The Common Agricultural Policy

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4 1. It is the oldest and most controversial Policy 2. It covers almost every aspect of farming life 3. It incorporates small family farms and huge factory farms 4. It gives directives to farms in the flatland and in the mountains

5 5. It covers a big range of agricultural products 6. It employs more than 25 Mio. people throughout the Union with big discrepancy 7. It is capable of provoking the public opinion

6 The Treaty of Rome (1957): Art. 3 a : «the activities of the Community shall include. a common policy in sphere of agriculture and fisheries»

7 The origins: Treaty of Rome 1957 Art. 33 defines the objectives: >to increase agricultural productivity >to ensure a fair standard of living for farmers >to stabilize agricultural markets >to guarantee regular supplies of food >to ensure reasonable prices for consumers

8 The political reasons: 1. to protect farmers and voters (France, Germany) 2. to have a big market for agric. Products (France) 3. to shift the cost of subsidizing agriculture from the national to the EU level (France) 4. not to harm the C.M. of manufactured goods (Germany)

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10 The guiding principles of the Commission (S. Mansholt 1960): > A Single Market for agri. products > Community preference > Financial solidarity

11 From Principles into practice by Mechanisms: > Target/Guaranteed Price > Intervention Price > System of Levies > System of Refunds

12 Consequences and Problems: >EEC became self sufficient >Guaranteed prices led to over-production >Surpluses had to be stored >Big farmers earned more than smaller >Inefficiency amongst farmers >Environmental destruction >Levies and quotas led to trade disputes >Export prices distorted world markets >the agricultural budget is getting out of hand

13 EEC became self sufficient Self-sufficiency rates (%) Cereals Wheat Barley Sugar Bovine meat

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15 Over production

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17 Budget problems

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19 Budget Problems 2005

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21 EU prices vs. world prices

22 Big farmers small farmer 70% of the funds go to 20% of EU farms 75% of the farmers live with less than EUR. Small farms account for 40% in the EU, But get only 8% of available subsidizes The Queen of England is the biggest benefactor

23 The Reforms

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25 Why is the CAP so difficult to reform? 1. Agricultural decision-making is complicated (many different institutions and bodies are involved and the unanimity rule applies). 2. The CAP is a redistributive policy, each Minister of Agric. wants to bring home the biggest part. 3. Farmers and their organizations exert pressure on governments + EU (in public opinion there is deep-rooted affinity for rural life). 4. Agri-markets are difficult to predict. 5. MS have very different structures (UK-F)

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30 The Reforms (after 1992): > Price cut in certain areas > Direct income support for farmers > Set-aside scheme > Accompanying measures > Food Safety

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33 Sir, My friend who is farming at the moment, recently received a cheque for 3000 from the Rural Payment agency for not rearing pigs. I would like now to join the «not rearing pigs business» (a letter to the Daily Mirror)

34 The Common Agriculture Policy The latest reforms (2003) Reasons: EU enlargement and the question how to integrate agrarian economies (P, R) into the CAP The new scheme (decoupled payments) will not distort trade

35 Reforms: Single farm payments Respect of environment, food safety, animal welfare (cross compliance) Requirement to keep farmland in good agric. and environmental conditions Reducing direct payments for bigger farms

36 Reforms: A mechanism to guarantee financial discipline until 2013 Revisions to the market policy: cuts in the milk sector (will be open in 2015) reduction of the increments in cereals reforms in rice, potatoes etc.

37 Implementation: Regulation 1: provision concerning cross compliance Regulation 2: Single farm payment if #1 is respected Regulation 3: specific areas of support (beef and meet) will stay

38 Reforms are based on 2 pillars: Market policy Rural Developement

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43 Changing Status of Agriculture in Member States (in %) labour force share of GDP larger than 20 ha France UK Germany Greece Spain Italy

44 Thousand people The Common Agriculture Policy UK Employment in Agriculture

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54 Protected markets

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58 Conclusions: 1.The European Agriculture does not exist. (structures are still very different) 2. People spend less and less for food 4. The increase of production is enormous. 5. The organic product market is becoming important. 6. Farmers are more than food producers. 7. The EP will have a greater say in CAP

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60 The diversity

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62 Questions: 1. Why did the CAP originally aim to maintain high prices? 2. What are the neg. Consequences of the CAP price support mecanism? 3. How did new debates about agricultural influence the 1992 reform package?

63 Questions: 4. Why did the 1992 reforms happen? 5. What are the challenges currently facing the CAP?