Academic journal article New Zealand International Review

EU AGENDA: Reforming the CAP: A New Agenda

Academic journal article New Zealand International Review

EU AGENDA: Reforming the CAP: A New Agenda

Article excerpt

Caroline Saunders reviews the European Union's Common Agricultural Policy and assesses the likely impact of the Agenda 2000 proposals for reform.

The developments in the European Union in agriculture and environmental policy have important implications for New Zealand. While the importance of the European Union as a market for New Zealand produce has diminished, it is still significant, especially as a high-value market; it accounts for 17 per cent of exports (6 per cent of which are to the United Kingdom).

The implications for New Zealand of changes in the European Union are both indirect and direct. Indirect impacts include the influence the European Union has in the outcome of WTO negotiations, particularly in relation to agricultural trade. Policy and market changes in the European Union also affect New Zealand indirectly by impacting on other potential New Zealand export markets. Direct impacts of changes in the European Union include the bringing into question of continuing access for New Zealand exports to the EU market, especially under preferential arrangements.

This article reviews the current Common Agricultural Policy (CAP), including the McSharry reforms of 1992, and assesses the next proposals for reform, Agenda 2000, especially in relation to their likelihood of meeting criteria under the next WTO round of negotiations and the implications for New Zealand.

The European Community was founded by the Treaty of Rome in 1957, with Article 39 concerned with the development of a common market and policy for agriculture, which was seen as essential for the formation of the European Community. It is not surprising that this policy followed the model of continental Europe in restricting imports to raise domestic prices. Nonetheless it took another ten years for the policy to be developed and implemented. The objectives of the CAP can be summarised as:

* to increase agricultural productivity

* to ensure a fair standard of living for those engaged in agriculture

* to stabilise markets

* to ensure availability of supplies

* to provide quality food production at reasonable prices.

Basic system

The basic system of support in the European Union was, and to some extent still is, based upon the fixing of institutional prices. These included the intervention price, effectively a minimum price at which supplies are removed from the market by government agencies, and the threshold price, the price at which imports are allowed into the domestic market, maintained by a system of import levies. These common prices were, in the case of most commodities, set well above world market prices. This led to increases in production within the Community, aided by increases in productivity through technological change. Thus self-sufficiency increased and the European Union became a major exporter of temperate zone products, disrupting world markets, especially for traditional food exporters like New Zealand.

This CAP policy led to a number of well documented problems, the main ones being the rising cost of the CAP, the deterioration of international relations, and environmental degradation. Pressures for reform increased. Other negative consequences of the CAP, such as high consumer inequitable poor transmission of support to farmers, received little if any attention.

There were various reforms to the CAP, on a piece-meal basis, over the 1980s. However, it was the McSharry reforms in 1992 which were the most comprehensive. Whilst these left the basic price structure in place, they reduced fixed prices to, or closer to, world market levels and compensated producers with direct payments based upon past production patterns.

The impact of these reforms and changes elsewhere in the European Union have reduced the importance of the CAP, which can be seen through changes in the EU budget. In 1970 the CAP took 90 per cent of the total EU budget for market, but is predicted by Eurostat to fall to 45 per cent by 2000. …

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