Common Agricultural Policy

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Sectors covered by the CAP
The common agricultural policy price intervention covers only some agricultural products, which are, by mutual agreement, subject to the organisation of the EU market:

  • cereal, rice, potatoes
  • oilseeds
  • dried fodder
  • milk and milk products, wine, honey
  • beef and veal, poultry meat and eggs, pig meat, sheep / lamb meat and goat meat
  • sugar
  • fruit and vegetables
  • cotton
  • peas, field beans
  • sweet lupins
  • olive oil
  • seed flax
  • silkworms
  • fibre flax
  • hemp
  • tobacco
  • hops
  • seeds
  • flowers and live plants
  • animal feed stuffs

The coverage of products in the external trade regime (EU) is more extensive than the coverage of the CAP regime. This is to limit competition between a CAP product or any EU product with added-value produced from a CAP covered product with an external product (for example, litchi juice could potentially compete with orange juice).

The creation of a common agricultural policy was proposed in 1960 by the European Commission. It followed the signature of the Treaty of Rome in 1958, which established the Common Market. The six member states were to be strongly affected by State intervention, in particular in regards to what was produced, intervention prices and farm structures.

Some Member States, in particular France, and all farming professional organisations wanted to maintain strong state intervention in agriculture, however, some of the policies had to be transferred at the European Community level.

In 1962, general orientations of the CAP were set, built upon three major principles:

  • market unity
  • Community preference
  • financial solidarity

Since then, the CAP has been a central element in the European institutional system.


The initial objectives were set out in Article 39 of the Treaty of Rome:

  1. to increase productivity, by promoting technical progress and ensuring the optimum use of the factors of production, in particular labour;
  2. to ensure a fair standard of living for the agricultural Community;
  3. to stabilise markets;
  4. to secure availability of supplies;
  5. to provide consumers with food at reasonable prices.

The CAP recognised the need to take account of the social structure of agriculture and of the structural and natural disparities between the various agricultural regions and to effect the appropriate adjustments by degrees.


The CAP is an integrated system of measures which works by maintaining commodity price levels within the EU and by subsidising production. There are three principal mechanisms:

  • Import Tariffs are applied to specified goods imported into the EU. These are set at a level to raise the World market price up to the EU target price.
  • An internal intervention price is set. If the internal market price falls below the intervention level then the EU will buy up goods to raise the price to the intervention level. The intervention price is set lower than the target price. The internal market price will vary in the range between the intervention price and target price.
  • A system of production subsidies. Historically these have been set at different levels for different crops, but a flat-rate subsidy per productive hectare is being phased in. There are additional subsidies for environmentally beneficial farming methods.

The CAP also uses external trade policy and legislative harmonisation within the Community. Some non member countries have negotiated quotas which allow them to sell particular goods within the EU without tariffs. This applies to some countries which had a traditional trade link with a member country.

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An obstacle to Community trade is the diversity of national laws regarding production or trade. Examples are the use of preservatives, coloring agents, hormones and disease control (e.g.during the foot and mouth disease outbreak in the United Kingdom, Ireland and the Netherlands). In spite of a harmonization process, it is far from complete and some issues are still to be resolved.

The CAP is funded by the European Agricultural Guidance and Guarantee Fund (EAGGF) of the EU. CAP reform has steadily lowered its share of the EU budget but it still accounts for nearly half EU expenditure. In recent years ...

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