- The common agricultural policy at a glance
- The CAP in practice
- CAP financing
- Related information
- The benefits of the CAP
- Produce food
- Rural community development
- Environmentally sustainable farming
- Key contributors to the CAP
- Evaluation of the CAP
- The CAP after 2020
- Legal foundations
- EU agriculture policy: What are the bones of contention?
- What is the CAP?
- How does the EU currently distribute farming subsidies?
- What's been the criticism of these subsidies?
- What reforms are necessary?
- What's been the reaction to the new plan?
- Why support farmers and growers?
- Reform of CAP
- (SOURCE: DEFRA, 2009)
- (SOURCE: EUROPEAN COMMISSION)
- (SOURCE: DEFRA)
- Examples of EU protection
- (SOURCES: ASIA TIMES; OXFAM, ‘THE GREAT EU SUGAR SCAM’, 2002)HTTPS://WWW.OXFAM.ORG.UK/
- (SOURCES: OXFAM REPORT, 2004 AND; THE TIMES, APRIL 2004)
- The Case of Textiles
- Common Agricultural Policy
- What does the CAP do?
- What is the difference between the two pillars?
- How much does the CAP cost?
- Is CAP the only way the EU supports farming?
- Why is EU agriculture policy controversial in the UK?
- How will the UK’s agriculture policy change after Brexit?
The common agricultural policy at a glance
Launched in 1962, the EU’s common agricultural policy (CAP) is a partnership between agriculture and society, and between Europe and its farmers. It aims to:
- support farmers and improve agricultural productivity, ensuring a stable supply of affordable food;
- safeguard European Union farmers to make a reasonable living;
- help tackle climate change and the sustainable management of natural resources;
- maintain rural areas and landscapes across the EU;
- keep the rural economy alive by promoting jobs in farming, agri-foods industries and associated sectors.
The CAP is a common policy for all EU countries. It is managed and funded at European level from the resources of the EU’s budget.
The CAP in practice
Farming is un most other businesses, as the following special considerations apply:
- despite the importance of food production, farmers’ income is around 40% lower compared to non-agricultural income;
- agriculture depends more on the weather and the climate than many other sectors;
- there is an inevitable time gap between consumer demand and farmers being able to supply – growing more wheat or producing more milk inevitably takes time.
While being cost-effective, farmers should work in a sustainable and environmentally friendly manner, and maintain our soils and biodiversity.
Business uncertainties and the environmental impact of farming justify the significant role that the public sector plays for our farmers. The CAP takes action with:
- income support through direct payments ensures income stability, and remunerates farmers for environmentally friendly farming and delivering public goods not normally paid for by the markets, such as taking care of the countryside;
- market measures to deal with difficult market situations such as a sudden drop in demand due to a health scare, or a fall in prices as a result of a temporary oversupply on the market;
- rural development measures with national and regional programmes to address the specific needs and challenges facing rural areas.
The level of support for EU farmers from the overall EU budget reflects the many variables involved in ensuring continued access to high quality food, which includes functions such as income support to farmers, climate change action, and maintaining vibrant rural communities.
The CAP is financed through two funds as part of the EU budget:
Payments are managed at the national level by each European Union country. Information about the recipients of CAP payments is published by each country, in accordance with EU transparency rules.
EU annual budget life-cycle
EU expenditure and revenue 2014-20
The benefits of the CAP
The CAP defines the conditions that will allow farmers to fulfil their functions in society in the following ways
- There are around 10 million farms in the EU and 22 million people work regularly in the sector. They provide an impressive variety of abundant, affordable, safe and good quality products.
- The EU is known throughout the world for its food and culinary traditions and is one of the world’s leading producers and net exporter of agri-food products. Due to its exceptional agricultural resources the EU could and should play a key role in ensuring food security of the world at large.
Rural community development
- Within our countryside and its precious natural resources, there are many jobs linked to farming. Farmers need machinery, buildings, fuel, fertilisers and healthcare for their animals, also known as ‘upstream’ sectors.
- Other people are busy in ‘downstream’ operations – such as preparing, processing, and packaging food, as well as in food storage, transport and retailing. The farming and food sectors together provide nearly 40 million jobs in the EU.
- To operate efficiently and remain modern and productive, farmers, upstream and downstream sectors need ready access to the latest information on agricultural issues, farming methods and market developments. During the period 2014-20, the CAP is expected to provide high-speed technologies, improved internet services and infrastructure to 18 million rural citizens – the equivalent of 6.4% of the EU’s rural population.
