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Common Agricultural Policy

Common agricultural policy (CAP) and the Treaties of the European Union

Description of Common agricultural policy (CAP) provided by the European Union Commission: The common agricultural policy is a matter reserved exclusively for the Community. Under Article 33 of the Treaty establishing the European Community, its aims are to ensure reasonable prices for Europe’s consumers and fair incomes for farmers, in particular by establishing common organisations for agricultural markets and by applying the principles of single prices, financial solidarity and Community preference. The CAP is one of the most important Union policies (agricultural expenditure accounts for some 45% of the Community budget). Policy is decided by qualified majority vote in the Council after consultation of the European Parliament. At the outset the CAP enabled the Community to become self-sufficient in a very short time. However, it came to be increasingly costly on account of excessively high European prices in relation to world market prices, and over-production. The 1992 reform made it possible to remedy this situation by cutting guaranteed farm prices, with compensatory premiums for inputs, and by introducing a series of “flanking measures”. The 1999 reform, based on Agenda 2000, reinforces the changes made in 1992 and puts the emphasis on food safety, environmental objectives and sustainable agriculture. Objectives falling outside the scope of market policy have been grouped together under rural development, which has become the second pillar of the CAP. This reform also endeavours to increase the competitiveness of Community agricultural products, streamline agricultural legislation and its application, strengthen the Union’s position at the World Trade Organisation (WTO) negotiations and stabilise expenditure. To this end a reduction in intervention prices, off-set by an increase in aid to farmers, has been introduced. The June 2003 reform, which represents a genuine challenge, comprises the following:

• simplification of market support measures and direct aid by decoupling direct payments to farmers (the aid which they receive is not tied to production);

• reinforcing rural development by transferring market support funds to rural development through modulation (reductions in direct payments to large farms);

• a financial discipline mechanism (ceiling placed on market support expenditure and direct aid between 2007 and 2013).

In 2004, a second series of measures was launched: reform of aid to Mediterranean products (tobacco, hops, cotton and olive oil), followed by a proposal for the reform of the common organisation on the market in sugar.

More about Common agricultural policy (CAP) and the Treaties of the European Union

The CAP is one of the most important Union policies (agricultural expenditure accounts for some 45% of the Community budget). Policy is decided by qualified majority vote in the Council after consultation of the European Parliament. At the outset the CAP enabled the Community to become self-sufficient in a very short time. However, it came to be increasingly costly on account of excessively high European prices in relation to world market prices, and over-production. The 1992 reform made it possible to remedy this situation by cutting guaranteed farm prices, with compensatory premiums for inputs, and by introducing a series of “flanking measures”. The 1999 reform, based on Agenda 2000, reinforces the changes made in 1992 and puts the emphasis on food safety, environmental objectives and sustainable agriculture. Objectives falling outside the scope of market policy have been grouped together under rural development, which has become the second pillar of the CAP. This reform also endeavours to increase the competitiveness of Community agricultural products, streamline agricultural legislation and its application, strengthen the Union’s position at the World Trade Organisation (WTO) negotiations and stabilise expenditure. To this end a reduction in intervention prices, off-set by an increase in aid to farmers, has been introduced. The June 2003 reform, which represents a genuine challenge, comprises the following:

Common Agricultural Policy and Structural funds and the European Union

Common Agricultural Policy and the European Union

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See Also

  • FEOGA
  • CAP

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  • European Agricultural Guidance and Guarantee Fund (EAGGF or FEOGA)

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Common agricultural policy (CAP) and the Treaties of the European Union

Description of Common agricultural policy (CAP) provided by the European Union Commission: The common agricultural policy is a matter reserved exclusively for the Community. Under Article 33 of the Treaty establishing the European Community, its aims are to ensure reasonable prices for Europe’s consumers and fair incomes for farmers, in particular by establishing common organisations for agricultural markets and by applying the principles of single prices, financial solidarity and Community preference. The CAP is one of the most important Union policies (agricultural expenditure accounts for some 45% of the Community budget). Policy is decided by qualified majority vote in the Council after consultation of the European Parliament. At the outset the CAP enabled the Community to become self-sufficient in a very short time. However, it came to be increasingly costly on account of excessively high European prices in relation to world market prices, and over-production. The 1992 reform made it possible to remedy this situation by cutting guaranteed farm prices, with compensatory premiums for inputs, and by introducing a series of “flanking measures”. The 1999 reform, based on Agenda 2000, reinforces the changes made in 1992 and puts the emphasis on food safety, environmental objectives and sustainable agriculture. Objectives falling outside the scope of market policy have been grouped together under rural development, which has become the second pillar of the CAP. This reform also endeavours to increase the competitiveness of Community agricultural products, streamline agricultural legislation and its application, strengthen the Union’s position at the World Trade Organisation (WTO) negotiations and stabilise expenditure. To this end a reduction in intervention prices, off-set by an increase in aid to farmers, has been introduced. The June 2003 reform, which represents a genuine challenge, comprises the following:

• simplification of market support measures and direct aid by decoupling direct payments to farmers (the aid which they receive is not tied to production);

• reinforcing rural development by transferring market support funds to rural development through modulation (reductions in direct payments to large farms);

• a financial discipline mechanism (ceiling placed on market support expenditure and direct aid between 2007 and 2013).

