Overview

The European Community has set agriculture high on its political agenda right from the start when the Treaty of Rome was negotiated. Ensuring sufficient levels of food production was a top priority in the post-World War II Europe.

The Common Agricultural Policy (CAP) first came into force in 1962, introducing a set of mechanisms on production, trade and food processing in the original Community of six Member States.

The CAP's main objectives are:

  • increasing agricultural productivity;
  • ensuring a fair standard of living for the agricultural community;
  • stabilising markets;
  • assuring the availability of supplies;
  • ensuring that supplies reach consumers at reasonable prices.

The following instruments were created in order to reach these objectives:

  • common rules on competition;
  • compulsory co-ordination of various national market organisations;
  • a European market organisation.

The importance of the CAP is underlined by its 50-percent share of the EU budget.

The first major reform of the CAP was implemented in 1992, under Agriculture Commissioner Ray MacSharry who proposed two discussion papers on the development and the future of the CAP. The main elements of the 1992 CAP reform:

  • cut of agricultural prices to render them more competitive in the internal and world market,
  • compensation of farmers for loss of income,
  • new market mechanisms,
  • measures to protect the environment.

T he second major CAP reform was adopted as part of the Agenda 2000 package in March 1999 by the European Council of Berlin.

Main elements of the CAP reform under Agenda 2000:

  • increasing competitiveness of agricultural products;
  • ensuring a fair standards of living for the farmers;
  • creation of substitute jobs and other sources of income for farmers;
  • introducing a new policy for rural development (the second pillar of the CAP);
  • more environmental and structural considerations;
  • improvement of food quality and safety;
  • simplification of agricultural legislation and decentralisation of its application.

The agreed Agenda 2000 reform was not as ambitious as proposed by the Commission, therefore a compromise was reached that a mid-term review would be undertaken in 2002-2003. The mid-term review should identify the main problems to be addressed by the next CAP reform.

Issues

The European Union is under great pressure to reform its Common Agricultural Policy for several reasons, notably:
The European Union is under great pressure to reform its Common Agricultural Policy for several reasons, notably:

  • eastward enlargement;
  • WTO and other trade negotiations;
  • food safety issues (BSE, dioxin, foot-and-mouth disease, public resistance to GMO food);
  • environmental concerns.

Enlargement will pose a heavy burden for the EU budget under the current rules. However, the Commission believes that the current CAP rules will not have to be modified in order to accommodate up to ten new members in the EU because the new members should not enjoy the same level of direct support under the 2000-2006 financial framework as the current Member States do.

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Positions

Italy presented its plan for CAP reform to the Agriculture Council on 18 February 2002. The report stresses that it is "necessary to safeguard the role of the CAP, and to reject any suggestion of scaling down or renationalising the sector". Until May 2001, when the government changed, Italy had championed the environmental strategy in agriculture, forming an alliance with Germany. The Italian proposal is the first amongst Member States calling for the conservation of the CAP in its present form.

A report on food production and farming, released on 29 January 2002 by the British Government Policy Commission on the Future of Farming and Food, called for reform of the CAP. The report says that the current situation is unsustainable and recommends redirecting subsidies from producing crops to protecting the countryside. The report says that "the current situation benefits no-one: farmers, taxpayers, consumers or the environment".

Germany is leading the efforts to promote more organic farming in Europe. Germany believes that more funding could be used for greener farming under the new rural development regulation. Under the regulation, Member States can shift up to 20 percent of the CAP towards rural development.

France is the biggest net beneficiary of the CAP subsidies and is seen as the strongest opposition to any reform of the CAP. While Germany outspokenly supports a radical change in favour of organic farming, France is more reserved and talks only of promoting environmentally friendly agriculture. However, the new government report on the future of the EU ( Ensemble, d³inons l'Europe), says that "a profound reform of the CAP was necessary in order to break with its productivist past".

The EU does not want the candidate countries to receive direct payments immediately after they join the Union. However, all the candidate countries demand equal treatment with the current Member States. The candidates warn that their farmers would suffer unfair competition in the EU if they are not eligible to receive the same level of support.

