Launched in 1962, the Common Agricultural Policy (CAP) is a system of EU agricultural subsidies and programmes that marks the biggest single budget outlay for the EU.
Fifty years later, debates focused on how to reward farmers for being more productive and environmentally sustainable. If approved as proposed, the 7-year, €435.6-billion programme would account for nearly 40% of EU's spending. Of that, €317.2 billion would fund direct payments to farmers under Pillar 1 of the CAP. In the 1970s, the CAP represented nearly 70% of the community’s budget.
The Commission’s October 2011 proposals to reward farmers to expand green space turned out to be a hotly contested issue, with farm organisations and their advocates in Parliament claiming this would create more bureaucracy. Others contend that reducing cultivatable land at a time of high food prices and rising global demand does not make sense.
About 70% of CAP spending goes to direct payments for farmers, 20% of the budget is spent on rural development measures, and the remainder is handed out as export subsidies to food companies. France, Germany, Spain, Italy and Britain are the biggest beneficiaries.
History of changing priorities
Agricultural policy is one of the oldest areas common European legislation, and it is also the most integrated of all European policies. In the 1950s, it was centred around subsidising farmers to provide enough food for Europe after war-induced shortages.
Once EU self-sufficiency was reached from the 1980s onwards, the policy lead to almost permanent surpluses of basic farm commodities ('butter mountains', 'wine lakes', etc.)
The CAP was subsequently increasingly used for export and storage subsidies. A series of reforms have taken place over the past two decades to remedy the surplus problem and take account of the environmental sustainability of agriculture.
The first major reform of the CAP was implemented in 1992, to limit rising production, while at the same time adjust to the trend towards freer agricultural markets. The reform also created 'set-aside' payments to withdraw land from production, limit stock levels and introduce measures to encourage retirement and forestation.
The second major CAP reform was adopted as part of the Agenda 2000 package in March 1999, which divided the CAP into two 'pillars': production support and rural development, the latter including issues such as trade, tourism, environmental protection and biodiversity.
The biggest reform so far was launched in 2003 and featured a 'decoupling' of agricultural production from subsidy payments to prevent over-production and waste. The new system involves a Single Payment Scheme (SPS), in which subsidies are allocated according to indicators such as land size rather than production volume.
Cross-compliance measures, whereby farmers are required to meet certain environmental, food safety and animal welfare standards, were also introduced as a pre-condition for receiving payments under the SPS. The reform also featured a shift or so-called 'modulation' of monies from the first pillar of the CAP (direct aid and market support) to its second pillar, rural development.
The 2003 reform was agreed upon just before the eastward enlargement of the bloc in 2004. The extension of the CAP to the new Eastern and Central European countries would have increased its budgetary burden to an unsustainable level. Indeed, the EU's enlargement doubled the agricultural labour force and the arable area of the EU, and added over 100 million food consumers to the internal market. Poland and Romania combined have almost as many farmers as the entire EU before enlargement.
The latest policy review, dubbed the CAP Health Check and launched in 2008, aimed to further modernise the policy and assess whether adjustments are needed to ensure that it is still relevant for new challenges, such as climate change. The EU 27 also agreed to further cut direct subsidies to farmers, for the benefit of rural development policy, and to abolish milk production quotas.
Future reforms beyond 2013
While subsidising production on a large scale and buying up surpluses in the interests of food security are now largely considered policies of the past, soaring global food prices in 2008 prompted a renewed debate about maintaining sufficient subsidies to the EU farming sector, as some argue that feeding people cannot be left to the mercy of the market.
2009 will see debate on the CAP's future beyond 2013, in the context of a general review of the EU budget. Agriculture Commissioner Dacian Ciolo? presented his proposals for the next CAP – covering 2014-2020 - in October 2011, touting them as a way to improve sustainability while making farming policy “both simple and efficient”.
For further information on EU agricultural policy and summaries of legislation, see: