PART III. WHAT ARE THE PROBLEMS WITH THE CAP?
Although the CAP has been very successful in increasing
agricultural production in the European Union countries, it has
not been without problems. These include:
-
the
economic costs of the program,
-
the
effects on the environment,
-
the
effects on public health,
-
the
effects on third world countries, and
-
the
effects on world trade.
Each
of these problem areas will be reviewed briefly below.
A. Εconomic Costs
A
major criticism of the CAP has been its costs. In effect, the
CAP transfers money from the taxpayers and consumers of Europe
to its farmers in order to support the agricultural sector,
promote food production and ensure an adequate supply of food.
The member states contribute annually to the CAP budget. Most of
these funds are derived from the payment of taxes, although the
CAP also generates some funds in the form of tariff levies on
imported agricultural products.
CAP
expenditures amounted to an estimated
€
40
billion in
2000.
CAP expenditures are a major part of the EU budget, accounting
for about two thirds of the budget in
1988,
but declining to around
40%
of the EU budget. The lion’s share of this amount (about
90%)
goes to payments to producers of crops or livestock, while about
10%
goes to rural development. Subsidies to producers of arable
crops account for about
40%
of the CAP budget, while other plant products receive about
22%,
and the beef and veal sector receives about
11%.
The
CAP has resulted in higher food prices for EU consumers.
Citizens of the EU pay an estimated
€
53
billion a year in higher prices for food due to price supports
and tariffs on imported products. This is about twice the amount
consumers would pay under free market conditions (i.e. an
economy without agricultural subsidies and tariffs). The
National Consumer Council in the United Kingdom has estimated
that the CAP costs a family of four an extra
€
1,560
per year. Higher food prices adversely affect the poor, who have
a smaller budget available for food.
Critics also say that CAP aid has become badly unbalanced, with
70%
of its funds going to only
20%
of Europe's farms, predominantly the largest. Small farmers,
which account for about
40%
of EU farms, receive only
8%
of EU subsidies.
B. Impacts to the Environment
The
Common Agricultural Policy was designed to increase agricultural
production and to improve the standard of living of those
engaged in agriculture. Initially, however, the policy did not
consider the effects that intensive agricultural production
would have on the natural environment. Overall, the CAP has had
negative impacts on the quantity and quality of water resources,
the quality of soils and on biodiversity. These negative
environmental impacts have been the reason for some of the CAP
reforms enacted in
1992
and
2003.
In
the case of water, increased agricultural production requires
more extraction of surface and ground water for irrigation,
lowering the level of ground water and the amount of water
flowing in rivers. In turn, these impacts may contribute to the
reduction in the area of wetlands, the reduction of oxygen in
rivers, and the inflow of salty water into the ground water in
coastal areas. When the water becomes polluted, it disrupts the
wildlife living in the area.
Agricultural activity also degrades the soil, as a result of
erosion, depletion
of nutrients in the soil, and contamination due to
the misapplication of inorganic nitrogen, phosphorus, or
potassium-based fertilisers. It is estimated that about
50
million hectares, representing
16%
of the land area of the EU, have degraded soils. The
corresponding figure for the new member states is
35%.
The European Commission has initiated a process that will
elevate soil protection to the same level as air quality and
water quality.
Biodiversity
– which refers to the number and variety of life forms within a
given area - has worked in partnership with farmers for
thousands of years to improve agricultural production.
In
traditional agricultural systems, farmers relied on local plant,
animal and insect populations. Crop growing areas were
interspersed with woodlands, wetlands, grassed areas, hedgerows
and other natural areas, which provided habitat to numerous
species and which supported the agricultural process. In modern
agricultural systems, natural areas have been cleared and
levelled in order to grow as many crops as possible. Many of the
ecological functions provided by biodiversity have been replaced
by artificial substitutes, such as fertiliser and pesticides.
These harm the environment by polluting surface and ground water
and by unintentionally eliminating beneficial insect species.
In
Europe, the natural vegetation and many wildlife species have
been greatly affected by changing patterns of agriculture. In
the past, traditional forms of agriculture sustained much of the
biodiversity. The landscape of Europe today has relatively few
large wilderness areas remaining that can support biodiversity.
By emphasizing production, EU agricultural policy promoted
monoculture, the growing of a single crop on large tracts. This
type of farming has harmed many plant and animal species, and
agriculture is no longer in harmony with its surrounding
landscape. In the UK, for example, most of the flower-rich
meadows and about half the ancient lowland woods and heath lands
have disappeared. As agricultural production intensifies, the
number and health of species traditionally associated with
agricultural land declines. Farmlands once provided habitat for
many bird species, but these are disappearing. In Germany, a
study indicated that agriculture was responsible for the decline
of
72%
of the plant and animal species evaluated. Agriculture also
negatively affects threatened tree species.
The
EU has addressed the problem of environmental impacts of its
agricultural policy in the CAP reforms of
1992
and
2003.
Among other measures, the increased set-asides of agricultural
land are expected to have a positive effect on the environment
by providing habitat areas for plants, insects and animals
(especially birds), reducing soil erosion, providing grazing
areas and restoring the cultural landscape.
C. Effects on Public Health
Public concerns about food safety in Europe have intensified in
recent years due to well-publicized episodes of mad cow disease,
dioxins, and foot and mouth disease, and the development of
genetically modified plants. In addition, the widespread use of
fertilisers and pesticides, increased use of additives in foods
and the introduction of genetically modified foods have also
heightened public awareness of the potential dangers of
consuming some food products. It is believed that the
introduction of large-scale agricultural operations, which
followed adoption of the CAP, is directly related to these
issues.
