This paper deals with the following questions: What is the significance of the Common Agricultural Policy (CAP)? How did the CAP develop in the course of time and which milestones left their mark on the regulations of today’s policy? What are the current problems and which challenges does the CAP have to respond to in the future? How will the development continue?
As a researcher the topic is of great interest as it concerns every European tax payer, the environmental change depends in certain aspects on the policy of the CAP as well as the quality of the European agricultural products. It’s a prevalent topic which not every citizen is fully aware of and whose effects should be examined more in detail.
Agriculture has many important needs to satisfy in the population and to ensure a wide range of social tasks: food production, production of biomass for power generation and material use, design and maintenance of cultural landscapes and biotopes, determination of animal welfare or the impact on social and economic structures.
In order to promote these societal tasks of agriculture, the politics should set the framework in such a way that the economic activity of the farmers fulfills common welfare purposes at the same time. This is done by specifying duties as well as by creating incentives. In this regard the CAP of the European Union (=EU) has a great influence. In this context the time has come again for the EU commission to set the Multiannual Financial Framework (=MFF) for the period from 2021 to 2027.
One of the biggest expenditures with about 54 billion euros a year is the CAP which is nowadays hardly criticised for promoting poverty and food security in developing countries through European subsidies. Interventions related to the agricultural policy cause a dilemma due to the fundamental conflict of interest between producers and consumers. On the one hand, the abolishment of the CAP apparently does not have a lot of negative consequences – according to the Joint Research Centre of the European commission the consequential decline of the agricultural production would be insignificant. On the other hand, the CAP does not have a lot of effects that harm its development, but a danger is prevalent that it might fall back into old patterns by e.g. using payments coupled to the production.
Table of contents
1 Introduction
2 The Common Agricultural Policy
2.1 Definition
2.2 Two-pillar system
3 Historic development
3.1 Initial stage: 1950s to 1960s
3.2 Period of crisis: 1970s to 1980s
3.3 MacSharry reform: 1990s
3.4 2000-2013
4 Current challenges
4.1 2014-2020
4.2 Future prospects
5 Conclusion
Bibliography
List of abbreviations
Abbildung in dieser Leseprobe nicht enthalten
1 Introduction
Agriculture has many important needs to satisfy in the population and to ensure a wide range of social tasks: food production, production of biomass for power generation and material use, design and maintenance of cultural landscapes and biotopes, determination of animal welfare or the impact on social and economic structures. In order to promote these societal tasks of agriculture, the politics should set the framework in such a way that the economic activity of the farmers fulfills common welfare purposes at the same time. This is done by specifying duties as well as by creating incentives. In this regard the Common Agricultural Policy (=CAP) of the European Union (=EU) has a great influence. In this context the time has come again for the EU commission to set the Multiannual Financial Framework (=MFF) for the period from 2021 to 2027. One ofthe biggest expenditures with about 54 billion euros a year is the CAP which is nowadays hardly criticised for promoting poverty and food security in developing countries through European subsidies. Interventions related to the agricultural policy cause a dilemma due to the fundamental conflict of interest between producers and consumers. On the one hand, the abolishment ofthe CAP apparently does not have a lot of negative consequences - according to the Joint Research Centre ofthe European commission the consequential decline ofthe agricultural production would be insignificant. On the other hand, the CAP does not have a lot of effects that harm its development, but a danger is prevalent that it might fall back into old patterns by e.g. using payments coupled to the production.1
But what is the significance of the CAP? How did the CAP develop in the course of time and which milestones left their mark on the regulations of today’s policy? Which are the current problems and to which challenges the CAP has to respond in future? How will the development continue?
As a researcher the topic is of great interest as it concerns every European tax payer, the environmental change depends in certain aspects on the policy of the CAP as well as the quality of the European agricultural products. It’s a prevalent topic of which not every citizen is fully aware and whose effects should be examined more in detail.
The following term paper consists of the interpretation of current literature by proceeding in a deductive way and a step by step approach is applied. Firstly, the term CAP is defined to narrow down the topic and its aims, financing and the two-pillar system are explained. As a second step the historic development is divided into the four, most important periods to understand the development until today. Thirdly, the current challenges, including the current period from 2014 to 2020, are elaborated and according to current information the future prospects, based on the current debated aspects as well as different opinions and evaluations of the future development, are pointed out. The goal is to show how the historic development lead to today’s challenges and future problems and which steps have to be taken in future to overcome difficulties and find solutions.
