This student report was prepared for Agricultural Rural Policy of EU Course during my Erasmus Exchange period in University of Helsinki (January-May 2008). I tried to give all the references I benefit from, thanks for their understanding. This report graded as 10/10 by the profesor. For who want to use some parts of this report please indicate in your references as:
Gürkan, O. 2008. "COMMON AGRICULTURAL POLICY OF EUROPEAN UNION: WHEN? HOW? WHY and by WHOM IT was ESTABLISHED?, University of Helsinki, MPOL1 Course Report 1. Web site: www.abtarim.blogspot.com
---------
WHEN? HOW? WHY and by WHOM IT was ESTABLISHED?
1. INTRODUCTION
After the long lasting wars in the 19th century, tired and damaged European Countries decided to pass the management of some important war industry resources to a supra-national organization to forestall the future wars. Regarding to the suggestion of Jean MONNET, under the leadership of Robert SCHUMAN the "SIX ORIGINALS" of the Europe (France, West Germany, Italy, Belgium, the Netherlands, and Luxembourg), signed an agreement in Paris in 1957 to establish a common market for coal and steel.
The effectiveness and success of this supra-national organization on coal and steel policy has followed by the establishment of European Economic Community (EEC) in 1957, to developed more common policies which are both in political and economical dimension. The priority task for European countries was to establish a common ground for agricultural policy which is very diverse from each other, to supply safe and secure food for their citizens which were having so many problems to reach food during and after the war years. Reduced rates in production, non-stable markets for farm products and food safety problems. After very severe arguments the one of the first common policy of European Union (was EEC in that days), was settled up. The "Common Agricultural Policy" (CAP) of Europe.
At the beginning it was designed to encouraging better productivity in the food chain, so that consumers had a stable supply of affordable food, but also to ensure that the EU had a viable agricultural sector as described in the document named "The Common Agricultural Policy Explained". The CAP was very successful in meeting its objective of moving the EU towards selfsufficiency, by the 1980s the EU had to contend with almost permanent surpluses of the major farm commodities, some of which were exported, others of which had to be stored or disposed of within the EU [1]. Passing years and chancing conditions of the world and the union, the common agricultural policy of EU has subjected to many reforms.
Today's CAP is one of the most developed and complex structured policy area both in Europe Union and the world, and still being subject to reforms to follow the and afford the demands of growing world and its own citizens. The environment where it has been first established and how it change during this long run is amazing. Today EU is the one of the major player of global
agricultural trade and world’s largest agricultural importer and the world’s second largest exporter [1][2][8] (Figure 1 and 2). As indicated in the document of USDA [8], 2004: The United States and the European Union are the world’s largest exporters of agricultural products, each accounting for nearly 20 percent of global exports in 1996-2000. The European Union is the world’s top importer of agricultural goods, and, since 1996, the United States is the second largest. Since 1996, the United States has imported, on average, 13 percent of world trade in agricultural products, while the EU accounted for 18 percent.
----------------------------------------
Figure 1: U.S., EU agricultural exports by major categories, 2000 [8]
----------------------------------------
----------------------------------------
Figure 2: U.S., EU agricultural imports by major categories, 2000 [8]
----------------------------------------
Today CAP is not just focused on economical and political dimension but also cares about the social life of its citizens. Health and environmental issues, animal welfare and the consumer demands are taking very important place in the policy. EU socializing its rural areas to set up a sustainable life for farmers.
In this report the history of the Common Agricultural Policy of EU will be described. Why? When? How? And who established it?
2. HISTORY OF THE CAP
2.1. WHEN, WHY and by WHOM?
The roots of the CAP starts in early 1950s following the idea of establishment of the black pool
(establishment of European Coal and Steel Community), the setting up of a green pool (to organize agricultural production and food supplies) was stated [3].
As mentioned under the introduction part; the Europe was become tired and damaged and related to widespread rural welfare problems, the relative backwardness of agricultural production in many areas, and a perceived need for secure food supplies following shortages persisted for nearly a decade following World War II [2]. On the other hand it was not easy to sustain the agricultural policies within the Continental Europe because many different agricultural policies was exist and this was also introducing new challenges to the countries during determining their own production gradient [4]. So it was necessary to carry a CAP within Continental Europe to surmount the difficulties in the area of agriculture. However, it was not possible to establish the green pool because of the jarring interest of the France and England [3].
