Review by Olivier Charnoz

 

 

 

The CAP is a unique experiment in social engineering:

 

· Centrally financed and directed by the EU

· Comprehensive in scope (responsibility for the welfare of the entire agricultural population)

· Logic of 'positive integration, whereas the basic idea behind European integration is an intervention free common market

· Remarkable also for its size (1/2 of the budget)

· The CAP has developed from an important source of internal and external stability into a source of crises Þ political battleground Þ attitudes toward the CAP often have very little to do with agriculture.

 

The article wants to show (+/- its structure) :

 

-                                   the proliferation and diversification of the policy instruments of the CAP

-                                   the deepening of the social and economic problems the CAP intended to solve

-                                   understand this paradox by examining the institutional particularities of the CAP

 

The making of the Common and Agricultural Policy of the European Community

 

Why the CAP ?

 

· Obvious social and economic problems of the agricultural sector after the WW II

· Pressing need for recovery of agricultural production

· Existing apparatuses of national systems of protection in the Members States (MS) -  due to a tradition of special treatment towards Agriculture Þ Position shared by all Member States that " the principle of economic liberalism cannot be applied to farming".

· Franco-German bargain : France opened its markets for German industrial products and in exchange got access to the German market for its agricultural products.

 

Particular features of modern agriculture in Western Europe:

 

· Characterised in large part by small-scale, owner-operated family farms

· Atomistic nature of its economic organisation : the market power of individual farmers is infinitely small (feature reinforced by the uniformity and homogeneity of agricultural products)

· Recently, the markets for purchased inputs have become increasingly important (fertilisers, machines...)

· Agriculture has unique instabilities of its own : vagaries of nature, cumulative effect of false price expectations of thousands of independent producers...

 

European tradition of protection of agricultural sector:

 

· The formation of the nation states, the industrial revolution, the establishment of national markets Þ industrialisation of agriculture and food.

· Second half of the 19^th century : competition of cheaper grains from settler regions (especially USA Canada, Australia, Argentina) Þ agricultural crisis in Europe Þ protectionists policies (primarily to ensure self-sufficiency in food supplies, especially in times of war) Þ both national agricultural and international food regimes became highly regulated

· After the WW II the rapid but uneven recovery brought no return to free markets.

 

Peculiar position of CAP in the Treaty of Rome

 

· The CAP necessitated strong elements of supranational governance, in sharp contrast with the restricted authority of the organs of the new community

· Community's responsibilities for agriculture were much greater than for other fields of economic integration, where the logic of "negative" integration prevailed (abolition of trade barriers, tariffs and quotas...)

· Yet, the institutional dominance of the Council of Ministers put the MS in a much stronger position than the Commission of the EC.

· For Elmar Rieger this is a 'structural error' Þ difficult to reform Þ now the CAP is totally 'out of kilter with the contemporary mood'.

· This intergovernmental feature of the system provides agrarian interest groups with easy access to the centre of decision-making.

 

Guiding principles and price support

 

· The Treaty remained vague on the nature of the CAP.

· Considering the strong position of the Council of Ministers, it took nearly three a half years to settle the basic principles.

· 1: Free trade of agricultural products within the Community

· 2: Community preference in trade

· 3: Common financial responsibility

· By the end of 1960, the Council of Ministers had accepted a system of market price support consistent with these principles. The system of common institutional prices became the main pillar of the CAP. Over 70 percent of final agricultural output is subject to these instrument (important exception : potatoes).

 

The bed rock principle

 

· Has been to 'stabilise farmers' income with institutional prices and an artificially insulated market.

· Especially of small farmers

· However, large farmers benefited the most since benefits from the CAP are tied to the volume of production.

 

Why is the common price policy more protectionist (high price levels0 than the national policies it replaced ?

 

· Countries with already high levels of price support wanted high common prices

· Each country had special interests in particular commodities

· The principle of common financing reduced pressure on individual countries

· Prices set annually by the Council of Ministers tend to stay high because unanimity is required.

 

Structural policies (to make farms more competitive)

 

·  Apart from common price support, all MS have their own policies to increase farm efficiency and to support the transition from small-scale farming to commercial farming

· This common aim became part of the CAP, in the form of the so-called "structural measures" (land drainage, vocational training.). Rationale for it :

· The system of price support creates no incentive for producers to look for efficiency. No market force to weed out the week and reward the efficient. Because of high institutional prices there is no incentive fore less efficient farmers to give up farming Þ need for structural policy

· bulk of the expenditure on structural measures: modernisation measures, improvement of infrastructures, and increasingly direct income payments.

 

Regional policies (social aims)

 

· At the outset CAP structural measures were based solely on the idea of making farms more competitive.

· Mid-1960s, new programs were introduced that were more social-policy like. Aimed at assisting small-scale farming in regions with structural disadvantages. Not directly linked with the CAP, they are part of regional policies.

· Regional policies are essentially a social instrument rather than a means of structural adjustment.

· e.g. : compensatory allowances to farmers in mountains, hills and other "less-favoured areas".

