Common Agricultural Policy (CAP)

While acknowledging and supporting these views with respect to the 2003 reform, this paper, however, tries to highlight that the overall support level for the agricultural sector remains relatively high and that most of the farm support still stems from market price support. In systematically analysing the main CAP measures and using most recent figures, it is shown that price support – together with quota restrictions and land set aside obligations – is one of the least efficient CAP instrument currently in place. Thus, the success of the 2003 reform does not allow for a position of leaning back. On the contrary, the drive of previous reforms (1992 and AGENDA 2000) with respect to bringing EU prices down to competitive levels need to be kept and perhaps even be further accelerated. The Common Agricultural Policy (CAP) still remains one of the most important Union policies in terms of expenditures (roughly 45% of Community budget). Excluding the administrative costs, which are significant especially within the Member States, the transfers from taxpayers and consumers to the EU farmers regularly reach around 100 billion € a year. These transfers make up nearly 40% of farmers’ total gross farm receipts and nearly 100% of the sectoral net value added produced. Including those support measures without direct income effect for farmers the sectoral support reaches even 116 bn € 1 . This support level far exceeds those for other sectors of the economy. As a consequence the rest of the economy is implicitly put at a disadvantage. This situation makes it necessary to continuously check the rationale and the effects of all policy instruments in place to assure that (a) this sectoral bias of support is well founded and justified with non- economic objectives and (b) that these non-economic objectives could not be achieved with less harmful economic effects.

We find ourselves today at a definite turning point: with financial crises spreading in a growing number of states, forcing national authorities to increase austerity measures, thus generating public turmoil, 27 European countries have to sit down and negotiate a common budget, a financial framework that must accommodate the needs and aspirations of each Member State of the European Union: from the “stingy” Brits to the straitened Friends of Cohesion, from the agricultural “enthusiastic” France to the infrastructure deprived Eastern European countries. The budget for 2007 – 2013 sums up to 976 billion Euros (European Commission, 2010, p. 3), which means that the EU’s annual budget is equivalent to around 1% of the Union’s national wealth, which is about 244 Euros per EU citizen per year (European Commission, 2010, p. 2). As shown in Figure 1, almost 42.33% of this amount is destined to overcome the problems that the environment, agricultural sector and rural areas have, under the Common Agricultural Policy (CAP) umbrella.

Abstract Agriculture is both a large‐scale user of land and a provider of landscapes. The adaptation of agricultural practices to local conditions has led to a wide variety of "cultural landscapes" in Europe. The Common Agricultural Policy is a major driver of land use and changes in farming practices in Europe, and thus also affects landscapes. The report analyzes how the CAP's design and implementation have influenced agricultural landscapes. It provides a catalogue of the CAP measures that have been put in place and are currently influencing landscapes, as well as the expected effects derived from the proposal for the post‐2013 CAP. It differentiates between pillar 1 and pillar 2, and between measures with a direct focus on landscapes vs. non‐targeted measures which also have the potential to influence landscapes (positively or negatively). The olive and livestock sectors, where the influence of the CAP on landscape is of particular interest, are also analyzed. By providing a list of the potential influences of the CAP on the landscape elements and structures valued by EU citizens, this report provides a knowledge base to support an effective CAP policy design in the direction of improved landscape management, an important component of the EU project towards a more sustainable agriculture.

Dacian Cioloş, European Commissioner for Agriculture and Rural Development, in The Common Agricultural Policy: A partnership between Europe and Farmers. Background The Common Agricultural Policy (CAP) was set out in the Treaty of Rome (1957) and established in 1962. It was intended to enable the European Community to avoid the food-shortages experienced during and after the war. Moreover, a common policy was needed to ensure the free movement of agricultural goods in the planned Common Market. The CAP was to ensure that mechanisms of market intervention - which Member States wanted to remain strong - did not interfere with the basic principles of the

1957 The Treaty of Rome creates the European Economic Community (a precursor of today’s EU), between six western European countries. CAP is foreseen as a common policy, with the objectives to provide affordable food for EU citizens and a fair standard of living for farmers. 1962 The common agricultural policy (CAP) is born! The essence of the policy is good prices for farmers. With every passing year, farmers produce more food. The shops are full of food at affordable prices. The first objective – food security – has been met.