Environmentally sustainable farming
- Farmers have a double challenge – to produce food whilst simultaneously protecting nature and safeguarding biodiversity. Using natural resources prudently is essential for our food production and for our quality of life – today, tomorrow and for future generations.
Key contributors to the CAP
The European Commission regularly consults civil dialogue groups and agricultural committees to best shape law and policies governing agriculture. Expert groups provide input to the European Commission, for example the agricultural market task force on unfair trading practices.
The European Commission carries out impact assessments when planning, preparing and proposing new European legislation, examining a need for EU action and the possible impacts of available solutions.
They are a key part of the EU’s better regulation agenda.
Impact assessments for agriculture and rural development took place in 2003 (mid term review), 2008 (health check – SEC(2008) 1885), 2011 (CAP towards 2020 – SEC(2011) 1153 final).
The EU's Court of Auditors also plays a major role in supervising expenditure in agriculture.
The European Commission regularly publishes the public opinion reports (also called Eurobarometer) on Europeans, agriculture and the CAP.
The Eurobarometer surveys, run in all EU countries, provide valuable information on citizens’ perception of CAP.
This includes awareness of the support provided through the CAP, its performance, quality matters, environment, importance of the CAP and much more.
Evaluation of the CAP
The European Commission assesses the CAP through the common monitoring and evaluation framework (CMEF).
The aim of the CMEF is to demonstrate the achievements of the CAP in 2014-20 and improve its efficiency through CAP indicators.
The CAP after 2020
To consolidate the role of European agriculture for the future, the CAP has evolved over the years to meet changing economic circumstances and citizens’ requirements and needs.
On 1 June 2018, the European Commission presented the legislative proposals on the future of the CAP for the period after 2020.
The legislative proposals came after a public consultation launched in 2017 on the future of the CAP and the communication on the future of food and farming.
The communication outlines the way ahead for the CAP, focusing on making it simpler and ensuring the best value-for-money. Tracing the priorities the future CAP must address, the European Commission sets ground for a discussion on a more flexible approach to implementing the policy for more effective results.
The legal basis for the common agricultural policy is established in the Treaty on the functioning of the European Union.
The following 4 regulations set out the different elements of the CAP work:
The common agricultural policy is managed by the European Commission's department for agriculture and rural development. It can adopt delegated and implementing acts to implement the common agricultural policy.
EU agriculture policy: What are the bones of contention?
The European Union's common agricultural policy (CAP) accounts for about a third of the EU budget, with some €54 billion ($64 billion) in farming subsidies going to the bloc's 27 member states each year. Such a significant line item is guaranteed to be a source of much disagreement.
As the EU sorts out its common budget for the 2021-2027 period, known as the multiannual financial framework, the CAP is set to undergo a major reform. Though the amount of farming subsidies is expected to remain similar — about €390 billion until 2027 — it remains to be seen how the funds will be distributed, and whether funds will be linked to mandatory environmental policies.
Read more: Opinion: EU fails to introduce real agricultural reform
What is the CAP?
The EU's common agricultural policy was launched in 1962 to ensure that postwar Europe would have enough food. It had five main goals:
- improve agricultural productivity in Europe
- ensure a stable supply of affordable food
- stabilize European markets
- ensure that farmers could make a «reasonable» living
- ensure fair consumer prices
As is the case for the rest of the budget, the European Commission, the European Parliament and the EU Council of Ministers — in this case, the agricultural ministers of all 27 member states — must decide on the future of the CAP together.
Read more: 'Eat less meat to help the climate' doesn't apply to everyone – here's why
- As northern regions warm, winegrowers have moved into places Denmark and the UK, among them Ryedale Vineyards in England. The EU-funded VISCA app, now being tested in Spain, Italy and Portugal, aims to help vineyards that are starting to feel the effects of a warming climate. Adaption strategies include precise irrigation, drought-resistant grapes and pruning techniques that influence growth.
- Sorghum, a hot weather grain, has been cultivated in Europe since just after World War II, primarily as animal fodder. But with increasing droughts it has started to see a resurgence in countries France, Italy, Hungary and Bulgaria. A staple in Africa, sorghum uses 30% less water than corn and can produce grains even in high temperatures. The EU has been promoting the plant since 2017.
