a detailed stylised account of decision-making internally and interinstitutionally. In addition, a full qualitative description is provided at the policy level. Chapter 7 moves to the issue level of analysis where decision-making propositions are tested on 12 issues. Each issue space is described briefly and depicted in figures to test the issue level propositions. The chapter then moves to the policy level to test propositions on voting behaviour in the EP and in the Council. Finally, the concluding chapter summarises the findings and offers some remarks on extending the study. 4

2. Background to the EU s Common Agricultural Policy Introduction In this chapter, I present a background outline of the development and evolution of agricultural policy in the EU. A brief historical account of the main reform events will provide context to the literature review that follows. The chapter focuses on the substance of previous constitutional and policy instrument changes in the agriculture policy field. The next chapter reviews the theory, causes, pressures and institutional factors that have been raised in the literature for causing agricultural reform. Despite substantial decline in the share that the agricultural sector contributes to Europe s GDP, the Common Agricultural Policy continues to be a politically controversial and economically costly element of EU governance. Nugent (2010, p.353) gives five reasons for the salience of the CAP: agriculture is an important component of value chains linked to other economic sectors; the supranational nature of the policy extends major decision-making power to EU level institutions; agriculture continues to consume about two-fifths of the annual budget; there is a large institutional presence of agricultural officials and staff in both the Commission and the Council relative to many other policy areas; and agriculture is the most controversial policy area with widely divergent views in member states to the extent the sector should be integrated. Outlined below are the purpose and objectives of agricultural policy in the EU as set out in Article 39 of the Treaty on the Functioning of the European Union (TFEU). 2 Other than the removal of initial transitional measures for the founding 2 Official Journal of the European Union (2012) Consolidated Versions of the Treaty on European Union and the Treaty on the Functioning of the European Union [online], C 326/160, 26 Oct, Luxembourg, 62-63, available: http://eur-lex.europa.eu/lexuriserv/lexuriserv.do?uri=oj:c:2012:326:full: 5

members, the text stipulating the Agriculture and Fisheries policy provisions is almost exactly the same as they was in the Treaty of Rome. In 1957 agriculture was seen as having an important role that required supranational protection from external agricultural producers and intervention in the market to maintain a fair income for farmers and a steady food supply for citizens. However, the CAP has been beset with problems since its inception and the broad objectives have proven very difficult to implement. Article 39(1) The objectives of the common agricultural policy shall be: a. 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; b. thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture; c. to stabilise markets; d. to assure the availability of supplies; e. to ensure that supplies reach consumers at reasonable prices. Article 39(2) In working out the common agricultural policy and the special methods for its application, account shall be taken of: a. the particular nature of agricultural activity, which results from the social structure of agriculture and from structural and natural disparities between the various agricultural regions; b. the need to effect the appropriate adjustments by degrees; c. the fact that in the Member States agriculture constitutes a sector closely linked with the economy as a whole. EN:PDF [accessed 20 Sep 2014]. 6

Atkin (2011) separates CAP reform into three distinct phases: 1958 to 1992 a period of coupled price support and market intervention; 3 1993 to 2004 a period of partial decoupling and the creation of Pillar 2 for separate agri-environmental and rural development payments; 4 and post-2005 almost full decoupling of payments from production with fixed farm payments for farmers that comply with certain environmental standards. 5 The following provides a brief outline of each of the phases by emphasising that change is often enacted through the adoption of new policy instruments or the linking of newly created policy areas such as the environment to agriculture. 1958 to 1992 Despite budget pressures, there were few changes during the first three decades of the CAP. The early CAP was based on the three fundamental principles of common pricing, financial solidarity and community preference (Cunha and Swinbank 2011, p.4). Common pricing promised no disparity in the levels of support between member states. Financial solidarity expressed the idea that total agricultural payments would be funded collectively and distributed from the EU level. Finally, community preference pledged to insulate farmers trade from non-member states and world markets. Each of these principles came under strain from budget constraints, demands for trade liberalisation and various enlargements. 3 Coupled direct payments are linked to the quantity of an item that is produced. As profit margins were dependent on quantity rather than market demand, farmers had an incentive to overproduce. Decoupled payments are direct payments without this link and are paid regardless of the quantity produced. 4 CAP funding is unevenly split between two pillars. Pillar 1 support consists of direct payments to farmers. Pillar 2 support is linked to rural development programmes and has a much smaller share. 5 Cross-compliance is a policy instrument that requires farmers to implement statutory management requirements and maintain good agricultural and environmental conditions on their farms to receive their monetary entitlements. 7

