One of the most important of the common policies of the European Union (EU). The basic principles behind the CAP (established 1962), or farm-support plan, are free trade for agricultural commodities within the EU, EU preference for domestic production, control of imports from the rest of the world, regional aid policies, and common financing. The objectives of the CAP were stated in the Treaty of Rome (1957) to be increased agricultural productivity, a fair standard of living for farmers, reasonable consumer prices, stability of markets, and secure food supplies. Most of these objectives have been met, through the use of high price-support measures, which in turn have generated surpluses in most major commodities (eg the butter mountain and wine lake). An important additional objective for the CAP is now to contain these surpluses, limit the huge cost associated with their disposal, and prepare for the admission of central and east European countries into the EU.
The Common Agricultural Policy (CAP) is a system of European Union agricultural subsidies and programmes.
The CAP
The CAP is an integrated system of measures which works by maintaining commodity price levels within the EU and by subsidising production. These are set at a level to raise the World market price up to the EU target price. The target price is chosen as the maximum desirable price for those goods within the EU. If the internal market price falls below the intervention level then the EU will buy up goods to raise the price to the intervention level. Current reforms of the system now underway are phasing out specific crop subsidies in favour of flat-rate subsidies based only on the area of land in cultivation, and in return for adopting environmentally beneficial farming methods.
The change in subsidies is intended to be accomplished by 2012, but individual governments have freedom to decide how the new scheme will be introduced.
The CAP also makes use of external trade policy.
The CAP also aims to promote legislative harmonisation within the Community.
Objectives
The objectives of the CAP, as set out in Article 33 of the Treaty of Rome, are :
to increase productivity, by promoting technical progress and ensuring the optimum use of the factors of production, in particular labour;The CAP recognised the need to take account of the social structure of agriculture and of the structural and natural disparities between the various agricultural regions and to effect the appropriate adjustments by degrees.
Sectors covered by the CAP
The common agricultural policy price intervention covers only certain agricultural products:
The coverage of products in the external trade regime is more extensive than the coverage of the CAP regime.
History of the CAP
The European Community (predecessor of the EU) rose from the ashes of World War II. The Common Agricultural Policy (CAP) was born in the late 1950s and early 1960s when the founding members of the EU had just emerged from over a decade of severe food shortages during and after the Second World War. However, due to the political clout of farmers, and the sensitivity of the issue, it would take many years before the CAP was fully implemented.
The Treaty of Rome defined the general objectives of a common agricultural policy. The principles of the Common Agricultural Policy (CAP) were set out at the Stresa Conference in July 1958. In 1960, the CAP mechanisms were adopted by the six founding Member States and two years later, in 1962, the CAP came into force.
By 1962, three major principles had been established to guide the CAP; Since then, the CAP has been an important element in the European institutional system.
Evolution and reform
The CAP has always been a difficult area of EU policy to reform; the Agricultural Council is the main decision-making body for CAP affairs and is dextrously manipulated by those states that hold the CAP most dearly, such as France. Above all, however, unanimity is needed for most serious CAP reform votes, resulting in gay and gradual change. Outside Brussels proper, the farming lobby's power has been a factor determining EU agricultural policy since the earliest days of integration.
In recent times, however, change has been more forthcoming, due to external trade demands and the intrusion in CAP affairs by other members of the EU policy framework, such as consumer advocate working groups and the environmental departments of the Union. In addition Euroscepticism in states such as the UK and Denmark is fed in part by the CAP, which is actually detrimental to their economies.
Helping to keep the CAP intact, though, is the normative background of the policy. all of these are used as rationales for keeping the CAP strong. It is not simply just another industry, hence its massive presence in the EU psyche (and the EU budget.) Finally, the aim of self-sufficiency and a "shared larder" in Europe, a particularly salient concern in the post-war years, lingers to this day.
Pre-1992
With the above in mind, it is clear that reform was as infrequent as it was underwhelming until fairly recently.
Bruised by the failure of Mansholt, would-be reformers were mostly absent throughout the 1970s, not least due to the various financial crises that rocked the union in this decade, such as oil supply problems and the economic depression.
The 1980s was the decade that saw the first true reforms of the CAP, foreshadowing further development from 1992 onwards. Environmentalists garnered great support in reining in the CAP, but it was financial matters that ultimately tipped the balance: due to huge overproduction the CAP was becoming expensive and wasteful. However, the basis of the CAP remained in place, and not until 1992 did CAP reformers begin to work in earnest.
1992
In 1992, the MacSharry reforms (named after the European Commissioner for Agriculture, Ray MacSharry) were created to limit rising production, while at the same time adjusting to the trend toward a more free agricultural market.
Since the MacSharry reforms cereal prices are closer to the equilibrium level, there is greater transparency in costs of agricultural support and the 'de-coupling' of income support from production support has begun. However, the administrative complexity involved invites fraud, and the associated problems of the CAP are far from being corrected.
It is worth noting that one of the main catalysts behind the 1992 reforms was the need to pacify the EU's external trade partners at the Uruguay round of the GATT trade talks with regards to agricultural subsidies. This set the tone for later reforms which were more often than not direct responses to external pressures on the Union, as opposed to a genuine and spirited response to the various anti-CAP groups existing within the EU.
2003
On 26 June 2003, EU farm ministers adopted a fundamental reform of the CAP, based on almost entirely "decoupling" subsidies from a particular crop.
Details of the UK scheme were still being decided at its introductory date of May 2005.
