How does CAP work today?
Initially, in 1962, CAP was built on guaranteed prices for farmers, export subsidies, and a high level of protectionism. The goals were to make Europe self-sufficient (see the graph below - France was a net importer untile the late 70s), to modernise European agriculture and to provide a fair income to farmers.
CAP lead to overproduction and the famous "meat mountains" and milk lakes of the mid 80s. Reform was started in 1984 with the milk quotas and in 1992 with the lowering of direct price supports and a switch to direct subsidies to the farmers and not to their production.. The 2003 reforms led to the final abandon of production linked subsidies, and inserted a new linkage to environmental and health criteria. It also developed the concept of "rural development", with the farmers to be "stewards of the countryside".
From bottom to top on the graph: export subsidies, price support, direct revenue subsidies, rural development
Export subsidies have not fully being eliminated, but this is the clear goal (conditioned to the USA doing to same as part of the global trade negotiations). This has not prevented exports from growing regularly.
ag. exports, and CAP export subsidies, in euro billion
Does the CAP budget eat too much of the EU budget and prevent other policies?
Today, the CAP budget is 50 billion euros per year, or 43% of the EU budget, or less than 2% of the EU GDP.
The reason the CAP takes so much of the EU budget is because it is the only fully federal policy of the EU. If the EU had decided to make education a federal policy, it would take a budget 15 times bigger than the CAP.
Remember this - it takes so much of the budget because it is the only thing that Europe actually controls in full. The rest of the (overall small) EU budget covers only small portions of Europe's public spending in all the relevant fields.
CAP costs each European 2 euros per week. It made up 0.65% of EU GDP in 1988 and will account for 0.30% in 2013. Agricultural prices have gone down significantly, even though consumers haven't seen it because there are many other players in the food chain. It has been noted, for example, that a German farmer gets 65% of the retail price of an egg, 40% for dairy products, but only 4.5% for bread.
Are Europeans paying for French agriculture?
France is the first beneficiary of CAP, with 21% of CAP amounts - 9 billion euros:
But it should never forgotten that the grand deal when the EU (then the EEC) was created was that France got support for its farmers in exchange for agreeing to opening up its borders to trade and in particular to German industrial goods.
That's certainly a good that strongly benefits all the pro-free trade countries of the EU, starting with the UK. Agricultural subsidies is the price for political acceptance of free trade in France.
And it may very well be true that France also benefits from free trade, but this is NOT an argument that works politically in France. As the referendum vote recently showed, there is still a VERY strong protectionist streak in France, and free trade within Europe should not be taken completely for granted, so that trade off is still justified today.
Is CAP unfair to the new member states?
The new member states will only receive 100% of the sums given to their Western colleagues in 2013. Currently, they get only 25%, and that will go up each year. So there is some sort of unfair transition period.
But it should be noted on the other hand that these reduced amounts helped increase farmer revenues by 50% in 2004 in the new member states - and this has led to a major shift in the perception of the EU by the rural populations of these countries. Note as well that they feared an invasion of Western agricultural products in their countries, and actually the opposite has happened - exports from the new member states to the rest of the EU have grown massively in the pasy year.
Are CAP funds going only to the richest farmers?
On this one, the reply is clearly yes, and this is how CAP was explicitly designed in the early years: CAP was not meant to help individuals, but to generate strategic self sufficiency in a few sectors (cereals, dairy products and bovine meat).
This has been increasingly criticised, and as part of the 2003 reforms, it was proposed to cap subsidies per farm (to EUR 300,000) but this was rejected by Germany and the UK which have more big farmers relatively speaking...
Is CAP noxious for the developping world?
This was very much true in the past, when the CAP was developed on the basis of high domestic prices, protected by high external tariffs, and then went on to export its surpluses thanks to export subsidies.
This really nasty policiy mix was significantly toned down starting in 1992, with the massive reduction in production linked subsidies. The goal now is to eliminate all export subsidies, although it has not been done yet.
The EU nevertheless is the largest importer of agricultural products in the world, and has a number of specific agreements with the least developed countries that give these access. The big tensions today are with intermediate countries like Brazil which do not benefit from these special rights, and do want to develop thanks to agricultural exports, as it is one of their competitive sectors on the world scene.
Would agriculture disappear in Europe without the CAP?
Some sectors would certainly disappear without the current framework. Ironically, France, with its highly productive grain producers in the greater Paris basin and Picardy, and its focus on wine and other fine foods, would probably suffer less than others.
Is CAP bad for the environment?
The most polluting activities, like pig farming or poultry farming actually get very few subsidies. It is nevertheless a fact that the CAP's focus for many years on increasing production and "modernisation" has encouraged industrial agriculture with all its negative side effects.
The reforms of recent years aim at moving away from that logic, by focusing on environmental and sanitary criteria.
As regards the big food crises like "mad cow" and others, the race for productivity can certainly be blamed, and EU rules and regulations, which are supposed to prevent these things, are only imperfectly enforced (but this is done largely on a national basis) and are often subject to derision and criticism in other circumstances (all the jokes about the diameter of bananas or the complaints that EU sanitary rules prevent the production of "real" food like traditional cheeses).
So, that's, from my perspective, a reasonably balanced description of the CAP. If you think it is hopelessly biased, being written by a French paper and commented by another French guy (although you know where I stand on this topic), here's the version from the Economist:
Europe, in particular, is struggling with its cosseted and deeply entrenched farm lobby. France has historically been the biggest obstacle to reform; almost half its area is farmland, and its farmers defend their subsidies vigorously. Thanks to such obstructionism, the EU's common agricultural policy (CAP) accounts for nearly half of its overall budget, even though only 4% of its population still works the land. Though there has been some modest progress on reform in recent years, disputes over the CAP are still acrimonious. A row over its funding was the main reason for the collapse of the EU summit in Brussels last week.
The reasons that I am personally favorable to a big reform of the CAP are:
- the impunity that farmers have in France. They can flaunt rules (especially environmental ones), they can riot and break public buildings and do various illegal acts and are never punished for it, and this is simply not tolerable; this is especially important as it becomes ever more important to enforce environmental and sanitary rules;
- France wastes a lot of its political capital in Europe on defending the CAP blindly, when a little more public and private flexibility would go a long way to reestablishing its - much needed from my perspective - leadership on other topics;
- the policy of favouring agrobusiness over small farmers needs to be changed, and this is not especially a French problem;
- similarly, all policies that distort international trade to the detriment of the agricultures of developing countries needs to be scrapped as much as possible.
But the CAP need not be scrapped altogether. And the fact that it uses up a large chunk of the budget is because all European countries are too selfish to put more money in the common pot for more ambitious policies in other areas (even those they purport to support like science, R&D and the like), and thus because the overall budget is too small, not because the agriculture budget is too big.