Due
to the erosion of public confidence in the food industry, the
European Commission adopted a
White Paper on Food Safety
in January
2002,
which proposed a programme of legislative reform to achieve a
“farm to table” approach to food safety. The White Paper
identified a number of weaknesses in existing practice,
including the lack of scientific support, inadequacies in the
monitoring and surveillance of food safety, deficiencies in the
rapid alert system and lack of coordination between scientific
study and analytical support. As a result of the White Paper, a
new European Food Safety
Authority has been established and directed to work
toward the highest possible standards of heath protection for
the consumers of Europe’s food. Legislation has been adopted or
proposed on a wide range of food safety issues, including
genetically modified food and feeds, labelling of foods, animal
by-products, food supplements, pesticide residues and others.
D. Effects on Third World Countries
The
CAP has had a negative impact on agriculture in third world
countries. Prior to the
2003
CAP reforms, EU farmers were paid according to the amount of
crop or livestock produced. Accordingly, they modified their
production methods in order to maximize their production and
thus increase their subsidy. This resulted in surplus products.
Since the EU could not use all its agricultural products it
produced, it sold them cheaply to third world countries, a
practice known as dumping.
It also subsidised the exports when their price was higher than
market prices in the rest of the world and it imposed tariffs on
the import of products from other countries. According to the
Organisation for Economic Co-operation and Development (OECD),
developed countries provide a billion dollars a day to support
their own agricultural sectors, a figure six times greater than
all the assistance they send to underdeveloped countries.
These
policies severely undercut farmers in underdeveloped countries,
who cannot compete with the heavily subsidised imports or afford
to pay the import tariffs in order to sell their products to EU
countries. The lost income to developing countries resulting
from the lack of access to international markets has been
estimated at over $100
billion a year. The decline of agriculture in third world
countries, due partly to the policies of the developed
countries, has accelerated the spread of poverty, the growth of
cities and widespread hunger in these countries. In the past,
societies in those countries were structured in a way that
enabled them to provide food to their own people. Today however,
global trends in agricultural technology, production and
distribution have disrupted those traditional systems. The ties
of traditional peoples to the land have been weakened or lost.
Millions have migrated to urban areas in search of jobs, leaving
the rural areas impoverished.
E. Effects on World Trade
Agricultural trade policies have been the subject of numerous
disputes among nations of the world because they directly affect
the economy and well-being of these countries. Agricultural
subsidies and import tariffs, such as those of the EU, provide
an advantage to the farmers and exporters of the country or
region that applies them; however, they negatively affect the
trading partners of that country or region. Such policies are
especially harmful to under-developed nations which do not have
an advanced agricultural sector. A series of international
conferences have been held under the auspices of the
General Agreement
on Trade and Tariffs
(GATT) and its successor
agency, the World Trade
Organisation (WTO), to address these issues. One
hundred forty seven countries are currently members of the WTO.
The EU is the world's biggest importer and the second biggest
exporter of agricultural products and is also a member of the
WTO. Accordingly, it is vitally interested in international
negotiations on agricultural trade.
The
Uruguay Round of
trade negotiations, which began in
1986
and ended in
1994,
was the first multilateral effort to address issues related to
agricultural trade. It led to the
Agreement on Agriculture,
which addressed the issues of market access, domestic
support, and export subsidies. The agreement called for a
reduction in the total amount of support to agriculture,
including export subsidies and custom duties in order to correct
and prevent distortions in world markets. These goals were to be
achieved over six years for developed countries and ten years
for developing countries.
Least-developed countries (LDCs) were not required to
make reductions. More specifically, the agreement included the
following elements and targets:
Market Access
-
members agreed to convert all import controls, including
variable import levies and import tariffs, into a system of
bound tariffs, so that all countries would have a uniform
basis for reducing these controls. This is known as
tarrification;
-
tariffs were to be reduced by an average of
36%
between
1995
and
2000
(a
24%
reduction between
1995
to
2004
for developing countries), and by at least
15%
for each product (10%
for developing countries). After five years, an assessment
would be made and negotiations would resume;
Domestic Support
-
the
aggregate measurement of
support (AMS) was to be reduced by an average of
20%
for all products in relation to the
1986-88
reference period (13%
for developing countries). In certain cases, direct income
support was not included in this reduction;
Export Subsidies
-
export subsidies are to be reduced by
21%
in terms of volume for each product over six years (14%
for developing countries), and by
36%
(24%
for developing countries), in budgetary terms. Some
flexibility applies to certain products such as beef.
At
the end of
1994,
the EU adopted regulations to implement the commitments it made
in the Uruguay Round Agreement on Agriculture. These included
adjustments to various COMs and conversion of variable import
levies to tariffs. The Uruguay Round agreement was considered a
significant first step in reforming agricultural trade and
removing the distortions in this trade that resulted from
domestic support policies.
Negotiations for further trade reforms resumed in
2000,
and in November
2001,
a ministerial conference was held in Doha, Qatar in order to set
a new mandate for making the objectives more specific. These
negotiations, which are ongoing, have a deadline for completion
of January
1,
2005,
and face some difficult issues.
The
EU's approach in the agricultural negotiations is based on its
Agenda
2000
package. The EU position is to defend the European model of
agriculture and to point out that the non-trade aspects of
agriculture should also be addressed. Apart from food
production, agriculture has a multi-functional role that
includes preserving the countryside, protecting the environment,
food safety and quality, animal welfare and others. A balance is
therefore needed between the trade-related and non-trade issues
of agriculture. |