In 1955, Paul-Henri SPAAK (Foreign Affairs Minister of Belgium), formulized the importance of the agricultural integration for establishment of the common market for very first time in his report –very well known as SPAAK Report. SPAAK was determining 3 important necessary conditions to complete to setting up a common market for agricultural products [5]:
1. To remove the barriers in Agricultural trade, including the quotas, custom duties, seasonal restrictions, export subsidize.
2. Setting up a common agricultural policy for all the member states
3. Requirement for a transitional period to harmonize the technical area, agricultural input sectors, and price levels.
These priorities had form the basics of the decisions related to agriculture under Treaty of Rome (Founder Treaty of the European Economic Community-1957 and establishes common market). The reasons behind the establishment of the common agricultural policy lay down under the purpose of the CAP which are introduced under article 39 of Title II of Part III of Rome Treaty as follows (Article 33 in Treaty of EU) (Figure 3) [7]:
(a) to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour;
(b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture;
(c) to stabilise markets;
(d) to assure the availability of supplies;
(e) to ensure that supplies reach consumers at reasonable prices.
The agricultural sector; was the most problematic area of the economic integration for the EC countries to negotiate because the agriculture of each was so different then each other. Each country had its own food and agricultural policies developed to meet the needs of its citizens [5] [9].
2.2. HOW?
Common agricultural policy has 3 target groups; which are Farmers, Consumers and Public Society. Related to these groups CAP is consist of production increase, income increase, food safety and security, affordable prices for required goods, environment and supply-demand equilibrium. Since the long lasting argument between Germany and France regarding to Germany’s power on the markets with its industrial products, France was expecting to introduce its power on agricultural products [3]. So, following the signing of Treaty of Rome, in 1958 during the Stresa Conference 3 fundamental principles of the CAP was introduced and Council of EEC was agreed on these principles in 1960 [2][3][4][10]:
1) Free trade within the Community based on common prices (Single Market): Member states should remove all trade barriers (custom duties, quantity restrictions, etc.) incrementally, should harmonize the administrative and technical procedures and health standards related to agricultural products. By these ways agricultural products could move freely between the Member States and Single Market would be set up. Establishment of the single market also required to determination of the common price formation and common protection against 3rd countries. Single Market would also allow harmonizing of the plant, animal and public health standards.
2) Preference for Community produce in Community markets: As it clearly indicates in its name, the agricultural products of and the production in Member States, will be supported as a whole. In this scope, Community will be able to take measures to protect the domestic market by import limitations and to support the exportation of the community products.
3) Joint financial responsibility: All Member States must undertake the setting up the community budget and all the required costs related to the management of the CAP will be met from this budget. In 1962, this principle was strengthening by the establishment of European Agricultural Guidance and Guarantee Fund (FEOGA, EAGGF). Since 1962, with an increasing amounts the total budget for CAP has reached to 50% of thetotal EU budget, and for 2007-2013 period it has determined around 40-45% (Figure 4) [11]. Large share of the Agriculture always subjected to discussion, however, it is reducing and has fixed for 2007-2013 period.
----------------------------------------
Figure 4: EU Expenditure in2006 and 2007-2013 peroid [11].
----------------------------------------
3. CONCLUSION
Under different literature sources the development of the CAP is described with similar milestones, if we try to summarize them[2][3][10]:
+ Establishment of CAP (1956-67)
- Common organisation of agricultural markets
- Setting up the agricultural budget
- Formation of common prices
+ Positive effects of CAP (1968-79)
- Price support mechanisms for unlimitted production
- Levy
+ Growing Problems and Reforms (1980-89 and 1990-95)
- Green Paper and Integrated Mediteranien Programs
- Delor’s Package
- Beginning of direct payments
- GATT/WTO Negotiations and Effects of Uruguay Round
+ Enlargement and Its Effects (1996-2006)
- Agenda 2000
- Enlargement
+ Last Stage (2007-2013)
- Social Responsibility
- More Environment Friendly Production
- Improvement of Rural Areas
- Competitiveness
At the beginning CAP was foreseen as an arrangement to supply mostly the domestic demands, however, as a result of heavy supports and protection on agriculture the production was improved to over demand, producer income increased. In a very short period, in 1980s EU (EEC at that time) was placed in very important place within the world agriculture market, and became a very important and competitive rival of USA and other important agricultural product exporter countries [5].