The overall EU and national budgets for subsidy have been capped.
The reforms enter into force in 2004-2005. (Member States may apply for a transitional period delaying the reform in their country to 2007 and phasing in reforms up to 2012)
EU expansion 2004
The expansion of the EU in 2004 increased the number of farmers from 7 to 11 million, increased the agricultural land area by 30% and crop production by 10-20%. The 2004 entrants into the EU have immediate access to price support measures (export refunds, intervention buying). EU states agreed in 2002 that agricultural expenditure up to 2013 should not increase in real terms.
The current areas that are issues of reform in EU agriculture are: lowering prices, ensuring food safety and quality, and guaranteeing stability of farmers' incomes.
European Commission Report
A 2003 report, commissioned by the European Commission, by a group of experts led by Belgian economist André Sapir stated that the budget structure was a “historical relic”. The report suggested a rethink of EU policy, redirecting expenditure towards measures intended to increase wealth creation and cohesion of the EU. As a significant proportion of the budget is currently spent on agriculture, and there is little prospect of the budget being increased, this would necessitate reducing CAP expenditure. The report largely concerned itself discussing alternative measures more useful to the EU, rather than discussing the CAP, but it did also suggest that farm aid would be administered more effectively by member countries on an individual basis.
The report's findings were largely ignored. Instead, CAP spending was kept within the remit of the EU - and France led an effort to agree a fixed arrangement for CAP spending that would not be changed until 2012.
Sugar regime reform 2005
One of the crops subsidised by the CAP is sugar produced from sugar beet;
Sugar was not included in the 1992 MacSharry reform, or in the 1999 Agenda 2000 decisions; Under the Sugar Protocol to the Lome Convention, nineteen ACP countries export sugar to the EU, and will be affected by price reductions on the EU market.
These proposals followed the WTO appellate body largely upholding on 28 April 2005 the initial decision against the EU sugar regime.
2006 reforms
As of 21 February 2006, the EU has decided on some reforms of sugar subsidies. According to the EU, this is the first serious reform of sugar under the CAP for 40 years.
An aim of this policy change is to allow easier and more profitable access to European markets for emerging economies. Critics, such as "EUPolitix", contend that this is not an altruistic move nor an idealistic shift from the EU, who are instead acting only in accordance with the wishes of the WTO, who supported challenges on sugar dumping by the EU from Australia, Thailand and Brazil. Another point of contention is that those countries who currently receive preferential treatment from EU member states - often due to colonial ties - as part of the ACP group may stand to lose out.
Criticism of the CAP
The CAP has been roundly criticised by many diverse interests since its inception.
Anti-development
Criticism of the CAP has united some supporters of globalisation with the anti-globalisation movement in that it is argued that these subsidies, like those of the USA and other Western states, add to the problem of what is sometimes called Fortress Europe;
Moreover, it is argued that in creating an oversupply of agricultural products which are then sold in the Third World and simultaneously preventing the Third World from exporting its agricultural goods to the West, the CAP increases Third World poverty by putting Third World farmers out of business.
Artificially high food prices
CAP price intervention causes artificially high food prices throughout the EU. Some have suggested that Europeans pay about 25% higher prices for food than they would without the CAP, whereas the Timbro research institute has counted figures reaching over 80%. This subsidy is estimated to cost each EU citizen on average £16 or €24 per week although intervention costs and subsidy are decreasing.
As a consequence of these artificial high food prices European consumers pay a regressive consumption tax. 218-219.)
Hurting smaller farms
Although most policy makers in Europe agree that they want to promote "family farms" and smaller scale production, the CAP in fact rewards larger producers. Because the CAP has traditionally rewarded farmers who produce more, larger farms have benefitted much more from subsidies than smaller farms. As a result most CAP subsidies have made their way to large scale farmers.
Environmental problems
The CAP has traditionally promoted a large expansion in agricultural production.
Equity among member states
Some countries in the EU have larger agricultural sectors than others, notably France, Spain, Poland, and Portugal, and consequently receive more money under the CAP.
CAP financing set up to benefit France
Many critics allege that the CAP has been of special benefit to France, which has a large agricultural sector. It is widely acknowledged that the CAP was initially established largely to suit France's interests, as it hoped to expand its large agricultural sector in which it enjoyed comparative advantage. However, many other countries have benefited from CAP subsidies, especially those with large agricultural sectors. The CAP is certainly not exclusively designed to benefit France, and farmer's associations across the union have supported it.
In their book, The great deception: can the European Union survive?, Christopher Booker and Richard North argue that the fundamental reason that France's President De Gaulle kept Britain out of the EEC during the 1960s was his concern to have the financial arrangement for the Common Agricultural Policy established first.
According to Booker and North, De Gaulle manipulated the EEC to get them to underwrite the high subsidies for French farmers, who in 1961 still accounted for a quarter of France's employment as opposed to only four percent in Britain. Once the CAP funding was settled, British membership of the EEC became a matter of French interest, and De Gaulle's veto was abandoned.
State intervention
Some major critics of the Common Agricultural Policy reject the idea of protectionism, either in theory, practice or both.
Economic Sustainability
Many economists believe that the CAP is unsustainable in an enlarged EU. The inclusion of ten additional countries on May 1, 2004 has obliged the EU to take measure to limit CAP expenditure. It is significantly larger than any of the other new members, but taken together the new states represent a significant increase in recipients under the CAP. Even before expansion, the CAP consumed a very large proportion of the EU's budget, upward of 90% in the late 1980s.
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