A simple trade-off that led to emergence of the CAP

 

In his memoirs Charles de Gaulle dealt at some length with his role in the European Economic Community. "If, on resuming control of our affairs [after his election as president in 1958]", he wrote, "I indeed embraced the Common Market, it was as much because of our position as an agricultural country as for the progress it would impose on our industry . . . the CAP was a sine qua non of [our] participation."

He asked: "How could we maintain on our territory more than two million farms, three-quarters of which were too small and too poor to be profitable, but on which, nonetheless, nearly one-fifth of the French population live?" And vote, he might have added.

The answer, of course, lay in the Common Agricultural Policy.

Despite its complexity, its origin and driving momentum lay in a simple but historic trade-off between France's agricultural interests and Germany's interest in securing free access for its industrial goods throughout the EEC. The customs union and the common external tariff built into the Treaty of Rome would not have got there without the CAP provisions spelled out in Article 39 of the treaty.

It provided for a single market for agricultural goods at guaranteed prices, a Community preference scheme against imports, and financial solidarity. Intervention in markets to buy up surplus stocks at minimum prices, subsidising sales on world markets and imposing levies on the import of cheaper goods from outside the Community - these were the techniques adopted, with the bill eventually paid for by taxpayers and consumers.

Although the basic principles were set out in the Rome Treaty, providing for the most ambitious transfer of national sovereignty to supranational institutions, it took nearly a decade to work out the precise principles involved and their application to different farming sectors. Germany had its own strong agricultural and associated political interests, notably in Bavaria. In one of these "package deals", the first of many in the CAP regime, Germany extracted high farm prices in the mid-1960s and insisted on French commitment to the Kennedy world trade round.

In consequence, as the system of price support developed through the 1970s and 1980s, the CAP absorbed more and more Community resources, from an estimated 12.9 per cent of the budget in 1966 to 68.4 or even 80 per cent in 1985. Between 1974 and 1983, guarantee expenditure on agricultural products grew from three billion ECUs to 16 billion ECUs. These trends emerged precisely as the importance of agriculture and rural populations in the member-states proportionately declined. Distribution of the benefits was also highly skewed; the Commission estimates that in 1991 some 80 per cent of support went to 20 per cent of the EU's farmers.

De Gaulle correctly underlined how significant rural interests were when the CAP was put in place. Britain was very distinctive, in that it had only 25 per cent of its employed population in agriculture in 1840, a level not reached in Germany until 1940, in France and Italy until around 1960 and in Greece until the late 1980s. It was therefore not surprising that one of de Gaulle's objectives in keeping the UK out was precisely to preserve the CAP.

Looking to the candidate accession states in central and eastern Europe, the figures are much larger - raising the key question of whether and how the CAP regime, however reformed, will be extended to them. In Ireland agriculture accounted for 9 per cent of domestic output and 12 per cent of employment in 1996, but these numbers were three times as large in 1961. The same point applies to agricultural self-sufficiency. The CAP was set up in the aftermath of war, food shortages and rationing by six states with a tradition of food protectionism. Germany had an estimated 83 per cent agricultural self-sufficiency in 1939, Italy 95 per cent and France 75 per cent. In the UK the figure was 25 per cent, although the system of imperial preference also made it distinctive.

Britain's cheap food policy was predicated on trading at world market prices, which were throughout this period substantially lower than the CAP ones. It was supplemented for its farmers from the 1950s by a system of deficiency payments. Ireland was then dependent on the British market, but its farmers were excluded from such payments. Joining the EEC and CAP were therefore clearly identified by Irish policy-makers as in this State's interest.

The White Paper on joining the EEC estimated in 1972 that agricultural income would increase by 150 per cent in the period 19701978- the outcome was closer to 200 per cent.

Irish ministers and farm leaders joined wholeheartedly in the clubbish organisation of agricultural policy-making, replete with side deals, growing complexity and burgeoning problems of over-production and food mountains, hugely expanding budgets, distorted effects on world markets (including damage to less developed states by dumped surpluses), and increasing environmental problems associated with intensified productivity and use of fertilisers.

That is the negative side of the story. The positive one includes CAP's role in equalising socio-economic conditions between urban and rural areas in all the member-states; the orderly managing down of the economic and demographic dependence on agriculture identified by de Gaulle, including maintaining a viable and functioning population in rural areas; and a tremendous increase in mechanisation, efficiency and yields in many sectors.

The CAP's very success in achieving some of these objectives, as well as the unsustainability of overproduction and huge budgets, has led to a major reform strategy initiated by Ray MacSharry in 1991-1992, the second round of which is under way in these Agenda 2000 negotiations. It is characterised by a decisive decoupling of price supports and production, and a shift to direct income support for farmers; price reductions for some commodities, with varying compensation; and making income support dependent on quotas and set-asides.

This reform strategy is intended to be compatible with changing world trade interests of the member-states.