The Protectionist Nature of the Common Agricultural Policy - Assignment Example

The Protectionist Nature of the Common Agricultural Policy The Common Agricultural Policy, commonly referred to as the CAP is the agricultural policy for the European Union member states introduced in 1962. The main objective of the CAP is to ensure that the farmers’ living standards are decent, and provision of stable and safe food supply at reasonable prices for the customers (Swinnen & Van Herck, 2010). Due to heavy criticism on the grounds of its cost, environmental and humanitarian impacts, the CAP has undergone a number of reforms since its introduction. According to the 2013 reforms, the CAP legislation will be majorly defined under the four consecutive regulations. These regulations cover rural development, horizontal matters like financial support and controls, direct payments for farmers among others. Most critics view the Common Agricultural Policy as a form of protectionism meant to defend European producers from inexpensive products produced outside the European Union. This paper is going to discuss the claim that despite repeated reform, the Common Agricultural Policy retains its protectionist nature. Over the years, the European Union has been a model in regional integration and trade promotion trough out the world. This is evidenced by its move to cut many trade barriers through bilateral trade agreements, giving grants to poor countries, not forgetting that its creation has enhanced trade among the member states in a very significant way. Most importantly, it can be noted that the European Union is one of the trading blocs with lowest tariffs on imports from non-member states. Although this claim is true to some extent, the European Union protects Agriculture, which is one of its member states’ key industry sectors through the Common Agricultural Policy. The Common Agricultural Policy enacts trade barriers on agricultural produce from outside the European Union and at the same time subsidizing the domestic producers among its member states. Subsidies and artificially higher prices sometimes lead to overproduction, hence food surpluses in the European markets. The European Union in turn sells the excess supplies to the world market through subsidized exports, ensuring that domestic farmers enjoy higher income and job security. These subsidized export products are sold below the market prices, competing unfairly with products from developing economies. Some of the surpluses are stored to make the food mountains which are often destroyed when they cannot be sold. Consumers on the other hand are compelled to pay artificially higher prices for the food as well as higher taxes to subsidize its production. Therefore, the local farmers in the countries that import the subsidized products from the European Union are undercut since the policy distorts the market and as a result impoverishing people. The policy is harmful to the less developed economies in that the subsidies avoid them from exporting the agricultural to the European Union on a fair playing field. In this case, the Common Agricultural Policy creates exaggerated food prices for European citizens and economic stagnation for the third world countries. The implication here is that it harms foreign producers in that it denies them access to the European Union market. Most of these countries are developing countries, and being denied access means that farmers do not have job security since they make many losses. This contradicts the claim that the European Union has many special relationships with third world countries aimed at economic development. The European Union started carrying out major reforms on the Common Agricultural Policy in the year 2003 in response to the criticism on the protectionist nature of the Common Agricultural Policy as well as the swelling budget and the taxpayers’ and consumer’s resentments. According to the reforms, the European Union funds should be channelled into rural development aid for the diversification of the rural economy and improving the productivity of the farms (Hart & Baldock, 2011). Further the natural appearance of the rural areas of the member states need to be maintained by the respective farmers. Generally, the payments should be decoupled from the quantity of the produce; guaranteed prices should be lowered and instead dependent on such quality factors and conditions as food safety, animal welfare and environmentally friendly practices. The argument for allocating large amounts to these farmers is that they help protect the countryside; hence, the European Union must look after them. This move is clearly meant to protect the European Union member states’ agricultural industry from cheaper products from producers outside the EU. In 2013, it was estimated that the European Union spends about £49 million on this system, which represents about 43% of its budget. In addition, there are other protectionist actions such as import tariffs and severe quotas on some products from countries outside the European Union. The result is high food prices, indeed some of the highest in the world, thus disadvantaging farmers from foreign countries. Through the critical analysis of the Common Agricultural Policy, one cannot help but notice that the policy is nothing but costly protectionism for some European Union members. In fact, Common Agricultural Policy is the antithesis of free trade as evidenced in its protectionist central planning and economic isolationism. Britain appears to be hit hard the most by the Common Agricultural Policy’s price inflation as the cost of living has gone up as the pricing hard pushes its citizens. Indeed consumers in the EU markets are forced to pay 17% more than what they would have paid under normal market conditions (Richard & Wyplosz, 2012). Over the years, the British have made efforts to change the policy but other countries like France and its allies have been resisting heavily because they disproportionately benefit from the subsidies. In other words, France and its allies use the Common Agricultural Policy to protect their interests, which reinforces the fact that even nations from within the European Union are using the policy for protectionism. Due to the attached benefits, some countries like France will look to maintain the