Of all economic sectors, community integration has been most promoted in the agriculture sector. It represents about 40% of the budget of the European Union.
Mentioned as far back as 1957 in the Treaty of Rome, the Common Agricultural Policy (CAP) was only put in place in 1962 and, at that time, reflected the need to increase food production in a Europe still devastated by war. It very quickly succeeded in reaching its main goal – to guarantee food self-sufficiency in the European Community.
Since the beginning of 2010, the Common Agricultural Policy has been directed by European Commissioner Dacian Ciolos (Romania).
In practice, the CAP has brought a significant increase in the level of agricultural production in Europe due to the establishment of instruments to guarantee farmers’ income, manage rural depopulation and encourage modernisation of farms.
As a result, the European Union has become a real world power in agriculture, competing with the United States in terms of exports as well as imports of agricultural foodstuffs.
However, imbalances soon appeared and have become greater over time. A victim of its own success, the CAP has undergone several adaptations aiming to correct production surpluses and their harmful environmental effects.
Since the 1990s, the CAP has been in a continuous process of reform that aims to guarantee a competitive European agriculture that is more respectful to the environment, capable of maintaining the vitality of rural areas and that responds to consumer demands in terms of animal welfare, quality and food security.
- Health check and perspectives
- Texts and documents
- Useful websites
- Useful addresses
The Common Agricultural Policy aims (art. 39 TFEU):
- to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour." The competitiveness of European agriculture internationally is one of the results of this;
- “to ensure a fair standard of living for the agricultural community, in particular by increasing the individual income of those who work in agriculture”. For this reason, the enlargement that took place on May 1st 2004 brought a size-related challenge to European agriculture as it led to a doubling of the agricultural area and a 70% increase in the number of farmers;
- “to stabilise markets”, by , in particular, avoiding overproduction;
- “to guarantee security of supply”. Food and food supply to Europeans as well as the rest of the world is one of the CAP’s central issues;
- “to ensure reasonable prices in delivering food to consumers”.
Along with these objectives defined by the treaties, there is commitment to healthy and quality food, production that is respectful to the environment and to animals, as well as increasing attention to rural development (2nd pillar of the CAP) through development of land, management of natural resources and economic diversification of the EU’s rural areas.
At the end of the Second World War, European countries found themselves facing food shortages. It was necessary to rebuild the poorly-structured agricultural sector. After long negotiations, and at the insistence of France, they chose to do this within the framework of the then recently created European Economic Community.
In 1962, the six member states of the EEC put in place a common agricultural policy (CAP) whose main objective was to increase food production and productivity in Europe thereby stabilising the markets and ultimately increasing income for farmers.
The 21 CMOs were replaced in 2008 by a single CMO.To do this, the Community finances the production efforts of farmers and puts in place Common Market Organisations (CMOs) which direct production, stabilise prices and guarantee security of supply for 21 products or groups of products (cereals, fruits and vegetables, pork, eggs, wine). When certain products do not find a buyer, the Community buys them at a guaranteed price (negotiated every year) that is higher than the international market price.
The 1970s: new difficulties
Since the 1970s, Europe has thus managed to guarantee food self-sufficiency to member states. New problems soon emerged however:
- surpluses occurred in several sectors (milk, wine, cereals, beef), which could not be absorbed by the market and the storage (or even destruction) of these products weighed increasingly heavily on the community budget. The Community therefore tried to control and even reduce production, in particular by introducing milk quotas in 1984.
- in order to sell the surpluses, the Community resorted to exporting. It subsidised European producers (“restitutions”) who sold their products abroad at a lower price (European products being more expensive than in the rest of the world). These subsidies earned Europe many critics, particularly within the World Trade Organization (WTO).
- the productivist model encouraged by the CAP had a growing environmental cost – water pollution, soil nutrient depletion etc.
- Several member states, particularly Great Britain, question the amount of the budget granted to the CAP.
The CAP and the WTO
In spite of continuing reforms to the CAP, it is still criticised outside of the Union in particular with regard to direct subsidies and export subsidies which create competitive distortions. Developing countries are also calling for preferential access to the European market. The majority of member states on the other hand emphasise the importance of an agricultural policy for sustainable development, the environment, food supply and territorial cohesion. The Doha negotiations were suspended in 2006, mainly because of EU-US disagreement on agricultural issues, and were launched again in February 2007. However, disagreements are ongoing.
Reform of the CAP
Also, since 1972 and the failure of the Mansholt Plan, the CAP has been adapted by successive reforms (1992, 1999 and 2003) which aim to:
- reduce surpluses by the establishment of quotas, setting aside of land etc;
- reduce the amount of the community budget given to agriculture (today it stands at 40% of EU budget but less than 1% of European GDP);
- give more importance to the quality dimension (rural development, environmental protection, respect of health and animal welfare standards);
- adapt the workings of the CAP to the rules of international trade as defined by the WTO.
Since the entry into force of the Lisbon Treaty, legislative decisions regarding the CAP are subject to ordinary legislative procedure (codecision). This means that the European Parliament henceforth has a fundamental role to play in agricultural issues. Non-legislative acts (subsidy amounts, quotas, prices, levies etc.) are decided by the Council through qualified majority on the basis of Commission proposals.
