A chance for further CAP reform By Christopher Haskins
★ The Common Agricultural Policy (CAP) accounts for around 40 per cent of the EU budget. There should be a reduction in overall CAP spending, with less going to farmers in western Europe and more to farmers in eastern Europe, as payments are equalised. ★ If global food prices remain strong – which seems likely – the case for subsidising agricultural production will become increasingly irrelevant. ★ Financial assistance should continue to be given to declining rural communities, especially in the east. ★ There should be an increase in research into the impact of agriculture on climate change, and vice versa. The CAP in its current shape expires in 2013, and negotiations to put its successor in place are underway. As the CAP accounts for around 40 per cent of current EU budget spending, the debate about future agricultural policy is a central part of the debate about the future EU budget, the Multiannual Financial Framework 2014-20, which the EU aims to agree in 2012. British critics argue that the CAP is a costly historic relic whilst the French claim that it remains a cornerstone of the EU’s single market. Initially the CAP, which was established by the Treaty of Rome in 1958, reflected France’s position. Driven by the experience of chronic wartime and post-war food shortages, European governments, including Britain, were happy to provide generous subsidies to their farmers in order to raise domestic food production. It was no surprise that the founding fathers of the EEC would adopt such an approach. Furthermore, relatively free trade between the six original states in agricultural products was the first, symbolic step towards creating a much wider common market. The original CAP was largely funded by Germany and was a sop to France, the main beneficiary. French farmers were concerned about their ability to compete against German farmers. In fact they coped pretty
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well. And the original case for the CAP has been overtaken by events. During the first 25 years of its existence the system got increasingly out of control as farmers, thanks to the subsidies, produced far more food than the market could absorb. The cost of storing, and worse still, dumping these surpluses on the world’s market soared. Eventually the situation was stabilised by the introduction of production caps on farmers. But the subsidies continued, as did tariffs on food imports. As a result, European consumers paid high prices for their food. Furthermore, the majority of the states who were members of GATT (later to become the World Trade Organisation) were keen to reduce barriers to trade, but the EU’s protectionist agricultural policies became a serious obstacle to wider trade liberalisation.
Fischler’s reforms The reforms of the CAP introduced by Agriculture Commissioner Franz Fischler in 1999 and 2003, and due to be reviewed in 2013, have changed all this. They effectively ended a system based around high farm-gate prices achieved through import tariffs and direct market intervention by the Commission.
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