status quo in order to continue enjoying a larger share of the subsidies. Despite the 2013 reforms, such concerns raised by Britain have not been looked into, meaning that protectionism is still a major concern. The British consumers usually buy food at higher prices due to tariffs and quotas put on cheaper imported food. Under free market conditions, the British citizens would pay 20% less on food compared to what the amount of money they spend on food currently (El-Agraa, 2011). In a strict sense, the Common Agricultural Policy does not protect the small farmers, which is contrary to what the majority believes. The fact is that small European farmers get little allocation of the subsidy money with the larger amount being allocated to industry giants like Nestle. The Common Agricultural Policy is meant to protect the interests of the large agri-industrial conglomerates in the market and lock out small European farmers from the European Union market, just like it does to poor farmers in developing economies. The quotas imposed on cheap food imports have seen such countries as Britain being unable to import cheap food from countries outside the European Union (Mathews, 2015). This is a clear indication that the Common Agricultural Policy is against free trade and that the policy is out to protect the European farmers. This is further reinforced by the introduction of a 25% aid supplement to young farmers in the member states during the first five years in addition to the existing investment procedures intended for young farmers (Europpean Commission, 2011). This is a move meant to ensure that as the aged farmers move out of the market, fresh young farmers replace them in order to ensure the continuity of the system. Member states being able to increase amounts allocated to the less favoured areas is another smart move to increase agricultural productivity in Europe, thus creating low demand for imports. The coupled payments according to the 2013 reforms will be allocated for a restricted amount of products. There will be a specific 2% combination for plant-based proteins in order to minimize the European Union less reliable on the imports in this region. The reduction of dependency on the imports in the area of plant proteins is aimed at preventing markets outside the European Union from operating in the European market. The move by the European Union to double the amount of funding on research, innovation and knowledge sharing is meant to ensure continuous and sustainable production (Dabertrand & Waite, 2013). The demand in the European market will be catered for and the overproduction will be controlled. It is a move meant to permanently undercut farmers from the developing economies from its market. After 2014, the export subsidies by the European Union will be triggered only in exceptional circumstances, implying that the subsidies still do exist even after the reforms (European Commission, 2013). In my interpretation, exceptional circumstances are when the production is surplus in Europe and their markets are unable to cope with the supply. According to the 2013 reforms, there will be a reduction for subsidies to the third world countries and not complete abolition of the same. However small the amount of these products would be, it will pose an unhealthy competition to the produce of poor farmers in these economies. The 2013 Common Agricultural Policy reforms reversed the proposal made by the Agricultural council to eliminate restrictions on the planting of new vines (Mathews, 2015). The planting rights, which were supposed to be liberalized, were once again curtailed by the European Union parliament. The 2013 reforms cemented the restrictive regime until 2030, implying that some European powers are out to bar other nations from the wine business. Once again, there is a clear fight to maintain the status quo despite the reforms made in 2013, in that some nations want to control the market and restrict others from entering the market. Concisely, the Common Agricultural Policy appears to be so appealing to many, but critically analyzing it proves otherwise. It totally goes against free trade and promotes the dominance of the European Union market. In other words, the Common Agricultural Policy is meant to promote European hegemony and ensure suppression of the poor from the less developed economies. Its impact is evident in the third world countries whose economies are still stagnating since they are undercut from the European Union market. It should be remembered that almost all less developed countries are mono-economies that majorly depend on agriculture as a source of income. The protectionist policy adopted by the Common Agricultural Policy will only ensure that the status quo in poor nations is maintained, as evidenced by intergenerational poverty in these countries. Refences Europpean Commission, 2011. Agricultural Policy Perspectives" Briefs. [Online] Available at: http://ec.europa.eu/agriculture/policy-perspectives/policy-briefs/index_en.htm [accessed 27/05/2015] European Commission, 2013. The common agricultural policy (CAP) and agriculture in Europe – Frequently asked questions. [Online] Available at: http://europa.eu/rapid/press-release_MEMO-13-631_en.htm [accessed 27/05/2015] Dabertrand, F., & Waite, R., 2013. Political agreement on new direction for common agricultural policy. European Commission. [Online] Available at: http://europa.eu/rapid/press-release_IP-13-613_en.htm [accessed 27/05/2015] El-Agraa, A., 2011. The European Union: Economics and Policies. Cambridge: Cambridge University Press. Hart, k., & Baldock, D., 2011. Greening the CAP: Delivering environmental outcomes through pillar one. Institute for European Environmental Policy, 26. Mathews, A., 2015. Europes common agricultural policy is broken-lets fix it! capreform [Online] Available at: http://capreform.eu/two-steps-forward-one-step-back-coupled-payments-in-the-cap [accessed 27/05/2015] Richard, E. B., & Wyplosz, C., 2012. The Economics Of European Integration . New York: McGraw-Hill Higher Education. Swinnen, J., & Van Herck, K., 2010. Compensation payments in EU Agriculture. Trade Adjustment Costs in Developing Countries: Impacts, Determinants and Policy Responses, London: Centre For Economic Policy Research and Washington, DC: The World Bank, 361-381. Read More