Mr. Ash Jain, Chair
jcjain@northwestern.edu


The Common Agricultural Policy is one of the most contentious and loaded issues that the EU faces as it moves toward closer unification and integration of new member states. It is particularly important because it consumes upwards of 45% of the total EU budget. The distribution of the funds, clearly a substantial sum, has been hotly disputed in recent years as new agrarian countries have joined the EU, while in the past old guard countries (especially France, Germany and Spain, which each consume 22%, 14% and 15% of the CAP, respectively) have consumed a very high proportion of the total amount.

The CAP derives its revenue from heavy import tariffs placed on a variety of different goods. It also sets prices for agricultural goods sold within the EU, using the aforementioned tariffs to raise the price of imported goods to match (or rise above) the predetermined price. The EU will also purchase a good to raise its price if market forces drive it below the designated level. Certain goods are heavily subsidized, in order to convince farmers to produce those crops. (The subsidization mechanism is currently being reconfigured, with various reforms underway that will change the subsidies from crop-based to geographically- and environmentally-based. These will most likely take effect by 2012.)

In recent years, the CAP has also received criticism from free trade advocates and those working on behalf of developing countries, who argue that it not only poses very high artificial barriers to free trade but also unfairly disadvantages farmers in LDCs who produce the same goods at much lower cost, but are kept out of the enormous European market by farm subsidies. As evidence of this, many point to how 40% of the CAP goes to “arable products,” which are often all that LDC farmers can produce.

http://europa.eu.int/pol/agr/index_en.htm
http://en.wikipedia.org/wiki/Common_Agricultural_Policy
http://www.eubusiness.com/guides/agri_overview