The CAP was very successful in meeting its objective of moving the EU towards self-sufficiency,
commodities, some of which were exported, others of which had to be stored or disposed of withinby the 1980s the EU had to contend with almost permanent surpluses of the major farm the EU [1] (Figure 5). In many different platforms the production increase and surplus are described as butter mountains, milk seas and wine lakes…
----------------------------------------
Figure 5: Changes in self-sufficiency of EU on main agricultural products [1]
----------------------------------------
Changing composition in world agriculture and trade, and changing conditions of the EU, has made reforms in CAP. Today CAP is not anymore what it was in 1960s-80s. Many important changes to the CAP were made in the 1990s. Production limits helped reduce surpluses and a new emphasis was placed on environmentally sound farming. However, with new introduced measures today EU farmers more competitive and market oriented. They will be free to produce according to what is most profitable for them while still enjoying a desirable stability of income [1].
As Franz Fischler says; In the past ten years scarcely a stone has been left unturned in the EU’s
common agricultural policy (CAP). A far cry from the policy that once offered subsidies in response to the quantity produced, CAP support is now dependent on meeting quality, environmental and food safety guarantees, in line with the priorities of the European public [1].
REFERENCES
[1] Anonymous, 2004. "The Common Agricultural Policy Explained", European Commission
Directorate General for Agriculture.
[2] Hasha, G. 1999. "The European Union’s Common Agricultural Policy: Pressures for Change - An Overview", Economic Research Service/USDA.
[3] Eraktan, G. 2005. "Avrupa Birligi Ortak Tarim Politikasi, Summary of the Conference V";Preparation For EU Negotiations Conferences Ministry of Agriculture and Rural Affairs Website:www.tarim.gov.tr/arayuz/10/icerik.asp?fl=../AB_Tarim/abhazirlik_konferanslar/kon
ferans_anasayfa.htm
[4] Varol, S. 2003."Dünden Bugüne OTP ve AB Tariminin Yönetim Yapisi" AB Genisleme Sürecinde Türkiye: "Tarimsal ve Kirsal Politikalar" Semposium. Chamber of Agricultural Engineers Website: www.zmo.org.tr/etkinlikler/abgst03.php
[5] Eraktan, G., Ören, N., 2005. “AB Ortak Tarim Politikasi Reform Süreci ve Türkiye’ye Etkileri” Türkiye Ziraat Mühendisligi VI. Teknik Kongresi, 1. Cilt, Sy: 23-33, 3-7 Ocak 2005 Milli Kütüphane, Ankara
[6] Anonymous, 2008. University Association for Contemporary European Studies Official website: www.uaces.org
[7] Anonymous, 2008. European Union Website: http://eur-lex.europa.eu/LexUriServ/site/en/oj/2006/ce321/ce32120061229en00010331.pdf
[8] Normile M. A. and Price, J., 2004. "The United States and the European Union— Statistical Overview"; U.S.-EU Food and Agriculture Comparisons / WRS-04-04, Economic Research Service, USDA p:1-13
[9] Porter J. M. and Bowers D. E. 1989. "A Short History of U.S. Agricultural Trade Negotiations" Agriculture and Rural Economy Division, Economic Research Service, U.S. Department of Agriculture
[10] Erkal, A., 2003. EU Expertise Thesis. “Avrupa Birligi Ortak Tarim Politikasi Kapsaminda Taze Meyve Ve Sebze Ortak Piyasa Düzeni”. Ministry of Agriculture and Rural Development.
