European Agricultural Market - Essay Example

Common Agricultural Policy With the formation of the European Common Market in 1960 came an agenda to pursue greater trade to benefit all the people of the member states. The Common Agricultural Policy (CAP) was formed to help stimulate and regulate the import, export, and pricing of agricultural products among the Common Market members. The ultimate goal of the CAP has been to stimulate food production in Europe, assure that farmers are given a fair price for their produce, and provide trade that is fair and equitable. In addition, standards have been set that assure that the foods are safe and meet the requirements for export and import. To accomplish these goals has meant subsidization of crops and produce as well as a system of tariffs. This government intervention has at times been problematic. It has often resulted in a tension between competing members as well as developing nations around the globe. In addition, it has been met with cultural resistance at the regional and local levels. In an effort to set European Union agribusiness standards in an equitable fashion, implementing the CAP has been a challenge due to financial, political, cultural, and social forces. The CAP has historically been a system that stimulated ample food production for Europe by subsidizing the production of agricultural products. The budgetary requirements to support farm subsidies rose from 2 billion Euros in 1970 to 31.6 billion Euros in 1990 (Kryn 3). These price supports made farming a profitable business and had the desired effects of creating a Europe that was agriculturally self-sufficient. This period transformed Europe from being an importer of temperate agricultural products to a net exporter (Roberts and Gunning-Trant 1). In fact, critics point to surpluses that have resulted and the market distortion that they have caused. The lucrative market has strengthened the farm lobby in the European Union (EU) and the move to reform the CAP has been met with some opposition (Kryn 3). The resulting surpluses must either be regulated by quota (which retards production, expansion, and technology), or granted substantial export subsidies to be able to compete on the world market. The traditional system of subsidies has been difficult to reform as stakeholders are reluctant to relinquish the financial traditions of the past. The efforts to direct the CAP budget have also been influenced by an ideological fight over the political goals of competing parties. Advocates of a free market argue that price supports distort the market price of commodities and have pushed for a move away from direct price supports for agricultural products. Critics of subsidies contend that they discourage the most productive farming methods and place an unrealistic price on the produce. Former EU Farm Commissioner Franz Fischler states, "As to global export markets, the key factor must become our European branding rather than a false competitive edge secured by high subsidies". There has been a move toward decoupling in recent years with a system that pays farmers a direct payment, rather than a product subsidy. However, this move towards decoupling has been politically challenging under a system where the EU CAP budget has been heavily in favor of the larger farms at the expense of the family farmer (Jeffery). This has been even more contentious as new members have been brought in from Eastern Europe where farming may need additional stimulus. The efforts to reform CAP have also been fought in the hearts and minds of the regional and local populations as they try to maintain their culture in the face of modernization. Europe has a rich tradition of local, regional, and national foods and agricultural products. These foods form the cultural identity of many areas and regions around Europe, and the people have a strong will to preserve their culture of local produce and family farms. According to Botterill, "When economic arguments about the special conditions facing farming are combined with sentiments about the inherent virtues of farming as a lifestyle, the resulting mix of values is potent and can have a significant impact on policy (6). There is some fear of turning Europe into the mass production landscape of the American Midwest, yet at the same time there is a need to move forward technologically. Fischler argues that, "A European farming culture that relies on clinging to tradition would soon degenerate to some sort of vast agri-museum". The desire to cling to the local cuisine, while acknowledging the need to compete globally, has been challenging to the CAP as it tries to satisfy both culture and economics. The over-production that subsidies have provided has also had a significant social impact that has been at the center of the debate on reforming the CAP. Surplus production has routinely been environmentally unsound and has resulted in the surpluses being dumped in developing countries at below local market prices. This has two negative effects. First, over cultivation has been injurious to farmland and "by the 1980s negative environmental effects of increased production (e.g. water pollution and soil impoverishment) began to surface" (Delayen 1). Secondly, the dumping of agricultural products in developing nations at below local market levels has led to an economic disaster for local farmers in these areas who are forced out of farming due to their inability to compete. In addition, there are concerns about food safety, international labeling, genetic engineering, and dietary concerns that face the CAP. Once again, financial and political goals come at odds with social and environmental activists as CAP moves forward into the globalization of the twenty-first century. In conclusion, the CAPs original goal of making Europe self sufficient in agricultural products has been accomplished and exceeded. The competing forces of economics, politics, culture, and social concerns have presented a challenge to the EU to reform CAP. The financial interests have a desire to maintain high subsidies, while the advocates of a free market have argued for a decoupling of support to production. These subsidies have traditionally favored large-scale production over the smaller, and more culturally based, family farmers. The ability to lobby the parliament has allowed this system to proliferate, while being opposed by smaller independent groups. Activists groups have also exerted pressure to reform the CAP due to unfairness to markets in developing countries and the drive for environmental sustainability. These forces have often collided and faced opposition in their efforts to reform the CAP. Works Cited Botterill, Linda. Balancing Values in the Agricultural Policy Process. [National Europe Centre Paper No. 106]. Canberra AU: The National Europe Centre, 2003. Delayen, Celine. The Common Agriculture Policy: A Brief Introduction. Minneapolis, MN: Institute for Agriculture and Trade Policy, 2007. Fischler, Franz. "Why CAP Reform is on Track." Europes World (2008). 15 Aug. 2008 . Jeffery, Simon. "The EU Common Agricultural Policy." The Guardian 26 June 2003 [London] . 15 Aug. 2008 . Kryn, Jeremy. A United Front: European Union Enlargement, the Common Agricultural Policy, and Polish Agriculture. Washington, DC: Center for International Private Enterprise, 2003. Roberts, Ivan, and Caroline Gunning-Trant. The European Union’s Common Agricultural Policy. Canberra AU: Australian Bureau of Agricultural and Resource Economics, 2007. Read More