In 2004, a second series of measures was launched: reform of aid to Mediterranean products (tobacco, hops, cotton and olive oil), followed by a proposal for the reform of the common organisation on the market in sugar.

More about Common agricultural policy (CAP) and the Treaties of the European Union

The CAP is one of the most important Union policies (agricultural expenditure accounts for some 45% of the Community budget). Policy is decided by qualified majority vote in the Council after consultation of the European Parliament. At the outset the CAP enabled the Community to become self-sufficient in a very short time. However, it came to be increasingly costly on account of excessively high European prices in relation to world market prices, and over-production. The 1992 reform made it possible to remedy this situation by cutting guaranteed farm prices, with compensatory premiums for inputs, and by introducing a series of “flanking measures”. The 1999 reform, based on Agenda 2000, reinforces the changes made in 1992 and puts the emphasis on food safety, environmental objectives and sustainable agriculture. Objectives falling outside the scope of market policy have been grouped together under rural development, which has become the second pillar of the CAP. This reform also endeavours to increase the competitiveness of Community agricultural products, streamline agricultural legislation and its application, strengthen the Union’s position at the World Trade Organisation (WTO) negotiations and stabilise expenditure. To this end a reduction in intervention prices, off-set by an increase in aid to farmers, has been introduced. The June 2003 reform, which represents a genuine challenge, comprises the following:

Resources

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Popular Treaties Topics

  • Treaties of the United Nations (UN)
  • Types of Treaties
  • International Treaties
  • Famous Treaties
  • Law of Treaties
  • Numbered Treaties

Common Agricultural Policy (CAP) and the GATT Policy Negotiations

In relation to the GATT Policy Negotiations, Christopher Mark (1993) provided the following explanation and/or definition of Common Agricultural Policy (CAP): The system of production targets and marketing mechanisms maintained by the European Community to manage farm trade within the EC and with the rest of the world. Article 39 of the Treaty of Rome established the CAP as a mechanism merging the individual member states’ agricultural policies into a unified program to promote regional agricultural development, fair and rising standards of living for the farm population, stable agricultural markets, increased agricultural productivity, and methods of dealing with security of food supply. The main categories of CAP market-management and support mechanisms are:

* Support Prices covering most grains, sugar, milk, beef, veal, pork, certain fruits and vegetables, table wine, and fishery products.

* External Protection without price supports, applying to eggs, poultry , certain fruits and vegetables, flowers, and wine other than table wine.

* Deficiency Payments or supplementary product aid to producers, covering olive oil, some oilseeds, tobacco, sheepmeat, tomatoes, and raisins.

* Flat-Rate Aid based on acreage or output, covering durum wheat, cotton seed, flax seed, hempseed, hops, and dehydrated fodder.

The CAP was designed as a policy that relied extensively on trade measures to maintain and stabilize internal prices. Thus, two of the most prominent features of the CAP in terms of its effects on international trade are the variable levy, and export subsidies to promote exports of farm products that cannot be sold within the EC at target prices. The CAP mechanisms for managing the domestic market and regulating imports are based on a variety of price concepts, the main types of which are:

* Target Price. An optimum wholesale price established with reference to the income requirements of EC farmers and consumer interests as well as to world market prices. The products concerned are grain, sugar, milk, olive oil, rapeseed, and sunflower seed. When the commodity price falls below the target price, the EC intervenes to purchase supplies and raise prices. To encourage distribution, the target price for a commodity in an area experiencing shortages may be reduced by the cost of transport from areas within the EC where excess supplies exist.

* Guide Price. Corresponds to the target price, but applies to beef, veal, and wine.

* Base Price or Basic Price. Corresponds to the target price, but applies to pork.

* Norm Price. Corresponds to the target price, but applies to tobacco.

* Threshold Price. A minimum import price for grain, sugar, milk products, and olive oil, calculated so that the imported product (after payment of transport costs) cannot be sold at less than the target price; the difference between the world price and the threshold price is covered by a variable levy. The threshold price for grain is computed by subtracting from the target price the costs of inland transportation from the nearest ocean port to the EC market center showing the greatest shortage of the commodity.