[11] Hausner, K.H. 2007. “The European Budget in the Years 2007 to 2013 and the Common Agricultural Policy”. Intereconomics, January/February 2007, s 54 - 60
Gürkan, O. 2008. "COMMON AGRICULTURAL POLICY OF EUROPEAN UNION: WHEN? HOW? WHY and by WHOM IT was ESTABLISHED?, University of Helsinki, MPOL1 Course Report 1. Web site: www.abtarim.blogspot.com
---------
WHEN? HOW? WHY and by WHOM IT was ESTABLISHED?
1. INTRODUCTION
After the long lasting wars in the 19th century, tired and damaged European Countries decided to pass the management of some important war industry resources to a supra-national organization to forestall the future wars. Regarding to the suggestion of Jean MONNET, under the leadership of Robert SCHUMAN the "SIX ORIGINALS" of the Europe (France, West Germany, Italy, Belgium, the Netherlands, and Luxembourg), signed an agreement in Paris in 1957 to establish a common market for coal and steel.
The effectiveness and success of this supra-national organization on coal and steel policy has followed by the establishment of European Economic Community (EEC) in 1957, to developed more common policies which are both in political and economical dimension. The priority task for European countries was to establish a common ground for agricultural policy which is very diverse from each other, to supply safe and secure food for their citizens which were having so many problems to reach food during and after the war years. Reduced rates in production, non-stable markets for farm products and food safety problems. After very severe arguments the one of the first common policy of European Union (was EEC in that days), was settled up. The "Common Agricultural Policy" (CAP) of Europe.
At the beginning it was designed to encouraging better productivity in the food chain, so that consumers had a stable supply of affordable food, but also to ensure that the EU had a viable agricultural sector as described in the document named "The Common Agricultural Policy Explained". The CAP was very successful in meeting its objective of moving the EU towards selfsufficiency, by the 1980s the EU had to contend with almost permanent surpluses of the major farm commodities, some of which were exported, others of which had to be stored or disposed of within the EU [1]. Passing years and chancing conditions of the world and the union, the common agricultural policy of EU has subjected to many reforms.
Today's CAP is one of the most developed and complex structured policy area both in Europe Union and the world, and still being subject to reforms to follow the and afford the demands of growing world and its own citizens. The environment where it has been first established and how it change during this long run is amazing. Today EU is the one of the major player of global
agricultural trade and world’s largest agricultural importer and the world’s second largest exporter [1][2][8] (Figure 1 and 2). As indicated in the document of USDA [8], 2004: The United States and the European Union are the world’s largest exporters of agricultural products, each accounting for nearly 20 percent of global exports in 1996-2000. The European Union is the world’s top importer of agricultural goods, and, since 1996, the United States is the second largest. Since 1996, the United States has imported, on average, 13 percent of world trade in agricultural products, while the EU accounted for 18 percent.
----------------------------------------
Figure 1: U.S., EU agricultural exports by major categories, 2000 [8]
----------------------------------------
----------------------------------------
Figure 2: U.S., EU agricultural imports by major categories, 2000 [8]
----------------------------------------
Today CAP is not just focused on economical and political dimension but also cares about the social life of its citizens. Health and environmental issues, animal welfare and the consumer demands are taking very important place in the policy. EU socializing its rural areas to set up a sustainable life for farmers.
In this report the history of the Common Agricultural Policy of EU will be described. Why? When? How? And who established it?
2. HISTORY OF THE CAP
2.1. WHEN, WHY and by WHOM?
The roots of the CAP starts in early 1950s following the idea of establishment of the black pool
(establishment of European Coal and Steel Community), the setting up of a green pool (to organize agricultural production and food supplies) was stated [3].
As mentioned under the introduction part; the Europe was become tired and damaged and related to widespread rural welfare problems, the relative backwardness of agricultural production in many areas, and a perceived need for secure food supplies following shortages persisted for nearly a decade following World War II [2]. On the other hand it was not easy to sustain the agricultural policies within the Continental Europe because many different agricultural policies was exist and this was also introducing new challenges to the countries during determining their own production gradient [4]. So it was necessary to carry a CAP within Continental Europe to surmount the difficulties in the area of agriculture. However, it was not possible to establish the green pool because of the jarring interest of the France and England [3].
