Common Agricultural Policy

One of the most controversial issues in the EU, the CAP was set up against a backdrop of food shortages and rationing following the Second World War. It was intended to stabilise food supplies by ensuring minimum prices for farmers within the EU.

If the price of wheat, for example, fell below an agreed minimum, the EU stepped in to buy wheat, driving up the price again. CAP comprises around half of the total £60bn EU budget and produced Europe's infamous wine lakes and butter-mountains. In June 2003, the EU announced what it called landmark reform to keep international trade talks afloat.

The Common Agricultural Policy (CAP) began in the 1950s by subsidising production of basic foodstuffs in the interests of self-sufficiency. The CAP of today, on the other hand, emphasises direct payments to farmers as the best way of guaranteeing farm incomes, food safety and quality, and environmentally sustainable production.

This approach makes it easier to recognise the role farmers can play in improving quality, preserving biodiversity and traditional landscapes, and in keeping rural economies alive. It strikes a balance that spends the money where it is most needed, gives consumers safe food at a fair price and value for money for the EU taxpayer.

The change of emphasis began some years ago after the policy of self-sufficiency in key foodstuffs at all times began to produce excessive surpluses. Beef and butter mountains, milk and wine lakes are now a thing of the past as a result of changes well over a decade ago to make the CAP more cost-effective. The CAP once accounted for nearly 70% of the EU budget. Now it takes well under half as the EU has expanded other policies and curbed CAP spending. At the same time, the range of activities funded from the budget for agriculture has expanded to include rural development and the environment. Less than 1% of all public expenditure in the EU goes on support for EU farmers.

Major reforms implementing the principles of Agenda 2000 and agreed in mid-2003 are now being implemented. They represent the most radical changes to the CAP since it was founded in 1958. Subsidies for production are largely disappearing and being replaced by direct payments to farmers. These payments are conditional on compliance with environmental, food safety, animal and plant health, and animal welfare standards, as well as on keeping farmland in good condition, both for farming and in terms of preservation of the countryside . The reforms are continuing, embracing products not included in the first wave in 2003. These include cotton, hops, olive oil, tobacco and sugar.

All this change stands on sound scientific foundations. The EU funds large amounts of research into sustainable production, prudent use of natural resources, and plant and animal diseases.

Changing the way EU farming is funded also addresses accusations that the CAP distorts world trade (e.g. through subsidies on exports of surplus foodstuffs). The most recent reforms reduced forms of farm support which distort trade by 70%. They prepared the EU for the ‘ Doha’ round of international trade liberalisation talks, where an offer by the EU to eliminate export subsidies altogether is on the table, but conditional on other major trading countries doing the same. However, even without further liberalisation, the EU is already the world’s largest importer of food and the biggest market for Third World foodstuffs.