Common Agricultural Policy

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Common Agricultural Policy (CAP) The central policy area of the European Union (EU) from its inception as the EEC in 1957 (European integration). From the beginning, member states agreed on a coordinated policy which guaranteed a stable standard of living for the relatively inefficient European agricultural sector through subsidies and the guarantee of quotas. The system led to vast overproduction and the creation of so-called butter mountains and wine lakes. Much of the overproduced grain was sold to less developed countries at dumping prices, thus destroying the livelihood of many local farmers. To overcome the problem, farmers were paid to set some of their land aside from cultivation. This, together with the occurrence of a series of bad harvests in the early 1990s, led to a virtual elimination of the EU's excess food supplies. Nevertheless, expenditure on the CAP still constituted 50.2 per cent of total EU expenditure in the 1995 budget. Reform of the CAP remained a deeply contentious and intractable issue in EU reform, and its resolution was not achieved in the Amsterdam and Nice Treaties. Eastern and Central European enlargement of the EU, envisaged from 2004, was destined to drain resources for agriculture away from the current influential net beneficiaries of CAP, France and Spain.

Common Agricultural Policy (CAP) System of support for agriculture within the European Union (EU). The Treaty of Rome created CAP in 1957. CAP was designed to increase food production within the EU, and to ensure a reasonable income for farmers. The EU sets target prices for commodities. If prices fall below target, to a level known as ‘intervention prices’, the EU buys up surplus product creating the so-called ‘beef mountains’ and ‘wine lakes’. In 1988, to prevent over-production, the EU introduced a policy of paying farmers to set aside part of their land as fallow. Prices for imports from outside the EU are kept above target by means of levies. By 1994, the CAP accounted for 51% of the total EU budget, having soared to 75% in the 1970s. Reform of the CAP is one of the most contentious issues in the Union.

http://eu.int/comm/agriculture/index_en.htm