The Common Agricultural Policy (CAP), created in the 1950s, is the most important European policy. It has evolved with society, from helping to achieve food security after World War II, to promoting more respect for the environment, better food safety, phytosanitary and animal welfare standards today. It is more than an agricultural policy – it is a societal one.

THE ORIGINAL CAP

The CAP has its roots in 1950s Western Europe, whose societies had been damaged by years of war, and where agriculture had been crippled and food supplies could not be guaranteed. The emphasis of the early CAP was to encourage better agricultural productivity so that consumers had a stable supply of affordable food and ensure that the EU had a viable agricultural sector.

©Jean-Pierre Verney/Min.Agri.Fr.

©Jean-Pierre Verney/Min.Agri.Fr.

The CAP offered subsidies and systems guaranteeing high prices to farmers and providing incentives for them to produce more. Financial assistance was provided for the restructuring of farming, for example by subsidizing farm investment in favor of farm growth and management of technology skills so that they were adapted to the economic and social conditions of the time. Certain measures were introduced in the form of help for early retirement, for professional training and to bolster underperforming regions.

The CAP was very successful in meeting its objective of moving the EU towards self-sufficiency from the 1980s onwards. Suddenly, however, the EU had to contend with almost permanent surpluses of the major farm commodities, some of which were exported (with the help of subsidies), others of which had to be stored or disposed of within the EU.

The CAP had to change…and it did!

THE CAP TODAY

Many important changes to the CAP were already made in the 1980s but, above all at the beginning of the 1990s. Production limits helped reduce surpluses (milk quotas in 1983). A new emphasis was then placed on environmentally sound farming. Farmers had to look more to the market place, while receiving direct income aid, and to respond to the public’s changing priorities (MacSharry reform of 1992).

©Xavier Remongin/Min.agri.fr

©Xavier Remongin/Min.agri.fr

This shift of emphasis, which was effected in 1999 (the “{Agenda 2000}” reform) and which promotes the competitiveness of European agriculture, also included a major new element – a rural development policy encouraging many rural initiatives while also helping farmers to restructure their farms, to diversify and to improve their product marketing. A ceiling was put on the budget to reassure taxpayers that CAP costs would not spiral out of control. Finally, in 2003 and by the Health Check of 2008, a further fundamental reform was agreed.

Farmers are no longer paid just to produce food. Today’s CAP is demand-driven. It takes consumers’ and taxpayers’ concerns fully into account, while giving EU farmers the freedom to produce what the market needs. In the past, the more farmers produced, the more they were subsidized. From now on, the vast majority of aid to farmers is paid independently of how much they produce. Under the new system farmers still receive direct income payments to maintain income stability, but the link to production has been severed: 90% of direct payments are decoupled, classified as non-distortionary WTO, and allow producers to be guided by market signals.

In addition, farmers have to respect environmental, food safety, phytosanitary and animal welfare standards. Farmers who fail to do this will face reductions in their direct payments (a condition known as ‘cross-compliance’). Severing the link between subsidies and production (usually termed ‘decoupling’) will enable EU farmers to be more market-orientated. This series of reforms has now painted a clearer future for the CAP, making its value to all of society more apparent.

©Cheick Saidou/Min.Agri.Fr

©Cheick Saidou/Min.Agri.Fr

The CAP budget has been also declining since the 1990s and supports have been massively redirected towards direct payments and rural development. Refunds on exports fell sharply (10 billion euros in the early 1990s to 350 million euros more than in 2009), well beyond the commitments in the WTO.

In terms of border protection, customs protection of Europe has virtually disappeared for the Least Developed Countries (LDC) and the African Caribbean Pacific (ACP).

To enhance the economic development of Least Developed Countries and African, Caribbean and Pacific countries, the EU has largely opened their borders: the initiative “Everything But Arms” and the access offered as part of their Economic Partnership Agreements allows anyone to export to the EU duty-free.

The European Union is the largest importer of products from the ACP (57%) and the EU absorbed in 2006, 40% of agricultural exports from LDCs. In 2007, EU agricultural imports from ACP countries were almost double the EU agricultural exports to these countries.

©Xavier Remongin/Min.agri.fr

©Xavier Remongin/Min.agri.fr

Finally, the EU, more than other OECD countries, was keen to give more preferences to developing countries most vulnerable, particularly on agricultural products.

Management tools market (intervention) now account for only 8% of the CAP budget and represent a safety net for European farmers. Intervention stocks of the EU are not used, except in exceptional cases, for international food aid operations. European food aid is not used to sell or manage agricultural surpluses, but to meet demonstrated need and is designated for vulnerable populations.

To learn more:

European Commission website