The early CAP was insulated from the support of the two largest member states France and Germany (Roederer-Rynning 2003, pp.136-138). France agreed to the opening of its industrial market in exchange for a fully integrated CAP for its large agricultural sector while Germany benefited from cereal protection and an open market for its industry sector. Therefore, the primary policy instruments during this period were market distorting measures such as high tariffs on imports or trade restrictions, intervention purchasing of surplus produce from community farmers and the use of export subsidies to dispose of surplus produce on world markets (Cunha and Swinbank 2011, p.5). These practices resulted in numerous problems, not least conflict between member states over the rising cost of the net budget, the costs associated with storing or selling subsidised surplus stock, the undesirable distribution of payments and the inevitable environmental externalities associated with coupled support (Mahé and Roe 1996, pp.1314-1315). 1993 to 2004 Although budget saving measures and a dairy quota that required a compromise rebate for Britain were agreed in 1984 (see Mahé and Roe 1996), 6 the impetus for substantial reform began with the opening in 1986 of the Uruguay Round under the General Agreement on Tariffs and Trade (GATT) where agricultural liberalisation was for the first time going to be one of the primary aims (Roederer-Rynning 2003, pp.139-140). Although the stabilisers reform package setting production ceilings for all major crops was agreed in 1988 (see Patterson 1997, pp.145-152), the agriculture Commissioner, Ray MacSharry, pushed for reform after international trade negotiations broke down in 6 Milk quotas were introduced at national and farm level to limit the oversupply of milk products on the market. 8

December 1990. The domestic cost to the CAP budget from dealing with surplus produce was the official reason for the reform, however, the substance of the Commission proposals were clearly linked to the contours set by the international trade talks (Daugbjerg and Swinbank 2009, pp.316-318). The MacSharry reforms set in motion the partial decoupling of price support from production where farmers would be compensated for lower prices through the receipt of a separate direct payment. 7 Conflict in the Council varied according to national interest with the main division lines fixed on milk quotas, the extent of price cuts for cereals, the objective to introduce modulation between small and big farmers and compulsory set-aside (Cunha and Swinbank 2011, pp.94-96). 8 While the final compromise would kick-start international trade talks, it was apparent that the idea of supporting agriculture was unquestioned and that the new regime would actually increase the cost of the agricultural budget. The agriculture Commissioner from 1996 to 2004, Franz Fischler, was responsible for proposing the Agenda 2000 reforms and the radical 2003 Mid-term Review (MTR) reforms. The Agenda 2000 reforms brought further reduction to price supports for cereals, milk, beef and veal. Pillar 2 was established to promote sustainable development in rural areas where programmes had to comply with agri-environmental measures. Both cross-compliance and modulation were introduced as voluntary instruments to the first pillar but the Commission found no support in the Council for the capping or setting ceilings on transfers to large farms, degressivity, 9 the progressive reduction of direct payments, or co-financing, where member states would be 7 The direct payment was fixed to the area farmed and the crop grown or the herd type and size. 8 For the MacSharry reforms, modulation referred to the transfer of funds from big farmers to small farmers to achieve a more equitable distribution of support. After 2006 modulation tends to refer to the transfer of funds from the direct payments Pillar 1 to the agri-environmental Pillar 2. Compulsory setaside was a measure aimed at removing a proportion of farmland from production to reduce the quantity of crops such as cereals entering the market. 9 Degressivity refers to a percentage reduction of payments above a certain threshold to distribute funding from large farms to other areas of the CAP. 9

responsible for funding a proportion of their own payments (Cunha and Swinbank 2011, pp.108-114). While Fischler s more far-reaching reforms were watered down or removed altogether, he managed to obtain a mandate from the Council to carry out a mid-term review of the new CAP in 2002 (Swinnen 2008, pp.157-158). The scale of reform proposed in the MTR surprised some member states to the extent that the Commissioner was accused of acting outside of his mandate (Pokrivcak et al 2008, p.10). Due to a perfect storm of internal and external factors (see Swinnen 2008 below), a moderate but radical reform in CAP terms was agreed in the Council. A new single payment scheme was to be paid to farmers regardless of production and additional compensation was decoupled from prices to a large extent although with some leeway granted to member states. 10 The cross-compliance policy instrument was made compulsory for Pillar 1 and more resources would be transferred to Pillar 2 to promote the implementation of a range of environmental, animal safety and food quality measures. Modulation was introduced by marginally reducing the unit amount of direct payments to finance second pillar rural development programmes. Degression, however, failed to find enough support in the Council again (Cunha and Swinbank 2011, pp.130-133). As is highlighted in the literature, the increase in the intensity of change was likely the result of the existing Council member states preparing for the forthcoming eastern enlargement (Henning 2008). Post-2005 Further decoupling reform to key sectors such as sugar, fruit and vegetables and wine was undertaken by newly appointed Commissioner, Mariann Fischer Boel. Although the CAP presented a clear line of division in negotiations in 2005 for the 2007-2013 10 The new payment would be based on historical claims between 2000 and 2002. 10

MFF Financial Perspective, it was agreed that Pillar 1 expenditure would be protected and member states could divert up to 20 per cent to Pillar 2 (Cunha and Swinbank 2011, pp.182-183). 11 Despite Fischer Boel s undertaking of a Health Check in 2008 after the European Council invited the Commission to complete a full review of EU expenditure, there was only minor change made to the single payment scheme (Atkin 2011, p.7). Further proposals that were agreed included almost full decoupling, the loosening of the intervention mechanisms for most products and preparation to wind down the milk quota programme. Modulation was strengthened from the previous 5 per cent to reach 10 per cent of the Pillar 1 national envelope by 2012 and capping was again discussed but not introduced. Finally, the reform of most interest to this project occurred after the ratification of the Lisbon Treaty. First proposed by the Convention on the Future of Europe in 2002 (see Roederer-Rynning and Schimmelfennig 2012), Agriculture and Fisheries would now operate under codecision or what is now known as the ordinary legislative procedure. This was a great extension of power granted to the European Parliament because MEPs would be equal legislators in agriculture with the Council for the first time and restricted from the decision-making of very few instruments. In addition, the previous distinction between compulsory and non-compulsory spending was reduced to a single unified budget procedure (Greer and Hind 2012, p.334). Consequently, not only would the EP be equal legislators, they would also have greater budgetary power. The Articles are as follows: 11 Long-term funding for CAP is negotiated as part of the Multi-annual Financial Frameworks. The CAP budget forms a major part of the discussions in the European Council. The CAP reforms were negotiated at the same time as the five MFFs to date (Delors I, 1988-1992; Delors II, 1993-1999; Agenda 2000, 2000-2006; the Multiannual Financial Framework, 2007-2013, and the MFF, 2014-2020); see European Parliament (2015) Fact Sheets on the European Union: Multiannual Financial Framework [online], available: http://www.europarl.europa.eu/aboutparliament/en/displayftu.html?ftuid=ftu_1.5.3.html [accessed 20 Sep 2015]. 11

