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 concern about the long-term environmental impact of CAP. The CAP at present takes only limited account of sustainability and environmental objectives. Many environmentalists argue that in promoting quantity, not quality, the CAP has encouraged EU farmers to ignore many of the environmental impacts of their farming methods. They argue that intensive farming has destroyed much of the countryside, turning once traditional landscapes into stretches of tightly packed rows. The disincentive to follow normal crop rotation strategies ruins the soil.
A Barrier to the completion of the Single Market: The CAP remains a major barrier to the final completion of the European Single Market and is a key cause of tension between the EU and the rest of the world in global trade negotiations. The Single Market is one of the final stages of economic integration within the EU and is built on the principles of free movement of goods, services, labour and capital.
Another problem is that the CAP payments are not allocated equitably across each member nation of the EU. Some countries receive a larger share of expenditure under the CAP budget than they contribute to the EU budget as a whole. Countries with a large share of output of more heavily subsidised commodities emerge as winners. Also, the distribution of direct support (direct payments) under the CAP is skewed heavily in favour of larger farmers because it is based to a large degree on the scale of production.
5) Farmers are reluctant for the CAP to be reformed because they believe that farming would be devastated without the subsidies. As a result, many farmers would go bankrupt and many jobs would be lost in the countryside. Consequently there would be mass rural-to-urban migration causing major depopulation in the countryside. As a result the countryside would deteriorate and taxpayers would lose out, as they would have to pay for the rejuvenation of the countryside. This is an argument from farmers who are reluctant for reform. Also, many farmers in Spain, Italy and France are against reform as they are the main beneficiaries from the CAP. In fact many of farmers are against CAP reform, as they would stand to lose a lot if it was reformed – and so through their own greed they oppose the notion of reforming the CAP.
6) If the EU was enlarged, then this would have a major impact on the CAP. This is because a large of majority of the members would be from Eastern Europe. And so, hypothetically, 10 new member states from Eastern Europe - most with large, poor agricultural sectors would qualify for billions of euros in subsidies under an unreformed CAP. These countries have a greater dependency on farming as a source of income and jobs. Many of the farms in these countries are much smaller and poorer than their Western European counterparts – a major problem given the bias within the CAP to offer disproportionately more financial support to larger more efficient farms. And so, the CAP would be under huge financial pressure.
If the CAP continues as it is with enlargement then over-production will still be a major issue and the EU would have to waste a large proportion of its money in buying this excess produce. Currently, the EU spends about half of its budget on the CAP, and if the CAP continues to enlarge, then the EU would have to spend a larger proportion. There would also be continuing problems for consumers who would still have to pay high taxes and rather unnecessary taxes.
Also, the problem in developing countries would increase. This is because as there is an excess supply of agricultural goods, farmers who and are driven by profits, would continue to flood foreign markets (i.e. markets of developing countries) with cheap imports. As a result, farmers in those countries will suffer as they won’t able to reduce their prices in order to compete, and so will be forced to close. Consequently, the economies of these developing countries will be heavily dependant on cheap foreign imports and will suffer as a result. Also, due to this dependency and lack of home produced products, their markets and the people will be more susceptible to exploitation, and so their development will be severely disrupted.
Also, many, if not all, of the problems which were discussed in question 4 would be amplified.
As in question 5, farmers who benefit from CAP are reluctant for reform for obvious reasons. Also, those who consider the CAP as an integral part of the agriculture and its survival are reluctant for reform. However, many farmers in countries such as Britain and Sweden are very much for reformation of the CAP. This is because those countries pay more into CAP than they receive.
Such groups as the Consumer Association think that reform is necessary as well. “The Consumers’ Association (CA) believes that the CAP is failing to meet even the limited objectives laid down in the 1950s which are increasingly out of touch with the needs of society today. The CA is proposing the elimination of all support for production. This will reduce incentives to farm intensively, and should have beneficial effects on the production of high quality food.
The market distortions and false incentives that the CAP imposes will be removed, leaving farmers free to produce what manufacturers, retailers and most crucially, consumers want.”
The sorts of reforms that are considered necessary are varied. However, I looked at the CA’s view on how it should be reformed and they proposed:
“In place of production subsidies, new specific targeted food, environmental and rural policies are needed to promote safe and sustainable production, and encourage diversification. There must be incentives to farmers who act as stewards of the countryside, and thus contribute to our enjoyment of the countryside and wildlife.”
These are all plausible reforms and would be worth discussion. In fact there are constant proposals of reform; however, evaluating the likely effects of fundamental reform of the CAP is a difficult process. The effects of reform in the short to medium term will vary from nation to nation within the EU and there are likely to be significant regional implications for individual countries. Some of the main issues to consider are as follows:
Will reductions in direct payments for production stimulate increases in farm productivity arising from a switch to larger-scale production? Will reforms to the CAP stimulate improvements in the efficiency of the UK and European farming industry? Supporters of reform believe that cutting dependency on financial support will encourage farmers to diversify the use of their land including breaking into rural tourism and focusing resources on supplying niche products to local markets.
Will there be sufficient geographical and occupational mobility in the farming industry to offset many of the likely tensions and problems that structural change will cause? The main risk is a sharp rise in structural unemployment and associated problems of rural poverty. That said, the British farming industry has suffered greatly in recent years even without fundamental reforms to the CAP. Will there be massed forced sales of land leading to a collapse in farm land prices? And, how will smaller farms survive? Should governments target financial assistance on poorer farmers?
All these problems and more need to be considered and then reform can take place for a better and more successful CAP.
