European Union Common Agricultural Policy

The creation of the ESCP was proposed by the European Commission. The proposal followed the signing of the Rome Treaty in 1957, which created the Common Market. The six member countries individually strictly protected their agricultural sectors, especially in the area of ​​what they produced, supporting commodity prices depending on how farming was organized. Such interventions represented obstacles to the free trade of goods, since the rules differed from country to country, and later freedom of trade became incompatible with intervention policies. Some member countries, especially France, and all professional farming organizations wanted to maintain strong government interventions in agriculture. However, they could only be preserved if the policy of transferring it to the supranational level of the European Communities were harmonized. By 1962, there were three main principles for the conduct of the CES: market integrity, preference for community products, and financial solidarity. Since then, CEF has been a central element of the European institutional system. The UCP is often interpreted as the result of a political compromise between France and Germany: German industry will gain access to the French markets, and in turn, Germany will help pay French farmers. Germany is still the largest contributor to the EU budget, however, France is also a donor of the budget, and agricultural countries such as Spain, Greece and Portugal are the largest recipients. Traditional rules apply to newly joined countries, which limits the subsidies they receive.

The original objectives were enshrined in Article 39 of the Rome Treaty of 1957:

1. Increasing productivity by promoting progress and ensuring optimal use of factors of production, mainly labor.

2. Guaranteeing fair living standards for the rural population.

3. Stabilization of the markets

4. Secure access to supplies

5. Providing consumers with food at affordable prices.

The CEF recognized the need to take into account the social structure of agriculture and both structural and natural differences between different agricultural regions and to act in accordance with degree amendments.

The CEF is an integrated system of measures that works by maintaining the level of prices for goods within the EU and subsidizing production. There is a set of mechanisms:

• Import taxation applies to certain goods imported into the EU. They are set at the level necessary to increase the world price to the EU target level. The target price is set as the maximum desired price for these goods within the EU.

• Import quotas are used as a means of limiting the number of products imported into the EU. Some member countries have contractual quotas that allow them to sell certain goods within the EU without tariffs. This is mainly applicable to those countries that have had trade relations with this member country.

• Domestic intervention prices. If the domestic market price falls below the intervention level, the EU buys goods to raise the price to the intervention level. Intervention prices are set lower than target prices.

• Direct subsidies to farmers. Historically, this measure was conceived as encouraging farmers to choose those crops that are subsidized and to maintain an “internally grown” supply. Subsidies were mainly paid to the land on which a particular crop was grown, and not to the total number of crops produced. The 2005 reform developed special subsidies in favor of fixed payments, calculated only on the area of ​​cultivated land, and for the introduction of environmentally friendly farming methods. The reform is aimed at ensuring greater freedom for farmers to choose the crop for which there is greater demand and reduce economic incentives for overproduction.

• Production quotas and payments for land non-use were introduced as an attempt to prevent the overproduction of certain types of products (such as milk, cereals and wine), which attracted subsidies at prices higher than market prices. The need to store and place surplus production was a waste of resources and led to a decline in the reputation of the UCP. The secondary market has evolved, especially for the sale of quotas for milk, while farmers made an imaginary use of “payments for the non-use of land”, for example, leaving unused land that is difficult to cultivate. Currently, payments for land non-use are suspended, remaining the subject of a further decision on their future, which leads to higher prices for some goods and an increase in interest in growing biofuels.

The change in the subsidy system is planned to be completed by 2011, but the governments of member countries have some freedom of decision as a new scheme will be introduced. The UK government has decided to launch a dual subsidy system, each year giving greater preference to the total payments to the new scheme. Payments under the old scheme were frozen at their previous average level of 2002-2003 and are declining every subsequent year. This gives farmers a certain period when their income is saved, which they can use to change farming to comply with the new regime. Other governments have chosen to wait and change the system all at once lately. Governments also have limited ability to continue to use a small portion of the budget for subsidies to support certain crops. The CEF is also aimed at promoting harmonization of legislation within the Community. Different laws in community countries can create some problems for everyone who seeks to trade between them. Examples include: the resolution of preservatives or food colors, labeling rules, or the use of hormones or other substances in products intended for human consumption and disease control, and animal welfare. The process of removing all hidden legislative barriers is not yet complete. The CEF is funded by the European Referral and Guarantee Fund (EAGGF). Reform of the CEF is constantly reducing its share in the EU budget, but it still makes up about half of the EU’s costs. In recent years, France has received the largest amount of these subsidies. The new expansion of 2004 at the expense of countries with large agricultural sectors will surpass France as the main beneficiary, but limited subsidies will be set for them during the transition period. The problem of how to subsidize new countries when they become full-fledged has already led France to concessions on the reform of the UCP.