- Europe's olive oil industry, led by Spain, Italy and Greece, produces about three-quarters of global supply. But drought, erratic weather hail, as well as warm-weather pests and diseases have become detrimental. 2018 was a particularly bad year: Italy's production dropped 57%. Improved irrigation techniques, selective pruning and a gradual northward shift could help olive groves adapt.
- Some farmers in Spain and Italy have begun cultivating pistachios, drought-resistant nut trees which are suited to arid areas with lots of sun. Today, most of the world's pistachios are grown in Iran and California, but other parts of southern Europe share the same ideal conditions: cold winters, very hot summers and late frosts.
- Other alternatives for farmers in southern Europe are tropical fruits, including mango, avocado, lychee and papaya. Recent years have seen an exponential growth of such crops in southern Italy. They've begun to edge out citrus fruits, which are no longer the moneymakers they once were. Milder winters have been beneficial, but water shortages in the summer months remain a challenge. Martin Kuebler
How does the EU currently distribute farming subsidies?
The first pillar of the CAP comprises direct payments, which are calculated by hectare. Simply put: the larger the farm, the larger the subsidy. According to the German Environment Agency (UBA), direct payments account for, on average, about 40% of a farm's yearly income.
But these direct payments have been criticized for contributing to the decline of smallholdings; farmers with smaller properties benefit considerably less from the EU's subsidies than industrial factory farms.
According to the German Ministry of Food and Agriculture, Germany receives €6.2 billion in agricultural subsidies each year. Of this, €5 billion is direct payments. The remaining €1.2 billion — the CAP's second pillar — is put aside for rural development plans and measures relating to the climate and environment.
The problem is that this second pillar is co-financed by member states. A country, region or municipality has to match any EU subsidy from the second pillar with the same amount from its own resources — which is why member states often don't apply for these funds.
Read more:In Europe, climate change brings new crops, new ideas
According to the first pillar of the CAP, the larger the farm, the larger the subsidy
What's been the criticism of these subsidies?
Large-scale industrial agriculture has often been blamed for contributing to biodiversity loss and growing CO2 emissions, and for polluting soil and water through the use of pesticides and fertilizers. Environment groups, climate activists and green political parties have criticized the CAP's direct payment-per-hectare system, accusing it of overwhelmingly promoting such practices.
These payments generally aren't linked to schemes that benefit the environment. As it stands today, to receive subsidies farmers simply have to confirm the «good agricultural and environmental conditions» of their land, as well as fulfill the «statutory management requirements,» according to the European Commission.
However, a new regulation was introduced in 2013 to ensure that a third of direct payments would only be released if certain «greening» measures had been put in place — that is, if farms meet certain environmental requirements.
But Friends of the Earth Germany and other environmental groups have said this requirement doesn't go far enough.
The German Environment Agency admitted in September that «greening measures had not led to many operational changes and had hardly any positive effects from an environmental point of view.»
Read more:Could high-tech Netherlands-style farming feed the world?
What reforms are necessary?
The EU's agricultural policy must become more ecological and sustainable, and farmers should be rewarded for introducing measures that protect the environment — that's idea, anyway. However, there's been a long-running debate within the EU as to what percentage of direct payments should be linked to ecological measures in the years ahead.
The European Commission has suggested that member states themselves should control the environmental measures, monitoring and sanctions — currently, these are stipulated by the EU. It also wants member states to send their policy plans to be approved by the European Commission.
However, this proposal — backed on Wednesday by the bloc's 27 agriculture ministers — has been rejected by environmentalists, who think that member states would set the environmental bar too low, and agricultural lobby groups, who think the plan would unfairly distort competition between member states.
The commission's proposed «eco-schemes,» which will be linked to first pillar payments and are expected to be much stricter than any previous measures, have also been contentious.
Under the eco-schemes, 20% of the payments to farmers would be earmarked for green initiatives such as organic farming and agroforestry.
A farm would only receive the full direct payment once it proves that it has fulfilled all the new environmental regulations, and wouldn't be able use the money for other purposes. The European Parliament, however, has backed a plan that would see this upped to 30% of payments.
Read more: Vegan meat: The future of planet-saving plant-based eating
- With the global population increasing and the supply of agricultural land under threat — around a third of the world's arable land has been lost in the last 40 years — pressure is being put on the world's food supply. Then there is the strain meat production places on the environment. Many believe insects — such as the locust eaten here with an egg by a man in Tokyo — are a credible alternative.
