Common Agricultural Policy

The Common Agricultural Policy (CAP) is a system of European Union agricultural subsidies which represents about 50%-70% of the EU's spending. These subsidies work by guaranteeing a minimum price to producers, which provides some economic certainty for EU farmers, thus ensuring the production of a certain quantity of agricultural goods.

Creation of the CAP

The creation of a common agricultural policy was proposed in 1960 by the European Commission. It followed the signature of the Treaty of Rome in 1958, which established the Common Market. The six member states were to be strongly affected by State intervention, in particular in regards to what was produced, intervention prices and farm structures. Some Members States, in particular France, and all market. It is governing the production and market of agricultural products during the marketing year and by means of socio-structural policy. It is coordinating farm structures evolution and adaptation. The CAP also uses external trade policy and legislative harmonisation within the Community.

An obstacle to Community trade is the diversity of national laws regarding production or trade. Example are use of preservatives, coloring agents, hormones uses, disease control (e.g., foot and mouth disease outbreak in England). In spite of some harmonization, it is far from complete and some issues are still to be solved.

The CAP is supported by finance from a special fund, and by legal and institutional machinery. In recent years, the biggest beneficiary of these subsidies has been France. Some of the strongest supporters in the face of calls for liberalisation of agricultural markets are French.

Objectives of the CAP

The initial objectives were set out in Article 39 of the Treaty of Rome:

1. to increase productivity, by promoting technical progress and ensuring the optimum use of the factors of production, in particular labour;
2. to ensure a fair standard of living for the agricultural Community;
3. to stabilise markets;
4. to provide consumers with food at reasonable prices.

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 covers only some agricultural products, which are, by mutual agreement, subject to the organisation of the EU market:

• cereal, rice, potatoes
• oilseeds
• dried fodder
• milk and milk products, wine, honey
• beef and veal, poultry meat and eggs, pig meat, sheep meat and goat meat
• sugar
• fruit and vegetables
• cotton
• peas, field beans
• sweet lupins
• olive oil
• seed flax
• silkworms
• fibre flax
• hemp
• tobacco
• hops
• seeds
• flowers and live plants
• animal feed stuffs

The coverage of products in the external trade regime (EU) is more extensive than the coverage of the CAP regime. This is to limit competition between a CAP product or any EU product with added-value produced from a CAP covered product with an external product (for example, litchi juice could potentially compete with orange juice) .

Criticisms

Some major critics of the Common Agricultural Policy are those that reject the idea of protectionism, either in theory, practice or both. Free market advocates are among those who disagree with the government intervention because, they say, a free market (one without such intervention) will allocate resources much more efficiently.

Criticism of the CAP also has united some supporters of globalization with the anti-globalisation movement in that it is argued that these subsidies, like those of other Western states, add to the problem of what is sometimes called Fortress Europe; The West spends high amounts on agricultural subsidies every year, and this is sometimes viewed as a tax on poorer nations competing for the agricultural markets. As such, the OECD countries' total agricultural subsidies amount to more than the GDP of the whole of Africa, and according to a study by the Centre for New Europe, the CAP kills 6,600 people in developing countries every day.

Moreover it is argued that in creating an oversupply of agricultural products which are then sold in the third-world and simulatanously preventing the third world from exporting its agricultural goods to the West, that the CAP increases third world poverty by putting third world farmers out of business. The average cow in the European Union makes more in subsidies than the average Afrian person makes working.

Agricultural subsidies also maintain 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 as high as 80-100%.

The CAP is disproportionately favourable to certain areas of the EU, notably France, Spain, and Portugal. These countries receive large amounts of money at the expense of other countries, especially Germany.

Many economists believe that the CAP is unsustainable in an enlarged EU. With the inclusion of ten additional countries on May 1, 2004 the demands on the CAP will increase dramatically (especially in the case of Poland which has two million smallhold farmers). However, reform of the programme has proven difficult because of political constraints, in the form of strong agricultural lobbies, in some member countries.

See also

• European Union Association Agreement