Unified agricultural policy began in the late 1950s and early 1960s, when the founding countries of the EEC only recovered from a decade of severe food shortages after World War II. Part of the construction of a common market was the elimination of tariffs on agricultural products. However, due to the political influence of the farmers and the acuteness of the issue, it took many years for the full implementation of the CEF.

The creation of the ESCP was proposed by the European Commission. The proposal followed the signing of the Rome Treaty in 1957, which created the Common Market. The six member countries individually strictly protected their agricultural sectors, especially in the area of ​​what they produced, supporting commodity prices depending on how farming was organized. Such interventions represented obstacles to the free trade of goods, since the rules differed from country to country, and later freedom of trade became incompatible with intervention policies. Some member countries, especially France, and all professional farming organizations wanted to maintain strong government interventions in agriculture. However, they could only be preserved if the policy of transferring it to the supranational level of the European Communities were harmonized. By 1962, there were three main principles for conducting the unified economic and social policy: market integrity, preference for community products, and financial solidarity. Since then, the CEF has been a central element of the European institutional system.

Mansholt Plan

In 1960, Mansholt's plan emerged, the goal of which was to destroy small farms and consolidate farmers into a larger, more efficient industry. The special status of farmers and the enormous influence of the farm lobby on the continent made the plan disappear from the Communities agenda. On December 21, 1968, Sikko Mansholt (European Commissioner for Agriculture) sent a memorandum to the Council of Ministers regarding agricultural reform in the European Communities. This long-term plan is also known as the “Agricultural Program of 1980” or the “Report of the Geischel Group”, named for the village in Luxembourg where it was prepared, laid the foundations of a new social and structural policy in agriculture in a united Europe.

Mansholt’s plan outlined the limits of price and market support policies. He predicted the instability that would occur in certain markets unless the Community reduced the amount of cultivated land by at least 5 million hectares. The former Dutch Minister of Agriculture also noted that the standard of living of farmers has not improved since the introduction of the CAP, in contrast to the growth of production and the constant increase in Community costs. In this regard, he advocated reform and modernization of production methods. According to the plan, small farms that were on the verge of extinction sooner or later, according to Community experts, should be increased in size. The goal of the plan was to encourage more than 5 million farmers to quit farming. This should have made it possible to redistribute their land and increase the size of the remaining farms. Farms were considered viable if they could provide their owners with an average annual income comparable to that of other workers in the region. In addition to retraining programs, Mansholt also offered welfare programs to cover retraining and early retirement. In the end, he called on member countries to reduce direct aid to non-income farms. Faced with growing discontent on the part of the agricultural community, Sikko Mansholt was forced to reduce the scale of his some proposals. In the end, Mansholt’s plan was reduced to three directives, which in 1971 concerned the modernization of agricultural holdings, the conservation of farms, and the training of farmers.

Struck by Mansholt’s failure, the so-called reformers were mostly absent throughout the 1970s, and reform proposals were few and far between. A system called "Agro-money" was introduced as part of the development of the EMU project (European Monetary Union), but was considered a failure and did not stimulate further reforms. The 1980s - the decade that led to the first real reforms of the UCP, anticipated further development since 1992. The influence of the farmers' bloc has declined, freeing the hands of reformers. Environmentalists supported the reform of the UCP for financial reasons that upset the balance: due to the overproduction of the UCP, it became expensive and wasteful. Together, these factors led to the introduction of quotas for milk production in 1984 and, as a result, in 1988, to the establishment of a ceiling on spending on supporting farmers. Nevertheless, the basis of the CES remained, and until 1992 did not change.

In 1992, McSherry reforms (named for the European Commissioner for Agriculture, Paradise McSherry) were carried out to limit growing production, while at the same time, measures were taken to promote a movement towards a freer agricultural market. Reforms reduced support levels to 29% for grains and to 15% for beef. They also created a system of payments for land non-use for land withdrawal from production, payments restricting the market level, and introduced measures to encourage retirement and afforestation. After McSherry's reforms, grain prices were close to equilibrium, there is greater transparency in the cost of rural support. Nevertheless, administrative complexity has created fraud, and the problems of the UCP are far from being resolved. The 1992 reforms are nothing more than one of the factors necessary to fulfill obligations in accordance with the agreements of the Uruguay Round GATT / WTO, which dealt with issues of state subsidization of agriculture. During the reform, it was decided to create an InVeKoS system, which is an essential tool for monitoring EU expenditures in the agricultural sector.