* Gate Price (also known as a “Sluice-Gate Price” or “Lock-Gate Price”). A minimum import price established for pork, poultry, and eggs. The gate price is derived by computing the cost of feed –adjusted quarterly in relation to world market prices — and other factors constructed to represent producer costs in the non-EC country with the highest technical efficiency. When the price of an imported product falls below the gate price, a supplementary levy is imposed to neutralize the presumed price advantage of the foreign producer.

* Reference Price. A minimum import price established for fruit and vegetables, wine, and certain fishery products. The reference price is established in relation to EC producer prices in a way similar to the gate price, but modified to reflect the special characteristics of the relevant commodity markets. A countervailing charge (not to be confused with a countervailing duty) may be levied in addition to the normal customs duty to cover the difference between the entry price of an imported product and the reference price.

* Intervention Price. The price at which EC intervention agencies are obliged to purchase commodities offered on the market. The products concerned are grain, sugar, butter, powdered milk, certain cheeses, olive oil, rapeseed, beef, veal, pork, and tobacco.

The CAP came into effect in 1961; at that time, the original EC member states were large net importers of most agricultural products. While variable levies under the CAP isolated EC producers and consumers from world market forces, it was not seriously disruptive to world trade for products in which the EC was a net importer. Since the 1970s, however, a combination of CAP price incentives and technological advances led to increased agricultural investment and domestic production increases at a time when European demand for farm products was stagnant or falling. The EC consequently went from a net importer to a major net exporter of grains, sugar, meat, and poultry, leading to escalating trade frictions with other countries. At the same time, the CAP has been beset with problems arising from monetary fluctuations, costly subsidies, overproduction, and high price support levels.

Hierarchical Display of Common agricultural policy

Agriculture, Forestry And Fisheries > Agricultural policy
Finance > Prices > Farm prices
European Union > European construction > Deepening of the European Union > EU activity > EU policy
Agriculture, Forestry And Fisheries > Agricultural policy > Agricultural policy > Regional farm policy
Economics > Regions and regional policy > Regional policy > EU regional policy
Agriculture, Forestry And Fisheries > Agricultural structures and production > Agricultural production policy
Trade > Tariff policy > Common tariff policy > Countervailing charge
Agriculture, Forestry And Fisheries > Agricultural structures and production > Policy on agricultural structures
Economics > Economic policy > Economic policy > Intervention policy > Support policy
Trade > Trade policy > Trade policy > Market stabilisation
Agriculture, Forestry And Fisheries > Agricultural policy > Agricultural policy > Agricultural situation
European Union > EU finance > EU financing > EU financial instrument > Fund (EU) > EAGGF
Agriculture, Forestry And Fisheries > Agricultural policy > Agricultural policy > Agricultural market > EU agricultural market
Trade > Trade policy > Common commercial policy > Community preference
Trade > Consumption > Goods and services > Public goods

Common agricultural policy

Concept of Common agricultural policy

See the dictionary definition of Common agricultural policy.

Characteristics of Common agricultural policy

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Translation of Common agricultural policy

Thesaurus of Common agricultural policy

Agriculture, Forestry And Fisheries > Agricultural policy > Common agricultural policy
Finance > Prices > Farm prices > Common agricultural policy
European Union > European construction > Deepening of the European Union > EU activity > EU policy > Common agricultural policy
Agriculture, Forestry And Fisheries > Agricultural policy > Agricultural policy > Regional farm policy > Common agricultural policy
Economics > Regions and regional policy > Regional policy > EU regional policy > Common agricultural policy
Agriculture, Forestry And Fisheries > Agricultural structures and production > Agricultural production policy > Common agricultural policy
Trade > Tariff policy > Common tariff policy > Countervailing charge > Common agricultural policy
Agriculture, Forestry And Fisheries > Agricultural structures and production > Policy on agricultural structures > Common agricultural policy
Economics > Economic policy > Economic policy > Intervention policy > Support policy > Common agricultural policy
Trade > Trade policy > Trade policy > Market stabilisation > Common agricultural policy
Agriculture, Forestry And Fisheries > Agricultural policy > Agricultural policy > Agricultural situation > Common agricultural policy
European Union > EU finance > EU financing > EU financial instrument > Fund (EU) > EAGGF > Common agricultural policy
Agriculture, Forestry And Fisheries > Agricultural policy > Agricultural policy > Agricultural market > EU agricultural market > Common agricultural policy
Trade > Trade policy > Common commercial policy > Community preference > Common agricultural policy
Trade > Consumption > Goods and services > Public goods > Common agricultural policy

See also

  • CAP
  • Common agricultural market
  • Green Europe

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