CAP1 - TheCAP TheCAP AadvanMourik policy x CAP x x...

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The CAP The CAP Aad van Mourik
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Objective of the presentation Objective of the presentation Overview of the economics of agricultural  policy Overview of the functioning of the “old”  CAP Overview of the main CAP reform The future of the CAP 
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STRUCTURE OF EC  STRUCTURE OF EC  AGRICULTURE (contd.) AGRICULTURE (contd.) Reason : Productivity growth differential between  industry/agriculture (1.8/1.6% p.a.) Most developed MS: GDP contribution: 2.5-3% Employment: 5-6% Least developed MS: GDP contribution: 10-20% Employment: 15-30%
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Rationale for agricultural  Rationale for agricultural  policy policy instability of agricultural markets cobweb models of price instability food security  structural falling behind of farm incomes low price and income elasticities of demand supply shifts due to technological advances cause relative farm  prices to fall limited labour mobility because resources are trapped in  agriculture maintenance of the rural population environmental and landscape benefits - the  multifunctionality of agriculture
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CAP was intended as a common policy that was to strengthen common links in other policy areas OBJECTIVES OF THE CAP OBJECTIVES OF THE CAP Article 39, Rome Treaty: increase agric. productivity fair standard of living market stabilization availability of supplies reasonable prices for consumers
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Operating principles Operating principles Three main operating principles put forward  during the Stresa Conference (1958) EU preference EU free trade Shared financial responsibility The first two suggest a customs union for  agricultural products with high import tariffs The third principle a funding through the EC  budget
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PROPOSED MEASURES MANSHOLT REPORT 1968 affecting the structure of production: reduction of number of persons employed (supplementary income allowance for older people if they release land, enable younger farmers to change to non-farming activities, retraining) create farms of adequate economic dimensions adjusting supply more closely to demand : reduce area of cultivated land improve information to market parties, impose stricter discipline on producers, concentration of supply cautious price policy in case of poorest farmers: provide personal assistance NOT tied to volume of production or employment
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FUNCTIONING OF THE CAP Target prices Intervention prices Threshold prices Variable export subsidies (Variable) import levies (now tariffied) Monetary compensation amounts (MCAs)
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THE CAP’S PRICE SUPPORT SYSTEM: CEREALS WORLD EC TARGET PRICE THRESHOLD PRICE VARIABLE INTERVENTION IMPORT PRICE LEVY EXPORT REFUND WORLD PRICE
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Target Price Target Price Target price: the ideal price for the EU, offering 
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This note was uploaded on 03/23/2010 for the course ECON D0M09A taught by Professor Vanmourik during the Winter '10 term at Katholieke Universiteit Leuven.

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CAP1 - TheCAP TheCAP AadvanMourik policy x CAP x x...

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