The CAP, the common agricultural policyApril 29, 2018
At the Council of Ministers of the European Union on 20 March 2006, the Minister for Agriculture and Fisheries presented a memorandum on the implementation and future of the reformed CAP. It has been very widely supported by its European partners within the Council of Agriculture Ministers. All also stressed the need to simplify the management of the CAP in order to make it simpler, more transparent and more efficient. The memorandum refers in particular to measures intended both to prevent but also to manage crises such as :
insurance schemes partly covered by public funds;
specific instruments adapted to certain sectors such as fruit and vegetables and wine, or better Community management of safeguard clauses against imports in the event of major market destabilisation;
provisions to mobilize national solidarity mechanisms in a more flexible and responsive manner
History of the CAP
The CAP is one of the first common policies, created to accompany the gradual implementation of the European common market. The Treaty of Rome defines the general objectives of the CAP. Its guiding principles were set at the Stresa Conference in July 1958. The basic mechanisms of the CAP were adopted by the six founding members of the Community in 1960, allowing this policy to enter into force as early as 1962. Since the 1960s, it has significantly increased the level of agricultural production in Europe thanks to the introduction of tools guaranteeing farmers’ incomes, accompanying the rural exodus and the modernisation of farms by increasing yields and productivity, and ensuring Community preference for European production on the common market.
Since its creation and especially since the 1990s, the CAP has undergone a continuous reform process, under the influence of major trends that have profoundly transformed its face: changes in the needs of European agriculture and the expectations of European citizens, the emergence of the precautionary principle, successive enlargements of the European Union, the opening up of agriculture to world markets since the 1994 Marrakech agreements. The introduction of milk quotas in 1984 to control production in this sector thus marked an important turning point. The 1992, 1999 and 2003 reforms have as their common thread the gradual shift of product price support (a system of prices guaranteed by public purchases on the markets) towards “direct aid” to farmers. The 2003 reform adds to this a very broad decoupling of aid from production levels and the strengthening of rural development policies, which currently account for almost 10% of CAP appropriations. The sugar sector was reformed in November 2005 according to the same logic.
Function of the pac
1 – The rules of the CAP are defined in Articles 32 to 38 TEC. Article 33 of the Code sets out the objectives assigned to this policy, which are as follows:
to increase agricultural productivity by developing technical progress, ensuring the rational development of agricultural production and the optimum use of factors of production, in particular labour;
to ensure a fair standard of living for the agricultural population, in particular by increasing the individual income of those working in agriculture;
ensuring security of supply
ensure reasonable prices in deliveries to consumers.
Decisions are taken by the Council of Agriculture Ministers, which acts by a qualified majority on the basis of proposals forwarded to it by the Commission. They are prepared by the Special Committee on Agriculture or “SCA” (market policy issues) or by the Committee of Permanent Representatives of the Member States to the European Union or “COREPER” (food safety issues in particular).
2 – The budget allocated to the CAP has long made it the first of the common policies. This is constantly decreasing. The CAP now represents around 43% of the Community budget (55.1 billion euros), compared to 60% in the 1990s. The share devoted to rural development is constantly increasing, reaching 12.4 billion euros (2007 budget).
of the European Council.
Since 1 January 2007, the European Agricultural Guidance and Guarantee Fund (EAGGF) which financed support for the common market organisations (Guarantee Section) and rural development (Guidance Section) has been replaced by two funds: the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD) (Council Regulation of 21 June 2005).
Like all expenditure items in the Community budget, the appropriations allocated to the CAP are subject to a multiannual framework through the “financial perspective”. In accordance with the conclusions of the Berlin European Council of 24 and 25 March 1999 (“Agenda 2000”), which governed the period 2000-2006, the ceiling for CAP expenditure for the whole period was set at EUR 295 billion. The growing awareness of the need for budgetary discipline has led Europeans to step up their efforts to control the growth of CAP expenditure, the share of which in the Community budget is steadily decreasing, in contrast to expenditure on regional and cohesion policy, the dynamics of which are the opposite. It is in this spirit that the Copenhagen European Council of 10 and 11 December 2002 decided, on the occasion of the enlargement of the Union to 25, to cap CAP market expenditure for the 2007-2013 programming period for the benefit of the 25 Member States at the level of the ceilings foreseen for 2006 (expenditure for the 15 old Member States plus the very beginning of “phasing in”, i.e. the gradual increase in aid for the new Member States).
