Perspectives on European Agriculture in 2020

Abstract

Earlier 2020 briefs identified annual growth rates for world population of 1.7 percent per year based on United Nations projections and per capita income growth in low- and middle-income economies of 2.9 percent as the major driving forces for growth in agricultural demand. These growth rates would probably result in a food demand increase of 2.5--3.0 percent, which should then be matched by agricultural production. Over the period 1970--90, production grew 2.3 percent annually, but most experts agree that major efforts will be needed to sustain a growth rate of about 2 percent in the future. Though most of this production growth will be realized within the regions, some food will have to be imported, and international trade will play an increasingly important role. Drawing on a recent study of European Union (EU) agriculture, this brief focuses on the EU-12 members in 1994 and discusses the consequences of possible further reforms of the EU's Common Agricultural Policy (CAP) on its agriculture and its potential as an agricultural exporter. The EU and CAP Reform Boosted by high support prices, EU agriculture is dynamic and productive. The EU is now a net exporter of cereals, meat, and milk products. This achievement comes with two problems: first, surpluses can only be deposed of by using export subsidies, leading to confrontations with other exporters; second, the high internal prices adopted by the EU to subsidize its exports and to support its farmers have led to steadily rising agricultural outlays in the budget. These pressures led to a reform of the CAP in 1992, which then paved the way for the General Agreement on Tariffs and Trade (GATT). This new policy environment will change the position of the EU on the world market and open new opportunities. The EU is already a major player on world food markets. It is a large importer of coffee, tea, cacao, oilseeds, tropical fruits, and feedstuffs. Exports mainly consist of temperate products such as dairy, wheat, meat, and horticultural products. EU agriculture is characterized by high productivity per farmer and per hectare, and by high internal prices that are realized through high rates of protection on exports. Rates of protection on agricultural imports are virtually prohibitive, except on tropical products, fats and oils, and animal feeds such as protein feeds (cakes) and carbohydrates (corn gluten and cassava, for example). Tables 1 and 2 illustrate the EU's international role.