the common agricultural policy n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
The Common Agricultural Policy PowerPoint Presentation
Download Presentation
The Common Agricultural Policy

Loading in 2 Seconds...

play fullscreen
1 / 25

The Common Agricultural Policy - PowerPoint PPT Presentation


  • 138 Views
  • Uploaded on

The Common Agricultural Policy. Impact on International Trade 29th November 2009 European Economic Integration, Institute of economic studies. Outline. What is Common Agriculture Policy? Establishment Pressures to reform CAP CAP reforms over time IT consequences Africa & CAP.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'The Common Agricultural Policy' - townsend


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
the common agricultural policy

The Common Agricultural Policy

Impact on International Trade

29th November 2009

European Economic Integration, Institute of economic studies

outline
Outline
  • What is Common Agriculture Policy?
  • Establishment
  • Pressures to reform CAP
  • CAP reforms over time
  • IT consequences
  • Africa & CAP
what is common agriculture policy
What is Common Agriculture Policy?
  • System of European Union agricultural subsidies and programs
  • 42 % of the EU's budget and still decreasing
  • Practices:
    • Trade controls
    • Price-support measures
    • Income transfers
    • Production subsidies
    • Health regulations
eu budget
EU budget

Source: EU budget 2009; Sustainable developmentand innovation at the core of the EU budget

establishment
establishment
  • after World War II - part of the Treaty of Rome

(signed in 1957, came into force in 1958)

  • 1962: went into effect – 4 BASIC PRINCIPLES:
    • A unified market for the free movement of agricultural products in the European Union
    • Financial solidarity
    • Community preference
    • Parity and productivity
pressures to reform cap
Pressures to reform cap
  • Budgetary pressures
  • Pressures from consumers
  • External pressures
  • Environmental pressures
cap reforms over time
CAP reforms over time
  • Introduction of milk quotas in 1984
  • Mac Sharry reform in 1992
  • The Agenda “2000”
  • The 2003 reform
  • CAP “Health Check” 2008
situation before the milk quotas
EU was exporter of diary products

Subsidization of diary farmers (per produced output) motivated farmers to produce more.

Overproduction led to export subsidies and consequently to dumping.

Results:

Producer surplus= a+b+c

Consumer surplus= -(a+b)

Gov. Revenue = -(b+c+d+f+g+h)

+ High storage costs (not depicted)

Situation before the milk quotas

Export subsidy case

introduction of milk quotas in 1984
Introduction of milk quotas in 1984
  • Total guaranteed quantity: the quota of each country
  • The references quantities: the producers’ and/or purchasers’quotas
  • The milk tax: Taxes if producers exceed their reference quota - (superlevy)
impact on international trade
Impact on international trade
  • End of overproduction of diary products
    • Reduction of the production from 103.7 million tons in 1984 to 96 million tons in 1992
  • Thus decrease in EU diary export as result of abolishment of large production subsidies (=export subsidies)
  • Side-effect – higher import of cows for beef (especially from Brazil)
  • Decrease in storage costs
mac sharry reform in 1992
Mac Sharry reform in 1992
  • Pressures from other agricultural exporting countries
  • From price support to income support
  • The beginning of direct payments
    • compensation for the decrease of the price support
  • New subsidies to farmers for good environmentalpractices
    • „Set-aside land“
impact on international trade1
Impact on international trade
  • Lower export subsidies
  • Higher direct payments
impact on international trade2
Impact on international trade
  • EU prices closer to world prices
  • International agricultural trade liberalization
  • Fall in cereal prices by 50%
  • Fall in income of African countries, which were making profits on selling goods to Europe (under Lomé convention)
  • An increase in the export price competitiveness of basic EU food and agricultural exportsfor African countries
further reforms
Further reforms
  • The Agenda 2000
    • “multi-functionality” of farming activities
  • The reform in 2003
    • A reduction in direct payments for bigger farms to finance the new rural development policy
  • CAP “Health Check“ 2008
    • Increase of milk quotas, ...
cap vs africa case
„CAP vs. Africa“ case
  • African exporters seem to be sensitive to EU reforms
  • Pros and cons of CAP reforms (from African point of view)
  • Future prospects
pros and cons
Pros and Cons

+

2001: free access to the market granted to the least developed countries under „Everything Buts Arms“ initiative.

Problem? – sugar,rice and bananas excluded

After MacSharry reform, EU price reductions drove some African exporters out of the EU market

Undermining of African markets by price-competitive EU goods (wheat) – „markets of last resort“

EU policy emphasis shift – „from quantity to quality“

  • Large food surpluses exported to Africa as a food aid (before MacSharry)
  • Certain African (sugar) exporters profited from Lomé convention (€500 mil. in 99/2000)
situation when africa rejects to trade with eu
Situation when Africa rejects to trade with EU

Africa

higher value food

Qh

PPF

Ql

lower value food

trading situation ricardian model
Trading situationRicardian model

Africa

EU

QH

QH

PFT

TT

TT

PA = CA

PA = CA

higher value food

higher value food

IFT

CFT

PPF

CFT

IFT

PPF

IA

IA

PFT

Ql

QH

lower value food

lower value food

Africa has comparative advantage in producing lower value food

future prospect
Future prospect
  • African exporters:
    • lower value food and agricultural products distributors
  • European exporters:
    • higher value food and agricultural products
conclusion
Conclusion
  • Trend in reforms of CAP – lower direct payments
  • Decoupling:
    • ↑ economic prosperity
    • ↓ negative impacts on the environment
  • From import levy to direct subsidies – before and after Mac Sharry reform
  • Africa has to trade with lower value food
slide24

Thank you

for your attention

Petra Andrlíková

Radovan Parrák

references
references
  • Institure for Agriculture and Trade Policy: The Common Agricultural Policy: A Brief Introduction, Prepared for the Global Dialogue Meeting (May 14 and 15, 2007, Washington, D.C.)
  • European Economic Policies:CommonAgricultural Policy; Laurent Weill: Université de Strasbourg, Charles University - Prague , April 2009
  • Policy Notes 2009/7: The Impact of Common Agricultural Policy (CAP): Reformon Africa-EU Trade in Food and Agricultural Products
  • http://ec.europa.eu/budget/index_en.htm