Reform of the European Common Agricultural Policy

*Introduction The European Common Agricultural Policy (CAP) was established in the EU in the late 1960s. It is aimed to support farmers’ incomes while encouraging them to produce high quality food products to meet consumer demand. The CAP protects EU farmers and agricultural producers from global competition in three ways: import tariffs, export subsidies and direct subsidies to inputs and outputs. Since its introduction in the EU the CAP has gradually evolved and adapted to the changing needs of both agriculture and society as a whole.

History of the CAP (1957-1980’s) The main objectives of this policy were as follow: To increase agricultural productivity by promoting technological advancements, ensuring optimum utilisation of assets and by ensuring rational development of agricultural production. To increase the earnings of those in the agricultural community to ensure a fair standard of living for all. To stabilise European food markets. To ensure adequate availability of supplies. To ensure that products are set at a fair price for the consumer. (Fennell, 1979).

Along with the five main objectives above the treaty also outlines a number of broader principles aimed at improving economic and social issues in the agricultural community. These principles include ensuring social protection for agricultural wage earners; ensure that rural children have the same opportunities as those elsewhere; to aid those wishing to set up as independent farmer; to facilitate retirement pensions for farmers; to improve rural housing and to improve social and cultural infrastructure in rural areas (Fennell, 1979).

Market unity; this principle aims to allow produce to circulate freely among EU member states. To achieve this common organization of markets, common prices, currency stability, and harmonization of administrative, health and sanitary regulations is required. Community preference; the second principle ensures that produce from EU community farms have priority for sales over imports. Imports are subject to tariffs, quotas, or variable levies. Joint financial responsibility; due to the extremely high cost of funding the CAP, principle three ensures that EU member states jointly finance the policy costs.

Producer co-responsibility; since the 1980s grain, milk, and sugar producers are required to pay a small part of CAP expenditure. This principle was introduced because agricultural expenditure was repeatedly draining the EU budget (Weyerbrock, 1996). As well as the price supports there is protection offered for EU producers by placing levies on goods imported into the EU. Variable levies that bridge the gap between the threshold price and the world market price are applied to most imports. These levies act as a barrier to imported goods.

To allow for European goods to be sold on the world market the CAP pays export subsidies to farmers in order to bridge the gap between the EU and the world price (Scotland Government, 2006). Shortcomings of the CAP Policy Reform There were a number of motives which lead to additional reform in the 1990s. These included; growing environmental concerns, market developments and consumers concerns about food safety; increasing gap between urban and rural equality and increasing trade liberalisation due to the establishment of the WTO (Hughes, 2002).

The McSharry reform was established in 1992 to address these issues. This reform supported price cuts and the switch to direct aid. The main points of the McSharry reform were the continuing of the milk quota regime and the ‘set-aside’ policy which paid farmers to keep a certain proportion of their land unused. There was a signification reduction in the price floors for beef and cereals; this resulted in a decrease in the level of subsidies paid to producers and the size of the subsidy paid on subsequent export of these commodities.

There was an introduction of compensation payments to farmers in an attempt to bridge the gap between urban and rural incomes. The McSharry reform left the support regime for most other crops largely unchanged (O’Driscoll, 2001). Agenda 2000 was the next reform package introduced in 1999. The policy basically extended that McSharry reforms introducing further beef and cereal price cuts and increased direct payments (European Commission, 2007). The reform of the CAP in 2003 saw a significant change in the nature of agricultural support.

There were a number of elements to the 2003 reform: Partial decoupling: this refers to the introduction of the ‘single-payment’ scheme to farmers. The payment is calculated by the amount of land employed in agricultural activity rather than the amount of land owned. Cross compliance: In order to receive payments farmers must meet certain conditions. This policy was introduced to improve environmental conditions, food safety and animal welfare. Modulation: A small reduction of about 5 percent in the level of single payments was proposed. The reduction aimed to use capital

saved for improving rural development. Price floor cuts: price floor cuts first introduced in the McSharry report were extended to other commodities, such as butter and rice, in order to combat over production. (Scottish Executive, 2003). Summary References European Commission (2009) ‘“Health Check” of the Common Agricultural Policy’ [online] available: http://ec. europa. eu/agriculture/healthcheck/index_en. htm [accessed 20 March 2009]. European Commission (2007) ‘The Common Agricultural Policy Explained’ [online], available: http://ec.

europa. eu/agriculture/publi/capexplained/cap_en. pdf [accessed 18 March 2009]. Fennell, R. (1979) The_ common agricultural policy of the European community, _London: Granada Publishing. Hughes, D. (2002) ‘Consumer Interests and the Reform of the CAP: A Review of the Relevant Documentation and Research’ [online], available: http://ec. europa. eu/consumers/reports/rep02_en. pdf [accessed 19 March 2009]. Moyer, H. W. and Josling, T. E. (1990) Agricultural Policy Reform, New York: Harvester Wheatsheaf. O’ Driscoll, A.

(2002) ‘Reform of the CAP and the challenge of coherence for Ireland’, Irish Aid Advisory Committee, Discussion series papers No. 4 [online] available: www. tcd. ie/iiis/policycoherence/index. php/iiis/content/download/354/1379/file/IAAC_policy_coherence_and_agriculture_paper. doc [accessed 19 March 2009]. Scottish Executive (2003) ‘Reform of the Common Agricultural Policy: A Summary of the Agreement’ [online], available: http://www. scotland. gov. uk/Publications/2003/10/18367/28118 [accessed 18 March 2009].