In 2005, France was the main beneficiary of this policy with a return rate of 23% in 2003, far ahead of Spain (14.5%), Germany (13.1%), Italy (12.1%) and the United Kingdom (8.9%). The French return rate on rural development is 17.6%. The downward trend in return rates is inevitable with enlargement and the ceiling decided in 2002.
3 – The CAP’s mechanisms are based on three principles:
a unified market, involving the free movement of agricultural products and the implementation of common instruments and mechanisms throughout the Union;
Community preference, whereby European products enjoy preference over imported products (customs duties);
financial solidarity, which implies that the expenditure and costs related to the application of the market CAP are charged to the Community budget.
The CAP is mainly based on the following mechanisms:<
common market organisations (CMOs): based on a system of common prices, intervention measures to support prices on the Community market and a system governing trade with third countries (customs duties and export refunds). The most elaborate CMOs (arable crops, milk and milk products, sugar, beef) are based on intervention agencies which, in each Member State, buy in and store surplus quantities in order to ensure market price stability. The external aspect (export refunds) is tending to decline due to the approximation of European prices with world prices and the liberalisation process initiated with multilateral trade negotiations at the WTO. The markets thus organised are governed by Council Regulations, the implementing rules for which are defined by the Commission, which relies on management committees involving the Member States. Public procurement on markets and export subsidies now represent only 20% of the CAP budget (almost 100% in 1992);
direct aids to farmers (80% of the CAP budget): introduced since the 1992 reform, their aim is to compensate for the fall in guaranteed prices. They may take the form of aid per hectare for arable crops or premiums per head of livestock in the livestock sector. According to the 2003 decisions, two thirds of the aid is unrelated to the level of production (“decoupling”);
instruments to control agricultural supply: aimed at avoiding overproduction, they have been introduced since the 1980s and cover various aspects: production quotas (milk, sugar), set-aside and set-aside, reference levels for aid (such as the suckler cow maintenance premium – PMTVA), etc;
a rural development policy: since the reform of Agenda 2000, it has become the real “second pillar” of the CAP. Its objectives bring the CAP closer to consumer expectations (preservation of the environment and rural heritage, improving the competitiveness of rural areas, promoting diversification of activities, combating rural desertification). This rural development policy is based on several types of instruments (cross-compliance of direct payments with environmental standards, granting compensatory allowances for natural handicaps in less-favoured areas, particularly in mountain areas, etc.). It will have increased resources after the reform adopted on 26 June 2003, which provides for financial transfer mechanisms from direct aid appropriations to rural development appropriations (this transfer mechanism is called “modulation” of direct aid);
The 2006 CAP is therefore profoundly different from that of 1984 or even 1991: customs duties have fallen: 80% of the budget goes to direct aid, rather than export subsidies or market purchases; 70% of this aid is unrelated to production levels. The CAP now supports farmers in ways that no longer penalise world trade.
Stakes for the future
The CAP reforms of 1999 and 2003, as well as the financial decisions of 2002 and 2003 and the European Council of 17 December 2005, organise the future of the CAP up to 2013:
implementation of the 2003-2005 reform, which is gradually entering into force (partial decoupling of direct aids) and will be fully implemented in 2008 (dairy sector). Technical adaptation clauses are foreseen in 2007/2008 (implementation of decoupling of aid, level of milk quotas, cross-compliance, advice to farmers) and in no way constitute a general review clause before 2013 ;
293.1 billion for the first pillar (market support and direct aids) and 69.75 billion for the second pillar of the CAP, i.e. rural development, the balance being allocated to fisheries.
WTO negotiations in the Doha Round on the basis of a balanced overall agreement and the room for manoeuvre created by the 1999/2005 reforms (direct aids, export subsidies, market access).
The European Council agreement of 17 December 2005 provides for the Commission to draw up a report in 2008-2009 on the future of the European budget, in particular on the CAP (and the British rebate). The implementation of these proposals will be valid for the period after 2013, unless possible anticipation requires the unanimous agreement of the European Council.