Article 43(2) The European Parliament and the Council, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, shall establish the common organisation of agricultural markets provided for in Article 40(1) and the other provisions necessary for the pursuit of the objectives of the common agricultural policy and the common fisheries policy. Article 43(3): The Council, on a proposal from the Commission, shall adopt measures on fixing prices, levies, aid and quantitative limitations and on the fixing and allocation of fishing opportunities. Conclusion In this chapter I offered a brief summary of the evolution of the common agricultural policy in the EU. The objective was to introduce the key periods of reform and outline some of the main policy instruments that have been proposed by the Commission. Some instruments such as cross-compliance have been successfully adopted by the member states while others such as capping and degressivity have persistently failed to find majority member state approval. The intensity of reform was the highest from 1992 to 2005 when significant measures were implemented to reduce the market distorting features of the old CAP and expanding rural development and agri-environmental features. The next chapter presents a selective literature review that looks specifically at the qualitative CAP reform literature. Chapter 4 builds more on the quantitative literature to formulate a generalisable legislative decision-making model for early agreements. The following chapters then move onto the empirical part of the study. 12

3. Literature Review Introduction The previous chapter gave a short account of agricultural policy in the EU and introduced the main objectives, policy instruments and reforms that have been implemented since its inception. In this chapter I present a selective review of the political science literature on the common agricultural policy. Although interesting insights about agricultural policy in the comparative and quantitative research literature will be expanded upon later, this chapter reviews the literature where CAP reform is a central component. This approach will serve two objectives. First, the review will tease out what areas of CAP reform previous literature found worthy of investigation. Second, the review will demonstrate that while the causes and consequences of different periods of reform have received a good deal of attention, empirical research outlining the actual positions of key actors for explaining agricultural policy outcomes are noticeably lacking. After the opening section briefly outlines the descriptive literature, the chapter presents the internal and external factors that have been put forward for contributing to CAP reform. This is followed by a review of the literature that offers institutional explanations for reform. The next section presents a summary of the existing literature on the focus of this study, the CAP Reform 2014-2020. The final part of the chapter concludes with a selective summary table of the literature and offers some justification for the theoretical approach that underpins the theoretical and empirical chapters that follow. There is a vast literature on the EU s CAP. Agriculture is a major policy field of the EU and continues to consume the largest portion of the budget (Aksoy 2010, 13

p.174). It is interesting to political scientists because agriculture is a policy area that is vital for national interest but was the most integrated community policy for decades. Many textbooks present the history or describe the CAP through a particular conceptual lens (for example, Fennell 1997; Ritson and Harvey 1997; Grant 1997; Ackrill 2000), and introductory texts on policy-making in the EU usually have a chapter dedicated to agricultural policy (for example, Dinan 2005; Nugent 2010; Fouilleux 2010; Roederer- Rynning 2010; Bache et al 2011). However, other than providing broad descriptive or historical analyses, a limited number of studies attempt to explain, theorise and link European agricultural bargaining processes to broader policy outcomes (Pokrivcak et al 2006, p.563). The non-descriptive literature can broadly be divided into studies that either employ constructivist or rational choice theory (Lynggaard and Nedergaard 2009, pp.292-293). The former research attempts to understand the CAP by focusing on factors such as stable exogenous preferences, interest maximisation and institutional decisions. The latter research understands the CAP by focusing more on the role of internalised preferences, ideas and the influencing nature of the decision-making environment. The remainder of this chapter looks at the literature in more detail by identifying the main internal, external and institutional factors from different theoretical approaches that have been employed to explain CAP reform. Internal and external factors Employing policy network analysis, Daugbjerg (1999) argues that the MacSharry reforms were moderate because of the dominant interventionist policy paradigm persisting in the agricultural network and an institutional context that favoured veto players. Although reform was necessary to move into line with GATT demands, the 14