 

The three enlargements have also brought into the PAC special measures

 

· The 'Mediterranean package' (irrigation and infrastructure improvements) - pressure from Italy

· The ambitious "Integrated Programs" became the price the EC had to pay to Greece for the accession to membership of Spain and Portugal

 

Therefore, the CAP is NOT a monolithic policy

 

· Growth and diversification of policy instruments :

-                                   price support

-                                   structural policies

-                                   regional policies (more social policy like)

· It comprises numerous commodity regimes that differ in the detail of their implementation. The common denominator of commodity regimes is the maintenance of high internal prices,

· Structural measures are not easy to summarise.

 

Institutional Considerations

 

· Under the article 92 of the Treaty of Rome, the Comm, any MS or any private party can challenge any program of national aid to farmers that is not explicitly addressed in the CAP legislation

· The Commission has an important means of controlling national activities. Since 1974 the MS are legally bound to register with the Commission any national measure that supports agricultural incomes.

· Nevertheless, the Comm is in a weak position vis-à-vis the Council of Ministers.

· EU structural measures depend on the MS for implementation.

Western European Agricultures under the CAP

 

Respect to economic performance the CAP has been eminently successful

 

· European agriculture has not only reached self-sufficiency.

·. but moved from being a net importer to becoming an net exporter (the first in the world)

 

Structural consequences of the CAP

 

· Rapid decline of the agricultural labour force.

· However important differences among MS.

· CAP's strong reliance on price support has increased the heterogeneity of agricultural structures :

-                                   benefits larger farms and encourage increased production

-                                   at the same time, high institutional prices effectively provide protective shelters for small farmers Þ relative persistence of small farmers.

· Member States expenditures on agriculture have, in most cases, been decreasing. The reason is the strict division of labour between the Union and its members :

-                                   the Union has a monopoly of action in price policy

-                                   MS concentrated therefore on structural policy

 

Where does the money go? Largely to wealthy agricultural regions.

 

· Because price policies are tied to commodities and levels of output, most of the money under the CAP is going to countries with large agricultural sector.

· Hence the centre regions receive preferential treatment - a legacy of the historical development off the CAP with its concentration on the major commodities of the original six MS  i.e. of the core regions  ; milk, beef, veal, cereals.

 Þ No consistent relationship between the economic and social need of agricultural regions and CAP spending.

· However, in the mid 70s, new emphasis on problem of rural development

Þ The 1975 directive addressing mountain and less favoured areas

       Þ Following the Enlargements

Þ Now more than a half of the Union's agricultural area is classified as less favoured (In contrast to about a third in 1975)

· Yet, the amount of money spent on structural measures (Guidance Section of the EAGGF) is less than 5 percent of the money spent on price support (Guarantee Section) Þ clear indicator of the nature of the CAP, since the only way to direct more resources to disadvantaged regions is through the Guidance Section schemes.

 

 

Making Sense of the CAP: towards a Sociology of Sectoral Integration and Community Building.

 

A social policy

 

"Social policy is not just at the periphery of the CAP - it was at the core of the integration of the agricultural sectors of the MS. The creation of a common market for agricultural products was less important. The CAP was created and used for specific social purposes in a particular historical setting. Its main purpose was to enable farm income to keep pace with other incomes, even given the relatively low elasticity of demand for agricultural products".

 

A unique social order

 

· The CAP constitutes a social order of a special kind. While for some farmers (above all the more commercial and efficient ones) the CAP constitutes a golden cage, it is nevertheless a cage.

· This unique social order grew slowly, following different competing principles, expressing the public's general notions about the rural society, values.

· As for its economic and social consequences, the CAP functions as an agent of "decomodification" of agricultural markets

 

An agent of Decomodification

 

· Decomodification = implicit social right to make farmer income more independent of market forces

· Three mechanism

- Protect farmer's incomes against sudden rises and falls in market price.

- High prices Þ secure adequate incomes for small-scale farmers.

-                                   Increases the gap between market incomes and real incomes

 

Þ Veritable European Welfare State ?

Þ social rights in agriculture on a European Level?

 

Is the CAP in fact a "welfare state for farmers" (granting rights)?     (ÞNo)

 

· This is often claimed, because eof the dominance of the social aims (especially until the beginning of the 1980s)

· The important question is whether the CAP is actually a creation of rights. The answer is NO.

· The European Court of Justice was reticent to admit the emergence of rights and specific Community responsibilities vis-à-vis farmers.

· The ECJ tends to maximise the discretion of the Commission and Council of Ministers.

· The Union has therefore justified sudden changes in levies, quotas and tariff on the ground of the balance of markets, the interests of commercial producers, and increasingly the necessity to come to terms with the USA.

· Actually there is no legal protection of the economic and social rights of the farmers "because this would endanger the entire system of the CAP itself.

· This constitutes an important departure from other policies of the EU, which became much more responsive to the rights of EU citizens trough the decisions of the ECJ

Conclusion

· Pressure to preserve the present system of governance (a CAP is necessary to bargain on the world stage), but at the same time, pressure to shift the general direction of the CAP from social policy to efficiency and free trade.

· The CAP is primarily a social policy, event though in a way that is bound to be destructive for farmers, especially small.

· Institutional structures tend to status quo.