Three major principles underscore the CAP:
- a single agricultural market: the customs barriers between member states no longer exist and health rules and technical standards have been harmonised;
- financial solidarity: drawing on the community budget, the resources are allocated to communal spending and not in terms of member states’ contributions.
- Community preference: the agricultural foodstuffs produced in Europe are favoured through import levy mechanisms and export subsidies (“restitution”).
In order to encourage the production of quality products, the European Union put in place a labelling system that attests to the origin and quality of the products: PDO (Protected Designation of Origin), PGI (Protected Geographical Indication) and TSG (Traditional Speciality Guaranteed). The EU also created a label for organic farming products.
Furthermore, the CAP is organised around the following major mechanisms:
- a common market organisation (CMO) for agriculture which guarantees the stability of the markets for different products, particularly by establishing communal rules regarding competition and regulating agricultural prices and subsidies.
- direct subsidies to farmers: direct subsidies were introduced by the 1992 reform and aimed to give farmers a guaranteed minimum income independent of the quantity produced (“decoupling”), in order to avoid any overproduction and to eliminate trade distortions.
Before this date (and still today in certain new member states), farmers could sell their products at “guaranteed pries” so if their products were not sold, the EU itself bought them at the same price. Direct subsidies were thus introduced to compensate for the reduction in guaranteed prices meaning that a single farm payment is paid to the producer based on historical data. It is thought that this will make up 70% of the CAP budget in 2010.
- financial incentives that encourage farmers to choose production methods that are respectful to the environment. For example, the principle of “cross-compliance” means that subsidies are granted subject to the producer’s respect of criteria related to the environment and animal welfare.
- instruments to control agricultural supply: they aim to avoid overproduction. They were introduced in the 1980s (production quotas, setting aside of land etc.).
- rural development policy: it represents the “second pillar” of the CAP. Several types of instruments exist such as cross-compliance and modulation (a part of direct and decoupled subsidies was gradually redirected to the financing of rural development). In 2010, the rural development budget is thought to represent about 25% of the CAP budget.
Since January 1st 2007, financing of the two pillars of the CAP has been carried out by the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD), which replaced the European Agricultural Guidance and Guarantee Fund (EAGGF). In 2010, the Common Agricultural Policy (CAP) will be the European Union’s second-highest area of expenditure after social cohesion.
At €56 billion, it represents less than 40% of the community budget. Until December 31st 2007, the CAP represented the largest share of the European budget (up to 70% of the budget in 1984 for example, as opposed to 43% in 2008).
In the period 2007-2013, France will remain the primary beneficiary of expenditure relative to agricultural markets (first pillar), with a return rate of 19.4% and 7.2% for the second pillar (rural development). The trend towards a reduced return rate is inevitable given enlargement and the capping decided upon in 2002.
In 2004, the return rate (ratio between CAP-related expenditure and income) of France was 21% (13% for rural development), far ahead of Spain (14.1%), Germany (13.5%), Italy and the United Kingdom. IThe question of CAP financing remains a bone of contention between EU members even if, in accordance with the agreement concluded in 2002 at the European Council in Brussels, the CAP has a budget that is guaranteed until 2013.
Some countries that do not benefit directly from agricultural subsidies want to break away from the principle of financial solidarity and are calling for the partial “renationalisation” of CAP financing. However, agreement on the financial perspectives for the period 2007-2013, concluded in December 2005, did not challenge the 2002 agreement.
Health check and perspectives
Published in November 2007 by the European Commission, the “health check of the CAP" kicked off a major consultation process with member states on the measures to be implemented in preparation for the period after 2013. One year after, on November 20th 2008, the ministers for agriculture agreed on the following:
- the removal of obligatory setting aside of land by 2013
- progressive increases in milk quotas (1% each year) before they disappear completely in 2015
- le "découplage" des aides pour tous les Etats membres (sauf dans certains secteurs)
- the “decoupling” of subsidies for all member states (except in certain sectors)
- Supplementary financing for farmers in the 12 new member states of the EU
- Allocation of the budget giving greater preference to rural development
- A simplification of the principle of “cross-compliance”.
Perspectives: debate on the CAP post-2013
According to a Commission communication from March 2009, simplification of the CAP is one of the main issue debated by EU ministers. Furthermore, the Commission plans to put forward a document in 2010 on the budget of the EU and the financing of different policies after 2013.The Common Agricultural Policy is currently the subject of heated negotiations inside and outside the EU. Challenged by some, denounced at international negotiations but supported by a majority of member states as well as by the current European Commissioner for Agriculture, the “new CAP” has to be defined for the period after 2013 (the current budget of the Union having been concluded for the period 2007-2013).
The debate on the CAP post-2013 will have to take account of the following challenges:
- guaranteeing food security in the face of a rapidly increasing world population;
- monitoring good management of EU territories, 80% of which is covered by agricultural land and forests;
- fighting against climate change through a reduction of emissions from agriculture and adapting to the effects of the changes;
- supporting sustainable development in rural areas (where more than half the population of the EU live).
Texts and documents
La politique agricole commune (PAC): une politique en mutation, Jacques Loyat and Yves Petit, 2008, La Documentation française.
European Commission – Directorate-General for Agriculture – B1049 Brussels – Tel: 00.322.295.32.40 - Fax: 00.322.295.01.30
Mise à jour :19/03/10