- Entomophagy is the name for the human use of insects as food. Humans have been eating insects since prehistoric times and today, most of the world's culinary cultures encorporate the eating of insects in some way. In the restaurant pictured here in the city of Kinshasa, DR Congo, a person is eating grilled caterpillars with olive oil. The food is cheap but provides a rich source of protein.
- Despite its global ubiquity, there are many places, particularly in Europe and North America, where insect-eating is rare and treated with a certain reserve. However, there are signs that, prompted by the increasing promotion by environmentalists of insects as a sustainable food source, it is growing in popularity. In this image, Sydney chef Nowshad Alam Rasel displays a signature cricket dish.
- But what's so sustainable about farming bugs? Compared with livestock farming, insect farming requires much less land and water and its greenhouse gas emissions are much lower. Insects need very little feed, and can themselves be used as sustainable feed for animals and fish. Increasingly, they are being used in high-end cuisine — in this Bangkok restaurant, winged ants are eaten with fish.
- Biteback, an Indonesian start-up, has been promoting insects as a nutrient-rich, sustainable alternative to palm oil, the cultivation of which is criticized for its environmental impacts, particularly in Indonesia and other Southeast Asian countries. The founders, pictured here making insect ramen, emphasize that insects are nutritious and have high fatty acids, protein and mineral content.
- Global demand for meat is expected to increase by more than 75 percent by 2050. The amount of agricultural land and animal feed required for such production means the need for credible protein alternatives will intensify in the years ahead. Entomophagy enthusiasts point to insects' culinary flexibility — exemplifed in products such as the worm and cricket lollipops pictured here.
- While insect-eating may well be a big part of the future of food, much development is needed in the sector. In trying to tantalize palates, unusual meals — such as this cake of roasted bees being eaten at a Berlin environmental fair — are being tried out. But given the pressure bee populations themselves are under worldwide, more practical insect-based meals may need to be dreamed up. Arthur Sullivan
What's been the reaction to the new plan?
Environmentalists want the EU to go even further. Angelika Lischka, an agriculture expert with NABU, Germany's largest nature conservation NGO, told DW that organizations such as hers «are calling for at least half of the direct payments in the first pillar to be linked with eco-schemes.»
But Joachim Rukwied, the head of the German Farmers' Association, has warned against maximizing the requirements «linked exclusively to the environment.» He said the EU needed to provide support for the agriculture sector to guarantee that all of the CAP's goals are met, including ensuring that farmers are able to earn a reasonable living.
Environmental groups and the German Environment Agency (UBA) agree that the coming funding period should be used to completely overhaul the EU's agricultural policy, considering that the environmental damage caused by the sector is already a major problem.
Lea Köder from the UBA told DW that Germany had already breached EU law by exceeding the limits set out in the bloc's Nitrates Directive, which aims to reduce water pollution from agricultural sources. «We have to start reforming the system now, or it will only be possible to reach environmental goals with very expensive and drastic measures,» she said.
Read more: Farmers in Germany feel the heat of climate change
CAP was created by the Treaty of Rome (1957) to ensure food supplies for Europe, and provide a fair income for European farmers. The creation of CAP was central to the formation of the European common market, and an early step on the road to European integration.
Why support farmers and growers?
Farmers suffer from three potential problems:
- Farm incomes have fallen because of increasing global food production, and higher yields following the application of new technology in the developing world, and new entrants into the market.
- Farm prices are extremely unstable, largely because of random supply shocks, such as poor weather and disease.
- Farmers and growers have lost power to the large supermarket chains, which can exert their monopsony power in pushing farm prices down.
As a result, farmers are often regarded as a special case for government support. Food is a strategic good, and governments around the world often view food security as a key economic objective.
The introduction of CAP, in Europe, was seen as an important step in establishing food security for Europe. Price support schemes, such as guaranteed prices, were first introduced in 1962, and became the main means of supporting European farmers.
So effective was the support to farmers, over-production was encouraged, resulting in the infamous wine lakes, butter mountains, and the $2 a-day cow.
Reform of CAP
By the mid 1980s, over-production led to sweeping reforms, including the use of set-aside programmes. Set-aside programmes, which involved the voluntary setting aside of land in an attempt to reduce agricultural surpluses, were introduced into the UK in 1988.
