Agriculture & Rural Development

Main aims

The Common Agricultural Policy (CAP) is one of the most important and expensive European policies.

The basic goals, which remain unchanged since the 1960s are to promote improved productivity in the sector and ensure a stable food supply. These are pursued whilst balancing the consumer interest in reasonable prices with the farming interest in maintaining and improving incomes.

EU agricultural policy has particular sensitivity because agriculture is seen across the EU as much more than a branch of the economy – it is seen as the lifeblood of rural society.

The CAP has been funded from what is known as the European Agricultural Guidance and Guarantee Fund. Traditionally, the vast bulk of resources were devoted to guaranteeing a price for farm produce by intervening in the market. This approach resulted in the EU budget paying to take agricultural produce off the market and into storage.

In recent years other mechanisms have included capping production through quotas (e.g. in the milk sector) or by "setting aside" land as well as increased use of direct income support to farmers. Resources have also been devoted to agricultural development and diversification under Structural Funds. Further reform was seen as essential – not just to modernise the CAP which already serves agriculture from northern Finland to Southern Portugal but also to prepare for enlargement of the EU to include the countries of Central & Eastern Europe.

Budget

Even after recent reforms, the CAP still takes up over 40% of EU expenditure. Consumers complained that the system of ensuring farm income by guaranteeing a price per product has meant prices have been kept unnecessarily high. On the other hand, the proportion of EU GDP devoted to agriculture is not untypical of what many national governments have chosen to spend on agriculture in the past. Countries outside the EU (including neighbours like Switzerland and Norway, Japan and the US) still spend a comparable proportion.

Rural Development

The CAP has traditionally assumed that helping farmers is the best way to help rural communities. It has had limited success in reversing the trend of rural depopulation and doubts have been expressed about whether large subsidies for big, productive farms have really benefited communities in rural areas. So policy has shifted towards a better balance between supporting farmers and developing the rural community as a whole.

Environment

The CAP has been criticised as failing to take environmental factors sufficiently into account, for example, by encouraging intensive farming.

Food safety and animal welfare

There has been an increasing demand for the CAP to play a part in promoting high standards of food safety and animal welfare, especially after the BSE crisis.

International dimension

CAP rules imposing duties on agricultural imports and subsidising exports have long been attacked as unfair by countries outside Europe. They are now limited by international rules under the World Trade Organisation (WTO) and further trade liberalisation for agriculture is one likely result of the next round of WTO negotiations. This will have to embrace not only farm support, but the relationship between agriculture, trade and environment; consumer safety and animal welfare; and labeling/consumer information.

Implementing CAP reform

As part of the Agenda 2000 package, EU leaders agreed reforms to the CAP for the period 2000-2006 based on the following policy objective:

• increase competitiveness in domestic and external markets, to ensure that European farmers can take full advantage of expanding world markets,
• enhance the safety and quality of products to meet consumers´ demands,
• ensure a fair standard of living for the agricultural community and contribute to the stability of farm incomes,
• integrate environmental goals into the CAP,
• promote a sustainable agriculture,
• enhance the creation of alternative job and income opportunities for farmers,
• simplify CAP legislation to make it more transparent and accessible.

Enlargement and CAP reform

The enlargement of the EU to Central and Eastern Europe will bring a number of heavily agricultural and relatively poor economies into the EU. The CAP has to be adaptable enough to incorporate these countries without de-stabilising agriculture either in the existing EU 15, or in the new Members.

CAP reform

• Competitiveness: Ensuring farm incomes by guaranteeing prices meant EU farm products were relatively expensive. Price cuts have been agreed to improve competitiveness by stimulating the internal market and helping EU agricultural products which compete in global markets.
• These include a 15% price cut for cereals, a 30% price cut for beef and veal, and a 15% price cut for butter and skimmed milk. Cuts on this scale represent a substantial benefit to the consumer. This will benefit shoppers, the processing industries, and many farmers.
• Rural development and the environment: The reforms seek to bring rural development and the environment into the heart of the CAP. A unified strategy should embrace agricultural support, help to rural communities and countryside stewardship. This means new resources and more coordination. Problems like the impact of intensive beef farming are tackled by tripling support for extensive farms. New milk quotas are reserved for young farmers to counter depopulation. Compliance with nationally-set environmental rules will be a condition for support.
• Decentralisation: Member States have been given a new autonomy to influence the application of the CAP within their frontiers. For example, they will have the power to set conditions to the payment of direct aids, such as environmental requirements, limits on intensive farming, or employment levels. When farms fail to meet such conditions and direct aids are not paid, Member States will keep the funds to pay for their own agro-environmental programmes. They will also be given a new role in deciding where direct support in the beef and dairy industry should go.
• Simplification: Over the years, a wide range of different support schemes have been established, each with its own rules and procedures. These can be difficult for farmers and administrators alike. These have been cut back and rationalised, reducing both the time spent on management and the scope for fraud.