Common Agricultural Policy
Reforming the EU’s Common Agricultural Policy: health check, budget review, Doha Round
Should EU untargeted support to agriculture be abolished?
Authors:
V. Zahrnt
Publisher:
European centre for international political economy, 2008
While the European Commission has tabled a proposal for reforming the Common Agricultural Policy (CAP), the World Trade Organisation (WTO) might necessitate further decisions on agricultural tariff cuts at any time. Related to that, this policy brief argues in favour of a fundamental reform of agricultural policy in the European Union (EU).
The paper notes that the divisions over the CAP appear to be bigger than ever. For example, while some stakeholders propose to abolish tariffs and other protectionist measures, some others deem the CAP so effective that the policy should be exported to developing countries. In this sense, one of the major critical issues in the CAP is the untargeted support to agriculture. While its forms were designed to stimulate production or support farmers' income, some economists consider that it does little to help farmers. The main criticism points on the untargeted agricultural support are that:
- it harms poor consumers who face higher food prices
- it is distributed unfairly among farmers
- it fails to stimulate rural development in disadvantaged regions or to motivate environmentally friendly farming practices
- it is inadequate to support food security
- it distorts the economy and reduces European welfare
On the other hand, the paper deals with the targeted policies, noticing that they are specific to the societal objective they serve. These policies can be particularly efficient to improve the environmental performance of agriculture. They can also keep public expenditures low by repaying farmers their individual costs of providing environmental services. However, to avoid trade distortion, the paper recommends better targeting of subsidies, which would allow the re-nationalisation of agricultural policies. The paper states that agricultural subsidies could be largely left to national authorities. It underlines that national authorities are in a better position to pursue local preferences, with locally responsive policies that are financially more responsible. This would mean the end of the bureaucratic and interventionist CAP as it has existed. And the new era will be one of decentralised agricultural policies that combine free and fair market competition with targeted measures. This combination promotes societal preferences not sufficiently compensated on the market.
