The Changed Architecture of the EU’s Agricultural Policy Over Four Decades: Trade Policy Implications for Australia

Abstract

When the European Economic Community (EEC)—today’s European Union (EU)—created its common agricultural policy (CAP) in the 1960s and 1970s it paid scant regard to the interests of other nations. That ‘old’ CAP attempted to increase farm incomes by manipulating farm-gate prices, while a nascent, but rather ineffectual, structural policy sought to improve the competitive structure of European agriculture. Details differed from one product to another, but market price support meant in the main that imports were heavily taxed, exports subsidised and intervention stocks accumulated. When, in 1973, the EEC was enlarged with the accession of Denmark, Ireland and the United Kingdom (UK)—the latter a major importer of agricultural products from world markets—trade diversion was inevitable, and Australia in particular found its agricultural products displaced from the UK market. The CAP’s escalating budgetary costs in the 1980s led to some half-hearted attempts at reform, but it was the Uruguay Round of trade negotiations under the auspices of the General Agreement on Tariffs and Trade (GATT) that triggered a succession of ‘reforms’ that significantly changed the CAP’s policy mechanisms, while retaining its core focus of farm income support. The latest recalibration of the CAP, in 2013, established the policy framework for the period 2014–20. The aim of this chapter is to briefly explain the succession of policy changes of the last four decades and how it has changed the policy context within which a free trade area agreement with Australia has to be considered.