The Commission says that the CAP does not need to be reformed in order to accommodate up to ten new members of the EU in 2004.

The Danish Agricultural Council called for the delay of the enlargement until 2006 to avoid cuts in farm support to existing Member States. The Danish farmers' association said that a two-year delay of enlargement would give the EU time to finish the CAP reform, making enlargement affordable.

The Polish government has published a study claiming that Polish agriculture will not be too big a burden for the CAP budget. According to officials, Poland expects to receive 3 billion euro per year in direct payments for its farmers. The report says that Poland's farms will not cost the EU much because direct payments are linked to the size of farms, yields and number of animals, and not to the number of farmers.

The European Landowners' Organisation (ELO) wants to "steer the CAP towards a more integrated rural policy which acknowledges and supports the food, forestry, energy, recreational, social, environmental and cultural landscape roles of land management in a more balanced way". It says that this can be characterised as "a switch in emphasis from producers to land managers".

The Deutsche Bank Research says that the enlargement requires a reform of the CAP. Its report, "EU agricultural policy: a plea for real reform", says that the time is ripe for agricultural reform because the economic and ecological damage of former policies is evident.

Euronatur , a joint platform of German environmental, agricultural, animal welfare and consumer associations, has called for a "rigorous reorientation" of the European Union's agricultural policy. Euronatur says that the primary objective is no longer a continuous increase in productivity. It lists new priorities, such as:

  • production of quality food,
  • protection of consumers' health,
  • protection of nature and the environment,
  • welfare of farm animals,
  • improvement of economic prospects for farmers and the rural areas.

The European Farmers Coordination warns that the present CAP only benefits big farmers at the expense of family farming and rural development. The organisation warns that the present CAP is "destructive for farmers, consumers, taxpayers, their health and their environment" because of the rapid disappearance of family farms, repeated health crises, increasing pollution of waters by pesticides and other problems related to it.

The European Liberal Democrats (ELDR) group in the European Parliament launched a proposal for a radical reform of the EU's Common Agricultural Policy (CAP) in July 2001. Its policy paper, "A new food and rural policy - an alternative to the CAP", proposes replacing the CAP with a new Food and Rural Policy. Some of the key points of the ELDR proposal:

  • The final objective of the reform should be to eliminate all support directly linked to production.
  • Feed and ingredients must be traceable throughout the production chain.
  • The entire production chain must meet ethical requirements such as animal welfare, environment, good labour standards.
  • Support should be provided in order to increase ecological production.
  • The same rules for support should apply to the whole EU, but should be co-financed by Member States.

The European People's Party (EPP) presented its position on CAP reform in January 2002. It calls for an EU strategy that "must combine agriculture, rural life, the food industry, consumer safety, environmental protection, energy policy, sustainability, subsidiarity, and solidarity". The EPP group states that the CAP reform must prepare the EU for enlargement and, at the same time, be firmly anchored within the WTO.

The United States have adopted a new Farm Bill in May 2002 that will boost agriculture spending by 70 percent over the next 10 years and increase subsidies to US farmers. Under the new law, US farmers will receive 173.5 billion dollars in subsidies over the next ten years.

The EU, Australia, Canada and Brazil have all condemned the US farm bill as trade distorting and expressed concerns that it will endanger WTO trade liberalisation talks on agriculture. They warned that the developing countries depending on farm exports will be hit particularly hard by the new law. However, the level of subsidy to agriculture in the EU is 35 per cent, whilst it is only 4 per cent in Australia and 21 per cent in the United States.

The Cairns Group plans radical reductions of farm export subsidies. The signatories would commit themselves to a 50 per cent cut in subsidies within the first year of any agreement. The remaining 50 per cent would then be eliminated over the following three years, with one third of the remaining amount removed each year. A less severe regime would operate for developing countries who would be expected to eliminate the remaining 50 per cent of subsidies in equal installments over the following six years.

Timeline

A mid-term review of the CAP is planned for 2002-2003 to re-examine market developments and the agricultural budget.

A more thorough agricultural reform is expected to take place in the framework of the 2006-2012 financial framework negotiations in 2005.