Europe's Agriculture: Reform of the Cap*

Abstract

A GRICULTURAL issues have played a large part in the development of the European Community. In the 1950s they helped to discourage British participation in the Common Market. In the 1960s agricultural policy became the most active area of common decision-taking as the Common Agricultural Policy (CAP) was established. In the 1970s the process of enlargement has involved much discussion about agriculture. Today the admission of Greece, and possibly of Spain and Portugal, again raises sensitive agricultural matters. The CAP brings agriculture within the Common Market 'by regulating trade with third countries and by maintaining the internal price level of key agricultural products. In addition, the policy promotes the structural improvement of the industry through payments made under the 'guidance ' section of the European Agricultural Guidance and Guarantee Fund (EAGGF). Total payments from this fund to maintain prices and support structural improvements absorb very much the largest share of the Community's budget, some 74 per cent in 1977. Even so, Community-financed support represents only part of all the official aid given to farmers. In 1975 payments from national governments were equivalent to twice the amount financed through the CAP. In addition to budget payments, the CAP brings about a transfer of incomes from consumers to farmers whenever the price at which imports are available is below the prices fixed within the Community. Sometimes, as in 1973 and 1974, the direction of this transfer has been reversed for some products. But in general the effect of the policy has been to keep prices higher than they would otherwise have been. The goals set out by the founders of the Community for the CAP (Article 39 of the Rome Treaty) included improved productivity and thereby improved incomes for those working in the industry, stable markets, regular supplies and reasonable prices for consumers. The performance of the industry since 1958 might be thought to reflect a measure of success in these directions. Productivity has risen, fewer men are employed and more is produced. The price level has been