In 1955, Paul-Henri SPAAK (Foreign Affairs Minister of Belgium), formulized the importance of the agricultural integration for establishment of the common market for very first time in his report –very well known as SPAAK Report. SPAAK was determining 3 important necessary conditions to complete to setting up a common market for agricultural products [5]:
1. To remove the barriers in Agricultural trade, including the quotas, custom duties, seasonal restrictions, export subsidize.
2. Setting up a common agricultural policy for all the member states
3. Requirement for a transitional period to harmonize the technical area, agricultural input sectors, and price levels.
These priorities had form the basics of the decisions related to agriculture under Treaty of Rome (Founder Treaty of the European Economic Community-1957 and establishes common market). The reasons behind the establishment of the common agricultural policy lay down under the purpose of the CAP which are introduced under article 39 of Title II of Part III of Rome Treaty as follows (Article 33 in Treaty of EU) (Figure 3) [7]:
(a) to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour;
(b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture;
(c) to stabilise markets;
(d) to assure the availability of supplies;
(e) to ensure that supplies reach consumers at reasonable prices.
The agricultural sector; was the most problematic area of the economic integration for the EC countries to negotiate because the agriculture of each was so different then each other. Each country had its own food and agricultural policies developed to meet the needs of its citizens [5] [9].
2.2. HOW?
Common agricultural policy has 3 target groups; which are Farmers, Consumers and Public Society. Related to these groups CAP is consist of production increase, income increase, food safety and security, affordable prices for required goods, environment and supply-demand equilibrium. Since the long lasting argument between Germany and France regarding to Germany’s power on the markets with its industrial products, France was expecting to introduce its power on agricultural products [3]. So, following the signing of Treaty of Rome, in 1958 during the Stresa Conference 3 fundamental principles of the CAP was introduced and Council of EEC was agreed on these principles in 1960 [2][3][4][10]:
1) Free trade within the Community based on common prices (Single Market): Member states should remove all trade barriers (custom duties, quantity restrictions, etc.) incrementally, should harmonize the administrative and technical procedures and health standards related to agricultural products. By these ways agricultural products could move freely between the Member States and Single Market would be set up. Establishment of the single market also required to determination of the common price formation and common protection against 3rd countries. Single Market would also allow harmonizing of the plant, animal and public health standards.
2) Preference for Community produce in Community markets: As it clearly indicates in its name, the agricultural products of and the production in Member States, will be supported as a whole. In this scope, Community will be able to take measures to protect the domestic market by import limitations and to support the exportation of the community products.
3) Joint financial responsibility: All Member States must undertake the setting up the community budget and all the required costs related to the management of the CAP will be met from this budget. In 1962, this principle was strengthening by the establishment of European Agricultural Guidance and Guarantee Fund (FEOGA, EAGGF). Since 1962, with an increasing amounts the total budget for CAP has reached to 50% of thetotal EU budget, and for 2007-2013 period it has determined around 40-45% (Figure 4) [11]. Large share of the Agriculture always subjected to discussion, however, it is reducing and has fixed for 2007-2013 period.
----------------------------------------
Figure 4: EU Expenditure in2006 and 2007-2013 peroid [11].
----------------------------------------
3. CONCLUSION
Under different literature sources the development of the CAP is described with similar milestones, if we try to summarize them[2][3][10]:
+ Establishment of CAP (1956-67)
- Common organisation of agricultural markets
- Setting up the agricultural budget
- Formation of common prices
+ Positive effects of CAP (1968-79)
- Price support mechanisms for unlimitted production
- Levy
+ Growing Problems and Reforms (1980-89 and 1990-95)
- Green Paper and Integrated Mediteranien Programs
- Delor’s Package
- Beginning of direct payments
- GATT/WTO Negotiations and Effects of Uruguay Round
+ Enlargement and Its Effects (1996-2006)
- Agenda 2000
- Enlargement
+ Last Stage (2007-2013)
- Social Responsibility
- More Environment Friendly Production
- Improvement of Rural Areas
- Competitiveness
At the beginning CAP was foreseen as an arrangement to supply mostly the domestic demands, however, as a result of heavy supports and protection on agriculture the production was improved to over demand, producer income increased. In a very short period, in 1980s EU (EEC at that time) was placed in very important place within the world agriculture market, and became a very important and competitive rival of USA and other important agricultural product exporter countries [5].
