CAP was introduced in 1957 under the auspices of the Treaty of Rome. Besides ensuring food security – which to all intents and purposes it has enabled Europe to achieve -- price stability and the increased flow of income to European farmers are the most important of its four basic pillars. CAP was also designed to ensure that agriculture provides a base for economic development, the creation of employment, and linkages with other sectors of the economy.
However, the resultant mountains of food and lakes of wine introduced distortions in global trade in agricultural commodities by placing downward pressure on global commodity prices; often, surplus commodities were dumped on the international market, thus affecting production outside Europe. These trends, coupled with tariff barriers, have resulted in the creation of a ‘double exclusion’ system - with prices being affected as a result of subsidisation on the one hand, and tariff protection on the other. Developing countries with a strong agricultural export potential have been negatively affected.
Factors with a bearing on CAP reform are many. CAP currently comprises about 50% of the EU budget, compared to 70% when it was first introduced. This constitutes a significant degree of ‘aid’ to European farmers. As an Oxfam report once noted, the subsidies are so large that one is able to transport a European cow several times around the earth. From an environmental perspective, the importance of CAP lies in the fact that it has enabled, directly or indirectly, almost half of European land to be transformed by agriculture. Besides the negative impacts that CAP subsidies have had on the environment, consumer groups have been protesting against high prices and the tax burden on European citizens. This is likely to increase as the programme of European enlargement takes off. CAP also benefits 20% of privileged farmers, bringing into question the equity of the scheme and the damage it has done to family farms in favour of large-scale agro-industries.
The CAP mechanisms of border price support and direct payments to farmers have heavily influenced the nature of farming in Europe. European consumer resistance to CAP is largely based on the fear - demonstrated in respect of ‘mad cow disease’ and the introduction of GMOs - that CAP is undermining quality. Besides this, CAP has been criticised by trade unions as it supports 2-3% of the European labour force while other sectors have suffered persistent unemployment (about 12%). This raises the political issue of whether CAP funds should not be diverted to other sectors in order to combat unemployment.
Besides this, the process of CAP reform will have to take into account the issue of enlargement, which involves the incorporation of east European countries into the EU, thus placing considerably more agricultural land and farmers under the CAP system. Such expansionism may well lead to the consolidation of smaller farms into large agro-industries dominated by capital from the prosperous west. This may increase income disparities while expanding Europe’s ability to generate even greater surpluses of feedstock and food that will glut the world market.
CAP reform has been initiated because its original rationale has become lost over the last 40 years or so. The principles behind it are reflected in the introduction of the Common Agricultural and Rural policy for Europe (CARPE), which is a response to shortcomings in CAP policy. One of its major objectives is to ‘ensure an economically efficient and environmentally sustainable agriculture, and to stimulate the integrated development of the Union’s rural areas.’ Another is to find ways of ensuring that European agriculture becomes more internationally competitive by removing price distortions and other structural imbalances that have led some farmers to produce low-value and low-quality agricultural products. CARPE marks a shift from price support to a system of direct payment to farmers, with an emphasis on rural investment (as a way of ensuring that EU farmers become more adaptable to changing global markets), and land rehabilitation and management.
Following Doha, and the agreement on a new round in 2003, agricultural reform under the WTO will once again put CAP under the spotlight. The persistence of the doctrine of ‘multifunctionality’ within the EU is still a bone of contention. While the EU may recognise the need to remove perverse subsidies, ‘multifunctionality’ -- or what is now euphemistically referred to as ‘non-trade concerns’ -- may turn out to be ‘back-handed’ subsidies couched in the language of food security, rural development, and environmental protection. Nonetheless, as part of the programme of action before the Fifth WTO Ministerial in 2003, the WTO committee for trade and the environment (CTE) has been asked to closely examine positive spin-offs from the ‘elimination or reduction of trade restrictions and distortions’ which would result in benefits for the environment, development, and trade. While many environmentalists would agree that the removal of production and export subsidies will have a positive dividend for the environment, the political battle in the WTO needed to shift these subsidies towards real environmental improvements still needs to be fought and won. The danger here is that the same skewed situation could be perpetuated in a new guise.
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