Lecture 8a: Agriculture and Rural Development (CAP) (Ch 11)
Common Agriculture Policy (CAP) till now
↪ one of the first policies of EU, changed over time, role of different actors
↪ agricultural sector not very well organized (many lobby organisations)
• CAP + Rural Development subsidies
↪ €58 billion/year
↪ EU subside project
↪ 35% of EU budget
↪ only about 7% of EU jobs and 6% of EU GDP → big part of EU budget goes to relatively
small sector
↪ because it just started and is difficult to stop financing CAP (e.g. some countries do not
want to finish subsidizing CAP
↪ some think it’s strange to subsidize this sector, or certain parts of this sector. It should be
subsidizing different things/sectors
• reasons for start CAP (p. 156)
↪ guarantee self-sufficiency (zelfvoorziening) as for food production
↪ produce healthy food
↪ ensure fair income for farmers
↪ stimulate developments (greening, environment)
↪ support rural areas (preserving landscape, help regions to have economic transition e.g. tourism)
• large parts in agriculture production are not subsidised
↪ greenhouses in Westland (NL) (a lot of innovation; no use pesticides, use of wastewater, energy
through e.g. geothermal heat)
↪ no subsidies related to agriculture (sometimes subsidies by energy and climate policy)
↪ subsidies to cow milk, but not to soy milk
• special subsidies to promote certain agricultural products (CHAFEA)
↪ e.g. subsidies for adds stimulating more meat
• is CAP policy a one-size-fits-all policy, how is it related to enormous diversity in EU?
↪ share of employment in agriculture differs in EU (high in Romania, Poland, Greece, south of Spain)
↪ rural areas in countries differ (e.g. NL hardly has rural areas, France has many)
↪ % of population living in rural areas and working in agriculture differ
↪ farm sizes differ (big farms in Czech
percentage of population living in rural areas
Republic, Slovakia, UK, part of France and
Germany)
↪ % of employment in agriculture in old
Member States declined since 1968
↪ possible due to reforms and
agriculture became more productive
↪ different impact and scale of impact of climate change on agriculture in countries
Development of CAP over time
• original goals (early years)
↪ increase agricultural productivity and self-sufficiency
↪ ensure fair standard of living/income for farmers
↪ stabilise market
↪ ensure fair prices of food to consumers
1
, • main instruments (system developed in NL after WWII)
↪ guaranteed (minimum) prices for production
↪ import taxes
↪ export subsidies
• old system CAP (price levels for e.g. grain)
↪ internal market price level; price level for grain production in EU
↪ price could drop below an intervention price; farmers subsidised by Commission
↪ ideally, target price would be high; farmers earning a lot by producing grain
↪ difference between internal market price level/target price and world market price level
↪ export restitution; farmers use subsidies of EU to increase amount of exports
↪ protection of production in EU regulated by import duties; tariffs 3th countries have to pay to
enter European market (very high in beginning to protect EU production)
• effect; overall successful policy
↪ subsidies (and technical progress) → increase of production
↪ open ended budget; more producing → more subsidies
↪ most of subsidies to big farms or agricultural industry
↪ higher incomes big farmers, but incomes for smaller farmers still low
↪ policy to stimulate production, scale enlargement, pesticides → start of environmental
degradation (aantasting milieu) in rural areas
• Mansholt Plan (1968); to stimulate further productivity and scale enlargement
↪ reduce number of farmers (especially small farmers) through e.g. early retirement, reduce number
of cows (esp. of small farms)
↪ ideal sizes for farm; crop: production 60-120 ha dairy: 40-60 cows
↪ huge impact on CAP → a lot of opposition/resistance
↪ reform of the plan (1972); less ambitious, but still stimulus for industrial farming
↪ later Mansholt said he made mistakes, we need small scale organic farming
• with reformed plan, CAP problems still remained
↪ subsidised exports required large increase in CAP expenditure (uitgaven)
↪ subsidies to agriculture; €9 billon 1964-1978 → increase to €31,5 billion in 1917
↪ was seen as not sustainable, not good for overall spending of EU (because EU needs
money for new policies, e.g. regional policy) → reforms + budget share agriculture declining
• reforms; stimulated by open ending subsidising and by external pressure (WTO)
↪ Quota (1984); limit for amount of production (produce more → pay extra price/fine)
↪ MacSharry reforms (1992); shifting from subsidies for production to subsidizing rural incomes
(direct payments to farmers)
↪ decoupling subsidies from production
↪ single farm payment; cut price supports to near world-price level and compensate farmers
with direct payments
↪ cross compliance / delivery of public goods; only single farm payment if you link it to
respect of environmental, food safety, animal and plant health
