monetary compensatory amounts

monetary compensatory amounts (MCAs) or green money

the system used by the COMMON AGRICULTURAL POLICY of the EUROPEAN UNION to convert the common prices agreed for farm products into the national currencies of member countries outside the eurozone and to realign prices when the EXCHANGE RATES of those currencies change.

The Council of Ministers meets annually and fixes common prices for individual farm products, such as milk, beef, etc., for the coming year. These prices are converted into national currency values on the basis of prevailing exchange rates. Should, however, a member alter its exchange rate then the ‘common link’ is broken and its farm prices will either be more, or less, expensive than the other members’, depending upon whether its exchange rate has fallen or increased. To counter this, border taxes and subsidies on food IMPORTS and EXPORTS (monetary compensatory amounts) are deployed. For example, if the exchange rate rises (see APPRECIATION 1), the general effect is to cheapen food imports and make food exports more expensive. To ‘compensate’ for this movement, that is, to ensure ‘green money’ values and domestic farm incomes remain stable, then food imports are taxed and food exports are subsidized. In contrast, if the exchange rate falls (see DEPRECIATION 1), the general effect is to cheapen food exports and make food imports more expensive. To stabilize the situation, food imports are subsidized and food exports are taxed.

References in periodicals archive ?
EU officials with long memories recall the complicated system of monetary compensatory amounts which were used for agricultural payments in national currencies before arrival of the euro.
Before the Single Market, the effects of movements between EC member states' exchange rates were largely cancelled out by monetary compensatory amounts (MCAs), which were imposed as taxes on food shipments from weak-currency suppliers to strong-currency markets and as subsidies where trade flows were in the opposite direction.
But Member States' exchange rates have fluctuated much less under the EMS, reducing the importance of green rate adjustments and farm prices have varied much less from country to country since the old Monetary Compensatory Amounts went out when the Single Market came in.