In the period preceding the emergence of the European Union agriculture was a sensitive issue for most governments in Europe. The situation in agriculture in most of Europe after the Second World War was bad. There was not enough food. There were no adequate mechanisms to ensure enough food for the entire population. For this reason, the main goal of ZAP was the growth of agricultural productivity and ensuring sufficient food production, ensuring quality of living standards of the rural population. CAP is at its inception was based on the production of which is related to price support, yet there was no mention of addressing the structural problems of agriculture. This policy has enabled the creation of surpluses of some agricultural products. This all led to the opinion that it should be made more comprehensive formulation of the EEC. In this direction he went and Mansholt Plan Act of 1968 year. Under this plan, the Commission proposed a radical change in the common agriculture. The very essence of Mansholt Plan reflected the limited price policy and market support and encouragement of nearly five million farmers to abandon unprofitable production. Throughout the period of the seventies there were some attempts to introduce new reforms. Some serious reform activities are made only in the mid eighties the adoption of the Green Paper, which gave a new relationship with the EEC agricultural policy. The Common Agricultural Policy has changed fundamentally with the reform package. McSherry plan contained four major policy changes: First, there was a decrease in prices in certain sectors. Second, given the direct support of farmers' incomes. Third, an important feature of these reforms was the introduction of so-called. "Scheme for non-use," which was supposed to commercial producers in certain sectors (notably cereals sector) in certain regions of wages to keep land idle rather than to grow crops that the EU should be purchased and fourth point, which is related to the follow-up measures.

implying qualitative criteria such as food safety and precaution, favourable method of production, environmental impact etc., presented by agricultural policies in last decade and for future, is largely influenced by final stages of agri-food commodity chains. Distributors and well-established processors are those who “translate” the consumer’s demand to agricultural producers. Those decide significantly about the dimension, structure and market share of agricultural production in concrete area in essence. This situation has influenced effectiveness of the Common Agricultural Policy (CAP) exactly. Based upon the last reforms of the CAP in the EU evaluation, the significant changes of commodity markets regulation tools and a new approach partly related to income stabilisation policy partly to support of technological change and restructuring in wider social and regional aspects of the CAP are demonstrated there.

The Common Agricultural Policy (CAP) is the most important driver of agricultural management and sustainability in the European Union. The CAP represents around 40% of the European Union (EU) budget, whose annual expenditure (in current prices) doubled from about EUR 30 billion in 1990 to EUR 60 billion in the CAP period 2007-2013. The European CAP has evolved from its initial inception in 1962 when it covered six countries. In 1973, the inclusion of the United Kingdom, Ireland, and Denmark increased this number to nine. Further additions were made in 1981 (10), 1986 (12), 1995 (15), and 2004 (25). The inclusion of Romania and Bulgaria in 2007 brought the total to 27, which finally amounted to 28 after the incorporation of Croatia in 2013, and which will return to 27 after the Brexit agreements. The CAP has now a direct impact on 14 million farmers, with a further 4 million people working in the food sector. One of the key CAP reforms occurred in 1992, when the ‘MacSharry’ reforms sought to limit the increasing cost of the CAP with a shift from product support (through prices) to coupled direct payments (through income support). The reforms also saw the reduction or complete removal of coupled payments, exports, refunds, and market support measures. The year 1992 also saw the introduction of the first directives that provided European support to the planting of forest trees on agricultural land. The Agenda 2000 reforms, signed in Berlin in 1999, emphasised the division of the CAP into a ‘first pillar’ based on single farm payments and a ‘second pillar’ focused on rural development measures. Following the CAP reform in 2003, payments were decoupled from the production of a specific product, while farmers would instead receive payments based on a set amount per hectare of agricultural land. The CAP has also aimed at becoming more environmentally oriented. For the 2007-2013 period, Pillar I across the EU-27 was worth just over three times the budget of Pillar II. However, differences existed between the CAP budgets for old and new Member States. Whilst the level of expenditure was relatively balanced in the 12 newest EU states (where the level of expenditure on both Pillars was almost the same), the EU-15 received five times as much for Pillar I than for Pillar II. For the 2014-2020 period, rural development and environmental issues will account to near 24% of the total CAP budget.

