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Common Agricultural Policy

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What is the Common Agricultural Policy?
The Common Agricultural Policy (CAP) is an EU policy. It was introduced to increase the quantity of food produced by EU farmers to help with shortages after the Second World War. Its aims have now changed and instead it tries to protect the EU farming industry by making payments to farmers to look after the countryside, and by funding rural development. This subsidises the cost of farming, allowing food to be sold for less so farms can compete with cheaper farms outside the EU.

It has been a cause of controversy because of its high cost, but also because it is seen as an unfair way of protecting European agriculture from overseas competition.

How the Common Agricultural Policy developed
The CAP was created in 1957 under the Treaty of Rome. It started operating in 1962 and was successful in boosting food production.  Reforms to the CAP came in 1992 following food surpluses in the previous decades. Price support, where farmers would be guaranteed certain prices for everything they produced, was replaced with direct payments to farms. The focus of the CAP started to switch towards food quality and caring for the environment. In 2000 there was further reform that widened the CAP’s focus to include rural development. Neither made a significant difference to the level of subsidies paid to farmers.

In June 2003, EU agricultural ministers agreed changes which were brought in between 2005 and 2012.  Farmers were no longer subsidised but received a lump-sum called the Single Farm Payment. They were encouraged to produce in response to consumer demand. Instead of payments being made to control how much farmers produced, they started being paid for their role as guardians of the countryside.

In May 2008, the European Commission came up with new proposals to improve the CAP. These included; reducing payments to large farms, increasing money available to fund rural development, subsidising farmers who grow crops for biofuels (considered more environmentally friendly than fossil fuels) and abolishing the ‘set aside’ scheme, which paid farmers to leave a part of their land unfarmed to prevent over-production.

Environmental groups criticised the ending of the ‘set aside’ scheme, claiming it would endanger wildlife in unfarmed areas. Following a fall in milk prices in late 2009 farmers protested and the EU agreed to spend €17.9m to protect the EU dairy industry in 2010-13.

More reforms came as the result of the first ever comprehensive review of the CAP, with the intention of making it greener, fairer and more efficient.  By 2013 a number of reforms had been approved for implementation from 2015-2020.

The Common Agricultural Policy today
The most notable reforms were the replacement of the Single Farm Payment with a scheme under which farmers will receive a flat-rate subsidy based on the acres of land they own. This introduced the concept of greening whereby farmers are expected to satisfy a number of environmentally beneficial criteria to qualify for 30% of their funding. To address the lack of young farmers, new entrant young farmers (those under the age of 40) are also given a 25% top-up to their payments in their first five years.

The CAP budget for the period 2014-2020 is €278bn, with the UK receiving €27.6bn over the seven year period. As the largest single component of the EU budget, the CAP impacts on the contributions countries must pay to the EU and affects the amount the UK gets back in the rebate.