The Common Agricultural Policy.

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The Common Agricultural Policy

1) The 5 objectives of the Common Agricultural Policy (CAP) set out in Article 39 of the Treaty of Rome were:

  • To increase agricultural productivity
  • To ensure a fair standard of living for farmers
  • To stabilise markets
  • To guarantee availability of supplies
  • To ensure fair prices for consumers

2) An intervention price is a price at which the EU/government will buy produce from the producer. It is a fixed price, and it is the minimum price that the producer will get for their goods. In this case, the EU established an intervention price at which it would buy the produce from the farmers. As a result the farmers could either choose to sell their produce on the open market or sell it to the EU for the minimum fixed price.

As a result of the intervention price scheme farmers increased their production – knowing that no matter how much they produced, the EU would buy it. Naturally supply began to outstrip demand. Instead of the EU selling the produce produced by the farmers, they have stored them in large warehouses and as a result the infamous lakes and mountains have developed. This excess produce then had to be sold, often at a fraction of the cost of production, and some was even destroyed.

3) CAP has affected consumers in two ways. Firstly, they have to pay higher prices for goods which would be cheaper if they were bought on the world market. Secondly, CAP relies on taxes from EU citizens. As a result, consumers would have to pay for the large costs of running the CAP. Both of these effects are detrimental to the consumer.

4) Here are the majority of problems that the CAP has formed:

Inefficiency and surplus: CAP intervention prices have encouraged excess production and permitted production inefficiencies and dependency on farm subsidies – all of which leads to a misallocation of scarce resources.

Loss of allocative efficiency: The CAP is seen by much of the public as failing to deliver what society wants from agriculture in terms of food safety, animal health and rural environment. It is neither consistent with policies on sustainable development, nor with consumer demands for high quality, local and regional foods.

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Fraud and Government failure: The cost of maintaining the CAP is magnified by fraud within the system and the ever-rising costs of administration and compliance.

The CAP is a ridiculous complex system of farm support.

Damage to consumer welfare: Farm support imposes higher food prices for EU consumers – the cost hits low income families most because they spend a higher proportion of their income on food. Also, taxpayers are affected as their taxes have to pay for the large costs of running the CAP.

Environmental concerns: The CAP has encouraged intensive farming prompting growing ...

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