2 The Common Agricultural Policy
2.1 Definition
The Common Agricultural Policy, short CAP, as a part of the European aid or support policy, is composed of directives and guidelines which regulate the agricultural sector in Europe as one of the few common European policy areas. The policy nowadays amounts to nearly 40 % of the MFF of the EU-budget and thus is its biggest part and also one of the most important areas of responsibility of European politics. The expenditures are financed by two different funds, the European Agriculture Guidance and Guarantee Fund (=EAGGF) and the European Agriculture Fund for Rural Development (=EAFRD). The EAGGF funds the direct payments and support measures for the agricultural markets whereas the EAFRD finances the support of rural areas. Apart from financing the sector, the European commission also has the right to initiate new agricultural regulations and standards.2
The main objectives were raising the farm incomes in terms of the per capita income of the rural population, but also the creation of a common policy to guarantee the food supply to the population, to increase the productivity of farmers by supporting the technological progress and optimise the utilisation of all production factors, especially improving the employment of workers, as well as stabilizing the European agricultural markets.3
Nowadays the objectives changed or rather expanded to environmental or ecological objectives as the quality of soil and water, climate change, reduction of greenhouse gas emissions, the securing of habitats and biodiversity as well as food quality, the guarantee of animal protection, the maintenance and cultivation of countrysides, the development of rural areas, the protection of small farms and the support for young farmers.4
2.2 Two-pillar system
The financial support ofthe CAP is nowadays represented in the so-called ‘two-pillar system’ which has gradually developed until today, but still includes its fundamental, main points. The first pillar includes direct payments to owners of agricultural holdings per hectare depending on complying several conditions as standards. Those standards, called ‘cross compliance’, mean the dependency of payments ofthe compliance with sustainable farming practices, including environmental regulations and animal welfare and food safety standards. 30 per cent ofthe direct payments are tied to the regulations of crop diversification, the maintenance of permanent pasture and the provision of ecological compensation areas in the context ofthe so-called ‘greening’. The ‘Basic Payment Scheme’, meaning the payments per hectare, varies for young and smallholder farmers, deprived areas or land with natural constraints. Optional are the redistribution of 30 per cent of the basis premium and less than 10 per cent coupled payments to the production of a specific product. At least the pillar contains the prevention ofthe abuse of payments to ‘sofa farmers’ or absentee landlords, meaning non-active farmers who receive money, through a list of criteria and tasks or activities for which no payments are granted.5
The second pillar contains programmes for environmentally friendly and ecological farming and cultivation practices and the rural development. Priorities are the environmental and climate protection, so the ecologic farming and agriculture. About 30 per cent are spent on land management projects and programmes tied to climate change. The rural development should be improved through supporting the competitiveness, the creation and maintenance of jobs, the knowledge transfer, better ecosystems, an improved resource efficiency through the transition to a low carbon economy and improving the economic development, the poverty rate and the social inclusion.6
The aim of this chapter 2 was to explain and specify the term CAP more in detail and to show its form of financing and main objectives. The explanation of the two-pillar system of the CAP points out how the priorities of the financing of the CAP are set and can be seen as the cornerstones ofthe concept ofthe CAP.