(SOURCE: DEFRA, 2009)
Other measures were introduced during the 1980s and 1990s to limit production, including fixed quotas for milk production, with penalties for over-production. These measured, combined with set-aside, gradually reduced the huge surpluses.
(SOURCE: EUROPEAN COMMISSION)
By the early 1990s, there was a movement away from guaranteed prices (often referred to as product-support), towards direct subsidies to farmers, irrespective of the output produced (often referred to as direct aid). Subsidies are, of course, a form of protection and trade barrier. These reforms are commonly referred to as the MacSharry reforms, after Ray MacSharry, the European Commissioner for Agriculture.
The Agenda 2000 reform encouraged EU farmers to diversify and to re-structure their farms so that they could become more competitive in world markets.
Included in this reform package was a reduction in subsidies for selected agricultural products, including cereals, milk, and beef.
This would encourage European farmers to become more price-competitive, and enable Europe to increase its export of agricultural products.
The Fischler Reforms of 2003 introduced a Single Farm Payment, which continued the process of decoupling subsidies and farm output. It also introduced a green element to CAP, forcing farmers to meet environmental and animal welfare standards.
The UK receives a controversial rebate against payments into the EU to compensate for that fact that it receives relatively little income from CAP in comparison with France and Spain.
Examples of EU protection
The Case of Sugar
CAP provides considerable support for European sugar producers, with subsidies of around £400 per tonne, and with total subsidies of around $1.5b.
(SOURCES: ASIA TIMES; OXFAM, ‘THE GREAT EU SUGAR SCAM’, 2002)HTTPS://WWW.OXFAM.ORG.UK/
The initial purpose of the subsidy was to enable the vast and growing EU sugar surplus to be exported at the prevailing world price, which was around 4p a pound by 2005, compared to the EU price of 15p.
Estimates suggest that approximately 5m tonnes of excess EU sugar are dumped on world markets each year. The EU uses quotas and tariffs against non-EU sugar imports, including a 200% tariff on sugar-cane from non-EU countries. There are lower tariffs on sugar from certain favoured countries, including Mauritius.
(SOURCES: OXFAM REPORT, 2004 AND; THE TIMES, APRIL 2004)
The combined effect of sugar subsidies is to make Europe the world’s leading exporter of white sugar. Critics argue that the effect of this is to divert trade away from more efficient sugar producers, especially those based a number of African countries.
In 2005, following complaints from Brazil, Tailand and Australia, the WTO imposed an annual limit on subsidised EU sugar of 1.37m tonnes.
See: WTO Green Box definitions
The Case of Textiles
Since the 1970s the EU has imposed quotas and tariffs on textile imports. During 2005, the EU blocked imports of textiles from China because it had exceeded its quota for clothing items such as T-shirts, knitwear and dresses.
See: Trade creation and trade diversion
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Common Agricultural Policy
The Treaty of Rome (1957), the founding document of the European Economic Community (EEC), committed its signatories to establishing a Common Agricultural Policy (CAP) and set out a list of contradictory objectives for that policy. The motivations for this policy were politically strong.
In 1959 agricultural workers formed 24 percent of the employed labor force in France, a similar proportion in the German Federal Republic, and 33 percent in Italy. Their electoral judgments counted, particularly in Germany and Italy, where they were closely tied to the Christian Democratic political parties.
And agricultural exports were an import contribution to Dutch and Italian trade.
Even so, the idea of enforcing a common trading and pricing policy on so great a number of small-scale farmers would probably not have become so important were it not that in every member state of the Community agriculture had already been receiving a wide range of state subsidies—for output, for new investment, for veterinary services, for fuel, for exports—as well as being favored by the tax system. During the throes of the Great Depression there had been little support for the idea of a free domestic market in agricultural products; in the food shortages of the aftermath of World War II, there was even less. Sales were regulated in some member-states of the EEC, notably Germany and the Netherlands, by producers' associations such as the Deutscher Bauernverband, or, in the Netherlands, the Stichting voor de Landbouw. Everywhere in the EEC, ministries of agriculture functioned rather national agricultural corporations managing the sector with state largesse.
One notable aspect of the CAP, however, was that although the common market of the EEC was shaped with the intention of sweeping away barriers to trade within the Community, the effect of the CAP was to increase the extent of regulation and controls on traded agricultural produce within the market and to sustain high levels of protection on the same products against nonmember states. Since the CAP came into effect the standard of living of those still employed in the sector has greatly improved, fulfilling one of the CAP's intentions. For most of the agricultural produce that can be produced in Europe's climate, the EC/EU is more or less self-sufficient.