Market management arrangements for cereals and the price levels decided annually for grains in the Community are fundamental to the working of the common agricultural policy and [r]

3. Heasures required to deal immediately with any temporary disadvantages arising from the common agricultural policy. Care must be taken that these measures shall [r]

301–315. Abstract: The paper analyses the structure and level of international cooperation among African states in the area of ag- riculture and rural development. It focuses on the African Union (AU) and its eight Regional Economic Communities. The international cooperation schemes between the World Bank, EU, FAO and African countries in agricultural policy are reviewed. The paper concludes that, despite numerous cross-border initiatives, governance of agricultural policies in the pan-African context remains fragmented. Policy-making and cooperation schemes need to be stepped up to address con- tinent-wide challenges in the sector. There is an urgent need for the AU and the EU to intensify their cooperation in agri- cultural policies and development. The AU in collaboration with its regional bodies should establish a common agricultural policy for the continent. Such initiatives need to be Africa-driven and adapted to African needs. The EU should only provi- de technical know-how and institutional support if welcomed by African partners. Collective action towards rural areas via greater coordination of African agricultural policies and actions would help to develop the missing institutional framework needed for agricultural development in the continent. Fostering economic growth through agricultural development and reforms may also lead to a reduction of migration as witnessed by the EU in the sixties.

legitimacy as a consequence of evidence-based criticisms from organizations concerned with the Global South such as Oxfam. Intervention purchasing, export subsidies and protection from international competition tended to lead to over production in member states, resulting in structural surpluses of commodities such as milk. The CAP therefore introduced a number of policy instruments designed to restrain production, of which quotas were one of the most important. Quotas had been introduced, rather unsuccessfully, in the sugar sector in 1967, and they won little favour as a general policy instrument in the 1970s . Nevertheless, they were used from 1984 as a means of addressing the problems of the dairy sector which was producing a heavy strain on the EC budget. „Dairy farmers had particularly strong incentives to produce a surplus as they could use low- cost cereal substitutes and soybeans for feed while the EC guaranteed them a high price for whatever amount of milk they marketed. Dairy stocks, by 1983, exceeded all other EC stocks in value and were increasing rapidly.‟ (Moyer and Josling, 1990:

CAP is the Agricultural Council but member states’ influence on the decision making process can not be ignored. In this respect France is a good example. 78 When one analyses the post World War II period and Cold War years it is clear that being self-sufficient in terms of food supply composed one of the main motives of the European Economic Community. In fact in the first years of the European project the Community reached its goal but in the following decades, by the 1970s, overproduction in the form of wine lakes, beef wars or butter mountains was the major threat knocking the EU, then EC, door. The agricultural production exceeding the EC citizens’ demands was making the CAP more costly day by day and increasing its burden on European consumers. The CAP in this period was in a way shrinking the EC resources. So the concerns on agricultural production shifted this policy towards a reform process. In fact a variety of tools from production quotas to price cuts were used to deal with the overproduction problem inside the policy. Since the main aim is to put under control the supply of agricultural output in order to cope with overproduction these two options seem to be idealistic. Yet since the 1992 reform the second option has been used, given the first option, bringing production quotas, was conceived as a shadow on production capacity and competition of EC by certain milieu. Whereas the second option works more in favour of balancing the supply and demand side because when the prices are lowered for agricultural output then automatically production of the food will decrease. So in a way the balance will have been enhanced. 79

ing of abandoned land was created. The lack of the sufficient administrative capacity and the effective control over spent financial resources from the State Agricultural Fund becomes a reason why part of them is not spent accordingly. The experience with utilizing financial resources from this line as well as from the SAPARD Programme suggests the type of problems that will be encountered upon implementing the CAP after Bulgaria joins the EU. The creation of such unified information system should have started much earlier in order to preserve the reliability of information gathered during the process of land restitution. In 2003, there was started the work for the creation of the Geographical Information System (GIS). This system will allow the implementation of modern information technologies in services dealing with property registration and cadastre. Already there is purchased the necessary hardware and the main GIS software, on the basis of which the Agricultural Land Identification System (ALIS) is developed. Land identification is made by location, ownership, and other characteristics of agricultural and forest land.