The CAP was very successful in meeting its objective of moving the EU towards self-sufficiency,
commodities, some of which were exported, others of which had to be stored or disposed of withinby the 1980s the EU had to contend with almost permanent surpluses of the major farm the EU [1] (Figure 5). In many different platforms the production increase and surplus are described as butter mountains, milk seas and wine lakes…
----------------------------------------
Figure 5: Changes in self-sufficiency of EU on main agricultural products [1]
----------------------------------------
Changing composition in world agriculture and trade, and changing conditions of the EU, has made reforms in CAP. Today CAP is not anymore what it was in 1960s-80s. Many important changes to the CAP were made in the 1990s. Production limits helped reduce surpluses and a new emphasis was placed on environmentally sound farming. However, with new introduced measures today EU farmers more competitive and market oriented. They will be free to produce according to what is most profitable for them while still enjoying a desirable stability of income [1].
As Franz Fischler says; In the past ten years scarcely a stone has been left unturned in the EU’s
common agricultural policy (CAP). A far cry from the policy that once offered subsidies in response to the quantity produced, CAP support is now dependent on meeting quality, environmental and food safety guarantees, in line with the priorities of the European public [1].
REFERENCES
[1] Anonymous, 2004. "The Common Agricultural Policy Explained", European Commission
Directorate General for Agriculture.
[2] Hasha, G. 1999. "The European Union’s Common Agricultural Policy: Pressures for Change - An Overview", Economic Research Service/USDA.
[3] Eraktan, G. 2005. "Avrupa Birligi Ortak Tarim Politikasi, Summary of the Conference V";Preparation For EU Negotiations Conferences Ministry of Agriculture and Rural Affairs Website:www.tarim.gov.tr/arayuz/10/icerik.asp?fl=../AB_Tarim/abhazirlik_konferanslar/kon
ferans_anasayfa.htm
[4] Varol, S. 2003."Dünden Bugüne OTP ve AB Tariminin Yönetim Yapisi" AB Genisleme Sürecinde Türkiye: "Tarimsal ve Kirsal Politikalar" Semposium. Chamber of Agricultural Engineers Website: www.zmo.org.tr/etkinlikler/abgst03.php
[5] Eraktan, G., Ören, N., 2005. “AB Ortak Tarim Politikasi Reform Süreci ve Türkiye’ye Etkileri” Türkiye Ziraat Mühendisligi VI. Teknik Kongresi, 1. Cilt, Sy: 23-33, 3-7 Ocak 2005 Milli Kütüphane, Ankara
[6] Anonymous, 2008. University Association for Contemporary European Studies Official website: www.uaces.org
[7] Anonymous, 2008. European Union Website: http://eur-lex.europa.eu/LexUriServ/site/en/oj/2006/ce321/ce32120061229en00010331.pdf
[8] Normile M. A. and Price, J., 2004. "The United States and the European Union— Statistical Overview"; U.S.-EU Food and Agriculture Comparisons / WRS-04-04, Economic Research Service, USDA p:1-13
[9] Porter J. M. and Bowers D. E. 1989. "A Short History of U.S. Agricultural Trade Negotiations" Agriculture and Rural Economy Division, Economic Research Service, U.S. Department of Agriculture
[10] Erkal, A., 2003. EU Expertise Thesis. “Avrupa Birligi Ortak Tarim Politikasi Kapsaminda Taze Meyve Ve Sebze Ortak Piyasa Düzeni”. Ministry of Agriculture and Rural Development.
[11] Hausner, K.H. 2007. “The European Budget in the Years 2007 to 2013 and the Common Agricultural Policy”. Intereconomics, January/February 2007, s 54 - 60
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