Common Agricultural Policy


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Common Agricultural Policy

the EUROPEAN UNION's programme for the subsidization and protection of the farm sector.

Common Agricultural Policy (CAP)

the policy of the EUROPEAN UNION (EU) for assisting the farm sector. The main aims of the CAP are fair living standards for farmers and an improvement in agricultural efficiency (see AGRICULTURAL POLICY).

The CAP is administered by the European Agricultural Guidance and Guarantee Fund, with major policy and operational decisions (e.g. the fixing of annual farm prices) residing in the hands of the Council of Ministers of the EU. The farm sector is assisted in four main ways:

  1. around 70–75% of EU farm produce benefits directly from the operation of a PRICE-SUPPORT system that maintains EU farm prices at levels in excess of world market prices. The prices of milk, cereals, butter, sugar, pork, beef, veal, certain fruits and vegetables and table wine are fixed annually and, once determined, are then maintained at this level by support-buying of output that is not bought in the market. MONETARY COMPENSATION AMOUNTS are used to convert the common price for each product into national currencies and to realign prices when the exchange rates of members’ currencies change;
  2. variable TARIFF rates are used to increase import prices to internal price-support levels in the cases of the products referred to above, thus ensuring that EU output is fully competitive. The 25% of EU farm produce that is not subject to direct price-support relies entirely on tariff protection to maintain high domestic prices;
  3. EXPORT SUBSIDIES are used to enable EU farmers to lower their export prices and thus compete successfully in world markets;
  4. grants are given to facilitate farm modernization and improvements as a means of improving agricultural efficiency

The CAP is the largest single component of the EU's total budget. In 2003 it accounted for 45% of total EU spending. Over 90% of the CAP's budget in recent years has been spent on price-support and export subsidies. Although the CAP can claim a number of successes, most notably the attainment of EU self-sufficiency in many food products, critics complain it has many drawbacks: consumers lose out because they are required to pay unnecessarily high prices for food products; resources are misallocated because inefficient, high-cost farmers are overprotected, and too little of the CAP's resources are devoted to long-term structural reform and modernization of the sector; artificially high prices supported by intervention buying encourage gross overproduction and results in large surpluses (‘mountains’) of produce that are expensive to stockpile and difficult to sell off; subsidized exports from the EU can depress world farm prices, making life even more difficult for the less developed countries, many of which (specifically non-LOMÉ AGREEMENT countries) had already been hard hit by the trade diversionary effects of the EU (see TRADE DIVERSION).

However, the CAP has become less protectionist as a result of the ‘Uruguay Round’ of trade concessions (see WORLD TRADE ORGANIZATION). The EU committed itself (over a six-year period starting in 1995) to reduce its import levies by 36%, reduce its domestic subsidies by 20%, and reduce its export subsidies by 36%. Further reductions are currently being negotiated as part of the ‘Doha Round’. See INCOME SUPPORT.

References in periodicals archive ?
The bases of the Common Agricultural Policy (CAP) were set in 1957, within the Treaty of Rome, article 2, paragraph b.
Reading a statemnt on behalf of Farmers Association, Laurent Pintel said that EU's Common Agricultural Policy is threatening farming in France.
"The government wants to support more rural communities through Common Agricultural Policy funding, and I'm keen to hear the thoughts of northern farmers, businesses and local communities on this in Hexham today."
The Council's Special Committee on Agriculture (SCA) rubber-stamped, on 7 October, the amended Common Agricultural Policy (CAP) reform text, bringing its ratification process a step closer to conclusion.
One of the most important elements of European integration since the 1950s has been the Common Agricultural Policy (CAP), and earlier the European Commission called for a broad debate on its future goals and policy options after 2013.
At least 30% of the EU funds earmarked for agriculture will go to "green" measures, according to a decision of the Agriculture and Rural Development Committee of the European Parliament, which votes Monday on a Common Agricultural Policy (CAP) reform package.
If you add the net contribution for 2010 to the indirect costs such as the Common Agricultural Policy, Common Fisheries Policy and EU Regulation you get the grand total of pounds 77bn per annum - which equates to pounds 146,499 per minute!
According to him, this is regional coordination of the countries in the agricultural politics in context to the directions on the EU common agricultural policy.
NFU president Peter Kendall will talk to farmers from across the West Midlands about proposals to reform the Common Agricultural Policy at the Stoneleigh event next week.
THE NEW European Union (EU) agriculture Commissioner who took office on Wednesday (Feb 10) has asked the food industry for views on reforming the EU's Common Agricultural Policy (CAP).
16 December 2009 -- The National Union of Farmers (NFU) is to launch a survey of its members to gauge their thoughts on the future of the Common Agricultural Policy (CAP), it has been announced.
"From the common agricultural policy to climate change and the environment it is crucial that Welsh citizens understand the role of the European Union in our rural communities via impartial and factual information."

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