In view of the importance of this problem and the lack of adequate research in this area, we will devote the remainder of this paper to it. In Western Europe and the USA, where agricultural interventionism has operated continually since the 1950s, studies have confirmed that imperfect competi- tion in the areas of agricultural food processing and the manufacture of means of production and service provision to agriculture has a significant effect on the distribution of political rents (McCorriston and Sheldon, 1991; Salhofer and Schmid, 2004). In turn, it has been shown (Ciaian and Swinnen, 2009) that the net effect of area payments on the profits of single-product farms is negative. For example, in extensive grain production, while farms profit directly from subsidies and indirectly from the increased efficiency result- ing from subsidised investments, they lose significantly due to the increase in prices of rent and purchase of land, whose marginal productivity increases, stimulating demand. These losses are dominant in the balance of costs and benefits of decoupled payments. Mixed farms, however, may gain over- all, as CAP payments make it easier for them to obtain credit. Diverging from the main line of thought concerning the decrease in overall well-being due to the payment of political rents is the ‘theory of complementarity of rent-seeking and production’ (Teng, 2013). Based on a model formalisation, that author challenges the universality of the thesis whereby rent-seeking is identified with a fall in productivity, and pro- poses a theory in which increased production and rent-seek- ing are not substitutes. These processes become complemen- tary when the entities seeking rent are also producers, and their production output at the same time constitutes inputs to the rent-seeking effort. It is not easy to apply this generalisa- tion to agriculture (it would be as if farmers paid lobbyists in agricultural products), but certain analogies may be noted. If it is accepted that the ‘products’ of agriculture include specific public goods, they may also represent a bargain- ing counter for the agricultural lobby and politicians. In this sense the aforementioned complementarity of production and rent-seeking also arises in agriculture. This is an issue to which we shall return in a later part of our considerations.

out that it is confusing to call all CAP subsides ‘the politi- cal rents’ in terms of the rent-seeking theory. Quantification of the political rent in agriculture enables a more rational and socially-appropriate distribution of support from the CAP in accordance with the agricultural policy goals in the financial framework after 2014. Measuring pure politi- cal rents has revealed a new dimension of inequalities in the distribution of CAP subsidies which particularly badly affect the most productive and the most eco-efficient Mem- ber States. Although the division of payment envelopes between Member States has been decided, since 2014 the CAP has gained flexibility in terms of the structure of both Pillars and transfers between them. These matters remain in the hands of the Member State governments. The prob- lem may be that in many countries the breaking of the link between subsidies and output was reflected more in decla- rations than in facts, and ways are constantly being sought to ‘get round’ that requirement. Such attempts exacerbate King’s effect, and mean that a large share of the subsidies is not capitalised within agriculture, but are captured by sur- rounding sectors. Economic surplus flowed out of farms in the period 2004-2012 through the unfavourable changes of prices, particularly of fertilisers, energy and feedstuffs, but also milk and poultry livestock (Czyżewski and Matuszc- zak, 2017; Czyżewski, 2017) We have in mind here the fact that, for example, investment support goes mainly to the largest farms, where it is subject to the strongest drainage through price flexibility.

Change and reform remained a constant feature of the CAP in 2001: various measures were introduced, including a simplified scheme for direct payments; the Council adopted a regulatio[r]

implementation of measures to limit the use of the factors of production (set-aside of arable land, number of animals per hectare of forage area, etc.) alongside[r]

(2) Compulsory notification by Member States of all draft legis- lation, regulations and administrative rulos on agricultural structure and of projects for long-term[r]

procluction.. certain rit!idi ty in production \.rhich, in the absence of a genuine Community socio-structural policy, accompanies the structural rigidity in the less[r]