European Common Agricultural Policy


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For all those interested in "European Common Agricultural Policy" - my new infoposter "ECONOMICS" is now available:

- the poster gives an overview of the development of economic theory from its beginnings.
- the poster shows the historical roots of economic ideas and their application to contemporary economic policy debates.

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Best regards

Martin Kolmhofer

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European Common Agricultural Policy

  1. 1. European Economic Integration Metropolitan University Prague Martin Kolmhofer 2011/2012
  2. 2. Common Agricultural Policy (CAP) <ul><li>Massively complex, massively expensive policy. </li></ul><ul><li>Hard to understand without seeing how it developed. </li></ul><ul><li>The Common Agricultural Policy (CAP) accounts for about half of the EU's budget but it used to account for much more. </li></ul>
  3. 4. The European Agricultural sector is one of the most productive in the world. Used to be different: 50 years ago food needed to be imported
  4. 5. EEC  Treaty, signed in Rome in  1957 , brings together France, Germany, Italy and the Benelux countries
  5. 6. In 1958 , the delegations of the Six meet in  Stresa , Italy, to discuss the introduction of a common agricultural policy (CAP)
  6. 9. <ul><li>Increase agricultural productivity </li></ul><ul><li>Ensure supplies of food </li></ul>
  7. 11. 3. provide an adequate income to farmers
  8. 12. Objectives <ul><li>The need to ensure adequate supplies of food at reasonable prices. </li></ul><ul><li>The need to provide an adequate income to farmers. </li></ul><ul><li>The need to increase agricultural productivity. </li></ul><ul><li>(France made it a condition of its participation in the EEC that agricultural policy be a joint pillar alongside the common market in industrial goods) </li></ul>
  9. 13. 1962: E uropean A gricultural G uidance and G uarantee F und is set up to guarantee minimum price for farmers
  10. 15. Common External Tariff
  11. 16. In the 60s and 70s: CAP amounts for 70% of EC budget „ Butter mountains, milk lakes...“ – cost of administrating surplus
  12. 17. 1973: Margareth Thatcher „I want my money back“ (UK Rebate because CAP benefits the UK much less than other countries as it has a relatively small farming sector)
  13. 18. 1986 Spain and Portugal (big agricultural countries) join the EC
  14. 19. Pressure for CAP reform in the 1990s <ul><li>Budgetary pressures </li></ul><ul><li>Reunification of Germany </li></ul><ul><li>The need to stabilize democracy and capitalism in the states of Central and Eastern Europe </li></ul>
  15. 20. MacSharry Reform 1992 <ul><li>To separate income support from production </li></ul><ul><li>… by using direct payments to producers to compensate them for loss of income, without increasing agricultural production as price supports did. This measure was accompanied by lower cereal and beef prices. The reforms were intended to restructure the sector by encouraging farmers to take land out of cultivation and to shift people out of agricultural jobs. Environmental elements were also introduced to encourage sustainable farming practices. </li></ul><ul><li>Main effect: </li></ul><ul><li>… to reduce the 'food mountains' that the EU had accumulated. </li></ul>
  16. 21. Agenda 2000 reforms <ul><li>Decreasing price levels </li></ul><ul><li>Decoupling direct payments to farmers from production </li></ul><ul><li>Linking payments to social and economic objectives (environmental stewardship, foods safety, animal welfare) </li></ul>
  17. 22. After enlargements of 2004 and 2007: two different types of agriculture
  18. 24. Distribution of farm sizes in the EU <ul><li>is very unequal: ranking farms from large to small, the 7% largest farms account for about half the land, while the 50% smallest farms account for only 7% of that land. </li></ul>
  19. 27. ’ Simplified Approach’ used to calculate agricultural support to the new member states <ul><li>New member states receive a flat-rate decoupled payment based on farm size, starting at 25% of the average rate for the existing EU member states </li></ul>
  20. 29. Who tends to benefit most from the CAP? <ul><li>70% of the CAP payments tend to go to 25% of the largest and wealthiest farms. </li></ul><ul><li>Large producers received more CAP payments than small producers because the CAP had been based upon output. </li></ul><ul><li>Example: One of the main beneficiaries of CAP subsidies in the UK after de-coupling is the Queen </li></ul>