↪ maybe biggest revolution in CAP
2
Common Agriculture Policy (CAP) till now
↪ one of the first policies of EU, changed over time, role of different actors
↪ agricultural sector not very well organized (many lobby organisations)
• CAP + Rural Development subsidies
↪ €58 billion/year
↪ EU subside project
↪ 35% of EU budget
↪ only about 7% of EU jobs and 6% of EU GDP → big part of EU budget goes to relatively
small sector
↪ because it just started and is difficult to stop financing CAP (e.g. some countries do not
want to finish subsidizing CAP
↪ some think it’s strange to subsidize this sector, or certain parts of this sector. It should be
subsidizing different things/sectors
• reasons for start CAP (p. 156)
↪ guarantee self-sufficiency (zelfvoorziening) as for food production
↪ produce healthy food
↪ ensure fair income for farmers
↪ stimulate developments (greening, environment)
↪ support rural areas (preserving landscape, help regions to have economic transition e.g. tourism)
• large parts in agriculture production are not subsidised
↪ greenhouses in Westland (NL) (a lot of innovation; no use pesticides, use of wastewater, energy
through e.g. geothermal heat)
↪ no subsidies related to agriculture (sometimes subsidies by energy and climate policy)
↪ subsidies to cow milk, but not to soy milk
• special subsidies to promote certain agricultural products (CHAFEA)
↪ e.g. subsidies for adds stimulating more meat
• is CAP policy a one-size-fits-all policy, how is it related to enormous diversity in EU?
↪ share of employment in agriculture differs in EU (high in Romania, Poland, Greece, south of Spain)
↪ rural areas in countries differ (e.g. NL hardly has rural areas, France has many)
↪ % of population living in rural areas and working in agriculture differ
↪ farm sizes differ (big farms in Czech
percentage of population living in rural areas
Republic, Slovakia, UK, part of France and
Germany)
↪ % of employment in agriculture in old
Member States declined since 1968
↪ possible due to reforms and
agriculture became more productive
↪ different impact and scale of impact of climate change on agriculture in countries
Development of CAP over time
• original goals (early years)
↪ increase agricultural productivity and self-sufficiency
↪ ensure fair standard of living/income for farmers
↪ stabilise market
↪ ensure fair prices of food to consumers
1
, • main instruments (system developed in NL after WWII)
↪ guaranteed (minimum) prices for production
↪ import taxes
↪ export subsidies
• old system CAP (price levels for e.g. grain)
↪ internal market price level; price level for grain production in EU
↪ price could drop below an intervention price; farmers subsidised by Commission
↪ ideally, target price would be high; farmers earning a lot by producing grain
↪ difference between internal market price level/target price and world market price level
↪ export restitution; farmers use subsidies of EU to increase amount of exports
↪ protection of production in EU regulated by import duties; tariffs 3th countries have to pay to
enter European market (very high in beginning to protect EU production)
• effect; overall successful policy
↪ subsidies (and technical progress) → increase of production
↪ open ended budget; more producing → more subsidies
↪ most of subsidies to big farms or agricultural industry
↪ higher incomes big farmers, but incomes for smaller farmers still low
↪ policy to stimulate production, scale enlargement, pesticides → start of environmental
degradation (aantasting milieu) in rural areas
• Mansholt Plan (1968); to stimulate further productivity and scale enlargement
↪ reduce number of farmers (especially small farmers) through e.g. early retirement, reduce number
of cows (esp. of small farms)
↪ ideal sizes for farm; crop: production 60-120 ha dairy: 40-60 cows
↪ huge impact on CAP → a lot of opposition/resistance
↪ reform of the plan (1972); less ambitious, but still stimulus for industrial farming
↪ later Mansholt said he made mistakes, we need small scale organic farming
• with reformed plan, CAP problems still remained
↪ subsidised exports required large increase in CAP expenditure (uitgaven)
↪ subsidies to agriculture; €9 billon 1964-1978 → increase to €31,5 billion in 1917
↪ was seen as not sustainable, not good for overall spending of EU (because EU needs
money for new policies, e.g. regional policy) → reforms + budget share agriculture declining
• reforms; stimulated by open ending subsidising and by external pressure (WTO)
↪ Quota (1984); limit for amount of production (produce more → pay extra price/fine)
↪ MacSharry reforms (1992); shifting from subsidies for production to subsidizing rural incomes
(direct payments to farmers)
↪ decoupling subsidies from production
↪ single farm payment; cut price supports to near world-price level and compensate farmers
with direct payments
↪ cross compliance / delivery of public goods; only single farm payment if you link it to
respect of environmental, food safety, animal and plant health
↪ maybe biggest revolution in CAP
2
