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 ?
Dacian Ciolos defended his controversial Common Agricultural Policy (CAP) at this year's Royal Welsh Show
Presented by Patel (history, European Union Institute, Italy), 14 papers use the European Union's Common Agricultural Policy as an empirical window for exploring different approaches to the history of European integration.
Conservationists say the new Common Agricultural Policy for the period 2014-2020 should ensure that public spending is used to promote public goods rather than to be given as a blank cheque.
The last Labour Government agreed above-inflation rises in the EU budget and gave away our "rebate" in 2005, supposedly for changes to the Common Agricultural Policy which did not materialise.
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).
BRITISH families pay nearly pounds 400 a year in higher food prices and taxes because of the EU's common agricultural policy.
Diouf warned that the European Union`s farm subsidy system -- the Common Agricultural Policy (CAP) -- and US farm bills were exacerbating the problem, with the world`s population set to climb to nine billion people in 2050.
The Welsh Assembly Government is encouraging producers to get in touch to find out if they are eligible for a payment through the EU Common Agricultural Policy (CAP).
Fischler Says CAP Must Change to Address Food 'Crisis': Europe's Common Agricultural Policy must be changed to tackle the "world's worst food crisis in decades," former EU Agriculture Commissioner Franz Fischler said this week.
Although one of the more stable policy fields of the European Union, the Common Agricultural Policy (CAP) has encountered disharmony in matters relating to organic farming.
The European Union's Common Agricultural Policy should be scrapped and replaced with a new rural policy for Europe, a House of Commons committee said.
The reform of the EU Common Agricultural Policy has resulted in a more market-orientated and quality-focused agricultural production, with lower surpluses in most sectors.

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