The Common Agricultural Policy (CAP), created in the 1950s, is the most important European policy. It has evolved with the evolution of society, from helping to achieve food security after World War II, to today’s promoting more respect for the environment, better food safety, phytosanitary and animal welfare standards. CAP is more than an agricultural policy - it is a societal policy.

The beginning

The CAP has its roots in post-war Western Europe, whose economies had been damaged by years of destruction, agriculture had been crippled and unable to guarantee food supplies. The emphasis of the early agricultural policy was to encourage better agricultural productivity, so that consumers had a stable supply of affordable food, and ensure that the EU had a viable agricultural sector.

The CAP offered subsidies and systems ensuring high prices to farmers and providing incentives for them to produce more. Financial assistance was provided for the restructuring of farming, for example by subsidizing farm investment in favour of farm growth and management of technology skills so that they were adapted to the economic and social conditions of the time. Certain measures were introduced to improve the situation of farmers in the form of help for early retirement, for professional training and to bolster underperforming regions.

From the 1980s onwards, the CAP was successful in meeting its objective of moving the EU towards self-sufficiency. At a certain moment, however, the Union had to contend with almost permanent surpluses of the major farm commodities, some of which were exported with the help of subsidies and others stored or disposed of within the member states.

The time had come for a change!

The development

Many important changes were already made in the 1980s and accelerated at the beginning of the 1990s. Production limits helped reduce surpluses (such as the milk quotas introduced in 1983). A new emphasis was placed on environmentally sound farming. Farmers had to become more responsive to the market place, while receiving direct income aid, and account of the public’s changing priorities (the MacSharry reform of 1992).

This shift of emphasis, which came into effect in 1999 (the “Agenda 2000” reform) and which promotes the competitiveness of European agriculture included a major new component: the rural development policy, encouraging a variety of rural initiatives and helping farmers to restructure their farms, and diversify and improve their product marketing. A ceiling was put on the budget to reassure taxpayers that CAP costs would not spiral out of control. Finally, in 2003 and by the Health Check of 2008, a further fundamental reform was agreed.

Farmers are no longer paid just to produce food. Today’s CAP is demand-driven. It takes consumers’ and taxpayers’ concerns fully into account, while giving EU farmers the freedom to produce what the market needs. In the past, the more farmers produced, the more they were subsidized. From now on, the vast majority of aid to farmers is paid independently of how much they produce. Under the new system farmers still receive direct income payments to maintain income stability, but the link to production has been severed: 90% of direct payments are decoupled, classified as non-distortionary WTO, and allow producers to be guided by market signals.

In addition, farmers have to respect environmental, food safety, phytosanitary and animal welfare standards. Failure to do it means reductions in their direct payments - a condition known as “cross-compliance”. The “decoupling” measure that discontinues the link between subsidies and production will make EU farmers more market-orientated. This series of reforms has now designed a clearer future for the CAP, making its value to the entire society more apparent.

The CAP budget has been also declining since the 1990s and supports have been massively redirected towards direct payments and rural development. Refunds on exports fell sharply, down from 10 billion euros in the early 1990s, well beyond the commitments in the WTO. In terms of border protection, customs protection of Europe has virtually disappeared for the Least Developed Countries and the African Caribbean Pacific.

To enhance the economic development of Least Developed Countries and African, Caribbean and Pacific countries, the EU member states have largely opened their borders: the initiative "Everything But Arms" and the access offered as part of their Economic Partnership Agreements allows anyone to export to the EU duty-free.

The European Union is the largest importer of products from the African, Caribbean and Pacific area (57%). Also in 2006 the EU absorbed 40% of the agricultural exports of the Least Developed Countries. Finally the EU, more than other OECD countries provided more preferences to the most vulnerable developing countries, particularly on agricultural products.

Management tools market (interventions) now account for only 8% of the CAP budget and represent a safety net for European farmers. Intervention stocks of the EU are not used but in exceptional cases, e.g. for international food aid operations. No European food aid is granted to sell or manage agricultural surpluses, but to meet demonstrated needs, specially designated for vulnerable populations.