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 ?
In fact, we are preparing for the common agriculture policy of the EU after 2013," said Ljubica Nuri from the Economic Chamber of Macedonia.
The bulk of the volume consists of examinations of the EU's Common Agriculture Policy as a catalyst for trade conflict, the agricultural trade negotiations in the WTO Doha round, the banana trade dispute and the effects of EU market liberalization, the political economy of the steel dispute, the EU's complaints over the US tax regime's treatment of foreign sales corporations, controversies over beef hormones and genetically modified products, and process and production method issues.
The EU's Common Agriculture Policy (CAP) has taken control of nearly all agriculture and has nearly destroyed British agriculture.
50 a week extra for food because of the discredited Common Agriculture Policy.
The European Union reformed its Common Agriculture Policy, a 45-year-old subsidy system that props up inefficient Euro bloc farmers, keeping food two times more expensive at home and occasionally hooding foreign markets with overproduction, driving down world prices.
Director General of the World Trade Organization (WTO) Supachai Panitchpakdi suggested Tuesday that reform of the European Union (EU) Common Agriculture Policy, expected to be later this month, could help move forward WTO negotiations on farm trade liberalization.
Food security measures adopted by other countries, such as Europe's Common Agriculture Policy, or farm subsidies in the US and Japan must be employed by Africa - and if the IMF raises objections, they must be rebutted vigorously by the continent as a whole.
Fischler also said that recently announced new proposals by the European Commission, the executive arm of the 15-member European Union, to streamline the Common Agriculture Policy (CAP) provide ''more negotiating capital'' for Europeans in the WTO negotiations.
Europe's Common Agriculture Policy (CAP) has been a disaster, bringing farming to the brink of financial collapse, encouraging massive fraud, and perhaps even contributing to outbreaks of Mad Cow Disease and Foot and Mouth Disease, according to Neil Parish, a member of the European Parliament from Southwest England.
The farming community, a mainstay of the economy, has prospered through the Common Agriculture Policy.
An informal meeting between EU agriculture ministers on 8 April could be a starting point for more discussion about the reform of the Common Agriculture Policy (CAP), according to the Swedish Agriculture Minister Margareta Winberg.
But it seems crazy that, under the Common Agriculture Policy, farmers can be paid for allowing land to be set aside and not used, yet cannot qualify for subsidies to produce organic foods.