Financial support for agriculture has dominated the Community's budget. Expenditure on agriculture and fisheries amounted to 80.6 percent of the 1973 general budget. Agreement on budgetary reform in 1988 led to a steady decline in this share. In 1999 it was only 45.5 percent.
There are, however, other items in the budget that provide some measure of support for agriculture. Until 1970 the budgetary contributions of the member-states were related through a system of «keys» totheir Gross Domestic Output.
Persistent demands by France that the Community be financed through its own resources (ressources propres) led to a fundamental change in 1970. The customs dues raised by the Common External Tariff were allocated to these «own resources.
» Levies on agricultural produce crossing internal frontiers, their purpose being to standardize prices within the Community, were also allocated to the Community's own budget. One percent of the Value Added Tax (VAT) collected in all the member-states was allocated in the same direction.
Lastly, direct financial contributions from the member-states had to be made to bring the Community's own resources up to a maximum of 1.27 percent of the Community's GNP in 1999. That last step carried with it, of course, the implication that the European Community had some attributes of a nation.
In many parts of the Community, agriculture is a small-scale activity. The number of separate enterprises under supranational management through common community rules made the task of managing almost impossible.
One result was that the CAP took up such a large share of the funding that other policies were underfunded. Furthermore, national contributions to the common budget dominated political arguments between the member states, and often within them.
One result of the CAP has been to preserve small farms throughout a half century of change in the organization of European industry and services—change that has been driven by trade liberalization and increasingly open markets.
It would be difficult to argue that in the early stages of the EEC this was not politically and socially a wise choice. As subsidized enterprises tend to do, however, the system has partially outlived its usefulness.
The European Agricultural Guidance and Guarantee Fund (usually referred to by its French acronym FEOGA), although in 2006 only a minor cog in the subsidization machinery, was the major distributor of subsidies until the 1990s.
Its expenditures supported farmers' incomes by subsidizing the prices of more than two-thirds of the EC's agricultural products through guaranteed prices and sales.
This involved purchasing and storing produce that could not otherwise attract the fixed price and frequently selling it later to Eastern European countries or providing it as food aid to the third world. Some products continue to be directly subsidized, and many products remain protected by import regulations.
Final EC prices are fixed annually by the national ministers of agriculture acting as an EC committee. Since ministries of agriculture have acted in all countries as supporters of farmers' pressure groups, the prices have been high. Excess production has been one result.
developed non–European Union (EU) countries that export agricultural produce, the European Union subsidizes agricultural exports. This practice has led to high-level trade disputes with the United States, Australia, and Argentina.
It has led also to clamorous protest from those who believe exports from the poorest third-world countries should be encouraged by subsidies rather than made more difficult by subsidies to producers from rich European and American states.
In 2006 export subsidies constitute a much smaller share in the CAP's subsidy expenditure than at any time in the CAP's history.
Community subsidies for exports take the form of «restitutions,» which are, in plainer English, refunds allowing exporters to close the gap between Community prices and the price at which they will have to sell in the unsubsidized world. In 1986 such restitutions absorbed about 40 percent of the FEOGA guarantee fund.
In 2005 they amounted to less than 20 percent of the same fund and are due for further reduction. Protest over the extent and size of agricultural subsidies has been increasing within the European Union since 1984, when the first serious attempts were made to hold agricultural expenditure to a lower rate of increase than that of the union's overall budget.
Efforts to reduce EU food surpluses have been slow and controversial because the financial consequences do not fall equally on the member states. In the 1990s some countries, particularly the United Kingdom, used EU subsidies to stop production on less fertile land. Restrictions on domestic milk production have been in operation since 1986.
Similar procedures have been cautiously adopted for cereal farming, a sector which for the first twenty years of the CAP was notorious for its largeshare of export subsidies, which it obtained because of the influence of large-scale grain farmers in national farmer's organizations in France and the United Kingdom.
Further financial restrictions came in 1988, when the rate of growth of annual agricultural expenditure was fixed at no more than three-quarters of the growth of total EC expenditure.
In the 1990 world trade talks, usually known as the Uruguay Round, the United States led a challenge to the European Union, calling for a 75 percent cut to its agricultural subsidies. The talks collapsed over this issue.
The European Union's response fell far short of the United States' demand.
