United States Mission to the European Union
Foreign Agricultural Service
United States Department Of Agriculture
Last modified: January 28, 2014

CAP Reform

THE COMMON AGRICULTURAL POLICY (CAP)

 

The Common Agricultural Policy (CAP) was proposed by the European Commission in 1960, three years after the signing of the Treaty of Rome, and adopted by the Council in 1962. The objectives of the CAP, set out in Article 39 of the Treaty of Rome, were:

 

  • To increase agricultural productivity by promoting technical progress and ensuring the optimum use of the factors of production, in particular labor;
  • To ensure a “fair standard of living” for farmers;
  • To stabilize markets;
  • To assure availability of supplies;
  • To ensure reasonable prices for consumers.

 

The CAP initially addressed these objectives by moving towards self-sufficiency and food security through subsidizing of basic foodstuffs production. By the 1980s, this policy led to institutionalized surpluses of the major farm commodities, some of which were exported with expensive subsidies, others were stored or disposed of within the EU at considerable cost. Therefore, the CAP became progressively unpopular with consumers and taxpayers. Recognizing this, the Council introduced budgetary guidelines that set a maximum ceiling for the CAP budget. A limit was set on quantities guaranteed to receive support and a new policy was developed to encourage rural and less favored areas.  In 1992, the “MacSharry reform” began the shift from support of agricultural production through prices to producer support through income. Direct payments were introduced in order to compensate farmers for the decrease of the price support. At the same time, the reform required farmers to set-aside a portion of their arable land as a supply side market management tool. The Agenda 2000 and 2003 CAP reforms deepened this strategy by encouraging farming decisions to be more influenced by market signals. The direct payments aim to guarantee farmers a reasonable income, and are often linked to compliance with broader objectives including standards on food safety, animal and plant health, animal welfare and the preservation of traditional rural landscapes. In January 2009, the Council adopted a mid-term review, commonly known as “The Health Check,” of the 2003 reform.  The Health Check was the first part of the European Commission’s “one vision, two steps” approach to the CAP.  The second step entailed a further examination to be implemented after the 2013 financial perspectives.  On June 26, 2013 the European Parliament, the Council of Ministers and the European Commission reached a political agreement on reforming the CAP post-2013. Compromise legislative proposals were prepared and presented to the Lithuanian Presidency and to the Commission in September 2013. The final package was approved by the Parliament in November 2013 and the Council in December 2013. All aspects of the reform are applicable as from January 2014 with the exception of the new direct payments structure (including “green” payments, and additional support for young farmers) which will apply from 2015.

 

 

Read more  (updated Jan. 23, 2014)

 

Over the course of the last three years both the United States and EU have been working on the next round of their respective farm policies, the Farm Bill and the Common Agricultural Policy (CAP).  In light of the European Parliament’s inaugural legislative approval of the CAP and the pending reauthorization of the Farm Bill by Congress, the following presentation given  on December 5, 2013, was developed by FAS Interm Joanna Brown, Master’s student in Agricultural Economics at the University of Georgia.  It captures some of the commonalities and differences in these two influentail food, farm and agriculture policies.

 

Presentation “US and EU Farm Policies”    (December 2013)