Common Agricultural Policy

The Common Agricultural Policy (CAP) was proposed by the European Commission in 1960, three years after the signing of the Treaty of Rome, and adopted by the Council in 1962. The objectives of the CAP, set out in Article 39 of the Treaty of Rome, were:

• To increase agricultural productivity by promoting technical progress and ensuring the optimum use of the factors of production, in particular labor;
• To ensure a “fair standard of living” for farmers;
• To stabilize markets;
• To assure availability of supplies;
• To ensure reasonable prices for consumers.

The CAP initially addressed these objectives by moving towards self-sufficiency and food security through subsidizing of basic foodstuffs production.

By the 1980s, this policy led to institutionalized surpluses of the major farm commodities, some of which were exported with expensive subsidies, others were stored or disposed of within the EU at considerable cost. Therefore, the CAP became progressively unpopular with consumers and taxpayers. Recognizing this, the Council introduced budgetary guidelines that set a maximum ceiling for the CAP budget. A limit was set on quantities guaranteed to receive support and a new policy was developed to encourage rural and less favored areas.

In 1992, the “MacSharry reform” began the shift from support of agricultural production through prices to producer support through income. Direct payments were introduced in order to compensate farmers for the decrease of the price support. At the same time, the reform required farmers to set-aside a portion of their arable land as a supply side market management tool. The Agenda 2000 and 2003 CAP reforms deepened this strategy by encouraging farming decisions to be more influenced by market signals. The direct payments aim to guarantee farmers a reasonable income, and are often linked to compliance with broader objectives including standards on food safety, animal and plant health, animal welfare and the preservation of traditional rural landscapes. In January 2009, the Council adopted a mid-term review, commonly known as “The Health Check,” of the 2003 reform.  The Health Check was the first part of the European Commission’s “one vision, two steps” approach to the CAP.  The second step entailed a further examination to be implemented after the 2013 financial perspectives.