It was not clear that the United States' own extensive agricultural subsidies were as low as the level it demanded from the European Union.
It is difficult to predict the extent to which the 1990s policy changes within the CAP will survive in the greatly enlarged European Union of the twenty-first century.
Attempts to freeze farm spending between 2000 and 2006 were rejected by Germany, although the level of spending was increased only slightly and part of the increase was to help the new member states to adapt to the new, and for them unexpected, harsher regime.
They had been expecting to benefit from the extensive and proliferating programs of agricultural subsidy.
The special program of subsidization, the Special Assistance Programme for Agricultural and Rural Development (SAPARD), that they were offered, was directed toward increasing investment in farming methods, marketing techniques, conservation, village preservation, rural heritage projects, and other matters that seem of more immediate concern to farmers in western Europe. (The list does not include many of the easier pickings that had earlier been provided for western European farmers.)
The CAP should be understood as a lingering consequence of the Great Depression of the 1930s, which cemented agricultural protection firmly into place and stimulated increases in food output across Europe as a way of reducing imports.
The complex interplay between national government policies and farmers' own bureaucracies has only since 1990 slowly adapted to fit the agricultural sector into a less regulated trade regime.
The European Union's reactions have not been slower than those in other parts of the world, especially when the political complexity of its constitutional arrangements are taken into account.
Indeed, it may well be that the most potent force for change has not been international pressure but internal dissent among the early EU members, where agricultural labor is now only a very small part of the total labor force and has far less political leverage with national governments.
The CAP's contribution to the construction of the European Community also has to be recognized. It presided over an unprecedented movement of labor the agricultural labor force and into other branches of the labor force. Between 1951 and 1959, at least 350,000 agricultural workers per year left the land and were absorbed into other jobs.
Such a large change would not have been possible without a rapid growth in manufacturing. One consequence was a sharp improvement in labor productivity in the agricultural sector. The determination of governments in the 1930s to keep people on the land was swept away.
In the more backward sectors of the European Union, labor productivity in agriculture improved the most spectacularly. In the German Federal Republic, it improved by 5.5 percent annually between 1949 and 1959, in France by 4.9 percent, and in Italy by 4.7 percent.
United Nations estimates suggest that the improvement of total productivity in Europe was greatest in the northwest, where labor markets were tightest. In that region, about two-thirds of the investment in agriculture went to labor-saving machinery.
The CAP made changes in total productivity throughout the German economy relatively easy, resolving one of the worst problems of the 1930s and in doing so making domestic politics far more peaceful. The same can be said about its political impact in France and Italy.
See alsoAgriculture; European Coal and Steel Community (ECSC); European Union; Rome, Treaty of.
Hill, Brian E. The Common Agricultural Policy: Past, Present, and Future. London, 1984.
Milward, Alan S. The European Rescue of the Nation-State. 2nd ed. London, 2000.
Tracy, Michael. Government and Agriculture in Western Europe, 1880–1988. 3rd ed. New York, 1989.
Alan S. Milward
What does the CAP do?
For most of its existence, the CAP provided income support to farmers by supporting the prices they were paid for produce. But this system was widely criticised for encouraging overproduction, leading to notorious wine lakes and butter mountains – produce that was then often dumped in third markets with adverse impacts on local agriculture.
Following a major CAP reform in 2005, there are two big strands to CAP payments: one for direct income support (pillar 1) and the second for rural development (pillar 2). Direct income support is much a much bigger programme than rural development.
CAP payments are an important part of farm incomes in the UK: the Department for Environment, Food and Rural Affairs (Defra) estimated that payments represented 55% of farm incomes in 2014. Those payments could also be regarded as subsidies to food prices. Because EU payments are denominated in euros, farmers get more when sterling depreciates and vice versa.
What is the difference between the two pillars?
Pillar 1 payments are direct income support payments to farmers.
To remove any incentive to overproduce, payment (now known in England as the Basic Payment Scheme) is the amount of land a farmer owns, not how much they produce.
This money comes direct from the EU and is administered by national governments (Defra for farmers in England, the devolved administrations for Scotland, Wales and Northern Ireland).
In order to qualify for payment, farmers have to meet certain standards on environmental management, animal welfare standards and traceability – these conditions are known as ‘cross-compliance’. Member states can also apply market support measures in certain conditions – the UK has used this to support dairy farmers when prices have been particularly low.