3 Historic development
3.1 Initial stage: 1950s to 1960s
After the second world war, the deficiency and shortage of food was still prevalent in Europe, so the six founding members of the European Economic Community (=EEC) already defined the first objectives and principles ofthe European agricultural policy in 1957 in the Treaty of Rome. In the mid-1950s the importance of agriculture in western Europe in terms of Gross Domestic Product (=GDP) and employment share was immense so that the sector needed support to drive the development process forward, especially to maintain the living standard of farm workers by securing their jobs. Moreover, the guarantee of reasonable consumer prices for the European agricultural products was considered as an issue of social stability. In 1958 the main lines, the three fundamental principles market unity, community preference and financial solidarity, of the future CAP were worked out to reach the objectives of the EEC treaty. Market unity meant the introduction of common market and price regulations to eliminate trade barriers, in the long term the creation of a Single European Market. The term community preference implies the pre-eminence and price advantages of EU-products in order to only permit low price third country imports in case of difficulty of meeting EU demand and to protect the European market from market fluctuation. Lastly, the financial solidarity contained the agreement that the CAP price support policies had to be supported by the budget of the EEC, the future EU-budget.7
The introduction of the CAP in the year 1962 through a package of regulations firstly was met with a positive response from many sides due to its ‘price-support based design’. The introduction of the so-called ‘price floor’ ensured producers more stable and higher prices through guaranteeing them a minimum price fortheir production. The price floor is an artificially set price over the world price through which the producers got a subsidy for their output and the consumers paid a consumption tax. Moreover, the EEC promised a ‘market intervention’ system implying to carry out intervention purchases in case of agricultural overproduction. The system even generated a tax revenue for the EU budget so in the early stages of the implementation the consequences seemed to be positive, the production rose, the food supply was saved and its stabilization evoked a sense of satisfaction. Nevertheless, it was a piecemeal introduction of market regulations for agricultural products and therefore the first common market regulation for grain was not introduced before 1967. Due to still different price levels in the European Community (=EC), the principle of financial solidarity could not be realized because importers had to import at the higher European price floor whereas exporters were refunded the difference between the European and the world market price. Consequently, a conflict of interests resulted between the member states of the EC since some states had a higher net transfer through higher subventions than payments. From 1965 to 1969 the agricultural expenditures rose exponentially from 8% to 80% ofthe CAP’S budget share.8
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1 Compare Rudloff, B., Brüntrup, M., CAP consequences, 2018, p. 1 et seqq.; compare Wissen- schaftlicherBeiratfürAgrarpolitik, Ernährung und gesundheitlichen Verbraucherschutz beim BMEL, Future CAP, 2018, p. 1.
2 Compare Maas, S., Schmitz, P. M., CAP, 2007, p. 94; compare Baldwin, R., Wyplosz, C., Economics, 2015, p. 218; compare https://www.bmel.de/DE/Landwirtschaft/Agrarpolitik/_Texte/GAP- FAQs2018.html#doc10945774bodyText4, accessed on 15/10/2018; compare https://www.bundes- finanzministerium.de/Content/DE/Standardartikel/Themen/Europa/EU_auf_einen_Blick/Poli- tikbereiche derEU/EU Agrarpolitik/2012-03-21-ueberblick-gemeinsame-agrarpolitik.html, accessed on 15/10/2018.
3 Compare Matthews, A., Agricultural Integration, 2014, p. 3; compare Heinemann, F., EU budget, 2017, p. 4.
4 Compare Heinemann, F., EU budget, 2017, p. 4 et seq.
5 Compare. https://www.bmel.de/DE/Landwirtschaft/Agrarpolitik/_Texte/GAP- FAQs2018.html#doc10945774bodyText6, accessed on 14/10/2018; compare https://www.bundes- finanzministerium.de/Content/DE/Standardartikel/Themen/Europa/EU_auf_einen_Blick/Poli- tikbereiche_der_EU/EU_Agrarpolitik/2012-03-21-ueberblick-gemeinsame-agrarpolitik.html, accessed on 14/10/2018; compare http://www.europarl.europa.eu/factsheets/de/sheet/109/die-erste-saule-der- gap-ii-direktzahlungen-an-inhaber-landwirtschaftlicher-betri, accessed on 14/10/2018; compare Lippert, C., Agricultural policy, 2014, p. 159; compare Baldwin, R., Wypiosz, C., Economics, 2015, p. 236; compare Röder, N., Greening, 2018, p. 101 et seq.
6 Compare Baldwin, R., Wypiosz, C., Economics, 2015, p. 236 et seq.; compare http://www.euro- parl.europa.eu/factsheets/de/sheet/110/die-zweite-saule-der-gap-politik-zur-entwicklung-des-land- lichen-raums, accessed on 14/10/2018; compare https://www.bmel.de/DE/Landwirtschaft/Agrarpoli- tik/_Texte/GAP-FAQs2018.html#doc10945774bodyText4, accessed on 14/10/2018.
7 Compare. Maas, S., Schmitz, P. M., CAP, 2007, p. 94; compare. Rohwer, A., CAP, 2010, p. 27; compare Matthews, A., Agricultural Integration, 2014, p. 3 et seq.; compare Baldwin, R., Wypiosz, C., Economics, 2015, p. 218; compare Heinemann, F., EU budget, 2017, p. 4.
8 Compare Maas, S., Schmitz, P. M., CAP, 2007, p. 94; compare Wessels, W, Political system, 2008, p. 71; compare Matthews, A., Agricultural Integration, 2014, p. 4; compare Baldwin, R., Wy- plosz, C., Economics, 2015, p. 219, 221,224, 226.