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The Common Agricultural Policy. ( c ) J.A Kigozi, 2012 GSIS. Korea Univ. Presentation outline. History and Principles of CAP Common Market Organizations (CMOs) Financing CAP CAP shocks External Pressure CAP Reforms New emerging issues. History and Principles.

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the common agricultural policy

The Common Agricultural Policy

( c ) J.A Kigozi, 2012

GSIS. Korea Univ

presentation outline
Presentation outline
  • History and Principles of CAP
  • Common Market Organizations (CMOs)
  • Financing CAP
  • CAP shocks
  • External Pressure
  • CAP Reforms
  • New emerging issues

( c ) J.A Kigozi, 2013

history and principles
History and Principles
  • Article 39 of the Rome Treaty laid down objectives of CAP but came into force in 1962
  • The principles were,
    • Market Unity
    • Community preference
    • Financial solidarity
  • Common Market Organizations (CMOs)
  • Reasons? (free trade, erect barriers to the outside world and protect farmers’ revenue)

( c ) J.A Kigozi, 2013

cmo complementary tools
CMO Complementary Tools
  • Guaranteed price
    • Vulnerability to natural disasters and dependence on climatic conditions made public intervention necessary to guarantee descent living conditions for farmers.
    • Prices were not determined by forces of dd and ss but rather fixed centrally
    • What was the effect of such a system?
    • Was it a political compromise??????

( c ) J.A Kigozi, 2013

cmo cont
CMO cont.
  • Public intervention system
    • Was to be adopted if there would be excessive internal supply that would lead to lower prices (Buffer stocks)
    • What is the ultimate truth about this system?
  • Variable levies at the Community’s border
    • Just incase prices fixed within the EC were higher than the imports
    • Produce could only be allowed in the Community only if its price was or above the fixed EC price
    • Trade diversion??

( c ) J.A Kigozi, 2013

financing the cap
Financing the CAP
  • A fund to cover CAP financing was established (EAGGF)
  • Comprised of 2 parts
  • Guarantee; costs involved with market system like export refunds
  • Guidance; for funding structural policies
  • Proportion of the budget on agriculture has decreased especially since 1980s from 65.1% in 1986 to 42.3% in 2004

( c ) J.A Kigozi, 2013

need for cap reforms
Need for CAP Reforms
  • CAP shifted from its initial objectives in 1970s (food mountains, wine lakes)
  • CAP became more costly to operate
  • Deterred development of other priorities hence a major concern for European policy makers and the need for a reform was inevitable

( c ) J.A Kigozi, 2013

cap shocks
CAP Shocks
  • 1970s and 1980s
    • Guaranteed ceilings (for crops in 1981, milk quotas in 1984, MGQs for cereals in 1987-8
    • Guaranteed high prices
  • What was the effect of this?
  • 1990s; Cutting Institutional prices to restore role of market forces

( c ) J.A Kigozi, 2013

external pressure
External Pressure
  • 1986; GATT ‘Uruguay Round’ opened and for the first time, negotiations included agriculture.
  • Main players were USA and the Cairns group (14 major agricultural exporters) and were on the offensive
  • To U.S, CAP was a system which allowed European farmers to eschew competition with rest of the world, thereby creating trade distortions for producers in the non EU countries
    • They took a decision not to negotiate on other aspects of the Round until the agricultural issue was resolved

( c ) J.A Kigozi, 2013

cap reforms
CAP Reforms
  • Commission delivered its radical CAP reform proposal to the Agricultural Council in Feb 1991
  • Issues:
    • Partly replace system of price support with system of direct support to farmers or individual direct payments
    • Sliding scale of competition (size of farm)
  • Agreed by the Council in May 1992
  • Not so much a hustle for German e.g. had important interests in non-agricultural part of the negotiations

( c ) J.A Kigozi, 2013

buying time
Buying time?
  • Although political decision to reform the CAP was taken by the Heads of States, negotiations on precisely how the reform would be implemented took place in the Agricultural Council over a period of 18 months
  • Further CAP reform in 1999

( c ) J.A Kigozi, 2013

food for thought
Food for thought!
  • In your opinion, which is the best way to reform CAP?
  • My opinion: Discard CAP completely
  • Why?
  • \'The way to build lasting economic growth [in Africa] is for Europe to end the CAP.\' Sir Digby Jones, former Chairman, CBI

( c ) J.A Kigozi, 2013

new emerging issues
New emerging Issues
  • Since 2000, there is the Rural Development Policy, also known as the "second pillar" of the CAP.
  • The 2003 CAP reform involved a major strengthening of rural development policy by reducing direct payments for bigger farms and transferring the funds into rural development measures (modulation).
  • European strategic guidelines for rural development were set out

in February 2006.

  • Rural Development policy was strengthened to help rural areas respond to economic, social and environmental issues of the 21st century.
  • Rural Development policy for the period 2007-2013 will be based on 3 themes or axis ,11% of the total EU budget is today allocated among these three main areas,

( c ) J.A Kigozi, 2013

slide14

Experience of the Leader Community Initiative, aims at implementing local

strategies for rural development through local public-private partnerships.

( c ) J.A Kigozi, 2013

first axis
First axis
  • Focuses on improving the competitiveness of the farm and forestry sector through;
    • support for restructuring,
    • Development and innovation.

( c ) J.A Kigozi, 2013

second axis
Second Axis
  • Concerns the improvement of the environment and the countryside through;
    • Support for land management
    • Helping to fight climate change.

Such projects could for example concern preserving water quality, sustainable land management, planting trees to prevent erosion and floods.

( c ) J.A Kigozi, 2013

third axis
Third Axis
  • Concerns improving the quality of life in rural areas and encouraging diversification of economic activity.
  • The policy also provides support to the Leader rural development methodology, under which Local Action Groups design and carry out local development strategies for their area.
  • Member States distribute "second pillar" funds through Rural Development Programme actions.

( c ) J.A Kigozi, 2013

cap arguments
CAP Arguments
  • The EU must look after its farmers because they help protect the countryside. (?)
  • The free market is unstable. Without intervention prices would fluctuate and farmers would not be able to respond to consumer demand. (?)

( c ) J.A Kigozi, 2013

against
Against
  • Resources are best allocated through a free market: CAP makes food more expensive in the EU than it need be.
  • The CAP increases poverty in poor countries by competing unfairly with local farmers. (Dumping)
  • The CAP demands far too high a budgetary contribution to support only a small minority of EU businesses.
  • Processing farmers\' CAP payments is expensive (in 2009, the average cost of processing an SFP claim in the UK was £742, even for payouts as small as £5).

( c ) J.A Kigozi, 2013

conclusion
Conclusion
  • CAP is one of the most controversial European Union policies. It initially sought to increase agricultural productivity in the EU and secure availability of food supplies during the Cold War.
  • Its aims have now changed to protecting agriculture throughout the EU by controlling prices and levels of production and by subsidizing the rural lifestyle in order to safeguard the countryside.
  • Several attempts have been made to reform the CAP. However, there has been only limited success in reducing its cost. It has been a cause of controversy not only because of its huge cost as a proportion of the EU budget, but also because it is seen as an unfair way of protecting European agriculture from overseas competition when farming contributes relatively little to EU GDP.

( c ) J.A Kigozi, 2013

eu should discard cap for a better tomorrow
EU should discard CAP for a better Tomorrow

Thank you for agreeing with me.

( c ) J.A Kigozi, 2013

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