complete liberalisation of agricultural trade and the ending of all compensation to farmers was noticeably absent from the dominant discourse. Daugbjerg and Swinbank (2009), recognising the interrelationship between EU and GATT/WTO policy development, insist that ideational change during the Uruguay Round to a market liberal paradigm transformed the hitherto dominant state-assisted paradigm at the EU level. They argue that through a process of institutional layering the EU preserved the core objectives of agricultural policy while making modest adjustments to bring the CAP into line with the competitive agricultural paradigm. Grant (2010) also emphasises the importance of prevailing paradigms which serve to delegitimise particular old policy instruments while legitimising new instruments. In this view, the dominant multifunctionality discourse promoted the introduction of new agricultural instruments that produce positive externalities and public goods while delegitimising other instruments such as coupled payments and export subsidies. By extending the advocacy coalition framework to agricultural policy, Nedergaard (2008; see also Sabatier 1998) reasons that internal and external focusing events such as crises can alter the belief system and learning process of different coalitions in the policy system. During the Fischler Reforms, the beginning of WTO Doha round talks (after the breakdown of Seattle negotiations in 1999) and the spread of bovine spongiform encephalopathy (BSE) from the UK to mainland Europe in 2000 changed the equilibrium of the CAP policy core. Member states such as Ireland, Belgium, Austria, Greece and Italy joined the Commission, the EP, the UK, Germany, the Netherlands, Denmark and Sweden in accepting that a new direction for the CAP was necessary (Nedergaard 2008, p.190-192). Looking at the milk quota reform of 1984, the MacSharry reform of 1992 and the Fischler reform of 2003, Lynggaard and Nedergaard (2009) argue that the ideational context shapes preferences in the long and 15

medium term, but that short-term negotiations are better understood by employing rationalist bargaining assumptions that recognise institutional factors and interest maximisation. Using game theory Mahé and Roe (1996, pp.1318-1322) emphasise the prisoner dilemma type restaurant table effect where member states typically tend to favour greater protection in sectors where they have a particular interest when the bill is shared among the collective. Although they pointed to Uruguay Round pressures as the primary explanation for the 1992 adjustments, they predicted that future adjustments could be determined by enlargement pressures, fiscal constraints, further decoupling or environmental externalities (Mahé and Roe 1996). Coleman and Tangermann (1999) apply game theory to stress the interdependencies between policy-making at the EU and the international level. By separating the negotiations into autonomous linked games they show how policy instruments such as lower intervention prices, direct payments and compulsory set-asides were proposed and successfully adopted in the EU game because they were necessary to advance negotiations in the international GATT game. Patterson (1997) extends Putnam s (1988) two-level game model to include the community level as well as the international level and the domestic level to an analysis of the 1988 stabilisers reform and the 1992 MacSharry reforms. She concluded that more heterogeneous interests at the domestic level weakened the agricultural antireformist lobby and the electoral cycle was more permissive in Germany and France in 1992. The costs of protecting the status quo and having no international agreement increased and central actors such as the Commissioner acted strategically and with more autonomy. According to Nedergaard (2006a, p.409), the iron construction of the various interests embedded in the CAP can only be deconstructed to a significant 16

extent in circumstances where the CAP comes under fire from strong political players outside of the European Union. According to Roederer-Rynning (2003), the Uruguay Round and the BSE crisis in the 1990s gave supranational actors such as the Commission and the EP more opportunities to influence agricultural policy. Also, budget conflict and pressure from enlargement began to erode the iron pact between France and Germany. Nedergaard (2006b) puts forward a rational choice explanation for the 2003 MTR. By conceptualising the EU as a super asymmetrical political system that favours particular (agricultural) interests, he argues that significant reform requires external pressure to change the asymmetry of the political system and a Commissioner who acts as a policy entrepreneur to strategically create a reformist coalition in the Council of Ministers. Pappi and Henning (1999) propose an exchange model to assess the political influence of the different national and supranational actors for the 1992 CAP reforms. Based on the results of interviews with the Commission, the Council, EP party groups and interest group representatives directly involved, they conclude that a complex web of relationships exists between national ministries of agriculture, EP party groupings and the Commission who depend on national farmer organisations and peak organisations for expert knowledge and public support. Nedergaard (2006a) employs insights from welfare economics and rational choice theory to propose a deductive theoretical model for the CAP. He argued that previous market-based understandings need to be extended by incorporating the interests of individual decision-makers such as politicians and bureaucrats into the models. From this perspective, continued protection in agriculture can be explained by the logic of collective action as a result of the intensity of agricultural compared to consumer interests at national and EU level to promote the interests of vote-seeking politicians and influence-seeking bureaucrats. 17

