EU306 lecture slides8 - Common Agricultural Policy (CAP)...

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Common Agricultural Policy (CAP)
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CAP CAP – system of EU agricultural subsidies Represents about 44% of the EU budget Subsidies function by: - Guaranteeing a minimum price to producers - Giving direct payment of a subsidy for crops planted Reforms are planned for the future of CAP
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CAP The CAP has shaped European Agriculture for approximately the last 50 years Decisions regarding the future of CAP will have an impact on millions of individuals, households, industries, farmers, food manufacturers, and exporters of food
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Beginnings of the CAP Proposed in 1960 by the EC The six original members intervened strongly in their agricultural sectors This intervention posed an obstacle to free trade Countries like France wanted to maintain strong state intervention in agriculture
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Beginnings of the CAP This could therefore only be achieved if policies were harmonized and transferred to the EC level CAP became a political compromise between Germany and France: German industry would have access to the French market, in exchange Germany would help pay for France's farmers
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How the CAP works CAP maintains commodity price levels within EU and by subsidising production 3 mechanisms 1. Import Tariffs – applied to specified goods imported into the EU (set to raise world market price up to the EU target price) 1. Internal intervention price – if the internal market price falls below the intervention level then the EU will buy up goods to raise the price to the intervention level
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How the CAP works 1. Subsidies – paid to farmers growing particular crops, intended to encourage farmers to choose to grow those crops attracting subsidies and maintain home- grown supplies Change in subsidies is intended for 2011
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How the CAP Works CAP also makes use of external trade policy Some non-member countries have negotiated quotas which allow them to sell particular goods within the EU without tariffs CAP also tries to promote legislative harmonizatiob within the EU (ex. Differing laws regarding things like preservatives or coloring agents in foods, labelling regulations, use of hormones and drugs in livestock and disease control)
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CAP All countries subsidize their farming sectors to a greater or lesser degree - Ex: total support to agriculture in 2001 was $311 billion - Producer support is 21% of farm income in the USA and 35% in the EU
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Background of the CAP Introduced in 1960 Aim: to provide a reasonable standard of living for farmers and a reasonably priced food for all - Are these reasons still relevant?
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Original Aims vs. Situation Today of CAP Original aim 1 : Improve production yields to guarantee farm supplies - Situation today : no longer needed due to freely competitive agricultural markets and technological innovation Original aim 2 : Ensuring a fair standard of living for EU farmers - Situation today : major doubts to this objective; wide division between large-scale and small-scale farmers within the EU (especially new member countries)
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Original Aims vs. Situation Today
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EU306 lecture slides8 - Common Agricultural Policy (CAP)...

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