1. CAP origins and Development
The Common Agricultural policy (CAP) is one of the most controversial European Union Policies. When created during the late 1950’s after years of severe food shortages around Europe as a result of World War II, its initial aim was to strengthen and support the European Union farming industry and supply the people of Europe with better food and ensure them with more supplies by encouraging better agricultural productivity. When the Treaty of Rome was signed in 1956 and a common market was established in a hope to lift trade barriers between European countries. This led the way for the creation of five primary objectives for the CAP, which consisted of: 1.
Increasing agricultural productivity
Ensuring a fair standard of living for farmers
Helping stabilise markets
Guaranteeing the availability of supplies
Ensuring fair prices for consumers
These objectives were set out at a conference held during the spring of 1958 in Stresa, Italy. Members and ministers of agriculture from all the participating EU states met to draw up objectives and proposals for the CAP. After the conference, all the members asked the European Commissioner of Agriculture Sicco Mansholt to draw up detailed objectives. To help achieve and maintain these five objectives, three key policies were introduced;
Tariffs on imports
Quotas on imports
When the CAP finally came into effect in 1962, the partnership that had been established linking agriculture and society between Europe and its farmers, were faced with many problems. During the 1980’s farmers were beginning to produce agricultural products that there was no market for. Consequently, the overproduction of agricultural products led to problems where huge surpluses of stock built up. “Colorful terms such as ”Butter Mountains and Wine lakes” were common” (Reinhorn, 2007). Many of these surpluses were offloaded and distributed to third world countries, destroyed or used as feed for farm animals.
In 1992 when the CAP began to fall under huge political and financial strain the current Economic Commissioner for Agriculture and former Tánaiste, Ireland’s Ray MacSharry implemented the first attempt to reform the CAP and introduced the “MacSharry reform”. Trying to reform these problems the MacSharry reform tried to move away from product support through prices and shift its focus to producer support through income support. This replacement of guarantees for prices, to compensation for farmers if prices fell was widely received. The Macsharry reform proposed two key policies; measures such as the compulsory “Set Aside” policy whereby farmers were being paid to not use certain percentages of their land for production of agriculture. “Direct Grants” were also introduced which were one off payments not linked to agricultural production. Helping to bring consumption in line to the same level as production while helping to promote economically friendly farming. These reforms are still continuing to this day with an overly increasing emphasis on the environment, as the CAP continues to be seen as one of the most important European Union policies.
2. Nature of price support system
Dominating the great debate of the CAP is the controversial price support system put in place, mainly because of its expense to the EU. Comprising of:
A Target Price: a price at which it is hoped farmers will be able to obtain on the open market
A Threshold Price: the price to which imports are raised when the world prices are lower than EU prices
A guaranteed of intervention price: a price at which the commission will take surplus product off the market by stepping in and buying it up.
As a result of this Price Support system, surpluses and overproduction unfolded. While helping marginal farmers stay in business, it heavily encouraged more productive farmers to overproduce leading to surpluses. The impact of government...
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