Origins of CAP

Born in post World War ll reconstruction. The 1957 Treaty of Rome article 39 stated CAP should:

- "increase production by promoting technical progress..
- "ensure a fair standard of living for the agricultural community..
- "stabilise markets...
- "assure availability of supplies...
- "ensure that supplies reach consumers at reasonable prices..."

Stresa Conference

In July 1958, participants at the Stresa Conference in Italy agreed three objectives for CAP:

- "to increase farm incomes...by a price support policy..
- "to contribute to overall growth by allowing specialisation within the Community and eliminating market distortions"
- "preserving family farming and ensuring that structural and price policies go hand in hand."

How CAP works

The six main mechanisms are:

- Price support: guarantees minimum prices set by agricultural ministers
- Import taxes: to ensure external prices cannot undercut internal EU prices
- Intervention: support by selling or storing surpluses
- Stock disposal: to dispose of surpluses by other means e.g. Free Food Scheme
- Subsidised exports (that results in the "dumping" of surplus produce causing a destabilising of prices in third countries)
- Production control: quotas (e.g. on milk) and "set aside" (refers to land)

CAP has always been changing

- Reaction to severe shortages and instability
- Cold War era: need to ensure food security
- Mansholt reforms (former Agriculture Commissioner) during 1960s
- Enlargement: from six to 15 member states (and to 25 by 2010)
- MacSharry reforms 1992 (former Agriculture Commissioner)
- GATT 1994 commitments (EU versus USA and the Cairns Group), now World Trade Organisation (WTO)
- Agenda 2000
- WTO process: the current round, based on agreement in Uruguay in 1998, will not be finished before 2005. In Seattle, no agreement was achieved. In Doha, proposals were put forward for reductions in EU subsidies on foods but were watered down at the last moment.

Internal tensions and conflicts

Some question whether CAP has failed to meet some of its objectives:

- Cost: CAP is almost 50% of total EU budget
- Employment has collapsed. Between 1970 and 1990, the number of farmers in Europe halved. The average farmer is now aged about 55 years.
- Questioning of whether the CAP is meeting is objective of "reasonable prices": UK National Consumer Council (NCC) estimated that CAP costs an extra £20 per week (30 Euros) for family of 2+2 (1996); Netherlands study suggests an additional 242 Euros per year.
- Environmental impact
- Public health costs
- Social (in)justice

Public health costs include

- Impact on the poor: Fruit and vegetable prices kept high (dumping) (Swedish NIPH 1996). 1.5 billion Euros spent on "withdrawals" in 1994. Destruction of > 1 million tonnes of fruit and vegetables.
- Externalised costs: Coronary heart disease (CHD), cancers, diabetes and so on. However, it is very hard to calculate these costs and the implications of CAP are complex. For example, by raising the cost of dairy fats, CAP might actually be good for health. Currently there are more generous subsidies for schools for full fat milk than for low-fat milk. Butter production is subsidised and butter that is not bought by consumers is sold at a further subsidised price to the food industry and used to produce items such as pastries, cakes, biscuits etc.
- Tobacco: subsidises rose from 309 million Ecus (1980) to 1 billion Ecus (1996); dumping of unwanted high tar tobacco.

This guide was developed with the help of materials provided by Tim Lang, Professor of Food Policy at Thames Valley University, UK, with additional material from Liselotte Schäfer Elinder, Research Department, National Institute of Public Health, Sweden.

Fischler’s Mid-term review proposals (published 10 July 2002)

- Farmers will no longer receive subsidies directly linked to beef or grain production. Instead, flat payments will be related to environmental, animal welfare and food quality standards ("cross compliance")

- Subsidies to big farms will be cut. Currently, 20% of farms receive 80% of the payments. The proposal is that large farms will first have their support capped and then the subsidies will be reduced in five stages by a total of 20%

- Savings from cuts in subsidies will be redirected into Rural Development with some diverted to the accession countries after EU enlargement.

Last modified on July 4 2006.