Modern areas of reform are: price reduction, providing safe and quality food, guaranteeing the stability of farmers' incomes. Other issues are environmental pollution, animal welfare, and the search for alternative sources of income for farmers. Some of these issues are the responsibility of member countries. 1999 Reforms called "Agenda 2000" breaks down the UCP into two pillars; support for production and agricultural development. Several measures to support rural development have been introduced including diversification, establishment of production groups and support for young farmers. Rural environment programs have become mandatory for all member countries. (Dinan 2005: 367). Support for market prices for cereals, milk and dairy products and beef and veal declined stepwise while direct paired payments (apparently if you produce two goods at once) increased. Payments for arable crops such as cereals and sunflowers were harmonized.

In 2003, a report was prepared by a group of experts led by Belgian economist Andre Sapier, which included the idea that the budget structure is a historical relic. The report suggested rethinking the idea of ​​EU policies, redirecting the costs of measures necessary to increase EU wealth and cohesion. A significant part of the budget is currently spent on agriculture, and there is little prospect that the budget will increase, this will lead to a decrease in the costs of the CEF. The report dealt with ideas that were more important for the EU than the problems of the EECP, but it also suggested distributing aid to farmers in a more organized way at the level of member countries.

The provisions of the report were largely ignored. However, the costs of the CEF are reduced within the EU - and France agreed to fix the costs of the CEF and not change them until 2012. This was made possible thanks to an agreement concluded with Germany on a similar issue. The UK wants to revise this agreement in order to defend its position and taking into account that it stands for lowering barriers for exporters from third countries.

On June 26, 2003, EU ministers adopted a plan for a fundamental reform of the CEF based on the sharing of subsidies for certain crops. (Although member countries may retain a limited number of certain subsidies). The new system of "single farm payments" is the subject of mutual compliance with environmental conditions, food security and animal welfare. Many of which were either practical recommendations for goods or separate legal requirements governing the activities of farmers. The goal is to concentrate money on environmental and animal welfare programs.

Details of the UK scheme continued to be discussed until its introduction in May 2005. Each country has certain freedom of election. In England, the single payment system provides flat payments of about 230 pounds per hectare for keeping the land in a condition suitable for cultivation. In Scotland, payouts have developed historically and can differ very much. The new scheme allows for non-productive use of land to receive an environmental element of support. Additional payments are provided if the land is cultivated in accordance with environmental regulations.

The total EU budget and national subsidy budgets have been limited. This avoids the situation where the EU has to spend more on the CES than has its limited budget.

Reforms were carried out in 2004-2005. (member countries can apply a transitional period deferring reforms in their countries until 2007 and stretch reforms until 2012)

The EU enlargement in 2004 increased the number of farmers from 7 to 11 million, increased rural land by 30% and production by 10-20%. Those who entered in 2004 immediately gained access to price support measures (export financing and intervention procurement). Nevertheless, direct payments are extended for 10 years (2004–2013), starting with 30% of payments from the amount of old countries in 2004 and 30% in 2005. New countries have access to the rural development fund (for early retirement, environmental issues , the poorest territories, and technical assistance) with a budget of 5 billion euros. EU countries agreed in 2002 that agricultural expenditures until 2013 should not increase in real terms. This should lead to a 5% cut in subsidies to old countries to finance payments to new countries. Given Bulgaria and Romania will have to cut by 8%.

One of the EU-subsidized crops is sugar produced from sugar beets. The EU is still the largest sugar beet producer in the world, with an annual production of 17 million tons. This compares with the production levels of Brazil and India, the two largest producers of sugar cane sugar.

Sugar was not included in the McSherry reform in 1992 and in the “Agenda 2000” in 1999. Sugar is sold under the “all but weapons” program, which enables third world countries to trade in Western markets. In 2005, agriculture ministers agreed to reduce the minimum beet price to 39% of 2006 by 4 years. Under the Sugar Protocol of the Lamea Convention, 19 countries exporting sugar to the EU may be affected by lower prices in the European market. Such EU plans led to the WTO’s decision against the sugar regime in April 2005.

In February 2006, the EU decided to reform sugar subsidies. The guaranteed price of sugar decreased by 36%, a sharp decline in production within the Union was planned. This is the most extensive sugar reform in 40 years. This policy change allowed easier and more profitable access to EU markets for emerging economies. Critics say this is neither altruism nor an idealistic EU change that is in line with WTO requirements, which supports EU sugar dumping changes from Australia, Thailand and Brazil. Another point of view is that these countries are former colonies and need to maintain ties.

In 2007, the European Commission developed proposals to limit subsidies to individual owners of land and farm factories. Many of them are nothing more than a family household. Such attempts were unsuccessful earlier. In the UK, there is strong opposition to the farming union and business association.