Common Agricultural Policy European Economics Topic 3

EU- Agricultural trade patterns

EU- Agricultural patterns

Common Agricultural Policy A set of policies aimed at raising the farm incomes in the EU. One of the most complex and controversial EU policies. One of the oldest policy of EU that developed due to the need of ensuring food security after the Second World War and due to the increased employment in this sector (about one in five Europeans lived on farms when the Treaty of Rome was written).

Common Agricultural Policy The main mechanisms of CAP were adopted by the six founder states of European Economic Community in The CAP was developed in order to provide Europe security in what concerns food stocks.

Common Agricultural Policy  In 1970 almost 70% of EU budget was orientated towards the agricultural sector.  Nowadays, the EU expenditures orientated towards the agricultural sector and rural development represent 45% and counts for 55 billions euro.  The highest rate of the budget orientated towards supporting the agricultural sector was reached in 1982 and it counted for 74% of EU budget.

CAP Main Objectives Initially the main objectives established by the Treaty of Rome in respect with the CAP were the following: Increasing productivity in agriculture by technological progress, by developing agricultural productivity and by optimal use of the productivity factors especially the working labor. Assuring an equitable standard of living for those that work in the agriculture field. Market stability. Ensuring a constant supply with food. Ensuring a constant supply for consumers at reasonable prices.

CAP Main objectives Along with the CAP reform, the main objectives also changed. Accordingly to the 2000 Agenda, the CAP objectives include: Improving competiveness of EU products on external markets by reducing prices; Ensuring food safety and quality for consumers by improving the processing and marketing strategies of the agricultural products; Improving the production system by environment protection; Simplifying legislation; Flexibility in what concerns CAP support in member states.

Common Agricultural Policy Market Control Policy – embodies regulations regarding the market functioning, intervention agencies and competition. Structural policy - operates with the changes that occur regarding production factors and production costs.

Common Agricultural Policy Principles Market unity – as defined by article 7 of the Treaty regarding EEC and refers to the free transit of agricultural products between member states. Financial solidarity - The overall expenses for CAP are collective and supported by the member states through EAGGF. Community preference - Community products should take precedence over imported goods.

Common Agricultural Policy The main instruments used by the control policy include: The price support system Intervention price Target price Threshold price Direct subsidies Import bariers Export subsidies A proper monetary system of agriculture (Agri-Money).

Common Agricultural Policy - Reforms  Mc Sherry Reforms – established in 1988 and aimed at substantially reducing the price of agricultural goods in EU. Uruguay Round – imposed measures of liberalization of the trade Agenda – it continued the reduction of threshold prices and the establishment of CAP total expenditures. Doha Round – liberalization of agricultural policies.

CAP Pillars First Pillar – consists of direct payments to the producers and the intervention for the stabilization of the agricultural products price. Second Pillar – concentrated upon the rural development measures.

Costs and benefits of CAP CostsBenefits Is an expensive policy Is an anachronistic policy European consumers may be disadvantaged. Source of conflicts with other states. Source of pollution and degradation of the environment. Increase farmers revenues. Reduce dependence over the imported goods. Modifies the productivity of the factors used in agriculture.

The Common Agricultural Policy after 2013: Present and perspectives General objectives: Viable production of food; Sustainable management of the natural resources and of the environment; Equitable development between regions.

The Common Agricultural Policy after 2013: Present and perspectives The reforms established by CAP: Direct payments; Common organization of the internal market; Rural development; Horizontal rules.