For Swinnen (2015) structural change brought about by economic development, technological change or the introduction of new policy instruments can alter the balance and membership of coalitions competing for political influence. The type and target area of a policy instrument set the line of conflict and provide incentives for lobbying by interest groups at the national and EU level (Swinnen 2015, pp.97-98). In an overview of the CAP since its inception, Burrell (2009, pp.275-279) concludes that the main changes from 1992 to 2007 increasing the objectives of the CAP; reforming the instruments of Pillar 1; and creating Pillar 2 were driven by an interaction of budget concerns, international pressures and enlargement. Similarly, in a historical analysis Moehler (2008) finds reform to have been caused internally through budget constraints, changing expectations of society and the idea of a European model of agriculture, and externally, from internal trade negotiations and enlargement. Swinnen (2008) explains the extent of the MTR reforms by the coming together of the perfect storm of factors including favourable previous institutional reforms, an optimal institutional context for reform and the supportive preferences and qualities of key actors. Institutional Factors Other research looks at the additional effect of institutional change on agricultural reform. Crombez (2008) emphasises how Treaty changes extended a qualified majority rule in the Council to the Commission appointment and legislative procedures. This adjustment brought more reformed-minded officials into the Commission and removed the veto of individual member states in the Council. Looking at the possible restaurant table effects under unanimity, qualified majority and simple majority rules, de Gorter et al (1998; see also Pokrivcak et al 2001) formally demonstrate how non decision- 18

making procedure results in a systematic upward bias in the protection level because each member state decides on the same policy and implements the same common instrument. In other words, each member state is choosing the same meal. Further studies look at the effect on agricultural policy of the voting weights given to member states and the effect of enlargement on bargaining in the Council. Testing a period from 1977 to 2006, Aksoy and Rodden (2009) demonstrate how greater net agricultural and structural transfers are related to the disproportionate number of votes afforded to small member states in the Council (and in the Parliament). König and Bräuninger (2000), based on GDP per capita and the size of the agricultural sector in each member state, predict that even under the qualified majority rule enlargement would increase the opportunity for gridlock and tilt the balance in favour of small member states. Henning (2008) contributes the 2003 MTR to the ex ante effect of enlargement where the old member states were preparing for the negative effects of a larger union. Legislative gridlock in agricultural policy was predicted following enlargement unless external shocks were sufficient to converge member state preferences. Similarly, while Olper (2008) recognises the typical internal and external drivers of the CAP, he attributed the sudden change from the previous slow adjustment in 2003 to the anticipation of extending the old CAP to the new member states. Using spatial analysis, Pokrivcak et al (2006; 2008) offers a formal model of how the consultation decision-making procedure effects CAP reform for single and package deals. The influence of the Commission is positively related to the intensity of an external event and the amendment rule in the Council as well as negatively related to the qualified majority rule. Moreover, although the distribution of member state preferences in agricultural policy reinforces a status quo bias, under certain conditions a greater number of policy instruments (such as in package deals) can be used by the 19

Commission to offer sufficient compensation to assemble a winning coalition. Henning and Latacz Lohmann (2004) argue that the Commission as agenda-setter will propose agricultural policy that is acceptable to the pivotal member state in the Council. However, they predict that enlargement will make preferences in the Council more heterogeneous where no qualified majority of weighted votes will move the status quo in either direction. In an analysis on reform of the decision-making procedure, Roederer-Rynning and Schimmelfennig (2012) view the parliamentarisation of agriculture through the extension of codecision not in traditional policy-seeking, legitimacy-seeking or interinstitutional bargaining terms, but as the broader constitutionalisation and legal simplification of all policy areas. Crombez and Swinnen (2011) use spatial models to test decision-making in different one-dimensional scenarios. Although, formally, the EP gains power and the Commission s influence declines with the introduction of codecision, actual influence on the policy outcome depends on the relative positions of the Council, the EP and the Commission, the position of the status quo and the relative bargaining power of the co-legislators in the Conciliation Committee. Elsewhere, Crombez et al (2012) predict that the EP s formal empowerment in agricultural policy may be offset by factors such as internal divisions in the EP, ideological conservatism in the Committee for Agriculture and Rural Development (COMAGRI) and resource and expertise asymmetries relative to other institutions such as the Agricultural and Fisheries Council and the Directorate-General for Agriculture and Rural Development of the Commission (DG AGRI). Similarly, Greer and Hind (2012, p.336) point to time and expertise resources in the EP, and emphasise the potential for multiple sources of conflict collectively between committees and individually for MEPs choosing between national and EU interests. 20

Greer and Hind (2012) provide an alternative view of the perceived loss of power of the Commission by emphasising the greater use of delegated and implementing powers in agriculture and the information and expertise asymmetries that can be utilised to influence the position of the EP. At the policy advice level, Heard- Lauréote (2010, pp.149-179) finds that the division of seats and operating procedures in the Commission s agriculture advisory groups (AAGs) provide a limited forum for consultation and favour producer interests (COPA/COGECA in particular) rather than consumer, animal or environmental groups. The underdevelopment of civil society organisation in the new member states has resulted in little change to AAG operation and structures after enlargement (Heard-Lauréote 2008). 2013 Reforms The 2013 reforms have not received a great deal of attention from the political science literature. For Ciaian et al (2014, pp.647-648) the primary pressures to reform Pillar 1 payments came from EU Ministers of Finance to reduce SPS spending, pressure to make payments more effective at providing public goods (such as landscape quality, biodiversity, and water quality) and pressure to make payments more equitable both within and between member states. After over one year of negotiations, Matthews (2013) offer a comprehensive account of the extension of environmental conditions to CAP instruments since the 1980s and questioned the bargaining advantage for the Commission to attach the greening measures to the receipt of direct payments in Pillar 1. While the mandatory greening measures were potentially proposed to make direct payments appear more palatable and legitimate, neither of the legislative institutions appeared to support overly ambitious greening measures (Matthews 2013, pp.21-24). 21

Based on an analysis of the literature, Garcia-Duran and Millet (2014) identify the determinants of previous reforms and conclude that the absence of major reform in 2013 demonstrates how internal pressures (budgetary constraints, EP empowerment, enlargement, path dependency) require additional external international pressure to achieve substantial policy instrument change. In an analysis of EP amendments in the 2013 reform, Kovács (2014b) finds that around half of the EP amendments were included in the final texts of the CAP Regulations. There was clear evidence that EP amendment activity (8606 tabled amendments) increased considerably with the advent of the codecision procedure, and Rapporteur draft reports and compromise amendments tended to have high adoption success. Extending the same data, Kovács (2014a) employs social network analysis to test what patterns influence MEP behaviour when tabling open amendments. He finds that party group, nationality and the extent of member states contribution to the EU budget can influence MEP coalition formation when submitting amendments to the Commission proposal. Conclusion The chapter focused on the existing literature that examined different periods of CAP reform. Table 3.1 below summarises the literature on CAP reform by distinguishing between study type, research focus, theory and temporal period. Previous research has tended to focus on CAP reform at the policy level of analysis. While there is a broad literature focusing on the internal and external drivers of the CAP, the search for causal patterns at the policy reform level tends to overlook day-to-day decision-making and the potential for individual action to shape reform. While the institutional literature is better placed to search for lower level explanations, reproducible empirical evidence is 22

not available for any of the major agricultural reforms. Consequently, the insights and claims of the institutional literature have been empirically tested only to a limited extent. The next chapter develops a simple legislative decision-making model that is suitable to search for causal patterns at the issue level of analysis. The decision-making process is broken into three stages and numerous propositions are formulated by moving away from the agricultural literature to the quantitative literature. Now that agricultural decision-making includes the European Parliament as an equal legislator, there is merit in linking agricultural policy-making to the theoretical insights developed to look at the ordinary legislative process. Once the legislative model is presented, the following chapters will describe the empirical part of the study. 23