Pillar 2 requires co-financing from member state governments. The EU describes the purposes of this as:
- fostering the competitiveness of agriculture
- ensuring the sustainable management of natural resources
- combating climate change
- achieving a balanced territorial development of rural economies and communities including the creation and maintenance of employment.
How much does the CAP cost?
The CAP is one of the big EU programmes, with a total budget of just under €60 billion. France topped the list in 2014, with payments worth €8.5 billion. Next came Spain, Germany and Italy.
Most of the money paid to farmers comes from the EU budget, paid for by contributions from member states, including the UK. The UK then tops up from domestic expenditure to pay for “co-financing of pillar 2 schemes”. In 2015 those top ups cost €250 million for the whole of the UK. The breakdown of payments for the whole UK is set down below for EU budget year 2015, in € millions.
Is CAP the only way the EU supports farming?
Those are not the only costs of the CAP. Defra has also had to pay fines for mismanaging farm payments. This is called “disallowance” and is quite big money.
In his comment on Defra’s 2015–16 accounts the Comptroller and Auditor General, Sir Amyas Morse, noted that: “The total value of cumulative disallowance penalties incurred under CAP 2007–13 is £661 million” – or over £90 million a year.
The other leg of EU agricultural support is through trade policy. Many producers from outside the EU pay tariffs on goods they import. The Common External Tariff is low on most manufactured goods but remains high on agricultural goods. This protection is another form of income support to EU farmers – but at the expense of consumers rather than taxpayers.
Why is EU agriculture policy controversial in the UK?
The UK gets much less from the CAP than it contributes.
But the CAP has also been criticised for encouraging farming practices that damage the environment. One indicator of the degree of environmental damage is the dramatic decline in farmland birds in recent decades. What is impossible to judge is what would have happened under potential alternative policies.
The CAP benefits large landowners just for owning more land. EU protectionism on agriculture has been criticised for the costs it imposes on consumers through higher food prices and the costs it imposes on developing countries by making it difficult for them to compete with EU farmers.
How will the UK’s agriculture policy change after Brexit?
The government has introduced a new Agriculture Bill to set up a domestic framework a payment system of ‘public money for public goods’ in England.
The government has proposed establishing an Environmental Land Management Scheme which will require farmland management to be linked to the 25 Year Environment Plan goals.
The transition to the new system will take place over seven years, with a national pilot starting in 2021.
Both agriculture and environment policies are fully devolved, but the freedom of individual nations to diverge from existing rules is constrained by the policy frameworks being set by the EU. This will change after Brexit. The UK government and devolved administrations are currently working to establish common frameworks in some of these areas.
The Agriculture Bill also includes provisions for Northern Ireland to prepare for its own replacement scheme. But un the bill introduced under Theresa May, there are no longer similar provisions for; the Welsh government plans to bring forward its own Agriculture Bill. The Scottish government will do the same.
The UK government and devolved administrations will still need to agree how agriculture spending fits into any future fiscal framework. At the moment, CAP money flows from the EU and passes onto the devolved nations, all of whom receive significantly more CAP funding per capita than England.
- European Commission, Food, Farming, Fisheries, https://ec.europa.eu/info/food-farming-fisheries
- Matthews A, Gainers and losers from the CAP budget, CAP Reform, 17 November 2015, retrieved on 17 March 2020, http://capreform.eu/gainers-and-losers-from-the-cap-budget
- Department for Environment, Food and Rural Affairs; Department of Agriculture, Environment and Rural Affairs (Northern Ireland); Welsh Assembly Government, The Department for Rural Affairs and Heritage; The Scottish Government, Rural and Environment Research and Analysis Directorate, Agriculture in the United Kingdom, GOV.UK, 26 May 2016, retrieved on 17 March 2020, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/557993/AUK-2015-05oct16.pdf
- Department for Environment, Food and Rural Affairs, Annual Report and Accounts 2015–16 (HC328), GOV.UK, 14 July 2016, retrieved on 17 March 2020, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/547296/defra-annual-report-2015-2016-web.pdf
- Niemietz K, Abolish the CAP, let food prices tumble, Institute of Economic Affairs, 18 January 2013, retrieved on 17 March 2020, https://iea.org.uk/blog/abolish-the-cap-let-food-prices-tumble
- Department for Environment, Food and Rural Affairs, Farming for the future Policy and progress update, GOV.UK, February 2020, retrieved on 17 March 2020, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/868041/future-farming-policy-update1.pdf